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1
7
ANNUAL REPORT 2017
SOUTHERN
REGION
PARINGA
WAIKERIE
LAKE
CULLULLERAINE
HILLSTON
EUSTON
NORTHERN
REGION
GRIFFITH
Sydney
Adelaide
LOXTON
ROBINVALE
CENTRAL
REGION
Processing Centres
Select Harvests Orchards
THOMASTOWN
Melbourne
A$300M+
MARKET
CAP
A$240M+
ANNUAL
SALES
7,135HA
TOTAL
PLANTED
AREA*
(17,630 acres)
300
EMPLOYEES
COUNTRYWIDE
2 VALUE-ADDING
MANUFACTURING
PLANTS IN AUSTRALIA
Largest
INTEGRATED ALMOND
bUSINESS IN AUSTRALASIA
* area as at 30 June 2017
Company
Profile
2,329HA
2,857HA
1,948HA
PLANTED
AREA IN
SOUTHERN REGION
(5,756 acres)
PLANTED
AREA IN
CENTRAL REGION
(7,060 acres)
PLANTED
AREA IN
NORTHERN REGION
(4,814 acres)
1
Select Harvests is one of Australia’s
largest almond growers and a leading
manufacturer, processor and marketer
of nut products, health snacks and
muesli. We supply the Australian retail
and industrial markets plus export
almonds globally.
We are Australia’s second largest almond
producer and marketer with core capabilities
across: Horticulture, Orchard Management,
Nut Processing, Sales and Marketing. These
capabilities enable us to add value throughout
the value chain.
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 7,689 Ha
(19,000 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 processing facility at Carina West
near Robinvale, Victoria and our value-added
processing facility at Thomastown in the
Northern Suburbs of Melbourne. Our
Carina West processing facility has the
capacity to process 25,000 MT of almonds
in the peak season and is capable of meeting
the ever increasing demand for in-shell,
kernel and value-added product. Our
processing plant in Thomastown processes
over 10,000 MT 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, NuVitality,
Sunsol, Allinga Farms and Soland in retail;
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 Vision
For Select Harvests to be recognised
as one of Australia’s most respected
agrifood businesses.
www.selectharvests.com.au 2
Contents
1 Company profile
2 Contents
3 performance Summary
4 Chairman & Managing Director’s Report
8 Strategy
10 Almond Division
11 Food Division
12 people & Diversity
12 Communities
12 oH&S
12 Sustainability & environment
14 executive team
15 board of Directors
16 Historical Summary
17 Financial Report
18 Directors’ Report
24 Remuneration Report
37 Auditor’s Independence Declaration
38 Statement of Comprehensive Income
39 balance Sheet
40 Statement of Changes in equity
41 Statement of Cash Flows
42 notes to the Financial Statements
71 Directors’ Declaration
72
Independent Auditor’s Report
79 ASX Additional Information
81 Corporate Information
Select Harvests Annual Report 2017 performance Summary
3
Results – Key Financial Data
$’000 (except where indicated)
Reported Result (AIFRS)
Variance (%)
Underlying Result (1)
Variance (%)
REVENUE
Crop Volume (Mt)
Almond price (A$/kg)
EBIT
Almond Division
Food Division
Corporate Costs
Operating EBIT
Interest expense
Net Profit Before Tax
tax expense
Net Profit After Tax
earnings per Share (cents per share)
Interim Dividend (cents per share)
FY16
286,168
14,200
8.08
44,575
10,342
(5,132)
49,785
(5,495)
44,290
(10,494)
33,796
46.7
FY17
242,142
14,100
7.43
13,686
7,950
(4,657)
16,979
(5,001)
11,978
(2,729)
9,249
12.6
21
(0% franked)
10
(100% franked)
Final Dividend (cents per share)
25
(100% franked)
net Debt(2)
Gearing (net Debt/equity) %
Share price (A$/Share as at 30 June)
Market Capitalisation (A$M)
67,265
23.1%
6.74
491
nil
145,817
52.5%
4.90
361
FY16
FY17
(15.4%)
286,168
242,142
(15.4%)
(69.3%)
(23.1%)
(9.3%)
(65.9%)
(9.0%)
(73.0%)
(74.0%)
(72.6%)
(73.0%)
36,093(1)
10,342
(5,132)
41,303
(5,495)
35,808
(7,949)
27,857
38.5
13,686
7,950
(4,657)
16,979
(5,001)
11,978
(2,729)
9,249
12.6
(62.1%)
(23.1%)
(9.3%)
(58.9%)
(9.0%)
(66.5%)
(65.7%)
(66.8%)
(67.3%)
116.8%
127.3%
67,265
23.1%
145,817
52.5%
116.8%
127.3%
(1) the adjustment to the reported Almond division ebIt in FY16 relates to gains on asset sales of A$8.5m. Refer below for definitions
of underlying ebIt and underlying npAt.
(2) net debt includes Finance lease commitments of A$41.4m in FY17 (compares to A$41.8m in FY16).
Definitions:
• Underlying Earnings Before Interest and Tax (“ebIt”) is a non-International Financial Reporting Standards (“IFRS”) measure calculated
by adjusting profit before Income tax for interest expense and any non-recurring items.
• Underlying Net Profit After Tax (“npAt”) is a non-IFRS measure calculated by adjusting profit Attributable to Members of Select
Harvests ltd for any non-recurring items.
• Underlying Earnings Per Share (“epS”) is a non-IFRS measure calculated by adjusting epS for any non-recurring items.
non-IFRS measures used by the company are relevant because they are consistent with measures used internally by management and by
some in the investment community to assess the operating performance of the business. the non-IFRS measures have not been subject
to audit or review.
www.selectharvests.com.au
4
Chairman & Managing Director’s Report
Key Facts
Improved our safety record
– reduced lost time Injuries
by 18% year on year
pre-tax operating
cash flow A$33.8 million.
tax A$29.0 million. operating
cash flow A$4.7 million
net profit After tax (npAt)
of A$9.2 million
earnings per Share (epS)
– 12.6 cents per share (cps)
total dividend payment
– 10.0 cps fully franked
net Debt A$145.8 million.
net Debt to equity 53%
Average SHV almond price
A$7.43/kg
Almond crop – 14,100 Mt
progressed Strategic projects
– H2e and parboil. parboil
commissioned 1QFY18
A$14.3 million
Acquired Jubilee orchards
465 planted Ha
(1,147 planted acres) and
1,335 Ml high security water
for A$26.4 million
planted 844 Ha (2,084 acres)
of almonds in July 2016
prepared to plant 352 Ha
(870 acres) of almonds in
July 2017 – 7,490 planted Ha
(18,500 planted acres) as at
october 2017
Welcome to Select Harvests’ 2016/17
Annual Report. It has been a challenging
year for the company with a variety of
controllable and uncontrollable events
(including project delays and currency)
impacting this year’s result. Whilst the
results are disappointing, pleasingly the
underlying fundamentals of the industry
remain positive with both almond and
plant protein consumption continuing
to increase.
As a business we have made considerable
progress on our key strategic initiatives
– increasing our almond growing capacity
through our Greenfield Almond planting
program and the acquisition of mature
Almond orchards, adding value by investing
in our brands and investing in plant and
equipment capable of increasing the value
of the base commodity raw almonds (project
parboil) and finally by reducing cost through
investing in sustainable solutions like the H2e
biomass facility. positioning the company to
be globally competitive through all cycles.
Financial Performance
Select Harvests produced a Reported npAt
of A$9.2 million and epS of 12.6 cents per
share in FY17.
the company generated a healthy pre-tax
operating cash flow of A$33.8 million. After
paying A$29.0 million tax in FY17, relating
to the record FY16 npAt, FY17 operating
cash flow was reduced to A$4.7 million.
the company paid an interim, fully franked
dividend of 10 cps on 5 April 2017 and declared
nil final dividend.
At 30 June 2017, net Debt (including lease
liabilities) was A$145.8 million and net Debt
to equity was 53%.
Select Harvests Annual Report 2017 5
KEY PROJEcT UPDATES
Jubilee Almond Orchard Acquisition
During the year, Select Harvests acquired
the proven high yielding Jubilee orchard
near Waikerie, SA for A$26.4 million,
comprising 465 planted Ha (1,147 planted
acres) of almonds and 1,335 Ml of high
security water entitlements. the Jubilee
orchard is an outstanding, high performing
asset that compliments the geographically
diversified Select Harvests almond portfolio.
Jubilee will make an important long term
contribution to Select Harvests profitability
and asset base, beginning with the 2018 crop.
Greenfield Almond Plantings
In July 2016, Select Harvests planted out
844 Ha (2,084 acres) of Greenfield almond
orchards that it will lease from First State
Super (FSS). In July 2017, we planted out
another 352 Ha (870 acres) funded by FSS
– we now have 7,490 Ha (18,500 acres)
of planted almond orchards. this provides
Select Harvests with long term control of
a large scale, globally competitive almond
orchard. the first crop from the 2016
plantings will be harvested in three years
and fully mature in seven years.
the 2017 crop was 14,100 Mt. based on
current greenfield plantings, our crop will
be 21,000 Mt by 2022, just under 50%
greater than today.
Project Parboil (value-Added
Almond Facility)
the state of the art Value-Added Almond
processing Facility at Carina West (project
parboil) has experienced significant delays
and commenced commissioning in Q1
FY2018 at an increased cost of A$14.3 million.
this facility is now in production and
progressing through the individual customer
certifications. this facility provides increased
efficiency, greater processing capacity and
importantly allergen-free almond products
(including pastes – the essential ingredient
in the commercial production of almond milk).
parboil will assist in maximizing the average
price of the almonds and in part insulate
us from the effects of the commodity cycle.
Project H2E (2.4MW Biomass Electricity
cogeneration Facility)
project H2e will provide the Carina West
processing Facility and neighbouring farms
with secure, low-cost electricity supply
generated from operational by-product plus
significantly reducing our carbon footprint.
We have experienced significant time delays
and cost increases. the revised timeline for
commissioning of project H2e is Q3 FY2018
and estimated cost is now A$19.7 million.
Despite these unfortunate events the
investment returns remain positive, in an
environment of escalating energy costs.
7,490 HA
PLANTED AS AT
OcTOBER 2017
www.selectharvests.com.au 6
Chairman & Managing Director’s Report continued
Balance Sheet
Current debt levels are at the top of the
targeted range. the balance sheet includes
the impact of A$56.8 million of net investing
cash outflows resulting from the acquisition
of the Jubilee orchard, expenditure on major
projects and orchard development costs.
We continue to focus on reducing operational
expenditure, working capital and capital
expenditure, and are investigating a number
of debt reduction initiatives to strengthen
our balance sheet. We recognise the need
for a strong balance Sheet to allow us to
invest and grow in all cycles.
Almond Division
the Almond Division delivered an ebIt
of A$13.7 million in FY2017 – down on the
FY2016 Reported profit of A$44.6 million
and FY2016 underlying profit of A$36.1 million.
the year on year profit decline was largely
the result of a fall in the global almond price
and the appreciation of the AuD, plus higher
orchard lease costs as a result of re-valuation.
Almond volume was 14,100 Mt (FY16 14,200 Mt)
while price was A$7.43/kg (FY16 A$8.08/kg).
the crop volume was lower than forecast,
impacted by the significantly wetter spring
and milder summer – a trend that was seen
across the Australian Almond Industry.
post-harvest review has concluded that the
FY17 yield shortfall was attributable to these
abnormal conditions. It should be noted that
the development of Select Harvests young
orchard toward maturity, combined with the
high-performance input program, will deliver
greater than 50% volume growth over the
next 8 years.
Food Division
the Food Division produced an FY2017
ebIt of A$8.0 million, down on FY2016 ebIt
of A$10.3 million. the drop was driven by
commodity price decreases passed onto
our customers and reduced volumes in the
Consumer business mainly relating to retailer
brand contracts, while the consumer sales
channel has achieved growth in export. the
lucky brand maintained a strong share in
the Cooking and baking category as market
leader with 38.4% market share (source:
IRI Aztec 18 June 2017). Sunsol Cereal
products sales grew by over 35%. export
sales continue to grow in both the Industrial
and Consumer packaged Food Divisions.
peter Ross (previously GM Horticulture)
been promoted to GM Almond operations
responsible for the Carina West facility
(inc. capital projects and Carina West facility).
ben brown (previously Horticulture
Manager) has been promoted to Acting
GM Horticulture.
Mark eva (GM Consumer) has retained
his current responsibilities and will
have additional responsibilities for
the thomastown production facility.
Board Membership
During the year, Ross Herron was appointed
to fill a casual vacancy on the board – he
will retire from the board at the 2017 AGM.
Ross has been a significant contributor over
his nearly 12 years as a Director of Select
Harvests. As Head of the Audit and Risk
Committee, Ross has provided invaluable
leadership in the areas of governance,
finance and strategic planning. on behalf
of the board and shareholders, I would like to
acknowledge and thank him wholeheartedly
for his efforts, his counsel and his valued
direction of the business.
on 6 July 2017, Fiona bennett joined the
Select Harvests board. Fiona is a Chartered
Accountant and senior executive with over
30 years’ experience in business and financial
management, corporate governance,
risk management and audit. Fiona is an
experienced company director and currently
serves as Chairman of the Audit and Risk
Committee at Hills limited, as Chairman of
Audit at beach energy limited and as Chair
of the Victorian legal Services board. We
welcome Fiona to the Select Harvests board.
Market Outlook
the world demand for almonds and plant
protein has continued to increase with
further supporting research being published,
outlining the health benefits of the increased
consumption of plant protein products such as
almonds. the impact on consumption of this
research and lower prices has been immediate,
absorbing the increased production from
California and Australia. While the 2017 uS
almond crop is expected to be a record
2.25 billion pounds (up 110 million pounds
or 5% on the prior year), shipments of the 2016
crop were 2.10 billion pounds (up 290 million
pounds or 16% on prior year). this momentum
is reinforced with the Almond board of
California’s August 2017 position Report
showing that forward commitments for August
2017 are up 40% on August 2016. the high level
of commitments, strong shipments and with
almonds currently positioned as the cheapest
tree nut, has stimulated demand, which should
lead to a further strengthening of prices.
Safety & Wellbeing
Select Harvests number one objective is to
ensure the safety of our people, by preventing
injuries before they occur.
Agriculture is one of Australia’s most
dangerous industries. the Select Harvests
Zero Harm Safety and Wellbeing strategy
is to improve our safety performance by
25% per annum until we operate in a zero
harm environment. It is a companywide
strategy that involves all stakeholders.
pleasingly this year we exceeded our
Medically treated Injury Frequency Rates
(MtIFR) objective with MtIFR reducing
by greater than 25%.
Sustainability
During the year Select Harvests launched
our inaugural Sustainability Report. We had
no environmental breaches and implemented
a number of sustainability initiatives, including
our first off-grid solar powered farm hub,
investing in low-friction irrigation and
energy efficient pumping technology plus
the installation of a worm farm converting
operational waste into liquid fertiliser.
Recognising our role in regional Australia
the company and its employees participate
in several community events, including the
Mallee Almond blossom Festival and ongoing
sponsorship of local community groups,
school and clubs.
Management Restructure
As a result of an organisational review
and recent resignations, a number of
changes have been made to the executive
Management team.
paul Chambers, CFo and Company Secretary
has resigned effective 8 november 2017.
– the search for a new CFo has commenced
and is well-advanced.
bruce van twest, GM operations has
resigned, effective 31 July 2017.
Select Harvests Annual Report 2017 Price – Almonds have been the cheapest tree nut for the last 18 months
Commodity price trend 2014-2017 – A$/KG CFR
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
Feb
14
Apr
14
Jun
14
Aug
14
Oct
14
Dec
14
Feb
15
Apr
15
Jun
15
Aug
15
Oct
15
Dec
15
Feb
16
Apr
16
Jun
16
Aug
16
Oct
16
Dec
16
Feb
17
Apr
17
Jun
17
Chinese Pinenut 600 Count
Pistachio Inshell R&S
Almond Kernel SSR
Vietnamese Cashew WW320
California Walnuts LH&P
Source: Company Data
SHv Theoretical Harvest volumes 2017-2026
(basis: Current planted Area and planned planted Area at 1.2 tonnes per Acre @ Industry Average Maturity Yield)
e
s
a
e
r
c
n
I
e
m
u
o
V
l
)
s
e
n
n
o
t
(
e
m
u
o
V
l
+12%
+20%
+29%
+40%
+49%
+52%
+53%
+55%
+57%
*
0
0
1
,
4
1
6
1
8
,
5
1
6
7
9
,
6
1
6
2
1
,
8
1
8
7
6
,
9
1
3
5
9
,
0
2
6
9
3
,
1
2
3
3
6
,
1
2
8
5
8
,
1
2
1
9
0
,
2
2
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24
FY25
FY26
Yield from existing portfolio
Yield from Committed & Immature new plantings
Source: Company Data
7
Strategy
our almond orchards, valued-added
processing capability, brands and people
remain the backbone of delivering
this strategy.
We have continued to execute our strategy
to capitalise on the increasing consumption
of plant based foods. Recent research
and consumer behaviour have continued
to support the acceleration of this trend
with increased consumption of tree nuts
and plant based foods globally.
our strategy is based around 8 core strategic
objectives – to grow the almond portfolio,
improve yield & crop value, be best in class
supply chain, invest in the industrial & trading
division, strengthen packaged food business,
fix our systems and processes, seek non
organic growth and finally engage with
our people and stakeholders.
With capital invested, assets in place and
the growth platform established the key
priority of management is to control our
cost and become as efficient as possible
and maximise profitability.
Thankyou
this year has had its challenges, but the
core fundamentals of our business and our
industry remain strong. the capital intensive
asset development phase of our orchard
growth objective is nearing completion.
the outlook for Select Harvests is extremely
positive with our orchards, integrated
processing facilities and brands positioned
to take advantage of the healthy eating
megatrend of increasing consumption
of plant based high protein foods and drinks.
to all of our stakeholders in this business,
shareholders, suppliers and our loyal,
diligent, passionate and hardworking
employees – we would like to thank you
for your support. We are building a strong,
safe and resilient almond based food
business with great people, great assets
and cost-efficient operations and we are
glad to have you with us.
Michael Iwaniw Chairman
Paul Thompson Managing Director
www.selectharvests.com.au
8
Strategy
HORIzON 1
PERFEcT THE
cURRENT
MODEL
HORIzON 2
TRANSITION
INTO
INTEGRATED
MODEL
HORIzON 3
ExPAND
MODEL
GLOBALLY
Optimise &
grow almond
agri assets
Improve
supply chain
efficiency
Maximise
commodity
value through
innovation
Build our
systems &
grow our
people
Grow the
value of
Brands
Grow in
SHFP Asian
market via
partnerships
Pursue value
accretive
acquisitions in
the agrifood
sector
Explore
opportunities
in the global
industry
Select Harvests Annual Report 2017 9
vISION
Select Harvests to be recognised as one of Australia’s
most respected agrifood businesses
MISSION
To deliver sustainable stakeholder returns by being
a leader in the supply of better for you plant
based foods
ASPIRATIONS
• Zero harm to people & environment
• EPS Growth minimum 5% CAGR
• Gender, age and ethnicity balance
ENABLERS
• Employer of choice
• Culture of innovation
• Market aware
• Proactive communicator
www.selectharvests.com.au The Almond Division produced a
disappointing result with FY17 Reported
EBIT of A$13.7 million, compared to
FY16 Reported EBIT of A$44.6 million and
FY16 Underlying EBIT of A$36.1 million.
Almond price and currency had a major
impact, although there were a range
of contributing factors that impacted
the result.
the company has sold or committed for
sale 72% of the 2017 crop at an average price
of A$7.91/kg (AuD/uSD exchange rate
of 0.75). the FY17 almond price estimate
of A$7.43/kg (FY2016 A$8.08/kg) will depend
on the selling price of the remaining crop
(which includes lower grade product)
and the exchange rate achieved.
the 2017 crop volume was 14,100 Mt,
compared to 2016 crop of 14,200 Mt.
like most of the Australian Almond industry,
we experienced a much wetter spring
and cooler summer, which had a negative
impact on the crop.
the combination of lower crop price and
volume than FY2016 (impact –A$10.0 million).
Sales of the 2015 and 2016 crops realised
at lower prices than previous estimates
(impact –A$6.1 million).
orchard lease costs increased due to the
market revaluation of the almond orchards
leased from Rural Funds Management
(impact –A$4.9 million).
orchard costs/hectare remained flat, but
orchard costs increased due to additional
area of immature trees coming into production
(impact –A$2.3 million). As these trees
incrementally mature each year, the yields
will increase and they will make a positive
contribution.
10
Almond Division
Movement in SHv EBIT (A$M)
49.8
8.5
41.3
10.0
6.1
4.9
2.3
1.5
0.9
1.2
4.9
2.3
17.0
FY16
Reported
ebIt
Gain
on Asset
Sale
FY16
underlying
ebIt
2017 Crop
price and
Volume
vs 2016
prior
Crop Year
Revaluations
orchard Rent
Increases
orchard
Costs
processing
Cost net of
Hull Revenue
Variance
Harvest
Cost
Increases
other
Costs
Development
Fee & Grant
Income
Increases
Food
Division
ebIt
Variance
FY17
Reported
ebIt
Source: Company Data
US YTD Industry Shipments and commitments
lower prices have acted to stimulate future commitments
900
800
700
600
500
400
300
200
100
0
)
s
b
l
(
s
d
n
u
o
p
f
o
s
n
o
i
l
l
i
M
29%
Increase in
Commitments
651.9
481.8
170.0
CY2016
497.6
371.4
126.2
CY2015
845.8
677.2
40%
Increase in
Commitments
168.6
CY2017
US YTD Shipments
US YTD Commitments
Source: Blue Diamond Almonds Market Update – August 2017 Shipment Report
Age profile of SHv almond orchard portfolio
75% of current planted acres are cash generative
3%
Future years
planting
program
(2018-21)
34%
Planted orchards
are immature
59%
Planted orchards in econmic sweetspot –
low capex & high cash generation
7%
Planted orchards post
economic maturity
1
2
0
2
t
n
a
P
l
0
2
0
2
t
n
a
P
l
9
1
0
2
t
n
a
P
l
8
1
0
2
t
n
a
P
l
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20 21
22
23
24 25
26 27
28 29 30 31
32
33
tree Age (Years)
Source: Company Data
Select Harvests Annual Report 2017
Food Division
11
the wet and mild growing conditions
in 2017 resulted in increased harvest costs
due to a higher level of tree reshaking
(impact –A$0.9 million) to remove any
remaining nuts from trees, ensuring
optimal orchard hygiene and mitigating
against insects and diseases.
Increased development fee income and
government grants (impact +A$4.9 million).
Almond processing and almond hull
sales, the net cost was higher than
anticipated, partly due to energy cost
increases and lower returns from hull due
to the good winter rains, depressed state
of the dairy industry affecting both price
and demand (impact –A$1.5 million).
During the year, we acquired Jubilee orchards
near Waikerie, South Australia, comprising
465 planted Ha (1,147 planted acres) – 320 Ha
(792 acres) bearing, 145 Ha (355 acres)
non-bearing and 1,335 Ml of high security
water entitlements for A$26.4 million.
In July 2016 we planted out 844 Ha
(2,084 acres) of new almond orchards on
properties funded via the lease agreement
with First State Super (“FSS”).
844 HA OF
NEW ALMOND
ORcHARDS
PLANTED
the global almond market is continuing
to absorb the increased global supply
of almonds – in fact over the last 12 months
the uS crop increased by 5% (or 110 million
pounds) while uS shipments increased
by 16% (290 million pounds).
Select Harvests has continued to invest
in orchard expansion (greenfield plantings
and orchard acquisitions) through the
low point of the almond pricing cycle and
as at october 2017 we now have 7,490 Ha
(18,500 acres) of planted almond orchards.
Consistent with our strategic plan, we have
built a global scale, critical mass of almonds
and a world-class, allergen free, integrated
almond processing and value-adding
facility, making Select Harvests not only
one of the largest producers of almonds
in the world, but one of the best.
The Food Division delivered an FY2017
EBIT of A$8.0 million, down on FY2016
EBIT of A$10.3 million.
Commodity price and currency had a major
impact on Industrial & private label sales
contracts as commodity price decreases
were passed onto customers in the Industrial
and trading business.
the Consumer business experienced
reduced volumes, mainly relating to retailer
brand contracts.
the Consumer sales channel has achieved
growth in export and maintained a strong
share in branded product, despite a tough
pricing environment in this segment.
lucky remains the Cooking and baking
nut market leader with 38.4% market share
(Source: IRI Aztec 18 June 2017), down from
prior year due to private label competition.
new products now make up 16.5% of sales
driven by Sunsol, lucky “entertainers” and
“topperz”, and nuVitality.
During the year we commenced China
Consumer packaged products sales. this
is a small beginning, but we are positioning
to supply the projected increase in Chinese
consumption of Australian almonds.
there is growing awareness of the new
allergen-free Almond Value-Adding Facility
(project parboil) being in production and we
are getting strong interest in both the local
and export market for its products. It brings
significant quality assurance improvements,
productivity enhancements, cost savings and
increased capacity. It neatly complements the
global scale almond orchards with in-house
access to a world class, value-added, fully
integrated almond processing capability that
will enhance our ability to supply high quality
almond products to our customers around
the world.
16.5% of ConSuMER
SALES NOW MADE
UP OF NEW PRODUcTS
www.selectharvests.com.au 12
A sustainable, growing business
People & Diversity
Select Harvests recognises the advantages
of having a diverse workforce including (but
not limited to) gender, age, ethnicity, religious
and cultural beliefs and sexual orientation.
We are proud of our ongoing achievements
in employing a diverse range of over 300 full
time and part time permanent employees, in
addition to our seasonal workforce employed
in both regional and urban Australia.
our Inclusion and Diversity objectives are
to recruit, develop and retain talent whilst
building and maintaining a flexible workplace.
the Company’s Diversity policy is available on
the website (Governance Section). Reporting
on the Diversity policy can be found in the
2017 Corporate Governance Statement in the
same section.
the company has strong experience in the
employment of people from ethnically diverse
backgrounds – 42% of our people are from
a culturally diverse background and a second
female with ethnic diversity was appointed
to the executive team during the year.
We celebrate cultural diversity through events
such as our annual Multi-Cultural Day. this
event supports our people by bringing a dish
of traditional food and dressing in traditional
cultural outfits. Its popularity attracts great
engagement and participation company-
wide, reinforcing our importance of inclusion
and diversity in the workplace.
During the year there has been a 6% increase
in female representation at board & Senior
executive level.
on 6 July 2017, we welcomed Fiona bennett to
our board of Directors – Fiona is an experienced
company director with a background in financial
management, corporate governance, risk
and audit – her appointment takes female
representation on the board to 25%.
In accordance with the Workplace Gender
equality Act, Select Harvests submits an
annual report to the Workplace Gender
equality Agency (WGeA). this year’s results
have been benchmarked to the 2015/16
WGeA’s Agriculture Comparison Group
comprising 26 organisations. the findings
concluded that our female representation
is 2.8% better than industry average with
females accounting for 30% of SHV’s
employees and males representing 70%.
A copy of the Company’s Workplace
Gender equality Report 2016-17 is available
on the website (see Governance section –
http://selectharvests.com.au/governance).
communities
Select Harvests operates in areas with many
diverse cultural and ethnic backgrounds. We
are proud to partner with a number of these
community organisations to support the
creation of a sustainable future workforce.
We have contributed over A$40,000 across
40 organisations to local community groups,
clubs, sports teams and schools to improve
and upgrade infrastructure and facilities and to
promote various activities and events, including:
ongoing Strategic partnership with
Robinvale College – through provision
of an annual breakfast sponsorship program.
Annual Mallee Almond Festival sponsorship.
Foodbank Victoria.
partnership with the Clontarf Foundation (a
charitable, not-for-profit organisation which
exists to improve the education, discipline,
life skills, self-esteem and employment
prospects of young Aboriginal men).
OH&S
our first and foremost objective is the safety and
wellbeing of our people and through the Zero
Harm oH&S Safety & Wellbeing Strategy. our
focus is to prevent injuries before they occur.
our 2016/17 Safety Strategy has been extended
to include wellness.
the four strategic priority areas include:
1. Safety leadership – culture and education
2. Performance management
3. Process improvement
4. Wellbeing and education
the Zero Harm Safety Strategy targets 25%
reductions in ltIFR (lost time Injury Frequency
Rate) and MtIFR (Medically treated Injury
Frequency Rate). the chart below illustrates our
performance and progress on the measures.
LTIFR (Lost Time Injury
Frequency Rate)
MTIFR (Medically Treatment
Injury Frequency Rate)
FY16 / 18.4
FY17 / 15.1
18%
FY16 / 40.0
FY17 / 19.0
53%
LTISR (Lost Time Injury
Severity Rate)
TRIFR (Total Recordable
Incidents Frequency Rate)
FY16 / 16.0
FY17 / 13.0
19%
FY16 / 99.0
FY17 / 70.0
29%
Source: Company Data
Select Harvests is making tangible progress
towards achieving its safety goals.
Sustainability & Environment
Select Harvests seeks to operate its business
in a sustainable manner, based around 3
platforms – environmental, Social/Wellbeing
and Financial.
In recognition of the importance of
sustainability in our business, we produced
our first Sustainability Report in 2016/17 which
is now available in the Sustainability section
of our website (http://selectharvests.com.au/
sustainability).
While energy, water and bees are key areas
of focus, we seek out sustainable solutions
to challenges across our business.
We aim to recycle and maximise the benefits
of waste/by-product wherever we can.
We have recently installed a worm farm to
convert almond waste into worm castings.
the combination of worm castings and
waste water produces a natural fertiliser that
can be used to support the growth of the
almond orchards. Sustainability is simply good
business sense.
As our farms and processing facilities are
significant users of energy, developing ways to
reduce our power costs are both economically
imperative and environmentally sensible.
project H2e will turn almond by-product (hull,
shell and orchard prunings) into cost-efficient
energy that we can use to reduce our reliance
on increasingly expensive power supplied from
the grid. project H2e will generate enough
electricity to power the Carina West processing
Facility as well as nearby pumps for the Carina
orchard. project H2e will reduce our carbon
footprint (by 27%), taking the equivalent of
8,210 cars per annum off the road.
Select Harvests is a significant, long term user
of water. We recognise water as a critically
important input into our business that is a scarce
and finite resource, although one that is also
subject to variability across seasons and cycles.
our water strategy is dedicated to securing our
significant water needs at the most efficient price
over the long term. Adoption of industry best
practice irrigation systems and management
techniques is an important part of the application
of this strategy. Delivering the right amount of
water demanded by the trees in the orchard,
at the right time, not only saves money, it also
prevents drainage of excess water into the
water table. through strategy, infrastructure
and management, we seek to conserve, recycle
and save water wherever possible.
Select Harvests is dependant on bees to
pollinate its orchards. We are active in the
bee and pollination industries and show our
support through a range of measures including
industry advocacy (sponsorship/support of
associations, committees & conferences),
on-farm bee husbandry (alternative forage
crops, water availability at hive sites, avoidance
of weedicide sprays in presence of bees, spray
diaries, hive inspections, disease monitoring)
and industry R&D projects.
Sustainability generates value for our
shareholders.
Select Harvests Annual Report 2017 13
BUNARGOOL ORcHARD:
PLANTED IN JULY 2016,
ON TIME, ON BUDGET
Business Ethics
OH&S & Wellbeing
Fair Work
Inclusion & Diversity
Community
Development
& Employment
OUR
PEOPLE
RURAL &
REGIONAL
DEVELOPMENT
Food safety
Sourcing
Sustainability
Traceability
Consumer
Relations
HUMAN
HEALTH &
NUTRITION
OPLE
E
P
PRO
FIT
SELECT
HARVESTS
N ET
A
P L
CLIMATE
CHANGE
& WATER
Water
Management
Horticultural
Disruptions
SUSTAINABLE
FARM
MANAGEMENT
RESOURCE
EFFICIENCY
Bee stewardship
Wildlife Management
Land Management
Pests
Chemicals
Greenhouse Gas
emissions
Energy
Environmental
Compliance
www.selectharvests.com.au
14
executive team
1
2
3
4
5
6
7
PAUL cHAMBERS (1) / chief Financial
Officer and company Secretary
paul 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.
Paul resigned from Select Harvests effective
8 November 2017.
vANESSA HUxLEY (2) / General Manager
Finance and Assistant company Secretary
Vanessa joined Select Harvests in 2011 and was
appointed Assistant Company Secretary in
november 2014. She is a Chartered Accountant
with over 15 years of experience in senior
financial management and corporate advisory
roles across agriculture, manufacturing, retail
and the healthcare industry.
MARK EvA (6) / General Manager
consumer
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.
KATHIE TOMEO (7) / General Manager
Human Resources
Kathie tomeo joined Select Harvests
as General Manager, Human Resources
in May 2016. Kathie is an HR Director with
international experience gained in Agricultural,
banking, Financial Services, technology and
Retail industries. Kathie brings over 10 years’
experience in senior HR generalist roles with
expertise in change and project management
at local, country and regional levels. Kathie
holds a Master degree in Human Resource
Management and bachelor of Commerce.
PETER ROSS (3) / General Manager
Horticulture
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 vAN DRIEL (4) / General
Manager Trading and Industrial
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.
BRUcE vAN TWEST (5) / General Manager
Operations
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.
Bruce resigned from Select Harvests
effective 31 July 2017.
Select Harvests Annual Report 2017 board of Directors
15
1
2
3
4
5
6
7
8
NIcKI ANDERSON (7) / Non-Executive
Director
Appointed to the board on 21 January 2016.
She is an accomplished leader with deep
experience in strategy, marketing and
innovation within branded food and consumer
goods businesses, including agri businesses
of SpC Ardmona and McCain. nicki has over
20 years local and international experience
including senior positions in marketing
and innovation within world class FMCG
companies and was Managing Director within
the blueprint Group concentrating on sales,
marketing and merchandising within the retail
sales channel. She is a current non-executive
director of the Australia Made Campaign
limited and Skills Impact (representing
the national Farmers Federation) and
Chairman of the Monash university Advisory
board (Marketing). She is a member of the
Remuneration and nomination Committee.
FIONA BENNETT (8) / Non-Executive
Director
Appointed to the board on 6 July 2017. Fiona
joins the board with an extensive background
in corporate governance, audit and risk, and
is currently on the boards of Hills limited and
beach energy limited. She serves as Chairman
of the Audit and Risk Committee at Hills
limited and Chairman of Audit at beach
energy limited. Fiona has previously served
on the boards of boom logistics limited,
Alfred Health and the Institute of Chartered
Accountants in Australia, following a senior
executive career in leading listed companies,
and major private, Government sector and
consulting organisations.
MIcHAEL IWANIW (1) / 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. Michael is the immediate past
Chairman of Australian Grain technologies and
a former director of Australian Renewable Fuels
ltd and Australian Grain Growers Co-operative.
He is a member of the Remuneration and
nomination Committee.
PAUL THOMPSON (2) / Managing Director
and cEO
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.
ROSS HERRON (3) / Non-Executive Director
Appointed to 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
and a Director of the Judicial Commission of
Victoria. He was a former Deputy Chairman
of Insurance Manufacturers Australia limited
and a non-executive director of Kinetic
Superannuation ltd as well as being the
immediate past chairman of RACV pty ltd. He
is Chairman of the Audit and Risk Committee.
MIcHAEL cARROLL (4) / Non-Executive
Director
Appointed to the board on 31 March 2009.
He brings to the board diverse experience
from executive and non-executive roles in
food and agribusiness. Current non-executive
board roles include Sunny Queen Farms,
tassal, Rural Funds Management, paraway
pastoral Company, RFM poultry and the
Australian Rural leadership Foundation.
previous board roles include Queensland
Sugar and Warrnambool Cheese & butter.
During his executive career Mike established
and led the nAb’s agribusiness division
with earlier senior executive roles including
marketing, investment banking and corporate
advisory services. He is Chairman of the
Remuneration and nomination Committee.
FRED GRIMWADE (5) / 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. He is
Chairman of Cpt Global ltd and a director
of Australian united Investment Company
ltd, XRF Scientific ltd and AgCap pty ltd.
He was formerly a director of AWb ltd,
Chairman of troy Resources ltd and 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 current member of the
Audit and Risk Committee.
PAUL RIORDAN (6) / 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.
www.selectharvests.com.au 16
Historical Summary
Select harvests consolidated
results for years ended 30 june
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
total sales
224,655
248,581
238,376
248,316
246,766
190,918
188,088
223,474
285,917
242,142
earnings before interest and tax
operating profit/(loss) before tax
net profit after tax
earnings per share (basic)
Return on shareholders’ equity
Dividend per ordinary share
Dividend franking
Dividend payout ratio
Financial ratios
net tangible assets per share
net interest cover
net debt/equity ratio
Current asset ratio
Balance sheet data as at 30 June
Current assets
non-current assets
total assets
Current liabilities
27,120
26,827
25,384
23,047
18,130
16,712
26,032
23,603
17,253
22,612
18,473
17,674
(cents)
(%)
(cents)
(%)
(%)
46.7
19.3
45
100
96.7
($)
1.41
(times)
15.60
(%)
(times)
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
100
38.6
2.17
6.70
43.3
1.96
(2,495)
(8,743)
(4,469)
(7.9)
(2.8)
8
100
(101.3)
2.19
(0.4)
41.7
1.42
5,241
198
2,872
5.0
1.8
12
100
239.8
2.14
1.0
49.6
1.61
31,288
26,833
21,643
85,845
49,785
16,979
80,514
44,290
56,766
33,796
11,978
9,249
37.5
12.3
20
55
53.5
2.38
6.9
54.0
4.02
82.9
19.8
50
–
60.3
3.35
15.9
38.2
3.36
46.7
11.6
46
54
99.1
3.22
9.0
23.1
1.90
12.6
3.3
10
100
79.4
2.95
3.4
52.9
1.05
77,014
81,075
83,993
91,228
76,936
123,303
136,639
207,782
155,521
136,610
118,934
133,884
145,612
214,352
202,371
180,542
194,080
280,130
294,251
343,081
195,948
214,959
229,605
305,580
279,307
303,845
330,719
487,912
449,772
479,691
88,162
102,348
58,469
46,454
54,369
76,800
33,988
61,893
81,783
130,371
non-current liabilities
13,715
11,735
57,515
90,311
64,608
67,540
121,325
138,632
77,088
71,701
101,877
114,083
115,984
136,765
118,977
144,340
155,313
200,525
158,871
202,072
94,071
100,876
113,621
168,815
160,330
159,505
175,406
287,387
290,901
277,619
44,375
46,433
47,470
95,066
11,235
12,949
11,327
11,201
38,461
41,494
54,824
62,548
95,957
10,472
53,901
97,007
99,750
170,198
178,553
181,164
9,144
12,190
12,818
11,168
11,602
53,354
63,466
104,371
101,180
84,853
94,071
100,576
113,621
168,815
160,330
159,505
175,406
287,387
290,901
277,619
Select Harvests’ share price – close
($)
(’000)
39,009
39,519
3,296
2.16
39,779
56,227
56,813
3,039
3.46
3,227
1.84
3,359
1.30
57,463
3,065
3.27
57,999
71,436
3,779
5.14
4,328
11.00
72,919
8,928
6.74
73,607
10,476
4.90
3,319
6.00
Market capitalisation
234,054
85,361
137,635
103,458
73,857
187,904
298,115
785,796
491,474
360,674
$’000 (except where indicated)
* 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’.
total liabilities
net assets
Shareholders’ equity
Share capital
Reserves
Retained profits
total shareholders’ equity
Other data as at 30 June
Fully paid shares
number of shareholders
Select Harvests Annual Report 2017 17
Financial Report
Contents
18
37
38
39
Directors’ Report
Auditor’s Independence Declaration
Statement of Comprehensive Income
Balance Sheet
40
Statement of Changes in Equity
41
Statement of Cash Flows
42 Notes to the Financial Statements
71
72
79
81
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
Corporate Information
www.selectharvests.com.au 18
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 2017.
DireCtors
The qualifications, experience and special responsibilities of each person who has been a director of Select Harvests Limited at any time during or
since the end of the financial year is provided below, together with details of the company secretary. Directors were in office for this entire period
unless otherwise stated.
Names, qualificatioNs, experieNce aNd special respoNsibilities
m iwaniw, B Sc, Graduate Diploma in 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. Michael is the immediate past Chairman of Australian Grain Technologies and a former director of Australian Renewable
Fuels Ltd and Australian Grain Growers Cooperative. He is a member of the Remuneration and Nomination Committee.
Interest in shares: 201,932 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: 479,975 fully paid shares.
m carroll, B AgSc, MBA and FAICD (Non-Executive Director)
Appointed to the board on 31 March, 2009. He brings to the Board diverse experience from executive and non-executive roles in food and
agribusiness. Current non-executive board roles include Sunny Queen Farms, Tassal, Rural Funds Management, Paraway Pastoral Company,
RFM Poultry and the Australian Rural Leadership Foundation. Previous board roles include Queensland Sugar Limited and Warrnambool Cheese
& Butter. During his executive career Mike established and led the NAB’s agribusiness division with earlier senior executive roles including
marketing, investment banking and corporate advisory services. He is Chairman of the Remuneration and Nomination Committee.
Interest in shares: 17,228 fully paid shares.
f s Grimwade, B Com, LLB (Hons), MBA, FAICD, SF Fin and FCIS (Non-Executive Director)
Appointed to the board on 27 July, 2010. Fred is a Principal and Director of Fawkner Capital, a specialist corporate advisory and investment firm.
He is Chairman of CPT Global Ltd and a director of Australian United Investment Company Ltd, XRF Scientific Ltd and AgCap Pty Ltd. He was
formerly a director of AWB Ltd., Chairman of Troy Resources Ltd and 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 current member of the Audit and Risk Committee.
Interest in shares: 102,804 fully paid shares.
r m Herron, FCA and FAICD (Non-Executive Director)
Appointed to 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 and a director of the Judicial Commission of Victoria. He was a former Deputy
Chairman of Insurance Manufacturers Australia Limited and a non-executive director of Kinetic Superannuation Ltd as well as being the
immediate past chairman of RACV Pty Ltd. He is Chairman of the Audit and Risk Committee.
Interest in shares: 56,952 fully paid shares.
Select Harvests Annual Report 2017 19
Names, qualificatioNs, experieNce aNd special respoNsibilities
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.
N anderson (Non-Executive Director)
Appointed to the board on 21 January 2016. She is an accomplished leader with deep experience in strategy, marketing and innovation within
branded food and consumer goods businesses, including agri businesses of SPC Ardmona and McCain. Nicki has over 20 years local and
international experience including senior positions in marketing and innovation within world class FMCG companies and was Managing
Director within the Blueprint Group concentrating on sales, marketing and merchandising within the retail sales channel. She is a current
Non-Executive director of the Australia Made Campaign Limited and Skills Impact (representing the National Farmers Federation) and
Chairman of the Monash University Advisory Board (Marketing). She is a member of the Remuneration and Nomination Committee.
Interest in shares: 3,500 fully paid shares.
f bennett, BA (Hons), FCA, FAICD and FIML (Non-Executive Director)
Appointed to the board on 6 July 2017. Fiona joins the Board with an extensive background in corporate governance, audit and risk, and is
currently on the Boards of Hills Limited and Beach Energy Limited. She serves as Chairman of the Audit and Risk Committee at Hills Limited
and Chairman of Audit at Beach Energy Limited. Fiona has previously served on the Boards of Boom Logistics Limited, Alfred Health and the
Institute of Chartered Accountants in Australia, following a senior executive career in leading listed companies, and major private, Government
sector and consulting organisations.
Interest in shares: Nil.
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 of 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: 90,249 fully paid shares.
V Huxley, BCom, CA, (General Manager Finance and Assistant Company Secretary)
Joined Select Harvests in 2011 and appointed Assistant Company Secretary in November 2014. She is a Chartered Accountant with over
15 years of experience in senior financial management and corporate advisory roles across agriculture, manufacturing, retail and the
healthcare industry.
Interest in shares: Nil.
www.selectharvests.com.au 20
Directors’ Report
Continued
Corporate information
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.
results summary and reconciliation
$’000
ebit ($’000)
Almond Division
Food Division
Corporate Costs
operating ebit
Interest Expense
Net profit before tax
Tax Expense
Net profit after tax
Earnings Per Share
employees
The Company employed 588 full time
equivalent employees as at 30 June 2017
(2016: 630 full time equivalent employees).
Full time equivalent employees include:
executive, permanent, contractor and
seasonal (casual and labour agency hire)
employment types.
operating anD
finanCial review
Highlights and Key
developments during the year
The financial year ended 30 June 2017
has been challenging for Select Harvests,
although the business fundamentals are
positive and the Company continues to
expect strong growth in the long term.
The focus this year by the Board, Executive
Management and employees, has been on
continuing to grow the almond orchard foot
print, progressing significant capital projects,
while continuing to strengthen the Food
Division. The Company acquired 1,147acres
(464Ha) of orchards in South Australia for
consideration of $24.9 million during the year.
2,084 acres (844 Ha) of new almond orchards
have been planted out on Select Harvests
owned and leased orchards in Victoria and
South Australia. Over $12.8 million has been
invested in the construction of the new
cogeneration plant and value added
processing facility at Carina West, both
of which will be commissioned in FY18.
finanCial performanCe
review
profitability
Reported Net Profit After Tax (NPAT) is
$9.2 million, which compares to a reported
Net Profit After Tax of $33.8 million in 2016.
Earnings Before Interest and Taxes (EBIT) is
$17.0 million, which compares to EBIT of
$49.8 million in FY16.
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:
reported result (aifrs)
uNderlyiNG result
fy17
13,686
7,950
(4,657)
16,979
(5,001)
11,978
(2,729)
9,249
12.6
fy16
44,575
10,342
(5,132)
49,785
(5,495)
44,290
(10,494)
33,796
46.7
fy17
13,686
7,950
(4,657)
16,979
(5,001)
11,978
(2,729)
9,249
12.6
fy16
36,093(1)
10,342
(5,132)
41,303
(5,495)
35,808
(7,949)(1)
27,859
38.5
(1)
The adjustment to the reported Almond division EBIT in FY16 relates to gains on asset sales of $8.5 million and related tax effect, to exclude these costs from the underlying EBIT
in the period.
Any further commentary set out below reviews divisional performance on a like for like basis, taking into account the adjustment referred to above.
Select Harvests Annual Report 2017 21
almond division profitability
Revenues of $120.7 million, compared to
$161.2 million in 2016. The decrease in
revenues was driven by the realised sales
of the 2016 and 2017 crop in the financial year,
with comparable volumes at almond prices
lower than the average achieved in the
previous financial year.
Underlying EBIT is $13.7 million which
compares to underlying EBIT of $36.1 million
last year. This result is driven by the valuation
of the 2017 crop, based on a yield of 14,100 MT
and an almond price projection of $7.43/kg
compared to higher prices of the 2016 crop
estimated at 30 June 2016, plus the impact
of realised sales of the 2016 crop during FY17
at lower prices than previously estimated.
Higher orchard lease costs and harvest costs
have also contributed to the lower EBIT.
food division profitability
Revenues of $146.9 million compare to
$161.8 million in 2016, a decrease of 9.3%. EBIT
of $8.0 million, compares to $10.3 million in 2016.
The decrease in revenues and EBIT is driven by
the lower almond price in FY17 impacting sales
to industrial food manufacturers as commodity
price decreases were passed on, offset to an
extent by strong returns from branded product
sales. The consumer sales channel has achieved
growth in export and maintained share in
branded product, despite a tough pricing
environment in this segment.
interest expense
Interest expense has decreased to $5.0 million in
FY17 compared to $5.5 million in FY16, with lower
debt levels maintained in the first half of the year.
balance sheet
Net assets at 30 June 2017 are $277.6 million,
compared to $290.9 million last year.
The balance sheet includes the impact of
$58.8 million of investing cash outflows
resulting from the acquisition of the Jubilee
Orchard, expenditure on major projects
and orchard development costs.
Net working capital has decreased by 7.4%.
As summarised below, the main decrease
relates to the value of inventory, which
comprises the fair value of the unsold 2017
almond crop, which is lower than the value
of the 2016 crop for the corresponding period
last year, due to the impact of the lower
almond price valuation.
$’000
Trade and other receivables
Inventories
Trade and other payables
Net working capital
2017
46,806
87,474
(14,294)
119,986
2016
48,477
104,316
(23,180)
129,613
cash flow and Net bank debt
Net bank debt at 30 June 2017 was
$145.8 million (including finance lease
commitments of $41.4 million), with a gearing
ratio (net bank debt/equity) of 52.5%.
Operating cash inflow in the financial year
is $4.7 million, compared to $92.9 million last
year. The decrease in operating cash inflow
is mainly driven by the cash flows derived
from the proceeds on selling through the
2016 crop, and sales to date of the 2017 crop
compared to the higher sales value in 2016.
Investing cash outflows of $56.8 million
are primarily a result of the acquisition
of the Jubilee Orchard, investment in
the cogeneration plant and new almond
value added production facility and new
orchard developments.
dividends
A nil final dividend has been declared,
resulting in a total dividend of 10 cents per
share for the financial year. This compares to
a total dividend of 46 cents per share in FY16.
Corporate soCial
responsibility
occupational Health and safety
(oH&s)
oHs and wellbeing
The development of our Zero Harm OH&S
& Wellbeing strategy aims to prevent
incidents before they occur and to improve
individual wellbeing. Our industry is high
risk given our agricultural manufacturing
and key business activities focused on manual
handling and usage of tools, equipment
and heavy machinery.
Our targets include a 25% year on year
reduction in both LTIFR (Lost Time Injury
Frequency Rate) and MTIFR (Medically Treated
Injury Frequency Rate).
The four key strategic priority areas include
the following:
1.
2.
3.
Safety Leadership: Culture and Education
Performance management
Process improvement
4. Wellbeing and education
www.selectharvests.com.au 22
Directors’ Report
Continued
Whilst zero harm is our ultimate goal, we have made progress against targets illustrated below.
These results are inclusive of our permanent and casual employees, seasonal workers and contractors.
LTIFR
(Lost Time Injury Frequency Rate)
MTIFR
(Medically Treated Injury Frequency Rate)
LTISR
(Lost Time Injury Severity Rate)
TRIFR
(Total Injury Frequency Rate)
ltifr (lost time injury frequency rate):
We have achieved a 42% reduction over 3
years in LTIFR which measures the number
of lost time injuries per million hours worked.
Pleasingly we have seen a reduction in both
severity and lost time by 51% compared to
FY 2016. This can be attributed to our process
improvements in:
• Leadership safety education
• Health and wellbeing
• Acceleration of return to work and
proactive injury management
approaches and
• Hazard and near miss reporting campaign
mtifr (medically treated injury
frequency rate):
We have exceeded our target with a 53%
reduction in MTIFR which measures the
number of medically treated injuries per
million hours worked. In addition, the severity
of injuries is lessening which can be attributed
to accurate diagnosis of injury classifications,
identifying root cause and corrective actions
taken to prevent reoccurrence.
ltisr (lost time injury severity rate):
Pleasingly, we achieved a 19% reduction in
LTISR which measures the lost time injury
severity rate, indicating the severity of our
injuries is lessening. This is a result of our
hazard reporting campaign and injury
management culture in supporting employees
to return to work through ongoing
communication, offering modified work
duties and partnerships with insurers and
rehabilitation providers.
2014/15
fiNaNcial
2015/16
fiNaNcial
2016/17
fiNaNcial
VariaNce
2015/16 vs 2016/17
26
15
37
115
18.4
40
16
99
15.1
19
13
70
–18%
–53%
–19%
–29%
trifr (total recordable injury
frequency rate):
We have exceeded our target, with a 39%
reduction in TRIFR over 3 years which
measures the number of LTI, MTI and First Aid
injuries per million hours worked. Whilst the
on-going reduction is positive, we will
continue to improve on our safety strategy
activities in pursuit of achieving a zero-harm
working environment.
Overall, we are performing well against our
targets and our strategy. This progress has
been achieved through the following:
•
Independent Safety audits have been
completed across our business
• A company wide safety survey was
completed, with action items identified
to address key priority areas
• High priority safety audit
recommendations are being addressed
• A company-wide safety manual review
is being developed
• Education focused on manual handling and
wellbeing, with annual refresher training to
be provided
• Review and update of our Equal
Employment Opportunity, Anti-
Discrimination, Harassment and Bullying
Policy and training
•
•
Individual health assessments conducted
Installation of ergonomic equipment
to increase productivity and minimise
manual handling
• Quarterly injury management reviews to
develop training and plans in conjunction
with our health and wellbeing partnerships
Community
In addition to our direct employment
opportunities, we continue to play an
important role in our ongoing efforts to
improve our rural and regional communities
through Select Harvests’ annual community
grants donation program. Our partnerships
with community organisations support the
engagement and creation of a sustainable
future workforce.
This year we have donated in excess of
$40,000 to over 40 organisations including
schools, clubs, sports teams and local
community groups to improve and upgrade
their infrastructure and facilities and to
promote various activities and events.
Some examples of the support we have
provided include the following:
• Our ongoing strategic partnership with
Robinvale College through the provision of
an annual breakfast sponsorship program
• Our annual Mallee Almond Festival
sponsorship
• Foodbank Victoria
• Partnership with the Clontarf Foundation
(a charitable, not-for-profit organisation
which exists to improve the education,
disciplines, life skills, self-esteem and
employment prospects of young
Aboriginal men)
fair employment practices
We are committed to ensuring that all workers
who work directly or indirectly by Select
Harvests are treated in a fair and reasonable
manner. We are an Equal Employment
Opportunity employer as demonstrated
through our Inclusion and Diversity strategy
and workplace practices.
All third-party labour providers engaged are
subject to meeting our Contractor
Select Harvests Annual Report 2017 23
Engagement and Recruitment Policies that
warrant compliance with Australian labour
laws and legislative obligations. To ensure fair
labour operations, regular audits on payment
of wages and eligibility to work in Australia
compliance checks are conducted on a
regular basis. We have had nil breaches.
associated to water supply which highlights the
importance of managing a balanced profile. This
mitigates risk exposure including drought periods
and high market prices. This strategy is reviewed
annually which accounts how various factors
may affect the future years’ strategy based on
projected climate outlook and market trends.
sustainability and environment
energy savings
Select Harvests aims to operate a sustainable
business on the basis of 3 platforms:
environmental, social/wellbeing and financial
benefits. These will generate value for our
shareholders, customers, consumers and the
communities in which we operate.
We are cognisant of the potential impact of
climate change on the suite of risks being
managed in our business. For more
information on our economic, environmental
and social risks, we are pleased to present
these in our first Sustainability report which
can be accessed via our website.
A summary of our environmental water,
energy consumption and bee pollination
practices are outlined below.
We remain committed to preserving native
vegetation and wildlife through our wildlife
management plan and fulfil our requirements
around licencing as required. We are pleased
to report that we have had nil environmental
breaches in the last year.
We are a signatory of the National Packaging
Industry Covenant, which aims to deliver more
sustainable packaging, increased recycling
rates and reduced litter. Our office and farm
waste is recycled where appropriate and we
sell almond hull to the stockfeed industry.
We have installed a worm farm to convert
almond waste from the Carina West
Processing Facility into worm castings.
In combination with waste water, it produces
a clear, natural liquid fertiliser to be disposed
sub soil back into the almond orchard.
Water
Water is a scarce and finite resource which
remains a high priority for Select Harvests.
We are continuing to employ a number of
efforts to manage our utilisation. This includes
installing best practice irrigation systems to
deliver water efficiently with reduced system
drainage and impact to water tables, our
orchard management team reviewing and
agreeing the irrigation and fertigation
application on a weekly basis, the efficient
application of fertiliser, product stocktakes and
internal audits by our Technical department.
Given almonds are a long term investment,
to enable a secure supply, we have developed
a diverse water strategy. This analyses risks
Our largest energy saving initiative remains
Project H2E, the biomass electricity
co-generation plant which will now become
operational in FY18. Consuming almond
by-product (including hull, shell and orchard
waste), Project H2E will generate enough
electricity to power the Carina West
Processing Facility as well as nearby pumps
for the Carina Orchard.
When Project H2E is operational it will deliver
a carbon footprint reduction of 27% – the
equivalent to removing 8,210 cars off the road.
pollination management
Our almond orchards are 100% pollination
dependent. Therefore, the key challenges and
risks in bee stewardship centre on crop safety
and optimum bee health. Other critical
components to ensuring maximum yield
include successful cross-pollination, avoiding
bloom pathogens (disease causing fungi) and
maintaining strong relationships with our hive
brokers. This generates productive
relationships with apiarists to supply
a pollination service.
We play an active role within the bee and
pollination industries including the
sponsorship and support for apiary
associations, participation and presentation
at conferences, industry R&D projects,
committees and meetings.
Our ongoing advocacy and bee stewardship
practices continue with the supply of
alternative forage sources for bees, provision
of water at hive sites to aid bee hydration,
avoidance of weedicide spraying when hives
are present, audited spray diaries and ongoing
hive inspections to monitor for disease, hive
strength and orchard retention.
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.
The Company maintains and refreshes its detailed
risk register annually. 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:
• Safety (including employee safety and
fire prevention);
• Horticultural Risks (including climatic,
disease, water management, pollination,
and quality); and
• Processing and manufacturing Risks
(including product quality, utilities supply,
major equipment failure).
The Company continues to focus on product
quality with process improvements and capital
investments being made, both on farm and
at the processing facilities to mitigate risks
associated with inventory management from
harvest through to consumer.
Managing financial risks, including exposure
to currency volatility has once again been a
key focus area for management and the Board.
outlook
The horticultural program for the 2018 crop
is well underway and the trees have received
sufficient chill hours through the dormancy
period. We are in the early stage of pollination
so it is yet to be assessed. Based on industry
average yields and the age profile of the
orchards, and assuming normal growing
conditions for the season, the Select Harvests
2018 theoretical crop would be approximately
15,000MT – 16,000MT. USD almond pricing is
currently steady based on an estimated US
crop of 2.25 billion pounds.
The business will be focused on productivity
improvements from our existing asset base
and new investments. Improved yield, quality,
sales mix and cost out continues to be an
absolute priority. The Parboil processing
facility will be commissioned in the first
quarter of FY2018 and focus in this area will
then shift to maximising the opportunities it
offers. Commissioning of the cogeneration
plant remains a key priority for the business,
along with the management of our new
almond orchard plant outs.
The Food Business will continue the strategy to
enter new markets and channels, including the
launch of new products and innovations. The
expansion of export sales in particular through
continuing to develop distribution and
marketing models in China, is a strategic priority.
The medium and long term fundamentals of
our industry and business are strong. There is
increasing demand from consumers and industry
for plant protein product, in both developed and
developing economies. The Select Harvests’
strategy continues to be to minimise risk, invest
in productive, long term growth assets and major
cost out initiatives and value adding brands.
www.selectharvests.com.au 24
Directors’ Report
Continued
signifiCant CHanges
in tHe state of affairs
There have been no significant changes
in the state of affairs of the Company.
signifiCant events after
tHe balanCe Date
On 25 August 2017, the directors declared a nil
final dividend.
The Company has agreed revised covenants
and terms of debt facilities with the lenders.
Further information is contained in note 1(a)
and note 15 to the accounts.
environmental regulation
anD performanCe
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
remuneration and equity based remuneration.
Executive directors and other 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.
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 $830,000 was approved
by shareholders at the 26 November 2015
Annual General Meeting. For the reporting
period the total amount paid to non-executive
directors was $693,414.
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:
$207,562
$92,250
$12,300
$12,300
interest expense, net bank debt, net debt, net
working capital and adjustments to reconcile
from reported results to underlying results.
remuneration report
The directors present the 2017 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
base fees (iNcludiNG superaNNuatioN)
Chairman
Other non-executive directors
additioNal fees (iNcludiNG superaNNuatioN)
Chair of the Audit and Risk Committee
Chair of the Remuneration Committee
executive remuneration
Executive remuneration has three components:
1.
2.
3.
Base salary and benefits;
Short term performance incentives; and
Long term incentives.
Select Harvests Annual Report 2017 25
An overview of these remuneration arrangements is included in the table below.
table 1: overview of executive remuneration arrangements
fixed remuNeratioN
base salary and benefits
Variable remuNeratioN
short term incentives (sti)
purpose
term
instrument
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 is no guaranteed base pay
increase in any executives’ contracts.
% of fixed remuneration
ceo
executives
Up to 40%
Up to 40%
Create incentive to exceed the annual business objectives.
1 year
Cash
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.
Why these were chosen
long term incentives (lti)
purpose
term
instrument
performance conditions*
• 30% Financial (including exceeding the annual NPAT targets)
• 50% Business unit and department 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)
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.
Reward achievement of long term business objectives and sustainable value creation for shareholders
Up to 133%
Up to 30%
3 years, vesting at the end of the period.
Performance rights
• continuing service
• 50% Compound Annual Growth Rate (CAGR) in Underlying earnings per share (EPS) over three years
• 50% Total shareholder return (TSR) compared to the TSR of a peer group of ASX listed companies over three years
The performance targets and vesting proportions are as follows:
preVious issues
measure
underlying eps**
Below 5% CAGR
5% CAGR
5.1% – 6.9% CAGR
7% or higher CAGR
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%
curreNt issues****
measure
underlying eps**
Below 5% CAGR
5% CAGR
5.1% – 19.9% CAGR
20% or higher CAGR
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
Underlying 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.
Underlying EPS is basic EPS adjusted for the impact of underlying adjustments which is consistent with guidance for underlying measures as issued by the Australian Institute
of Company Directors and Financial Services Institute of Australasia in March 2009 and ASIC Regulator Guide RG230 ‘Disclosing Non-IFRS financial information’.
*** Of the peer group of ASX listed companies.
**** Relates to rights that are due to vest from 30 June 2018 onwards.
www.selectharvests.com.au 26
Directors’ Report
Continued
remuneration report (CONTINUED)
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 ($’000)
Basic EPS (cents)
Basic EPS Growth
Dividend per share (cents)
Opening share price 1 July ($)
Change in share price ($)
Closing share price 30 June ($)
TSR % p.a.+
2017
9,249
12.6
(73%)
10.0
6.74
(1.84)
4.90
(26%)
2016
33,796
46.7
(44%)
46.0
11.00
(4.26)
6.74
(35%)
2015
56,766
82.9
121%
50.0
5.14
5.86
11.0
124%
2014*
21,643
37.5
650%
20.0
3.27
1.87
5.14
63%
2014
29,007
50.2
904%
20.0
3.27
1.87
5.14
63%
2013
2,872
5.0
163%
12.0
1.30
1.97
3.27
161%
*
+
Restated as a result of early adopting the amendments made to AASB 116 Property, Plant and Equipment and AASB 141 Agriculture in relation to bearer plants.
TSR is calculated as the change in share price for the year plus dividends announced for the year, divided by opening share price
short term incentive (sti)
Details of the range of potential STI cash payments, actual payments made and the amounts forfeited by the CEO and executive team in relation to
the 2017 financial year are shown in Table 3 below. The actual outcomes are based on performance against the conditions outlined in Table 1.
table 3: sti
sti raNGe
(of tfr#)
executive director
P Thompson
0%–40%
other key management personnel
P Chambers
M Eva
P Ross
L Van Driel
K Tomeo*
V Huxley**
B Van Twest+
C Barbuto++
0%–40%
0%–40%
0%–40%
0%–40%
0%–30%
0%–25%
0%–40%
0%–20%
#
*
**
+
++
Total Fixed Remuneration
Appointed 9 May 2016
Appointed 9 September 2016
Resigned 31 July 2017 and his STI reversed
Resigned 26 January 2016
sti (oVer)/
uNder
from
preVious
year ($)
curreNt sti
acrual ($)
Net sti ($) % acHieVed % forfeited
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
1,416
(1,416)
4,948
(4,948)
6,304
(6,304)
(7,911)
400
(11,976)
13,898
–
–
–
–
(6,738)
3,317
–
(3,893)
–
134,787
2,849
83,387
17,664
81,290
11,548
70,417
15,763
76,894
7,076
–
6,162
–
–
76,980
–
–
1,416
133,371
7,797
78,439
23,968
74,986
3,637
70,817
3,787
90,792
7,076
–
6,162
–
(6,738)
80,297
–
(3,893)
1%
57%
5%
56%
18%
60%
3%
57%
3%
71%
9%
–
10%
–
(5%)
59%
–
(17%)
99%
43%
95%
44%
82%
40%
97%
43%
97%
29%
91%
–
90%
–
105%
41%
–
117%
Select Harvests Annual Report 2017
27
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.
A summary of the EBIT and average short term incentives paid to the Executive for the last 7 years is outlined below.
ebit and average sti achieved as % of target
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
-10,000
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
FY11
FY12
FY13
FY14
FY15
FY16
FY17
EBIT ($'000)
Average KMP STI Achieved as % Target
long term incentive (lti)
Vesting of performance rights 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 outcomes
eps GroWtH
Basic EPS (cents)
Underlying EPS* (cents)
3 Year EPS CAGR
3 Year EPS CAGR target 5% – 7%
Percentage vested
*
Underlying EPS is basic EPS adjusted for the impact of the following:
1.
2.
3. The tax impact of items 1 to 2.
In FY16, gains on asset sales of $8.5 million and $2.8m in R&D tax offsets.
In FY15, acquisition transaction costs of $3.8 million.
relatiVe tsr performaNce
TSR % p.a.
3 Year Median TSR %
3 Year Median TSR Ranking
3 Year Median TSR Ranking target 60th – 75th percentile
Peer group 3 Year Median TSR
SHV Ranking against peer group*
Percentage vested
2017
12.6
12.6
(37%)
2016
46.7
38.5
(1%)
2015
82.9
86.8
73%
0%
0%
100%
2017
(26%)
1%
2016
(35%)
108%
2015
124%
749%
13th percentile
73rd percentile
100th percentile
18%
64%
61%
14th out of 16
5th out of 16
1st out of 15
0%
94%
100%
*
TSR ranking relative to ASX Consumer Staples also included in the All Ordinaries index, excluding alcohol and tobacco products companies.
www.selectharvests.com.au
28
Directors’ Report
Continued
remuneration report (CONTINUED)
3. details of remuneration
Details of the remuneration of the directors and other 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.
table 5: 2017 and 2016 remuneration
aNNual remuNeratioN
loNG term
remuNeratioN
base fee
$
short term
incentives
$
Non cash
benefits
$
super-
annuation
contributions
$
long service
leave
accrued
$
performance
rights
Granted $
termination
benefits
$
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
207,562
183,650
95,480
89,849
84,247
78,725
95,480
89,849
84,247
78,725
84,247
36,018
539,777
510,612
321,079
312,398
271,179
266,698
290,482
289,672
299,910
292,595
232,877
34,633
176,999
–
315,376
307,088
–
95,511
–
–
–
–
–
–
–
–
–
–
–
–
1,416
133,371
7,797
78,439
23,968
74,986
3,637
70,817
3,787
90,792
7,076
–
6,162
–
(6,738)
80,297
–
(3,893)
–
–
–
–
–
–
–
–
–
–
–
–
38,689
53,575
15,436
15,739
37,668
28,567
10,692
3,986
–
–
–
–
11,657
–
15,696
15,739
–
–
–
–
9,071
8,531
8,004
7,475
9,071
8,531
8,004
7,475
8,004
3,439
19,565
19,221
19,565
19,264
19,565
19,264
19,565
19,264
28,491
27,797
22,123
3,290
20,795
–
19,565
19,264
–
10,357
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,067
7,942
–
–
6,806
34,654
8,153
8,230
–
–
23,942
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
117,165
153,164
17,203
113,649
7,397
34,739
17,203
113,822
17,203
117,769
7,059
–
13,468
–
7,397
35,269
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
total
$
207,562
183,650
104,551
98,380
92,251
86,200
104,551
98,380
92,251
86,200
92,251
39,457
716,612
869,943
389,147
547,431
359,777
424,254
348,385
532,215
357,544
537,183
269,135
37,923
253,023
–
351,296
457,657
–
101,975
Non executive directors
M Iwaniw
M Carroll
F Grimwade
R M Herron
P Riordan
N Anderson#
M Eva
P Ross
L Van Driel
K Tomeo*
V Huxley**
B Van Twest+
C Barbuto++
executive director
P Thompson
2017
2016
other key management personnel
P Chambers
#
*
**
+
++
Appointed 21 January 2016
Appointed 9 May 2016
Appointed 9 September 2016
Resigned 31 July 2017 and his STI reversed
Resigned 26 January 2016
Select Harvests Annual Report 2017 29
notes
The elements of remuneration have been determined on the basis of the cost to the consolidated entity.
Performance rights granted have been independently valued using the Black Scholes 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.
fixed and variable remuneration
Table 6 details the proportion of fixed and variable remuneration earned by directors and key management personnel during the 2017 and 2016
financial years.
table 6: fixed and Variable remuneration
fixed remuNeratioN
at risK – sti
at risK – lti^
Non executive directors
M Iwaniw
M Carroll
F Grimwade
R M Herron
P Riordan
N Anderson#
executive director
P Thompson
other key management personnel
P Chambers
M Eva
P Ross
L Van Driel
K Tomeo*
V Huxley**
B Van Twest+
C Barbuto++
2017
%
100.0
100.0
100.0
100.0
100.0
100.0
83.5
93.6
91.2
94.1
94.1
94.8
92.3
99.8
–
2016
%
2017
%
2016
%
2017
%
2016
%
100.0
100.0
100.0
100.0
100.0
100.0
67.1
64.9
74.1
65.3
61.2
100.0
–
74.7
103.8
–
–
–
–
–
–
0.2
2.0
6.7
1.0
1.1
2.6
2.4
(1.9)
–
–
–
–
–
–
–
15.3
14.3
17.7
13.3
16.9
–
–
17.5
(3.8)
–
–
–
–
–
–
16.3
4.4
2.1
4.9
4.8
2.6
5.3
2.1
–
–
–
–
–
–
–
17.6
20.8
8.2
21.4
21.9
–
–
7.7
–
#
*
**
+
++
^
Appointed 21 January 2016
Appointed 9 May 2016
Appointed 9 September 2016
Resigned 31 July 2017
Resigned 26 January 2016
Based on the value of performance rights as at grant date as valued using the option pricing model
www.selectharvests.com.au
30
Directors’ Report
Continued
remuneration report (CONTINUED)
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
date
VestiNG
coNditioNs
performaNce
period
participatiNG
executiVes
performaNce acHieVed
Vested %
30 June 2014 rights achieved 100%
of EPS condition rights and 88%
of TSR condition rights
30 June 2015 rights achieved 100%
of EPS condition rights and 100%
of TSR condition rights
30 June 2016 rights achieved 0%
of EPS condition rights and 94%
of TSR condition rights
30 June 2014 rights achieved 100%
of EPS condition rights and 88%
of TSR condition rights
30 June 2015 rights achieved 100%
of EPS condition rights and 100%
of TSR condition rights
30 June 2016 rights achieved 0%
of EPS condition rights and 94%
of TSR condition rights
30 June 2015 rights achieved 100%
of EPS condition rights and 100%
of TSR condition rights
30 June 2016 rights achieved 0%
of EPS condition rights and 94%
of TSR condition rights
30 June 2017 rights achieved 0%
of EPS condition rights and 0%
of TSR condition rights
30 June 2017 rights achieved 0%
of EPS condition rights and 0%
of TSR condition rights
94% of 30 June 2014 rights
100% of 30 June 2015 rights
47% of 30 June 2016 rights
94% of 30 June 2014 rights
100% of 30 June 2015 rights
47% of 30 June 2016 rights
100% of 30 June 2015 rights
47% of 30 June 2016 rights
0% of 30 June 2017 rights
0% of 30 June 2017 rights
2018-2020 period to be
determined.
N/A
29 Jun 2012
• EPS
30 June 2014
P Chambers
30 June 2015
30 June 2016
P Ross
Compound
Annual
Growth
• Relative TSR
performance
to peer group
• Continuous
service
30 Apr 2013
• EPS
30 June 2014
L Van Driel
30 June 2015
30 June 2016
30 June 2015
30 June 2016
30 June 2017
P Thompson
M Eva
B Van Twest
Compound
Annual
Growth
• Relative TSR
performance
to peer group
• Continuous
service
• EPS
Compound
Annual
Growth
• Relative TSR
performance
to peer group
• Continuous
service
11 Feb 2016
• EPS
30 June 2017
P Chambers
2017
Compound
Annual
Growth
• Relative TSR
performance
to peer group
• Continuous
service
• EPS
Compound
Annual
Growth
• Relative TSR
performance
to peer group
• Continuous
service
30 June 2018
30 June 2019
30 June 2020
P Ross
L Van Driel
P Thompson+
P Chambers*
M Eva*
P Ross*
L Van Driel*
B Van Twest*
K Tomeo*
V Huxley*
+
*
Granted 20 October 2014
Granted 29 September 2016
Select Harvests Annual Report 2017 31
The LTI Plan provides for the offer of a parcel of performance rights with a three year performance period to participating employees. The rights
vest at the end of the three year period 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.
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
year
Granted
2013
2013
2013
2017
2017
2017
2012
2012
2012
2016
2017
2017
2017
2013
2013
2013
2017
2017
2017
2012
2012
2012
2016
2017
2017
2017
2013
2013
2013
2016
2017
2017
2017
Number
Granted
300,000
300,000
300,000
75,000
75,000
75,000
57,960
57,960
57,960
60,000
15,000
15,000
15,000
52,687
60,000
60,000
15,000
15,000
15,000
54,060
54,060
54,060
60,000
15,000
15,000
15,000
50,600
50,600
50,600
60,000
15,000
15,000
15,000
Value
per right*
$2.26
$2.26
$2.26
$4.35
$4.20
$4.07
$1.08
$1.15
$1.20
$4.44
$2.85
$3.45
$3.38
$2.26
$2.26
$2.26
$2.85
$3.45
$3.38
$1.08
$1.15
$1.20
$4.44
$2.85
$3.45
$3.38
$2.25
$2.26
$2.26
$4.44
$2.85
$3.45
$3.38
riGHts to deferred sHares
Vested
%
100%
47%
Vested
Number
300,000
141,450
0%
0%
0%
0%
94%
100%
47%
0%
0%
0%
0%
100%
47%
0%
0%
0%
0%
94%
100%
47%
0%
0%
0%
0%
94%
100%
47%
0%
0%
0%
0%
0
0
0
0
54,511
57,960
27,328
0
0
0
0
52,687
28,290
0
0
0
0
50,843
54,060
25,489
0
0
0
0
47,589
50,600
23,858
0
0
0
0
forfeited
Number
financial years
in which rights
may vest
0
30–Jun–15
158,550
30–Jun–16
300,000
30–Jun–17
max. Value
yet to vest*
$0
$0
$0
0
0
0
30–Jun–18
30–Jun–19
30–Jun–20
$326,250
$315,000
$305,250
3,449
30–Jun–14
0
30–Jun–15
30,632
30–Jun–16
60,000
30–Jun–17
0
0
0
0
30–Jun–18
30–Jun–19
30–Jun–20
30–Jun–15
31,710
30–Jun–16
60,000
30–Jun–17
0
0
0
30–Jun–18
30–Jun–19
30–Jun–20
3,217
30–Jun–14
0
30–Jun–15
28,571
30–Jun–16
60,000
30–Jun–17
$0
$0
$0
$0
$42,750
$51,750
$50,700
$0
$0
$0
$42,750
$51,750
$50,700
$0
$0
$0
$0
0
0
0
30–Jun–18
30–Jun–19
30–Jun–20
$42,750
$51,750
$50,700
3,011
30–Jun–14
0
30–Jun–15
26,742
30–Jun–16
60,000
30–Jun–17
$0
$0
$0
$0
0
0
0
30–Jun–18
30–Jun–19
30–Jun–20
$42,750
$51,750
$50,700
www.selectharvests.com.au 32
Directors’ Report
Continued
remuneration report (CONTINUED)
table 8: Grants of performance rights (continued)
Name
B Van Twest
K Tomeo
V Huxley
year
Granted
Number
Granted
Value
per right*
2013
2013
2013
2017
2017
2017
2017
2017
2017
2017
60,000
60,000
60,000
15,000
15,000
15,000
10,000
10,000
10,000
10,000
$2.26
$2.26
$2.26
$2.85
$3.45
$3.38
$3.38
$2.85
$3.45
$3.38
riGHts to deferred sHares
Vested
%
100%
47%
Vested
Number
60,000
28,290
0%
0%
0%
0%
0%
0%
0%
0%
0
0
0
0
0
0
0
0
forfeited
Number
financial years
in which rights
may vest
0
30–Jun–15
31,710
30–Jun–16
60,000
30–Jun–17
0
0
0
0
0
0
0
30–Jun–18
30–Jun–19
30–Jun–20
30–Jun–20
30–Jun–18
30–Jun–19
30–Jun–20
max. Value
yet to vest*
$0
$0
$0
$42,750
$51,750
$50,700
$33,800
$28,500
$34,500
$33,800
*
This represents the 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.
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.
2017
Number
executive director
P Thompson
other key management personnel
P Chambers
M Eva
P Ross
L Van Driel
B Van Twest
K Tomeo
V Huxley
All vested rights are exercisable at the end of the year.
opening
balance
Granted
during
the year
Vested
during
the year
forfeited
during
the year
closing
balance
300,000
225,000
60,000
60,000
60,000
60,000
60,000
–
45,000
45,000
45,000
45,000
45,000
10,000
30,000
–
–
–
–
–
–
–
–
300,000
225,000
60,000
60,000
60,000
60,000
60,000
–
–
45,000
45,000
45,000
45,000
45,000
10,000
30,000
Select Harvests Annual Report 2017 33
table 10: Number of shares held by directors and other 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 other
key management personnel, including their personally related entities, is as follows:
Non-executive directors
M Iwaniw
R M Herron
M Carroll
F Grimwade
P Riordan
N Anderson
executive director
P Thompson
other key management personnel
P Chambers
P Ross
M Eva
L Van Driel
K Tomeo*
V Huxley**
B Van Twest+
*
**
+
Appointed 9 May 2016
Appointed 9 September 2016
Resigned 31 July 2017
Held at
1 July 2016
receiVed oN
exercise of
performaNce
riGHts
otHer – drp,
sales aNd
purcHases
Held at
30 JuNe 2017
199,097
53,920
10,941
102,804
10,000
3,500
–
–
–
–
–
–
2,835
3,032
6,287
–
–
–
201,932
56,952
17,228
102,804
10,000
3,500
338,379
141,450
146
479,975
113,171
104,903
52,687
–
–
–
27,328
25,489
28,290
23,858
–
–
(50,250)
–
–
–
–
–
90,249
130,392
80,977
23,858
–
–
22,500
28,290
(22,500)
28,290
www.selectharvests.com.au 34
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.
Notice period
base salary iNcl.
superaNNuatioN
Name
title
P Thompson
Managing Director & CEO
P Chambers
Chief Financial Officer
term
On-going
On-going
General Manager Sales and Marketing Consumer
On-going
M Eva
P Ross
L Van Driel
K Tomeo*
V Huxley**
General Manager Horticulture
Group Trading Manager
General Manager Safety, People and
Sustainability
General Manager Finance and
Assistant Company Secretary
6 months
3 months
3 months
3 months
3 months
3 months
On-going
On-going
On-going
On-going
3 months
B Van Twest+
General Manager Operations
On-going
3 months
*
**
+
Appointed 9 May 2016
Appointed 9 September 2016
Resigned 31 July 2017
598,082
356,131
333,289
320,790
328,401
255,000
248,977
350,688
Base salaries quoted are for the year ended 30 June 2017. They are reviewed annually by the Remuneration Committee, however at the time
of preparing the remuneration report the review for the 30 June 2018 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
For the year ended 30 June 2017, the Remuneration and Nomination Committee engaged Ernst & Young (EY) to complete the following:
• Attend Remuneration and Nomination Committee meetings
• Prepare a Board paper outlining the overview of an Employee Share Trust (EST) to assist with the operation of the new Long Term Incentive
Plan (LTIP)
• Prepare LTIP documentation for a grant of performance rights, including an employee tax summary outlining the key Australian tax
implications of participating in the plan
• Provide an employee tax presentation outlining the Australian tax implications for participants of the new LTIP
• Prepare a new set of Performance Rights Plan Rules
The total consulting fees paid were $48,492.
The following arrangements were made to ensure that the engagement and delivery of services from EY are free from undue influence
by members of the Group’s Key Management Personnel are as follows:
• Remuneration Consultants are to be engaged by, and report directly to, the Chair of the Remuneration and Nomination Committee.
Agreements for the provision of remuneration consulting services are to be executed by the Chair of the Remuneration Committee under
delegated authority on behalf of the Board.
• Reports containing remuneration recommendations are to be provided directly to the Chair of the Remuneration Committee; and
• Remuneration Consultants are permitted to speak to management throughout the engagement (if required) to understand company
processes, practices and other business issues and obtain management perspectives. However, the Remuneration Consultants are not
permitted to provide any member of management with a copy of their draft or final report that contains remuneration recommendations.
Select Harvests Annual Report 2017 DiviDenDs
Interim franked dividend for 2017
• on ordinary shares
Nil final dividend declared for 2017
35
ceNts
2017
$’000
10.0
7,349
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
remuNeratioN aNd NomiNatioN
M Carroll (Chairman)
M Iwaniw
N Anderson (replacing F Grimwade)
F Grimwade (resigned from committee)
DireCtors’ meetings
The number of meetings of directors (including meetings of committees of directors) held during the financial year and the number of meetings
attended by each director 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
12
12
12
12
12
12
12
12
12
12
12
12
12
12
1
4
4
1
4
4
–
1
4
4
1
4
4
–
5
5
–
5
1
–
5
5
5
–
5
1
–
5
M Iwaniw
P Thompson
R M Herron
M Carroll
F Grimwade
P Riordan
N Anderson
www.selectharvests.com.au 36
Directors’ Report
Continued
DireCtor’s interests in ContraCts
Directors’ interests in contracts are disclosed in Note 24(d) 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 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 23. 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.
rounDing
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under
the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The Company
is an entity to which the Class Order applies.
proCeeDings on beHalf of tHe Company
There are no material legal proceedings in place on behalf of the Company as at the date of this report.
Corporate governanCe
In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Select Harvests Limited support and
have adhered to the ASX principles of corporate governance. The Company has previously adopted Listing Rule 4.10.3 which allows companies to
publish their corporate governance statement on their website rather than in their annual report. A copy of the statement along with any related
disclosures is available at: http://www.selectharvests.com.au/governance.
This report is made in accordance with a resolution of the directors.
m iwaniw
Chairman
Melbourne, 25 August 2017
Select Harvests Annual Report 2017 Auditor’s Independence Declaration
37
Auditor’s Independence Declaration
As lead auditor for the audit of Select Harvests Limited for the year ended 30 June 2017, 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.
Andrew Cronin
Partner
PricewaterhouseCoopers
Melbourne
25 August 2017
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, 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.
www.selectharvests.com.au 38
Statement of Comprehensive Income
Statement of Comprehensive Income
for the year ended 30 June 2017
revenue
Sales of goods and services
Other revenue
total revenue
other income
Inventory fair value adjustment
Gain on sale of assets
total other income
expenses
Cost of sales
Distribution expenses
Marketing expenses
Occupancy expenses
Administrative expenses
Finance costs
Other expenses
profit before iNcome tax
Income tax expense
profit attributable to members of select HarVests limited
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
earnings per share for profit attributable to the ordinary equity holders of the company:
coNsolidated
2017
$’000
2016
$’000
Note
5
5
6
6
6
7
239,981
2,161
242,142
(14,250)
12
(14,238)
285,917
251
286,168
(43,033)
8,644
(34,389)
(194,240)
(186,286)
(3,972)
(1,445)
(1,232)
(7,014)
(5,032)
(2,991)
11,978
(2,729)
9,249
(4,463)
(1,304)
(1,314)
(6,642)
(5,538)
(1,942)
44,290
(10,494)
33,796
205
205
1,053
1,053
9,454
34,849
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
22
22
12.6
12.4
46.7
46.0
The above statement should be read in conjunction with the accompanying Notes.
Select Harvests Annual Report 2017 Balance Sheet
as at 30 June 2017
curreNt assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
total curreNt assets
NoN-curreNt assets
Property, plant and equipment
Intangible assets
total NoN-curreNt assets
total assets
curreNt liabilities
Trade and other payables
Interest bearing liabilities
Derivative financial instruments
Current tax liabilities
Deferred gain on sale
Employee entitlements
total curreNt liabilities
NoN-curreNt liabilities
Interest bearing liabilities
Deferred tax liabilities
Deferred gain on sale
Employee entitlements
total NoN-curreNt liabilities
total liabilities
Net assets
equity
Contributed equity
Reserves
Retained profits
total equity
The above balance sheet should be read in conjunction with the accompanying Notes.
39
coNsolidated
2017
$’000
2016
$’000
Note
9
10
11
12
13
14
15
11
16
17
15
7(c)
16
17
18
1,060
46,806
87,474
1,270
136,610
282,477
60,604
343,081
479,691
14,294
110,385
160
2,322
175
3,035
130,371
36,492
30,591
3,021
1,597
71,701
202,072
277,619
181,164
11,602
84,853
277,619
1,435
48,477
104,316
1,293
155,521
238,187
56,064
294,251
449,772
23,180
30,619
–
25,142
175
2,667
81,783
38,082
34,452
3,197
1,357
77,088
158,871
290,901
178,553
11,168
101,180
290,901
www.selectharvests.com.au 40
Statement of Changes in Equity
Statement of Changes in Equity
coNsolidated
balance restated at 30 June 2015
profit for the year
other comprehensive loss
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
Issue of ordinary shares
Dividends paid or provided
Employee performance rights
balance at 30 June 2016
profit for the year
other comprehensive income
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
Dividends paid or provided
Employee performance rights
balance at 30 June 2017
1.
Nature and purpose of reserves
(i) asset revaluation reserve
Note
contributed
equity
$’000
170,198
–
–
–
8,355
–
–
–
178,553
–
–
–
2,611
–
–
181,164
18
8
25
18
8
25
reserves1
$’000
12,818
–
1,053
1,053
retained
earnings
$’000
104,371
33,796
–
33,796
total
$’000
287,387
33,796
1,053
34,849
–
(3,271)
–
568
11,168
–
205
205
–
–
229
11,602
–
3,271
8,355
–
(40,258)
(40,258)
–
101,180
9,249
–
9,249
–
(25,576)
–
84,853
568
290,901
9,249
205
9,454
2,611
(25,576)
229
277,619
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.
(ii) options reserve
The options reserve is used to recognise the fair value of performance rights granted and expensed but not exercised.
(iii) 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.
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
Select Harvests Annual Report 2017
Statement of Cash Flows
for the year ended 30 June 2017
casH floWs from operatiNG actiVities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income tax paid
Net cash inflow from operating activities
casH floWs from iNVestiNG actiVities
Proceeds from Government grants
Proceeds from sale of property, plant and equipment
Proceeds from sale and leaseback transaction
Payment for water rights
Payment for property, plant and equipment
Acquisition of almond orchards
Tree development costs
Net cash outflow from investing activities
casH floWs from fiNaNciNG actiVities
Proceeds from sale and leaseback transaction
Proceeds from borrowings
Repayments of borrowings
Repayments of finance leases
Dividends on ordinary shares, net of Dividend Reinvestment Plan
Net cash (outflow)/inflow from financing activities
Net increase/(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
reconciliation to cash at the end of the year:
Cash and cash equivalents
Bank overdrafts
Cash and cash equivalents
41
coNsolidated
2017
$’000
2016
$’000
Note
19
249,969
(211,212)
38,757
31
(5,028)
(29,022)
4,738
2,805
12
–
(4,540)
(23,581)
(21,838)
(9,646)
(56,788)
–
209,250
(128,750)
(3,962)
(22,964)
53,574
1,524
(3,455)
(1,931)
1,060
(2,991)
(1,931)
304,306
(205,688)
98,618
294
(5,156)
(890)
92,866
4,118
9,800
34,922
(9,591)
(32,717)
(5,285)
(4,408)
(3,161)
28,362
197,000
(279,608)
(1,911)
(31,903)
(88,060)
1,645
(5,100)
(3,455)
1,435
(4,890)
(3,455)
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.
The above cash flow statement should be read in conjunction with the accompanying Notes.
www.selectharvests.com.au 42
Notes to the Financial Statements
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 2.
banking covenants
Prior to 30 June 2017 the Company received
a conditional amendment to certain of its
banking facility covenants from its lenders
for the 30 June 2017 measurement period.
As the amendment was conditional on the
agreement of revised covenants and terms
the total debt facility drawn has been disclosed
as a current liability. These revisions have now
been agreed and are in place with lenders. The
changes include a revision to existing financial
covenants relating to debt serviceability,
gearing and assessment periods.
The Board and Management will continue
to closely monitor the results and forecast
against the covenants and believe that the
company should be in a position to take any
appropriate and necessary action with a view
to ensuring that no covenants are breached.
The immediate priority for the business will
be to reduce operational expenditure,
working capital and capital expenditure
and to proactively investigate a number
of debt reduction initiatives.
new and amended standards
Certain new accounting standards and
interpretations have been published that are
not mandatory for the 30 June 2017 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.
(iii) aasb 16 leases (effective from
1 april 2019)
The standard was released on 23 February
2016 and will primarily affect the accounting
treatment of leases by lessees and will result
in the recognition of almost all leases on the
balance sheet. The current standard removes
the current distinction between operating
and financing leases and requires recognition
of an asset (the right to use the leased item)
and a financial liability to pay rentals for almost
all lease contracts. The Company is yet to
assess its full impact and has not yet decided
when to adopt AASB 16.
(iv) aasb 2016-1: amendments to australian
accounting standards – aasb 112 income taxes
The amendments to AASB 112 clarify the
accounting for deferred tax where an asset
is measured at fair value and that fair value
is below the asset’s tax base. They do not
change the underlying principles for the
recognition of deferred tax assets.
The amendments are effective for annual
periods beginning on or after 1 January 2017.
Earlier application is permitted. The changes
must be adopted retrospectively.
(v) aasb 2017-2: amendments to australian
accounting standards – annual
improvements to australian accounting
standards 2014-2016 cycle
This standard is applicable from annual
reporting periods beginning on or after
1st January 2017. The annual improvements
project makes minor but necessary annual
amendments to various accounting standards.
This amendment clarifies that the disclosure
requirements of AASB 12 apply to interests in
entities that are classified as held for sale,
except for the requirement to disclose
summarised financial information.
(vi) aasb 2016-2: amendments to australian
accounting standards – disclosure initiative:
amendments to aasb 107
The amendment requires disclosure of
changes arising from cash flows, such as
drawdowns and repayments of borrowings,
and non-cash changes, such as acquisitions,
disposals and unrealised exchange differences.
The amendment is effective for annual
periods beginning on or after 1 January 2017.
Earlier application is permitted.
There are no other standards that are not
yet effective and that are expected to have a
material impact on the entity in the current or
future reporting periods and on foreseeable
future transactions.
Select Harvests Annual Report 2017 43
1. summary of signifiCant
aCCounting poliCies
(CONTINUED)
(b) principles of consolidation
(d) comparatives
Where necessary, comparatives have been
reclassified and repositioned for consistency
with current year disclosures.
(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.
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.
(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.
(e) rounding
The amounts contained in this report and in
the financial report have been rounded to the
nearest $1,000 (where rounding is applicable)
under the option available to the Company
under ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument
2016/191. The Company is an entity to which
the Class Order applies.
(f) parent entity
financial information
The financial information for the parent entity,
Select Harvests Limited, disclosed in Note 27
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.
2. 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 $7.43 per kg and almond yield based
on a crop estimate for the Company orchards
of 14,100mt.
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.
Carrying value of intangible assets
The Group tests annually whether intangible
assets, have suffered any impairment, in
accordance with the accounting policy stated
in Note 13. The recoverable amounts of cash
generating units have been determined based
on value-in-use calculations.
Key assumptions and sensitivities are
disclosed in Note 13.
3. 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.
www.selectharvests.com.au 44
Notes to the Financial Statements
3. finanCial risK management (CONTINUED)
(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 bankers, 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 2017
usd $’000
30 JuNe 2017
eur $’000
30 JuNe 2016
usd $’000
30 JuNe 2016
eur $’000
16,710
(2,296)
3,399
25,500
–
–
440
–
21,995
(3,627)
991
19,033
–
–
1,625
–
Based on financial instruments held at 30 June 2017, 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 $938,000 lower/$1,037,000 higher (2016: $825,000
lower/$912,000 higher), mainly as a result of the US dollar denominated financial instruments as detailed in the above table. Equity would have
been $1,564,000 lower/$1,728,000 higher (2016: $1,555,000 lower/$1,719,000 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 (c) below.
30 JuNe 2017
aVeraGe
iNterest rate
%
3.05%
1.64%
balaNce
$’000
102,500
2,296
30 JuNe 2016
aVeraGe
iNterest rate
%
6.37%
1.29%
balaNce
$’000
22,000
4,890
The Group analyses interest rate exposure on an ongoing basis in conjunction with the 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 $27.5m (2016:Nil) of debt for 1 year and
$13.5m (2016:Nil) for 2 years at a rate of 1.69% and 1.77% respectively to reduce the risk that higher interest rate pose to the company’s cash flows.
Group sensitivity
At 30 June 2017, 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 $183,000 lower/higher (2016: $45,000 lower/higher).
Select Harvests Annual Report 2017 45
3. finanCial risK management (CONTINUED)
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:
fiNaNcial iNstrumeNts
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
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
%
2016
%
(i) financial assets
Cash
Trade and other receivables
Forward exchange contracts
Interest Rate Swap
1,060
1,435
–
–
–
–
–
–
total financial assets
1,060
1,435
(ii) financial liabilities
Bank overdraft – USD @ AUD
2,991 4,890
Commercial Bills
Trade creditors
Other creditors
Forward exchange contracts
102,500 22,000
–
–
–
–
–
–
total financial liabilities
105,491 26,890
financial assets
–
–
–
4
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17
17
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,060
1,435
41,131 44,888
41,131 44,888
1,270
1,293
1,270
1,293
–
–
21
–
– 42,401 46,181 43,482 47,616
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,991 4,890
– 102,500 22,000
1.64
3.05
1.29
6.37
8,160 8,007
8,160 8,007
6,134
15,173
6,134
15,173
160
–
160
–
–
–
–
–
–
–
– 14,454 23,180 119,945 50,070
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.
financial liabilities
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.
(b) credit risk
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).
www.selectharvests.com.au 46
Notes to the Financial Statements
3. finanCial risK management (CONTINUED)
(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), Rabobank (Rabo) and Commonwealth Bank (CBA) in proportions
of 50%, 25% and 25% respectively, except as noted.
debt facilities
1. Revolving
2. Working capital
3. Seasonal*+
4. Cash advance facility#
5. Overdraft*
expiry date
facility limit
amouNt draWN 30 JuNe 2017
01/03/2019
01/03/2018
01/09/2019
01/03/2019
28/02/2018
$65,000,000
$29,000,000
$19,000,000
$30,000,000
aud $143,000,000
USD $5,000,000
$43,500,000
$29,000,000
–
$30,000,000
aud $102,500,000
USD $2,296,000
* Held with NAB only; + Available for the period 1 March to 30 June each year.
# Held with CBA and RABO in equal proportions
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
• Revolving/Working capital/Seasonal/Cash advance facility
• Bank overdraft facility USD
2017
$’000
2016
$’000
AUD $40,500
AUD $93,000
USD $2,704
USD $1,373
The bank overdraft facility may be drawn at any time and may be terminated by the bank without notice. The debt facilities (revolving, working
capital, seasonal) may be drawn at any time over the term subject to restrictions noted above on the seasonal facility.
Select Harvests Annual Report 2017 47
3. finanCial risK management (CONTINUED)
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.
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 2017
Non-derivatives
Variable Rate
Derivatives
Group at 30 June 2016
Non-derivatives
Variable Rate
Derivatives
Debt facilities*
Trade and other payables
Bank Overdraft
Interest Rate Swap
EUR buy – outflow
USD buy – outflow
USD sell – (inflow)
usd net
103,647
14,294
–
–
440
3,399
(25,500)
(22,101)
–
–
3,029
27,000
–
–
–
–
–
–
–
13,500
–
–
–
–
103,647
14,294
3,029
40,500
440
3,399
(25,500)
(22,101)
102,500
14,294
2,991
21
17
144
(1,270)
(1,126)
less tHaN 6
moNtHs
$’000
6 – 12
moNtHs
$’000
more tHaN
12 moNtHs
$’000
total
coNtractual
casH floWs
$’000
carryiNG
amouNt
(assets)/
liabilities
$’000
Debt facilities
Trade and other payables
Trade finance
Bank Overdraft
Interest Rate Swap
EUR buy – outflow
USD buy – outflow
USD sell – (inflow)
usd net
22,624
23,180
–
–
–
1,625
991
(19,033)
(18,042)
–
–
–
–
–
–
–
–
–
–
–
4,890
–
–
–
–
–
–
22,624
23,180
4,890
–
–
1,625
991
(19,033)
(18,042)
22,000
23,180
4,890
–
–
24
(2)
1,271
1,269
*
Refer to note 1(a) and note 15 for further information on the classification of the debt facilities at 30 June 2017.
(d) fair Value measurement
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.
www.selectharvests.com.au 48
Notes to the Financial Statements
3. finanCial risK management (CONTINUED)
Disclosures are required 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 30 June 2017 the group’s assets and liabilities measured and recognised at fair value comprised the foreign exchange forward contracts
and interest rate swap derivative. Both are level 2 measurements under the hierarchy.
4. 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:
revenue
Total revenue from external
customers
Intersegment revenue
total segment revenue
Other revenue
total revenue
EBIT
Interest received
Finance costs expensed
profit before income tax
segment assets (excluding
intercompany debts)
segment liabilities (excluding
intercompany debts)
acquisition of non-current
segment assets
depreciation and amortisation
of segment assets
2017
2016
2017
2016
2017
2016
2017
2016
food division
($’000)
almond division
($’000)
eliminations and corporate
($’000)
consolidated entity
($’000)
146,852
161,825
–
–
93,129
25,418
124,092
36,887
146,852
161,825
118,547
160,979
–
–
2,130
146,852
161,825
120,677
7,950
10,342
13,686
–
–
–
–
–
(2,731)
208
161,187
44,575
–
(2,127)
7,950
10,342
10,955
42,448
–
(25,418)
(25,418)
31
–
239,981
285,917
(36,887)
–
–
(36,887)
239,981
285,917
43
2,161
251
(25,387)
(36,844)
242,142
286,168
(4,657)
31
(2,301)
(6,927)
(5,132)
43
(3,411)
(8,500)
16,979
49,785
31
(5,032)
11,978
43
(5,538)
44,290
70,708
75,039
408,398
375,295
585
(562)
479,691
449,772
(8,247)
(10,446)
(89,079)
(96,588)
(104,746)
(51,837)
(202,072)
(158,871)
240
461
240
61,609
60,476
1,852
1,852
63,701
62,568
454
14,341
12,091
64
54
14,866
12,599
Sales to major customers include Coles 29% and Woolworths 18% of total sales of the Food Division
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.
Select Harvests Annual Report 2017 5. revenue
Revenue from continuing operations
– Sale of goods
– Management services
– Government grant and other revenue
total revenue
49
coNsolidated
2017
$’000
2016
$’000
Note
232,120
7,861
2,161
242,142
281,517
4,400
251
286,168
revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances,
and amounts collected on behalf of third parties. Revenue is recognised to the extent that it is probable that the economic 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.
management services
Management services revenue relates to services provided for the management and development of farms and is recognised as services
are provided.
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.
almond pool revenue
Under contractual arrangements, the group acts as an agent for external growers by selling almonds on their behalf and does not make a margin
on those sales. These amounts are not included in the group’s revenue. However, the Company receives a marketing fee for providing this service.
As at 30 June 2017 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
Government grants are assistance provided 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.
www.selectharvests.com.au 50
Notes to the Financial Statements
6. eXpenses
Profit before tax includes the following specific expenses:
Depreciation of non-current assets:
Buildings
Plantation land and irrigation systems
Plant and equipment
Bearer plants
total depreciation of non-current assets
Employee benefits
Operating lease rental minimum lease payments
Net (gain)/loss on disposal of property, plant and equipment
Acquisition transaction costs
7. inCome taX
(a) income tax expense
Current tax
Deferred tax
Over provided in prior years
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
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2016 – 30%)
Tax effect of amounts that are not deductible/(taxable) in calculating taxable income
Other assessable items
Over provided in prior years
income tax expense
coNsolidated
2017
$’000
2016
$’000
Note
220
1,644
7,115
5,887
14,866
26,220
3,225
(12)
–
205
1,364
5,241
5,789
12,599
23,854
5,169
(8,644)
381
coNsolidated
2017
$’000
(6,473)
2,816
928
2016
$’000
(25,142)
11,609
3,039
(2,729)
(10,494)
(2,729)
(2,729)
(10,494)
(10,494)
(481)
3,297
2,816
11,978
(3,593)
(64)
928
7,163
4,446
11,609
44,290
(13,287)
(246)
3,039
(2,729)
(10,494)
Note
7(c)
7(c)
Select Harvests Annual Report 2017 7. inCome taX (CONTINUED)
(c) 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
Lease liabilities
amounts recognised directly in other comprehensive income
cash flow hedges
amounts recognised directly in equity
Equity raising costs
Net deferred tax liabilities
movements:
Opening balance 1 July
Prior period (over)/under provision
(Credited)/Charged to income statement
Debited/(Credited) to equity
closing balance at 30 June
51
coNsolidated
2017
$’000
2016
$’000
Note
(2,019)
5,590
35,139
871
(8,423)
31,158
(2,305)
10,437
34,824
750
(8,561)
35,145
(276)
(276)
(291)
30,591
34,452
(1,045)
(2,816)
–
30,591
(417)
34,452
44,064
1,470
(11,609)
527
34,452
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.
www.selectharvests.com.au 52
Notes to the Financial Statements
7. inCome taX (CONTINUED)
(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.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
8. DiviDenDs paiD or proposeD for on orDinary sHares
(a) dividends paid during the year
(i) interim – paid 5 april 2017 (2016: 15 april 2016)
Fully franked dividend (10c per share)
(2016: Unfranked dividend 21c per share)
(ii) final – paid 30 september 2016 (2016: 13 october 2015)
Fully franked dividend (25c per share)
(2016: Unfranked dividend 35c per share)
coNsolidated
2017
$’000
2016
$’000
Note
7,349
15,255
18,227
25,576
25,003
40,258
(b) dividends proposed and not recognised as a liability.
Nil final dividend declared. The Group’s ability to pay future dividends will be dependent on the progress of initiatives set out in note 1(a).
(c) franking credit balance
Franking credits available for subsequent reporting periods based on a tax rate of 30% (2016: 30%)
28,074
1,699
The above amounts represent the balance of the franking account (presented as the gross dividend value) as at the end of the financial year,
adjusted for:
(i)
Franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date
(ii) Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date.
9. traDe anD otHer reCeivables
Trade receivables
Provision for impairment of trade receivables
Prepayments
Note
coNsolidated
2017
$’000
41,134
(3)
41,131
5,675
46,806
2016
$’000
44,956
(68)
44,888
3,589
48,477
Select Harvests Annual Report 2017 53
9. traDe anD otHer reCeivables (CONTINUED)
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.
(a) trade receivables past due but not impaired
As at 30 June 2017, trade receivables of $13,952,505 (2016: $3,692,661) were past due but not impaired. The ageing analysis of these receivables
is as follows:
Up to 3 months
3 to 6 months
> 6 months
(b) effective interest rates and credit risk
All receivables are non-interest bearing.
Note
coNsolidated
2017
$’000
14,100
138
(285)
13,953
2016
$’000
3,557
145
(9)
3,693
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 3 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 3.
(c) fair value
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.
10. inventories
Raw materials
Finished goods
Other inventory
Almond stock
Note
(a)
coNsolidated
2017
$’000
4,740
27,550
7,368
47,816
87,474
2016
$’000
7,311
20,495
8,804
67,706
104,316
Inventories are valued at the lower of cost and net realisable value except for almond stocks which are measured at fair value less estimated cost
to sell at the point of harvest, and subsequently at Net Realisable Value under AASB 102 Inventories.
Costs, incurred in bringing each product to its present location and condition, are accounted for as follows:
• Raw materials and consumables: purchase cost on a first in first out basis;
• Finished goods and work in progress: cost of direct material and labour and a proportion of manufacturing overheads based on normal
operating capacity; and
• Almond stocks are valued in accordance with AASB 141 Agriculture whereby the cost of the non-living (harvested) produce is deemed to be
its net market value immediately after it becomes non-living. This valuation takes into account current almond selling prices and current
processing and selling costs.
• Other inventories comprise consumable stocks of chemicals, fertilisers and packaging materials.
www.selectharvests.com.au 54
Notes to the Financial Statements
10. inventories (CONTINUED)
(a) 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.
11. Derivative finanCial instruments
current assets
Forward exchange contracts – cash flow hedges
Total current derivative financial instrument assets
current liabilities
Forward exchange contracts – cash flow hedges
Total current derivative financial instrument liabilities
Note
coNsolidated
2017
$’000
1,270
1,270
160
160
2016
$’000
1,293
1,293
–
–
(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.
(i) fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with
any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
(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.
Select Harvests Annual Report 2017 55
11. Derivative finanCial instruments (CONTINUED)
(i) cash flow hedges
The Company entered 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.
At balance date, the details of outstanding forward exchange contracts are:
less than 6 months
Buy United States Dollars Settlement
Buy Euro Settlement
less than 6 months
Sell United States Dollars Settlement
sell australiaN dollars
aVeraGe excHaNGe rate
2017
$’000
USD3,399
EUR440
2016
$’000
USD991
EUR1,625
2017
$
0.74
0.65
2016
$
0.74
0.67
buy australiaN dollars
aVeraGe excHaNGe rate
2017
$’000
2016
$’000
USD25,500
USD19,033
2017
$
0.74
2016
$
0.71
(ii) credit risk exposures
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is
the carrying amount of those assets, net of any provisions for doubtful debts of those assets, as disclosed in the 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 $22,101,085 and EUR $439,568
(2016: USD USD $18,042,745; EUR $1,625,403).
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.
www.selectharvests.com.au 56
Notes to the Financial Statements
12. property, plant anD eQuipment
(a) reconciliations
Reconciliations of the carrying amounts of property, plant and equipment for the current financial year.
plaNtatioN
laNd aNd
irriGatioN
systems
$’000
buildiNGs
$’000
plaNt aNd
equipmeNt
$’000
bearer
plaNts
$’000
capital
WorK iN
proGress
$’000
13,688
(2,233)
11,455
11,455
–
200
–
(205)
–
11,450
13,888
(2,438)
11,450
11,450
1,500
–
(220)
2,179
14,909
17,567
(2,658)
14,909
116,476
(29,740)
86,736
86,736
–
1,792
(23,832)
(1,364)
4,865
68,197
99,301
(31,104)
68,197
68,197
7,827
–
(1,644)
2,692
77,072
109,820
(32,748)
77,072
61,610
(41,908)
19,702
19,702
9,053
–
(151)
(5,241)
6,596
29,959
76,959
(47,000)
29,959
29,959
5,090
(5)
(7,115)
6,618
107,553
(9,995)
97,558
97,558
7,191
2,340
–
(5,789)
–
101,300
117,084
(15,784)
101,300
101,300
17,700
–
(5,887)
1,896
34,547
115,009
88,486
(53,939)
34,547
136,680
(21,671)
115,009
15,991
–
15,991
15,991
31,294
–
(8,543)
–
(11,461)
27,281
27,281
–
27,281
27,281
27,044
–
–
(13,385)
40,940
40,940
–
40,940
total
$’000
315,318
(83,876)
231,442
231,442
47,538
4,332
(32,526)
(12,599)
–
238,187
334,513
(96,326)
238,187
238,187
59,161
(5)
(14,866)
–
282,477
393,493
(111,016)
282,477
at 30 June 2015
Cost
Accumulated depreciation
Net book amount
year ended 30 June 2016
Opening net book amount
Additions
Acquired through business combinations
Disposals
Depreciation expense
Transfers between classes
closing net book amount
at 30 June 2016
Cost
Accumulated depreciation
Net book amount
year ended 30 June 2017
Opening net book amount
Additions
Disposals
Depreciation expense
Transfers between classes
closing net book amount
at 30 June 2017
Cost
Accumulated depreciation
Net book amount
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.
Select Harvests Annual Report 2017 57
12. property, plant anD eQuipment (CONTINUED)
Depreciation
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.
Bearer plants are assumed ready for use when a commercial crop is produced from the seventh year post planting. Leasehold improvements
are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.
The useful lives for each class of assets are:
Buildings:
Leasehold improvements:
Plant and equipment:
25 to 40 years
5 to 40 years
5 to 20 years
Leased plant and equipment:
5 to 10 years
Bearer plants
Irrigation systems:
Capital works in progress
10 to 30 years
10 to 40 years
Capital works in progress are valued at cost and relate to costs incurred for owned orchards and other assets under development.
(b) leased assets
Plant and equipment and bearer plants includes the following amounts where the Group is a lessee under a finance lease.
leasehold plant and equipment and bearer plants
Note
At cost
Accumulated depreciation and impairment
leases
coNsolidated
2017
$’000
48,474
(7,143)
41,331
2016
$’000
44,938
(3,231)
41,707
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.
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.
www.selectharvests.com.au 58
Notes to the Financial Statements
13. intangibles
year ended 30 June 2016
Opening net book amount
Acquisition of permanent water rights
Disposal of permanent water rights
Acquired through business combinations
closing net book amount
year ended 30 June 2017
Opening net book amount
Acquisition of permanent water rights
Disposal of permanent water rights
Acquired through business combinations
closing net book amount
coNsolidated
Goodwill
$’000
brand Names*
$’000
permanent
Water rights
$’000
25,995
2,905
–
–
–
–
–
–
25,995
2,905
25,995
2,905
–
–
–
–
–
–
19,439
9,745
(2,973)
953
27,164
27,164
4,540
–
–
total
$’000
48,339
9,745
(2,973)
953
56,064
56,064
4,540
–
–
25,995
2,905
31,704
60,604
*
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.
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.
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.
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).
Select Harvests Annual Report 2017 59
13. intangibles (CONTINUED)
(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. 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 12.6% (2016:12.7%) 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 2017.
A decrease of 10% in the projected annual cash flows, or an increase of 1% in the pre-tax discount rate of 12.6% does not result in an impairment
of the goodwill and brand names at 30 June 2017. 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.
14. traDe anD otHer payables
Trade creditors
Other creditors and accruals
Note
coNsolidated
2017
$’000
8,160
6,134
14,294
2016
$’000
8,007
15,173
23,180
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.
15. interest bearing liabilities
current – secured
Bank overdraft
Debt facilities
Finance lease
Non-current – secured
Finance lease
Note
20(b)
20(b)
coNsolidated
2017
$’000
2016
$’000
2,991
102,500
4,894
110,385
36,492
36,492
4,890
22,000
3,729
30,619
38,082
38,082
www.selectharvests.com.au 60
Notes to the Financial Statements
15. interest bearing liabilities (CONTINUED)
borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost.
Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the
period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction
costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw
down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as
a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are 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.
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.
(a) security
Details of the security relating to each of the secured liabilities and further information on the bank overdrafts and bank facilities are set out in 15(c).
Finance lease is secured with plant and equipment and bearer plants with various leasing companies and First State Super respectively.
(b) interest rate risk exposures
Details of the Company’s exposure to interest rate changes on borrowings are set out in Note 3.
(c) 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
total current assets pledged as security
Non-current
Floating charge
Property, plant and equipment
Permanent water rights
Total non-current assets pledged as security
total assets pledged as security
coNsolidated
2017
$’000
2016
$’000
Note
1,060
46,806
87,474
1,270
136,610
241,146
31,704
272,850
409,460
1,435
48,477
104,316
1,293
155,521
196,480
27,164
223,644
379,165
Select Harvests Annual Report 2017 61
15. interest bearing liabilities (CONTINUED)
financing arrangements
The Company has a debt facility available to the extent of $143,000,000 as at 30 June 2017 (2016: $115,000,000). The Company has bank overdraft
facilities available to the extent of US$5,000,000 (2016: US$5,000,000).The current interest rates at balance date are 2.93% (2016: 2.83%) on the
debt facility, and 1.925% (2016: 1.62%) on the United States dollar bank overdraft facility.
As indicated in note 1(a), at 30 June 2017 the Company received a conditional amendment to certain of its banking facility covenants from its
lenders for the 30 June 2017 measurement period. As this amendment was conditional on the agreement of revised covenants and terms the
total debt facility drawn of $102.5million has been disclosed as a current liability. Subsequent to year end, revisions have been agreed and are
in place with lenders. All other covenants and financial undertakings associated with the banking facilities have been met during the period
and as at 30 June 2017.
16. DeferreD gain on sale
current
Sale and leaseback
Non-current
Sale and leaseback
coNsolidated
2017
$’000
2016
$’000
Note
175
175
3,021
3,197
The deferred gain on sale relates to the sale and leaseback of bearer plants for three orchards that were sold to First State Super on 22 September 2015
and 01 January 2016. The lease is for a 20 year term.
17. provisions
current
Employee benefits
Non-current
Employee benefits
coNsolidated
2017
$’000
2016
$’000
Note
3,035
2,667
1,597
1,357
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.
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.
www.selectharvests.com.au 62
Notes to the Financial Statements
17. provisions (CONTINUED)
(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 funds and are charged as expenses when incurred.
18. ContributeD eQuity
(a) issued and paid up capital
Ordinary shares fully paid
Contributed equity
Ordinary shares are classified as equity. The value of new shares or options issued is shown in equity.
(b) movements in shares on issue
Note
coNsolidated
2017
$’000
181,164
181,164
2016
$’000
178,553
178,553
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
2017
2016
Number of
shares
72,918,757
413,373
274,705
–
$’000
178,553
2,611
–
–
Number of
shares
71,435,801
907,649
575,307
–
$’000
170,198
8,355
–
–
73,606,835
181,164
72,918,757
178,553
The Company offered employee participation in long term incentive schemes as part of the remuneration packages for the employees.
In determining the quantum of rights offered the board considers a number of factors including: the corporate strategy; the appropriate mix of
fixed and at risk remuneration; the fair value and face value of the rights; and the 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 2013 and 2016 year were forfeited under this plan (refer Note 25 and Directors’ Report for further details).
The market value of ordinary Select Harvests Limited shares closed at $4.90 on 30 June 2017 ($6.74 on 30 June 2016).
Select Harvests Annual Report 2017 63
18. ContributeD eQuity (CONTINUED)
(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.
19. reConCiliaton of tHe net profit after inCome taX to tHe net CasH flows from
operating aCtivities
Net profit after tax
Non-cash items
Depreciation and amortisation
Inventory fair value adjustment
Net (gain)/loss on sale of assets
Options expense
Income tax expense
changes in assets and liabilities
Decrease/(Increase) in receivables
Decrease/(Increase) in inventory
Decrease/(Increase) in other assets
Decrease in trade payables
Increase/(Decrease) in income tax payable
(Decrease)/increase in deferred tax liability
Increase in employee entitlements
(Decrease) in other payables
Net cash flow from operating activities
Note
coNsolidated
2017
$’000
9,249
14,866
14,250
(12)
229
2,729
3,756
2,592
(2,160)
(10,458)
(22,819)
(3,861)
606
(4,229)
4,738
2016
$’000
33,796
12,599
43,033
(8,644)
568
10,494
13,428
(6,175)
(1,599)
(8,747)
19,668
(9,613)
477
(6,419)
92,866
Non cash financing activities
During the current year the company issued 413,373 (2016: 907,649) of new equity as part of the Dividend Reinvestment Plan.
www.selectharvests.com.au 64
Notes to the Financial Statements
20. 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
Note
coNsolidated
2017
$’000
22,312
83,454
200,700
306,466
2016
$’000
20,351
77,871
191,957
290,179
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.
(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
The almond orchard leases comprises:
Note
coNsolidated
2017
$’000
2,930
2,777
–
5,707
2016
$’000
3,431
7,120
–
10,551
19,382
80,677
200,700
300,759
16,920
70,751
191,957
279,628
(i)
20 years 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.
(ii) A 20 years lease term of 3,017 acres at Hillston with Rural Funds Management.
(iii) 2,458 acres of almond orchards and approximately 3,992 acres for future development of almonds with First State Super for a lease term
of 20 years. 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.
Select Harvests Annual Report 2017 65
20. eXpenDiture Commitments (CONTINUED)
(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
Later than 5 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
Later than 5 years
minimum lease payments
Note
coNsolidated
2017
$’000
7,404
19,623
34,008
61,035
(19,650)
41,385
4,893
12,392
24,099
41,385
2016
$’000
6,392
20,792
36,575
63,759
(21,948)
41,811
3,729
12,963
25,119
41,811
Finance lease payments are for rental of farming equipment and bearer plants with a net carrying amount of $15,367,974 (2016: $14,273,752)
and $25,962,568 (2016: $27,433,668) respectively.
(c) capital commitments
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
Property, plant and equipment
21. events oCCuring after balanCe Date
On 25 August 2017, the directors declared a nil final dividend.
Note
coNsolidated
2017
$’000
7,947
2016
$’000
13,456
www.selectharvests.com.au 66
Notes to the Financial Statements
22. 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:
2017
ceNts
12.6
12.4
2016
ceNts
46.7
46.0
coNsolidated
2017
$’000
2016
$’000
basic earnings per share:
Profit attributable to equity holders of the company used in calculating basic earnings per share
9,249
33,796
diluted earnings per share:
Profit attributable to equity holders of the company used in calculating diluted earnings per share
Weighted average number of ordinary shares used in calculating basic earnings per share
effect of dilutive securities:
9,249
33,796
Number of sHares
2017
2016
73,366,492
72,426,703
Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share
74,372,588
73,498,364
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.
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.
23. remuneration of auDitors
audit and other assurance services
Audit and review of financial statements
Other assurance services
total remuneration for audit and other assurance services
total remuneration of pricewaterhousecoopers
coNsolidated
2017
$
2016
$
Note
255,000
264,200
–
255,000
255,000
–
264,200
264,200
Select Harvests Annual Report 2017 67
24. relateD party DisClosures
(a) parent entity
The parent entity within the consolidated entity is Select Harvests Limited.
(b) subsidiaries
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
(c) Key management personnel compensation
Short term employment benefits
Post-employment benefits
Long service leave
Share based payments
couNtry of iNcorporatioN
perceNtaGe oWNed (%)
2017
2016
Australia
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
100
100
100
100
100
100
100
100
100
100
Note
coNsolidated
2017
$
2016
$
3,275,885
3,308,438
211,388
46,968
204,095
173,172
50,826
568,412
3,738,336
4,100,848
Other disclosures relating to key management personnel are set out in the Remuneration Report.
(d) director related entity transactions
Michael Carroll is a director of Rural Funds Management, the responsible entity for Rural Fund Group, which leases orchards to Select Harvests.
These transactions are on normal commercial terms and procedures are in place to manage any potential conflicts of interest.
There were no other director related entity transactions during the year.
www.selectharvests.com.au 68
Notes to the Financial Statements
25. sHare baseD payments
long term incentive plan
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 performance period to participating employees on an annual basis. One third of the rights vesting each year, with half of the rights vesting
upon achievement of underlying earnings per share (EPS) CAGR targets and the other half vesting upon achievement of total shareholder return
(TSR) targets. The underlying EPS growth targets are based on the CAGR of the company’s underlying 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
underlying eps
Below 5% CAGR
5% CAGR
5.1% – 6.9% CAGR
7% or higher CAGR
tsr
Below the 60th percentile*
60th percentile*
preVious issues
rights to Vest
Nil
25%
Pro rata vesting
50%
Nil
25%
measure
underlying eps
Below 5% CAGR
5% CAGR
5.1% – 19.9% CAGR
20% or higher CAGR
tsr
Below the 50th percentile*
50th percentile*
curreNt issues**
rights to Vest
Nil
25%
Pro rata vesting
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 as outlined in the directors’ report.
Relates to rights that are due to vest from 30 June 2018 onwards.
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:
GraNt
date
VestiNG
date
exercise
price
balaNce
at start
of tHe
year
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
aGGre-
Gate
2017
Number Number Number Number on issue
Vested
$ Number
$
30/04/2013 30/06/2017
11/02/2016 30/06/2017
20/10/2014 30/06/2020
29/09/2016 30/06/2020
02/12/2016 30/06/2020
– 420,000
– 180,000
– 420,000
– 180,000
–
–
–
–
225,000
– 265,000
–
67,500
–
–
–
–
–
–
–
–
225,000
– 265,000
–
67,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.26
4.44
4.21
3.23
3.23
$
–
–
946,500
856,600
217,800
GraNt
date
VestiNG
date
exercise
price
balaNce
at start
of tHe
year
GraNted
duriNG
tHe year
forfeited
duriNG
tHe year
Vested
duriNG
tHe year
balaNce at eNd
of tHe year
proceeds
receiVed
sHares
issued
2016
Number Number Number Number on issue
Vested
$ Number
29/06/2012 30/06/2016
–
112,020
30/04/2013 30/06/2017
– 890,600
–
–
59,203
52,817
–
248,712
221,888 420,000
11/02/2016 30/06/2017
–
– 180,000
–
– 180,000
–
–
–
–
–
–
–
–
–
fair
Value per
sHare
fair
Value
aGGre-
Gate
$
1.14
$
–
2.26
949,200
4.44
799,200
Select Harvests Annual Report 2017
69
25. sHare baseD payments (CONTINUED)
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:
2 december 2016
performaNce
riGHts issue
29 september 2016
performaNce
riGHts issue
20 october 2014
performaNce
riGHts issue
11 february 2016
performaNce
riGHts issue
30 april 2013
performaNce
riGHts issue
Share price at grant date
Expected volatility*
Expected dividends
Risk free interest rate
$6.23
45%
Nil
1.58%
$5.62
45%
Nil
1.58%
$5.95
45%
Nil
2.84%
$4.44
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
coNsolidated
2017
$
228,910
228,910
2016
$
568,412
568,412
share-based payments
Share-based compensation benefits are provided to employees via the Select Harvests Limited Long Term Incentive Plan (LTIP).
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.
26. Contingent liabilities
(i) Guarantees
Cross guarantees are given by the entities comprising the Group. Group entities are set out in Note 24(b).
www.selectharvests.com.au 70
Notes to the Financial Statements
27. 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
Cash flow hedge reserve
Options reserve
Retained profits
total shareholders’ equity
Profit for the year
total comprehensive income
2017
$’ 000
4,187
573,528
111,538
379,185
2016
$’ 000
6,231
524,109
56,915
316,654
181,164
178,553
1,109
2,850
9,220
194,343
13,073
12,868
904
2,621
25,377
207,455
21,815
20,762
(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 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. The funding amounts
are recognised as current intercompany receivables or payables.
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.
(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.
Select Harvests Annual Report 2017 Directors’ Declaration
71
In the directors’ opinion:
(a)
the financial statements and Notes set out on pages 26 to 65 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
and
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 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 24
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 27.
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, 25 August 2017
www.selectharvests.com.au
72
Independent Auditor’s Report
Independent auditor’s report to the shareholders of Select
Harvests Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Select Harvests Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2017 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the consolidated balance sheet as at 30 June 2017
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331 MELBOURNE VIC 3001
T: +61 3 8603 1000, F: +61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Select Harvests Annual Report 2017 73
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Select Harvests Limited is an Australian company listed on the ASX. Select Harvests Limited is one of
Australia’s largest almond growers and a manufacturer, processor and marketer of nut products,
health snacks and muesli.
Materiality
Audit scope
Key audit matters
As part of designing our audit,
we determined materiality and
assessed the risks of material
misstatement in the Group
financial report.
Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
and Risk Committee:
– Inventory valuation –
Our audit focused on where the
almond crop
– Accounting for bearer plants
– Carrying value of intangible
assets
– Borrowings
– Capital projects
They are further described in
the Key audit matters section of
our report.
Group made subjective
judgements; for example,
significant accounting estimates
involving assumptions and
inherently uncertain future
events. One of the key areas in
this respect is the Group’s
inventory valuation.
Our audit mainly consisted of
procedures performed by the
audit engagement team at the
Thomastown head office in
Melbourne, with site visits to
the Carina West processing
facility and surrounding
orchards.
For the purpose of our audit,
we used overall group
materiality of $1.5m which
represents approximately 5% of
the Group’s three year average
profit before tax, and further
reduced for relevant factors
impacting the profit before tax
for the year ended 30 June
2017.
We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the financial
report as a whole.
We chose group profit before
tax because, in our view, it is
the metric against which the
performance of the Group is
most commonly measured and
is a generally accepted
benchmark. A three year
average was used to address
volatility in the profit before
tax calculation caused by the
almond price and yield
fluctuations between years.
We selected 5% based on our
professional judgement, noting
that it is also within the range
of commonly acceptable profit
related thresholds.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
www.selectharvests.com.au 74
Independent Auditor’s Report
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
Inventory valuation – almond crop
Refer to Critical accounting estimates and judgements
in note 2 to the financial report
The current year almond crop is classified by the Group
as a biological asset. Australian Accounting Standards
require agriculture produce (such as almonds) from an
entity’s biological assets to be measured at fair value
less costs to sell, at the point of harvest.
To measure these biological assets, the Group has made
various assumptions at the balance date as the actual
crop yield will not be known until it is completely
processed and the selling price of the crop can only be
estimated.
As outlined in Note 2 - Critical Accounting Estimates
and Judgements, the key assumptions are the
estimated average almond selling price at the point of
harvest of $7.43 per kg, crop estimate for the Group’s
orchards of 14,100mt based on estimated harvest yield,
quality and grade of the almonds, and the estimated
remaining cost of processing.
We believe this was a key audit matter because of its
financial significance to the Group’s assets, liabilities
and net profit at 30 June 2017 and the judgemental
nature of the key assumptions.
We performed a number of audit procedures in relation
to the Group’s valuation of the almond crop, including
the following:
Tested the almond crop on hand based on a
physical observation and sample testing performed
during the Group’s inventory stocktake at 30 June
2017.
Assessed the yield, quality and grade estimates of
unprocessed almonds based on (i) the experience
of the 2017 crop actually processed at 30 June
2017, and (ii) historical experience from prior
years.
Evaluated the Group’s ability to make estimates on
the fair value of almond crops by comparing prior
estimates to actual results with the benefit of
hindsight, including assessing the fair value
recognised at 31 December 2016 compared to
actual selling prices of the almond crop achieved in
the period to 30 June 2017. This included
comparing a sample of committed sales to
contracts and considering external spot price
information.
Considered sources of estimation uncertainty and
external factors, such as global almond prices,
global supply pressures and foreign exchange rate
assumptions with reference to external industry
information and market data.
Tested the costs of harvesting and processing the
almond crop during the period, and the allocation
to inventory at 30 June 2017.
Tested the mathematical accuracy of the Group’s
almond crop calculations.
We also evaluated the adequacy of the disclosures made
in the financial statements at note 2 and note 10.
Accounting for bearer plants
Refer to note 12 to the financial report
The Group accounts for its Almond trees as Property,
Plant and Equipment, to be recorded at cost less
accumulated depreciation.
Under applicable accounting standards, the Group
capitalises growing and leasing costs proportionate to
maturity up to 7 years, when trees are deemed to reach
a mature commercial state. It is from this point that
depreciation would commence on a units of production
We performed a number of audit procedures in relation
to the Group’s accounting for bearer plants, including
the following:
Tested amount and nature of a sample of
growing costs capitalised during the year to
supporting purchase documentation for trees
with a maturity of up to 7 years old.
Tested a sample of the acquisition of trees
during the year to supporting purchase
documentation.
Select Harvests Annual Report 2017 75
Key audit matter
How our audit addressed the key audit matter
method, reflecting the commencement of the revenue
stream from the trees. Depreciation is charged over 10
to 30 years depending on the maturity of the bearer
plant.
At 30 June 2017, carrying value of $115m of Property
Plant and Equipment related to trees against which
depreciation of $5.9m was charged during the year.
This was a key audit matter due to the significance of
the net book value to the Group’s balance sheet,
estimates and judgements regarding capitalisation and
depreciation, and complexities in accounting for
leasing arrangements.
Carrying value of intangible assets
Refer to Critical accounting estimates and judgements
in note 2 to the financial report
Evaluated the Group’s useful life assessment,
maturity of trees and yield profile
assumptions applied in the units of
production method for depreciation against
the 2017 crop processed to 30 June 2017 and
historical experience.
We also evaluated the adequacy of the disclosures made
in the financial statements at note 12.
We performed a number of audit procedures in relation
to the Group’s assessment of the carrying value of
intangibles assets, including the following:
As required by Australian Accounting Standards, the
Group tests annually whether goodwill and other
intangible assets that have an indefinite useful life have
suffered any impairment. Impairment is recognised
where the estimated recoverable amount for each
division is less than the carrying amount of the
division’s intangible assets.
The Food Division has goodwill and brand names of
$29m. The recoverable amount of the Food Division is
estimated by the Group using a value-in-use discounted
cash flow model (the model). The model’s cash flows
are based on the Board approved Food Division budget.
Assumptions applicable to the model are described in
Note 13.
The Almond Division has permanent water rights
assets held at cost of $32m. The recoverable amount of
permanent water rights related to the Almond Division
is based on the current tradeable market value of the
rights.
This was a key audit matter due to the significant
carrying value of the Group’s intangible non-current
assets which are subject to the significant judgements
and assumptions outlined above in determining
whether any impairment of value has occurred.
Evaluated the Group’s cash flow forecasts for the
Food Division in the model and the process by
which they were developed with reference to
current year results, external industry information
and market data.
Checked that the forecast earnings were consistent
with the Board approved FY18 budget, and that the
key assumptions such as forecast growth and
discount rates were subject to oversight from the
directors.
Compared the previous year’s forecasts for FY2017
with the actual results for FY2017 to assess the
accuracy and reliability of forecasting.
Assessed the Group’s discount rate assumption,
including having regard to the inputs utilised in
the Group’s weighted average cost of capital such
as peer company betas, risk free rate and gearing
ratios, assisted by PwC valuation experts.
Considered the sensitivity of the calculations by
varying key assumptions such as forecast growth
and discount rates.
We compared the carrying amount of the permanent
water rights to tradeable market value.
We evaluated the adequacy of the disclosures made in
the financial statements at note 2 and note 13.
www.selectharvests.com.au 76
Independent Auditor’s Report
Key audit matter
How our audit addressed the key audit matter
We obtained confirmations directly from the Group’s
banks to confirm the borrowings’ balance, tenure and
conditions.
We read the most up-to-date agreements between the
Group and its lenders to develop an understanding of
the terms associated with the facilities and the amount
of facility available for drawdown.
This included reviewing the conditional amendment
received by the Group prior to 30 June 2017 regarding
the banking facility covenants, and the revised
agreements entered into with lenders subsequent to
year end.
We evaluated whether the debt was classified in
accordance with Australian Accounting Standards and
we also evaluated the adequacy of the disclosures made
in note 1(a) and note 15.
We performed a number of audit procedures in relation
to the Group’s capital projects, including the following:
Compared, on a sample basis, costs incurred to
supporting documentation and checked amounts
were appropriately capitalised.
Checked that the most recent project forecasts
were consistent with Board approved forecasts.
Considered sources of estimation uncertainty in
the project forecasts, such as electricity, hull and
labour price assumptions, and agreed these
assumptions to external market information,
where available.
Considered the impact of project overruns and
delays on project carrying values and checked that
the calculation of each project’s net present value
remained positive.
We also evaluated the adequacy of the disclosures made
in the financial statements at note 12.
Borrowings
Refer to note 1a and note 15 to the financial report
There are external borrowings on the balance sheet at
30 June 2017 of $102.5m.
The Group received a conditional amendment to
certain of its banking facility covenants from its lenders
for the 30 June 2017 measurement period. As this
amendment was conditional on the agreement of
revised covenants and terms, the total debt facility
drawn has been disclosed as a current liability at 30
June 2017.
Given the financial significance of the borrowings
balance, the receipt of conditional amendments in
relation to the banking facility covenants requiring
subsequent agreement of revised covenants and terms,
the cyclical financing demands of the business and the
importance of capital for continued growth in support
of the Group’s strategy, the accounting for the Group’s
borrowings was considered a key audit matter.
Capital projects
Refer to reconciliation of the carrying amounts of
property, plant and equipment in note 12 to the
financial report
The Group has a capital works in progress balance of
$41m as at 30 June 2017. The most significant capital
projects within this balance which are currently being
implemented are:
Project H2E (Hull to Energy) – this is a Biomass
Cogeneration Power Plant Project that will use
almond hull and shell as a fuel source for
generating electricity and steam directly to the
Group’s Carina West manufacturing site.
Project Parboil (Almond Value-Add Production
Facility) - a state-of-the-art, fully integrated
almond processing facility at Carina West,
enabling the processing of blanched, roasted and
sliced almonds.
In accordance with the Group’s accounting policies, the
Group capitalises costs up to the commissioning date of
each project and then the costs will be depreciated over
the useful lives of the asset.
In order to assess the carrying value of each capital
project at 30 June 2017, the Group has prepared
discounted cash flow models that compare the forecast
capital expenditures with the projected cash flow
benefits from each project (the capex models).
Select Harvests Annual Report 2017 77
Key audit matter
How our audit addressed the key audit matter
This was a key audit matter due to the financial
significance of capital expenditure made by the Group,
the number of judgements and assumptions required in
determining the related cash flows of each project,
delays in the completion of the projects from initial
estimates and forecast expenditure for each project that
have exceeded initial estimates.
Other information
The directors are responsible for the other information. The other information included in the Group’s
Annual Financial Report for the year ended 30 June 2017 comprises the Director’s Report and ASX
Additional Information (but does not include the financial report and our auditor’s report thereon),
which we obtained prior to the date of this auditor’s report. We expect other information to be made
available to us after the date of this auditor’s report, including Company Profile, Geographic Diversity,
Performance Summary, Strategy Explanation & Progress, Almond Division, Food Products Division,
People and Diversity, Communities, OH&S, Sustainability and Environment, Executive Team, Board
of Directors, Historical Summary, Financial Summary and Corporate Information.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, on the other information that we obtained prior to the date
of this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received as identified above, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to the directors and use
our professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
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 gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
www.selectharvests.com.au 78
Independent Auditor’s Report
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 24 to 34 of the directors’ report for the
year ended 30 June 2017.
In our opinion, the remuneration report of Select Harvests Limited for the year ended 30 June 2017
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Andrew Cronin
Partner
Melbourne
25 August 2017
Select Harvests Annual Report 2017 ASX Additional Information
79
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 2017.
The number of shareholders, by size of holding, in each class of share is:
Number of ordiNary sHares
Number of sHareHolders
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
5,360
4,504
926
631
40
The number of shareholders holding less than a marketable parcel of shares is:
Number of ordiNary sHares
30,900
Number of sHareHolders
614
(b) twenty largest shareholders
The following information is current as at 31 July 2017.
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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
INVIA CUSTODIAN PTY LIMITED
BNP PARIBAS NOMS PTY LTD
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