Healthy gro w t h
ANNUAL REPORT 2015
S
E
L
E
C
T
H
A
R
V
E
S
T
S
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
5
S
t
r
a
tegic roots
People
Engagement
Systems and
Process
Almond
Critical Mass
Best
in Class
Improve
Value
Sustainable
Food Model
Investment
in Divisions
Select Harvests Limited ABN 87 000 721 380
Company Profile
Select Harvests is one of Australia’s
largest almond producers and
marketers with core capabilities across:
Horticulture, Orchard Management,
Processing, Sales and Marketing.
These capabilities enable us to benefit
throughout the value chain.
We are one of Australia’s largest almond
growers and the country’s leading
manufacturer, processor and marketer
of nut products, health snacks and muesli.
We supply the Australian retail and industrial
markets and export almonds globally.
Our Operations
Our geographically diverse almond orchards
are at or near maturity. Located in Victoria,
South Australia and New South Wales our
portfolio includes more than 7,602 Ha (18,776
acres) of company owned and leased almond
orchards and land suitable for planting.
These orchards, plus other independent
orchards, supply our state-of-the-art primary
processing facility at Carina West near
Robinvale, Victoria and our value added
processing facility at Thomastown in the
Northern Suburbs of Melbourne. Our
primary processing facility has the capacity
to process 22,000 metric tonnes of almonds
in the peak season and is capable of meeting
the ever increasing demand for both in-shell
and kernel product. Our processing plant in
Thomastown processes over 10,000 metric
tonnes of product per annum.
Export
Select Harvests is one of Australia’s largest
almond exporters and continues to build
strong relationships in the fast growing
markets of India and China, as well as
maintaining established routes to markets
in Asia, Europe and the Middle East.
Our Brands
The Select Harvests Food Division provides
a capability and route to market domestically
and around the world for processed almonds
and other natural products. It supplies both
branded and private label products to the
key retailers, distributors and industrial users.
Our market leading brands are: Lucky,
Nu-Vit, Sunsol, Allinga Farms and Soland in
retail markets and Renshaw and Allinga Farms
in wholesale and industrial markets. In addition
to almonds, we market a broad range of snacking
and cooking nuts, health mixes and muesli.
Our Mission
To deliver sustainable shareholder value by
being a global leader in integrated growing,
processing & marketing of almonds.
Geographic Diversity
SOUTHERN
REGION
PARINGA
LOXTON
Adelaide
LAKE
CULLULLERAINE
HILLSTON
NORTHERN
REGION
Sydney
EUSTON
GRIFFITH
ROBINVALE
Swan Hill
Nhill
CENTRAL
REGION
Processing Centres
Albury
Select Harvests Orchards
THOMASTOWN
Melbourne
1,611
2,161
1,825
PLANTED HA
IN SOUTHERN REGION
(3,979 ACRES)
PLANTED HA
IN CENTRAL REGION
(5,337 ACRES)
PLANTED HA
IN NORTHERN REGION
(4,508 ACRES)
Note: Planted area as at 30 September 2015. Includes 384 HA (948 acres) planted in Southern Region post 30 June 2015.
www.selectharvests.com.au
Industry Overview
9 things you might not know about almonds...
1/ australia’s largest
horticultural export
2/ australia exports almonds
to 50 countries
3/ almonds grow with the global
chocolate industry
export sales
246%
oVer past
fiVe years
india
consumes
24%
of australian
almond
exports
66%
of chocolate
consumers
prefer
chocolate
with almonds
than without
Export sales will reach A$600m in 2015/16.
Sales will top A$1b by 2020.
Source: ABA
Export sales of A$422m in 2014/15.
Source: ABA
The global chocolate industry was forecast
to grow another 27% over the next 5 years.
Source: Californian Almond Board/Euromonitor
4/ the dominant tree nut
5/ australia leads consumption
6/ cheap source of protein
almonds
comprise
33%
of tree nuts
globally
934
grams /
person /
year
Value & cost
Almonds are roughly double the volume
of the next largest nut, making substitution
of other tree nuts for almonds difficult.
Source: Company Data
Australian per capita almond consumption
was the highest in the world at 934gm/
person/year in 2014.
Source: ABA
On a price per unit of protein basis,
almonds are still one of the cheapest
sources of protein on the planet.
Source: Company Data
7/ good for your thinking
8/ nuts are healthy for you
9/ almonds are rich in nutrients
may improVe
cognitiVe
processes
40%
possible
reduction in
heart disease
pound
for pound,
almonds
are one of
the best
nuts for
your health
A new review of 70 studies has found that
a handful of nuts may improve cognitive
processes, which include mental
processes such as memory, problem
solving and decision making.
Source: Nuts for Life
Nuts have been linked to a 40% Reduced
Risk of Death from Heart Disease in a recent
meta-analysis.
Source: Nuts for Life
Almonds are the tree nut highest in protein,
fibre, calcium, vitamin E, riboflavin, niacin
and one of the highest sources of hard-to-
get magnesium.
Source: Nuts for Life
01
Contents
01
Industry Overview
02 Contents
03 Performance Summary
04 Chairman & Managing
Director’s Report
08 Our Growth Platform
10 Almond Division
11 Food Division
12 People & Diversity
13 OH&S, Sustainability
14 Executive Team
15 Board of Directors
16 Historical Summary
17 Financial Report
02
Select Harvests Annual Report 2015 Performance Summary
EBIT ($000’s)
Almond Division
Food Division
Corporate
Total EBIT
Interest Expense
Profit Before Tax
Tax Expense
NPAT (before acquisition costs)
Acquisition Costs
NPAT Reported
EPS (excluding acquisition costs)
EPS reported
Operating Cash flow
Net Debt
Gearing (Net Debt/Equity)
A Record Year
• Select Harvests delivered a
record Underlying NPAT
(excluding acquisition costs)
in 2015 of $59.4 million,
following on from the strong
restated 2014 result of
$21.6 million.
• The business generated
cash flow of $30.4 million,
32% higher than 2014.
FY14 (restated)
30,275
5,644
(4,631)
31,288
(4,455)
26,833
(5,190)
21,643
–
21,643
37.5 cents
37.5 cents
23,063
94,764
54.1%
• Earnings per share
(excluding acquisition costs)
was 86.8 cps, an increase
of 131% on last year’s
underlying EPS.
• The result was driven by
the valuation of the 2015
crop, based on a yield of
14,500 tonnes and a price
of $11.45/kg plus further
upside from the 2014 crop.
• This improved performance
has resulted in gearing
being reduced to 38.2%
• Our 7 strategic platforms
have resulted in growth,
improved productivity
and profitability plus
reduced risk.
FY15
87,503
6,817
(4,685)
89,635
(5,331)
84,304
(24,885)
59,419
(2,653)
56,766
86.8 cents
82.9 cents
30,399
109,708
38.2%
03
www.selectharvests.com.au • Risk mitigation
− Frost Fans – 13 frost events, nil loss
− Increased harvest matrix – 14 days less
harvesting time
− Almond Dryer – Quality/mix improvement
• Almond crop
− 14,500 tonnes – up 4,000 tones on FY14
Financial Performance
The company generated a Reported NPAT
of $56.8 million in FY15 – a record result
and substantially up on the strong FY14
Underlying NPAT of $21.6 million. Excluding
the impact of acquisition transaction costs
and the company’s early adoption of new
Accounting Standards, FY15 NPAT would
have been $63.2 million.
Reported FY15 Earnings Per Share (“EPS”)
increased to 82.9 cents per share (“cps”),
up 121% on Restated FY14 EPS of 37.5 cps.
The company paid a final dividend of 35
cents per share on 13 October 2015 (Record
Date 31 August 2015), taking the full year
dividend to 50 cents per share (up from
20 cents last year).
As at 30 June 2015, Net Debt was $109.7
million and gearing (Net Debt to Equity)
was 38%.
Strategy
The company has continued to deliver
against the milestones set out in its
7 strategic platforms. The recent orchard
acquisitions and greenfield expansion will
deliver the primary strategy platform of
building and controlling the critical mass
of nut. The enhanced tree nutrition program
and increased density of new tree plantings
will deliver greater orchard productivity,
leveraging the global almond opportunity
that we have been steadily working towards
in recent years and maximizing profitability.
Capital investments in the Almond Dryer,
Cogen Plant and Project Parboil will improve
quality and productivity, reduce the cost
base and increase the efficiency, capacity
and sustainability of our supply chain.
These investments will positively impact the
ability of the Packaged Food business and
Industrial & Trading business to capture new
opportunities and grow.
The investment in brands is gaining traction
and delivering increased sales and margin,
while the growth in other channels and
geographies will assist future profitability
and growth.
We are pleased to present you with
Select Harvests’ 2014/15 Annual Report.
It has been an outstanding year for the
company with record volumes, prices,
productivity and financial results, driven
by executing our strategy, enhanced
by favourable market conditions.
Highlights
• Record Reported Profit – $56.8 million,
up 162%
• Productivity gains
− Harvest – 38% larger harvest
− Processing – 20% more productive
in FY15
− Orchard – Higher nutrient program
reflecting in tree health and yield
• Sales Growth
− Almond sales up 189%
− Industrial sales up 28%
− Branded consumer sales up 9%
• Strategic Projects – Approved
− Project Parboil (facility to improve almond
supply chain efficiency) – $10.0m,
− Project H2E (Electricity Cogen Plant)
– $12.0m
• Funding – equity raising, sale & leaseback
− Acquisition of 2 orchards and land bank
− Replanted 207 HA (512 acres)
in Q3CY2014
− Planted 384 HA (948 acres)
in Q3CY2015
− Funding in place to plant another
960 HA (2,371 acres)
04
Select Harvests Annual Report 2015 Chairman
& Managing
Director’s
Report
Acquisitions
During the financial year the company
acquired 2 almond orchards (Amaroo
in South Australia and Mullroo in Victoria).
These acquisitions delivered another 1,004
HA (2,481 acres) of planted almond orchards
and land suitable for planting to almonds,
which will be planted out over the next 3 years.
Select Harvests now has 5,597 HA (13,824
acres) of planted almond orchards, including
384 HA (948 acres) planted in the Southern
Region post 30 June 2015. With plantings
anticipated over the next 2 seasons, we will
have portfolio of approx 6,680 HA (16,500
acres) of planted almond orchard.
Funding
During the year, the company secured
additional funding from a number of sources.
To fund the acquisition of the aforementioned
orchards and land bank, the company raised
a total of $66.2 million in equity ($46.5 million
Institutional Placement and $19.7 million
Share Purchase Plan) at $5.35/share.
The company was granted additional
facilities from its bankers NAB and Rabo,
ensuring that it was adequately positioned
to fund further projects.
Select Harvests recently announced a Sale
& Leaseback Agreement with First State
Super (“FSS”), whereby FSS would acquire
a mature orchard and unplanted land from
Select Harvests for $67 million. Select
Harvests will lease back these properties,
plus develop the unplanted orchards in FY17
and FY18, with all development costs funded
by FSS. Select Harvests maintains the full
horticultural control and income from these
orchards. Post planting out of this Greenfield
acreage, the ratio between owned and
leased orchards across the portfolio will
be approximately 50:50.
FSS are a significant Australian
superannuation company who are at the
forefront of Australian super funds investing
in highly productive and valuable farmland.
Select Harvests are pleased to have secured
this relationship. The relationship delivers
secure long term funding allowing Select
Harvests to significantly grow almonds under
its control, whilst protecting EPS while the
orchards mature.
Select Harvests continues to seek mature
orchards to acquire and opportunities
to develop greenfield properties. These
initiatives, along with the outlook for the
business, place the company in a very
strong position.
Almond Division
The Almond Division generated an EBIT
of $87.5 million in FY15 (FY14 $30.3 million).
Almond kernel volume was 14,500 tonnes
(last year 10,500 tonnes) and average
almond price was A$11.45/kg (last year
A$8.50/kg).
While the FY15 harvest volume was 38%
larger, we were able to complete harvest
activities in 14 less days than FY14. Recent
initiatives such as geographic diversification,
investment in irrigation infrastructure,
a higher nutrient horticultural program,
increased harvest machinery matrix, night
harvesting and the Almond Dryer all assisted
in delivering this outcome. The dryer was
successfully used as a pre-conditioner for
processing, which along with other initiatives,
assisted 20% increased productivity at the
Carina West Processing Facility.
We continue to investigate methods to
improve yield, reduce volatility & risk and
minimize cost. Improving orchard productivity,
tree health and yield remain our focus.
05
www.selectharvests.com.au Chairman
& Managing
Director’s
Report
Continued
In the last 3 years we have
significantly lifted the
productive scale of the
business with the acquisition
of 2,205 HA (5,447 acres)
of almond orchards
Food Division
The Food Division generated an EBIT
of $6.8 million (last year $5.6 million).
The performance was an improvement
on last year, and shows there is good
potential in the Consumer Brands and
Industrial & Trading businesses. Industrial
& Trading grew through aligning with key
regional industrial customers and astute
trading. Consumer Brands grew through a
combination of new product development
and customer alignment – Lucky registered
July MAT market share of 39.8% – the
highest in 7 years. New distribution in
exports markets such as Malaysia, Japan,
Thailand and China have laid the foundation
for future export growth.
Operations
Commissioning of the Almond Dryer and
stage one of the Electricity Cogen Plant
was seamless and greatly assisted
productivity improvement at the Carina
West Processing Facility.
The recently announced Project Parboil is a
critical component of our strategic platform
to reduce cost and have a Best in Class
Supply Chain, along with Project H2E which
will deliver reliable, cheap and sustainable
power to our Carina West Processing Facility
through the conversion of waste product.
Project Parboil will establish Carina West
Processing Facility as a state of the art
almond value-add processing facility,
adjacent to the existing hulling and shelling
plant – this will not only reduce cost
and wastage, but will create new sales
opportunities as it increases currently fully
utilized capacity and will allow us to supply
customers who wish to buy almonds from
a peanut free facility.
Safety
Safety is a very important issue and
is viewed seriously by the Board. We
have commenced rollout of the ZERO
Harm OH&S strategy. The focus in the
next 12 months is to increase employee
engagement, identify and eradicate hazards.
Staff Recognition
The Chairman’s Awards are given annually
to employees considered to consistently
represent Select Harvests’ work and ethical
values. I am pleased to say that this year
Alison Box (Thomastown), Erika Banner
(Thomastown), Sia Mafi (Carina West) and
Mick Hore (Belvedere Orchard) were the
recipients of the Chairman’s Awards and
we congratulate each of them on their
contribution.
Capital investments in
the Almond Dryer, Cogen
Plant and Project Parboil
will improve quality and
productivity, reduce the
cost base and increase
the efficiency, capacity
and sustainability of our
supply chain
06
Select Harvests Annual Report 2015 Outlook
Despite higher almond prices in 2015,
continuing strong global demand has
ensured that the crop has been sold
and delivered to customers at those
higher prices.
Demand in major almond consuming
markets like the US and India remained
strong. Local evidence of this strong
demand is that 212 new products with
almond as an ingredient were launched
onto Australian supermarket shelves
in the 12 months to Feb 2015.
With modest carryover inventory and a
reduced current US crop outlook, pricing
remains strong. We look forward with
confidence to placing Select Harvests
2015/16 crop at attractive prices.
While we have a strong focus on growth,
we will maintain an even sharper focus
on driving improvement from our core
business, including:
• Roll out ZERO Harm OH&S strategy
• Improve yield and orchard performance
• Acquire orchards
• Implement greenfield program
• Implement Project H2E
• Implement Project Parboil
• Further development of our food business
• Implement consolidation of One Select
ERP program
The Board and Executive have refreshed our
strategy and established targets to ensure
the ongoing growth of Select Harvests.
We have a pipeline of growth initiatives
in our business and a range of projects to
sustainably grow scale, improve yields and
reduce cost whilst increasing the efficiency
of our business. The balance sheet is strong,
the company is well placed to capitalize
on the long term trend towards healthy
eating and particularly, the increasing global
consumption of almonds.
Thank you
Finally, we’d like to thank the team at
Select Harvests for continuing to raise the
bar in 2015. Their passion and relentless
commitment to lift performance through
efficient execution of strategy is becoming
part of Select Harvests’ DNA and will assist
in delivering future milestones. We look
forward to another exciting year of growth
and performance in 2016.
Michael Iwaniw Chairman
Paul Thompson Managing Director
07
www.selectharvests.com.au
Our Growth
Platform
karoth krak
ORCHARD HAND
almond diVision
9 YEARS
Strategic Objective & Activities
fy13 / completed
cOnTROl cRiTicAl mASS
OF AlmOnDS
Secure the critical mass of nuts needed
to maximize profitability and leverage
the global almond opportunity.
fy13 initiatives
• Acquired 521 HA (1,286 acres)
almond orchard
• Ceased WA investment
imPROve yielD
& cROP vAlue
Improve yield and overall crop value
by perfecting on-farm and farm
to factory practices.
• Restructured Horticulture Division
• Investments in Benchmarking/Tech.
• Improve efficiency/protect yield
• $500K frost fans
Be BeST in clASS
SuPPly cHAin
Continuously improve our supply chain,
achieving high quality, low cost and
optimum capital utilisation.
inveST in inDuSTRiAl
& TRADing DiviSiOn
Allocate resources to leverage our
trading skills and grow sales in the
industrial channel
TuRn AROunD PAckAgeD
FOOD BuSineSS
Develop a new model for the packaged
food category that will deliver sustainable
returns above the cost of capital.
Fix OuR SySTemS
& PROceSS
Develop the business systems and
processes required to be a global
industry leader.
engAge wiTH OuR PeOPle
& OuR STAkeHOlDeRS
Engage with investors and our industry
while developing the team required
to be a global industry leader.
• Restructured Operations Division
• Grew Industrial Division 40%
• Exited unprofitable Retail
Brand business
• Product Research/Collect Insights
• OHS improvement – LTI’s
dropped 60%
• Investor engagement – conferences,
site tours and road shows
We are making
significant progress
on implementation
of Select Harvests’
7 strategic platforms
& transition to a
fully integrated
agribusiness.
08
Select Harvests Annual Report 2015 Scale, Productivity & Risk Mitigation
During the year, the company announced a range of initiatives
focussed on enhancing scale and productivity, totalling
$78 million, including:
• Acquisitions – acquired 1,004 HA (2,481 acres) of planted
orchards ($55m)
• Almond Dryer – risk mitigation ($1m)
• Cogen Plant – electricity generation from orchard waste ($12m)
• Project Parboil – almond value-adding facility ($10m)
fy14 / completed
fy15 / completed
fy16 / ongoing
fy18
fy14 initiatives
fy15 initiatives
fy15+
• Acquired 275 HA (680 acres)
• Acquired 1,004 HA (2,481 acres)
planted orchard
planted orchard
• Acquired 405 HA (1,000 acres)
• Acquired 1,808 HA (4,465 acres)
unplanted
unplanted
• Acquired 6,215 ML high security water
• Replanted 207 HA (512 acres)
in Q3CY2014
• Acquired mature orchards
• Develop 2,024+ HA (5,000+ acres)
of greenfield almonds
• Planted 384HA (948 acres)
in Q3CY2015
• Total review of Horticultural assets
• Further $500K frost fans
• Additional harvest equipment
• Additional harvest equipment
• Biostimulants trial
• Trial catch & shake harvest
technology
• Increase Hort program to target
3.2T/HA (1.3T/acre) yield
• On farm drying
• Irrigation management
• Evaluate operational improvements
• High voltage network (Project H2E)
& refine proposals
Cogen Plant
• New Optical Sorter at Thomastown
• Carina West Dryer
• Reduce cost (Project Parboil)
• Refrigerated storage
• Biomass (Project H2E)
• Grew Industrial Division 24% through
local and SE Asia customer base
• Innovations assisted growth
• Expanding business with food
processors in local and SE
Asian markets
• Increase value adding
capacity (Project Parboil)
• Product Development – Innovation/
Renovation/Reformulation/Repackaging
• Brand relaunch – Sunsol & Lucky
• Multiple relaunches & new products
• Range rationalisation
• New distributors – Thailand
Smart Snax
& Malaysia
• Relaunch key brands
• Accelerate NPD rate
of branded business
• Distribution in SE Asia
• OHS improvement – LTI’s
• IT upgrade
dropped 73%
• New risk management framework
• New OHS policies/procedures
• Single Company ERP
• Reduce LTI’s by 25% Y on Y
• Hort 3 training for Farm Management
• Refreshed company website
• Introduction of employee
newsletters/intranet
• Further development of Performance
• Improve skill levels on farm
Review process
• Diversity Committee
& processing QA
• Employee diversity
09
www.selectharvests.com.au Almond
Division
unDeRlying eBiT ($m)
Fy14
30.3
Fy15
87.5
189%
The Almond Division delivered a great
result in FY15 with EBIT of $87.5 million,
up 189% on last year. This was driven
by increased volume of 14,500 tonnes
(FY14 10,500 tonnes) and a price
of $11.45/kg (last year $8.50/kg).
The company strategy requires improved
productivity and this was evident throughout
the Almond Division result.
• In the orchard, while we benefited from
a much better season than the prior
year, improved tree yield and health was
achieved due the higher nutrient program.
• Harvest operations, despite a 38% higher
volume (20% excluding acquisitions),
harvest was completed in 14 days less
than last year – protecting product
integrity. This was aided by the better
weather, but driven by company initiatives
of increased harvest equipment matrix
and inaugural night harvesting activities.
• An increased fertigation program is in
place which will enhance yields over
a 2 year time horizon.
• The orchard acquisitions have been
integrated smoothly and are transitioning
to the higher yield targets as planned.
Risk mitigation initiatives literally paid dividends.
• Despite 13 frost events during the year, there
was no loss associated with frost damage.
• Geographic orchard diversification has
meant that harvest equipment finished in
1 region that can be redeployed to assist
and speed the uncompleted harvest
in other regions.
• The investment in the Almond Dryer has
allowed us to pre-condition almonds,
improving the productivity of the
processing facility by 20%.
We will continue to seek out risk mitigation
initiatives to reduce the volume variance and
protect quality in our product.
During the financial year the company
continued to invest in the future scale
and productivity of the business with the
acquisition/planting/replanting program:
• Acquired 2 orchards totalling 1,004 HA
(2,481 acres) of planted almond orchards
• Planted 384 HA (948 acres) of greenfield
orchard
• Replanted 202 HA (500 acres) of older trees
• Replants and new plantings were at higher
densities than our older orchards
• A similar level of replants will happen in FY16,
prior to the commencement of the plant out
of the greenfield acreage in FY17 and FY18.
We continue to focus on increasing the
critical mass of almonds, through orchard
growth (mature acquisitions, greenfield
development), yield improvements and
value protection and enhancement.
gaVin eggmolesse
ORCHARD HAND
almond diVision
8 YEARS
incReASing ScAle
1,004
HA
DuRing THe yeAR we AcquiReD
2 PlAnTeD AlmOnD ORcHARDS
(2,481 AcReS)
totesia (sia) mafi
PRODUCTION PLANNER
almond diVision
7 YEARS
10
Select Harvests Annual Report 2015 Project Parboil will also deliver extra sales as
there are significant customers who will not
currently buy almond product from Select
Harvests as our almonds are value added in
our Thomastown facility that handles other
nuts, particularly peanuts. As the Almond
Value-Add Facility will be immediately
adjacent to the hulling and shelling facility,
logistics are simple and waste/ullage will be
significantly reduced.
Project H2E (biomass electricity Cogen Plant)
will drop the processing plant’s cost base by
20%, enhancing our competitive position.
The efficient use of almond waste product
(hull & shell) and orchard prunings, will
voluntarily reduce Select Harvests carbon
footprint by 23,645 tonnes.
The foundation of the business will be
permanently and sustainably enhanced with
the completion of this project in Q3 CY2016.
We will continue to invest to improve the
efficiency of our supply chain, refresh/
relaunch our brands, introduce new
products and packaging and access new
channels and markets. The Food Division
performance is consistent with plan and we
are optimistic on the future of this business.
Food
Division
unDeRlying eBiT ($m)
Fy14
5.6
Fy15
6.8
21%
TM
The Food Division delivered an improved
performance with EBIT of $6.8 million,
up 21% on FY14.
Increased sales of branded product, strong
sales to industrial food manufacturers, price
increases and astute commodity trading
offsetting reduced private label sales were
the foundations of this result.
There has been a focus on product
development and innovation during the year,
along with the introduction of new capability
in the management teams. Brands like
Lucky Smart Snax and Sunsol Muesli have
been undergoing innovation, renovation,
reformulation, repackaging and relaunching.
Our export growth strategy is underway
with the appointment of new distributors
in Thailand and Malaysia.
The investment in our Consumer Brands
is gaining traction, most obviously with
the Australian market share data for Lucky
Brand with July 2015 MAT of 39.8%
(36.8% July 2014).
The improved sales mix drove margin
improvement and this on the back of new
product launches – 17% of branded sales
are being generated from new products.
We will continue to introduce new products
and access new channels and markets.
The Industrial Business grew by 28%
through good trading and aligning with key
regional industrial customers.
New distribution into Malaysia, Japan,
Thailand & China will underpin the export
growth strategy which plays on our
integrated, completely in-house, end to end
supply chain delivering high value Australian
food products into high growth premium
markets that place significant value
on quality assurance and food security.
Project Parboil will deliver a dedicated
Almond Value-Add Facility and increased
capacity that will support this high growth
part of the business. With modern, in-line
value-add equipment replacing ageing
equipment in a less than optimal layout
at Thomastown, the cost savings, quality
improvement and ability to serve our
customers will be greatly enhanced.
gulsun okray
ASSISTANT
ACCOUNTANT
corporate
8 MONTHS
11
www.selectharvests.com.au People & Diversity
The company recognises and embraces
the advantages, opportunities and
responsibilities of a diverse workforce,
in all its various forms.
Select Harvests has a diverse and longstanding
workforce (including age, cultural, ethnic,
gender, religious and tenure diversity) of
approximately 270 permanent employees and
a seasonal workforce peaking at 500 people
across regional and urban Australia.
With 37% of its workforce born outside
of Australia, Select Harvests has specific
experience in the employment of people
of many different ethnicities.
With average tenure of 5 years across the
business (3 months-30 years) and employee
age ranging between 18-60+ years, this
provides an implicit employee statement
of endorsement on their value of the
Select Harvests culture and quality of the
employment conditions.
The company’s Diversity Policy is available
on the website (under Governance). During
the year Select Harvests established a
Diversity Committee comprising employees
from all functions of the business.
Select Harvests 2015 Diversity Initiatives include:
• An empowered and effective Diversity
Committee
• Diversity KPIs for MD & GMHR
• Negotiating flexibility provisions
in its enterprise agreements
• Ensuring flexible work arrangement
opportunity for any employees
• Ensuring recruitment practices are
open, fair and unbiased
• Conducting performance reviews that
encourage development opportunity
consideration
• Conducting a Pay Parity Review
The Director’s Report (detailed later in the
Annual Report) assesses Select Harvests
performance against its 2014/15 Diversity
Objectives and outlines the 2015/16 Objectives.
All objectives were met in 2014/15.
Select Harvests Annual Report to the
Workplace Gender Equality Authority
(WGEA) highlighted:
• An 8% increase in female participation
at senior to middle management level roles.
• Females comprise 30% of senior
to middle management level roles.
• Females comprise 22% of other manager
level roles.
• Females comprise 28% of non-
managerial roles.
The company is making progress and
is well advanced in meeting its gender
diversity targets by 2018. Select Harvests
is an organisation that has great diversity
– beyond its regulatory responsibilities the
company embraces diversity in all its forms,
because it is the right and just thing to do
and it makes good sense. Diversity helps to
make Select Harvests the company that it is.
12
reece merlin
IT SUPPORT
almond diVision
7 YEARS
ethnic and gender diVersity
37%
8%
workforce 37% OF OUR
WORKFORCE WERE BORN
OUTSIDE OF AUSTRALIA.
workplace An 8% incReASe
in FemAle PARTiciPATiOn
AT SeniOR TO miDDle
mAnAgemenT level.
Select Harvests Annual Report 2015 OH&S,
Sustainability
Occupational Health & Safety (OH&S)
The health and safety of our people
comes first – Select Harvests’ goal
is to have ZERO Harm.
Safety is the most serious matter and is
everyone’s responsibility. OH&S is reported
to the Executive and Board monthly and
all employees have OH&S KPI’s.
After a significant reduction in the LTIF in 2014,
it increased back to industry average in 2015.
Management has begun implementing a
strategy and plan based around ZERO Harm.
We seek to understand, manage and where
possible, eliminate the risks in our business.
We have procedures and controls in place
plus provide training to ensure a safe and
healthy workplace.
In 2015 the focus was on educating,
encouraging and maintaining a proactive
safety culture by identifying workplace
hazards. Building on these foundations,
future improvement will be driven by
increased emphasis on reporting leading
indicators of safety and more regular and
extensive safety audits.
Select Harvests is committed to continuously
improving OH&S and ensuring a healthy and
safe working environment for all employees.
safety and sustainability
ZERO
HARm
CO2
23,645t
safety OuR gOAl iS ZeRO HARm.
sustainability BiOmASS POweR
geneRATiOn PlAnT will ABATe 23,645
TOnneS OF gReenHOuSe emiSSiOnS.
Sustainability and environment
Sustainable, responsible business
practices are an integral part of
delivering enduring value to Select
Harvests’ stakeholders.
Select Harvests is committed to minimising
its environmental impact and contributing
favourably to the environment we operate in.
Our orchards are a natural carbon sink and
over the course of their 25 to 30 year life,
significantly increase their biomass. During
the year the Board approved an investment
in a biomass power generation plant to reduce
our reliance on external power and add value
to our waste. This $12.0M project will be
commissioned by September 2016 and fuelled
by almond hull, shell and orchard waste, will
abate 23,645 tonnes of greenhouse emissions.
Other 2015 activities include:
• selling of waste to be reused as stock
feed and mulch;
• office and orchard waste recycling;
• reduction of gas consumption due
to removing large afterburners;
• installation of low energy lighting (LED)
at our factories and farms;
• recycling of chemical drums and plastic;
• upgrade of irrigation system to reduce
water consumption
We have an evidence based continuous
improvement program in place to improve
water use efficiency and to optimise the value
created per mega litre of water consumed.
Select Harvests holds licences issued
by the Environmental Protection Authority
(EPA), which regulate the management of
discharge to the air and stormwater runoff
associated with the operations. In 2014/15,
no environmental breaches have been
notified by the EPA.
The company is committed to preserving
native vegetation and wildlife through
our wildlife management plan. We are a
signatory of the National Packaging Industry
Covenant, which aims to deliver more
sustainable packaging, increased recycling
rates and reduced packaging litter.
Select Harvests will continue to implement
progressive environmentally sustainable
projects and aim to be a leader in our industry.
communities
Helping communities to thrive is part
of our culture. We recognise the positive
impact we can have on communities,
while creating value for our business.
Key community initiatives during 2014/15:
• Sponsorships and donations to 35 local
community organisations
• School career expos and work inspiration
programme (Robinvale College)
13
www.selectharvests.com.au Executive Team
PAul
cHAmBeRS
Chief Financial
Officer and Company
Secretary
Joined Select
Harvests as Chief
Financial Officer and
Company Secretary
in September 2007.
He is a Chartered
Accountant and
has over 25 years
experience in
senior financial
management
roles in Australian
and European
organisations,
including corporate
positions with the
Fosters Group, and
Henkel Australia and
New Zealand. Paul
is a Graduate of the
Australian Institute of
Company Directors.
BRuce
vAn TweST
General Manager
Operations
PeTeR
ROSS
General Manager
Horticulture
lAuRence
vAn DRiel
General Manager
Trading and Industrial
mARk
evA
General Manager
Sales & Marketing –
Consumer Products
cAROlyn
BARBuTO
General Manager
Human Resources
Bruce joined Select
Harvests in 2012.
With a deep working
knowledge of
complex ‘end to end’
supply chains, Bruce
has been a highly
successful contributor
within the executive
management teams
of large-scale
corporates across
food production,
apparel, industry
consumables
and suppliers to
automotive industries.
Prior to joining Select
Harvests he was
Operations Director
at Kraft Foods, CEO
of Bizwear & Alert
Safety and Director
Supply, ANZ at SCA
Hygiene Australasia.
Peter joined Select
Harvests in 1999.
He has held the
positions of Plant
Manager, Project
Manager and
General Manager
for the processing
area of the Almond
Division before being
appointed to the role
of General Manager
for Horticulture in
November 2012.
Prior to joining
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 30 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.
Mark joined Select
Harvests in 2012.
Mark has strong
FMCG experience
across branded,
private label and
commodity products
with a track
record of driving
profitable sales
growth. He joined
Select Harvests
from SCA Hygiene
where he was the
Director of Sales
and Marketing,
Consumer. He
was previously
General Manager
– Marketing, Sales
and Innovation at
Bulla Dairy Foods.
Carolyn joined
Select Harvests
in November 2014.
She has acquired
comprehensive
Human Resource
experience with past
roles in the following
organisations: CSL
Ltd, Colonial Mutual
and more recently
The Nuance Group.
She is a dedicated
HR professional with
strong leadership,
strategic insight and
operational skills.
14
Select Harvests Annual Report 2015
Board of Directors
micHAel
iwAniw
Chairman
PAul
THOmPSOn
Managing Director
ROSS
HeRROn
Non-Executive
Director
micHAel
cARROll
Non-Executive
Director
FReD
gRimwADe
Non-Executive
Director
PAul
RiORDAn
Non-Executive
Director
Michael Iwaniw
was appointed
as Chairman of
Select Harvests
in November 2011
following a career
spanning 40
years in Australian
agribusiness. He
became Managing
Director of the
Australian Barley
Board (ABB) in 1989,
retiring from the
role some 20 years
later. As Managing
Director he led the
transition from a
statutory authority
to a publicly listed
company, growing
the business into an
ASX 100 company
with a market
capitalisation of
A$1.6 billion. Michael
has acted as a Non
Executive Director
of a number of
Companies. He is
currently Chairman
of Australian Grain
Technologies and
a Non Executive
Director of Australian
Grain Growers
Cooperative. He was
also a Non Executive
Director of Australian
Renewable Fuels Ltd
in the last 3 years.
Michael is a member
of the Remuneration
and Nomination
Committee.
Paul Thompson
joined Select
Harvests as
Managing Director
in July 2012. He
is an experienced
executive with
over 30 years in
management.
Before joining Select
Harvests Paul was
President of SCA
Hygiene Australasia
responsible for a
$600 million turnover
business across all
of its divisions (FMCG,
Pharmacy, Industrial/
Foodservice &
Healthcare) and
overseeing leading
brands including
Sorbent and
Handee. Paul is
a member of the
Australian Institute
of Company
Directors and
has formerly held
positions as a
Director of the
Australian Food
& Grocery Council
and councillor in the
Australian Industry
Group.
Ross Herron
joined the Board
on 27 January
2005. A Chartered
Accountant,
he retired as a
Senior Partner of
PriceWaterhouse-
Coopers in
December 2002.
He was a member
of the Coopers
& Lybrand (now
PriceWaterhouse-
Coopers) Board
of Partners where
he was National
Deputy Chairman,
and Melbourne
office Managing
Partner for six years.
He also served on
several international
committees within
Coopers & Lybrand.
He is Chairman of
GUD Holdings Ltd,
Deputy Chairman
of Insurance
Manufacturers
Australia Ltd and
a non-executive
director of Kinetic
Superannuation Ltd.
Ross is Chairman of
the Audit and Risk
Committee.
Fred Grimwade
was appointed
to the Board on
27 July, 2010. Fred
is a Principal and
Director of Fawkner
Capital, a specialist
corporate advisory
firm, and works
with a wide range of
companies in a board
or advisory capacity.
He is Chairman of
CPT Global Ltd and
Troy Resources Ltd
and is also a director
of Australian United
Investment Company
Ltd, XRF Scientific
Ltd and NewSat
Ltd. He has held
general management
positions with
Colonial Agricultural
Company, Colonial
Mutual Group,
Colonial First State
Investments Group,
Western Mining
Corporation and
Goldman, Sachs &
Co. He is a member
of the Audit and
Risk Committee and
the Remuneration
and Nomination
Committee.
Paul Riordan was
appointed to the
Board on 2 October
2012. He has
worked in various
rural enterprises
during his career,
in Australia and
the United States,
including small seed
production, large-
scale sheep and
grain organisations,
and beef cattle. Paul
is a co-founder and
Executive Director
(Operations) of
Boundary Bend
Olives, Australia’s
largest vertically
integrated olive
company. Paul has
a Diploma of Farm
Management from
Marcus Oldham
Agricultural College,
Geelong and has
extensive operational
and business
experience in
vertically integrated
agribusinesses.
He is a member of
the Audit and Risk
Committee.
Michael joined the
Board on 31 March
2009. He has
worked for a range of
food and agricultural
businesses in a
board, advisory and
executive capacity.
Other board
positions include
Sunny Queen
Australia, Rural
Funds Management,
Tassal, Paraway
Pastoral Company
and the Gardiner
Dairy Foundation.
Former board
positions include
Queensland Sugar,
Warrnambool
Cheese and Butter,
the Australian Farm
Institute and Meat
& Livestock Australia.
Executive experience
includes establishing
and leading National
Australia Bank’s
Agribusiness
division, a senior role
in NAB’s Investments
and Advisory unit
and business
development roles
with international
animal health
and crop care
companies. He
is Chairman of
the Remuneration
and Nomination
Committee.
15
www.selectharvests.com.au
Historical Summary
select harVests consolidated
results for years ended 30 June
2006
2007
2008
2009
2010
2011
2012
2013
2014
*
2015
Total sales
217,866
229,498
224,655
248,581
238,376
248,316
246,766
190,918
188,088
223,474
Earnings before interest and tax
38,369
40,549
27,120
26,827
26,032
22,612
(2,495)
5,241
31,288
85,845
Operating profit/(loss) before tax
37,903
40,014
25,384
23,047
23,603
18,473
(8,743)
198
26,833
80,514
26,492
28,098
18,130
16,712
17,253
17,674
(4,469)
2,872
21,643
56,766
Net profit 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
(cents)
(%)
(cents)
(cents)
(%)
(%)
67.1
26.1
53
10
100
80.0
71.0
29.4
57
–
100
80.0
46.7
19.3
45
–
100
96.7
Net tangible assets per share
($)
1.83
1.57
1.41
Net interest cover
Net debt/equity ratio
Current asset ratio
balance sheet data as at 30 June
(times)
82.30
75.80
15.60
(%)
(times)
1.3
1.82
1.7
1.32
49.7
0.87
42.6
16.6
12
–
100
28.2
1.56
7.10
51.9
0.79
43.3
15.2
21
–
100
48.5
1.87
10.70
39.6
1.44
33.7
10.5
13
–
(7.9)
(2.8)
8
–
5.0
1.8
12
–
100
100
100
37.5
12.3
20
–
55
82.9
19.8
50
–
–
38.6
(101.3)
239.8
53.5
60.3
2.17
6.70
43.3
1.96
2.19
(0.4)
41.7
1.42
2.14
1.0
49.6
1.61
2.38
6.9
54.0
4.02
3.35
15.9
38.2
3.36
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
shareholders’ equity
Share capital
Reserves
Retained profits
72,455
70,983
77,014
81,075
83,993
91,228
76,936
123,303
136,639
207,782
79,421
89,170
118,934
133,884
145,612
214,352
202,371
180,542
194,080
280,130
151,876
160,153
195,948
214,959
229,605
305,580
279,307
303,845
330,719
487,912
39,905
53,680
88,162
102,348
58,469
46,454
54,369
76,800
33,988
61,893
10,490
10,969
13,715
11,735
57,515
90,311
64,608
67,540
121,325
138,632
50,395
64,649
101,877
114,083
115,984
136,765
118,977
144,340
155,313
200,525
101,481
95,504
94,071
100,876
113,621
168,815
160,330
159,505
175,406
287,387
52,665
41,953
44,375
46,433
47,470
95,066
95,957
97,007
99,750
170,198
12,691
11,273
11,235
12,949
11,327
11,201
10,472
9,144
12,190
12,818
36,125
42,278
38,461
41,494
54,824
62,548
53,901
53,354
63,466
104,371
Total shareholders’ equity
101,481
95,504
94,071
100,576
113,621
168,815
160,330
159,505
175,406
287,387
other data as at 30 June
Fully paid shares
(000)
39,708
38,739
39,009
39,519
39,779
56,227
56,813
57,463
57,999
71,436
Number of shareholders
3,369
2,953
3,319
3,296
3,039
3,227
3,359
3,065
3,779
4,328
select harvests’ share price
– close
($)
13.02
11.60
6.00
2.16
3.46
1.84
1.30
3.27
5.14
11.00
Market capitalisation
516,998
449,372
234,054
85,361
137,635
103,458
73,857
187,904
298,115
785,796
$’000 (except where indicated)
roshni chand
QUALITY
ASSURANCE
TEAM LEADER
food diVision
13 YEARS
* The 2014 result has been restated due to the early adoption
of changes to Accounting Standards, AASB 116 Property,
Plant and Equipment, and AASB 141 Agriculture, impacting
‘bearer plants’.
16
Select Harvests Annual Report 2015 Financial Report
Contents
18 Directors’ Report
37 Auditor’s Independence Declaration
38 Corporate Governance Statement
44
Income Statement
45 Statement of Comprehensive Income
46 Balance Sheet
47 Statement of Changes in Equity
48 Statement of Cash Flows
49 Notes to the Financial Statements
84 Directors’ Declaration
85
Independent Auditor’s Report to the
Members of Select Harvests Limited
87 ASX Additional Information
17
www.selectharvests.com.au Directors’ Report
The directors present their report together
with the financial report of Select Harvests
Limited and controlled entities (referred to
hereafter as the “Company”) for the year
ended 30 June 2015.
DIRECTORS
The qualifications, experience and special
responsibilities of each person who has
been a director of Select Harvests Limited
at any time during or since the end of the
financial year is provided below, together
with details of the company secretaries as at
the year end. Directors were in office for this
entire period unless otherwise stated.
18
M Carroll, B AgSc, MBA and FAICD
(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 Paraway Pastoral
Company Ltd, Sunny Queen Australia Pty
Ltd, Gardiner Dairy Foundation, Rural Funds
Management Ltd and Tassal Ltd. He has
18 years experience in banking and finance,
having established and led the Agribusiness
division at 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. Former board
positions include Warrnambool Cheese
and Butter Ltd and Queensland Sugar Ltd.
He is Chairman of the Remuneration and
Nomination Committee.
Interest in Shares: 3,202 fully paid shares.
F S Grimwade, B Com, LLB (Hons),
MBA, (Non-Executive Director)
Appointed to the board on 27 July, 2010.
Fred is a Principal and Director of Fawkner
Capital, a specialist corporate advisory firm,
and works with a wide range of companies
in a board or advisory capacity. He is
Chairman of CPT Global Ltd and Chairman
of Troy Resources Ltd and is also a director
of Australian United Investment Company
Ltd, XRF Scientific Ltd and NewSat Ltd.
He has held general management positions
with Colonial Agricultural Company,
Colonial Mutual Group, Colonial First
State Investments Group, Western Mining
Corporation and Goldman, Sachs and Co.
He is a member of the Audit and Risk
Committee and the Remuneration and
Nomination Committee.
Interest in shares: 102,804 fully paid shares.
NAMES, QUALIFICATIONS,
EXPERIENCE AND SPECIAL
RESPONSIBILITIES
M Iwaniw, B Sc, Graduate Diploma
of Business Management, MAICD
(Chairman)
Appointed to the board on 27 June 2011
and appointed Chairman 3 November 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 is a Chairman
of Australian Grain Technologies and a
non-executive director of Australian Grain
Growers Cooperative. He was formerly
a non-executive director of Australian
Renewable Fuels Ltd. He is a member of the
Remuneration and Nomination Committee.
Interest in shares: 188,087 fully paid shares.
P Thompson (Managing Director
and Chief Executive Officer)
Appointed the Managing Director and Chief
Executive Officer (CEO) of Select Harvests
Limited on 9 July 2012. Has over 30 years of
management experience. Formerly President
of SCA Australasia, part of the SCA Group,
one of the world’s largest personal care and
tissue products manufacturers. He is a
member of the Australian Institute of
Company Directors and has formerly held
positions as a Director of the Food and
Grocery Council and councillor in the
Australian Industry Group.
Interest in Shares: 37,111 fully paid shares.
Select Harvests Annual Report 2015 COMPANY SECRETARIES
CORPORATE INFORMATION
P Chambers, BSc Hons, CA,
GAICD (Chief Financial Officer
and Company Secretary)
Joined Select Harvests as Chief Financial
Officer and Company Secretary in September
2007. He is a Chartered Accountant and has
over 25 years experience in senior financial
management roles in Australian and
European organisations, including corporate
positions with the Fosters Group, and
Henkel Australia and New Zealand. He is
a member of the Australian Institute of
Company Directors.
Interest in shares: 76,511 fully paid shares.
V Huxley, BCom, CA, (Assistant
Company Secretary)
Appointed Assistant Company Secretary
in November 2014. She is a Chartered
Accountant with over 15 years experience
in senior financial management and
corporate advisory roles.
Interest in shares: Nil.
Nature of operations and
principal activities
The principal activities during the year
of entities within the Company 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 Company employed 564 full time
equivalent employees as at 30 June 2015
(2014: 415 full time equivalent employees).
Full time equivalent employees include:
executive, permanent, contractor and
seasonal (casual and labour agency hire)
employment types.
R M Herron, FCA and 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 and Lybrand (now
PricewaterhouseCoopers) Board of Partners
where he was National Deputy Chairman
and was the Melbourne office Managing
Partner for six years. He also served on
several international committees within
Coopers and Lybrand. He is Chairman of
GUD Holdings Ltd, Deputy Chairman of
Insurance Manufacturers Australia Limited
and a non-executive director of Kinetic
Superannuation Ltd. He is Chairman of
the Audit and Risk Committee.
Interest in Shares: 49,879 fully paid shares.
P Riordan (Non-Executive Director)
Appointed to the board on 2 October 2012.
He has worked in various rural enterprises
during his career, in Australia and the United
States, including small seed production,
large-scale sheep and grain organisations,
and beef cattle. He is co-founder and
Executive Director (Operations) of Boundary
Bend Olives, Australia’s largest vertically
integrated olive company. Paul has a
Diploma of Farm Management from
Marcus Oldham Agriculture College,
Geelong and has extensive operational
and business experience in vertically
integrated agri-businesses. He is a
member of the Audit and Risk Committee.
Interest in shares: 10,000 fully paid shares.
19
www.selectharvests.com.au Directors’ Report
Continued
OPERATING AND
FINANCIAL REVIEW
Highlights and Key developments
during the year
In the financial year ended 30 June 2015
Select Harvests has delivered a record
Net Profit After Tax (NPAT) following on
from the strong result last year.
The focus this year by the Board, Executive
Management, and employees, has been on
consolidating the strong foundations of the
business in advancing the implementation
of the strategic priorities as set out in the
7 Strategy platforms which were defined
in the 5 year plan established in 2013.
Results Summary and Reconciliation
Progress remains ahead of this plan, and
further commentary on this is included
later in the review.
Financial Performance Review
Profitability
Reported Net Profit After Tax (NPAT) is
$56.8 million, which compares to a reported
Net Profit After Tax (restated for the impact
of accounting policy change) of $21.6 million
in 2014. Earnings Before Interest and Taxes
(EBIT) is $85.8 million, which compares to
EBIT of $ 31.3 million (restated for the impact
of accounting policy change) in 2014.
Adjusting for the impact of acquisition
transactions costs of $3.8 million incurred
in FY15, underlying EBIT is $89.6 million,
and underlying NPAT is $59.4 million.
The impact of the accounting policy change
arises through the Company’s decision to
early adopt the requirements of amendments
to AASB 116 Property, Plant and Equipment
and AASB 141 Agriculture, on the
accounting treatment of Bearer Plants
(the value of almond trees). Note 1 (ad)
to the Financial Statements sets out the
background and impact of this change.
Further commentary on the impact of
this change is set out below.
To better understand the underlying
performance of the business in comparison
to last year, the impact of adjusting items
is set out in the table below:
$ 000’S
EBIT ($000’s)
Almond Division (2)
Food Division
Corporate Costs
Operating EBIT
Interest Expense
Net Profit Before Tax
Tax Expense
Net Profit After Tax
Earnings Per Share
REPORTED RESULT (AIFRS)
UNDERLYING RESULT
FY15
83,713
6,817
(4,685)
85,845
(5,331)
80,514
(23,748)
56,766
82.9
FY14 (1)
30,275
5,644
(4,631)
31,288
(4,455)
26,833
(5,190)
21,643
37.5
FY15
87,503
6,817
(4,685)
89,635
(5,331)
84,304
(24,855)
59,419
86.8
FY14 (1)
30,275
5,644
(4,631)
31,288
(4,455)
26,833
(5,190)
21,643
37.5
(1) The FY14 Result has been restated as required by the early adoption of amendments to Accounting Standards AASB 116 and AASB 141. In summary:
• EBIT in the FY14 period has been restated to charge additional depreciation of $4.5 million, and remove the impact of the biological fair value adjustment
of $6 million, with a net reduction of EBIT of $10.5 million.
If the change to the accounting standards had not been adopted:
•
the FY14 EBIT would be $ 41.8 million, and NPAT would be $ $29.0 million, and EPS would have been 50.2 cents (as reported in last year’s financial
statements);
•
the reported FY15 EBIT in the Almond Division has been charged with $5.5 million of additional depreciation;
• The FY15 underlying EBIT would have been $95.1 million, and underlying NPAT would have been $ 63.2 million, and underlying EPS would have been
92 cents per share (assuming that there had been no change to the fair value of trees).
(2) The adjustment to the reported Almond division EBIT in FY15 relates to acquisition transaction costs of $3.8 million to exclude these costs from the underlying
EBIT in the period.
Any further commentary set out below reviews divisional performance on a like with like basis, taking into account the impact of the change
in accounting standards referred to above.
20
Select Harvests Annual Report 2015
Almond Division Profitability
Revenues of $ 115.3 million, compared
to $88.0 million in 2014. The increase in
revenues is driven by the realised sales of
the 2014 and 2015 crop in the financial year,
with an increase in volumes and at almond
prices higher than average prices achieved
in the previous financial year.
Underlying EBIT is $ 87.5 million which
compares to underlying EBIT of $30.3 million
last year. This result is driven by the valuation
of the 2015 crop, based on a yield of 14,500
MT and an almond price projection of
$11.45/kg. This is partially offset by the
lower realised value of the 2014 crop
achieved on completion of the processing
and selling through the 2014 crop, which
was impacted by poor weather during
the harvest in that year.
Food Division Profitability
Revenues of $138.8 million compare to
$117.9 million in 2014, an increase of
+17.7%. EBIT of $6.8 million, compares
to $5.6 million in 2014. The increase
in revenues and EBIT is driven by the
combined impact of increased sales of
branded products, strong sales to industrial
food manufacturers, increases in commodity
trading, offset by reduced sales in private
label. A continuation in the improved sales
mix during the year has again improved the
overall quality of earnings, in spite of the
challenge of increased raw material cost,
and a tough pricing environment in this
segment. The Food Division remains on
target with the planned strategy to improve
overall returns year on year.
Interest Expense
Interest expense has increased to
$5.1 million in FY15 compared to $4.5 million
in FY14, due to a higher average debt level
arising from investing cash flows incurred in
FY15, and an increase in working capital
associated with the almond orchards
acquired in the period.
Balance Sheet
Net assets at 30 June 2015 are
$287.4 million, compared to $175.4 million
last year (restated for the impact of changes
to accounting standards).
The balance sheet includes the impact of
$99.9 million of investing cash out-flows,
comprising almond orchard acquisitions,
permanent water purchases, and other
capital expenditures incurred during the
Financial year, which were funded by a
combination of increased new equity
($64.7 million raised from a placement and
Share Purchase Plan), and increased debt.
Net working capital has increased by 72%.
As summarised below, the main increase
relates to the value of inventory, which
comprises the fair value of the unsold 2015
almond crop, which is significantly higher
than at the corresponding period last year,
due to the combined impact of higher yield
and higher almond price valuation.
$000’s
Trade and other receivables
Inventories
Trade and other payables
Net working capital
Cash flow and Net Bank Debt
Dividends
Net bank debt at the 30 June 2015 is
$109.7 million, with a gearing ratio (net bank
debt/net assets) of 38.2%. Operating cash
in-flow in the financial year is $30.4 million,
compared to $23.1 million last year. The
improvement in operating cash in-flow is
mainly driven by the cash flows derived from
the proceeds on selling through the 2014
crop, and sales to date of the 2015 crop.
Investing cash out-flows of $99.9 million are
a result of investment in the acquisition of
almond orchards during the first half of the
year, the commencement of construction of
the cogeneration plant, the development of
948 acres (384 hectares) of new plantings
at Allinga in South Australia, replanting of
512 acres (207 hectares) of older orchards,
and additional investment in harvest
equipment and risk mitigation.
An unfranked final dividend of 35 cents
per share has been declared, resulting in
a total dividend of 50 cents per share. This
compares to a total dividend of 20 cents
per share in FY14.
Strategy Implementation
Significant progress has been made on the
implementation of the Company strategy.
Set out below is a report on progress
against the 7 identified platforms, which
have been designed to chart out the growth
objectives of the Company.
2015
60,082
142,354
2014
39,135
83,018
(31,273)
(22,693)
171,163
99,460
1. To control a critical mass of almonds:
at the core of the Company strategy has
been to expand the almond acreage to
benefit from the fundamentals of the
global almond market, with a focus on
growth through acquisition, and green
field development projects.
• On 24 August 2014, the company
announced the acquisition of 2 new
almond orchards:
– Amaroo orchards near Renmark
in South Australia, were acquired
for $52.5 million, which included
2,011 acres (814 hectares) of
planted almond trees, plus vacant
land suitable for planting of
almonds, plus 6,215 ML of high
security water entitlements;
– Mullroo orchards near Lake
Culluleraine, Victoria, were
acquired for $8.5 million, which
included 434 acres (176 hectares)
of planted almond trees, and land
suitable for planting of almonds;
21
www.selectharvests.com.au Directors’ Report
Continued
OPERATING AND FINANCIAL REVIEW Continued
• On 31 August 2014 the company
settled on the purchase of vacant
land at Mendook, near Euston,
Northern Victoria, close to the existing
Company operations, of which
approximately 1,600 acres (647
hectares) is suitable for a greenfield
almond development project;
During the year the company has
evaluated a range of funding options
to support an expansion of green field
almond orchards. On 20 August, 2015,
the Company entered into a partnership
with First State Superannuation, under a
lease structure, designed to secure long
term funding to support the Company’s
green field almond orchard expansion
plan. This structure will enable future
production to be significantly enhanced
whilst maintaining prudent capital
management ratios during the
development period of these
new orchards;
2. To improve yield and crop value:
the activities during the year remained
focused on improvement of on farm
and farm to factory practises, aimed
at improving productivity and product
quality. This includes benchmarking
studies, research and development
into new varieties, and training and
development of employees;
• During the year 512 acres (207
hectares) of existing almond
orchards were removed with a plan
to replant older non performing
orchards with new varieties and
densities, to optimise future
production capacity;
• During the year, there has been
increased investment in increased
harvest equipment, to support night
harvesting, on farm and in factory
drying technology, and a focus on
mitigating risk (eg insects), and
upgrading of irrigation systems;
• The Company continued to invest in
the core farming programs aimed at
increasing long term tree health and
yield potential of the orchard portfolio;
22
3.
Implement best in class supply
chain: Develop a manufacturing and
supply chain footprint which optimises
geographical location, efficiency and
cost, maximises quality and customer
service, whilst ensuring an economically
and environmentally sustainable use of
by products;
• An investment of approximately
$12 million has been approved
to design and construct a
Co-generation plant at the Carina
West processing facility in Northern
Victoria. This plant will convert by
product from almond production
(hull and orchard waste materials)
in an environmentally sustainable
way to create energy to operate the
processing plant and nearby almond
orchards. This will generate significant
annualised costs savings once
fully operational, with the benefits
anticipated to be realised from the
2017 financial year onwards;
• An investment of $10 million has
6.
been approved to develop a state
of the art almond value added
processing facility which will enable
the consolidation of certain almond
production activities onto a single
pathogen free site at the Carina
West processing facility in Northern
Victoria. The ability to increase
production capacity and utilise best
in class technologies will open up
new markets for the Company
as well as enabling productivity
improvements to be realised;
4.
Invest in the industrial and trading
division: Leverage the competencies
and capacity to supply almonds and
other nut ingredients to export and
domestic markets, including food
manufacturing channels, through
investment in capability and marketing.
• The growth of the industrial
business, through the supply of
processed almond to ingredient
manufacturers, continues to remain
strong, with growth in both domestic
and export markets. The committed
investment in new manufacturing
capacity and technology on a
pathogen free site at Carina West
will enable increased reach into
new customers and markets, further
supporting the profitable growth
in this part of the business.
5. Turnaround Packaged Food Division:
Focus on growing brand values by
investing in insights, innovation and
product development, brand image
and awareness, and improve position
and scope in new channels and
markets, such as food service, health,
and export markets, with an absolute
focus on margin management and
return on investment.
• During the year this part of the
business continued on its path
to improve the margin mix and
economic returns. Revenues in
private label and non-core brands
have declined, through the exiting
of lower margin business, offset by
the improved sales and margins in
the branded business;
•
Investment in organisation capability,
and New Product development
has continued;
• Re-launching key brands.
Improve our systems and processes:
Develop internal business systems and
structures to enable a more integrated
based business focus, aligning all
activities and functions around effective
sales and operations planning, IT
systems, policies and procedures,
including risk management and
environmental sustainability
• The integration of an end to
end supply chain process has
commenced through the
implementation of a new Enterprise
wide IT system, through the 1Select
program. Through common
processes, all parts of the business
from farm to consumer will be better
connected and aligned towards
improved control and management
processes. It is anticipated the
program will take approximately
12 months to implement;
7. Engage with our people and
stakeholders: Ensure maintenance of
a safe working culture and environment;
drive a culture of transparency,
cooperation and accountability across
the business; improve engagement with
investors, shareholders, government
and industry bodies; and develop
our human capital plan for high
performance and orderly succession.
Select Harvests Annual Report 2015
• The focus on Safety has continued
to be a number one priority in the
business. This is specifically referred
to in the section below;
• Employee communication and
performance management
processes are now fully rolled out,
with a high performance culture
being developed in the company;
• External communications have
remained a focus, including with
the investment community;
• Select Harvests is now an ASX 200
Listed Company, and has 8 analysts
covering the stock;
• During the year, the company
established a Diversity Committee,
which comprises management and
employees from all parts of the
business. Its aims are to enhancing
the focus on the benefits of a diverse
workforce, and advance processes
which measure the benefits
of diversity.
Corporate Social Responsibility
Occupational Health and Safety
(OH&S)
Select Harvests recognises that the health
and safety of our people comes first, our
goal is to have ZERO Harm. Our strategy is
to understand, manage and where possible,
eliminate the risks in our business. We have
procedures and controls in place plus
provide training to ensure a safe and
healthy workplace.
Disappointingly after a 70% reduction in Lost
Time Injury Incident Frequency (LTIF) to 15.7
last year, this year our LTIF has increased to
26.1. Management has developed a strategy
and plan based around ZERO Harm,
implementation will commence in the
second quarter of the 2015/16 financial year.
The OH&S Committee has responsibility
across all Select Harvests sites, with each
site having its own Committee. All employees
have OH&S KPIs. OH&S is reported to the
Executive and Board monthly.
The focus in 2014/15 has been on educating,
encouraging and maintaining a proactive
safety culture by identifying workplace
hazards. Our goal is to prevent accidents
before they happen. This is being driven
by increasing the emphasis on reporting
“leading” indicators of safety such as
hazards and near misses, and more
extensive safety audits and including safety
on all daily tool box meetings. The number
of hazards identified has increased by 100%.
To reinforce this all senior employees must
have ensured we had the foundations of
safe working environment in place before
being entitled to participate in the annual
incentive program.
Select Harvests is committed to
continuously improve in OH&S and ensure
a healthy and safe working environment for
all employees. At Select Harvests safety is
everyone’s responsibility.
Sustainability and Environment
Select Harvests believe sustainable and
responsible business practices are critical to
delivering value to our stakeholders. Select
Harvests is committed to minimising our
environmental impacts and contributing
favourably to the environment in which
it operates, ensuring its practices are
communicated openly and transparently
to all stakeholders, including shareholders,
customers, suppliers, employees and
regulatory bodies.
At the core of our activities, we grow trees
which over the course of their 25 to 30 year
life increase their biomass and are a natural
carbon sink. We recognise that we are a
large user of irrigation water and have an
evidence based continuous improvement
program in place to improve water use
efficiency and to optimise the value created
per mega litre of water consumed.
Recent activities include:
• selling of waste to be reused as stock
feed and mulch;
• office and orchard waste recycling;
• reduction of gas consumption due to
removing large afterburners;
•
installation of low energy lighting (LED)
at our factories and farms;
• recycling of chemical drums and plastic;
• upgrade of irrigation system to reduce
water consumption
During the year the Board approved
investment in a biomass power generation
plant to reduce our reliance on external
power and add value to our waste. This
$9.2 million project will be commissioned
by September 2016 and fuelled by almond
hull, shell and orchard waste will abate
23,645 tonnes of greenhouse emissions.
Select Harvests has applied for a grant
from Regional Development Victoria (State
Government Victoria) to support this project.
Select Harvests holds licences issued by
the Environmental Protection Authority
which specify limits for discharges to the
environment. These licences regulate the
management of discharge to the air and
stormwater runoff associated with the
operations. In 2014/15, no environmental
breaches have been notified by the
Environmental Protection Authority.
The Company is committed to preserving
native vegetation and wildlife through our
wildlife management plan. We are a
signatory of the National Packaging Industry
Covenant, which aims to deliver more
sustainable packaging, increased recycling
rates and reduced packaging litter.
Select Harvests will continue to implement
progressive environmentally sustainable
projects and aim to be a leader in
our industry.
Communities
Helping communities to thrive is embedded
in our culture. We recognise the positive
impact we can have on communities while
creating value for our business.
Key community initiatives during 2014/15
• Sponsorships and donations to 35 local
community organisations
• School career expos and work inspiration
programme (Robinvale College)
Risk Management
It is a policy of Select Harvests to ensure
that a formal risk management process is in
place to identify, analyse, assess, manage
and monitor risks throughout all parts of
the business.
During the previous year the Company
updated its detailed risk register, and rolled
out formal policies and procedures through
all parts of the business. The register
provides a framework and benchmark
against which risks are reported on at
different levels in the business, with a bi
annual report presented to the Board.
During this financial year a number of
specific risks have been focussed on being:
• Horticultural Risks (including climatic
disease, water management, pollination,
and quality);
• Processing and manufacturing Risks
(including product quality, fire, utilities
supply, major equipment failure);
An emphasis has been on product quality
with a number of key financial investments
23
www.selectharvests.com.au Directors’ Report
Continued
OPERATING AND FINANCIAL REVIEW Continued
Significant changes in the state
of affairs
Environmental regulation
and performance
There have been no significant changes
in the state of affairs of the Company.
Significant events after the
balance date
On 20 August 2015, the Company
announced a sale and leaseback transaction
with First State Super. The transaction
involves selling three properties in South
Australia, Victoria and New South Wales for
proceeds of $67 million, accompanied by a
long term lease to support the development
of new greenfield almond orchards.
At 30 June 2015 the financial effect of the
transaction cannot be accurately estimated,
and these assets have not been classified
as held for sale, as the accounting treatment
cannot be completed until all aspects of
the leaseback transaction are finalised.
The assets sold include land, irrigation,
infrastructure and trees that have been
acquired during the year. Any differential
between the proceeds and carrying value,
which is not currently expected to be
material, will either be deferred over the
lease term or recognised in the income
statement, dependent upon finalisation
of the accounting treatment.
On 21 August 2014, the Directors declared a
final unfranked dividend of 35 cents per share
payable on 13 October 2015 to shareholders
on the register on 31 August 2015.
The Company’s operations are subject to
environmental regulations under laws of the
Commonwealth or of a State or Territory.
The Company holds licences issued by
the Environmental Protection Authority
which specify limits for discharges to the
environment which are the result of the
Company’s operations. These licences
regulate the management of discharge to
the air and stormwater runoff associated
with the operations. There have been
no significant known breaches of the
Company’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.
Non IFRS Financial Information
The non IFRS financial information included
within this Directors’ Report has not been
audited or reviewed in accordance with
Australian Auditing Standards.
Non IFRS financial information includes
underlying EBIT, underlying result, underlying
NPAT, underlying earnings per share, net
interest expense, net bank debt, net debt, net
working capital and adjustments to reconcile
from reported results to underlying results.
being made, both on farm and at the
processing facilities to mitigate risks such
as speed of harvest to beat the rain, drying
technologies, and processes to protect
against insect damage.
Managing financial risks, including exposure
to currency volatility has once again been
a key focus area for management and
the Board.
Outlook
The fundamentals underpinning the global
almond industry remain very strong,
meaning that the outlook for the company
remains positive. Demand for almonds
continues to grow domestically and
internationally and supply remains
constrained. A continuation of a prolonged
drought in California means there is
uncertainty on the impact of production over
the medium term, meaning almond pricing is
seen to remain at near record highs moving
into the new financial year. The relatively
weak Australian Dollar against the US Dollar
will continue to benefit the earnings of the
Company, with the majority of the Company
revenues realised in US Dollars.
Select Harvests orchard growth now has
a defined growth plan to increase future
almond production. This will commence
during the first half of the 2016 financial year.
Benchmarking on yield and productivity will
remain an absolute focus for our horticulture
team as we strive to identify and deliver best
practise and high economic returns. Older
uneconomic parts of the orchard portfolio
will continue to be evaluated with the
replanting program continuing in the new
financial year.
The horticultural program for the 2016
crop is well underway, with the water
management plan fully funded.
The implementation of 2 major investments
(co-generation and consolidation of almond
value added processing) will be an absolute
focus and priority for the business during
the coming year.
The continued improvement across the Food
Division will again remain a focus as the roll
out of New Product innovations occurs.
24
Select Harvests Annual Report 2015 Executive remuneration
Executive remuneration has three
components:
1. Base salary and benefits;
2. Short term performance incentives; and
3. Long term incentives.
An overview of these remuneration
arrangements is included in the table below.
Non-executive directors’
remuneration
Non-executive directors receive fees
(including statutory superannuation) but
do not receive any performance related
remuneration nor are they issued options
or performance rights on securities. This
reflects 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. The current aggregate fee limit
of $680,000 was approved by shareholders
at the 21 November 2014 Annual General
Meeting. For the reporting period the total
amount paid to non-executive directors
was $504,000.
The remuneration is a base fee with
the Chair of the Board and each of the
Committees receiving additional amounts
commensurate with their responsibilities.
The current directors’ fees are as follows:
Base Fees
(including superannuation)
Chairman
Other non-executive
directors
$160,000
$80,000
Additional Fees
(including superannuation)
Chair of the Audit and Risk
Committee
Chair of the Remuneration
Committee
$12,000
$12,000
REMUNERATION REPORT
The directors present the 2015
Remuneration Report which sets out
remuneration information for the Company’s
non-executive directors, executive director
and other key management personnel.
For the purposes of this report, key
management personnel are members of the
Executive Management team who have the
authority and responsibility for planning,
directing and controlling the activities of the
Company. They include all Directors of the
Board, executive and non-executive.
1. Overview of Remuneration
Arrangements
Remuneration strategy
The objective of the Group’s executive
reward framework is to set remuneration
levels to attract and retain appropriately
qualified and experienced directors and
senior executives. The framework aligns
executive reward with achievement of
specific business plans and performance
indicators, which include occupational health
and safety, financial and operational targets
relevant to performance at the consolidated
entity level, divisional level, or functional
level, as applicable, for the financial year.
Remuneration packages include a mix of
fixed remuneration, performance based
remuneration and equity based
remuneration. Executive directors and key
management personnel may receive short
and long term incentives.
The Remuneration Committee 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.
25
www.selectharvests.com.au Directors’ Report
Continued
REMUNERATION REPORT Continued
Table 1: Overview of Executive Remuneration Arrangements
FIXED REMUNERATION
Base salary
and benefits
Consists of cash salary, superannuation and non cash benefits, in the form of salary sacrifice arrangements such as
motor vehicles and certain private expense reimbursements.
Reviewed annually with reference to the market and Company objectives. There are no guaranteed base pay increases
in any executives’ contracts.
VARIABLE REMUNERATION
Short term incentives (STI)
Purpose
Term
Instrument
Create incentive to exceed the annual business objectives.
1 year
Cash
% OF FIXED REMUNERATION
CEO
Up to 40%
Executives
Up to 40%
Performance
conditions*
•
It is a condition of any STI payment that key OH&S foundations are in place to ensure a safe working environment
for all employees.
• 40% Financial (including exceeding the annual NPAT targets)
• 40% Project goals (achievement of stretching and balanced Key Performance Indicators as established in annual
performance plans)
• 20% Values and Challenges (Company values displayed and response to challenge)
Why these
were chosen
To incentivise successful and sustainable financial outcomes, annual business objectives that drive the achievement of long
term business objectives, continuous safety improvement and behaviour consistent with Company values and objectives.
Long term incentives (LTI)
Up to 133%
Up to 30%
Purpose
Term
Reward achievement of long term business objectives and sustainable value creation for shareholders
3 years, vesting proportionately
Instrument
Performance rights
Performance
conditions*
• Continuing service
• 50% Earnings per share (EPS) growth targets (compound annual growth of the Company’s EPS over the three years
prior to vesting)
• 50% Total shareholder return (TSR) targets (Company’s average TSR compared to the TSR of a peer group of ASX
listed companies over the three years prior to vesting)
The performance targets and vesting proportions are as follows:
EXISTING ISSUES
Measure
EPS
Below 5% growth
5% growth
5.1% – 6.9% growth
7% or higher growth
TSR
Below the 60th percentile**
60th percentile**
61st – 74th percentile**
At or above 75th percentile**
Rights to Vest
Nil
25%
Pro rata vesting
50%
Nil
25%
Pro rata vesting
50%
FUTURE ISSUES
Measure
EPS
Below 5% growth
5% growth
5.1% – 19.9% growth
20% or higher growth
TSR
Below the 50th percentile**
50th percentile**
51st – 74th percentile**
At or above 75th percentile**
Rights to Vest
Nil
25%
Pro rata vesting
50%
Nil
25%
Pro rata vesting
50%
Why these
were chosen
EPS represents a strong measure of overall business performance.
TSR provides a shareholder perspective of the Company’s relative performance against comparable companies.
* The Remuneration Committee is responsible for assessing whether the targets are met. Financial performance conditions are determined on an underlying
results basis.
** Of the peer group of ASX listed companies
*** Market value at grant date.
26
Select Harvests Annual Report 2015 2. Company Performance
The following section provides an overview of the Company’s performance and its link to remuneration outcomes.
Table 2: 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.
Net profit after tax ($ million)
Basic EPS (cents)
Basic EPS Growth
Dividend per share (cents)
Opening share price 1 July ($)
Change in share price ($)
Closing share price 30 June ($)
TSR % p.a.+
2015
56,766
82.9
121%
50.0
5.14
5.86
11.00
124%
2014***
21,643
37.5
650%
20.0
3.27
1.87
5.14
63%
2014
29,007
50.2
904%
20.0
3.27
1.87
5.14
63%
2013**
2,872
5.0
163%
12.0
1.30
1.97
3.27
161%
2012*
(4,469)
(7.9)
(123%)
8.0
1.84
(0.54)
1.30
(25%)
2011
17,674
33.7
(22%)
13.0
1.50
0.34
1.84
31%
*
Includes $17.4 million of post tax net asset write downs.
**
Includes $27.9 million of post tax net asset write downs and $9.1 million discount on acquisition.
*** Restated as a result of early adopting the amendments made to AASB 116 Property, Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
+ TSR is calculated as the change in share price for the year plus dividends announced for the year, divided by opening share price.
Short Term Incentive (STI)
Details of the range of potential STI cash payments, actual payments made and the amounts forfeited by the CEO and executive team in
relation to the 2015 financial year are shown in Table 3 below. The actual outcomes are based on performance against the conditions outlined
in Table 1.
Table 3: STI
Executive Director
P Thompson
Executives
P Chambers
M Eva
P Ross
L Van Driel
B Van Twest
C Barbuto*
# Total Fixed Remuneration
* Commenced 10 November 2014.
STI Range
(of TFR#)
STI Payment
($)
%
Achieved
%
Forfeited
STI Payment
($)
%
Achieved
%
Forfeited
2015
2014
0%–40%
169,950
75%
25%
165,000
75%
25%
0%–40%
0%–40%
0%–40%
0%–40%
0%–40%
0%–20%
101,198
94,554
91,155
85,641
99,498
17,400
75%
75%
75%
69%
75%
75%
25%
25%
25%
31%
25%
25%
98,578
73,440
73,750
88,500
73,988
–
75%
60%
63%
73%
57%
–
25%
40%
38%
27%
43%
–
The STI is usually paid in September following determination of the STI entitlement, so the above STI payment amounts represent an accrual
in relation to the current financial performance year, which will be paid in the following financial year, plus any over or under accrual of the
prior year following STI entitlement.
The STI program is also available to a select group of other key senior managers within the business.
27
www.selectharvests.com.au Directors’ Report
Continued
REMUNERATION REPORT Continued
Long Term Incentive (LTI)
The 2014 financial year was the first time performance rights vested for some of the current issues of performance rights. Vesting is based
on performance against the hurdles over the three years prior to vesting.
The following illustrates the Company’s performance against the metrics in the LTI plan.
Table 4: LTI Performance Conditions and Current Indicative Outcomes
EPS Growth
Basic EPS (cents)
Basic EPS Growth
Underlying EPS* (cents)
Underlying EPS* Growth
3 Year Compound Average EPS Growth
3 Year Compound Average EPS Growth** target 5% – 7%
* Underlying EPS is basic EPS adjusted for the impact of the following:
2015
82.9
65%
86.8
73%
73%
2014
50.2
904%
50.2
25%
44%
2013
5.0
163%
40.1
139%
1.
In FY13, an impairment write down of $39.9 million was made against the Western Australian almond project. A gain of $8.0 million was made on the
acquisition of almond orchard assets during the financial year.
2. In FY15, acquisition transaction costs of $3.8 million.
3. The tax impact of items 1 and 2.
Relative TSR Performance
3 Year Average TSR Ranking
3 Year Average TSR Ranking target 60th – 75th percentile
2015
100th percentile
* TSR ranking relative to ASX Consumer Staples also included in the All Ordinaries index, excluding alcohol and tobacco products companies.
3. Details of Remuneration
Details of the remuneration of the directors and the key management personnel of Select Harvests Limited and the consolidated entity
are set out in the following tables.
It should be noted that performance rights granted, referred to in the remuneration details set out in this report, comprise a proportion
of rights which have not yet vested and are reflective of rights that may or may not vest in future years.
28
Select Harvests Annual Report 2015 Table 5: 2014 and 2015 Remuneration
ANNUAL REMUNERATION
LONG TERM
REMUNERATION
Short
Term
Incentives
$
Non Cash
Benefits
$
Base Fee
$
Super-
annuation
Contri-
butions
$
Long
Service
Leave
Accrued
$
Perform-
ance
Rights
Granted
$
Termina-
tion
Benefits
$
160,000
150,000
84,018
76,376
73,059
68,807
84,018
78,440
73,059
68,807
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,982
7,065
6,941
6,365
7,982
7,256
6,941
6,365
504,512
169,950
43,289
18,699
498,012
165,000
34,213
17,775
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
160,000
150,000
92,000
83,441
80,000
75,172
92,000
85,696
80,000
75,172
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
446,857
425,107
– 1,183,307
– 1,140,107
303,158
101,198
15,468
18,699
303,704
98,578
6,021
19,256
242,928
94,554
47,853
18,699
265,847
73,440
11,292
19,056
274,267
91,155
10,884
18,699
271,204
73,750
6,021
18,858
7,443
8,546
–
–
–
–
36,051
86,140
92,690
88,870
33,625
80,344
284,073
85,641
276,430
88,500
298,095
99,498
304,225
73,988
117,082
17,400
–
–
–
–
–
–
–
–
34,654
7,644
74,258
25,155
12,155
177,717
18,699
17,558
11,123
–
–
–
–
–
100,548
96,198
–
–
–
–
–
–
–
–
–
–
–
–
–
–
482,017
522,245
496,724
458,505
428,630
450,177
486,270
579,957
516,840
491,969
145,605
–
Non Executive Directors
M Iwaniw
M Carroll
F Grimwade
R M Herron
P Riordan
Executive Director
P Thompson
Other key
management personnel
P Chambers
M Eva
P Ross
L Van Driel
B Van Twest
C Barbuto*
* Commenced 10 November 2014
Notes
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
The elements of remuneration have been determined on the basis of the cost to the consolidated entity.
Performance rights granted have been valued using the Monte Carlo simulation option pricing model, which takes account of factors
such as the exercise price of the rights, the current level and volatility of the underlying share price and the time to maturity of the rights.
The amount shown here is an accounting expense and reflects the value as determined using this model. The value is expensed over the
vesting period of the rights.
29
www.selectharvests.com.au Directors’ Report
Continued
REMUNERATION REPORT Continued
Fixed and Variable Remuneration
Table 6 details the proportion of fixed and variable remuneration earned by directors and key management personnel during the 2014
and 2015 financial years.
Table 6: Fixed and Variable Remuneration
Non Executive Directors
M Iwaniw
M Carroll
F Grimwade
R M Herron
P Riordan
Executive Director
P Thompson
Other key management personnel
P Chambers
M Eva
P Ross
L Van Driel
B Van Twest
C Barbuto*
FIXED REMUNERATION
AT RISK – STI
AT RISK – LTI #
2015
%
100.0
100.0
100.0
100.0
100.0
2014
%
100.0
100.0
100.0
100.0
100.0
2015
%
2014
%
2015
%
2014
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
47.9
55.1
14.4
18.6
37.8
26.2
71.5
62.3
70.9
67.1
61.3
88.0
64.6
64.6
65.8
54.1
65.4
–
21.0
19.0
21.3
17.6
19.3
12.0
18.9
16.0
16.4
15.3
15.0
–
7.5
18.7
7.8
15.3
19.5
–
16.5
19.4
17.8
30.6
19.6
–
* Commenced 10 November 2014
# based on the value of performance rights as at grant date as valued using the option pricing model.
30
Select Harvests Annual Report 2015 Performance Rights
Table 7 details awards of performance rights granted to executives under the LTI Plan that are still in progress.
Table 7: Performance Rights affecting Remuneration
Grant Year
Vesting Conditions
Performance
Period
Participating
Executives
2012
• EPS growth
30 June 2014
P Chambers*
• Relative TSR
30 June 2015
P Ross*
performance to peer
group
30 June 2016
• Continuous service
2013
• EPS growth
30 June 2014
L Van Driel**
• Relative TSR
performance to peer
group
• Continuous service
30 June 2015
30 June 2016
Performance Achieved
30 June 2014 rights achieved 100%
of EPS condition rights and 88.1%
of TSR condition rights
30 June 2015 rights achieved 100%
of EPS condition rights and 100%
of TSR condition rights
2016 period to be determined.
30 June 2014 rights achieved 100%
of EPS condition rights and 88.1%
of TSR condition rights
30 June 2015 rights achieved 100%
of EPS condition rights and 100%
of TSR condition rights
2016 period to be determined.
% Due for
vesting
100% of 30 June
2014 rights
100% of 30 June
2015 rights
N/A other period
100% of 30 June
2014 rights
100% of 30 June
2015 rights
N/A other period
• EPS growth
30 June 2015
P Thompson**
• Relative TSR
30 June 2016
M Eva**
performance to peer
group
• Continuous service
30 June 2017
B Van Twest**
30 June 2015 rights achieved 100%
of EPS condition rights and 100%
of TSR condition rights
100% of 30 June
2015 rights
N/A other periods
2016 and 2017 periods to be
determined.
* Granted 29 June 2012
** Granted 30 April 2013
The current LTI Plan provides for the offer of a parcel of performance rights with a three year expiry period to participating employees.
The rights vest annually in three tranches on achievement of the performance hurdles.
Performance rights 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.
31
www.selectharvests.com.au Directors’ Report
Continued
REMUNERATION REPORT Continued
Table 8: Grants of Performance Rights
The following table details the grants of performance rights available to the Managing Director & CEO and executive team.
Name
P Thompson
P Chambers
M Eva
P Ross
L Van Driel
B Van Twest
Year
Granted
2013
2013
2013
2012
2012
2012
2013
2013
2013
2012
2012
2012
2013
2013
2013
2013
2013
2013
Number
Granted
300,000
300,000
300,000
57,960
57,960
57,960
52,687
60,000
60,000
54,060
54,060
54,060
50,600
50,600
50,600
60,000
60,000
60,000
RIGHTS TO DEFERRED SHARES
Value per
right*
Vested %
Vested
Number
Forfeited
Number
Financial years
in which rights
may vest
Max. Value
yet to vest*
$2.26
$2.26
$2.26
$1.08
$1.15
$1.20
$2.26
$2.26
$2.26
$1.08
$1.15
$1.20
$2.25
$2.26
$2.26
$2.26
$2.26
$2.26
100%
300,000
0%
0%
94%
100%
0%
100%
0%
0%
94%
100%
0%
94%
100%
0%
100%
0%
0%
0
0
54,511
57,960
0
52,687
0
0
50,843
54,060
0
47,589
50,600
0
60,000
0
0
0
0
0
30 June 2015
$0
30 June 2016
$677,815
30 June 2017
$678,136
3,449
30 June 2014
30 June 2015
30 June 2016
$69,486
30 June 2015
$0
30 June 2016
$135,563
30 June 2017
$135,627
3,217
30 June 2014
30 June 2015
3,011
30 June 2014
30 June 2015
30 June 2016
$64,810
$0
$0
$0
$0
$0
$0
30 June 2016
$114,325
30 June 2015
$0
30 June 2016
$135,563
30 June 2017
$135,627
0
0
0
0
0
0
0
0
0
0
0
0
* This represents the maximum value of the performance rights as at their grant date as valued using the option pricing model. The minimum possible total value
of the rights is nil if the applicable vesting conditions are not met.
32
Select Harvests Annual Report 2015 Table 9: Details of Performance Rights Granted, Vested and Exercised
The following table illustrates the movements in performance rights granted to the Managing Director & CEO and executive team during
the period.
2015
Executive Director
P Thompson
Other key management personnel
P Chambers
M Eva
P Ross
L Van Driel
B Van Twest
Opening
Balance
Granted
during
the year
900,000
115,920
172,687
108,120
101,200
180,000
–
–
–
–
–
–
NUMBER
Vested
during
the year
300,000
57,960
52,687
54,060
50,600
60,000
Forfeited
during
the year
–
–
–
–
–
–
Closing
Balance
600,000
57,960
120,000
54,060
50,600
120,000
All vested rights are exercisable at the end of the year.
Table 10: Number of shares held by directors and key management personnel
The movement during the financial 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:
2015
Directors – Non-executive
M Iwaniw
R M Herron
M Carroll
F Grimwade
P Riordan
Directors – Executive
P Thompson
Key Management Personnel
P Chambers
P Ross
M Eva
L Van Driel
B Van Twest
C Barbuto
Held at
1 July 2014
Received on
exercise of
performance rights
Other – DRP, sales
and purchases
Held at
30 June 2015
178,567
45,326
–
100,000
–
30,700
22,000
–
–
–
–
–
–
–
–
–
–
–
54,511
50,843
–
47,589
–
–
9,520
4,553
3,202
2,804
10,000
188,087
49,879
3,202
102,804
10,000
6,411
37,111
–
–
–
–
–
–
76,511
50,843
–
47,589
–
–
33
www.selectharvests.com.au Directors’ Report
Continued
REMUNERATION REPORT Continued
4. Service Agreements
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 office of director.
Remuneration and other terms of employment for the managing director, chief financial officer and other key management personnel
are also formalised in service agreements. Each of these agreements provide for performance related cash bonuses.
The major provisions of the agreements are set out below.
Name
Title
P Thompson
Managing Director & CEO
P Chambers
Chief Financial Officer
M Eva
P Ross
General Manager Sales and Marketing Consumer
General Manager Horticulture
L Van Driel
Group Trading Manager
B Van Twest
General Manager Operations
C Barbuto*
Group Human Resource
* Commenced 10 November 2014
Notice
Period
Base Salary
incl. Super-
annuation
Term
On-going
6 months
On-going
3 months
On-going
3 months
On-going
3 months
On-going
3 months
On-going
3 months
On-going
3 months
566,500
337,325
315,180
303,850
311,060
331,660
200,000
Base salaries quoted are for the year ended 30 June 2015. They are reviewed annually by the Remuneration Committee, however at the
time of preparing the remuneration report the review for the 30 June 2016 year is yet to be completed.
Other than the notice periods noted above there are no specific termination benefits applicable to the service agreements.
5. Use of Remuneration Consultants
No remuneration consultants were used during the year.
34
Select Harvests Annual Report 2015 DIVIDENDS
Interim fully franked dividend for 2015
• on ordinary shares
Final unfranked dividend declared for 2015
• on ordinary shares
Cents
2015
$’000
15.0
10,641
35.0
25,003
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During the year the Company entered into an insurance contract to indemnify directors and officers against liabilities that may arise from
their position as directors and officers of the Company and its controlled entities. The terms of the contract do not permit disclosure of the
premium paid.
Officers indemnified include the Company Secretary, all directors, and executive officers participating in the management of the Company
and its controlled entities.
COMMITTEE MEMBERSHIP
During or since the end of the financial year, the company had an Audit and Risk Committee and a Remuneration and Nomination Committee
comprising members of the Board of Directors.
Members acting on the committees of the Board during or since the end of the financial year were:
Audit and Risk
R M Herron (Chairman)
F Grimwade
P Riordan
DIRECTORS’ MEETINGS
Remuneration and Nomination
M Carroll (Chairman)
F Grimwade
M Iwaniw
The number of meetings of directors (including meetings of committees of directors) held during the financial year and the number of
meetings attended by each director was as follows:
MEETINGS OF COMMITTEES
DIRECTORS’ MEETINGS
AUDIT AND RISK
REMUNERATION AND
NOMINATION
Number
Eligible to
Attend
Number
Attended
Number
Eligible to
Attend
Number
Attended
Number
Eligible to
Attend
Number
Attended
M Iwaniw
P Thompson
R M Herron
M Carroll
F Grimwade
P Riordan
16
16
16
16
16
16
16
16
16
15
16
15
–
–
4
–
4
4
–
–
4
–
4
3
4
–
–
4
4
–
4
–
–
4
4
–
35
www.selectharvests.com.au ROUNDING
CORPORATE GOVERNANCE
The amounts contained in this report and
in the financial report have been rounded
to the nearest $1,000 (where rounding is
applicable) under the option available to the
company under ASIC Class Order 98/100.
The Company is an entity to which the
Class Order applies.
PROCEEDINGS ON BEHALF
OF THE COMPANY
There are no other material legal
proceedings in place on behalf of the
company as at the date of this report.
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.
M Iwaniw
Chairman
Melbourne, 21 August 2015
Directors’ Report
Continued
DIRECTOR’S INTERESTS
IN CONTRACTS
Directors’ interests in contracts are disclosed
in Note 31 to the financial 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 “Auditor’s Independence Declaration”
on page 37.
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 Company
during the year are detailed in Note 30.
The directors are satisfied that the provision
of the non-audit services during the year by
the auditor is compatible with the general
standard of independence for auditors
imposed by Corporations Act 2001 as
non-audit services are reviewed by the
Audit and Risk Committee to ensure they
do not impact the impartiality and objectivity
of the auditor.
36
Select Harvests Annual Report 2015 Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Select Harvests Limited for the year ended 30 June 2015, 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
21 August 2015
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.
37
www.selectharvests.com.au
Corporate Governance Statement
This statement outlines the key corporate
governance practices of the Company 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 financial 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 Company. 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 identified by the
Board and ensuring arrangements are in
place to adequately manage those risks.
To ensure that the Board is well equipped to
carry out its responsibilities it has established
38
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
benefits 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 qualified and
experienced to carry out its responsibilities
and has in place procedures to assess the
performance of the Managing Director and
the Executive Management team.
Board Processes
To assist in the execution of its
responsibilities, the Board established a
Remuneration Committee, and an Audit
and Risk 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 Company.
The full Board holds twelve scheduled
meetings each year, plus any additional
meetings at such other times as may be
necessary to address any specific matters
that may arise.
The agenda for meetings is prepared and
includes the Managing Director’s report,
financial reports, business segment reports,
strategic matters, governance and
compliance. Submissions are circulated in
advance. Executives are involved in Board
discussions where appropriate, and
Directors have other opportunities, including
visits to operations, for contact with a wider
group of employees.
Set out below, Director Education,
Independent Advice and Access to
Company Information and Composition of
the Board make reference to Principle 2,
Structure the board to add value.
Director Education
The Company has a process to educate new
Directors about the nature of the business,
current issues, the corporate strategy, and
the expectations of the Company concerning
performance of Directors. Directors also
have the opportunity to visit the facilities of
the Company 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
Company’s expense.
Composition of the Board
The names of the Directors of the company
in office at the date of this report are set
out in the Directors’ report.
The composition of the Board is
determined in accordance with the
following ASX principles:
• The Board should comprise at least
four Directors;
• The Board should maintain a majority
of independent non-executive Directors;
• The Chairperson must be a
non-executive director; and
• The Board should comprise Directors
with an appropriate range of
qualifications, skills and experience.
The Board assesses the independence of
each Director in light of interests known to
the Board, as well as those disclosed by
each Director.
The Company website contains a Board
responsibility, skills and experience matrix
setting out the mix of capability of the
current Board in key areas.
REMUNERATION
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.
Remuneration and
Nomination Committee
The main objectives of the Remuneration
and Nomination Committee are to:
1) Ensure that the board’s responsibilities
in relation to compensation of the
company’s directors and executives
are fulfilled.
Select Harvests Annual Report 2015 2) Recommend parameters for the setting
and approval of remuneration, STIP and
LTIP for company executives and any
incentive scheme for other employees.
performance of each Board member is
reviewed against the Board charter and any
specific objectives agreed and set by the
Board for the Company.
3) Ensure that the composition of the
Board of Directors is appropriate for the
purpose of fulfilling its responsibilities to
shareholders in accordance with the
law and current governing guidelines
issued by the Australian Securities
Exchange and other regulatory bodies.
The duties and responsibilities of the
Committee are to review and recommend
to the Board:
• Executive remuneration and
incentive policies.
• The remuneration structure and
packages for directors.
• The remuneration packages of
senior management.
• The company’s recruitment, retention,
and termination policies and procedures
for senior management.
• Executive Incentive Schemes.
• Superannuation arrangements.
• The preparation of the remuneration
report for the company’s Annual Report.
• The application of ASX, government and
related agencies’ human resource and
remuneration standards and related
reporting requirements.
• Board composition recommendations.
• Provide to the Board, nomination/s
for any Board or Remuneration and
Nomination Committee vacancy.
• Non-Executive Director fees that are
in the form of cash, superannuation
contributions or other forms as approved
by the Board.
• The Non-Executive Director fee cap
as recommended to the Board for
AGM endorsement.
• Non-Executive Directors skill alignment
to company needs.
• Workplace Diversity.
• Review the Board’s performance
against its charter.
The Chairman of the Board evaluates
the performance of each Board member
annually in the last quarter of each financial
year. The Chairman of the Audit Committee
reviews the performance of the Chairman
of the Board in the same period. The
The Committee evaluates the performance of
the Managing Director and is also responsible
for share option schemes, incentive
performance packages, superannuation
entitlements and fringe benefits policies.
Remuneration levels are reviewed annually
and the Remuneration Committee may
obtain independent advice on the
appropriateness of remuneration packages,
given trends in the marketplace.
The members of the Remuneration and
Nomination Committee are disclosed in
the Directors’ Report.
The Managing Director is invited to
Remuneration and Nomination Committee
meetings as required to discuss senior
executives’ performance and remuneration
packages.
The Remuneration and Nomination
Committee meets four times a year or as
required. The Committee met four times
during the financial year and the Committee
members’ attendance record is disclosed in
the table of Directors’ meetings.
Further details of the Remuneration and
Nomination Committee’s charter are
available on the company’s website.
Remuneration Policies
Remuneration levels are set to attract
and retain appropriately qualified and
experienced Directors and senior executives.
The Remuneration Committee may obtain
independent advice on the appropriateness
of remuneration packages, given trends in
the marketplace. Remuneration packages
include a mix of fixed remuneration,
performance based remuneration,
and equity based remuneration.
Executive Directors and senior executives
may receive short term incentives based
on achievement of specific business plans
and performance indicators, which include
financial and operational targets relevant
to performance at the consolidated entity
level, divisional level, or functional level, as
applicable, for the financial year. In addition,
the consolidated entity offers executive
Directors and senior executives participation
in the long-term incentive scheme involving
the issue of performance rights to the
employee under the executive long term
incentive plan. The plan provides for the
offer of a parcel of performance rights
to participating employees on an annual
basis, with a three-year expiry period,
exercisable at the market price. The
performance rights 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 financial year are
disclosed in the Directors’ Report.
The external auditors, the Managing Director
and Chief Financial Officer are invited to
Audit and Risk Committee meetings at the
discretion of the Committee, and the external
auditor also meets with the Audit Committee
during the year without management being
present. The Committee met four times
during the year and the Committee
members’ attendance record is disclosed
in the table of Directors’ meetings.
The Managing Director and the Chief
Financial Officer have provided a statement
in writing to the Board that the Company’s
financial reports for the year ended
30 June 2015 present a true and fair view,
in all material respects, of the Company’s
financial condition and operational results
and are in accordance with the relevant
accounting standards. This statement
is required annually.
Further details of the Audit and Risk
Committee’s charter are available on the
Company’s website.
The duties and responsibilities of the Audit
and Risk Committee include:
• Recommending to the Board the
appointment of the external auditors;
• Recommending to the Board the fee
payable to the external auditors;
39
www.selectharvests.com.au Corporate Governance Statement
Continued
• Reviewing the audit plan and
performance of the external auditors;
• Determining that no management
restrictions are being placed upon the
external auditors;
• Evaluating the adequacy and effectiveness
of the reporting and accounting controls
of the company through active
communication with operating
management and the external auditors;
• Reviewing all financial reports to
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 conflicts of interest;
• Requiring reports from management and
the external auditors on any significant
regulatory, accounting or reporting
development to assess potential
financial reporting interest;
• Reviewing and approving all significant
company accounting policy changes;
• Reviewing the company’s taxation position;
• Reviewing the annual financial statements
with the Chief Financial Officer and the
external auditors, and recommending
acceptance to the Board;
• Evaluating the adequacy and
effectiveness of the company’s risk
management policies and procedures
including insurance; and
• Directing any special projects or
investigations deemed necessary
by the Board or by the Committee.
The Audit and Risk Committee is committed
to ensuring that it carries out its functions in
an effective manner. Accordingly, it reviews
its charter at least once in each financial
year and the company’s risk register has
been established in accordance with
ISO standards.
RISK MANAGEMENT
The Board oversees the Company’s risk
management system. The Company’s areas
of focus in respect of risk management
practices include, but are not limited to,
product safety, occupational health and
safety, environment, property, financial
reporting and internal control.
40
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 Company’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 Company;
• Risk management framework: The
Company’s risk management framework
provides a mandate and commitment to
risk management, includes the Company’s
policy that sets out the Company’s
risk objectives and intentions, embeds
risk management within business
processes, defines accountabilities and
responsibilities, outlines a risk reporting
schedule and provides mechanisms for
monitoring and continuous improvement;
• 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 and
safety, insurance, and legal matters;
• Continuous disclosure: A process is in
place to identify matters that may have
a material effect on the price of the
Company’s securities and to notify
them to the ASX; and
•
Investment appraisal: Guidelines for
capital expenditure include annual
budgets, appraisal and review
procedures, due diligence requirements
where businesses are being acquired
or divested.
The Managing Director and Chief Financial
Officer have provided a statement in writing
to the Board that the declaration made in
respect of the Company’s financial reports
is founded on a system of risk management
and internal compliance and control which
reflects the policies adopted to date by
the Board, and that the Company’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, Conflict of Interest and Dealings
in Company Shares are with reference to
Principle 3, Promote ethical and
responsible decision making.
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
Company. These standards are reflected
in the company’s code of conduct.
Diversity
Select Harvests has a very diverse workforce
of approximately 270 permanent employees
and a seasonal workforce employed in both
regional and urban Australia. The Company
recognises its responsibilities to have a
diverse workforce including ethnic, religious,
gender and cultural diversity.
Select Harvests believes it is particularly
strong in the employment of people of many
different ethnicities and is proud to include
many people from the Pacific Islands and
Asia in its work force. 37% of our workforce
were born outside Australia.
During the year Select Harvests reinforced
its commitment to building the diversity in
its workforce with the establishment of a
Diversity Committee comprising employees
from all functions of the business.
The Company’s Diversity Policy is available
on the website (under Governance). This
policy is supported by a range of related
policies including:
• Recruitment Policy
• Workplace Fair Treatment Policy
• Equal Employment Opportunity,
Harassment and Bullying Policy
• Select Harvests Code of Conduct
• Flexible Working Arrangements
• Key Performance Indicators (KPI’s)
and Review Policy
The following table shows the performance
against our 2014/15 Diversity Objectives and
includes the 2015/16 Objectives. All
objectives were meet in 2014/15.
Select Harvests Annual Report 2015 OBJECTIVE
2014/15 MEASURABLE ACTION
2014/15
PROGRESS
Communicate the Company’s
core values
Induct all new employees on the
Company’s values.
All new employees have been
inducted.
Recruit, develop and retain
females increasing gender
participation across the
Company
• All interview panels will have
at least one female member.
• All interview panels have at
least one female member.
• Remuneration and
• Remuneration and
Nomination Committee
include Diversity Review
on its annual work plan.
Nomination Committee now
review Diversity performance
and targets on the annual
workplan for the month
of July.
2015/2016 MEASURABLE ACTION
Companywide communication
of performance to core values
to be undertaken on a
quarterly basis.
• At least 30% of all
interviewed candidates
will be females.
• Sponsor 10 or more female
employees to be members
of NAWO.
Build a flexibility workplace
Establish CEO/MD Diversity
Committee.
Diversity Committee was
established in April MD and
GMHR both have Diversity KPIs.
Review all Executive roles
to understand flexibility
opportunities within roles.
Regular and accurate
reporting of diversity
Workplace Fair
Treatment Policy
Remuneration and Nomination
Committee annual review of
gender targets.
Remuneration and Nomination
Committee review gender
performance and targets.
Review of employee of gender,
age and ethnicity profile will be
undertaken.
N/A
N/A
0% Bullying and Harassment
claims at Fair Work Australia.
The Company believes that the following
targets for gender diversity are achievable
by 2018:
In accordance with the federal Gender
Equality Act, Select Harvests submits an
annual report to the Workplace Gender
Equality Authority (WGEA). The 2015
report reflected:
The organisation supports diversity through:
• An empowered and effective Diversity
Committee
• Having diversity KPIs for MD and GMHR
• 8% increase in the level of female
participation at senior to middle
management level roles.
• Females comprise 30% of senior
to middle management level roles.
• Females comprise 22% of other
manager level roles.
• Females comprise 28% of
non-managerial roles.
A female has been appointed to the Senior
Management Executive and the company
remains committed to its target of 30%
female representation on the Board and
Senior Executive team.
Future Direction
The Company is cognisant of its
responsibilities under the various State
and Federal age, gender, physical, ethnic,
cultural, religious and related discrimination
legislation and will continue to ensure that its
policies and procedures remain compliant
with these.
• Negotiating flexibility provisions in its
enterprise agreements
• Ensuring flexible work arrangement
opportunity for any employees
WGEA Category
Board and Senior
Executive
• Making sure its recruitment practices
Senior Managers
are open, fair and unbiased
• Conducting annual performance reviews
which encourages both individuals and
managers to consider development
opportunities
Other Managers
Non Managerial
Roles
• Conducting a Pay Parity Review
Conflict of Interest
Current
Female
%
Target
2018
%
8%
30%
30%
22%
28%
40%
30%
40%
Select Harvests will continue to apply fair
and open recruitment processes, flexible
work and leave arrangements, career and
personal development, employee support
arrangements and related measures to
attract and retain skilled employees.
Directors must keep the Board advised,
on an ongoing basis, of any interest that
could potentially conflict with those of the
Company. Should a situation arise where the
Board believes that a material conflict exists,
the Director concerned shall not receive
the relevant Board papers and will not be
present at the meeting when the item
is considered. Details of Director related
entity transactions with the Company
and consolidated entity are set out in
the Notes to the financial statements.
41
www.selectharvests.com.au Information is posted on the Company’s
website immediately after ASX confirms
an announcement has been made
to ensure that the information is
made available to the widest
audience. The Company’s website
is www.selectharvests.com.au;
• The Board encourages full participation
of shareholders at the Annual General
Meeting to ensure a high level of
accountability and identification with the
Company’s strategy and goals. It is the
policy of the Company 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.
Corporate Governance Statement
Continued
Dealings in Company Shares
Communication with Shareholders
•
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 Company’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.
The Board of Directors aims to ensure
that shareholders are informed of all major
developments affecting the Company’s state
of affairs. Information is communicated to
shareholders as follows:
• The annual report is distributed to all
shareholders (unless a shareholder has
specifically requested not to receive the
document), including relevant information
about the operations of the Company
during the year, changes in the state of
affairs and details of future developments;
• The half yearly report contains
summarised financial information and a
review of the operations of the Company
during the period. The half year audited
financial report is lodged with the
Australian Securities and Investments
Commission and the ASX, and sent
to any shareholder who requests it;
• The Company has nominated the
Company Secretary to ensure
compliance with the Company’s
continuous disclosure requirements, and
overseeing and co-ordinating disclosure
of information to the ASX;
42
Select Harvests Annual Report 2015 Annual Financial Report
CONTENTS
44 Income Statement
45 Statement of Comprehensive Income
46 Balance Sheet
47 Statement of Changes in Equity
48 Statement of Cash Flows
49 Notes to the Financial Statements
84 Directors’ Declaration
85 Independent Auditor’s Report to the Members of Select Harvests Limited
87 ASX Additional Information
This financial report covers the Group consisting of Select Harvests Limited and its
subsidiaries. The financial report is presented in the Australian currency.
Select Harvests Limited is a company limited by shares, incorporated and domiciled
in Australia. Its registered office and principal place of business is:
Select Harvests Limited
360 Settlement Road
Thomastown Vic 3074
A description of the nature of the Company’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 financial report.
The financial report was authorised for issue by the directors on 21 August 2015.
The company has the power to amend and reissue the financial 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 financial reports
and other information are available on our website: www.selectharvests.com.au.
43
www.selectharvests.com.au Income Statement
For the year ended 30 June 2015
Revenue
Sales of goods and services
Other revenue
Total revenue
Other income
Inventory fair value adjustment
Total other income
Expenses
Cost of sales
Distribution expenses
Marketing expenses
Occupancy expenses
Administrative expenses
Finance costs
Other expenses
Profit before income tax and discount on acquisition
Discount on acquisition of assets
PROFIT BEFORE INCOME TAX
Income tax expense
PROFIT ATTRIBUTABLE TO MEMBERS OF SELECT HARVESTS LIMITED
Earnings per share for profit attributable to the ordinary equity holders of
the company:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
CONSOLIDATED
2015
$’000
Restated*
2014
$’000
Notes
4
4
4
5
5
6
25(c)
29
29
223,474
188,088
170
163
223,644
188,251
47,517
47,517
2,476
2,476
(168,130)
(144,134)
(4,349)
(1,181)
(1,304)
(5,180)
(5,387)
(5,116)
(4,797)
(668)
(1,289)
(4,781)
(4,512)
(3,795)
80,514
26,751
–
80,514
(23,748)
56,766
82
26,833
(5,190)
21,643
82.9
81.0
37.5
36.4
The above income statement should be read in conjunction with the accompanying Notes.
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
44
Select Harvests Annual Report 2015 Statement of Comprehensive Income
For the year ended 30 June 2015
Profit for the year
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss
Changes in fair value of cash flow hedges, net of tax
Other comprehensive income/(expense) for the year
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO
MEMBERS OF SELECT HARVESTS LIMITED
CONSOLIDATED
2015
$’000
Restated*
2014
$’000
56,766
21,643
Notes
(156)
(156)
2,092
2,092
56,610
23,735
The above statement of comprehensive income should be read in conjunction with the accompanying Notes.
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
45
www.selectharvests.com.au Balance Sheet
As at 30 June 2015
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other assets
Assets held for sale
TOTAL CURRENT ASSETS
NON CURRENT ASSETS
Other assets
Property, plant and equipment (includes bearer plants)
Intangible assets
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Interest bearing liabilities
Derivative financial instruments
Current tax liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Interest bearing liabilities
Deferred tax liabilities
Provisions
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained profits
TOTAL EQUITY
CONSOLIDATED
2015
$’000
Restated*
2014
$’000
Restated*
1 July 2013
$’000
Notes
9
10
11
12
13
14
15
16
17
18
19
12
20
21
22
23
24
25
25
270
60,082
142,354
76
–
6,312
39,135
83,018
542
2,632
8,939
42,142
66,879
343
–
202,782
131,639
118,303
5,000
5,000
5,000
207,782
136,639
123,303
349
584
814
231,442
156,333
143,447
48,339
280,130
487,912
31,273
21,051
288
5,473
3,808
61,893
88,927
44,064
5,641
138,632
200,525
287,387
170,198
12,818
104,371
287,387
37,163
194,080
330,719
22,693
8,299
532
–
2,464
33,988
92,777
26,553
1,995
121,325
155,313
175,406
99,750
12,190
63,466
36,281
180,542
303,845
29,495
40,873
3,321
–
3,111
76,800
47,250
19,579
711
67,540
144,340
159,505
97,007
9,144
53,354
175,406
159,505
The above balance sheet should be read in conjunction with the accompanying Notes.
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
46
Select Harvests Annual Report 2015 Statement of Changes in Equity
For the year ended 30 June 2015
CONSOLIDATED
Balance at 30 June 2013
Profit 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 performance rights
Balance restated at 30 June 2014*
Profit for the year
Other comprehensive loss
Total comprehensive profit for the year
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity, net of transaction costs and
deferred tax
Issue of ordinary shares
Dividends paid or provided
Employee performance rights
Balance at 30 June 2015
97,007
–
–
–
2,743
–
–
Notes
Contributed
Equity
Reserves
Retained
Earnings
9,144
–
2,092
2,092
53,354
21,643
–
21,643
Total
159,505
21,643
2,092
23,735
24
8
25
24
8
25
–
–
954
–
2,743
(11,531)
(11,531)
–
954
99,750
12,190
63,466
175,406
–
–
–
–
(156)
(156)
56,766
56,766
–
(156)
56,766
56,610
5,792
64,656
–
–
–
–
–
–
–
5,792
64,656
(15,861)
(15,861)
784
–
784
170,198
12,818
104,371
287,387
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
47
www.selectharvests.com.au Statement of Cash Flows
For the year ended 30 June 2015
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
Net Cash Inflow From Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Government grants
Proceeds from sale of property, plant and equipment
Payment for water rights
Payment for property, plant and equipment
Acquisition of almond orchards
Acquisition of land – deposit paid
Tree development costs
CONSOLIDATED
2015
$’000
2014
$’000
Notes
205,747
195,161
(170,330)
(167,398)
35,417
27,763
136
(5,154)
30,399
210
(4,910)
23,063
2,302
227
(11,218)
(33,833)
(54,600)
–
(2,810)
–
527
(3,515)
(8,584)
(16,601)
(215)
(1,467)
26
7
Net Cash Outflow from Investing Activities
(99,932)
(29,855)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of shares
Proceeds from borrowings
Repayments of borrowings
Dividends payment on ordinary shares, net of Dividend Reinvestment Plan
Net Cash Inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
9(a)
The above cash flow statement should be read in conjunction with the accompanying Notes.
64,656
97,332
(91,500)
(10,068)
60,420
(9,113)
4,013
(5,100)
–
69,527
(57,000)
(8,788)
3,739
(3,053)
7,066
4,013
48
Select Harvests Annual Report 2015 Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The principal accounting policies adopted
in the preparation of these consolidated
financial statements are set out below.
These policies have been consistently
applied to all the years presented, unless
otherwise stated. The financial statements
are for the Company consisting of Select
Harvests Limited and its subsidiaries.
(a) Basis of preparation
This general purpose financial 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. Select Harvests Limited is a for
profit entity for the purpose of preparing
the financial statements.
Compliance with IFRS
The consolidated financial 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 financial statements have been
prepared under the historical cost
convention, as modified by the revaluation of
available-for-sale financial assets, financial
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 financial 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
Company’s accounting policies. The areas
involving a higher level of judgement or
complexity, or areas where assumptions
and estimates are significant to the financial
statements are disclosed in Note 3.
New and amended standards
adopted by the group
The Company has elected to early adopt the
amendments made to AASB 116 Property,
Plant and Equipment and AASB 141
Agriculture in relation to bearer plants.
The resulting changes to the accounting
policies and retrospective adjustments made
to the financial statements are explained in
Note 1(ad).
The Company has adopted the new standard
AASB 120 Accounting for Government
Grants and Disclosure of Government
Assistance which is explained in Note 1(e).
Certain new accounting standards and
interpretations have been published that are
not mandatory for the 30 June 2015 reporting
period. The Company’s assessment of the
impact of these new standards and
interpretations is set out below.
(i) AASB 9 Financial Instruments
(effective from 1 January 2018)
AASB 9 Financial Instruments addresses
the classification, measurement and
derecognition of financial assets and financial
liabilities and introduces new rules for hedge
accounting. The standard is not applicable
until 1 January 2018 but is available for early
adoption. The Company is yet to assess its
full impact and has not yet decided when
to adopt AASB 9.
(ii) AASB15 Revenue from Contracts with
Customers (effective from 1 January 2017)
The new standard is based on the principle
that revenue is recognised when control of
a good or service transfers to a customer
– so the notion of control replaces the existing
notion of risks and rewards. The standard
is not applicable until 1 January 2018 but is
available for early adoption. The Company is
yet to assess its full impact and has not yet
decided when to adopt AASB 15.
(b) Principles of consolidation
(i) Subsidiaries
Subsidiaries are all entities (including
structured entities) over which the group
has control. The group controls an entity
when the group is exposed to, or has rights
to, variable returns from its involvement with
the entity and has the ability to affect those
returns through its power to direct the
activities of the entity. Subsidiaries are
fully consolidated from the date on which
control is transferred to the group. They
are deconsolidated from the date that
control ceases.
The acquisition method of accounting is
used to account for business combinations
by the group (refer to note 1(z)).
Intercompany transactions, balances and
unrealised gains on transactions between
group companies are eliminated. Unrealised
losses are also eliminated unless the
transaction provides evidence of an
impairment of the transferred asset.
Accounting policies of subsidiaries have
been changed where necessary to ensure
consistency with the policies adopted by
the group.
(ii) Equity method
Under the equity method of accounting, the
investments are initially recognised at cost
and adjusted thereafter to recognise the
group’s share of the post-acquisition profits
or losses of the investee in profit or loss, and
the group’s share of movements in other
comprehensive income of the investee in
other comprehensive income. Dividends
received or receivable from associates and
joint ventures are recognised as a reduction
in the carrying amount of the investment.
When the group’s share of losses in an
equity-accounted investment equals or
exceeds its interest in the entity, including
any other unsecured long-term receivables,
the group does not recognise further losses,
unless it has incurred obligations or made
payments on behalf of the other entity.
Unrealised gains on transactions between
the group and its associates and joint
ventures are eliminated to the extent of the
group’s interest in these entities. Unrealised
losses are also eliminated unless the
transaction provides evidence of an
impairment of the asset transferred.
Accounting policies of equity accounted
investees have been changed where
necessary to ensure consistency with
the policies adopted by the group.
The group treats transactions with
non-controlling interests that do not result in
a loss of control as transactions with equity
owners of the group. A change in ownership
interest results in an adjustment between
the carrying amounts of the controlling
and non-controlling interests to reflect their
relative interests in the subsidiary. Any
difference between the amount of the
adjustment to non-controlling interests
and any consideration paid or received
is recognised in a separate reserve within
equity attributable to owners of Select
Harvests Limited.
49
www.selectharvests.com.au Notes to the Financial Statements
Continued
(d) Revenue Recognition
(e) Government grants
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 benefits will flow to the
entity, the revenue can be reliably measured,
and the risks and rewards have passed to
the buyer. The following specific recognition
criteria must also be met before revenue
is recognised:
Sale of Goods
Risk and reward for 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 flow 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.
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 2015 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).
Government grants are assistance by
the government in the form of transfers of
resources to the Group in return for past or
future compliance with certain conditions
relating to the operating activities of the
consolidated entity.
Government grants relating to income are
recognised as income over the periods
necessary to match them with the related
costs. Government grants that are receivable
as compensation for expenses or losses
already incurred or for the purpose of giving
immediate financial support to the Group
with no future related costs are recognised
as income of the period in which they
become receivable.
Government grants whose primary condition
is that the Group should purchase, construct
or otherwise acquire non-current assets are
deducted from the carrying amount of the
asset on the Balance sheet. The Grant is
recognised in profit or loss over the life of
the depreciable asset as a reduced
depreciation expense.
(f) Cash and cash equivalents
For the purpose of presentation in the
statement of cash flows, cash and cash
equivalents includes cash on hand, deposits
held at call with financial 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.
(g) Trade Receivables
Trade receivables are recognised initially at
fair value and subsequently measured at
amortised cost using the effective interest
method, less provision for impairment. See
Note 10(a) for further information about the
group’s accounting for trade receivables and
Note 1(n) for a description of the group’s
impairment policies.
(h) 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.
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Continued
(b) Principles of consolidation
Continued
(iii) Changes in ownership interests
When the group ceases to have control,
joint control or significant influence, any
retained interest in the entity is remeasured
to its fair value with the change in carrying
amount recognised in profit or loss. This fair
value becomes the initial carrying amount for
the purposes of subsequently accounting for
the retained interest as an associate, joint
venture or financial asset. In addition, any
amounts previously recognised in other
comprehensive income in respect of that
entity are accounted for as if the group
had directly disposed of the related assets
or liabilities. This may mean that amounts
previously recognised in other comprehensive
income are reclassified to profit or loss.
If the ownership interest in a joint venture
or an associate is reduced but joint control
or significant influence is retained, only
a proportionate share of the amounts
previously recognised in other
comprehensive income are reclassified
to profit or loss where appropriate.
(c) Foreign currency translation
(i) Functional and presentation
currency
Items included in the financial statements
of each entity comprising the Company are
measured using the currency of the primary
economic environment in which the entity
operates (“the functional currency”).
The consolidated financial 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 flow hedges.
50
Select Harvests Annual Report 2015 Costs, incurred in bringing each product
to its present location and condition,
are accounted for as follows:
• Raw materials and consumables:
purchase cost on a first in first out basis;
• Finished goods and work in progress:
cost of direct material and labour and a
proportion of manufacturing overheads
based on normal operating capacity;
• 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; and
• Other inventories comprise consumable
stocks of chemicals, fertilisers and
packaging materials.
(i) 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 Company
designates derivatives as either; (1) hedges
of the fair value of recognised assets or
liabilities or a firm commitment (fair value
hedge); or (2) hedges of highly probable
forecast transactions (cash flow hedges).
The Company 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 Company 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 flows of hedged items.
(ii) Cash flow hedge
The effective portion of changes in the fair
value of derivatives that are designated and
qualify as cash flow hedges is recognised
in equity in the cash flow 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 profit 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-financial asset (for
example, inventory) or a non-financial 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.
(j) 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 flows which
will be received from the assets’ employment
and subsequent disposal. The expected net
cash flows have been discounted to present
values in determining recoverable amounts.
(i) Fair value hedge
Depreciation
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.
The depreciable amount of all fixed 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
Bearer plants:
Irrigation systems:
10 to 30 years
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.
(k) Leases
Leases are classified at their inception as
either operating or finance leases based on
the economic substance of the agreement
so as to reflect the risks and benefits
incidental to ownership.
Operating leases
The minimum lease payments of operating
leases, where the lessor effectively retains
substantially all of the risks and benefits of
ownership of the leased item, are recognised
as an expense on a straight line basis over
the term of the lease.
Finance leases
Leases which effectively transfer
substantially all the risks and benefits
incidental to ownership of the leased item
to the Company 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.
51
www.selectharvests.com.au Notes to the Financial Statements
Continued
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Continued
(l) Agriculture produce
Growing almond crop
The growing almond crop is valued in
accordance with AASB 141 Agriculture.
The fair value amount is an aggregate of
the fair valuation of the current year almond
crop and the reversal of the fair valuation of
the prior year almond crop. The current year
fair 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.
(m) Intangibles
Goodwill
Goodwill represents the excess of the cost
of an acquisition over the fair value of the
Company’s share of the net identifiable
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 indefinite 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.
52
Permanent water rights
Permanent water rights are recorded at
historical cost. Such rights have an indefinite
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.
(n) Impairment of assets
Goodwill and other Intangible assets that
have an indefinite 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 identifiable cash flows
(cash generating units).
(o) 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 financial 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
profit or taxable profit 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.
(i) Investment allowances and
similar tax incentives
Companies within the group may be
entitled to claim special tax deductions for
investments in qualifying assets or in relation
to qualifying expenditure (eg the Research
and Development Tax Incentive regime in
Australia or other investment allowances).
The group accounts for such allowances as
tax credits, which means that the allowance
reduces income tax payable and current
tax expense. A deferred tax asset is
recognised for unclaimed tax credits
that are carried forward.
(ii) 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 flows are included in the cash flow
statement on a gross basis and the GST
component of cash flows arising from
investing and financing activities, which is
recoverable from, or payable to the taxation
authority are classified as operating
cash flows.
Select Harvests Annual Report 2015 Commitments and contingencies are
disclosed net of the amount of GST
recoverable from, or payable to, the
taxation authority.
(p) Trade and other payables
These amounts represent liabilities for goods
and services provided to the Group prior to
the end of the financial year which are unpaid.
These amounts are unsecured and are
usually paid within 30 days of recognition.
(q) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including
non-monetary benefits and annual leave
expected to be settled wholly 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 benefits. All other
short-term employee benefit obligations are
presented as payables.
(ii) Other long-term benefit obligations
The liability for long service leave and annual
leave which is not expected to be settled
wholly within 12 months after the end of the
period in which the employees render the
related service is recognised in the provision
for employee benefits 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 outflows.
Contributions are made by the Company to
an employee superannuation fund and are
charged as expenses when incurred.
Share-based payments
Financial Liabilities
Share-based compensation benefits
are provided to employees via the Select
Harvests Limited Long Term Incentive Plan
(LTIP). Information relating to this scheme
is set out in Note 34.
The fair value of performance rights granted
under the Select Harvests Limited LTIP is
recognised as an employee benefit 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 performance rights. The fair value at
grant date is independently determined
using a Black Scholes option pricing model
that takes into account the term of the right,
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 right. The fair value of the
performance rights granted is adjusted
to reflect market vesting conditions, but
excludes the impact of any non market
vesting conditions (for example, profitability
and sales growth targets). Non market
vesting conditions are included in
assumptions about the number of rights that
are expected to vest. At each balance sheet
date, the entity revises its estimate of the
number of rights that are expected to vest.
The employee benefit 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.
(r) 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 specific contract which
specifies an alternative date. Amounts
receivable from related parties are carried
at full amounts due.
The bank overdraft disclosed within
interest bearing liabilities 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 Company.
Finance lease liabilities are accounted for
in accordance with AASB 117 Leases.
(s) Fair value estimation
The fair value of certain financial assets and
financial liabilities must be estimated for
recognition and measurement or for
disclosure purposes.
The fair value of financial instruments traded
in active markets, such as foreign exchange
hedge contracts and the interest rate swap,
are based on quoted market prices at the
balance sheet date. The quoted market price
used for financial assets held by the
Company is the current bid price; the
appropriate quoted market price for financial
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 financial
liabilities for disclosure purposes is
estimated by discounting the future
contractual cash flows at the current
market interest rate that is available to
the Company for similar instruments.
(t) 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.
53
www.selectharvests.com.au Notes to the Financial Statements
Continued
(y) 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 identified as the Chief
Executive Officer.
(z) 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. Identifiable 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 identifiable assets.
The excess of the consideration transferred
the amount of any non-controlling interest
in the acquire 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 identifiable assets acquired
is recorded as goodwill. If those amounts are
less than the fair value of the net identifiable
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 financier under
comparable terms and conditions.
Contingent consideration is classified either
as equity or a financial liability. Amounts
classified as a financial liability are
subsequently remeasured to fair value
with changes in fair value recognised in
profit or loss.
(aa) Comparatives
Where necessary, comparatives have been
reclassified and repositioned for consistency
with current year disclosures.
(ab) Rounding amounts
The company is of a kind referred to in
Class Order 98/100, issued by the Australian
Securities and Investments Commission,
relation to the “rounding off” of amounts in
the financial report. Amounts in the financial
report have been rounded off in accordance
with that Class Order to the nearest
thousand dollars, or in certain cases,
to the nearest dollar.
(ac) Parent entity financial
information
The financial information for the parent entity,
Select Harvests Limited, disclosed in Note
36 has been prepared on the same basis
as the consolidated financial statements,
except as set out below.
(i) Investments in subsidiaries
and associates
Investments in subsidiaries and associates
are accounted for at cost in the financial
statements of Select Harvests Limited.
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Continued
(t) Borrowings Continued
Borrowings are classified 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.
(u) 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.
(v) Provisions
Provisions are recognised when the
Company has a present legal or constructive
obligation as a result of past events, it is
probable that an outflow of resources will
be required to settle the obligation, and the
amount has been reliably estimated.
(w) Contributed equity
Ordinary shares are classified as equity.
The value of new shares or options issued
is shown in equity.
(x) Earnings per share
(i) Basic Earnings per share
Basic earnings per share are calculated
by dividing the profit attributable to equity
holders of the company by the weighted
average number of ordinary shares
outstanding during the financial year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the
figures used in the determination of basic
earnings per share to take into account the
weighted average number of additional
ordinary shares that would have been
outstanding assuming the conversion of
all dilutive ordinary shares, and the after
income tax effect of interest and other
financing costs associated with dilutive
potential ordinary shares.
54
Select Harvests Annual Report 2015 (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’ financial statements.
The amounts receivable/payable under the
tax funding agreement is due upon receipt
of the funding advice from the head entity,
which is issued as soon as practicable after
the end of each financial 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.
(ad) Changes in accounting policies
As explained in 1(a) above, the group
has adopted the amendments made to
Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141
Agriculture in relation to bearer plants this
year. These amendments have resulted
in changes in accounting policies and
adjustments to the amounts recognised
in the financial statements.
(i) Bearer plants
Amendments to AASB 116 Property, Plant
and Equipment and AASB 141 Agriculture
distinguish bearer plants from other
biological assets. Bearer plants are solely
used to grow produce over their productive
lives and are seen to be similar to an item of
machinery. They will therefore now be
accounted for under AASB 116 Property,
Plant and Equipment. However, agricultural
produce growing on bearer plants will remain
within the scope of AASB 141 Agriculture
and continue to be measured at fair value
less cost to sell.
The group’s almond trees qualify as bearer
plants under the new definition in AASB 141
Agriculture. As required under the standards,
the change in accounting policy has been
applied retrospectively to the earliest period
presented in the financial statements. As a
consequence, the trees were classified to
property, plant and equipment effective
1 July 2013 and prior year financial
statements have been restated.
The trees are now measured at amortised
cost and first depreciated from maturity at
year seven, to the end of their useful life which
is estimated to be year 30. As permitted
under the transitional rules, the fair value
of the trees at 1 July 2013 was deemed
to be their cost at that date.
55
www.selectharvests.com.au Notes to the Financial Statements
Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued
(ad) Changes in accounting policies Continued
(ii) Impact on financial statements
As a result of the changes in the entity’s accounting policies, prior year financial statements have been restated. The following tables show
the adjustments recognised for each individual line item. Line items that were not affected by the change have not been included. As a result,
the sub-totals and totals disclosed cannot be recalculated from the numbers provided. As permitted under the transitional rules, the impact
on the current period is not disclosed.
PRIOR YEAR RESTATEMENT
2014
(Previously
stated)
$’000
Increase/
(Decrease)
$’000
2014
(Restated)
$’000
8,503
(3,810)
37,353
(8,346)
29,007
50.2
48.8
81,229
85,625
341,239
29,709
158,469
(6,027)
(4,493)
(10,520)
3,156
(7,364)
(12.7)
(12.4)
2,476
(8,303)
26,833
(5,190)
21,643
37.5
36.4
(81,229)
70,708
(10,520)
–
156,333
330,719
(3,156)
(3,156)
26,553
155,313
182,770
(7,364)
175,406
70,830
182,770
(7,364)
(7,364)
63,466
175,406
99,750
12,190
70,830
182,770
–
–
(7,364)
(7,364)
99,750
12,190
63,466
175,406
Statement of profit or loss (extract)
Biological asset fair value adjustment
Depreciation
Profit before income tax
Income tax benefit/(expense)
Profit attributable to members of Select Harvests Limited
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Balance Sheet (extract)
Biological asset
Property, Plant and Equipment
Total assets
Deferred tax liabilities
Total liabilities
Net assets
Retained earnings
Total equity
Statement of changes in equity (extract)
Contributed equity
Reserves
Retained earnings
Total
56
Select Harvests Annual Report 2015 2. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial 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 Company’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.
The Group also acquires capital related items internationally in Euro.
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
Overdraft
Foreign exchange contracts
– buy foreign currency (cash flow hedges)
– sell foreign currency (cash flow hedges)
Group sensitivity analysis
30 June 2015
USD $’000
30 June 2015
EUR $’000
30 June 2014
USD $’000
30 June 2014
EUR $’000
24,045
(4,141)
6,198
10,864
–
–
5,158
–
18,435
(2,299)
7,125
11,699
–
–
–
–
Based on financial instruments held at the 30 June 2015, had the Australian dollar strengthened/weakened by 5% against the US dollar and
the EUR, with all other variables held constant, the Group’s post tax profit for the year would have been $860,000 lower/$951,000 higher
(2014: $576,000 lower/$636,000 higher), mainly as a result of the US dollar denominated financial instruments as detailed in the above table.
Equity would have been $811,000 lower/$896,000 higher (2014: $738,000 lower/$815,000 higher), arising mainly from foreign forward
exchange contracts designated as cash flow hedges.
(ii) Cash flow interest rate risk
The Group’s interest rate risk arises from borrowings issued at variable rates, which exposes the Group to cash flow 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:
Debt facilities (AUD)
Overdraft (USD)
An analysis of maturities is provided in 2(c) below.
30 June 2015
Weighted
Average
Interest Rate
%
5.06%
1.43%
30 June 2014
Weighted
Average
Interest Rate
%
5.48%
0.95%
Balance
$’000
94,608
4,141
Balance
$’000
98,777
2,299
The Group analyses interest rate exposure on an ongoing basis in conjunction with debt facility, cash flow and capital management.
As part of the Risk Management policy of Select Harvests Limited, the company has entered into an agreement to swap $10,000,000
(2014: $20,000,000) of debt at a rate of 3.97% to reduce the risk that higher interest rates pose to the company’s cash flows. The weighted
average interest rate of 5.06% in the table above is inclusive of the interest rate swap.
57
www.selectharvests.com.au Notes to the Financial Statements
Continued
2. FINANCIAL RISK MANAGEMENT Continued
(a) Market risk Continued
(ii) Cash flow interest rate risk Continued
Group sensitivity
At 30 June 2015, if interest rates had changed by +/– 25 basis points from the weighted average interest rate with all other variables held
constant, post tax profit for the year would have been $182,000 lower/higher (2014: $169,000 lower/higher).
Interest rate risk
The Company’s exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities both recognised and
unrecognised at the balance date, are as follows:
FIXED INTEREST RATE MATURING IN:
FLOATING
INTEREST
RATE
1 YEAR OR LESS
OVER 1 TO 5
YEARS
MORE THAN 5
YEARS
NON-INTEREST
BEARING
TOTAL CARRYING
AMOUNT
AS PER
THE BALANCE
SHEET
WEIGHTED
AVERAGE
EFFECTIVE
INTEREST RATE
Financial
Instruments
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
%
2014
%
(i) Financial assets
Cash
270
6,312
Trade and other
receivables
Forward exchange
contracts
–
–
–
–
Total financial assets
270
6,312
(ii) Financial
liabilities
Bank overdraft
– USD @ AUD
5,370
2,299
–
–
–
–
–
Commercial Bills
94,609
78,777
10,000
–
–
–
–
–
–
–
–
–
–
–
–
99,979
81,076
10,000
Trade creditors
Other creditors
Interest Rate Swap
Forward exchange
contracts
Total financial
liabilities
(b) Credit risk
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,000
–
–
–
–
20,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
270
6,312
58,308
37,566
58,308
37,566
76
542
76
542
58,384
38,108
58,654
44,420
–
–
–
–
–
–
–
–
–
5,370
2,299
– 104,609 98,777
1.43
5.06
0.95
5.48
8,112
7,439
8,112
7,439
23,161
16,613
23,161
16,613
135
314
135
314
153
218
153
218
–
–
–
–
–
–
–
–
31,561
24,584 141,540 125,660
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions,
as well as exposure to wholesale, retail and farm investor customers, including outstanding receivables and committed transactions.
The Group has no significant 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
financial institutions.
The credit quality of financial 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 partners have long-term credit ratings of AA– and A+ (Standard and Poor’s).
Refer to Note 10 for a summary of aged receivables impaired, and past due but not impaired.
58
Select Harvests Annual Report 2015 (c) Liquidity risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial
assets and liabilities.
Financing arrangements
The following debt facilities are held with the National Australia Bank (NAB) and Rabobank in equal proportions, except as noted.
Debt facilities
1. Term debt
2. Working capital
3. Acquisition
4. Acquisition – bridging
5. Trade finance*
6. Overdraft*
* Held with NAB only
Expiry Date
31/08/2018
31/03/2016 NAB /
31/10/2016 Rabobank
31/10/2016
31/07/2015 NAB /
30/09/2015 Rabobank
Facility Limit
$50,000,000
$60,000,000
$75,000,000
$80,000,000
30/04/2016
$10,000,000
AUD $275,000,000
31/03/2016
USD $5,000,000
The interest rate paid on these facilities is determined by an incremental margin on the BBSY or LIBOR rate.
The Group had access to the following undrawn borrowing facilities at the reporting date:
Floating rate
– Working capital/Acquisition facility
– Bank overdraft facility USD
2015
$’000
2014
$’000
A$170,392
A$36,223
US$859
US$2,714
The bank overdraft facility may be drawn at any time and may be terminated by the bank without notice. The debt facilities (term debt,
working capital, acquisition, acquisition – bridging and trade finance) may be drawn at any time over a three year term.
59
www.selectharvests.com.au Notes to the Financial Statements
Continued
2. FINANCIAL RISK MANAGEMENT Continued
(c) Liquidity risk Continued
Financing arrangements Continued
Group at 30 June 2015
Non derivatives
Variable Rate
Derivatives
Debt facilities
Trade finance
Bank Overdraft
Interest Rate Swap
EUR buy – outflow
USD buy – outflow
USD sell – (inflow)
USD net
Less than 6
months
$’000
6 – 12
months
$’000
More than
12 months
$’000
Total
contractual
cash flows
$’000
Carrying
Amount
(assets)/
liabilities
$’000
–
–
5,370
101
2,710
4,518
(10,864)
(6,346)
21,511
3,182
–
34
2,448
1,680
–
1,680
96,698
118,209
101,427
–
–
–
–
–
–
–
3,182
5,370
135
5,158
6,198
(10,864)
(4,666)
3,182
5,370
135
(58)
(18)
153
135
Less than 6
months
$’000
6 – 12
months
$’000
More than
12 months
$’000
Total
contractual
cash flows
$’000
Carrying
Amount
(assets)/
Liabilities
$’000
Group at 30 June 2014
Non derivatives
Variable Rate
Derivatives
Debt facilities
Bank Overdraft
Interest Rate Swap
USD buy – outflow
USD sell – (inflow)
USD net
–
2,299
94
7,125
(11,699)
(4,574)
6,153
102,273
108,426
–
94
–
–
–
–
126
–
–
–
2,299
314
7,125
(11,699)
(4,574)
98,777
2,299
314
218
(542)
(324)
(d) Fair Value Measurement
The fair value of financial assets and financial 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 2015 and 30 June 2014, the group’s assets and liabilities measured and recognised at fair value comprised the interest rate
swap derivative and foreign exchange forward contracts. Both are level 2 measurements under the hierarchy.
Maturities of financial liabilities
The table below analyses the Group’s financial 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 flows.
60
Select Harvests Annual Report 2015 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 Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, 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 financial year are discussed below.
Inventory – Current Year Almond Crop
The current year almond crop is classified as a biological asset and valued in accordance with AASB 141 Agriculture. In applying this
standard, the consolidated entity has made various assumptions at the balance date as the selling price of the crop can only be estimated
and the actual crop yield will not be known until it is completely processed and sold. The assumptions are the estimated average almond
selling price at the point of harvest of $11.45 per kg and almond yield based on a crop estimate for Company Orchards of 14,500mt.
Fair Value of Acquired Assets
In calculating the fair value of acquired assets, in particular almond orchards, the company has made various assumptions. These include
future almond price, long term yield and discount rates. The valuation of almond trees is very sensitive to these assumptions and any change
may have a material impact on these valuations.
Carry value of intangible assets
The Group tests annually whether intangible assets, have suffered any impairment, in accordance with the accounting policy stated in
Note 1(l). The recoverable amounts of cash generating units have been determined based on value-in-use calculations.
Key assumptions and sensitivities are disclosed in Note 17.
4. REVENUE
Revenue from continuing operations
– Management services
– Sale of goods
Other revenue
– Bank interest
– Other revenue
Total other revenue
Total revenue
CONSOLIDATED
2015
$’000
Restated*
2014
$’000
Notes
5,725
217,749
223,474
4,280
183,808
188,088
56
114
170
57
106
163
223,644
188,251
61
www.selectharvests.com.au Notes to the Financial Statements
Continued
5. EXPENSES
Profit before tax includes the following specific expenses:
Cost of goods and services sold
Depreciation of non-current assets:
Buildings
Plantation land and irrigation systems
Plant and equipment
Bearer plants*
Total depreciation of non-current assets
Employee benefits
Finance costs
Impairment loss/(gain): trade receivables
Foreign exchange loss/(gain)
Operating lease rental minimum lease payments
Net loss on disposal of property, plant and equipment
Acquisition transaction costs
Notes
CONSOLIDATED
2015
$’000
Restated*
2014
$’000
168,130
144,134
193
1,202
3,649
5,502
10,546
20,803
5,387
(14)
–
5,334
251
3,790
272
1,076
2,462
4,493
8,303
19,872
4,512
6
(1)
5,381
239
1,038
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
6. INCOME TAX
(a) Income tax expense
Current tax
Deferred tax
Over provided in prior years
Over provided research and development tax offsets
Income tax expense is attributable to:
Profit from continuing operations
Aggregate income tax expense
Deferred income tax benefit included in income tax benefit comprises:
(Increase)/Decrease in deferred tax assets
Increase/(Decrease) in deferred tax liabilities
22
22
62
CONSOLIDATED
2015
$’000
Restated*
2014
$’000
Notes
(10,406)
(13,461)
–
119
(7,787)
(227)
1,009
1,815
(23,748)
(5,190)
(23,748)
(23,748)
(17,599)
4,138
(13,461)
(5,190)
(5,190)
1,055
(1,282)
(227)
Select Harvests Annual Report 2015 CONSOLIDATED
2015
$’000
Restated*
2014
$’000
Notes
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
80,514
26,833
Tax at the Australian tax rate of 30% (2014 – 30%)
(24,154)
(8,049)
Tax effect of amounts that are not deductible/(taxable) in calculating taxable income
Discount on acquisition
Other assessable items
Over provided in prior years
Over provided relating to research and development tax offsets
Income tax expense
–
287
–
119
35
–
1,009
1,815
(23,748)
(5,190)
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
7. BUSINESS COMBINATIONS
(a) Summary of acquisitions
On 22 August 2014, Select Harvests acquired 4,248 acres of land, which includes 2,011 acres of almond orchards and 731 acres of citrus
orchards, near Renmark in South Australia (referred to as Amaroo) for $57.7 million cash consideration, which included $3.4 million for the
orchard assets and $1.9 million for title to the 2015 crop.
On 22 August 2014, Select Harvests also acquired 2,953 acres of land, which includes 434 acres of almond orchards in Victoria (referred
to as Mullroo) for $8.4 million cash consideration.
The fair values of assets and liabilities acquired are as follows:
Plantation land and irrigation systems
Buildings
Plant and equipment
Bearer plants – trees
Permanent water rights
Inventory
Employee entitlements
Net Identifiable Assets
Net cash outflow on acquisition
Total purchase consideration
Amaroo
$’000
18,000
1,000
3,375
22,314
11,186
1,953
(146)
57,682
57,682
57,682
Mullroo
$’000
5,451
40
–
2,909
–
–
–
8,400
8,400
8,400
Included in other expenses in the income statement are transaction costs totalling $3.8 million relating to statutory, legal and advisors fees
associated with the acquisitions.
These properties have been included in a sale and leaseback transaction subsequent to year end, as detailed in Note 28.
63
www.selectharvests.com.au Notes to the Financial Statements
Continued
7. BUSINESS COMBINATIONS Continued
(b) Financial contribution of acquisitions
The acquired businesses contributed earnings before interest and tax of $9,881,000 to the group for the period from acquisition date
to 30 June 2015.
If the acquisition had occurred on 1 July 2014, consolidated profit after tax for the year ended 30 June 2015 would have remained
unchanged from the reported results.
8. DIVIDENDS PAID OR PROPOSED FOR ON ORDINARY SHARES
(a) Dividends paid during the year
(i) Interim – paid 16 April 2015 (2014: 24 April 2014)
Unfranked dividend (15c per share)
(2014: Fully franked 11c per share)
(ii) Final – paid 15 October 2014 (2014: 15 October 2013)
Unfranked dividend (9c per share)
(2014: Fully franked 9c per share)
(b) Dividends proposed and not recognised as a liability
A final unfranked dividend of 35 cents per share has been declared by the directors ($25,002,530).
(c) Franking credit balance
Franking credits available for the subsequent financial year arising from:
Franking credits available for subsequent reporting periods
CONSOLIDATED
2015
$’000
2014
$’000
Notes
10,641
6,360
5,220
15,861
5,171
11,531
CONSOLIDATED
2015
$’000
2014
$’000
Notes
331
331
331
331
The above amounts represent the balance of the franking account (presented as the gross dividend value) as at the end of the
reporting period.
There is no impact on the franking account from the dividend recommended by the directors since year end, but not recognised
as a liability at year end, as it is unfranked (2014: unfranked).
64
Select Harvests Annual Report 2015 9. CASH AND CASH EQUIVALENTS (CURRENT)
Cash at bank and in hand
(a) Reconciliation to cash at the end of the year
The above figures are reconciled to cash at the end of the financial year as shown in the
statement of cash flows as follows:
Balances as above
Bank overdrafts
10. TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables
Provision for impairment of trade receivables
Prepayments
As at 30 June 2015 current trade receivables of the Group with a value of $30,100
(2014: $44,079) were impaired. The amount of the provision was $30,100 (2014: $44,079).
The ageing of these receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
Movements in the provision for impairment of receivables are as follows:
At 1 July
Provision for impairment recognised during the year
Receivables written off during the year
At 30 June
(a) Trade receivables past due but not impaired
As at 30 June 2015, trade receivables of $5,796,640 (2014: $5,198,329) 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
Notes
CONSOLIDATED
2015
$’000
270
270
2014
$’000
6,312
6,312
19
270
(5,370)
(5,100)
6,312
(2,299)
4,013
Notes
CONSOLIDATED
2015
$’000
58,338
(30)
58,308
1,774
60,082
2014
$’000
37,566
(44)
37,522
1,613
39,135
–
–
30
30
44
5
(19)
30
9
35
–
44
38
6
–
44
5,702
5,156
9
86
43
–
5,797
5,199
65
www.selectharvests.com.au Notes to the Financial Statements
Continued
10. TRADE AND OTHER RECEIVABLES (CURRENT) Continued
(b) Effective interest rates and credit risk
All receivables are non-interest bearing.
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 Company operates. Refer to Note 2 for more information on the risk
management policy of the Company.
Information concerning the effective interest rate and credit risk of both current and non-current receivables is set out in Note 2.
(c) Fair value
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.
11. INVENTORIES (CURRENT)
Raw materials at cost
Finished goods at cost
Other inventory at cost
Almond stock at cost
12. DERIVATIVE FINANCIAL INSTRUMENTS (CURRENT)
Current Assets
Forward exchange contracts – cash flow hedges
Total current derivative financial instrument assets
Current Liabilities
Interest rate swap – cash flow hedges
Forward exchange contracts – cash flow hedges
Total current derivative financial instrument liabilities
(i) Cash flow hedges
Notes
1(l)
CONSOLIDATED
2015
$’000
9,522
10,889
9,684
112,259
142,354
2014
$’000
8,490
13,139
6,550
54,839
83,018
CONSOLIDATED
2015
$’000
2014
$’000
Notes
76
76
135
153
288
542
542
314
218
532
On 25 February 2015, the Company entered into an agreement to swap the variable interest rate applicable to $10m of debt to fixed interest
at a rate of 3.97% until 29 February 2016. The market value of the swap is recognised as a current liability in the balance sheet. Movements in
the fair value of the swap are treated similarly to those of forward exchange contracts. Movements caused by changes in the intrinsic value of
the swap 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 Company also enters into forward exchange contracts to buy and sell specified amounts of foreign currency in the future at stipulated
exchange rates. The objective of entering the forward exchange contracts is to protect the Company 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).
66
Select Harvests Annual Report 2015 At balance date, the details of outstanding forward exchange contracts are:
Less than 6 months
Buy United States Dollars Settlement
Buy Euro Dollars Settlement
Less than 6 months
Sell United States Dollars Settlement
More than 6 months
Buy United States Dollars Settlement
Buy Euro Dollars Settlement
(ii) Credit risk exposures
SELL AUSTRALIAN DOLLARS
AVERAGE EXCHANGE RATE
2015
$’000
4,518
2,710
2014
$’000
7,125
–
2015
$
0.77
0.70
2014
$
0.91
–
BUY AUSTRALIAN DOLLARS
AVERAGE EXCHANGE RATE
2015
$’000
10,864
2014
$’000
11,699
2015
$
0.77
2014
$
0.90
SELL AUSTRALIAN DOLLARS
AVERAGE EXCHANGE RATE
2015
$’000
1,680
2,448
2014
$’000
–
–
2015
$
0.76
0.68
2014
$
–
–
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets
is the carrying amount of those assets, net of any provisions for doubtful debts of those assets, as disclosed in the balance sheet and
Notes to the financial statements.
Credit risk for derivative financial instruments arises from the potential failure by counterparties to the contract to meet their obligations
at maturity. The credit risk exposure to forward exchange contracts and the interest rate swap are the net fair values of these instruments.
The net amount of the foreign currency the Company 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 USD $4,665,372
and EUR $5,158,417 (2014: USD $4,574,833).
The Company does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered
into by the Company.
13. OTHER ASSETS (CURRENT)
Temporary water rights
14. ASSETS HELD FOR SALE (CURRENT)
Property, plant and equipment
Notes
Notes
CONSOLIDATED
2015
$’000
–
–
CONSOLIDATED
2015
$’000
5,000
5,000
2014
$’000
2,632
2,632
2014
$’000
5,000
5,000
The property, plant and equipment amount represents the estimated recoverable amount of assets at the Company’s Western Australian
orchards, less cost to sell. The decision was made to exit this project. A sale process is currently in progress as the Company seeks to
maximise the value from these assets. These assets are included within the Almond Division segment.
67
www.selectharvests.com.au Notes to the Financial Statements
Continued
15. OTHER ASSETS (NON-CURRENT)
Prepayments
16. PROPERTY, PLANT AND EQUIPMENT
(a) Reconciliations
Notes
CONSOLIDATED
2015
$’000
349
349
2014
$’000
584
584
Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current financial year.
At 1 July 2013* (Restated)
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Acquired through business combinations
Disposals
Depreciation expense
Transfers between classes
Closing net book amount
At 30 June 2014* (Restated)
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2015
Opening net book amount
Additions
Acquired through business combinations
Disposals
Depreciation expense
Transfers between classes
Closing net book amount
At 30 June 2015
Cost
Accumulated depreciation
Net book amount
Plantation
land and
irrigation
systems
$’000
Buildings
$’000
Plant and
equipment
$’000
Bearer
Plants
$’000
Capital work
in progress
$’000
12,531
(1,768)
10,763
10,763
60
–
–
(272)
–
10,551
12,591
(2,040)
10,551
10,551
–
1,040
–
(193)
57
11,455
13,688
(2,233)
11,455
81,463
(27,462)
54,001
54,001
502
5,733
–
(1,076)
564
59,724
88,262
(28,538)
59,724
59,724
35
23,451
–
(1,202)
4,728
86,736
116,476
(29,740)
86,736
51,097
(41,554)
9,543
9,543
2,968
851
(766)
(2,462)
434
10,568
49,142
(38,574)
10,568
10,568
10,552
–
(564)
(3,649)
2,795
19,702
61,610
(41,908)
19,702
68,415
–
68,415
68,415
475
6,311
–
(4,493)
–
70,708
75,201
(4,493)
70,708
70,708
4,476
25,223
–
(5,502)
2,653
97,558
725
–
725
725
5,055
–
–
–
(998)
4,782
4,782
–
4,782
4,782
18,075
3,375
(8)
–
(10,233)
15,991
107,553
15,991
(9,995)
97,558
–
15,991
Total
$’000
214,231
(70,784)
143,447
143,447
9,060
12,895
(766)
(8,303)
–
156,333
229,978
(73,645)
156,333
156,333
33,138
53,089
(572)
(10,546)
–
231,442
315,318
(83,876)
231,442
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
68
Select Harvests Annual Report 2015 (b) Leased assets
Plant and equipment includes the following amounts where the Group is a lessee under a finance lease.
CONSOLIDATED
Leasehold plant and equipment
At cost
Accumulated depreciation and impairment
17. INTANGIBLES (NON-CURRENT)
Year ended 30 June 2014
Opening net book amount
Acquisition of permanent water rights
Closing net book amount
Year ended 30 June 2015
Opening net book amount
Acquisition of permanent water rights
Disposal of permanent water rights
Acquired through business combinations
Closing net book amount
Notes
2015
$’000
6,673
(452)
6,221
CONSOLIDATED
Brand
Names*
$’000
Permanent
Water Rights
$’000
2,905
–
2,905
7,381
882
8,263
Goodwill
$’000
25,995
–
25,995
2014
$’000
1,483
(68)
1,415
Total
$’000
36,281
882
37,163
25,995
2,905
8,263
37,163
–
–
–
–
–
–
25,995
2,905
573
(583)
11,186
19,439
573
(583)
11,186
48,339
* Brand name assets principally relate to the “Lucky” brand, which has been assessed as having an indefinite useful life. This assessment is based on the
Lucky brand having been sold in the market place for over 50 years, being a market leader in the cooking nuts category and remaining a heritage brand.
(a) Impairment tests for goodwill and brand names
Goodwill is allocated to the Company’s cash-generating units (CGU) identified according to operating segment. The total value of goodwill
and brand names relates to the Food Products CGU. The recoverable amount of a CGU is determined based on value-in-use calculations
which require the use of assumptions. These calculations use cash flow forecasts based on financial projections by management covering
a five year period based on growth rates taking into account past performance and its expectations for the future, in line with the Strategic
Review. Assumptions made include that new product development, enhanced marketing and market penetration and the exiting of lower
margin business will improve EBIT over the forecast period. Cash flow projections beyond the five year period are not extrapolated, but a
terminal value is included in the calculations. A real pre-tax weighted average cost of capital of 12% (2014:12%) has been used to discount
the cash flow projections.
(b) Impact of possible changes to key assumptions
The recoverable amount of the goodwill and brand names in the Food Division exceeds the carrying amount of goodwill at 30 June 2015.
A decrease of 10% in the projected annual cash flows, or an increase of 1% in the pre-tax discount rate of 12% does not result in an impairment
of the goodwill and brand names at 30 June 2015. These changes would be considered reasonably possible changes to the key assumptions.
(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.
69
www.selectharvests.com.au Notes to the Financial Statements
Continued
18. TRADE AND OTHER PAYABLES (CURRENT)
Trade creditors
Other creditors and accruals
19. INTEREST BEARING LIABILITIES (CURRENT)
Secured
Bank overdraft
Trade finance
Debt facilities
Total secured current borrowings
Lease liability
(a) Security
Notes
Notes
27(b)
CONSOLIDATED
2015
$’000
8,112
23,161
31,273
2014
$’000
7,439
15,254
22,693
CONSOLIDATED
2015
$’000
5,370
3,182
12,499
21,051
1,367
1,367
2014
$’000
2,299
–
6,000
8,299
255
255
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 Company’s exposure to interest rate changes on borrowings are set out in Note 2.
20. PROVISIONS (CURRENT)
Employee benefits
21. INTEREST BEARING LIABILITIES (NON-CURRENT)
Term debt facility
70
Notes
Notes
CONSOLIDATED
2015
$’000
2,441
2,441
2014
$’000
2,209
2,209
CONSOLIDATED
2015
$’000
88,927
88,927
2014
$’000
92,777
92,777
Select Harvests Annual Report 2015 Assets pledged as security
The bank overdraft and debt 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
Derivative financial instruments
Assets held for sale
Total current assets pledged as security
Non-current
Floating charge
Prepayments
Property, plant and equipment
Permanent water rights
Total non-current assets pledged as security
Total assets pledged as security
Financing arrangements
CONSOLIDATED
2015
$’000
Restated*
2014
$’000
Notes
270
60,082
142,354
76
5,000
6,312
39,135
83,018
542
5,000
207,782
134,007
349
584
231,442
156,333
19,439
251,230
459,012
10,896
167,813
301,820
The Company has a debt facility available to the extent of $275,000,000 as at 30 June 2015 (2014: $135,000,000). The Company has bank
overdraft facilities available to the extent of US$5,000,000 (2014: US$5,000,000).
The current interest rates at balance date are 4.37% (2014: 5.12%) on the debt facility, and 1.16% (2014: 1.06%) on the United States dollar
bank overdraft facility.
A number of covenants and financial undertakings are associated with the company banking facilities, all of which have been met during
the period as at 30 June 2015.
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
Lease liability
Notes
27(b)
CONSOLIDATED
2015
$’000
4,534
4,534
2014
$’000
1,104
1,104
71
www.selectharvests.com.au Notes to the Financial Statements
Continued
22. DEFERRED TAX LIABILITIES (NON CURRENT)
The balance comprises temporary differences attributable to:
Amounts recognised in profit and loss
Accruals and provisions
Inventory
Property, plant and equipment (includes bearer plants)
Intangibles
Amounts recognised directly in OCI
Cash flow hedges
Amounts recognised directly in equity
Equity raising costs
Net deferred tax liabilities
Carry forward tax losses
Total deferred tax liabilities
Movements:
Opening balance 1 July
Prior period under provision
Charged/(credited) to income statement
Charged/(credited) to equity
Discount on acquisition
Use of carry forward tax losses
Closing balance at 30 June
CONSOLIDATED
2015
$’000
Restated*
2014
$’000
Notes
(3,499)
23,078
25,571
134
(2,530)
8,382
25,296
677
45,284
31,825
(664)
(556)
3
–
44,064
–
44,064
31,828
(5,275)
26,553
26,553
19,579
119
13,340
(1,223)
–
5,275
44,064
2,824
(2,636)
3
35
6,748
26,553
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
23. PROVISIONS (NON CURRENT)
Employee entitlements
Notes
CONSOLIDATED
2015
$’000
1,107
1,107
2014
$’000
891
891
Aggregate employee entitlements liability (Including current liabilities in Note 20)
3,548
3,100
72
Select Harvests Annual Report 2015 24. CONTRIBUTED EQUITY
(a) Issued and paid up capital
Ordinary shares fully paid
(b) Movements in shares on issue
Beginning of the financial year
Issued during the year:
• Dividend reinvestment plan
• Long term incentive plan – tranche vested
• Ordinary shares issued under equity raising (net of transaction costs
and deferred tax)
End of financial year
(c) Performance Rights
Long Term Incentive Plan
CONSOLIDATED
2015
$’000
2014
$’000
Notes
170,198
170,198
99,750
99,750
2015
2014
Number
of Shares
$’000
Number
of Shares
57,999,427
99,750
57,462,851
$’000
97,007
894,540
152,943
–
5,792
536,576
2,743
–
–
–
–
12,388,891
64,656
71,435,801
170,198
57,999,427
99,750
The company offered 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 fixed remuneration of the
employee, with relevant proportions based on market relativity of employees with equivalent responsibilities.
The long term scheme involves the issue of performance rights to the employee, under the Long Term Incentive Plan. During the financial
year, performance rights granted during the 2012 year have vested under this plan (refer Note 34 and Directors’ Report for further details).
The market value of ordinary Select Harvests Limited shares closed at $11.00 on 30 June 2015 ($5.14 on 30 June 2014).
(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.
(e) Capital risk management
The group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
73
www.selectharvests.com.au Notes to the Financial Statements
Continued
25. RESERVES AND RETAINED PROFITS
Capital reserve
Cash flow hedge reserve
Asset revaluation reserve
Options reserve
Retained profits
(a) Movements
Capital reserve
Balance at beginning of year
Balance at end of year
Cash flow hedge reserve
Balance at beginning of year
Fair value movement in interest rate swap
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
CONSOLIDATED
2015
$’000
3,270
(149)
7,645
2,052
Restated*
2014
$’000
3,270
7
7,645
1,268
12,818
12,190
Notes
25(a)
25(a)
25(a)
25(a)
25(c)
104,371
63,466
3,270
3,270
7
125
(281)
(149)
7,645
7,645
1,268
784
2,052
3,270
3,270
(2,085)
179
1,913
7
7,645
7,645
314
954
1,268
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
(b) Nature and purpose of reserves
(i) Capital reserve
The capital reserve was previously used to isolate realised capital profits from disposal of non-current assets.
(ii) Asset revaluation reserve
The asset revaluation reserve was previously 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 performance rights granted and expensed but not exercised.
(iv) Cash flow hedge reserve
The cash flow hedge reserve is used to record gains or losses on the fair value movements in the interest rate swap and foreign currency
contracts in a cash flow hedge that are recognised directly in equity.
74
Select Harvests Annual Report 2015 (c) Retained profits
Balance at the beginning of year
Profit attributable to members of Select Harvests Limited
Total available for appropriation
Dividends paid
Balance at end of year
CONSOLIDATED
2015
$’000
Restated*
2014
$’000
Notes
63,466
56,766
120,232
53,354
21,643
74,997
(15,861)
(11,531)
104,371
63,466
26. RECONCILIATION OF THE NET PROFIT AFTER INCOME TAX TO THE NET CASH FLOWS
FROM OPERATING ACTIVITIES
Net profit
Non-cash items
Depreciation and amortisation
Inventory fair value adjustment
Discount on acquisition
Net loss on sale of assets
Options expense
Income tax expense
Changes in assets and liabilities
(Increase)/decrease in receivables
(Increase) in inventory
Decrease in prepayments
(Increase)/decrease in other assets
Increase/(decrease) in trade and other payables
(Increase) in income tax payable
Increase/(decrease) in deferred tax liability
Increase in employee entitlements
Net cash flow from operating activities
Notes
CONSOLIDATED
2015
$’000
56,766
10,546
(47,517)
–
251
784
Restated*
2014
$’000
21,643
8,303
(2,476)
(82)
239
954
23,748
5,190
(20,786)
(14,990)
235
(854)
9,730
(5,473)
17,511
448
4,129
(10,163)
–
(566)
(4,001)
–
(237)
130
30,399
23,063
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
Non cash financing activities
During the current year the company issued 12,388,891 (2014: Nil) and 894,540 (2014: 536,576) of new equity as part of the Equity Raising
and Dividend Reinvestment Plan respectively.
75
www.selectharvests.com.au Notes to the Financial Statements
Continued
27. EXPENDITURE COMMITMENTS
(a) Operating lease commitments
Commitments payable in relation to leases contracted for at the reporting date but not
recognised as liabilities:
Within one year
Later than one year but not later than five years
Later than five years
(i) Property and equipment leases (non-cancellable):
Minimum lease payments
• Within one year
• Later than one year and not later than five years
• Later than five years
Aggregate lease expenditure contracted for at reporting date
Property and equipment lease payments are for rental of premises, farming and factory equipment.
(ii) Almond orchard leases:
Minimum lease payments
• Within one year
• Later than one year and not later than five years
• Later than five years
Aggregate lease expenditure contracted for at reporting date
CONSOLIDATED
2015
$’000
2014
$’000
Notes
11,039
41,487
92,873
10,837
37,019
78,494
145,399
126,350
4,062
9,205
–
4,501
9,884
1,512
13,267
15,897
6,977
32,282
92,873
6,336
27,135
76,982
132,132
110,453
The almond orchard leases comprises the lease of a 512 acre almond orchard and a 1,002 acre lease from Arrow Funds Management in
which the Company has the right to harvest the almonds from the trees owned by the lessor for the term of the agreement. The Company
also has first 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 first right of refusal clauses. There is also a 20 year lease of 3,100 acres at Hillston with Rural Funds Management.
76
Select Harvests Annual Report 2015 CONSOLIDATED
2015
$’000
2014
$’000
Notes
(b) Finance lease commitments
Commitments payable in relation to leases contracted for at the reporting date
and recognised as liabilities:
Within one year
Later than one year but not later than five years
Minimum lease payments
Future finance charges
Total lease liabilities
The present value of finance lease liabilities is as follows:
Within one year
Later than one year but not later than five years
Minimum lease payments
Finance lease payments are for rental of farming equipment with a carrying amount of $6,220,629 (2014: $1,415,000).
(c) Capital commitments
Significant capital expenditure contracted for at the end of the reporting period by not
recognised as liabilities is as follows:
Property, plant and equipment
1,367
4,534
5,901
(497)
5,404
1,124
4,280
5,404
332
1,201
1,533
(174)
1,359
255
1,104
1,359
9,070
9,070
–
–
28. EVENTS OCCURRING AFTER BALANCE DATE
On 20 August 2015, the Company announced a sale and leaseback transaction with First State Super. The transaction involves selling three
properties in South Australia, Victoria and New South Wales for proceeds of $67 million, accompanied by a long term lease to support the
development of new greenfield almond orchards.
At 30 June 2015 the financial effect of the transaction cannot be accurately estimated, and these assets have not been classified as held for
sale, as the accounting treatment cannot be completed until all aspects of the leaseback transaction are finalised. The assets sold include
land, irrigation, infrastructure and trees that have been acquired during the year. Any differential between the proceeds and carrying value,
which is not currently expected to be material, will either be deferred over the lease term or recognised in the income statement, dependent
upon finalisation of the accounting treatment.
On 21 August 2015, the Directors declared a final unfranked dividend of 35 cents per share in relation to the financial year ended
30 June 2015 to be paid on 13 October 2015.
77
www.selectharvests.com.au Notes to the Financial Statements
Continued
29. EARNINGS PER SHARE
Basic earnings per share attributable to equity holders of the company
Diluted earnings per share attributable to equity holders of the company
The following reflects the income and share data used in the calculations of basic and diluted earnings per share:
2015
Cents
82.9
81.0
Restated*
2014
Cents
37.5
36.4
CONSOLIDATED
2015
$’000
Restated*
2014
$’000
Basic earnings per share:
Profit attributable to equity holders of the company used in calculating basic earnings per share
56,766
21,643
Diluted earnings per share:
Profit attributable to equity holders of the company used in calculating diluted earnings per share
56,766
21,643
Weighted average number of ordinary shares used in calculating basic earnings per share
68,455,421
57,745,998
Effect of dilutive securities:
Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share
70,074,337
59,486,545
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
NUMBER OF SHARES
2015
2014
78
Select Harvests Annual Report 2015 30. REMUNERATION OF AUDITORS
Audit and other assurance services
Audit and review of financial statements
Operational review and other assurance services
Total remuneration for audit and other assurance services
Taxation services
Tax consulting
Total remuneration for taxation services
Total remuneration of PricewaterhouseCoopers
31. 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 33.
(c) Key management personnel compensation
Short term employment benefits
Post-employment benefits
Long service leave
Share based payments
Other disclosures relating to key management personnel are set out in the Remuneration Report.
(d) Director related entity transactions
There were no director related entity transactions during the year.
2015
$
2014
$
297,000
151,000
448,000
269,400
–
269,400
31,818
31,818
83,855
83,855
479,818
353,255
Notes
CONSOLIDATED
2015
$
2014
$
3,275,159
2,992,655
169,118
144,709
15,087
20,701
784,029
954,376
4,243,393
4,112,441
79
www.selectharvests.com.au Notes to the Financial Statements
Continued
32. SEGMENT INFORMATION
Segment products and locations
The segment reporting reflects the way information is reported internally to the Chief Executive Officer.
The Company has the following business segments:
• Food Division – processes, markets, and distributes edible nuts, dried fruits, seeds, and a range of natural health foods.
• Almond Division – grows, processes and sells almonds to the food industry from company owned almond orchards, and provides a range
of management services to external owners of almond orchards, including orchard development, tree supply, farm management, land and
irrigation infrastructure rental, and the sale of almonds on behalf of external investors.
The Company operates predominantly within the geographical area of Australia.
The segment information provided to the Chief Executive Officer is referenced in the following table:
FOOD DIVISION
($’000)
ALMOND DIVISION
($’000)
ELIMINATIONS
AND CORPORATE
($’000)
CONSOLIDATED ENTITY
($’000)
2015
2014
2015
Restated*
2014
2015
2014
2015
Restated*
2014
Revenue
Total revenue from external customers
138,757
117,926
84,717
70,162
–
–
223,474
188,088
Intersegment revenue
–
–
30,550
17,805
(30,550)
(17,805)
–
–
Total segment revenue
138,757
117,926
115,267
87,967
(30,550)
(17,805)
223,474
188,088
Other revenue
Total revenue
–
–
113
105
57
58
170
163
138,757
117,926
115,380
88,072
(30,493)
(17,747)
223,644
188,251
EBIT
Interest received
Finance costs expensed
6,817
5,644
83,713
30,275
(4,685)
(4,631)
85,845
31,288
–
–
–
–
–
(182)
–
–
56
57
56
57
(5,205)
(4,512)
(5,387)
(4,512)
Profit before income tax
6,817
5,644
83,531
30,275
(9,834)
(9,086)
80,514
26,833
Segment assets (excluding
intercompany debts)
Segment liabilities (excluding
intercompany debts)
77,059
69,378
418,225
280,823
(7,372)
(19,482)
487,912
330,719
(11,489)
(8,848)
(78,115)
(72,481)
(110,921)
(73,984)
(200,525)
(155,313)
Acquisition of non-current
segment assets
Depreciation and amortisation
of segment assets
584
475
405
98,741
29,935
326
504
10,033
7,771
38
42
28
99,651
30,382
10,546
8,303
Sales to major customers include Coles 23% and Woolworths 22% of total sales of the Food Division
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
80
Select Harvests Annual Report 2015 33. CONTROLLED ENTITIES
Parent Entity:
Select Harvests Limited (i)
Subsidiaries of Select Harvests Limited:
Kyndalyn Park Pty Ltd (i)
Select Harvests Food Products Pty Ltd (i)
Meriram Pty Ltd (i)
Kibley Pty Ltd (i)
Select Harvests Nominee Pty Ltd (i)
Select Harvests Orchards Nominee Pty Ltd (i)
Select Harvests Water Rights Unit Trust (i)
Select Harvests Water Rights Trust (i)
Select Harvests Land Unit Trust (i)
Select Harvests South Australian Orchards Trust (i)
Select Harvests Victorian Orchards Trust (i)
Select Harvests NSW Orchards Trust (i)
(i) Members of extended closed group
34. SHARE BASED PAYMENTS
Long Term Incentive Plan
COUNTRY OF
INCORPORATION
PERCENTAGE OWNED
(%)
2015
2014
Australia
100
100
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
–
–
–
–
–
The Group offers executive directors and senior executives the opportunity to participate in the long term incentive plan (LTI Plan) involving
the issue of performance rights to the employee under the LTI Plan. The LTI Plan provides for the offer of a parcel of performance rights with
a three year life to participating employees on an annual basis. One third of the rights vesting each year, with half of the rights vesting upon
achievement of earnings per share (EPS) growth targets and the other half vesting upon achievement of total shareholder return (TSR)
targets. The EPS growth targets are based on the average growth of the company’s EPS over the three years prior to vesting. The TSR
targets are measured based on the company’s average TSR compared to the TSR of a peer group of ASX listed companies over the three
years prior to vesting. The performance targets and vesting proportions are as follows:
Measure
EPS
Below 5% growth
5% growth
EXISTING ISSUES
Rights to Vest
Nil
25%
Measure
EPS
Below 5% growth
5% growth
FUTURE ISSUES
Rights to Vest
Nil
25%
5.1% – 6.9% growth
Pro rata vesting
5.1% – 19.9% growth
Pro rata vesting
7% or higher growth
TSR
Below the 60th percentile*
60th percentile*
50%
Nil
25%
20% or higher growth
TSR
Below the 50th percentile*
50th percentile*
50%
Nil
25%
61st – 74th percentile*
Pro rata vesting
51st – 74th percentile*
Pro rata vesting
At or above 75th percentile*
50%
At or above 75th percentile*
50%
* Of the peer group of ASX listed companies
81
www.selectharvests.com.au Notes to the Financial Statements
Continued
34. SHARE BASED PAYMENTS Continued
Summary of performance rights over unissued ordinary shares
Details of performance rights over unissued ordinary shares at the beginning and ending of the reporting date and movements during
the year are set out below:
2015
GRANT DATE
EXPIRY DATE
BALANCE
AT START
OF THE
YEAR
EXERCISE
PRICE
GRANTED
DURING
THE YEAR
FORFEITED
DURING
THE YEAR
VESTED
DURING
THE YEAR
BALANCE AT
END OF THE YEAR
PROCEEDS
RECEIVED
SHARES
ISSUED
FAIR
VALUE
PER
SHARE
FAIR VALUE
AGGREGATE
29/06/2012
29/06/2015
30/04/2013
30/04/2016
–
–
224,040
1,353,887
–
–
–
–
112,020
112,020
463,287
890,600
–
–
Number
Number
Number
Number On Issue
Vested
$
–
–
Number
$
$
–
–
1.14
127,703
2.26
2,012,756
2014
GRANT DATE
EXPIRY DATE
BALANCE
AT START
OF THE
YEAR
EXERCISE
PRICE
GRANTED
DURING
THE YEAR
FORFEITED
DURING
THE YEAR
VESTED
DURING
THE YEAR
BALANCE AT
END OF THE YEAR
PROCEEDS
RECEIVED
SHARES
ISSUED
FAIR
VALUE
PER
SHARE
FAIR VALUE
AGGREGATE
29/06/2012
29/06/2015
30/04/2013
30/04/2016
–
–
336,060
1,404,487
–
–
6,665
105,355
224,040
3,011
47,589
1,353,887
–
–
Number
Number
Number
Number On Issue
Vested
$
–
–
Number
$
$
–
–
1.14
255,406
2.26
3,059,785
Fair value of performance rights granted
The assessed fair value at grant date is determined using a Black-Scholes option pricing model that takes into account the term of the rights,
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 right.
The model inputs for rights granted in the tables above included:
Share price at grant date
Expected volatility*
Expected dividends
Risk free interest rate
29 June 2012
Performance Rights Issue
30 April 2013
Performance Rights Issue
$1.62
30%
Nil
5%
$2.90
30%
Nil
5%
* Expected share price volatility was calculated with reference to the annualised standard deviation of daily share price returns on the underlying security
over a specified period.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense
were as follows:
Performance rights granted under employee long term incentive plan
35. CONTINGENT LIABILITIES
(i) Guarantees
Cross guarantees given by the entities comprising the Group are detailed in Note 36.
82
CONSOLIDATED
2015
$’000
784,029
784,029
2014
$’000
954,287
954,287
Select Harvests Annual Report 2015
36. PARENT ENTITY FINANCIAL INFORMATION
(a) Summary financial information
The individual financial 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 flow hedge reserve
Options reserve
Retained profits
Total Shareholders’ Equity
Profit for the year
Total comprehensive income
2015
$’000
1,475
Restated*
2014
$’000
7,727
569,084
406,870
28,364
9,406
368,422
295,974
170,196
99,750
3,270
(149)
2,052
25,293
3,270
7
1,268
6,601
200,662
110,896
5,901
2,218
5,745
4,383
* Refer to note 1(ad) for details regarding the restatements as a result of early adopting the amendments made to Accounting Standards AASB 116 Property,
Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
(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(o).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 liabilities 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’ financial statements.
The amounts receivable/payable under the tax funding agreement is due upon receipt of the funding advice from the head entity, which is
issued as soon as practicable after the end of each financial 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 financial 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.
83
www.selectharvests.com.au Directors’ Declaration
In the directors’ opinion:
(a)
the financial statements and Notes set out on pages 44 to 83 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 financial position as at 30 June 2015 and of its performance for the financial
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 identified in
Note 33 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 36.
Note 1(a) confirms that the financial 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 Officer required under section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
M Iwaniw
Chairman
Melbourne, 21 August 2015
84
Select Harvests Annual Report 2015 Independent Auditor’s Report to the
Members of Select Harvests Limited
Harvests Limited
Report on the financial report
We have audited the accompanying financial report of Select Harvests Limited (the company), which
comprises the balance sheet as at 30 June 2015, the income statement, statement of comprehensive
income, statement of changes in equity and statement of cash flows for the year ended on that date, a
the Select Harvests Group (the consolidated entity). The consolidated entity comprises the company
and the entit
The directors of the company are responsible for the preparation of the financial 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
financial report that is free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those 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 financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
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.
85
www.selectharvests.com.au Independent Auditor’s Report to the
Members of Select Harvests Limited
Continued
In our opinion, the financial report of Select Harvests Limited is in accordance with the Corporations
Act 2001, including:
(a)
(b)
giving a true and fair view of the consolidated entity's financial position as at 30 June 2015 and
of its performance for the year ended on that date; and
complying with Australian Accounting Standards including the Australian Accounting
Interpretations and the Corporations Regulations 2001.
Report on the Remuneration Report
We have audited the remuneration report included in
2015. 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.
In our opinion, the remuneration report of Select Harvests Limited for the year ended 30 June 2015
complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
John O Donoghue
Partner
Melbourne
21 August 2015
86
Select Harvests Annual Report 2015 ASX Additional Information
Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is as follows.
(A) DISTRIBUTION OF EQUITY SECURITIES
The following information is current as at 31 July 2015.
The number of shareholders, by size of holding, in each class of share is:
Number of ordinary shares
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
The number of shareholders holding less than a marketable parcel of shares is:
Number of ordinary shares
1,389
(B) TWENTY LARGEST SHAREHOLDERS
The following information is current as at 31 July 2015.
The names of the twenty largest registered holders of quoted shares are:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
AMP LIFE LIMITED
BRAZIL FARMING PTY LTD
CITICORP NOMINEES PTY LIMITED
SANDHURST TRUSTEES LTD
REZANN PTY LTD
NATIONAL NOMINEES LIMITED
ROBERT FERGUSON + JENNIFER FERGUSON + RACHEL FERGUSON
WARD MCKENZIE PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
PAKA NOMINEES PTY LTD
BOND STREET CUSTODIANS LIMITED
MRS BARBARA ANNE KNOTT
BOND STREET CUSTODIANS LIMITED
MILTON CORPORATION LIMITED
Number of
Shareholders
1,934
1,671
508
418
31
Number of
Shareholders
228
Number of
Shares
Percentage
of Shares
24,218,334
10,022,399
6,158,349
4,646,427
1,501,427
888,356
722,804
350,692
332,133
295,000
281,891
280,000
185,000
183,482
180,000
177,804
177,170
172,410
166,764
161,862
33.90%
14.03%
8.62%
6.50%
2.10%
1.24%
1.01%
0.49%
0.46%
0.41%
0.39%
0.39%
0.26%
0.26%
0.25%
0.25%
0.25%
0.24%
0.23%
0.23%
87
www.selectharvests.com.au ASX Additional Information
Continued
(C) SUBSTANTIAL SHAREHOLDERS
The names of substantial shareholders are:
FMR LLC
Thorney Investment Group
(D) VOTING RIGHTS
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
The Company is listed on the Australian Stock Exchange. The home exchange is Melbourne.
Number of
Shares
7,168,268
4,304,659
88
Select Harvests Annual Report 2015 Corporate
Information
ABN 87 000 721 380
Directors
M Iwaniw (Chairman)
P Thompson (Managing Director)
M Carroll (Non-Executive Director)
F S Grimwade (Non-Executive Director)
R M Herron (Non-Executive Director)
P Riordan (Non-Executive Director)
Company Secretary
P Chambers
Registered Office
– Select Harvests Limited
360 Settlement Road
THOMASTOWN VIC 3074
Postal address
PO Box 5
THOMASTOWN VIC 3074
T (03) 9474 3544
F (03) 9474 3588
E info@selectharvests.com.au
Solicitors
Minter Ellison Lawyers
Bankers
National Australia Bank Limited
Rabobank Australia
Auditor
PricewaterhouseCoopers
Share Register
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067
T (03) 9415 4000
F (03) 9473 2555
Website
www.selectharvests.com.au
www.colliercreative.com.au #SEL0005
Select Harvests Limited
ABN 87 000 721 380
PO Box 5
Thomastown VIC 3074
360 Settlement Road
Thomastown VIC 3074
T (03) 9474 3544
F (03) 9474 3588
E info@selectharvests.com.au
ASX ticker code: SHV
www.selectharvests.com.au
Company Websites
www.luckynuts.com.au
www.sunsol.com.au
www.soland.com.au
www.allingafarms.com.au
Company Instagram Sites
www.instagram.com/select_harvests/
www. instagram.com/lucky.nuts/
www. instagram.com/sunsol_muesli/
TM
Product range
nuts, dried fruit,
legumes and pulses,
cereals, grains,
seeds, flour, muesli
and organic foods
Bulk and convenient
packs
Distribution
health and food stores
and pharmacies
nationally
Product range
muesli, dried fruit,
nuts and snacks
Distribution
major supermarkets
(muesli) and export
markets including
Hong Kong,
Singapore, Malaysia,
Indonesia and the
Pacific Rim
Product range
muesli, dried fruit,
wholefoods, nuts
and snacks
Distribution
Health aisle of major
supermarkets and
export markets
including Hong
Kong, Singapore,
Malaysia, Indonesia
and Pacific Rim
Product range
almonds and other
nuts, dried fruit,
seeds, nut pastes,
pralines and muesli
Bulk and convenient
packs
Products sold to
local and overseas
food manufacturers,
wholesalers,
distributors
and re-packers
Supplies bulk
product to
major bakeries,
manufacturers and
wholesalers who
depend on quality
and service.
Market leader
in the cooking
nut category
Cooking Nut
product range
almonds, walnuts,
cashews, brazilnuts,
pine nuts, pistachios,
macadamias,
sunflower seeds
and pepitas (market
share - July 2015
MAT - 39.8%)
Snacking
product range
portion control
packs, Lucky Smart
Snax and Lucky
Snack Tubs
Distribution
major supermarkets
and export markets
including the Middle
East, Indonesia and
Papua New Guinea