SECOS GROUP LIMITED
ABN 89 064 755 237
APPENDIX 4E
FULL–YEAR PERIOD
Full-year ended (“current reporting period”)
30 June 2024
Full-year ended (“previous corresponding period”)
30 June 2023
RESULTS FOR ANNOUNCEMENT TO THE MARKET
Continuing operations
Revenue from ordinary activities ($’000)
Down
8.1%
to
14,449
Loss from ordinary activities after tax attributable to members ($’000)
Up
47.7%
to
(9,424)
DIVIDENDS
Current reporting period
Nil
Previous corresponding period
Nil
NET TANGIBLE ASSET BACKING
Current reporting period
Previous corresponding
period (“PCP”)
Net tangible assets per ordinary share
2.4 cents
3.3 cents
This full-year report should be read in conjunction with the Annual Financial Report for the year ended 30 June
2024 and any public announcements made by SECOS Group Limited and its controlled entities during the full-
year in accordance with continuous disclosure requirements arising under the Corporations Act 2001 and the ASX
Listing Rules.
Changing the world
of packaging
SECOS GROUP LIMITED
(ASX:SES)
ANNUAL REPORT
For the year ended 30 June 2024
ABN 89 064 755 237
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
2
CONTENTS
Corporate Directory
3
Chairman’s Report
4
Directors’ Report
6
Auditor’s Independence Declaration
25
Consolidated Statement of Profit or Loss and Other Comprehensive Income
26
Consolidated Statement of Financial Position
27
Consolidated Statement of Changes in Equity
28
Consolidated Statement of Cash Flows
29
Notes to the Financial Statements
30
Consolidated Entity Disclosure Statement
56
Directors’ Declaration
58
Independent Auditor’s Report
59
Shareholders’ Information
65
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
3
CORPORATE DIRECTORY
Directors
Mr. James (Jim) Walsh (Non-Executive Chairman)
Mr. Richard Tegoni (CEO, Executive Director)
Mr. Stephen J Walters (Executive Director)
Mr. Donald F Haller Jnr (Non-Executive Director)
Ms. Natalya Jurcheshin (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
Automic Group
Level 5, 191 St Georges Terrace
Perth WA 6000
GPO Box 5193,
Sydney NSW 2001
Telephone: 1300 288 664
Email: hello@automicgroup.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 6, 67 Palmerston Crescent,
South Melbourne, VIC 3205
Securities Exchange
Australian Securities Exchange
Level 45, South Tower, Rialto
525 Collins Street
Melbourne, VIC 3000
ASX Code
SES
Website
Corporate:
www.secosgroup.com.au
E-commerce
www.myecobag.com.au
www.myecoworld.com.au
www.myecoworld.com
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
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
4
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 ended
30 June 2024.
SECOS is now exclusively a sustainable packaging materials
business in line with its strategy, following the sale of our
traditional plastic business in December 2023. SECOS remains
well placed to grow in many regions as countries seek
sustainable packaging solutions and the removal of plastic from
the environment. Every day, more companies are seeking more
sustainable solutions in the way they produce their products,
and as a result SECOS’ pipeline of opportunities continues
to improve.
The MyEcoBag® branded products are now being sold in over
2,400 Australian stores and is the category leader in
compostable bin liner and kitchen caddy sales in both Coles and
Woolworths. More recently SECOS began supplying carry-bags
to independent grocery chain, Ritchies.
Despite falling short of the annual sales target in the first 12
months of their agreement, SECOS and Jewett Cameron
Corporation (JCC) agreed to renew the existing exclusive sales
agreement under the same terms, as a result of the significant
work being undertaken to establish a meaningful presence in
North America. Both companies believe this positions us well for
sales growth and we look forward to working with JCC to expose
SECOS to the increasing consumer demand for sustainable
alternatives
to
conventional
plastics
in
the
USA
and
Canada markets.
It was pleasing to see SECOS awarded participation in the
Solving Plastic Waste Cooperative Research Centre (CRC)
program, where there is matched R&D funding from the
Australian Federal Government from a joint Industry University
bid. SECOS’ share of the $140.6m allocated to this CRC will be
confirmed at a later date as the Company seeks to scope
R&D projects.
In June 2024, Recycling Victoria released the Draft Service
Standards which classifies certified compostable caddy bin
liners as a non-accepted material in Victoria’s proposed
standardised four-stream household waste and recycling
system. In response, SECOS has made a submission to the state
government opposing the draft standards and undertaken
various public awareness campaigns.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
5
On a continuing operations basis, while the FY24 sales of $14.4
million were disappointing, down 8.1% on FY23, it was pleasing
to see that the gross margin of 21.5% was up on 16.5% in FY23.
The directors are acutely aware sales performance must
improve, and with management will strive to increase sales and
continue to increase margins. The loss before tax of $8.4 million
(FY23: $5.4 million loss) includes a non-cash impairment of
intangibles of $3.6 million. On a positive note, working capital
reduced by $1.7 million compared to FY23, mainly driven by the
divestment of the traditional plastic business in December 2023.
The Company continues to operate with no debt and finished
with a cash balance of $6.1 million as of 30 June 2024. A $0.5
million investment has been made in capital expenditure in the
Company’s Malaysian biopolymer plant and for new equipment
for the Company’s Research and Development Centre.
The sale of our traditional plastic business assets in December
2023 better enables SECOS to concentrate on its core mission
and business. Our investments in marketing and R&D
capabilities aim to deliver increased future compostable and
sustainable sales and position the Company to grow its
MyEcoBag® range of products in retail stores and new markets.
These investments and efforts underly our belief that SECOS has
the core competencies and technologies to expand our
presence in our global markets.
On behalf of the Board, I would like to thank everyone in the
SECOS team for their efforts under challenging conditions. I
would like to thank and welcome our new customers who have
made the choice to support a better future for our world, and to
our shareholders and key stakeholders who continue with us on
our journey to change the world of packaging.
Jim Walsh
Chairman, SECOS Group Limited
The MyEcoBag® branded products are now being
sold in over 2,400 Australian stores and is the
category leader in compostable bin liner and
kitchen caddy sales in both Coles and Woolworths
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
6
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 2024.
Directors
The following persons were Directors of SECOS during the financial year and up to the date of
this report, unless otherwise stated:
•
James (Jim) Walsh (Non-Executive Chairman)
•
Richard Tegoni (CEO and Executive Director)
•
Stephen J Walters (Executive Director)
•
Donald F Haller Jnr (Non-Executive Director)
•
Natalya Jurcheshin (Non-Executive Director)
Company Secretary
The Company Secretary is Colin Lai who is also the Chief Financial Officer of SECOS.
Principal Activities
SECOS Group Limited (ASX: SES) is a leading developer and manufacturer of sustainable
packaging materials. SECOS supplies its proprietary biodegradable and compostable resins,
packaging products and films to a blue-chip global customer base. SECOS Group is integrated
from resin production into film and can develop bespoke compostable solutions for a range of
applications.
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 a resins plant in Malaysia.
SECOS has sales offices in Australia, Malaysia, China, Mexico and the USA, with a network of
distributors across the Americas, Europe and Asia.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
7
Operating and Financial Review
Financial Results Headlines
Continuing Operations ($’000)
FY24
FY23
% Change
MyEco® Branded (Global)
2,917
2,192
33.0%
Councils
4,833
4,112
17.5%
Resin
3,628
4,688
(22.6%)
Film
715
728
(1.7%)
White label and Other
2,356
3,214
(26.7%)
Total Sustainable Revenue
14,449
14,934
(3.2%)
Total Traditional Revenue
-
783
(100%)
Total Revenue
14,449
15,717
(8.1%)
Gross Margin %
21.5%
16.5%
505 bps
Normalised EBITDA1
(3,476)
(3,917)
11.3%
Impairment of intangibles
(3,568)
-
-
Loss before tax
(8,446)
(5,390)
(56.7%)
Net Loss after tax
(9,424)
(6,381)
(47.7%)
Discontinued Operations2 ($’000)
FY24
FY23
% Change
Revenue
1,709
7,119
(76.0%)
Gross Margin %
15.6%
7.8%
778 bps
EBITDA1
176
(53)
432.1%
Impairment of intangibles
-
-
-
Loss before tax
121
(361)
133.5%
Net Loss after tax
97
(369)
126.3%
1.
EBITDA stands for earnings before interest, tax, depreciation, and amortisation. EBITDA is a non-IFRS measure
and is presented to provide users with additional insight into the Company’s business and to facilitate
incremental understanding of the Company’s underlying financial performance. Non-IFRS information is not
audited. Normalised EBITDA excludes the non-recurring impairment of intangibles.
2.
The Company sold its traditional plastic business in December 2023.
FY24 sustainable sales from continuing operations were $14.4 million, down 3.2% mainly due to
lower resin sales, down 22.6% and due to lower white label and other product sales. The decrease
in resin sales is due to excess resin inventory being held by customers as a residual impact from
the difficult global logistics and market conditions experienced in the prior two years. Strong sales
growth was achieved in the Group’s global MyEco™ products and from Councils at 33.0% and
17.5% respectively. The white label and other product sales were lower predominantly due to our
exclusive distributor and strategic partner in the USA and Canada, switching from their Lucky
Dog® products to MyEcoWorld® branded products.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
8
Operating and Financial Review (continued)
In H2 FY24, total sustainable sales increased to $8.3 million, up 33.3% on H1 FY24 and up 11.0% on
the prior corresponding period. The much stronger second half of FY24 saw growth in categories
such as MyEco® branded products and Council business and has established a solid platform for
growth into the coming year.
FY24 gross margin of 21.5% improved on FY23 of 16.5% as freight rates and lead times have
returned to pre-pandemic levels, which has improved the predictability of working capital
management.
Loss before interest, tax, depreciation, amortisation and impairment (normalised EBITDA loss)
was $3.5 million, favourable by 11.3% on FY23 mainly due to improved margins and lower inventory
obsolescence and credit losses during the current year. These were partly offset by an increase in
employment expenses driven by an investment in people and capability.
Following the completion of the annual review of the carrying value of its assets as of 30 June
2024 and in accordance with the Company’s accounting policies and applicable accounting
standards, a non-cash impairment charge of $3.6 million was recognised in FY24. The impairment
mostly relates to the carrying value of goodwill for the acquisition of Stellar Group in 2015 and
several factors were considered in assessing the carrying value of assets including recent business
performance, changes in market conditions and market capitalisation. As the impairment charge
is non-cash it does not impact the Company’s liquidity position. The loss before tax reported for
the year was $8.4 million, up 56.7% on FY23 predominantly due to the impairment charge.
The Company has carry-forward tax losses available in Australia to offset future taxable profits. At
30 June 2024, the Company has derecognized the deferred tax asset to a nil balance (FY23: $1.0
million) relating to carry-forward tax losses. The movement in the deferred tax asset, which has
resulted in an increase in tax expense of $1.0 million for the year, reflects the Company’s expected
ability to utilise tax losses over the short to medium term and is in line with the Company’s policy
and applicable accounting standards. Total unrecognised carry forward tax losses available to the
Group are disclosed in Note 5 of the financial report.
The Company achieved net operating cash outflows of $1.3 million (FY23: net $2.0 million cash
inflows) and had $6.1 million in cash and no debt as at 30 June 2024.
MyEco Branded Products
The MyEcoBag® branded product range continues to deliver in over 2,400 Australian stores and
is the category leader in compostable bin liner and kitchen caddy sales in both Coles and
Woolworths, with 29% market share in in 850 Coles stores1, and 46% market share in 970
Woolworths stores2. Furthermore, SECOS was awarded an initial order to supply 80 Ritchies stores
with reusable compostable check out bags, opening a new category that is aimed at replacing
paper and plastic reusable check out bags in retail stores. These have resulted in the company
achieving 33.0% growth in MyEco® branded sales compared to FY23. The Company will continue
to pursue growth in this category which is being supported by national marketing campaigns to
build brand awareness and bolster sales via our large distribution footprint in Australia.
Jewett Cameron Company (JCC) is SECOS’ exclusive distributor and strategic partner in the USA
and Canada and continues to develop the retail market for MyEcoWorld® branded products in
this region. MyEcoWorld® branded products in major online retailers such as Amazon and Costco
continue to gain momentum since their launches in Q3 FY24. In Q4 FY24 JCC was awarded the
supply of post-consumer recycled dog bags to Costco Mexico representing the company’s first
orders of this new product range, which is made by SECOS using Certified 95% recycled soft
plastic, addressing the critical need for effective recycling solutions in a world where only 9% of
plastics, including soft plastics, are recycled globally. Despite falling short of the annual sales
target in the first 12 months, SECOS and JCC agreed to renew the existing exclusive sales
agreement under the same terms, as a result of the significant work being undertaken to
establish a meaningful presence in the region. Both companies believe this positions us well for
sales growth and we look forward to working with JCC to expose SECOS to the increasing
consumer demand for sustainable alternatives to conventional plastics in the USA and Canada
markets.
1.
IRI Scan Data between 12/11/22 to 2/7/24
2.
Quantium Scan Data between 12/7/23 to 9/7/24
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
9
Operating and Financial Review (continued)
Councils and Waste Management
Council business grew by 17.5% versus PCP, strengthened through demand from Councils to
supply their food organics and garden organics programs (“FOGO”) and demand from waste
companies which require food-diversion bags. SECOS remains committed to Australian Council
initiatives to divert food waste from landfill to organic waste stations with the supply of
Compostable Kitchen Tidy Bags. The Council programs redirect food waste from land fill to
organic waste treatment which creates fertile mulch, which in turn mitigates greenhouse gas
emissions and reduces Council land fill costs.
SECOS has opposed, via formal submission, the Draft Service Standards released by Recycling
Victoria in June 2024. The Standards classifies certified compostable caddy bin liners, including
caddy liners certified to AS 4736 and AS 5810 as a non-accepted material in Victoria’s proposed
standardised four-stream household waste and recycling system. The new classification is in clear
misalignment with Australia’s broader environmental commitments. Furthermore, the non-
acceptance of certified compostable caddy bin liners is in direct conflict with one of the objectives
of the Draft Service Standards which is to reduce the volume of household recyclables and
organic material being sent to landfills. The Company is committed to preventing the Draft
Services Standards released by Recycling Victoria from being implemented to the extent they
apply to compostable caddy liners, given certified compostable caddy bin liners significantly
enhance environmental outcomes by diverting over 30% more organic household waste from
landfills. In tandem with government lobbying efforts, SECOS undertook a marketing campaign
to mobilise public support against the proposal which includes a petition, outdoor billboards,
shopping centre media and paid social media advertising. Additionally, SECOS engaged in public
relations activity and collaboration with social media influencers to maximise reach and impact.
Resin
Compostable resin sales have continued to stabilise as the Company manages through the
residual impact of difficult global logistics and market conditions that led to excess resin
inventory being held by customers. This was illustrated through sales of Q4 FY24 up 13.5% on the
previous quarter. SECOS entered into a new distribution agreement with SM Resinas, a major
distributor of resins across Latin America and new SECOS sustainability partner, with the aim of
expanding sales volumes especially across LATAM. SECOS continues to develop new resin grades
aimed at meeting the differing sustainability needs in markets globally, including a lower cost
resin and resins specifically designed for food packaging and magazine wrapping to meet
increasing competition from lower quality and cost suppliers. Initial trial orders of these new
resins have been received from several customers across several markets.
Film
Compostable and sustainable film sales currently represent a relatively small component of the
business. High-speed compostable wrapping film products remain a strategic focus for the
company as they offer opportunities to enter the growing and high-volume sustainable pallet
and magazine wrap markets. The Company is working to develop a distribution channel to
support the sale of our compostable and sustainable film products in major markets.
Research and Development and Other Investments
SECOS is working on extending its range of sustainable products to better meet the growing
need for sustainable alternatives for conventional plastics. Investments have also been made in
the research and development of new resin formulations and food packaging to address
opportunities in the market shift to compostable and sustainable food packaging. The
investment in R&D will also support the launch of new SECOS branded products including
greater value-adding products.
SECOS continues to scope R&D projects as part of its role in the Solving Plastic Waste Cooperative
Research Centre (CRC) program, where there is matched R&D funding from the Australian Federal
Government from a joint Industry University bid. SECOS’ share of the $140.6 million allocated to this
CRC will be confirmed once the R&D project scope is finalised and the Commonwealth CRC
Agreement, Partners Agreements, and Project Agreements are executed in Q1 FY25.
The Company launched a new ERP system in Australia and other international regions which is
expected to deliver improvements in cost and financial controls, efficiency, data quality and
reporting over time. The implementation of the ERP system globally is in the final stage and will
enable all regions to be on the same platform and enabling improvements in inventory and
working capital management.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
10
Outlook
We continue to pursue sales growth underpinned by the expansion of MyEco® branded products
globally through the Company’s established strategic partners and global distribution footprint.
The Company will continue to invest in research and development with the aim of launching new
and innovative sustainable products to market during the current year and beyond.
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.
Significant Changes in State of Affairs
The following significant changes in the state of affairs of the Group occurred during the year.
•
On 1 August 2023, the Company announced that it entered into an asset sale agreement
to divest its traditional plastic manufacturing assets held in Stellar Films (Malaysia) Sdn
Bhd and entered into a strategic manufacturing agreement to supply resin for
compostable pallet wrap and sustainable packaging films under the SECOS
MyEcoWorld™ brand. The assets were disposed of in FY24.
•
In December 2023, following shareholder approval at the November 2023 Annual General
Meeting, the following securities were issued to certain directors of the Company:
o
3,129,360 fully paid ordinary shares at $0.065 per share with one free attaching option
per share exercisable at $0.10 per option before expiry date of 11 April 2025, under the
terms of the share placement to institutional and sophisticated investors announced
on 7 March 2023;
o
1,384,617 options exercisable at $0.10 per option before expiry date of 11 April 2025,
under the terms of the Share Purchase Plan announced on 7 March 2023.
Risks and Uncertainties
The Company is subject to general risks as well as risks that are specific to the Group and its
business activities. The following is a list of risks which the Directors believe are or potentially will
be material to the Company’s business and future financial prospects. However, this is not a
complete list of all risks which the Company is or may be subject to.
Reliance on foreign markets
Due to the Company’s reliance on the Asian market (in particular, Malaysia and China), it is
exposed to potential disruption or volatility. For example, the Company is exposed to risks relating
to labour practices, environmental matters, costs associated with enforcing contracts, changes
to and uncertainty in the relevant legal and regulatory regime (including in relation to taxation
and foreign investment and practices of government and regulatory authorities) and other issues
in those markets. The Group continues to monitor geopolitical events and changes and is
expanding its global reach in relation to procurement and locations of customers which will
provide diversification.
Competition
The bioplastics market is competitive, and includes companies with greater financial, technical,
human, research and development and marketing resources than the Group. The Group
continues to invest in new and innovative technologies through its internal R&D function using
market data, industry guidelines and feedback from customers and other experts.
Changes in Laws and Government Policy
The Group’s operations may be adversely affected by changes in government policy and laws.
The impact of actions by governments may affect the Group's activities, including its access to
land and infrastructure, compliance with environmental regulations, and exposure to taxation
and royalties. The Group continues to monitor changes in laws and government policies with
contingency plans to combat unexpected changes that may arise.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
11
Foreign Currency Risk
Revenue and expenditure in overseas jurisdictions are subject to the risk of fluctuations in foreign
exchange markets. Any payment obligations of the Group in foreign currencies may exceed the
budgeted expenditure if there are adverse currency fluctuations against the Australian dollar.
This is mitigated by a currency risk management policy in place which sets out the guidelines on
dealing with these matters.
Environmental Risk
The Group’s business model is based on the development and manufacture of environmental
products. The Group may be subject to the market’s appetite and uptake of environmental
products and other unforeseen events, such as changes in methodology and regulations, which
may have adverse financial implications for the Group’s business model. The Group monitors
changes in regulations and market views and works closely with its customers to ensure it can
address changing positions in a timely and effective manner.
Loss of key customers
There is no guarantee that the Group will be able to retain existing customers or attract new
customers in the future. This would materially and adversely impact the Group’s operating results
and viability. The Group’s in-house R&D and sales functions enable it to service its existing
customers to address their challenges and goals and also open up new opportunities for meeting
new global customer requirements.
Reliance on key personnel
The responsibility of overseeing the day-to-day operations and the strategic management of the
Company depends substantially upon senior management and its key personnel. There can be
no assurance given that there will be no detrimental impact on the Company if one or more of
these employees cease their employment or if one or more of the Directors leaves the Board. The
management and Board have policies in place which enable retention of talent through
appropriate incentive arrangements and forward planning strategies such as succession
planning for key roles.
Events After the Reporting Date
No matter or circumstance has arisen since 30 June 2024 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 Developments 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 of Australia.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
12
Board of Directors
James Walsh
Non-Executive Chairman
Experience and Qualifications
Jim has been a Non-Executive Director since November 2018
and was appointed Chairman on 1 February 2023. Previous
executive roles include Finance Director at carpet
manufacturer Godfrey Hirst Australia Pty Ltd for 10 years, and
most recent 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 the Board and Remuneration Committee
Interest in Shares and
Options
4,222,728 Ordinary Shares
461,539 Unlisted Options
Directorships Held in Other
Listed Entities
Has not held a directorship in any other listed entity over the
last 3 years
Richard Tegoni
CEO and Executive Director
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 taken on
the role of CEO and Executive Director effective 1 February
2023.
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
Chief Executive Officer
Interest in Shares and
Options
16,029,309 Ordinary Shares
923,078 Unlisted Options
Directorships Held in Other
Listed Entities
Has not held a directorship in any other listed entity over the
last 3 years
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
13
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
Joined the Board on 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
No special responsibilities.
Interest in Shares and
Options
48,878,186 Ordinary Shares
3,129,360 Unlisted Options
Directorships Held in Other
Listed Entities
Has not held a directorship in any other listed entity over the
last 3 years
Natalya Jurcheshin
Non-Executive Director
Experience and Qualifications
Joined the Board on 25 May 2023. Natalya brings over twenty
years’ experience spanning finance, operations and strategy
throughout Australia, North America, Ukraine and Russia in
professional services, private and public companies, start-ups,
and SMEs. Natalya is a Non-Executive Director of Adacel
Technologies Limited (ASX: ADA) where she is the Chair of the
Audit & Risk Management Committee and Remuneration
Committee. She is a former CFO, Head of Operations and
Company Secretary of Circadian Technologies Limited
(renamed Opthea Limited) (ASX:OPT) and is a qualified
chartered accountant.
Special Responsibilities
Chair of Risk and Audit Committee
Interest in Shares and
Options
None
Directorships Held in Other
Listed Entities
Adacel Technologies Limited
Company Secretary
Colin Lai has held the role of Company Secretary since June 2022. Colin is a Chartered Accountant
and Fellow of the Governance Institute of Australia and is an experienced global finance and
governance executive with over ten years’ experience in public companies based in
manufacturing, financial and software sectors.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
14
Directors’ Meetings
The number of meetings of the Company’s Board of Directors and Board Committees held during
the year ended 30 June 2024 and the number of meetings attended by each Director.
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
R Tegoni
12
12
-*
4
-*
4
S Walters
12
12
-*
4
-*
4
D Haller Jr
12
11
4
4
4
4
J Walsh
12
12
4
4
4
4
N Jurcheshin
12
12
4
4
4
4
*
Denotes that the Director was not a member of the relevant committee although all directors may attend any
committee meeting
Shares Under Option
The Group has 60,708,165 unlisted options as at the date of this report.
Shares Under Performance Rights
Performance rights of the Group as at the date of this report are as follows:
Grant Date
Expiry Date
Number Under Rights
09-Sep-2021
01-Nov-2024
83,656
08-Sep-2022
01-Nov-2025
533,675
06-Sep-2023
01-Nov-2026
3,114,276
Total
3,731,607
Shares Issued on the Exercise of Options
There were no shares issued during the year ended 30 June 2024 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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
15
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
The Company’s Audit and Risk Committee (Committee) is responsible for the maintenance of audit
independence. Specifically, the Committee Charter ensures the independence of the auditor is
maintained by:
•
limiting the scope and nature of non‑audit services that may be provided; and
•
requiring that permitted non‑audit services must be pre‑approved by the Chair of
the Committee.
During the year William Buck, the Group’s auditor, has performed certain other services in
addition to the audit and review of the financial statements. The Board has considered the
non‑audit services provided during the year by the auditor and in accordance with the advice
provided by the Committee, is satisfied that the provision of those non‑audit services during the
year by the auditor is compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
•
All non‑audit services were subject to the corporate governance procedures adopted by
the Group and have been reviewed by the Committee to ensure they do not impact the
integrity and objectivity of the auditor; and
•
The non‑audit services provided do not undermine the general principles relating to
auditor independence as set out in APES 110 Code of Ethics for Professional Accountants
(including Independence Standards) as they did not involve reviewing or auditing the
auditors’ own work, acting in a management or decision‑making capacity for the Group,
acting as an advocate for the Group or jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the Group, William Buck, for audit and non‑audit
services provided during the year are set out in note 7.
Auditor’s Independence Declaration
The lead Auditor's Independence Declaration for the year ended 30 June 2024 follows 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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
16
Remuneration Report (Audited)
The remuneration report details the key management personnel remuneration arrangements
for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and
its Regulations. Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the activities of the entity, directly or
indirectly, including all directors.
The remuneration report is set out under the following main headings:
•
Principles used to determine the nature and amount of remuneration
•
Details of remuneration
•
Service agreements
•
Share-based compensation
•
Additional information
•
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The Board is responsible for the Group’s remuneration policies and practices. The role of the
Remuneration Committee is to assist the Board in ensuring 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 reviews the
appropriateness of director remuneration and monitors compliance with Board approved
remuneration practices.
In accordance with best practice corporate governance, the structure of non-executive director
and executive director remuneration is separate.
The Group’s remuneration policy has been tailored to align goal congruence between
shareholders, directors and executives.
There is an Employee Incentive Plan in place to assist the Company to attract and retain key
executives and employees. The Board believes the Employee Incentive Plan will achieve the
following key objectives:
(a)
establish a method by which Eligible Participants can participate in the future growth
and profitability of the Company;
(b)
provide an incentive and reward for Eligible Participants for their contributions to the
Company;
(c)
attract and retain a high standard of managerial and technical personnel for the
benefit of the Company; and
(d)
align the interests of Eligible Participants more closely with the interests of
Shareholders, by providing an opportunity for Eligible Participants to hold an equity
interest in the Company.
Non-executive directors remuneration
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, duties
and accountability.
ASX listing rules require that 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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
17
Remuneration Report (Continued)
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with
a level and mix of remuneration which has both fixed and variable components.
The executive remuneration and reward framework has four components:
•
base pay and non-monetary benefits
•
short-term performance incentives or discretionary cash bonus
•
share-based payments
•
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are
reviewed annually by the Remuneration Committee based on individual and business unit
performance, the overall performance of the consolidated entity and comparable market
remunerations.
The short-term incentives are designed to align the targets of the business units with the
performance hurdles of executives. Payments are granted to executives based on specific annual
targets and key performance indicators ('KPI's') being achieved. KPI's vary between executives
but are linked to revenue, gross margins, earnings before interest, depreciation and amortization
(‘EBITDA’), strategic and other operational metrics. In the prior year this was a discretionary cash
bonus.
The long-term incentives include long service leave and share-based payments. Share based
payments are in the form of performance rights. The Remuneration Committee reviewed the
long-term equity-linked performance incentives specifically for executives during the year ended
30 June 2024.
Performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the consolidated
entity. A portion of cash bonus and incentive payments are dependent on financial metrics
including revenue, gross margins and EBITDA. The remaining portion of the cash bonus and
incentive payments are at the discretion of the Remuneration Committee. Refer to the section
'Additional information' below for details of the earnings and total shareholders return for the last
five years.
Use of remuneration consultants
Remuneration consultants have not been used in assessing and calculating Director and key
management personnel remuneration in the year.
Voting and comments made at the company’s 2023 Annual General Meeting (‘AGM’)
The resolution to adopt the remuneration report for the year ended 30 June 2023 was passed at
the 2023 AGM, which occurred on 17 November 2023. The Company did not receive any specific
feedback at the AGM regarding its remuneration practices.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
18
Remuneration Report (Continued)
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel (KMP) of the consolidated entity are
set out in the following tables.
The key management personnel of the consolidated entity consisted of the following personnel
of SECOS Group Ltd:
•
Richard Tegoni - Chief Executive Officer and Executive Director
•
Stephen Walters - Executive Director
•
James Walsh - Non-Executive Chairman
•
Donald Haller Jr - Non-Executive Director
•
Natalya Jurcheshin - Non-Executive Director
•
Colin Lai – Chief Financial Officer and Company Secretary
2024
Short Term
Benefits
Post-
employment
Benefits
Long
Term
Benefits
Share
based
Payments
Total
Salary, Fees
and Annual
Leave
Discretionary
Cash Bonus1
Pension and
Super-
annuation
LSL
$
$
$
$
$
$
Non-Executive Directors
J Walsh
80,000
-
-
-
-
80,000
D Haller Jr
60,000
-
-
-
-
60,000
N Jurcheshin
60,000
-
-
-
-
60,000
Executive Directors
R Tegoni
220,156
15,287
25,136
874
7,704
269,157
S Walters
191,011
7,150
21,707
2,796
6,933
229,597
Other Key Management Personnel
I Stacey
-
-
-
-
-
-
C Lai
293,737
10,147
27,399
1,446
13,095
345,824
Total
904,904
32,584
74,242
5,116
27,732
1,044,578
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
19
Remuneration Report (Continued)
2023
Short Term
Benefits
Post-
employment
Benefits
Long
Term
Benefits
Share
based
Payments
Total
Salary,
Fees and
Annual
Leave
Discretionary
Cash Bonus1
Pension and
Super-
annuation
LSL
$
$
$
$
$
$
Non-Executive Directors
J Walsh2
68,333
-
-
-
-
68,333
D Haller Jr
60,000
-
-
-
-
60,000
N Jurcheshin3
6,087
-
-
-
-
6,087
Executive Directors
R Tegoni4
159,474
-
9,997
223
-
169,694
S Walters
191,215
3,515
19,950
2,474
2,112
219,266
Other Key Management Personnel
I Stacey5
140,915
-
12,947
-
-
153,862
C Lai
298,417
5,180
25,292
977
3,112
332,978
Total
924,441
8,695
68,186
3,674
5,224
1,010,220
(1)
Based on performance on various projects and services and Group financial performance metrics
(2)
Appointed Non-Executive Chairman on 1 February 2023
(3)
Appointed on 25 May 2023
(4)
Appointed Chief Executive Officer and Executive Director on 1 February 2023 and was previously the Executive
Chairman
(5)
Resigned on 1 February 2023. On resigning, all entitlements to share-based payments were forfeited. He was paid
accrued annual leave on resignation.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
20
Remuneration Report (Continued)
The proportion of remuneration linked to performance and the fixed proportion are as per below.
Non-executive directors are not eligible to participate in short term or long-term incentive plans.
Name
Fixed remuneration
At Risk – Short Term
At Risk – Long Term
2024
2023
2024
2023
2024
2023
Non-Executive Directors
J Walsh
100%
100%
0%
0%
0%
0%
D Haller Jr
100%
100%
0%
0%
0%
0%
N Jurcheshin
100%
100%
0%
0%
0%
0%
Executive Directors
R Tegoni
91%
100%
6%
0%
3%
0%
S Walters
94%
97%
3%
2%
3%
1%
Other Key Management Personnel
C Lai
93%
97%
3%
2%
4%
1%
Cash bonuses are dependent on meeting defined performance measures. The amount of the
bonus is determined having regard to the satisfaction of performance measures and weightings.
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Cash Bonus Paid/ Payable
Cash Bonus Forfeited
2024
2023
2024
2023
Non-Executive Directors
J Walsh
-
-
-
-
D Haller Jr
-
-
-
-
N Jurcheshin
-
-
-
-
Executive Directors
R Tegoni
40%
-
60%
-
S Walters
22.5%
33%
77.5%
67%
Other Key Management Personnel
C Lai
32.5%
33%
67.5%
67%
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
21
Remuneration Report (Continued)
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in
service agreements. Details of these agreements are as follows:
Name
Title
Commenced
Term of agreement
Richard Tegoni
Chief Executive Officer
and Executive Director
1 February 2023
Executive Service
Agreement
Three months’
termination notice
period
Stephen Walters
Executive Director
21 April 2015
Executive Service
Agreement
Three months’
termination notice
period
James Walsh
Non-Executive
Chairman
15 November 2018
Letter of appointment
Donald Haller Jr
Non-Executive Director
1 September 2016
Letter of appointment
Natalya
Jurcheshin
Non-Executive Director
25 May 2023
Letter of appointment
Colin Lai
Chief Financial Officer
and Company Secretary
14 June 2022
Executive Service
Agreement
Three months’
termination notice
period
Key management personnel have no entitlement to termination payments in the event of
removal for misconduct.
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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
22
Remuneration Report (Continued)
Share based compensation
Issue of shares
There were no shares issued to KMP as part of share based compensation.
Options
No options were issued as part of remuneration during the year.
Performance rights
In September 2023, the Company issued 3,114,276 performance rights under the Employee Share
Incentive Plan. Of these 2,074,534 were 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 vesting date of 30 September 2026. The performance vesting conditions
are based on FY26 Company performance in relation to the following metrics:
•
Revenue
•
Earnings before interest, tax, depreciation and amortisation
•
Return on invested capital
Name
Number of
performance
rights
granted
Grant
date
Expiry
date
Vesting
Date
Fair Value
per right
Exercise
Price
Probability
of achieving
non-market
conditions
R Tegoni
746,007
06-Sep-
2023
01-Nov-
2026
30-Sep-
2026
5.1 cents
-
75%
S Walters
424,412
06-Sep-
2023
01-Nov-
2026
30-Sep-
2026
5.1 cents
-
75%
C Lai
904,115
06-Sep-
2023
01-Nov-
2026
30-Sep-
2026
5.1 cents
-
75%
Additional information
The following table shows the gross revenue and profits for the last 5 years for the Group on a
continued and discontinued operations basis, as well as the share prices at the end of the
respective financial years.
$’000
FY241
FY231
FY22
FY21
FY20
Revenue
16,158
22,836
31,043
30,081
21,039
Profit/(loss) before tax
(8,324)
(5,751)
(2,913)
537
(1,186)
Profit/(loss) after tax
(9,327)
(6,750)
(3,085)
2,590
(1,186)
1. Includes continuing and discontinued operations
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
FY24
FY23
FY22
FY21
FY20
Share price at financial year end (cents)
2.9
5.0
10.0
26.6
6.0
Total dividends declared (cents per share)
-
-
-
-
-
Basic earnings per share (cents per share)
(1.6)
(1.2)
(0.6)
0.5
(0.3)
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
23
Remuneration Report (Continued)
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally
related parties, is set out below:
Opening
Balance
1 July 2023
Received as
Compensation
On market
transaction
Change as a
result of
resignation
Closing
Balance
30 June 2024
R Tegoni
15,529,309
-
500,000
-
16,029,309
S Walters
29,044,639
-
-
-
29,044,639
J Walsh
4,222,728
-
-
-
4,222,728
D Haller Jr
45,748,826
-
3,129,360
-
48,878,186
N Jurcheshin
-
-
-
-
-
C Lai
-
-
-
-
-
Option holding
The number of options held in the company held during the financial year by each director and
other members of key management personnel of the consolidated entity, including their
personally related parties, is set out below:
Opening
Balance
1 July 2023
Received as
Compensation
On market
transaction
Change as a
result of
resignation
Closing
Balance
30 June 2024
R Tegoni
-
-
923,078
-
923,078
S Walters
-
-
-
-
-
J Walsh
-
-
461,539
-
461,539
D Haller Jr
-
-
3,129,360
-
3,129,360
N Jurcheshin
-
-
-
-
-
C Lai
-
-
-
-
-
The on-market transactions relate to a Share Purchase Plan which occurred in March 2023 (refer
to 7 March 2023 Australian Stock Exchange Announcement), whereupon investors under the
placement received one free attaching option for every one share subscribed. The options are
unlisted, with an exercise price of $0.10 per share, exercisable within a two-year term. Shareholder
approval was required to issue the options to the KMP who took part in the Share Purchase Plan
which occurred at the AGM on 17 November 2023.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
24
Remuneration Report (Continued)
Performance rights
The number of performance rights held in the company held during the financial year by each
director and other members of key management personnel of the consolidated entity, including
their personally related parties, is set out below:
Opening
Balance
1 July 2023
Received as
Compensation
Vested and
Exercised
Change as a
result of
resignation
Closing
Balance
30 June 2024
R Tegoni
-
746,007
-
-
746,007
S Walters
87,189
424,412
-
-
511,601
C Lai
128,488
904,115
-
-
1,032,603
Total
215,677
2,074,534
-
-
2,290,211
The performance rights held have the following inputs:
Grant date
Expiry date
Vesting Date
Fair Value
per right
Exercise
Price
Probability of
achieving
non-market
conditions
09-Sep-2021
01-Nov-2024
30-Sep-2024
33.5 cents
-
75%
08-Sep-2022
01-Nov-2025
30-Sep-2025
12.0 cents
-
75%
06-Sep-2023
01-Nov-2026
30-Sep-2026
5.1 cents
-
75%
This concludes the remuneration report, which has been audited.
This report is made in accordance with a resolution of directors, pursuant to section 209(2)(a) of
the Corporations Act 2001.
On behalf of the directors
Jim Walsh
Chairman
21 August 2024
Melbourne, Australia
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.
Lead Auditor’s Independence Declaration under Section 307C of
the Corporations Act 2001
To the directors of SECOS Group Limited
As lead auditor for the audit of SECOS Group Limited for the year ended 30 June 2024, I declare that, to
the best of my knowledge and belief, 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.
This declaration is in respect of SECOS Group Limited and the entities it controlled during the year.
William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136
A. A. Finnis
Director
Melbourne, 21 August 2024
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
26
CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
For the Year Ended 30 June 2024
Notes
2024
2023
$’000
$’000
Sales
3
14,449
15,717
Cost of sales
(11,337)
(13,126)
Gross profit
3,112
2,591
Other Income
3
281
396
Employment related expense
(3,492)
(2,961)
Marketing and distribution expenses
(1,818)
(1,811)
Administration expense
(922)
(1,643)
Legal and compliance
(637)
(490)
Impairment of intangible assets
(3,568)
-
Depreciation and amortisation expense
(1,349)
(1,252)
Finance costs
(53)
(220)
Loss before tax from continuing operations
(8,446)
(5,390)
Income tax expense
5
(978)
(991)
Loss for the year after tax from continuing operations
(9,424)
(6,381)
Discontinued operations
Profit/(Loss) after income tax from discontinued operations
25
97
(369)
Loss after tax for the year attributed to the owners of
SECOS Group
(9,327)
(6,750)
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
192
(509)
Total comprehensive loss for the year
(9,135)
(7,259)
Loss per share from continuing operations attributable to
the owners of SECOS Group
Basic / diluted loss per share
(1.59) cents
(1.16) cents
Profit/ (Loss) per share from discontinued operations
attributable to the owners of SECOS Group
Basic / diluted loss per share
0.02 cents (0.06) cents
Loss per share for loss attributable to the owners of
SECOS Group
Basic / diluted loss per share
(1.57) cents
(1.22) cents
The accompanying notes form part of these financial statements.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
27
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
As at 30 June 2024
Notes
2024
2023
$’000
$’000
Current Assets
Cash at bank
6,108
8,424
Trade and other receivables
9
3,246
4,033
Inventories
10
3,169
4,095
Prepayments
437
630
Other assets
34
34
Total Current Assets
12,994
17,216
Non-Current Assets
Deferred tax assets
5
-
960
Plant and equipment
11, 20
3,994
4,535
Right-of-use asset
12
1,065
1,645
Intangible assets
14
-
3,591
Other assets
-
15
Total Non-Current Assets
5,059
10,746
Total Assets
18,053
27,962
Current Liabilities
Trade and other payables
15
1,556
1,807
Employee benefits
264
290
Accrued expenses
965
861
Lease liability
13
627
780
Total Current Liabilities
3,412
3,738
Non-Current Liabilities
Employee benefits
25
30
Lease liability
13
582
1,061
Total Non-Current Liabilities
607
1,091
Total Liabilities
4,019
4,829
Net Assets
14,034
23,133
Equity
Issued capital
16
48,447
48,447
Reserves
17
(523)
(751)
Accumulated losses
(33,890)
(24,563)
Total Equity
14,034
23,133
The accompanying notes form part of these financial statements.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
28
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the Year Ended 30 June 2024
Issued
capital
Accumulated
losses
Share based
payment
reserve
Foreign
currency
translation
reserves
Total
Equity
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2023
48,447
(24,563)
42
(793)
23,133
Loss for the Year
-
(9,327)
-
-
(9,327)
Other Comprehensive
income for the year
-
-
-
192
192
Total comprehensive loss
for the year
-
(9,327)
-
192
(9,135)
Transactions with owners in
their capacity as owners
Shares issued during the
year net of costs
-
-
-
-
-
Share based payments
-
-
36
-
36
Balance at 30 June 2024
48,447
(33,890)
78
(601)
14,034
Issued
capital
Accumulated
losses
Share based
payment
reserve
Foreign
currency
translation
reserves
Total
Equity
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2022
44,730
(17,813)
36
(284)
26,669
Loss for the Year
-
(6,750)
-
-
(6,750)
Other Comprehensive
income for the year
-
-
-
(509)
(509)
Total comprehensive loss
for the year
-
(6,750)
-
(509)
(7,259)
Transactions with owners in
their capacity as owners
Shares issued during the
year net of costs
3,717
-
-
-
3,717
Share based payments
-
-
6
-
6
Balance at 30 June 2023
48,447
(24,563)
42
(793)
23,133
The accompanying notes form part of these financial statements.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
29
CONSOLIDATED STATEMENT OF
CASH FLOWS
For the Year Ended 30 June 2024
Notes
2024
2023
$’000
$’000
Cash Flows from Operating Activities
Receipts from customers
15,843
19,698
Payments to suppliers and employees
(18,212)
(18,823)
Finance costs
(53)
(220)
Net operating cash generated by/(used in) continuing operations
(2,422)
655
Net operating cash generated by/(used in) discontinued operations
1,135
1,363
Net Cash Inflow/(outflow) from Operating Activities
21
(1,287)
2,018
Cash Flows from Investing Activities
Purchase of plant and equipment
(499)
(641)
Net cash used in continuing operations’ investing activities
(499)
(641)
Net cash generated by discontinued operations’ investing activities
197
2
Net Cash Outflow from Investing Activities
(302)
(639)
Cash Flows from Financing Activities
Proceeds from issues of ordinary shares (net of costs)
-
3,717
Lease payments
(610)
(520)
Net cash generated by/(used in) continuing operations’ financing
activities
(610)
3,197
Net cash used in discontinued operations’ financing activities
(109)
(259)
Net Cash Inflow/(outflow) from Financing Activities
(719)
2,938
Net (decrease)/increase in cash held
(2,308)
4,317
Increase/(decrease) in cash due to changes in foreign exchange rate
(8)
(15)
Cash at the beginning of the financial year
8,424
4,122
Cash at the end of the financial year
6,108
8,424
The accompanying notes form part of these financial statements.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
30
NOTES TO THE FINANCIAL STATEMENTS
Note 1
Material Accounting Policy Information
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 applicable) under the option available to the company under ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191.
This general-purpose financial report has been prepared on a going concern basis following the
directors’ consideration of the operating plans and budgets for the period of 12 months from the
date of signing the financial statements.
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 21 August 2024 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 2023.
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
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of
SECOS Group Limited (‘Company’ or ‘parent entity’) as at 30 June 2024 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.’
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. The accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
31
Note 1 Material Accounting Policy Information (continued)
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.
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 foreign
currency 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 26 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 income tax expense or revenue for the period is the tax payable or receivable on the current
period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to temporary differences and to unused
tax losses.
The current income tax charge is calculated using tax rates that have been enacted or are
substantially enacted at the end of the reporting period in the countries where the subsidiaries
operate and generate taxable income.
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 for
deductible temporary differences and unused tax losses to the extent that it is probable that
future tax amounts will be available to utilize those temporary differences and tax losses.
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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
32
Note 1 Material Accounting Policy Information (continued)
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.
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
Depreciation Rate
Plant and Machinery
10% to 33%
Office Equipment and Motor Vehicles
7.5% to 40%
Leasehold Improvements
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 of 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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
33
Note 1 Material Accounting Policy Information (continued)
h.
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.
i.
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 and other comprehensive income.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives
or more frequently if events or changes in circumstances indicate that they might be impaired.
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.
j.
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.
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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
34
Note 1 Material Accounting Policy Information (continued)
k.
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 a 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.
l.
Discontinued Operation
A discontinued operation is a component of the Group that has been disposed of or is classified
as held for sale and that represents a separate major line of business or geographical area of
operations, is part of a single co-ordinated plan to dispose of such a line of business or area of
operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued
operations are presented separately on the face of the statement of profit or loss and other
comprehensive income.
m.
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; determines 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 recognises 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 estimated concessions provided to the
customer such as discounts, rebates and refunds, any potential add-ons or bonuses from the
customer and any other contingent events. Variable consideration is to be recognised only if it is
highly improbable that a significant reversal of this amount will 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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
35
Note 1 Material Accounting Policy Information (continued)
n.
Trade and other receivables
Trade receivables are initially recognised at fair value less any allowance for expected credit losses.
Trade receivables are generally due for settlement within 30 to 60 days. In accordance with AASB 9
‘Financial Instruments’, the Group has applied the simplified approach to measuring expected
credit losses which uses a lifetime expected credit loss allowance (‘ECL’) for all trade receivables.
Specific allowances are made for any expected credit losses based on a review of all outstanding
amounts and individual receivables are written off when management deems them
unrecoverable. The loss allowances for financial assets are based on assumptions about risk of
default and expected loss rates and the Group uses judgement in making these assumptions based
on the Group’s history and existing market conditions as well as forward-looking estimates.
o.
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.
p.
New Accounting Standards and interpretations issued not yet
mandatory or early adopted
The below are Accounting Standards and Interpretations issued by the AASB that are not yet
mandatorily applicable to the Group which we do not expect to have material impact in
future reporting:
Accounting Standards and Interpretations
Applicable to annual reporting
periods beginning on or after
AASB 2020-1 Amendments to Australian Accounting Standards
– Classification of Liabilities as Current or Non-current
1 Jan 2024
AASB 2014-10 Sale or contribution of Assets between an
Investor and its Associate or Joint Venture
1 Jan 2025
q.
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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
36
Note 1 Material Accounting Policy Information (continued)
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.
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.
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(i).
Impairment exists when the carrying value of an asset or cash generating unit (CGU) 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 funds, 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 discounted cash flow (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
temporary differences and unused tax losses. The Directors and management of the Group have
made a significant judgement 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 are determined to be the share price on the date that the
rights are issued as there is no exercise price. There are multiple non-market performance vesting
conditions allocated to each tranche of 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. Refer to note 18 for further information.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
37
Note 2
Parent Entity
The individual financial statements for the parent entity show the following aggregate amounts:
2024
2023
$’000
$’000
Statement of Financial Position
Assets
Current Assets
4,714
4,829
Non-Current Assets
37,861
40,140
Total Assets
42,575
44,969
Liabilities
Current Liabilities
993
592
Non-Current Liabilities
19
11
Total Liabilities
1,012
603
Equity
Issued capital
97,515
97,515
Accumulated losses
(55,952)
(53,149)
Total Equity
41,563
44,366
Statement of Comprehensive Income
Loss for the year after tax
(2,828)
(2,397)
Total comprehensive income/(loss)
(2,828)
(2,397)
Guarantees
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. As at 30 June 2024 there is a bank guarantee of $0.03
million (2023: $0.03 million).
Contingent liabilities
SECOS Group Limited had no contingent liabilities as at 30 June 2024 (2023: NIL).
Contractual commitments
At 30 June 2024, SECOS Group Limited had not entered into any contractual commitments for
the acquisition of property, plant and equipment (2023: 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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
38
Note 3
Revenue
2024
2023
Note
$’000
$’000
Revenue
Sales of goods at a point in time
20
14,449
15,717
Total sales revenue
14,449
15,717
Other Income
Sundry income and subsidies
281
396
Total other income
281
396
Note 4
Expenses for the Year
2024
2023
$’000
$’000
The Profit/(loss) before income tax includes the
following items of expenses:
Research, development, and patent costs
338
380
Superannuation expense
213
173
Depreciation of right-of-use assets
690
851
Depreciation of plant and equipment
759
713
Finance (income)/cost for leases
(15)
185
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
39
Note 5
Income Tax Expense
Income tax recognised in profit or loss
2024
2023
$’000
$’000
Current tax expense
(18)
(33)
Deferred tax expense
(960)
(958)
Income tax expense
(978)
(991)
Reconciliation of income tax expense to prima facie tax on accounting
profit or loss
2024
2023
$’000
$’000
Loss before income tax
(8,446)
(5,390)
Prima facie income tax benefit at the Australian
tax rate of 25% (2023: 25%)
2,112
1,347
Overseas tax rate differential
(25)
(57)
Non-deductible impairment of goodwill
(883)
-
Other Current year tax losses not brought into
account
(1,191)
(1,290)
Reversal of previously booked tax losses
(960)
(958)
Withholding tax
(18)
(26)
Other
(12)
(7)
Total income tax expense recognised in the current period
(978)
(991)
Deferred tax assets
2024
2023
$’000
$’000
Deferred tax asset comprises temporary differences
attributable to:
Recognition of tax losses carried forward
-
960
Deferred tax asset
-
960
Movements:
Opening balance
960
1,918
Write down of deferred tax assets
(960)
(958)
Closing balance
-
960
2024
2023
$’000
$’000
Tax benefit carried forward at applicable tax rate
13,969
12,281
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
40
Note 5 Income Tax Expense (continued)
The Group has carried forward tax losses that can be offset against taxable profit at each tax
jurisdiction, subject to probable future taxable profit and in accordance with the laws of each tax
jurisdiction. As of 30 June 2024 the carried forward tax losses for the Australian jurisdiction
amounted to $11.2 million. There is no deferred tax asset recognised for any carry forward tax
losses at 30 June 2024 (30 June 2023: $960 thousand). An assessment of the deferred tax asset of
$960 thousand was performed during the year based on the future cash flows used in the
impairment test described in Note 14, and it was considered unlikely that the full amount would
be recoverable in the first three years of the projection. As a result, an impairment of $960
thousand was recognised in FY24.
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.
2024
2023
$
$
Short-term employee benefits
937,488
933,136
Post-employment benefits
74,242
68,186
Long-term employee benefits
5,116
3,674
Share based payments
27,732
5,224
Total
1,044,578
1,010,120
Note 7
Remuneration of Auditors
2024
2023
$
$
Remuneration of the auditor of the parent entity (William Buck) for:
•
auditing or reviewing the financial statements
95,000
90,000
•
research and development tax compliance services
42,000
25,000
Remuneration of other auditors of subsidiaries for:
•
auditing or reviewing the financial statements of subsidiaries
8,904
9,969
Total
145,904
124,969
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
41
Note 8
Earnings/Loss Per Share
2024
2023
$’000
$’000
Loss used to calculate basic/diluted EPS from continuing
operations attributable to the owners of SECOS Group
(9,424)
(6,381)
Profit/(loss) used to calculate basic/diluted EPS from discontinued
operations attributable to the owners of SECOS Group
97
(369)
Loss used to calculate basic/diluted EPS attributable to the
owners of SECOS Group
(9,327)
(6,750)
Number
Number
Weighted average number of ordinary shares used in the
calculation of basic and diluted loss per share1
595,267,651
551,727,297
Loss per share from continuing operations attributable to
the owners of SECOS Group
(1.59 cents)
(1.16 cents)
Profit/(Loss) per share from discontinued operations
attributable to the owners of SECOS Group
0.02 cents
(0.06 cents)
Loss per share attributable to the owners of SECOS Group
(1.57 cents)
(1.22 cents)
1
The potential vesting of performance rights and exercise of options are not included in diluted EPS as the impacts
are anti-dilutive given the Group made a loss
Note 9
Trade And Other Receivables
2024
2023
$’000
$’000
Current
Trade receivables
2,627
4,075
Less: Allowance for expected credit losses
(179)
(479)
2,448
3,596
Other receivables
798
437
Total
3,246
4,033
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
42
Note 9
Trade And Other Receivables (continued)
Allowance for expected credit losses
The ageing of the receivables and allowance for expected credit losses provided for the above are
as follows:
Trade
Receivables
<30
31-60
61-90
>90
2024
Trade receivables
2,627
1,117
451
322
738
Expected credit loss rate
-
-
-
-
24.3%
Allowance for expected credit losses
(179)
-
-
-
(179)
Total
2,448
1,117
451
322
559
2023
Trade receivables
4,075
1,742
746
152
1,435
Expected credit loss rate
-
-
-
-
33.3%
Allowance for expected credit losses
(479)
-
-
-
(479)
Total
3,596
1,742
746
152
956
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 the $0.2 million allowance for expected credit
losses as prudent in 2024 (2023: $0.5 million) at the reporting date.
Movement in the expected credit loss for receivables
Expected credit loss
Opening
Balance
Charge for
the Year
Amounts
Write off/back
Closing
Balance
$’000
$’000
$’000
$’000
2024
(479)
(21)
321
(179)
2023
-
(552)
73
(479)
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 2024 (2023: Nil).
Note 10
Inventories
2024
2023
$’000
$’000
Current
Raw materials including work in progress
1,242
2,483
Finished goods
2,128
2,307
Provision for obsolescence
(201)
(695)
Total
3,169
4,095
Inventories are held at the lower of cost or net realisable value. The decrease in total inventories
reflects decreased sales activity.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
43
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 years are set out below.
2024
Plant,
Machinery and
Equipment
Leasehold
Improvements
Construction in
Progress
Total
$’000
$’000
$’000
$’000
Opening Balance
4,170
30
335
4,535
Additions
499
-
-
499
Disposals
(268)
-
-
(268)
Transfers
335
-
(335)
-
Depreciation Expenses
(759)
-
-
(759)
Exchange Rate Variation
(13)
-
-
(13)
Closing Balance
3,964
30
-
3,994
As at 30 June 2024
Cost
7,734
108
-
7,842
Accumulated
Depreciation
(3,770)
(78)
-
(3,848)
Closing Balance
3,964
30
-
3,994
2023
Plant, Machinery
and Equipment
Leasehold
Improvements
Construction
in Progress
Total
$’000
$’000
$’000
$’000
Opening Balance
4,093
32
578
4,703
Additions
614
-
25
639
Disposals
-
-
-
-
Transfers
268
-
(268)
-
Depreciation Expenses
(711)
(2)
-
(713)
Exchange Rate Variations
(94)
-
-
(94)
Closing Balance
4,170
30
335
4,535
As at 30 June 2023
Cost
16,566
108
335
17,009
Accumulated
Depreciation
(12,396)
(78)
-
(12,474)
Closing Balance
4,170
30
335
4,535
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
44
Note 12
Non-Current Assets - Right-Of-Use Assets
2024
2023
$’000
$’000
Opening Balance
1,645
2,266
Additions
175
286
Depreciation
(690)
(851)
Exchange rate variations
(65)
(56)
Closing Balance
1,065
1,645
Cost
4,503
4,175
Accumulated Depreciation
(3,438)
(2,530)
Closing Balance
1,065
1,645
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.
Note 13
Lease Liability
2024
2023
$’000
$’000
Lease liability – current
627
780
Lease liability – non-current
582
1,061
Lease liability
1,209
1,841
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
45
Note 14 Intangible Assets
Goodwill
Product
Development
Total
2024
$’000
$’000
$’000
Opening Balance
3,532
59
3,591
Additions
-
-
-
Impairment
(3,532)
(36)
(3,568)
Amortisation Expenses
-
(23)
(23)
Closing Balance
-
-
-
As at 30 June 2024
Cost
3,532
167
3,699
Accumulated Amortisation
(3,532)
(167)
(3,699)
Closing Balance
-
-
-
Goodwill
Product
Development
Total
2023
$’000
$’000
$’000
Opening Balance
3,532
90
3,622
Additions
-
-
-
Impairment
-
-
-
Amortisation Expenses
-
(31)
(31)
Closing Balance
3,532
59
3,591
As at 30 June 2023
Cost
3,532
167
3,699
Accumulated Amortisation
-
(108)
(108)
Closing Balance
3,532
59
3,591
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
46
Note 14
Intangible Assets (Continued)
Impairment Disclosures
The Group first recognised goodwill on its balance sheet following the acquisition of Stellar Film
Group in April 2015. Since then and as required by AASB 136 - impairment of assets, 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.
The Group has determined the recoverable amount of the Group’s cash generating unit 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, with a terminal value
applied from year five of the model into perpetuity. The cash flows are discounted using an
estimated discount rate based on a capital asset pricing model. Revenue has been projected
using the assumptions described below. 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 Company.
A set of assumptions were applied in the value-in-use-calculation for the purpose of the
impairment test. These assumptions are not an exact reflection of management expectations of
future performance of the CGU.
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% (2023: 2.5%). The weighted average growth rate
over the 5-year forecast period was 13.0% (2023: 15.0%).
Revenue is forecast to alter in line with relevant changes to the Group’s direct manufacturing
cost.
Projected cash flows have been discounted using a pre-tax discount rate of 14.75% (2023: 14.50%).
As a result of the above analysis the recoverable amount as determined by the value-in-use model
was below the carrying value of the CGU’s assets. As a result, amounts capitalised to goodwill and
product development were impaired to $nil as at 30 June 2024. Any change to the assumptions
described above would result in a different charge being recorded by the Group.
Note 15
Trade And Other Payables
2024
2023
$’000
$’000
Current
Trade payables
1,029
1,315
Sundry payables
527
492
Total
1,556
1,807
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
47
Note 16
Issued Capital
a)
Share Capital
2024
2023
$’000
$’000
Ordinary – fully paid shares
48,447
48,447
b)
Movements in Ordinary Share Capital
Date
Number of
Shares
$/share
Amount ($’000)
01-Jul-23
Balance
593,480,667
-
48,447
4-Dec-23
Placement1
3,129,360
0.065
-
30-Jun-24
Balance
596,610,027
-
48,447
1
Subscription by Non-Executive Director Donald Haller Jr for US$137,500 (A$203,408) in the March 2023
placement, which was approved by shareholders at the Company’s Annual General Meeting on 17 November
2023. The funds were received by the Company in March 2023.
c)
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.
d)
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 significant
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 Securities Exchange
(ASX) listing rule 7.1 and 7.1A placement capacity.
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
Reserves comprise a foreign currency translation reserve which records exchange differences
arising on translation of a foreign controlled subsidiary as described in Note 1(j) and a share based
payments reserve.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
48
Note 18
Share Based Payments
The Company has an Employee Share Incentive Plan which was established to encourage
employees of the consolidated entity, including directors, to share in the ownership of the
consolidated entity, in order to promote their long-term success. The Plan offers selected
employees of the consolidated entity, including directors, an opportunity to share in the growth
and profits of the consolidated entity alongside the Company’s shareholders.
During the financial year ended 30 June 2024, there were 3,114,276 performance rights (“rights”)
issued to employees and executive directors of the Company (30 June 2023: 822,774). The 1,170,419
rights issued to the executive directors were approved at the Annual General Meeting held on
17 November 2023.
There are multiple non-market performance vesting conditions allocated to each tranche of
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 5.1 cents as there is no exercise price.
The following tables illustrate the movements in performance rights, during the current financial
year and the comparative financial year.
Number
of rights
Number
of rights
2024
2023
Outstanding at the beginning of the financial year
700,987
661,854
Granted
3,114,276
822,774
Exercised / Forfeited
(83,656)
(783,641)
Outstanding at the end of the financial year
3,731,607
700,987
Grant date
Expiry date
Exercise
price
Balance at
the start
of the
period
Granted Exercised
Expired/
forfeited/
other
Balance at
the end of
the period
09-Sep-2021
01-Nov-2023
-
83,656
-
-
(83,656)
-
09-Sep-2021
01-Nov-2024
-
83,656
-
-
-
83,656
08-Sep-2022
01-Nov-2025
-
533,675
-
-
-
533,675
06-Sep-2023
01-Nov-2026
-
-
3,114,276
-
-
3,114,276
Total
-
700,987
3,114,276
-
(83,656)
3,731,607
Note 19
Contingent Liabilities and Contingent Assets
Estimates of the potential financial effect of contingent liabilities that may become payable:
2024
2023
$’000
$’000
Bank Guarantees
34
34
There were no contingent assets as at 30 June 2024 (2023: NIL).
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
49
Note 20
Operating Segments
Identification of reportable operating segment
Historically Group management viewed the business as a single operating segment being the
manufacture and distribution of polyethylene films, and renewable resource-based resins and
finished products. During the time up until 30 June 2023 the management team prepared
internal reports with a multi-dimensional view with emphasis on Group consolidated results that
were used by the Board of Directors in assessing the performance and in determining the
allocation of resources of the Group.
Following the change of CEO during the FY23 financial year and the repositioning and
transitioning of the Group to a manufacturer and distributor of biopolymer materials
management reviewed its operations on 1 July 2023 and identified two distinct operating
segments being, manufacturer and distribution of traditional plastic (polyethylene) products and
the manufacture and distribution of renewable resource-based resins and finished products.
During the period to 30 June 2024 the Company entered into an asset sale agreement to divest
its traditional plastic manufacturing assets held in Stellar Films (Malaysia) Sdn Bhd, resulting in
the traditional plastics segment being identified as a discontinued operation as at the reporting
date.
The continuing operations of the Group as at 30 June 2024 reflects the single operating segment
with the principal activities being the manufacture and distribution of renewable resource-based
resins and finished products as disclosed in the Statement of Profit or Loss and Other
Comprehensive Income. The is how the Chief Operating Decision Makers of the Group view the
business on a monthly basis.
This note excludes the discontinued operations of Stellar Films (Malaysia) Sdn Bhd.
Sales Revenue by geographical region (external customers)
2024
2023
$’000
$’000
Oceanic
8,203
6,869
Asia
2,883
4,058
Americas
1,840
3,259
Europe
1,493
1,355
Africa
30
177
Total Revenue
14,449
15,718
Major customers
The Group has a number of customers to whom it provides products. The Group has supplied a
single external customer who accounted for 11.0% (2023: 11.5%) of external revenue.
Plant and equipment by geographical region
2024
2023
$’000
$’000
The geographic location of segment assets (plant
and equipment) is disclosed below:
Oceanic
791
870
Asia
3,203
3,665
Total Assets
3,994
4,535
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
50
Note 21
Cash Flow Information
Reconciliation of Cash Flow from Operations with Profit/(Loss) after Income
Tax on a continued and discontinued operations basis
2024
2023
$’000
$’000
Loss for the year after tax
(9,327)
(6,750)
Non-Cash Items
Provision for inventory obsolescence
119
695
Allowance for expected credit loss
21
479
Impairment of intangibles
3,568
-
Impairment of deferred tax assets
960
958
Depreciation and amortisation
1,472
1,595
Share based payments expense
36
6
Unrealised foreign currency differences
276
(336)
Movements in assets and liabilities
Decrease/(increase) in inventories
807
2,484
Decrease/(increase) in receivables, prepayments and other assets
958
3,191
(Decrease)/increase in payables, accrued expenses and provisions
(177)
(304)
Net cash inflow/(outflow) from operating activities
(1,287)
2,018
Note 22
Events After The Reporting Date
No matter or circumstance has arisen since 30 June 2024 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 23
Related Parties
Parent Entity
SECOS Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in Note 26.
Key management personnel
Disclosures relating to key management personnel are set out in Note 6 and the remuneration
report in the directors’ report. There were no other related party transactions.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
51
Note 24 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 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 orders 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. Aggregates of such amounts are as detailed in Note 9. Credit risk
arising on cash balances is considered low.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
52
Note 24
Financial Instruments (continued)
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.
A summary of the entity’s financial assets and liabilities is shown in the table below:
Year ended 30 June 2024
<6 months
6-12 months
1-5 years
Total
$’000
$’000
$’000
$’000
Financial assets
Cash
6,108
-
-
6,108
Trade and other receivables
3,246
-
-
3,246
9,354
-
-
9,354
Financial liabilities
Trade and other payables
1,556
-
-
1,556
Accrued expenses
965
-
-
965
Lease liability
324
303
582
1,209
2,845
303
582
3,730
Net maturity
6,509
(303)
(582)
5,624
Year ended 30 June 2023
<6 months
6-12 months
1-5 years
Total
$’000
$’000
$’000
$’000
Financial assets
Cash
8,424
-
-
8,424
Trade and other receivables
4,033
-
-
4,033
12,457
-
-
12,457
Financial liabilities
Trade and other payables
1,807
-
-
1,807
Accrued expenses
861
-
-
861
Lease liability
430
350
1,061
1,841
3,098
350
1,061
4,509
Net maturity
9,359
(350)
(1,061)
7,948
Fair Value of financial instruments
Unless otherwise stated, the carrying amount of financial instruments reflects 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
An official increase/decrease in interest rates of 2% has no adverse/favourable effect on profit or
loss before tax. The Group had no borrowings as at 30 June 2024 (2023: NIL)
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
53
Note 24
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:
2024
2023
$’000
$’000
Financial Assets
229
381
Financial Liabilities
-
-
The Group has performed 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 2024, the effect on profit or loss 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:
2024
2023
$’000
$’000
Change in Profit and Equity
- movement in AUD to USD by 10.0%
+/-26
+/-43
Foreign Currency Translation Reserves (“FCTR”)
The foreign currency translation reserve records exchange differences arising on translation of a
foreign controlled subsidiary as described in Note 1(j). At 30 June 2024, all balance sheet items in
foreign currencies are translated to local currency at closing exchange rates and this is further
translated to Australian dollar. Upon consolidation of the entities, the impact is captured in the
reserves line in the equity section.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
54
Note 25 Discontinued Operations
On 1 August 2023, the Company announced that it entered into an asset sale agreement to divest
its traditional plastic manufacturing assets held in Stellar Films (Malaysia) Sdn Bhd and entered
into a strategic manufacturing agreement to supply resin for compostable pallet wrap and
sustainable packaging films under the SECOS MyEcoWorld™ brand. The plastic manufacturing
assets held a carrying amount of $0.26 million and were sold in FY24 for $0.19 million. There were
other assets not related to the asset sale agreement which were sold during FY24 with a gain of
sale of $0.05 million.
2024
2023
$’000
$’000
Sales
1,709
7,119
Cost of sales
(1,443)
(6,565)
Gross profit
266
554
Other income
92
68
Employment expense
(95)
(326)
Marketing and distribution expenses
(25)
(58)
Administration expense
(30)
(283)
Legal and compliance expenses
(7)
(8)
Depreciation and amortisation expense
(123)
(343)
Finance income
68
35
Loss on disposal of asset
(25)
-
Profit/(Loss) before income tax
121
(361)
Income tax expense
(24)
(8)
Profit/(Loss) for the period after tax from discontinued operations
97
(369)
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
55
Note 26 Controlled Entities
Controlled Entities Consolidated
Equity Holding (%)
Name
Principal
activities
Country of
Incorporation
2024
2023
Cardia Bioplastics (Australia)
Pty Ltd
Sales and
marketing
Australia
100%
100%
Biograde (Nanjing) Pty Ltd1
Manufacturing
China
100%
100%
Cardia Bioplastics (Malaysia)
Sdn Bhd2
Manufacturing
Malaysia
100%
100%
Cardia Bioplastics, S.A de C.V
Sales and
marketing
Mexico
100%
100%
CO2 Starch Pty Ltd
Research
Australia
100%
100%
Tristano Pty Ltd2
Research
Australia
100%
100%
Stellar Films (Malaysia) Sdn Bhd
Holding company
Malaysia
100%
100%
Biograde (Hong Kong) Pty Ltd2
Holding company
Hong Kong
100%
100%
Secos Americas Inc
Sales and
marketing
USA
100%
100%
Carida Americas LLC3
Sales and
marketing
USA
100%
100%
MyEcoWorld LLC3
Sales and
marketing
USA
100%
100%
Stellar Americas LLC3
Sales and
marketing
USA
100%
100%
1
100% owned by Biograde (Hong Kong) Pty Ltd
2
100% owned by Cardia Bioplastics (Australia) Pty Ltd
3
100% owned by Secos Americas Inc
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
56
CONSOLIDATED ENTITY DISCLOSURE
STATEMENT AS AT 30 JUNE 2024
Name
Type of
Entity
Principal
activities
Country of
Incorporation
Equity
Holding
(%)
Tax Residency
Australia
or Foreign
Foreign
jurisdiction
SECOS Group Ltd
Body
Corporate
Holding
company
Australia
N/A
Australia
N/A
Cardia Bioplastics
(Australia) Pty Ltd
Body
Corporate
Sales and
marketing
Australia
100%
Australia
N/A
Biograde
(Nanjing) Pty Ltd1
Body
Corporate Manufacturing
China
100%
Foreign
China
Cardia Bioplastics
(Malaysia) Sdn
Bhd2
Body
Corporate Manufacturing
Malaysia
100%
Foreign
Malaysia
Cardia Bioplastics,
S.A de C.V
Body
Corporate
Sales and
marketing
Mexico
100%
Foreign
Mexico
CO2 Starch
Pty Ltd
Body
Corporate
Research
Australia
100%
Australia
N/A
Tristano Pty Ltd2
Body
Corporate
Research
Australia
100%
Australia
N/A
Stellar Films
(Malaysia) Sdn
Bhd
Body
Corporate
Holding
company
Malaysia
100%
Foreign
Malaysia
Biograde (Hong
Kong) Pty Ltd2
Body
Corporate
Holding
company
Hong Kong
100%
Foreign
Hong
Kong
Secos Americas
Inc
Body
Corporate
Sales and
marketing
USA
100%
Foreign
USA
Carida Americas
LLC3
Body
Corporate
Sales and
marketing
USA
100%
Foreign
USA
MyEcoWorld LLC3
Body
Corporate
Sales and
marketing
USA
100%
Foreign
USA
Stellar Americas
LLC3
Body
Corporate
Sales and
marketing
USA
100%
Foreign
USA
1
100% owned by Biograde (Hong Kong) Pty Ltd
2
100% owned by Cardia Bioplastics (Australia) Pty Ltd
3
100% owned by Secos Americas Inc
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
57
Consolidated Entity Disclosure Statement as at 30 June 2024 (continued)
Basis of preparation
This Group disclosure statement (CEDS) has been prepared in accordance with the Corporations
Act 2001 and includes information for each entity that was part of the Group as at the end of the
financial year in accordance with AASB 10 Consolidated Financial Statements.
Determination of tax residency
Section 295 (3A)(vi) of the Corporations Act 2001 defines tax residency as having the meaning in
the Income Tax Assessment Act 1997. The determination of tax residency involves judgement as
there are different interpretations that could be adopted, and which could give rise to a different
conclusion on residency.
In determining tax residency, the consolidated entity has applied the following interpretations:
Australian tax residency
The Group has applied current legislation and judicial precedent, including having regard to the
Tax Commissioner's public guidance in Tax Ruling TR 2018/5.
Foreign tax residency
Where necessary, the Group has used independent tax advisers in foreign jurisdictions to assist
in its determination of tax residency to ensure applicable foreign tax legislation has been
complied with (see section 295(3A)(vii) of the Corporations Act 2001).
Partnerships and Trusts
None of the entities noted above were trustees of trusts within the Group, partners in a
partnership within the Group or participants in a joint venture within the Group.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
58
DIRECTORS’ DECLARATION
In the Directors' opinion:
a.
the financial statements and notes set out on pages 26 to 55 are in accordance with
the Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and
other mandatory professional reporting requirements; and
(ii)
giving a true and fair view of the consolidated entity's financial position as at
30 June 2024 and of its performance for the financial year ended on that
date; and
b.
there are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable; and
c.
the information disclosed in the consolidated entity disclosure statement on pages 56
to 57 is true and correct.
d.
The remuneration disclosures set out on pages 16 to 24 of the directors’ report comply
with Accounting Standards AASB 124 Related Party Disclosures and the Corporations
Regulations 2001.
Note 1 confirms that the financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and the Chief
Financial Officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Jim Walsh
Non-Executive Chairman
Melbourne, Australia
Date: 21 August 2024
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.
Independent auditor’s report to the members of SECOS Group
Limited
Report on the audit of the financial report
Our opinion on the financial report
In our opinion, the accompanying financial report of SECOS Group Limited (the Company) and its
subsidiaries (the Group) is in accordance with the Corporations Act 2001, including:
— giving a true and fair view of the Group’s financial position as at 30 June 2024 and of its financial
performance for the year then ended; and
— complying with Australian Accounting Standards and the Corporations Regulations 2001.
What was audited?
We have audited the financial report of the Group, which comprises:
— the consolidated statement of financial position as at 30 June 2024,
— the consolidated statement of profit or loss and other comprehensive income for the year then ended,
— the consolidated statement of changes in equity for the year then ended,
— the consolidated statement of cash flows for the year then ended,
— notes to the financial statements, including material accounting policy information,
— the consolidated entity disclosure statement, and
— the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial report section of
our report. We 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 & 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.
Discontinued
operations
Area of focus
(refer also to notes 1 & 25)
On 1 August 2023 the Group finalised the
divestment of its traditional plastic
manufacture assets held in Stellar Films
(Malaysia) Sdn Bhd. On this date the
Group disposed of its assets, and they
were removed from the Group’s
statement of financial position.
Due to the significance of the transaction
to the Group’s financial position and
performance this matter was considered a
key audit matter.
How our audit addressed the
key audit matter
Our audit procedures included:
— Verified that the accounting
treatment of the transaction,
including presentation and
disclosure was in accordance with
the accounting standards;
— Verified that the sale transaction
completed on 1 August 2023 was
accounted for appropriately through
review of the sale agreement and
vouching of supporting
documentation such as the cash
received by the Group on
completion; and
— Performed audit procedures over
the balances relating to the
disposal of assets as at the date of
settlement in order to calculate the
loss on disposal.
We have also assessed the adequacy
of disclosures in the notes to the
financial report.
Assessment
of the
carrying
value of
goodwill
Area of focus
(refer also to notes 1 & 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
the cash generating unit to which the
goodwill belongs exceeds its recoverable
amount and may be impaired.
How our audit addressed the
key audit matter
Our audit procedures included:
— A detailed analysis of the Group’s
CGU’s to determine that the
changes which have occurred
during the year are appropriate;
— An examination of the discounted
cashflow model which includes
testing for its arithmetical accuracy,
checking 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;
From 1 July 2023 the Group reassessed
its Cash Generating Unit (“CGU”) and
determined that the Group operated in
two CGU’s being traditional plastic and
the manufacture and distribution of
renewable resource-based resins and
finished products. As noted above as a
result of the discontinued operation the
traditional plastics CGU was discontinued
on 1 August 2023.
The recoverable amount of the remaining
CGU has been calculated based on a
value-in-use discounted cashflow model,
this examines the expected discounted
cashflows of its sole CGU over a five-year
period extending from reporting date, plus
a terminal value.
As a result of the impairment test the
recoverable amount did not exceed the
carrying value of the CGU and a charge
of $3.6 million was recorded against the
Group’s intangible assets, reducing the
balance to $nil at 30 June 2024.
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.
— Assessing the capability of the
independent expert utilised by
management in determining the
discount rate applied in the model;
— 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 & 10)
The Group’s inventory of $3.2 million is
significant to the financial statements and
has decreased 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 the
key audit matter
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;
— On a sample basis, validated the
cost price of inventory items
through to supporting
documentation;
— A review of subsequent product
sales to ensure inventory was
valued at the lower of cost and net
realisable value;
Other information
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2024, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly 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.
— We assessed management’s
judgements in relation to the need
for provisioning based on the
ageing and condition of the
inventory; and
We also considered the adequacy of
disclosures in relation to inventory.
Deferred tax
asset
Area of focus
(refer also to notes 1 & 5)
During the year ended 30 June 2023, the
group impaired the deferred tax asset
balance recognised on the statement of
financial position from $1.9 million to
$0.96 million based on the Group’s
reassessment of its recoverability the
balance has been impaired to $nil at 30
June 2024.
Assessing the recoverability of deferred
tax assets requires the Group to make
significant estimates related to the
quantum and timing of future taxable
income.
Estimates of future taxable income are
based on the forecast of cash flows from
operations, the reversal of temporary
differences and the application of existing
tax laws in each jurisdiction.
Due to the above-mentioned factors,
recoverability of deferred tax assets was
considered a key audit matter.
How our audit addressed the
key audit matter
Our audit procedures included:
— Assessing the board approved
budgets to determine the likelihood
of future profitability and the use of
its deferred tax assets in future
periods;
— Understanding the basis of
accounting for the impairment of the
deferred tax assets based on our
knowledge of the tax environment in
which the Group operates, and
assessing management’s
judgements on the cash flow
projections used in forecasting
future taxable income and the
reversal of temporary differences;
and
We also considered the adequacy of
the Group’s disclosures in relation to
the recognised and unrecognised
deferred tax assets in the financial
report.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of:
— the financial report (other than the consolidated entity disclosure statement) that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001; and
— the consolidated entity disclosure statement that is true and correct in accordance with the Corporations
Act 2001, and
for such internal control as the directors determine is necessary to enable the preparation of:
— the financial report (other than the consolidated entity disclosure statement) that gives a true and fair
view and is free from material misstatement, whether due to fraud or error; and
— the consolidated entity disclosure statement that is true and correct and is free of misstatement, whether
due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
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 the financial report is located at the Auditing and
Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Our opinion on the Remuneration Report
In our opinion, the Remuneration Report of SECOS Group Limited, for the year ended 30 June 2024,
complies with section 300A of the Corporations Act 2001.
What was audited?
We have audited the Remuneration Report included in of the directors’ report for the year ended 30 June
2024.
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, 21 August 2024
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
65
SHAREHOLDERS’ INFORMATION
The shareholder information set out below was applicable as at 12 August 2024.
(A)
Distribution of Equity Securities
Analysis of numbers of equity security holders by size of holding:
Ordinary Shares
Number of Holders
1 - 1,000
297
1,001 - 5,000
1,091
5,001 - 10,000
578
10,001 - 100,000
1,156
100,001 and over
421
Total
3,543
There were 2,446 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 (%)
BELGRAVIA STRATEGIC EQUITIES PTY LTD
70,047,093
11.7%
R&K EDWARDS INVESTMENTS
57,295,825
9.6%
DONALD HALLER JR
48,878,186
8.2%
SECOS FRIENDS LLC
30,212,228
5.1%
UBS NOMINEES
27,939,784
4.7%
STELLAR DEVELOPMENTS
20,696,906
3.5%
RICHARD TEGONI
16,029,309
2.7%
BRENDAN O'SULLIVAN
11,189,054
1.9%
HSBC CUSTODY NOMINEES
8,935,532
1.5%
ADVANCE PUBLICITY
8,425,000
1.4%
HELPLESS PTY LTD
8,024,262
1.3%
GOBBLE PTY LTD
7,203,346
1.2%
PLANET JANET SUPER PTY LTD
6,000,000
1.0%
DAVID WAKE
5,157,109
0.9%
SCOTCH INVESTMENTS PTY LTD
5,000,000
0.8%
KIRZY PTY LTD
4,990,191
0.8%
GARY T HEDRICK
4,864,555
0.8%
ROBERT V DEUTSCH CAPITAL LLC
4,741,575
0.8%
MARK L DEUTSCH CAPITAL LLC
4,741,575
0.8%
JAMES WALSH
4,222,728
0.7%
Total
354,594,258
59.4%
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
66
(C)
Substantial Shareholders
The names of the substantial shareholders listed in the holding company’s register as at
12 August 2024 are:
Number of Ordinary
Shares Held
Percentage of
Issued Shares (%)
BELGRAVIA STRATEGIC EQUITIES PTY LTD
70,047,093
11.7%
R&K EDWARDS INVESTMENTS
57,295,825
9.6%
DONALD HALLER JR
48,878,186
8.2%
SECOS FRIENDS LLC
30,212,228
5.1%
(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.
SECOS GROUP LIMITED (ASX:SES)
FY24 ANNUAL REPORT
67