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pg02
Highlights & achievements
Australia is currently one of the top
three almond growers in the world and
Select Harvests manages over 60%
of Australia’s almond orchards.
pg04
Our business at a glance
at a glance
Contents
Mission Statement
Our Year in Brief
pg09
Summary of Achievements
Our Business at a Glance
Our brands
Milestones
From the Chairman and
Managing Director
Our Brands
Review of Operations
Maintaining Quality
pg10
Environmental Sustainability
Our operations
Review of Operations
Our People
Our Social and Community
Involvement
Our Board
Our Management
Statistical Summary
Financial Contents
Financial Reports
Auditor’s Declaration
Directors’ Declaration
Independent Audit Report
ASX Additional Information
19
20
21
22
23
24
32
73
74
75
1
2
3
4
5
6
9
10
16
17
18
Shareholder Information
Annual General Meeting
2005/06 Calendar
pg17
Environmental Sustainabilityiniti
atives
The Annual General Meeting will be held on
Monday 24 October 2005 at the ASX Theatrette,
530 Collins Street Melbourne Victoria,
commencing at 2pm. A separate notice of
meeting has been posted to all shareholders.
Feb Announcement of interim results
Apr Payment of interim dividend
Aug Announcement of preliminary
full year results
Sept Annual Report to shareholders
Oct Payment of final dividend
Oct Annual General Meeting
pg 19
Social & Community
Our mission
To continue to develop and expand our
business model to generate sustainable
earnings growth into the future thereby
delivering increased value to shareholders.
Our strategy
Through an ongoing process of
diversification and expansion of our
income stream by leveraging our core
strengths of almond growing and
knowledge of edible nuts and their
markets, we will continue to develop
a fully integrated food company with
sustained earnings growth and reduced
volatility from agricultural risk.
Our activities
From origins as a commodity-based
almond grower, Select Harvests has
successfully transformed itself into a
significant integrated agri-food business
with a diversified income stream.
Our activities now include managing
orchards for investors, marketing
almonds in the domestic and export
markets, and processing and marketing
an extensive range of nut and fruit based
products to retailers, distributors and
food manufacturers.
Our outlook
We are one of the largest growers of
almonds in Australia and globally, and our
food products division has a significant
footprint in the Australian market.
Increasing nut consumption domestically
and internationally, the existence of
strong fundamentals in the international
almond market, and increasing investor
interest in almonds as a mainstream
horticultural investment, are expected to
contribute to a positive future outlook
for the company. As a result of these key
drivers, we are planning a further 6,000
acres of new almond projects in 2006, and
scaling up our nursery and development
resources to facilitate further projects
into the future. We are targeting sales,
market, and distribution growth from
our food products division with a focus
on our branded products, which are well
positioned to continue to capitalise on
the growing trend towards healthier diets
and an increasing awareness of the health
benefits associated with the regular
consumption of nuts.
Select Harvests Annual Report 2005 1
Highlights
• Increased acres of new almond
• Increased yields from company
developments by 15%
owned orchards by 24%
• Expanded the total acres under
• Almond price achieved per kilogram
management by 29%
increased by 11%
• Increased production from investor
owned orchards by 124%
• Acquisition of the Nibbles business
and branded product sales growth
increased food products sales by 48%
Our year in brief
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2 Select Harvests Annual Report 2005
Summary of our achievements for the 2004/2005 financial year
Almond Operations
Our strategic objectives
• Total production up to 6,036 metric
Our objectives for 2005/06
tonnes from 3,538 in 2004
• Expansion of processing capacity to
cater for increased crop levels.
• Costs per kilogram decreased by
6% on the previous year from our
owned orchards
• These efficiency gains consolidate
the cost savings achieved in previous
years and make us one of the most
efficient producers in the world
• Planted 4,108 acres of new
orchards in 2005, totalling 15,773
acres of investor owned orchards
representing 87% of total acreage
under management.
• Continue to extract efficiency
gains from additional acres under
management and the processing of
increasing crop levels
• Plan the further expansion of
processing capacity
• Anticipate further plantings
totalling 6,000 acres of investor
owned orchards for 2006
• Scale up nursery and development
resources to support future
developments.
Maintain our position as a low
cost almond producer and develop
additional investor owned orchards
operated by Select on a fee basis
to deliver long term stable income
streams, economies of scale, and
guaranteed supply to meet increasing
market demand.
Our achievements during 2004/05
• Crop from company owned orchards
up 24% to a record 2,350 metric
tonnes in 2005
Investor owned crop increased
from 1,643 tonnes in 2004 to 3,686
tonnes in 2005
•
Food Products
Our strategic objectives
Our achievements during 2004/05
Our objectives for 2005/06
Grow distribution and market share to
enhance our position as the leading
processor, marketer, and distributor of
almonds, other nuts, and dried fruits,
and add value to the marketing and
distribution of almonds harvested from
our almond operations division.
•
Increased sales revenue by 48% over
the prior year to $131 million.
• Acquired the Chiquita Nibbles
business, contributing to revenue
and EBIT together with improved
distribution in the fresh produce
category
Increased market share in the
branded cooking and muesli
categories of Australian supermarkets.
•
• Continue to build our branded
products in the cooking, health, and
muesli categories
• Expand domestic distribution for
our products outside the grocery
channel
• Continue to develop and expand our
export business in Asia and Europe
• Utilise our competencies in product
sourcing, processing, marketing and
distribution to maximise our retail
and industrial business.
Earnings
Our strategic objectives
Our achievements during 2004/05
• Total EBIT increased by 39% to
Earnings growth, improved quality of
earnings, diversification of earnings
streams, with less dependency on
almond pricing.
• Total sales revenue increased by
40% to $178 million
• EBIT contribution from activities
other than company owned orchards
increased during 2004/05 further
reducing exposure to agricultural risk
$33.3 million
• Net profit after tax increased by 43%
to $21.7 million.
Our objectives for 2005/06
• Continue to deliver earnings growth.
Shareholders Equity
Our strategic objectives
• Total shareholders’ equity increased
Our objectives for 2005/06
Enhance shareholder value.
by 15% to $91.5 million
• Return on shareholders’ equity
Our achievements during 2004/05
increased to 23.7% p.a.
• Total dividends increased by 62% to
42 cents per share
• Earnings per share increased by 40%
to 55.9 cents per share
• Share price increased by 45% to
$9.70 at 30 June 2005.
• Continue to increase shareholder
value through investment in the
existing business
Identification and evaluation
of appropriate expansion
opportunities.
•
Select Harvests Annual Report 2005 3
Sustained growth during 2005 saw the expansion of total acres under management
by 29% and increased acres of new almond developments by 15%.
Our Business at a glance
Select Harvests Limited, Australia’s largest
almond grower, manages in excess of 60% of
Australia’s almond orchards, and is one of the
largest almond growers globally.
It is Australia’s leading manufacturer,
processor and marketer of a range
of nuts, fruit based, and associated
products to the Australian retail and
industrial markets, and exports almonds
to several countries in Asia, Europe and
the Middle East.
Through a focused diversification and
growth strategy, Select Harvests has
delivered an increase in profit after tax
of 314% over the last six years.
Select Harvests’ business streams are
as follows:
Almond Operations
Food Products
• Owns/leases 2,375 acres of almond
orchards in the Robinvale area of
north-west Victoria.
• Manages on a fee for service basis,
15,773 acres of almond orchards
on behalf of a number of external
investors. These services include
orchard establishment, tree supply,
farm management, harvesting,
processing, and marketing.
• Currently processes approximately
6,000 metric tonnes of almonds
representing approximately 40%
of Australia’s crop. Future tonnage will
exceed 20,000 metric tonnes as new
orchards come into full production.
• Exports approximately 40% of its
almond production to a range of
countries including India, Japan,
China, Indonesia, Germany, Spain,
United Kingdom, Russia, France,
Holland and Belgium.
• Produces an extensive range of
packaged nuts and associated
products (snacks, cooking
ingredients, mueslis, natural health
foods, dried fruits, etc).
• Australia’s leading supplier of
processed and packaged nuts
to Australian supermarkets. The
Company markets product through
the Lucky, Sunsol, Nu-Vit, Meriram,
and Soland brands.
• Manufactures a range of nut-based
ingredients for food manufacturers
and distributors.
Pesticide Products
• This business will be divested in
the first half of the 2006 financial
year. Please refer to The Chairman
and Managing Director’s Report
for further details on page 6.
4 Select Harvests Annual Report 2005
John Bird, Managing Director
and future growth prospects, and we are targeting
“ Our strategic initiatives have expanded our business
further growth in the current year.”
Milestones
1 July 95 – 30 June 96
1 July 98 – 30 June 99
1 July 02 – 30 June 03
– Defender Limited changed its name
to Select Harvests Limited
– Stage 1 of hulling and shelling plant
upgrade commenced
– Sorting and packing plant moved to
Euston - NSW
1996
– Acquired 3,950 acres of land.
– Max Fremder joined the Board
1 July 96 – 30 June 97
– Sold ‘DEFENDER’ Brand name (but
retained manufacturing agreement)
– Development of own tree nursery
– Max Fremder became Chairman of
Select Harvests Limited
– 236 acres planted at Carina (first
major plantings since 1988)
1997
upgrade commissioned.
– Stage 2 of hulling and shelling plant
1 July 97 – 30 June 98
–
Installed an inshell processing line
for export markets
–
168 new acres planted at Carina
–
John Bird joined the Company
as CEO
1998
– Sandy Clark joined the Board
– Stage 3 of hulling and shelling plant
upgrade commissioned.
– Acquired Lucky Candy Company in
October 1998, the leading marketer
of nuts, dried fruits and seeds in the
cooking section of supermarkets
1999
– First major plantings of investor
owned orchards (510 acres).
– Achieved the position of “One of the
top 5 almond growers in the world”
2003
– Relocated and consolidated our
manufacturing operations to
Thomastown facility from Northcote
and Scoresby.
1 July 99 – 30 June 00
1 July 03 – 30 June 04
– Planted an additional 727 acres
of investor owned orchards
– Entered into Strategic Alliance with
Timbercorp Limited to develop
10,000 acres of almond orchards
over the next 5 years
– Acquired Munch Nuts Pty Ltd in
December 1999, a leading snack nut
producer
2000
– All food processing plants accredited
under ISO 9002 and HACCP.
1 July 00 – 30 June 01
– Planted over 3,000 acres of new
investor owned orchards
HACCP accreditations.
– Orchards earned ISO 9002 and
– Acquired Renshaw Foods in October
2000, a leading ingredient supplier
to food manufacturers
2001
2002
– Planted an additional 518 acres
of investor owned orchards.
– Replaced 160 acres of 30 year old
trees at Boundary Bend
1 July 01 – 30 June 02
– MILLIONTH TREE PLANTED!!!
July 2003
– Acquired the Meriram business in
2004
– Curt Leonard joined the Board.
– Dan O’Brien joined the Board
1 July 04 – 30 June 05
– Acquired Chiquita Nibbles business
from Chiquita Brands South Pacific
in October 2004
– New Strategic Alliance with
Timbercorp finalised to develop a
further 10,000 acres over the next
five years
– Expanded and upgraded hulling
and shelling plant to 10,000 metric
tonne capacity
– Ross Herron joined the Board
– New Laser sorter installed in the
Thomastown processing plant
–
Internal microbiological laboratory
established in the Thomastown
processing plant
2005
– Almond price hits record highs.
Select Harvests Annual Report 2005 5
Max Fremder: Chairman
John Bird: Managing Director
form of profit growth, increased dividend
“ We continue to deliver value in the
payments and share price appreciation.”
From the Chairman
and Managing Director
Delivering
Shareholder Value
We are pleased to report to
shareholders that our business model
continues to deliver value in the form
of profit growth, increased dividend
payments and share price appreciation.
At the same time we have made further
progress in expanding our core activities
providing a larger base to underpin
future shareholder returns.
The sixth consecutive year of earnings
growth in excess of 25% delivered a
profit after tax of $21.7 million, up 43%
on the previous year. Directors declared
a final dividend of 26 cents per share,
bringing the total dividend for the year
to 42 cents (fully franked), an increase of
62% on the previous year.
Over the financial year our share price
increased by 45% from $6.67 to $9.70,
and has since increased further. Our key
performance indicators were all positive
showing an increased area under
management, larger crops from both
company owned and investor owned
orchards, higher almond prices, and
increased sales and market expansion
in our food products division.
Over recent years Select Harvests
has established and now operates an
integrated agri-food business.
Our activities include owning almond
orchards, managing almond orchards
for investors, marketing almonds in
domestic and international markets,
and processing and marketing an
extensive range of nut and fruit based
products to retailers, distributors and
food manufacturers.
Our chosen markets continue to be
kind to us with almond prices at record
highs driven by a sustained period of
global consumption growth and more
recently by a reduced 2005 USA crop,
and consumption of our product range
growing in the Australian market place.
While appreciative of being in the right
place at the right time, we continue
to do the right thing to ensure we
maximise the opportunities provided by
our competitive position.
In the last year we have expanded both
our orchard management services
and food products division which are
the cornerstone of our expansion and
diversification strategy.
We have recently completed the
establishment of a further 4,108 acres
of almond orchards increasing our total
area under management by 29% to
18,148 acres providing an increased base
for generating orchard management
services income. As a result, we estimate
that we are managing over 60% of the
total Australian almond acreage and
are one of the three largest growers
in the world.
The acquisition of the Nibbles business
completed in October 2004 contributed
to an increase in food product sales for
the year from $88 million to $131 million,
and at the same time significantly
increased our share of the important
and growing fresh produce area. We
now have an expanded business with
a leadership position servicing all
categories of supermarkets in which our
products are ranged.
These initiatives have expanded our
business model and future growth
prospects and we are targeting further
growth in the current year.
Our markets
We have spoken before about the key
drivers of our business; the strong
fundamentals of the international
almond market, and the increasing
consumption of our products in both
the domestic and international markets.
These conditions continued through the
financial year and present indications are
that they will continue into the future.
A sustained period of consumption
growth over the last 5 years coupled
with a plateauing of supply out of the
USA due to low levels of plantings in
recent years pushed almond prices
to seven year highs. More recently, an
anticipated 15% drop in the 2005 USA
almond crop will see global almond
supply drop below the previous year’s
consumption levels, driving prices to
new record highs.
USA growers accelerated new plantings
this year and we expect to see this
continue, however it will take a number
of years to deliver the increased
supply necessary to match potential
consumption growth.
The health message continues to gain
momentum with increased awareness
6 Select Harvests Annual Report 2005
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(cid:33)(cid:76)(cid:77)(cid:79)(cid:78)(cid:68)(cid:223)(cid:47)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:223)
(cid:23)(cid:16)(cid:5)
(cid:38)(cid:79)(cid:79)(cid:68)(cid:223)(cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:83)(cid:223)
(cid:48)(cid:69)(cid:83)(cid:84)(cid:73)(cid:67)(cid:73)(cid:68)(cid:69)(cid:83)(cid:223)
(cid:18)(cid:20)(cid:5)
(cid:22)(cid:5)
(cid:18)(cid:16)(cid:16)(cid:20)(cid:0)(cid:37)(cid:34)(cid:41)(cid:52)(cid:0)(cid:4)(cid:18)(cid:19)(cid:14)(cid:24)(cid:0)(cid:77)(cid:73)(cid:76)(cid:76)(cid:73)(cid:79)(cid:78)
(cid:18)(cid:16)(cid:16)(cid:21)(cid:0)(cid:37)(cid:34)(cid:41)(cid:52)(cid:0)(cid:4)(cid:19)(cid:19)(cid:14)(cid:19)(cid:0)(cid:77)(cid:73)(cid:76)(cid:76)(cid:73)(cid:79)(cid:78)
(cid:33)(cid:76)(cid:77)(cid:79)(cid:78)(cid:68)(cid:223)(cid:47)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:223)
(cid:23)(cid:17)(cid:5)
(cid:38)(cid:79)(cid:79)(cid:68)(cid:223)(cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:83)(cid:223)
(cid:48)(cid:69)(cid:83)(cid:84)(cid:73)(cid:67)(cid:73)(cid:68)(cid:69)(cid:83)(cid:223)
(cid:18)(cid:22)(cid:5)
(cid:19)(cid:5)
(cid:33)(cid:76)(cid:77)(cid:79)(cid:78)(cid:68)(cid:223)(cid:47)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:223)
(cid:38)(cid:79)(cid:79)(cid:68)(cid:223)(cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:83)(cid:223)
(cid:48)(cid:69)(cid:83)(cid:84)(cid:73)(cid:67)(cid:73)(cid:68)(cid:69)(cid:83)(cid:223)
(cid:23)(cid:19)(cid:5)
(cid:18)(cid:19)(cid:5)
(cid:20)(cid:5)
amongst health professionals and other
food and diet influencers. Nut based
products continue to grow in popularity
showing strong consumption growth
both domestically and in international
markets. There is continuing evidence
of a move towards natural snacks
with a greater focus by retailers and
increased marketing activity from
retailers, suppliers and industry groups.
The strong almond market improves
returns for both Select Harvests and
our investor growers and underpins the
attractiveness of almond orchards as an
investment in Australia.
The consumption trends towards healthy
eating matches the branding position
of our food products division and the
market growth provides the base for
revenue growth and an expanded
market for our future almond crops.
Future Prospects
Global almond prices continue to be
buoyant and will continue to impact
positively on our business.
We are planning to establish a
further 6,000 acres of investor owned
orchards in 2006 with potential to
increase this further. The larger area
under management and increased
production from maturing orchards
will increase orchard management
services revenue for the year.
The strong fundamentals of the
international almond market and
Australia’s competitiveness as an
almond grower and marketer, has
increased the demand to own almond
orchards. To match this demand we are
planning, with our alliance partners,
to expand our orchard establishment
activities over the next few years.
To facilitate this expansion, we have
upgraded our tree nursery capacity
and development infrastructure
and resources, and are focussing on
identifying suitable land reserves to
support this growth.
Our food products division continues
to operate in a growth market and
we are looking for further sales
and distribution growth in 2006,
particularly from our branded business.
We continue to look for further
expansion opportunities by acquisition
which would complement and add
value to our existing business.
Divestment of
Pesticides Business
We have entered an agreement
to sell Riverina Pelletising Services
Pty Ltd (Pesticides Business) for a
total consideration of $5.7 million.
Settlement is expected to occur on 14th
October and we estimate a net profit
before tax of approximately $4 million
from the transaction.
The business has been a good
contributor to our earnings over a
number of years. However given it is
today a non core activity operating in
a market in which we have minimal
influence, it is appropriate we take this
opportunity to divest the business and
concentrate on the further development
of our core activities. The Directors thank
Vince Cavanagh and his team for their
efforts and dedicated service and wish
them well under the new ownership.
Select Harvests Annual Report 2005 7
Our People
We have in the last year significantly
grown our business in terms of sales,
acreage, processing capacity, and
people. Our ability to successfully
manage this ongoing expansion and at
the same time deliver improved results
is in no small part due to the skill, effort
and dedication of our staff at all of our
locations and to the continued support
of our customers and suppliers.
We thank board members,
management and staff for their efforts
over the last year and their contribution
to the ongoing development of the
company.
We take the opportunity to welcome Mr
Ross Herron to the board. His skill base
and wealth of experience will serve the
company well in the future.
We are pleased with the progress the
company has made in recent years; our
business model has served us well and
will continue to do so in the coming
years. We are operating in a marketplace
that continues to provide opportunities
for further growth and once again we
can say that we approach the future
with confidence. We remain committed
to profitably growing the company and
delivering shareholder value in the future.
Max Fremder
Chairman
John Bird
Managing Director
The Almond Harvest Cycle
Winter activity
The months following harvest are used for orchard maintenance where
trees are pruned and prepared for the next season. Cold weather during
the winter months helps the trees to rest before the next growing season
begins. Winter is also a time for planting new trees and rootstock seeds
for the following year. Nursery trees that have reached heights over 90
cm are wrenched from the nursery and planted in prepared orchards. In
the processing plants, the hulling and shelling of the crop concludes but
grading, packing and dispatching continues in earnest.
Spring activity
Spring on the almond orchards is beautiful. As the warmer
temperature returns, the bud swells and flowering commences.
The potential size of the new crop depends upon the pollination by
bees placed in the orchard. Insects and fungus must be controlled
to protect the emerging flower so foliar spraying plays a key role.
Post bloom the flowers drop from the trees and the pollinated
almonds begin to grow. The ‘nutlets’ are susceptible to wind
and frost damage so for optimum growth, fair, warm and calm
conditions are needed during this period.
Winter
Spring
Autumn
Summer
Autumn activity
Almonds are shaken, picked up and transported to the hulling
and shelling plant where the processing and grading of almonds
commences. Following this they are transported to the sorting and
packing facility where they are further sorted and packed after which
dispatching commences. Some almonds are packed with the hull
removed but the inner shell intact. This type of presentation is called
‘inshell’ and is preferred by certain export markets.
Summer activity
As the nuts grow the tree drops those that exceed its ability to
nourish leaving the remaining nuts to mature, increasing in size
until early summer. During this period irrigation and fertigation
is critical to sustaining the size and quality of the almond crop. As
the nut reaches maturity growth stops and the nut begins to dry.
The ‘orchard floor’ is prepared for harvest by removing weeds and
smoothing the surface. Harvest commences at the end of this
season. At the same time tree grafting takes place in the nursery
where the almond tree begins its growth from the grafted bud.
8 Select Harvests Annual Report 2005
Our Brands
Lucky
Sunsol
Nu-Vit
The Nu-Vit brand was developed in
1984. Nu-Vit premium health food
products include a range of specially
formulated wholefoods, organics,
gluten free muesli and nutritional
snack products, natural food
supplements, and food blends. The
Nu-Vit health food range also includes
the distinctive Funpack/Multipack
range with the fun character N.E.D.
Nibbles ( Nuts Every Day). Nu-Vit
branded products are distributed
through major supermarket chains
in Australia and in Asia.
Lucky branded products include
healthy nut based snacks and cooking
ingredients. The brand was developed in
1957 and its distinctive brown and gold
packaging has become synonymous
with home cooking. Lucky products
are located in the dried fruit and nut
section of supermarkets nationally.
Sunsol branded products include the
top selling Sunsol ‘Natural Fruity Muesli’
and ‘Sunsol Natural Muesli’. Sunsol
wholefoods include a range of nuts,
seeds and dried fruits packaged in the
bright yellow, blue and red pack. Sunsol
products also include a range of portion
controlled lunch box packs with blends of
natural fruits, nuts and yoghurt coatings.
The brand was developed in 1984.
Meriram
Meriram branded products include
a quality range of breakfast mueslis,
cooking nuts, seeds, dried fruits, and
wholefoods. The brand was developed
in 1982. With a distinctive design and
unique packaging artwork on the muesli
range, the Meriram range is distributed
throughout supermarkets nationally.
Soland
Soland supplies health food stores in
Australia with a range of branded
health foods, muesli, dried fruits, nuts
and seeds. The Soland brand was
developed in 1984 and includes a range
of organic foods in the distinctive
Soland packaging.
Select Harvests Limited 2005 9
Review of Operations
Our Almond Operations have
undertaken a shift in direction
over recent years with a focus
on establishing and managing
investor owned orchards.
The Australian almond crop is harvested from late February to April which is counter seasonal
to the northern hemisphere where harvest commences in late August.
10 Select Harvests Annual Report 2005
Almond Operations
Result for the year
The division increased EBIT for the year
by 44% to $26.3 million.
The increased earnings were driven by
the further expansion of our orchard
management services business and
improved returns from our company
owned orchards in both yield and price.
• Area of new investor owned orchards
developed up 15% to 4,108 acres
• Expansion of total acres under
management up 29% to 18,148 acres
• Total 2005 crop production up 71%
to 6,036 tonnes
• 2005 crop production from
investor owned orchards up 124%
to 3,686 tonnes
• 2005 crop production from
company owned orchards up 24%
to 2,350 tonnes
• Almond price received per kilogram
up 11% on previous financial year
• Revenue from almond sales pool
up 90% to $40 million on previous
financial year
Strategic Development
– a shift to investor owned orchards
Our almond operations have undertaken
a shift in direction over recent years with
a focus on establishing and managing
investor owned orchards.
The company’s origins were as an
almond grower around the township
of Robinvale in North West Victoria.
Our initial orchards were planted at
Boundary Bend in the mid-1970’s with
Wayne Turner: General Manager Almond Operations
although a small player, is able to compete effectively
“ Almond prices are currently at record highs. Australia,
in terms of cost, quality and market access.”
Almond Operations at a glance
2005
2004
EBIT
$26,297
$18,264
% of Group EBIT
74%
No of Employees
126
71%
121
further expansion from 1980 to 1988
making the company Australia’s largest
grower, farming approximately 1,870
acres. Today we remain a significant
grower with a total of 2,375 acres.
By the mid-1990’s the company was
operating at world’s best practice in
crop yields and an investment in new
processing capacity positioned us to
expand our growing and processing
activities.
In 1998 the company embarked on
a strategy to expand the acreage
under management and the tonnage
produced and sold by developing
new almond orchards on behalf of
external investors. This changed the
income stream of the business from
the revenue from our almond crop to
a fee based recurring income stream
from orchard development, farm
management, harvesting, processing
and marketing.
This second phase of the company’s
development started with plantings of
around five hundred acres per annum.
This has accelerated in recent years
and we now manage over 15,000 acres
of investor owned orchards, with this
year’s plantings exceeding 4,000 acres.
Almonds are now established as a
main stream horticultural investment
in Australia and, together with our
strategic alliance partner Timbercorp
Limited, we are planning to further
expand into the foreseeable future.
Almond acres under
management today
Investor Owned
Orchards
company Owned/Leased
Orchards
Year
Planted
1997
1998
1999
2000
2001
2002
2003
2004
2005
Total
Acres
236
168
510
727
3,133
518
2,800
3,573
4,108
15,773
Year
Planted
1980
1982
1984
1987
1988
2002
2004
Acres
243
200
200
590
470
160
512
Total
2,375
Total area
under management 18,148 Acres
2005 Crop
The Australian almond crop is
harvested from late February to April,
which is counter seasonal to the
northern hemisphere where harvest
commences in late August.
Almond production commences in
the third year after tree planting with
a yield of approximately 15% of full
production, which is typically reached
in the seventh or eighth year after
planting. Mature trees continue to crop
for a further twenty years.
Our 2005 crop yielded 6,036 tonnes,
up from 3,538 tonnes in 2004.
Crop yields from company owned
orchards increased by 24% to a record
2,350 tonnes, and investor owned
orchards increased to 3,686 tonnes from
1,643 tonnes in 2004, as new orchards
came into production. Our investor
owned orchards have a young profile
with only 66% in production and only
3% fully mature. We anticipate that the
future almond crop from almond trees
currently planted will exceed 20,000
tonnes when all orchards reach maturity.
Approximately 40% of our 2005 crop
was shipped to export markets from
March to July 2005. Destinations
included India, China, Japan, Indonesia,
Spain, UK, Russia, France, Holland,
Belgium and Germany. The balance
of the crop is contracted to domestic
customers and will be delivered
progressively through to January 2006
when we commence preparation for
the intake of the 2006 crop.
Processing Capacity
The company operates a hulling and
shelling facility to extract the almond
kernel from the outer hull and shell and
a separate facility to sort, grade, and pack
almonds as required by the market. To
accommodate the increase in our 2005
crop and beyond, the existing hulling
and shelling facility was substantially
upgraded ($2.2 million) prior to the
harvest of the 2005 crop. This upgrade
increased capacity to approximately
10,000 tonnes, which is sufficient to
process the 2006 and 2007 crops. To
accommodate future increases in
production a new processing facility will
be established and commissioned prior
Select Harvests Annual Report 2005 11
Planting …
Growing …
Harvesting …
to the 2008 harvest. We will also upgrade
our sorting, grading and packing capacity.
The need to further expand processing
capacity will be assessed as additional
orchard developments are undertaken.
The relatively predictable crop increases
allow for the detailed planning of
processing capacity expansion and for a
smoothing of the required investment.
in the short to medium term. The
USA almond industry accelerated its
planting programs in 2005, but this
will take a number of years to
significantly impact on almond supply.
The increased supply from these new
plantings will be required to meet
anticipated consumption growth in
the coming years.
Why Almonds – Australia well placed
Almond prices are currently at
record highs and the current market
fundamentals indicate a positive
outlook going forward. Australia,
although a small player, is able to
compete effectively in terms of cost,
quality and market access. We are
operating in a growth market in which
we can compete effectively and we have
an opportunity to substantially expand
production without a major impact on
world supply.
Our market
Global consumption of almonds has
grown strongly over the last five years.
Current consumption levels are now
matched with a flat supply from
the USA as a result of low planting
activity in the mid to late 1990’s.
This has resulted in upward pressure
on prices over the last 12 months.
Expectations for a lower 2005 USA
almond crop (expected to be down by
15%) has exerted further pressure on
prices, which are currently trading at
record highs. These conditions, together
with increasing demand, provide
strong support for the almond market
Australia’s competitive position
Australia has an established competitive
position as an almond grower on the
global stage. Production is currently
around 15,000 tonnes contributing
3% of world supply, contrasted to
the USA, which provides over 80% of
world supply. However, from this small
base we can effectively compete with
the major player due to following
advantages:
• Comparable growing cost with higher
average yields per acre, lowering the
cost per kilogram of almonds produced
• USA almond crop is susceptible to
insect damage, lowering the quality
of their almonds and restricting their
access to higher quality customers
• Australia’s crop is counter-seasonal to
the northern hemisphere providing a
source of fresh almonds to our export
markets. We are able to supply these
markets at competitive freight costs
to USA growers.
Ongoing development activity in
Australia is likely to see us pass Spain
as the second largest almond producer
in the next 10 years. Select currently
manages around 60% of Australia’s
almond orchards and will move from
40% to 60% of total almond production
as our orchards mature.
On a world scale, Select is in the
top three almond growers and will
move into the top ten suppliers as
our crops mature. Therefore, as an
almond grower, we have scale both
domestically and internationally and
operate at a competitive advantage
to USA growers.
Outlook
The almond price is expected to
remain firm in the short-term on the
back of a reduced USA crop, and the
fundamentals appear favourable in the
medium-term.
Australia’s competitiveness as a grower
and marketer of almonds and the
scale and industry exposure achieved
in recent years has increased the
attractiveness and demand for almond
orchard investments.
We plan to expand the area of
investor owned orchards over the
next few years. A further 6,000 acres
will be planted in 2006.
We are scaling up our tree nursery
facilities and development resources
and infrastructure to support increased
developments in 2007 and beyond.
12 Select Harvests Annual Report 2005
Strategic Acquisitions
Acquisition
Lucky Candy (1998)
Details
Cooking needs distributed to major retailers under the leading “Lucky” brand.
Category has since expanded to healthy snacking
Munch Nuts (1999)
Major supplier of a range of private label salty snacks to major retailers.
Renshaw Foods (2000)
Meriram (2003)
Nibbles (2004)
Manufacturer and processor of nut based ingredients to major and small
food manufacturers, and supplier to food service and other distributors and
wholesalers.
Manufacturer of branded products to cooking needs, health and muesli
categories of major supermarkets. Wider distribution network to smaller retailers
and health food stores.
Category specialist and major supplier to the fresh produce section of major
supermarkets.
Food Products
Result for the year
The division increased EBIT for the year
by 19% to $8.1 million.
The increased earnings were driven by
increased sales for the year from the
acquisition of the Nibbles business, and
sales and market share growth from
branded product sales.
• Sales revenue for the year increased
by 48% to $131 million
• Continued sales growth of nut based
products in supermarkets
• Cooking needs category grew in retail
dollar sales by 23%
• Select Harvests branded products
increased market share
• Larger quantity of company almond
production processed in-house
Food Products Division at a glance
2005
2004
EBIT
$8,115
$6,813
% of Group EBIT
23%
No of Employees
132
26%
117
Strategic Development – establishment
of a processing and marketing capability
The second limb of our core strategy
was to be more involved in the selling
and marketing of our almonds, to
participate in added value processing,
and to move closer to the consumer.
Our intent was to build more
sustainable distribution channels for
our almond production and to derive
additional income from these activities.
From our origins as a farm gate seller
of almonds, the establishment of a
processing and marketing business
was identified as the strategy to
become more involved in the further
processing and marketing of our
almond crop. We recognised the
benefit of a product range that could
be marketed to a number of channels
rather than a single product with
limited channels. The diversification
into processing and marketing would
also enable the company to lock in
distribution channels for the future
almond production from new orchards
developed on behalf of investors.
Over the last six years a number of
strategic acquisitions have been made
to give the company a manufacturing
base to produce a range of nut based
products with a market leadership
position in Australia. The consolidated
group resulting from this acquisition
program is what is now known as our
food products division.
Current Position
Today we produce an extensive range
of packaged nuts and associated
products including snacks, cooking
ingredients, mueslis, natural health
foods, dried fruits etc. We are Australia’s
leading supplier of processed
and packaged nuts to Australian
supermarkets with a presence in all
categories where nuts are ranged. We
market through the Lucky, Sunsol, Nu-
Vit, Meriram and Soland brands as well
as manufacturing a number of private
label and bulk products for retailers.
In addition we manufacture a number
of nut-based ingredients for food
manufacturers, food service distributors
and health food stores.
The division operates two manufacturing
facilities; Thomastown, Melbourne, and
Everton Hills, Brisbane. We currently
process in excess of 15,000 tonnes of
product per annum of which almonds
make up a large percentage.
We service all major supermarkets and
smaller independent retailers and run
a national merchandising team of 40
staff to service our product ranges in
major retailers.
Our market
The increase in consumption of nut
based products continues with a
growing awareness of the health
benefits amongst consumers, health
professionals and food influencers.
The sales growth is encouraging a
greater focus from market participants.
This is evident from increased space
being allocated by retailers and
additional promotional and marketing
activity by suppliers and industry
groups. The major growth is being
seen in the natural snacking and health
food area with a move by consumers
towards healthy and natural foods.
Select Harvests Annual Report 2005 13
Ray Tanti: Sales and Marketing Manager (Melbourne)
and leverage our strong position to further grow
“ We plan to capitalise on current market growth
our brands across the supermarket space.”
Our brands are positioned in these
categories and we are benefiting from
this trend in terms of sales and market
share growth. We have over the last
12 months launched a number of new
products under the Lucky and Nu-Vit
brands aimed at the healthy snacking
market, and they are performing well.
It has been widely reported in the
press that the supermarket landscape
is changing with an increased focus
by retailers on developing their own
brands. This has a two fold impact;
a margin squeeze when supplying
house brands, and an impact on the
branded products the housebrands
compete against. We are fortunate that
our categories are growing strongly,
providing the opportunity to continue
to grow our branded sales and market
share in the current environment.
Private label supply remains an
important component of our business
and we will continue to operate in
this area, particularly in arrangements
that provide reasonable returns and
tenure of supply.
Nibbles Acquisition
During the year we acquired the
Nibbles business from Chiquita Brands
South Pacific Limited. Nibbles is a
major supplier to the fresh produce
category of Australian supermarkets.
This category now has the largest share
of nut product sales in the supermarket
and the largest share of almond sales.
This acquisition positioned Select
Harvests as the major supplier to this
important sector and increased our
almond distribution at supermarket level.
We have incorporated the Nibbles
operations into our Thomastown facility
bringing in-house the processing and
raw material sourcing activities.
Operations
We currently operate in two locations,
Melbourne and Brisbane. The
Melbourne operation is a consolidation
of four Melbourne based acquisitions,
and the Brisbane operation houses the
Meriram acquisition. We have to date
operated these facilities independently,
but in the future will operate the
division as a national business.
We have recently appointed a Group
Operations Manager – Derek Jones,
who has national responsibility for
purchasing, manufacturing and
logistics. In this role, Derek has
responsibility for both sites and for
the delivery of operational efficiencies
and synergies across the division.
Food Safety
Food safety and quality management is
a key component of our management
systems. Our major raw materials are
natural agricultural products which
can be subject to foreign material and
microbacterial contamination.
We have enhanced our foreign material
management by the addition of
electronic sorting machines at both
our almond processing facilities and
Thomastown facility.
During the year we established an
in-house micro testing laboratory
at Thomastown. This enables a
more timely and extensive testing
of our products for microbacterial
contamination. This laboratory is now
fully operational and services both the
Thomastown facility and our almond
processing facilities.
Outlook
We expect the market for nuts to
continue to grow, supported by the
increased marketing activity. Our plan
is to capitalise on the market growth
and leverage our strong position to
further grow our brands across the
supermarket space.
Our product development focus will be
in the “healthy snacking” area and we
will continue to maximise ranging and
sales of almond based products.
Our business in non-supermarket
channels is today underdeveloped
and we are looking to expand our
distribution in this area.
We have had some success in ranging
our products in Asia and we will
continue to develop this market,
as well as more broadly looking for
opportunities to export processed
almond products.
From an operational perspective we
will adopt a national management
approach to our business. This will
improve operating efficiencies, enhance
customer service, and facilitate further
market development and sales growth.
14 Select Harvests Annual Report 2005
Max Ciobo: General Manager
Natalie Hennessy: Executive Manager – Meriram
“The increase in consumption of nut based products
benefits amongst consumers and health professionals.”
continues, with a growing awareness of the health
Promoting our Products
As part of our marketing plans, we are involved in a range of industry
initiatives, and actively participate in a number of national and local
programs, all aimed at promoting the great taste and numerous health
benefits associated with the regular consumption of nuts.
Almond Board of Australia (ABA)
Select Harvests and our almond orchard investors contribute to ABA
marketing programs aimed at:
1)
Increasing the consumption of almonds in Australia, and
2) Differentiating Australian almonds from Californian almonds in the
international market place.
ABA activities include magazine promotions, exhibition participation, Heart
Foundation sponsorship and alignments with key sporting and dietician
associations. For more information visit www.aussiealmonds.com.au
Nuts for Life Campaign
Select Harvests is an active participant in the ‘Nuts for life’ campaign which
is an educational initiative of the Australian Tree Nut Industry of which we
are a strong supporter and contributor. The goal of ‘Nuts for Life’ is to raise
the awareness of the health benefits of tree nuts, particularly amongst
health professionals. A number of promotional and research based activities
including promotions through health clubs, seminars, printed matter, recipe
competitions and media releases are conducted on a regular basis. Recent
surveys have shown strong acceptance amongst health professionals and
further promotion is planned to focus on consumer education.
For more information on ‘Nuts for Life’ visit
www.nutsforlife.com.au
Promoting health and fitness
On a national level we are involved in numerous programs
including the Cardiology Specialist Conference, Coeliac Society
Promotions, National Health Foundation, Diabetes Australia, AMA Events,
and special education and the Special Olympics. We also participate in
health and lifestyle expos, community expos, youth expositions and royal
shows around Australia. On a smaller scale we also participate in promotion
through product donation – look out for baskets of our products at your local
charity functions or children’s school events.
Select Harvests Annual Report 2005 15
In addition to investments made in the past,
the 2005 financial year saw the implementation
of further initiatives to build on our existing food
safety and quality practices across the group.
Maintaining Quality
The products processed by the company
are agricultural products that, through
the growing and harvesting process, are
subject to possible contamination as
well as inherent unwanted material, for
example, shell and hull. Being natural
products, there is also some risk of
contamination from microorganisms.
Laser Sorting
As was highlighted last year, a fully
automated sorting technology for our
Thomastown processing plant was
installed to improve the quality of our
products. Sourced from Belgium, the
new sorter uses a full spectrum of lasers
to identify different types of foreign
materials that may be present in raw
materials used, and through timed, high
speed air guns, remove foreign material.
Our Laboratories
In early 2005 a microbiological
laboratory was commissioned at our
Thomastown site. The new laboratory
is equipped with technology to provide
testing and monitoring services to our
processing plants and orchards, thereby
helping to further enhance our quality
control systems. The microbiological
laboratory employs qualified staff and
uses industry recognised and globally
accepted methods of analysis.
Our existing physical testing laboratory,
established at the Thomastown site
in July 2003, is where we analyse
and evaluate our raw and finished
products. Raw product particulars such
as size, grade and colour are checked
and finished goods are analysed for a
number of factors that can affect shelf
life including peroxide value, free fatty
acids, moisture, and oxygen levels.
The combination of our internal
microbiological and physical
laboratories, in conjunction with our
overall quality systems, enables Select
Harvests to maintain a high level of
quality across all products.
The laboratory team from left, Alex Harrison, Robert Angeleski, Helen Lazarus and
Winnie Saputra. The laboratory is equipped to provide testing and monitoring services.
16 Select Harvests Annual Report 2005
We are committed to maintaining
a healthy environment and the
natural biodiversity of the region.
Environmental Sustainability
The Regent Parrot has now become
a protected species.
Water
Water is a scarce but valuable resource
to residential and commercial users,
and is vital for the healthy growth
of our almonds. Our management
practices promote awareness of the
need to use water effectively. This is
achieved through:
• The use of soil moisture monitoring
equipment to ensure that water is
fed to our orchards when required
• The staging of water distribution
to our orchards to ensure a smooth
demand on the Murray River
throughout the day
• Working closely with the authorities
and our orchard managers to
monitor the water table
• Working in partnership with the
authorities to develop strategies
to meter water drawn from the
Murray River and used on orchards
to enable more accurate forecasting
of water demand.
Native Vegetation
A number of steps have been taken
to ensure the development and
management of land for almond
production does not adversely impact
the natural vegetation that exists in the
Robinvale district. These include:
• The establishment of fenced
native vegetation buffer zones,
protecting and enhancing existing
native vegetation
• The establishment of native
vegetation corridors on known
flight paths for native birds in
the area, creating protected
flight corridors
• The revegetation of areas that
have been cleared through previous
farming practices
• The eradication of pest weeds from
native vegetation plots
• Fulfilling the role of Managing
Secretary of the Narcooyia Creek,
a 15 km waterway off the Murray
River that supplies several major
horticultural developments in the
Tol Tol area (Robinvale)
• Working in partnership with various
environmental and government
authorities in the development
of a long term environmental
management plan for the Narcooyia
Creek. The plan focuses on long-
term environmental enhancement
and development of the creek and
its surrounding habitats.
Energy
Over the last few years, increased
demands have been placed on the local
power supply due to the increased level
of horticultural developments within
the Robinvale and surrounding areas.
As a major user of electricity during
various parts of the year, we work
with the authorities to better utilise
the current power infrastructure and
to reduce the sudden draw on power.
This is being achieved through the
strategic staging of pump start-ups
and pumping time frames and we
are investigating other initiatives to
further support the existing system
and increase efficiencies through
appropriate upgrades.
The Regent Parrot
Over the years, changes to the landscape
and native habitat as a result of human
activity has seen the Regent Parrot’s
population reduced to critical levels, and
it is now listed as an endangered species.
The habitat is being preserved through
the establishment of native vegetation
corridors on known flight paths,
and developing and implementing
long term sustainable environmental
management plans.
Narcooyia Creek
A comprehensive Environmental Impact
Assessment was undertaken in relation
to Narcooyia Creek by the Narcooyia
Creek Pumping Syndicate, of which
Select Harvests is a member.
The Narcooyia Creek is a natural
branch of the Murray River, which
is used as a source of irrigation
water for a number of farms and
orchards. The environmental factors
assessed included water seepage,
water evaporation and salinity, and
the impact on the fish community,
geomorphology, and native vegetation.
The assessment concluded that any
likely negative impacts arising from
the increase in water flow were
insignificant compared with the
benefits that may arise. Overall the
findings were very positive.
Regent Parrot photo courtesy of Peter Rogers,
Bird Observers Club of Australia.
Select Harvests Annual Report 2005 17
Annabel Galea: Group OH&S Manager
“ With a sound framework in place, the company’s
to meet the challenges of the future.”
health and safety programs are in good shape
Our People
We continue to experience significant change and
new challenges as we rapidly expand our business.
Our ability to manage these changes and at the same
time deliver improved results is due to the skill, efforts
and dedication of our staff at all locations.
Health and Safety Program
As a result of improvements in safety
initiatives and risk management
undertaken progressively over the
last few years, our health and safety
program has evolved into an integral
part of the business.
Starting with our Occupational
Health, Safety and Environment
Policy and the ongoing review and
contributions made at Board level,
an annual plan is developed with
each business unit containing clear
targets. These are reviewed on a
regular basis throughout the year.
Health and safety performance is
measured by performance indicators
and monitored by health and
safety committees, involving both
management and staff representatives,
that meet regularly to review and
discuss a range of health and safety
matters including hazards and risks,
results of audits, procedures, training
requirements, special projects, and
accidents and their prevention.
Staff Training and
Development
Training programs covering specific
health and safety matters are
conducted periodically throughout
the year to educate staff and reinforce
previously learned concepts. Feedback
from staff is an important part of
health and safety development, and
opportunities to voice opinions are
provided through training sessions,
health and safety meetings, risk
assessments, and health and safety
representatives.
Our Future
The last twelve months have
demonstrated continued progress in
our health and safety management
program. This has been achieved
through the dedication and
commitment of management and
staff alike. With a sound framework in
place, the company’s health and safety
programs are in good shape to meet the
challenges of the future.
Feedback from staff is an important part
of health and safety development.
18 Select Harvests Annual Report 2005
Orchard visits: A regular event
in the Robinvale area, we are involved in supporting
“ Due to the size and the scale of our operations
the local and surrounding communities.”
Our Social and
Community Involvement
We directly or indirectly employ the services of a large
number of people and businesses in and around the
Robinvale area of North Western Victoria.
In 2005 Select Harvests sponsored the
Robinvale and District Harness Racing
Association’s final meeting held at
Robinvale, and assisted the Mildura
Show Society by sponsoring the vests
used by officials at the district’s largest
community based event as a way to help
the Society meet its OH&S obligations.
Chaplaincy Program
Select Harvests continues its
commitment to the Robinvale
Secondary School Chaplaincy program,
which was established after a need
was identified to provide counselling,
guidance and support to young people
attending the local secondary school.
The program provides guidance services
to the students of the Robinvale
community with a ‘spiritual’ focus on
student welfare.
Contributing to the
Melbourne Community
Select Harvests is also proud to be an
annual contributor to:
• The Rotary Club of Preston, which
promotes ‘CIRCUS QUIRKUS’
– an event for special needs and
disadvantaged children. Select
Harvests has been a proud sponsor
of this event since 1998.
• The Lions Club of Melbourne,
which hosts the ‘WORLD FESTIVAL
OF MAGIC’ a family magic show
held at the Melbourne Convention
Centre for disabled, terminally ill and
handicapped children. Select Harvests
has been a proud sponsor of the
World Festival of Magic since 2000.
We are the largest employer of full time
and casual staff in the district, with a
full time staff of approximately 130, and
casual employees who assist us with
planting, pruning, and harvesting varying
seasonally at approximately 150 workers .
Due to the size and scale of our
operations in this area, we are involved
in the support and development of the
local and surrounding communities.
With a view to ensuring that
community development, welfare
and social activities are maintained
throughout the district, Select Harvests
supports a number of different
community and sporting groups and
programs. These include: The Robinvale
Football Club, Euston Football Club,
Robinvale Netball Association, Robinvale
Tennis Club, Robinvale Rowing Club,
Robinvale/Euston Cricket Association,
Robinvale Swimming and Diving
Association, and Robinvale and District
Harness Racing Association.
Our people are also on the boards of
local committees such as Robinvale
Pre-School, Robinvale Kinder-Gym,
and Robinvale Play Group, helping
to build the community through
their involvement.
Select Harvests Annual Report 2005 19
Left-right: Max Fremder, Chairman; Dan O’Brien, Non-Executive Director; Ross Herron,
Non-Executive Director: John Bird, Managing Director; Sandy Clark, Non-Executive Director;
Curt Leonard, Non-Executive Director, and Marcello Mattia, Company Secretary.
Our Board
Directors
M A Fremder
(Chairman)
Joined the board in March 1996. Formerly
a director of IAMA Limited, and founder of
Nufarm, one of Australia’s largest chemical
manufacturers for the rural industry. Mr
Fremder also was Non-Executive Director
of Tassal Limited between 3 October
2003 and 18 March 2005. Member of
the Remuneration Committee, and the
Nomination Committee.
J Bird
(Managing Director)
Joined the board in September 2001.
Has had many years experience in
the food industry and international
trade. Formerly Managing Director
of Jorgenson Waring Foods and has
been the Managing Director of Select
Harvests Limited since January 1998.
Member of the Nomination Committee.
C G (Sandy) Clark, B.Comm, Dip.Ag.Econ
(Non-Executive Director)
Joined the board in January 1998. Is
currently Chairman, Aviva Australia
Holdings Limited; Chairman, The Myer
Family Office Limited; Director, Southern
Cross Broadcasting Australia Ltd; Director,
The Myer Foundation; Trustee, The
William Buckland Foundation; Chairman
of Council, Melbourne Grammar School;
and a director of a number of private
companies. Member of the Audit and
Risk Committee, and the Nomination
Committee, and Chairman of the
Remuneration Committee.
20 Select Harvests Annual Report 2005
G F Dan O’Brien, B.Sc, B.VMS, MBA
(Non-Executive Director)
R M Herron, FCA & FAICD
(Non-Executive Director)
Joined the Board on 29 March 2004.
Currently principal of Dromoland
Capital, a private equity group, and
a director of Coates Hire Limited,
and Hexima Limited. Mr O’Brien has
significant commercial experience
having held CEO positions for BIL
Australia Limited, Mattel Asia Pacific,
and The King Island Company. He
holds an MBA, having graduated with
distinction from Harvard Business
School and is a qualified veterinary
surgeon. Member of the Audit and Risk
Committee, Remuneration Committee,
and Nomination Committee. Mr O’Brien
was a director of SPC Ardmona Limited
between 9 January 2002 and
4 March 2005.
J C Leonard, B.Mktng & Bus. Admin, MBA
(Non-Executive Director)
Joined the Board on 21 July 2004. Has
held senior management positions
with the Mars group of companies in
Australia including General Manager of
Mars Confectionery, Managing Director
of Uncle Bens, and Managing Director
of Mars Australia and New Zealand. In
addition, he has served as President,
Asia Pacific of all Mars businesses, and a
Director of the Managing Board of Mars
Incorporated global business. Member
of the Audit and Risk Committee, and
Nomination Committee.
Joined the Board on 27 January 2005.
A Chartered Accountant, Mr Herron
retired as Senior Partner of Price
Waterhouse Coopers in December
2002. He was a member of the Coopers
& Lybrand (now Price Waterhouse
Coopers) Board of Partners where he
was Deputy Chairman and was the
Melbourne office Managing Partner
for six years. He also served on several
international committees within
Coopers & Lybrand. He is a Non-
Executive Director of GUD Holdings
Ltd, Heemskirk Consolidated Ltd and a
major industry superannuation fund.
He is also a Director of Variety Club
Inc. He was a non-Executive Director of
National Telecoms Group Ltd from 6 July
2001 to 30 June 2003. Chairman of the
Audit and Risk Committee, and member
of the Nomination Committee.
Company Secretary
M Mattia, B.Bus (Acc), ACA
(Company Secretary)
Appointed to the position of Company
Secretary and Chief Financial Officer
on 1 May 2003. He is qualified as a
Chartered Accountant having had
several years consulting experience with
a leading international professional
services firm. He has also held general
management and senior finance
roles in private and international
organisations.
Our Management
Corporate
Managing Director
John Bird
Chief Financial Officer
and Company Secretary
Marcello Mattia B.Bus(Acc), ACA
Group OH&S Manager
Annabel Galea M.App.Sc(Tox), B.Ag.Sc,
MSIA,RSP(Aust)
Almond Operations
General Manager
Wayne Turner
Horticultural Manager
Tim Millen Dip.Hort Distinct
Commercial Manager
Garry Watkins B.Comm
Food Products
Sales and Marketing Manager
(Melbourne)
Ray Tanti
Sales Manager – Trading
Laurence Van Driel
Group Operations Manager
Derek Jones
Financial Controller
Rob Anstey
General Manager – Meriram
Max Ciobo
Executive Manager – Meriram
Natalie Hennessy
Commercial Manager – Meriram
Ian Allen
Select Harvests Annual Report 2005 21
Statistical Summary
SELECT HARVESTS CONSOLIDATED
RESULTS FOR YEARS ENDED 30 JUNE
Total sales
2005
2004
2003
2002
2001
2000
178,029
127,380
80,994
78,327
64,996
43,002
$000 (except where indicated)
Earnings before interest and tax
33,263
23,836
17,421
14,749
12,196
Operating profit before tax
Net profit after tax
Earnings per share (Basic)
(cents)
Return on shareholders’ equity
(% pa)
Dividend per ordinary share
Dividend franking
Dividend payout ratio
Financial ratios
Net tangible assets per share
Net interest cover
Debt/equity ratio
Current asset ratio
(cents)
(% pa)
(%)
($)
(times)
(%)
(times)
Balance sheet data as at 30 June
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Reserves
31,995
22,587
16,110
12,803
10,260
21,716
15,225
10,962
8,554
6,564
55.9
23.7
42.0
100
75.7
1.64
26.2
0.9
1.45
40.0
19.2
26.0
100
65.7
1.35
19.1
10.2
1.70
31.3
18.3
18.5
100
62.8
1.08
13.3
15.4
1.61
25.4
17.3
13.5
100
54.5
0.77
7.6
38.9
1.30
20.0
15.5
10.0
100
50.0
0.56
6.3
70.2
1.31
8,389
7,586
5,239
16.0
15.9
8.0
100
50.0
0.43
10.4
54.9
0.87
55,022
32,591
25,077
22,599
23,584
17,981
77,290
74,364
60,672
63,090
66,405
53,556
132,312
106,955
85,749
85,689
89,989
71,537
37,908
19,077
15,581
17,381
18,048
20,705
2,859
8,610
10,162
18,971
29,568
17,967
40,767
27,687
25,743
36,352
47,616
38,672
91,545
79,268
60,006
49,337
42,373
32,865
46,925
43,940
36,206
34,199
31,124
31,108
Retained profits (accumulated losses)
30,429
21,137
14,191
14,191
9,458
14,342
9,458
5,680
9,458
1,791
4,386
(2,629)
Total shareholders’ equity
Other data as at 30 June
Fully paid shares
Number of shareholders
Select Harvests’ share price:
– year’s high
– year’s low
– close
91,545
79,268
60,006
49,337
42,373
32,865
(000)
39,069
38,525
35,455
34,585
32,841
32,824
2,999
2,413
2,054
1,610
1,286
1,167
($)
($)
($)
10.20
6.47
9.70
7.00
4.44
6.67
4.95
2.60
4.80
3.25
1.49
3.10
1.70
1.18
1.68
1.20
0.90
1.19
Market capitalisation
378,970
256,965
170,184
107,214
55,173
39,061
22 Select Harvests Annual Report 2005
Financial contents
Directors’ Report
Auditor’s Independence Declaration
Corporate Governance Statement
Statement of Financial Performance
Statement of Financial Position
Statement of Cash Flows
Notes to the Financial Statements
1. Summary of Significant Accounting Policies
2. Revenue from Ordinary Activities
3. Expenses and Losses/(Gains)
4. Income Tax
5. Dividends Paid or Provided for on Ordinary Shares
6. Receivables (Current)
7. Inventories (Current)
8. Other Current Assets
9. Receivables (Non-Current)
10. Other Financial Assets (Non-Current)
11. Property, Plant and Equipment
12. Self-Generating and Regenerating Assets
13. Intangibles
14. Payables (Current)
15. Interest-Bearing Liabilities (Current)
16. Provisions (Current)
17. Payables (Non-Current)
18. Interest-Bearing Liabilities (Non-Current)
19. Provisions (Non-Current)
20. Contributed Equity
21. Reserves and Retained Profits
22. Statement of Cash Flows
23. Expenditure Commitments
24. Subsequent Events
25. Earnings Per Share
26. Remuneration of Directors and Executives
27. Auditor’s Remuneration
28. Related Party Disclosures
29. Segment Information
30. Financial Instruments
31. Controlled Entities
32. Employee Benefits
33. Contingent Liabilities
34. Impact of Adopting Australian Equivalents to International Financial Reporting Standards
Directors’ Declaration
Independent Audit Report
ASX Additional Information
24
32
33
38
39
40
41
41
47
47
48
49
49
50
50
50
50
51
53
53
53
53
54
54
54
54
54
55
56
57
58
58
59
63
63
64
67
69
69
70
71
73
74
75
Select Harvests Annual Report 2005 23
directors’ report
The Directors present their report together with the financial report of Select Harvests Limited and controlled entities
for the year ended 30 June 2005 and the independent auditor’s report thereon.
Directors
The qualifications, experience and special responsibilities of each person who has been a Director of Select Harvests Limited
at any time during or since the end of the financial year is provided below, together with details of the company secretary
as at the year end. Directors were in office for this entire period unless otherwise stated.
Names, Qualifications, Experience and Special Responsibilities
M A Fremder (Chairman)
Joined the Board in March 1996. Formerly a Director of IAMA Limited, and founder of Nufarm, one of Australia’s largest
chemical manufacturers for the rural industry. Mr Fremder also was Non-Executive Director of Tassal Limited between
3 October 2003 and 18 March 2005. Member of the Remuneration Committee, and the Nomination Committee.
Interest in Shares and Options: 5,598,352 fully paid shares.
J Bird (Managing Director)
Joined the Board in September 2001. Has had many years’ experience in the food industry and international trade. Formerly
Managing Director of Jorgenson Waring Foods and has been the Managing Director of Select Harvests Limited since January
1998. Member of the Nomination Committee.
Interest in Shares and Options: 271,122 fully paid shares, 103,600 options expiring 28 October 2005 exercisable at $3.31, and
29,200 options expiring 1 November 2006 exercisable at $5.60 each.
C G (Sandy) Clark, B.Comm, Dip.Ag.Econ (Non-Executive Director)
Joined the Board in January 1998. Is currently Chairman, Aviva Australia Holdings Limited; Chairman, The Myer Family Office
Limited; Director, Southern Cross Broadcasting Australia Ltd; Director, The Myer Foundation; Trustee, The William Buckland
Foundation; Chairman of Council, Melbourne Grammar School; and a Director of a number of private companies. Member
of the Audit and Risk Committee, and the Nomination Committee, and Chairman of the Remuneration Committee.
Interest in Shares and Options: 22,927 fully paid shares.
G F Dan O’Brien, B.Sc, B.VMS, MBA (Non-Executive Director)
Joined the Board on 29 March 2004. Currently principal of Dromoland Capital, a private equity group, and a Director of Coates
Hire Limited, and Hexima Limited. Mr O’Brien has significant commercial experience having held CEO positions for BIL Australia
Limited, Mattel Asia Pacific, and The King Island Company. He holds an MBA, having graduated with distinction from Harvard
Business School and is a qualified veterinary surgeon. Member of the Audit and Risk Committee, Remuneration Committee,
and Nomination Committee. Mr O’Brien was a Director of SPC Ardmona Limited between 9 January 2002 and 4 March 2005.
Interest in Shares and Options: 50,000 fully paid shares.
J C Leonard, B.Mktng & Bus. Admin, MBA (Non-Executive Director)
Joined the Board on 21 July 2004. Has held senior management positions with the Mars group of companies in Australia
including General Manager of Mars Confectionery, Managing Director of Uncle Bens, and Managing Director of Mars Australia
and New Zealand. In addition, he has served as President, Asia Pacific of all Mars businesses, and a Director of the Managing
Board of Mars Incorporated global business. Member of the Audit and Risk Committee, and Nomination Committee.
Interest in Shares and Options: 414,258 fully paid shares.
24 Select Harvests Annual Report 2005
R M Herron, FCA & FAICD (Non-Executive Director)
Joined the Board on 27 January 2005. A Chartered Accountant, Mr Herron retired as Senior Partner of Price Waterhouse Coopers
in December 2002. He was a member of the Coopers & Lybrand (now Price Waterhouse Coopers) Board of Partners where he was
Deputy Chairman and was the Melbourne office Managing Partner for six years. He also served on several international committees
within Coopers & Lybrand. He is a Non-Executive Director of GUD Holdings Ltd, Heemskirk Consolidated Ltd and a major industry
superannuation fund. He is also a Director of Variety Club Inc. He was a Non-Executive Director of National Telecoms Group Ltd from
6 July 2001 to 30 June 2003. Chairman of the Audit and Risk Committee, and member of the Nomination Committee.
Interest in Shares and Options: 5,000 fully paid shares.
M Mattia, B.Bus (Acc), ACA (Company Secretary)
Appointed to the position of Company Secretary and Chief Financial Officer on 1 May 2003. He is qualified as a Chartered
Accountant having had several years consulting experience with a leading international professional services firm. He has also
held general management and senior finance roles in private and international organisations.
Interest in Shares and Options: 2,000 fully paid shares, 8,800 options expiring 1 November 2006 exercisable at $5.60.
Corporate Information
Nature of Operations and Principal Activities
The principal activities during the year of entities within the consolidated entity were:
• Processing, packaging, marketing and distribution of edible nuts, dried fruits, seeds, and a range of natural health foods;
• The growing, processing and sale of almonds to the food industry, from company owned almond orchards, and the
provision of management services to external owners of almond orchards, including consultancy, orchard development,
tree supply, farm management, land rental, and irrigation infrastructure; and the marketing and selling of almonds on
behalf of external investors; and,
• The production of pelletised snail, slug and rodent baits for other marketers.
There have been no significant changes in the nature of those activities during the year.
Employees
The consolidated entity employed 276 full time employees as at 30 June 2005 (2004: 252 employees).
Review and Results of Operations
Refer to Chairman and Managing Director’s report in the front section of the Annual Report.
Significant Changes in the State of Affairs
No significant changes in the state of affairs of the Company occurred during the financial year.
Significant Events after the Balance Date
On 23 August 2005, the Board announced that a contract of sale was signed to sell all of the shares in Riverina Pelletising Services
Pty Ltd, for a total consideration of $5.7 million to Australian Businesspoint Pty Ltd. Subject to certain conditions precedent being
satisfied, the sale is scheduled to be completed on Friday 14 October 2005, with an effective date of 1 October 2005.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly
affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.
Likely Developments and Expected Results
Refer to Chairman and Managing Director’s report in the front section of the Annual Report.
Select Harvests Annual Report 2005 25
directors’ report
Environmental Regulation and Performance
The economic entity’s operations are subject to environmental regulations under laws of the Commonwealth or of a State
or Territory. Details of the economic entity’s performance in relation to such environmental regulations follow:
The economic entity holds licences issued by the Environmental Protection Authority which specify limits for discharges
to the environment which are the result of the economic entity’s operations. These licences regulate the management
of discharge to the air and stormwater run-off associated with the operations.
There have been no significant known breaches of the economic entity’s licence conditions.
Directors’ and Senior Executives’ Remuneration Report
Remuneration levels are set to attract and retain appropriately qualified and experienced Directors and senior executives.
The Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages, given
trends in the marketplace. Remuneration packages include a mix of fixed remuneration, performance-based remuneration,
and equity-based remuneration.
Executive Directors and senior executives may receive short term incentives based on achievement of specific business plans
and performance indicators, which include financial and operational targets relevant to performance at the economic entity
level, divisional level, or functional level, as applicable, for the financial year. In addition, the economic entity offers Executive
Directors and senior executives participation in the long-term incentive scheme involving the issue of options to the employee
under the executive share option scheme. The executive share option scheme provides for the offer of a parcel of options to
participating employees on an annual basis, with a three-year expiry period, exercisable at the market price set at the time the
offer was made. The options are granted annually in three tranches on achievement of the performance hurdles. The contracts
for service between the economic entity and specified Directors and executives are on a continuing basis, the terms of which
are not expected to change in the immediate future.
Non-Executive Directors receive fees and do not receive options or bonus payments, and further details regarding components
of Directors’ and executive remuneration are provided in the notes to the financial statements.
The names and positions of each person who held the position of Director at any time during the financial year have been
provided on pages 22-23. The nature and amount of each major element of the remuneration of each Director of the Company
and each of the five named executive officers of the Company and the consolidated entity, receiving the highest remuneration,
for the financial year is detailed below. The percentage value of each person’s total fixed remuneration that consists of options
is shown in brackets.
Remuneration of Directors of Select Harvests Limited
2005
ANNUAL REMUNERATION
BASE FEE
$
SHORT TERM
INCENTIVES
$
NON CASH SUPERANNUATION
CONTRIBUTIONS
$
BENEFITS
$
LONG TERM REMUNERATION
OPTIONS GRANTED
NUMBER
VALUE
$
84,000
Non Executive
M A Fremder
C G Clark
G F Dan O’Brien
42,000
J C Leonard (appointed 21/07/04) 39,773
R M Herron (appointed 27/01/05) 18,025
42,000
–
–
–
–
–
–
–
–
–
–
7,560
3,780
3,780
3,580
1,622
–
–
–
–
–
–
–
–
–
–
TOTAL
$
91,560
45,780
45,780
43,353
19,647
Executive
J Bird
332,823
155,041
32,766
29,478
136,400
77,089
627,197
(25%)
26 Select Harvests Annual Report 2005
Remuneration of Directors of Select Harvests Limited
2004
ANNUAL REMUNERATION
BASE FEE
$
SHORT TERM
INCENTIVES
$
NON CASH SUPERANNUATION
CONTRIBUTIONS
$
BENEFITS
$
LONG TERM REMUNERATION
OPTIONS GRANTED
NUMBER
VALUE
$
70,370
Non Executive
M A Fremder
B P Burns (retired 30/06/04)
C G Clark
35,185
D J Williams (resigned 16/02/04) 23,457
G F Dan O’Brien
(appointed 29/03/04)
35,185
9,179
–
–
–
–
–
–
–
–
–
–
6,333
3,167
3,167
2,111
826
–
–
–
–
–
–
–
–
–
–
TOTAL
$
76,703
38,352
38,352
25,568
10,005
Executive
J Bird
286,470
119,093
39,576
25,633
176,000
70,593
(25%)
541,365
Remuneration of the Five Most Highly Paid Executive Officers of the Company and the Consolidated Entity
2005
M Mattia
M Ciobo
W Turner
L Van Driel
T Millen
2004
M Ciobo
M Mattia
W Turner
C Lukauskas
L Van Driel
ANNUAL REMUNERATION
BASE FEE
$
159,332
SHORT TERM
INCENTIVES
$
57,168
NON CASH SUPERANNUATION
CONTRIBUTIONS
$
14,149
BENEFITS
$
37,984
NUMBER
8,800
LONG TERM REMUNERATION
OPTIONS GRANTED
210,000
115,705
–
27,067
30,530
19,000
18,900
12,759
–
7,000
99,163
17,487
14,821
9,625
19,800
96,195
13,930
5,000
9,826
9,300
ANNUAL REMUNERATION
BASE FEE
$
210,000
139,635
111,046
93,615
SHORT TERM
INCENTIVES
$
–
4,366
10,237
10,000
NON CASH SUPERANNUATION
CONTRIBUTIONS
$
18,900
BENEFITS
$
15,989
40,900
19,000
26,000
12,462
10,196
9,236
NUMBER
–
–
–
12,400
LONG TERM REMUNERATION
OPTIONS GRANTED
107,939
18,594
–
9,625
15,900
TOTAL
$
277,433
259,430
181,531
152,070
130,107
TOTAL
$
244,889
197,363
150,479
144,877
143,232
VALUE
$
8,800
(15%)
–
7,000
(15%)
10,974
(10%)
5,156
(5%)
VALUE
$
–
–
–
6,026
(15%)
7,074
(10%)
In accordance with the remuneration policy described above, options granted as remuneration are subject to continuing service
with the economic entity. Options granted as remuneration are valued at grant date in accordance with AASB 2: ‘Share-based
Payments’. No options previously granted as remuneration have lapsed during the year.
Select Harvests Annual Report 2005 27
directors’ report
Notes
The terms ‘Director’ and ‘officer’ have been treated as mutually exclusive for the purposes of this disclosure.
The elements of remuneration have been determined on the basis of the cost to the Company and the consolidated entity.
Options granted as part of remuneration have been valued using the Black-Scholes option pricing model, which takes account of factors
such as the option exercise price, the current level and volatility of the underlying share price, and the time to maturity of the option.
Executives are those directly accountable and responsible for the operational management and strategic direction of the
Company and the consolidated entity.
The category ‘other’ includes the value of any non-cash benefits provided and includes FBT where applicable.
Share Options
Executive Share Option Scheme
The current executive share option scheme provides for the offer of a parcel of options to participating employees on an
annual basis, with a three-year expiry period, exercisable at the market price at the time the offer was made.
The options are valued using the Black-Scholes valuation method and individual parcels are based on a percentage of fixed
remuneration. The options are granted annually in three tranches on achievement of performance hurdles.
The following table is a summary of the Executive Share Option Schemes currently in place.
PARTICIPATING
EMPLOYEES
7
9
9
OPTION
VALUATION
$
0.486
1.00
0.98
2002 Offer
2003 Offer
2004 Offer
Total
Options Issued
EXERCISE
EXPIRY DATE
$
3.31
NUMBER
PRICE OF OPTIONS
OFFERED
277,500 28 October 2005
193,200 1 November 2006
234,300 20 October 2007
705,000
5.60
7.78
GRANTED
SEPTEMBER 03
GRANTED
AUGUST 04
BALANCE
92,500
-
–
85,200
85,200
64,400 128,800
– 234,300
92,500
149,600 448,300
During or since the end of the financial year, the Company granted options over unissued ordinary shares to the following
Executive Director and the following five most highly remunerated officers of the Company as part of their remuneration.
Director
J Bird
J Bird
J Bird
Officers
M Mattia
W Turner
L Van Driel
L Van Driel
L Van Driel
T Millen
T Millen
T Millen
28 Select Harvests Annual Report 2005
NUMBER OF
OPTIONS GRANTED
EXERCISE PRICE
$
EXPIRY DATE
55,400
51,800
29,200
8,800
7,000
8,600
7,300
3,900
3,800
3,700
1,800
1.66
3.31
5.60
5.60
5.60
1.66
3.31
5.60
1.66
3.31
5.60
20 October 2004
28 October 2005
1 November 2006
1 November 2006
1 November 2006
20 October 2004
28 October 2005
1 November 2006
20 October 2004
28 October 2005
1 November 2006
Unissued Ordinary Shares Under Option
At the date of this report unissued ordinary shares of the Company under option are:
OFFER
2002
2003
NUMBER OF
SHARES
131,900
56,300
EXERCISE PRICE
$
3.31
5.60
EXPIRY DATE
28 October 2005
1 November 2006
All options expire on the earlier of their expiry date or termination of the employee’s employment.
Current option holders do not have any right, by virtue of the option, to participate in any share issue of the Company
or any related body corporate.
Shares Issued on Exercise of Options
During or since the end of the financial year, the Company issued ordinary shares as a result of the exercise of options as follows:
NUMBER
OF SHARES
212,900
35,200
8,100
AMOUNT PAID
ON EACH SHARE
$
1.66
3.31
5.60
There were no amounts unpaid on the shares issued.
Options granted as remuneration that have been exercised or lapsed during the financial year
DIRECTORS AND EXECUTIVES
VALUE AT
1 JULY 2004
$
VALUE
GRANTED
$
VALUE
EXERCISED
$
VALUE
LAPSED
$
VALUE AT
30 JUNE 2005
$
Directors
J Bird
Executives
M Mattia
W Turner
L Van Driel
T Millen
Dividends
Final dividends proposed and not recognised as a liability:
• on ordinary shares
Fully Franked Dividends paid in the year:
Interim for the year
• on ordinary shares
Final for 2004 shown as recommended in the 2004 report
• on ordinary shares
70,603
77,089
68,142
–
–
3,548
4,914
8,800
7,000
10,974
5,156
–
–
7,074
4,674
CENTS
26.0
16.0
–
–
–
-
-
79,550
8,800
7,000
7,448
5,396
$
10,157,971
6,224,599
16,382,570
16.0
6,200,728
Select Harvests Annual Report 2005 29
directors’ report
Indemnification and Insurance of Directors and Officers
During the year the Company has paid a premium in respect to an insurance contract to indemnify Directors and officers
against liabilities that may arise from their position as Directors and officers of the Company and its controlled entities.
Officers indemnified include the Company Secretary, all Directors and executive officers participating in the management
of the Company and its controlled entities.
Further disclosure required under section 300 (9) of the Corporations Act 2001 is prohibited under the terms of the contract.
Directors’ Meetings
The number of meetings of Directors (including meetings of committees of Directors) held during the financial year and the
number of meetings attended by each Director were as follows:
DIRECTORS’ MEETINGS
NUMBER
ELIGIBLE
TO ATTEND
12
NUMBER
ATTENDED
12
12
12
12
12
6
12
11
12
12
6
AUDIT AND RISK
MEETINGS OF COMMITTEES
REMUNERATION
NOMINATION
NUMBER
ELIGIBLE
TO ATTEND
-
-
4
4
4
2
NUMBER
ATTENDED
-
-
4
4
4
2
NUMBER
ELIGIBLE
TO ATTEND
1
-
1
1
-
-
NUMBER
ATTENDED
1
-
1
1
-
-
NUMBER
ELIGIBLE
TO ATTEND
1
1
1
1
1
-
NUMBER
ATTENDED
1
1
1
1
1
-
M A Fremder
J Bird
C G Clark
G F Dan O’Brien
J C Leonard
(appointed 21/07/04)
R M Herron
(appointed 27/01/05)
Committee Membership
During or since the end of the financial year, the Company had an Audit and Risk Committee, a Remuneration Committee,
and a Nomination Committee comprising members of the Board of Directors.
Members acting on the committees of the Board during or since the end of the financial year were:
Audit and Risk
Remuneration
Nomination
R M Herron (Chairman)
C G Clark (Chairman)
M A Fremder (Chairman)
(appointed 31/01/05)
M A Fremder
(appointed Chairman 22/06/05)
G F Dan O’Brien
C G Clark
G F Dan O’Brien
J C Leonard
(appointed 21/07/04)
J Bird
C G Clark
G F Dan O’Brien
J C Leonard
(appointed 21/07/04)
R M Herron
(appointed 27/01/05)
30 Select Harvests Annual Report 2005
Directors’ Interests in Contracts
Directors’ interest in contracts are disclosed in Note 28 to the financial statements.
Auditors Independence Declaration
A copy of the auditor’s independence declaration in relation to the audit for the financial year is provided with this report.
Non-audit Services
Non-audit services are approved by resolution of the Audit and Risk Committee and approval is provided in writing to the
Board of Directors. Non-audit services provided by the auditors of the consolidated entity during the year, Pitcher Partners,
are detailed in note 27. The Directors are satisfied that the provision of the non-audit services during the year by the auditor
is compatible with the general standard of independence for auditors imposed by Corporations Act 2001.
Rounding
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding
is applicable) under the option available to the Company under ASIC Class Order 98/100. The Company is an entity to which
the Class Order applies.
Proceedings on Behalf of the Company
There are no material legal proceedings in place on behalf of the Company as at the date of this report.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Select Harvests
Limited support and have adhered to the ASX principles of corporate governance. The Company’s corporate governance
statement is contained in detail in the corporate governance section of this Annual Report.
Signed in accordance with a resolution of the Directors.
M A Fremder
Chairman
Melbourne, 23rd August 2005
Select Harvests Annual Report 2005 31
auditor’s declaration
Auditor’s Independence Declaration
To the Directors of Select Harvests Limited
In relation to the independent review for the financial year ended 30 June 2005, to the best of my knowledge and belief
there have been:
a) No contraventions of the auditor independence requirements of the Corporations Act 2001; and
b) No contravention of any applicable code of professional conduct.
Pitcher Partners
T J BENFOLD
Partner
Melbourne
23 August 2005
32 Select Harvests Annual Report 2005
governance
Corporate Governance Statement
This statement outlines the key corporate governance practices of the economic entity which considers the ASX Corporate
Governance Council recommendations.
Board of Directors and its Committees
Role of the Board
The Board of Directors of Select Harvests Limited is responsible for the overall corporate governance of the economic entity.
The Board guides and monitors the business and affairs of Select Harvests Limited on behalf of the shareholders by whom
they are elected and to whom they are accountable. Details of the Board’s charter is located on the Company’s website.
The Board seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and
obligations. In addition, the Board is responsible for ensuring that management’s objectives and activities are aligned with
the expectations and risks identified by the Board and ensuring arrangements are in place to adequately manage those risks.
To ensure that the Board is well equipped to carry out its responsibilities it has established guidelines for the nomination
and selection of Directors and for the operation of the Board.
The Board has delegated responsibility for the operation and administration of the Company to the Managing Director
and the executive management team. The Board ensures that this team is appropriately qualified and experienced to carry
out its responsibilities and has in place procedures to assess the performance of the Managing Director and the executive
management team.
Board Processes
To assist in the execution of its responsibilities, the Board has established a Remuneration Committee, and an Audit and
Risk Committee. The Board also performs, as part of its function, the role of Nomination Committee. These Committees
have written charters, which are reviewed on a regular basis and are located on the Company’s website. The Board has
also established a framework for the management of the economic entity.
The full Board holds twelve scheduled meetings each year, plus any additional meetings at such other times as may be
necessary to address any specific matters that may arise.
The agenda for meetings is prepared and includes the Managing Director’s report, financial reports, business segment
reports, strategic matters, governance and compliance. Submissions are circulated in advance. Executives are involved in Board
discussions where appropriate, and Directors have other opportunities, including visits to operations, for contact with a wider
group of employees.
Director Education
The economic entity has a process to educate new Directors about the nature of the business, current issues, the corporate
strategy, and the expectations of the economic entity concerning performance of Directors. Directors also have the opportunity
to visit the facilities of the economic entity and to meet with management to gain a better understanding of business
operations. Directors are able to access continuing education opportunities to update and enhance their skills and knowledge.
Independent Professional Advice and Access to Company Information
Each Director has the right of access to all relevant Company information and to the Company’s executives and, subject to prior
consultation with the Chairman, may seek independent professional advice at the economic entity’s expense.
Select Harvests Annual Report 2005 33
governance
Composition of the Board
The names of the Directors of the Company in office at the date of this report are set out in the Directors’ report.
The composition of the Board is determined in accordance with the following ASX principles:
• The Board should comprise at least four Directors;
• The Board should maintain a majority of independent Non-Executive Directors;
• The Chairperson must be a Non-Executive Director; and
• The Board should comprise Directors with an appropriate range of qualifications, skills and experience.
The Board assesses the independence of each Director in light of interests known to the Board, as well as those disclosed
by each Director. In accordance with the ASX Corporate Governance Council’s recommendations, the Board wishes to
outline the following:
• The Chairman of the Company, Mr M A Fremder, is a substantial shareholder, having a 14.3% shareholding at 30 June 2005.
• The Chairman of the Company, Mr M A Fremder, owns (directly or indirectly) almond orchards totalling 300 acres in respect
to which the economic entity provides Orchard Management Services under contract at market rates.
Nomination Committee
The Board of Directors, as one of its important functions, performs the role of Nomination Committee. The Board’s role as
Nomination Committee is to ensure that the composition of the Board of Directors is appropriate for the purpose of fulfilling
its responsibilities to shareholders.
The duties and responsibilities of the Board in its role as Nomination Committee are as follows:
• To access and develop the necessary and desirable competencies of Board members;
• To develop and review Board succession plans;
• To evaluate the performance of the Board;
• To recommend to the Board, the appointment and removal of Directors; and
• Where a vacancy exists, to determine the selection criteria based on the skills deemed necessary and to identify potential
candidates with advice from external consultants.
The Chairman of the Board evaluates the performance of each Board member annually in the last quarter of each financial
year. The Chairman of the Audit Committee reviews the performance of the Chairman of the Board in the same period. The
performance of each Board member is reviewed against the Board charter and any specific objectives agreed and set by the
Board for the economic entity.
The Nomination Committee meets annually unless otherwise required. The Committee met once during the financial year
and the Committee members’ attendance record is disclosed in the table of Directors’ meetings. The members of the
Nomination Committee are disclosed in the Directors’ Report.
Further details of the Nomination Committee’s charter are available on the Company’s website.
Remuneration
Remuneration Committee
The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies
applicable to the Managing Director, senior executives and the Directors themselves. It evaluates the performance of the
Managing Director and is also responsible for share option schemes, incentive performance packages, superannuation
entitlements and fringe benefits policies. Remuneration levels are reviewed annually and the Remuneration Committee
may obtain independent advice on the appropriateness of remuneration packages, given trends in the marketplace.
The members of the Remuneration Committee are disclosed in the Directors’ Report.
34 Select Harvests Annual Report 2005
The Managing Director is invited to Remuneration Committee meetings as required to discuss senior executives’ performance
and remuneration packages.
The Remuneration Committee meets once a year or as required. The Committee met once during the financial year and the
Committee members’ attendance record is disclosed in the table of Directors’ meetings.
Further details of the Remuneration Committee’s charter is available on the Company’s website.
Remuneration Policies
Remuneration levels are set to attract and retain appropriately qualified and experienced Directors and senior executives.
The Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages, given
trends in the marketplace. Remuneration packages include a mix of fixed remuneration, performance-based remuneration,
and equity-based remuneration.
Executive Directors and senior executives may receive short term incentives based on achievement of specific business plans
and performance indicators, which include financial and operational targets relevant to performance at the economic entity
level, divisional level, or functional level, as applicable, for the financial year. In addition, the economic entity offers Executive
Directors and senior executives participation in the long-term incentive scheme involving the issue of options to the employee
under the executive share option scheme. The executive share option scheme provides for the offer of a parcel of options to
participating employees on an annual basis, with a three-year expiry period, exercisable at the market price set at the time
the offer was made. The options are granted annually in three tranches on achievement of the performance hurdles.
Non-Executive Directors do not receive any performance related remuneration.
Audit and Risk Committee
The Audit and Risk Committee has a documented charter, approved by the Board. All members of the Committee are
Non-Executive Directors with a majority being independent, and the Chairman of the Audit and Risk Committee is not
the Chairman of the Board of Directors.
The members of the Audit and Risk Committee during the financial year are disclosed in the Directors’ Report.
The external auditors, the Managing Director and Chief Financial Officer are invited to Audit and Risk Committee meetings
at the discretion of the Committee, and the external auditor also meets with the Audit and Risk Committee during the year
without management being present. The Committee met four times during the year and the Committee members’ attendance
record is disclosed in the table of Directors’ meetings.
The Managing Director and the Chief Financial Officer have provided a statement in writing to the Board that the economic
entity’s financial reports for the year ended 30 June 2005 present a true and fair view, in all material respects, of the economic
entity’s financial condition and operational results and are in accordance with the relevant accounting standards. This statement
is required annually.
Further details of the Audit and Risk Committee’s charter are available on the Company’s website.
The duties and responsibilities of the Audit and Risk Committee include:
• Recommending to the Board the appointment of the external auditors;
• Recommending to the Board the fee payable to the external auditors;
• Reviewing the audit plan and performance of the external auditors;
• Determining that no management restrictions are being placed upon the external auditors;
• Evaluating the adequacy and effectiveness of the reporting and accounting controls of the Company through active
communication with operating management and the external auditors;
• Reviewing all financial reports to be made to shareholders and/or the public prior to their release;
• Evaluating systems of internal control;
Select Harvests Annual Report 2005 35
governance
• Monitoring the standard of corporate conduct in areas such as arms-length dealings and likely conflicts of interest;
• Requiring reports from management and the external auditors on any significant regulatory, accounting or reporting
development to assess potential financial reporting interest;
• Reviewing and approving all significant company accounting policy changes;
• Reviewing the Company’s taxation position;
• Reviewing the annual financial statements with the Chief Financial Officer and the external auditors, and recommending
acceptance to the Board;
• Evaluating the adequacy and effectiveness of the Company’s risk management policies and procedures including
insurance; and
• Directing any special projects or investigations deemed necessary by the Board or by the Committee.
The Audit and Risk Committee is committed to ensuring that it carries out its functions in an effective manner. Accordingly,
it has undertaken a review of its charter during the financial year and will review its charter at least once in each financial year.
Risk Management
The Board oversees the establishment, implementation, and review of a system of risk management within the economic
entity. The economic entity’s areas of focus in respect of risk management practices include, but are not limited to,
environment, occupational health and safety, property, financial reporting and internal control.
The Board is responsible for the overall risk management and internal control framework, but recognises that no cost-effective
risk management and internal control system will preclude all errors and irregularities. The Board has the following procedures
in place to monitor performance and to identify areas of concern:
• Strategic Planning – The Board reviews and approves the strategic plan that encompasses the economic entity’s strategy,
designed to meet the stakeholders’ needs and manage business risk. The strategic plan is dynamic and the Board is actively
involved in developing and approving initiatives and strategies designed to ensure the continued growth and success of the
economic entity;
• Financial reporting – Monthly actual results are reported against budgets approved by the Directors and revised forecasts
prepared during the year;
• Functional Reporting – Key areas subject to regular or periodical reporting to the Board include, but are not limited to,
operational, treasury (including foreign exchange), environmental, occupational health & safety, insurance, and legal matters;
• Continuous disclosure – A process is in place to identify matters that may have a material effect on the price of the
Company’s securities and to notify them to the ASX; and
• Investment appraisal – Guidelines for capital expenditure include annual budgets, appraisal and review procedures,
due diligence requirements where businesses are being acquired or divested.
The Managing Director and Chief Financial Officer have provided a statement in writing to the Board that the declaration
made in respect of the economic entity’s financial reports is founded on a system of risk management and internal compliance
and control which reflects the policies adopted to date by the Board, and that the economic entity’s risk management and
internal control and compliance system is operating effectively in all material respects based on the criteria for effective
internal control established by the Board.
36 Select Harvests Annual Report 2005
Ethical Standards
All Directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to
enhance the reputation and performance of the economic entity. The economic entity’s code of conduct includes the following:
Conflict of Interest
Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the
Company. Should a situation arise where the Board believes that a material conflict exists, the Director concerned shall not
receive the relevant Board papers and will not be present at the meeting when the item is considered. Details of Director
related entity transactions with the Company and economic entity are set out in the notes to the financial statements.
Dealings in Company Shares
Directors and senior management are prohibited from dealing in Company shares except within a four week trading window
that commences 48 hours after the release of the economic entity’s results at year-end and half year on the basis that they are
not in possession of any price sensitive information. Directors must advise the ASX of any transactions conducted by them in
shares in the Company.
Communication with Shareholders
The Board of Directors aims to ensure that shareholders are informed of all major developments affecting the economic
entity’s state of affairs. Information is communicated to shareholders as follows:
• The Annual Report is distributed to all shareholders (unless a shareholder has specifically requested not to receive the
document), including relevant information about the operations of the economic entity during the year, changes in the state
of affairs and details of future developments;
• The half-yearly report contains summarised financial information and a review of the operations of the economic
entity during the period. The half-year audited financial report is lodged with the Australian Securities and Investments
Commission and the ASX, and sent to any shareholder who requests it;
• The economic entity has nominated the Company Secretary to ensure compliance with the economic entity’s continuous
disclosure requirements, and overseeing and co-ordinating disclosure of information to the ASX;
• Information is posted on the economic entity’s website immediately after ASX confirms an announcement has been made
to ensure that the information is made available to the widest audience. The economic entity’s website is
www.selectharvests.com.au
• The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of
accountability and identification with the economic entity’s strategy and goals. It is the policy of the economic entity
and the policy of the auditor for the lead engagement partner to be present at the Annual General Meeting to answer
any questions about the conduct of the audit and the preparation and content of the auditor’s report; and
• Occasional letters from the Chairman and Managing Director may be utilised to provide shareholders with key
matters of interest.
Select Harvests Annual Report 2005 37
performance
Statement of Financial Performance
Year ended 30 June 2005
Sales revenue
Cost of sales
Gross profit
Other revenues from ordinary activities
Other revenues from SGARA stock adjustment
Distribution expenses
Marketing expenses
Occupancy expenses
Administrative expenses
Borrowing costs expensed
Other expenses from ordinary activities
Other expenses from SGARA tree adjustment
Profit from ordinary activities before income tax expense
Income tax expense relating to ordinary activities
Profit from ordinary activities after income tax expense
Net profit
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
2
3(a)
178,029
127,380
(131,605)
(91,242)
46,424
36,138
2
2
3
870
787
(3,334)
(659)
(1,608)
(2,724)
(1,361)
(6,171)
(229)
31,995
446
561
(2,467)
(522)
(1,314)
(2,500)
(1,369)
(6,044)
(342)
22,587
-
-
-
-
-
-
18,829
16,304
-
-
-
-
-
-
-
-
(1,980)
(1,219)
(561)
-
(1,333)
(1,182)
(661)
-
15,069
13,128
4
(10,279)
(7,362)
(366)
(618)
21,716
21,716
21,716
15,225
15,225
15,225
14,703
14,703
14,703
12,510
12,510
12,510
Net profit attributable to members of Select Harvests Limited
21(b)
Total changes in equity other than those resulting
from transactions with owners as owners attributable
to members of Select Harvests Limited
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
21,716
15,225
14,703
12,510
25
25
55.9
55.7
40.0
39.7
The Statement of Financial Performance is to be read in conjunction with the Notes to the Financial Statements.
38 Select Harvests Annual Report 2005
position
Statement of Financial Position
At 30 June 2005
Current assets
Cash assets
Receivables
Inventories
Other
Total current assets
Non-current assets
Receivables
Other financial assets
Property, plant and equipment
Deferred tax assets
Self-generating and regenerating assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest-bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Payables
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits (accumulated losses)
Total equity
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
6
7
8
9
10
11
4
12
13
14
15
4
16
17
18
4
19
20
21
21
4,539
24,862
24,796
825
55,022
-
21
43,991
395
5,516
27,367
77,290
489
15,702
15,444
956
32,591
-
19
41,792
322
4,986
27,245
74,364
132,312
106,955
4,231
10
-
770
5,011
-
19
-
784
803
41,205
12,195
41,673
12,195
523
83
-
-
747
124
-
-
54,006
59,017
54,739
55,542
32,044
14,344
1,370
486
3,239
2,139
957
2,229
1,547
-
318
191
587
205
378
150
37,908
19,077
1,879
1,320
-
376
2,123
360
2,859
40,767
91,545
46,925
14,191
30,429
91,545
-
13,490
7,123
1,263
224
8,610
27,687
79,268
43,940
14,191
21,137
79,268
-
-
48
13,538
15,417
43,600
46,925
3,270
(6,595)
43,600
9,150
6,700
-
36
15,886
17,206
38,336
43,940
3,270
(8,874)
38,336
The Statement of Financial Position is to be read in conjunction with the Notes to the Financial Statements.
Select Harvests Annual Report 2005 39
cash flows
Statement of Cash Flows
Year ended 30 June 2005
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Borrowing costs
Income tax paid
Net cash flows from/(used in) operating activities
22(a)
22(d)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Purchase of other non-current assets
Net cash flows from/(used in) financing activities
Cash flows from financing activities
Proceeds from issues of ordinary shares
Proceeds from borrowings – other
Repayments of borrowings – other
Payment of dividends on ordinary shares
Net cash flows from/(used in) financing activities
Net increase/(decrease) in cash held
Add opening cash brought forward
Closing cash carried forward
22(b)
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
180,687
125,862
-
-
(137,414)
(102,405)
(1,328)
(1,682)
94
(1,361)
(8,478)
33,528
774
(6,155)
(6,933)
120
(1,369)
(7,281)
14,927
359
(4,329)
(9,145)
(12,314)
(13,115)
515
-
(7,597)
(9,955)
(17,037)
4,177
362
4,539
6,318
-
(1,286)
(7,012)
(1,980)
(168)
530
362
69
(1,219)
(382)
(2,860)
134
(133)
-
1
515
-
16,657
(9,955)
7,217
4,358
(127)
4,231
101
(1,182)
(499)
(3,262)
-
(545)
-
(545)
6,318
-
3,848
(7,012)
3,154
(653)
526
(127)
The Statement of Cash Flows is to be read in conjunction with the Notes to the Financial Statements
40 Select Harvests Annual Report 2005
notes to the financial statements as at 30 June 2005
1. Summary of significant accounting policies
(a) Basis of accounting
The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the
Corporations Act 2001 which includes applicable Accounting Standards. Other mandatory professional reporting requirements
(including Urgent Issues Group Consensus Views) have also been complied with.
The financial report covers Select Harvests Limited as an individual parent entity and Select Harvests Limited and controlled
entities as an economic entity. Select Harvests Limited is a company limited by shares, incorporated and domiciled in Australia.
The financial report has been prepared on an accruals basis and is based on historical costs, except where AASB 1037: ‘Self
Generating and Regenerating Assets’ has been applied, and does not take into account changing money values or, except
where stated, current valuations of non-current assets. Cost is based on the fair value of consideration that would be given
in exchange for assets.
The following is a summary of the material accounting policies adopted by the economic entity in the preparation of the
financial report. The accounting policies have been consistently applied, unless otherwise stated.
(b) Principles of consolidation
The consolidated financial statements are those of the consolidated entity, comprising Select Harvests Limited (the parent
entity) and all entities which Select Harvests Limited controlled from time to time during the year and at balance date.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent
accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been
eliminated in full.
(c) Foreign currencies
Translation of foreign currency transactions
Transactions in foreign currencies of entities within the consolidated entity are converted to local currency at the rate of
exchange ruling at the date of the transaction.
Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign
currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate
at the end of the financial year.
A monetary item arising under a foreign currency contract outstanding at the reporting date where the exchange rate for the
monetary item is fixed in the contract is translated at the exchange rate fixed in the contract.
Except for certain specific hedges, all resulting exchange differences arising on settlement or re-statement are recognised
as revenues and expenses for the financial year. Any gains or costs on entering a hedge are deferred and amortised over the
life of the contract.
Specific hedges
Where a purchase or sale is hedged specifically, exchange gains or losses on the hedging transaction arising up to the date
of purchase or sale and costs, premiums and discounts relative to the hedging transaction are deferred and included in the
measurement of the purchase or sale. Exchange gains and losses arising on the hedge transaction after that date are taken
to the Statement of Financial Performance.
This accounting policy will be impacted on first-time adoption of AIFRS (refer to Note 34).
Select Harvests Annual Report 2005 41
notes to the financial statements as at 30 June 2005
1. Summary of significant accounting policies (continued)
(d) Cash and cash equivalents
Cash on hand and in banks and short-term deposits are stated at nominal value.
For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks, and money market investments
readily convertible to cash within two working days, net of outstanding bank overdrafts.
Bank overdrafts are carried at the principal amount. Interest is charged as an expense as it accrues.
(e) Inventories
Inventories are valued at the lower of cost and net realisable value except for almond stocks which are measured at net market
value in accordance with AASB 1037: ‘Self Generating and Regenerating Assets’ – refer to (f) below.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
• Raw materials and consumables – purchase cost on a first-in-first-out basis;
• Finished goods and work-in-progress – cost of direct material and labour and a proportion of manufacturing overheads
based on normal operating capacity; and
• Almond stocks are valued in accordance with AASB 1037: ‘Self Generating and Regenerating Assets’ whereby the cost of the
non-living (harvested) produce is deemed to be its net market value immediately after it becomes non-living. This valuation
takes into account current almond selling prices and current processing and selling costs.
(f) Self-generating and regenerating assets
Almond trees
Almond trees are classified as a self generating and regenerating asset and valued in accordance with AASB 1037: ‘Self
Generating and Regenerating Assets’.
Developing almond trees are valued at their growing cost until the year they achieve economic maturity. The values of
economically mature almond trees are calculated using a discounted cash flow methodology. The discounted cash flow
incorporates the following factors:
• Almond trees have an estimated 30-year economic life, with crop yields consistent with long-term yield rates;
• Selling prices are based on long-term average trend prices;
• Growing, processing and selling costs are based on long-term average levels;
• Cash flows are discounted at a rate that takes into account the cost of capital plus a suitable risk factor; and
• Asset values to be deducted from the cumulative cash flow, to determine the tree value, are based on current valuation and
then adjusted annually to account for capital expenditure, depreciation and utilised acreage.
Growing almond crop
The growing almond crop is valued in accordance with AASB 1037: ‘Self Generating and Regenerating Assets’. This valuation
takes into account current almond selling prices and current growing, processing and selling costs. The calculated crop value
is then discounted to take into account that it is only partly developed, and then further discounted by a suitable factor to
take into account the agricultural risk until crop maturity.
New orchards growing costs
All costs associated with the establishment, planting and growing of almond trees for a new orchard are accumulated for
the first three years of that orchard. Once immature trees commence bearing a commercial crop a proportion of the annual
growing costs are expensed on the basis of yield achieved as a proportion of anticipated yield of a mature tree. At the end
of the eighth year full maturation is deemed to occur, after which the tree is considered to be mature in terms of revenue
generation and the annual growing costs are then expensed in full and the almond trees are valued as described above.
42 Select Harvests Annual Report 2005
(g) Property, plant and equipment
Cost and valuation
Plantation land, water rights and buildings on freehold land are measured on a fair value basis. Carrying amounts are regularly
reviewed by Directors to ensure that they do not differ materially from the asset’s fair value at reporting date. Where necessary,
the asset is revalued to reflect its fair value.
All other classes of property, plant and equipment are measured at cost.
The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable
amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be
received from the assets employment and subsequent disposal. The expected net cash flows have not been discounted to
present values in determining recoverable amounts.
Where assets have been revalued, the potential effect of the capital gains tax on disposal has not been taken into account
in the determination of the revalued carrying amount. Where it is expected that a liability for capital gains tax will arise, this
expected amount is disclosed by way of note.
Depreciation
The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land water
rights, and almond trees, are depreciated on a straight line basis over their estimated useful lives to the entity commencing
from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired
period of the lease or the estimated useful lives of the improvements.
The useful lives for each class of assets are:
Buildings
Leasehold improvements
Plant and equipment
Leased plant and equipment
Plantation land and irrigation systems
2005
2004
25 to 40 years
5 to 40 years
5 to 20 years
5 to 10 years
10 to 40 years
25 to 40 years
5 to 40 years
5 to 20 years
5 to 10 years
10 to 40 years
Capital works in progress
Capital works in progress are valued at cost and relate to costs incurred for orchards and other assets under development.
(h) Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement
so as to reflect the risks and benefits incidental to ownership.
Operating leases
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits
of ownership of the leased item, are recognised as an expense on a straight line basis.
Finance leases
Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the
group are capitalised at the present value of the minimum lease payments and disclosed as plant and equipment under lease.
A lease liability of equal value is also recognised.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the assets and the lease term.
Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense
calculated using the interest rate implicit in the lease and charged directly to the Statement of Financial Performance.
The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements, and amortised over
the unexpired period of the lease or the estimated useful lives of the improvements, whichever is the shorter.
Select Harvests Annual Report 2005 43
notes to the financial statements as at 30 June 2005
1. Summary of significant accounting policies (continued)
(i) Intangibles
Brand names
Brand names are measured at cost. Directors are of the view that brand names have an indefinite life. Brand names are
therefore not depreciated.
This accounting policy will be impacted on first-time adoption of AIFRS (refer to Note 34).
Goodwill
Goodwill represents the excess of the purchase consideration plus incidental costs over the fair value of identifiable net assets
acquired at the time of acquisition of a business or shares in a controlled entity.
Goodwill is amortised on a straight line basis over the period during which benefits are expected to be received. This is taken
as being 20 years.
This accounting policy will be impacted on first-time adoption of AIFRS (refer to Note 34).
( j) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue
can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Sale of goods
Control of the goods has passed to the buyer.
Rendering of services
Revenue from the rendering of services is recognised upon the delivery of the service to the customer. Certain clients may
be invoiced in advance of provision of services.
Interest
Interest revenue is recognised when it becomes receivable on a proportional basis taking into account the interest rates
applicable to the financial assets.
Dividends
Control of the right to receive a dividend is evidenced by the approval of the dividend at a meeting of the Board of Directors
in accordance with the Company’s constitution.
Almond stocks
Increments or decrements in the net market value of almond stocks are recognised as revenues or expenses in the Statement
of Financial Performance in the financial year in which they occur. The net increment or decrement in the total market value of
the almond stocks is determined as the difference between the net market value and quantities at the beginning of the year
and at year end, less any further costs required to get the almonds stocks to a saleable state.
Almond pool revenue
Under the contractual arrangements with external growers the Company simultaneously acquires and sells the almonds
and does not make a margin on those sales. These transactions are disclosed in Note 2 and are not recognised as revenue.
As at 30 June 2005 the Company held almond inventory on behalf of external growers which was not recorded as inventory
of the Company.
All revenue is stated net of the amount of Goods and Services Tax (GST).
44 Select Harvests Annual Report 2005
(k) Taxes
Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated
on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time
items are recognised in the financial statements and when items are taken into account in determining taxable income, the
net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for
deferred income tax. The net future income tax benefit relating to tax losses and timing differences is not carried forward as
an asset unless the benefit is virtually certain of being realised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no
adverse change will occur in income tax legislation, and the anticipation that the economic entity will derive sufficient future
assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
Where assets are revalued no provision for potential capital gains tax has been made.
This accounting policy will be impacted on first-time adoption of AIFRS (refer to Note 34).
Tax consolidation
The parent entity of Select Harvests Limited and its subsidiaries have implemented the tax consolidation legislation and
formed a tax-consolidated group from 1 July 2003.
The parent entity and subsidiaries in the tax-consolidated group have entered into a tax funding agreement such that each
entity in the tax consolidated group recognises the assets, liabilities, expenses and revenues in relation to its own transactions,
events and balances only. All entities in the tax-consolidated group have adopted UIG 52 to account for the effects of the tax
funding agreement under the tax consolidation system. This means that:
• The parent entity recognises all current and deferred tax amounts relating to its own transactions, events and balances only;
• The subsidiaries recognise current or deferred tax amounts arising in respect of their own transactions, events and balances only;
• All expenses and revenues arising under the tax funding agreement are recognised as a component of income tax expense
or income tax revenue by each individual entity; and
• All assets and liabilities arising under the tax funding agreement are recognised as tax-related amounts receivable from or
payable to other entities in the group, rather than as tax assets or tax liabilities.
Deferred tax balances relating to the subsidiaries have been remeasured by reference to the carrying amounts of the subsidiaries’
assets based on the reset tax value under tax consolidation.
The tax-consolidated group also has a tax sharing agreement in place to limit the liability of subsidiaries in the tax-consolidated
group arising under the joint and several liability requirements of the tax consolidation system in the event of default by the
parent entity to meet its payment obligations.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
• Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case
the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables
in the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing
and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
Select Harvests Annual Report 2005 45
notes to the financial statements as at 30 June 2005
1. Summary of significant accounting policies (continued)
(l) Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date.
These benefits include wages and salaries, annual leave and long service leave.
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within
twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected
to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated
future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the
present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have
terms to maturity approximating the terms of the related liability, are used.
Employee benefit expenses and revenues arising in respect of the following categories are charged against profit on a net basis
in their respective categories:
• Wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave benefits.
• Other types of employee benefits.
Contributions are made by the economic entity to an employee superannuation fund and are charged as expenses when incurred.
(m) Financial instruments
Terms and Conditions
Financial assets
Trade receivables are carried at full amounts due less any provision for doubtful debts. A provision for doubtful debts
is recognised when collection of the full amount is no longer probable.
Amounts receivable from other debtors are carried at full amounts due. Other debtors are normally settled on 30 days
from month end unless there is a specific contract which specifies an alternative date.
Amounts receivable from related parties are carried at full amounts due. Details of the terms and conditions are set out in Note 30.
Financial Liabilities
The bank overdraft is carried at the principal amount. Interest is charged as an expense as it accrues. The bank overdraft
is secured by a floating charge over the Company’s assets.
Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the
economic entity. Trade liabilities are normally settled on 30 days from month end.
Finance lease liability is accounted for in accordance with AASB 1008: ‘Leases’. As at balance date, the Company had finance
leases with an average lease term of four years. The average discount rate implicit in the leases is 7%. The lease liability is
secured by a charge over the leased asset.
(n) Comparatives
Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures.
(o) Rounding amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission,
relation to the ‘rounding off’ of amounts in the financial report. Amounts in the financial report have been rounded off in
accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
46 Select Harvests Annual Report 2005
2. Revenue from Ordinary Activities
Revenues from operating activities
Total revenues from operating activities
Revenues from non-operating activities
Management fees
Dividends and distributions
– Controlled entities
– Other corporations
Total dividends and distributions
Interest
– Wholly owned entities
– Other persons/corporations
Total interest
Other Income
Proceeds from disposal of property, plant and equipment
Total revenues from non-operating activities
SGARA Revenue – Stock increment
Total revenues from ordinary activities
Revenue/Cost of goods sold from almond pool
Revenue from almond pool sales
Cost of goods sold from almond pool sales
3. Expenses and Losses/(Gains)
(a) Expenses
Cost of goods and services sold
Depreciation of non-current assets
– Freehold land and buildings
– Buildings
– Plantation land and irrigation systems
– Plant and equipment
Total depreciation of non-current assets
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
178,029
127,380
-
-
-
-
2
2
-
94
94
774
870
787
-
-
-
-
-
120
120
2
324
446
561
3,011
2,608
13,907
11,300
-
-
13,907
11,300
1,708
69
1,777
-
134
2,295
101
2,396
-
-
18,829
16,304
-
-
179,686
128,387
18,829
16,304
12,632
(12,632)
-
5,163
(5,163)
-
131,605
91,242
5
55
342
2,453
2,855
5
75
303
2,173
2,556
-
-
-
-
1
-
-
-
-
-
-
1
-
-
166
167
107
108
Select Harvests Annual Report 2005 47
notes to the financial statements as at 30 June 2005
3. Expenses and Losses/(Gains) (continued)
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
(a) Expenses (continued)
Amortisation of non-current assets
– Goodwill
– Leased plant and equipment
Total amortisation of non-current assets
Total depreciation and amortisation expenses
Borrowing costs expensed
– Wholly owned entities
– Other persons
Total borrowing costs
Movement in provisions for doubtful debts
Net expense (revenue) for movement in provision
for employee entitlements
Net expense (revenue) for movement in provision for stock diminution
Operating lease rental
– Minimum lease payments
Total operating lease rental
(b) Losses/(gains)
Net loss on disposal of property, plant and equipment
4. Income Tax
The prima facie tax, using tax rates applicable in the country
of operation, on profit and extraordinary items differs from
the income tax provided in the financial statements as follows:
Prima facie tax on profit from ordinary activities
Tax effect of permanent differences
– Rebateable dividends
– Amortisation of intangible assets
– Other non allowable items
Under/(over) provision of previous year
1,514
323
1,837
4,692
-
1,361
1,361
24
1,166
(105)
3,713
3,713
1,413
380
1,793
4,349
-
1,369
1,369
27
589
67
2,189
2,189
78
17
-
8
8
175
-
1,219
1,219
-
117
-
-
44
-
25
25
133
-
1,182
1,182
-
54
-
-
-
9,599
6,776
4,520
3,939
-
454
237
(11)
-
424
130
32
(4,172)
(3,390)
-
8
10
366
-
6
63
618
378
-
124
Income tax expense attributable to ordinary activities
Deferred tax assets and liabilities
Provision for income tax – current
Provision for deferred income tax – non-current
Future income tax benefit – non-current
This future income tax benefit will only be obtained if:
(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
3,239
2,229
1,263
2,123
395
322
318
83
-
10,279
7,362
(b) the conditions for deductibility imposed by tax legislation continue to be complied with; and
(c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
48 Select Harvests Annual Report 2005
5. Dividends Paid or Provided
for on Ordinary Shares
(a) Dividends paid during the year
(i) Current year interim
Franked dividends (16.0c per share) (2004:10.0c)
(ii) Previous year final (paid 1st October 2004)
Franked dividends (16.0c per share)
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
6,225
6,225
6,199
12,424
3,840
3,840
4,590
8,430
6,225
6,225
6,199
12,424
3,840
3,840
4,590
8,430
(b) Dividends proposed and not recognised as a liability
Franked dividends (26.0c per share, $10,157,971)
(c) Franking credit balance
Balance of franking account at year-end adjusted for franking
credits arising from payment of provision for income tax and
dividends recognised as receivables, franking debits arising from
payment of proposed dividends and any credits that may be
prevented from distribution in subsequent years.
28,229
25,894
The dividend franking account has been measured at the after tax profits basis not the income tax paid basis in accordance
with the New Business Tax System (Imputation) Act 2002.
The tax rate at which paid dividends have been franked is 30% (2004: 30%).
6. Receivables (Current)
Trade debtors
Provision for doubtful debts
Other receivables
24,829
15,710
(24)
(27)
24,805
15,683
57
19
24,862
15,702
–
–
–
10
10
–
–
–
19
19
Select Harvests Annual Report 2005 49
notes to the financial statements as at 30 June 2005
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
7(a)
7(a)
28
28
7,234
(51)
7,183
7,649
(466)
7,183
5,318
5,318
5,112
5,112
3,248
(31)
3,217
6,061
(381)
5,680
2,569
2,569
3,978
3,978
24,796
15,444
(412)
(105)
(517)
(479)
67
(412)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
825
956
770
784
-
-
-
21
-
21
-
-
-
42,304
(1,099)
41,205
42,772
(1,099)
41,673
19
-
19
-
12,195
12,195
-
12,195
12,195
7. Inventories (Current)
Raw materials
Raw materials at cost
Provision for diminution in value
Finished goods
Finished goods at cost
Provision for diminution in value
Other inventory
Other inventory at cost
Almond stocks
At net market value
Total inventories
(a) Movements in provision for diminution in value
Beginning of the financial year
Movement during the year
End of the financial year
8. Other Current Assets
Prepayments
9. Receivables (Non-current)
Related party receivables
Wholly-owned group
– Controlled entities
– Provision for diminution
10. Other Financial Assets (Non-current)
Investments at cost comprise:
Shares
Other corporations
Controlled entities – unlisted
50 Select Harvests Annual Report 2005
11. Property, Plant and Equipment
Freehold land and buildings
At cost
Accumulated depreciation
Buildings
At fair value
Accumulated depreciation
Plantation land and irrigation systems
At fair value
Accumulated depreciation
Total land and buildings
Plant and equipment under lease
At cost
Accumulated amortisation
Plant & equipment
At cost
Accumulated depreciation
Capital works in progress
At cost
Total plant and equipment
Total property, plant and equipment
Fair value
Cost
Accumulated depreciation and amortisation
Total written down amount
(a) Valuations
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
315
(83)
232
2,792
(261)
2,531
24,147
(1,162)
22,985
25,748
2,771
(1,457)
1,314
465
(81)
384
2,792
(206)
2,586
23,822
(819)
23,003
25,973
3,368
(1,664)
1,704
11(b)
11(a)
11(b)
11(a)
11(b)
11(b)
31,165
25,762
(15,424)
(13,084)
11(b)
15,741
12,678
11(b)
1,188
1,188
1,437
1,437
18,243
15,819
26,939
35,439
62,378
26,614
31,032
57,646
(18,387)
(15,854)
43,991
41,792
-
-
-
-
-
-
-
-
-
-
-
-
-
1,198
(689)
509
14
14
523
-
1,212
1,212
(689)
523
150
(1)
149
-
-
-
-
-
149
144
(69)
75
1,049
(526)
523
-
-
598
-
1,343
1,343
(596)
747
The fair values of freehold land, and buildings on freehold land have been determined by the Directors, based upon information
and advice received during the previous financial year. Such valuations are performed on an open market basis, being the
amounts for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller
in an arm’s length transaction at the valuation date.
Select Harvests Annual Report 2005 51
notes to the financial statements as at 30 June 2005
11. Property, Plant and Equipment (continued)
NOTES
(b) Reconciliations
Reconciliations of the carrying amounts of property, plant and
equipment at the beginning and end of the current financial year.
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2005
$’000
Freehold land and buildings
Carrying amount at beginning
Additions
Depreciation expense
Disposals
Buildings
Carrying amount at beginning
Depreciation expense
Plantation land and irrigation systems
Carrying amount at beginning
Additions
Disposals
Transfer between classes
Depreciation expense
Plant and equipment under lease
Carrying amount at beginning
Additions through acquisition of entities/operations
Transfers between classes
Depreciation expense
Plant and equipment
Carrying amount at beginning
Additions
Disposals
Additions through acquisition of entities/operations
Transfers between classes
Depreciation expense
Capital works in progress
Carrying amount at beginning
Additions
Transfers
Total written down value
52 Select Harvests Annual Report 2005
384
25
(5)
(172)
232
2,586
(55)
2,531
23,003
434
(382)
272
(342)
22,985
1,704
505
(572)
(323)
1,314
12,678
4,648
(113)
142
839
(2,453)
15,741
1,437
1,048
(1,297)
1,188
43,991
149
24
(1)
(172)
-
-
-
-
-
-
-
-
-
-
75
(67)
-
(8)
-
523
95
(6)
-
63
(166)
509
-
14
-
14
523
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
5,516
2005
2,375
4,986
2004
2,375
–
–
12. Self-Generating and Regenerating Assets
SGARA Almond Trees – at net market value
(a) Physical quantity of trees
Almond Trees (acres)
(b) Movement in carrying amounts
2005
Balance at the beginning of the year
– Additions
– SGARA tree adjustment
13. Intangibles
Goodwill – at cost
Accumulated amortisation
Brand names – at cost
14. Payables (Current)
Trade creditors
Other creditors
SGARA
PLANTATION
$’000
4,986
759
(229)
5,516
31,032
(6,565)
24,467
2,900
27,367
29,396
(5,051)
24,345
2,900
27,245
–
–
–
–
–
7,042
25,002
32,044
5,275
9,069
14,344
97
1,273
1,370
15. Interest-Bearing Liabilities (Current)
Lease liability
Borrowings secured by floating charge
15(a),(b),23
– Bank overdraft
15(b)
(a) Secured lease liability – finance lease
(b) Terms and conditions relating to the above financial instruments:
486
–
486
486
830
127
957
830
(i) A registered mortgage debenture is held as security over all the assets and undertakings of Select Harvests Limited
and the entities of the wholly owned group.
(ii) A deed of cross guarantee exists between the entities of the wholly owned group.
Select Harvests Annual Report 2005 53
–
–
–
–
–
124
463
587
78
127
205
78
notes to the financial statements as at 30 June 2005
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
16. Provisions (Current)
Employee benefits
Other
17. Payables (Non-Current)
Aggregate amounts payable to related parties
– Wholly owned companies
18. Interest-Bearing Liabilities (Non-Current)
Lease liability
18(a),(b),23
Borrowings secured by floating charge
– Bills of exchange and promissory notes
18(b)
(a) Secured lease liability – finance lease
(b) Terms and conditions relating to the above financial instruments:
19 (a)
2,059
80
2,139
1,547
-
1,547
191
-
191
-
-
376
-
376
376
-
-
13,490
13,490
423
6,700
7,123
423
-
-
-
-
150
-
150
9,150
9,150
-
6,700
6,700
-
(i)
A registered mortgage debenture is held as security over all the assets and undertakings of Select Harvests Limited
and the entities of the wholly owned group.
(ii) A deed of cross guarantee exists between the entities of the wholly owned group.
19. Provisions (Non-Current)
Employee entitlements
(a) Aggregate employee entitlements liability
(b) Number of full time employees at year end
20. Contributed Equity
(a) Issued and paid up capital
Ordinary shares fully paid
(b) Movements in shares on issue
Beginning of the financial year
Issued during the year
– Dividend reinvestment scheme
– Employee share scheme
– Other shares issued
End of Financial year
54 Select Harvests Annual Report 2005
19 (a)
360
2,419
276
224
1,771
252
48
239
11
36
186
7
46,925
46,925
43,940
43,940
46,925
46,925
43,940
43,940
2005
NUMBER OF
SHARES
$’000
NUMBER OF
SHARES
2004
$’000
38,525,552
43,940
35,455,341
36,206
287,268
256,300
-
2,470
515
234,311
1,416
302,400
491
-
2,533,500
5,827
39,069,120
46,925
38,525,552
43,940
20. Contributed Equity (continued)
(c) Share options
Options over ordinary shares:
Employee share scheme
The Company continued to offer employee participation in short-term and long-term incentive schemes as part of the
remuneration packages for the employees of the Companies. Both the short-term and long-term schemes involve payments
up to an agreed proportion of the total fixed remuneration of the employee, with relevant proportions based on
market-relativity of employees with equivalent responsibilities.
The employee is able to receive payments under the short-term incentive scheme based on the achievement of agreed
business plans by the individual. This performance is measured and reported by a balanced scorecard approach.
The long-term scheme involves the issue of options to the employee, under the executive share option scheme. During or since
the end of the financial year, 228,700 options (2004: 502,000 options) have been granted under this scheme (refer note 26 and
Directors’ Report for further details). The market value of ordinary Select Harvests Limited shares closed at $9.70 on 30 June
2005 ($6.67 on 30 June 2004).
21. Reserves and Retained Profits
Capital reserve
Asset revaluation
Retained profits
(a) Capital
(i) Nature and purpose of reserve
The capital reserve is used to isolate realised capital profits
from disposal of non-current assets.
(b) Asset revaluation
(i) Nature and purpose of reserve
The asset revaluation reserve is used to record increments and
decrements in the value of non-current assets. The reserve can
only be used to pay dividends in limited circumstances.
(ii) Movements in reserve
Balance at beginning of year
Surplus on revaluation
Balance at end of year
(c) Retained profits
Balance at the beginning of year
Net profit attributable to members of Select Harvests Limited
Total available for appropriation
Dividends paid
Balance at end of year
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
21(a)
21(b)
21(c)
3,271
10,920
14,191
30,429
3,271
10,920
14,191
21,137
3,270
3,270
-
3,270
(6,595)
-
3,270
(8,874)
10,920
-
6,187
4,733
10,920
10,920
-
-
-
-
-
-
21,137
21,716
42,853
(12,424)
30,429
14,342
15,225
29,567
(8,874)
(12,954)
14,703
5,829
12,510
(444)
(8,430)
(12,424)
(8,430)
(6,595)
21,137
Select Harvests Annual Report 2005 55
(8,874)
notes to the financial statements as at 30 June 2005
22. Statement of Cash Flows
(a) Reconciliation of the net profit after tax
to the net cash flows from operations
Net profit
Non-cash Items
Depreciation and amortisation
Amortisation of goodwill
SGARA revenue – stock
SGARA expense – trees
Net (profit)/loss on disposal of property, plant and equipment
Dividends received from controlled entities
Interest received
Management fees received
Management fees paid
Changes in assets and liabilities
(Increase)/decrease in trade receivables
(Increase)/decrease in inventory
(Increase)/decrease in receivables and other assets
Increase in trade and other creditors
(Decrease)/increase in income tax payable
(Decrease)/increase in deferred income tax liability
(Decrease)/increase in employee entitlements
Net cash flow from operating activities
(b) Reconciliation of cash
Cash balance comprises:
Cash at bank
Bank overdraft
Closing cash balance
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
21,716
15,225
14,703
12,510
3,178
1,514
787
(229)
(106)
-
-
-
-
(9,122)
(5,685)
341
18,793
1,010
833
498
2,936
1,413
561
(342)
(11)
-
-
-
-
(3,330)
(4,733)
234
2,194
137
(56)
699
175
-
-
-
44
133
-
-
-
-
(13,907)
(11,300)
(1,708)
(3,011)
(2,295)
(2,608)
-
-
-
23
787
(60)
42
52
-
-
-
58
74
170
(57)
53
33,528
14,927
(2,860)
(3,262)
4,539
-
4,539
489
(127)
362
4,231
-
4,231
-
(127)
(127)
(c) Credit stand-by arrangements and loan facilities
The economic entity and the Company have a bank overdraft facility available to the extent of $2,000,000 (2004: $2,000,000).
As at 30 June 2005 the economic entity and the Company have used $Nil (2004: $Nil) of the facility.
The economic entity and the Company have a commercial bill facility available to the extent of $28,000,000
(2004: $22,900,000).
As at 30 June 2005 the economic entity and Company have used $Nil (2004: $6,700,000).
56 Select Harvests Annual Report 2005
(d) Acquisition of entities and businesses
There were no acquisitions of entities during the year. In the 2004 year Select Harvests Marketing Pty Ltd, a wholly owned
subsidiary of Select Harvests Limited, acquired 100% of the share capital of Meriram Pty Ltd and Kibley Pty Ltd at an initial
cost of $9.145 million.
During the year the economic entity paid $1.5 million to the shareholders of Meriram Pty Ltd and Kibley Pty Ltd in relation
to the achievement of the EBIT target for the financial year ended 30 June 2004.
During the year the economic entity acquired the Chiquita Nibbles business from Chiquita Brands South Pacific Limited for
a total consideration of $5.4 million.
ECONOMIC ENTITY
PARENT ENTITY
Details of this transaction are:
Purchase consideration
Cash consideration
Assets and liabilities held at acquisition date:
Receivables
Inventories
Property, plant and equipment
Intangible assets
Other assets
Creditors
Interest liabilities
Provisions
Other liabilities
Goodwill on consolidation
2005
$’000
6,933
6,933
-
-
4,225
647
-
81
-
(505)
(150)
-
4,298
2,635
6,933
2004
$’000
9,145
9,145
-
2,278
3,046
2,544
1,168
406
(2,909)
(691)
(668)
(314)
4,860
4,285
9,145
2005
$’000
2004
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 30 June 2005 an additional amount of $500,000, as noted in Note 33, became due and payable and was recognised
as a liability as at 30 June 2005. This amount has been added to the goodwill on consolidation.
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
23. Expenditure Commitments
Lease expenditure commitments
(i) Operating leases (non-cancellable)
Minimum lease payments
– Not later than one year
– Later than one year and not later than five years
– Later than five years
– Aggregate lease expenditure contracted for at reporting date
Aggregate expenditure commitments comprise:
Aggregate lease expenditure contracted for at reporting date
3,860
13,599
13,442
30,901
2,659
10,815
14,413
27,887
30,901
27,887
-
-
-
-
-
-
-
-
-
-
Operating lease payments are for rental of premises, farming and factory equipment.
Select Harvests Annual Report 2005 57
notes to the financial statements as at 30 June 2005
(ii) Finance leases
– Not later than one year
– Later than one year and not later than five years
– Total minimum lease payments
– Future finance charges
– Lease liability
– Current liability
– Non-current liability
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
536
426
962
(100)
862
486
376
862
2004
$’000
2005
$’000
2004
$’000
882
441
1,323
(70)
1,253
830
423
1,253
-
-
-
-
-
-
-
-
78
-
78
-
78
-
-
78
24. Subsequent Events
On 23 August 2005, the Board announced that a contract of sale was signed to sell all of the shares in Riverina Pelletising Services
Pty Ltd, for a total consideration of $5.7 million to Australian Businesspoint Pty Ltd. Subject to certain conditions precedent being
satisfied, the sale is scheduled to be completed on Friday 14 October 2005, with an effective date of 1 October 2005.
There has been no other matter or circumstance, which has arisen since 30 June 2005 that has significantly affected or may
significantly affect:
a) the operations, in financial years subsequent to 30 June 2005, of the economic entity, or
b) the results of those operations, or
c) the state of affairs, in financial years subsequent to 30 June 2005, of the economic entity.
25. Earnings Per Share
The following reflects the income and share data used
in the calculations of basic and diluted earnings per share:
Net profit
Earnings used in calculating basic and diluted earnings per share
Weighted average number of ordinary shares
used in calculating basic earnings per share
Effect of dilutive securities
Share options
Adjusted weighted average number of ordinary
shares used in calculating diluted earnings per share
21,716
21,734
15,225
15,264
NUMBER OF SHARES
2005
2004
38,864,450
38,041,423
153,518
439,622
39,017,968
38,481,045
58 Select Harvests Annual Report 2005
26. Remuneration of Directors and Executives
Remuneration levels are set to attract and retain appropriately qualified and experienced Directors and senior executives.
The Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages, given
trends in the marketplace. Remuneration packages include a mix of fixed remuneration, performance-based remuneration,
and equity-based remuneration.
Executive Directors and senior executives may receive short term incentives based on achievement of specific business plans
and performance indicators, which include financial and operational targets relevant to performance at the economic entity
level, divisional level, or functional level, as applicable, for the financial year. In addition, the economic entity offers Executive
Directors and senior executives participation in the long-term incentive scheme involving the issue of options to the employee
under the executive share option scheme. The executive share option scheme provides for the offer of a parcel of options to
participating employees on an annual basis, with a three-year expiry period, exercisable at the market price set at the time
the offer was made. The options are granted annually in three tranches on achievement of the performance hurdles.
Non-Executive Directors each receive a base fee of $45,780 per annum. The Chairman receives up to twice the base fee.
Non-Executive Directors do not receive any performance related remuneration nor are they issued options on securities.
The following table provides the details of all Directors of the economic entity (‘specified Directors’) and the five or more
executives of the economic entity with the greatest authority (‘specified executives’) and the nature and amount of the
elements of their remuneration for the year ended 30 June 2005.
Remuneration of Directors of Select Harvests Limited
2005
ANNUAL REMUNERATION
BASE FEE
$
SHORT TERM
INCENTIVES
$
NON CASH SUPERANNUATION
CONTRIBUTIONS
$
BENEFITS
$
LONG TERM REMUNERATION
OPTIONS GRANTED
NUMBER
VALUE
$
–
–
–
–
–
–
–
–
–
–
7,560
3,780
3,780
3,580
1,622
–
–
–
–
–
–
–
–
–
–
TOTAL
$
91,560
45,780
45,780
43,353
19,647
42,000
84,000
Non Executive
M A Fremder
C G Clark
G F Dan O’Brien
42,000
J C Leonard (appointed 21/07/04) 39,773
R M Herron (appointed 27/01/05) 18,025
Executive
J Bird
Total Specified Officers
2004
558,621
332,823
70,370
35,185
Non Executive
M A Fremder
B P Burns (retired 30/06/04)
C G Clark
35,185
D J Williams (resigned 16/02/04) 23,457
G F Dan O’Brien
(appointed 29/03/04)
Executive
J Bird
Total Specified Officers
459,846
286,470
9,179
155,041
155,041
32,766
32,766
29,478
49,800
136,400
136,400
77,089
77,089
627,197
873,317
–
–
–
–
–
–
–
–
–
–
6,333
3,167
3,167
2,111
826
–
–
–
–
–
–
–
–
–
–
76,703
38,352
38,352
25,568
10,005
119,093
119,093
39,576
39,576
25,633
41,237
176,000
176,000
70,593
70,593
541,365
730,345
Select Harvests Annual Report 2005 59
notes to the financial statements as at 30 June 2005
26. Remuneration of Directors and Executives (continued)
Remuneration of the five or more executives of the economic entity with the greatest authority.
2005
ANNUAL REMUNERATION
BASE FEE
$
SHORT TERM
INCENTIVES
$
NON CASH SUPERANNUATION
CONTRIBUTIONS
$
BENEFITS
$
LONG TERM REMUNERATION
OPTIONS GRANTED
NUMBER
VALUE
$
TOTAL
$
91,477
159,332
M Mattia
(Chief Financial Officer
and Company Secretary)
M Ciobo
(General Manager – Meriram) 210,000
R Tanti
(General Manager
– Food Products, Melbourne)
(commenced 29/09/04)
V Cavanagh
(General Manager – Pesticides) 80,665
T Millen
(Horticultural Manager)
W Turner
(General Manager
– Almond Division)
L Van Driel
(Trading Manager)
Total Specified Officers
2004
852,537
115,705
96,195
99,163
139,635
M Ciobo
(General Manager – Meriram) 210,000
M Mattia
(Chief Financial Officer
and Company Secretary)
V Cavanagh
(General Manager – Pesticides) 74,980
T Millen
(Horticultural Manager)
P Petropolous
(Operations Manager)
W Turner
(General Manager
– Almond Division)
L Van Driel
(Trading Manager)
Total Specified Officers
805,207
111,046
107,939
85,854
75,753
60 Select Harvests Annual Report 2005
57,168
37,984
14,149
8,800
8,800
277,433
–
–
30,530
18,900
–
6,060
–
–
–
259,430
–
97,537
9,984
16,800
8,109
18,200
10,162
125,720
13,930
5,000
9,826
9,300
5,156
130,107
27,067
19,000
12,759
7,000
7,000
181,531
17,487
14,821
125,636
124,135
9,625
79,428
19,800
63,100
10,974
152,070
42,092
1,223,828
–
15,989
18,900
4,366
40,900
12,462
–
–
–
–
244,889
197,363
11,063
16,800
7,681
24,100
9,630
120,154
9,317
5,000
8,510
7,500
3,356
112,037
3,660
19,000
6,804
10,237
19,000
10,196
–
–
105,217
–
150,479
18,594
57,237
–
116,689
9,625
74,178
15,900
47,500
7,074
143,232
20,060
1,073,371
Options and rights over equity instruments granted as remuneration
During the reporting period, the following options over ordinary shares were granted and vested during the current year under
the executive share option scheme:
Remuneration Options
Specified Directors
J Bird
Specified Executives
M Mattia
V Cavanagh
T Millen
W Turner
L Van Driel
GRANT
DATE
GRANTED &
VESTED
NUMBER
VALUE PER
OPTION AT
GRANT DATE
$
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
55,400
51,800
29,200
8,800
7,700
6,800
3,700
3,800
3,700
1,800
7,000
8,600
7,300
3,900
0.410
0.486
1.000
1.000
0.410
0.486
1.000
0.410
0.486
1.000
1.000
0.410
0.486
1.000
EXERCISE
PRICE
FIRST
EXERCISE
DATE
LAST
EXERCISE
DATE
$
1.66
3.31
5.60
5.60
1.66
3.31
5.60
1.66
3.31
5.60
5.60
1.66
3.31
5.60
27/08/04
27/08/04
27/08/04
20/10/04
28/10/05
01/11/06
27/08/04
01/11/06
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
27/08/04
20/10/04
28/10/05
01/11/06
20/10/04
28/10/05
01/11/06
27/08/04
01/11/06
27/08/04
27/08/04
27/08/04
20/10/04
28/10/05
01/11/06
All options vest immediately upon granting. Options expire up to three years after vesting. Exercise price equals the market
price at date of offer. The service and performance criteria, together with other details are described above. All options expire
on the earlier of their expiry date or termination of the individual’s employment. The options are exercisable at any time
after they have been granted.
Shares issued on exercise of remuneration options
During the financial year, the following shares were issued on the exercise of options previously granted as remuneration:
NUMBER OF SHARES
AMOUNT PAID PER SHARE
$
Specified Directors
J Bird
Specified Executives
V Cavanagh (General Manager – Pesticides)
T Millen (Horticultural Manager)
L Van Driel (Trading Manager)
166,200
23,100
11,400
8,600
7,300
1.66
1.66
1.66
1.66
3.31
There are no amounts unpaid on the shares issued as a result of the exercise of the options.
Select Harvests Annual Report 2005 61
notes to the financial statements as at 30 June 2005
26. Remuneration of Directors and Executives (continued)
Number of options held by Directors and specified executives
The movement during the financial year in the number of options over ordinary shares in the Company held, directly or indirectly,
by each specified Director and specified executive is as follows:
HELD AT
GRANTED AS
1 JULY 2004 REMUNERATION
EXERCISED
HELD AT
30 JUNE 2005
VESTED AND
EXERCISABLE AT
30 JUNE 2005
Specified Directors
J Bird
Specified Executives
M Mattia (Chief Financial Officer & Company Secretary)
V Cavanagh (General Manager – Pesticides)
T Millen (Horticultural Manager)
W Turner (General Manager – Almond Division)
L Van Driel (Trading Manager)
162,600
136,400
(166,200)
132,800
132,800
–
22,200
11,300
–
8,800
18,200
9,300
7,000
–
(23,100)
(11,400)
–
8,800
17,300
9,200
7,000
8,800
17,300
9,200
7,000
7,300
19,800
(15,900)
11,200
11,200
No options held by specified Directors or specified executives are vested but not exercisable.
Number of shares held by Directors and specified executives
The movement during the financial year in the number of ordinary shares of the Company held, directly or indirectly, by each
specified Director and specified executive, including their personally related entities is as follows:
2005
HELD AT
1 JULY 2004
RECEIVED AS
REMUNERATION
RECEIVED ON
EXERCISE OF
OPTIONS
OTHER – DRP,
SALES &
PURCHASES
TOTAL
Specified Directors
Non-Executive
M A Fremder
J C Leonard (appointed 21/07/2004)
C G Clark
R M Herron (appointed 27/01/05)
G F Dan O’Brien
Executive
J Bird
Specified Executives
M Mattia (Chief Financial Officer & Company Secretary)
M Ciobo (General Manager – Meriram)
L Van Driel (Trading Manager)
V Cavanagh (General Manager – Pesticides)
T Millen (Horticultural Manager)
5,548,911
–
22,079
–
20,000
266,107
–
35,728
8,600
141,365
11,514
Other transactions with specified Directors and specified executives
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
49,441
5,598,352
413,091
413,091
848
5,000
30,000
22,927
5,000
50,000
166,200
(161,185)
271,122
–
–
15,900
23,100
11,400
2,000
–
(4,000)
2,000
35,728
20,500
(52,000)
112,465
–
22,914
There were no other transactions with specified Directors and specified executives that require disclosure in accordance
with AASB 1046 for the year ended 30 June 2005.
62 Select Harvests Annual Report 2005
NOTES
ECONOMIC ENTITY
PARENT ENTITY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
27. Auditors’ Remuneration
Amounts received or due and receivable by Pitcher Partners for:
• An audit or review of the financial report of the entity
and any other entity in the consolidated entity
• Other financial services
118,800
126,380
118,800
126,380
(a)
80,987
29,765
80,987
29,765
199,787
156,145
199,787
156,145
(a) Amounts paid or payable to an auditor for non-audit services provided during the year by the auditor to any entity
that is part of the consolidated entity for:
2005
17,858
24,892
29,505
8,732
80,987
2004
12,000
3,100
-
14,665
29,765
Taxation compliance and advice
Tax consolidation advice
IFRS advice
Other
28. Related Party Disclosures
Directors
The Directors of Select Harvests Limited during the financial year were:
M A Fremder
J C Leonard (appointed 27/07/05)
J Bird
C G Clark
R M Herron (appointed 27/01/05)
G F Dan O’Brien
Wholly-owned group transactions
Loans
Loans made by Select Harvests Limited to controlled entities under normal terms and conditions.
Loans made to Select Harvests Limited by controlled entities under normal terms and conditions.
Management fees are received by Select Harvests Limited from controlled entities under normal terms and conditions.
Director-related entity transactions
Services
Select Harvests Limited has an Almond Orchard Management Agreement and a Land Lease Agreement with Maxdy Nominees
Pty Ltd, a company in which Mr M A Fremder is a Director. Under the terms of the agreements, Select Harvests Limited has
developed and continues to manage 300 acres of almond orchard on a fee basis for Maxdy Nominees Pty Ltd.
In addition, Select Harvests Limited will process and sell the entire production of the orchard for the entire 25-year life of the
orchard. The economic entity received an amount of $951,906 during the financial year in relation to the above contract. The
agreements are under normal terms and conditions no more favourable than those which it is reasonable to expect the entity
would have adopted if dealing with the Director or Director-related entity at arms length in the same circumstances.
Select Harvests Annual Report 2005 63
notes to the financial statements as at 30 June 2005
29. Segment Information
Segment products and locations
During the financial year, a review was conducted and substantially similar segments in the almond operations of the
economic entity combined to reflect the continuing shift in strategic direction and growth of the almond business from owned
orchards to orchards managed on behalf of third parties. The economic entity has the following business segments:
• The food products division processes, markets, and distributes edible nuts, dried fruits, seeds, and a range of natural health foods.
• The almond operation comprises the growing, processing and sale of almonds to the food industry, from company owned
almond orchards; the sale of a range of management services to external owners of almond orchards, including consultancy,
orchard development, tree supply, farm management, land rental, and irrigation infrastructure; and the sale of almonds on
behalf of external investors.
• The pesticide products operation comprises the production of pelletised snail, slug and rodent baits for other marketers.
The economic entity operates predominantly within the geographical area of Australia.
64 Select Harvests Annual Report 2005
BUSINESS SEGMENTS
2005
FOOD
PRODUCTS
$’000
ALMOND
OPERATIONS
$’000
PESTICIDE
PRODUCTS
$’000
ELIMINATIONS
& CORPORATE
$’000
ECONOMIC
ENTITY
$’000
Revenue
Sales to customers outside the consolidated entity
Intersegment revenues
Sale of Almonds to customers outside the economic
entity on behalf of managed orchard owners*
Less Cost of Almonds sold by the economic entity
on behalf of managed orchard owners*
Other revenue
Total segment revenue
Unallocated revenue
Total consolidated revenue
Results
Segment result
Unallocated expenses
Consolidated entity profit from ordinary activities
before income tax expense
Income tax expense
Consolidated entity profit from ordinary activities
after income tax expense
Net profit
Assets
Segment assets
Liabilities
Segment liabilities
Other segment information
Acquisition of non-current segment assets
Depreciation and amortisation of segment assets
131,381
721
-
-
89
132,191
42,483
19,075
12,632
(23,508)
1,364
52,046
4,165
509
-
178,029
(20,305)
-
-
-
1
-
12,632
10,876
(12,632)
134
1,588
4,675
(9,295)
179,617
8,115
26,297
1,259
(2,408)
69
179,686
33,263
(1,268)
31,995
(10,279)
21,716
21,716
70,938
58,316
2,349
709
132,312
7,829
30,381
631
1,926
40,767
1,548
2,971
4,457
1,446
17
100
133
175
6,155
4,692
Select Harvests Annual Report 2005 65
notes to the financial statements as at 30 June 2005
29. Segment Information (continued)
BUSINESS SEGMENTS
2004
Revenue
Sales to customers outside the consolidated entity
Intersegment revenues
Sale of Almonds to customers outside the economic
entity on behalf of managed orchard owners*
Less Cost of Almonds sold by the economic entity on
behalf of managed orchard owners*
Other revenue
Total segment revenue
Unallocated revenue
Total consolidated revenue
Results
Segment result
Unallocated expenses
Consolidated entity profit from ordinary activities
before income tax expense
Income tax expense
Consolidated entity profit from ordinary activities
after income tax expense
Net profit
Assets
Segment assets
Liabilities
Segment liabilities
Other segment information
Acquisition of non-current segment assets
Depreciation and amortisation of segment assets
FOOD
PRODUCTS
$’000
ALMOND
OPERATIONS
$’000
PESTICIDE
PRODUCTS
$’000
ELIMINATIONS
& CORPORATE
$’000
ECONOMIC
ENTITY
$’000
88,442
18
–
–
321
35,164
7,205
5,163
(8,117)
584
3,775
443
(1)
127,380
(7,666)
–
–
–
–
–
5,163
2,954
(5,163)
–
905
88,781
39,999
4,218
(4,713)
128,285
102
128,387
6,813
18,264
752
(1,993)
23,836
(1,249)
22,587
(7,362)
15,225
15,225
61,729
46,889
2,279
(3,942)
106,955
9,493
10,326
265
7,603
27,687
1,225
2,510
2,637
1,377
15
114
557
348
4,434
4,349
* The economic entity provides a range of management and other services to externally owned or third party orchards. The
income and expenses associated with the provision of orchard establishment, orchard management, harvesting, maintenance
services and processing and marketing are included in the ‘Almond Operations’ segment of the above summary. In addition to
these services, the economic entity sells the crop of almonds harvested from the orchards of the external owners. Almond pool
sales are sales of almonds for externally owned almond orchards, which are sold by the economic entity on a pooled basis, the
proceeds from which are distributed to the pool participants.
66 Select Harvests Annual Report 2005
30. Financial Instruments
(a) Interest rate risk
The consolidated entity’s exposure to interest rate risks and the effective interest rates of financial assets and financial
liabilities, both recognised and unrecognised at the balance date, are as follows:
FINANCIAL INSTRUMENTS
FLOATING
INTEREST
RATE
FIXED INTEREST RATE MATURING IN:
1 YEAR
OR LESS
OVER 1 TO MORE THAN
5 YEARS
5 YEARS
NON
INTEREST
BEARING
TOTAL
CARRYING
AMOUNT
AS PER THE
STATEMENT
OF FINANCIAL
POSITION
$’000
2005
(i) Financial assets
Cash
Trade and other receivables
Total financial assets
(ii) Financial liabilities
Bank overdraft
Trade creditors
Other creditors
Finance lease liability
Bills of exchange and promissory notes
Foreign exchange contracts
Total financial liabilities
2004
(i) Financial assets
Cash
Trade and other receivables
Total financial assets
(ii) Financial liabilities
Bank overdraft
Trade creditors
Other creditors
Finance lease liability
Bills of exchange and promissory notes
Foreign exchange contracts
Total financial liabilities
$’000
$’000
$’000
$’000
$’000
537
-
537
-
-
-
-
-
10,295
10,295
487
–
487
127
–
–
–
–
17,504
17,631
4,000
-
4,000
-
-
-
486
-
-
486
–
–
–
–
–
–
830
6,700
–
7,530
-
-
-
-
-
-
376
-
-
376
–
–
–
–
–
–
423
–
–
423
-
-
-
-
-
-
-
-
-
-
–
–
–
–
–
–
–
–
–
–
2
24,862
24,864
-
7,042
25,002
-
-
-
4,539
24,862
29,401
-
7,042
25,002
862
-
-
32,044
32,906
2
15,597
15,599
–
5,275
9,069
–
–
–
489
15,597
16,086
127
5,275
9,069
1,253
6,700
–
14,344
22,424
WEIGHTED
AVERAGE
EFFECTIVE
INTEREST
RATE
%
3.0
-
-
-
-
-
7.0
-
-
-
2.5
–
9.1
–
–
7.0
6.0*
–
* There is one facility for fixed borrowings at an interest rate of 6.18%. The average interest rate is included in the table.
Select Harvests Annual Report 2005 67
notes to the financial statements as at 30 June 2005
(b) Credit risk exposures
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised
financial assets is the carrying amount of those assets, net of any provisions for doubtful debts of those assets, as disclosed
in the Statement of Financial Position and Notes to the Financial Statements.
Credit risk for derivative financial instruments arises from the potential failure by counterparties to the contract to meet their
obligations. The credit risk exposure to forward exchange contracts is the net fair value of these contracts.
The economic entity does not have any material credit risk exposure to any single debtor or group of debtors under financial
instruments entered into by the economic entity.
Concentrations of credit risk
The Company minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with
a large number of customers from across the range of business segments in which the group operates. Refer also to
Note 29 – Segment Information.
(c) Net fair values
For other assets and other liabilities the net fair value approximates their carrying value.
The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the Statement
of Financial Position and in the Notes to the Financial Statements.
(d) Forward exchange contracts
The economic entity enters into forward exchange contracts to buy and sell specified amounts of foreign currency in the
future at stipulated exchange rates. The objective in entering the forward exchange contracts is to protect the economic
entity against unfavourable exchange rate movements for both the contracted and anticipated future sales and purchases
undertaken in foreign currencies.
The full amount of the foreign currency the economic entity will be required to pay or purchase when settling the brought
forward exchange contracts should the counterparty not pay the currency it is committed to deliver to the Company. At
balance date the net amount was $10,295,000 (2004: $17,503,960).
The accounting policy in regard to forward exchange contracts is detailed in Note 1(c).
At balance date, the details of outstanding forward exchange contracts are:
BUY UNITED STATES DOLLARS
SETTLEMENT
Less than 6 months
6 months to 1 year
Greater than 1 year
BUY AUSTRALIAN DOLLARS
SETTLEMENT
Less than 6 months
6 months to 1 year
1 year to 2 years
2 years to 3 years
68 Select Harvests Annual Report 2005
SELL AUSTRALIAN DOLLARS
2004
$’ 000
2005
$’000
AVERAGE EXCHANGE RATE
2004
$
2005
$
10,994
1,080
248
12,322
3,654
-
-
3,654
0.76
0.76
0.77
0.71
-
-
SELL UNITED STATES DOLLARS
2004
$’ 000
2005
$’000
AVERAGE EXCHANGE RATE
2004
$
2005
$
15,796
1,770
5,051
-
7,850
-
8,257
5,051
22,617
21,158
0.64
0.49
0.59
-
0.54
-
0.57
0.59
31. Controlled Entities
(a) Parent Entity
Select Harvests Limited
Subsidiaries of Select Harvests Limited
– Allinga Farms Pty Ltd
– Kyndalyn Park Pty Ltd
– Riverina Pelletising Services Pty Ltd
– Select Home Garden Pty Ltd
– Select Harvests Marketing Pty Ltd
Subsidiaries of Select Harvests Marketing Pty Ltd
– Meriram Pty Ltd
– Kibley Pty Ltd
(b) Controlled entities acquired
COUNTRY OF INCORPORATION
PERCENTAGE OWNED (%)
2005
100
100
100
100
100
100
100
100
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
2004
100
100
100
100
100
100
100
100
No controlled entities were acquired during the financial year ended 30 June 2005.
32. Employee Benefits
Executive share option scheme
The economic entity has in place an executive share scheme. The scheme provides for the Board to offer to eligible employees
a parcel of options, which will be granted for no consideration in three equal tranches over a period of approximately three
years from the date of each result announcement to the ASX in each financial year.
Each option is convertible into one ordinary share. The exercise price of the options, determined in accordance with the rules
of the scheme, is based on the weighted average price of the Company’s shares over the first 50 sales of shares in the ordinary
course of trading on the stock market of the ASX immediately following the result announcement.
All options expire on the earlier of their expiry date or termination of the employee’s employment. The granting of options
is conditional upon the economic entity achieving growth of at least 10% in Earnings Per Share in each financial year over
the preceding financial year. Accordingly, the scheme does not represent remuneration for past services.
There are no voting or dividend rights attached to the options.
Select Harvests Annual Report 2005 69
notes to the financial statements as at 30 June 2005
32. Employee Benefits (continued)
Summary of options over unissued ordinary shares
Details of options over unissued ordinary shares at the beginning and ending of the reporting date and movements during the year
are set out below:
NUMBER OF OPTIONS
AT END OF YEAR
GRANT DATE
EXERCISE
DATE ON
OR AFTER
EXPIRY EXERCISE NUMBER OF
DATE
PRICE OPTIONS AT GRANTED
OPTIONS OPTIONS
LAPSED
OPTIONS
EXERCISED
ON
ISSUE
VESTED PROCEEDS NUMBER FAIR VALUE FAIR VALUE
RECEIVED OF SHARES PER SHARE AGGREGATE
$
ISSUED
$
$
2004
30/08/01 30/08/01 20/10/03
28/08/02 28/08/02 20/10/03
01/09/03 01/09/03 20/10/03
28/08/02 28/08/02 20/10/04
01/09/03 01/09/03 20/10/04
01/09/03 01/09/03 20/10/05
2005
28/08/02 28/08/02 20/10/04
01/09/03 01/09/03 20/10/04
27/08/04 27/08/04 20/10/04
01/09/03 01/09/03 20/10/05
27/08/04 27/08/04 20/10/05
27/08/04 27/08/04 01/11/06
$ BEGINNING
OF YEAR
1.55
1.55
1.55
1.66
1.66
3.31
1.66
1.66
1.66
3.31
3.31
5.60
82,900
82,900
–
–
–
93,300
79,100
–
–
–
87,500
92,500
66,900
66,900
–
–
–
79,100
82,000
–
–
–
85,200
64,400
–
–
–
–
–
–
–
–
–
–
–
–
82,900
82,900
93,300
–
–
–
– 128,495
82,900
1.77 146,733
– 128,495
82,900
3.15 261,135
– 144,615
93,300
5.60 522,480
12,200
66,900
66,900
20,252
12,200
3.15
38,430
20,600
66,900
66,900
34,196
20,600
5.60 115,360
10,500
82,000
82,000
34,755
10,500
5.60
58,800
66,900
66,900
79,100
–
–
–
– 111,054
66,900
3.15 210,735
– 111.054
66,900
5.60 374,640
– 131,306
79,100
7.82 618,562
19,700
62,300
62,300
65,207
19,700
5.60 110,320
15,600
69,600
69,600
51,636
15,600
7.82 121,992
8,100
56,300
56,300
45,360
8,100
7.82
63,342
The fair value of shares issued as a result of exercising the options during the reporting period is the market price of the Company’s shares
on the ASX as at the close of trading on the exercise date.
The amounts recognised in the financial statements of the economic entity in relation to executive share options exercised during
the financial year were:
Issued and Paid up Capital
2005
$’000
515
2004
$’000
491
33. Contingent Liabilities
Upon achieving an EBIT target of $2.5 million in each of the financial years ending 30 June 2004 and 30 June 2005, further payments
to a maximum of $2 million are to be made in respect of the acquisition of Meriram Pty Ltd and Kibley Pty Ltd.
During the year the economic entity paid $1.5 million to the shareholders of Meriram Pty Ltd and Kibley Pty Ltd in relation to the achievement
of the EBIT target for the financial year ended 30 June 2004.
As at 30 June 2005 $500,000 became payable in accordance with the share purchase agreement and this amount has been recognised
as a liability as at 30 June 2005.
70 Select Harvests Annual Report 2005
34. Impact of Adopting Australian Equivalents to International Financial
Reporting Standards (AIFRS)
The economic entity has evaluated the key differences in accounting policies that are expected to arise from adopting AIFRS
and the key differences in accounting policies that are expected to arise from adopting AIFRS are detailed below. The transition
date for first-time adoption of AIFRS is 1 July 2004. A reconciliation of estimated adjustments to opening balances at 1 July
2004, together with restated results under AIFRS for the financial year to 30 June 2005, is provided below.
Share-based payments
Under AASB 2: ‘Share-based Payments’, the economic entity will be required to determine the fair value of equity settled
transactions and recognise an expense in the Statement of Financial Performance. Share-based payments to Directors and
other employees (such as the grant of options under the Employee Option Plan) will also be expensed under AIFRS.
On first-time adoption of AIFRS, retained earnings at 1 July 2004 and reported results for the financial year to 30 June 2005 will
be adjusted for all share-based payments granted after 7 November 2002, which do not vest prior to 1 January 2005.
An estimate of the financial impact is provided in the reconciliation note below.
Goodwill and brand names
Goodwill on consolidation will be recalculated to derecognise intangible assets acquired in business combinations that
do not meet the identifiability criteria under AIFRS, and to recognise deferred tax liabilities at the acquisition date under
the balance-sheet method.
Amortisation of goodwill will cease on first-time adoption of AIFRS. Therefore on adoption of AIFRS, reported results for the
financial year to 30 June 2005 will be adjusted for amortisation charges from 1 July 2004. However, amortisation charges prior
to 30 June 2004 may not be reversed under the first-time adoption provisions.
Under AIFRS, goodwill and brand names will be subject to annual impairment testing. The economic entity does not anticipate
any write-downs for impairment of goodwill on first-time adoption of AIFRS.
Impairment of assets
The recoverable amount test under Australian GAAP will be replaced by impairment testing whereby the recoverable amount is
determined as the higher of fair value less costs to sell and value in use. Value in use incorporates the use of discounted cash flows.
The economic entity does not anticipate any write-downs for impairment of non-current assets on first-time adoption of AIFRS.
Income taxes
Under AIFRS a balance sheet approach will be adopted under which temporary differences are identified for each asset and
liability rather than accounting for the effect of timing and permanent differences between taxable and accounting profit.
In addition, a future income tax benefit must be recognised for tax losses where their realisation is considered probable. Under
Australian accounting standards tax losses may only be recognised where realisation is considered to be virtually certain.
On first-time adoption of AIFRS, adjustments to the provision for deferred tax will be required for initial asset revaluations,
foreign currency exchange provisions, and tax losses.
Derivative financial instruments
The entity uses derivative financial instruments for hedging purposes. These instruments have not previously been recognised
in the financial statements. Hedging instruments will be recognised in the financial statements on first-time adoption of AIFRS.
An estimate of the financial impact is provided in the reconciliation overleaf.
Select Harvests Annual Report 2005 71
notes to the financial statements as at 30 June 2005
34. Impact of Adopting Australian Equivalents to International Financial
Reporting Standards (continued)
1. Reconciliation of Total Equity at 1 July 2004
Total equity at 1 July 2004 as reported under Australian Accounting Standards
Share-based payments/options reserve:
DR Retained Earnings
CR Options Granted Reserve
Adjustments relating to the recalculation of deferred income tax using the balance sheet method at 30 June 2004
Deferred gains/losses on cash flow hedges not previously recognised at 30 June 2004
Total equity at 1 July 2004 as restated under AIFRS
2. Reconciliation of Operating Profit after Tax for the year ended 30 June 2005
Operating profit after tax for the financial year to 30 June 2005 as reported under Australian Accounting Standards
Share-based payments earned during the year
Goodwill on consolidation adjustments:
– Reversal of amortisation for the year
Operating profit after tax as restated under AIFRS for the year ended 30 June 2005
3. Reconciliation of Total Equity at 30 June 2005
Total equity at 30 June 2005 as reported under Australian Accounting Standards
Share-based payments/options reserve:
DR Retained Earnings
CR Options Granted Reserve
Adjustments to operating profit for the year as described above – Goodwill
Increase/decrease in fair value of financial instruments designated as cash flow hedging instruments for the year
Adjustments to equity for the year as described above
Total equity at 30 June 2005 as restated under AIFRS
$’000
79,268
54
(54)
(5,739)
3,820
77,349
$’000
21,716
(219)
1,514
23,011
$’000
91,545
219
(219)
1,514
59
(1,919)
91,199
72 Select Harvests Annual Report 2005
declaration
Directors’ Declaration
The Directors declare that the financial statements and notes set out on pages 36 to 70 in accordance with the
Corporations Act 2001:
(a) Comply with accounting Standards, the Corporations Regulations and other mandatory professional reporting requirements;
(b) Give a true and fair view of the financial position of the consolidated entity as at 30 June 2005 and of its performance
as represented by the results of its operations and its cash flows, for the financial year ended on that date; and
(c) That the Directors have been given the declaration required under section 295A of the Corporations Act 2001 from
the Managing Director and Chief Financial Officer for the financial year ended 30 June 2005.
In the Directors’ opinion there are reasonable grounds to believe that Select Harvests Limited will be able to pay its debts
as and when they become due and payable.
This declaration is made in accordance with a resolution of the Directors.
M A Fremder
Chairman
Melbourne, 23 August 2005
Select Harvests Annual Report 2005 73
audit report
Independent Audit Report
To the members of Select Harvests Limited
Scope
We have audited the financial report of Select Harvests Limited and controlled entities for the financial year ended 30 June
2005 comprising the Directors’ Declaration, Statement of Financial Performance, Statement of Financial Position, Statement
of Cash Flows and Notes to the Financial Statements.
The Company’s Directors are responsible for the financial report. We have conducted an independent audit of this financial
report in order to express an opinion on it to the members of the Company.
Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the
financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting
the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting
estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report
is presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements in
Australia and Corporations Act 2001 so as to present a view which is consistent with our understanding of the Company’s
financial position and performance as represented by the results of their operations and their cash flows.
The audit opinion expressed in this report has been formed on the above basis.
Audit Opinion
In our opinion, the financial report of Select Harvests Limited and controlled entities is in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and consolidated entities financial position as at 30 June 2005 and of its
performance for the financial year ended on that date; and
(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
(b) other mandatory professional requirements in Australia.
Pitcher Partners
T J Benfold
Partner
Melbourne
Date: 23 August 2005
74 Select Harvests Annual Report 2005
ASX information
ASX Additional Information
Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is as follows.
The information is current as at 29 July 2005.
(a) Distribution of equity securities
The number of shareholders, by size of holding, in each class of share are:
NUMBER OF
ORDINARY SHARES
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
NUMBER OF
SHAREHOLDERS
1,089
1,260
308
301
41
(b) Twenty largest shareholders
The names of the twenty largest holders of quoted shares are:
J P Morgan Nominees Australia Limited
1 Maxdy Nominees Pty Ltd
2 Almonds Australia Pty Ltd
3 M F Custodians Ltd
4 Westpac Custodian Nominees Limited
Invia Custodian Pty Limited
5
6 Thurston Investments Pty Ltd
7 National Nominees Limited
8
9 Frank Hadley Pty Ltd
10 Mr Peter Charles Nicholas Middendorp
11 AMP Life Limited
12 Ellise Investments Pty Ltd
13 Longo Pty Ltd
14 Mr Rodney Milton Fitzroy
15 Est Mr James Ronald Mackinnon c/o Mr Bourne and Mr Macauley
16 Mid Manhattan Pty Ltd
17 Mirrabooka Investments Limited
18 Mutual Trust Pty Ltd
19 John Bird
20 Dr John Carey
NUMBER OF
NUMBER OF
SHAREHOLDERS ORDINARY SHARES
The number of
Shareholders holding
less than a marketable
parcel of shares are:
59
1,029
LISTED ORDINARY SHARES
NUMBER
OF SHARES
PERCENTAGE
OF ORDINARY
5,598,352
4,500,000
1,906,334
1,721,174
1,302,339
950,000
901,035
832,679
645,000
436,767
421,567
409,497
400,947
331,347
322,003
319,161
314,687
300,000
271,122
225,556
14.3
11.5
4.9
4.4
3.3
2.4
2.3
2.1
1.7
1.1
1.1
1.0
1.0
0.8
0.8
0.8
0.8
0.8
0.7
0.6
Select Harvests Annual Report 2005 75
ASX information
ASX Additional Information (continued)
(c) Substantial shareholders
The names of substantial shareholders are:
Maxdy Nominees Pty Ltd
Almonds Australia Pty Ltd
(d) Voting rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
(e) The Company is listed on the Australian Stock Exchange. The home exchange is Melbourne.
NUMBER OF SHARES
5,598,352
4,500,000
76 Select Harvests Annual Report 2005
Corporate Information
ABN 87 000 721 380
Directors
M A Fremder (Chairman)
J Bird (Managing Director)
C G Clark (Non-Executive Director)
G F Dan O’Brien (Non-Executive Director)
J C Leonard (Non-Executive Director)
R M Herron (Non-Executive Director)
Company Secretary
M Mattia
Registered Office Select Harvests Limited
360 Settlement Road
Thomastown VIC 3074
Postal address
PO Box 5
Thomastown VIC 3074
Telephone (03) 9474 3544
(03) 9474 3588
Facsimile
Email info@selectharvests.com.au
Solicitors
Gadens Lawyers
Bankers
Australia and New Zealand Banking Group Limited
Share Register
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Telephone 61 3 9415 5040
Facsimile 61 3 9473 2562
Auditors
Pitcher Partners
Internet Address
www.selectharvests.com.au
At Narcooyia Creek,
Select Harvests has found a
balance which conserves the
environmental values of the
area – see page 17 for full story.
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Select Harvests Limited
ABN 87 000 721 380
360 Settlement Road
Thomastown VIC 3074
Australia
Telephone (03) 9474 3544
(03) 9474 3588
Facsimile
Email info@selectharvests.com.au
our locations
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