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Annual Report
2020
Contents
About the Company
2020 Features
Five Year Summary
Ridley Locations and Sectors
Chairman’s Report
1
1
2
5
6
Board of Directors
Financial Report
Independent Auditor’s Report
Shareholder Information
Glossary
Chief Executive Officer’s Review 10
Corporate Directory
28
30
98
102
104
105
Financial Review
19
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, canine and home
layer markets in the recreational sector.
Ridley’s product range comprises commercial stockfeeds delivered in bulk and mostly in pellet
form, except for a mash offering available in certain markets and regions, and packaged feeds
and ingredients, including raw materials, additives, supplements and animal meals, delivered
in packaged form ranging from one-tonne bulka bags to 3kg feed bags.
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 for
animal feed produced from otherwise surplus by-products, which are subjected to a process
called rendering. Ridley operates a rendering plant in Victoria and New South Wales through
which most of its animal meal feed requirements are sourced, and from which external sales
are made to the stockfeed, aquafeed and petfood industries, both domestically and overseas.
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.
2020 Features
• A year of business reset and
• Resolution of long-standing
repositioning for growth
legal claim from major customer
• Large overhead structure
• Commercial sales of NovacqTM
addressed
commenced
• Closure of uneconomic
feedmill at Murray Bridge
• New organisational structure
focused on customer
engagement
• Wellsford feedmill construction
complete and rationalisation of
Northern Victorian operations
underway
• Growth strategy starting to
deliver positive commercial
outcomes
1
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYRidley Corporation Limited Annual Report 2020 Five Year Summary
A$’000 unless otherwise stated
Operating results
Revenue
Other income
EBITDA
Depreciation and amortisation (DA)
Earnings before interest and tax (EBIT)
Net finance cost
Operating (loss)/profit before tax
Tax benefit/(expense)
Net (loss)/profit after income tax attributable to members
Other comprehensive income/(loss) (net of tax)
Total comprehensive (loss)/income
Net loss/(profit) on significant items (net of tax)
Profit attributable to members before significant items
Financial position
Ridley shareholders’ funds
Intangible assets
Total assets
Total liabilities
Net debt
Market capitalisation
Enterprise value (market capitalisation plus net debt)
Development capital expenditure
Operating cash flow
Closing share price (cents)
Weighted average number of shares on issue – non-diluted
(thousands)
Number of employees (number)
Key profitability ratios
Sales tonnes (millions)
EBITDA/tonne ($)
EBITDA: shareholders’ funds (%)
Return on shareholders’ funds (%)
Earnings per share (EPS) (cents)
Total Shareholder Return (%)
EPS growth (%)
EBITDA growth (%)
Operating cash flow/EBITDA (times)
Operating cash flow per share (cents)
Market capitalisation/operating cash flow (times)
EBITDA per employee (A$’000)
Capital market and structure ratios
Gearing: debt/debt plus equity (being enterprise value) (%)
Interest cover: EBITDA/net interest (times)
EBITDAx (market capitalisation/EBITDA) (times)
EBITDA per share (cents)
EBITDA growth (%)
Enterprise value/EBITDA (times)
Price/earnings (P/E) ratio (share price/EPS)(times)
Net debt/shareholders’ funds (%)
Shareholders’ funds/total assets (%)
Net debt/EBITDA (times)
Net tangible asset (NTA) backing per share (cents)
Dividends per share (cents)
Dividend payout ratio (%)
Percentage franked (%)
2020
Actual
2019
Actual
2018
Actual
2017
Actual
2016
Actual
967,942
1,082
16,202
26,159
(9,957)
5,828
(15,785)
7,145
(8,640)
114
(8,526)
29,546
21,020
261,645
75,001
646,726
385,081
147,182
226,407
373,589
42,900
23,485
72.50
1,002,583
7,300
54,315
18,903
35,412
5,073
30,339
(6,774)
23,565
(403)
23,162
(3,641)
19,521
277,499
85,670
573,754
296,255
101,443
366,875
468,318
60,000
36,824
119.00
917,660
6,248
43,629
17,262
26,367
4,648
21,719
(4,310)
17,409
520
17,929
-
17,929
263,107
82,485
510,319
247,212
52,781
423,248
476,029
21,100
50,900
137.50
852,923
8,581
54,484
15,220
39,264
4,977
34,287
(8,472)
25,815
-
25,815
-
25,815
259,823
79,284
490,603
230,780
51,544
426,327
477,871
19,600
29,655
138.50
912,561
12,121
60,723
14,989
45,734
5,419
40,315
(13,112)
27,203
-
27,203
403
27,606
247,884
76,355
484,850
236,966
40,967
430,944
471,911
19,300
17,612
140.00
312,285
622
308,298
697
307,817
710
307,817
697
307,817
676
1.80
9.00
6%
(3.3)
(2.8)
(37.8)
(136.4)
(70.2)
1.4
7.5
9.6
26.0
39%
2.8
14.0
5.2
(70.2)
23.1
(26.2)
56.3
40.5
9.1
59.8
1.50
(54.9)
100.0
2
1.89
28.74
20%
8.5
7.6
(10.4)
33.3
24.5
0.7
11.9
10.0
77.9
22%
10.7
6.8
17.6
24.5
8.6
15.7
36.6
48.4
1.9
62.2
4.25
56.6
100.0
2.05
21.28
17%
6.7
5.7
2.3
(32.6)
(19.9)
1.2
16.5
8.3
61.4
11%
9.4
9.7
14.2
(19.9)
10.9
24.1
20.1
51.6
1.2
58.7
4.25
73.0
100.0
1.93
28.23
21%
10.2
8.4
1.8
(6.6)
(10.3)
0.5
9.6
14.4
78.2
11%
10.9
7.8
17.7
(10.3)
8.8
16.5
19.8
53.0
0.9
58.7
4.0
47.7
100.0
1.93
31.46
24%
11.4
8.8
15.2
28.5
18.9
0.3
5.7
24.5
89.8
9%
11.2
7.1
19.7
18.9
7.8
15.9
16.5
51.1
0.7
55.7
4.0
45.3
100.0
Ridley Corporation Limited Annual Report 2020 EBIT from continuing
operations
Consolidated
net profit
Dividends per share
3
7
.
5
4
6
2
.
9
3
1
4
.
5
3
7
3
.
6
2
6
1
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7
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8
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8
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3
3
2
0
2
0
2
4
8
.
9
-
1
0
2
0
2
s
n
o
i
l
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M
$
30
20
10
0
2
.
7
2
1
8
.
5
2
INTRODUCTION
0
-10
6
1
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3
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.
7
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.
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1
i
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M
$
Dividends per share
Consolidated
Consolidated
5
s
net profit
net profit
t
n
e
C
30
4
s
n
o
30
s
n
o
i
l
l
i
M
$
i
l
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M
20
$
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3
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.
0
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0
2
7
1
0
2
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1
0
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1
0
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1
1
0
2
0
2
Dividends per share
Dividends per share
s
t
n
e
C
5
s
t
n
e
C
4
5
4
3
3
2
2
1
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2
2
0
0
2
2
2
0
2
0
2
Dividends per share
5
s
t
n
e
C
Consolidated
Consolidated
4
EBITDA
EBITDA
0
0
4
.
5
2
.
4
5
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.
4
0
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4
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$
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$
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50
2
7
.
2
0
6
1
0
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20
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30
50
20
40
10
30
0
20
-10
10
0
EBIT from continuing
operations
Consolidated
50
s
n
EBITDA
o
40
60
i
l
l
i
M
s
$
n
o
3
7
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5
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1
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2
9
1
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2
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1
0
2
EBIT from continuing
operations
Operating
50
s
n
volume
o
40
2.5
i
l
l
i
3
7
.
5
4
M
s
e
$
n
n
o
t
n
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i
l
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M
30
2.0
20
1.5
10
1.0
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2
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3
3
3
.
0
8
.
1
2
0
2
0
2
2
0
2
0
2
Dividends per share
Operating
1. Inclusive of individually significant items
volume
2. Before individually significant items
5
s
t
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M
3
1.5
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0
0
1. Inclusive of individually significant items
2. Before individually significant items
Consolidated
net profit
EBIT from continuing
30
operations
EBIT from continuing
operations
s
n
o
i
l
l
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M
50
$
40
s
n
o
i
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$
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40
M
$
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3
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5
4
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1
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4
6
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2
7
1
0
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2
9
1
0
2
Consolidated
net profit
Consolidated
30
s
n
EBITDA
o
Operating
Operating
M
60
s
20
volume
volume
n
$
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i
l
l
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.
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2
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0.5
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3
2
1
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3
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7
1
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4
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1
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1
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.
2
3
9
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1
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1
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4
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8
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1
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-
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1
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1
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1
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2
9
1
0
2
Consolidated
EBITDA
1. Inclusive of individually significant items
1. Inclusive of individually significant items
2. Before individually significant items
2. Before individually significant items
s
n
o
60
i
l
l
i
M
$
2
7
.
0
6
8
4
4
5
.
.
1
3
4
5
.
3
6
3
4
50
40
30
20
10
0
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
6
1
.
1
0
2
0
2
2
0
2
0
2
3
Operating
volume
s
n
o
i
l
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LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYRidley Corporation Limited Annual Report 2020
Major capital
program completed
and business reset
for growth.
Ridley Corporation Limited
Annual Report 2020
4
LOCATIONS
& SECTORS
Ridley Locations and Sectors
Australia
Thailand
Business Unit
Structure
Bulk Stockfeeds
Monogastric
Pellet, meals, concentrates and premixes for poultry and pigs
Ruminant
Pellet, meals, concentrates and premixes for dairy cattle, beef
cattle and sheep
Packaged Feeds and Ingredients
Packaged
Products and
Supplements
Aquafeed
NovacqTM
Bagged poultry, dairy, dog, horse and lifestyle animal feed,
and block and loose lick supplements
Extruded and steam pelleted products for all major fin fish
and prawns
Novel value-adding feed ingredient being commercialised
for sale into prawn feed globally
Rendering
Rendered poultry, red meat and fish products for the petfood,
stockfeed and aquaculture sectors
5
CHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020 Chairman’s Report
Dr Gary H Weiss AM
Chairman
My tenth and final year
on the Ridley Board
commenced with the
process to recruit a
new Chief Executive
Officer and Managing
Director (CEO) capable
of growing the business
and extracting the value
from the refreshed
portfolio of Ridley assets
on which $150 million
of capital has been
invested over the last
eight years.
After an extensive search process,
on 26 August 2019 the Ridley Board
appointed Quinton Hildebrand as the
new Ridley CEO. With over 20 years of
experience in the agribusiness and food
industries, including Chief Executive
Officer at Mackay Sugar and Chief
Commercial Officer at Inghams Group
Limited, Quinton was an outstanding
candidate for the role and the Ridley
Board is delighted to have secured
his appointment.
I would like to thank fellow Ridley
Director Mr David Lord for his
contribution as Interim CEO for the
period from 1 July 2019 to 26 August
2019, and particularly for bringing
stability and calm in a period of
uncertainty and for leading the
CEO recruitment process in such
a professional manner.
Quinton is now focusing Ridley on
its domestic growth plans, leveraging
its state-of-the-art facilities, and
accelerating the commercialisation of
its NovacqTM franchise internationally
to drive value for Ridley shareholders.
In September 2019, the closure of the
Murray Bridge feedmill was announced.
This followed extensive reviews by
management and unsuccessful efforts
over several months to secure the
additional production volumes
necessary to restore the feedmill
to profitability.
The closure of Murray Bridge was a
reflection of future losses foreseeable
from a feed mill unable to replace the
feed volumes formerly provided to
Inghams in South Australia under a
supply agreement which expired in
October 2018. All the anticipated
costs of employee termination, asset
write down or relocation, and site
closure, remediation, demolition and
development approvals in preparation
for future divestment, were brought to
account in the first half year, amounting
to a total of $7.2 million.
Further restructuring initiatives
followed, including the removal of
a number of layers in certain parts
of the organisation to deliver a leaner,
simplified and flatter reporting structure
with clear lines of accountability. The
new structure is designed to engender
proactive customer engagement and
better alignment, while removing an
estimated $5 million of annualised
costs. A heightened focus on leveraging
Ridley’s centralised procurement
purchasing and nutrition expertise to
deliver a compelling customer value
proposition was also implemented.
The total cost of the restructure brought
to account in the first half year was
$2.9 million.
6
Ridley Corporation Limited Annual Report 2020 CHAIRMAN &
CEO’S REVIEWS
Consolidated EBITDA
before restructuring
of $59.4 million.
7
Ridley Corporation Limited
Annual Report 2020
LOCATIONS & SECTORSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Chairman’s Report continued
The resolution of the Baiada legal
claim was another important milestone
achieved during the year, and while
the $1.9 million net settlement figure
brought to account in the first half year
by Ridley is naturally disappointing,
the extension of the existing supply
agreement for two years and the
production efficiencies for Ridley were
both positive features of the agreement.
Furthermore, relations between the two
entities have been restored to a more
positive footing.
In February 2020, Ridley acquired
approximately 50 hectares of land at
Chanthaburi, Thailand, plus the
remaining 51% interest to provide a
100% ownership interest in, and full
control of, the Pen Ngern feedmill.
The land and share acquisition was
facilitated by the approval received from
the Thailand Board of Investment (BoI)
to relax the strict foreign landholding
restrictions applicable to Ridley’s
wholly-owned subsidiary in Thailand,
and to approve a 100% ownership
interest in the Pen Ngern feedmill.
The land acquired at Chanthaburi
includes the 14 NovacqTM production
ponds previously under a long-term
lease arrangement, plus all of the
infrastructure in which Ridley has
invested over the past three years.
BoI approval was also received during
the year to resolve the onerous
restrictions regarding the usage of
power at the NovacqTM production site
by granting a development approval
for Ridley to house the NovacqTM
dewatering and drying operation within
the large and surplus warehouse area
of the Pen Ngern feedmill.
The above transaction secures and
de-risks the production activities in
Chanthaburi and the Pen Ngern feedmill
site, and provides an ideal footprint for
the long-term expansion of the
NovacqTM operations in Thailand.
In February 2020, the world was about
to change forever. I am pleased to say
that our leadership team was extremely
proactive in foreseeing and planning
for the worst-case Coronavirus (as it
was called then) outcome. Ahead of
the outbreak of the COVID-19 pandemic
in the first few months of 2020,
management devised and implemented
a regime of controls, processes, facilities
and protocols to manage the business
during this period of societal and
economic disruption. These initiatives
have been critical in not only maintaining
the safety of our team, suppliers and
customers, but also in preserving the
wellbeing of the livestock whose very
existence depends on the timely receipt
of their Ridley feed deliveries. To date,
we are immensely proud that we have
not missed a production shift as a
result of the COVID-19 pandemic.
The management team is to be
congratulated on this tremendous
performance.
In June 2020 Ridley announced
the successful construction and
commissioning of the new state-of-
the-art poultry and pig feedmill located
at Wellsford, Bendigo, on budget and
as scheduled in the fourth financial
quarter. This milestone triggered the
foreshadowed rationalisation of Ridley’s
operations in Central/Northern Victoria,
which will result in the closure of the
Mooroopna feedmill in the second half
of the 2021 financial year once all of
the production has been transitioned
to Wellsford.
All production was successfully
transitioned from the former Bendigo
feedmill to Wellsford by 30 June 2020,
resulting in the cessation of operations
at, and closure of, the old Bendigo site.
The site has been secured from a safety
perspective and the remediation,
demolition and redevelopment approval
activities commenced and fully
accounted for in the 2020 financial year
to prepare the site for divestment.
With a 350,000 tonne annual capacity,
the new feedmill at Wellsford can
absorb not only the production capacity
of the old Bendigo feedmill, but also
that of the existing Mooroopna feedmill.
After consolidating the volumes from
both the Bendigo and Mooroopna
feedmills into the new Wellsford
feedmill, there will still be an additional
70,000 tonnes of feed production
capacity at Wellsford, located in this
key farming region extending through
Central and Northern Victoria.
48 cage trial pond at Chanthaburi with feed mill in the background.
New feedmill at Wellsford, Central Victoria.
8
Ridley Corporation Limited Annual Report 2020
CHAIRMAN &
CEO’S REVIEWS
Once the transition program has
concluded, the Mooroopna site will
also be closed, made safe and prepared
for divestment.
The estimated costs of employee
termination, closure, asset write-down
or relocation, and site remediation,
demolition, and development approvals
in preparation for future divestment of
the Bendigo and Mooroopna sites were
brought to account in the 2020 result
at an estimated $7.0 million.
The Wellsford feedmill was officially
opened on 23 July 2020.
The second and final phase of the
internal restructure for the remainder of
the business not reached in November
2019 was effected in May and June
2020, with a further $1.3 million of
restructure costs incurred and brought
to account.
On 13 August 2020, the Board
announced an impairment of
$21.6 million in respect of the NovacqTM
Business Unit, referred to as a Cash
Generating Unit or CGU for impairment
purposes.
Although the efficacy of NovacqTM
in the production of prawns has been
well demonstrated and the product
is being sold commercially, delays in
the development and installation of
processing technology have hindered
the scale-up of production and
restricted sales volumes and earnings
accordingly.
As a consequence of the above,
coupled with the general economic
uncertainty prevailing in domestic and
world markets, a non-cash impairment
of $21.6 million in the NovacqTM CGU
was raised in the 2020 financial results.
The 13 August 2020 announcement
also included the full impairment of the
property at Moolap with a prior period
carrying value of $1.3 million. This
decision reflects the lack of commercial
opportunities to generate shareholder
value for the site under the Victorian
State Government’s strategic framework
for the Point Henry region of Victoria,
and in particular, for Ridley’s former
saltfields at Moolap.
It should be noted that the above
impairments are non-cash in nature
and do not impact the outlook for the
business as a whole. Furthermore,
there is no impact on bank covenant
compliance given that appropriate relief
had already been granted by Ridley’s
bankers in this year of significant
restructure and repositioning for Ridley.
Having made my decision to retire
after 10 years with Ridley, a Board
recruitment process was commenced.
My tenure was extended from 30 June
2020 to the 26 August 2020 release of
the 2020 financial year results, largely
as a result of COVID-19-induced delays
in the recruitment process.
On 23 August 2020, Ridley advised
of the appointment of Mick McMahon
and Rhys Jones to the Ridley Board,
with Mick to succeed me as Ridley
Chair, effective from 27 August 2020.
The Ridley Board is delighted to have
secured the services of two such
highly regarded and experienced
professionals, and I wish them and
my fellow Directors every success
in directing Ridley to further
achievements in the years ahead.
I would like to take this final opportunity
to thank my fellow Directors, and all
members of the Ridley team, past and
present, who I have engaged with over
the last decade. I wish you all, and
everyone associated with Ridley, every
success for the future, and thank you
for making my time at Ridley such
a positive experience.
Dr Gary H Weiss AM
Chairman
Novacq ponds in production at Chanthaburi.
New extrusion plant at Westbury, Tasmania.
9
LOCATIONS & SECTORSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020 Chief Executive Officer’s Review
Quinton Hildebrand
Chief Executive Officer
and Managing Director
Mandate for domestic
growth, leveraging
of capital investment
program, and acceleration
of NovacqTM.
Upon commencing in the CEO role, the
mandate from the Board was to focus
Ridley on its domestic growth plans,
leverage its investment in state-of-the-
art facilities, and accelerate the
commercialisation of its NovacqTM
franchise internationally. Consequently,
my first year in the role has resulted in
significant change, which has been
necessary to set the business up to
generate lasting benefits for the years
to come. These changes have incurred
implementation costs, and we have
endeavoured to bring shareholders
on the journey with us and provide
transparency through the progressive
releases via the ASX announcements
platform.
Safety record
In a year of such widespread change,
and also unprecedented disruption
associated with the COVID-19
pandemic, an outstanding achievement
for the business as a whole has
been realising its best ever safety
performance. From the perspective
of our core Key Performance Indicators
(KPIs) of Lost Time Injury Frequency
Rate (LTIFR) and Total Recordable
Frequency Rate (TRFR), we are pleased
to report a record low LTIFR of 1.41
and TRFR of 3.53 incidents per million
hours worked.
Record Safety Performance
Engaging our people on the journey
to operational excellence
Focus on accountability and
planning to promote:
• Safer working conditions
• Improved quality performance
• Environmental leadership
• Efficient operations
10
Ridley Corporation Limited Annual Report 2020 CHAIRMAN &
CEO’S REVIEWS
In a year of such widespread
change, and also unprecedented
disruption associated with the
COVID-19 pandemic, the delivery
of a record safety result is an
outstanding achievement.
11
Ridley Corporation Limited
Annual Report 2020
LOCATIONS & SECTORSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Chief Executive Officer’s Review continued
Full personal
protective equipment
Buildings, plant and equipment
subject to thorough sanitisation
Notwithstanding this result, there is no
room for complacency on the journey
to an injury-free environment, and I
believe our changes in leadership have
introduced a new energy to the safety
accountability within the business.
COVID-19 response
Ridley provides an essential service
in the food supply chain, and during
this past year has demonstrated its
resilience in the face of the pandemic.
In January 2020, Ridley established a
Biosecurity Committee to assess,
update, monitor and prepare a plan to
address the emerging biosecurity risks
of the Coronavirus (as it was then
known) outbreak being reported from
Wuhan in China. Overseas travel by
employees was restricted and, in
anticipation of the disruption to Chinese
supply chains, Ridley commenced
sourcing minerals, additives and
vitamins from alternative supply chains.
As the pandemic has spread, having
alternative sources of supply for all key
ingredients has meant that Ridley has
always been able to ensure continuity
of feed supply.
By March, having conducted successful
trial testing of the IT system to sustain
widespread remote access, non-
operational staff were split into teams,
alternating one week in the office,
the next week at home. Employees
at operational sites were segregated
by shift, with separate meal and toilet
facilities to ensure that there was no
crossover. Dedicated ‘Clean Team’
working groups were established to
respond in the event of a positive
infection at a Ridley facility in their
state, with the objective of returning
the facility back to production in the
shortest possible time; however,
fortunately this has yet to be required.
The following photographs demonstrate
the extent of the Clean Team activities
at the Laverton rendering plant.
Well-established Disaster Recovery
Plans, which allow for the production
of feed at alternative sites should a site
be closed for a disease outbreak, were
reviewed and updated where
appropriate. Ridley internal volunteer
support networks were established to
support Ridley’s “front line” employees
who have been required to keep
working through the pandemic to
maintain the welfare of the country’s
livestock. The Company’s support
extended at times to financial support
for localised childcare arrangements
and to public transport alternatives
in order to avoid public contact.
The leadership team has worked hard
to sustain the morale and well-being
of our employees, and sites have
developed their own initiatives to
engender family, team and community
spirit such as the messages expressed
in the photograph (p13 top).
Solid operating performance
Having experienced a weak trading
performance in the first quarter, the
business has responded well to the
organisational restructure and renewed
focus on customer outcomes to post a
13% year on year growth in EBITDA from
ongoing operations.
The following is a summary of the
operating performance of each of the
Business Units for the year.
(i) Bulk Stockfeed
Poultry volumes were marginally beneath
the one million tonne mark for the year
as the broiler volumes for chicken and
duck were impacted by COVID-19-related
closures in the food service sector in the
second half of the year. Layer volumes
benefited from an increased
supermarket presence and lockdown-
enforced home-cooking activities.
Pig volumes were up 13,000 tonnes on
the prior year, which is reflective of the
process to rebuild industry sow
numbers as international pig production
is impacted by African Swine Fever and
we secure additional market share due
to improved customer engagement.
12
Ridley Corporation Limited Annual Report 2020
CHAIRMAN &
CEO’S REVIEWS
Laverton Rendering team.
“We are working hard to keep Australia’s food chain safe.
We disinfect more than just our hands.”
Sales to beef and sheep customers
were strong for the first three quarters
of the year and volumes were only
marginally below the prior year’s record.
However, the breaking of the drought in
the fourth quarter provided welcome
relief for farmers across the country.
The emergence of widespread pasture
growth reduced demand for
supplementary feeding in the beef,
sheep and dairy sectors. The reduction
in sales has been most significant in
the previously drought-affected
areas of northern New South Wales
and southern Queensland in the
fourth quarter.
(ii) Aquafeed
Moving from a single extrusion plant to
twin plant operations was successfully
achieved for the year, with positive dog
food and prawn feed production
volume increases at Narangba, and a
stockbuild in progress at year end in
preparation for the upcoming prawn
season. Production volumes at the new
Westbury extrusion plant are below
initial expectations reflecting the surplus
capacity available with three separately
owned plants now operating in Tasmania
to service the salmon producers in
Tasmania and New Zealand.
(iii) Rendering
A long-term project to work with
suppliers to improve the consistency
of raw materials delivered for
processing culminated in a noticeable
upgrading of the quality of the finished
meals and oils. This, together with
favourable market demand, contributed
to an improved year on year result at
both rendering operations.
(iv) Packaged Products
and Supplements
Packaged volumes across all species
were largely preserved in a year that
witnessed a decline in demand across
all major channels. Ridley consolidated
the results from its prior year launch into
horse racing, with the new concentrated
high-performance feed and its
partnership with British Horse Feeds to
exclusively distribute Speedi-Beet and
Fibre-Beet in Australia and New Zealand.
Supplements enjoyed a strong financial
performance on the back of high
demand for dry season block sales in the
first half of the year due to a longer than
normal northern dry season and the
sales contribution from a new product
development, magnesium capsules.
(v) NovacqTM
Progress in commercialising NovacqTM
has been steady; however, we have been
constrained in ramping up production.
13
While the overall production per hectare
of ponds is making quantum shifts
through optimising the fertilisation and
improving the aeration in the ponds, the
challenge has been, and continues to
be, how to dry the product. While simple
solar drying is successful in Thailand,
this can only happen in the dry season,
which limits the amount of product
available. Hence we are pursuing a
mechanical drying system that can be
used all year round. In April we installed
a mechanical dryer solution in Yamba,
which is gradually making productivity
gains day to day.
Upon being granted approval for 100%
ownership and to install our drying
equipment in the Pen Ngern feedmill,
we acquired the remaining 51% and
assumed full control in February 2020.
With the low demand for feed in the
region, we ceased feed production at
the facility at the end of June and are
concentrating on installing the
mechanical drying equipment for the
NovacqTM being grown in the ponds
adjacent to the feedmill site.
Collaboration with CSIRO in the year
centred around the development of
an assay to test and provide a real-time
measure (as opposed to measurement
of live animals over periods of time in
tank trials) of the level of bioactivity
of NovacqTM. The output from this
work program will also be pivotal to
the identification of the most likely
applications for NovacqTM beyond the
known monodon and vannamei species
of prawn.
LOCATIONS & SECTORSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020 Chief Executive Officer’s Review continued
The Packaged Products business is
expected to experience growth on the
back of a positive outlook for the rural
sector and the recently consolidated
rural store network organisations.
The Supplements block and loose lick
business will return to levels of demand
akin to a ‘normal’ season following
improved grazing conditions for cattle
stations in Queensland and the
Northern Territory.
The current Novacq™ stocks are
committed for sale in Ridley feed for the
upcoming Australian prawn season or
for trials with prospective domestic
and international customers. The focus
for the year ahead is to increase the yields
from the recently acquired production
assets and to double production.
With the completion of the $150 million
asset renewal program, which has
delivered four new world-class
production facilities in the last eight
years, capital expenditure in the year
ahead will return to more normal levels
and the focus will be on cash generation
and debt reduction. The execution
of the growth strategy is expected
to increase earnings as the business
capitalises on the full year benefits of
the initiatives implemented in FY20,
derives value from the capital
investment program, and focuses on
providing proactive solutions and a
compelling value proposition to
support the sustainable growth
of our customers.
Outlook
The 2020 financial year has seen
a reset of the business, with significant
restructuring, repositioning and revaluing
activities. These have now been
substantially concluded. The outlook for
the coming year is positive, despite the
general economic uncertainty prevailing
in domestic and world markets.
Poultry layer volumes are expected
to remain strong in FY21 through a
continuation of the high demand for
eggs experienced in recent months,
while broiler volumes are expected
to have stabilised with increased
supermarket and retail sales offsetting
the reduced food service demand.
Higher prices for Australian pork are
likely to underpin the ongoing increase
in sow numbers, with commensurate
growth in our feed supply for the
year ahead.
Dairy industry fundamentals are
positive, with the combination of a
relatively strong farmgate milk price
and lower input costs, which should
stimulate our sales into this sector.
The year on year outlook for beef and
sheep feed volumes is significantly
lower as a result of the pasture growth
that has followed rainfall in the drought-
affected regions.
Notwithstanding the impact that
COVID-19 has had on the supply
of fish and crustaceans through the
food service channel, our aquaculture
customers are expected to continue
pursuing their long-term expansion
plans in the year ahead. Ridley will
need to deliver superior feed products
and nutritional support to secure our
share of this growth in this highly
competitive market.
In FY21, poultry raw material supply to
rendering is expected to be maintained;
however, there will be a reduction in red
meat raw material with a decline in the
number of animals passing through
the abattoirs. This impact has been
anticipated and should be offset
by higher prices for our meals and
effective cost control in our plants.
14
Ridley Corporation Limited Annual Report 2020 CHAIRMAN &
CEO’S REVIEWS
Peta and Jed receiving their prize from
Ridley SA Territory Manager, Tania McKee.
The 2019 Cobber Challenge was the
most successful to date by all key metrics.
The event has become widely anticipated
within working dog communities across
the country, and is expected to continue
to grow in popularity. The 2020 Cobber
Challenge commenced on 17 August
2020, and to commemorate its fifth year,
a new ‘Contenders Vs All Stars’ format
was introduced to invite past competitors
to compete against first-time entrants.
The Cobber Challenge uniquely positions
the Cobber brand as the brand of
choice for hard-working dogs around
the country, thousands of whom are
fuelled by Cobber. Details of the 2020
challenge can be found on the website:
www.cobberchallenge.com.au.
The fourth annual Cobber Challenge took place from 12 August to 5 September 2019
and was a year of firsts – the first Border Collie to win, the first South Australian team
to win, and the first female handler to win.
The Cobber Challenge is a three week national competition that celebrates
the invaluable contribution of working dogs to Australian farms, where two dogs
from each state wear Global Positioning System (GPS) collars for the duration of the
competition to track their speed, distance and duration worked on farm. Points are
awarded based on the data collected each day, and the dog with the most points
at the conclusion of the competition is declared the Cobber Challenge champion.
15
LOCATIONS & SECTORSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020
Chief Executive Officer’s Review continued
Customer recognition
In February 2020, Ridley was recognised by its two largest Packaged Products customers, AIRR and Nutrien/CRT, as their Supplier
of the Year – Animal Nutrition. These awards are based on sales support, product quality, customer service, innovation, marketing
and supply chain, and are great recognition of Ridley’s effort in striving to be value-adding business partners to our customers.
It was the second year in a row for CRT to recognise Ridley as such, and the first year in which Ridley received the Windmill
trophy from AIRR.
Facing a challenging competitive
marketplace, the Barastoc marketing
team devised and executed the Golden
Note promotion. This promotion
focused on the unique positioning of
Barastoc Golden Yolk, whereby through
our retailer network, consumers were
able to participate in a competition to
win a replica golden note in 24ct. gold.
The campaign captured market share
and increased the brand awareness.
16
Ridley Corporation Limited Annual Report 2020 CHAIRMAN &
CEO’S REVIEWS
Ridley strives to
be a value–adding
business partner
to our customers.
17
Ridley Corporation Limited
Annual Report 2020
LOCATIONS & SECTORSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTION Ridley Corporation Limited
Annual Report 2020
18
FINANCIAL
REVIEW
Financial Review
Alan Boyd
Chief Financial Officer
and Company Secretary
Results
For statutory reporting purposes, the consolidated profit and loss (Table 1) from continuing operations after income tax for the year
was a loss of $8.6 million (m) (2019: $23.6m profit). The consolidated profit and loss from continuing operations before income tax
for the year was a loss of $15.8m (2019: $30.3m profit).
Table 1 – Summary results
Profit from continuing operations before significant items and before income tax
Individually significant items before income tax
(Loss)/profit from continuing operations before income tax
Income tax benefit/(expense)
(Loss)/profit from continuing operations after income tax
Other comprehensive income/(loss), net of income tax
Total comprehensive (loss)/income for the year
2020
$’000
27,431
(43,216)
(15,785)
7,145
(8,640)
114
(8,526)
2019
$’000
24,178
6,161
30,339
(6,774)
23,565
(403)
23,162
The profit and loss summary with a prior period comparison provided in Table 1 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 1 is useful for users as it reflects the underlying profits of the business.
Profit from continuing operations before significant items and before income tax (Table 1) of $27.4m was up $3.2m from the prior
year’s $24.2m.
Sales revenue for FY20 of $967.9m was down $34.7m (3.5%) on last year’s $1,002.6m, and reflects 1.79m (2019: 1.89m) tonnes
of stockfeed and rendered product sold. The decrease in sales revenue is a reflection of the October 2018 expiry of the Inghams
supply agreement (year on year 65,000 tonnes reduction), the pass through of raw material price movements, and a tightening
of sales arising from the COVID-19 pandemic.
19
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020 Financial Review continued
Operating result
Table 2 – Profit and loss account in $ million
Earnings before net interest, tax expense, depreciation and
amortisation (EBITDA) from ongoing operations before individually
significant items
EBITDA impact of introduction of lease accounting standard
Less: Corporate
Consolidated EBITDA before significant items
Individually significant items (Table 3)
Consolidated EBITDA
Depreciation and amortisation (DA)
Consolidated EBIT
Net finance costs
Income tax benefit/(expense)
Reported net (loss)/profit after tax
Comprehensive income/(loss), net of tax
Total comprehensive (loss)/income for the year
2020
2019
Movement
64.3
5.0
(9.8)
59.5
(43.2)
16.3
(26.2)
(9.9)
(5.8)
7.1
(8.6)
0.1
(8.5)
59.4
-
(11.3)
48.1
6.2
54.3
(18.9)
35.4
(5.0)
(6.8)
23.6
(0.4)
23.2
4.9
5.0
1.5
11.4
(49.4)
(38.0)
(7.3)
(45.3)
(0.8)
13.9
(32.2)
0.5
(31.7)
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.
Net finance costs have increased
as a result of the higher borrowings
associated with the major capital
expenditure program, which has
concluded with the 3 August 2020
official opening of the new Wellsford
feedmill, plus the $0.4m incremental
charge associated with the change
in accounting treatment for leases.
The income tax expense is calculated
taking full account of the significant items.
The available-for-sale financial sale was
disposed of during the financial year,
thereby realising the fair value reserve,
generating other comprehensive
income of $0.1m, and realising cash
proceeds of $1.9m.
The reported EBITDA from ongoing
operations before significant items
and lease accounting impact of
$64.3m is $4.9m above last year’s
equivalent $59.4m.
Consolidated EBITDA of $16.3m (after
significant items and lease accounting
impact) is reported after deducting
$43.2m of significant expense items
and adding back lease payments of
$5.0m previously expensed under the
former lease accounting arrangements.
The introduction of the new lease
accounting standard gives rise to a
favourable $5.0m EBITDA impact,
unfavourable $4.9m increase in DA,
and $0.4m increase in interest expense
as detailed in Notes 5(b) and 5(c) to
the financial statements.
Corporate costs have been reduced
by $1.5m to $9.8m, which is consistent
with the prior year after concluding
the Baiada legal claim in February 2020
and after implementing the internal
restructure.
Details of the individually significant
items are provided in the following
section of this review.
20
Ridley Corporation Limited Annual Report 2020 FINANCIAL
REVIEW
Individually significant items impacting the FY20 result
Table 3 – Individually significant items in $ million
Murray Bridge feedmill closure
Internal restructure
Restructure of Central Victorian operations
Settlement of legal claim
Impairment of NovacqTM Cash Generating Unit
Impairment of Moolap investment property
Property segment profit1
Total individually significant items
2020
(7.2)
(4.2)
(7.0)
(1.9)
(21.6)
(1.3)
-
(43.2)
2019
-
-
-
-
-
-
6.2
6.2
Movement
(7.2)
(4.2)
(7.0)
(1.9)
(21.6)
(1.3)
(6.2)
(49.4)
1. The Property segment was closed on 30 June 2019 and ongoing surplus property maintenance costs absorbed within Corporate from 1 July 2019.
The profit and loss individually significant items summary with a prior period comparison provided in Table 3 above has been sourced
from the audited accounts, but has not been subject to separate review or audit. The Directors believe that the presentation of the
unaudited non-IFRS profit and loss significant items summary in Table 3 is useful for users as it reflects the underlying profits
of the business.
The reported result was impacted by six
individually significant events, being the
closure of the Murray Bridge feedmill,
an internal restructure of the business
in each of the first half and second half
years, rationalisation of the Central/
Northern Victorian operations, the
settlement of the legal claim from a
major customer, the impairment of the
NovacqTM Cash Generating Unit (CGU),
and the impairment of the Moolap
investment property asset. All of these
events have been progressively
announced to the market through
the ASX Announcements Platform.
Murray Bridge feedmill closure
The aggregate financial impact of the
closure of the Murray Bridge feedmill for
the year ended 30 June 2020 amounts
to the $7.2m brought to account in the
first half year, which includes
appropriate provisioning to complete
the site demolition, remediation,
rezoning approvals and asset removal.
Of the total restructuring provision
brought to account, $4.4m represents
non-cash write-downs of fixed assets
to nil value, and $2.1m is retained at
30 June 2020 for activities to be
conducted in FY21.
Internal restructure
Settlement of legal claim
The aggregate cost of internal
restructure reflected in the year result
amounts to $4.2m, of which $2.9m was
incurred in the first half year and $1.3m
in the second half year. The reported
amounts include all notice periods,
severance payments and associated
oncosts. The new Ridley group structure
has removed a number of layers in
certain parts of the organisation,
provides clear lines of accountability,
facilitates a more proactive relationship
with customers, and enables effective
leveraging of the centralised
procurement purchasing and nutrition
expertise.
Rationalisation of Central and
Northern Victorian operations
Ridley’s operations in Central and
Northern Victoria were rationalised in
June with the announcement of the
immediate closure of the former
Bendigo feedmill and transition of
Mooroopna production to the new
Wellsford feedmill over the first eight
months of FY21, at the conclusion of
which the Mooroopna feedmill will
also be closed. The total cost brought
to account in FY20 in respect of this
rationalisation is $7.0m, comprising
non-cash asset write-offs of $5.6m
plus all estimated redundancy, site
demolition, remediation, rezoning
approvals and asset removal costs.
On 14 February 2020, Ridley announced
the settlement of the legal proceedings
whereby Baiada immediately terminated
its legal proceedings and Ridley agreed
to pay $1.935m to Baiada in three
instalments over a 12-month period, all
of which have been brought to account
in the full year results. As part of the
settlement, the existing supply
agreement between Ridley and Baiada
was amended to provide production
efficiencies for Ridley and changes to the
fee structure. The term of the agreement
was extended for a further two years to
expire on 30 November 2025.
Impairment of NovacqTM Business
Unit
Although the efficacy of NovacqTM in the
production of prawns has been well
demonstrated and the product is being
sold commercially, delays in the
development and installation of
processing technology have hindered
the scale-up of production and
restricted sales volumes and earnings
accordingly.
As a consequence of the above,
coupled with the general economic
uncertainty prevailing in domestic and
world markets, the Company has raised
a non-cash impairment of $21.6m in its
NovacqTM CGU in the financial results
for the year ended 30 June 2020.
21
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020 Financial Review continued
Impairment of Moolap
investment property
With the prospects of a commercial
development considered to be low
under the Victorian State Government’s
strategic framework for the region
encompassing Ridley’s Moolap site, the
site has been impaired down to zero as
at 30 June 2020.
Balance Sheet
The Balance Sheet reports a net
deficiency in liquidity with current
liabilities of $379.9m exceeding current
assets of $262.2m by $117.7m. This
position is a result of the borrowing
liability of $193.0m being reported
as a current liability for the reasons
stated following.
Subsequent to 30 June 2020 and prior
to 13 August 2020, the Group received
certain waivers from its lenders on its
financial covenants for the 30 June
2020 testing period. These waivers
provide financial covenant relief in
respect of any impairment charges
raised against the FY20 result.
On 13 August 2020, the Ridley Board
considered and resolved to approve
the recognition of non-cash impairment
charges against the NovacqTM CGU.
Despite having received the impairment
waivers, the Australian Accounting
Standards deem this decision to have
applied as at 30 June 2020 (i.e. prior to
the granting of the impairment waivers
by the Group’s financiers), and therefore
that there has been a technical breach
of banking covenants, which requires
the Group’s borrowings to be reported
as current rather than non-current. At
the date of approval of the Financial
Report, the lending facilities have been
restored to the classification of non-
current borrowings and the Group has
remained at all times compliant with its
funding covenants, including as at the
most recent test date of 30 June 2020.
effective from 1 July 2019 as a result
of the introduction of the new lease
accounting standard (refer Notes
5(c) and 28 to the financial
statements). The closing carrying
value of these assets as at 30 June
2020 was $8.8m after applying
an amortisation charge of $4.9m.
The closing balance of property,
plant and equipment reflects
the write-down of Bendigo and
Mooroopna assets of $5.2m and
Murray Bridge assets of $4.4m.
Of the total impairment charge
of $21.6m raised in the year, $7.9m
was applied to property, plant and
equipment in the NovacqTM CGU.
(vii) A net $10.7m decrease in intangibles
from $85.7m to $75.0m comprising
additions for software purchases
of $0.3m, capitalised NovacqTM
assets under development in
Thailand of $3.4m, and goodwill
of $1.0m. Offsetting the additions
were the amortisation charge of
$1.8m, disposals of $0.1m, and the
$13.7m impairment of the NovacqTM
CGU asset under development.
(viii) The 49% shareholding in the
non-current equity-accounted
investment in the Thailand feedmill
was increased during the year to
100%, recapitalised and
consolidated within the Group.
The available-for-sale financial
asset investment in the UK-listed
specialist ingredients company
was sold during the year.
(ix) A $4.9m increase in provisions,
which comprises a new $6.3m
restructuring provision to cover
the FY21 non-cash write-down
of Mooroopna assets ($2.8m), plus
all anticipated costs associated
with the disposal of the feedmills
at Murray Bridge, Bendigo and
Mooroopna ($3.5m) offset by
a $1.4m reduction in employee
provisions following the FY20
internal restructure.
(x) Current lease liabilities of $4.2m
and non-current lease liabilities
of $4.8m are brought to account
for the first full financial year within
Balance Sheet payables as a result
of the introduction of the new lease
accounting standard.
There have been the following
movements in the Balance Sheet over
the last 12 months:
(i)
A $45.8m increase in net debt for
the year from $101.4m to $147.2m,
reflecting the completion of the
capital investment program to
construct a new extrusion plant at
Westbury in Tasmania and feedmill
at Wellsford in Central Victoria. Net
debt at 30 June 2020 comprises
gross borrowings of $193.0m offset
by cash and cash equivalent
balances of $45.8m.
(ii) A $3.5m increase in current
receivables from $108.2m to $111.7m,
which reflects a normal fluctuation
in timing between invoicing and
receipts and no movement in
debtor days outstanding from the
33-day pre-COVID-19 position at
30 June 2020.
(iii) A $20.6m increase in inventory
from $83.8m to $104.4m, which
reflects a combination of higher
inventory holdings to ensure
continuity of production in the
current environment of uncertain
supply, plus an increase in
stockbuild for new fin fish feed
production and the forthcoming
prawn growing season.
(iv) A $10.0m decrease in non-current
receivables from $11.7m to $1.7m,
due to the $3.85m receipt of prior
year land sale deferred consideration
plus the $6.6m recapitalisation
of the loan to the former Thailand
49% joint venture interest, which
became wholly-owned and
consolidated during the year.
(v) The impairment down to zero in
the financial year of the carrying
values of the former saltfields at
Moolap previously carried at $1.3m
and disclosed as non-current
investment property.
(vi) A $34.9m increase in non-current
property, plant and equipment from
$259.3m to $294.2m, which reflects
the costs of completion for the new
extrusion plant at Westbury and
feedmill at Wellsford. In addition,
$13.8m of right-of-use assets,
formerly off-balance sheet
operating leased assets, were
brought onto the Balance Sheet
22
Ridley Corporation Limited Annual Report 2020 FINANCIAL
REVIEW
(xi) Share capital increased by $4.6m
through of the utilisation of the
Dividend Reinvestment Plan
supported by a shortfall placement
for the FY20 interim dividend.
Dividend
The Board paid a 2019 final cash
dividend of 2.75 cents per share, fully
franked, on 31 October 2019, and a 2020
interim dividend of 1.5 cents per share,
fully franked, on Thursday 30 April 2020.
The Dividend Reinvestment Plan (DRP)
was reinstated for the 2020 interim
dividend, under which 2,862,277 fully
paid ordinary shares were issued
to existing shareholders plus 3,313,057
fully paid ordinary shares under a
placement shortfall at an issue price
of $0.748 per share.
After the balance sheet date, the
Ridley Board determined not to pay a
dividend and to apply these funds to
the retirement of net debt. This dividend
decision was made in respect of the
final FY20 dividend only, and was made
in accordance with Ridley practice to
consider the payment of dividends
in the context of capital requirements,
net debt, the earnings and cash flow
conversion of the business and the
growth opportunities prevalent and
foreseeable at the time of dividend
declaration.
Cash flow and working capital
The operating cash inflow for the
year (Table 4) after working capital
movements and maintenance capital
expenditure was $18.3m, a reduction
of $15.4m on last year’s $33.7m. The
$22.8m impairment of the NovacqTM
CGU and Moolap investment property
is a non-cash expense.
Working capital increased by $7.5m
over last year largely due to an increase
in inventory holding levels, which have
been temporarily raised to ensure
continuity of raw material supply in the
current environment of uncertainty.
Maintenance capital expenditure has
been maintained at historical levels.
Development capital expenditure
of $42.9m includes the completion
of the extrusion plant at Westbury,
Tasmania and the feedmill at Wellsford,
Victoria, which was officially opened
on 3 August 2020.
Payments for intangible assets of
$4.5m comprise NovacqTM assets
under development and software, plus
goodwill of $1.0m initially recognised
on the acquisition of the controlling
interest in the Thailand feedmill but
subsequently impaired to zero.
Dividends paid for the year of $10.9m
comprise the 2019 final dividend of
2.75 cents per share paid fully in cash
on 31 October 2019, plus the interim
FY20 dividend of 1.5 cents per share
paid on 30 April 2020, of which $2.1m
was settled through the take-up of DRP
entitlements by existing shareholders
and $0.2m through payment of
employee in-substance options.
$2.4m of proceeds were received in
respect of the FY20 interim dividend
DRP placement shortfall, and $0.2m
was expended to acquire 150,000
shares issued to two key employees
under the Special Retention Plan.
The prior year disposal of property
assets realised $3.8m of proceeds
in the year, with a further $1.9m of
proceeds generated from the sale of
the available-for-sale financial asset.
$0.5m of funds were loaned to the
Thailand Joint Venture prior to it
becoming wholly owned as part of the
land and share acquisition transaction,
for which the cash consideration paid
was $8.6m and attributed to property,
plant and equipment.
Net tax payments of $4.3m were made
during the year and $6.2m in net
finance costs.
23
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020
Financial Review continued
Table 4 – Cash flows for the year in $ million
Consolidated EBIT
Depreciation and amortisation
Consolidated EBITDA
Add back non-cash impairment
Increase in working capital
Maintenance capital expenditure
Operating cash flow
Development capital expenditure
Payment for intangibles
Dividends paid
Issue of share capital under DRP
Share-based payments
Proceeds from sales of assets
Net finance cost
Net tax payments
Loans to related parties
Payment of lease liabilities for right-of-use assets
Other items
Cash flow for the year
Opening net debt balance at 1 July
Closing net debt balance at 30 June
30 June 2020
(9.9)
26.2
16.3
22.8
(7.5)
(13.3)
18.3
(42.9)
(4.5)
(10.9)
2.4
(0.2)
5.7
(6.2)
(4.3)
(0.5)
(5.0)
2.3
(45.8)
(101.4)
(147.2)
30 June 2019
35.4
18.9
54.3
-
(7.3)
(13.3)
33.7
(60.0)
(5.5)
(11.7)
3.1
(2.4)
5.0
(5.7)
(1.7)
(0.7)
-
(2.7)
(48.6)
(52.8)
(101.4)
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/Diluted earnings per share
– Continuing
– Before significant items #
# The profit after income tax before significant items adopted in the above calculation is $21,020,000.
2020
Cents
(2.8)/(2.8 )
7.1/7.1
2019
Cents
7.6/7.6
7.6/7.6
The Directors believe that the presentation of the unaudited non-IFRS EPS calculation before significant items above is useful for
users of the accounts as it reflects the underlying earnings per share of the business.
Gearing and financing
facility
On 13 November 2019, Ridley executed
a new $30m Receivables Purchase
Agreement facility with Rabobank.
The facility was and remains fully drawn
down, with the funds applied against
Ridley’s consolidated banking facility,
which was refinanced on 26 December
2019 for a further five years. As part of
the refinancing, the total borrowing
facility of $200m and the Trade Payables
facility of $50m were both retained.
In addition, certain banking covenant
requirements were relaxed to
accommodate the funding
requirements for the new plants at
Westbury and Wellsford, the closure
of the Murray Bridge feedmill, the
restructure of Central Victorian
operations, and internal restructure
of the business.
Gearing is reported as net debt
to equity in accordance with the
covenants of the banking facility, and
includes the fully drawn Receivables
Purchase Agreement facility, but
excludes the draw down against the
Trade Payables facility.
Gross debt
Less: cash
Net debt
Total equity
Gearing ratio
2020
$’000
193,000
(45,818)
147,182
261,645
56.3%
2019
$’000
118,926
(17,483)
101,443
277,499
36.6%
24
Ridley Corporation Limited Annual Report 2020
FINANCIAL
REVIEW
• Continued divestment of residual
property assets, with the remaining
property at Moolap written down to
nil as at 30 June 2020 as a reflection
of the Victorian State Government’s
restrictions for the commercial
development of the site as published
in its August 2019 Moolap Coastal
Strategic Framework Plan. Activities to
divest the last remaining land parcel
at Lara and the Moolap site are
continuing in FY21.
In light of the above, and recognising
the fundamental changes in business
activity, the new organisational structure
and internal reporting to the CODM
arising from the FY20 business
restructures, from 1 July 2020
Ridley expects to report segment
information for:
• Bulk Stockfeeds – comprising the
Group’s premium quality, high-
performance animal nutrition
stockfeed solutions delivered in bulk.
• Packaged Feeds and Ingredients
– comprising the Group’s premium
quality, high-performance animal
nutrition feed and ingredient solutions
delivered in packaged form from
one-tonne bulka bag down to 3kg bags.
Capital movements
During FY20, a total of 150,000 (FY19:
2,092,935) shares were acquired by the
Company on market for an outlay of
$0.2m (FY19: $2.8m) in satisfaction of:
(i) the vesting of 150,000 (FY19: nil)
shares under the Special Retention
Plan, which were acquired on-market
for a total outlay of $163,387;
(ii) the vesting of nil (FY19: 1,384,802
with a further 24,123 share
entitlement satisfied by payment
in cash) shares allocated to Ridley
employees under the Ridley Long
Term Incentive Plan; and
(iii) the vesting of nil (FY19: 708,133)
shares allocated under the Ridley
Employee Share Scheme, which
was suspended for FY20.
The Dividend Reinvestment Plan (DRP)
was utilised for the payment of the FY20
interim dividend on 30 April 2020,
which resulted in the issue of 2,862,277
(2019: 896,926) fully paid ordinary
shares to existing shareholders, plus
3,313,057 (2019: 2,542,224) fully paid
ordinary shares issued to institutional
and sophisticated investors pursuant
to a shortfall placement under the DRP.
The issue price for these shares was
$0.748 per share.
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 (CODM).
Segment results 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, borrowings, income
tax assets and liabilities and surplus
property asset holding costs. Segment
capital expenditure is the total cost
incurred during the period to acquire
property, plant and equipment and
intangible assets other than goodwill.
On 26 August 2019, Ridley appointed
Mr Quinton Hildebrand as its new
Chief Executive Officer and Managing
Director (CEO). Following the
appointment of the new CEO, Ridley has
set a new strategic direction, continued
the disposal of surplus property assets,
announced a number of restructuring
initiatives to better align the Group’s
operating model and site footprint to
the new strategy, and has undertaken
necessary investments to maximise the
potential of NovacqTM. These activities
have included:
• An organisational redesign
announced on 11 November 2019
involving changes in executive
leadership and the establishment
of a leaner organisational design,
followed by a subsequent restructure
announced on 23 June 2020 across
those business units not included in
the initial announcement.
• The closure, rationalisation or
suspension of operations at selected
feedmills across Australia and
Thailand, combined with the
commissioning of new facilities at
Westbury and Wellsford.
25
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020 Vast array of new
processes, practices
and procedures introduced
to safeguard the safety
and well-being of the
Ridley network.
Ridley Corporation Limited
Annual Report 2020
26
FINANCIAL
REVIEW
Financial Review continued
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,
Companion Animals, Consumer
Goods, 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 for the
feed Ridley manufactures on their
behalf, 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 – while 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 in livestock or market
access restrictions offshore
due to increased segregation
requirements in rendering – Ridley
has a strategy of plant 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 the 2016
outbreak of White Spot disease (White
Spot Syndrome Virus or WSSV) in the
Logan River region of Queensland,
which devastated a number of
affected farms in the region, or from
an offshore market demanding
increased product segregation in
rendering such as the Indonesian
decree across animal protein imports
issued in 2018 that banned Ridley’s
rendered product exports to
Indonesia.
• Customer and supplier
concentration and risk of customer
and supplier vertical integration or
risk of losing a significant customer
or supplier – Ridley endeavours to
enter into long-term sales and supply
contracts with its customers and
suppliers. This strategy 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 and forward
integration into rendering by
significant suppliers. 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 the Maroota
Rendering operation. The potential for
disputes to arise with customers over
animal performance linked to feed
is a significant risk.
• Commercialising NovacqTM –
although the efficacy of NovacqTM
in the production of prawns has been
well demonstrated and the product
is being sold commercially, current
delays in the development and
installation of processing technology
have hindered scale-up of production
and restricted sales volumes and
earnings accordingly. Although
commercialisation of NovacqTM and
risk mitigation strategies are being
actively managed by Ridley, risks exist
27
with any start-up business, some of
which are beyond Ridley’s control and
could further delay commercialisation.
Risks such as adverse weather
impacting the expansion of pond
space to produce NovacqTM, falling
demand for prawns due to a
significant disease outbreak, or
from the current global economic
uncertainty.
• Corporate – risks such as safety,
recruitment and retention of high-
calibre employees, inadequate
innovation and new product
development, customer credit risk,
climate risk, interest rate risk, foreign
exchange risk and inappropriate raw
material purchases, risk of lower than
anticipated return on capital invested
and risk of lower underlying earnings
are all managed through the Group’s
risk management framework, which
includes review and monitoring by
the executive lead team.
Overlaying the day-to-day business
activity risks are the unique operational
risks associated with the COVID-19
pandemic, the management of which
has necessitated the introduction of a
vast array of new practices, processes
and procedures collectively designed
to ensure the safety and wellbeing
of all Ridley and related personnel
while maintaining essential continuity
of supply to all farmers of livestock.
Among a host of other risk management
measures, segregation of shift structures,
a thorough cleaning regime using
external contractors and a dedicated
internal team have been introduced for
all operational sites in order to be able
to manage any potential infection that
may be detected within a particular shift
structure. To date, these measures have
proven to be effective; however, all
personnel have been instructed to be
vigilant and diligent in adhering to the
new requirements, which will remain in
place for the foreseeable future and
until such time as there is a significant
shift in the risk profile.
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020 Board of Directors
Dr Gary H Weiss AM
LLB (Hons) LLM (NZ)
JSD (Cornell, NY)
Quinton L Hildebrand
BSc AgEcon, MBA
David J Lord
MBA (Executive) MBS, Grad. Dip. Bus
(Management)(Monash) MAICD
Independent Non-Executive
Director and Chair to
26 August 2020
Chief Executive Officer
and Managing Director
Independent
Non-Executive
Director
Appointed in April 2016, Mr Lord has
enjoyed a senior management career in
consumer products and agribusiness,
most recently as President and Chief
Operating Officer of Saputo Dairy
Division (Australia), as CEO and
Managing Director of Warrnambool
Cheese & Butter Factory Company
Limited (ASX:WCB), and he currently
serves on the board of Dairy Australia
Corporation. Between 2002 and 2009,
David was CEO and Managing Director
of Parmalat Australia. David has
extensive executive director experience
in supply chain, the domestic markets
for consumer and industrial food
products, and the marketing of
Australian dairy products in the
international commodity markets.
From 28 June 2019 to 26 August 2019,
Mr Lord was appointed to the executive
position as Interim CEO for the Ridley
consolidated group while it conducted
its CEO search.
Other current listed company
directorships
None.
Former listed company
directorships in the last three years
None.
Appointed in June 2010, Dr Weiss is an
Executive Director of Ariadne Australia
Ltd and a former executive director of
Guinness Peat Group plc (now Coats
plc). Gary holds LL.B (Hons) and LLM
(Dist.) degrees from Victoria University
of Wellington, New Zealand and a
JSD degree 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. In June 2019, Gary was
appointed as a Member of the Order
of Australia.
Other current listed company
directorships
Ariadne Australia Limited from 1989.
Thorney Opportunities Limited
from 2013.
The Straits Trading Company Limited
from 2014.
Estia Health Ltd from 24 February 2016.
Ardent Leisure Group Limited from
3 September 2017.
Former listed company
directorships in the last three years
Tag Pacific Limited from 1988 until
31 August 2017.
Pro-Pac Packaging Limited from 2012
until November 2017.
Mr Hildebrand has more than 20 years
of experience in the agribusiness
and food industries across Australia
and in South Africa. He has extensive
experience in general management,
commerce, marketing, sales, supply
chain and logistics, planning and
operations.
In his most recent role, which
commenced in 2015, Quinton was
Chief Commercial Officer and
Operations Excellence Director at
Inghams Group Limited. In 2018,
Quinton was appointed as Interim
Chief Executive Officer (CEO).
Prior to joining Inghams Group Limited,
Mr Hildebrand was CEO of Mackay
Sugar Limited from 2008 to 2015,
General Manager Marketing at Illovo
Sugar in South Africa from 2007 to
2008, and International Marketing
Director at South African Sugar
Association from 2001 to 2007.
Mr Hildebrand has a Bachelor of
Science in Agricultural Economics from
the University of Natal in South Africa,
a Master of Business Administration
from the Edinburgh Business School
in Scotland, and a Graduate Diploma
in Banking from the Institute of Bankers
in South Africa.
Other current listed company
directorships
None.
Premier Investments Limited from 1994
until July 2018.
Former listed company
directorships in the last three years
None.
28
Ridley Corporation Limited Annual Report 2020 BOARD OF
DIRECTORS
Professor Robert J van Barneveld
B.Agr.Sc. (Hon), PhD,
R.An.Nutr., FAICD
Ejnar Knudsen
CFA
Independent
Non-Executive
Director
Mr Knudsen represents the
interests of 19.73% shareholder
AGR Agricultural Investments 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. 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.
Other current listed company
directorships
Green Plain Inc.
Former listed company
directorships in the last three years
None.
Patria M Mann
BEc FAICD
Independent
Non-Executive
Director
Appointed in March 2008, Mrs Mann
has over 17 years’ experience as a
Non-Executive Director across various
sectors and is currently also on the
boards of Event Hospitality &
Entertainment Limited and Bega
Cheese Limited. As an experienced
director and a former partner at KPMG,
Patria brings strong ASX, audit, risk
management and governance
experience to the Board. Patria qualified
as a Chartered Accountant and is a
Fellow of the Institute of Company
Directors.
Other current listed company
directorships
Event Hospitality & Entertainment
Limited from October 2013.
Bega Cheese Limited from
10 September 2019.
Former listed company
directorships in the last three years
None.
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 Board of the Australasian
Pork Research Institute 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.
29
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020 Financial Report
Directors’ Report
Remuneration Report – Audited
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
31
43
54
55
56
57
58
59
60
97
98
Ridley Corporation Limited
Annual Report 2020
30
Directors’ Report
For the Year Ended 30 June 2020
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 2020.
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
P M Mann
Q L Hildebrand 1
D J Lord 2
R J van Barneveld
E Knudsen
1. Mr Hildebrand was appointed as Chief Executive Officer (CEO) and Managing Director on 26 August 2019.
2. Mr Lord was Interim CEO from 1 July 2019 to 25 August 2019.
The Ridley Board was restructured following the adoption of this report as detailed in the Post Balance Date Event note (Directors’
Report Note 11).
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) from continuing operations after income tax for the year
was a loss of $8.6 million (m) (2019: $23.6m profit). The consolidated profit and loss from continuing operations before income tax
for the year was a loss of $15.8m (2019: $30.3m profit).
Table 1 – Summary results
Profit from continuing operations before significant items and before income tax
Individually significant items before income tax
(Loss)/profit from continuing operations before income tax
Income tax benefit/(expense)
(Loss)/profit from continuing operations after income tax
Other comprehensive income/(loss), net of income tax
Total comprehensive (loss)/income for the year
2020
$’000
27,431
(43,216)
(15,785)
7,145
(8,640)
114
(8,526)
2019
$’000
24,178
6,161
30,339
(6,774)
23,565
(403)
23,162
The profit and loss summary with a prior period comparison provided in Table 1 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 1 is useful for users as it reflects the underlying profits of the business.
Profit from continuing operations before significant items and before income tax (Table 1) of $27.4 m was up $3.2m from the prior
year’s $24.2m.
Sales revenue for FY20 of $967.9m was down $34.7m (3.5%) on last year’s $1,002.6m, and reflects 1.79m (2019: 1.89m) tonnes of
stockfeed and rendered product sold. The decrease in sales revenue is a reflection of the October 2018 expiry of the Inghams
supply agreement (year on year 65,000 tonnes reduction), the pass through of raw material price movements, and a tightening
of sales arising from the COVID-19 pandemic.
31
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Directors’ Report continued
For the Year Ended 30 June 2020
4. Review of operations
Operating result
Table 2 – Profit and loss account in $ million
Earnings before net interest, tax expense, depreciation and amortisation
(EBITDA) from ongoing operations before individually significant items
EBITDA impact of introduction of lease accounting standard
Less: Corporate
Consolidated EBITDA before significant items
Individually significant items (Table 3)
Consolidated EBITDA
Depreciation and amortisation (DA)
Consolidated EBIT
Net Finance costs
Income tax benefit/(expense)
Reported net (loss)/profit after tax
Comprehensive income/(loss), net of tax
Total comprehensive (loss)/income for the year
2020
2019
Movement
64.3
5.0
(9.8)
59.5
(43.2)
16.3
(26.2)
(9.9)
(5.8)
7.1
(8.6)
0.1
(8.5)
59.4
-
(11.3)
48.1
6.2
54.3
(18.9)
35.4
(5.0)
(6.8)
23.6
(0.4)
23.2
4.9
5.0
1.5
11.4
(49.4)
(38.0)
(7.3)
(45.3)
(0.8)
13.9
(32.2)
0.5
(31.7)
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 reported EBITDA from ongoing operations before significant items and lease accounting impact of $64.3m is $4.9m above last
year’s equivalent $59.4m.
Consolidated EBITDA of $16.3m (after significant items and lease accounting impact) is reported after deducting $43.2m of
significant expense items and adding back lease payments of $5.0m previously expensed under the former lease accounting
arrangements.
The introduction of the new lease accounting standard gives rise to a favourable $5.0m EBITDA impact, unfavourable $4.9m
increase in DA, and $0.4m increase in interest expense as detailed in Notes 5(b) and 5(c).
Corporate costs have been reduced by $1.5m to $9.8m, which is consistent with the prior year after concluding the Baiada legal
claim in February 2020 and after implementing the internal restructure.
Details of the individually significant items are provided in the following section of this review.
Net finance costs have increased as a result of the higher borrowings associated with the major capital expenditure program, which
has concluded with the 3 August 2020 official opening of the new Wellsford feedmill, plus the $0.4m incremental charge associated
with the change in accounting treatment for leases.
The income tax expense is calculated taking full account of the significant items.
The available-for-sale financial sale was disposed of during the financial year, thereby realising the fair value reserve, generating
other comprehensive income of $0.1m, and realising cash proceeds of $1.9m.
Individually significant items impacting the FY20 result
Table 3 – Individually significant items in $ million
Murray Bridge feedmill closure
Internal restructure
Restructure of Central Victorian operations
Settlement of legal claim
Impairment of Novacq™ Cash Generating Unit
Impairment of Moolap investment property
Property segment profit1
Total individually significant items
2020
(7.2)
(4.2)
(7.0)
(1.9)
(21.6)
(1.3)
-
(43.2)
2019
-
-
-
-
-
-
6.2
6.2
Movement
(7.2)
(4.2)
(7.0)
(1.9)
(21.6)
(1.3)
(6.2)
(49.4)
1. The Property segment was closed on 30 June 2019 and ongoing surplus property maintenance costs absorbed within Corporate from 1 July 2019.
32
Ridley Corporation Limited Annual Report 2020 The profit and loss individually significant items summary with a prior period comparison provided in Table 3 above has been
sourced from the audited accounts, but has not been subject to separate review or audit. The Directors believe that the presentation
of the unaudited non-IFRS profit and loss significant items summary in Table 3 is useful for users as it reflects the underlying profits
of the business.
The reported result was impacted by six individually significant events, being the closure of the Murray Bridge feedmill, an internal
restructure of the business in each of the first half and second half years, rationalisation of the Central/Northern Victorian
operations, the settlement of the legal claim from a major customer, the impairment of the Novacq™ Cash Generating Unit (CGU),
and the impairment of the Moolap investment property asset. All of these events have been progressively announced to the market
through the ASX Announcements Platform.
Murray Bridge feedmill closure
The aggregate financial impact of the closure of the Murray Bridge feedmill for the year ended 30 June 2020 amounts to the $7.2m
brought to account in the first half year, which includes appropriate provisioning to complete the site demolition, remediation,
rezoning approvals and asset removal. Of the total restructuring provision brought to account, $4.4m represents non-cash write-
downs of fixed assets to nil value, and $2.1m is retained at 30 June 2020 for activities to be conducted in FY21.
Internal restructure
The aggregate cost of internal restructure reflected in the year result amounts to $4.2m, of which $2.9m was incurred in the first
half year and $1.3m in the second half year. The reported amounts include all notice periods, severance payments and associated
oncosts. The new Ridley group structure has removed a number of layers in certain parts of the organisation, provides clear lines
of accountability, facilitates a more proactive relationship with customers, and enables effective leveraging of the centralised
procurement purchasing and nutrition expertise.
Rationalisation of Central and Northern Victorian operations
Ridley’s operations in Central and Northern Victoria were rationalised in June with the announcement of the immediate closure of
the former Bendigo feedmill and transition of Mooroopna production to the new Wellsford feedmill over the first eight months
of FY21, at the conclusion of which the Mooroopna feedmill will also be closed. The total cost brought to account in FY20 in respect
of this rationalisation is $7.0m, comprising non-cash asset write-offs of $5.6m plus all estimated redundancy, site demolition,
remediation, rezoning approvals and asset removal costs.
Settlement of legal claim
On 14 February 2020, Ridley announced the settlement of the legal proceedings whereby Baiada immediately terminated its legal
proceedings and Ridley agreed to pay $1.935m to Baiada in three instalments over a 12-month period, all of which have been
brought to account in the full year results. As part of the settlement, the existing supply agreement between Ridley and Baiada was
amended to provide production efficiencies for Ridley and changes to the fee structure. The term of the agreement was extended
for a further two years to expire on 30 November 2025.
Impairment of Novacq™ Business Unit
Although the efficacy of Novacq™ in the production of prawns has been well demonstrated and the product is being sold
commercially, delays in the development and installation of processing technology have hindered the scale-up of production
and restricted sales volumes and earnings accordingly.
As a consequence of the above, coupled with the general economic uncertainty prevailing in domestic and world markets,
the Company has raised a non-cash impairment of $21.6 million in its Novacq™ CGU in the financial results for the year ended
30 June 2020.
Impairment of Moolap investment property
With the prospects of a commercial development considered to be low under the Victorian State Government’s strategic
framework for the region encompassing Ridley’s Moolap site, the site has been impaired down to zero as at 30 June 2020.
33
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Directors’ Report continued
For the Year Ended 30 June 2020
4. Review of operations continued
Balance Sheet
The Balance Sheet reports a net deficiency in liquidity with current liabilities of $379.9m, exceeding current assets of $262.2m
by $117.7m. This position is a result of the borrowing liability of $193.0m being reported as a current liability for the reasons
stated following.
Subsequent to 30 June 2020 and prior to 13 August 2020, the Group received certain waivers from its lenders on its financial
covenants for the 30 June 2020 testing period. These waivers provide financial covenant relief in respect of any impairment
charges raised against the FY20 result.
On 13 August 2020, the Ridley Board considered and resolved to approve the recognition of non-cash impairment charges against
the Novacq™ CGU. Despite having received the impairment waivers, the Australian Accounting Standards deem this decision to
have applied as at 30 June 2020 (i.e. prior to the granting of the impairment waivers by the Group’s financiers), and therefore that
there has been a technical breach of banking covenants, which requires the Group’s borrowings to be reported as current rather
than non-current. At the date of approval of the Financial Report, the lending facilities have been restored to the classification of
non-current borrowings and the Group has remained at all times compliant with its funding covenants, including as at the most
recent test date of 30 June 2020.
There have been the following movements in the Balance Sheet over the last 12 months:
(i) A $45.8m increase in net debt for the year from $101.4m to $147.2m, reflecting the completion of the capital investment
program to construct a new extrusion plant at Westbury in Tasmania and feedmill at Wellsford in Central Victoria. Net debt
at 30 June 2020 comprises gross borrowings of $193.0m offset by cash and cash equivalent balances of $45.8m.
(ii) A $3.5m increase in current receivables from $108.2m to $111.7m, which reflects a normal fluctuation in timing between
invoicing and receipts and no movement in debtor days outstanding from the 33-day pre-COVID-19 position at 30 June 2020.
(iii) A $20.6m increase in inventory from $83.8m to $104.4m, which reflects a combination of higher inventory holdings to ensure
continuity of production in the current environment of uncertain supply plus an increase in stockbuild for new fin fish feed
production and the forthcoming prawn growing season.
(iv) A $10.0m decrease in non-current receivables from $11.7m to $1.7m, due to the $3.85m receipt of prior year land sale deferred
consideration plus the $6.6m recapitalisation of the loan to the former Thailand 49% joint venture interest, which became
wholly-owned and consolidated during the year.
(v) The impairment down to zero in the financial year of the carrying values of the former saltfields at Moolap previously carried
at $1.3m and disclosed as non-current investment property.
(vi) A $34.9m increase in non-current property, plant and equipment from $259.3m to $294.2m, which reflects the costs of
completion for the new extrusion plant at Westbury and feedmill at Wellsford. In addition, $13.8m of right-of-use assets,
formerly off-balance sheet operating leased assets, were brought onto the balance sheet effective from 1 July 2019 as a result
of the introduction of the new lease accounting standard (refer Notes 5(c) and 28). The closing carrying value of these assets
as at 30 June 2020 was $8.8m after applying an amortisation charge of $4.9m. The closing balance of property, plant and
equipment reflects the write-down of Bendigo and Mooroopna assets of $5.2m and Murray Bridge assets of $4.4m. Of the total
impairment charge of $21.6m raised in the year, $7.9m was applied to property, plant and equipment in the Novacq™ CGU.
(vii) A net $10.7m decrease in intangibles from $85.7m to $75.0m comprising additions for software purchases of $0.3m, capitalised
Novacq™ assets under development in Thailand of $3.4m, and goodwill of $1.0m. Offsetting the additions were the amortisation
charge of $1.8m, disposals of $0.1m, and the $13.7m impairment of the Novacq™ CGU asset under development.
(viii) The 49% shareholding in the non-current equity-accounted investment in the Thailand feedmill was increased during the year
to 100%, recapitalised and consolidated within the Group. The available-for-sale financial asset investment in the UK-listed
specialist ingredients company was sold during the year.
(ix) A $4.9m increase in provisions, which comprises a new $6.3m restructuring provision to cover the FY21 non-cash write-down
of Mooroopna assets ($2.8m), plus all anticipated costs associated with the disposal of the feedmills at Murray Bridge, Bendigo
and Mooroopna ($3.5m) offset by a $1.4m reduction in employee provisions following the FY20 internal restructure.
(x) Current lease liabilities of $4.2m and non-current lease liabilities of $4.8m are brought to account for the first full financial year
within Balance Sheet payables as a result of the introduction of the new lease accounting standard.
(xi) Share capital increased by $4.6m through of the utilisation of the Dividend Reinvestment Plan (DRP) supported by a shortfall
placement for the FY20 interim dividend.
34
Ridley Corporation Limited Annual Report 2020 Dividend
The Board paid a 2019 final cash dividend of 2.75 cents per share, fully franked, on 31 October 2019, and a 2020 interim dividend of
1.5 cents per share, fully franked, on Thursday 30 April 2020. The DRP was reinstated for the 2020 interim dividend, under which
2,862,277 fully paid ordinary shares were issued to existing shareholders, plus 3,313,057 fully paid ordinary shares under a placement
shortfall at an issue price of $0.748 per share.
After the balance sheet date, the Ridley Board determined not to pay a dividend and to apply these funds to the retirement of net
debt. This dividend decision was made in respect of the final FY20 dividend only, and was made in accordance with Ridley practice
to consider the payment of dividends in the context of capital requirements, net debt, the earnings and cash flow conversion of the
business and the growth opportunities prevalent and foreseeable at the time of dividend declaration.
Cash flow and working capital
The operating cash inflow for the year (Table 4 overleaf) after working capital movements and maintenance capital expenditure
was $18.3m, a reduction of $15.4m on last year’s $33.7m. The $22.8m impairment of the Novacq™ CGU and Moolap investment
property is a non-cash expense.
Working capital increased by $7.5m over last year largely due to an increase in inventory holding levels, which have been temporarily
raised to ensure continuity of raw material supply in the current environment of uncertainty.
Maintenance capital expenditure has been maintained at historical levels.
Development capital expenditure of $42.9m includes the completion of the extrusion plant at Westbury, Tasmania and the feedmill
at Wellsford, Victoria, which was officially opened on 3 August 2020.
Payments for intangible assets of $4.5m comprise Novacq™ assets under development and software, plus goodwill of $1.0m initially
recognised on the acquisition of the controlling interest in the Thailand feedmill but subsequently impaired to zero.
Dividends paid for the year of $10.9m comprise the 2019 final dividend of 2.75 cents per share paid fully in cash on 31 October 2019,
plus the interim FY20 dividend of 1.5 cents per share paid on 30 April 2020, of which $2.1m was settled through the take-up of DRP
entitlements by existing shareholders and $0.2m through payment of employee in-substance options.
$2.4m of proceeds were received in respect of the FY20 interim dividend DRP placement shortfall and $0.2m was expended to
acquire 150,000 shares issued to two key employees under the Special Retention Plan.
The prior year disposal of property assets realised $3.8m of proceeds in the year, with a further $1.9m of proceeds generated from
the sale of the available-for-sale financial asset.
$0.5m of funds were loaned to the Thailand Joint Venture prior to it becoming wholly owned as part of the land and share
acquisition transaction, for which the cash consideration paid was $8.6m and attributed to property, plant and equipment.
Net tax payments of $4.3m were made during the year and $6.2m in net finance costs.
35
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Directors’ Report continued
For the Year Ended 30 June 2020
4. Review of operations continued
Table 4 – Cash flows for the year in $ million
Consolidated EBIT
Depreciation and amortisation
Consolidated EBITDA
Add back non-cash impairment
Increase in working capital
Maintenance capital expenditure
Operating cash flow
Development capital expenditure
Payment for intangibles
Dividends paid
Issue of share capital under DRP
Share-based payments
Proceeds from sales of assets
Net finance cost
Net tax payments
Loans to related parties
Payment of lease liabilities for right-of-use assets
Other items
Cash flow for the year
Opening net debt balance at 1 July
Closing net debt balance at 30 June
30 June 2020
(9.9)
26.2
16.3
22.8
(7.5)
(13.3)
18.3
(42.9)
(4.5)
(10.9)
2.4
(0.2)
5.7
(6.2)
(4.3)
(0.5)
(5.0)
2.3
(45.8)
(101.4)
(147.2)
30 June 2019
35.4
18.9
54.3
-
(7.3)
(13.3)
33.7
(60.0)
(5.5)
(11.7)
3.1
(2.4)
5.0
(5.7)
(1.7)
(0.7)
-
(2.7)
(48.6)
(52.8)
(101.4)
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/diluted earnings per share
– Continuing
– Before significant items #
# The profit after income tax before significant items adopted in the above calculation is $21,020,000.
2020
Cents
(2.8)/(2.8 )
7.1/7.1
2019
Cents
7.6/7.6
7.6/7.6
The Directors believe that the presentation of the unaudited non-IFRS EPS calculation before significant items above is useful for users
of the accounts as it reflects the underlying earnings per share of the business.
Gearing and financing facility
On 13 November 2019, Ridley executed a new $30m Receivables Purchase Agreement facility with Rabobank. The facility was
and remains fully drawn down, with the funds applied against Ridley’s consolidated banking facility, which was refinanced on
26 December 2019 for a further five years. As part of the refinancing, the total borrowing facility of $200m and the Trade Payables
facility of $50m were both retained. In addition, certain banking covenant requirements were relaxed to accommodate the funding
requirements for the new plants at Westbury and Wellsford, the closure of the Murray Bridge feedmill, the restructure of Central
Victorian operations, and internal restructure of the business.
Gearing is reported as net debt to equity in accordance with the covenants of the banking facility, and includes the fully drawn
Receivables Purchase Agreement facility but excludes the draw down against the Trade Payables facility.
36
Ridley Corporation Limited Annual Report 2020
Gearing ratio
Gross debt
Less: cash
Net debt
Total equity
Gearing ratio
Capital movements
2020
$’000
193,000
(45,818)
147,182
261,645
56.3%
2019
$’000
118,926
(17,483)
101,443
277,499
36.6%
During FY20, a total of 150,000 (FY19: 2,092,935) shares were acquired by the Company on market for an outlay of $0.2m (FY19: $2.8m)
in satisfaction of:
(i)
(ii)
the vesting of 150,000 (FY19: nil) shares under the Special Retention Plan, which were acquired on-market for a total outlay
of $163,387;
the vesting of nil (FY19: 1,384,802 with a further 24,123 share entitlement satisfied by payment in cash) shares allocated to Ridley
employees under the Ridley Long Term Incentive Plan; and
(iii) the vesting of nil (FY19: 708,133) shares allocated under the Ridley Employee Share Scheme, which was suspended for FY20.
The Dividend Reinvestment Plan (DRP) was utilised for the payment of the FY20 interim dividend on 30 April 2020, which resulted
in the issue of 2,862,277 (2019: 896,926) fully paid ordinary shares to existing shareholders plus 3,313,057 (2019: 2,542,224) fully paid
ordinary shares issued to institutional and sophisticated investors pursuant to a shortfall placement under the DRP. The issue price
for these shares was $0.748 per share.
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 (CODM).
Segment results 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, borrowings, income
tax assets and liabilities and surplus property asset holding costs. Segment capital expenditure is the total cost incurred during
the period to acquire property, plant and equipment and intangible assets other than goodwill.
On 26 August 2019, Ridley appointed Mr Quinton Hildebrand as its new Chief Executive Officer and Managing Director (CEO).
Following the appointment of the new CEO, Ridley has set a new strategic direction, continued the disposal of surplus property
assets, announced a number of restructuring initiatives to better align the Group’s operating model and site footprint to the new
strategy, and has undertaken necessary investments to maximise the potential of Novacq™. These activities have included:
• An organisational redesign announced on 11 November 2019 involving changes in executive leadership and the establishment
of a leaner organisational design, followed by a subsequent restructure announced on 23 June 2020 across those business units
not included in the initial announcement.
• The closure, rationalisation or suspension of operations at selected feedmills across Australia and Thailand, combined with the
commissioning of new facilities at Westbury and Wellsford.
• Continued divestment of residual property assets, with the remaining property at Moolap written down to nil as at 30 June 2020
as a reflection of the Victorian State Government’s restrictions for the commercial development of the site as published in its
August 2019 Moolap Coastal Strategic Framework Plan. Activities to divest the last remaining land parcel at Lara and the Moolap
site are continuing in FY21.
In light of the above, and recognising the fundamental changes in business activity, the new organisational structure and internal
reporting to the CODM arising from the FY20 business restructures, from 1 July 2020 Ridley expects to report segment
information for:
• Bulk Stockfeeds – comprising the Group’s premium quality, high-performance animal nutrition stockfeed solutions delivered in bulk.
• Packaged Feeds and Ingredients – comprising the Group’s premium quality, high-performance animal nutrition feed and ingredient
solutions delivered in packaged form from one-tonne bulka bag down to 3kg bags.
37
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Directors’ Report continued
For the Year Ended 30 June 2020
4. Review of operations continued
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, Companion Animals, Consumer Goods,
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 for the feed Ridley manufactures on their behalf, 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 – while 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 in livestock or market access restrictions
offshore due to increased segregation requirements in rendering – Ridley has a strategy of plant 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 the 2016 outbreak of White Spot disease (White Spot Syndrome Virus
or WSSV) in the Logan River region of Queensland, which devastated a number of affected farms in the region, or from
an offshore market demanding increased product segregation in rendering such as the Indonesian decree across animal
protein imports issued in 2018 that banned Ridley’s rendered product exports to Indonesia.
• Customer and supplier concentration and risk of customer and supplier vertical integration or risk of losing a significant
customer or supplier – Ridley endeavours to enter into long-term sales and supply contracts with its customers and suppliers.
This strategy 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 and forward integration into rendering by
significant suppliers. 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 the Maroota Rendering operation. The potential for disputes to arise with customers over animal performance
linked to feed is a significant risk.
• Commercialising Novacq™ – although the efficacy of Novacq™ in the production of prawns has been well demonstrated and
the product is being sold commercially, current delays in the development and installation of processing technology have
hindered scale-up of production and restricted sales volumes and earnings accordingly. Although commercialisation of Novacq™
and risk mitigation strategies are being actively managed by Ridley, risks exist with any start-up business, some of which are
beyond Ridley’s control and could further delay commercialisation. Risks such as adverse weather impacting the expansion
of pond space to produce Novacq™, falling demand for prawns due to a significant disease outbreak, or from the current
global economic uncertainty.
• Corporate – risks such as safety, recruitment and retention of high-calibre employees, inadequate innovation and new product
development, customer credit risk, climate risk, interest rate risk, foreign exchange risk and inappropriate raw material purchases,
risk of lower than anticipated return on capital invested and risk of lower underlying earnings are all managed through the Group’s
risk management framework, which includes review and monitoring by the executive lead team.
Overlaying the day-to-day business activity risks are the unique operational risks associated with the COVID-19 pandemic, the
management of which has necessitated the introduction of a vast array of new practices, processes and procedures collectively
designed to ensure the safety and wellbeing of all Ridley and related personnel while maintaining essential continuity of supply
to all farmers of livestock.
Among a host of other risk management measures, segregation of shift structures, a thorough cleaning regime using external
contractors and a dedicated internal team have been introduced for all operational sites in order to be able to manage any potential
infection that may be detected within a particular shift structure. To date, these measures have proven to be effective; however,
all personnel have been instructed to be vigilant and diligent in adhering to the new requirements, which will remain in place for
the foreseeable future and until such time as there is a significant shift in the risk profile.
38
Ridley Corporation Limited Annual Report 2020 Outlook
The 2020 financial year has seen a reset of the Group, with significant restructuring, repositioning and revaluing activities.
These have now been substantially concluded. The outlook for the coming year is positive, despite the general economic
uncertainty prevailing in domestic and world markets. In managing the risk posed by the COVID-19 pandemic, the Group has
implemented a comprehensive program of segregation, isolation, sanitation and communication to safeguard the essential service
provided by the Group. The program has jointly focused on maintaining the safety and wellbeing of all employees, suppliers and
customers, and of the wellbeing of the livestock that is dependent upon the continuity of supply of Ridley feed solutions.
Ridley customers have been affected by the pandemic in many different ways, ranging from increased demand for layer birds for
egg production to a decline in premium meat and fish cuts arising from the disruption to food service markets. Being a critical
supplier to the essential industries providing protein predominantly to the Australian population, and having reset its operating
cost base and customer value focus in FY20, Ridley’s operational performance has proven to be robust.
With the completion of the $150m asset renewal program, which has delivered four new world-class production facilities in the last
eight years, capital expenditure in the year ahead will return to more normal levels and the focus will be on cash generation and
debt reduction. The execution of the growth strategy is expected to increase earnings as the business capitalises on the full year
benefits of the initiatives implemented in FY20, derives value from the capital investment program, and focuses on providing
proactive solutions and a compelling value proposition to support the sustainable growth of our customers.
5. Significant changes in the state of affairs
Other than as reported in Section 4 of this report, there were no significant changes in the state of affairs of the Group during the
year ended 30 June 2020.
6. Dividends and distributions to shareholders
The Company paid a 2019 final cash dividend of 2.75 cents per share, fully franked, on 31 October 2019, and a 2020 interim dividend
of 1.5 cents per share, fully franked, on Thursday 30 April 2020.
Dividends paid to members during the financial year were as follows:
Interim dividend
In respect of the 2020 financial year paid on 30 April 2020 of 1.5 cents, 100% franked
The Dividend Reinvestment Plan (DRP) was reinstated for the 2020 interim dividend, under which 2,862,277
fully paid ordinary shares were issued to existing shareholders plus 3,313,057 fully paid ordinary shares under
a placement shortfall at an issue price of $0.748 per share
Final dividend
In respect of the 2019 financial year paid on 31 October 2019 of 2.75 cents, 100% franked
7. Directors’ and executives’ remuneration
Refer to the Remuneration Report.
2020
$’000
4,670
8,556
13,226
39
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Directors’ Report continued
For the Year Ended 30 June 2020
8. 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:
Board
Audit and Risk
Committee
Remuneration and
Nominations Committee
Ridley Innovation and
Operational Committee
Directors
G H Weiss
Q L Hildebrand 1
P M Mann
R J van Barneveld
E Knudsen
D J Lord
H
12
10
12
12
12
12
A
12
10
12
12
11
12
1. Appointed on 26 August 2019.
H
5
5
5
A
5
5
4
H
5
5
5
A
5
5
3 2
H
4
4
4
A
4
4
4
2. For the two meetings held in August 2019, Mr Lord was in attendance but temporarily stepped down from formal committee membership given
he was engaged in an executive capacity as Interim CEO.
H: Number of meetings held during period of office.
A: Number of meetings attended.
In addition to the formal attendance above, all Directors are invited to attend all committee meetings.
9. 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.
10. 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.
11. 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 (in substance Options) *
* The share grant and supporting loan together in substance comprise a share option.
Number
6,046,106
3,320,443
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.
40
Ridley Corporation Limited Annual Report 2020 12. 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 Board is 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 continues to comply with its
NGER reporting requirements.
13. Post balance date events
As previously announced, Ridley Chair Dr Gary Weiss AM retired on 26 August 2020.
Mr Mick McMahon and Mr Rhys Jones are being appointed as Ridley Directors on 27 August 2020, with Mr McMahon assuming the
role of Ridley Chair. Mr McMahon is also being appointed to the Ridley Audit and Risk Committee and Mr Jones to the Remuneration
and Nominations Committee.
There were no other matters or circumstances have arisen since 30 June 2020 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.
14. 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.
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 FY20 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.
41
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Directors’ Report continued
For the Year Ended 30 June 2020
15. Non-audit services continued
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page
54 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
$
20,058
2,898
22,956
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 2018/191 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 26 August 2020 in accordance with a resolution of the Directors.
Dr Gary H Weiss
Director and Ridley Chair
Quinton L Hildebrand
CEO and Managing Director
42
Ridley Corporation Limited Annual Report 2020 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 2020. This report forms part
of the Directors’ Report for the year ended 30 June 2020.
Remuneration and Nominations Committee
The Remuneration and Nominations Committee (throughout the Remuneration Report referred to as the Committee), consisting
of at least three 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 responsible for evaluating the Board’s performance, reviewing Board size and composition, setting the criteria for membership,
and identifying and evaluating candidates to fill vacancies on behalf of 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
During the 2018 financial year, Morrow SodaIi 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 most meaningful measure of shareholder performance; and
• a recommendation in relation to diversity policy disclosure.
The Board adopted these recommendations in prior years, have reviewed and reassessed them, and have continued to apply the
existing policies and practices throughout the 2020 financial year.
Remuneration of Directors and executives
Principles used to determine the nature and amount of remuneration
Remuneration packages are set at levels that are intended to attract and retain Directors and executives capable of directing and
managing the Group’s operations and achieving the Group’s strategic objectives.
Executive Remuneration is 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.
43
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Remuneration Report – Audited continued
Remuneration of Directors and executives continued
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 years.
(Loss)/profit attributable to members
of Ridley Corporation Ltd
Earnings before interest, tax, depreciation
and amortisation (EBITDA) #
Earnings before interest and tax #
Cash flow from operating activities #
Return on shareholders’ funds before
discontinued operations #
Dividends paid
TSR 1
Short-term incentive to KMP
2020
2019
2018
2017
2016
$’000
(8,640)
23,565
17,409
25,815
27,606
$’000
$’000
$’000
%
$’000
%
$’000
16,316
(9,843)
23,485
(3.1)
13,226
(35.5)
445
54,315
35,412
36,824
8.6
13,083
(10.4)
-
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
# For 2020, EBITDA result is shown after significant pre-tax expense items of $43.216m.
1. Total Shareholder Return (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, expressed as a percentage.
Non-Executive Directors
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, Ridley Innovation and Operational Committee and Remuneration and Nominations Committee each receives $10,000
of incremental fees in addition to the base Director fees. The total amount paid to Non-Executive Directors in FY20 was $545,844
(FY19: $545,475).
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
For FY20, executives and employees in senior positions are eligible for short-term incentive (STI) payments based on two performance
streams, being consolidated EBITDA (70% weighting) and personal Key Performance Indicators (KPls) (30% weighting), of which
there may be up to six for each STI scheme participant aligned to the participant’s role and ability to create shareholder value.
Each year, appropriate KPls 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. Where achievement of
90% of budgeted EBITDA is reached, the payment of a partial STI based on the achievement of personal KPls will be assessed.
44
Ridley Corporation Limited Annual Report 2020 KPls 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 KPls are then cascaded down to the Key Management Personnel (KMP),
Direct Reports of the CEO referred to as C-Suite Executives, 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 EBITDA. The measures of personal
performance include targets on safety, training, operational excellence, customer focus, sustainability and community, and people
values and development. A summary of the STI award structure for FY20 is shown in the following table, subject always to the
exercise of discretion by the Board.
Metric
Financial
Financial
Financial
Financial
Personal
Personal
Percentage of budgeted EBITDA
< 100%
100%
100% + $1m to 100% + $10m
100% + > $10m
< 90%
90% or greater
Award
Nil
50% of the 70% financial component
51%–100% of the 70% financial component straight line, pro rata
of incremental $10m
100% of the 70% financial component
Nil
100% of the 30% financial component subject to the individual
meeting his or her own KPls for the year
Following the end of the 2020 financial year, the financial results and each individual’s performance against KPls have been
reviewed to determine STI payments for each executive. Given the underlying consolidated EBITDA performance ahead of budget
before significant items, all of which favourably reposition the business for the future, the Board has resolved to award 50% of the
FY20 STI entitlements to participating employees (reduced on a pro-rata basis for any employee completing greater than six but
less than 12 months of continuous service in FY20). The award will be satisfied through the issue of unrestricted Ridley shares
in September 2020, using a five day Volume Weighted Average Price (VWAP) prior to the issue date as the basis for determining
the number of shares to equate to the award value.
STI incentives by role range from 70% of the base package for the CEO down to 10% of the base package for the least senior
participants in the plan as shown in the following table.
The KPls 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.
For each STI and grant of performance rights included in the annual 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 $890,499 (2019: $1,511,311)
payable to KMP had all STI performance targets been achieved.
Name
Q L Hildebrand – from
26 August 20192
A Boyd
C Klem
A Lochland3
H Slattery – from
4 April 20204
KMP STI for FY20
STI percentage
range of TEP
STI maximum
potential
award 1
2020
2019
2020 STI
payment in $
Paid
%
Forfeited
%
Paid
%
Forfeited
%
0–70%
0–50%
0–40%
0–30%
0–40%
414,540
245,933
147,216
82,810
207,270
122,967
73,608
41,405
Nil
Nil
890,499
445,250
50%
50%
50%
50%
Nil
50%
50%
50%
50%
N/A
-
-
-
Nil
N/A
N/A
100
100
100
N/A
Former KMP M Murphy and J Scaife did not participate in the FY20 STI as a result of their termination during the first half year.
1. STI percentage applicable subject to pro rata adjustment for the period of employment or in the KMP role.
2. Mr Hildebrand’s maximum potential award has been pro-rated to his 26 August 2019 date of commencement of employment.
3. Although no longer a KMP from 11 November 2019, Mr Lochland was Acting CEO of Novacq™ through to 31 March 2020, and consequently qualifies
for pro rata participation in the STI for FY20.
4. In order to participate in the STI, the employee needs to have completed not less than six months’ continuous service in that financial year.
45
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Remuneration Report – Audited continued
Long-term incentives
There was an issue of performance rights to senior executives and officers under the Ridley Long Term Incentive Plan (LTIP) with an
effective grant date of 1 September 2019 and standard terms and conditions as stated below. The adoption of a 1 September 2019
effective date of grant in FY20 was designed to coincide with the commencement of the new Ridley CEO and a five-day VWAP
reflective of the first five days of trading following the release of the FY19 annual result. In future years, the performance period
will revert to the historical three-year term from a 1 July effective date of grant.
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.
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 the satisfaction of performance hurdles set over the three-year term of the Rights.
In prior years, the performance measure has been Total Shareholder Return (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 1 July effective date of grant. Fair value was calculated by an independent expert in accordance with AASB2 on an option-
equivalent basis.
For FY20 and subsequent years, there are two performance measures, namely Return on Funds Employed (ROFE) and Absolute
TSR (as opposed to Relative TSR). The new measures are more aligned to current industry best practice and are less subject to
distortion from extraneous factors beyond the Group’s control. A summary of the performance measures for FY20 is provided
in the following table.
The number of Rights issued to each participant is divided equally into two tranches, Tranche A and Tranche B. The performance
measure for Tranche A Rights is the ROFE hurdle, while the Absolute TSR is the performance hurdle for Tranche B Rights. Each
tranche is independently tested, such that one tranche could hypothetically result in 100% vesting while the other could result
in 100% forfeiture, or any combination thereof.
The fair value of Tranche B Rights has been calculated by an independent expert in accordance with AASB2 on an option-equivalent
basis, while the accounting fair value of Tranche A Rights is estimated excluding the impact of the ROFE hurdle (as this is considered
a ‘non-market condition’). The impact of the ROFE hurdle is then taken into consideration via adjusting the estimated number of
Tranche A Rights that will vest based on current and projected performance.
Tranche
A
A
A
A
B
B
B
B
Metric
ROFE
ROFE
ROFE
ROFE
Absolute TSR
Absolute TSR
Absolute TSR
Absolute TSR
Performance hurdle for
the period to 30 June 2022
< 19%
19%
19%–30%
> 30%
< 30%
30%
30%–70%
> 70%
Award
Nil
50%
50%–100% on a straight-line, pro rata basis
100%
Nil
50%
50%–100% on a straight-line, pro rata basis
100%
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, the number of unvested Rights is reduced on a pro rata time basis by the proportion of the period not served by
the departing employee to the three-year term of the Rights. The resulting unvested Rights are then tested as at the date
of the employee’s departure and any shares duly awarded accordingly.
46
Ridley Corporation Limited Annual Report 2020 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 LTIP, any unvested Rights will lapse.
The shares to satisfy awards under the plan may be newly issued capital or existing shares purchased on-market, with the practice
in recent years being to purchase the shares on-market.
During the year ended 30 June 2020, 4,098,368 (2019: 2,700,000) Rights were issued under the LTIP, of which 1,695,207
(2019: 1,300,000) were granted as remuneration to KMP and the balance issued to other non-KMP senior executives within
the organisation. Of the total Rights issued during the year, 452,262 issued to non-KMP were subsequently cancelled.
Summary of Ridley TSR performance
The following table provides a summary of Ridley share price performance for each tranche of the LTIP Rights on issue at year end
measured against the Small Ords Index, rebased to the effective date of grant and using 30 June 2020 as the hypothetical end
date. The data does not take account of dividends and are therefore only an indicative and incomplete measure of Absolute
and Relative TSR performance.
Start date
1 July 2017 1
1 July 2018
1 Sep 2019 2
1 Sep 2019
Test date
30 June 2020
30 June 2021
30 June 2022
30 June 2022
Ridley
(47.7%)
(46.1%)
N/A
(31.3%)
Small Ords
(9.6%)
(8.7%)
N/A
(8.5%)
Number of
rights on issue
2,225,000
2,400,000
1,823,053
1,823,053
Hypothetically
vested as at
30 June 2020
Nil
Nil
N/A 2 – Tranche A
Nil – Tranche B
% Hypothetically
vested as at
30 June 2020
Nil
Nil
N/A
Nil
1. The Rights on issue with an effective grant date of 1 July 2017 and performance period ending 30 June 2020 all lapsed on 1 July 2020.
2. It is not relevant to ascribe a theoretical vesting to this Tranche A of Rights given that vesting is determined by operating EBITDA performance
from 1 July 2021 to 30 June 2022.
There have been no issues of Rights subsequent to balance date; however, the Board expects to make a 2021 financial year offer
of Rights in the first half year.
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. Consequently, 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 2020, nil (2019: nil) SRP Rights were issued and the 150,000 SRP
Rights on issue at the start of FY20 were converted into 150,000 ordinary Ridley shares on 1 January 2020, which were acquired
on-market for a total outlay of $163,387.
Ridley Employee Share Scheme (ESS)
Under the ESS, shares have historically been offered to permanent employees with a minimum of 12 months’ continuous service
prior to the offer date, at a discount of 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 ESS
shares are applied against the outstanding loan balance until such balance is fully extinguished. The amount of the discount and
number of shares allocated are at the sole discretion of the Board. The purpose of the ESS is to align employee and shareholder
interests and to foster a sense of loyalty and ownership in the Company. The Scheme was suspended for FY20 as a result of the
COVID-19 pandemic such that nil (2019: 708,133) shares were acquired on-market and allocated to participating employees during
the year. The total value of shares purchased on-market pursuant to the ESS was nil (2019: $858,349).
47
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Remuneration Report – Audited continued
Long-term incentives 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
Special Retention Plan
Long Term Incentive Plan 1
Total
Number of shares
Market value $’000
2020
-
150,000
-
150,000
2019
708,133
-
1,384,802
2,092,935
2020
-
163
-
163
2019
858
-
1,942
2,800
1. In addition to the shares purchased on-market in FY19, 24,123 of the LTI employee share entitlement was satisfied in cash in lieu of shares.
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 2020 financial year unless otherwise stated.
Name
Directors 1
G H Weiss
Q L Hildebrand
P M Mann
R J Van Barneveld
E Knudsen
D J Lord
Executives
A Boyd
C Klem
H Slattery
M Murphy
A Lochland 2
J Scaife
Position and status
Chair
Managing Director and CEO – from 26 August 2019
Director
Director
Director
Director – Interim CEO from 1 July 2019 to 26 August 2019
Chief Financial Officer and Company Secretary
General Manager Rendering
General Manager Aquafeed – from 4 April 2020
General Manager Safety, People and Technical Development – to 11 November 2019
General Manager Packaged Products, Aquafeed and Supplements – to 11 November 2019
General Manager Commercial Feeds – to 11 November 2019
1. While the formal separation date of former CEO and Managing Director Mr T Hart was 27 July 2019, Mr Hart ceased performing any executive
or Director Ridley duties and thereby being a KMP from 27 June 2019.
2. Although no longer a KMP, Mr Lochland was Acting CEO Novacq™ from 11 November 2019 until 31 March 2020.
From 13 November 2019, an Acting Chief Operating Officer (COO) was engaged on a short-term contract while the Group conducted
an executive search process. Given the short-term nature of the interim role and the degree of oversight provided by the CEO,
this role is not considered to be a KMP role. The permanent COO role will be a KMP role effective from 1 July 2020.
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 2020 and 2019 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.
48
Ridley Corporation Limited Annual Report 2020 2020
Short-term benefits
Post
employ-
ment
benefits
Directors’
fees and
cash salary
$
Super-
annuation
$
STI
$
Other
benefits
$
Share-
based
payments
Perfor-
mance
rights/
options
$
Total
$
Name
Directors
G H Weiss – Chair
Q L Hildebrand – CEO
and Managing Director3
P M Mann
R J van Barneveld4
E Knudsen4
D J Lord5
T J Hart8
Total Directors
Executives
A Boyd
C Klem
M Murphy6
A Lochland6
J Scaife6
H Slattery7
Total executives
Total
163,864
-
16,386
-
-
180,250
575,481
88,955
97,850
87,550
173,527
53,756
1,240,983
469,246
343,041
197,951
257,281
222,933
72,311
1,562,763
2,803,746
207,270
-
-
-
-
-
207,270
122,967
73,608
-
41,405
-
-
237,980
445,250
21,314
8,895
-
-
14,213
5,290
66,098
22,620
25,000
15,439
18,750
15,540
8,242
105,591
171,689
-
-
-
-
881,670
881,670
-
-
234,735
161,916
80,730
-
477,381
1,359,051
109,348
-
-
-
-
-
109,348
913,413
97,850
97,850
87,550
187,740
940,716
2,505,369
130,565
80,708
22,120
22,120
11,594
-
267,107
376,455
745,398
522,357
470,245
501,472
330,797
80,553
2,650,822
5,156,191
% 1
-
12%
-
-
-
-
-
18%
15%
5%
4%
4%
N/A
% 2
-
35%
-
-
-
-
-
34%
30%
5%
13%
4%
N/A
1. Percentage remuneration consisting of performance rights/options.
2. Percentage remuneration that is performance related.
3. Appointed on 26 August 2019.
4. Director fee paid to a company.
5. Interim CEO from 1 July 2019 to 26 August 2019, whereupon Mr Lord reverted to Non-Executive Director.
6. KMP until internal restructure on 11 November 2019. Other benefits comprise contracted severance payments. Although no longer a KMP,
Mr Lochland was Acting CEO Novacq™ until 31 March 2020.
7. From 4 April 2020.
8. While the formal separation date of former CEO and Managing Director Mr T Hart was 27 July 2019, Mr Hart ceased performing any executive
or Director Ridley duties from 27 June 2019.
From 13 November 2019, an Acting COO was engaged on a short-term contract while the Group conducted an executive search
process. Given the short-term nature of the interim role and the degree of oversight provided by the CEO, this role is not
considered to be a KMP role. The permanent COO role is a KMP role effective from 1 July 2020.
49
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Remuneration Report – Audited continued
2019
Short-term benefits
Post
employ-
ment
benefits
Name
Directors
G H Weiss – Chair
T J Hart – Managing
Director3
P M Mann
R J van Barneveld 4
E Knudsen4
D J Lord
Total Directors
Executives
A Boyd
M Murphy
C Klem
A Lochland
J Scaife
Total executives
Total
Directors’
fees and
cash salary
$
161,477
793,396
87,659
95,000
85,000
83,114
1,305,646
482,078
319,581
337,681
337,681
357,964
1,834,985
3,140,631
Share-
based
payments
Perfor-
mance
rights/
options
$
Total
$
Super-
annuation
$
STI
$
Other
benefits5
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,148
-
-
177,625
20,290
8,766
-
-
8,311
53,515
22,625
25,000
25,000
25,000
25,481
123,106
176,621
1,000
-
-
-
-
1,000
1,000
1,000
1,000
1,000
-
4,000
5,000
433,558
-
-
-
-
433,558
144,000
91,557
91,557
91,557
31,667
450,338
1,248,244
96,425
95,000
85,000
91,425
1,793,719
649,703
437,138
455,238
455,238
415,112
2,412,428
883,896 4,206,148
% 1
-
35%
-
-
-
-
22%
21%
20%
20%
8%
% 2
-
35%
-
-
-
-
22%
21%
20%
20%
8%
1. Percentage remuneration consisting of performance rights/options.
2. Percentage remuneration that is performance related.
3. Mr Hart’s employment terminated on 27 June 2019.
4. Director fee paid to a company.
5. Comprises first $1,000 of value upon vesting of Performance Rights, with the balance satisfied through the allocation of Ridley shares.
50
Ridley Corporation Limited Annual Report 2020 Contracts of employment
Remuneration and other terms of employment for the Managing Director are formalised in a service agreement that includes
provision of performance-related bonuses and other benefits, eligibility to participate in the Ridley Corporation LTIP, STI and Ridley
Employee Share Scheme. Other major provisions of the agreements relating to remuneration are set out below.
Q L Hildebrand, CEO and Managing Director from 26 August 2019
• Base remuneration, inclusive of superannuation and any elected benefits, of $700,000 from the 26 August 2019 date of
commencement of employment, to be reviewed annually each December with any changes to be effective from the following
1 January, commencing with a December 2020 review.
• Full scheme participation up to 70% of total base package based on the achievement of certain agreed KPls as approved by
the Board, split 70% on consolidated Group EBITDA performance and 30% on personal KPls. The split of personal KPls for FY20
comprised targets for safety (20%), Novacq™ commercialisation (20%), Aquafeed new business (30%) and business improvement
and cost reduction (30%). The 70% of Ridley financial performance STI for FY20 is assessed solely against budgeted EBITDA
before any extraordinary item(s).
• 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 25 November 2019 for the 1,133,488 performance rights
issued to Mr Hildebrand in FY20 with a performance test period that expires on 30 June 2022.
• 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 CEO’s contract of employment has no fixed term, and Ridley is able to terminate the contract by giving the CEO 12 months’
notice in writing. Conversely, the CEO may terminate his contract by giving the Company six months’ notice in writing. Ridley
is able to terminate the contract of employment without notice or payment in lieu if the CEO engages in fraud or other serious
misconduct, commits a serious or persistent breach of the contract, disobeys a lawful and reasonable direction of the Company,
or is found guilty of an offence precluding or inhibiting further performance of the duties of the CEO office.
From 28 June 2019, Mr David Lord ceased being a Non-Executive Director and commenced in the role as Interim CEO. Mr Lord was
remunerated as Interim CEO at an annualised salary of $822,420 and based on the submission of a timesheet for the days and half
days worked. Mr Lord was not entitled to STI or LTl under this interim arrangement, which continued until 26 August 2019,
whereupon Mr Lord resumed all of his former activities and salary as a Non-Executive Director.
Other senior executives have individual contracts of employment but with no fixed term of employment other than Mr Dillon’s
short-term contract of employment as COO.
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.
51
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Remuneration Report – Audited continued
Equity instrument disclosures relating to Directors and executives
Performance rights provided as remuneration
Details of rights over ordinary shares in the Company provided as remuneration to the Managing Director of Ridley Corporation
Limited and each of the other KMP of the Group and issued under the Ridley LTIP are set out below.
Long Term Incentive Plan (LTIP)
The ‘Balance at 30 June 2020’ 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 attained all of its stipulated performance hurdles under the relevant
offers of rights.
Balance at
1 July 2019
Granted 1
Vested
Forfeited 2
Balance at
30 June 2020
Recipients of LTIP rights
Directors
Q L Hildebrand 3
Key Management Personnel
A Boyd
C Klem
M Murphy 4
A Lochland 4
J Scaife 4
H Slattery5
-
1,133,488
600,000
375,000
375,000
375,000
125,000
-
351,381
210,338
-
-
-
-
-
-
-
-
-
-
-
-
-
1,133,488
(200,000)
(125,000)
(125,000)
(125,000)
-
-
751,381
460,338
250,000
250,000
125,000
-
(575,000)
2,970,207
Total issued to Directors and Key
Management Personnel
1,850,000
1,695,207
1. The effective grant date was 1 September 2019. The fair value per right at the grant date was $0.96 for Tranche A Rights before adjusting for the
likelihood of exceeding the ROFE hurdle, and $0.25 for Tranche B Rights, with each participant’s holding split equally between the two tranches.
2. The vesting criterion was not met for the rights that were tested as at 1 July 2019, and consequently all of these rights were forfeited.
3. Shareholder approval was received on 25 November 2019 for the 1,133,488 rights granted to Mr Hildebrand on 25 November 2019.
4. KMP until internal restructure on 11 November 2019.
5. Mr Slattery was a KMP from 4 April 2020 and did not participate in the FY20 offer of rights.
52
Ridley Corporation Limited Annual Report 2020 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
Director/Executive
G H Weiss
Q L Hildebrand 3
P M Mann
R J van Barneveld
E Knudsen
D J Lord
Total Directors
A Boyd
C Klem
M Murphy4
A Lochland4
J Scaife4
H Slattery5
Total executives
Total Key Management Personnel
Balance at
1 July 2019 1
270,000
-
97,489
83,053
703,286
73,200
1,227,028
1,065,469
654,979
140,850
328,893
-
-
2,190,191
3,417,219
Acquired
under DRP 2
5,416
1,037
1,555
-
-
-
8,008
-
-
-
-
-
-
-
8,008
Holding
at date of
termination
-
-
-
-
-
-
-
-
-
(140,850)
(328,893)
-
-
(469,743)
(469,743)
Acquired/
(disposed)
during
the year
-
51,719
-
-
-
-
51,719
-
-
-
-
-
-
-
51,719
Balance at
30 June 2020
275,416
52,756
99,044
83,053
703,286
73,200
1,286,755
1,065,469
654,979
-
-
-
-
1,720,448
3,007,203
1. Balance at the later of 1 July or when the executive became a KMP.
2. Received during the year by way of participation in DRP for FY20 interim dividend.
3. As at date of appointment on 26 August 2019.
4. KMP until internal restructure on 11 November 2019.
5. KMP from 4 April 2020.
53
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Auditor’s Independence Declaration
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Ridley Corporation Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Ridley Corporation Limited
for the financial year ended 30 June 2020 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Chris Sargent
Partner
Melbourne
26 August 2020
27
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
54
Ridley Corporation Limited Annual Report 2020 Consolidated Statement of Comprehensive Income
For the Year Ended 30 June 2020
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 from equity accounted investments
(Loss)/profit from continuing operations before income tax expense
Income tax benefit/(expense)
(Loss)/profit from continuing operations after income tax
Net (loss)/profit after tax attributable to members
of Ridley Corporation Limited
Other comprehensive income
Available for sale financial assets – net change in fair value
Other comprehensive income for the year, net of tax
Note
4
4
5(d)
5(b)
14
6
20
2020
$’000
967,942
(901,152)
66,790
86
1,082
(14,493)
(63,003)
(5,914)
(333)
(15,785)
7,145
(8,640)
2019
$’000
1,002,583
(930,033)
72,550
481
7,300
(14,049)
(29,908)
(5,554)
(481)
30,339
(6,774)
23,565
(8,640)
23,565
114
114
(403)
(403)
Total comprehensive (loss)/income for the year
(8,526)
23,162
Total comprehensive (loss)/income for the year attributable to:
Ridley Corporation Limited
(8,526)
23,162
Earnings per share
Basic earnings per share – continuing
Basic earnings per share
Diluted earnings per share – continuing
Diluted earnings per share
1
1
1
1
(2.8)c
(2.8)c
(2.8)c
(2.8)c
7.6c
7.6c
7.6c
7.6c
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
55
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Consolidated Balance Sheet
As at 30 June 2020
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
Borrowings
Provisions
Tax liability
Total current liabilities
Non-current liabilities
Payables
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
18
17
15
16
18
17
19
20
20
2020
$’000
2019
$’000
45,818
111,722
104,490
-
188
262,218
1,702
-
294,251
75,001
-
-
13,554
384,508
646,726
165,374
193,000
21,117
384
379,875
4,882
-
324
5,206
385,081
17,483
108,212
83,829
-
182
209,706
11,673
1,265
259,323
85,670
655
1,725
3,737
364,048
573,754
158,759
-
16,006
2,046
176,811
-
118,926
518
119,444
296,255
261,645
277,499
223,521
1,843
36,281
261,645
218,941
3,718
54,840
277,499
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
56
Ridley Corporation Limited Annual Report 2020 Consolidated Statement of Changes in Equity
For the Year Ended 30 June 2020
2020
Opening balance at 1 July 2019
(Loss)/profit for the year
Other comprehensive (loss)/income:
Available for sale financial assets – net change in fair value,
net of tax
Total comprehensive (loss)/income for the year
Realisation of reserves following disposal of asset
Transactions with owners recognised directly in equity:
Dividends paid/declared
Shares issued under the Dividend Reinvestment Plan
Share-based payment transactions
Total transactions with owners recognised directly
in equity
Balance at 30 June 2020
2019
Balance at 1 July 2018
Recognition of expected credit losses under IFRS 9
Related tax
Impact at 1 July 2018
Revised opening balance at 1 July 2018
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/declared
Shares issued under the Dividend Reinvestment Plan
Share-based payment transactions
Total transactions with owners recorded directly
in equity
Balance at 30 June 2019
Share
capital
$’000
218,941
-
-
-
-
-
4,580
-
4,580
223,521
Share
capital
$’000
214,445
-
-
-
214,445
-
-
-
-
4,496
-
4,496
218,941
-
-
-
-
-
(1,758)
(1,758)
1,843
Share-
based
payments
reserve
$’000
3,240
-
-
-
3,240
-
-
-
-
-
361
361
3,601
Share-
based
payments
reserve
$’000
3,601
-
Fair value
reserve
$’000
117
-
Retained
earnings
$’000
54,840
(8,640)
Total
$’000
277,499
(8,640)
114
(8,526)
-
(13,226)
4,580
1,318
-
(8,640)
231
(13,226)
-
3,076
114
114
(231)
-
-
-
-
-
(10,150)
36,281
(7,328)
261,645
Fair value
reserve
$’000
520
-
-
-
520
-
Retained
earnings
$’000
44,902
(239)
72
167
44,735
23,565
Total
$’000
263,107
(239)
72
167
262,940
23,565
(403)
(403)
-
23,565
(403)
23,162
-
-
-
-
117
(13,083)
-
(377)
(13,460)
54,840
(13,083)
4,496
(16)
(8,603)
277,499
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
57
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Consolidated Statement of Cash Flows
For the Year Ended 30 June 2020
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
Proceeds from sale of available for sale asset
Proceeds from sale of non-current assets
Net cash used in investing activities
Cash flows from financing activities
Issue of share capital
Purchase of shares for share-based payments
Proceeds of borrowings
Dividends paid
Payment of lease liabilities
Loans to related parties
Net cash from financing activities
Net movement in cash held
Cash at the beginning of the financial year
Note
2020
$’000
2019
$’000
7
2
28
1,059,670
(1,026,704)
86
1,082
(6,314)
(4,335)
23,485
1,104,549
(1,060,736)
481
410
(6,225)
(1,655)
36,824
(56,245)
(4,544)
1,888
3,850
(55,051)
2,440
(160)
74,074
(10,926)
(5,046)
(481)
59,901
(73,336)
(5,479)
-
5,000
(73,815)
3,140
(2,370)
42,704
(11,727)
-
(714)
31,033
28,335
(5,958)
17,483
23,441
Cash at the end of the financial year
7
45,818
17,483
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
58
Ridley Corporation Limited Annual Report 2020 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
Inventories
9.
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. Leases
29. Commitments for expenditure
30. Contingent liabilities
31. Events occurring after the Balance Sheet date
32. Auditor’s remuneration
33. Corporate information and accounting policy summary
59
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements
30 June 2020
Note 1 – Earnings per share
Basic/diluted earnings per share
– Continuing
– Before significant items #
Earnings used in calculating earnings per share:
(Loss)/Profit after income tax
2020
Basic
$’000
(8,640)
Diluted
$’000
(8,640)
# The profit after income tax before significant items adopted in the above calculation is $21,020,000.
Weighted average number of shares used in calculating:
Basic earnings per share
Diluted earnings per share
Basic earnings per share
2020
Cents
(2.8)/(2.8)
7.1/7.1
2019
Basic
$’000
23,565
2019
Cents
7.6/7.6
7.6/7.6
Diluted
$’000
23,565
2020
312,285,443
312,285,443
2019
308,297,610
310,685,570
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.
On 5 May 2020, 2,862,277 (2019: 3,439,150) shares were issued under the Dividend Reinvestment Plan (DRP), which was utilised for
the payment of the FY20 interim dividend. On 6 May 2020, a further 3,313,057 shares were issued pursuant to a DRP shortfall
placement.
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. Based on the
vesting conditions and exercise price, as at 30 June 2020 there are no dilutive potential ordinary shares outstanding.
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 nil (2019: nil) 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.
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 2020
(2019: 10 May 2019)
31 October 2019
(2019: 31 October 2018)
Per share
(cents)
1.5
(2019: 1.5)
2.75
(2019: 2.75)
Paid in cash
Paid through the issue of shares#
Non-cash dividends paid on employee in-substance options
2020
$’000
4,670
8,556
13,226
10,926
2,140
160
13,226
2019
$’000
4,618
8,465
13,083
11,727
1,193
163
13,083
The DRP was utilised for the payment of the FY20 interim dividend on 30 April 2020, which resulted in the issue of 2,862,277
(2019: 896,926) fully paid ordinary shares to existing shareholders, plus 3,313,057 (2019: 2,542,224) fully paid ordinary shares
issued to institutional and sophisticated investors pursuant to a shortfall placement under the DRP. The issue price for these
shares was $0.748 per share.
60
Ridley Corporation Limited Annual Report 2020
Since the end of the financial year, the Board has declared the following with respect
to the FY20 final dividend:
After the balance sheet date, the Ridley Board determined not to pay a dividend and to apply
these funds to the retirement of net debt. This dividend decision was made in respect of the
final FY20 dividend only and was made in accordance with Ridley practice to consider the
payment of dividends in the context of capital requirements, net debt, the earnings and cash
flow conversion of the business and the growth opportunities prevalent and foreseeable at
the time of dividend declaration
2020
$’000
2019
$’000
-
8,465
Amount of franking credits available at 30 June to shareholders of Ridley Corporation Limited
for subsequent financial years
16,048
17,321
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 (CODM).
Segment results 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, borrowings, income
tax assets and liabilities and surplus property asset holding costs. Segment capital expenditure is the total cost incurred during
the period to acquire property, plant and equipment and intangible assets other than goodwill.
On 26 August 2019, Ridley appointed Mr Quinton Hildebrand as its new Chief Executive Officer and Managing Director (CEO).
Following the appointment of the new CEO, Ridley has continued the disposal of surplus property assets, announced a number
of restructuring initiatives to better align the Group’s operating model and site footprint to the new strategic direction, and has
undertaken necessary investments to maximise the potential of Novacq™. These activities have included:
• An organisational redesign announced on 11 November 2019 involving changes in executive leadership and the establishment
of a leaner organisational design, followed by a subsequent restructure announced on 23 June 2020 across those business units
not included in the initial announcement.
• The closure, rationalisation or suspension of operations at selected feedmills across Australia and Thailand, combined with the
commissioning of new facilities at Westbury and Wellsford.
• Continued divestment of residual property assets, with the remaining property at Moolap written down to nil as at 30 June 2020 as
a reflection of the Victorian State Government’s restrictions for the commercial development of the site as published in its August
2019 Moolap Coastal Strategic Framework Plan. Activities to divest the last remaining land parcel at Lara are continuing in FY21.
In light of the above, and recognising the fundamental changes in business activity, the new organisational structure and internal
reporting to the CODM arising from the FY20 business restructures, from 1 July 2020 Ridley expects to report segment
information for:
• Bulk Stockfeeds – comprising the Group’s premium quality, high-performance animal nutrition stockfeed solutions delivered
in bulk.
• Packaged Feeds and Ingredients – comprising the Group’s premium quality, high-performance animal nutrition feed and
ingredient solutions delivered in packaged form from one-tonne bulka bag down to 3kg bags.
The basis of inter-segmental transfers is market pricing. The non-operating, unallocated component in the segment reporting tables
represents mainly corporate expenses, interest-bearing loans, borrowings and corporate assets, plus any residual surplus property
asset holding costs.
61
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 3 – Operating segments continued
Geographical segments
While the Group predominantly operates in Australasia, it has established a platform for Novacq™ commercial operations at
Chanthaburi, Thailand. Up to 30 June 2020, all Novacq™ activities at Chanthaburi have been applied R&D activities and capitalised
accordingly; however, from 1 July 2020 the site became fully operational.
Also from 1 July 2020, the Pen Ngern Feed Mill ceased production of prawn feed and became a dedicated site for the dewatering,
drying, bagging and storing of Novacq™.
In addition to Thailand, legal entities have been established in India and Ecuador in anticipation of an international expansion of
Novacq™ operations, commencing with commercial trials in FY21.
2020 financial year in $’000
Total sales revenue – external (Note 4)
Other revenue (Note 4)
Total revenue
Share of (losses) of equity accounted investments (Note 14)
Depreciation and amortisation expense (Note 5)
Interest income
Finance costs (Note 5)
Reportable segment profit/(loss) before income tax
Total segment assets
Segment liabilities
Acquisitions of property, plant and equipment, intangibles and other
non-current segment assets (including the impact of business
combinations and the transition impact of AASB 16 Leases)
2019 financial year in $’000
Total sales revenue – external (Note 4)
Other revenue (Note 4)
Total revenue
Share of (losses) of equity accounted investments (Note 14)
Depreciation and amortisation expense (Note 5)
Interest income
Finance costs (Note 5)
Reportable segment profit/(loss) before income tax
Segment assets
Investments accounted for using the equity method
Total segment assets
Segment liabilities
Acquisitions of property, plant and equipment, intangibles and other
non-current segment assets (including the impact of business combinations)
AgriProducts
967,942
741
968,683
-
(26,148)
5
(1,490)
6,352
579,664
186,775
Unallocated
-
341
341
(333)
(11)
81
(4,424)
(22,137)
67,062
198,306
Consolidated
967,942
1,082
969,024
(333)
(26,159)
86
(5,914)
(15,785)
646,726
385,081
53,031
26,204
79,235
AgriProducts
1,002,583
285
1,002,868
(481)
(18,898)
27
(1,567)
38,978
541,583
655
542,238
170,204
Unallocated
-
7,015
7,015
-
(5)
454
(3,987)
(8,639)
31,516
-
31,516
126,051
Consolidated
1,002,583
7,300
1,009,883
(481)
(18,903)
481
(5,554)
30,339
573,099
655
573,754
296,255
75,142
-
75,142
62
Ridley Corporation Limited Annual Report 2020 Note 4 – Revenue and other income
Revenue from continuing operations
Sale of goods
Other income from continuing operations
Rent received
Profit on sale of land
Credit card fees
Other
Revenue recognition
2020
$’000
2019
$’000
967,942
1,002,583
78
-
277
727
1,082
124
6,809
-
367
7,300
For the sale of feed, the Group generally has one performance obligation. Consequently, revenue is currently recognised when the
feed is 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 feed and the performance obligation has been met when the control transfers. 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.
Interest income is recognised using the effective interest rate method. Dividend income is recognised as revenue when the right
to receive payment is established.
Note 5 – Expenses
Profit from continuing operations before income tax is arrived at after charging the following individually significant items:
(a) Depreciation and amortisation (i)
Buildings
Plant and equipment
Software
Intangible assets
Right of use assets
2020
$’000
2,153
17,584
1,418
133
4,871
26,159
(i) The depreciation and amortisation charge is included either as cost of goods sold or within general and administrative expenses in the
Consolidated Statement of Comprehensive Income, depending on the use of the asset.
(b) Finance costs
Interest expense
Interest expense on lease liabilities
Amortisation of borrowing costs
Interest income
Unwind of discount on deferred consideration
2020
$’000
5,877
437
279
(86)
(679)
5,828
2019
$’000
1,704
14,905
1,325
969
-
18,903
2019
$’000
6,225
-
144
-
(815)
5,554
Finance costs include interest and amortisation of ancillary costs incurred in connection with the arrangement of borrowings.
Borrowing costs are expensed as incurred unless they relate to qualifying assets, being assets that normally take more than
12 months from commencement of activities necessary to prepare for their intended use or sale to the time when substantially
all such activities are complete.
63
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 5 – Expenses continued
(c) Other expenses
Employee benefits expense
Expenses relating to short-term leases and low-value assets#
Bad and doubtful debt expense – net of recoveries
Foreign exchange loss
Loss on disposal of property, plant and equipment
Research and development
2020
$’000
89,493
747
(10)
94
269
17,779
2019
$’000
85,471
4,313
163
-
-
24,480
# The new lease accounting standard AASB 16 is effective for the financial year beginning 1 July 2019.
For the year ended 30 June 2020, the introduction of the new lease accounting standard has had the following financial impact.
Refer also Note 28.
30 June 2020 in $’000
EBITDA
EBIT
EBT
Reversal of lease payments previously expensed in profit and loss
as general and administrative expenses
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Total profit and loss financial impact
5,046
-
-
5,046
(d) General and administrative expenses include the following individually significant items
Internal restructure
Murray Bridge feedmill closure
Settlement of Baiada legal claim
Rationalisation of Central/Northern Victoria operations
Impairment of non-current investment property
Impairment of Novacq™ Business Unit
Total significant items included in general and administrative expenses
5,046
(4,871)
-
175
2020
$’000
4,219
7,219
1,935
7,005
1,265
21,573
43,216
5,046
(4,871)
(437)
(262)
2019
$’000
-
-
-
-
-
-
-
64
Ridley Corporation Limited Annual Report 2020 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 provided in prior year
Aggregate income tax (benefit)/expense
Income tax expense is attributable to:
Profit from continuing operations
(b) 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
(c) Reconciliation of income tax expense and pre-tax accounting profit
Consolidated group (loss)/profit before income tax expense
Income tax (benefit)/expense using the Group’s tax rate of 30%
Tax effect of amounts that are not deductible/(taxable) in calculating taxable income:
Non-deductible expenses
Overprovision in prior year
Research and development allowance
Disposal of Lara surplus land holdings
Disposal of asset available for sale
Recognition of capital loss on contract intangible
Impairments
Tax effect of overseas losses
Other
Income tax (benefit)/expense
2020
$’000
2019
$’000
2,959
(9,817)
(287)
(7,145)
6,833
157
(216)
6,774
(7,145)
6,774
-
244
(15,785)
(4,736)
30,339
9,102
116
(287)
(1,511)
-
99
-
(705)
159
(280)
(7,145)
269
(216)
(1,700)
672
-
(1,363)
-
-
10
6,774
65
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 7 – Cash and cash equivalents
Cash and cash equivalents comprise cash balances in Australian dollars and foreign currencies.
Cash at bank
Reconciliation of net cash inflow from operating activities to profit after income tax
Net (loss)/profit after tax for the year
Adjustments for non-cash items:
Depreciation and amortisation (Note 5(a))
Net profit on sale of non-current assets (Note 4)
Share of loss from equity accounted investment (Note 14)
Non-cash impairment
Non-cash share-based payments expense (Note 25)
Non-cash write-down of closed feedmill assets and investment property
Non-cash finance movements
Bad debts provision
Other non-cash movements
Change in operating assets and liabilities:
Decrease/(increase) in prepayments
Decrease/(increase) in receivables
Decrease/(increase) in inventories
Decrease/(increase) in deferred income tax asset
Increase/(decrease) in trade creditors
Increase/(decrease) in provisions
Increase/(decrease) in net income tax liability
Net cash from operating activities
Note 8 – Receivables
Current
Trade debtors
Less: Allowance for doubtful debts (a)
Derivative assets (b)
Prepayments and other receivables
Lara land sale deferred consideration receivable
Non-current
Prepayments
Other receivable – joint venture entity (c)
Lara land sale deferred consideration receivable
66
2020
$’000
45,818
2019
$’000
17,483
(8,640)
23,162
26,159
(163)
333
21,573
1,481
10,911
(400)
(121)
(2,129)
3,366
(4,829)
(20,661)
(9,817)
3,167
4,917
(1,662)
23,485
2020
$’000
102,362
(118)
102,244
2,073
3,605
3,800
111,722
352
-
1,350
1,702
18,903
(6,809)
481
-
2,354
-
(815)
-
(233)
(913)
(1,383)
(7,163)
2,901
2,862
1,431
2,046
36,824
2019
$’000
97,533
(239)
97,294
-
7,068
3,850
108,212
534
5,989
5,150
11,673
Ridley Corporation Limited Annual Report 2020
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less the provision for doubtful
debts. Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off.
The adoption of AASB 9 has changed the Group’s accounting for impairment losses for trade and other receivables by replacing
AASB 139’s incurred loss approach with a forward-looking credit loss (ECL) approach. AASB 9 requires the Group to record an
allowance for ECLs for all loans and other debt financial assets, including trade and other receivables.
For trade and other receivables, the Group has applied the standard’s simplified approach and has calculated ECLs based on
lifetime expected credit losses. The Group has established a provision matrix that is based on the Group’s historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic environment. A provision has been
recognised, determined with reference to forward-looking ECL.
(a) Movement in the allowance for doubtful debts
Balance brought forward at 1 July
Adjustment to opening balance to recognise general provision
Revised opening balance as at 1 July
Provision for impairment during the year
Provision raised during the year
Receivables written off during the year
Balance carried forward at 30 June
2020
$’000
239
-
239
(500)
416
(37)
118
2019
$’000
-
239
239
-
163
(163)
239
As at 30 June 2020, a provision for doubtful debts of $118,335 (2019: $239,077) was raised against trade receivables. 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.
The Group’s policy is to write off debts when there is no longer a reasonable expectation of recovery. Debts that are written off are
still subject to enforcement activity. Any write-off of debt is presented to and approved by the Ridley Audit and Risk Committee.
Concentration of risk
Within the trade debtors ledger at 30 June 2020, the top five customer balances represent 37% of the total, and the top 20
represent 65%.
The current and non-current Lara land sale receivables are due from a single purchaser of the property, the legal titles for which
are withheld by Ridley pending receipt of the final payment.
Ageing analysis
At 30 June 2020, the age profile of trade receivables that were past due amounted to $6,892,000 (2019: $10,061,000) as shown
in the following table.
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
2020
$’000
5,771
657
259
205
6,892
2019
$’000
7,651
1,140
655
615
10,061
(b) Derivative assets
Represents the fair value of the mark to market unrealised gain on forward futures contracts used to hedge the fair value risk
associated with the purchase of raw materials.
67
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020
Notes to the Financial Statements continued
30 June 2020
Note 8 – Receivables continued
(c) Other receivable – joint venture entity
The parent entity previously provided an unsecured loan to the Pen Ngern Feed Mill Co., Ltd. (PNFM), which in the prior year was
recognised as a non-current other receivable in accordance with the joint venture accounting of that entity in which Ridley held
a 49% ownership interest. During FY20, the remaining 51% ownership interest in PNFM was acquired and the loan balance
recapitalised into the investment in PNFM. The loan balance capitalised during FY20 was $6,474,000, compared to the outstanding
loan balance at 30 June 2019 of $5,989,000.
Note 9 – Inventories
Current
Raw materials and stores – at cost
Finished goods
– at cost
– at net realisable value
2020
$’000
63,012
35,506
5,972
104,490
2019
$’000
42,695
39,486
1,648
83,829
Write-downs of inventories to net realisable value of $1.0m (2019: $0.5m) have been recognised as an expense during the year.
Inventories are valued at the lower of cost and net realisable value. Costs are determined on the first in, first out and weighted
average cost methods. Costs included in inventories consist of materials, labour and manufacturing overheads that 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
2020
$’000
188
2019
$’000
182
The sole residual surplus land holding at Lara, Lot D, which had a carrying value of $188,000 (2019: $182,000) was subject to an option
to purchase agreement which expired on 2 July 2020. Subsequent to balance date, management is assessing the opportunities
available to divest this land in the next 12 months and believes it appropriate to maintain the current carrying value and classification
as a current asset.
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.
The only investment property comprises the former saltfield at Moolap, near Geelong in Victoria. An impairment against the full
asset cost base was raised in FY20 and recognised in the Consolidated Statement of Comprehensive Income. The decision to
impair the asset reflects the Victorian State Government’s restrictions for the commercial development of the site as published
in its August 2019 Moolap Coastal Strategic Framework Plan. The impairment of the asset will not diminish the Company’s
endeavours to generate shareholder value from this asset.
68
Ridley Corporation Limited Annual Report 2020
Movement in investment properties
Carrying amount at 1 July
Impairment
Depreciation and other expenses
Carrying amount at 30 June
2020
$’000
1,265
(1,265)
-
-
2019
$’000
1,275
-
(10)
1,265
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
Note 12 – Property, plant and equipment
2020
$’000
156
2019
$’000
702
2020 in $’000
Cost at 1 July 2019
Accumulated depreciation
Carrying amount at 1 July 2019
Transition to AASB 16 Lease accounting
standard (Note 28)
Other lease movements (Note 28)
Additions
Transfers from plant under construction
Impairment
Disposals
Depreciation
Carrying amount at 30 June 2020
At 30 June 2020
Cost
Accumulated depreciation
Carrying amount at 30 June 2020
Land and
buildings
67,175
(10,878)
56,297
Plant and
equipment
268,723
(154,298)
114,425
Capital work in
progress
88,601
-
88,601
Right of use
assets
-
-
-
-
-
7,249
27,780
-
(1,369)
(2,153)
87,804
-
-
2,055
98,804
(7,911)
(5,603)
(17,584)
184,186
-
-
51,416
(126,584)
-
-
-
13,433
100,835
(13,031)
87,804
356,068
(171,882)
184,186
13,433
-
13,433
13,810
(1,587)
1,476
-
-
-
(4,871)
8,828
13,699
(4,871)
8,828
Total
424,499
(165,176)
259,323
13,810
(1,587)
62,196
-
(7,911)
(6,972)
(24,608)
294,251
484,035
(189,784)
294,251
69
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020
Notes to the Financial Statements continued
30 June 2020
Note 12 – Property, plant and equipment continued
2019 in $’000
Cost at 1 July 2018
Accumulated depreciation
Carrying amount at 1 July 2018
Additions
Disposals
Transfers from capital work in progress
Depreciation
Carrying amount at 30 June 2019
At 30 June 2019
Cost
Accumulated depreciation
Carrying amount at 30 June 2019
Property, plant and equipment
Land and
buildings
66,812
(9,174)
57,638
-
-
363
(1,704)
56,297
Plant and
equipment
245,011
(140,577)
104,434
-
(7)
24,903
(14,905)
114,425
Capital work
in progress
40,524
-
40,524
73,343
-
(25,266)
-
88,601
67,175
(10,878)
56,297
268,723
(154,298)
114,425
88,601
-
88,601
Total
352,347
(149,751)
202,596
73,343
(7)
-
(16,609)
259,323
424,499
(165,176)
259,323
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, being 13 to 40 years for buildings and two to 30 years for
plant and equipment.
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.
Certain items of plant and equipment in the Novacq™ Business Unit were impaired during the year by $7.9m to write these assets
down to their estimated recoverable value (refer Note 13).
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 $2.0m was awarded by Tasmania Development and Resources in 2017. With $1.0m already
received in FY17 as Instalment 1, the remaining $1.0m was received in FY20 (nil in FY19) across two equal instalments, the first
$500,000 (excluding GST) after commissioning in July 2019, and the second upon satisfactory validation of the achievement
of 20 FTEs employed at Ridley’s new extrusion plant at Westbury, Tasmania. All grant amounts received were recorded against
the cost of the asset.
70
Ridley Corporation Limited Annual Report 2020
Note 13 – Intangible assets
2020 in $’000
Carrying amount at 1 July 2019
Transfer from property, plant and
equipment/additions
Disposals
Impairment
Amortisation charge
Carrying amount at 30 June 2020
At 30 June 2020
Cost
Accumulated amortisation and
impairment
Carrying amount at 30 June 2020
1. Raised as reduction in revenue.
Software
3,779
Goodwill
68,950
Contracts
597
Assets under
development
12,344
381
(58)
-
(1,418)
2,684
1,022
-
(1,022)
-
68,950
-
-
-
(215) 1
382
3,413
-
(12,639)
(133)
2,985
Total
85,670
4,816
(58)
(13,661)
(1,766)
75,001
18,065
69,903
685
3,250
91,903
(15,381)
2,684
(953)
68,950
(303)
382
(265)
2,985
(16,902)
75,001
The amortisation charge is included within general and administrative expenses in the Consolidated Statement of
Comprehensive Income.
2019 in $’000
Carrying amount at 1 July 2018
Transfer from property, plant and
equipment/additions
Amortisation charge
Carrying amount at 30 June 2019
At 30 June 2019
Cost
Accumulated amortisation
Carrying amount at 30 June 2019
Intangible assets
Software
3,305
Goodwill
68,950
Contracts
748
Assets under
development
9,482
1,799
(1,325)
3,779
17,806
(14,027)
3,779
-
-
68,950
69,903
(953)
68,950
685
(836)
597
5,185
(4,588)
597
2,995
(133)
12,344
12,477
(133)
12,344
Total
82,485
5,479
(2,294)
85,670
105,371
(19,701)
85,670
(i) Software
Software has a finite useful life and is carried at cost less accumulated amortisation and impairment losses. The cost of system
development, including purchased software, is capitalised and amortised over the estimated useful life, being three to eight years.
Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.
(ii) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets
of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisitions of associates is included in investments in associates, accounted for using the equity method.
Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more frequently
if events or changes in circumstances indicate that it might be impaired.
Goodwill is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold. Goodwill is allocated to Cash Generating Units for the purpose of impairment testing.
Goodwill is not amortised.
71
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 13 – Intangible assets continued
$56.6m (2019: $56.6m) of goodwill has been recognised in the Rendering Cash Generating Unit (CGU), while the balance has been
accumulated from a combination of other CGUs over many years as summarised below:
Rendering
AgriProducts
Total goodwill
2020
$’000
56,616
12,334
68,950
2019
$’000
56,616
12,334
68,950
(iii) Contracts
Amortisation methods, useful lives and residual values are and were reviewed at each financial year end and adjusted if appropriate.
Contracts are amortised as a reduction in revenue.
(iv) Assets under development
Assets under development as at 30 June 2019 comprised the applied R&D activities conducted at Chanthaburi in Thailand in
respect of the novel feed ingredient Novacq™ project. These assets were impaired by $12.6m down to zero as at 30 June 2020.
The balance of assets under development at 30 June 2020 comprises the cumulative value of the five-year Novacq™ alliance
with CSIRO, under which the Group contributes $1.0m per annum.
Research and development expenditure
Research and development (R&D) expenditure of $17,779,085 (estimated) has been incurred in the current year (2019: $24,480,278),
which is expected to be included as eligible R&D in the R&D tax incentive schedule for FY20. 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.
Amortisation
Amortisation is calculated to write off the cost of the intangible assets less their residual values using the straight-line method over
their estimated useful lives, and is generally recognised in profit or loss.
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.
Impairment testing
The recoverable amount of a CGU is initially assessed using value-in-use calculations. The following assumptions have been used
in the preparation of the cash flow projections and analyses to undertake impairment testing, and have been applied to each CGU
unless otherwise stated.
(i) Cash flow forecasts are based on the Board approved FY21 budget, with the forecast for the subsequent four years based on
either (a) specific budgets and forecasts or (b) projected using a constant growth rate. A terminal value is also included in the
calculation of the value in use.
72
Ridley Corporation Limited Annual Report 2020 (ii) Forecast growth rates are based on management’s expectations of future performances for the respective CGUs having regard
to industry growth rates and factors specific to the Group. Excluding the Aquafeed and Novacq™ CGUs, the Group applied
a constant growth rate of 2% (2019: 2%) to the period beyond FY21, and also adopted a growth rate of 2% (2019: 2%) in the
calculation of the terminal value. Growth rates for Aquafeed and Novacq™ vary for each year in the forecast period, influenced
by factors such as the forecast growth from the new feedmill at Westbury and the expansion of commercial production of
Novacq™. A terminal growth rate of 2.5% was applied to the Aquafeed CGU and 2% to the Novacq™ CGU.
(iii) Discount rates used are the weighted average cost of capital for the Group, adjusted as appropriate for the specific CGU.
The post-tax discount rate applied to forecast cash flows was 8.0% (2019: 8.0%) except for the Novacq™ CGU, where 10%
was adopted to reflect the early stage of its commercial lifecycle.
Impairments during the year
Although the efficacy of Novacq™ in the production of prawns has been well demonstrated and the product is being sold
commercially, delays in the development and installation of processing technology have hindered the scale-up of production
and restricted sales volumes and earnings accordingly.
As a consequence of the above, coupled with the economic uncertainty prevailing in domestic and world markets, the Company
has recognised a non-cash impairment of $21.6m in its Novacq™ CGU in the financial results for the year ended 30 June 2020.
The allocation of this impairment was $7.9m to property, plant and equipment, $12.6m to intangible assets under development, and
$1.0m to goodwill. Following the recognition of this impairment there is no goodwill related to the Novacq™ CGU, the recoverable
amount of which was assessed at $27.048m.
Impact of possible changes in key assumptions
With the exception of Novacq™, the carrying value of all CGUs was supported by the Group’s impairment testing. The recoverable
amount of the Aquafeed CGU (headroom of $10m at 30 June 2020) is sensitive to the forecast increase in production throughput
at the newly commissioned feedmill in Westbury. Given the impairment recognised in relation to the Novacq™ CGU, any adverse
change in assumptions or inputs (holding all other assumptions constant) would result in a further impairment.
Note 14 – Investments accounted for using the equity method
Name of company
Joint venture entities:
Nelson Landholdings Pty Ltd as Trustee
for Nelson Landholdings Trust 1
Pen Ngern Feed Mill Co., Ltd.2
Principal
activity
Country of
incorporation
2020
%
2019
%
2020
$’000
2019
$’000
Ownership interest
Carrying amount
Property
realisation
Aquafeed
production
Australia
Thailand
50
100
50
49
-
-
-
-
655
655
Investments accounted for using the equity method
1. 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. The balance date of the Nelson
Landholdings Pty Ltd joint venture entity is 30 June.
2. 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 up to 30 June 2020 operated, a feedmill at Chanthaburi for the production of Aquafeed. The PNFM balance
date is 31 December. Movements in the carrying amount of the investment up to 14 February 2020 reflect Ridley’s equity accounted share of the
operating result for PNFM.
On 14 February 2020, the Group acquired the remaining 51% ownership interest in PNFM as part of a transaction that included the acquisition of
approximately 50 hectares of land encompassing the existing Thailand Novacq™ production ponds plus 3m Thai Baht (c.$143,000) of net debt
forgiveness. The purchase consideration of 171.2m Thai Baht (approximately $8.2m) has been applied to the value of the land acquired given the
net indebtedness and recapitalisation of PNFM.
In accordance with the accounting requirements of AASB 3 Business Combinations, fair values have been attributed to the net assets of PNFM
as at the acquisition date and these values, plus 100% of the profits and losses of PNFM, have been consolidated as part of the Ridley Group result
since that date.
On 30 June 2020, the PNFM operation was restructured. From 1 July 2020, the feedmilling operations of PNFM have been suspended until such
time as local prawn production has recovered from its current lows. The PNFM site is now dedicated to the Novacq™ dewatering, drying and
bagging operation in accordance with the Thailand Board of Investment (BoI) approval received during FY20 for this activity. Approval was
also received in FY20 from the BoI to relax the foreign land ownership restriction, thereby enabling Ridley to acquire full control and 100%
ownership of PNFM.
73
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020
Notes to the Financial Statements continued
30 June 2020
Note 14 – Investments accounted for using the equity method continued
Investments in joint venture entities are accounted for in the consolidated financial statements using the equity method of
accounting.
Carrying amount of investments accounted for using the equity method
Opening carrying amount at 1 July
Share of operating losses after income tax
Carrying value of investment taken to consolidation adjustment
Closing carrying amount of equity accounted investment
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 below.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net liabilities
Revenue
Net loss after tax
2020
$’000
2019
$’000
655
(333)
(322)
-
-
-
-
-
-
-
-
-
-
1,136
(481)
-
655
479
5,658
6,137
32
7,529
7,561
(1,424)
634
(979)
The Group’s share of operating losses of the joint venture for the period to consolidation was $333,000, which resulted in a joint
venture accounted carrying value at the date of consolidation of $322,000.
Note 15 – Tax assets and liabilities
Current
Tax asset
Tax liability
Non-current
Deferred tax asset
Movement in deferred tax asset:
Opening balance at 1 July
Credited to the statement of comprehensive income
Closing balance at 30 June
2020
$’000
-
384
2019
$’000
-
2,046
13,554
3,737
3,737
9,817
13,554
3,619
118
3,737
74
Ridley Corporation Limited Annual Report 2020 Recognised deferred tax assets and liabilities
Consolidated balances
Intangibles
Doubtful debts
Property, plant and equipment
Employee entitlements
Provisions
Restructuring provision
Other
Tax assets/(liabilities)
Assets
Liabilities
Net
2020
$’000
372
36
6,754
4,869
33
1,819
749
14,224
2019
$’000
-
72
2,623
4,660
-
-
227
7,582
2020
$’000
-
-
(1,078)
-
-
-
-
(1,078)
2019
$’000
(3,241)
-
(624)
-
-
-
20
(3,845)
2020
$’000
372
36
5,676
4,869
33
1,819
749
13,554
2019
$’000
(3,241)
72
1,999
4,660
-
-
247
3,737
Movement in net deferred tax assets and liabilities
Consolidated movements
Intangibles
Doubtful debts
Property, plant and equipment
Employee entitlements
Provisions
Restructuring provision
Other
Tax assets/(liabilities)
Income tax
Balance
30 June 2018
$’000
(3,052)
-
2,188
4,544
-
-
(61)
3,619
Recognised in
profit or loss
$’000
(189)
72
(189)
116
-
-
308
118
Balance
30 June 2019
$’000
(3,241)
72
1,999
4,660
-
-
247
3,737
Recognised in
profit or loss
$’000
3,613
(36)
3,677
209
33
1,819
502
9,817
Balance
30 June 2020
$’000
372
36
5,676
4,869
33
1,819
749
13,554
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.
75
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 16 – Payables
Current
Trade creditors and accruals
Lease liabilities
Non-current
Lease liabilities
Trade payable facility
2020
$’000
161,247
4,127
165,374
2019
$’000
158,759
-
158,759
4,882
-
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
(2019: $50,000,000). The amount utilised and recorded within trade creditors at 30 June 2020 was $49,854,499 (2019: $38,534,164).
Note 17 – Provisions
Current
Provision for restructuring
Employee entitlements
Non-current
Employee entitlements
Provisions
2020
$’000
6,354
14,763
21,117
2019
$’000
-
16,006
16,006
324
518
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 restructuring
The provision for restructuring comprises all of the estimated costs of employee termination benefits, asset relocation, site closure,
demolition, remediation and preparation for divestment with regard to the Bendigo and Mooroopna feedmills.
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.
Superannuation
Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
76
Ridley Corporation Limited Annual Report 2020 Note 18 – Borrowings
Current
Bank loans (unsecured)
Non-current
Bank loans (unsecured)
2020
$’000
2019
$’000
193,000
-
-
118,926
Subsequent to 30 June 2020 and prior to 13 August 2020, the Group received certain waivers from its lenders on its financial
covenants for the 30 June 2020 testing period. These waivers provide financial covenant relief in respect of any impairment
charges raised against the FY20 result.
On 13 August 2020, the Ridley Board considered and resolved to approve the recognition of non-cash impairment charges against
the Novacq™ Cash Generating Unit. Despite having received the impairment waivers, the Australian Accounting Standards deem
this decision to have applied as at 30 June 2020 (i.e. prior to the granting of the impairment waivers by the Group’s financiers),
and therefore that there has been a technical breach of banking covenants, which requires the Group’s borrowings to be reported
as current rather than non-current. At the date of approval of the Financial Report, the lending facilities have been restored to the
classification of non-current borrowings and the Group has remained at all times compliant with its funding covenants, including
as at the most recent test date of 30 June 2020.
Total loan facilities available to the Group
A$’000
Long-term loan facility
Trade receivables facility
Cash
(a) Long-term loan facility
(a)
(b)
2020
2019
Limits
200,000
30,000
-
230,000
Utilised
163,000
30,000
(45,818)
147,182
Limits
200,000
-
-
200,000
Utilised
119,500
-
(17,483)
102,017
On 24 December 2019, the Group executed an extension in term and value of its long-term loan facility (Facility) with ANZ and
Westpac. The Facility term was extended a further five years to 26 December 2024 and the available funding maintained at $200m,
continuing to be split equally split between the two financiers.
The Facility comprises unsecured bank loans with floating interest rates subject to bank covenant arrangements in respect of
a leverage cover ratio, interest cover ratio, gearing ratio and consolidated net worth. The leverage cover ratio was relaxed during
FY20 to accommodate the increased level of debt associated with the construction of the new feedmill at Wellsford in Central
Victoria, which follows the commissioning of the new extrusion plant formally opened in July 2019 at Westbury in Tasmania.
The Group is in compliance with all Facility covenants and reports as such to the two financiers on a six-monthly basis coinciding
with the release of the half year and full year Financial Reports.
(b) Trade Receivables Facility
In order to provide an appropriate funding contingency buffer in addition to the facility, on 13 November 2019 the Group executed
a $30m Trade Receivables Facility with Cooperative Rabobank U.A. Australia Branch (Rabobank). Upon execution of this new facility,
the funds were fully drawn and applied to the partial repayment of the Facility. This Rabobank facility has been, and will continue to
be, fully drawn for the foreseeable future. In addition to adopting the same bank covenants calculation and reporting arrangements
as prevailing under the Facility, a detailed monthly analysis of the Trade Receivables Ledger is provided by the Group to Rabobank.
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 Facility agreement, subject to the paragraph following, if the Group does not pay an amount when due and
payable, the banks 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.
Under the terms of the Rabobank facility, ANZ as the Group’s transactional bank, has agreed not to exercise its right of set off until
Rabobank has received payment in full of the amount advanced to the Group under the trade receivables facility.
As at 30 June 2020, the value of legally enforceable cash balances that upon default or bankruptcy would be applied to the loan
facility is $45,818,000 (2019: $17,483,000).
77
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 19 – Share capital
Fully paid up capital:
317,431,555 ordinary shares with no par value (2019: 311,256,221)
Parent entity
2020
$’000
2019
$’000
223,521
218,941
The Dividend Reinvestment Plan (DRP) was utilised for the payment of the FY20 interim dividend of 1.5cps on 30 April 2020, which
resulted in the issue of 2,862,277 (2019 interim: 896,926) fully paid ordinary shares to existing shareholders, plus 3,313,057 (2019
interim: 2,542,224) fully paid ordinary shares issued to institutional and sophisticated investors pursuant to a shortfall placement
under the DRP. The issue price for these shares was $0.748 per share and the costs of the DRP were $39,172 (2019 interim: $69,420).
Issued share capital consequently increased through the issue of these 6,175,334 (2019 interim: 3,439,150) shares from 311,256,221
shares to 317,431,555 shares.
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
2020
$’000
193,000
(45,818)
147,182
261,645
56.3%
2020
$’000
3,601
1,481
(163)
(3,076)
1,843
2019
$’000
118,926
(17,483)
101,443
277,499
36.6%
2019
$’000
3,240
2,354
(2,370)
377
3,601
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
Realisation of reserve following disposal of asset
Closing balance at 30 June
2020
$’000
117
114
(231)
-
2019
$’000
520
(403)
-
117
78
Ridley Corporation Limited Annual Report 2020 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.
Retained earnings
Opening balance at 1 July
Recognition of expected credit losses under IFRS 9
Related tax
Impact at 1 July
Revised opening balance at 1 July
Net (loss)/profit for the year
Dividends paid
Share-based payments reserve transfer
Fair value 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
Ridley Corporation Ecuador S.A.
Ridley Corporation (India) Private Limited
Novacq™ International Pte. Ltd.
Pen Ngern Feed Mill Co., Ltd. (PNFM) – see Note 14
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
Ecuador
India
Singapore
Thailand
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2020
$’000
54,840
-
-
-
54,840
(8,640)
(13,226)
3,076
231
36,281
2019
$’000
44,902
(239)
72
(167)
44,735
23,565
(13,083)
(377)
-
54,840
Ownership interest
2020
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2019
100%
100%
100%
100%
100%
100%
-
49%
100%
100%
100%
100%
PNFM transitioned from an equity accounted 49% interest to a wholly-owned subsidiary in FY20 as detailed in Note 14 to these
accounts. Novacq™ International Pte. Ltd. was incorporated in Singapore on 17 December 2019 with AUD$10,000 of issued share
capital. Any operational and trading activity through the regional trading hub of Singapore can be managed through this entity,
which did not trade during the year.
79
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 22 – Parent entity
As at 30 June 2020 and throughout the financial year ending on that date, the parent company of the Group was Ridley
Corporation Limited.
Result of the parent entity
Loss 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
Share capital
Share-based payment reserve
Retained earnings
Total equity
2020
$’000
(9,937)
114
(9,823)
24,388
398,008
422,396
199,549
-
199,549
222,847
223,521
1,843
(2,517)
222,847
2019
$’000
(11,363)
(403)
(11,766)
1,392
363,702
365,094
6,072
118,926
124,998
240,096
218,941
3,718
17,437
240,096
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees the debts of certain
of its subsidiaries that 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 – realisation on disposal of asset
Total comprehensive income for the year
2020
$’000
7,905
(2,633)
5,155
114
5,269
2019
$’000
24,178
(6,774)
17,404
(403)
17,001
80
Ridley Corporation Limited Annual Report 2020 (b) Summary of movements in retained profits
Opening balance at 1 July
Recognition of expected credit losses under IFRS 9 – after tax
Pen Ngern Feed Mill pre-consolidation losses
Comprehensive income for the year
Dividends paid
Share-based payment reserve net transfer
Closing balance at 30 June
(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
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
Tax liability
Total current liabilities
Non-current liabilities
Borrowings
Payables
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
81
2020
$’000
44,630
-
4,186
5,272
(13,226)
1,318
42,180
2020
$’000
43,652
107,585
104,227
-
255,464
15,360
279,751
85,841
12,979
-
5,548
-
399,479
654,943
166,434
20,934
1,825
189,193
193,000
4,882
324
198,206
387,399
267,544
223,521
1,843
42,180
267,544
2019
$’000
41,256
(167)
-
17,001
(13,083)
(377)
44,630
2019
$’000
13,799
104,184
83,829
-
201,812
10,151
259,045
85,215
-
655
3,737
1,725
360,528
562,340
157,672
16,006
2,046
175,724
118,926
-
518
119,444
295,168
267,172
218,941
3,601
44,630
267,172
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
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
– associate
Purchases of products/services – associate
– joint venture entity
Outstanding balances with related parties were as follows:
Current receivable – joint venture entity
2020
$’000
2019
$’000
-
-
-
-
-
-
-
5,989
The Pen Ngern Feed Mill joint venture became a wholly-owned subsidiary during the financial year and the loan balance was
recapitalised as detailed in Note 8(c).
Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Other benefits
Short-term incentive remuneration
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
2020
$
2,803,746
171,689
1,359,051
445,250
376,455
5,156,191
2020
$’000
-
1,481
1,481
2019
$
3,140,631
176,621
5,000
-
883,896
4,206,148
2019
$’000
455
1,899
2,354
The fair value at grant date of equity-settled share-based payment arrangements granted to employees is generally recognised as
an expense, with a corresponding increase in equity, over the period of vesting of the awards. The amount recognised as an expense
is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected
to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and
non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, such
as the ESS, the fair value at grant date is measured to reflect such conditions and there is no true up for differences between
expected and actual outcomes.
82
Ridley Corporation Limited Annual Report 2020
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.
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 Rights granted is recognised as an employee benefit expense over the performance period with a corresponding
increase in equity.
Current year issues under the Ridley Corporation Long Term Incentive Plan
In prior years, the performance measure for Rights issued under the LTIP has been Total Shareholder Return (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 1 July effective date of grant. Fair value was calculated by an independent expert in accordance
with AASB2 on an option-equivalent basis.
For FY20 and subsequent years, there are two performance measures, namely Return on Funds Employed (ROFE) and Absolute TSR
(as opposed to Relative TSR). The new measures are more aligned to current industry best practice and are less subject to distortion
from extraneous factors beyond the Group’s control.
The number of Rights issued to each participant in FY20 is divided equally into two tranches, Tranche A and Tranche B. The performance
measure for Tranche A Rights is the ROFE hurdle, while the Absolute TSR is the performance hurdle for Tranche B Rights. The testing
of each tranche is independent of the other tranche, such that one tranche could hypothetically result in 100% vesting while the
other could result in 100% forfeiture, or any combination thereof.
The fair value of Tranche B Rights has been calculated by an independent expert in accordance with AASB2 on an option-equivalent
basis, while the accounting fair value of Tranche A Rights is estimated excluding the impact of the ROFE hurdle (as this is considered
a ‘non-market condition’). The impact of the ROFE hurdle is then taken into consideration via adjusting the estimated number of
Tranche A Rights that will vest based on current and projected performance.
The model inputs for the Tranche A and Tranche B Rights granted during the reporting period under the LTIP included:
Grant date/expiry date
Share price at grant date
Fair value at grant date: Tranche A/Tranche B
Expected price volatility of the Company’s shares
Expected dividend yield
Risk-free interest rate
1 Sept 2019/30 June 2022
$1.08
$0.96 1/$0.250
22.5%
4.25cps
0.68%
1. The fair of Tranche A Rights before adjusting for the likelihood of exceeding the ROFE hurdle.
The expected share price volatility is based on the historic volatility (based on the remaining life of the Rights), adjusted for any
expected changes to future volatility due to publicly available information.
83
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 25 – Share-based payments continued
Details of Rights outstanding under the plans at balance date are as follows:
2020
Expiry date
Grant date
Long Term Incentive Plan
1 July 2016
1 July 2017
1 July 2018
1 September 2019
30 Jun 2019
30 Jun 2020
30 Jun 2021
30 Jun 2022
Special Retention Plan
1 Jan 2017
1 Jan 2020
2019
Expiry date
Grant date
Long Term Incentive Plan
1 July 2015
1 July 2016
1 July 2017
1 July 2018
1 July 2018
1 July 2019
1 July 2020
1 July 2021
Balance at
1 July 2019
Granted during
the year
Cancelled
during the year
Vested during
the year
Balance at
30 June 2020
2,500,000
2,450,000
2,650,000
-
7,600,000
-
-
-
4,098,368
4,098,368
(2,500,000) 1
(225,000)
(250,000)
(452,262)
(3,427,262)
-
-
-
-
-
-
2,225,000
2,400,000
3,646,106
8,271,106
150,000
7,750,000
-
4,098,368
-
(3,427,262)
(150,000)
(150,000)
-
8,271,106
Balance at
1 July 2018
Granted during
the year
Cancelled
during the year
Vested during
the year
Balance at
30 June 2019
2,425,000
2,600,000
2,550,000
-
7,575,000
-
-
-
2,700,000
2,700,000
(1,016,075)
(100,000)
(100,000)
(50,000)
(1,266,075)
(1,408,925)
-
-
-
(1,408,925)
-
2,500,000 1
2,450,000
2,650,000
7,600,000
Special Retention Plan
1 Jan 2017
1 Jan 2020
150,000
7,725,000
-
2,700,000
-
(1,266,075)
-
(1,408,925)
150,000
7,750,000
1. The performance targets for this tranche of Performance Rights were not met and consequently all of these Performance Rights were forfeited
on 1 July 2019.
Ridley Employee Share Scheme
At the 1999 Annual General Meeting, shareholders approved the introduction of the Ridley Employee Share Scheme (ESS).
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.
There were no options issued under the ESS in FY20.
The fair value at grant date of the options issued in the prior year through the ESS was measured based on the binomial option
pricing model using the following inputs:
Grant date
Restricted life
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
84
21 June 2019
3 years
$1.185
$0.642
22.5%
0.41–0.42cps
1.28%
Ridley Corporation Limited Annual Report 2020 Ridley Employee Share Scheme movements
2020 Number of shares
Grant date
5 April 2005
11 April 2008
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
21 June 2019
Date shares
become
unrestricted
5 April 2008
11 April 2011
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
21 June 2022
Weighted
average
exercise price
$0.77
$0.56
$0.61
$0.66
$0.61
$0.41
$0.48
$0.66
$0.85
$0.84
$0.84
$0.64
Balance
at start of
the year
46,980
111,166
141,636
132,704
168,708
403,546
476,370
436,835
471,801
516,605
608,450
708,133
4,222,934
Granted
during
the year
-
-
-
-
-
-
-
-
-
-
-
-
-
Exercised
during
the year
(46,980)
(111,166)
(22,792)
(22,620)
(28,118)
(77,792)
(87,690)
(82,018)
(88,740)
(94,180)
(108,955)
(131,440)
(902,491)
Balance
at the end
of the year
-
-
118,844
110,084
140,590
325,754
388,680
354,817
383,061
422,425
499,495
576,693
3,320,443
Exercisable
at the end
of the year
-
-
118,844
110,084
140,590
325,754
388,680
354,817
383,061
422,425
-
-
2,244,255
Weighted average exercise price
$0.68
N/A
$0.67
$0.68
$0.65
The ‘Exercisable at end of the year’ column in the above and following table reflects the fact that the options outstanding have
a weighted average contractual life of three years (2019: three years).
2019 Number of shares
Date shares
become
unrestricted
Grant date
29 January 2002 29 January 2005
28 January 2003 28 January 2006
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
21 June 2019
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
21 June 2022
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
$0.64
Balance
at start 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
Granted
during
the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
708,133
708,133
Exercised
during
the year
(22,000)
(41,850)
(15,660)
(84,896)
(94,986)
(17,930)
(230,568)
(37,444)
(37,700)
(41,350)
(80,223)
(127,980)
(139,074)
(106,488)
(73,405)
(77,825)
-
(1,229,379)
Balance
at the end of
the year
-
-
46,980
-
-
111,166
-
141,636
132,704
168,708
403,546
476,370
436,835
471,801
516,605
608,450
708,133
4,222,934
Exercisable
at the end of
the year
-
-
46,980
-
-
111,166
-
141,636
132,704
168,708
403,546
476,370
436,835
471,801
-
-
-
2,389,746
Weighted average exercise price
$0.66
$0.64
$0.60
$0.68
$0.61
85
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
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 dependants 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 $5,613,534 (2019: $5,687,335).
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. Any derivatives used to manage
these exposures are designated into either fair value or cash flow hedging relationships (as appropriate).
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
Cash
Assets
Net balance sheet exposure
USD
488
-
488
NZD
1,086
-
1,086
2020
EUR
41
THB
2,162
- 24,453
41 26,615
SGD
30
-
30
USD
93
-
93
NZD
1,053
-
1,053
2019
EUR
111
-
111
THB
3,681
5,989
9,670
GBP
-
1,725
1,725
86
Ridley Corporation Limited Annual Report 2020 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 $357,688 (2019: $1,156,690) or increased by $437,174 (2019: $1,413,732) 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 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 2.8% (2019: 3.8%).
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.
In $’000
Variable rate instruments
Cash
Bank loans
Interest rate
2020
Interest rate
2019
-
2.8%
45,818
193,000
-
3.8%
17,483
119,500
Interest rate sensitivity
A 100 basis point change 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 $1,351,000 (2019: $832,000).
(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
Further credit risk disclosures on trade receivables are disclosed in Note 8.
2020
$’000
102,244
5,150
45,818
153,212
2019
$’000
97,294
16,989
17,483
131,766
87
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 27 – Financial risk management continued
(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 finance team 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 18.
The following tables disclose the contractual maturities of financial liabilities, including estimated interest payments:
2020 in $’000
Carrying
amount
Less than
1 year
Non-derivative financial liabilities
Trade and other payables1
160,988
160,998
Lease liabilities
Bank loans
9,009
193,000
362,997
4,127
5,346
170,471
1. Includes derivative of $1,719,800 to be settled within 12 months.
2019 in $’000
Carrying
amount
Less than
1 year
Non-derivative financial liabilities
1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
Total
contractual
cash flows
-
2,374
5,346
7,720
-
1,586
5,346
6,932
-
886
195,628
196,514
-
36
-
36
160,998
9,009
211,666
381,673
1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
Total
contractual
cash flows
Trade and other payables
Bank loans
158,759
118,926
277,685
158,759
4,555
163,314
-
4,555
4,555
-
4,555
4,555
-
4,555
4,555
-
123,481
123,481
158,759
141,701
300,460
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different
amounts, noting that the maturity of the contractual cash flows for the Group’s borrowings reflects the impact of the waivers
granted by the Group’s lenders.
(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
2020
$’000
2019
$’000
-
1,725
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.
88
Ridley Corporation Limited Annual Report 2020 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.
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. Refer Note 33.
(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 – Leases
While the majority of the Group’s operations are conducted on sites owned by the Group, the Group leases certain sites and
warehouses on long-term lease periods of up to 10 years in duration, preferably with options for Ridley to renew in order to provide
operational flexibility. Each lease is negotiated in the context of market conditions and unique terms and conditions as offered by
the individual lessor. Previously, these long term leases were classified as operating leases and the lease payments expensed as
incurred, with no balance sheet entries required to be recorded.
The Group leases motor vehicles and certain items of mobile plant under a number of different lease arrangements with external
fleet management entities. The Group leases certain IT equipment with contract terms of up to three years. These leases are
considered to be short term and for low-value individual items. Under the new accounting standard, the Group has elected not
to recognise these right of use assets and liabilities in respect of these leases, which consequently continue to be expensed
as payments are incurred.
(i) Right of use assets – in $’000
Balance as at 1 July 2019
Cancellation of Thailand leases
Additions to right of use assets
Execution of extension option
Cancellation of leases
Accumulated depreciation
Balance as at 30 June 2020
Property Motor vehicles
1,645
-
419
162
-
(1,107)
1,119
8,225
(1,210)
-
-
-
(2,530)
4,485
Plant
3,940
-
1,057
128
(667)
(1,234)
3,224
Total
13,810
(1,210)
1,476
290
(667)
(4,871)
8,828
89
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 28 – Leases continued
(ii) Lease liabilities – in $’000
Balance as at 1 July 2019
Cancellation of Thailand leases
Additions to lease liability
Execution of extension option
Cancellation of leases
Accretion of interest
Payments
Balance as at 30 June 2020
Current
Non-current
(iii) Extension options
Property Motor vehicles
(1,645)
-
(419)
(162)
-
(62)
1,169
(1,119)
820
299
(7,521)
587
-
-
-
(240)
2,545
(4,629)
2,189
2,440
Plant
(3,940)
-
(1,057)
(128)
667
(135)
1,332
(3,261)
1,118
2,143
Total
(13,106)
587
(1,476)
(290)
667
(437)
5,046
(9,009)
4,127
4,882
Some property leases contain extension options exercisable by the Group up to one year before the expiry of the initial lease term.
The Group assesses at the commencement of the initial lease term, or whenever there is a significant event or change in
circumstances relating to a lease, the likelihood of it exercising its option to extend the lease.
The Group’s Aquafeed business unit is currently undertaking a storage and logistics review of its Narangba operation. Consequently,
the renewal of the existing office and warehousing third party lease, which expires in December 2020, does not meet the reasonably
certain criterion for execution of an extension option. The current annual lease rental for this facility is $0.8m. The Group considers
the potential future lease payments associated with the exercise of all other lease term extension options to be immaterial or uncertain.
(iv) Amounts recognised in profit or loss and statement of cash flows – in $’000
Refer to Note 5(b) for the financial impact of lease accounting on profit or loss. The total cash outflows for leases in the year
was $5,046,000.
(v) Reconciliation of operating lease expenses reported at 30 June 2019 to AASB16 adopted numbers on 1 July 2019,
in $’000
Operating lease commitments at 30 June 2019 as disclosed in the Group’s consolidated financial statements
Discounting using the incremental borrowing rate at 1 July 2019
Recognition of exemption for leases with less than 12 months of lease term and low value assets at transition
Lease liabilities recognised at 1 July 2019
Note 29 – 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.
90
2020
$’000
12,968
1,750
14,718
224
224
560
-
1,008
15,741
(1,823)
(812)
13,106
2019
$’000
41,815
2,750
44,565
5,244
4,272
5,282
943
15,741
Ridley Corporation Limited Annual Report 2020 (a) Capital plant and equipment
At 30 June 2020, capital plant and equipment commitments of $2.714m existed in respect of completion of the new Wellsford
feedmill. At 30 June 2020, there was $44.4m of capital work in progress associated with the construction of this new feedmill
in Central Victoria, which was commissioned during the fourth quarter of FY20 and officially opened on 3 August 2020.
The new extrusion plant at Westbury, Northern Tasmania, was transferred from capital work in progress to property, plant and
equipment effective on 1 July 2019.
(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 30 – 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
2020
$’000
971
2019
$’000
967
In the ordinary course of business, the Group may be subject to legal proceedings or claims. Where there is significant uncertainty
as to whether a future liability will arise in respect of these items, or the amount of liability (if any) that may arise cannot be reliably
measured, these items are accounted for as contingent liabilities. Based on information available as of the date of this report,
the Group does not expect any of these items to result in a material loss.
On 14 February 2020, Ridley announced the conclusion of the Baiada legal proceedings through the execution of a commercial
settlement, whereby Baiada terminated its legal proceedings. Under the terms of the settlement agreement, Ridley is paying
$1.935m to Baiada in three instalments over a 12-month period, all of which have been accounted for in the FY20 result and of which
$1.5m was outstanding as at 30 June 2020. The existing supply agreement between Ridley and Baiada was also amended to provide
production efficiencies for Ridley and changes to the fee structure. The term of the agreement was extended for a further two years
to expire on 30 November 2025.
Note 31 – Events occurring after the balance sheet date
As previously announced, Ridley Chair Dr Gary Weiss AM retires on 26 August 2020.
Mr Mick McMahon and Mr Rhys Jones are being appointed as Ridley Directors on 27 August 2020, with Mr McMahon assuming the
role of Ridley Chair. Mr McMahon is also being appointed to the Ridley Audit and Risk Committee and Mr Jones to the Remuneration
and Nominations Committee.
There were no other matters or circumstances have arisen since 30 June 2020 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.
91
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 32 – Auditor’s remuneration
(a) Audit and review of financial reports
Auditor of the Company – KPMG Australia
(b) Other services
Auditor of the Company – KPMG Australia – in relation to other assurance, taxation and due
diligence services
Total remuneration of auditor
2020
$
2019
$
362,480
369,196
22,956
385,436
26,383
395,579
Note 33 – Corporate information and accounting policy summary
Ridley Corporation Limited (the Company) is a company limited by shares, incorporated and domiciled in Australia, whose
registered office is at level 4, 565 Bourke Street, Melbourne, Victoria, 3000, and whose shares are publicly traded on the Australian
Securities Exchange (ASX). The consolidated financial statements as at, and for the year ended, 30 June 2020 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 26 August 2020 and is presented in Australian dollars, being
the Company’s functional currency. The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2018/191 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.
Basis of preparation
The principal accounting policies as outlined below and as 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 except if mentioned otherwise. Certain
comparative amounts have been restated, reclassified or re-presented to conform with the current year’s presentation. This is the
first set of the Group’s financial statements in which AASB 16 Leases has been applied.
(i) Statement of compliance
These consolidated financial statements are general purpose financial statements prepared in accordance with Australian
Accounting Standards (AASBs) (including Interpretations) adopted by the Australian Accounting Standards Board (AASB) and
the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs)
and interpretations adopted by the International Accounting Standards Board (IASB).
The Group has adopted all of the new and revised standards and interpretations issued by the AASB that are relevant to its
operations and effective for the current financial year, and has not early adopted any new or amended standards in preparing
these consolidated financial statements.
(ii) AASB 16 Leases (Policy applicable from 1 July 2019)
The new lease accounting standard AASB 16 is effective for the financial year beginning 1 July 2019. It requires all leases to be
recognised on the balance sheet with a right-of-use asset capitalised and depreciated over the estimated lease term together with
a corresponding liability that will reduce over the same period with an appropriate interest charge recognised. AASB 117 Leases only
requires leases categorised as finance leases to be recognised on the balance sheet. The Group has applied AASB 16 using the
modified retrospective approach and therefore the comparative information has not been restated and continues to be reported
under AASB 117.
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in AASB 16.
This policy is applied to contracts entered into on or after 1 July 2019.
92
Ridley Corporation Limited Annual Report 2020 (a) As a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the
contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property, the Group has
elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset
or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the
lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the
right-of-use asset reflects that the Group will exercise a purchase option. In that case, the right-of-use asset will be depreciated over
the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental
borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
• amounts expected to be payable under a residual value guarantee; and
• the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of
a lease unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate, if:
• there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee,
• the Group changes its assessment of whether it will exercise a purchase, extension or termination option, or
• if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use
asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
(b) As a lessor
The Group has no material contractual arrangements where it is the lessor of an operating or finance lease.
(c) Short-term leases and lease of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases,
including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line
basis over the lease term.
(d) Financial impact – profit and loss account
The financial impact of the introduction of the new accounting standard is reported in Note 5(c).
(e) Reconciliation of lease liabilities at 1 July 2019 to operating lease commitments at 30 June 2019
The reconciliation of movements in right-of-use assets and associated lease liabilities for the year is provided in Note 28.
93
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 33 – Corporate information and accounting policy summary continued
(f) Use of lease estimates and judgements
• Determining the lease term of contracts with renewal and termination options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option
to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.
The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating
whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. After the commencement
date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and
affects its ability to exercise or not to exercise the option to renew or terminate.
• Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to
measure lease liabilities. The IBR is the rate of interest the Group would have to pay to borrow over a similar term, and with similar
security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.
The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available.
Where leases are held in non-Australian dollar currencies, the spot exchange rates on 1 July 2020 have been used to value them.
Lease liabilities will be revalued to spot exchange rates at each future balance sheet date.
(iii) 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.
(iv) 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 that 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 following.
(a) Estimated recoverable amount 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 that are largely independent of the cash inflows from other assets or groups of assets (Cash Generating Units,
or CGUs). Refer to Note 13 for further details on impairment testing.
(b) Estimated Research and Development costs and tax provisions
As at the date of adoption of these financial statements, the total cost of projects eligible to claim the Research and Development
Tax Incentive (RDTI) and the tax provisions are estimates only. The actual RDTI claimable cost and income tax return are finalised
in the first half of the ensuing financial year in order to facilitate respective lodgements within the required deadlines.
(c) 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 11 for further details on investment properties.
94
Ridley Corporation Limited Annual Report 2020 (d) Provision for ECL on receivables
The Group calculates the doubtful debts provision under the expected credit loss (ECL) model. The Group has established
a provision matrix that is based on the Group’s historical credit loss experience, adjusted for forward-looking factors specific
to the debtors and the economic environment. Measurement of ECL allowance for trade receivables is disclosed in Note 8.
(e) Determining timing of satisfaction of performance obligations
The Group generally has one performance obligation, and consequently revenue from the sale of feed is recognised at a point
in time. Refer to Note 4 for further details on revenue recognition.
(v) 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.
(a) 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.
Ridley buys large volumes of grain for stockfeed manufacture, with price risk mainly offset through sales of finished feed. Where
Ridley commits to forward grain purchases at a fixed price and future date, unsupported by a finished feed sale contract, Ridley
may look to offset price risk through the use of a forward futures contract derivative instrument, which creates a floating purchase
price to mitigate the price risk in the intervening period.
In such instances, the futures contract hedge is deemed to be highly effective because (a) volumes are consistent across the
committed purchase and sold futures contract, (b) timeframes for grain delivery and futures maturity are aligned, and (c) pricing
reference points are consistent.
(b) Non-derivative financial assets and liabilities
The forward futures contracts and the committed purchases in place at balance date have been revalued at 30 June 2020.
The hedge is classified as a fair value hedge of a firm commitment per IFRS 9/39. Both the derivative and the commitment have
been revalued at 30 June 2020 and recognised on balance sheet at their fair value. The difference between the two revaluations
represents the ‘ineffectiveness’ in the hedge relationship and gives rise to a mark to market gain (or loss) and is recognised in
profit or loss.
As at 30 June 2020, the Group had 16 forward futures contracts in the form of swaps in Australian dollar currency with a mark to
market gain of $295,512. The corresponding asset of $2,073,000 has been recorded as a current receivable ‘Fair value of financial
instruments’ (Note 8), while the liability is included within current payables ‘Trade creditors and accruals’ (Note 18).
(c) 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.
(vi) 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.
95
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Notes to the Financial Statements continued
30 June 2020
Note 33 – Corporate information and accounting policy summary continued
(vii) 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.
(viii) 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.
(ix) 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.
(x) Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars at the exchange rates prevailing at balance date.
The income and expenses of foreign operations are translated into Australian dollars at the exchange rates prevailing at the date
of the transactions.
96
Ridley Corporation Limited Annual Report 2020 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 55 to 96 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 2020 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 2020.
4. The financial statements also comply with International Financial Reporting Standards as disclosed in Note 33.
This declaration is made in accordance with a resolution of the Directors
Dr G H Weiss
Director and Ridley Chair
Q L Hildebrand
CEO and Managing Director
Melbourne
26 August 2020
97
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSCORPORATE DIRECTORYINTRODUCTIONFINANCIAL REPORTRidley Corporation Limited Annual Report 2020 Independent Auditor’s Report
Independent Auditor’s Report
To the shareholders of Ridley Corporation Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Ridley Corporation Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
giving a true and fair view of the
Group’s financial position as at 30
June 2020 and of
financial
performance for the year ended on
that date; and
its
•
•
The Financial Report comprises:
•
•
Consolidated balance sheet as at 30 June 2020
Consolidated statement of comprehensive
income,
Consolidated statement of changes in equity, and
Consolidated statement of cash flows for the year then
ended
• Notes including a summary of significant accounting
policies
• Directors’ Declaration.
complying with Australian Accounting
Standards
the Corporations
and
Regulations 2001.
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:
• Carrying value of non-current assets,
including goodwill and capitalised
development costs
• Accounting for inventory, including
consideration of valuation risks
Key Audit Matters are those matters that, in our professional
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.
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.
78
Liability limited by a scheme approved under
Professional Standards Legislation.
98
Ridley Corporation Limited Annual Report 2020 Carrying value of non-current assets, including goodwill and capitalised development costs
Refer to Note 12 Property, plant and equipment and Note 13 Intangible assets to the financial report
The key audit matter
How the matter was addressed in our audit
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:
-
-
-
-
-
-
Considering the appropriateness of the value in
use method applied by the Group to perform
the
against
the
requirements of the accounting standards.
impairment
test
for
Assessing the integrity of the value in use
models used, including the accuracy of the
underlying calculation formulas.
Comparing the forecast cash flows contained in
the value in use models to the Board approved
forecasts.
Assessing the accuracy of previous Group
forecasts to inform our evaluation of current
forecasts
in the model. We
considered previous trends where volatility in
earnings in the agriculture industry existed and
how this volatility impacted the business.
incorporated
Considering the sensitivity of the model by
varying key assumptions, such as growth rates,
cash flows 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 knowledge of the Group, business
and industry developments, we challenged the
Group’s significant forecast cash flow and
growth assumptions as incorporated in the
models.
- Working with our valuation specialists, we
independently developed a discount rate range
considered comparable using publicly available
market data for comparable entities, adjusted
by risk factors specific to the Group and the
industry it operates in. In addition, we involved
our valuation specialists in the assessment of
the long term growth rates used in the value in
use model.
- Working with our valuation specialists, we
compared the earnings multiples implied by the
Group’s recoverable amount assessment to
observable multiples for comparable entities;
A key audit matter for us was the Group’s
annual testing of non-current assets, including
goodwill and capitalised development costs, for
impairment 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,
terminal value,
annual growth rates and discount rates;
and
including
the
of
future
Complexity
the Group’s
in auditing
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
from
commercialisation of the product. The
industry is evolving through technology
advancements by
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.
the Group and
benefits
to
inputs
The Group uses complex models to perform
its annual testing for impairment. The models
are largely manually developed, use adjusted
historical performance, and a range of internal
and external sources as
the
assumptions. For certain CGUs, the Group has
not met prior forecasts, increasing our focus
on the risk associated with the reliability of
current forecasts. Complex modelling using
forward-looking assumptions
to be
prone to greater risk for potential bias, error
and inconsistent application. These conditions
necessitate additional scrutiny by us,
in
particular to address the objectivity of sources
used for assumptions, and their consistent
application.
tends
In addition to the above, the Group recorded
an impairment charge of $21.6 million in
relation to goodwill, intangible assets and
property, plant and equipment relating to the
Novacq CGU. This further increased our audit
effort in this key audit area.
79
99
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020 Independent Auditor’s Report continued
involved
to
valuation
We
supplement our senior audit team members in
assessing this key audit matter.
specialists
• We recalculated the impairment charge against the
financial
the
in
recorded amount disclosed
statements; and
• We assessed the disclosures in the financial report
using our understanding of the issue obtained from
our testing and against the requirements of the
accounting standards.
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:
•
•
•
•
•
•
the
inventory balance by
Assessing
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 assessment of net
realisable value where the carrying value of
inventory was identified as being at-risk.
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.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors report. The
About the Company, 2020 Features, Five Year Summary, Ridley Locations and Sectors, Chairman’s Report,
CEO’s Review, Financial Review, Board of Directors, Shareholder Information, Glossary and Corporate
Directory are expected to be made available to us after the date of the Auditor’s Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and
will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
80
100
Ridley Corporation Limited Annual Report 2020 In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
Responsibilities of 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
Ridley Corporation Limited for the year
ended 30 June 2020 complies with Section
300A of the Corporations Act 2001.
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 2020.
responsibility
Our
the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
to express an opinion on
is
KPMG
Chris Sargent
Partner
Melbourne
26 August 2020
81
101
LOCATIONS & SECTORSCHAIRMAN & CEO’S REVIEWSFINANCIAL REVIEWBOARD OF DIRECTORSFINANCIAL REPORTCORPORATE DIRECTORYINTRODUCTIONRidley Corporation Limited Annual Report 2020 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
>100,000
Total
Number of
Holders
Number of
Securities
% Held by 20 largest
Shareholders
6,440
317,431,555
73.84%
Number of ordinary
shareholders
1,182
2,243
1,146
1,739
130
Number of ordinary
shares held
514,889
6,647,342
8,619,344
44,871,141
256,778,839
6,440
317,431,555
There are 789 holders of unmarketable parcels (comprising shareholdings less than 667 shares at $0.75 per share) of Ordinary Shares.
20 largest fully paid shareholders
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
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