CONTENTS
HIGHLIGHTS & SHAREHOLDER INFO
INTEGRATED BUSINESS MODEL
KEY FINANCIAL RESULTS
FROM THE CHAIRMAN
OUR BOARD OF DIRECTORS
FROM THE CEO
THE GLOBAL ALMOND MARKET
AUSTRALIAN ALMONDS
EXPANDING COMPANY ORCHARDS
OUR EXECUTIVE TEAM
MARKETING OUR PRODUCTS
ENVIRONMENT AND COMMUNITY
OUR PEOPLE
STATISTICAL SUMMARY
FINANCIAL REPORT CONTENTS
DIRECTORS’ REPORT
AUDITORS’ INDEPENDENCE DECLARATION
CORPORATE GOVERNANCE STATEMENT
FINANCIAL REPORT
INCOME STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
BALANCE SHEET
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
ASX ADDITIONAL INFORMATION
1
2
3
4
5
6
8
9
10
12
14
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17
18
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32
37
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83
84
86
HIGHLIGHTS &
SHAREHOLDER INFO
“Select Harvests is a world leading owner and manager of almond
orchards. We have a dynamic growth strategy and integrated
business model which puts us in a strong position to benefi t from
favourable supply demand fundamentals in the global market.
Global almond consumption has grown at 11% per annum over the
past fi ve years, and supply is constrained by a slowdown in recent
plantings. Select Harvests’ expanded Company Orchards have an
attractive maturity profi le at a time of tightening supply.
Early indications, based on blossoming patterns and pollination
conditions, are supportive of improved yields in 2012 based on
normal growing and harvesting conditions.”
JOHN BIRD, CHIEF EXECUTIVE OFFICER
Shareholder Information
Annual General Meeting
The Annual General Meeting will be held on 25th October 2011, at the Sofi tel Melbourne,
Collins Street, Melbourne, Victoria at 11.00am. A separate notice of meeting has been posted
to all shareholders.
2012 Calendar
February
Announcement of interim results
April
Payment of interim dividend
August
Announcement of preliminary full year results
September Annual Report to shareholders
October
Payment of fi nal dividend
October
Annual General Meeting
SELECT HARVESTS ANNUAL REPORT 2011
1
INTEGRATED
BUSINESS MODEL
Select Harvests has an integrated business model which captures
the full almond value chain. Our expertise encompasses orchard
establishment, orchard management, processing, and marketing.
We have established routes to domestic and international
markets.
With 40,000 metric tonnes capacity, our state-of-the-art
Robinvale processing facility is well placed to meet a shortfall
in capacity across the Australian industry.
OPERATING EBIT
2010: $29.6m
2011: $25.9m (1 & 2)
ORCHARD DEVELOPMENT
— Nursery
— Orchard establishment
ORCHARD MANAGEMENT
EBIT
2010: $11.2m
2011: $10.3m
ACRES : 34,000
ORCHARD MANAGEMENT
— Almond growing
— Harvesting
COMPANY ORCHARDS EBIT
2010: $6.8m
2011: $8.1m(1)
2010 CROP: 2,800 mt
2011 CROP: 4,173 mt (est)
ALMOND PROCESSING EBIT
PROCESSING
2010: $6.5m
2011: $3.8m
2010 CROP: 18,700 mt
2011 CROP: 18,400 mt (est)
— Almond processing
— Value-added processing
SALES & MARKETING EBIT
SALES & MARKETING
2010: $1.9m
2011: $1.2m
— Almond pool sales
— Value-added product sales
VALUE-ADDED
PROCESSING EBIT
2010: $3.2m
2011: $2.5m(2)
1. Includes $5.6m impact of discount on acquisition, net of transaction fees
2. Includes $1 million of one off costs/product recall costs
2
SELECT HARVESTS ANNUAL REPORT 2011
KEY FINANCIAL
RESULTS
While signifi cant progress was made against our strategy in 2011
it remained a challenging year. The fi nancial performance refl ects
a number of external pressures including adverse growing
conditions impacting yields, and some of the wettest harvesting
conditions on record.
Overall the crop this year was 30% below standard industry
yields and processing and marketing was delayed by the wet
harvest. The stronger Australian dollar, and the effect of the
wet conditions on crop quality contributed to a weaker than
anticipated almond price which was 12% below the price achieved
in 2010. Early indications for 2012 show good crop potential across
Company and Managed Orchards.
Year ended 30 June 2011
Year ended 30 June 2010
% increase (decrease)
248,316
238,376
14,144
8,069
22,213
3,709
25,922
(3,310)
22,612
17,674
17,717
6,791
24,508
5,104
29,612
(3,580)
26,032
17,253
4.2%
-20.2%
18.8%
-9.4%
-27.3%
-12.5%
-7.5%
-13.1%
2.4%
A $’000’s
Sales revenue
EBIT
– Management services
– Almond orchards
Almond division
Food division
Operating EBIT
Corporate costs
EBIT
Net profi t after tax
EARNINGS PER SHARE
CENTS
+6%
+18%
+42%
-34%
-9%
+2%
-22%
70
60
50
40
30
20
10
0
ORDINARY DIVIDEND PER SHARE
+8%
+26%
+62%
-21%
CENTS
60
50
40
30
20
10
0
+75%
-73%
-38%
2005
2006
2007
2008
2009
2010
2011
2005
2006
2007
2008
2009
2010
2011
SELECT HARVESTS ANNUAL REPORT 2011
3
Future Strategy
I am extremely excited about the future for
Select Harvests. Global almond fundamentals
remain compelling and Select Harvests has the
strategy and expertise to benefi t from those
strong fundamentals.
What that means is that we will continue
to seek out opportunities to expand our
total acreage by acquisition, long-lease or
by establishing new orchards. We will also
seek to further leverage our state-of-the-art
processing facility and marketing expertise to
meet an anticipated shortfall in capacity in the
Australian market.
Board
Our Directors have a broad and diverse range
of complementary skills and experience and
I am pleased to report that during the year
we appointed Michael Iwaniw as a non-
executive director. Mr Iwaniw’s appointment
further strengthens the board following the
appointment of Fred Grimwade in July 2010.
Mr Iwaniw has a career spanning 40 years in
the Australian grain industry. He started his
career as a chemist at the Australian Barley
Board (ABB) and becoming the Managing
Director in 1989, retiring from that role
some 20 years later. His depth of experience
in agribusiness, combining domestic
and international operations, is highly
complementary to our existing board.
I would like to take this opportunity to thank
our team for their professionalism, hard
work and commitment, and to thank you,
our shareholders, for your ongoing support.
I have every confi dence that Select Harvests
is well placed for the next phase of our
company’s growth.
FROM THE
CHAIRMAN
“Select Harvests has made
excellent progress in our
strategy to expand our
Company Orchards. We have
built a diversifi ed orchard
portfolio with an attractive
maturity profi le which leaves
us well placed to benefi t from
the strong supply-demand
fundamentals in the global
almond market.”
CURT LEONARD—CHAIRMAN
Progress
Over the past year your Company has made
signifi cant progress towards a fundamental
and signifi cant transition in our business,
further positioning the Company to benefi t
from anticipated tightening supply in the
global almond market.
I am pleased to report that just two years since
the challenges presented by Timbercorp’s
collapse, and despite a number of external
pressures affecting the industry this year,
we have executed on a growth strategy to
increase the total almond acreage we own and
manage over the long term, and to broaden our
access to the full almond value chain.
The Timbercorp experience brought home to
us the need to diversify our earnings stream
and increase our control over future earnings.
Over the past two years we have invested
considerably in our business such that we are
on track to quadruple our portfolio of Company
Orchards from 3,400 acres two years ago to
13,100 acres. As a direct result of that expansion,
we now stand to benefi t from an improved
maturity profi le across Company Orchards just
as global supply is expected to plateau.
Therefore, while it was with some
disappointment that we learnt this year that
Olam did not intend to extend its Almond
Orchard Management Agreement with
Select Harvests beyond the 2012 crop, we
are confi dent that our expanded Company
Orchards and integrated business model
positions us well for the future.
Capital Structure
Our business strategy requires that we invest
funds not only in acquiring orchards but also
to support the crop cycle. After a review of
our capital requirements we successfully
completed a $45 million capital raising in
September 2010.
More recently we have further strengthened
our capital structure with the agreement
of a new debt facility of up to $115 million,
which gives us increased fl exibility to support
our growth strategy. The new facility has a
repayment schedule and associated fi nancial
undertakings which are aligned with the
Board’s capital management plan, which
aims to ensure the company has balance
sheet fl exibility to prudently manage funding
requirements.
Investing cash fl ows refl ect our expansion of
Company Orchards. Investment of $66 million
included $25 million in acquisitions, $20 million
in our greenfi eld development in Western
Australia and a further $14 million in growing
costs for less mature orchards.
Financial Performance
2011 has not been an easy year. We have faced
external pressures including an Australian dollar
which appreciated by some 30% against its US
counterpart during the period, adverse climatic
conditions during the growing period and
heavy and frequent rainfall before and during
the harvest. These were not conditions we
faced alone, they affected the entire Australian
almond industry, but they are refl ected in our
fi nancial performance for the year.
Net Profi t After Tax for the year was
$17.7 million compared to $17.3 million a year
ago. Excluding the upwards revaluation of
orchards bought during the period, and other
one off items, NPAT was $12.5 million.
The fi nal fully franked dividend of 3c per share
took our dividend for the year to 13c per share.
This refl ects our confi dence in the outlook for
the business, the profi t performance during
the year and the Board’s intention to balance
shareholder returns while retaining suffi cient
funds to invest in the business.
4
SELECT HARVESTS ANNUAL REPORT 2011
OUR BOARD
OF DIRECTORS
CURT LEONARD—CHAIRMAN
JOHN BIRD—CEO
Curt joined the Board on 21 July 2004.
He has held senior management positions
with the Mars group of companies in
Australia including General Manager of Mars
Confectionery, Managing Director of Uncle
Ben’s, and Managing Director of Mars Australia
and New Zealand. In addition, he has served as
President, Asia Pacifi c of all Mars businesses,
and a Director of the Managing Board of Mars
Incorporated global business. Curt is a Director
of Patties Foods Limited. He is Chairman of
the Board, a member of the Audit and Risk
committee and Remuneration Committee.
John became the CEO of Select Harvests
Limited in January 1998. He has had many
years’ experience in the food industry and
international trade. Formerly Managing
Director of Jorgenson Waring Foods.
Appointed Managing Director and joined
the Board in September 2001. Through his
deep industry experience the company has
developed over 40,000 acres of almond
orchards during the last 13 years. John is
a member of the Nomination Committee.
FRED GRIMWADE—
NON- EXECUTIVE DIRECTOR
Fred was appointed to the Board on
27 July, 2010. He works with a wide range
of companies in a board or advisory capacity.
He is Chairman of CPT Global Limited, and
is a Principal and Executive Director of
Fawkner Capital and is also a director at
Troy Resources NL. He has held General
Management positions in Colonial Agricultural
Company, Colonial Mutual Group, Colonial
First State Investments Group, Western
Mining Corporation and Goldman Sachs & Co.
Fred is a member of the Remuneration
Committee, Audit and Risk Committee
and the Nomination Committee.
MICHAEL IWANIW—
(NON- EXECUTIVE DIRECTOR)
ROSS HERRON—
NON-EXECUTIVE DIRECTOR
MICHAEL CARROLL—
NON-EXECUTIVE DIRECTOR
Michael was appointed to the board on 27 June,
2011. He began his career as a chemist with
the Australian Barley Board (ABB), became
managing director in 1989 and retired 20 years
later. Helped orchestrate the merger of ABB
Grain, AusBulk Ltd and United Grower Holdings
Limited to form one of Australia’s largest
agri-businesses. He has a Bachelor of Science,
a graduate diploma in business administration
and is a member of the Australian Institute of
Company Directors. He has acted as a Non-
executive director for a number of companies
including Toepfer International, New World
Grain, Australian Bulk Alliance and 5-star fl ower
mill, and is currently a non-executive director
of Australian Grain Growers Cooperative.
Ross joined the Board on 27 January 2005.
A Chartered Accountant, he retired as a
Senior Partner of PriceWaterhouseCoopers
in December 2002. He was a member
of the Coopers & Lybrand (now
PriceWaterhouseCoopers) Board of Partners
where he was National Deputy Chairman
and was the Melbourne offi ce 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, Customers Ltd, Royal
Automobile Club of Victoria (RACV) Ltd and a
major industry superannuation fund. Ross is
Chairman of the Audit and Risk Committee,
and member of the Remuneration and
Nomination Committees.
Michael joined the Board on 31 March, 2009.
He works with a range of agribusiness
companies in a board and advisory capacity,
and has directorships with Meat and Livestock
Australia, the Rural Finance Corporation,
Rural Funds Management, and Warrnambool
Cheese and Butter. He has 18 years’ experience
in banking and fi nance, having lead and
established the Agribusiness division within
the National Australia Bank. He has worked
for a number of companies in the agricultural
sector. He is Chairman of the Remuneration
Committee, and a member of the Audit and
Risk Committee and Nomination Committee.
SELECT HARVESTS ANNUAL REPORT 2011
5
FROM THE
CEO
“We have signifi cantly expanded
our Company Orchards from
3,400 acres two years ago
to 13,100 acres when Stage 2
planting in Western Australia
is completed.
We have expanded our Company
Orchards footprint in Victoria
and fi rmly consolidated our
presence in New South Wales
and Western Australia. Company
and Managed Orchards are in
good productive health and early
indications are supportive of
improved yields in 2012.”
JOHN BIRD—CEO
Our Company Orchards expansion continued
at a pace in 2011. During the year we acquired
2,145 acres comprising 645 acres in Sunraysia,
Victoria, and 1500 acres in the Riverina area
of New South Wales. Our exciting greenfi eld
development in Western Australia also
progressed well with Stage 1 planting of
2,000 acres completed and Stage 2 planting
of 2,300 acres currently underway.
The underlying fi nancial performance of
the business during the year refl ected the
challenges faced by the entire Australian
almond industry. These included adverse
growing conditions, the worst rainfall during
harvesting in over 60 years, and an Australian
dollar which reached $1.10 against its US
counterpart. This was the second consecutive
year of abnormal growing conditions and it
resulted in a lower than expected 2011 crop,
delays in processing and marketing that crop
and additional processing costs. The quality
of the crop was also impacted by the wet
conditions, contributing to an almond price
which was 12% below the price achieved in 2010.
Net Profi t After Tax of $17.7 million, an increase
of 2% compared to last year, included the
impact of $5.6 million of a discount on the
acquisition of Company Orchards (net of
transaction fees) during the period. The
discount arises through valuing those orchards
using long term almond price assumptions,
and yield projections, based on the maturity
of the orchards, and is consistent with the
valuation methodology we use for existing
Company Orchards.
Early indications for 2012 are positive with
good fl owering patterns and pollination
conditions indicating good crop potential.
Managed Orchards
Managed Orchards includes the 29,500 acres
Select Harvests manages on behalf of Olam
and the 4,500 acres of orchards managed
for other third-party owners. Fee income is
received from management of the orchards
and processing and selling of the crop they
produce, as well as incentive payments based
on performance.
Managed Orchards EBIT of $14.1 million
(2010: $17.7 million) refl ected the rebased fee
income associated with management services
contracts following the transition in ownership
of the former Timbercorp orchards to Olam.
No incentives were achieved in 2011 under
those contracts, while the Company retains the
potential to earn incentives in 2012.
The total crop for Managed Orchards is
now estimated to be 18,400 metric tonnes
compared to 18,600 metric tonnes a year ago.
Early indications for the 2012 crop are good.
Achieving standard industry yields during
the year would deliver a crop of 33,800
metric tonnes.
Olam Contract
During the period we received notifi cation
from Olam that it would not extend its
Almond Orchard Management Agreement
with Select Harvests beyond the 2012 crop.
Olam was very clear that the decision is
consistent with its strategy to manage all of its
own nuts businesses and we will work closely
with them to ensure a smooth transition of
those orchards.
This will not impact 2012 earnings. There will
be a part year impact on 2013 earnings, by
which time we will see the continued benefi ts
of our strategy to expand Company Orchards
as established orchards near maturity and
newly planted orchards begin to yield their
fi rst almonds.
Excluding the Olam orchards, and following
the completion of Stage 2 planting in Western
Australia, Select Harvests will be the manager
of 17, 600 acres of almond orchards. These
orchards have the potential to produce
approximately 23,000 tonnes of almonds
annually at full maturity.
Company Orchards
Company Orchards EBIT of $8.1 million
(2010: $6.8 million) includes the $5.6 million
impact of the discount on acquisition of
almond orchards. Excluding the impact of the
discount on acquisition, Company Orchards
EBIT was $2.5 million compared to $6.8 million
last year. This was despite an increase in the
estimated crop from 2,800 metric tonnes in
2010 to 4,173 metric tonnes in 2011. The EBIT
performance was negatively impacted by a
number of factors including the wet weather
during the 2010 and 2011 harvests and the
impact of that wet weather on the quality of
the almond crop. This substantially increased
the cost of processing and delayed the
marketing program for the crop. The quality of
the crop contributed to a lower almond price
than previously anticipated. The performance
also included increased rental costs on leased
orchards, primarily the 3,000 acres of orchards
leased at Hillston in the Riverina region of
New South Wales.
In Western Australia the trees planted in the
Stage 1 planting of 2,000 acres are growing
well, and have ready access to reliable water
sources. The fi rst commercial crop is expected
from these orchards in 2013. Stage 2 planting of
2,300 acres commenced in Winter 2011. There
is potential for up to 10,000 acres in Western
Australia with Stage 3 and Stage 4 and we are
reviewing the optimal funding and ownership
structure for that further development.
Company Orchards will benefi t in 2012 from
an improved maturity profi le and additional
acreage. Achieving standard industry yields
would deliver a 2012 Company Orchards crop
of 8,200 metric tonnes.
Food Division
Our Food Division provides us with a vertically
integrated route to market for Australian
almond products. EBIT of $3.7 million
was impacted by a product recall in the
Australian market in April 2011. The recall was
precautionary and resulted in a decline in sales,
which are now rebuilding.
Excluding the impact of one-off costs, value
added EBIT increased 9% to $3.5 million. The
performance of value-added products was
driven by brand extensions of “Lucky” products
and increased consumer awareness of the
health benefi ts of eating almonds. This was
particularly pleasing as we continue to focus
on optimising our core almond products
and brands.
6
SELECT HARVESTS ANNUAL REPORT 2011
Future Growth
Select Harvests remains very well placed to
take advantage of growth opportunities within
the sector and we are determined to make the
most of the opportunities that present to us.
We anticipate our future growth will
come from:
•
•
•
•
Volume growth from existing orchards as
they reach maturity
Continued expansion of Company Orchards
by acquisition or long-lease of established
orchards that are nearly or fully mature, and
therefore are, or soon to be, cash generative
Further greenfield development in
Western Australia
Securing farm services and processing
and marketing contracts, utilising spare
processing capacity and marketing
capabilities to meet industry demand
Outlook
The outlook for Select Harvests is positive.
In 2012 Select Harvests will benefi t from an
increase in Company Orchards acreage as well
as an improved maturity profi le, and higher
water allocations, across its Company Orchards
and Managed Orchards.
After the second consecutive year of below
standard industry yields early indications,
based on blossoming patterns and pollination
conditions, are supportive of improved yields
in 2012. Should yields return to more normal
levels there is the potential for a substantial
uplift in crop volumes across Company and
Managed orchards.
In the medium term yields derived from the
maturity profi le of Company Orchards will
coincide with the emergence of tightening
world almond supply.
The fundamentals of the international and
Australian almond industry are strong. Global
almond demand has grown by 11% per annum
over the past fi ve years and is estimated to be
worth US$4.5 billion by 2013. Australia is a fast
growing almond producing nation on track to
become the world’s second largest almond
producer by 2015 with a product quality and
counter seasonal timing which typically allows
access to premium market segments.
As a world-leading orchard manager,
processor and marketer of almonds, with an
attractive maturity profi le across its orchard
portfolio, Select Harvests is well positioned to
benefi t from the favourable supply-demand
fundamentals in the global almond market.
SELECT HARVESTS ANNUAL REPORT 2011
7
THE GLOBAL
ALMOND MARKET
The global almond market is worth an
estimated US$4.5 billion and continues to
demonstrate attractive growth. Over the
last decade consumption has increased
at around 8% per annum, increasing to
11% per annum over the past 5 years.
In 2011 consumption is estimated to
have grown by 13%.
Almond supply is constrained by a slow-down
in plantings by some major producers in recent
years, a lack of suitable growing conditions
globally and the relatively long-lead times from
planting to full production.
US Almond Supply
The US is the world’s largest almond producer,
with Californian almonds accounting for over
80% of global almond supply. In 2011 shipments
from the US increased 13% refl ecting continued
growth in consumption globally and the
maturity profi le of Californian orchards, the
majority of which are now at full maturity.
US shipments increased to growth markets
including India, the Middle East and China,
where increasing affl uence is driving
consumption. Traditional markets such as
Western Europe also continued to grow driven
by healthy eating trends.
GLOBAL ALMOND SUPPLY AND DEMAND OUTLOOK
3,000
2,000
1,000
)
S
B
L
N
O
I
L
L
I
M
(
0
0
0
0
2
0 1
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0 1 0
2
0 1 1
2
0 1 2
2
0 1 3
2
0 1 4
2
0 1 5
2
GLOBAL PRODUCTION
GLOBAL PRODUCTION (LOWER RANGE)
GLOBAL DEMAND (8% GROWTH)
GLOBAL DEMAND (5% GROWTH)
US ALMOND SHIPMENTS BY DESTINATION
600
500
400
300
200
100
0
AMERICAS
WESTERN EUROPE
ASIA PACIFIC
MIDDLE EAST/AFRICA
EASTERN EUROPE
2005
2009
2010
)
s
b
l
n
o
i
l
l
i
m
(
Global Almond Market (US$)
$4,500,000,000
Increase in consumption (2011)
13%
8
SELECT HARVESTS ANNUAL REPORT 2011
AUSTRALIAN
ALMONDS
A fi ve-fold increase in Australian
almond plantings over the past decade
gives Australia an enviable maturity
profi le within the global market. With
our Western Australian greenfi eld
development and 30 years heritage in
orchard development, Select Harvests
remains at the forefront of growth in
the industry.
Already a signifi cant global producer and seller
of almonds Australia’s contribution to global
almond production is expected to increase
from 4% in 2010 to 10% in 2015, making it the
world’s second largest almond producer.
Approximately 70% of the Australian almond
crop is exported to more than 40 countries
around the world with Australia’s product
quality and counter seasonal timing allowing
access to higher priced market segments. We
are particularly well positioned to serve fast
growing emerging economies such as China
and India. India is already Australia’s largest
almond export market.
)
s
b
l
n
o
i
l
l
i
m
(
ALMOND PRODUCTION FORECAST
2,500
2,000
1,500
1,000
500
0
0
0
0
2
0 1
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0 1 0
2
0 1 1
2
0 1 2
2
0 1 3
2
0 1 4
2
0 1 5
2
USA
AUSTRALIA
SELECT HARVESTS ANNUAL REPORT 2011
9
EXPANDING
COMPANY ORCHARDS
A core element of our strategy has been our focus on expanding
Company Orchards to enable us to diversify our earnings stream
and broaden access to the whole of the almond value chain.
Our Company Orchards portfolio is on track to quadruple from
3,400 acres two years ago, to 13,100 acres when Stage 2 planting
of our greenfi eld development in Western Australia is completed.
FY11 total orchards under management: (acres)
Sunraysia, Victoria
Managed Orchards: (acres)
34,000
Company Orchards: (acres)
4,300
Processing facility with
capacity to support growth.
47,100
Managed Orchards: (acres)
34,000
Company Orchards: (acres)
13,100
Wheatbelt Region,
Western Australia
Company Orchards Stage 1: (acres)
2,000
Company Orchards Stage 2: (acres)
2,300
10
SELECT HARVESTS ANNUAL REPORT 2011
Riverina, New South Wales
Company Orchards: (acres)
4,500
The Riverina, New South Wales
Over the past two years Select Harvests
has acquired and leased 4,500 acres of
established orchards in the Riverina region
of New South Wales.
In April 2011 we acquired the 1,500 acre
Belvedere almond orchards near Narranderra
for $19.5 million. These orchards are in good
productive health with the majority of trees
reaching full maturity in 2013. Select Harvests
also manages and controls 3,000 acres of
orchards near Hillston under a 20 year lease
agreement with Rural Funds Management.
Robinvale
Processing Facility
A key component of our integrated business
model is our state-of-the-art Robvinale
processing facility. Robinvale has capacity
to process up to 40,000 tonnes of almonds.
With an anticipated shortfall in processing
capacity across the Australian industry we will
seek to increase processing volumes, utilising
spare capacity, marketing expertise and our
established routes to market.
SELECT HARVESTS ANNUAL REPORT 2011
11
Sunraysia, Victoria
In 2011 Select Harvests secured 530 acres of
orchards at Lake Powell and another 115 acres
of orchards at Bannerton. This brings the
total Company Orchards in Sunraysia to 4,300
acres, the majority of which are set to reach
full maturity by 2014. In addition we manage
4,500 acres of orchards in Sunraysia excluding
the Olam orchards and will continue to seek
opportunities to own and manage orchards
in the region.
The Wheatbelt,
Western Australia
In the winter of 2011 we commenced Stage 2
planting of 2,000 acres at our greenfi eld
orchards in the Dandaragan Plateau in Western
Australia. Stage 1 planting of 2,000 acres was
completed in winter 2010 with early indications
extremely positive for the second phase of
development. Stage 2 planting of 2,300 acres
commenced in Winter 2011. Over time there is
potential to develop 10,000 acres with Stage 3
and Stage 4 plantings.
OUR
EXECUTIVE TEAM
TIM MILLEN—
HORTICULTURAL MANAGER
PETER ROSS—OPERATIONS MANAGER
ALMOND DIVISION
LAURENCE VAN DRIEL—
TRADING MANAGER
Tim joined Select Harvests in 1996. Tim has
over 18 years’ experience in horticulture.
He has held senior horticultural positions in
operations management, as well as holding
the roles of Technical Offi cer and Horticulturist.
Prior to commencing with Select Harvests,
Tim was Orchard Manager for an Australian
and New Zealand Nashi, Stonefruit and
Pipfruit operation.
Peter joined Select Harvests in 1999. Peter held
the position of Plant and then Project Manager
for the processing area of the Almond Division
before being appointed to his current role in
July of this year. Prior to commencing with
Select Harvests, Peter ran his own maintenance
and fabrication business servicing agriculture,
mining and heavy industry.
Laurence joined Select Harvests in 2000.
Laurence has over 20 years’ experience in
trading edible nuts and dried fruits. He has a
comprehensive knowledge of international
trade and deep insights into the trading
cultures of the various countries in which
these commodities are sold. He has held senior
purchasing and sales management positions
with internationally recognised companies.
MATTHEW GRAHAM—
GENERAL MANAGER – FOOD DIVISION
PAUL CHAMBERS—
CHIEF FINANCIAL OFFICER &
COMPANY SECRETARY
Matthew joined Select Harvests in August
2007 and moved into the Group Manager
Sales & Marketing role in March 2009. He was
appointed General Manager – Food Division in
January 2011.
Prior to joining Select Harvests he developed
his multi channel FMCG experience through
senior management roles at both Mars Food,
and Nestle Confectionery. His experience
includes Channel and Customer Management
roles across our major Grocery customers.
Paul joined Select Harvests in 2007.
Paul is a Chartered Accountant and has
over 20 years’ experience in senior fi nancial
management roles in Australian and European
organisations. He was CFO, Henkel ANZ
and prior to that he held corporate positions
with the Fosters Group. He has managed
complex change, acquisition and business
integration projects.
CEO: JOHN BIRD
Horticultural Manager:
TIM MILLEN
Operations Manager
Almond Division:
PETER ROSS
Trading Manager:
LAURENCE VAN DRIEL
General Manager –
Food Division:
MATTHEW GRAHAM
CFO & Company
Secretary:
PAUL CHAMBERS
12
SELECT HARVESTS ANNUAL REPORT 2011
SELECT HARVESTS ANNUAL REPORT 2011
13
MARKETING
OUR PRODUCTS
Select Harvests Food Products
Growing our brands
Select Harvests Food Products is
a leading almond marketer with
established routes to market in Australia
and around the world.
In Australia our direct access to the whole food
industry encompasses the retail, food service
and food manufacturing sectors and ensures
that we capture the maximum value from the
almond value chain.
Internationally we are a major exporter of
almonds to Asia, Europe and the Middle-East
with strong relationships in rapidly growing
emerging markets such as India.
With almonds at the core of the Food Products
business, the overarching objective is to
put more almonds into the hands of more
consumers. To achieve this objective, we work
closely with the Almond Board of Australia to
partner with our major retail customers.
In each quarter, we developed promotions in
line with the seasonal advertising calendar of
the Australian almond industry:
•
The Australian almond blossom season in
August: highlighting the natural goodness
of almonds;
•
Celebrate Christmas with Australian almonds
in November and December: promoting the
versatility of almonds for Christmas cooking;
•
The “New Year, New Heart” promotion in
January and February: communicating the
heart health benefits of eating a handful
of almonds everyday;
•
The “New Season” promotion in April
and May: focusing on the enjoyment of
Australian almonds fresh from the orchards.
One of the features of this year’s promotional
campaign was the giveaway of over 150,000
heart-shaped almond snack tins. These are
extremely popular with consumers and
an effective tool in driving incremental
almond consumption.
The branded component of our business
focused on driving our hero brand, Lucky. The
strong sales growth of Lucky leveraged the
growing consumer interest in healthy snacking
as well as the trend of Australians returning to
home cooking.
Lucky’s healthy snacking offer was signifi cantly
enhanced by the national launch of the Lucky
Smart Snax range. Each of the products in this
range has been developed in consultation with
an Approved Practising Dietitian to maximize
benefi cial nutrients like dietary fi bre, protein,
healthy fats and antioxidants.
Three new six pack products were also
introduced nationally last year which helped
drive the continued growth of the Lucky
snacking segment. These six packs are: Lucky
Oven Roasted Almonds and Cranberries, Lucky
Oven Roasted Almonds and Yoghurt Sultanas,
and Lucky Oven Roasted Cashews and
Yoghurt Currants.
Within Lucky’s traditional cooking portfolio,
we added Lucky Natural Sliced Almonds in
February. The almonds in this product have
thicker slices, compared to the Lucky Flaked
Almonds and the skin is left on, which adds
to the nutritional value of the product.
They are ideal for baking or tossing over
a salad or stir-fry.
One of the promotional activities to support
the Lucky brand was an exhibition at the
inaugural MasterChef Live show which was
held in Sydney in December 2010. Building on
the phenomenal success of the MasterChef
franchise, this show was a mixture of live
theatre conducted by a number of celebrity
chefs and a food festival, where food
companies promoted their products to
enthusiastic consumers over the three days.
In response to the growing consumer trend
towards healthy, natural foods, we have
launched new products within our Sunsol brand.
Sunsol has an extensive range of nuts, nut
mixes and various health related products
including mueslis, which are sold through
independent supermarkets. New packaging for
these products was developed and launched
from November 2010, designed to ensure
maximum visibility in-store and to refl ect the
natural properties of the brand.
Our Food Products business also features
two health food brands: Nu-Vit, which is
merchandised in the health food category of
the major supermarkets and Soland, which
is sold through independent health food
stores. We are able to leverage learnings from
operating within this health food sector back
into our Lucky and Sunsol brands. Over the past
year, we have upgraded the packaging of both
the Nu-Vit and Soland brands, improving their
shelf-presence and consumer convenience.
An important component of our marketing
strategy has been the re-development of the
websites for our key brands. Our portfolio of
brand websites includes www.luckynuts.com.au,
www.sunsol.com.au and www.soland.com.au.
The range of possible consumer touch points
with our brands have been further extended
through our presence on social media sites
such as Facebook and Twitter.
Almond exports
Globally consumption of almonds continues
to be driven by healthy eating trends in
Western economies and increasing affl uence
in emerging markets.
Almonds are a versatile product with a variety
of uses – in Europe and Australia almonds
are used for baking, snacking, confectionary
and cereals. In India, the Middle East and
China almonds are a celebratory food with
consumption frequently driven around
major festivals.
Over 70% of Select Harvests sales are to
international markets where the company
has established strong relationships and is
supported by the counter seasonal timing
and traditional premium quality of the
Australian crop.
14
SELECT HARVESTS ANNUAL REPORT 2011
Almond consumption is being driven
by healthy eating trends in established
markets and increasing affl uence in
emerging markets.
Select Harvests Food Products is
a leading marketer of almonds in
Australia and around the world.
SELECT HARVESTS ANNUAL REPORT 2011
15
ENVIRONMENT
AND COMMUNITY
OUR COMMUNITY
OUR ENVIRONMENT
Select Harvests have proudly supported
a range of community health initiatives
around the Diabetes Week and Healthy
Bones Week promotions. We have also
provided assistance to the Variety 2010
Christmas Party and Oscar’s Law, a charity
devoted to ending puppy factories.
We also support a range of community
projects in Robinvale, Victoria. As a major
employer in this region, Select Harvests has a
long history of working closely with the local
community. One example is the role we play
in hosting the annual Mallee Almond Blossom
Festival at Kyndalyn Park where people of
the region gather to enjoy the colour of our
orchards in blossom. This event grows each
year with over 50 stalls promoting the local
produce and wines from the region.
Other important community activities around
Robinvale that we support are the Robinvale
and Euston Football clubs and the Robinvale
Secondary College Chaplaincy program.
In 2011, Environmental scientists from
Charles Sturt University, in conjunction
with support from the Victorian
Department of Sustainability and
Environment (DSE), NSW Offi ce of
Environment & Heritage (OEH), and
the Mallee Catchment Management
Authority, continued research on the
Australian Research Council (ARC)
funded Linkage project titled “Managing
agricultural landscapes to maximise
production and conservation outcomes:
the case of the Regent Parrot”. Select
Harvests is a major funding partner
in this project, and contributed
considerable in-kind staffi ng resources.
The main aims of the research are to (1)
identify the relationships between key habitat
and food resources and native birds, with a
focus on the endangered Regent parrot, (2)
investigate the foraging behaviour of birds,
to determine both positive (e.g. nut cleanup
after harvest) and negative interactions with
crops (e.g. fruit damage), to assess overall cost-
benefi ts that birds provide to farmers, and (3)
provide management guidelines to maximise
biodiversity and production gains.
To undertake this work, CSU and Select
Harvests provided industry scholarships for
two PhD students. One of these doctoral
projects investigated: (a) nut loss during the
ripening season to causes other than birds,
and (b) the removal of nuts from trees by birds
post-harvest. Data collected from fi eldwork
over the past two years, in conjunction with
Select Harvests management data, is currently
being analysed to investigate relationships
between birds and crops, and overall cost-
benefi ts of native birds to farmers. The other
PhD project focussed specifi cally on the Regent
Parrot, which has involved capture, and the
fi rst-ever radio-tracking of this species in the
Robinvale region. Initial data from this work
has revealed noticeable differences in the
spatial locations of where different age cohorts
of Regent Parrots are found (i.e. crops versus
native vegetation). Also, tracking of birds has
revealed how almond crops provide access to
patches of native vegetation not previously
accessible by these birds, by infi lling with trees
previously open landscapes.
The wealth of data being generated from
the project is being analysed to help guide
future farming and conservation
management decisions.
16
SELECT HARVESTS ANNUAL REPORT 2011
OUR
PEOPLE
OCCUPATIONAL HEALTH
AND SAFETY
Training programmes are considered a priority
and have included:
•
ChemCert (Chemical Users Certificate)
•
First Aid
•
Test & Tagging
•
OHS 5-Day for H&S Reps
•
EEO Training
•
Bee Safety Awareness
•
Mule (ATV) Training – (SHV developed
•
training program)
•
Traffic Management Training – (SHV
developed)
•
1080 Training for relevant staff
•
Forklift Training for relevant staff
•
ACUP permit
•
HCDG Licencing for relevant staff
•
Fire Safety Training
A review of existing policies, and the
development of new policies, procedures and
forms has been undertaken to align the OHS
programme with the Draft Model Work Health
and Safety Bill and Regulations.
Select Harvests takes a proactive
approach to its Occupational Health and
Safety (OHS) program.
The overall aim of our program is to: apply
what is morally and legally right; use a simple
and practical approach; and provide a platform
for everyone to contribute.
Health and safety performance is measured
by a range of positive performance indicators
relating to auditing, reporting of hazards and
closure of issues raised, health and safety
committee meetings, procedure development
and updates, special projects and training, in
addition to negative performance indicators
such as the number and severity of accidents,
medically treated injuries, lost time injuries and
workers compensation claims.
A critical component to the development of
an OHS programme is the involvement of
employees. This process has been encouraged
through the election of OHS Representatives
in the workplace, monthly OHS committee
meetings, open discussions in training sessions,
staff meetings and discussions on safety issues.
Both Select Harvests Almond Division and
Food Products Division have dedicated OHS
committees. Meeting monthly, health and
safety representatives in conjunction with
Management discuss and contribute to safety
matters within each division with outcomes
being implemented across the business.
Areas of focus and improvement in the
Almond Division have been a review of
harvest machinery in collaboration with
Worksafe Victoria with the insight of potential
improvements on new equipment; participation
in Worksafe Victoria’s “Safety in Agriculture”
audit on systems and processes involving fi ve
Worksafe Inspectors over a duration of 7-days
looking at all aspects of the business; a full
review of the contractor management process
and the establishment of OHS management
systems across NSW and WA orchards.
Some of the highlights for the Food Products
Division include a decrease in the number
of lost time injuries as well as the number
of medically treated injuries. The reporting
of hazards through the hazard reporting
procedure has been embedded within the
company. Both short term and long term
solutions are being addressed in a shorter
period of time. A number of special projects
have been undertaken including extra
guarding on conveyors and equipment;
resurfacing of a selection of the factory fl oors
with a food grade non-slip resistant coating;
and a review of the internal and external traffi c
management programme.
SELECT HARVESTS ANNUAL REPORT 2011
17
2011
2010
2009
2008
2007
2006
248,316
238,376
248,581
224,655
229,498
217,866
22,612
19,223
17,674
26,032
23,603
17,253
26,827
23,047
16,712
27,120
25,384
18,130
40,549
40,014
28,098
38,369
37,903
26,492
(cents)
(%)
(cents)
(cents)
(%)
(%)
(%)
(times)
(%)
(times)
33.7
10.5
13
-
100
38.6
2.17
6.7
43.3
2.00
43.3
15.2
21
-
100
48.5
1.87
10.7
39.6
1.44
42.6
16.6
12
-
100
28.2
1.56
7.1
51.9
0.79
87,978
214,352
83,993
145,612
302,330
229,605
81,075
133,884
214,959
58,469
102,348
43,954
89,561
133,515
168,815
95,066
11,201
62,548
168,815
56,227
3,227
57,515
115,984
113,621
47,470
11,327
54,824
113,621
39,779
3,039
11,735
114,083
100,876
46,433
12,949
41,494
100,876
39,519
3,296
39,009
3,319
(000)
($)
46.7
19.3
45
-
100
96.7
1.41
15.6
49.7
0.87
77,014
118,934
195,948
88,162
13,715
101,877
94,071
44,375
11,235
38,461
94,071
71.0
29.4
57
-
100
80.0
1.57
75.8
1.7
1.32
70,983
89,170
160,153
53,680
10,969
64,649
95,504
41,953
11,273
42,278
95,504
38,739
2,953
67.1
26.1
53
10
100
80.0
1.83
82.3
1.3
1.82
72,455
79,421
151,876
39,905
10,490
50,395
101,481
52,665
12,691
36,125
101,481
39,708
3,369
1.84
3.46
2.16
6.00
11.60
13.02
103,458
137,635
85,361
234,054
449,372
516,998
STATISTICAL
SUMMARY
SELECT HARVESTS CONSOLIDATED
RESULTS FOR YEARS ENDED 30 JUNE
Total sales
Earnings before interest and tax
Operating profi t before tax
Net profi t after tax
Earnings per share (Basic)
Return on shareholders’ equity
Dividend per ordinary share
Special dividend per ordinary share
Dividend franking
Dividend payout ratio
Financial ratios
Net tangible assets per share
Net interest cover
Net debt/equity ratio
Current asset ratio
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
Retained profi ts
Total shareholders’ equity
Other data as at 30 June
Fully paid shares
Number of shareholders
Select Harvests’ share price
- close
Market capitalization
$ ‘000 (except where indicated)
18
SELECT HARVESTS ANNUAL REPORT 2011
CONTENTS
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE
DECLARATION
CORPORATE GOVERNANCE
STATEMENT
FINANCIAL REPORT
INCOME STATEMENT
STATEMENT OF
COMPREHENSIVE INCOME
BALANCE SHEET
STATEMENT OF
CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE
FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S
REPORT TO THE MEMBERS
20
31
32
37
38
39
40
41
42
43
83
84
ASX ADDITIONAL INFORMATION 86
SELECT HARVESTS ANNUAL REPORT 2011
19
DIRECTORS’ REPORT
The directors present their report together with the fi nancial report of Select Harvests Limited and controlled entities (referred to hereafter as
the “consolidated entity”) for the year ended 30 June 2011.
Directors
The qualifi cations, 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 fi nancial year is provided below, together with details of the company secretary as at the year end. Directors were in
offi ce for this entire period unless otherwise stated.
Names, qualifi cations, experience and special responsibilities
J C Leonard, B.Mktng & Bus. Admin, MBA (Chairman)
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 Pacifi c of all Mars businesses, and a Director of the Managing Board of Mars Incorporated global business.
Is a Director of Patties Foods Limited. He is Chairman of the Board, a member of the Audit and Risk Committee, Remuneration Committee
and Nomination Committee.
Interest in Shares and Options: 947,099 fully paid shares.
J Bird (Managing Director)
Became the CEO of Select Harvests Limited in January 1998. Has had many years experience in the food industry and international trade.
Formerly Managing Director of Jorgenson Waring Foods. Appointed Managing Director and joined the Board in September 2001. Member
of the Nomination Committee.
Interest in Shares and Options: 645,005 fully paid shares.
R M Herron, FCA & FAICD (Non-Executive Director)
Joined the Board on 27 January 2005. A Chartered Accountant, Mr Herron retired as a Senior Partner of PricewaterhouseCoopers in December
2002. He was a member of the Coopers & Lybrand (now PricewaterhouseCoopers) Board of Partners where he was National Deputy Chairman
and was the Melbourne offi ce 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, Royal Automobile Club Of Victoria (RACV) Ltd, Customers Limited, and a major
industry superannuation fund. Chairman of the Audit and Risk Committee, and a member of the Remuneration Committee and Nomination
Committee.
Interest in Shares and Options: 40,672 fully paid shares.
M Carroll, BSC, MBA (Non-Executive Director)
Joined the board on 31 March, 2009. He works with a range of agribusiness companies in a board and advisory capacity, and has directorships
with Meat and Livestock Australia, the Rural Finance Corporation, Rural Funds Management and Warnambool Cheese and Butter. He has
18 years experience in banking and fi nance, having led and established the Agribusiness division within the National Australia Bank. He has
worked for a number of companies in the agricultural sector including Monsanto Agricultural Products and a venture capital biotechnology
company. He is Chairman of the Remuneration Committee, and a member of the Audit and Risk Committee and Nominations Committee.
Interest in Shares and Options: 0 fully paid shares.
F S Grimwade, B.Com, LLBW(Hons), MBA, (Non-Executive Director)
Appointed to the board on 27 July, 2010. He works with a wide range of companies in a board or advisory capacity. He is Chairman of CPT
Global Limited, a Principal and Executive Director of Fawkner Capital, a specialist corporate advisory fi rm, and is also a director of Troy
Resources NL. He has held General Management positions in Colonial Agricultural Company, Colonial Mutual Group, Colonial First State
Investments Group, Western Mining Corporation and Goldman, Sachs & Co.
Interest in shares and options: 30,000 fully paid shares.
20
SELECT HARVESTS ANNUAL REPORT 2011
M Iwaniw (Non-Executive Director)
Appointed to the board on 27 June, 2011. He began his career as a chemist with the Australian Barley Board (ABB), became managing
director in 1989 and retired 20 years later. During these years he accumulated extensive experience in all facets of the company’s operations,
including leading the transition from a statutory authority and growing the business from a small base to an ASX 100 listed company.
Helped orchestrate the merger of ABB Grain, AusBulk Ltd and United Grower Holdings Limited to form one of Australia’s largest
agri-businesses. He has a Bachelor of Science, a graduate diploma in business administration and is a member of the Australian Institute
of Company Directors. He has acted as a Non-executive director for a number of companies including Toepfer International, New World Grain,
Australian Bulk Alliance and 5-star fl our mill, and is currently a non-executive director of Australian Grain Growers Cooperative.
Interest in shares and options: 3,000 fully paid shares.
M A Fremder (Non–Executive Director)
Joined the board in March 1996 and from that time was Chairman of The Board until retiring from this position on 15 August, 2008. 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
a Non-executive director of Tassal Limited between 3 October 2003 and 18 March 2005. Member of the Remuneration Committee, Audit and
Risk Committee, and Chairman of the Nomination Committee.
Interest in Shares and Options (at date of retirement): 5,835,234 fully paid shares.
Max Fremder retired 27 October 2010.
P Chambers, BSc Hons, ACA (Chief Financial Offi cer and Company Secretary)
Joined Select Harvests as Chief Financial Offi cer and Company Secretary in September 2007. He is a Chartered Accountant and has over
20 years experience in senior fi nancial management roles in Australian and European organisations, including corporate positions with the
Fosters Group, and Henkel Australia and New Zealand.
Interest in shares and options: 8,000 fully paid shares.
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, and
•
The growing, processing and sale of almonds to the food industry from company owned almond orchards, the provision of management
services to external owners of almond orchards, including orchard development, tree supply, farm management, land rental and irrigation
infrastructure, and the marketing and selling of almonds on behalf of external investors.
Employees
The consolidated entity employed 384 full time employees as at 30 June 2011 (2010: 387 employees).
Review and results of operations
Profi t attributable to the members of Select Harvests Limited for the year ended 30 June 2011 was $17.7 million compared to $17.3 million in 2010.
For additional information refer to the announcement lodged with the ASX and the report before the Appendix 4E.
Signifi cant changes in the state of affairs
Signifi cant changes in the state of affairs of the group during the fi nancial year were as follows:
•
Contributed equity increased by $47,596,154 (from $47,469,830 to $95,065,984) as the result of a rights issue and the issue of shares under
the dividend reinvestment plan. Details of the changes in contributed equity are disclosed in note 25 to the fi nancial statements.
•
Olam advised that they will not be extending the existing management services agreement beyond 30th June 2012. Olam will take control of
the management of their orchards in July 2012.
•
Select Harvests agreed on a new debt facility of up to $115 million with National Australia Bank. The new facility replaces the $88 million debt
facility with ANZ.
SELECT HARVESTS ANNUAL REPORT 2011
21
DIRECTORS’ REPORT
Signifi cant events after the balance date
On 29 August 2011, the Directors declared a fi nal dividend of 3 cents per share payable on 13 October 2011 to shareholders on the register on
7 September 2011.
Likely developments and expected results
In 2012, the company will focus on integrating the newly acquired almond orchards and complete the plant out of the second stage of the
Western Australia development. Results will benefi t from the increased acreages now owned, which will increase the contribution from
company orchards.
Environmental regulation and performance
The consolidated entity’s operations are subject to environmental regulations under laws of the Commonwealth or of a State or Territory.
Details of the consolidated entity’s performance in relation to such environmental regulations follow:
The consolidated entity holds licences issued by the Environmental Protection Authority which specify limits for discharges to the
environment which are the result of the consolidated 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 signifi cant known breaches of the consolidated entity’s
licence conditions.
The company takes its environmental responsibilities seriously, has a good record in environmental management to date, and adheres to
environmental plans that preserve the habitat of native species. Almond developments have had a positive environmental impact. The change
in land use and the increase in food source have seen a rejuvenation of remnant native vegetation and an increase in the wildlife population,
in particular bird species. The company has committed funding to the monitoring of Regent parrot populations around our orchards and the
effectiveness of protecting native vegetation corridors in preserving wildlife.
22
SELECT HARVESTS ANNUAL REPORT 2011
The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001.
Principles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to set remuneration levels to attract and retain appropriately qualifi ed and
experienced directors and senior executives. The framework aligns executive reward with achievement of specifi c business plans and
performance indicators, which include fi nancial and operational targets relevant to performance at the consolidated entity level, divisional
level, or functional level, as applicable, for the fi nancial year.
Remuneration packages include a mix of fi xed remuneration, performance based remuneration and equity based remuneration. Executive
directors and key management personnel may receive short and long term incentives.
The Board has established a Remuneration Committee which makes recommendations to the Board on remuneration packages and other
terms of employment for executive and non-executive directors. The Remuneration Committee may obtain independent advice on the
appropriateness of remuneration packages, given trends in the marketplace. The Group has structured an executive reward framework that
is market competitive, performance driven and compliant with the Group’s reward strategy.
Non-executive directors
Non-executive directors receive fees but do not receive any performance related remuneration nor are they issued options on securities.
This refl ects the responsibilities and the Group’s demands of directors. Non-executive directors’ fees are periodically reviewed by the Board
to ensure that they are continually appropriate and in line with market expectations.
Directors’ fees
The current base fees were last reviewed with effect from 1 July 2008. Non-executive directors each receive a base fee of $65,000 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 fees have applied:
Base Fees (excluding superannuation)
Chair
Other non-executive directors
From 1 July 2008
$130,000
$65,000
A review of Directors’ fees resulted in an increase in fees effective 1 July 2011. Base fees for the Chair increased to $133,250. Base fees for other
non-executive directors increased to $66,625. An additional fee was approved for the Chairman of the Audit and Risk committee of $10,000,
and for the Chair of the Remuneration committee of $8,000.
Executive Pay
The executive pay and reward framework has three components:
1. base pay and benefi ts (including superannuation);
2. short term performance incentives; and
3.
long term incentives involving the issue of options in the Select Harvests Limited executive Share Option Scheme.
The combination of these three components forms the executive’s total remuneration.
Base pay and benefi ts
A total employment cost package which can be structured as a combination of cash and non cash benefi ts at the discretion of the company.
Executives receive a base pay that is reviewed annually to ensure market competitiveness in line with the objectives of the remuneration
framework. There are no guaranteed base pay increases in any executives’ contracts.
Executives receive benefi ts including motor vehicle and certain private expense reimbursements.
Superannuation
Retirement benefi ts are delivered under the Select Harvests Limited Employees’ Superannuation Fund.
SELECT HARVESTS ANNUAL REPORT 2011
23
DIRECTORS’ REPORT
Short-term incentives
Executive directors and senior executives may receive short term incentives based on achievement of business plans and performance
indicators, which include fi nancial and operational targets relevant to performance at the consolidated entity level, divisional level, or
functional level, as applicable, for the fi nancial year. The Remuneration Committee is responsible for assessing whether the KPIs are met based
on detailed reports on performance prepared by management. Financial targets ensure that variable reward is only available when value has
been created for Shareholders. Operational targets allow for the recognition of effi ciencies that will provide for future shareholder value. The
company has elected to pay bonuses for the 2011 fi nancial year due to the operational and fi nancial initiatives implemented that will have a
positive impact on earnings in the long term.
Long-term incentives
The Group offers executive directors and senior executives the opportunity to participate 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 and have a three year life, with one third vesting in each year, upon achievement
of a 10% increase in EPS . The Remuneration Committee is responsible for assessing whether the targets are met based on reports prepared
by management.
Performance of Select Harvests Limited
The overall level of executive reward takes into account the performance of the consolidated entity over a number of years, with greater
emphasis given to the current year. Over the past 5 years, the consolidated entity’s EPS has fallen 53%.
Earnings Per Share
Cents
Growth
2007
71.0
6%
2008
46.7
(34%)
2009
42.6
(9%)
2010
43.3
2%
2011
33.7
(22%)
Options, vesting proportionally one-third per year over a three year period, were granted each year for the last fi ve years, but none have vested.
Details of remuneration
Details of the remuneration of the directors and the key management personnel as defi ned in AASB 124 Related Party Disclosures of Select
Harvests Limited and the consolidated entity are set out in the following tables.
The key management personnel of the consolidated entity includes the directors as listed above and the following executive offi cers, which
also includes the 5 highest paid executives of the consolidated entity:
NAME
P Ross
T Millen
L Van Driel
P Chambers
M Graham
K Martin
POSITION
Operations Manager Almond Division
Group Horticultural & Farm Operations Manager
EMPLOYER
Select Harvests Limited
Select Harvests Limited
Group Trading Manager
Select Harvests Food Products Pty Ltd
Chief Financial Offi cer & Company Secretary
Select Harvests Limited
Sales & Marketing Manager
Select Harvests Food Products Pty Ltd
Operations Manager Food Products Division
Select Harvests Limited
The nature and amount of each major element of the remuneration of each director of the Company and each of the key management
personnel of the company and the consolidated entity for the fi nancial year is detailed below. It should be noted that “share based payments”
referred to in the remuneration details set out in this report comprise a proportion of share options which have not yet vested and are
refl ective of options that may be vested in the fi nancial year.
24
SELECT HARVESTS ANNUAL REPORT 2011
2011
ANNUAL REMUNERATION
LONG TERM
Base Fee
$
27,083
59,583
130,000
65,000
65,000
-
Short Term
Incentives
$
Non Cash
Benefi ts
$
-
-
-
-
-
-
-
-
-
-
-
-
Super
Contri-
butions
$
2,438
5,363
11,700
5,850
5,850
-
Long Service
Leave Accrued
$
Options
Granted
$
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
29,521
64,946
141,700
70,850
70,850
-
642,874
198,069
27,932
36,995
10,885
(106,827)
809,928
Non Executive
M A Fremder*
F Grimwade**
J C Leonard
M Carroll
R M Herron
M Iwaniw***
Executive
J Bird
Other key management personnel
224,047
M Graham
K Martin****
L Van Driel
T Millen
P Chambers
P Ross
336,922
206,499
196,791
226,449
248,073
35,535
26,265
35,535
35,535
41,714
-
23,465
-
31,219
11,899
43,171
-
23,443
17,026
21,510
19,448
24,135
22,327
4,333
-
3,964
3,604
4,494
4,135
-
(25,500)
(23,000)
(23,500)
(27,000)
(25,000)
310,823
354,713
275,727
243,777
312,963
249,535
* Retired 27 October 2010
** Commenced 27 July 2010
*** Commenced 27 June 2011
**** Departed 25 February 2011 (Base fee includes Termination Payments of $174,007)
+ Options granted includes a negative adjustment for options previously recognised as remuneration that will not vest.
2010
ANNUAL REMUNERATION
LONG TERM
Base Fee
$
65,000
130,000
65,000
65,000
Short Term
Incentives
$
Non Cash
Benefi ts
$
-
-
-
-
-
-
-
-
Super
Contri-
butions
$
5,850
11,700
5,850
5,850
Long Service
Leave Accrued
$
Options
Granted
$
-
-
-
-
-
-
-
-
Total
$
70,850
141,700
70,850
70,850
583,003
128,200
27,932
63,830
13,502
53,408
869,875
Non Executive
M A Fremder
J C Leonard
M Carroll
R M Herron
Executive
J Bird
Other key management personnel
M Graham
K Martin
L Van Driel
T Millen
P Chambers
P Ross
Notes
197,395
240,963
190,727
180,782
215,531
267,368
22,500
25,500
23,000
40,000
27,000
-
21,579
-
31,219
39,848
43,171
-
19,951
23,982
19,053
16,270
21,828
-
5,027
5,831
5,298
5,546
6,174
-
-
12,750
11,500
11,500
13,500
12,500
266,452
309,026
280,797
293,946
327,204
279,868
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.
Key management personnel are those directly accountable and responsible for the operational management and strategic direction of the
Company and the consolidated entity.
SELECT HARVESTS ANNUAL REPORT 2011
25
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6.2
-
4.2
4.2
4.0
4.2
4.5
DIRECTORS’ REPORT
2011
Fixed Remuneration
Non Executive
M A Fremder
J C Leonard
M Carroll
R M Herron
F Grimwade
M Iwaniw
Executive
J Bird
At risk - STI
2011
%
2010
%
At risk - LTI
2011
%
2010
%
2011
%
100.0
100.0
100.0
100.0
100.0
-
2010
%
100.0
100.0
100.0
100.0
100.0
-
-
-
-
-
-
-
-
-
-
-
-
-
78.4
78.8
21.6
15.0
Other key management personnel
M Graham
K Martin
L Van Driel
T Millen
P Chambers
P Ross
Service Agreements
88.6
93.1
88.1
86.7
87.7
100.0
91.4
87.4
87.5
82.1
87.4
95.5
11.4
6.9
11.9
13.3
12.3
-
8.6
8.4
8.3
13.9
8.4
-
On appointment to the Board, all non-executive directors enter into a service agreement with the company in the form of a letter of
appointment. The letter summarises the Board policies and terms, including compensation, relevant to the offi ce of director.
The major provisions of the agreements are set out below.
NAME
J Bird
M Graham
T Millen
P Chambers
L Van Driel
P Ross
TERM OF AGREEMENT
On-going
On-going – 3 Month Notice
On-going
On-going – 3 Month Notice
On-going
On-going
BASE SALARY INCL SUPER*
707,800
270,955
228,137
293,755
259,228
270,400
* Base salaries quoted are for the year ended 30 June 2011; they are reviewed annually by the Remuneration Committee.
There are no specifi c termination benefi ts applicable to the service arrangements.
26
SELECT HARVESTS ANNUAL REPORT 2011
2011
Executive
J Bird
Share-based compensation
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 granted annually in three tranches on
achievement of the performance hurdles.
Individual parcels of options offered to participating employees are based on a percentage of fi xed remuneration. The options vest annually
in three tranches on achievement of a 10% increase in EPS. Options granted as remuneration are subject to continuing service with the
consolidated entity. Options granted as remuneration are valued at grant date in accordance with AASB 2 Share-based Payments. Options
previously granted as remuneration in relation to 293,593 shares, valued at $388,125 have lapsed during the year.
The assessed fair value at offer date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the
term of the option, the impact of dilution, the share price at offer date and expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of the option.
Options are granted under the plan for no consideration. The plan rules contain a restriction on removing the ‘at risk’ aspect of the
instruments granted to executives. Plan participants may not enter into any transaction designed to remove the ‘at risk’ aspect of an
instrument before it vests.
During or since the end of the fi nancial year, the Company granted 455,553 options over unissued ordinary shares to the executive director
and the key management personnel of the Company as part of their remuneration.
Number of
Options granted
during the year
$ Value of
options at
grant date
Number of
options vested
during the year
Number of
options lapsed
during the year
$ Value at
lapse date
Other key management personnel
M Graham
K Martin
L Van Driel
T Millen
P Chambers
P Ross
191,927
55,019
41,320
45,811
41,320
41,320
48,506
45,349
11,845
13,132
11,845
11,845
13,905
13,000
nil
nil
nil
nil
nil
nil
nil
(103,125)
(152,625)
-
(154,692)
(20,270)
(20,270)
(26,351)
-
-
(154,148)
(30,000)
(30,000)
(38,999)
-
Details of ordinary shares in the company provided as a result of the exercise of remuneration options to each director of the consolidated
entity and other key management personnel are set out below.
No options were exercised in the fi nancial year ended 30 June 2011 (and in 2010).
SELECT HARVESTS ANNUAL REPORT 2011
27
DIRECTORS’ REPORT
Details of remuneration: Bonuses and share based compensation benefi ts
For each cash bonus and grant of options included above, the percentage of the available bonus or grant that was paid, or that vested, in the
fi nancial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below.
No part of the bonuses is payable in future years. No options will vest if the conditions are not satisfi ed hence the minimum value of the
option yet to vest is nil. The maximum value of the options yet to vest has been calculated based on the option price.
NAME
CASH BONUS
OPTIONS
Paid
%
95
Forfeited
%
5
Year
granted
2008
Vested
%
-
Forfeited
%*
100
-
-
5
-
-
5
-
-
-
-
-
5
-
-
10
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009
2010
2010
95
95
-
95
90
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Financial
years in
which
options
may vest
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2013
Minimum
total value
of grant yet
to vest
($)
Maximum
total value
of grant yet
to vest
($)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
nil
53,408
55,019
nil
11,500
11,845
nil
11,500
11,845
nil
12,500
13,000
nil
13,500
13,905
11,845
J Bird
L Van Driel
T Millen
P Ross
P Chambers
M Graham
* These options are not legally forfeited, but they have been deemed unlikely to vest.
Loans to directors and executives
Information on loans to directors and executives (if any), are set out in Note 32.
Share options granted to directors and the most highly remunerated offi cers
For options over unissued ordinary shares of Select Harvests Limited granted and not exercised during or since the end of the fi nancial year to
the fi ve most highly remunerated offi cers of the company as part of their remuneration, refer to table above.
No options have been granted since the end of the fi nancial year.
Unissued Ordinary shares Under Option
At the date of this report there are 1,127,292 unissued ordinary shares of the company under option.
Dividends – Select Harvests Limited
DIVIDENDS
Interim for the year
• on ordinary shares
Final for 2011 shown as recommended in the 2011 report
• on ordinary shares
Cents
10.0
3.0
2011
$000’S
5,567
1,687
28
SELECT HARVESTS ANNUAL REPORT 2011
Indemnifi cation and insurance of directors and offi cers
During the year the Company entered into an agreement at a premium of $53,671 (incl GST) in respect to an insurance contract to indemnify
directors and offi cers against liabilities that may arise from their position as directors and offi cers of the Company and its controlled entities.
Offi cers indemnifi ed include the Company Secretary, all directors, and executive offi cers participating in the management of the Company
and its controlled entities.
Directors’ meetings
The number of meetings of directors (including meetings of committees of directors) held during the fi nancial year and the number of
meetings attended by each director was as follows:
MEETINGS OF COMMITTEES
Directors’ Meetings
Audit and Risk
Remuneration
Nomination
Number
Eligible to
Attend
4
Number
Attended
4
Number
Eligible to
Attend
1
Number
Attended
1
Number
Eligible to
Attend
-
Number
Attended
-
Number
Eligible to
Attend
-
Number
Attended
-
12
12
12
12
12
-
12
12
11
12
12
-
-
4
4
4
4
-
-
4
4
4
4
-
-
1
1
1
1
-
-
1
1
1
1
-
1
1
1
1
1
-
1
1
1
1
1
-
M A Fremder
J Bird
J C Leonard
R M Herron
M Carroll
F Grimwade
M Iwaniw
Committee membership
During or since the end of the fi nancial 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 fi nancial year were:
Audit and Risk
R M Herron (Chairman)
Remuneration
M Carroll (Chairman)
Nomination
J C Leonard (Chairman)
J C Leonard
F Grimwade
M Carroll
M Iwaniw
M A Fremder
J C Leonard
F Grimwade
R M Herron
M Iwaniw
M A Fremder
M A Fremder retired from the board 27 October 2010
M Iwaniw joined the board 27 July 2011
J Bird
R M Herron
M Carroll
M Iwaniw
F Grimwade
M A Fremder
Director’s interests in contracts
Director’s interest in contracts are disclosed in Note 32 to the fi nancial statements.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 31.
SELECT HARVESTS ANNUAL REPORT 2011
29
DIRECTORS’ 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 are detailed in Note 31. The directors are satisfi ed 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 as non-audit services are reviewed by the Audit & Risk Committee to ensure they do not impact the
impartiality and objectivity of the auditor.
Rounding
The amounts contained in this report and in the fi nancial 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.
This report is made in accordance with a resolution of the directors.
J C Leonard
Chairman
Melbourne, 29 August 2011
30
SELECT HARVESTS ANNUAL REPORT 2011
Auditor’s Independence Declaration
As lead auditor for the audit of Select Harvests Limited for the year ended 30 June 2011, I declare that to the best of my
knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Select Harvests Limited and the entities it controlled during the period.
John O’Donoghue
Partner
PricewaterhouseCoopers
Melbourne
29 August 2011
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
SELECT HARVESTS ANNUAL REPORT 2011
31
CORPORATE GOVERNANCE STATEMENT
This statement outlines the key corporate governance practices of the consolidated entity which considers the ASX Principles of Good
Corporate Governance and Best Practice Recommendations issued by the ASX Corporate Governance Council. During the reporting period,
the company has been compliant with the ASX Guidelines.
These principles are:
Principle 1 – Lay solid foundations for management and oversight
Principle 2 – Structure the board to add value
Principle 3 – Promote ethical and responsible decision making
Principle 4 – Safeguard integrity in fi nancial reporting
Principle 5 – Make timely and balanced disclosure
Principle 6 – Respect the right of shareholders
Principle 7 – Recognise and manage risk
Principle 8 – Remunerate fairly and responsibly
The statements set out below refer to the above Principles as applicable.
Board of Directors and its Committees
The role of the Board and Board Processes set out below are with reference to Principle 1, Lay solid foundations for management
and oversight.
Role of the Board
The Board of Directors of Select Harvests Limited is responsible for the overall corporate governance of the consolidated 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 are 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
identifi ed 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. A number of channels are used to source candidates to ensure the company benefi ts from a
diverse range of individuals during the selection process.
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 qualifi ed 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 consolidated 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 specifi c matters that may arise.
The agenda for meetings is prepared and includes the Managing Director’s report, fi nancial 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.
Set out below, Director Education, Independent Advice and Access to Company Information, Composition of The Board and the Nomination
Committee, make reference to Principle 2, Structure the board to add value.
32
SELECT HARVESTS ANNUAL REPORT 2011
Director Education
The consolidated entity has a process to educate new Directors about the nature of the business, current issues, the corporate strategy, and
the expectations of the consolidated entity concerning performance of Directors. Directors also have the opportunity to visit the facilities of
the consolidated 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 consolidated entity’s expense.
Composition of the Board
The names of the Directors of the company in offi ce 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 qualifi cations, 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:
•
A former non–executive director of the Company (resigned October 27, 2010), Mr M A Fremder, is a substantial shareholder, having a 10.46%
shareholding at 30 June 2011.
•
A former non–executive director of the Company (resigned October 27, 2010), Mr M A Fremder, owns (directly or indirectly) almond orchards
totalling 2,082 acres in respect to which the consolidated entity provides orchard management services under contract at market rates.
•
The Chairman of the Company, Mr J C Leonard, owns (directly or indirectly) almond orchards totalling 1,782 acres in respect to which the
consolidated 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 fulfi lling 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 fi nancial 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 specifi c objectives agreed and set by the Board for the consolidated entity.
The Nomination Committee meets annually unless otherwise required. The Committee met once during the fi nancial 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.
The statements set out below in relation to Remuneration, the Remuneration Committee and Remuneration Policies are with reference to
Principle 8, Remunerate fairly and responsibly.
SELECT HARVESTS ANNUAL REPORT 2011
33
CORPORATE GOVERNANCE STATEMENT
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 benefi ts 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.
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 fi nancial year and the Committee
members’ attendance record is disclosed in the table of Directors’ meetings.
Further details of the Remuneration Committee’s charter are available on the company’s website.
Remuneration Policies
Remuneration levels are set to attract and retain appropriately qualifi ed 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 fi xed remuneration, performance based remuneration, and equity based remuneration.
Executive Directors and senior executives may receive short term incentives based on achievement of specifi c business plans and performance
indicators, which include fi nancial and operational targets relevant to performance at the consolidated entity level, divisional level, or
functional level, as applicable, for the fi nancial year. In addition, the consolidated 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 each year and vest over three years
on achievement of the performance hurdles.
Non-executive directors do not receive any performance related remuneration.
Set out below are statements in relation to the Audit and Risk Committee and Risk Management, with reference to Principle 7, Recognise and
Manage Risk, and Principle 4, Safeguard integrity in Financial Reporting.
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 fi nancial year are disclosed in the Directors’ Report.
The external auditors, the Managing Director and Chief Financial Offi cer are invited to Audit and Risk Committee meetings at the discretion
of the Committee, and the external auditor also meets with the Audit 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 Offi cer have provided a statement in writing to the Board that the consolidated entity’s
fi nancial reports for the year ended 30 June 2011 present a true and fair view, in all material respects, of the consolidated entity’s fi nancial
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.
34
SELECT HARVESTS ANNUAL REPORT 2011
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 fi nancial reports to shareholders and/or the public prior to their release;
•
Evaluating systems of internal control;
•
Monitoring the standard of corporate conduct in areas such as arms-length dealings and likely confl icts of interest;
•
Requiring reports from management and the external auditors on any signifi cant regulatory, accounting or reporting development to assess
potential fi nancial reporting interest;
•
Reviewing and approving all signifi cant company accounting policy changes;
•
Reviewing the company’s taxation position;
•
Reviewing the annual fi nancial statements with the Chief Financial Offi cer 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 reviews its
charter at least once in each fi nancial year.
Risk Management
The Board oversees the establishment, implementation, and review of a system of risk management within the consolidated entity.
The consolidated entity’s areas of focus in respect of risk management practices include, but are not limited to, environment, occupational
health and safety, property, fi nancial 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 consolidated 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 consolidated entity;
•
Financial reporting; The Board reviews actual results 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 Offi cer have provided a statement in writing to the Board that the declaration made in respect
of the consolidated entity’s fi nancial reports is founded on a system of risk management and internal compliance and control which refl ects
the policies adopted to date by the Board, and that the consolidated 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.
The statements set out below on Ethical standards, Confl ict of Interest and Dealings in Company Shares are with reference to Principle 3,
Promote ethical and responsible decision making.
SELECT HARVESTS ANNUAL REPORT 2011
35
CORPORATE GOVERNANCE STATEMENT
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 consolidated entity. The consolidated entity’s code of conduct includes the following:
Diversity
Select Harvests is an equal opportunity employer and recruits people from a diverse range of backgrounds.
Workplace diversity encompasses the full variety of differences between people in the organisation. It recognises differences in gender, race,
ethnicity, age, disability and cultural background. Embracing such diversity in its workforce contributes to the achievement of the Group’s
objectives and enhances its reputation.
Select Harvests is committed to achieving the goals of providing access to equal opportunities at work based on merit; and fostering a culture
that embraces the values of diversity.
To support this goal, The Board has developed a Diversity Policy which will guide the group in implementing diversity initiatives and measures
in the year ahead.
The Group acknowledges the changes to Corporate Governance Principles and Recommendations and is reviewing its Policies and practices to
ensure they align with the spirit of Principle 3.
Confl ict of Interest
Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially confl ict with those of the Company. Should
a situation arise where the Board believes that a material confl ict 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
consolidated entity are set out in the Notes to the fi nancial 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 consolidated 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.
The statement below in relation to Communication with Shareholders is with reference to Principle 5, Make timely and balanced disclosures
and Principle 6, Respect the right of shareholders.
Communication with Shareholders
The Board of Directors aims to ensure that shareholders are informed of all major developments affecting the consolidated entity’s state of
affairs. Information is communicated to shareholders as follows:
•
•
The annual report is distributed to all shareholders (unless a shareholder has specifi cally requested not to receive the document), including
relevant information about the operations of the consolidated entity during the year, changes in the state of affairs and details of future
developments;
The half yearly report contains summarised fi nancial information and a review of the operations of the consolidated entity during the period.
The half year audited fi nancial report is lodged with the Australian Securities and Investments Commission and the ASX, and sent to any
shareholder who requests it;
•
The consolidated entity has nominated the Company Secretary to ensure compliance with the consolidated entity’s continuous disclosure
requirements, and overseeing and co-ordinating disclosure of information to the ASX;
•
Information is posted on the consolidated entity’s website immediately after ASX confi rms an announcement has been made to ensure that
the information is made available to the widest audience. The consolidated 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
identifi cation with the consolidated entity’s strategy and goals. It is the policy of the consolidated 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.
36
SELECT HARVESTS ANNUAL REPORT 2011
SELECT HARVESTS Limited ABN 87 000 721 380
Annual fi nancial report
Contents
Financial report
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Statement of cash fl ows
Notes to the fi nancial statements
Directors’ declaration
Independent auditor’s report to the members
ASX additional information
Page
38
39
40
41
42
43
83
84
86
This fi nancial report covers the consolidated entity consisting of Select Harvests Limited and its subsidiaries. The fi nancial report is
presented in the Australian currency.
Select Harvests Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered offi ce and principal place
of business is:
Select Harvests Limited
360 Settlement Road
Thomastown VIC 3074
A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of operations and
activities and in the Directors’ report, both of which are not part of this fi nancial report.
The fi nancial report was authorised for issue by the Directors on 29 August 2011. The company has the power to amend and reissue the
fi nancial report.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost
to the company. All fi nancial reports and other information are available on our website: www.selectharvests.com.au.
SELECT HARVESTS ANNUAL REPORT 2011
37
INCOME STATEMENT
For the year ended 30 June 2011
Notes
CONSOLIDATED
Revenue
Sales of goods and services
Other revenue
Total revenue
Other income (expenses)
Biological asset fair value adjustment
Total other income (expenses) excluding discount on acquisition
Expenses
Cost of sales
Distribution expenses
Marketing expenses
Occupancy expenses
Administrative expenses
Finance costs
Other expenses
Discount on acquisition
PROFIT BEFORE INCOME TAX
Income Tax Expense
PROFIT ATTRIBUTABLE TO MEMBERS
OF SELECT HARVESTS LIMITED
Earnings per share for profi t attributable
to the ordinary equity holders of the company:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
4
4
15
5
5
7
6
25(c)
29
29
The above income statement should be read in conjunction with the accompanying Notes.
2011
$’000
248,316
1,642
249,958
2,397
2,397
2010
$’000
238,376
735
239,111
2,405
2,405
(220,439)
(200,651)
(7,249)
(1,114)
(1,276)
(3,544)
(3,774)
(2,247)
6,511
19,223
(1,549)
17,674
33.7
33.7
(6,890)
(631)
(1,331)
(3,783)
(2,946)
(1,681)
-
23,603
(6,350)
17,253
43.3
43.3
38
SELECT HARVESTS ANNUAL REPORT 2011
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2011
Notes
CONSOLIDATED
Profi t for the year
Other comprehensive income
Changes in fair value of cash fl ow hedges, net of tax
Other comprehensive income for the year
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO
MEMBERS OF SELECT HARVESTS LIMITED
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
2011
$’000
17,674
179
179
17,853
2010
$’000
17,253
(1,743)
(1,743)
15,510
SELECT HARVESTS ANNUAL REPORT 2011
39
BALANCE SHEET
As at 30 June 2011
Notes
CONSOLIDATED
2011
$’000
7,398
37,065
37,618
348
5,549
87,978
1,283
116,523
49,585
46,961
214,352
302,330
24,221
16,458
79
3,196
43,954
137
64,000
24,373
1,051
89,561
133,515
168,815
95,066
11,201
62,548
168,815
2010
$’000
13,184
33,495
34,152
541
2,621
83,993
1,553
87,560
17,363
39,136
145,612
229,605
37,504
18,153
42
2,770
58,469
329
40,000
16,302
884
57,515
115,984
113,621
47,470
11,327
54,824
113,621
9
10
11
12
13
14
15
16
17
18
12
19
20
21
22
23
24
25
25
CURRENT ASSETS
Cash and cash equivalents
Receivables (current)
Inventories
Derivative fi nancial instruments
Current tax receivables
TOTAL CURRENT ASSETS
NON CURRENT ASSETS
Other Assets
Property, plant and equipment
Biological assets – almond trees
Intangible assets
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Interest bearing liabilities
Derivative fi nancial instruments
Provisions
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Trade and other payables
Interest bearing liabilities
Deferred tax liabilities
Provisions
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained profi ts
TOTAL EQUITY
The above balance sheet should be read in conjunction with the accompanying Notes.
40
SELECT HARVESTS ANNUAL REPORT 2011
STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED
Balance at 1 July 2009
Profi t for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with equity holders in their
capacity as equity holders:
Contributions of equity, net of transaction costs
Employee share options
Dividends paid or provided
Balance at 30 June 2010
Profi t for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity, net of transaction costs
and deferred tax
Dividends paid or provided
Employee share options
Balance at 30 June 2011
Notes
Contributed
Equity
Reserves
Retained
Earnings
Total
46,433
12,949
41,494
100,876
-
-
-
1,037
-
-
-
(1,743)
(1,743)
-
120
-
17,253
-
17,253
-
-
(3,922)
17,253
(1,743)
15,510
1,037
120
(3,922)
47,470
11,327
54,824
113,621
-
-
-
47,596
-
-
-
179
179
-
-
(305)
17,674
-
17,674
-
(9,950)
-
17,674
179
17,853
47,596
(9,950)
(305)
95,066
11,201
62,548
168,815
24
25
8
24
8
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
SELECT HARVESTS ANNUAL REPORT 2011
41
STATEMENT OF CASH FLOWS
For the year ended 30 June 2011
Notes
CONSOLIDATED
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees
(inclusive of goods and services tax)
Interest received
Interest paid
Income tax received/(paid)
Net Cash Infl ow From Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment
Payment for property, plant and equipment
Acquisition of almond orchards
Tree development costs
Net Cash Outfl ow From Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from equity raising
Commercial bill draw downs
Repayments of borrowings
Dividends payment on ordinary shares, net of DRP
Net Cash Infl ow (Outfl ow) from fi nancing activities
26
14
7
15
24
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the fi nancial year
Cash and cash equivalents at the end of the fi nancial year
9(a)
The above cash fl ow statement should be read in conjunction with the accompanying Notes.
2011
$’000
318,352
(316,257)
2,095
385
(3,774)
1,841
547
-
(21,087)
(24,991)
(19,415)
(65,493)
45,057
79,000
(55,000)
(8,202)
60,855
(4,091)
10,031
5,940
2010
$’000
298,694
(263,455)
35,239
517
(3,719)
(6,542)
25,495
15
(12,143)
-
(3,102)
(15,230)
-
-
(1,500)
(2,886)
(4,386)
5,879
4,152
10,031
42
SELECT HARVESTS ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these consolidated fi nancial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated. The fi nancial statements are for the consolidated entity
consisting of Select Harvests Limited and its subsidiaries.
(a) Basis of preparation
This general purpose fi nancial report has been prepared in accordance with Australian Accounting Standards, other authoritative
pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.
Compliance with IFRS
The consolidated fi nancial statements of the Select Harvests Limited group comply with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).
Historical cost convention
These fi nancial statements have been prepared under the historical cost convention, as modifi ed by the revaluation of available-for-sale
fi nancial assets, fi nancial assets and liabilities (including derivative instruments) at fair value through the income statement, biological assets,
and certain classes of property, plant and equipment.
Critical accounting estimates
The preparation of fi nancial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher
level of judgement or complexity, or areas where assumptions and estimates are signifi cant to the fi nancial statements are disclosed in Note 3.
(b) Principles of consolidation
The consolidated fi nancial statements are those of the consolidated entity, comprising Select Harvests Limited (the parent entity) and all
entities which Select Harvests Limited controlled at any point during the year and at balance date.
Subsidiaries are all those entities (including special purpose entities) over which the consolidated entity has power to govern the fi nancial and
operating policies, generally accompanying of more than one-half of the voting rights. The existence and effect of potential voting rights that
are currently exercisable or convertible are considered when assessing whether the consolidated entity controls another entity.
Subsidiaries are fully consolidated from the date at which control is transferred to the consolidated entity. They are deconsolidated from the
date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the consolidated entity.
The fi nancial 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 profi ts arising from intra-group transactions, have been eliminated in full.
Investments in subsidiaries are accounted for at cost in the individual fi nancial statements of Select Harvests Limited.
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the fi nancial statements of each entity comprising the consolidated entity are measured using the currency of the primary
economic environment in which the entity operates (“the functional currency”). The consolidated fi nancial statements are presented in
Australian dollars, which is the functional and presentation currency of Select Harvests Limited.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as
qualifying cash fl ow hedges.
(d) Cash and cash equivalents
For the purpose of presentation in the statement of cash fl ows, cash and cash equivalents includes cash on hand, deposits held at call with
fi nancial institutions, money market investments readily convertible to cash within two working days, and bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities in the balance sheet.
SELECT HARVESTS ANNUAL REPORT 2011
43
NOTES TO THE FINANCIAL STATEMENTS
(e) Inventories
Inventories are valued at the lower of cost and net realisable value except for almond stocks which are measured at fair value less estimated
cost to sell at the point of harvest, and subsequently at Net Realisable Value under AASB 102 Inventories.
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 fi rst in fi rst 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 141 Agriculture 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.
•
Other inventories comprise consumable stocks of chemicals, fertilisers and packaging materials.
(f) Biological assets
Almond trees
Almond trees are classifi ed as a biological asset and valued in accordance with AASB 141 Agriculture.
A fair value review is completed at each period end to ensure compliance with AASB 141. The value of almond trees is measured at fair value
using a discounted cash fl ow methodology.
The discounted cash fl ows incorporate 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 being $6 per Kg;
•
Growing, processing and selling costs are based on long term average levels;
•
Cash fl ows are discounted at a rate of 14%, that takes into account the cost of capital plus a suitable risk factor; and
•
An appropriate rental charge is included to represent the use of the developed land on which the trees are planted.
Nursery trees are grown by the consolidated entity for sale to external almond orchard owners and for use in almond orchards owned by the
consolidated entity. Nursery trees are carried at fair value.
Growing almond crop
The growing almond crop is valued in accordance with AASB 141 Agriculture. 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 an orchard in a new area where there is no previous
experience of commercial almond production are accumulated for the fi rst three years of that orchard. Once the fair value of this orchard
becomes reliably measurable, the orchard is measured in accordance with the almond trees policy noted above.
(g) Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair
value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so,
the nature of the item being hedged. The consolidated entity designates derivatives as either; (1) hedges of the fair value of recognised assets
or liabilities or a fi rm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash fl ow hedges).
The consolidated entity documents at the inception of the transaction the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedge transactions. The consolidated entity also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and
will continue to be highly effective in offsetting changes in fair values or cash fl ows of hedged items.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together
with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
44
SELECT HARVESTS ANNUAL REPORT 2011
(ii) Cash fl ow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges is recognised in equity
in the cash fl ow hedge reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profi t or loss (for
instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition
of a non fi nancial asset (for example, inventory) or a non fi nancial liability, the gains and losses previously deferred in equity are transferred
from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred to the income statement.
(h) Property, plant and equipment
Cost and valuation
All classes of property, plant and equipment are measured at historical cost less accumulated depreciation.
The carrying amount of property, 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 fl ows which will be received from the assets’
employment and subsequent disposal. The expected net cash fl ows have been discounted to present values in determining recoverable
amounts.
Depreciation
The depreciable amount of all fi xed assets including buildings and capitalised leased assets, but excluding freehold land water rights 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:
25 to 40 years
Leasehold improvements:
5 to 40 years
Plant and equipment:
5 to 20 years
Leased plant and equipment:
5 to 10 years
Irrigation systems:
10 to 40 years
Capital works in progress
Capital works in progress are valued at cost and relate to costs incurred for owned orchards and other assets under development.
(i) Leases
Leases are classifi ed at their inception as either operating or fi nance leases based on the economic substance of the agreement so as to refl ect
the risks and benefi ts incidental to ownership.
Operating leases
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefi ts of ownership
of the leased item, are recognised as an expense on a straight line basis over the term of the lease.
Finance leases
Leases which effectively transfer substantially all the risks and benefi ts incidental to ownership of the leased item to the consolidated entity
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 income statement.
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 2011
45
NOTES TO THE FINANCIAL STATEMENTS
( j) Business Combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other
assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred,
the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any asset
or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred. Identifi able assets acquired and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis,
the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of
the acquiree’s net identifi able assets.
The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value
of any previous equity interest in the acquiree over the fair value of the group’s share of the net identifi able assets acquired is recorded as
goodwill. If those amounts are less than the fair value of the net identifi able assets of the subsidiary acquired and the measurement of all
amounts has been reviewed, the difference is recognised directly in the income statement as a discount on acquisition.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at
the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be
obtained from an independent fi nancier under comparable terms and conditions.
Contingent consideration is classifi ed either as equity or a fi nancial liability. Amounts classifi ed as a fi nancial liability are subsequently
remeasured to fair value with changes in fair value recognised in profi t or loss.
(k) Intangibles
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the consolidated entity’s share of the net identifi able assets
of the acquired subsidiary/business at the date of acquisition. Goodwill is not amortised. Instead, goodwill is tested for impairment annually
or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less any accumulated
impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is
allocated to cash-generating units for the purpose of impairment testing.
Brand names
Brand names are measured at cost. Directors are of the view that brand names have an indefi nite life. Brand names are therefore not
depreciated. Instead, brand names are tested for impairment annually or more frequently if events or changes in circumstances indicate that
they might be impaired, and are carried at cost less any accumulated impairment losses.
Permanent water rights
Permanent water rights are recorded at historical cost. Such rights have an indefi nite life, and are not depreciated. As an integral component
of the land and irrigation infrastructure required to grow almonds, the carrying value is tested annually for impairment. If events or changes in
circumstances indicate impairment, the carrying value is adjusted to take account of any impairment losses.
(l) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade
allowances, and amounts collected on behalf of third parties. Revenue is recognised to the extent that it is probable that the economic
benefi ts will fl ow to the entity, the revenue can be reliably measured, and the risks and rewards have passed to the buyer. The following
specifi c recognition criteria must also be met before revenue is recognised:
Sale of Goods
Control of the goods has passed to the buyer.
Interest
Interest income is recognised using the effective interest method. When a receivable is impaired, the group reduces the carrying amount to its
recoverable amount, being the estimated future cash fl ow discounted at the original effective interest rate of the instrument, and continues
unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.
Dividends
Dividends are recognised as revenue when the right to receive payment is established.
46
SELECT HARVESTS ANNUAL REPORT 2011
Almond Pool Revenue
Under contractual arrangements, the group acts as an agent for external growers by simultaneously acquiring and selling the almonds and
therefore, does not make a margin on those sales. These amounts are not included in the group’s revenue.
As at 30 June 2011 the group 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).
(m) Income Tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income
tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the fi nancial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or
liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are applied to the cumulative
amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain
temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation
to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not
affect either accounting profi t or taxable profi t or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in
controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the
differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
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 balance sheet.
Cash fl ows are included in the cash fl ow statement on a gross basis and the GST component of cash fl ows arising from investing and fi nancing
activities, which is recoverable from, or payable to the taxation authority are classifi ed as operating cash fl ows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(n) Impairment of assets
Goodwill and other Intangible assets that have an indefi nite useful life are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash fl ows (cash generating units).
(o) Employee benefi ts
(i) Short-term obligations:
Liabilities for wages and salaries, including non-monetary benefi ts and annual leave expected to be settled within 12 months after the end of
the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting
period and are measured at the amounts expected to be paid when the liabilities are settled.
The liability for annual leave is recognised in the provision for employee benefi ts. All other short-term employee benefi t obligations are
presented as payables.
SELECT HARVESTS ANNUAL REPORT 2011
47
NOTES TO THE FINANCIAL STATEMENTS
(ii) Other long-term benefi t obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which
the employees render the related service is recognised in the provision for employee benefi ts and measured as the present value of expected
future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit
method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity
and currency that match, as closely as possible, the estimated future cash outfl ows.
Contributions are made by the consolidated entity to an employee superannuation fund and are charged as expenses when incurred.
Share-based payments
Share-based compensation benefi ts are provided to employees via the Select Harvests Limited Executive Share Option Scheme. Information
relating to this scheme is set out in Note 35.
The fair value of options granted under the Select Harvests Limited Executive Share Option Scheme is recognised as an employee benefi t
expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the
employees become unconditionally entitled to the options. The fair value at grant date is independently determined using a Black Scholes
option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact
of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free
interest rate for the term of the option. The fair value of the options granted is adjusted to refl ect market vesting conditions, but excludes
the impact of any non market vesting conditions (for example, profi tability and sales growth targets). Non market vesting conditions are
included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises
its estimate of the number of options that are expected to become exercisable. The employee benefi t expense recognised each period takes
into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the income statement with a
corresponding adjustment to equity.
(p) Financial Instruments
Financial Assets
Collectability of trade receivables is reviewed on an ongoing basis. 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, and where there is
objective evidence of impairment, debts which are known to be non collectible are written off immediately.
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 specifi c contract which specifi es an alternative date.
Amounts receivable from related parties are carried at full amounts due.
Financial Liabilities
The bank overdraft is carried at the principal amount and is part of the Net Cash balance in the Statement of Cash Flows. Interest is charged as
an expense as it accrues.
Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the consolidated entity.
Finance lease liabilities are accounted for in accordance with AASB 117 Leases.
(q) Fair value estimation
The fair value of certain fi nancial assets and fi nancial liabilities must be estimated for recognition and measurement or for disclosure purposes.
The fair value of fi nancial instruments traded in active markets, such as foreign exchange hedge contracts and the Interest Rate Cap, are based
on quoted market prices at the balance sheet date. The quoted market price used for fi nancial assets held by the consolidated entity is the
current bid price; the appropriate quoted market price for fi nancial liabilities is the current ask price.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair
value of fi nancial liabilities for disclosure purposes is estimated by discounting the future contractual cash fl ows at the current market interest
rate that is available to the consolidated entity for similar instruments.
48
SELECT HARVESTS ANNUAL REPORT 2011
(r) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost.
Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the
period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction
costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until
the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is
capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are classifi ed as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
(s) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete
and prepare the asset for its intended use. All other borrowing costs, inclusive of all facility fees, bank charges, and interest, are expensed as
incurred.
(t) Earnings per share
(i) Basic Earnings per share
Basic earnings per share are calculated by dividing the profi t attributable to equity holders of the company by the weighted average number of
ordinary shares outstanding during the fi nancial year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the fi gures used in the determination of basic earnings per share to take into account the after income tax
effect of interest and other fi nancing costs associated with dilutive potential ordinary shares.
(u) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The
chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been
identifi ed as the Chief Executive Offi cer.
(v) New accounting standards and UIG pronouncements
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2011 reporting periods.
The group’s assessment of the impact of these new standards and interpretations is set out below.
AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7
Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)
AASB 9 Financial Instruments addresses the classifi cation, measurement and derecognition of fi nancial assets and fi nancial liabilities. The
standard is not applicable until 1 January 2013 but is available for early adoption. There will be no impact on the group’s accounting for
fi nancial liabilities, as the new requirements only affect the accounting for fi nancial liabilities that are designated at fair value through the
income statement and the group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial
Instruments: Recognition and Measurement and have not been changed. The group has not yet decided when to adopt AASB 9.
IFRS 13 Fair Value Measurement (effective 1 January 2013)
IFRS 13 was released in May 2011. The AASB is expected to issue an equivalent Australian standard shortly. IFRS 13 explains how to measure fair
value and aims to enhance fair value disclosures. The group has yet to determine which, if any, of its current measurement techniques will
have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts
recognised in the fi nancial statements. However, application of the new standard will impact the type of information disclosed in the notes to
the fi nancial statements. The group does not intend to adopt the new standard before its operative date, which means that it would be fi rst
applied in the annual reporting period ending 30 June 2014.
Revised IAS 1 Presentation of Financial Statements (effective 1 July 2012)
In June 2011, the IASB made an amendment to IAS 1 Presentation of Financial Statements. The AASB is expected to make equivalent changes
to AASB 101 shortly. The amendment requires entities to separate items presented in other comprehensive income into two groups, based on
whether they may be recycled to the income statement in the future. It will not affect the measurement of any of the items recognised in the
balance sheet or the income statement in the current period. The group intends to adopt the new standard from 1 July 2012.
SELECT HARVESTS ANNUAL REPORT 2011
49
NOTES TO THE FINANCIAL STATEMENTS
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements
(effective 1 July 2013)
In July 2011 the AASB decided to remove the individual key management personnel (KMP) disclosure requirements from AASB 124 Related
Party Disclosures, to achieve consistency with the international equivalent standard and remove a duplication of the requirements with the
Corporations Act 2001. While this will reduce the disclosures that are currently required in the notes to the fi nancial statements, it will not
affect any of the amounts recognised in the fi nancial statements. The amendments apply from 1 July 2013 and cannot be adopted early. The
Corporations Act requirements in relation to remuneration reports will remain unchanged for now, but these requirements are currently
subject to review and may also be revised in the near future.
There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future
reporting periods and on foreseeable future transactions.
(w) Provisions
Provisions are recognised when the consolidated entity has a present legal or constructive obligation as a result of past events, it is probable
that an outfl ow of resources will be required to settle the obligation, and the amount has been reliably estimated.
(x) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the fi nancial year which are unpaid.
These amounts are unsecured and are usually paid within 30 days of recognition.
(y) Contributed equity
Ordinary shares are classifi ed as equity. The value of new shares or options issued is shown in equity.
(z) Comparatives
Where necessary, comparatives have been reclassifi ed and repositioned for consistency with current year disclosures.
(aa) Rounding amounts
The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities & Investments Commission, relation to the
“rounding off” of amounts in the fi nancial report. Amounts in the fi nancial report have been rounded off in accordance with that Class Order
to the nearest thousand dollars, or in certain cases, to the nearest dollar.
(ab) Parent entity fi nancial information
The fi nancial information for the parent entity, Select Harvests Limited, disclosed in note 37 has been prepared on the same basis as the
consolidated fi nancial statements, except as set out below.
(i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the fi nancial statements of Select Harvests Limited.
(ii) Tax consolidation legislation
Select Harvests Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Select Harvests Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax
amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Select Harvests Limited also recognises the current tax liabilities (or assets) and the
deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Select Harvests Limited
for any current tax payable assumed and are compensated by Select Harvests Limited for any current tax receivable and deferred tax assets
relating to unused tax losses or unused tax credits that are transferred to Select Harvests Limited under the tax consolidation legislation. The
funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ fi nancial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is
issued as soon as practicable after the end of each fi nancial year.
The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from
or payable to other entities in the group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a
contribution to (or distribution from) wholly-owned tax consolidated entities.
50
SELECT HARVESTS ANNUAL REPORT 2011
2. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of fi nancial risks: market risk (including currency risk, interest rate risk and commodity price risk),
credit risk and liquidity risk. The Group uses different methods to measure different types of risk to which it is exposed. These methods include
sensitivity analysis in the case of interest rate risk, foreign exchange and other price risks, and ageing analysis for credit risk.
Risk management is carried out by management pursuant to policies approved by the Board of Directors.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is
not the consolidated entity’s functional currency.
The Group sells both almonds harvested from owned orchards through the almond pool and processed products internationally in United
States dollars, and purchases raw materials and other inputs to the manufacturing and almond growing process from overseas suppliers
predominantly in United States dollars.
Management and the Board review the foreign exchange position of the Group and, where appropriate, take out forward exchange contracts,
transacted with the Group’s banker, to manage foreign exchange risk.
The exposure to foreign currency risk at the reporting date was as follows:
Group
Trade receivables net of payables
Cash at bank/(overdraft)
Foreign exchange contracts
- buy foreign currency (cash fl ow hedges)
- sell foreign currency (cash fl ow hedges)
Group sensitivity analysis
30 June 2011
USD $000’s
6,034
(1,344)
3,000
2,186
30 June 2010
USD $000’s
5,798
(2,377)
5,367
6,874
Based on fi nancial instruments held at the 30 June 2011, had the Australian dollar strengthened/weakened by 5% against the US dollar,
with all other variables held constant, the Group’s post tax profi t for the year would have been $147,000 lower/$162,000 higher (2010:
$136,000 lower/$150,000 higher), mainly as a result of the US dollar denominated fi nancial instruments as detailed in the above table. Other
components of equity would have been $121,000 higher/$134,000 lower (2010:$195,000 higher/$216,000 lower), arising mainly from foreign
forward exchange contracts designated as cash fl ow hedges.
(ii) Cash fl ow interest rate risk
The Group’s interest rate risk arises from borrowings issued at variable rates, which exposes the Group to cash fl ow interest rate risk.
The Group’s borrowings at variable interest rate are denominated in Australian dollars.
At the reporting date the Group had the following variable rate borrowings:
30 June 2011
Weighted Average
Interest Rate
%
8.48%
3.80%
30 June 2010
Weighted Average
Interest Rate
%
8.00%
3.80%
Balance
$’000
79,000
1,458
Balance
$’000
55,00
3,153
Debt facilities
Overdraft (USD)
An analysis of maturities is provided in 2(c) below
The Group analyses interest rate exposure on an ongoing basis in conjunction with debt facility, cash fl ow and capital management. As part of
the Risk Management policy of Select Harvests Limited, the company has entered into an agreement to cap $30,000,000 of debt at a rate of
5.75% to reduce the risk that higher interest rates pose to the company’s cash fl ows.
Group sensitivity
At 30 June 2011, if interest rates had changed by +/- 25 basis points from the year end rates with all other variables held constant, post tax
profi t for the year would have been $136,000 lower/higher (2010: $94,000 lower/higher).
SELECT HARVESTS ANNUAL REPORT 2011
51
NOTES TO THE FINANCIAL STATEMENTS
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52
SELECT HARVESTS ANNUAL REPORT 2011
(b) Credit risk
Credit risk arises from cash and cash equivalents, derivative fi nancial instruments and deposits with banks and fi nancial institutions, as well as
exposure to wholesale, retail and farm investor customers, including outstanding receivables and committed transactions.
The Group has no signifi cant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are
made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high credit quality
fi nancial institutions.
The credit quality of fi nancial assets that are neither past due or impaired can be assessed by reference to external credit ratings (if available)
or to historical information about default rates. Given that the majority of income is derived from large, blue chip customers with no history of
default, the provision raised against receivables is deemed to be satisfactory.
The Group’s banking partner has a long-term credit rating of AA (Standard & Poors).
Refer to note 10 for a summary of aged receivables impaired, and past due but not impaired.
(c) Liquidity risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash fl ows and matching the maturity profi les of fi nancial
assets and liabilities.
Financing arrangements
The following table contains the breakdown of the NAB facility detail:
Debt facilities
Facility Limit
Review Date
1. Core debt
$50m
21/06/2016
2. Working capital
$32m
Annual Review
3. Acquisition
$30m
4. USD Overdraft
$3m
31/12/2012
30/06/2012
The debt margin above is based on a margin above BBSY or LIBOR.
The Group had access to the following undrawn borrowing facilities at the reporting date:
Floating rate
- Working capital/Acquisition facility
- Bank overdraft facility USD
2011
$’000
2010
$’000
$A 34,542
$US 2,119
$A 25,000
$US 623
The bank overdraft facility may be drawn at any time and may be terminated by the bank without notice. The commercial bill acceptance
facility may be drawn at any time over a three year term.
(d) Fair Value Measurement
The fair value of fi nancial assets and fi nancial liabilities must be estimated for recognition and measurement or for disclosure purposes. As of 1
July 2009, Select Harvests Limited has adopted the amendment to AASB 7 Financial Instruments: Disclosures which requires disclosure of fair
value measurements by level of the following fair value measurement hierarchy:
(a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level one);
(b) Inputs other than quoted prices included within level one that are observable for the asset or liability, either directly (as prices) or indirectly
(derived from prices) (Level two); and
(c) Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level three).
At both 30 June 2011 and 30 June 2011, the Group’s assets and liabilities measured and recognised at fair value comprised the interest rate cap
derivative and FX forward contracts. Both are measured with reference to level 2.
SELECT HARVESTS ANNUAL REPORT 2011
53
NOTES TO THE FINANCIAL STATEMENTS
Maturities of fi nancial liabilities
The table below analyses the Group’s fi nancial liabilities, net and gross settled derivative instruments into relevant maturity groupings based
on the remaining period at the reporting date on the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash fl ows.
Less than
6 months
$’000
6 – 12
months
$’000
More than
12 months
$’000
Total
contractual
cash fl ows
$’000
Carrying Amount
(assets)/ liabilities
$’000
Group at 30 June 2010
Non derivatives
Variable Rate
Bills payable
Bank Overdraft
Derivatives
Interest Rate Cap
USD buy - outfl ow
USD sell - infl ow
USD net
Group at 30 June 2009
Non derivatives
Variable Rate
Debt facilities
Bank Overdraft
Derivatives
Interest Rate Cap
USD buy - outfl ow
USD sell - infl ow
USD net
2,500
1,458
(99)
(3,000)
2,186
(814)
Less than 12
months
$’000
2,500
3,153
(107)
(5,367)
6,807
1,440
17,500
-
(94)
-
-
-
17,500
-
(100)
-
67
67
74,000
-
(137)
-
-
-
94,000
1,458
(330)
(3,000)
2,186
(814)
79,000
1,458
(320)
79
(28)
51
More than 12
months
$’000
Total
contractual
cash fl ows
$’000
Carrying Amount
(assets)/liabilities
$’000
55,000
-
(329)
-
-
-
75,000
3,153
(536)
(5,367)
6,874
1,507
55,000
3,153
(536)
(183)
42
(141)
54
SELECT HARVESTS ANNUAL REPORT 2011
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors.
Critical accounting estimates and assumptions
The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defi nition,
seldom equal the related actual results. The estimates and assumptions that have a risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next fi nancial year are discussed below.
Almond trees
Almond trees are classifi ed as a biological asset and valued in accordance with AASB 141 “Agriculture”. The consolidated entity’s accounting
policies in relation to almond trees are detailed in Note 1(f). In applying this policy, the consolidated entity has made various assumptions.
These are detailed in Note 15 of the fi nancial statements. As at 30 June 2011, the value of almond trees carried in the fi nancial statements of
the consolidated entity is $49.6 million (2010:$17.4 million). The valuation of almond trees is very sensitive to the assumption of the long term
almond price. Any change to the long term almond price may have a material impact on these valuations.
Estimated impairment of intangible assets
The Group tests annually whether intangible assets, has suffered any impairment, in accordance with the accounting policy stated in Note 1(k).
The recoverable amounts of cash generating units have been determined based on value-in-use calculations.
Key assumptions are disclosed in Note 16.
Income taxes
The income tax provision is developed at Balance Sheet date based on a preliminary estimate of the tax payable or receivable. This includes
an estimate of allowable R&D tax concession credits. The tax return in relation to the fi nancial year ended 30 June 2011 will be prepared and
submitted during the fi nancial year ended 30 June 2012.
WA expenditure
Costs in relation to the Western Australia Greenfi eld orchard development have been capitalised. Costs incurred to date are within company
investment budgets and future returns are estimated to support the existing carrying value of these costs.
Impairment of hulling and cracking PP&E
The notifi cation of Olam International that it will not be renewing its management agreement at the end of the initial term is a trigger for the
impairment assessment of the hulling and cracking processing plant. A valuation assessment has been undertaken applying estimated future
cashfl ows. This supports the carrying value at Balance Sheet date.
SELECT HARVESTS ANNUAL REPORT 2011
55
NOTES TO THE FINANCIAL STATEMENTS
4. REVENUE
Revenue from continuing operations
- Management services
- Sale of goods
Other revenue
Bank interest
- Other persons/corporations
Total other revenue
Total revenue
5. EXPENSES
Profi t before tax includes the following specifi c expenses:
Cost of goods & services sold
Depreciation of non current assets
Buildings
Plantation land and irrigation systems
Plant and equipment
Total depreciation of non current assets
Finance costs
other persons
capitalised
Total fi nance costs
Impairment losses: trade receivables
Foreign exchange (gain)
Operating lease rental minimum lease payments
Net loss (gain) on disposal of property, plant and equipment
(a) Capitalised Borrowing Costs
Notes
Consolidated
2011
$’000
2010
$’000
104,801
143,515
248,316
385
1,257
1,642
102,321
136,055
238,376
517
218
735
249,958
239,111
220,439
200,651
46
406
4,760
5,212
3,774
-
3,774
3
47
11,990
(16)
51
355
4,546
4,952
3,718
(772)
2,946
170
98
10,692
(15)
5a
The capitalised rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the
entity’s outstanding borrowings during the 2010 year, 8.0%. There were no capitalised borrowing costs in 2011.
56
SELECT HARVESTS ANNUAL REPORT 2011
Notes
Consolidated
2011
$’000
2010
$’000
6. INCOME TAX
(a) Income tax expense
Current Tax
Deferred tax
(Over) provided in prior years
Income tax expense is attributable to:
Profi t from continuing operations
Aggregate income tax expense
Deferred income tax (revenue) expense included in income
tax expense comprises:
Decrease (increase) in deferred tax assets
(Decrease) increase in deferred tax liabilities
22
22
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profi t from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2010 – 30%)
Tax effect of amounts that are not deductible (taxable) in calculating
taxable income
Other non assessable items
Current year R&D estimate
(Over) provided in prior years
Income tax expense
(3,375)
5,585
(661)
1,549
1,549
1,549
439
5,146
5,585
19,223
5,767
(1,982)
(1,575)
(661)
1,549
2,196
4,929
(775)
6,350
6,350
6,350
(78)
5,007
4,929
23,603
7,081
44
-
(775)
6,350
SELECT HARVESTS ANNUAL REPORT 2011
57
NOTES TO THE FINANCIAL STATEMENTS
7. BUSINESS COMBINATION
(a) Summary of Acquisitions
On 2 December 2010, Select Harvests acquired 532 acres of established almond orchards at Lake Powell, Northern Victoria.
On 19 January 2011, Select Harvests purchased 116 acres of established almond orchards at Bannerton Park, Northern Victoria.
On 22 June 2011, Select Harvests purchased 1,500 acres of established almond orchards near Narranderra, New South Wales.
Details of the purchase consideration, the net assets acquired and discount on acquisition are as follows:
Purchase consideration
Cash paid
$000s
24,991
The provisional fair values of assets and liabilities recognised as a result of the acquisitions are as follows:
Property, Plant and Equipment
Biological Assets – Almond Trees
Inventory
Water
Annual leave liability
Deferred tax liability
Net Identifi able Assets
Discount arising on acquisition
Net Cash outfl ow on acquisition
Fair Value $000s
14,052
12,248
197
7,825
(30)
(2,790)
31,502
6,511
24,991
Included in other expenses in the income statement are transaction costs totaling $776k relating to stamp duty.
(b) Revenue and profi t contribution
The acquired businesses contributed $1.4m revenue and $200k profi t contribution for the period between acquisition and 30 June 2011.
Select Harvests were able to acquire these assets at a discount to fair value arising from the vendor’s requirement to realise assets for
funding purposes.
58
SELECT HARVESTS ANNUAL REPORT 2011
8. DIVIDENDS PAID OR PROPOSED FOR ON ORDINARY SHARES
Notes
Consolidated
2011
$’000
2010
$’000
(a) Dividends paid during the year
(i) Interim - paid 22 April 2011 (2010: 9 April 2010)
Fully franked dividend (10c per share)
(2010: 10c per share)
(ii) Final – paid (2010: nil)
Fully franked dividend (11c per share)
(2009: nil c per share)
(b) Dividends proposed and not recognised as a liability
A fi nal dividend of 3 c per share has been declared by the directors ($1,686,809)
(c) Franking credit balance
Franking credits available for the subsequent fi nancial year arising from:
Franking account balance after payment of current year tax
and dividends
5,566
5,566
4,384
9,950
3,922
3,922
-
3,922
44,867
44,867
45,328
45,328
The impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability at year
end, is $1,686,809 (2010 - $4,375,642).
9. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
(a) Reconciliation to cash at the end of the year
The above fi gures are reconciled to cash at the end of the fi nancial
year as shown in the statement of cash fl ow as follows:
Balances as above
Bank overdrafts
18
10. TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for impairment of trade receivables
Prepayments
7,398
7,398
7,398
(1,458)
5,940
34,496
(3)
34,493
2,572
37,065
13,184
13,184
13,184
(3,153)
10,031
33,000
(170)
32,830
665
33,495
SELECT HARVESTS ANNUAL REPORT 2011
59
NOTES TO THE FINANCIAL STATEMENTS
(a) Impaired trade receivables
As at 30 June 2011 current trade receivables of the Group with a value of $3,305 (2010: $170,000) were impaired. The amount of the provision
was $3,305 (2010:$170,000).
The aging of these receivables is as follows:
Over 6 months
Movements in the provision for impairment of receivables are as follows:
At 1 July 2010
Provision for impairment recognised during the year
Receivables written off during the year
At 30 June 2011
(b) Trade receivables past due but not impaired
Consolidated
2011
$’000
3
3
170
3
(170)
3
2010
$’000
170
170
4,688
170
(4,688)
170
As at 30 June 2011, trade receivables of $4,457,660 (2010: $4,094,787) were past due but not impaired. These relate to a number of customers
for whom there is no recent history of default. The ageing analysis of these receivables is as follows::
Up to 3 months
3 to 6 months
> 6 months
(c) Effective interest rates and credit risk
All receivables are non-interest bearing.
Consolidated
2011
$’000
4,099
227
132
4,458
2010
$’000
3,607
277
211
4,095
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 consolidated entity operates. Refer to Note 2 for more information on the
risk management policy of the consolidated entity.
Information concerning the effective interest rate and credit risk of both current and non-current receivables is set out in Note 2.
(d) Fair value
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.
60
SELECT HARVESTS ANNUAL REPORT 2011
Notes
Consolidated
2011
$’000
2010
$’000
11. INVENTORIES (CURRENT)
Raw materials
Raw materials at cost
Finished goods
Finished goods at cost
Other inventory
Other inventory at cost
Almond stocks
Almond stock at Net Realisable Value
1(f)
12. DERIVATIVE FINANCIAL INSTRUMENTS (CURRENT)
Current Assets
Forward exchange contracts – cash fl ow hedges
Interest rate cap – cash fl ow hedges
Total current derivative fi nancial instrument assets
Current Liabilities
Forward exchange contracts – cash fl ow hedges
Total current derivative fi nancial instrument liabilities
(i) Cash fl ow hedges
6,587
6,587
5,610
5,610
9,817
9,817
15,604
15,604
37,618
28
320
348
79
79
9,250
9,250
8,200
8,200
6,468
6,468
10,234
10,234
34,152
183
358
541
42
42
On 1 April 2010, the consolidated entity entered into an agreement to fi x the interest rate applicable to $30m of debt at 5.75% for a term of
3 years. The market value of the cap is recognised as a current asset in the balance sheet. Movements in the fair value of the cap are treated
similar to those of forward exchange contracts. Movements caused by changes in the intrinsic value of the cap are recognised in Other
Comprehensive Income to the extent that the hedge is effective; those relating to a change in the time value of money are recognised in the
income statement.
The consolidated entity also enters into forward exchange contracts to buy and sell specifi ed amounts of foreign currency in the future at
stipulated exchange rates. The objective in entering the forward exchange contracts is to protect the consolidated entity against unfavourable
exchange rate movements for highly probable contracted and forecasted sales and purchases undertaken in foreign currencies.
The accounting policy in regard to forward exchange contracts is detailed in Note 1(c).
SELECT HARVESTS ANNUAL REPORT 2011
61
NOTES TO THE FINANCIAL STATEMENTS
At balance date, the details of outstanding forward exchange contracts are:
Buy United States Dollars Settlement
Sell Australian Dollars
Average Exchange Rate
Less than 6 months
2011
$’000
3,000
3,000
2010
$’000
5,367
5,367
2011
$
1.04
Buy United States Dollars Settlement
Buy Australian Dollars
Average Exchange Rate
Less than 6 months
6 months to 1 year
(ii) Credit risk exposures
2011
$’000
2,186
-
2,186
2010
$’000
6,807
67
6,874
2011
$
1.05
-
2010
$
0.87
2010
$
0.85
0.89
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised fi nancial assets is
the carrying amount of those assets, net of any provisions for doubtful debts of those assets, as disclosed in the balance sheet and Notes to
the fi nancial statements.
Credit risk for derivative fi nancial instruments arises from the potential failure by counterparties to the contract to meet their obligations at
maturity. The credit risk exposure to forward exchange contracts and the interest rate cap are the net fair values of these instruments.
The net amount of the foreign currency the consolidated 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 was $813,858
(2010: $1,506,736).
The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors under fi nancial instruments
entered into by the consolidated entity.
62
SELECT HARVESTS ANNUAL REPORT 2011
13. OTHER ASSETS (NON-CURRENT)
Prepayments
14. PROPERTY, PLANT AND EQUIPMENT
Buildings
At cost
Accumulated depreciation
Plantation land and irrigation systems
At cost
Accumulated depreciation
Total land and buildings
Plant and equipment
At cost
Accumulated amortisation
Capital works in progress
At cost
Total plant and equipment
Total property, plant and equipment
Cost
Accumulated depreciation and amortisation
Total written down amount
Notes
Consolidated
2011
$’000
14(a)
14(a)
14(a)
14(a)
1,283
1,283
11,909
(799)
11,110
40,847
(3,490)
37,357
48,467
88,518
(35,601)
52,917
15,139
68,056
156,413
(39,890)
116,523
2010
$’000
1,553
1,553
10,609
(753)
9,856
30,091
(3,084)
27,007
36,863
69,583
(30,841)
38,742
11,955
50,697
122,238
(34,678)
87,560
SELECT HARVESTS ANNUAL REPORT 2011
63
NOTES TO THE FINANCIAL STATEMENTS
(a) Reconciliations
Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current fi nancial year.
Notes
Consolidated
2011
$’000
9,856
1,300
(46)
11,110
27,007
10,756
(406)
37,357
38,742
1,996
(16)
16,955
(4,760)
52,917
11,955
20,139
-
(16,955)
15,139
116,523
Buildings
Carrying amount at beginning
Acquired through business combinations
Depreciation expense
Plantation land and irrigation systems
Carrying amount at beginning
Acquired through business combinations
Depreciation expense
Plant and equipment
Carrying amount at beginning
Acquired through business combinations
Disposals
Transfers between classes
Depreciation expense
Capital works in progress
Carrying amount at beginning
Additions
Expensed to profi t & loss
Transfers between classes
Total written down value
64
SELECT HARVESTS ANNUAL REPORT 2011
2010
$’000
9,809
98
(51)
9,856
27,362
-
(355)
27,007
39,878
-
(94)
3,504
(4,546)
38,742
3,438
12,143
(24)
(3,602)
11,955
87,560
i5. BIOLOGICAL ASSETS – ALMOND TREES
The consolidated entity, as part of its operations, grows, harvests, and sells almonds. Harvesting of almonds occurs from February through to
April each year. The almond orchards are located in Victoria NSW and WA.
As at 30 June 2011 the consolidated entity owned a total of 6,254 acres of almond orchards (2010: 4,142 acres) and leased a total of 4,521 acres of
almond orchards (2010: 4,521 acres).
For almond trees on orchards leased on a long term basis by the company, the future economic risks and rewards associated with these trees
remain with Select Harvests. Accordingly, the tree valuations are deemed to be an asset of the company.
During the year ended 30 June 2011, 4,173 metric tonnes of almonds were harvested from these orchards (2010: 2,800 metric tonnes). These
almonds had a fair value less estimated point of sale costs of $19.8 million (2010: $15.3 million).
Carrying amount at 1 July
Transferred to inventory
Change in fair value
Acquired through business combinations
Additions
Carrying amount at 30 June
Consolidated
2011
$’000
17,363
(1,838)
2,397
12,248
19,415
49,585
2010
$’000
14,261
(2,405)
2,405
-
3,102
17,363
The value of crop bearing almond trees is calculated using a discounted cash fl ow methodology. The discounted cash fl ow 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 being $6 per kg;
•
Growing, processing and selling costs are based on long term average levels;
•
Cash fl ows are discounted at a rate of 14% (2010: 14%) which takes into account the cost of capital plus a suitable risk factor; and
•
An appropriate rental charge is included to represent the use of the developed land on which the trees are planted.
Price risk
The Group is exposed to commodity price risk in relation to its owned orchards. The Group sells almonds harvested from owned orchards
domestically and overseas throughout the year based on an almond price which will fl uctuate from time to time due to changes in
international market conditions. The Group has an active and ongoing almond marketing and selling program in place which is continually
monitored and adapted for changes in almond prices.
The Group also purchases raw materials and other inputs to the manufacturing and almond growing process domestically and overseas.
The price of such inputs will also fl uctuate from time to time based on market forces. Where practical, the consolidated entity, through its
procurement programs, contracts from time to time to acquire such quantity of inputs as is projected to be required at fi xed prices.
(a) Financial risk management strategies
The consolidated entity is exposed to fi nancial risks arising from changes in the Australian dollar price of almonds. The consolidated entity
reviews its outlook for almond prices regularly in considering the need for active fi nancial risk management.
(b) Non-current assets pledged as security
Refer to Note 21 for information on biological assets whose title is restricted and the carrying amounts of any biological assets pledged as
security by the parent entity or its subsidiaries.
SELECT HARVESTS ANNUAL REPORT 2011
65
NOTES TO THE FINANCIAL STATEMENTS
16. INTANGIBLES
Year ended 30 June 2010
Opening net book amount
Closing net book amount
Year ended 30 June 2011
Opening net book amount
Acquired through business combinations
Closing net book amount
Consolidated
Brand
Names*
$’000
Permanent
Water Rights
$’000
Goodwill
$’000
25,995
25,995
25,995
-
25,995
2,905
2,905
2,905
-
2,905
10,236
10,236
10,236
7,825
18,061
Total
$’000
39,136
39,136
39,136
-
46,961
* Brand name assets relate to the “Lucky” brand, which has been assessed as having an indefi nite useful life. This assessment was based on the Lucky brand
having been sold in the market place for over 50 years, is a market leader in the cooking nuts category and remains a heritage brand.
(a) Impairment tests for goodwill and brand names
Goodwill is allocated to the consolidated entity’s cash-generating units (CGU) identifi ed according to operating segment. The total value
of goodwill relates to the Food Products CGU. The recoverable amount of a CGU is determined based on value-in-use calculations. These
calculations use cash fl ow forecasts based on fi nancial projections by management covering a fi ve-year period assuming a 10% growth rate
based on projected crop increases and other growth rates based on past performance and its expectations for the future. These do not
exceed the long-term growth rate for the business in which the Food Products Division operates in. A weighted average cost of capital of 13%
(2010:12.8%) has been used to discount the cash fl ow projections.
(b) Impact of possible changes to key assumptions
The recoverable amount of the goodwill in the Food Products Division exceeds the carrying amount of goodwill at 30 June 2011. If a pre-tax
discount rate of 13.8% was used instead of 12.8% the recoverable amount of the goodwill in the Food Products Division would still exceed the
carrying amount of goodwill at 30 June 2011.
(c) Permanent water rights
The value of permanent water rights relates to the almond division Cash Generating Unit (CGU) and is an integral part of land and irrigation
infrastructures required to grow almond orchards. The fair value of permanent water rights is supported by the tradeable market value , which
at current market prices is in excess of book value.
Notes
Consolidated
2011
$’000
12,443
11,778
24,221
1,458
15,000
16,458
2010
$’000
17,168
20,336
37,504
3,153
15,000
18,153
17. TRADE AND OTHER PAYABLES (CURRENT)
Trade creditors
Other creditors and accruals
18. INTEREST BEARING LIABILITIES (CURRENT)
Secured
Bank overdraft
Working capital facility
Total secured current borrowings
66
SELECT HARVESTS ANNUAL REPORT 2011
(a) Security
Details of the security relating to each of the secured liabilities and further information on the bank overdrafts and bank facilities are set out in
Note 21.
(b) Interest rate risk exposures
Details of the consolidated entity’s exposure to interest rate changes on borrowings are set out in Note 2.
19. PROVISIONS (CURRENT)
Employee benefi ts
20. TRADE AND OTHER PAYABLES (NON-CURRENT)
Interest rate cap payable
21. INTEREST BEARING LIABILITIES (NON-CURRENT)
Term debt facility
Acquisition facility
Assets pledged as security
Notes
Consolidated
2011
$’000
3,196
3,196
137
137
50,000
14,000
64,000
2010
$’000
2,770
2,770
329
329
40,000
-
40,000
The bank overdraft and facilities of the parent entity and subsidiaries are secured by the following:
(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.
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Current
Floating charge
Cash and cash equivalents
Receivables
Inventories
Current tax receivables
Derivative fi nancial instruments
Total current assets pledged as security
Non-current
Floating charge
Prepayments
Property, plant and equipment
Biological assets – almond trees
Permanent water rights
Total non-current assets pledged as security
Total assets pledged as security
Notes
Consolidated
2011
$’000
7,398
37,065
37,618
5,549
348
87,978
1,283
116,523
49,585
18,061
185,452
273,430
2010
$’000
13,184
33,495
34,152
2,621
541
83,993
1,553
87,560
17,363
10,236
116,712
200,705
SELECT HARVESTS ANNUAL REPORT 2011
67
NOTES TO THE FINANCIAL STATEMENTS
Financing arrangements
The consolidated entity and the Company have bank overdraft facilities available to the extent of USD 3,000,000 (2010: USD 3,000,000).
The consolidated entity and the company have a debt facility available to the extent of $115,000,000 (2010: $75,000,000). As at 30 June 2011
the consolidated entity and company have used $79,000,000 (2010: $55,000,000). The split between current and non-current liabilities has
been based on the repayment requirements under the terms of the debt facility.
The current interest rates are 5.76% on the debt facility, and 2.41% on the United States dollar bank overdraft facility.
A number of covenants and fi nancial undertakings are associated with the company banking facilities, all of which have been met during the
period and as at 30 June 2011.
Notes
Consolidated
2011
$’000
2010
$’000
22. DEFERRED TAX LIABILITIES (NON CURRENT)
The balance comprises temporary differences attributable to:
Amounts recognised in profi t and loss
Inventory
Assets at cost
Accruals and provisions
Intangibles
Amounts recognised directly in OCI
Cash fl ow hedges
Amounts recognised directly in equity
Equity raising costs
Total deferred tax liabilities
Carry forward tax losses
Net deferred tax liabilities
Movements:
Opening balance 1 July
Prior period under provision
Credited to income statement
Business combination
Credited / (charged) to equity
Carry forward tax losses
Closing balance at 30 June
23. PROVISIONS (NON CURRENT)
Employee entitlements
(a) Aggregate employee entitlements liability
(including current liabilities in Note 19)
(b) Number of full time employees at year end
68
SELECT HARVESTS ANNUAL REPORT 2011
792
28,748
(1,515)
871
28,896
(18)
(791)
28,087
(3,714)
24,373
16,302
4,183
5,585
2,790
(773)
(3,714)
24,373
1,051
4,218
384
2,416
14,819
(1,954)
871
16,152
150
-
16,302
-
16,302
10,871
-
4,929
-
502
-
16,302
884
3,654
387
2011
Number of Shares
39,761,768
559,917
15,905,275
56,226,960
Number of Shares
15,905,275
2010
$’000
47,470
47,470
$’000
46,433
1,037
-
47,470
Notes
Consolidated
2011
$’000
95,066
95,066
2010
$’000
47,470
Number of Shares
39,518,915
242,853
-
39,761,768
1,748
45,848
95,066
$’000
47,715
(2,658)
45,057
791
45,848
24. CONTRIBUTED EQUITY
(a) Issued and paid up capital
Ordinary shares fully paid
(b) Movements in shares on issue
Beginning of the fi nancial year
Issued during the year
• Dividend reinvestment scheme
• Rights issue*
End of Financial year
* Gross proceeds from ordinary
shares issued under equity raising
Less: Associated transaction costs
Net proceeds from ordinary shares issued
under equity raising
Plus: deferred tax on associated
transaction costs
Contribution of equity net of transaction
costs & tax
(c) Share options
Executive share option 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. Both the short term and long term schemes involve payments up to an agreed proportion of the total fi xed 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
fi nancial year, no options (2010: no options) have vested under this scheme (refer Note 35 and Directors’ Report for further details). The market
value of ordinary Select Harvests Limited shares closed at $1.84 on 30 June 2011 ($3.46 on 30 June 2010).
(d) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of
and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each
share is entitled to one vote.
SELECT HARVESTS ANNUAL REPORT 2011
69
Notes
25(a)
25(a)
25(a)
25(a)
25(c)
NOTES TO THE FINANCIAL STATEMENTS
25. RESERVES AND RETAINED PROFITS
Capital reserve
Cash fl ow hedge reserve
Asset revaluation reserve
Options reserve
Retained profi ts
(a) Movements
Capital reserve
Balance at beginning of year
Balance at end of year
Cash fl ow hedge reserve
Balance at beginning of year
Fair value movement in Interest rate cap intrinsic
Fair value movement in foreign currency dealings arising
during the year
Balance at end of year
Asset revaluation reserve
Balance at beginning of year
Balance at end of year
Options reserve
Balance at beginning of year
Option expense
Balance at end of year
b) Nature and purpose of reserves
(i) Capital reserve
Consolidated
2011
$’000
3,270
(43)
7,645
329
11,201
62,548
3,270
3,270
(222)
315
(136)
(43)
7,645
7,645
634
(305)
329
2010
$’000
3,270
(222)
7,645
634
11,327
54,824
3,270
3,270
1,520
320
(2,062)
(222)
7,645
7,645
514
120
634
The capital reserve is used to isolate realised capital profi ts from disposal of non-current assets.
(ii) Asset revaluation reserve
The asset revaluation reserve is used to record increments and decrements in the value of non-current assets. This revaluation reserve is no
longer in use given assets are now recorded at cost. This is in line with accounting policies within note 1.
(iii) Options reserve
The options reserve is used to recognise the fair value of options granted and expensed but not exercised.
(iv) Cash fl ow hedge reserve
The cash fl ow hedge reserve is used to record gains or losses on the fair value movements in the interest rate cap and foreign currency
contracts in a cash fl ow hedge that are recognised directly in equity.
70
SELECT HARVESTS ANNUAL REPORT 2011
Notes
Consolidated
2011
$’000
(c) Retained profi ts
Balance at the beginning of year
Profi t attributable to members of Select Harvests Limited
Total available for appropriation
Dividends paid
Balance at end of year
26.RECONCILIATON OF THE NET PROFIT AFTER INCOME TAX TO THE NET
CASH FLOWS FROM OPERATING ACTIVITIES
Net profi t
Non-cash items
Depreciation and amortisation
Biological asset fair value adjustment
Discount on acquisition
Changes in assets and liabilities
(Increase) / decrease in trade receivables
(Increase) in inventory
(Increase) in other assets
(Decrease) / increase in trade and other payables
(Decrease) in income tax payable
Increase in deferred tax liability
(Increase) in deferred tax assets
Increase in employee entitlements
Net cash fl ow from operating activities
54,824
17,674
72,498
(9,950)
62,548
17,674
5,212
(2,397)
(6,511)
(1,663)
(3,269)
(920)
(13,283)
(2,928)
11,785
(3,714)
561
547
Non cash fi nancing activities
During the current year the company issued $1,748,305 of new equity as part of the Dividend Reinvestment Plan.
2010
$’000
41,493
17,253
58,746
(3,922)
54,824
17,253
4,952
-
-
8,249
(5,472)
(2,157)
3,188
(6,187)
7,598
(2,143)
214
25,495
SELECT HARVESTS ANNUAL REPORT 2011
71
NOTES TO THE FINANCIAL STATEMENTS
Notes
Consolidated
2011
$’000
2010
$’000
27. EXPENDITURE COMMITMENTS
Lease commitments – Group company as lessee
Commitments in relation to leases contracted for at the reporting
date but not recognised as liabilities, payable:
Within one year
Later than one year but not later than fi ve years
Later than fi ve years
(i) Operating leases (non cancellable):
Minimum lease payments
• Not later than one year
• Later than one year and not later than fi ve years
• Later than fi ve years
• Aggregate lease expenditure contracted for at reporting date
Operating lease payments are for rental of premises, farming and factory equipment.
(ii) Almond orchard leases:
Minimum lease payments
• Not later than one year
• Later than one year and not later than fi ve years
• Later than fi ve years
Aggregate lease expenditure contracted for at reporting date
15,203
33,413
99,537
148,153
9,408
8,402
8,952
26,762
5,795
25,012
90,584
121,391
15,690
40,730
105,786
162,206
10,006
16,387
8,692
35,085
5,684
24,343
97,094
127,121
The almond orchard leases comprises the lease of a 512 acre almond orchard and a 1,002 acre lease from Sandhurst Trustees Limited in which
the consolidated entity has the right to harvest the almonds from the trees owned by the lessor for the term of the agreement. The company
also has fi rst right of refusal to purchase the properties in the event that the lessor wished to sell. Other leases within the consolidated entity
have renewal and fi rst right of refusal clauses. There is also a 20 year lease of 3,100 acres at Hillston with Rural Funds Management.
28. EVENTS OCCURING AFTER BALANCE DATE
On 29 August 2011, the Directors declared a fi nal dividend of 3 cents per share in relation to the fi nancial year ended 30 June 2011 to be paid on
13 October 2011.
There has been no other matter or circumstance, which has arisen since 30 June 2011 that has signifi cantly affected or may signifi cantly affect:
a) the operations, in fi nancial years subsequent to 30 June 2011, of the consolidated entity, or
b) the results of those operations, or
c) the state of affairs, in fi nancial years subsequent to 30 June 2011, of the consolidated entity.
72
SELECT HARVESTS ANNUAL REPORT 2011
29. EARNINGS PER SHARE
The following refl ects the income and share data used in the calculations of basic and diluted earnings per share:
Profi t attributable to equity holders of the company
used in calculating basic earnings per share
Diluted earnings per share:
Profi t attributable to equity holders of the company
used in calculating diluted earnings per share
Weighted average number of ordinary shares
used in calculating basic earnings per share
Effect of dilutive securities:
Adjusted weighted average number of ordinary shares
used in calculating diluted earnings per share
CONSOLIDATED
2011
$’000
17,674
2010
$’000
17,253
17,674
17,253
Number of shares
2011
2010
52,462,405
39,761,768
52,462,405
39,761,768
30. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL
a) Directors
The following persons were directors of Select Harvests Limited during the fi nancial year:
(i) Chairman – non-executive
J C Leonard
(ii) Executive director
J Bird, Managing Director
(iii) Non-executive directors
M A Fremder*
F Grimwade
R M Herron
M Carroll
M Iwaniw
b) Other key management personnel
The following persons also had authority and responsibility for planning, directing, and controlling the continuing activities of the
consolidated entity, directly or indirectly, during the fi nancial year:
Name
K Martin**
T Millen
L Van Driel
P Chambers
P Ross
M Graham
Position
Employer
Operations Manager, Food Products Division
Select Harvests Limited
Group Horticultural & Farm Operations Manager
Select Harvests Limited
Group Trading Manager
Select Harvests Food Products Pty Ltd
Chief Financial Offi cer & Company Secretary
Operations Manager, Almond Division
Manager Sales & Marketing
Select Harvests Limited
Select Harvests Limited
Select Harvests Food Product Pty Ltd
* Retired
27 October 2010
** Departed 25 February 2011
SELECT HARVESTS ANNUAL REPORT 2011
73
NOTES TO THE FINANCIAL STATEMENTS
(c) Key management personnel compensation
Short term employment benefi ts
Long service leave
Share based payments
Notes
Consolidated
2011
$’000
3,134,743
31,415
(230,827)
2,935,331
2010
$’000
2,824,882
41,378
115,158
2,981,418
(d) Equity instrument disclosures relating to key management personnel
Number of options held by directors and key management personnel
The movement during the fi nancial year in the number of options over ordinary shares in the company held, directly or indirectly, by each
director and key management personnel is as follows:
2011
Directors
J Bird
Key Management Personnel
K Martin (Group Operations Manager)
T Millen
(Group Horticultural & Farm Operations Manager)
L Van Driel (Group Trading Manager)
P Chambers
( Chief Financial Offi cer & Company Secretary)
P Ross (Operations Manager Almond Division)
M Graham (Marketing Manager)
2010
Directors
J Bird
Key Management Personnel
K Martin (Group Operations Manager)
T Millen
(Group Horticultural & Farm Operations Manager)
L Van Driel (Group Trading Manager)
P Chambers
(Chief Financial Offi cer & Company Secretary)
P Ross (Operations Manager Almond Division)
Held at
1 July 2010
Granted as
Compensation
Lapsed
Held at
30 June 2011
Unvested at
30 June 2011
450,982
191,927
(103,125)
539,784
539,784
108,881
45,811
(154,692)
96,635
95,164
114,271
81,408
-
41,320
41,320
(20,270)
(20,270)
48,506
(26,351)
45,349
41,320
-
-
-
117,685
116,214
136,426
126,757
41,320
-
117,685
116,214
136,426
126,757
41,320
Held at
1 July 2009
Granted as
Compensation
Lapsed
Held at
30 June 2010
Unvested at
30 June 2010
297,003
190,744
(36,765)
450,982
450,982
63,345
45,536
-
108,881
108,881
63,363
61,656
66,057
36,765
41,071
(7,798)
96,635
96,635
41,071
(7,563)
95,164
95,164
48,214
44,643
-
-
114,271
114,271
81,408
81,408
No options held by directors or key management personnel are vested but not exercisable.
74
SELECT HARVESTS ANNUAL REPORT 2011
25,483
645,005
Number of shares held by directors and key management personnel
The movement during the fi nancial year in the number of ordinary shares of the company held, directly or indirectly, by each director and
key management personnel, including their personally related entities, is as follows:
Held at
1 July 2010
Received on exercise
of options
Other – DRP,
sales & purchases
2011
Directors – Non executive
M A Fremder
J C Leonard
R M Herron
M Carroll
F Grimwade
M Iwaniw
Directors – Executive
J Bird
Key Management Personnel
T Millen (Group Horticultural &
Farm Operations Manager)
L Van Driel (Group Trading Manager)
P Chambers (Chief Financial Offi cer &
Company Secretary)
P Ross (Operations Manager, Almond Division)
2010
Directors – Non executive
M A Fremder
J C Leonard
R M Herron
M Carroll
Directors – Executive
J Bird
Key Management Personnel
K Martin (Group Operations Manager)
T Millen (Group Horticultural &
Farm Operations Manager)
L Van Driel (Group Trading Manager)
P Chambers (Chief Financial Offi cer &
Company Secretary)
P Ross (Operations Manager, Almond Division)
5,835,234
663,668
18,772
-
-
-
619,522
45,444
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
283,431
21,900
-
30,000
3,000
-
-
8,000
-
Held at
1 July 2009
Received on exercise
of options
Other – DRP,
sales & purchases
5,777,234
615,628
18,772
-
619,522
-
45,444
-
-
-
-
-
-
-
-
-
-
-
-
-
58,000
48,040
-
-
-
-
-
-
-
-
Total
5,835,234
947,099
40,672
-
30,000
3,000
45,444
-
8,000
-
Total
5,835,234
663,668
18,772
-
619,522
-
45,444
-
-
-
(e) Other transactions with directors and key management personnel
Transactions with directors and key management personnel that require disclosure in accordance with AASB 124 for the year ended 30 June
2011 are detailed in Note 32.
SELECT HARVESTS ANNUAL REPORT 2011
75
NOTES TO THE FINANCIAL STATEMENTS
31. REMUNERATION OF AUDITORS
Audit and other assurance services
Audit and review of fi nancial statements
Other assurance services
Total remuneration for audit and other assurance services
Taxation services
Tax compliance services
Tax consulting
Total remuneration for taxation services
Total remuneration of PricewaterhouseCoopers
32. RELATED PARTY DISCLOSURES
(a) Parent entity
The parent entity within the consolidated entity is Select Harvests Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in Note 34.
(c) Key management personnel
Disclosures relating to key management personnel are set out in Note 30.
(d) Director related entity transactions
Services
2011
$
192,450
25,000
217,450
98,530
9,000
107,530
324,980
2010
$
192,450
45,000
237,450
64,355
23,145
87,500
324,950
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 a 25 year period. The consolidated entity holds
an amount of $1,282,498 (2010: $1,555,112) during the fi nancial 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 Limited also has an Almond Orchard Management Agreement with Almas Almonds Pty Ltd, a company which manages the
Almas Almonds Partnership in which both Mr M A Fremder and Mr J C Leonard have an indirect interest. Under the terms of the agreement,
Select Harvests Limited is developing and shall manage 1,782 acres of almond orchard on a fee basis for Almas Almonds Pty Ltd.
In addition, Select Harvests Limited will process and sell the entire production of the orchard for the entire 30 year life of the orchard. The
consolidated entity received an amount of $6,409,370 (2010: $4,851,165) during the fi nancial 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.
At 30 June 2011, the total amount receivable from director related entities in respect to the above transaction is $2,389,987.
During the fi nancial year the company entered into foreign exchange contracts on behalf of Almas Pty Limited and Maxdy Pty Ltd, under
conditions which pass costs and benefi ts to the related parties under normal commercial terms.
76
SELECT HARVESTS ANNUAL REPORT 2011
33. SEGMENT INFORMATION
Segment products and locations
The segment reporting refl ects the way information is reported internally to the Chief Executive Offi cer.
The consolidated 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 is split into two segments:
»
comprises the growing, processing and sale of almonds to the food industry from company owned almond orchards; and
»
the sale of a range of management services to external owners of almond orchards, including orchard development, tree supply, farm
management, land rental and, irrigation infrastructure; and the sale of almonds on behalf of external investors.
The consolidated entity operates predominantly within the geographical area of Australia.
SELECT HARVESTS ANNUAL REPORT 2011
77
NOTES TO THE FINANCIAL STATEMENTS
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78
SELECT HARVESTS ANNUAL REPORT 2011
34. CONTROLLED ENTITIES
Parent Entity:
Select Harvests Limited
Subsidiaries of Select Harvests Limited:
Kyndalyn Park Pty Ltd
Select Harvests Food Products Pty Ltd
Meriram Pty Ltd
Kibley Pty Ltd
35. EMPLOYEE BENEFITS
Executive share option scheme
Country of Incorporation
Percentage Owned (%)
2011
2010
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
The consolidated entity has in place an executive share option scheme. The scheme provides for the Board to grant 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 fi nancial 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 fi rst 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 vesting of options is conditional upon
the consolidated entity achieving growth of at least 10% in EPS in each fi nancial year over the preceding fi nancial year.
There are no voting or dividend rights attached to the options.
The assessed fair value at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the
term of the option, the impact of dilution, the share price at offer date and expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of the option.
SELECT HARVESTS ANNUAL REPORT 2011
79
NOTES TO THE FINANCIAL STATEMENTS
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80
SELECT HARVESTS ANNUAL REPORT 2011
35. EMPLOYEE BENEFITS (cont.)
The amounts recognised in the fi nancial statements of the consolidated entity in relation to executive share options exercised during the
fi nancial year were:
Issued and Paid up Capital
(b) Expenses arising from share-based payment transactions
Consolidated
2011
$
-
2010
$
-
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefi t expense were as
follows:
Options granted under employee option plan
36. CONTINGENT LIABILITIES
Cross guarantees given by the entities comprising the consolidated entity are detailed in Note 37.
37. PARENT ENTITY FINANCIAL INFORMATION
(a) Summary fi nancial information
The individual fi nancial statements for the parent entity show the following aggregate amounts:
Balance Sheet
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders’ Equity
Issued Capital
Reserves
Capital Reserve
Cash fl ow hedge reserve
Options Reserve
Retained profi ts
Profi t or Loss for the year
Total comprehensive income
Consolidated
2011
$
(305,000)
(305,000)
2010
$
120,000
120,000
2011
$’000
19,266
2010
$’000
13,641
308,226
206,891
17,987
206,887
95,066
3,270
(43)
329
2,717
101,339
1,842
2,021
16,532
155,042
47,470
3,270
(222)
633
696
51,847
4,121
2,378
SELECT HARVESTS ANNUAL REPORT 2011
81
NOTES TO THE FINANCIAL STATEMENTS
b) Tax consolidation legislation
Select Harvests Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July
2003. The accounting policy in relation to this legislation is set out in Note 1(m). On adoption of the tax consolidation legislation, the entities in
the tax consolidated group entered into a tax sharing agreement which limits the joint and several liability of the wholly-owned entities in the
case of a default by the head entity, Select Harvests Limited.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Select Harvests Limited
for any current tax payable assumed and are compensated by Select Harvests Limited for any current tax receivable and deferred tax assets
relating to unused tax losses or unused tax credits that are transferred to Select Harvests Limited under the tax consolidation legislation. The
funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ fi nancial statements.
The amounts receivable / payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which
is issued as soon as practicable after the end of each fi nancial year. The head entity may also require payment of interim funding amounts to
assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany receivables or payables.
(c) Guarantees entered into by parent entity
Each entity within the consolidated group has entered into a cross deed of fi nancial guarantee in respect of bank overdrafts and loans
of the group.
Loans are made by Select Harvests Limited to controlled entities under normal terms and conditions.
Loans are made to Select Harvests Limited by controlled entities under normal terms and conditions.
82
SELECT HARVESTS ANNUAL REPORT 2011
DIRECTORS’ DECLARATION
In the directors’ opinion:
(a) the fi nancial statements and Notes set out on pages 20 to 82 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
and
(ii) giving a true and fair view of the consolidated entity’s fi nancial position as at 30 June 2011 and of its performance for the fi nancial year
ended on that date; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identifi ed in note
34 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee
described in note 37.
Note 1(a) confi rms that the fi nancial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
The directors have been given the declarations by the Managing Director and Chief Financial Offi cer required under section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
J C Leonard
Chairman
Melbourne, 29 August 2011
SELECT HARVESTS ANNUAL REPORT 2011
83
Independent auditor’s report to the members of
Select Harvests Limited
Report on the fi nancial report
We have audited the accompanying fi nancial report of Select Harvests Limited (the company), which comprises the
balance sheet as at 30 June 2011, and the income statement, the statement of comprehensive income, statement of
changes in equity and statement of cash fl ows for the year ended on that date, a summary of signifi cant accounting
policies, other explanatory notes and the directors’ declaration for the Select Harvests Limited Group (the consolidated
entity). The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to
time during the fi nancial year.
Directors’ responsibility for the fi nancial report
The directors of the company are responsible for the preparation of the fi nancial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control
as the directors determine is necessary to enable the preparation of the fi nancial report that is free from material
misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard
AASB 101 Presentation of Financial Statements, that the fi nancial statements comply with International Financial
Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the fi nancial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether
the fi nancial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the fi nancial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial report in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the fi nancial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any
material inconsistencies with the fi nancial report.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinions.
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
84
SELECT HARVESTS ANNUAL REPORT 2011
Independent auditor’s report to the members of
Select Harvests Limited (continued)
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the fi nancial report of Select Harvests Limited is in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the consolidated entity’s fi nancial position as at 30 June 2011 and of its
performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
(b) the fi nancial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 23 to 28 of the directors’ report for the year ended
30 June 2011. The directors of the company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Select Harvests Limited for the year ended 30 June 2011, complies with
section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
John O’Donoghue
Partner
Melbourne
29 August 2011
SELECT HARVESTS ANNUAL REPORT 2011
85
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 31 July 2011.
(a) Distribution of equity securities
The number of shareholders, by size of holding, in each class of share is:
Number of Ordinary Shares
1 to 1,000
Number of Shareholders
1,064
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
1,230
423
467
43
The number of shareholders holding less than a marketable parcel of shares is:
Number of Ordinary Shares
-
Number of Shareholders
-
(b) Twenty largest shareholders
The names of the twenty largest holders of quoted shares are:
Listed Ordinary Shares
Number of Shares
10,744,224
Percentage of Ordinary
19.11
5,406,671
3,563,581
2,020,118
1,610,557
1,306,963
1,132,022
1,073,904
947,099
881,844
785,098
754,773
579,244
555,815
536,128
405,189
330,563
299,990
256,000
250,373
9.62
6.34
3.59
2.86
2.32
2.01
1.91
1.68
1.57
1.40
1.34
1.03
0.99
0.95
0.72
0.59
0.53
0.46
0.45
1 HSBC Custody Nominees (Australia) Limited
2 Maxdy Nominees Pty Ltd
3
JP Morgan Nominees Australia Limited (Cash A/c)
4 National Nominees Limited
5 MF Custodians Ltd
6 Citicorp Nominees Pty Ltd
7 UBS Nominees Pty Ltd
8
JP Morgan Nominees Australia Limited
9 MF Custodians (account 10051001)
10 Le Grand Pty Ltd
11 Mirrabooka Investments Limited
12 Spectrok Pty Ltd
13 Mid Manhattan Pty Ltd
14 Mr John Bird
15 Mr Petrus Cornelius Nicolaas Middencorp
16 National Australia Trustees Limited
17 Mr Max Fremder
18 RBC Dexia Investor Services Nominees Pty Limited
19 Rezann Pty Ltd
20 Milton Corporation Limited
86
SELECT HARVESTS ANNUAL REPORT 2011
(c) Substantial shareholders
The names of substantial shareholders are:
HSBC Custody Nominees (Australia) Limited
Maxdy Nominees Pty Ltd
ANZ Nominees Limited
(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
10,744,224
5,406,671
3,563,581
SELECT HARVESTS ANNUAL REPORT 2011
87
NOTES
88
SELECT HARVESTS ANNUAL REPORT 2011
CORPORATE
INFORMATION
Select Harvests Limited
ABN 87 000 721 380
Directors
J C Leonard (Chairman)
J Bird (Managing Director)
M Carroll (Non-Executive Director)
M Iwaniw (Non-Executive Director)
R M Herron (Non-Executive Director)
F Grimwade (Non-Executive Director)
Company Secretary
P Chambers
Registered Offi ce –
Select Harvests Limited
360 Settlement Road
THOMASTOWN VIC 3074
Postal address
PO Box 5
THOMASTOWN VIC 3074
Telephone (03) 9474 3544
Facsimile (03) 9474 3588
Email info@selectharvests.com.au
Solicitors
Minter Ellison Lawyers
Bankers
National Australia Bank Limited
Auditor
PricewaterhouseCoopers
Share Register
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067
Telephone (03) 9415 5040
Facsimile (03) 9473 2562
Internet Address
www.selectharvests.com.au
Select Harvests Limited
ABN 87 000 721 380
PO Box 5
THOMASTOWN VIC 3074
360 Settlement Road
THOMASTOWN VIC 3074
Telephone (03) 9474 3544
Facsimile (03) 9474 3588
Email info@selectharvests.com.au
www.selectharvests.com.au