Appendix 4E
Final Report
Secos Group Limited
ABN 89 064 755 237
Details of the reporting period and the previous corresponding period
Reporting Period:
Previous Corresponding Period:
30 June 2022
30 June 2021
Results for announcement to the market
Key information
Revenues from ordinary activities
Profit/(Loss) from ordinary activities after tax
attributable to members
2022
$’000
31,043
(3,085)
2021
$’000
30,081
2,590
% Change
3.2%
(219.1%)
Dividends Paid and Proposed
Amount per security
Final dividend
Interim dividend
Previous corresponding period
Nil
Nil
Nil
Franked amount per
security
Nil
Nil
Nil
Record date for determining entitlements to the
dividend.
Dividend re-investment plan.
No dividend has been declared or paid
No dividend re-investment plan in operation
Net Tangible Assets Backing
2022
Net tangible asset backing per ordinary security
4.3 cents
2021
4.8 cents
Control gained or lost over entities in the year
There were no entities where control was gained or lost during the period.
Commentary on the Results for the period
Refer to the commentary on the results for the period contained in the “Review of Operations” included
within the Directors’ report.
Status of Audit
The 30 June 2022 financial report and accompanying notes for Secos Group Limited have been audited
and are not subject to any disputes or qualifications. Refer to the 30 June 2022 Annual Report for a
copy of the auditor’s report.
ANNUAL REPORT
For the year ended 30 June 2022
Changing the world
of packaging
SECOS GROUP LIMITED
(ASX:SES)
ACN 064 755 237
Sustainable and eco-friendly
biopolymer producer
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
CONTENTS
CORPORATE DIRECTORY
CHAIRMAN’S REPORT
KEY FINANCIAL INDICATORS
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDERS’ INFORMATION
4
5
7
8
21
22
23
24
25
26
52
53
57
3
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
CORPORATE DIRECTORY
DIRECTORS
Mr. Richard Tegoni (Executive Chairman)
Mr. Stephen Walters (Executive Director)
Mr. Donald Haller Jr. (Non-Executive Director)
Mr. Jim Walsh (Non-Executive Director)
COMPANY SECRETARY
Mr. Colin Lai
REGISTERED OFFICE
Unit 1, 247 Ferntree Gully Road
Mount Waverley, VIC 3149
Telephone: +61 3 8566 6800
Email: info@secosgroup.com.au
SHARE REGISTRY
Advanced Share Registry Limited
110 Stirling Highway,
NEDLANDS, W.A. 6009
Telephone: +61 8 9389 8033
Email: admin@advancedshare.com.au
BANKERS
Bank of Melbourne
Level 8, 530 Collins Street,
MELBOURNE, VIC 3000
AUDITORS
William Buck
Level 20, 181 William Street,
MELBOURNE, VIC 3000
Telephone: +61 3 9824 8555
LAWYERS
CBW Partners
Level 1, 159 Dorcas Street,
South Melbourne, VIC 3205
SECURITIES EXCHANGE
Australian Securities Exchange
ASX CODE
WEBSITE
Level 45
South Tower, Rialto
525 Collins Street
MELBOURNE, VIC 3000
SES
Corporate:
www.secosgroup.com.au
E-commerce
www.cardiabioproducts.com
www.myecobag.com.au
www.myecoworld.com.au
www.myecopet.com.au
www.myecopet.com
CORPORATE GOVERNANCE
STATEMENT
The Corporate Governance statement can be found on the Investors
page at www.secosgroup.com.au
4
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
CHAIRMAN’S REPORT
Dear fellow Shareholders,
On behalf of the Board of SECOS Group Ltd (ASX: SES), I am
pleased to present our Annual Report for the year ending 30
June 2022.
This will be a year measured by outcomes achieved. The
successful outcomes delivered by the SECOS team leave no
question that this is a business much stronger and better
placed today to deliver shareholder value than when it began
the financial year.
including Pacchini’s
in NSW, Charmlaw
The expansion of Woolworths from 237 to 970 stores followed
Woolworths scan data, which showed SECOS MyEcoBag
compostable products delivered the greatest year-on-year
percentage sales growth within the entire Woolworths
garbage bag category. We also saw the engagement of new
distributors
in
Queensland, Downes in Victoria, and Auslink in WA, which
provided access to an additional 300 independent stores and
enabled MyEco™ products to be potentially available through
a national independent store network. Other achievements
include the successful launch of MyEco™ products into the
USA market with up to 300 stores scheduled to be supplying
MyEco™ products by late 2022, the appointment by EzyDog®
of SECOS to manufacture its Login® pet waste bag range and
subsequent expansion into 235 Pet Barn stores, and the
relaunch of Jewett Cameron’s, Lucky Dog® pet waste bags in
the USA after the loss of these sales during most of the year
due to new relabeling requirements. Supporting this growth
will be the new capacity provided via the launch of the new
biopolymer manufacturing plant in Malaysia with the capacity
to deliver $25m of incremental sales revenue per annum and
to support the expansion of the group’s sales trajectory.
Furthermore, the new global research and development
centre has already commenced trials to develop new products
and will support future sales growth. These milestones
together with other successes have reshaped SECOS and set a
new runway for the business to grow.
SECOS has become even more relevant as the world continues to drive to
achieve sustainable packaging solutions and to remove plastic from our
environment. Every day, more and more companies are seeking to find
solutions that make the way they produce their products more sustainable
and SECOS is seeing its pipeline of opportunities continue to improve.
5
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
Although it was the Company’s intent to achieve these excellent milestones during the year, it did not plan
to do so under the extraordinary trading conditions resulting from the global supply chain and Covid-19
disruptions that plagued most companies around the world during this period. A year with such significant
expansion was also expected to require a commensurate investment and the board remain confident that
this investment was well directed given the outcomes achieved throughout the year. The further unplanned
investment was required to manage the disruption impacts which caused cost pressures across a range of
areas with most becoming resolved as we now see trading conditions begin to normalise. Collectively,
investing in the Company’s expansion plans while managing complex supply chain and Covid-19 disruptions
created a very challenging task for the SECOS team and one that when seen in this context highlights the
extraordinary performance of managing the business through this period.
The financial performance results for FY22 finished with NPAT loss of $3.09m (FY21: $2.59m profit), sales of
FY22 $31.0m (FY21: $30.1m) and a gross margin of 13.1% (FY21: 19.0%). The Company continues to operate with
no debt and finished with a cash balance of $4.1m as of 30 June 2022.
A total of $7.2m in cash was utilized during the year, with $2.4m invested on capex mostly relating to the setup
of the Company’s new Malaysian plant and general capacity expansion across the Group’s manufacturing
plants. Inventory increased by $2.5m to facilitate the extended supply chain cycle during the year and the
most significant investments included entering and developing the USA market with the MyEco™ product
range and developing an expanded local team to support future growth in this market. Costs associated with
lost margin due to supply chain and inflationary impacts were greatest in the Group’s traditional plastic
hygiene business due to rising oil prices and the balance of cash spent was on general business growth
initiatives supporting the many successful outcomes outlined above.
The Board is pleased with the investment and outcomes delivered during the period while supply chain and
inflationary costs that were out of the Company’s control were mitigated and contained professionally by
management.
The task of growing the business while managing so many external impacts
during the year has proved the resilience and expertise of the SECOS group.
SECOS has ended the year much stronger and better positioned to take
advantage of the global trend to remove plastic from the environment.
On behalf of the board, I would like to congratulate everyone in the SECOS team responsible for achieving
these excellent outcomes under very difficult conditions. I would like to thank and welcome the many new
customers that have made the choice to support a better future for our world, and for the strong support
from shareholders and our key stakeholders who continue with us on our journey to change the world of
packaging.
Richard Tegoni
Executive Chairman
SECOS Group Limited
6
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
KEY FINANCIAL INDICATORS
s
d
n
a
s
u
o
h
T
s
d
n
a
s
u
o
h
T
s
d
n
a
s
u
o
h
T
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
$1,000
$500
$0
($500)
($1,000)
($1,500)
($2,000)
($2,500)
($3,000)
($3,500)
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
REVENUE ($'000)
$30,081
+3.2%
$31,043
2021
2022
NET PROFIT BEFORE TAX ($'000)
$537
(642%)
($2,913)
2021
2022
NET ASSETS ($'000)
$29,220
(8.7%)
$26,669
2021
2022
7
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
DIRECTORS’ REPORT
The Directors present their report on the consolidated entity consisting of SECOS Group Limited (“SECOS” or
the “Company”) and the entities it controlled (“the Group”) at the end of, or during, the year ended
30 June 2022.
DIRECTORS
The following persons were Directors of SECOS during the financial year and up to the date of this report,
unless otherwise stated:
• Richard Tegoni (Executive Chairman)
• Stephen Walters (Executive Director)
• Donald Haller Jr. (Non-Executive Director)
• David Wake (Non-Executive Director) – Resigned 30 June 2022
•
Jim Walsh (Non-Executive Director)
COMPANY SECRETARY
The Company Secretary is Colin Lai who is also the Chief Financial Officer of SECOS. He was appointed on 14
June 2022. Edmond Tern was previously the Company Secretary and Chief Financial Officer of SECOS up to
the date Colin joined SECOS.
PRINCIPAL ACTIVITIES
SECOS Group Limited (ASX: SES) is a leading developer and manufacturer of sustainable packaging materials.
Headquartered in Melbourne, Australia, SECOS supplies its proprietary biodegradable and compostable
resins, packaging products and high-quality cast films to a blue-chip global customer base. SECOS Group is
integrated from resin production, into film (cast and blown) production and can develop bespoke
compostable solutions for a large range of applications.
SECOS holds a strong patent portfolio and the global trend toward sustainable packaging is fueling the
Company’s growth.
The Company’s headquarters and Global Application Development Centre are based in Melbourne, Australia.
SECOS has a Product Development Centre and manufacturing plant for resins and finished products in China
and Malaysia. The Company also has manufacturing plants for high quality cast films in Malaysia as well as
manufacturing partners for film, bag making, and other applications in Malaysia, Mexico, and the USA.
SECOS has sales offices in Australia, Malaysia, China, Mexico and the USA, with a network of leading
distributors across the Americas, Europe, Asia, the Middle East, Africa, and India.
OPERATING RESULTS
The consolidated profit / (loss) for the year attributable to the members of the Group:
Profit / (Loss) for the year before income tax
Profit / (Loss) for the year after income tax
Net Profit / (Loss) attributable to members of the Company
2022
$’000
(2,913)
(3,085)
(3,085)
2021
$’000
537
2,590
2,590
8
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
DIVIDENDS
The Directors do not recommend the payment of a dividend and no dividends have been paid or declared
since the end of the last financial year.
REVIEW OF OPERATIONS
SECOS finished FY22 with 3% growth in year on year (YOY) sales; a YOY decrease in Gross Margin and a net
loss after tax of $ 3.1 million. Gross margins were impacted by raw material input cost increases, freight and
logistic cost increases, expenses associated with the multiple Covid-19 disruptions, and flooding at the
Company’s Malaysian port. The Company also made significant investments in branding and marketing its
own branded pet and bin liner products and getting distributors and sales channels in place to expand sales
in Australia and the USA. These investments have already started to pay off with significant and increasing
sales to Woolworths and UNFI, among other new sales to distributors and customers. There have also been
significant investments in research and development with the view that the new resin formulations and food
packaging development will place SECOS at the forefront of the market shift to compostable and sustainable
food packaging. Furthermore, the net profit achieved last year included a $2.1million benefit from the
recognition of a deferred tax asset.
At the close of FY22, SECOS has a cash position of $4.1m in cash and no debt.
SECOS saw overall Group sales growth and continued expansion of its biopolymer business YOY even with
the adverse Covid-19 impact on logistics, consequent shipping delays and impacts on stock in the supply
chain. Despite these challenges, SECOS finished the year in a solid cash position and with no debt. The main
priority for the year operationally has been to install additional biopolymer compound, film and resin capacity
in order to supply future growth opportunities. The now completed expansion in Malaysia capacity means
that SECOS has increased its production capacity by so that it could supply an additional $25.0 million in sales.
The other main priority was to significantly expand SECOS’s MyEco™ branded business and its private label
pet bag business. SECOS has been able to significantly expand the MyEco™ sales by expanding the range of
retailers, distributors, and stores carrying SECOS products in both Australia and the United States. These
branded sales served to significantly offset the loss $3-4 million in bag sales to Jewett Cameron Corporation
(JCC) due to packaging issues that developed with the State of California. These issues have now been
remedied and JCC has placed significant orders to begin its relaunch of compostable products in the US.
Despite the challenges discussed above, sales in our Compostable Biopolymer range was up 2.3% year on
year. SECOS’ traditional film business grew by 4.7% when compared to the Covid-19 induced production
slowdown and line shut-down for unforeseen maintenance in FY21.
Sustainable product sales of compostable Resins, Films and Bags remain the largest product segment
occupying 63.6% of total group sales. Within the sustainable products, both compostable resin and film grew
YOY by 7.1%-and 24.4% respectively. Sales of compostable bags were affected by delays in orders for JCC dog
waste bags with orders recommencing in June 2022. Excluding JCC, the underlying Biopolymer sales grew
by 23.7%. Delays in JCC reordering have been largely offset by strengthening demand from Councils to supply
their food organics and garden organics programs and demand from waste companies which require food-
diversion bags and improving MyEco™ branded sales through Woolworths and other retailers. Expanding
Dog-Waste Bag & Council Bags sales will continue to support the bottom line.
Figure: Annual sales by product group ($’000)
s
d
n
a
s
u
o
h
T
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
FY21
FY22
Traditional
Bio Resin
Bio Bags
Bio Film
9
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
REVIEW OF OPERATIONS (CONTINUED)
FINANCIAL HIGHLIGHTS
($’000)
Revenue
Traditional
Bio
Gross Margin %
Net Profit before tax
Net Profit after tax
Current assets
Current liabilities
Current ratio
Debt
Equity
Total assets
Debt/equity
Debt/assets
2022
31,043
11,285
19,758
13.1%
(2,913)
(3,085)
20,697
4,918
4.2
-
26,669
32,221
-
-
2021
% CHANGE
30,081
10,774
19,306
19.0%
537
2,590
23,313
2,945
7.9
-
29,220
33,772
-
-
3.2%
4.7%
2.3%
(5.9%)
(642.4%)
(219.1%)
(11.2%)
67.0%
(46.9%)
-
(8.7%)
(1.6%)
-
-
Biopolymer sales increased 2.3% despite the impact of well-documented global events including Covid-19
related logistics and shipping delays. The Company also faced into the challenge of ramping up sales to
support the expanded capacity in Malaysia. Traditional sales recorded 4.7% growth but faced significantly
higher raw material input costs due to increase in oil prices throughout the financial year.
OPERATIONAL HIGHLIGHTS
During the financial year SECOS:
•
Increased from 237 to 970 Woolworths stores that stock our compostable bin-liners for food diversion
into green bin organic waste streams.
• SECOS appointed four new distributors to supply MyEco™ products including Charmlaw in
Queensland, Downes in Victoria, Pacchini’s Sales and Distribution in NSW, and Auslink Foods in WA.
• Established and launched its new Malaysian Biopolymer plant with manufacturing capacity
expansion which can add incremental capacity for annual sales potential of $25 million. The new
Malaysian plant delivered initial MyEcoPet™ pet waste bag orders to the USA market and a news line
were commissioned to support Australian Council FOGO bag business.
• Secured EzyDog® to supply their Login® pet waste bags. EzyDog® has now been approved to go
into 235 Pet Barn stores with rollout expected in the September 2022 quarter. SECOS will also supply
the EzyDog® launch of a new range of compostable and biohybrid-based dog waste bags.
•
The investment in an Australian Research and Development centre and associated staff has
continued according to plan as well as the launch of SECOS branded products will support growth in
new higher-end product sales in Australia and USA.
• New R & D- compounding and co-extrusion lines successfully completed an initial run of certified
compostable material. SECOS has mapped out a series of projects where the R & D lines will be
employed to develop new applications for single-layer or multi-layer compostable structures for use
in food and other packaging requirements.
10
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
REVIEW OF OPERATIONS (continued)
SALES ACTIVITIES
In April 2022, the Company announced a significant expansion in the number of Woolworths stores for which
it will supply product. In total SECOS will now sell into 970 stores (previously it was 237 stores). The sales impact
associated with the expansion of stores will begin to impact SECOS financial results in the September
2022 quarter.
Council business continues to expand with total Council business increasing by 1.0% on FY21 as the number
of Australian city councils adopting Food Organics & Garden Organics (FOGO) waste programs grows despite
delays in FOGO expansion due to Covid-19 disruptions. In Q4, SECOS secured $0.7million in new tender
business for Kitchen Caddy & Dog Waste bags for Councils, for delivery in the new year.
SECOS appointed four new distributors to supply MyEco™ products including Charmlaw in Queensland,
Downes in Victoria, Pacchini’s Sales and Distribution in NSW, and Auslink Foods in WA. This has accelerated
the Company’s progress in its national rollout to independent retailers which account for a significant share
of Australian retail storefronts. The new distributors can supply approximately 300 incremental independent
stores. As such, MyEco™ brands will now become available to independent stores nationally.
The MyEcoPet™ range is now stocked in over 100 USA stores and is expected to reach over 200-300 stores by
late 2022. The initial store rollout has established SECOS successfully within the US market with the potential
to reach a significantly greater number of stores nationally. During the year the Company heavily invested in
establishing the US market and the recent success has indicated this investment will be well rewarded in the
coming years.
SECOS remains committed to the Australian Council initiatives to divert food waste from landfill to organic
waste stations. SECOS promotes Compostable Kitchen Tidy Bags to Councils which are used to facilitate
Council food waste diversion programs. These programs have the benefits of redirecting food waste from land
fill to organic waste treatment which creates fertile mulch, which in turn mitigates greenhouse gas emissions
as well as Council land fill costs.
SECOS is working on extending its range of sustainable products to include different precursors such as
starch-based compostable resin, film and bags, plant-derived ethanol films. These options can be included
in either Biohybrid-based film or bag offerings.
OUTLOOK
Further strong growth in biopolymer sales is expected predominantly in the second half of FY23 and the
company is focused on delivering on its exciting growth prospects. Retail Store acquisition as evidenced by
Woolworths expansion and new distributors to independent retailers have added over 1000 stores to which
MyEco™ branded stock will be supplied beginning the September 22 quarter. The global supply chain crisis
has effectively pushed SECOS’ growth pipeline into FY23.
Other highlights throughout the year included the establishment of a new manufacturing plant, R&D centre,
expansion of MyEco™ branded products nationally within Australia and the initial launch into the extremely
large and challenging USA market. These achievements establish a strong foundation for growth into FY23
and although the delays and disruption experienced during the year were frustrating, the Company remains
confident in its ability to sell out the group’s manufacturing assets over the coming few years which currently
allow for sales of between $50m to $60m per annum when fully utilized.
COVID-19
The impact of the Coronavirus (Covid-19) pandemic is ongoing. While the financial impact on the Group up
to 30 June 2022 was manageable, it is not practicable to estimate the potential impact after the reporting
date. The situation is dependent on measures imposed by governments in various jurisdictions in which the
Group operates.
11
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
REVIEW OF OPERATIONS (continued)
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
The following significant changes in the state of affairs of the Group occurred during the year.
• On 7-Jul-2021, the Company announced the establishment of a Global Research Centre for
Bioproducts.
• On 10-Sep-2021, the Company announced it had issued 786,425 Performance Rights to key
management personnel of the Company.
• On 8-Nov-2021, the Company announced that the US Veteran Canteen Services’ retail chain selected
SECOS to supply MyEcoPet™ compostable bag range.
• On 16-Nov-2021, the Company announced that Officeworks selected SECOS to supply Compostable
Courier Bags.
• On 24-Jan-2022, the Company announced launches of MyEcoBag and MyEcoPet™ through Pacchini
sales and distribution.
• On 2-Mar-2022, the Company announced United Natural Food Inc selects SECOS MyEcoPet™ in USA.
• On 14-Apr-2022, the Company announced the resignation of Mr Edmond Tern as Chief Financial
Officer & Company Secretary.
• On 20-Apr-2022, the Company announced the expansion of SECOS product in Woolworths to 970
stores.
• On 2-May-2022, the Company announced a strategic supply agreement with EzyDog Pty Ltd for the
manufacture of a new range of compostable and Biohybrid pet waste bags in the Australian market.
• On 16-May-2022, the Company announced the appointment of Mr Colin Lai as Chief Financial Officer
& Company Secretary.
• On 17-Jun-2022, the Company announced Mr Dave Wake retired as Non-Executive Director on 30
June 2022.
EVENTS AFTER THE REPORTING DATE
No matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly
affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of
affairs in future financial years.
LIKELY DEVELOPMENT AND EXPECTED RESULTS OF OPERATIONS
SECOS will continue to focus on its principal business activities with its sustainable packaging strategy and
waste management solutions. The Group does not expect any major developments or variation to results if
the Group continues to operate as normal.
ENVIRONMENTAL REGULATIONS
The Group’s operations are not subject to any significant environmental regulations under the law of the
Commonwealth or the States.
12
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
INFORMATION ON DIRECTORS
RICHARD TEGONI, EXECUTIVE CHAIRMAN
EXPERIENCE AND QUALIFICATIONS
Joined the Board as a Non-Executive Director on 21 December
2012. Richard was nominated as Non-Executive Chairman on 18
October 2013 before being appointed as Executive Chairman
effective 16 September 2014.
Richard has held executive positions with various large private
and public companies with a strong background in Finance
and Banking, Sales and Marketing.
Richard has an MBA (AGSM) and Diploma in Financial Markets
(SIA).
SPECIAL RESPONSIBILITIES
Chairman of the Board of directors
Corporate Strategy and Capital Raisings
INTEREST IN SHARES AND OPTIONS
14,606,231 Ordinary Shares
DIRECTORSHIPS HELD IN OTHER
LISTED ENTITIES
Has not held a directorship in any other listed entity over the
last 3 years
STEPHEN WALTERS, EXECUTIVE DIRECTOR
EXPERIENCE AND QUALIFICATIONS
Joined the Board on 21 April 2015. Steve is a veteran in the
flexible packaging industry having held senior management
positions with Orica Limited (formerly ICI Australia) and Stellar
Films Group. Steve was instrumental in the integration of the
Stellar and Cardia businesses.
Steve has a B. Bus (Marketing).
SPECIAL RESPONSIBILITIES
Responsible for the sales management of the Group.
INTEREST IN SHARES AND OPTIONS
29,044,639 Ordinary Shares
DIRECTORSHIPS HELD IN OTHER
LISTED ENTITIES
Has not held a directorship in any other listed entity over the
last 3 years
DONALD HALLER JR., NON-EXECUTIVE DIRECTOR
EXPERIENCE AND QUALIFICATIONS
Appointed 1 September 2016. Don was a former accounting
partner with Ernst & Young and a former management
consulting partner with PriceWaterhouseCoopers. He is also a
Director and major shareholder of VS Biosciences Ltd, a private
company specialising in microbial solutions to combat a variety
of viral based diseases.
SPECIAL RESPONSIBILITIES
Non-Executive Director
INTEREST IN SHARES AND OPTIONS
45,748,826 Ordinary Shares
DIRECTORSHIPS HELD IN OTHER
LISTED ENTITIES
Has not held a directorship in any other listed entity over the
last 3 years.
13
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
INFORMATION ON DIRECTORS (continued)
JIM WALSH, NON-EXECUTIVE DIRECTOR
EXPERIENCE AND QUALIFICATIONS
Appointed 16 November 2018. Previous executive roles include
Finance Director at carpet manufacturer Godfrey Hirst Australia
Pty Ltd for 10 years, and most recently five years in a similar role
at specialist mechanical services company A.G. Coombs Group
Pty Ltd. Jim is a Fellow of Chartered Accountants Australia and
New Zealand with B.Com, MBA, FCA, FAICD. He is a chairman
and non-executive director of several unlisted organisations
including:
Non- Executive Board Advisor of A.G. Coombs Group Pty Ltd
Non-Executive Chairman of KM Property Funds Ltd
SPECIAL RESPONSIBILITIES
Chair of Remuneration and Risk and Audit Committees
INTEREST IN SHARES AND OPTIONS
3,761,189 Ordinary Shares
DIRECTORSHIPS HELD IN OTHER
LISTED ENTITIES
Has not held a directorship in any other listed entity over the
last 3 years.
COMPANY SECRETARY
Colin Lai has held the role of Company Secretary since 14 June 2022. Colin is an experienced finance and
accounting executive who has held finance leadership roles at BWX Limited and National Australia Bank.
Edmond Tern previously held the role of Company Secretary since March 2017.
DIRECTORS’ MEETINGS
The number of meetings of the Company’s Board of Directors and Board Committees held during the year
ended 30 June 2022 and the number of meetings attended by each Director.
BOARD MEETINGS
AUDIT COMMITTEE
REMUNERATION
COMMITTEE
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
11
12
2
2
2
2
2
2
1
2
2
2
N/A
N/A
4
4
4
N/A
N/A
4
4
4
DIRECTOR
R TEGONI
S WALTERS
D HALLER JR
D WAKE
J WALSH
14
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
REMUNERATION REPORT (Audited)
REMUNERATION POLICY
The Board is responsible for the Group’s remuneration policies and practices. The role of the Remuneration
Committee is to assist the Board to ensure the appropriate and effective remuneration packages and policies
are implemented to attract and retain and motivate high quality personnel to create value for shareholders.
The Committee also monitors compliance with Board approved remuneration practices.
The Group's policy for determining the nature and amount of remuneration of board members and senior
executives of the Group is as follows:
•
The remuneration structure for executive officers, including executive directors, is based on a number
of factors, including length of service and particular experience of the individual concerned.
• All key management personnel receive a base salary and superannuation and/or equivalent.
• Remuneration consultants have not been used in assessing and calculating Director and Key
Management personnel remuneration in the year.
Upon retirement, key management personnel are paid employee benefit entitlements accrued to the date
of retirement. Termination payments are generally not payable on resignation or dismissal for serious
misconduct. Termination payments cannot exceed more than 1 year’s base salary as required by Corporations
Act 2001.
All remuneration paid to key management personnel is valued at the cost to the Company and expensed.
The Board’s policy is to remunerate non-executive directors at market rates for time, commitment and
responsibilities. The Board collectively determines payments to the non-executive directors and reviews their
remuneration annually, based on market practice, and duties and accountability.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by
a general meeting. The most recent determination was at the General Meeting held on 22 November 2019,
where the shareholders approved an aggregate remuneration of $300,000.
The resolution to adopt the remuneration report for the year ended 30 June 2021 was passed at the 2021
Annual General Meeting (“AGM”), which occurred on 30 November 2021. The Company did not receive any
specific feedback at the AGM regarding its remuneration practices.
RELATIONSHIP BETWEEN SHARE PRICE AND COMPANY PERFORMANCE
The remuneration policy has been tailored to increase goal congruence between shareholders, directors and
executives.
The following table shows the gross revenue and profits for the last 5 years for the listed entity, as well as the
share prices at the end of the respective financial years.
2022
2021
2020
2019
2018
Revenue (S’000)
31,043
30,081
21,039
20,852
23,638
Net Profit/(loss) ($’000)
(3,085)
2,590
(1,186)
(4,170)
(3,108)
Share price at year-end (cents)
10.0
26.6
6.0
4.2
8.1
USE OF REMUNERATION CONSULTANTS
During the financial year ended 30 June 2022, the Group did not engage remuneration consultants, to review
its existing remuneration policies and provide recommendations.
15
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
REMUNERATION REPORT (continued)
The key management personnel of the Group consisted of the following persons:
POSITION HELD
AS AT 30 JUNE
2022 AND ANY
CHANGE
DURING THE
YEAR
CONTRACT
DETAILS
(DURATION AND
TERMINATION)
PROPORTIONS OF
REMUNERATION
PACKAGE NOT
RELATED TO
PERFORMANCE
AT 30 JUNE 2022
PROPORTIONS OF
REMUNERATION
PACKAGE NOT
RELATED TO
PERFORMANCE
AT 30 JUNE 2021
GROUP KEY
MANAGEMENT
PERSONNEL
EXECUTIVE DIRECTORS
RICHARD TEGONI
Executive
Chairman
Letter of
appointment
STEPHEN WALTERS
Executive
Director
Executive Service
Agreement
One month’s
termination
notice period
NON-EXECUTIVE DIRECTORS
DONALD HALLER JR
Non-Executive
Director
Letter of
appointment
JIM WALSH
Non-Executive
Director
Letter of
appointment
EXECUTIVE MANAGEMENT
100%
100%
100%
100%
100%
100%
100%
100%
IAN STACEY
Chief Executive
Officer
Executive Service
Agreement
91%
100%
COLIN LAI1
Chief Financial
Officer and
Company
Secretary
Three months’
termination
notice period
Executive Service
Agreement
Three months’
termination
notice period
100%
100%
FORMER NON-EXECUTIVE DIRECTORS AND EXECUTIVE MANAGEMENT
DAVID WAKE2
Non-Executive
Director
Letter of
appointment
EDMOND TERN3
Chief Financial
Officer and
Company
Secretary
Executive Service
Agreement
Three months’
termination
notice period
1
2
3
Commenced employment on 14 June 2022
Resigned on 30 June 2022
Resigned on 14 June 2022
100%
100%
100%
100%
Terms of employment require that the relevant group entity provide the contracted person with a minimum
period of notice (one to three months) prior to termination of contract. Similarly, a contracted person has to
provide minimum period notice (one to three months) prior to the termination of their contract. In the
instance of serious misconduct, the Company can terminate employment at any time.
16
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
REMUNERATION REPORT (continued)
SHORT
TERM
BENEFITS
POST-
EMPLOYMENT
BENEFITS
LONG
TERM
BENEFITS
SHARE-
BASED
PAYMENTS
SALARY,
FEES AND
LEAVE
PENSION AND
SUPER-
ANNUATION
LONG
SERVICE
LEAVE
SHARES
ISSUE
TERMINATION
BENEFITS
TOTAL
NAME
FIN
YEAR
$
$
$
$
$
$
NON-EXECUTIVE DIRECTORS
D HALLER JR
2022
55,000
2021
50,000
D WAKE
2022
50,000
2021
40,000
J WALSH
2022
50,000
2021
40,000
EXECUTIVE DIRECTORS
R TEGONI
2022
145,000
2021
120,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
S WALTERS
2022
196,067
19,045
3,862
2021
146,785
14,160
2,920
OTHER KEY MANAGEMENT PERSONNEL
-
-
-
-
-
-
-
-
-
-
I STACEY
2022
208,265
20,250
4,798
22,529
2021
220,156
18,249
2,558
-
C LAI1
2022
15,139
1,400
2021
-
-
31
-
E TERN2
2022
202,031
19,850
4,134
2021
205,141
18,857
3,791
-
-
-
-
TOTAL REMUNERATION
TOTAL
2022
921,502
60,545
12,825
22,529
2021
822,082
51,266
9,269
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55,000
50,000
50,000
40,000
50,000
40,000
145,000
120,000
218,974
163,865
255,842
240,963
16,570
-
226,015
227,789
1,017,401
882,617
1
2
Commenced employment on 14 June 2022
Resigned on 14 June 2022. On resigning, all entitlements to shared-based payments were forfeited. He was paid
accrued annual leave on resignation.
17
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
REMUNERATION REPORT (continued)
CASH BONUSES, PERFORMANCE-RELATED BONUSES
There was no performance related remuneration paid during the year.
OPTIONS ISSUED AS PART OF REMUNERATION FOR THE YEAR ENDED 30 JUNE 2022
No options were issued as part of remuneration during the year.
PERFORMANCE RIGHTS
In September 2021, the Company issued 786,425 Performance Rights under the Employee Share Incentive
Plan. Of the 786,425 there was 535,455 issued to key management personnel of the Company. Each right can
be converted to a fully paid ordinary share on satisfying service, and performance vesting conditions. The
service vesting condition requires the employee to remain an employee of the Company until the time of
vesting .
The performance rights vest in three tranches:
•
•
•
Tranche 1 vesting date is 30 September 2022,
Tranche 2 vesting date is 30 September 2023,
Tranche 3 vesting date is 30 September 2024.
There are multiple non-market performance vesting conditions allocated to each tranche of rights and are
individualised to the employee who has the performance rights. The overarching performance hurdle is in
line with internal management targets and goals for future years.
OPENING
BALANCE
1 JULY 2021
RECEIVED AS
COMPENSATION
VESTED AND
EXERCISED
CHANGE AS A
RESULT OF
RESIGNATION
CLOSING
BALANCE
30 JUNE 2022
I STACEY
E TERN
C LAI
TOTAL
-
-
-
-
410,886
124,569
-
535,455
-
-
-
-
-
410,886
(124,569)
-
-
-
(124,569)
410,886
GRANT DATE
EXPIRY DATE VESTING DATE
FAIR VALUE
PER RIGHT
EXERCISE
PRICE
09-Sep-2021
01-Nov-2022
30-Sep-2022
33.5 cents
09-Sep-2021
01-Nov-2023
30-Sep-2023
33.5 cents
09-Sep-2021
01-Nov-2024
30-Sep-2024
33.5 cents
-
-
-
PROBABILITY
OF NON-
MARKET
CONDITIONS
75%
75%
75%
18
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
REMUNERATION REPORT (continued)
A.
OPTION HOLDINGS
Number of Options Held by Key Management Personnel (Direct and Indirect Interest)
No options are held by KMP as at 30 June 2022.
B.
SHARE HOLDINGS (DIRECT AND INDIRECT)
OPENING
BALANCE
1 JULY 2021
RECEIVED AS
COMPENSATION
ON MARKET
TRANSACTION
CHANGE AS A
RESULT OF
RESIGNATION
CLOSING
BALANCE
30 JUNE 2022
R TEGONI
14,606,231
S WALTERS
29,044,639
D HALLER JR
45,748,826
D WAKE
5,157,109
J WALSH
3,761,189
I STACEY
3,392,054
E TERN
2,131,945
C LAI
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,606,231
29,044,639
45,748,826
(5,157,109)
-
-
-
3,761,189
3,392,054
(2,131,945)
-
-
-
This concludes the remuneration report, which has been audited.
SHARES UNDER OPTION
The Group has no unlisted Options as at the date of this report.
SHARES UNDER PERFORMANCE RIGHTS
Unissued ordinary shares of the Group as at the date of this report are as follows:
GRANT DATE
EXPIRY DATE
NUMBER UNDER RIGHTS
09-Sep-2021
09-Sep-2021
09-Sep-2021
TOTAL
01-Nov-2022
01-Nov-2023
01-Nov-2024
220,618
220,618
220,618
661.856
SHARES ISSUED ON THE EXERCISE OF OPTIONS
There were no shares issued were issued during the year ended 30 June 2022 and up to the date of this report
on the exercise of options granted.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has agreed to indemnify all the current Directors and Officers of the Company and of its
controlled entities against all liabilities to another person (other than the Company or a related body
corporate) that may arise from their position as Directors and Officers of the Company and its controlled
entities, except where the liability arises out of conduct involving a lack of good faith. The Company agrees to
meet the full amount of any such liabilities, including costs and expenses.
The Company has paid an annual premium to insure the Directors and Officers against liabilities incurred in
their respective capacities. Under the policy, details of the premium are confidential.
19
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
INDEMNITY AND INSURANCE OF AUDITOR
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor
of the company or any related entity.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of court to bring proceedings on behalf of the Company, or to intervene in
any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
NON-AUDIT SERVICES
No non-audit services were undertaken by the auditors during the period.
AUDITOR’S INDEPENDENCE DECLARATION
The lead Auditor's Independence Declaration for the year ended 30 June 2022 is attached to the
Directors’ Report.
ROUNDING OF AMOUNTS
The Company is a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to “rounding-off.” Amounts in this report have been rounded off in
accordance with the Corporations Instrument to the nearest thousand dollars, or in certain cases, the
nearest dollar.
This report of the Directors incorporating the Remuneration Report is signed in accordance with a Resolution
of the Board of Directors.
Richard Tegoni
Executive Chairman
26 August 2022
Melbourne, Australia
20
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001 TO THE DIRECTORS OF SECOS GROUP
LIMITED
I declare that, to the best of my knowledge and belief during the year ended 30 June 2022 there have been:
— no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in
relation to the audit; and
— no contraventions of any applicable code of professional conduct in relation to the audit.
William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136
A. A. Finnis
Director
Melbourne, 26th August 2022
Level 20, 181 William Street, Melbourne VIC 3000
+61 3 9824 8555
vic.info@williambuck.com
williambuck.com.au
William Buck is an association of firms, each trading under the name of William Buck
across Australia and New Zealand with affiliated offices worldwide.
Liability limited by a scheme approved under Professional Standards Legislation.
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022
Sales
Cost of sales
Gross profit
Other Income
Employment related expense
Marketing and distribution expenses
Administration expense
Legal and compliance
Occupancy costs
Depreciation and amortisation expense
Finance costs
Profit / (Loss) before income tax
Income tax (expense)/benefit
5
Profit / (Loss) for the year after tax
Other comprehensive income
Item that may be reclassified to the profit or loss in
subsequent periods (net of tax)
Foreign currency translation differences for foreign
operations
Total comprehensive profit / (loss) for the year
NOTES
3
3
2022
$’000
31,043
(26,977)
4,066
2021
$’000
30,081
(24,371)
5,710
128
226
(3,133)
(1,541)
(347)
(512)
(76)
(1,304)
(194)
(2,913)
(172)
(3,085)
(2,604)
(905)
(322)
(477)
(73)
(882)
(136)
537
2,053
2,590
498
(2,587)
(410)
2,180
Profit / (Loss) per share
Basic / diluted profit / (loss) per share
(0.6 cents)
0.5 cents
The accompanying notes form part of these financial statements.
22
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
Current Assets
Cash at bank
Trade and other receivables
Inventories
Prepayments
Other assets
Total Current Assets
Non-Current Assets
Other assets
Deferred tax assets
Plant and equipment
Right-of-use asset
Intangible assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Employee benefits
Accrued expenses
Lease liability
Total Current Liabilities
Non-Current Liabilities
Employee benefits
Lease liability
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Accumulated losses
Total Equity
NOTES
9
10
5
11
12
14
15
13
13
16
17
2022
$’000
4,122
7,955
7,841
745
34
20,697
15
1,918
4,703
2,266
3,622
12,524
33,221
3,244
373
483
818
4,918
62
1,572
1,634
6,552
2021
$’000
11,287
5,975
5,308
743
-
23,313
15
2,071
2,650
2,105
3,618
10,459
33,772
1,499
340
531
575
2,945
42
1,565
1,607
4,552
26,669
29,220
44,730
(248)
(17,813)
26,669
44,730
(782)
(14,728)
29,220
The accompanying notes form part of these financial statements.
23
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
ISSUED
CAPITAL
ACCUMULATED
LOSSES
SHARE
BASED
PAYMENT
RESERVE
OTHER
RESERVES
TOTAL
EQUITY
$’000
$’000
$’000
$’000
$’000
Balance at 01 July 2021
44,730
(14,728)
Profit for the Year
Other Comprehensive income
for the year
Total comprehensive loss
for the year
Vesting of share based
payments
-
-
-
(3,085)
-
(3,085)
-
Balance at 30 June 2022
44,730
(17,813)
-
-
-
-
36
36
(782)
29,220
-
(3.085)
498
498
498
(2,587)
-
36
(284)
26,669
ISSUED
CAPITAL
ACCUMULATED
LOSSES
SHARE
BASED
PAYMENT
RESERVE
OTHER
RESERVES
TOTAL
EQUITY
$’000
$’000
$’000
$’000
$’000
Balance at 01 July 2020
29,065
(17,318)
Profit for the Year
Other Comprehensive income
for the year
Total comprehensive income /
(loss) for the year
Shares issued during the year
net of costs
-
-
2,590
-
2,590
15,665
-
Balance at 30 June 2021
44,730
(14,728)
-
-
-
-
-
-
(372)
11,375
-
2,590
(410)
(410)
(410)
2,180
-
15,665
(782)
29,220
The accompanying notes form part of these financial statements.
24
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2022
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Finance costs
NOTES
2022
$’000
31,572
(35,438)
(194)
2021
$’000
30,097
(34,665)
(136)
Net Cash Outflow from Operating Activities
22
(4,060)
(4,704)
Cash Flows from Investing Activities
Purchase of plant and equipment
Net Cash Outflow from Investing Activities
Cash Flows from Financing Activities
Proceeds from issues of ordinary shares (net of costs)
Lease payments
Repayments of unsecured loan
Net Cash Inflow/(Outflow) from Financing
Activities
Net (decrease)/increase in Cash and
Cash Equivalents Held
Increase/(decrease) in cash due to changes in foreign
exchange rate
Cash and cash equivalents at the beginning of the
financial year
Cash and Cash Equivalents at the end of the
financial year
The accompanying notes form part of these financial statements.
(2,442)
(2,442)
-
(747)
-
(1,150)
(1,150)
15,132
(542)
(200)
(747)
14,390
(7,249)
8,536
84
11,287
(128)
2,879
4,122
11,287
25
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION
These general-purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the
Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply
with International Financial Reporting Standards as issued by the International Accounting Standards
Board ('IASB').
The amounts contained in this financial report have been rounded to the nearest $1,000 (where rounding is
in
applicable) under the option available to the company under ASIC Corporations (Rounding
Financial/Directors’ Reports) Instrument 2016/191.
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of SECOS Group
Limited ('Company' or 'parent entity') as at 30 June 2022 and the results of all subsidiaries for the year then
ended. SECOS Group Limited and its subsidiaries together are referred to in these financial statements as
the '‘Group’.
SECOS Group Limited is a listed public company, incorporated and domiciled in Australia. The Company is a
for-profit entity for accounting purposes.
The Financial statements were authorised for issue on 26 August 2022 by the Board of Directors.
REPORTING BASIS AND CONVENTIONS
These financial statements have been prepared on an accruals basis and are based on historical costs. Except
for new accounting standards as stated below, the financial statements have been prepared in accordance
with the same accounting policies adopted in the Group’s last annual financial statements for the year ended
30 June 2021.
At this time the Directors are of the opinion that no asset is likely to be realised for an amount less than the
amount at which it is recorded in the Financial Report.
A.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED IN THE PERIOD
The group has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The
impact of these standards did not have a material impact on the group.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been
early adopted.
B.
PRINCIPLES OF CONSOLIDATION
Subsidiaries are all those 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 de-consolidated from the date that
control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment
of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in
ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference
between the consideration transferred and the book value of the share of the non-controlling interest
acquired is recognised directly in equity attributable to the parent.
26
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B.
PRINCIPLES OF CONSOLIDATION (CONTINUED)
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of
profit or loss and other comprehensive income, statement of financial position and statement of changes in
equity of the Group. Losses incurred by the Group are attributed to the non-controlling interest in full, even if
that results in a deficit balance.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in
equity. The Group recognises the fair value of the consideration received and the fair value of any investment
retained together with any gain or loss in profit or loss. A list of controlled entities is contained in Note 19 to
the financial statements.
C.
GOODWILL
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually
for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired
and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit
or loss and are not subsequently reversed.
Goodwill is allocated to the Group's cash-generating units or groups of cash-generating units, representing
the lowest level at which goodwill is monitored not larger than an operating segment. Gains and losses on
the disposal of an entity include the carrying amount of goodwill related to the entity disposed of. Changes
in the ownership interests in a subsidiary that do not result in a change in control are accounted for as equity
transactions and do not affect the carrying values of goodwill.
D.
INCOME TAX
The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable
or disallowed items. It is calculated using tax rates that have been enacted or are substantially enacted at the
end of the reporting period.
Deferred tax is accounted for using the liability method in respect of temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred
income tax will be recognised from the initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised
to items that may be credited directly to equity, in which case the deferred tax is adjusted directly
against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be
available against which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption
that no adverse change will occur in income taxation legislation and the anticipation that the Group will
derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions
of deductibility imposed by the law.
E.
INVENTORIES
Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products
includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads
are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average
costs.
F.
PLANT AND EQUIPMENT
Plant and equipment are measured on the cost basis less accumulated depreciation and accumulated
impairment losses.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to
the statement of profit or loss and other comprehensive income during the financial period in which they are
incurred.
27
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F.
PLANT AND EQUIPMENT (CONTINUED)
Depreciation
The depreciable amount of all fixed assets is depreciated on a straight-line basis over their useful lives to the
Group commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
CLASS OF FIXED ASSET
PLANT AND MACHINERY
OFFICE EQUIPMENT AND MOTOR VEHICLES
LEASEHOLD IMPROVEMENTS
DEPRECIATION RATE
10% to 33%
7.5% to 40%
2.5%
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life
of the assets, whichever is shorter.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains
and losses are included in the statement profit or loss and other comprehensive income.
G.
FAIR VALUE MEASUREMENT
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date; and assumes that the
transaction will take place either: in the principle market; or in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interest. For non-financial assets, the fair value
measurement is based on its highest and best use. Valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value, are used, maximising the use
of relevant observable inputs and minimising the use of unobservable inputs.
The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1:
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability.
Considerable judgement is required to determine what is significant to fair value and therefore which
category the asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These
include discounted cash flow analysis or the use of observable inputs that require significant adjustments
based on unobservable inputs.
H.
FINANCIAL INSTRUMENTS
Investments and other financial liabilities are initially measured at fair value. Transaction costs are included as
part of the initial measurement, except for the financial assets at fair value through the profit and loss. Such
assets are subsequently measured at either amortised cost or fair value depending on their classification.
Financial assets or liabilities are derecognised when the right to receive cash flows have expired or have been
transferred and the Group has transferred substantially all the risks and rewards of ownership. When there is
no reasonable expectation of recovering part or all of a financial asset the carrying value is written off.
28
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
I.
IMPAIRMENT OF FINANCIAL ASSETS
The Group recognises a loss allowance for expected credit losses on financial assets which are either
measured at amortised cost or fair value through other comprehensive income. The measurement of the loss
allowance depends upon the Group’s assessment at the end of each reporting period as to whether the
financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and
supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month
expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit
losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset
has become credit impaired or where it is determined that credit risk has increased significantly, the loss
allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss
recognised is measured based on the probability weighted present value of anticipated cash shortfalls over
the life of the instrument discounted at the original effective interest rate.
J.
IMPAIRMENTS OF NON-FINANCIAL ASSETS
At the end of each reporting period, the group reviews the carrying values of its tangible and intangible assets
to determine whether there is any indication that those assets have been impaired. If such an indication exists,
the recoverable amount of the asset being the higher of the asset's fair value less costs to sell and value in use,
is compared to the assets carrying value. Any excess of the assets carrying value over its recoverable amount
is expensed to the statement of profit or loss.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
K.
FOREIGN CURRENCY TRANSACTIONS AND BALANCES
Functional and presentation currency
The functional currency of each of the group’s entities is measured using the currency of the primary
economic environment in which that entity operates. The consolidated financial statements are presented in
Australian dollars which is the parent entity’s functional and presentation currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at
the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate.
Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of
the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date
when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the statement of profit
or loss and other comprehensive income.
Exchange differences arising on the translation of non-monetary items are recognised directly in other
comprehensive income to the extent that the gain or loss is directly recognised in other comprehensive
income; otherwise the exchange difference is recognised in the statement of profit or loss and other
comprehensive income.
29
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
K.
FOREIGN CURRENCY TRANSACTIONS AND BALANCES (CONTINUED)
Group companies
The financial results and position of foreign operations whose functional currency is different from the group’s
presentation currency are translated as follows:
• Assets and liabilities are translated at year-end exchange rates prevailing at the end of reporting
period.
•
Income and expenses are translated at average exchange rates for the period. The average rate is
only used where the rate approximates the rate at the date of transaction.
Exchange differences arising on translation of foreign operations are transferred directly to the group’s
foreign currency translation reserve in the statement of financial position. These differences are recognised in
the statement of profit or loss and other comprehensive income in the period in which the operation is
disposed.
L.
CURRENT AND NON-CURRENT CLASSIFICATION
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when:it is either expected to be realised or intended to be sold or consumed
in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected
to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless
restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal
operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the
reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months
after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
M.
BORROWINGS
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method.
N.
FINANCE COSTS
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred.
O.
EMPLOYEE BENEFITS
Short-term employee benefits
Liabilities for wages and salaries, including, annual leave and long service leave expected to be wholly settled
within 12 months of the reporting date are recognised in current liabilities in respect of employees' services
up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be wholly settled within 12 months of the
reporting date are recognised in non-current liabilities, provided there is an unconditional right to defer
settlement of the liability. The liability is measured as the present value of expected future payments to be
made in respect of services provided by employees up to the reporting date 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 reporting date
on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
30
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
P.
PROVISIONS
Provisions are recognised when the Group has a legal or constructive obligation as a result of past events for
which it is probable that an outflow of economic benefits will result, and that outflow can be reliably
measured.
Provisions are measurable using the best estimate of the amounts required to settle the obligation at the end
of the reporting period.
Q.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement
of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are
shown within borrowings in current liabilities on the statement of financial position.
R.
ISSUED CAPITAL
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
S.
REVENUE
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be
entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the
Group identifies the contract with a customer; identifies the performance obligations in the contract;
determine the transaction price, which takes into account estimates of variable consideration and the time
value of money; allocates the transaction price on the basis of the relative stand-alone selling price of each
distinct good or service to be delivered; and recognise revenue when each performance obligation is satisfied
in a manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration with the transaction price, if any, reflects concessions provided to the customer such
as discounts, rebates and refunds, any potential adds-ons or bonuses from the customer and any other
contingent events. Such estimates are determined using either the “expected value” or “most likely amount”
method. The measurement of variable consideration is subject to a constraining principle whereby revenue
will only be recognised to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue will not occur. The measurement constraint continues until the uncertainty associated
with the variable consideration is subsequently resolved. Amounts received that are subject to the
constraining principle are initially recognised as deferred revenue in the form of a separate liability.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the
goods, which is generally the time of delivery.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
T.
TRADE AND OTHER RECEIVABLES
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest method, less any allowance for expected credit losses. Trade receivables are generally due
for settlement within 30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based
on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit
losses.
31
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
U.
GOODS AND SERVICES TAX (GST) AND OTHER SIMILAR TAXES
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case, it is recognised as part of the cost of the acquisition of
the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the
statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the tax authority, are presented as operating
cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
tax authority.
V.
RIGHT-OF-USE ASSETS
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured
at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments
made at or before the commencement date net of any lease incentives received, any initial direct costs
incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred
for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the
estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain
ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life.
Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for
short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these
assets are expensed to profit or loss as incurred.
W.
LEASE LIABILITIES
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at
the present value of the lease payments to be made over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental
borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable
lease payments that depend on an index or a rate, amounts expected to be paid under residual value
guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur,
and any anticipated termination penalties. The variable lease payments that do not depend on an index or a
rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts
are remeasured if there is a change in the following: future lease payments arising from a change in an index
or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When
a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or
loss if the carrying amount of the right-of-use asset is fully written down.
X.
PROFIT OR LOSS PER SHARE
Basic profit or loss per share
Basic profit or loss per share is calculated by dividing the profit or loss attributable to the owners of SECOS
Group Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average
number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary
shares issued during the financial year.
Diluted profit or loss per share
Diluted profit or loss per share adjusts the figures used in the determination of basic profit or loss per share
to take into account the after-income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
32
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Y.
EARLY ADOPTED
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED NOT YET MANDATORY OR
The below are Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily
applicable to the Group, with an assessment of the potential impact of such pronouncements on the Group
when adopted in future periods:
ACCOUNTING STANDARDS AND INTERPRETATIONS
AASB 2020-1 Amendments to AASs - Classification of Liabilities as
Current or Non-current liabilities as Current or Non-current
AASB 2020 -3 Amendments to AASs - Annual Improvements 2018-
2020 and Other Amendments
AASB 2020-6 Amendments to AASs - Classification of Liabilities as
Current or Non-current liabilities as Current or Non-current –
Deferral of Effective Date
AASB 2021-2 Amendments to AASs - Disclosure of Accounting
Policies and Definition of Accounting Estimates
AASB 2021-5 Amendments to AASs - Deferred Tax related to Assets
and Liabilities arising from a Single Transaction
AASB 2014-10 Sale or contribution of Assets between an Investor and
its Associate or Joint Venture
APPLICABLE TO ANNUAL
REPORTING PERIODS
BEGINNING ON OR AFTER
1 Jan 2023
1 Jan 2022
1 Jan 2022
1 Jan 2023
1 Jan 2023
1 Jan 2025
Z.
CRITICAL ACCOUNTING ESTIMATES, JUDGEMENTS AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually
evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and
expenses. Management bases its judgements, estimates and assumptions on historical experience and on
other various factors, including expectations of future events, management believes to be reasonable under
the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual
results. Judgements, estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year
are discussed below.
Expected credit loss for impairment of receivables
The provision for impairment of receivables assessment requires a degree of estimation and judgement. The
level of expected credit loss is assessed by taking into account the recent sales experience, the ageing of
receivables, historical collection rates and specific knowledge of the individual debtor’s financial position.
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of estimation and judgement. The
level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories
and other factors that affect inventory obsolescence. No provision for impairment has been recorded during
the year.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment and finite life intangible assets. The useful lives could change significantly as
a result of technical innovations or some other event. The depreciation and amortisation charge will increase
where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets
that have been abandoned or sold will be written off or written down.
33
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Z.
CRITICAL ACCOUNTING ESTIMATES, JUDGEMENTS AND ASSUMPTIONS (CONTINUED)
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with
the accounting policy stated in Note 1(j).
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal. The fair value less costs of disposal calculation
is based on available fund, conducted at arm’s length, for similar assets or observable market prices less
incremental costs of disposing of the asset. The value in use calculation is based on a DCF model. The cash
flows are derived from the budget for the next five years and do not include restructuring activities that the
Group is not yet committed to or significant future investments that will enhance the performance of the
assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF
model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These
estimates are most relevant to goodwill and other intangibles with indefinite useful lives recognised by the
Group. The key assumptions used to determine the recoverable amount for the different CGUs, including a
sensitivity analysis, are disclosed and further explained in Note 14.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and/or tax losses only if the Group
considers it is probable that future taxable amounts will be available to utilise those losses carried forward. A
deferred tax asset of $1.918 million was recognised as at 30 June 2022. The Directors and management of the
Group have made a significant judgment in respect of forecasting the future profitability of the Group to
determine the carrying value of the deferred tax asset.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the
fair value of the equity instruments at the date at which they are granted. The fair value of the performance
rights issued during the year was determined to be the share price on the date that the rights were issued as
there is no exercise price. There are multiple non-market performance vesting conditions allocated to each
tranche of rights and are individualised to the employee who has the performance rights.
An estimate is made of the number of equity instruments for which the service and non-market performance
conditions are expected to be satisfied. This estimate is deemed to be significant. Refer to Note 18 for
further information.
34
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 2 PARENT ENTITY
The following information has been extracted from the books and records of the parent (“SECOS Group
Limited”) and has been prepared in accordance with Australian Accounting Standards.
2022
$’000
2021
$’000
Statement of Financial Position
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current liabilities
Non-current liabilities
Total Liabilities
Equity
Issued capital
Accumulated losses
Total Equity
Statement Of Comprehensive Income
Loss for the year after tax
Total comprehensive income
GUARANTEES
2,772
40,773
43,545
475
31
506
93,799
(50,760)
43,039
(2,021)
(2,021)
7,766
37,714
45,480
438
18
456
93,799
(48,775)
45,024
(1,706)
(1,706)
SECOS Group Limited has from time to time provided guarantees to third parties in relation to the
performance and obligations of controlled entities in respect to finance facilities. The guarantees are for the
terms of the facilities. No amount outstanding as at 30 June 2022 (2021: NIL).
CONTINGENT LIABILITIES
SECOS Group Limited had no contingent liabilities as at 30 June 2022. (2021: NIL).
CONTRACTUAL COMMITMENTS
At 30 June 2022, SECOS Group Limited had not entered into any contractual commitments for the acquisition
of property, plant and equipment (2021: NIL).
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in Note 1,
except for investments in subsidiaries that are accounted for at cost, less any impairment, in the parent entity.
35
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 3 REVENUE
Revenue
Sales of goods at a point in time
21
NOTE
Total sales revenue
Other Income
Sundry income and subsidies
Total other income
NOTE 4 EXPENSES FOR THE YEAR
The Profit/(loss) before income tax includes the
following items of expenses:
Research, development, and patent costs
Superannuation expense
Amortisation of right-of-use assets
Finance cost for leases
2022
$’000
31,043
31,043
87
87
2021
$’000
30,081
30,081
226
226
2022
$’000
2021
$’000
170
152
802
194
182
113
542
136
36
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 5
INCOME TAX EXPENSE
INCOME TAX EXPENSE
Current tax in respect of current year
Withholding tax
Recognition of previously unrecognised
tax losses
Income tax benefit/(expense)
DEFERRED TAX ASSETS
Deferred tax asset comprises temporary
differences attributable to:
Amounts recognised in profit or loss:
Employee benefits
Leases
Recognition of tax losses carried forward
Accrued expenses
Deferred tax asset
Movements:
Opening balance
Credited/(expensed) to profit or loss
Closing balance
Tax losses carried forward
2022
$’000
(153)
(19)
-
(172)
2022
$’000
1,918
-
-
-
-
1,918
2,071
(153)
1,918
2022
$’000
9,441
2021
$’000
-
(18)
2,071
2,053
2021
$’000
2,071
-
-
2,071
-
2,071
-
2,071
2,071
2021
$’000
7,586
The Group has carried forward tax losses that can be offset against taxable profit at each tax jurisdiction
(China, Australia and Malaysia). This is subject to probable future taxable profit and in accordance with the
laws of each tax jurisdiction. The financial report includes a deferred tax asset in respect of Cardia Bioplastics
(Australia) for a total of $1.9m. Tax losses for other jurisdictions have not been brought to account in this
financial report.
37
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 6 KEY MANAGEMENT PERSONNEL COMPENSATION
Names and positions held of Group and parent entity key management personnel in office at any time during
the financial year are included in the “Remuneration Report”.
Key management personnel remuneration details have been included in the Remuneration Report section
of the Directors Report.
2022
$’000
922
60
13
22
1,017
2022
$’000
84
10
94
2022
$’000
(3,085)
2021
$’000
822
51
9
-
883
2021
$’000
77
11
88
2021
$’000
2,590
NUMBER
NUMBER
535,901,862
(0.6 cents)
509,259,297
0.5 cents
Short-term employee benefits
Post-employment benefits
Long-term employee benefits
Share based payments
Total
NOTE 7 REMUNERATION OF AUDITORS
Remuneration of the auditor of the parent
entity (William Buck) for
•
auditing or reviewing the financial
statements
Remuneration of other auditors of
subsidiaries for:
•
auditing or reviewing the financial
statements of subsidiaries
Total
NOTE 8 PROFIT / (LOSS) PER SHARE
Gain/(Loss) used to calculate
basic/diluted EPS
Weighted average number of ordinary
shares used in the calculation of basic
and diluted profit/(loss) per share
Profit/(Loss) per share
38
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 9 TRADE AND OTHER RECEIVABLES
Current
Trade Receivables
Less: Allowance for expected
credit losses
Other receivables
Trade and other receivables
2022
$’000
7,870
-
7,870
85
7,955
2021
$’000
5,862
-
5,862
113
5,975
ALLOWANCE FOR EXPECTED CREDIT LOSSES
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
TRADE
RECEIVABLES
IMPAIRED
<30
31-60
61-90
>90
2022
2021
7,869
5,862
-
-
2,739
2,404
1,401
1,838
660
3,069
1,023
597
Current trade receivables are non-interest bearing and are generally on 30-to-60-day terms. The receivables
in the 61-90 and over 90 days ageing category are generally on longer credit terms.
Based on the above, the Directors have deemed that no impairment on trade receivables is required in 2022
(2021: NIL) at the reporting date.
Movement in the expected credit loss for receivables is as follows:
EXPECTED
CREDIT LOSS
2022
2021
OPENING
BALANCE
CHARGE FOR
THE YEAR
AMOUNTS
WRITE OFF/BACK
CLOSING
BALANCE
$’000
$’000
$’000
$’000
-
48
-
-
-
(48)
-
-
Neither the Group nor parent entity holds any financial assets with terms that have been renegotiated, but
which would otherwise be past due or impaired.
COLLATERAL PLEDGED
No security over trade receivables has been provided as at 30 June 2022. (2021: Nil).
39
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 10 INVENTORIES
Current
Raw materials including work in
progress
Finished goods
Total
2022
$’000
3,591
4,250
7,841
2021
$’000
3,256
2,052
5,308
Inventories are held at the lower of cost or net realisable value. The increase in inventories held reflects
increased sales activity.
NOTE 11 PLANT AND EQUIPMENT
MOVEMENT IN CARRYING AMOUNTS
Reconciliations of the carrying amounts of plant and equipment at the beginning and end of the current and
previous financial year are set out below.
2022
Opening Balance
Additions
Depreciation expenses
Exchange rate variations
Closing Balance
As at 30 June 2022
Cost
Accumulated depreciation
Closing Balance
2021
Opening Balance
Additions
Depreciation expenses
Exchange rate variations
Closing Balance
As at 30 June 2021
Cost
Accumulated depreciation
Closing Balance
PLANT,
MACHINERY AND
EQUIPMENT
$’000
LEASEHOLD
IMPROVEMENTS
$’000
CONSTRUCTION
IN PROGRESS
$’000
TOTAL
$’000
2,617
1,864
(829)
441
4,093
16,207
(12.114)
4,093
33
-
(1)
-
32
109
(77)
32
-
2,650
578
-
-
2,442
(830)
441
578
4,703
578
16,894
-
(12,191)
578
4,703
PLANT,
MACHINERY AND
EQUIPMENT
$’000
LEASEHOLD
IMPROVEMENTS
$’000
CONSTRUCTION
IN PROGRESS
$’000
1,796
1,150
(339)
10
2.617
13,250
(10,633)
2,617
40
34
-
(1)
-
33
109
(76)
33
-
-
-
-
-
-
-
-
TOTAL
$’000
1,830
1,150
(340)
10
2,650
13,359
(10,709)
2,650
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 12 NON-CURRENT ASSETS - RIGHT-OF-USE ASSETS
Opening Balance
Additions
Depreciation
Closing Balance
Cost
Accumulated Depreciation
Closing Balance
2022
$’000
2,105
316
(155)
2,266
4,175
(1,909)
2,266
2021
$’000
1,188
1,228
(311)
2,105
3,164
(1,059)
2,105
The Group leases land and buildings for its offices, factories and warehouses under agreements of between
three to five years with, in some cases, options to extend. The leases have various escalation clauses. On
renewal, the terms of the leases are renegotiated.
During the year the Group signed a new lease for a facility in Australia.
Additions to the right-of-use assets during the year were $316.452.
NOTE 13 LEASE LIABILITY
Lease liability – current
Lease liability – non-current
Lease liability
2022
$’000
818
1,572
2,390
2021
$’000
575
1,565
2,140
41
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 14 INTANGIBLE ASSETS
2022
Opening Balance
Additions
Amortisation expenses
Closing Balance
As at 30 June 2022
Cost
Accumulated amortisation
Closing Balance
2021
Opening Balance
Additions
Amortisation expenses
Closing Balance
As at 30 June 2021
Cost
Accumulated amortisation
Closing Balance
GOODWILL
$’000
3,532
-
-
3,532
3,532
-
3,532
GOODWILL
$’000
3,532
-
-
3,532
3,532
-
3,532
PRODUCT
DEVELOPMENT
$’000
86
37
(33)
90
167
(77)
90
PRODUCT
DEVELOPMENT
$’000
73
39
(26)
86
130
(44)
86
TOTAL
$’000
3.618
37
(33)
3,622
3,699
(77)
3,622
TOTAL
$’000
3,605
39
(26)
3,618
3,662
(44)
3,618
IMPAIRMENT DISCLOSURES
The Group first recognised Goodwill on its balance sheet following the acquisition of Stellar Film Group in
April 2015.
Per AASB 138, $89,570 relates to product development costs incurred prior to commercialisation of new
products which are captured in the Statement of Financial Position as intangible assets.
Since then and as required by AASB 136 regulatory guidelines, the Group has undertaken annual impairment
tests for its single cash-generating unit (“CGU”) being the manufacture and distribution of polyethylene films
and the renewable resource-based resins and finished products.
42
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 14
INTANGIBLE ASSETS (CONTINUED)
The Group has determined the recoverable amount of the Group’s goodwill by a Value-in-Use calculation
using a discounted cash flow (“DCF”) model. Value-in-use is calculated based on the present value of cash
flow projections for the next five years. The cash flows are discounted using an estimated discount rate based
on Capital Asset Pricing Model. Management has based the value-in-use calculations on five-year budget
forecasts of the group. Revenue has been projected on the below mentioned assumptions. Costs are
calculated taking into account historical gross margins as well as estimated weighted inflation rates over the
period which is consistent with inflation rates applicable to the locations in which the unit operates. Discount
rates are pre-tax and reflect risks associated with the distribution division.
The following assumptions were used in the value-in-use-calculations:
a.
Revenue is premised on a “zero based budget” approach whereby each customer, or potential
customer, has been specifically assessed having regard to current indications of demand,
customer contacts or as assessed by the relevant sales managers. Terminal growth post year 5 of
the forecast period has been estimated at 2.5% (2021: 2.5%). The average weighted average growth
rate over the 5-year forecast period was 16.2% (2021: 39.5%)
Long term contracts typically include expenditure “rise and fall” clauses. Accordingly, Revenue is
forecast to alter in line with relevant changes to the Company’s direct manufacturing costs.
b.
Projected cash flows have been discounted using discount rate of 12.3% (2021: 12.3%).
Based on the above assumptions, the recoverable amount of the cash generating unit has been determined
to exceed its carrying amount as at 30 June 2022 and; accordingly, no impairment loss has been recognised.
No reasonably possible change in any of the aforesaid assumptions materially impacting the above analysis
would result in an impairment charge.
NOTE 15
TRADE AND OTHER PAYABLES
Current
Trade payables
Sundry payables
Total
2022
$’000
2,742
502
3,244
2021
$’000
1,177
322
1,499
43
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 16
ISSUED CAPITAL
A)
SHARE CAPITAL
Ordinary - fully paid shares
2022
$’000
44,730
2021
$’000
44,730
There were no movements in ordinary share capital for the year ending 30 June 2022. There were no unlisted
Options outstanding as at 30 June 2022.
B)
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. Ordinary Shares have no par value, and the Company does not have a limited amount
of authorised share capital.
C)
CAPITAL MANAGEMENT
Management controls the capital of the Group in order to maintain sufficient liquidity to cover the Group’s
working capital requirements, to meet any new investment opportunities as they arise and to safeguard the
Group’s ability to continue as a going concern.
The Group’s debt and capital include ordinary share capital and financial liabilities supported by financial assets.
Management effectively manages the Group’s capital by regularly monitoring its current and expected
liquidity requirements and by assessing the Group’s financial risks, rather than using debt/equity ratio
analyses. The Group’s capital structure is adjusted in response to the changes in liquidity requirements and
financial risks. These responses include the management of debt levels and share issues.
There are no externally imposed capital requirements other than Australian Stock Exchange (ASX) listing rule 7.1
and 7.1A placement capacity. As at 30 June 2022, available placement capacity were circa 134 million new shares.
There have been no changes in the strategy adopted by management to control the capital of the Group
since the prior year.
NOTE 17 RESERVES
Nature and purpose of Reserves is foreign currency translation reserve records exchange differences arising
on translation of a foreign controlled subsidiary as described in Note 1(k) and a share based payment reserve.
44
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 18 SHARE BASED PAYMENTS
The Company has an Employee Share Incentive Plan which have been established to encourage employees
of the consolidated entity and its subsidiaries, including directors, to share in the ownership of the
consolidated entity and its subsidiaries, in order to promote their long-term success. The Plans offer selected
employees of the consolidated entity and its subsidiaries, including directors, an opportunity to share in the
growth and profits of the consolidated entity and its subsidiaries alongside the consolidated entity’s
shareholders.
During the financial year ending 30 June 2022, there were 786,425 Performance Rights (“rights”) issued to the
employees (no directors included) of the Company (June 2021: NIL). There were an additional 411,105 rights
issued, but these fail to meet the definition of cash-settled share-based payment transaction outlined in
AASB 2 Share-based payments.
Performance rights vest in three tranches:
•
•
•
Tranche 1 vesting date is 30 September 2022,
Tranche 2 vesting date is 30 September 2023,
Tranche 3 vesting date is 30 September 2024.
There are multiple non-market performance vesting conditions allocated to each tranche of rights and are
individualised to the employee who has the performance rights. The overarching performance hurdle is in
line with internal management targets and goals for future years.
The probability of non-market performance conditions occurring has been assessed to be 75%.
For the rights granted during the current financial period, the fair value of the rights equates to the share
price on the date that the rights were issued being 33.5 cents as there is no exercise price.
The following tables illustrate the movements in performance rights, during the current financial year ending
30 June 2022 and comparative financial year ending 30 June 2021.
Outstanding at the beginning of the financial year
Granted
Exercised / Forfeited
Outstanding at the end of the financial year
NUMBER OF RIGHTS
NUMBER OF RIGHTS
2022
-
786,425
(124,569)
661,856
2021
-
-
-
-
GRANT DATE EXPIRY DATE
BALANCE AT
THE START
OF THE
PERIOD
EXERCISE
PRICE
GRANTED EXERCISED
09-Sep-2021 01-Nov-2022
09-Sep-2021 01-Nov-2023
09-Sep-2021 01-Nov-2024
-
-
-
-
-
-
-
262,141
262,141
262,143
786,425
-
-
-
-
EXPIRED/
FORFEITED/
OTHER
BALANCE
AT THE END
OF THE
PERIOD
(41,523)
220,618
(41,523)
220,618
(41,523)
220,620
(124,569)
661,856
45
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 19 CONTROLLED ENTITIES
CONTROLLED ENTITIES CONSOLIDATED
NAME
COUNTRY OF
INCORPORATION
PRINCIPAL
ACTIVITIES
EQUITY HOLDING (%)
2022
2021
Stellar Films (Malaysia) Sdn Bhd
Malaysia
Manufacturing
100%
100%
CO2 Starch Pty Ltd
Australia
Research
100%
100%
Secos Americas LLC
Cardia Bioplastics (Australia) Pty Ltd
Cardia Bioplastics (Malaysia) Sdn Bhd
100% owned by Cardia Bioplastics
(Australia) Pty Ltd
Tristano Pty Ltd
100% owned by Cardia Bioplastics
(Australia) Pty Ltd
Biograde (Hong Kong) Pty Ltd
100% owned by Cardia Bioplastics
(Australia) Pty Ltd
Biograde (Nanjing) Pty Ltd
100% owned by Biograde (Hong Kong)
Pty Ltd
USA
Australia
Sales and
marketing
Sales and
marketing
100%
100%
100%
100%
Malaysia
Manufacturing
100%
100%
Australia
Research
100%
100%
Hong Kong
Holding
company
100%
100%
China
Manufacturing
100%
100%
Cardia Bioplastics, S.A de C.V
Mexico
Sales and
marketing
100%
-
NOTE 20 CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Estimates of the potential financial effect of contingent liabilities that may become payable:
Bank Guarantees
There were no contingent assets as at 30 June 2022 (2021: NIL).
2022
$’000
34
2021
$’000
-
46
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 21 OPERATING SEGMENTS
IDENTIFICATION OF REPORTABLE OPERATING SEGMENT
The management view the business as a single operating segment being the manufacture and distribution
of polyethylene films, and the renewable resource-based resins and finished products.
Operationally, Chief Executive Officer and Chief Financial Officer oversee the previously separate Cardia and
Stellar business. The Group now share common R&D resources actively promoting the films and renewable
recourses part of the business. There is now one warehouse location in each region housing films, resins and
biodegradable finished goods.
The management team prepares internal reports with multi-dimensional view with emphasis on group
consolidated results that are viewed and used by the Board of Directors in assessing the performance and in
determining the allocation of resources. The information is reported monthly.
SALES REVENUE BY GEOGRAPHICAL REGION
(EXTERNAL CUSTOMERS)
Oceanic
Asia
Americas
Europe
Africa
Total Revenue
MAJOR CUSTOMERS
2022
$’000
6,512
15,617
6,337
1,426
1,151
31,043
2021
$’000
5,060
13,930
8,975
1,402
714
30,081
The Group has a number of customers to whom it provides products. The Group has supplied a single external
customer in the manufacturing segment who accounted for 13.5% (2020: 13.2%) of external revenue.
PLANT AND EQUIPMENT BY
GEOGRAPHICAL REGION
The location of segment assets (plant and equipment)
by geographical location is disclosed below:
Australia
Asia
Total Assets
2022
$’000
783
3,920
4,703
2021
$’000
49
2,601
2,650
47
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 22 CASH FLOW INFORMATION
RECONCILIATION OF CASH FLOW FROM OPERATIONS WITH PROFIT AFTER INCOME TAX
Profit/(Loss) for the year after tax
Non-Cash Items
Deferred tax assets
Depreciation and amortisation
Share Based Payments Expense
Issue of shares in lieu of cash
Unrealised foreign currency differences
Movements in assets and liabilities
Decrease/(increase) in inventories
Decrease/(increase) in receivables and
other assets
(Decrease)/increase in payables
R&D capitalised
Net cash outflow from operating activities
2022
$’000
(3,085)
153
1,304
36
-
429
(2,532)
(2,016)
1,689
(38)
(4,060)
2021
$’000
2,590
(2,071)
882
-
83
(410)
(2,859)
(2,939)
33
(13)
(4,704)
NOTE 23 EVENTS AFTER THE REPORTING DATE
No matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly
affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of
affairs in future financial years.
NOTE 24 RELATED PARTIES
PARENT ENTITY
SECOS Group Limited is the parent entity.
SUBSIDIARIES
Interests in subsidiaries are set out in Note 19.
KEY MANAGEMENT PERSONNEL
Disclosures relating to key management personnel are set out in Note 6 and the remuneration report in the
directors’ report.
48
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 25 FINANCIAL INSTRUMENTS
FINANCIAL RISK MANAGEMENT OBJECTIVES
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price
risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses
on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group.
SPECIFIC FINANCIAL RISK EXPOSURES AND MANAGEMENT
The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and
market risk consisting of interest rate risk and foreign currency risk.
CREDIT RISK
Exposure to credit risk relating to financial assets arises from the potential non-performance by
counterparties of contract obligations that could lead to a financial loss to the Group.
Credit risk is managed through the negotiation of payment terms with customers such as advance payment
on order or payments through letter of credits, title retention clauses over goods, ensuring to the extent
possible, that customers and counterparties to transactions are of sound credit worthiness and monitoring
the financial stability of significant customers and counterparties. Such monitoring is used in assessing
receivables for impairment.
The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period
is equivalent to the carrying amount of those financial assets (net of any provisions) as presented in the
statement of financial position.
The Group has no significant concentration of credit risk with any single counterparty or group of
counterparties. Trade and other receivables that are neither past due nor impaired are considered to be of
high credit quality. Aggregate of such amounts are as detailed in Note 9.
Credit risk arising on cash balances is not material.
LIQUIDITY RISK
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or
meeting its obligations related to financial liabilities. The Group manages liquidity risk by maintaining a
reputable credit profile, managing credit risk related to financial assets, monitoring forecasted cash flows and
ensuring that new funding facilities are in place either in the form of the issuing of new securities or
establishing borrowing facilities.
49
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 25 FINANCIAL INSTRUMENTS (CONTINUED)
A summary of the entity’s financial assets and liabilities is shown in the table below;
YEAR ENDED 30 JUNE 2022
$’000
$’000
$’000
<6 MONTHS
6-12 MONTHS
1-5 YEARS
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Lease liability
Net maturity
4,122
7,955
12,077
3,244
399
3,643
8,434
-
-
-
-
-
-
-
-
419
419
1,572
1,572
(419)
(1,572)
YEAR ENDED 30 JUNE 2021
$’000
$’000
$’000
<6 MONTHS
6-12 MONTHS
1-5 YEARS
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Lease liability
11,287
5,975
17,262
1,499
343
1,842
-
-
-
-
233
233
-
-
-
-
1,565
1,565
Net maturity
15,420
(233)
(1,565)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Unless otherwise stated, the carrying amount of financial instruments reflect their fair value.
MARKET RISKS
There is no material exposure for the Group.
INTEREST RATE RISK
There is no material exposure for the Group.
INTEREST RATE RISK SENSITIVITY ANALYSIS
TOTAL
$’000
4,122
7,955
12,077
3,244
2,390
5,634
6,443
TOTAL
$’000
11,287
5,975
17,262
1,499
2,141
3,640
13,622
An official increase/decrease in interest rates of 2% has no adverse/favorable effect on profit before tax of $0
(2021: $0) per annum. The Group had no borrowings as at 30 June 2022 (2021: NIL).
50
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
NOTE 25
FINANCIAL INSTRUMENTS (CONTINUED)
FOREIGN CURRENCY RISK
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign
currency risk through foreign exchange rate fluctuations.
As the Group’s significant purchase and sales transactions are in US Dollars, any fluctuations in US Dollars may
impact on the Group’s financial assets. The risk is measured using sensitivity analysis and cash flow
forecasting.
For payments in all other foreign currencies, the Group has established that its exposure to foreign currency
risk is not material at this stage.
The carrying amount of the Group’s foreign currency (US Dollars) denominated financial assets and financial
liabilities at the reporting date were as follows:
Financial Assets
Financial Liabilities
2022
$’000
159
-
2021
$’000
1,392
-
The Group has performed a sensitivity analysis relating to its net exposure to foreign currency risk at the end of
reporting period. This sensitivity analysis demonstrates the effect on the current year results and equity which
could result from a change in these risks.
FOREIGN CURRENCY RISK SENSITIVITY ANALYSIS
At 30 June 2022, the effect on profit and equity as a result of changes in the value of the Australian Dollar to
the US Dollar with all other variables remaining constant is as follows:
2022
$’000
Change in Profit and Equity
• movement in AUD to USD by 7.8%
+/- 18
FOREIGN CURRENCY TRANSLATION RESERVES (“FCTR”)
2021
$’000
+/- 174
The foreign currency translation reserve records exchange differences arising on translation of a foreign
controlled subsidiary as described in Note 1(k). At 30 June 2022, all balance sheet items in foreign currencies
are translated to local currency at closing exchange rate and this is further translated to Australian dollar.
Upon consolidation of the entities, the impact is captured in reserves line in equity section.
51
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
DIRECTORS’ DECLARATION
1.
The Directors declare that the financial statements and notes; and remuneration disclosures that
are detailed within the Remuneration Report in the Directors’ Report, are in accordance with the
Corporations Act 2001 and:
a.
b.
c.
comply with Accounting Standards, the Corporations Regulations 2001; and
give a true and fair view of the financial position as at 30 June 2022 and of the
performance for the year ended on that date of the Company and Group.
the financial report also complies with International Financial Reporting Standards as
disclosed in Note 1.
2.
The Managing Director and Chief Financial Officer have each declared that:
a.
b.
c.
the financial records of the Company for the financial year have been properly
maintained in accordance with section 286 of the Corporations Act 2001;
the financial statements and notes for the financial year comply with the Accounting
Standards; and
the financial statements and notes for the financial year give a true and fair view.
3.
In the directors' opinion there are reasonable grounds to believe that the Company will be able
to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Directors.
Richard Tegoni
Executive Chairman
Melbourne, Australia
Date: 26 August 2022
52
SECOS Group Limited
Independent auditor’s report to members
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the financial report of SECOS Group Limited (the Company and its subsidiaries (the
Group)), which comprises the consolidated statement of financial position as at 30 June 2022, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies and other explanatory
information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act
2001, including:
i. giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial
performance for the year ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001.
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 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 (including Independence
Standards) (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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
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 of the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Level 20, 181 William Street, Melbourne VIC 3000
+61 3 9824 8555
vic.info@williambuck.com
williambuck.com.au
William Buck is an association of firms, each trading under the name of William Buck
across Australia and New Zealand with affiliated offices worldwide.
Liability limited by a scheme approved under Professional Standards Legislation.
ASSESSMENT OF CARRYING VALUE OF GOODWILL
Area of focus
Refer also to notes 1 and 14
During the financial year ended 30 June 2015 the
group expanded its activities through the reverse
acquisition of Cardia Bioplastics Limited by Stellar
Films Group. As a result, the acquisition created
Goodwill on the Group’s Consolidated Statement of
Financial Position of $3.5 million.
There is a risk that the carrying amount of goodwill
exceeds its recoverable amount and may be
impaired.
The Group continues to operate as a single Cash
Generating Unit (“CGU”) being the manufacture
and distribution of polyethylene films, and
renewable resources-based resins. Management
has assessed that they had been no significant
change to the business which would require a
change in the current year.
The recoverable amount of the CGU has been
calculated based on a value-in-use discounted
cashflow model, the examines the expected
discounted cashflows of its sole CGU over a five-
year period extending from reporting date, plus a
terminal value.
Overall due to the high level of judgement involved,
and the significant carrying amounts involved, we
have determined that this is a key judgemental area
that our audit concentrated on.
How our audit addressed it
Our audit procedures included:
— A detailed analysis of any changes to the
business to determine the continued
appropriateness of a single segment and CGU;
— An examination of the discounted cashflow
model, testing for
- its arithmetical accuracy;
- the reasonableness of the future cashflows,
comparing to historical trends of the business
and its pipeline of future sales transactions and
the overall industry climate affecting the
economics of the business model;
- the reasonableness of key inputs into the
model, including growth rates, the discount rate
and the working capital levels associated with
the derivation of those growth rates;
— An examination of key sensitivities of the
Group’s future discounted cash flows to
changes in key inputs; and
— Cross-checking the overall net present value
derived by the model to the current enterprise
value of the business, embodied in its market
capitalisation.
We also considered the adequacy of the Group’s
disclosures in relation to the impairment testing in
the financial report.
INVENTORY
Area of focus
Refer also to notes 1 and 10
The Group’s inventory of $8.0 million is
significant to the financial statements and has
increased significantly from prior year. The
Group’s inventory predominantly includes
polyethylene films and renewable resource-
based resins.
Inventory is required to be carried at the lower of
its cost and net realisable value applying the
weighted average cost method.
The valuation of inventory involves significant
judgement by management as value depends
on the age and types of polyethylene films and
renewable resource-based resins.
How our audit addressed it
Our audit procedures included:
— A physical verification of inventory at material
locations within the Group;
— Performance of cut-off testing for both inwards and
outwards goods around the year end date;
— A review of subsequent product sales to ensure
inventory was valued at the lower of cost and net
realisable value; and
— We assessed management’s judgements in
relation to the need for provisioning based on the
aging and condition of the inventory.
We also considered the adequacy of disclosures in
relation to inventory in the notes to the financial
statements.
Other Information
The directors are responsible for the other information. The other information comprises the information in
the Group’s annual report for the year ended 30 June 2022 but does not include the financial report and the
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information 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, 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.
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 has no realistic alternative but to do so.
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 this financial report.
A further description of our responsibilities for the audit of these financial statements 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 independent auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2022.
In our opinion, the Remuneration Report of SECOS Group Limited, for the year ended 30 June 2022,
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.
William Buck Audit (Vic) Pty Ltd
ABN: 59 116 151 136
A. A. Finnis
Director
Melbourne, 26th August 2022
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 11 August 2022
(A) DISTRIBUTION OF EQUITY SECURITIES
Analysis of numbers of equity security holders by size of holding:
ORDINARY SHARES
NUMBER OF HOLDERS
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
323
1,456
780
1,479
371
4,409
There were 1,285 holders of less than a marketable parcel of ordinary shares.
(B)
EQUITY SECURITY HOLDERS
The names of the twenty largest holders of quoted equity securities are listed below:
FULLY PAID ORDINARY SHARES
NUMBER HELD
PERCENTAGE OF
ISSUED SHARES (%)
R&K EDWARDS INVESTMENTS
BELGRAVIA STRATEGIC EQUITIES PTY LTD
DONALD HALLER JR
STELLAR DEVELOPMENTS
SECOS FRIENDS LLC
UBS NOMINEES
RICHARD TEGONI
HSBC CUSTODY NOMINEES
BRENDAN O'SULLIVAN
NATIONAL NOMINEES
KIRZY (PHILLIPPA WEEKLEY)
HELPLESS PTY LTD
GOBBLE PTY LTD
ADVANCE PUBLICITY
DAVID WAKE
SCOTCH INVESTMENTS PTY LTD
PLANET JANET SUPER PTY LTD
MARK L DEUTSCH CAPITAL LLC
ROBERT V DEUTSCH CAPITAL LLC
FEMALE PTY LTD
Total
57,295,825
53,185,413
45,748,826
20,696,906
18,832,738
16,478,690
14,606,231
14,582,281
11,189,054
10,951,188
8,998,217
7,829,008
7,203,346
6,625,000
5,157,109
5,000,000
4,923,397
4,741,575
4,741,575
4,218,950
10.7%
9.9%
8.5%
3.9%
3.5%
3.1%
2.7%
2.7%
2.1%
2.0%
1.7%
1.5%
1.3%
1.2%
1.0%
0.9%
0.9%
0.9%
0.9%
0.8%
323,005,329
60.3%
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SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
(C)
SUBSTANTIAL SHAREHOLDERS
The names of the substantial shareholders listed in the holding company’s register as at 11 August 2022 are:
NUMBER OF ORDINARY
SHARES HELD
PERCENTAGE OF ISSUED
SHARES (%)
R&K EDWARDS INVESTMENTS LLC
57,295,825
BELGRAVIA STRATEGIC EQUITIES PTY LTD
53,185,413
DONALD HALLER JR
45,748,826
10.7
9.9
8.5
(D)
VOTING RIGHTS
The voting rights attaching to each class of equity security are set out below:
Ordinary Shares:
On a show of hands every member present at a meeting in
person or by proxy shall have one vote and upon a poll
each share shall have one vote.
58
SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
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SECOS GROUP LIMITED (ASX:SES)
FY22 ANNUAL REPORT
60