More annual reports from TasFoods Limited:
2023 Report2018 Annual Report
TasFoods Limited
Contents
ACN 084 800 902
2 Chairman’s Report
16 Board of Directors
4
6
Business Operations
Summary
Managing Director and
CEO’s Report
10 Operating and Financial
Review
17 Executive Team
18 Directors’ Report
38 Financial Report
86 Shareholder Information
88 Corporate Directory
About TasFoods
TasFoods is a diversified food business
focused on leveraging the natural attributes
of Tasmania’s agricultural and food
production environment to create premium
food products for sale to Australian and
export customers.
The company owns a stable of high value food brands in
three key product categories: Poultry (Nichols Poultry),
Dairy (Pyengana Dairy, Meander Valley Dairy and Robur
Farm Dairy) and Horticulture (Shima Wasabi).
TasFoods aims to showcase Tasmania’s finest produce to
the world. The company works with strategic distribution
partners to deliver products to wherever their customers
choose to eat and shop.
Annual General Meeting
TasFoods will hold its 2018 Annual General
Meeting in the Chancellor 3 Room at the Hotel
Grand Chancellor located at 29 Cameron St,
Launceston TAS at 11.00am on Thursday,
23 May 2019.
TasFoods Annual Report 2018 | 1
Chairman’s Report
2018 was a year of achievement and transformation
for TasFoods, as we continued to build a successful
premium food business leveraging Tasmania’s
unique environmental and marketing advantages.
In my first year as Executive Chairman of Tasfoods, I am
pleased with the progress the business has made towards
achieving our strategic goals for both revenue growth and
operational optimisation.
“ The business has been disciplined
in its focus on cost control,
expansion of its sales channels, and
prudent capital investment in its
manufacturing facilities.
This focused approach has delivered strong revenue growth
and margin improvement and positioned the business well for
further gains in 2019.
Strengthening TasFoods’ financial position
In February 2018, $4.0 million, before costs, was raised
through the issue of 22,875,816 fully paid ordinary shares
through a share purchase plan and the second tranche of the
share placement to sophisticated and institutional investors
announced in December 2017. Some of these funds were used
to expand production capacity, investing in specialised plant
including a homogeniser at the Kings Meadows Dairy factory
and an air chiller at Nichols Poultry and for general working
capital purposes.
Board changes
Antony (Tony) Robinson resigned from the role of Chair of
the board on 1 February 2018 and I was appointed Executive
Chairman. Subsequently, Tony, who had been a Non-executive
Director since September 2015 and Chair since March 2017,
resigned as a Non-executive Director on 13 March 2018. On
behalf of the board and the TasFoods team, I would like to
thank him for his guidance and contribution during TasFoods’
first three years of operation.
Alexander (Sandy) Beard was appointed to the board as a
Non-executive Director on 13 March 2018 and has become
Chair of the Nomination and Remuneration Committee and
a member of the Audit and Risk Committee. He brings to the
board extensive experience in a broad range of businesses
with particular expertise in food manufacturing. Sandy is
an experienced director and has played important roles in
delivering value to shareholders across a broad spectrum of
industries and business types.
Looking to the future
Strong sales growth is forecast to continue in 2019, supported
by a full year of sales from dairy markets secured in the second
half of 2018, as well as by increased volumes of poultry sourced
from new contract growing sheds that began supplying Nichols
Poultry in late 2018 and early 2019.
Total revenue ($’000)
$16,139
2016
2017
2018
$31,112
$38,920
Total
revenue
$38.9m
Revenue
by division
%
Nichols Poultry – 84%
Dairy Division – 15%
Wasabi & other – 1%
2 | TasFoods Annual Report 2018
Chairman’s Report
“ We now have a sustainable and strongly
growing business based on leveraging
the unique quality attributes of
Tasmanian premium foods and, under
its current operating structure, we
expect the business to deliver positive
EBITDA for the year to December 2019.
I would like to take this opportunity to thank all members of the
TasFoods team for their efforts over the past year to improve
the business’ financial results, and my fellow directors for
their support. I look forward to updating shareholders as the
initiatives established in 2018 transition the company to profit.
Shane Noble
Executive Chairman
“I choose Nichols Ethical Free Range chicken
because they share the same beliefs as we do
at Pure South in regards to sustainability and
the ethical treatment of animals raised for
food. I think the extra care taken and methods
for rearing their chickens results in superior
flavour, texture and overall quality.”
David Hall, Executive Chef, Pure South, Melbourne
TasFoods Annual Report 2018 | 3
Business Operations Summary
Poultry
Nichols Poultry was established in the early
1980s when founder Rob Nichols and his
family immigrated to Tasmania. The business
has grown to become one of the most trusted
and respected meat brands in Tasmania.
Operational
activities
● Poultry processing
● RSPCA approved barn
raised poultry growing
● Free range poultry
growing
● Feedmill operation
● Contract grower
management
Dairy
The dairy division includes the milk and cream
processing operations at Kings Meadows,
goat farming operations located at the Nichols
Poultry farm at Sassafras, and the operations
of Pyengana Dairy.
Operational
activities
● Milk and cream
processing facility
● Cheese manufacture and
maturation facility
● Café and retail shop
● Goat farming operation
Wasabi
Shima Wasabi is the largest commercial
wasabi farm in Australia. Located in
Tasmania’s temperate northwest, it supplies
fresh and powdered wasabi products to
markets across Australia.
Operational
activities
● Wasabi growing and
harvesting facilities
● Wasabi packing and
processing facilities
4 | TasFoods Annual Report 2018
Achievements of the year
Objectives for 2019
Sales revenue ($’000)
● Sales revenue growth of 15% to $32.10 million
● Efficiency gains in processing labour costs
through automation of processing lines
● New contract grower sheds commissioned
contributing 12% growth in bird numbers
● Capital expenditure project delivered on time
and on budget increasing utility services to
the processing site and constructing a new
air chiller to increase processing capacity
by 50%
● Construction of new tunnel
ventilated poultry growing
sheds on Nichols Poultry land
to increase bird numbers
by 14%
● Relocation of targeted
processing operations into old
air chiller space to improve
operational efficiencies
$32,103
$27,978
$13,849
2016
2017
2018
Achievements of the year
Objectives for 2019
Sales revenue ($’000)
● Sales revenue growth of 140% to $5.96 million
● New premium brand developed for Pyengana
Dairy Milk with successful launch of 9 new
products in the range
● Ranging for Meander Valley Dairy Double
Cream in Coles nationally
● Rebranding of Pyengana Dairy Traditional
Cloth Matured Cheddar and launch of retail
portion cheese range and 1.3kg truckle wheels
● Sales growth benefiting from
full year of sales from new
markets established in 2018
● Launch of new Pyengana
Dairy cheese products
including St Columba Blue
and Cloth Matured Goat
Cheddar
$5,961
$2,484
$1,981
2016
2017
2018
Achievements of the year
Objectives for 2019
Sales revenue ($’000)
● Sales revenue growth of 25% to
● Launch of new value
$0.33 million
added wasabi products
● Development of new distribution
network to improve service and delivery
to restaurant customers
● Expansion of distribution
network for fresh wasabi
product
$150
$327
$261
● Efficiency gains in labour management
through revised harvest systems
2016
2017
2018
TasFoods Annual Report 2018 | 5
Managing Director and
CEO’s Report
The 2018 financial year has been a year of strong
growth for the TasFoods Group of businesses in all
areas of financial performance, setting the company
on a pathway to profit in line with our strategic
growth plan.
Sales revenue
Gross profit
Gross profit margin
EBITDA
NPAT
FY2018
$’000
38,391
10,716
28%
(1,110)
(1,358)
FY2017
$’000
30,743
6,961
23%
(5,710)
($6,808)
Change
$’000
7,648
3,755
4,600
5,450
Change
%
25%
54%
5%
The group’s 2018 sales revenue grew 25% to $38.40 million
from $30.74 million in 2017. The foundations laid in
2017 through rebranding the businesses and developing sales
channels supported growth across each of the operating
divisions, with the dairy segment’s sales increasing by 140% and
Nichols Poultry’s by 15%.
A 54% increase in gross profit to $10.72 million in 2018 from
$6.96 million in 2017 was a major contributor to the $4.60
million improvement in earnings before interest, tax,
depreciation and amortisation (EBITDA) to negative $1.11 million
in 2018 from negative $5.71 million in 2017 (which included
an impairment charge of $2.11 million). The gross margin
improvement of 5% to 28% in 2018 from 23% in 2017 was
achieved by building economies of scale through revenue
growth, strategic investment in automation, and labour
efficiencies across the businesses.
The company’s bottom line performance was a net loss
after income tax of $1.36 million which was a $5.45 million
improvement on the 2017 net loss of $6.81 million.
Sales
One of our objectives in 2018 was growing sales to markets
outside Tasmania. The perishable nature of the company’s
products necessitates relationships with partners capable of
delivering them to consumers wherever they choose to eat and
shop. Key distribution partnerships were established in 2018 to
deliver dairy and chicken products to customers in Victoria,
New South Wales and Queensland, contributing to sales
growth in interstate markets of 106%; this represented 13% of
total sales in 2018, up from 7% in 2017. Growth of 18% was
achieved in Tasmania through increased sales of chicken and
Pyengana Dairy branded milk.
Sales revenue ($’000)
H2
H1
FY
$40,000
$35,000
$30,000
$20,000
$15,000
$10,000
$5,000
$0
EBITDA ($’000)
H1
H2
FY
$0
($2,000)
($4,000)
($6,000)
FY2016
FY2017
FY2018
FY2016
FY2017
FY2018
6 | TasFoods Annual Report 2018
Managing Director and
CEO’s Report
Nichols Poultry remains the largest segment of the business,
contributing 84% of sales revenue. Investment by contract
growers to expand the network of contract grower sheds
provided 12% growth in the number of chickens processed
during 2018. Improvements to shed management, undertaken
by the Nichols Poultry agricultural team working with contract
growers, delivered an increase in the live weight of birds that
contributed additional volume of saleable meat. New wholesale
customers in Tasmania and growth in sales of Nichols Ethical
Free Range Chicken branded products to markets interstate
were the major contributors to a 15% increase in sales over the
year. Strategic investments were made during the year in key
processes, including air chilling that contributes to the Nichols
Poultry brand’s point of difference in the market.
The dairy segment achieved the highest growth in 2018,
with sales revenue increasing by 140%. This included the first
full year of sales revenue from Pyengana Dairy which was
purchased in October 2017. Sales revenue for products sold
under the Meander Valley Dairy and Robur Farm Dairy brands
increased by 72%, with the majority of growth coming from
interstate markets where sales increased by 83%.
A number of new markets were secured for dairy products
during the second half of 2018 under both the Meander Valley
Dairy and Pyengana Dairy brands. These markets will continue
to deliver growth for the dairy segment in 2019.
“We find it wonderful working with TasFoods
outstanding portfolio of world class Tasmanian
products. All are brands that are committed
to quality, innovation and sustainability -
attributes we love here at Two Providores. We
are looking forward to continuing to showcase
these products and build the brands here in
NSW and ACT.”
Sally Gosper, General Manager, Two Providores, Sydney
TasFoods Annual Report 2018 | 7
Managing Director and CEO’s Report (continued)
Processing operations
Improving operational efficiency across the business was a core
focus for the management team in 2018. Labour efficiencies
were achieved at each of the operating sites through a mixture
of automating processes, increasing line speed and improved
through-put. A number of cost saving projects were initiated
throughout the business under a Pathway to Profit project that
generated $0.50 million in operational savings.
The major capital investment for the company during 2018 was
a new air chiller at the Nichols Poultry processing site and
other improvements to services, all of which support capacity to
grow Nichols Poultry’s processing by 50%.
A strategic investment in a homogeniser at the Kings Meadows
Dairy site underpinned the development of a new range
of premium milk products released under the Pyengana
Dairy brand. Relocation of the milk bottling operation from
the Pyengana Dairy site enabled a reconfiguration of the
processing area to create new cheese making and maturing
facilities dedicated to production of a range of blue cheeses
that commenced in late 2018.
The business continues to focus on building a culture within
the workforce that supports the values of the business.
Improvements to systems and processes that underpin
standards for operations, customer service and animal welfare
were rolled out through 2018, combined with regular training
of staff.
Brands and marketing
The 2017 investment in the redevelopment of the brand portfolio
and associated packaging with a premium look and feel
contributed to the sales growth in 2018.
There was a significant reduction in the company’s spend on
marketing during 2018 to concentrate on strategic activities to
maximise value from this investment.
Rebranding of the Pyengana Dairy products commenced
in April 2018 with the launch of the first of a new range of
premium bottled milk products and continued into the second
half of the year with the rebranding of cheese products with
new premium labelling. The process was completed with
redevelopment of signage in the farmgate café to support the
brand as the home of Australia’s heritage farmhouse cheddar.
“ 2018 has been a year of growth for
TasFoods across the business, laying
the foundations for a profitable future
operation. The business will continue
to grow revenue through new and
existing sales channels whilst driving
operational efficiencies to improve
financial performance.
Growth through acquisition will remain a strategic focus for the
business in 2019 to build business scale and strengthen bottom
line performance.
Jane Bennett
Managing Director and CEO
Total sales
revenue
$30.7m
Total sales
revenue 2017
%
Interstate – 7%
Tasmania – 93%
Total sales
revenue
$38.4m
Total sales
revenue 2018
%
Interstate – 13%
Tasmania – 87%
8 | TasFoods Annual Report 2018
TasFoods Annual Report 2018 | 9
Operating and Financial Review
Nichols Poultry
Nichols Poultry’s sales revenue grew by 15% to
$32.10 million in 2018 from $27.9 million in 2017.
This reflected the acquisition of new wholesale
customers in Tasmania and increased sales of
Nichols Ethical Free Range Chicken in Victoria,
New South Wales and Queensland.
The volume of meat available for sale was higher as a result of
two operational initiatives:
● Improved feed conversion and contract grower shed
management led to a 5% increase in live weight, particularly
during winter when live weight had declined the previous year.
● Two contract grower sheds, each with capacity for 20,000
birds, were added to the network in April 2018 and a shed
with capacity for 40,000 birds was added in November 2018,
together increasing the average number of birds available
for processing each week by 12%. An additional shed with
capacity for 40,000 birds has come on line in January 2019.
Among other operational efficiencies emanating from the
company’s Pathway to Profit project, labour costs were reduced
through increased automation and the factory transitioned
from a five to a four day processing week.
Investment in facilities
A project to increase processing capacity, at a cost of
$2.5 million, was completed on time and on budget in
October 2018.
The project’s main component was construction of a new air
chill facility. Nichols Poultry is the only chicken processor in
Tasmania, and one of very few in Australia, using an air chill
system to cool its chicken after processing. This differentiates
the business’ products from most competitors which process
chicken through large spin chillers of iced water that can result
in a residual chlorine odour.
The new air chill facility was commissioned in late October
and provides capacity for 50% growth in the number of birds
processed. It has improved product quality by reducing chilling
time and increased efficiency through increased line speed.
The space created from the removal of the previous air chiller
will be renovated during 2019 to enable further improvements
to productivity.
Nichols Ethical Free-Range Chicken
Nichols Poultry produces RSPCA approved barn raised and Ethical Free Range Chicken. Nichols Ethical Free Range Chicken is
a premium priced brand, sales of which grew by 154% in 2018.
1
Free range, small flock,
pasture raised
2
Air chilled & matured on
the bone, free from added
water or chlorine
3
Superior flavour
and texture
4
Raising standards
in the field and
kitchen
10 | TasFoods Annual Report 2018
Shima Wasabi
Shima Wasabi’s sales revenue grew by 25%
to $0.33 million in 2018 from $0.26 million
2017. This increase resulted from a number of
strategic initiatives that included establishing
a strategic distribution partnership with
Flowerdale Farms based in the Epping Fruit and
Vegetable Wholesale Market to better service
our interstate foodservice market customers via
a network of providors. Targeted sales of wasabi
powder to industrial customers contributed to
sales growth along with the launch of a new
retail wasabi powder.
The change in distribution of fresh wasabi via Flowerdale
Farms has allowed the streamlining of the wasabi harvesting
process which has led to a reduction in labour and
operational costs.
Harvesting of the crop planted in greenhouse two during
2017 began in September 2018 with yields consistent
with expectations.
Research and Development activities commenced in 2018
to understand the active components of wasabi that may be
beneficial in health and wellbeing markets. CSIRO completed
an initial study of specific components of the plant yielding
results to warrant further investigation.
Shima Wasabi
Shima Wasabi is Australia’s largest commercial wasabi farm. All parts of the wasabi plant are edible. Shima Wasabi markets
flowers in season, leaves and leaf stalk as well as premium fresh wasabi stems and powdered wasabi.
1
A rare Japanese plant
Wasabi japonica climatically
suited to growing in Tasmania
2
Harvested by hand after
18 months of growth
3
Freshly grated to create
authentic wasabi paste
4
100% pure
Tasmanian Wasabi
japonica
TasFoods Annual Report 2018 | 11
Operating and Financial Review (continued)
Dairy
TasFoods’ dairy operations include:
● A facility at Kings Meadows which processes
cream for Meander Valley Dairy products,
goat milk and cheese under the Robur Farm
brand, and bottled milk under the Pyengana
Dairy brand;
● Pyengana Dairy which processes milk into
cheese under its own brand and is home to a
farmgate café; and
● A dairy goat farm at the Nichols site
at Sassafras.
“ The dairy operations’ revenue grew by
140% to $5.96 million in 2018 from $2.48
million in 2017, due partly to a full year’s
revenue from the Pyengana Dairy business
which was purchased in October 2017.
There was a significant improvement in financial performance
through improved labour efficiencies and equipment utilisation
due to increased production at the Kings Meadows facility.
All brands and product categories increased their sales, with
particular growth by Meander Valley Dairy Double Cream and
Pyengana Dairy milk.
Meander Valley Dairy Double Cream was launched in Coles
supermarkets nationally in late July 2018 and has been
distributed to independent retailers across Victoria, New South
Wales, Queensland and South Australia since August 2018.
Nine premium milks were released under the Pyengana Dairy
brand in late April 2018 and have been stocked in Woolworths,
Coles, IGA and independent retail stores across Tasmania
since May.
Robur Farm Dairy fresh goat milk sales achieved growth of
40% during 2018. Changes were made to the structure of
the goat farm management mid year as a component of the
Pathway to Profit project. The management of the herd was
simplified to better align the milk production with processing
requirements and a number of surplus young doelings were
sold to an export market.
Pyengana Dairy Cloth Matured Cheddar
Pyengana Dairy Cloth Matured Cheddar is Australia’s heritage farmhouse cheese made in the same way cheese has been
produced in the Pyengana valley continuously since 1887.
1
Single herd sourced milk
from pasture grazed cows in
Pyengana, North East Tasmania
2
Hand crafted using a process
passed down over 130 years
of cheese making
3
Cloth bound and aged
to perfection in an
underground cellar
4
Australia’s heritage
farmhouse cheddar
12 | TasFoods Annual Report 2018
Investment in facilities
In March 2018, milk bottling was moved from the Pyengana
Dairy site to the Kings Meadows processing facility, where it is
closer to customers, increasing shelf life and reducing freight
costs. The transfer was completed on time and on budget, with
no interruption to deliveries. Milk sold under the Pyengana
Dairy brand continues to be sourced exclusively from the
Pyengana farm with which TasFoods has a supply contract.
Space created in Pyengana Dairy’s processing facility through
removing the milk bottling line has been converted into
additional cheese making and maturing rooms.
“ Production of a new blue cheese began in
late 2018 in the renovated facilities. This
will be launched in the market in 2019.
A glass viewing pyramid has been installed in the Pyengana
farmgate café so visitors can see cheese maturing on shelves in
the cellar below.
In April 2018, a new homogeniser was installed at the Kings
Meadows facility. This has expanded the range of products
able to be manufactured on the site including the Pyengana
Dairy new milk range.
New branding
New Pyengana Dairy branding was introduced for the launch
of the new milk range launched in April, and this also was
adopted for Pyengana Cloth Matured Cheddar in the second
half of 2018 when a range of retail cheese portions was offered
to distributors and customers.
The new branding is reflected on signage for Pyengana
Dairy’s farmgate café, telling the story of Australia’s heritage
farmhouse cheese. The Pyengana Valley in north-east Tasmania
is the only region in Australia where cheese has been made on
farms continuously for over 130 years; the recipe and process
for its Cloth Matured Cheddar have been handed down
through generations of local farmers.
National recognition
The high quality of TasFoods’ dairy products was recognised
through awards in 2018. Pyengana Cloth Matured Cheddar
was named Champion Retail Cheddar Cheese at the Dairy
Industry Association of Australia’s national awards in May,
and in November Meander Valley Double Cream was named
as one of three finalists in the Australian Grand Dairy Awards
Cream Category after receiving gold medals at a number of
feeder shows across Australia.
Robur Farm Goat Milk
Milk is sourced for the Robur Farm Dairy brand exclusively from our own goat herd. Sales of fresh bottled goat milk grew by
40% in 2018.
1
Single herd sourced
milk from the Robur
Farm goat herd
2
Freshly pasteurised
to maintain a clean
mild flavour
3
Sweet tasting and
easy to digest
4
The natural
alternative
TasFoods Annual Report 2018 | 13
Operating and Financial Review (continued)
Outlook
TasFoods has established a solid base from
which the business can scale and grow.
We have established two foundation pillars in poultry and
dairy that each have a solid and loyal customer base in
Tasmania and opportunities for continued expansion in the
much larger interstate market. Revenue growth for these
pillars will continue during 2019, helped by the sales initiatives
implemented in 2018.
The poultry division’s revenue will reflect a full year of sales
to new wholesale customers acquired during 2018. It will also
benefit from additional chickens available from contract grower
sheds added to the network in 2018 and additional sheds due
to commence supply of chickens in late 2019 which will further
increase the average number of birds processed per week.
The dairy division will benefit from a full year of sales of the
new Pyengana Dairy milk range stocked in Coles, Woolworths
and independent retail stores across Tasmania and of Meander
Valley Dairy Double Cream stocked nationally in Coles and
in independent retail stores in Victoria, New South Wales,
Queensland and South Australia. New markets will continue to
be pursued for all dairy products.
Shima Wasabi will continue to grow its existing markets as
well as explore alternative uses for wasabi and the active
components of the plant that may have value to the health and
wellbeing markets.
The capital investment made during 2018 in upgrades to the
chicken processing facility at Nichols Poultry has increased
capacity by 50%. To leverage the increased processing
capacity the business is investing in chicken growing sheds to
deliver ongoing growth in revenue and EBITDA contribution.
In December 2018, TasFoods’ board approved capital
expenditure of $2.5 million to build a further two tunnel
ventilated chicken growing sheds, each with a capacity of
40,000 birds, on the Nichols Poultry farm site. These sheds
are scheduled to commence the supply of chickens in the
fourth quarter of 2019. The business is continuing to pursue
opportunities to expand the contract grower network of sheds.
The Pathway to Profit initiatives commenced in 2018 will
continue to drive efficiencies throughout the company’s
operations and improve productivity.
The business is actively seeking acquisitions that will
complement existing operations and build scale or
14 | TasFoods Annual Report 2018
provide standalone contributions to strengthen bottom
line performance.
The board believes that the long-term fundamentals of
TasFoods’ business are strong, with increasing demand
expected for premium foods, especially in the high fat dairy
and free range chicken segments. The company’s strategy will
be to continue to expand through leveraging its Tasmanian
heritage and maintaining the premium provenance of its
brands, growing its distribution footprint in existing and
new markets.
Risk
TasFoods is committed to successfully delivering
its strategic objectives including delivering high
quality, safe food products to its customers.
This requires the management of all types of
uncertainties and risks.
TasFoods has a formalised Risk Management Policy and
Framework which operates across the Group. The Policy
provides high level direction, establishes key principles and
allocates responsibilities to ensure TasFoods has an effective
and efficient system and process that will facilitate the
identification, assessment, evaluation and treatment of risks in
order to achieve strategic and performance objectives.
A copy of the Risk Management Policy can be
located on the Company’s website at http://www.
tasfoods.com.au/corporate-governance/
During 2018 the Group complied with its
Risk Management Policy and Framework,
ensuring all risks were regularly
reviewed and risk registers were
updated for new risks and changes
to existing risk profiles. Risks
identified remain relatively
stable, with no expectation
of increases or decreases in
the foreseeable future unless
specifically noted below. The
material business risks faced by
TasFoods which may have an effect
on the financial performance of the
Group are:
Supply Risk
Ensuring our input supply is secure, stable and reliable
TasFoods is reliant on a number of key suppliers for inputs
such as hatchlings, milk, cream and feed. We have strong
relationships and contracts with our suppliers to ensure that
quality, quantity and price are stable. Where appropriate
and able, TasFoods is diversifying supply channels to reduce
risk levels and dependence on key suppliers.
Market Risk
Delivering on our customer promises and growing our
customer base
TasFoods has a number of large key customers and the loss of
one or more would have a detrimental impact on the Group.
TasFoods mitigates this risk by investing in our relationships,
ensuring we delivery product in accordance with our customer’s
specifications, growing our customer base and entering
into contracts for supply. In addition, TasFoods responds to
changing customer compliance requirements via upgrading
facilities and processes. TasFoods has also developed a
point of difference in our products which reduces the risk
of substitution.
Biosecurity Risk
Minimising the risk of disease and infection impacting
our animals, plants and inputs
Careful site management, biosecurity measures and good
husbandry and agricultural management are used to
manage TasFoods’ risk of exposure to disease, infection and
contamination. Significant disease outbreaks may result in
mass mortality of livestock or loss of plants, having a significant
impact on saleable goods. Suppliers undergo an approval
process to ensure inputs comply with product specifications.
These are internally and where appropriate externally audited
and monitored for compliance.
Safety Risk
Ensuring our products are safe for customers and our
staff are safe at work
Food safety and workplace health and safety are risks that
must be managed by TasFoods at all times. We have built
strong quality and safety assurance systems which are
externally audited against relevant standards, are overseen
by highly skilled staff and a culture committed to food and
people safety. In addition, TasFoods holds relevant insurances
to further mitigate food safety and workplace health and
safety risks.
TasFoods Annual Report 2018 | 15
Board of Directors
Shane Noble Executive Chairman
Shane has over 20 years experience operating at either the CEO or Executive Chair level in a
diverse range of businesses across the consumer foods and agribusiness sectors. Appointed as a
Non Executive Director on 30 November 2017, Shane became Executive Chair as of 1 February 2018.
In his most recent role Shane was Executive Chairman and CEO of Green Foods Holding for 8 years.
Alexander (Sandy) Beard Non-executive Director
Sandy is CEO of CVC Limited and has extensive experience in a broad range of businesses with
particular expertise in food manufacturing. He is an experienced Board Director and has played
important roles in delivering value to shareholders over the past 20 years across a broad spectrum
of industries and stages of company growth. He was appointed as a Non-Executive Director on
13 March 2018.
Roger McBain Non-executive Director
Roger led a Tasmanian based Chartered Accounting firm as a partner for 25 years ultimately
leading the successful merging of the practice into Deloitte in 2010. Continuing as a partner at
Deloitte for a further 5 years, Roger delivered strong results to the Tasmanian practice, through his
extensive experience in a broad range of businesses with particular expertise in FMCG, agribusiness
and mining services. Roger currently pursues a number of private business interests including a water
remediation technology company, property development, tourism, hospitality and retail investments.
Jane Bennett Managing Director & CEO
Jane has over 20 years of experience as a senior executive in vertically integrated dairy businesses
in Tasmania and the UK. She has extensive past experience in regional provenance branding as
Chair of the Tasmanian Food Industry Council, Board Member of the Brand Tasmania Council and
Nuffield Scholar studying Place of Origin Branding. Jane has previously served on the Boards of
Australian Broadcasting Corporation, CSIRO, and Food Innovation Australia Ltd. She is a Fellow of
the Australian Institute of Company Directors. Jane was named 2010 Tasmanian Telstra Business
Woman of the Year and 1997 Australian ABC Rural Woman of the Year.
Janelle O’Reilly Company Secretary & General Counsel
Janelle is an experienced corporate lawyer and chartered company secretary having worked for
ASX listed entities Crane Group Limited and Ruralco Holdings Limited and as General Manager
Governance with Aurora Energy.
16 | TasFoods Annual Report 2018
Executive Team
Jane Bennett Managing Director & CEO
Jane has over 20 years of experience as a senior executive in vertically integrated dairy businesses in
Tasmania and the UK. She has extensive past experience in regional provenance branding as Chair
of the Tasmanian Food Industry Council, Board Member of the Brand Tasmania Council and Nuffield
Scholar studying Place of Origin Branding. Jane has previously served on the Boards of Australian
Broadcasting Corporation, CSIRO, and Food Innovation Australia Ltd. She is a Fellow of the Australian
Institute of Company Directors. Jane was named 2010 Tasmanian Telstra Business Woman of the Year
and 1997 Australian ABC Rural Woman of the Year.
Tom Woolley Chief Operating Officer
Tom Woolley is an experienced investment manager with over 11 years of private equity and investment
banking experience. Tom worked at Credit Suisse for 3 years followed by 8 years as a Director at
Ironbridge Capital, an Australian private equity company focused on growth investments. He holds
a Bachelor of Commerce (Honours) and a Bachelor of Science. Tom is a graduate of the Tasmanian
Leaders program.
Donna Wilson Chief Financial Officer
Donna is a qualified finance executive with over 18 years of experience working within public practice at
KPMG, ASX listed companies and at an executive level in statutory government authorities. Donna holds
a Masters of Business Administration in Corporate Governance and a Bachelor of Commerce. She is a
member of Chartered Accountants Australia and New Zealand. Donna serves on the Scotch Oakburn
College Finance Committee, an advisory committee to the Scotch Oakburn College School Board.
David Bennett Chief Sales & Marketing Officer
David has extensive experience in national sales, distribution and marketing of fast moving consumer
goods, specialising in premium dairy products. David holds a Bachelor of Laws (Honours) and Bachelor
of Commerce and has completed a Graduate Diploma in Legal Practice. He previously served as
Inaugural Chair of the North West Tasmanian Tourism, Cradle to Coast Tasting Trail.
TasFoods Annual Report 2018 | 17
The Directors of TasFoods Limited (the Company) present the financial report on the Company and its controlled entities (the
Group) for the year ended 31 December 2018.
In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:
Directors
Shane Noble
Experience and qualifications
Executive Chair
Shane joined the Board on 30 November 2017 and became Chair of the Board on
1 February 2018. Shane is a member of both the Audit and Risk Committee and the
Nomination and Remuneration Committee.
Shane has extensive experience in the consumer foods and agribusiness industries.
Most recently, Shane was the Executive Chair and Chief Executive Officer of Green’s
Foods Holdings which he successfully transformed through an integrated plan of profit
improvement initiatives and strategic acquisitions.
Other Directorships in listed entities:
Former Directorships in listed entities in
the last 3 years:
Nil
Nil
Interest in shares and options:
3,000,000 Ordinary Shares
Jane Bennett
Chief Executive Officer (CEO) and Managing Director
5,000,000 Share Options exercisable at $0.20 before 30 November 2021
Experience and qualifications
Jane was promoted to the position of CEO and Director on 18 February 2016,
having previously been the Company’s Head of Strategic Development and General
Manager of Dairy.
Jane was appointed to build TasFoods into a successful branded food business based
on the unique attributes of Tasmania and its produce.
Jane has extensive experience in the premium branded food industry in Tasmania,
including as the former Managing Director of Ashgrove Cheese, one of Australia’s
leading premium dairy brands. Jane also chaired the Tasmanian Food Industry
Council for 8 years and was a board member of the Brand Tasmania Council
for 10 years. Jane spent 4 years working as a non-executive director in a diverse
portfolio of companies including the CSIRO, Australian Broadcasting Corporation
and Tasmanian Ports Corporation. Jane is a fellow of the Australian Institute of
Company Directors.
Other Directorships in listed entities:
Former Directorships in listed entities in
the last 3 years:
Nil
Nil
Interest in shares and options:
2,175,472 Ordinary Shares
1,250,000 Share Options exercisable at $0.21 before 3 September 2019
1,250,000 share options exercisable at $0.42 before 3 September 2019
18 | TasFoods Annual Report 2018
Directors’ Report Roger McBain
Non-Executive Director
Experience and qualifications
Roger was appointed to the Board as an Executive Director on 3 September 2015
and transitioned to a Non-Executive Director role on 1 July 2016. Roger is the
Chair of the Audit and Risk Committee and is a member of the Nomination and
Remuneration Committee.
Roger led a Tasmanian based Chartered Accounting firm as a partner for 25 years
ultimately leading the successful merging of the practice into Deloitte in 2010.
Continuing as a partner at Deloitte for a further 5 years, Roger delivered strong
results to the Tasmanian practice, through his extensive experience in a broad range
of businesses with particular expertise in FMCG, agribusiness and mining services.
Roger currently pursues a number of private business interests including a water
remediation technology company, property development, tourism, hospitality and
retail investments.
Other Directorships in listed entities:
Former Directorships in listed entities in
the last 3 years:
Nil
Nil
Interest in shares and options:
2,199,000 Ordinary Shares
Alexander (Sandy) Beard
Non-Executive Director
1,250,000 Share Options exercisable at $0.21 before 3 September 2019
1,250,000 Share Options exercisable at $0.42 before 3 September 2019
Experience and qualifications
Sandy was appointed to the Board as a Non-Executive Director on 13 March 2018.
Sandy is the Chair of the Nomination and Remuneration Committee and a member of
the Audit and Risk Committee.
Sandy is the Managing Director and CEO of CVC Limited (a substantial shareholder
of TasFoods Limited) and has extensive experience in a broad range of businesses
with a particular expertise in food manufacturing. Sandy is an experienced Director
and has played important roles in delivering value to shareholders across a broad
spectrum of industries and stages of company growth.
Sandy is a Fellow of the Chartered Accountants Australia and New Zealand and is a
Member of the Australian Institute of Company Directors.
Other Directorships in listed entities:
CVC Limited
Eildon Capital Limited
Cellnet Limited
Probiotec Limited
US Residential Fund
Former Directorships in listed entities in
the last 3 years:
Interest in shares and options:
Nil
Nil
TasFoods Annual Report 2018 | 19
Antony Robinson
Former Chair and Non-Executive Director
Antony joined the Board on 29 May 2014 and became a Non-Executive Director in
September 2015 and Chair of the Board on 3 March 2017. Antony resigned from
the role of Chair of the Board on 1 February 2018 and resigned as a Non-Executive
Director on 13 March 2018.
Antony was a member of both the Audit and Risk Committee and the Nomination and
Remuneration Committee.
Antony has extensive experience in senior roles in the financial services, insurance and
telecommunications sectors. He is currently a Director of Bendigo & Adelaide Bank
Limited and was previously Managing Director of Centrepoint Alliance Limited. Prior
to that he held a number of senior executive roles including Executive Director and
CEO of IOOF Holdings Ltd, Managing Director and CEO of OAMPS Limited.
Bendigo & Adelaide Bank Limited (since April 2006), Pacific Current Group Limited
(since August 2015), Longtable Group Limited (previously known as Primary Opinion
Limited, since October 2015).
Experience and qualifications
Other Directorships in listed entities:
Former Directorships in listed entities in
the last 3 years:
Nil
Interest in shares and options:
800,000 Ordinary Shares (as at 13 March 2018)
1,500,000 Share Options exercisable at $0.21 before 3 September 2019
Company Secretary
Janelle O’Reilly
Company Secretary and General Counsel
Experience and qualifications
Janelle joined TasFoods on 9 September 2016.
Janelle previously held the positions of Company Secretary & General Counsel for
ASX listed companies Crane Group Limited and Ruralco Holdings Limited. She is an
expert in commercial law and corporate governance and was the General Manager
of Governance for Tasmanian State owned Aurora Energy Pty Ltd where she was
responsible for legal services, company secretariat, risk, compliance and information
management. She is a Director of Tasmanian not for profit Colony 47 and Womens
Health Education Network. She is a fellow of the Governance Institute of Australia
and a Graduate Member of the Australian Institute of Company Directors.
20 | TasFoods Annual Report 2018
Directors’ Report Meeting of Directors
The following table sets out the number of meetings of the Company’s Directors during the year ended 31 December 2018 and the
number of meetings attended by each Director during the financial year.
Board Meetings were held in addition to the Company’s Special General Meeting held on 15 February 2018 and Annual General
Meeting held on 24 May 2018. #
Board meeting
Audit and Risk Committee
Held during
time on
board
Attended
Held during
time on
board
Attended
Nomination &
Remuneration Committee
Held during
time on
board
Attended
16
13
16
16
2
16
12
15
16
1
7
5
7
7
2
7
4
7
7
1
3
1
3
3
1
3
1
2
3
1
S Noble
A Beard
J Bennett*
R McBain
A Robinson
# Only Mr Noble, Mr McBain and Ms Bennett were Directors for the full financial year.
* Ms Bennett is not a member of the Audit and Risk Committee or the Nomination and Remuneration Committee but attends the meetings as an invitee.
Principal Activities
The principal activities of the Group are the processing, manufacture and sale of premium Tasmanian-made food products.
Operating Results and Financial Position
A comprehensive review of operations is set out in the Operating and Financial Review section of this Annual Report.
Significant Change in State of Affairs
Capital Raising
In February 2018, TasFoods completed the issue of shares under the Share Purchase Plan and also under the second tranche of
the share placement to sophisticated and institutional investors (as announced in December 2017). This resulted in the issuing of
22,875,816 fully paid ordinary shares, raising approximately $4.0 million (before costs).
Funds raised were used to expand production capacity (via capital investment in specialised plant including a homogeniser at
Meander Valley Dairy factory and air chiller at Nichols Poultry) and for general working capital purposes.
There were no other significant changes in the state of affairs of the Group during the financial year.
After Balance Date Events
There are no matters or circumstances that have arisen since 31 December 2018, which have significantly affected the Group’s
operations, results or state of affairs, or may do so in future years.
TasFoods Annual Report 2018 | 21
Remuneration Report (Audited)
Message from the Chair of the Nomination and
Remuneration Committee
Shareholders
I am pleased to present the 2018 Financial Year Remuneration Report for TasFoods Limited (TasFoods), the first since assuming the
role as Chair of the Nomination and Remuneration Committee.
Since the 2017 Annual General Meeting, the Directors of TasFoods have engaged with shareholders to understand the concerns
of shareholders regarding the remuneration structure and practices and where they fell short of shareholder expectations in 2017.
TasFoods remuneration structure was then reviewed to determine where, if any, changes should be made.
As a result of this review and considering the Board’s strategic objectives for TasFoods in 2018 as well as the requirement of Key
Management Personnel to continue to deliver improved financial performance, the Board determined the remuneration structure
remained fit for purpose. However, in recognition of the importance of financial turnaround the Board determined it appropriate to
amend the 2018 short-term incentive performance measures. The amendments included placing a greater weighting on financial
performance measures and setting a minimum performance target hurdle of EBITDA which must be met for payment of the short-
term incentive. As outlined in sections 4.6 and 4.7 of this report, the minimum EBITDA target was not met in 2018 and as such no
short-term incentive was paid.
In setting the 2018 long-term incentives for Key Management Personnel, the Board determined that to align with shareholder
expectations the percentage of total fixed remuneration used to calculate the rights offered would be halved from the percentage
used in 2017. This has resulted in a halving of the number of performance rights granted.
On behalf of the Board, we recommend the Remuneration Report to you and look forward to welcoming you to the 2018 Annual
General Meeting.
Alexander Beard
Chair – Nomination and Remuneration Committee
The Directors of TasFoods Limited present the Remuneration Report for the Company and its controlled entities for the financial
year ended 31 December 2018, prepared in accordance with the requirements of the Corporations Act 2001 and its regulations.
This report outlines the remuneration arrangements in place for the Key Management Personnel (KMP) of the Group, which
comprises all Directors (executive and non-executive) and those other members of the TasFoods Executive who have authority and
responsibility for planning, directing and controlling the activities of the Group.
In 2018 the Company’s main activity related to developing Tasmanian premium branded food businesses (including Nichols Poultry,
Meander Valley Dairy, Pyengana Dairy, Robur Farm Diary and Shima Wasabi), therefore, the details of KMP remuneration for 2018
relate to those activities and the current remuneration structure.
This report has been prepared in accordance with section 300A of the Corporations Act 2001.
The Report has been set out as follows:
1. Key management personnel
2. Role of the Nomination and Remuneration Committee
3. Engagement of remuneration consultants
4. Remuneration strategy and framework
4.1 Executive remuneration schedule
22 | TasFoods Annual Report 2018
Directors’ Report 4.2 Remuneration mix and linking pay to performance
4.3 2018 fixed remuneration
4.4 2018 short-term incentive arrangements
4.5 2018 long-term incentive arrangements
4.6 KMPs 2018 short-term incentive arrangement results
4.7 Summary of 2018 short-term incentive payments to KMP
4.8 Company financial performance
5. Executive contracts
6. Non-executive directors’ remuneration structure
6.1 Current fee levels and fee pool
7. Restrictions on long-term incentive plan shares prior to vesting
8. Remuneration tables – Directors and KMP executives
Key management personnel
1.
The term Key Management Personnel refers to those persons having the authority and responsibility for planning, directing and
controlling the activities of the Consolidated entity, directly or indirectly, and includes any director of the Group (whether executive
or otherwise).
The KMP of TasFoods for the year ended 31 December 2018 were:
Current Executive and Non-executive Directors
Role
Shane Noble1
Roger McBain
Alexander Beard2
Executive Chair
Non-executive Director
Non-executive Director
Current KMP Executives
Role
Jane Bennett
Tom Woolley
Donna Wilson
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Appointment Date
30 November 2017
3 September 2015
13 March 2018
Appointment Date
3 September 2015
3 September 2015
27 June 2016
Former Non-executive Directors
Role
Appointment Date
Antony Robinson3
Non-executive Director
13 March 2018
1. Shane Noble was a Non-Executive Director prior to his appointment to Executive Chair on 1 February 2018.
2. Alexander (Sandy) Beard was appointed as a Non-Executive Director on 13 March 2018.
3. Antony Robinson resigned from the position of Non-Executive Director on 13 March 2018.
Role of the Nomination and Remuneration Committee
2.
The Committee has the responsibility for proposing candidates for consideration by the Board to fill casual vacancies or additions
to the Board and for devising criteria for Board membership and for reviewing membership of the Board, including:
● Assessment of necessary and desirable competencies of Board members;
● Review of Board succession plans to maintain an appropriate balance of skills, experience and expertise;
● As requested by the Board, evaluation of the Board’s performance and, as appropriate, developing and implementing a plan
for identifying, assessing and enhancing Director competencies; and
TasFoods Annual Report 2018 | 23
● Recommendations for the appointment or replacement of Directors.
Additional responsibilities of the Committee include reviewing and reporting to the Board on:
● Remuneration arrangements for the directors and senior executives of the Company (including, without limitation, incentive,
equity and other benefit plans and service contracts) to ensure remuneration suitably motivates executives to pursue the
success of the Company through the identification and profitable integration of growth opportunities;
● The review of the Audited Remuneration Report to be included in the annual report;
● Remuneration policies and practices for the Company generally;
● Superannuation arrangements;
● Board remuneration; and
● Such other matters as the Board may refer to the Committee from time to time.
Engagement of remuneration consultants
3.
The Nomination and Remuneration Committee periodically engages independent external consultants to advise and assess KMP
remuneration arrangements. No advice was sought or provided by external advisors regarding the remuneration structure during
the year ended 31 December 2018.
During 2018 Mercer Consulting Australia Pty Ltd (Mercer) was engaged to provide the valuation of rights to senior executives
(issued under the existing LTI Plan), but did not provide any recommendations on the participants, quantum for participants, or
the hurdles.
Remuneration strategy and framework
4.
The remuneration strategy sets the direction for the remuneration framework and drives the design and application of
remuneration policies for executives of TasFoods (including KMP).
TasFoods remuneration strategy and framework aims to attract and retain the best available people to run and manage TasFoods
and align their interests with our shareholders. The Board is committed to having a remuneration strategy and framework that
rewards, motivates, and retains executives, to achieve our business objectives and deliver shareholder returns.
TasFoods seeks to create alignment between the interests of its executives and shareholders. In the case of executives, by providing
a fixed remuneration component together with specific short-term and long-term incentives based on key performance areas
affecting TasFoods financial results.
In the case of non-executive directors, their remuneration does not contain performance-based or ‘at risk’ components.
Non-executive directors are paid fees and are encouraged to hold shares in TasFoods.
Executive remuneration structure
4.1.
The performance of the Company depends upon the quality of its executives. To prosper, the Company must attract, motivate and
retain highly skilled executives. To that end, the Company embodies the following principles in its remuneration framework:
● Provide competitive rewards to attract high calibre executives;
● Focus on creating sustained shareholder value;
● Place a portion of executive remuneration at risk by linking reward with the strategic goals and performance of the Company;
● Differentiate individual rewards commensurate with contribution to overall results and according to individual accountability,
performance and potential; and
● Ensure total remuneration is competitive by market standards.
Executives’ total remuneration package may be comprised of the following elements:
● Total Fixed Remuneration (base salary and superannuation)
● At-Risk Remuneration:
24 | TasFoods Annual Report 2018
Directors’ Report Performance Condition
Remuneration Strategy/Performance Link
– Short-Term Incentive (STI)
– Long-Term Incentive (LTI)
Total Fixed Remuneration (TFR)
● salary
● statutory superannuation
Executive remuneration levels are
market-aligned by comparison to similar
roles in ASX-listed companies that have
comparable market capitalisation,
revenues, and financial metrics relevant
to the executive’s role, executive’s
knowledge, skills and experience, and
individual performance.
Short Term Incentive (STI)
Performance is measured against:
Annual incentive opportunity
delivered in cash
● Financial Group performance (i.e.
sales revenue, gross profit margin and
EBITDA); and
● Non-Financial KPIs (i.e. WH&S (LTIFR)).
The STI plan applies more broadly beyond
the KMP and KPI’s vary depending on the
executive’s level and role.
Non-Financial KPIs also vary and
depend on the executive’s individual role
and responsibilities.
Details of the specific measures and results
for 2018 can be found in section 4.6 and
section 4.7.
Long Term Incentive (LTI)
An award of rights with performance
assessed over 3 years
LTI awards for the 2018 grants were
provided under the LTIP approved by
shareholders at the 2016 AGM.
A three-year performance period provides
a reasonable period to align reward
with shareholder return and also acts
as a vehicle to help retain the KMP,
align the business planning cycle, and
provide sufficient time for the longer-term
performance to be achieved.
Due to the importance that the Board
places on an improvement in share price
a single measure based on share price
growth was chosen for the 2018 grant.
The total rights granted in 2018 were
reduced by 50% compared to rights
granted in 2017.
Fixed remuneration is set to attract,
motivate, retain executives to ensure they
can deliver on TasFoods business strategy
and contribute to the TasFoods ongoing
financial performance.
The STI plan is designed to encourage
and reward high performance and for this
reason it places a significant proportion of
the executives’ remuneration at-risk against
targets linked to the Company’s annual
performance objectives and therefore
supports the alignment between the
interests of the executive, TasFoods and
our shareholders.
A combination of financial and
non-financial KPIs are used because the
Board believes that there should be a
balance between short term financial
measures and more strategic non-financial
measures which in the medium to longer
term will support the growth of TasFoods.
The Board believes the STI provides
the right measures and appropriately
challenging targets for participants.
The purpose of the LTI is to focus the
executives’ efforts on the achievement
of sustainable long-term shareholder
value creation and the long term financial
success of TasFoods.
The provision of LTIP awards via
performance rights for ordinary shares
in TasFoods encourages long-term share
exposure for the executives and, therefore,
aligns the long-term interests of executives
and shareholders.
TasFoods Annual Report 2018 | 25
4.2. Remuneration mix and linking pay to performance
The Board recognises that each executive needs a significant portion of their remuneration to be at-risk and be linked to TasFoods
annual business objectives and actual performance.
Remuneration is linked to performance by:
● Requiring a proportion of the executives’ remuneration to vary with the short-term and long-term performance of TasFoods;
● Setting clear expectations on target and stretch performance objectives required for STI payments to ensure quality
results; and
● Assessment of long-term performance through multiple measures to provide a complete picture of TasFoods performance and
the increase in shareholder value.
In addition, STI and LTI outcomes are not driven by a purely formulaic approach. The Nomination and Remuneration Committee
holds discretion to determine that awards are not to be provided or vested in circumstances where it would be inappropriate or
would provide unintended outcomes.
The relative weighting of fixed and variable components for target performance is set according to the scope of the executive’s
role. For the KMP the ‘at risk’ components for 2018 were as follows:
Current KMP Executives
Jane Bennett
Tom Woolley
Donna Wilson
Short Term
Incentive
(At-Target)1
Short Term
Incentive
(Stretch)2
Long Term
Incentive
(Target
Opportunity)3
Long Term
Incentive
(Maximum
Opportunity)
30%
25%
25%
45%
37.5%
37.5%
20%
17.5%
17.5%
40%
35%
35%
TFR
$262,800
$229,000
$186,150
1. The short-term incentive is the total payment at-target as a % of TFR
2. KMP executives’ STIs have a stretch component that is designed to encourage above at-target performance as a % of TFR.
3. The long-term incentive refers to the value, of any grant as a % of TFR.
Jane
Bennett
Tom
Woolley
Donna
Wilson
TFR – 67%
STI – 20%
LTI – 13%
TFR – 70%
STI – 18%
LTI – 12%
TFR – 70%
STI – 18%
LTI – 12%
4.3. 2018 fixed remuneration
TasFoods uses a total fixed remuneration (base salary and superannuation) for the purposes of calculating STI and/or LTI amounts.
Details of KMP executives’ total fixed remuneration for the year ended 31 December 2018 (and 31 December 2017) can be found in
the ‘Remuneration Tables’ section of this report.
26 | TasFoods Annual Report 2018
Directors’ Report 4.4. 2018 short-term incentive arrangements
The TasFoods Short Term Incentive Plan (STIP) rewards the CEO and those executives reporting to the CEO (including the
KMP executives) for performance against a pre-determined scorecard of measures linked to TasFoods short-term business
performance (12 months) and individual performance. The specific performance measures may vary from year to year depending
on the business’s objectives but are chosen on the basis that they will increase financial performance, market share and
shareholder returns.
The relative weighting of fixed and variable components for target performance is set according to the scope of the executive’s role.
The key performance indicators and other targets against which performance can be measured for determining the proportion of
‘at-risk’ remuneration, are generally as follows:
● Financial – actual results compared to budgeted results for items including EBITDA, Sales Revenue, and Gross Profit Margin.
● Business growth – NPAT, earnings per share, price earnings ratio, new order value, acquisitions and new customers.
● Business management – cash generation, capital management, number of days sales outstanding in debtors, inventory
turnover, cost/revenue ratios, and staff utilisation.
● Strategy – development, approval, implementation, and achievement.
● People – Workplace Health and Safety (LTIFR).
Performance for each measure is assessed on a range from Target to Stretch. Stretch is set by the Board for each measure at a
level that ensures maximum STI is payable only where performance has truly and substantially exceeded expectations.
Details of the STI performance measures and targets for 2018 are set out in section 4.6 and section 4.7.
4.5. 2018 long-term incentive arrangements
Executive remuneration is determined by the Board, having consideration to relevant market practices and the circumstances
of the Company on an annual basis. It is the view of the Board that it is in the interests of Shareholders for selected Executives
(the Participants) to receive part of their total remuneration package (TRP) in the form of at-risk equity that will vest based
on performance against indicators that are linked to Shareholder benefit (refer to details in respect of the Vesting Conditions
following) during a defined Measurement Period. This is also considered best practice with regards to evident market practices. It
should therefore be considered appropriate to provide some equity-based remuneration to Executives of the Company instead of
cash only.
The TasFoods Limited Rights Plan (TFLRP) was designed to form a significant component of at-risk remuneration and to create
alignment between Shareholder value creation and the remuneration of selected Executives. Grants under the TFLRP will facilitate
the Company providing appropriate, competitive and performance-linked remuneration to its Executives. The Board seeks to
ensure that grants to Executives are made at a level that will appropriately position their TRPs in the market, in accordance with
the Company’s remuneration policies.
The key elements of the LTI plan are:
Participants: the CEO, 2 executive KMP, and provision for additional participants but noting that the terms of their grants may be
varied as considered appropriate by the Board.
Instrument: The TFLRP uses Rights which are an entitlement to the value of a Share which may be settled either in the form of cash
or a Share/Restricted Share (a Share which is subject to disposal restrictions). Generally, it is expected that vested Rights will be
satisfied in Restricted Shares.
Maximum number of Performance Rights: The maximum number of Performance Rights is calculated by multiplying the total
fixed remuneration (TFR) of the Participant at the beginning of the financial year by the maximum LTI % and then dividing that
figure by a 10-day volume weighted average share price (VWAP) related to the time of calculation. The VWAP used to calculate
the maximum number of performance rights for 2018 was $0.17 cents based on the share price over a 10-day period, being the
10 trading days prior to the Company’s 2017 end of financial year.
Measurement Period: The Measurement Period will be the three financial years from 1 January 2018 to 31 December 2020.
TasFoods Annual Report 2018 | 27
Vesting Conditions: In order for Performance Rights to vest, the Participant must remain employed by the Company during the
Measurement Period (except in the case of a “Good Leaver”) and the performance conditions must be satisfied. The performance
condition in relation to this proposed grant of Performance Rights is Share Price growth, with the vesting percentages (of the grant/
stretch/maximum level of LTI) to be determined by the following scale:
Performance Level
TFL Share Price
% of the Grant/Stretch /Maximum Vesting
>Stretch
Stretch
Between Target and Stretch
Target
>$0.40
$0.40
>$0.33, < $0.40
$0.33
100%
100%
Pro-rata
50%
The targets for share price growth are based on a starting share price of $0.25 (being the share price at which investors acquired
their shares at the 2016 capital raising) which is a Compound Annual Growth Rate (CAGR) from 2016, the year of investment, of
7.5% to achieve ‘target’ share price and a CAGR of 12.5% to achieve ‘stretch’ share price; noting the share price at 1 January 2018
was $0.195 which is a CAGR of 19% to achieve ‘target’ share price and a CAGR of 27% to achieve ‘stretch’ share price.
Share Price will be determined by a ten trading day VWAP ending on the date that is the end of the Measurement Period (see
above). Details of the performance rights allocated to KMP can be found in Table D of section 8 below.
Retesting: Retesting is not permitted under the proposed terms of the 2018 Invitations.
Exercise Price: No amount will be payable by the Participant to exercise a Performance Right that has vested.
Cessation of Employment: Unless the Board determines otherwise, if a TFLRP Participant ceases employment and is classified
as a “Bad Leaver” (dismissal for cause, termination for poor performance or otherwise as determined by the Board), all unvested
Performance Rights held by the Participant will lapse. Unless the Board determines otherwise, if a Participant ceases employment
for any other reason, including by reason of death, disability, redundancy or retirement (“Good Leaver”), Performance Rights that
were granted to the Participant during the financial year in which the termination occurred will be forfeited in the same proportion
as the remainder of the financial year bears to the full year. All remaining Performance Rights for which Vesting Conditions have
not been satisfied as at the date of cessation of employment will then remain “on foot”, subject to the original Vesting Conditions. In
the circumstances of any termination, any Restricted Shares that flow from the exercising of the Rights would cease to be subject to
disposal restrictions unless otherwise specified in the Invitation.
4.6. KMPs 2018 short-term incentive arrangement results
The measures and targets for the 2018 STI were set by the Board in January 2018 and were based on the priorities for 2018. The
key performance indicators were based upon stretch targets, with operating EBITDA set as a hurdle requirement for payment of
the 2018 STI.
The following table shows the Company’s 2018 STI performance measures, weightings and outcomes as applied to KMP.
Performance Measure
Description
Weighting
Outcome
Comment
Sales Revenue
Statutory gross sales revenue
20%
Gross Profit Margin
Statutory gross profit margin
excluding biological asset
movements
20%
Target not
achieved
Target
achieved
Growth in sales revenue is key
to improved performance and
sustainability of the Group
The gross profit margin
is seen as a key outcome
of sales effectiveness and
operational efficiency
28 | TasFoods Annual Report 2018
Directors’ Report Performance Measure
Description
Weighting
Outcome
Comment
Operating EBITDA
Statutory EBITDA adjusted for
acquisition costs, capital raising
costs and incentive payments
40%
Target not
achieved
WHS – Lost time injury
frequency rate (LTIFR)
LTIFR are the number of lost
time injuries within a given year
relative to the total number of
hours worked in the same period
multiplied by 1 million
20%
Target not
achieved
EBITDA is seen as a key factor
of trading performance and
operational sustainability.
Operating EBITDA was a hurdle
requirement for STI payment
in 2018
Employees are a key asset to
TasFoods and their safety is
paramount. A reduction in the
LTIFR is a key outcome of the
WHS program
4.7. Summary of 2018 short-term incentive payments to KMP
Details of KMP executives’ STI payments for the year ended 31 December 2018, the proportion to be received for at-target and
stretch performance, achieved STI, and the amounts forfeited are shown in the table below.
FY18 STI Payment
Current KMP Executives
Jane Bennett
Tom Woolley
Donna Wilson
STI $
At-Target
$
78,840
54,750
46,538
STI $
Stretch
$
118,260
82,125
69,806
STI $
Achieved
$
% At-Target
STI Achieved
%
% Stretch
STI Achieved
%
% Stretch
STI Forfeited
%
–
–
–
0%
0%
0%
0%
0%
0%
100%
100%
100%
4.8. Company financial performance
The following table shows the relationship between KMP executives’ at-risk remuneration and TasFoods overall
financial performance:
Financial Year Ended 31 December 2018
Revenue ($000)
Net (loss)/profit before tax ($'000)
Net (loss)/profit after tax ($'000)
Share price at start of year
Share price at end of year
Share price growth
Dividends
Basic (loss)/earnings per share (cents)
Diluted (loss)/earnings per share (cents)
Average STI payout as a % at-target for eligible KMP executives
2018
$38,920
($2,273)
($1,358)
$0.190
$0.135
-28.95%
$0.00
(0.67)
(0.67)
0%
2017
$31,112
($6,639)
($6,808)
$0.180
$0.190
5.56%
$0.00
(4.14)
(4.14)
20%
TasFoods Annual Report 2018 | 29
5. Executive Contracts
The remuneration and other terms of employment for the executives are covered in formal employment contracts that have no fixed
terms. TasFoods may terminate an executive immediately for cause, in which case the executive is not entitled to any payment other
than the value of total fixed remuneration (and accrued entitlements) up to the termination date.
Notice
Period by
TasFoods
Notice
Period by
Executive
Termination/Redundancy Payment
Name
KMP – Executive Director
Jane Bennett
6 months
6 months
The Company has discretion to make a payment in lieu of all or
part of the notice period.
If the CEO’s employment is terminated in circumstances where
there has been a fundamental change to her role, or if she is
made redundant then she is entitled to a severance payment
equivalent to 12 months’ salary."
KMP Executives
Tom Woolley
6 months
6 months
The Company has discretion to make a payment in lieu of all or
part of the notice period.
Donna Wilson
6 months
6 months
If the COO’s employment is terminated in circumstances where
there has been a fundamental change to his role, or if he is made
redundant then he is entitled to a severance payment equivalent
to 12 months’ salary.
The Company has discretion to make a payment in lieu of all or
part of the notice period.
If the CFO’s employment is terminated in circumstances where
there has been a fundamental change to her role, or if she is
made redundant then she is entitled to a severance payment
equivalent to 12 months’ salary.
6. Non-executive directors’ remuneration structure
TasFoods remuneration policy for executive and non-executive directors aims to ensure that TasFoods can attract and retain
suitably qualified and experienced directors having regard to:
● the level of fees paid to executive and non-executive directors of other comparable Australian listed companies;
● the growing size and complexity of TasFoods operations;
● the responsibilities and work requirements of Board members; and
● the skills and diversity of Board members.
6.1. Current fee levels and pool
TasFoods’ remuneration policy for executive and non-executive directors aims to ensure that TasFoods can attract and retain
suitably qualified and experienced directors having regard to:
● the level of fees paid to non-executive directors of other comparable Australian listed companies;
● the growing size and complexity of TasFoods operations;
● the responsibilities and work requirements of Board members; and
● the skills and diversity of Board members.
30 | TasFoods Annual Report 2018
Directors’ Report Within the aggregate amount of $400,000, non-executive directors’ fees are reviewed periodically and determined by the
Nomination and Remuneration Committee and the Board with reference to other ASX-listed companies that have comparable
market capitalisation.
A review of NED fees was undertaken in November 2017, based on the benchmark data of a market capitalisation comparator
group. NED fees, effective 1 January 2018 (inclusive of superannuation) were:
Director
Shane Noble (Executive Chair)1
Roger McBain
Alexander Beard2
Base Fee
250,000
45,000
45,000
Committee
Chair Fee
–
–
–
Total
250,000
45,000
45,000
1. Shane Noble as Executive Chair has a more significant role in the business than that of Non-Executive Chair and in particular spends approximately 2 days a
week working with the CEO and Executive Team. Accordingly, the fee reflects the extra work that is provided by Shane Noble to TasFoods.
2. Alexander Beard was appointed to the Board on 13 March 2018, Sandy elected not to be paid a Directors fee by TasFoods in 2018 in recognition of the
committment by all Directors and staff to deliver the Group to profitability.
Directors may also be reimbursed for travel and other expenses incurred in attending to TasFoods affairs.
A non-executive director may be paid such additional or special remuneration as the Board decides is appropriate where a
director performs extra work or services. No fees were paid during 2018 as additional or special remuneration.
There are no retirement benefit schemes for directors other than statutory superannuation contributions, and executive chair and
non-executive directors’ remuneration must not include a commission on, or a percentage of, the profits or income of TasFoods.
7. Restrictions on LTIP shares prior to vesting
The Company prohibits executives from entering into arrangements to protect the value of unvested Long-Term Incentive
awards. This includes entering into contracts to hedge their exposure to performance rights over shares granted as part of their
remuneration package. Adherence to this policy is monitored informally on an annual basis where such awards exist by the
Nomination and Remuneration Committee requesting confirmation from each of the executives that no such activity has occurred.
The Company treats compliance with this policy as a serious issue and takes appropriate measures to ensure policy adherence.
TasFoods Annual Report 2018 | 31
8. Remuneration tables – Directors and KMP executives
Details of the nature and amount of each element of the remuneration and shareholdings of the KMP of the consolidated entity are
set out in the following tables.
Table A: Remuneration for KMP for the year ended 31 December 2018
s
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32 | TasFoods Annual Report 2018
1
2
3
4
5
Directors’ Report
Table B: Shareholdings
Shares held at
Start of Year
No.
Year
Issued as
Remuneration
Share Buyback
No.
Net other
changes
Shares held at
End of Year
%
0
%
0
%
0
%
0
%
0
%
0
%
7
%
0
%
7
%
0
%
6
%
0
%
0
%
0
%
0
Current Executive Chair and Non-executive Directors
Shane Noble
2018
3,000,000
Roger McBain
Alexander Beard
Current KMP executives
Jane Bennett
Tom Woolley
Donna Wilson
Former Non-executive Directors
Antony Robinson
Robert Woolley
Hugh Robertson
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
–
2,199,000
2,199,000
–
1,999,000
1,999,000
599,000
1,599,000
–
–
800,000
800,000
4,223,000
1,014,000
–
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1
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7
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2
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e
t
i
m
i
L
s
d
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F
s
a
T
y
b
e
e
f
s
r
o
t
c
e
r
i
D
a
d
i
a
p
e
b
o
t
t
o
n
d
e
t
c
e
l
e
s
a
h
e
h
t
n
e
m
t
n
i
o
p
p
a
s
i
h
e
c
n
i
s
,
8
1
0
2
h
c
r
a
M
3
1
n
o
d
r
a
o
B
e
h
t
o
t
d
e
t
n
i
o
p
p
a
s
a
w
d
r
a
e
B
r
e
d
n
a
x
e
l
A
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,000,000
3,000,000
3,000,000
–
–
–
2,199,000
2,199,000
–
Not applicable
–
–
–
–
–
–
–
–
–
–
176,472
–
–
(1,000,000)
2,175,472
1,999,000
599,000
599,000
–
–
–
–
–
–
–
–
N/A
800,000
N/A
N/A
TasFoods Annual Report 2018 | 33
Performance
Rights or
Options held
at End of
Year
No.
5,000,000
5,000,000
2,500,000
2,500,000
4,502,972
3,884,619
3,829,346
3,378,464
967,250
584,000
–
–
–
–
–
–
–
–
–
–
–
9,500,000
9,500,000
–
–
1,500,000
1,500,000
Table C: Movements during 2018 in performance rights or options over shares in the Company held, directly, indirectly or
beneficially, by each KMP, including their related parties.
Performance
Rights or
Options held
at Start of
Year
No.
Year
Granted as
remuneration
Vested and
exercisable
No.
Exercised
during the
reporting
period
No.
Forfeited
No.
Current Executive Chair and Non-executive Directors
Shane Noble
2018 5,000,000
–
Roger McBain
Current KMP executives
2017
–
5,000,000
2018 2,500,000
2017 2,500,000
–
–
Jane Bennett
2018
3,884,619
618,353
2017 2,500,000
1,384,619
Tom Woolley
2018
3,378,464
450,882
Donna Wilson
2017 2,500,000
878,464
2018
2017
584,000
383,250
–
584,000
Former Non-executive Directors
Robert Woolley
Antony Robinson
2018 9,500,000
2017 9,500,000
2018 1,500,000
2017
1,500,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34 | TasFoods Annual Report 2018
Directors’ Report Table D: Share-based payments granted as remuneration to KMP during 2018
Current Executive Chair and Non-executive Directors
Year
Grant Date
Value of
Performance
Rights or
Options Granted
$
Number
Granted
No.
Number Vested
No.
Percentage of
Grant Forfeited
No.
Shane Noble
Current KMP executives
Jane Bennett
Tom Woolley
Donna Wilson
2018
2017
2018
2017
2018
2017
2018
2017
30-Nov-17
5,000,000
325,000
–
–
26-Jul-18
17-Jul-17
26-Jul-18
17-Jul-17
26-Jul-18
17-Jul-17
618,353
1,384,619
450,882
878,464
383,250
584,000
27,208
94,154
19,839
59,736
16,863
39,712
–
–
–
–
–
–
–
–
0%
0%
0%
0%
0%
0%
0%
0%
Indemnity and Insurance of Officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or
executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the
Company paid a premium in respect of a contract to insure the directors and officers of the Company against a liability to the
extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of liability and the
amount of the premium.
Indemnity and Insurance of Auditor
The Company has not, during or since 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.
Environmental Regulations
The Company is subject to usual Federal and State environmental regulations. TasFoods manufacturing sites are licenced with
Council and State authorities. The licences stipulate performance standards for all emissions (noise, air, odour, waste water etc),
from the sites as well as the frequency and method of assessment of emissions. The Company’s activities are in full compliance with
all prescribed environmental regulations.
Shares Options and Performance Rights
During the financial year the Company issued 1,452,485 performance rights to Key Management Personnel. Further details
regarding the performance rights granted are contained within the Remuneration Report and in note 31.
Proceedings on Behalf of the Company
No person has applied for leave of the Court under Section 327 of the Corporations Act 2001 to bring proceedings on behalf of
the Company or 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 any part of those proceedings. The Company was not a party to any proceedings during the year.
Non-Audit Services
The Group may decide to engage its auditor on assignments additional to their statutory audit duties where the auditor’s expertise
and experience with the Group are important. Where auditors are engaged to perform non-audit services, the Directors are
TasFoods Annual Report 2018 | 35
satisfied that the provision of these non-audit services by the auditor (or by another person or firm on the auditor’s behalf) is
compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
Details of amounts paid or payable to the Group’s auditor for audit and non-audit services provided during the year are set
out below.
Auditors of the parent entity:
Auditing the financial report
Auditing the financial report – subsidiary companies
Other assurance services
2018
$
2017
$
123,900
–
3,876
120,750
32,000
–
127,776
152,750
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included at
page 37 of the Annual Report.
Auditor
PricewaterhouseCoopers continues in accordance with section 327 of the Corporations Act 2001. There are no officers of the
Company who are former audit partners of PricewaterhouseCoopers.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors support the
principles of good corporate governance. The Group continued to follow best practice recommendations as set out by
the ASX Corporate Governance Council. Where the Group has not followed best practice for any recommendation,
explanation is given in the Corporate Governance Statement which is available on the Company’s website at
http://www.tasfoods.com.au/corporate-governance/
Rounding of Amounts
The amounts contained in this report and in the financial report have been rounded to the nearest thousand (where rounding
is applicable) under the option available to the company under ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191. The company is an entity to which the Class Order applies. Amounts in the directors’ report have been
rounded off in accordance with the Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Signed in accordance with a resolution of the Directors made pursuant to section 298(2) of the Corporations Act 2001.
On behalf of the Directors
Shane Noble
Executive Chairman
27 February 2019
36 | TasFoods Annual Report 2018
Directors’ Report Auditor’s Independence Declaration
As lead auditor for the audit of TasFoods Limited for the year ended 31 December 2018, I declare that
to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of TasFoods Limited and the entities it controlled during the period.
Alison Tait
Partner
PricewaterhouseCoopers
Melbourne
27 February 2019
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
37
TasFoods Annual Report 2018 | 37
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and other
Comprehensive Income
for the year ended 31 December 2018
Revenue from operations
Other income
Fair value adjustment of biological assets
Impairment of goodwill
Raw materials used
Employment and contractor expense
Freight
Occupancy costs
Depreciation and amortisation
Finance costs
Travel and accommodation
Legal and professional fees
Marketing and event expenses
Repairs and maintenance
Research and development
Investment expenses
Other expenses
Loss before income tax
Income tax benefit/(expense)
Net Loss after tax for the year from continuing operations
Net profit after tax for the year from discontinued operations
Net Loss after tax for the year
Other comprehensive income
Items that may be reclassified to profit or loss in the future:
Other comprehensive loss net of tax
Total comprehensive income
Net profit for the period attributable to:
Non-controlling interest
Owners of TasFoods Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of TasFoods Limited
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Basic loss per share from continuing operations (cents per share)
Diluted loss per share from continuing operations (cents per share)
The above statement should be read in conjunction with the accompanying notes.
38 | TasFoods Annual Report 2018
Note
6
6
8
4
4
4
4
2018
$’000
38,391
529
291
–
(20,539)
(12,375)
(2,370)
(1,102)
(1,210)
(109)
(160)
(209)
(521)
(573)
(38)
(187)
(2,091)
(2,273)
915
(1,358)
–
(1,358)
2017
$’000
30,743
369
668
(2,116)
(16,753)
(12,075)
(1,323)
(967)
(853)
(76)
(130)
(633)
(629)
(604)
(110)
(40)
(2,109)
(6,639)
(169)
(6,808)
–
(6,808)
–
(1,358)
–
(6,808)
–
(1,358)
(1,358)
–
(1,358)
(1,358)
(0.67)
(0.67)
(0.67)
(0.67)
–
(6,808)
(6,808)
–
(6,808)
(6,808)
(4.14)
(4.14)
(4.14)
(4.14)
Consolidated Statement of Financial Position
for the year ended 31 December 2018
Current Assets
Cash and cash equivalents
Trade and other receivables
Biological assets
Inventory
Prepayments
Total Current Assets
Non-Current Assets
Property, plant and equipment
Intangible assets
Biological assets
Deferred tax assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Borrowings
Provisions
Total Current Liabilities
Non-Current Liabilities
Borrowings
Provisions
Deferred tax liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed Equity
Reserves
Accumulated Losses
Total Equity
Note
19
9
10
11
12
13
10
8
14
15
16
15
16
8
17
18
2018
$’000
6,658
2,609
2,432
2,572
542
2017
$’000
9,663
2,799
1,932
2,013
350
14,814
16,757
17,458
8,673
275
–
26,406
41,220
3,976
1,470
623
6,069
727
156
–
883
6,953
34,267
14,944
8,673
328
–
23,946
40,702
4,775
1,255
524
6,554
1,379
144
979
2,502
9,056
31,646
46,355
42,505
390
(12,477)
34,267
260
(11,119)
31,646
The above statement should be read in conjunction with the accompanying notes.
TasFoods Annual Report 2018 | 39
Total
$’000
35,073
(6,808)
–
(4,230)
(6,808)
–
(6,808)
(6,808)
(81)
–
–
–
(81)
3,501
(82)
43
(11,119)
31,646
(11,119)
(1,358)
–
(1,358)
–
–
–
31,646
(1,358)
–
(1,358)
4,000
(151)
130
(12,477)
34,267
Consolidated Statement of Changes in Equity
for the year ended 31 December 2018
Contributed
Equity
$’000
Reserves
$’000
Accumulated
Losses
$’000
At 1 January 2017
Loss for the year
Other comprehensive loss
Total comprehensive loss for the year
Adjustments as a result of finalisation of accounting for
business combinations
Issue of shares
Share issue costs
Share-based payment expense
As at 31 December 2017
At 1 January 2018
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Issue of shares
Share issue costs
Share-based payment expense
As at 31 December 2018
39,086
217
–
–
–
–
3,501
(82)
–
42,505
–
–
–
–
–
–
43
260
42,505
260
–
–
–
4,000
(151)
–
46,355
–
–
–
–
–
130
390
The above statement should be read in conjunction with the accompanying notes.
40 | TasFoods Annual Report 2018
Consolidated Statement of Cash Flows
for the year ended 31 December 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Expenditure incurred in the pursuit of acquisitions and investment opportunities
Income taxes received
Other
Net cash used in operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intellectual property
Proceeds from disposal of property, plant, and equipment
Net cash used in business combination
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Cost of issuing shares
Proceeds from borrowings
Repayment of borrowings
Net cash provided by financing activities
Net (decrease)/increase in cash held
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
2018
$’000
2017
$’000
39,052
(41,152)
30,488
(33,776)
148
(104)
(187)
–
266
83
(107)
(40)
205
130
19
(1,976)
(3,017)
(4,108)
(2,812)
–
11
–
(4,098)
4,000
(215)
152
(1,112)
2,825
(3,249)
9,227
5,977
(33)
–
(1,623)
(4,467)
3,501
(105)
2,843
(882)
5,357
(2,127)
11,354
9,227
19
The above statement should be read in conjunction with the accompanying notes.
TasFoods Annual Report 2018 | 41
1. General Information
The consolidated financial statements and notes represent those of TasFoods Limited and its Controlled Entities. TasFoods Limited
is a company incorporated in Australia, and whose shares are publicly traded on the Australian Securities Exchange (ASX).
The financial statements were authorised for issue on 27 February 2019 by the Directors of the Company.
All press releases and other information are available on our website www.tasfoods.com.au.
2. Significant Changes in the Current Reporting Period
In December 2017, TasFoods announced a placement of ordinary shares to institutional and sophisticated investors at $0.18 per
share. This was completed in February 2018, with the issue of shares under the Share Purchase Plan and also under the second
tranche of the share placement to sophisticated and institutional investors. This resulted in the issuing of 22,875,816 fully paid
ordinary shares, raising approximately $4.0 million (before costs).
There is a detailed discussion of the Group’s financial performance and position included in the Operating and Financial Review on
pages 10 to 15 at the start of this Annual Report.
There have been no changes in accounting policies since the previous financial report at 31 December 2017, with the exception of
those outlined in Note 32(i).
3. Segment Information
The operating segments are based upon the units identified in the operating reports reviewed by the Board and executive
management, and that are used to make strategic decisions, in conjunction with the quantitative thresholds established by AASB 8
Operating Segments. As such, there are three identifiable and reportable segments each of which are outlined below:
● The Dairy segment incorporates the Meander Valley Dairy and Pyengana Dairy businesses, the assets of which were acquired
in September 2015 and October 2017, respectively. In addition, the Dairy segment includes goat farming operations which were
acquired in June 2016. The Dairy segment primarily derives revenue from dairy processing activities including the manufacture
of premium fresh milk, cheese, cream and butter products. These products are sold under the Meander Valley Dairy, Pyengana
Dairy and Robur Farm Dairy brands.
● The Poultry segment incorporates the net assets and business operations of Nichols Poultry Pty Ltd, which was acquired in
June 2016. Revenue is primarily derived by the poultry segment from the sale of poultry meat products sold under the Nichols
Poultry, Nichols Ethical Free Range and Nichols Kitchen brands.
● The Corporate and Other segment, which comprise:
– Corporate costs that are not directly attributable to operational business units, including Shared Service teams, which
provide administrative support to the operational production units in the areas of financial management, human resources,
sales, marketing, brand management, route to market, quality assurance and food safety, and work health and safety; and
– The net assets and business operations of Shima Wasabi Pty Ltd, which were acquired in June 2016.
42 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 Management measures the performance of the segments identified at the ‘net profit before tax’ level.
Consolidated – 2018
Revenue
Total segment sales revenue
Other income
Segment profit/(loss)
Profit after tax from discontinued operation
Loss before income tax expense
Income tax benefit
Loss after income tax expense
Assets
Segment assets
Total Assets
Total assets include:
Dairy
$’000
5,961
122
Poultry
$’000
32,103
244
6,083
32,347
Corporate
and Other
$’000
327
163
490
(521)
2,708
(4,460)
8,221
23,290
9,709
Total
$’000
38,391
529
38,920
(2,273)
–
(2,273)
915
(1,358)
41,220
41,220
Goodwill on acquisition of non-current assets
2,397
3,137
–
5,534
Liabilities
Segment liabilities
Deferred tax liability/(asset)
Total liabilities
1,506
4,321
1,126
6,953
–
6,953
TasFoods Annual Report 2018 | 43
3. Segment Information (continued)
Consolidated – 2017
Revenue
Total segment sales revenue
Other income
Segment profit/(loss)
Profit after tax from discontinued operation
Loss before income tax expense
Income tax expense
Loss after income tax expense
Assets
Segment assets
Total assets
Total assets include:
Dairy
$’000
Poultry
$’000
Corporate
and Other
$’000
2,484
71
2,555
(1,521)
27,978
278
28,256
281
20
301
727
(5,845)
7,625
19,386
13,691
Total
$’000
30,743
369
31,112
(6,639)
–
(6,639)
(169)
(6,808)
40,702
40,702
Goodwill on acquisition of non-current assets
2,397
3,137
–
5,534
Liabilities
Segment liabilities
Deferred tax liability/(asset)
Total liabilities
SHAREHOLDER RETURNS
4. Earnings per Share
Basic loss per share
Diluted loss per share
Basic loss per share from continuing operations
Diluted loss per share from continuing operations
Basic (loss)/earnings per share from discontinued operations
Diluted (loss)/earnings per share from discontinued operations
2,085
5,063
929
2018
Cents
(0.67)
(0.67)
(0.67)
(0.67)
–
–
8,077
979
9,056
2017
Cents
(4.14)
(4.14)
(4.14)
(4.14)
–
–
44 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 Net (loss)/profit from continuing operations attributable to the owners of TasFoods Limited used in
calculation of basic and diluted earnings per share for:
All operations
Continuing operations
2018
$’000
2017
$’000
(1,358)
(1,358)
(6,808)
(6,808)
2018
Number
2017
Number
Basic
Weighted average number of ordinary shares outstanding during the period used in the
calculation of basic earnings per share
Diluted
Weighted average number of ordinary shares and convertible redeemable preference shares
outstanding and performance rights during the period used in the calculation of diluted earnings
per share
203,745,777
164,453,023
203,745,777
164,453,023
Information Concerning the Classification of Securities
Potential ordinary shares:
a) There were no options (other than those referred to in note 31) or other forms of potential shares on issue at 31 December 2018
(31 December 2017: Nil).
b) Options granted (as referred to in note 31) are not included in the calculation of diluted earnings per share as the share price
as at 31 December 2018 was lower than the exercise price. If the share price were to increase above the exercise price, any
options exercised would have a dilutive impact on the earnings per share.
Recognition and measurement
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of
servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary
shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
● Costs of servicing equity (other than dividends) and preference share dividends;
● The after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as
expenses; and
● Other non-discretionary changes in revenues or expenses during the year that would result from the dilution of potential
ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for
any bonus element.
5. Dividends to Shareholders
No dividends have been paid or declared during the year ended 31 December 2018 (31 December 2017: Nil).
TasFoods Annual Report 2018 | 45
PROFIT AND LOSS INFORMATION
6. Revenue
Revenue from continuing operations
Sales revenue
Other income
Interest received
Sundry income
Recognition and measurement
Sales revenue
Accounting for wholesale sales of dairy, poultry and wasabi goods
2018
$’000
2017
$’000
38,391
30,743
156
373
529
83
286
369
The sale of dairy, poultry and wasabi goods is measured at the fair value of consideration received net of any trade discounts and
volume rebates allowed.
The sale of dairy, poultry and wasabi goods represents a single performance obligation and accordingly, revenue is recognised
in respect of the sale of these goods at the point in time when control over the corresponding goods and services is transferred
to the customer (i.e. at a point in time for sale of goods when the goods are delivered to the customer or transferred to the
freight forwarder).
Revenue is recognised when control of the goods transfer to the customer i.e when the goods have been delivered to a customer
pursuant to a sales order which represents a change in revenue recognition accounting policy of the group from previous
recognition when the significant risks and rewards of ownership of the goods have passed to the buyer at the time of dispatch of
the goods to the customer.
While such arrangements are rare, if an arrangement with a wholesale customer includes multiple performance obligations, the
total revenues are allocated to the separate elements of the contract, at the appropriate transaction price. In such cases, revenue
will be recognised once each performance obligation is met.
Accounting for retail and online sales
Revenue is recognised when the transaction is processed at the point of sale, whether that is at the register in-store or via an on-
line checkout process.
Accounting for bill and hold transactions
For bill and hold sales transactions, control is deemed to pass and as such revenue recognised when (a) the customer has accepted
delivery of the goods; or (b) the customer’s freight forwarder has taken possession of the goods.
All revenue is stated net of the amount of goods and services tax (GST), where applicable.
Interest revenue
Interest revenue is recognised on a proportional basis using the effective interest rate method.
46 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 7. Expenses
Profit before income tax expense includes the following specific expenses:
Employee benefits expense:
Salaries and wages
Temporary employees
Share based payments
Superannuation expense (defined contribution)
Total employee benefits
Other employment expenses
Total employment and contractor expense
Rental expenses related to operating leases
Investment expense
2018
$’000
2017
$’000
10,255
137
130
922
11,444
932
12,375
203
187
8,264
2,308
43
709
11,324
751
12,075
151
40
Investment expense arises from costs relating to the identification of, and pursuit of investment and acquisition opportunities.
This includes non-refundable contractual payments to secure rights to exclusive periods of negotiation with third parties and
associated costs.
TasFoods Annual Report 2018 | 47
8.
Income Tax
(a) Income tax recognised in profit or loss:
Tax expense/(benefit) comprises:
Current tax (benefit)/expense
Deferred tax movements
Deferred income tax (benefit)/expense included in income tax expense comprises:
(Increase)/decrease in deferred tax assets
Increase/(decrease) in deferred tax liabilities
Reconciliation of income tax expense to proforma facie tax on accounting profit:
Loss before income tax expense
Tax benefit at Australian tax rate of 30% (2017: 30%)
Tax effect of amounts which are not deductible in calculating taxable income
Recognition of prior year tax losses
Research and development tax offset
Deferred taxes not recognised
Tax effect on impairment of goodwill in Shima Wasabi
Income tax (benefit)/expense for the period
(b) Income tax benefit recognised directly in equity during the period
Deferred tax arising from share issue costs
2018
$’000
2017
$’000
–
(915)
(915)
(1,062)
147
(915)
(2,273)
(682)
61
(294)
–
(915)
–
–
(915)
(65)
(65)
(142)
311
169
69
242
311
(6,639)
(1,992)
71
–
(164)
(2,085)
1,609
645
169
(32)
(32)
48 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 (c) Deferred tax balances
Taxable and deductible temporary differences arise from the following:
Opening
Balance
$’000
Charged to
Income
$’000
Charged to
Equity
$’000
Closing
Balance
$’000
Gross deferred tax assets:
Provisions
Trade and other payables
Share issue expenses
Trade and other receivables
Property, plant and equipment
Intangibles
Tax Losses
Gross deferred tax liabilities:
Biological assets
Inventory
Intangibles
Other
Net deferred tax asset/(liability)
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised:
Capital losses
Revenue losses
Potential tax benefit at 30%
213
47
350
6
9
13
–
638
(522)
(213)
(873)
(9)
(1,617)
(979)
46
(17)
(138)
2
(1)
(6)
1,176
1,062
(126)
(19)
–
(2)
(147)
915
–
–
65
–
–
–
–
65
–
–
–
–
–
65
2018
$’000
–
19,315
19,315
5,795
259
30
277
8
8
7
1,176
1,764
(648)
(232)
(873)
(11)
(1,764)
–
2017
$’000
–
20,307
20,307
6,092
Unused tax losses
The Group has recognised tax losses in the year ended 31 December 2018 only to the extent of the Groups taxable temporary
differences. After recognition of these losses the Group had a further $19.315 million of carry forward tax losses for which no
deferred tax asset has been recognised (31 December 2017: $20.307 million). The losses relate to both Group’s current operations
and also losses incurred by the loyalty, rewards and payments business previously operated by the Group. Prior to recognising the
carry forward tax losses transferred into and incurred by the loyalty, rewards and payments business, the Group will assess the
application of the continuity of ownership and continuity of business tests.
Recognition and measurement
Current income tax expense or revenue is the tax payable on the current year’s taxable income based on the applicable income
tax rate adjusted by changes in deferred tax assets and liabilities.
A balance sheet approach is adopted, under which deferred tax assets and liabilities are recognised for temporary differences
between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred tax asset or
TasFoods Annual Report 2018 | 49
8.
Income Tax (continued)
liability is recognised if it arose in a transaction, other than a business combination, that at the time of the transaction did not affect
either accounting or taxable profit or loss.
Deferred tax assets are recognised for temporary differences and unused tax losses only when it is probable that future taxable
amounts will be available to utilise those temporary differences and losses. Current and deferred tax balances attributable to
amounts recognised directly in equity are also recognised directly in equity.
Tax Consolidation
The Company and its wholly-owned Australian controlled entities have formed an income tax consolidated group effective
1 July 2010 under tax consolidation legislation. Each entity in the Group recognises its own deferred tax assets and liabilities
arising from temporary differences. Such taxes are measured using the ‘stand-alone taxpayer’ approach. Current tax liabilities or
assets and deferred tax assets arising from unused tax losses and tax credits in the controlled entities are immediately transferred
to the head entity which is the Parent entity. No tax sharing or funding arrangements are presently in place.
CURRENT ASSETS
9. Trade and Other Receivables
Trade Receivables
Loss allowance
Other receivables
Loss Allowance
Movements in theloss allowance were as follows:
Carrying value at the beginning of the year
Increase in loss allowance recognised
Receivables written off as uncollectable
Unused amount reversed
Carrying value at the end of the year
2018
$’000
2,265
(26)
371
2017
$’000
2,711
(20)
108
2,609
2,799
2018
$’000
2017
$’000
20
14
(8)
–
26
25
–
(2)
(3)
20
Recognition and measurement
Trade receivables include amounts due from customers for goods sold and services performed in the ordinary course of business.
Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other
receivables are classified as non-current assets.
Trade receivables are initially recognised at fair value and subsequently recognised less any expected loss allowance. The Group
applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for
all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk
characteristics and the number of days outstanding. The expected loss rates applied are based upon the payment sales profiles
over a 12 month period and the historical credit losses experienced in this period. Historical loss rates are adjusted to reflect current
and forward looking information including macroeconomic factors affecting the ability of the customers to settle the receivables.
50 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 The loss allowance for 31 December 2018 and 1 January 2018 (on adoption of AASB 9) was determined as follows for
trade receivables:
31 December 2018
Expected Loss Rate
Trade Receivables Gross Carrying Amount ($’000)
Loss Allowance ($’000)
Current
30 days
60 days
90+ days
Total
0%
1,810
–
0%
381
–
0%
22
–
51%
51
26
2,265
26
1 January 2018
Expected Loss Rate
Trade Receivables Gross Carrying Amount ($’000)
Loss Allowance ($’000)
Current
30 days
60 days
90+ days
Total
0%
2,200
–
0%
449
–
0%
23
–
51%
40
20
2,711
20
The amount of the impairment loss is recognised in the consolidated statement of profit and loss within other expenses. When
a trade receivable for which an impairment allowance has been recognised becomes uncollectable in a subsequent period,
it is written off against the provision account. Subsequent recoveries of amounts previously written off are credited against
other expenses.
Fair values of trade and other receivables
Due to the short-term nature of the current receivables, their carrying amount is approximated to fair value.
Credit risk
The Group has no significant concentration of credit risk with respect to any single counterparty or group of counterparties other
than those receivables specifically provided for within the loss allowance. The main source of credit risk to the Group is considered
to relate to the class of assets described as ‘trade and other receivables’.
The above table details the Group’s trade and other receivables exposed to credit risk (prior to collateral and other credit
enhancements) with ageing analysis and impairment provided thereon. Amounts are considered as ‘past due’ when the debt has
not been settled within the terms and conditions agreed between the Group and the customer or counterparty to the transaction.
Receivables that are past due are assessed for impairment by ascertaining the solvency of the debtors and are provided for where
there are specific circumstances that the debt may not be fully repaid to the Group.
The balances of receivables that remain within initial trading terms are considered to be of low credit risk.
TasFoods Annual Report 2018 | 51
10. Biological Assets
Balance as at 1 January 2017
Increases due to purchases and production
Decreases due to sales/processing/mortalityi
Movement in fair value as a result of physical and/or
price changesii
Balance as at 31 December 2017
Current
Non-current
Balance as at 1 January 2018
Increases due to purchases and production
Decreases due to sales/processing/mortalityi
Movement in fair value as a result of physical and/or
price changesii
Balance as at 31 December 2018
Current
Non-current
Poultry
$’000
950
695
(950)
262
957
957
–
957
957
1,312
(957)
134
1,446
1,446
–
1,446
Goats
$’000
256
1
(69)
142
330
20
310
330
330
8
(64)
10
284
11
273
284
Wasabi
Plants
$’000
863
19
(173)
264
973
955
18
973
973
2
(144)
147
977
976
2
977
Total
$’000
2,069
715
(1,192)
668
2,260
1,932
328
2,260
2,260
1,322
(1,165)
291
2,708
2,432
275
2,708
i
ii
includes biological assets reclassified as inventory at the point of harvest and/or processing.
includes physical changes as a result of biological transformation such as growth, degeneration and procreation.
Recognition and Measurement
Biological assets of the Group include poultry, goats and wasabi plants and are measured at fair value less costs to sell in
accordance with AASB 141 Agriculture. Where fair value cannot be reliably measured or little or no biological transformation has
taken place biological assets are measured at cost less impairment losses.
Market prices are derived from observable market prices and achieved sales prices and are reduced for costs associated with
bringing the finished product to market including incremental selling costs and harvesting and production costs to process the
biological asset into a saleable form.
The change in estimated fair value is charged to the income statement on a separate line item as fair value adjustment of
biological assets. This line item includes movements in fair value as a result of both physical and price changes.
Biological assets are reclassified as inventory at the point of harvesting or processing.
As at 31 December 2018, the Group held 465,788 live poultry (2017: 368,734), 764 goats (2017: 946) and 8,750 mature wasabi
plants (2017: 4,395) and 704 immature wasabi plants (2017: 5,922) that are less than 12 months of age and not suitable for harvest.
Poultry
For live poultry with an estimated dressed weight of below 1kg (which is consistent with independent poultry performance
guidelines for meat chicken) the carrying amount is a reasonable approximation of fair value. Live poultry with an estimated
52 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 dressed weight of greater than 1kg are measured at fair value less costs to sell and the measurement is categorised into Level 2 in
the fair value hierarchy.
The valuation is completed at the whole dressed bird stage for each batch of live poultry as there is no effective market for live
poultry produced by the Group. The valuation methodology takes into consideration estimated growth rates, feed intake and
carcass yield per independent performance guidelines.
Based on market prices and weights utilised at 31 December 2018, with all other variables held constant, the Group’s net profit/
(loss) for the period would have been impacted by $57,564 (2017: $31,896) by a pricing or dressed weight increase/decrease of 5%.
Goats
Goats are measured at fair value less costs to sell, based on market prices of similar age, breed and genetic merit. As these prices
are observable, they are deemed to be Level 2 in the fair value hierarchy.
The value of goats, comprised of mature does, weaned doelings and breeding bucks, is determined by independent valuation with
reference to prices received from sales of milking goat stock similar to the Group’s herd with direct references made to recent sales
evidence in relevant dairy goat markets. Prices of the Group’s goats are reflective of current market conditions.
Wasabi Plants
Wasabi plants which are greater than twelve months of age are considered mature and ready for harvest, as such plants which
are greater than twelve months of age are disclosed as a current asset. At 31 December 2018 the Group’s wasabi plants were an
average of 23 months of age (31 December 2017: 29 months) and at various stages of growth post-harvest, as such wasabi plants
are valued at fair value less estimated point of sale costs. The valuation methodology is deemed to be Level 3 in the fair value
hierarchy as it contains unobservable inputs due to the rare nature of the crop.
The fair value of the wasabi plants is determined using the estimated yield per plant in kilograms which has been determined
through collection of historical growth rate and harvest data for mature wasabi plants within the crop. Notable variations and
fluctuations in the fair value of wasabi plants may occur as a result of factors including; plant variety, the timing of cultivation, plant
maturity, timing of harvest, seasonal growth patterns and weather conditions.
Based on market prices and estimated yields utilised within the valuation methodology at 31 December 2018, with all other
variables held constant, the Group’s net profit/(loss) for the period would have been impacted by $57,877 (31 December 2017:
$48,257) by a yield increase/decrease of 5%.
Fair Value Measurement
2018
Recurring fair value measurements
– Poultry
– Goats
– Wasabi plants
Total biological assets recognised at fair value
2017
Recurring fair value measurements
– Poultry
– Goats
– Wasabi plants
Total biological assets recognised at fair value
Level 1
$’000
Level 2
$’000
Level 3
$’000
–
–
–
–
1,446
284
–
1,731
–
–
977
977
Level 1
$’000
Level 2
$’000
Level 3
$’000
–
–
–
–
957
330
–
1,287
–
–
973
973
Total
$’000
1,446
284
977
2,708
Total
$’000
957
330
973
2,260
TasFoods Annual Report 2018 | 53
10. Biological Assets (continued)
Fair value measurements using significant unobservable inputs
The following table summarises the quantitative information about the significant unobservable inputs used in Level 3 fair
value measurements:
Description
Wasabi plant biological assets at fair value:
Unobservable inputs
Average yield per wasabi plant used in fair value measurement:
0.58 kilograms (31 December 2017: 0.42 kilograms)
Relationship to unobservable inputs to fair value
An increase/decrease in yield would result in a direct increase/decrease in
the fair value
11. Inventory
Finished goods
Raw materials and packaging
Other
2018
$’000
1,343
591
637
2,572
2017
$’000
1,099
284
630
2,013
Recognition and measurement
Inventories are measured at the lower of cost and net realisable value and are assigned on a weighted average cost basis. Net
realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs to sell.
Inventories are accounted for in the following manner:
● Finished goods: cost includes direct materials, direct labour and an appropriate proportion of manufacturing variable and fixed
overheads based on normal operating capacity but excluding any borrowing costs.
● Biological assets reclassified as inventory: the initial cost assigned to agricultural produce is the fair value less costs to sell at
the point of harvesting or processing in accordance with AASB 141.
● Raw materials and packaging: purchase cost.
54 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 NON-CURRENT ASSETS
12. Property, Plant and Equipment
Land and buildings – at cost
Less accumulated depreciation
Plant and equipment – at cost
Less accumulated depreciation
Office equipment – at cost
Less accumulated depreciation
Motor vehicles – at cost
Less accumulated depreciation
Capital Work in Progress – at cost
Total Property, Plant and Equipment
2018
$’000
8,243
(475)
7,769
8,812
(1,781)
7,031
181
(131)
50
483
(96)
387
2,220
17,458
2017
$’000
8,132
(254)
7,879
7,538
(889)
6,650
173
(96)
77
197
(35)
162
177
14,944
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the financial
year are set out below:
Land and
buildings
$’000
Plant and
equipment
$’000
Office
equipment
$’000
Motor
vehicles
$’000
Capital work
in progress
$’000
Carrying value
As at 1 January 2017
Additions
Additions as a part of a business
combination
Adjustments as a result of
finalisation of accounting for
business combinations
Capitalisation to asset categories
Depreciation expense
Balance as at 31 December 2017
As at 1 January 2018
Additions
Capitalisation to asset categories
Depreciation expense
6,687
1,378
–
–
–
(185)
7,879
7,879
111
–
(221)
4,682
2,355
727
(495)
–
(619)
6,650
6,650
1,274
–
(892)
7,031
40
63
–
–
–
(26)
77
77
8
–
(35)
50
131
54
–
–
–
(23)
162
162
287
–
(62)
387
Balance as at 31 December 2018
7,769
Total
$’000
12,793
4,026
1,253
177
–
727
38
(1,291)
–
177
177
2,220
(177)
–
2,220
(457)
(1,291)
(853)
14,944
14,944
3,900
(177)
(1,210)
17,458
TasFoods Annual Report 2018 | 55
12. Property, Plant and Equipment (continued)
Recognition and measurement
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. 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 that the cost of the item can be measured reliably.
Repairs and maintenance expenditure is charged to the profit and loss during the period in which the expenditure is incurred.
The average depreciation rates for each class of fixed assets are:
Class of fixed asset
Buildings
Leasehold improvements
Plant and equipment
Office equipment
Motor vehicles
Average
depreciation
rates
2-5%
10-12%
8-20%
40-50%
15-20%
The assets’ residual values and useful lives are reviewed and adjusted if appropriate at the end of each reporting period.
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.
Assets are derecognised when sold or replaced with gains and losses on disposals determined by comparing proceeds with the
carrying amount. These gains or losses are recognised in the consolidated income statement when the item is derecognised.
13. Intangible Assets
Goodwill
Brands and trademarks
Other
Gross carrying value
At cost
Accumulated impairment
Total net carrying amounts
Reconciliations
Carrying amount at beginning
Transfers from other asset classes as a result of finalisation of accounting for
business combinations
Additions
Business combinations during the year
Impairment during the period
Carrying amount at end
56 | TasFoods Annual Report 2018
2018
$’000
5,534
2,945
194
8,673
11,390
(2,717)
8,673
2017
$’000
5,534
2,945
194
8,673
11,390
(2,717)
8,673
8,673
8,989
–
–
–
–
8,673
1,228
54
518
(2,116)
8,673
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 Goodwill relates to the acquisition of the assets of Meander Valley Dairy and Pyengana Dairy businesses in 2015 and 2017
respectively. Goodwill is also attributable to the acquisition of the wholly-owned controlled entities Nichols Poultry Pty Ltd and
Shima Wasabi Pty Ltd acquired in the 2016 year.
The goodwill of Shima Wasabi was written down to nil during 2017 as part of the annual impairment testing process.
Brands and trademarks are predominantly associated with the Nichols Poultry brand acquired in 2016.
Other intangible assets include water rights and intellectual property.
Goodwill and intangibles assessed as having an indefinite useful life are allocated to the Group’s cash generating units (CGUs)
as follows:
2018
Brands and
Trademarks
$’000
35
2,910
2,945
Goodwill
$’000
2,397
3,137
5,534
Other
$’000
–
194
194
Total
$’000
2,432
6,241
8,673
Goodwill
$’000
2,397
3,137
5,534
2017
Brands and
Trademarks
$’000
35
2,910
2,945
Other
$’000
–
194
194
Total
$’000
2,432
6,241
8,673
Dairy
Poultry
Total
Recognition and measurement
Intangible assets are initially recognised and recorded at cost where it is probable that future economic benefits attributable to
the asset will flow to the Group and the cost can be measured reliably. Subsequently, intangible assets are carried at cost less any
impairment losses.
Indefinite life assets
Assets with an indefinite useful life are not amortised but are tested annually for impairment. Assets subject to annual depreciation
or amortisation are reviewed for impairment whenever events or circumstances arise that indicate that the carrying amount of the
asset may be impaired.
Management has determined that the brand name associated with the Poultry CGU has an indefinite useful life. This assessment
was based on factors including independent expert advice, historical business growth rates and performance and future strategy
associated with the brand.
Goodwill
Goodwill is not amortised but is tested annually for impairment or more frequently if events or changes in circumstances indicate
that it might be impaired. Goodwill is carried at cost less accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to
each of the Group’s cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of
the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or group of units. Each
unit or group of units to which the goodwill is so allocated represents the lowest level within the Group at which the goodwill is
monitored for internal management purposes.
Impairment is determined by assessing the recoverable amount of the cash generating unit (group of cash generating units) to
which the goodwill relates. When the recoverable amount of the cash generating unit (group of cash generating units) is less than
the carrying amount, an impairment loss is recognised.
When goodwill forms part of a cash generating unit (group of cash generating units) and part of the operation within that unit
is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative
values of the operation disposed of and the portion of the cash generating unit retained.
Impairment losses recognised for goodwill are not subsequently reversed.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
TasFoods Annual Report 2018 | 57
13. Intangible Assets (continued)
Recoverable amount of goodwill and indefinite life intangibles
In accordance with the Company’s accounting policy, impairment testing has been undertaken at 31 December 2018 for all groups
of cash generating units (CGUs) for goodwill and indefinite life intangibles or where there is an indication of impairment.
The Company has two CGUs for which impairment testing has been completed for goodwill and indefinite life intangibles, which
are as follows:
Dairy CGU
The recoverable amount of the Dairy CGU has been determined based on a value-in-use calculation which uses cash flow
projections based on financial budgets and forecasts approved by management covering a five-year period, before any fair value
adjustments for biological assets.
Key assumptions used in the value-in-use calculations for the dairy CGU include:
Revenue Growth
Production costs
Indirect costs
Long-term growth rate
Pre-tax discount rates
Revenue growth over the five-year period is based upon budgeted revenue growth
associated with the Groups growth strategy with the expansion of the business
unit via increases in production volumes, new product offerings and expansion into
new markets.
Average revenue growth over the five-year forecast period is anticipated to
be 14.4% per annum (2017: 15.8%), with the baseline on which growth has been
determined including the full-year effect of sales growth initiatives achieved in 2018.
Production costs are anticipated to be consistent with 2018 levels over the five-year
period in line and are projected to be on average 69% of revenue over the five-year
period (2017: 70%).
Indirect costs are anticipated to increase by 5% per annum.
The long-term growth rate is the weighted average growth rate used to extrapolate
cash flows beyond the budget period. A long-term growth rate of 2.5% (2017: 2.5%)
has been used in the value-in-use calculation, which is consistent with the Reserve
Bank of Australia rates.
Discount rates represent the current market assessment of the risks relating to the
relevant CGU.
In performing the value-in-use calculations for the CGU, the Group has applied
post-tax discount rates to discount the forecast future attributable post-tax cash flows.
The equivalent pre-tax discount rate is 10.8% (2017: 10.8%).
Based on the above assumptions the recoverable amount of the CGU is estimated to be $9.3 million, which exceeds the CGU’s
carrying amount by $1.7 million. The recoverable amount of the CGU would equal its carrying amount if the key assumptions were
to change as follows:
Pre-tax discount rate
Increase from 10.8% to 12.1%.
Annual revenue growth rate
Reduction in average from 14.4% (over the five-year period) to 13.3%.
Production costs
Increase from 69% of revenue to 70.3%.
Poultry CGU
The recoverable amount of the Poultry CGU has been determined based on a value-in-use calculation which uses cash flow
projections based on financial budgets and forecasts approved by management covering a five-year period, before any fair value
adjustments for biological assets.
Key assumptions used in the value-in-use calculations for the Poultry CGU include:
58 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 Revenue Growth
Production costs
Indirect costs
Long-term growth rate
Pre-tax discount rates
Revenue growth over the five-year period is based upon budgeted revenue growth
associated with the Groups growth strategy with the expansion of the business
unit via increases in production volumes, new product offerings and expansion into
new markets.
Average revenue growth over the five-year forecast period is anticipated to be
8.7% per annum (2017: 12.9%).
Forecast production costs are anticipated to increase over the five-year period in line
with revenue growth and are projected to be on average 77% (2017: 71%) of revenue
over the five-year period. Conservative savings and efficiencies to be generated
as a result of automation of production have been recognised within the forecast
cash flows.
Indirect costs are anticipated to increase by 5% per annum.
The long-term growth rate is the weighted average growth rate used to extrapolate
cash flows beyond the budget period. A long-term growth rate of 2.5% (2017: 2.5%)
has been used in the value-in-use calculation, which is consistent with the Reserve
Bank of Australia rates.
Discount rates represent the current market assessment of the risks relating to the
relevant CGU.
In performing the value-in-use calculations for the CGU, the Group has applied post-
tax discount rates to discount the forecast future attributable post-tax cash flows. The
equivalent pre-tax discount rate is 10.8% (2017: 10.8%).
LIABILITIES
14. Trade and Other Payables
Trade and other payables
2018
$’000
3,976
3,976
2017
$’000
4,775
4,775
Recognition and measurement
Trade and other payables represent liabilities for goods and services received by the Group which remain unpaid at the end of the
reporting period. The balance is recognised as a current liability with amounts paid in accordance with supplier trading terms.
Fair value of trade and other payables
Due to the short-term nature of trade and other payables, the carrying value is reflective of fair value.
TasFoods Annual Report 2018 | 59
15. Borrowings
Current
Bank Overdraft
Secured Finance Lease Liabilities
Non-Current
Secured Finance Lease Liabilities
Total borrowings
Financing arrangements
Commitments in relation to financing arrangements are payable as follows:
2018
$’000
2017
$’000
681
789
1,470
727
2,198
436
818
1,255
1,379
2,633
Less than
12 months
$’000
Between 1
and 5 years
$’000
Over 5 years
$’000
Total
contracted
cash flows
$’000
Carrying
Amount
$’000
3,976
681
789
5,466
4,775
436
818
6,030
–
–
727
727
–
–
1,379
1,379
–
–
–
–
–
–
–
–
3,976
681
1,517
6,173
4,775
436
2,197
7,409
3,976
681
1,517
6,173
4,775
436
2,197
7,409
2018
2017
Limit
$’000
1,517
2,000
1,000
4,517
Undrawn
balance
$’000
–
2,000
319
2,319
Limit
$’000
2,197
2,000
1,000
5,197
Undrawn
balance
$’000
–
2,000
564
2,564
At 31 December 2018
Non-derivatives
Trade payables
Bank Overdraft
Finance lease liabilities
At 31 December 2017
Non-derivatives
Trade payables
Bank Overdraft
Finance lease liabilities
Available facilities:
Equipment Finance Liabilities
Bank Bill Facility
Bank Overdraft
60 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 Recognition and measurement
Borrowings, including finance lease liabilities, are initially recognised at fair value, net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in the consolidated income statement over the period of the borrowings using the effective interest method.
Borrowings are removed from the balance sheet of the Group when the terms and obligations specified in the contract are
discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or
transferred to another party, and the consideration paid is recognised in the consolidated income statement as other income or
finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at
least 12 months after the reporting period.
Borrowing costs, including transaction fees, are recognised in the consolidated income statement in the period in which they
are incurred.
Secured liabilities and assets pledged as security
Finance lease liabilities relate to specific operating equipment arranged with the Australia and New Zealand Banking Group
Limited (ANZ), Commonwealth Bank of Australia Limited (CBA) and Maia Financial (formerly Alleasing Pty Ltd). These facilities are
secured over the assets financed under each facility. The finance leases are held over a remaining period of less than 1 year to 5
years and have an average effective interest rate of 5.26%.
The Group also has access to an undrawn bank bill facility with the ANZ. This bill facility, along with the bank overdraft facility, is
secured by mortgage over the property and water rights owned by Nichols Poultry Pty Ltd and a general security agreement over
property of Nichols Poultry Pty Ltd not otherwise secured.
Financial covenants
Upon acquisition of Nichols Poultry Pty Ltd, the Group also acquired the financial covenants associated with the Nichols Poultry
overdraft and business development loan facility. Under the terms of the facilities, Nichols Poultry is required to comply with the
following financial covenant:
● Interest Cover Ratio (calculated using EBITDA) for each financial half year will not, as at the Compliance date, be less
than 1.50:1.
The Group has complied with the financial covenants throughout the reporting period.
16. Provisions
Current
Employee benefits
Other provisions
Non-current
Employee benefits
2018
$’000
2017
$’000
623
–
623
156
156
524
–
524
144
144
Recognition and measurement
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Group will be required to settle the obligation, and a reliable estimate can be made of the quantum of the obligation.
TasFoods Annual Report 2018 | 61
16. Provisions (continued)
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
reporting date, taking into consideration the risks and uncertainties surrounding the obligation. If the effect of the time value of
money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific
to the liability.
Employee benefits
A provision is made for employee benefits arising at the end of the reporting period. Employee benefit obligations are presented
as current liabilities in the consolidated balance sheet if the Group does not have an unconditional right to defer settlement for at
least 12 months after the reporting period, regardless of when the actual settlement is expected to occur.
Employee benefits that are expected to be settled within one year from the reporting date have been measured at amounts
expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at present
value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to
employee wage increments and the probability that the employee may satisfy any vesting requirements. Those cash flows are
discounted using market yields on Australian corporate bond rates with terms to maturity that match the expected timing of cash
flows attributable to those employees.
Provision has been made in the financial statements for benefits accruing to employees up to the reporting date such as annual
leave, long service leave and bonuses (where applicable). No provision is made for non-vesting sick leave as the anticipated
patterns of future sick leave indicates that accumulated non-vesting sick leave will not be paid. Annual leave provisions are
measured at nominal values using the remuneration rates expected to apply at the time of settlement. Long service leave
provisions are measured as the present value of expected future payments to be made in respect of services provided to
employees up to reporting date. Expected future payments are discounted using market yields at reporting date on Australian
corporate bonds with terms to maturity that match the estimated future cash flows.
On-costs, such as superannuation and payroll tax are included in the determination of employee benefits provisions.
The net change in the obligation for employee benefits provisions are recognised in the consolidated income statement as a part of
employee benefits expense.
EQUITY
17. Contributed Equity
Number of Shares
Share Capital
Ordinary shares – fully paid (no par value)
206,599,073
183,723,257
2018
2017
Total share capital
Movements in ordinary share capital:
Date
1/1/18
2/2/18
21/2/18
21/2/18
Details
Balance at beginning of period
Issue of shares
Issue of shares
Issue of shares
Issue costs – net of tax
62 | TasFoods Annual Report 2018
2018
$’000
46,355
46,355
2017
$’000
42,505
42,505
Ordinary
Shares
183,723,257
7,794,180
3,970,525
1 1 , 1 1 1 , 1 1 1
206,599,073
Price
0.17
0.17
0.18
$’000
42,505
1,325
675
2,000
(151)
46,355
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 Terms and Conditions of Issued Capital
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 shares held. On a show of hands each 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.
Share Options and Performance Rights
Share options and performance rights do not entitle the holder to participate in dividends and the proceeds on winding up of the
Company. The holder is not entitled to vote at General Meetings.
There were 23,500,000 share options on issue and 4,825,597 performance rights granted as at 31 December 2018 (2017:
23,500,000 share options and 3,212,083 performance rights).
Recognition and measurement
Ordinary shares are classified as equity, with ordinary share capital being recognised at the fair value of the consideration received
by the Company.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds
received. Ordinary share capital bears no special terms or conditions affecting income or capital entitlements of the shareholders.
Where the Company purchases the Company’s equity instruments, for example as the result of a share buy-back or a share-based
payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from
the equity attributable to the owners of TasFoods Limited as ordinary share capital until the shares are cancelled or reissued.
Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental
transactions costs and the related income tax effects, is included in the equity attributable to the owners of TasFoods Limited.
18. Reserves
Employee share option reserve
2018
$’000
390
390
2017
$’000
260
260
Nature and Purpose of Reserves
Employee share option reserve
The reserve is used to record the value of equity instruments issued to employees and directors as part of their remuneration, and
other parties as part of compensation for their services. Details of the employee share option payments are contained in note 31.
Balance at start of year
Net Movement during the year
Balance at end of year
2018
$’000
260
130
390
2017
$’000
217
43
260
TasFoods Annual Report 2018 | 63
OTHER NOTES
19. Additional Cash Flow Information
Cash and cash equivalents
2018
$’000
6,658
2017
$’000
9,663
Recognition and measurement
Cash and cash equivalents include cash on hand and at banks and short-term deposits with an original maturity of three months or
less held at call with financial institutions.
(a) Reconciliation of cash and cash equivalents to the statement of cash flows:
For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and in banks and short-term
deposits at call, net of outstanding bank overdrafts. Cash and cash equivalents as at the end of the financial year as shown in the
statement of cash flows is reconciled to the related items in the statement of financial position as follows:
Cash and cash equivalents
Bank overdraft
a) Reconciliation of operating loss after income tax to net cash flows from operating activities:
Net loss after income tax
Depreciation and amortisation
Impairment expense
Movement in fair value of biological assets
Share based payments
Other
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in biological assets
(Increase)/decrease in inventories
(Increase)/decrease in prepayments
(Increase)/decrease in deferred taxes
(Decrease)/Increase in trade and other payables
(Increase)/decrease in current tax receivable
Increase/(decrease) in provisions
Net cash (outflow)/inflow from operating activities
b) Non-cash activities
There were no non-cash financing activities.
64 | TasFoods Annual Report 2018
2018
$’000
6,658
(681)
5,977
2018
$’000
(1,358)
1,210
–
(291)
130
46
190
208
(559)
(192)
(979)
(492)
–
111
2017
$’000
9,663
(436)
9,227
2017
$’000
(6,808)
853
2,116
(668)
43
38
(507)
(293)
(791)
(45)
1,147
1,658
42
197
(1,976)
(3,017)
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 20. Financial Risk Management
The Group’s principal financial instruments comprise receivables, payables, cash and short-term deposits.
The Group manages its exposure to key financial risks, including interest rate and currency risk in accordance with the Group’s
financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst
protecting future financial security.
The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, price risk, credit risk and
liquidity risk. The Group uses different methods to measure and manage different types of risk to which it is exposed. These include
monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rate,
foreign exchange and commodity prices. Ageing analyses and monitoring of specific credit allowances are undertaken to manage
credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised in the following.
Primary responsibility for identification and control of financial risks rests with the Chief Financial Officer under the authority of
the Board. The Board reviews and agrees policies for managing each of the risks identified below, including any hedging cover of
foreign currency, interest rate risk, credit allowances, and future cash flow forecast projections.
The carrying amounts of the Group’s financial assets and liabilities at balance date were equal to their fair value.
Recognition and measurement
Classification
The Group classifies its financial instruments in the following categories: financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose
for which the investments were acquired. Management determines the classification of its financial instruments at the time of
initial recognition.
Financial Assets at Fair Value through Profit or Loss
Upon initial recognition a financial asset or financial liability is designated as at fair value through profit or loss when:
(a) An entire contract containing one or more embedded derivatives is designated as a financial asset or financial liability at fair
value through profit and loss.
(b) Doing so results in more relevant information, because either:
(i)
It eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring
assets or liabilities or recognising gains or losses on them on different bases.
(ii) A group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis,
in accordance with a documented risk management or investment strategy, and information about the group is provided
internally on that basis to key management personnel.
Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be
reliably measured are not designated as at fair value though profit or loss.
Present investment strategy is to keep assets in a highly liquid state and almost all of the investment assets are held in cash.
A gain or loss arising from a change in the fair value of a financial asset or financial liability classified as at fair value through profit
or loss is recognised in the consolidated statement of profit or loss and other comprehensive income.
Non-listed investments, for which fair value cannot be reliably measured, are carried at cost and tested for impairment.
Loans and Receivables
Loan and receivables are measured at fair value at inception and subsequently at amortised cost using the effective interest
rate method.
TasFoods Annual Report 2018 | 65
20. Financial Risk Management (continued)
Financial Liabilities
Financial liabilities include trade payables, other creditors and loans from third parties including inter-company balances and loans
from or other amounts due to Director-related entities.
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principle payments
and amortisation.
Risk Exposures and Responses
Interest Rate Risk
The Group’s exposure to market interest rate related primarily to the Group’s cash deposits. At balance sheet date, the Group had
the following mix of financial assets exposed to Australian and overseas variable interest rate risks that are not designated as cash
flow hedges:
Financial Assets
Cash and cash equivalents
Net exposure
2018
$’000
6,658
6,658
2017
$’000
9,663
9,663
The Group regularly analyses its interest rate opportunity and exposure. Within this analysis consideration is given to existing
positions and alternative arrangements for its deposits.
The following sensitivity analysis is based on the interest rate opportunity/risk relating to cash deposits at balance date.
At 31 December 2018, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post-tax
profit and equity would have been affected as follows:
Judgements of reasonably possible movements
+ 0.5% (50 basis points)
- 0.5% (50 basis points)
2018
$’000
2017
$’000
33
(33)
48
(48)
The movement in profits are due to higher/lower interest received. As the Group does not have any derivative instruments the
movements in equity are those of profit only. A movement of + and – 0.5% is selected because this historically is within a range of
rate movements.
Liquidity Risk
Liquidity Risk is the risk that the Group, although balance sheet solvent, cannot meet or generate sufficient cash resources to meet
its payment obligations in full as they fall due, or can only do so at materially disadvantageous terms.
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity
risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and
actual cash flows and matching the maturity profiles of financial assets and liabilities.
The Group has Total Liabilities of $6.953 million (2017: $9.056 million) of which $6.069 million (2017: $6.554 million) is recorded
as current liabilities and Total Current Assets of $14.814 million (2017: $16.757 million) of which $6.658 million (2017: $9.663 million)
consists of cash or cash equivalents providing the Board with comfort that the Group is solvent and can meet its payment
obligations in full as they fall due.
All current liabilities fall due within normal trade terms, which are generally 30 days.
66 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 Credit Risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade and other
receivables. The Group’s exposure to credit risk arises from potential default of the counter party, with maximum exposure equal to
the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note.
The Group does not hold any credit derivatives to offset its credit exposure.
The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group’s
policy to securitize its trade and other receivables.
It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including
an assessment of their independent credit rating, financial position, past experience and industry reputation. The risks are regularly
monitored.
The Group applies the AASB 9 simplified approach to measuring expected credit losses as disclosed in note 9. Receivables
balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.
Fair Value
The method for estimating fair value is outlined in the relevant notes to the financial statements. All financial assets held at fair
value are valued based on the principles outlined in AASB 7 in relation to Level 1 of the hierarchy of fair values, being quoted prices
(unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
21. Capital Management
When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain
optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that
ensures the lowest cost of capital available to the entity.
Management are constantly adjusting the capital structure to take advantage of favourable costs of capital or high returns on
assets. As the market is constantly changing, the Board may change the amount of dividends to be paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.
Borrowings
Trade and other payables
Total debt
Less cash and cash equivalents
Net (cash)/debt
Total equity
Total capital
Gearing ratio (total debt / total equity)
2018
$’000
2,198
3,976
6,173
(6,658)
(485)
34,267
46,355
18.0%
2017
$’000
2,633
4,775
7,409
(9,663)
(2,254)
31,646
42,505
23.4%
The Group is not subject to any externally imposed capital requirements, other than those referred to in note 15 relating to Nichols
Poultry Pty Ltd.
TasFoods Annual Report 2018 | 67
GROUP MANAGEMENT
22. Parent Entity Supplementary Information
Information relating to TasFoods Limited:
Financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Reserves
Accumulated losses
Total equity
Financial performance
Total revenue
Loss for the period
Comprehensive loss for the period
2018
$’000
2017
$’000
24,440
12,329
36,769
2,046
365
2,411
34,358
46,320
390
(12,351)
34,358
4,525
(4,915)
(4,915)
24,141
11,186
35,327
1,914
846
2,760
32,567
42,470
260
(10,164)
32,567
1,982
(3,856)
(3,856)
Deed of Cross Guarantee
The wholly-owned subsidiaries disclosed in note 23 are parties to a deed of cross guarantee under which each company
guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from any requirement
to prepare a financial report and directors’ report that might otherwise apply under Instrument 2016/785 issued by the Australian
Securities and Investments Commission.
The closed group financial information for 2018 is identical to the financial information included in the consolidated financial
statements. The wholly-owned subsidiaries became a party to the deed of cross guarantee dated 23 October 2017.
The companies disclosed in note 23 represent a ‘closed group’ for the purposes of the Instrument, and as there are no other parties
to the deed of cross guarantee that are controlled by TasFoods Limited, they also represent the ‘extended closed group’.
Capital Commitments
Non-cancellable capital expenditure contracted for but not in the financial statements relating to TasFoods Limited’s dairy
operations are as follows:
Payable:
– Not longer than one year
– Longer than one year and not longer than five years
– Longer than five years
68 | TasFoods Annual Report 2018
2018
$’000
2017
$’000
–
–
–
–
39
–
–
39
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 Finance Leases
The balance of finance leases at 31 December 2018 is as follows:
Current
Secured Finance Lease Liabilities
Non-Current
Secured Finance Lease Liabilities
Total Finance Lease Liabilities
2018
$’000
2017
$’000
622
572
363
985
845
1,418
Contingent Liabilities
TasFoods Limited is not subject to any liabilities that are considered contingent upon events known at balance sheet date.
23. Subsidiaries
Van Diemen's Land Dairy Pty Ltd
Nichols Poultry Pty Ltd
Shima Wasabi Pty Ltd
Tasmanian Food Co Dairy Pty Ltd
MarketSmart International Pty Ltd
Country of
Incorporation
Principal
Activity
Australia
Australia
Australia
Australia
Australia
Dairy
Poultry
Wasabi
Dairy
Loyalty
Solutions
Equity Holding
2018
%
100%
100%
100%
100%
2017
%
100%
100%
100%
100%
0%
100%
In 2016 the Board resolved to close and deregister MarketSmart International Pty Ltd, a subsidiary which operated loyalty
solutions activities as part of the historical OnCard International Ltd operations. On 9 January 2018, the Company applied to
ASIC for deregistration of MarketSmart International Pty Ltd. The Company received notification from ASIC that on 6 June 2018
Marketsmart International Pty Ltd had been deregistered.
TasFoods Annual Report 2018 | 69
24. Business Combinations
Finalisation of Prior Year Acquisition
Pyengana Dairy
On 6 October 2017 the Company acquired via its new subsidiary Tasmanian Food Co Dairy Pty Ltd, the business operations of the
Pyengana Dairy food products business based in Tasmania. The acquisition was completed for cash consideration of $1.623 million.
In the financial statements for the year ended 31 December 2017, the net asset valuation and allocation of the purchase price to
acquired assets and fair values assigned were preliminary. In accordance with the Group’s accounting policy, the accounting for the
acquisition of Pyengana Dairy was finalised during the current period.
The final fair values of the assets arising from the acquisitions are as follows:
Plant and equipment
Trade and other receivables
Other current assets
Trade and other payables
Provisions
Net identifiable assets acquired
Add: Goodwill
Consideration paid
Preliminary
Fair Value as
presented at
31 December 2017
$’000
Final Fair Value
$’000
727
111
401
(127)
(7)
1,105
518
1,623
727
111
401
(127)
(7)
1,105
518
1,623
Recognition and Measurement
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination
is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group,
liabilities incurred by the Group to the former owners of the acquire, and the equity instruments issued by the Group in exchange
for control of the acquiree.
Acquisition-related costs are expensed as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value.
Goodwill is measured as the excess of the sum of the consideration transferred and the fair value of the acquirer’s previously held
equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities
assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair
value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a
bargain purchase gain.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts
are adjusted during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained
about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised
as of that date.
70 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 UNRECOGNISED ITEMS
25. Contingent Liabilities and Assets
There are no matters which the Group consider would result in a contingent liability as at the date of this report.
26. Commitments for Expenditure
Capital Commitments – Capital Expenditure Projects
Non-cancellable capital expenditure contracted for but not in the financial statements:
Payable:
– Not longer than one year
– Longer than one year and not longer than five years
– Longer than five years
Other Commitments – Operating Expenditure
Operating expenditure contracted but not included in the financial statements:
Payable:
– Not longer than one year
– Longer than one year and not longer than five years
– Longer than five years
2018
$’000
2017
$’000
–
–
–
–
2018
$’000
1,367
65
–
1,432
39
–
–
39
2017
$’000
708
–
–
708
Operating expenditure commitments are primarily associated with contracts entered into with suppliers of Nichols Poultry Pty Ltd
to secure grain supply during the following financial year, with contracted volumes at levels to meet forecast feed demand.
27. Operating Lease Arrangements
Operating Leases
Non-cancellable operating leases contracted for but not included in the financial statements:
Payable:
– Not longer than one year
– Longer than one year and not longer than five years
– Longer than five years
2018
$’000
181
199
–
380
2017
$’000
204
378
–
582
TasFoods Annual Report 2018 | 71
28. Events Occurring After Reporting Date
The Board is not aware of any matter or circumstance not otherwise dealt with in these financial statements that has significantly
or may significantly affect the operation of the Group, the results of those operations, or the state of affairs of the Group in
subsequent financial years.
OTHER INFORMATION
29. Related Party Transactions
Key Management Personnel Compensation
The aggregate compensation of the key management personnel of the entity is set out below:
Short term benefits
Post-employment benefits
Share based payments
Termination payments
2018
$
2017
$
931,477
805,717
87,993
124,169
–
70,939
39,168
–
1,143,639
915,824
30. Auditor’s Remuneration
Remuneration for audit and review of the financial reports of the parent entity or any entity in the Group:
Auditors of the parent entity:
Auditing the financial report
Auditing the financial report – subsidiary companies
Other assurance services
31. Share Based Payments
Performance Rights
2018
$
2017
$
123,900
–
3,876
120,750
32,000
–
127,776
152,750
Share based payment arrangements
a.
TasFoods Limited offers the Chief Executive Officer and senior management the opportunity to participate in the Long-Term
Incentive Plan (LTIP), which involves performance rights to receive shares in TasFoods Limited. The LTIP is designed to:
● Assist in the motivation, retention and reward of employees, including the Chief Executive Officer and members of senior
management; and
● Align the interests of employees participating in the LTIP more closely with the interests of shareholders by providing
an opportunity for those employees to receive an equity interest in the TasFoods Limited Group through the granting of
performance rights.
Under the LTIP, performance rights were issued to the Chief Executive Officer and managers of senior management as the LTI
component of their remuneration. Performance rights granted under the LTIP have a share price growth performance vesting
condition. Vesting percentages (of the grant/stretch/maximum level of LTI) to be determined by the following scale:
72 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 Performance Level
TFL Share Price
% of the Grant/Stretch /Maximum Vesting
>Stretch
Stretch
Between Target and Stretch
Target
>$0.40
$0.40
>$0.33, < $0.40
$0.33
100%
100%
Pro-rata
50%
The targets for share price growth are based on a starting share price of $0.25 (being the share price at which investors acquired
their shares at the 2016 capital raising) which is a Compound Annual Growth Rate (CAGR) of 10% to achieve ‘target’ share price
and a CAGR of 17% to achieve ‘stretch’ share price; noting the share price at 1 January 2018 was $0.135 which is a CAGR of 35%
to achieve ‘target’ share price and a CAGR of 44% to achieve ‘stretch’ share price.
Share Price will be determined by a ten trading day volume weighted average share price ending on the date that is the end of the
Measurement Period.
Performance rights granted
b.
Below is a summary of performance rights granted under the LTIP.
2018
Performance Period
Grant Date
17/7/17
26/7/18
From
1/1/17
1/1/18
To
31/12/19
31/12/20
Balance at
start of Year
Granted
During Year
3,212,083
–
–
1,613,514
Forfeited
Vested
Balance at
End of Year
Fair Value
per Share
–
–
–
–
3,212,083
$0.068
1,613,514
$0.044
2017
Performance Period
Grant Date
17/7/17
From
1/1/17
To
31/12/19
Balance at
start of Year
Granted
During Year
Forfeited
Vested
Balance at
End of Year
Fair Value
per Share
–
3,212,083
–
–
3,212,083
$0.068
The performance rights hold no voting or dividend rights and are not transferable.
Fair value of performance rights granted
c.
For the performance rights granted during the 2018 financial year, the fair value was measured at the grant date of 26 July 2018
for those rights issued to the Chief Executive Officer and senior management.
The fair value of the performance rights granted under the LTIP was calculated by an independent expert using a
Monte-Carlo simulation.
The expense recognised in relation to the performance rights applicable to the Chief Executive Officer and senior management for
the year ended 31 December 2018 is $48,236 (31 December 2017: $36,404).
Share Options
Share based payment arrangements
a.
On 30 November 2017 TasFoods Limited issued 5,000,000 share options to Shane Noble upon his appointment as a Director of
the Company. The options granted were for nil cash consideration and will entitle the option holder to acquire one ordinary share
in the Company at an exercise price of $0.20 until 30 November 2021.
In addition, during 2015 TasFoods Limited established an employee share ownership plan (ESOP) to provide a long-term incentive
for employees and Directors of TasFoods Limited. It allowed entitled officers of the Group to participate in TasFoods Limited’s
future growth and provided an incentive to increase profitability and returns to shareholders. The ESOP was replaced with the LTIP
noted above in 2017.
TasFoods Annual Report 2018 | 73
31. Share Based Payments (continued)
Share options granted
b.
Share options outstanding at 31 December 2018 are as follows:
Grant Date
Expiry Date
Exercise Price
4/9/15
4/9/15
3/9/19
3/9/19
30/11/17
30/11/21
$0.21
$0.42
$0.20
Weighted average exercise price
Balance at
start of the
year
10,000,000
8,500,000
5,000,000
23,500,000
Granted
Exercised
–
–
–
–
–
–
–
–
Expired/
forfeited/
other
Balance at
the end of
the year
10,000,000
8,500,000
–
5,000,000
– 23,500,000
$0.28
The options hold no voting or dividend rights and are not transferable.
Fair value of share options granted
c.
For share options granted during the 2017 financial year, the fair value was measured at the grant date of 30 November 2017.
The fair value of the performance rights granted under the LTIP was calculated by an independent expert using the
Binomial method.
The expense recognised in relation to share options for the year ended 31 December 2018 is $81,250 (31 December 2017: $6,901).
Share Options at 31 December 2018
d.
Details of share options held by Directors and employees outstanding as at end of year:
Grant Date
Expiry Date
Exercise Price
4/9/15
4/9/15
30/11/17
3/9/19
3/9/19
30/11/21
3/9/19
3/9/19
30/11/21
Share Price at
Grant Date
Exercise
Price
Fair Value at
Grant Date
$0.150
$0.150
$0.165
$0.210
$0.420
$0.200
$0.020
$0.002
$0.065
There are no performance hurdles attached to the options granted, however service conditions do apply.
Recognition and Measurement
The Group provides benefits to the Directors, the Chief Executive Officer and certain senior management in the form of share-
based payment, whereby services are rendered in exchange for rights over shares (performance rights) or options.
The fair value of the performance rights and options is recognised as an employee benefits expense, with a corresponding increase
in equity. The total amount to be expensed is determined by reference to the fair value of the performance rights or options
granted.
The total expense is recognised over the period in which the performance and/or service conditions are fulfilled (the vesting
period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date).
74 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 32. Summary of Significant Accounting Policies
Basis of preparation
(a)
These financial statements are general purpose financial statements that have been prepared in accordance with Australian
Accounting Standards, Australian Accounting Interpretations and the Corporations Act 2001, as appropriate for profit
oriented entities.
The financial statements cover the Company and its controlled entities as a group for the financial year ended 31 December 2018.
The Company is a company limited by shares, incorporated and domiciled in Australia.
Separate financial statements for the Company as an individual entity are no longer presented as a consequence of a change to
the Corporations Act 2001, however limited financial information for the Company as an individual entity is included in Note 22.
The following is a summary of material accounting policies adopted by the Group in the preparation and presentation of the
financial statements not elsewhere disclosed. The accounting policies have been consistently applied, unless otherwise stated.
Compliance with IFRS
(b)
The financial statements comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
Historical Cost Convention
(c)
The financial statements have been prepared under the historical cost convention. All amounts are presented in Australian dollars
unless otherwise noted.
Principles of Consolidation
(d)
The consolidated financial statements are those of the Group, comprising the parent entity and its controlled entities as defined in
Accounting Standard AASB 10 ‘Consolidated Financial Statements’. Control is achieved when the Company:
● has power over the investee;
● is exposed, or has rights, to variable returns from its involvement with the investee; and
● has the ability to use its power to affect its returns.
The Company reassess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
Details of the controlled entities are contained in note 23.
Financial statements for controlled entities are prepared for the same reporting period as the parent entity. Controlled entities are
fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which
control is transferred out of the Group. Adjustments are made to bring into line any dissimilar accounting policies, which may exist.
All inter-company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation.
Non-controlling interests in the equity and results of the entities that are controlled are shown separately in the consolidated
financial statements.
Critical Accounting Estimates, Judgements and Errors
(e)
The preparation of the financial statements of the Group requires the use of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting policies.
Areas within the financial report which contain a higher degree of judgement or complexity, and items which are more likely to
be materially adjusted due to estimates and assumptions turning out to be incorrect. Detailed information about each of these
estimates and judgements are included in the notes to the financial statements together with the basis of calculation.
The areas involving significant estimates or judgements are:
● Estimated fair value of biological assets; and
● Estimated value in use calculations for the assessment of the recoverable amount of goodwill and indefinite life intangibles.
TasFoods Annual Report 2018 | 75
32. Summary of Significant Accounting Policies (continued)
Estimates and judgements are continually evaluated. They are based on historical experience, information, and other factors,
including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under
the circumstances.
Leases
(f)
Operating lease payments are charged to the statement of profit or loss and other comprehensive income in the periods in which
they are incurred, as this represents the pattern of the benefits derived from the leased assets.
Comparatives
(g)
Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures.
New and Amending Accounting Standards and Interpretations Adopted
(h)
The Group has applied the following standards and amendments for the first time for its annual reporting period commencing
1 January 2018:
● AASB 9 Financial Instruments
● AASB 15 Revenue from Contracts with Customers
● AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based
Payment Transactions
The impact of the adoption of these standards, which did not require retrospective adjustments, and the new accounting policies
are disclosed in note 32(i) below.
New, Revised or Amending Accounting Standards and Interpretations Adopted
(i)
This note explains the impact of the adoption of AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with
Customers on the Group’s financial statements and also discloses the new accounting policies that have been applied from
1 January 2018, where they are different to those applied in prior periods.
AASB 15 Revenue from Contracts with Customers – Impact of adoption
The group has adopted AASB 15 Revenue from Contracts with Customers effective 1 January 2018 which resulted in changes
in accounting policies and required no retrospective adjustments to the amounts recognized in the financial statements. In
accordance with the transition provisions in AASB 15, the Group has adopted the new standard with the modified retrospective
method and has determined the application of AASB 15 to have an immaterial impact on the group’s financial statements.
AASB 15 Revenue from Contracts with Customers – Accounting policies changes
● Accounting for wholesale sales of dairy, poultry and wasabi goods
The sale of dairy, poultry and wasabi goods is measured at the fair value of consideration received net of any trade discounts and
volume rebates allowed.
The sale of dairy, poultry and wasabi goods represents a single performance obligation and accordingly, revenue will be
recognised in respect of the sale of these goods at the point in time when control over the corresponding goods and services is
transferred to the customer (i.e. at a point in time for sale of goods when the goods are delivered to the customer or transfer to the
freight forwarder).
Under AASB 15, revenue is recognised when control of the goods transfer to the customer i.e when the goods have been delivered
to a customer pursuant to a sales order which represents a change in revenue recognition accounting policy of the group from
previous recognition when the significant risks and rewards of ownership of the goods have passed to the buyer at the time of
dispatch of the goods to the customer.
In addition, while such arrangements are rare, if an arrangement with a wholesale customer includes multiple performance
obligations, the total revenues are allocated to the separate elements of the contract, at the appropriate transaction price. In such
cases, revenue will be recognised once each performance obligation is met.
76 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 ● Accounting for retail and online sales
Revenue is recognised when the transaction is processed at the point of sale, whether that is at the register in-store or via an on-
line checkout process.
● Accounting for bill and hold transactions
For bill and hold sales transactions, control is deemed to pass and as such revenue recognised when (a) the customer has accepted
delivery of the goods; or (b) the customer’s freight forwarder has taken possession of the goods.
AASB 9 Financial Instruments – Impact of adoption
AASB 9 replaces the provisions of AASB 139 that relate to the recognition, classification and measurement of financial assets
and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting. Most of
the changes are not relevant to the Group, however there was a new impairment model introduced in AASB 9 which requires
the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the
case under AASB 139. It applies to financial assets classified at amortised cost, debt instruments measured at fair value through
other comprehensive income, contract assets under AASB 15 Revenue from Contracts with Customers, lease receivables, loan
commitments and certain financial guarantee contracts. The adoption of AASB 9 Financial Instruments from 1 January 2018
resulted in changes to the Group’s accounting policies. No opening adjustment was necessary as a result of the adoption of
AASB 9.
Impairment of financial assets
The Group has one type of financial asset that is subject to AASB 9’s new expected credit loss model:
● trade receivables for sales of inventory
The group was required to review its impairment methodology under AASB 9 for this class of assets. While cash and cash
equivalents are also subject to the impairment requirements of AASB 9, the identified impairment loss was nil.
The group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on credit
risk characteristics and the days past due. There was no adjustment required between the expected credit loss calculated under
AASB 9 and AASB 139.
AASB 9 Financial Instruments – Accounting policy changes
From 1 January 2018, for the trade receivables, the Group applies the simplified approach permitted by AASB 9, which requires
expected lifetime losses to be recognized from initial recognition of the receivables.
TasFoods Annual Report 2018 | 77
32. Summary of Significant Accounting Policies (continued)
New Standards and interpretations not yet adopted
(j)
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2018
reporting periods and have not yet been adopted by the Group. The Group’s assessment of the impact of these new standards and
interpretations is set out below.
AASB 16 Leases
AASB 16 Leases will replace existing accounting requirements for leases under AASB 117 Leases. Under AASB 117, leases are
classified based on their nature as either finance leases, which are recognised on the Consolidated Statement of Financial Position,
or operating leases, which are not recognised on the Consolidated Statement of Financial Position.
Under AASB 16 Leases, the Group’s accounting for operating leases as a lessee will result in the recognition of a right to use asset
and an associated lease liability on the Consolidated Statement of Financial Position. The lease liability represents the present
value of future lease payments, with the exception of short-term and low value leases. An interest expense will be recognised on
the lease liabilities and a depreciation charge will the recognised for the right to use assets. These will also be additional disclosure
requirements under the new standard.
The Group will apply AASB 16 on 1 January 2019, using the modified retrospective approach. Therefore, the cumulative effect of
adopting AASB 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 January 2019, with no
restatement of comparative information.
The Group has assessed the estimated impact that AASB 16 will have on its Consolidated Financial Statements at
31 December 2018. At this time, the Group has non-cancellable operating lease commitments of $380,206, refer to note 27.
For the remaining lease commitments, the Group expects to recognise right-of-use assets of approximately $1,363,000
on 1 January 2019, lease liabilities of $1,443,000 (after adjustments for prepayments and accrued lease payments as at
31 December 2018) and deferred tax assets of $24,000. Overall the net assets of the Group will be approximately $56,000 lower.
The Group expects that the net profit after tax will decrease by approximately $11,000 in the year ending 31 December 2019 as a
result of adopting AASB 16. Adjusted EBITDA used to measure the Group’s performance is expected to increase by $213,000, as
the operating lease payments were included in EBITDA, but the amortisation of right-of-use assets and interest on the lease liability
will be excluded from this measure.
Operating cash flows will increase and financing cash flows decrease by approximately $160,000 as repayment of the principal
portion of the lease liabilities will be classified as cash flows associated with financing activities.
There are no other standards that are not yet effective and that would be expected to have a material impact on the Group in the
current or future reporting periods and on foreseeable future transactions.
Rounding Amounts
(k)
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in
accordance with that Class Order, amounts in the financial statements have been rounded off to the nearest thousand dollars, or in
certain cases, to the nearest dollar.
78 | TasFoods Annual Report 2018
Notes to and forming part of the Financial Statementsfor the year ended 31 December 2018 1.
In the opinion of the Directors of TasFoods Limited (the “Company”):
a. The financial report and the Remuneration Report included in the Directors’ Report, designated as audited of the Group are
in accordance with the Corporations Act 2001, including:
i. Giving a true and fair view of the Group’s financial position as at 31 December 2018 and of its performance for the year
ended on that date; and
ii. Complying with the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements;
b. At the date of this declaration, there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable;
2. The financial statements and notes comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board, as described in the notes to the financial statements; and
3. This declaration has been made after receiving the declarations required by section 295A of the Corporations Act 2001 from
the Chief Executive Officer and the Chief Financial Officer for the financial year ended 31 December 2018.
Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001. This
declaration is made in accordance with a resolution of the Directors.
Shane Noble
Executive Chairman
27 February 2019
Launceston
TasFoods Annual Report 2018 | 79
Directors’ Declarationfor the year ended 31 December 2018 Independent auditor’s report
To the members of TasFoods Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of TasFoods Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 31 December 2018 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 31 December 2018
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit and loss and other comprehensive income for the year then
ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
80
80 | TasFoods Annual Report 2018
Independent Auditor’s Reportfor the year ended 31 December 2018 Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
Key audit matters
•
•
Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
and Risk Committee:
− Valuation of goodwill and
indefinite lived intangible
assets
− Accounting for biological
assets
These are further described in
the Key audit matters section of
our report.
•
For the purpose of our audit
we used overall Group
materiality of $384,000, which
represents approximately 1%
of total Group revenue.
•
• We applied this threshold,
Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
• We performed an audit of the
most financially significant
operating business units of the
Group, being Poultry and
Dairy. We performed specific
risk focused audit procedures
over Wasabi and the corporate
head office.
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the financial
report as a whole.
• We chose Group revenue as, in
our view, it is the benchmark
against which the performance
of the Group is most
commonly measured given it
remains in the growth and
acquisition phase of its
lifecycle.
81
TasFoods Annual Report 2018 | 81
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
Valuation of goodwill and indefinite lived
intangible assets
(Refer to note 13 in the financial report)
The Group holds intangible assets totalling $8.7 million
as at 31 December 2018, of which $5.5 million relates to
goodwill and $2.9 million relates to an indefinite life
brand. Under Australian Accounting Standards, the
Group is required to assess goodwill and indefinite life
intangibles for impairment at least annually.
The Group performed an impairment assessment for
the Dairy and Poultry CGUs described above by
calculating the value-in-use of the net assets, including
intangible assets, in each CGU.
The valuation models (the “models”) used by the Group
to perform the impairment assessment are based on
cash flow forecasts obtained from board approved
budgets.
The Group identified that for the Dairy and Poultry
CGUs the Group’s recoverable amount exceeded the
carrying value and therefore are not impaired.
The Group performed sensitivity analysis and
determined that the Dairy CGU impairment assessment
was sensitive to a reasonable change in growth rates
and the discount rate. The changes in these
assumptions are disclosed in note 13.
This is a key audit matter as the balance of goodwill
and indefinite lived intangible assets is material and on
the basis the impairment assessment involves
significant judgement by the Group in estimating
future earnings and cash flows for the CGUs.
We assessed whether the Group’s determination of
CGUs was consistent with our understanding of the
nature of the Group’s operations and internal Group
reporting.
We tested the mathematical accuracy and integrity of
the calculations in the models.
We assessed the appropriateness of the discount rates
used in the models by comparing it to our view of an
acceptable range based on market data.
To evaluate the cash flow forecasts and the process by
which they were developed we performed the following
procedures, amongst others:
• Compared the 2019 forecast cash flows used in the
models with the FY2019 budget formally approved
by the Board.
• Assessed the historical accuracy of the Group’s
forecasts by comparing the forecasts used in the
prior year models to the actual performance.
• Assessed the forecast growth assumptions used in
the models by reference to our understanding of
the key drivers for growth and the Group’s future
plans.
• Compared the terminal growth rate used in the
models to economic forecasts.
We performed sensitivity analysis which highlighted
that the Dairy CGU impairment model is sensitive to
changes in key assumptions. We recalculated the
change in the growth rates and discount rate which
would result in an impairment and evaluated the
adequacy of the disclosures in note 13 in light of the
requirements of Australian Accounting Standards.
82 | TasFoods Annual Report 2018
82
Independent Auditor’s Reportfor the year ended 31 December 2018 Key audit matter
How our audit addressed the key audit matter
Accounting for biological assets
(Refer to note 10 in the financial report)
We performed the following procedures amongst
others on the biological assets:
The Group held biological assets of $2.7million at
31 December 2018. The biological assets include live
poultry, wasabi plants and goats.
Australian Accounting Standards require biological
assets to be measured at fair value less cost to sell or, in
the absence of a fair value, at cost less impairment.
The Group has valued each of the biological assets as
follows:
Poultry
At 31 December 2018 the carrying value of poultry was
$1.4 million. The quantity, age and related weight of
the chickens are key elements of the valuation
methodology. The Group considered the cost of the
chicks, feed costs, grower costs and the conversion rate
for the chicken meat (using industry standards), to
determine the fair value less cost to sell.
Wasabi plants
The carrying value of wasabi plants at 31 December
2018 was $1 million. This was determined based on the
current market price of wasabi powder net of the costs
of harvesting, preparing and selling the product. The
methodology takes into account an estimated yield per
plant in kilograms, which has been determined based
on historical growth rates and harvest data for mature
wasabi plants.
Goats
The carrying value of goats at 31 December 2018 was
$0.3 million. This was determined on the market prices
of goats based on age and breed.
We consider the valuation of biological assets a key
audit matter on the basis that these involve judgement
and estimates using key assumptions.
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•
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Considered the appropriateness of the
valuation methodologies against the relevant
Australian Accounting Standard.
Tested the mathematical accuracy of the
valuation calculations.
On a sample basis, compared the fair value
recognised as at 31 December 2018 to the
actual selling price once biological assets were
reclassified into inventory.
Compared the fair value of goats to market
prices.
To assess the valuation of the poultry biological assets,
we performed the following procedures, amongst
others:
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Compared the reasonableness of the number
and age of chickens recognised as at 31
December 2018 based on a sample of purchase
information for chickens for the December
period and physical observation of chickens as
at 31 December 2018.
Compared the conversion rate for chicken
meat used in the Group’s calculation as at
31 December 2018 to the industry valuation
methodology standards and the Group’s
performance for such biological assets.
Agreed the cost of feed, grower and other costs
to sell used in the Group’s calculation as at 31
December 2018 to a sample of supplier
invoices.
To assess the valuation of the wasabi biological assets,
we performed the following procedures, amongst
others:
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•
•
Considered the reasonableness of the number
of plants on hand based on physical
observation at 31 December 2018.
Assessed the reasonableness of the yield per
plant based on the harvest data prepared by the
Group over the preceding 12 month period.
Considered the reasonableness of the costs of
harvest and selling costs based on the costs
incurred over the preceding 12 month period.
Observed the harvest of a wasabi plant, and its fresh
yield (in kgs) and compared this to the Group’s data.
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Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 31 December 2018, 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 on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
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84 | TasFoods Annual Report 2018
Independent Auditor’s Reportfor the year ended 31 December 2018 Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 22 to 35 of the directors’ report for the
year ended 31 December 2018.
In our opinion, the remuneration report of TasFoods Limited for the year ended 31 December 2018
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Alison Tait
Partner
Melbourne
27 February 2019
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TasFoods Annual Report 2018 | 85
The shareholder information set out below was applicable as at 30 January 2019.
A. Distribution of Equity Securities
Analysis of numbers of equity security holders by size of holding:
Spread of Holdings
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
> 100,000
Total
Number of Holdings
% of Total Issued Capital
Number of Units
Holders
252 (14.75%)
443 (25.92%)
222 (12.99%)
616 (36.04%)
176 (10.30%)
Units
85,991 (0.04%)
1,367,949 (0.66%)
1,838,422 (0.89%)
23,579,056 (11.41%)
179,727,655 (86.99%)
1,709 (100.00%)
206,599,073 (100.00%)
The number of shareholders with less than a marketable parcel is 559.
B. Equity Security Holders
Twenty largest quoted equity security holders.
The names of the twenty largest holders of quoted equity securities are listed below (some are grouped where the holdings are
deemed to be controlled by the same entity):
Rank Name
1
2
3
4
5
6
7
8
9
Janet H Cameron
Elsie Cameron Foundation Pty Ltd
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