TasFoods Limited
Annual Report 2022

Plain-text annual report

1 A N N U A L R E P O R T 22 TASFOODS ANNUAL REPORT 2022AUDITOR PricewaterhouseCoopers 2 Riverside Quay Southbank Victoria 3006 Australia SOLICITORS HWL Ebsworth Level 26, 530 Collins Street Melbourne Victoria 3000 Australia O’Reilly Legal & Governance Pty Ltd Maning Avenue, Sandy Bay, Tasmania, 7005 Australia BANKERS Australia and New Zealand Banking Group Bendigo Bank STOCK EXCHANGE LISTING TasFoods Limited shares are listed on the Australian Securities Exchange, ticker: TFL 0 2 CORPORATE DIRECTORY BOARD OF DIRECTORS John Murphy Independent Non-Executive Chair Ben Swain Non-Executive Director John O’Hara Independent Non-Executive Director COMPANY SECRETARY Shona Croucher REGISTERED OFFICE 52-54 Tamar Street Launceston Tasmania 7250 Australia Telephone: Facsimile: Website: + 61 3 6331 6983 + 61 3 6256 9251 www.tasfoods.com.au POSTAL ADDRESS Po Box 425 Launceston Tasmania 7250 Australia SHARE REGISTRY Link Market Services Level 12, 680 George Street Sydney New South Wales 2000 Australia Telephone: + 61 2 8280 7100 + 61 2 9287 0303 Facsimile: TasFoods Limited ACN 084 800 902 TA S F O O D S A N N U A L R E P O R T 2 0 2 2 0 3 CONTENT Corporate Directory Chairman & CEO's Report Operating & Financial Review • Poultry Division • Dairy Division • Wasabi • Corporate • 2023 Outlook • Risk Board of Directors Executive Team Directors’ Report Financial Report • Consolidated Statement of Profit or Loss IFC 05 10 11 14 18 20 21 23 27 28 29 54 and Other Comprehensive Income 55 • Consolidated Statement of Financial Position 56 • Consolidated Statement of Changes In Equity 57 • Consolidated Statement of Cash Flows 58 • Notes to Financial Statements • Directors’ Declaration • Independent Auditor’s Report Shareholder Information 102 96 59 97 TA S F O O D S A N N U A L R E P O R T 2 0 2 2 0 4 OUR BRAND PORTFOLIO OUR BRANDS EMBODY AUTHENTIC PROVENANCE THAT REFLECTS THE ESSENCE OF PREMIUM TASMANIAN PRODUCTS. OUR DIVERSIFIED CUSTOMER BASE ENABLES US TO DELIVER THE ESSENCE OF TASMANIA TO WHERE CONSUMERS CHOOSE TO SHOP. PREMIUM Brands that reflect artisan provenance and Tasmanian heritage, targeted at food lovers seeking authenticity. EVERYDAY LUXURY Brands that provide a piece of Tasmanian indulgence for everyday life, targeted at national retail and export markets. MAINSTREAM / VALUE Brands that support loyal customers with local products providing profitable volume to underpin the operations. TA S F O O D S A N N U A L R E P O R T 2 0 2 2 0 5 CHAIRMAN & CEO’S REPORT JOHN MURPHY NON-EXECUTIVE CHAIRMAN SCOTT HADLEY CHIEF EXECUTIVE OFFICER ON BEHALF OF THE BOARD OF DIRECTORS AND THE MANAGEMENT OF TASFOODS LTD, WE PRESENT TO YOU THE ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022. As announced in our AGM address 12 months ago, we had reviewed and refreshed the strategic plan, and our immediate priority in 2022 was to stabilise the foundations of the business and be in a position to leverage our core competencies for profitable growth. We achieved a substantial amount during the year and made significant changes to all aspects of the business with Management and the Board working together to simplify, streamline and enhance our operating model to drive superior execution and provide greater speed and nimbleness as market conditions evolve. “ OUR IMMEDIATE PRIORITY IN 2022 WAS TO STABILISE THE FOUNDATIONS OF THE BUSINESS AND THEN BE IN A POSITION TO LEVERAGE OUR CORE COMPETENCIES FOR PROFITABLE GROWTH. At our AGM last year, the Chairman of the Board, Craig Treasure, announced his decision to step down from this position and the Board. Craig made a significant contribution to TasFoods and we thank him for his commitment and service to the Company. John Murphy was appointed Acting Chairman and formally ratified to the position in August 2022. The Board’s composition and capabilities continue to be reviewed to ensure the skill set, industry experience and tenure of the Directors remains appropriate for the business and continues to provide the necessary support, checks and balances and guidance to the Management team. In the first half of the year, the Company completed a successful capital raising of $5.5m placement, along with a $0.5m Share Purchase Plan to fund initial stages of the Company’s new strategy and working capital requirements. The placement was strongly supported by our investors to undertake the rebuild work required under the strategic reset and support the opportunity for TasFoods. Over the course of the year, both the broader categories in which TasFoods operates and the Company itself has faced unprecedented uncertainty, supply chain disruptions and broader macro-economic pressures which impacted TASFOODS ANNUAL REPORT 20220 6 CHAIRMAN & CEO’S REPORT, CONT. operational performance. COVID-19 disruptions affected both our business divisions where labour shortages severely impacted operations and imposed significant costs. The Poultry division in particular was impacted as we prioritised continuity of supply and animal welfare during the first quarter. Temporary labour and overtime increases were required to process birds, and the team at Nichols did an outstanding job under difficult circumstances. During the second half of the year, consumer sentiment and spending was negatively impacted by the upward momentum of inflation and interest rates. Consumers are actively controlling their spending and value offerings are seeing growth at the expense of premium brands in the categories TasFoods operates in. Our Dairy division felt the impacts of this change in behaviour with volume negatively impacted. Poultry sales performed adequately during this period as chicken remains the most affordable protein, however the division did see a swing to more affordable cuts and pack formats. FINANCIAL PERFORMANCE Gross margins for the year were significantly impacted by input cost increases associated with dairy (milk and cream), poultry feed and labour (COVID related). As part of the Company’s ongoing efficiency program, Management have fully implemented a SKU rationalisation program across both the Dairy and Poultry divisions and implemented significant changes to the Company’s logistics network. The Company has also implemented initiatives to reduce per unit conversion costs in our facilities through efficiency and effectiveness measures. The performance in 2022 coupled with subdued forward looking industry forecasts for the categories TasFoods participates in has resulted in the company recognising an impairment charge of $6.8m, comprising brands and trademark impairment of $2.9m in the Poultry division and $3.9m in the Dairy division. The impairment charges are non-cash and do not impact the Company’s cash position. FY 2022 FY 2021 Dairy $’000 Poultry $’000 Horticulture $’000 Shared Services $’000 Total $’000 Dairy $’000 Poultry $’000 Horticulture $’000 Shared Services $’000 Total $’000 Change $’000 Change % 31,213 39,858 423 120 71,615 30,497 39,083 412 76 70,067 1,505 2.1% (29,738) (43,980) (518) (7,338) (85,421) (28,162) (40,439) (451) (5,735) (74,788) (4,131) 5.5% 1,475 (1,509) (94) (7,218) (7,346) 2,334 (1,356) (39) (5,660) (4,720) (2,626) (55.6%) Total Revenue Operating Expenditure Operating EBITDA GP Margin 29% 18% 298 - Movement in Fair Value Impairment Expense (3,925) (2,910) 59% 77 - - - - 22% 375 35% (32) 17% (113) (6,835) (2,770) (1,137) 60% 69 - - - - 27% (76) (3,907) (5.0%) EBITDA (2,449) (4,122) (17) (7,218) (13,806) (468) (2,606) 30 (5,660) (8,704) (5,102) (58.6%) NPAT (16,478) (10,741) TASFOODS ANNUAL REPORT 20220 7 CHAIRMAN & CEO’S REPORT, CONT. Sales to interstate markets grew in late 2H 2022 through increased volume to existing customers and the acquisition of new customers. Profitable growth in interstate markets will remain a focus in 2023. Input costs increased at unprecedented levels in 2022 and the Company worked hard to either minimise their impact or pass through to customers where appropriate. Feed costs associated with the Poultry division increased by 14.9% per tonne, milk costs increased by 30% per litre as a direct result of higher farm gate prices, and cream prices increased by 13% per litre compared to PCP. Against the backdrop of this challenging operating environment which may continue for sometime, whilst we are positive on the many operating initiatives we have put in place, we continue to assess the asset profile of both our key business divisions, and the businesses themselves to ensure we are able to drive long term returns for shareholders. We continue to review our Capital management framework and have made key decisions to exit the organic poultry operations and the sale & leaseback of non-core real estate assets associated with Betta Milk. The Company produced a solid sales performance, reporting an increase of 1.6% to $70.6 million, despite undertaking an extensive SKU and customer rationalisation to simplify operations. On a like for like basis, sales revenue was up 2.7%. Group operating EBITDA was a loss of $7.3 million which was driven by significantly increased input costs relating to milk, wheat, cream and labour. COVID impacted the result, particularly in the first quarter, with labour costs increasing by $0.4 million to ensure continuity of supply. The organic poultry operation resulted in a loss of $0.9 million for the year (including decommissioning costs) with this business unit being closed in July to eliminate future operating losses. The impairment expense of $6.8 million recognised in December contributed to the full- year financial result of a net loss after tax of $16.5 million. The impairment of intangible assets did not affect the cash position of the company. After taking into account the SKU rationalisation programme, our two major operating divisions both achieved sales revenue growth, with the Poultry division increasing revenue by 1.5% and Dairy division increasing sales by 2.3%. The SKU rationalisation programme was significant with over 50% of poultry SKU’s being rationalised, 24% of Betta Milk SKU’s deleted and 56% of Meander Valley Dairy SKU’s discontinued. This programme started in March 2022 and was completed by the end of the year as we ran out stocks of raw materials. TASFOODS ANNUAL REPORT 20220 8 CHAIRMAN & CEO’S REPORT, CONT. PEOPLE & SYSTEMS CAPABILITY MARKETING & E-COMMERCE During the year, a new management team and structure was implemented to best deliver upon our strategy and maximise performance of the business. New and replacement hires were made in sales, marketing, dairy operations, IT, logistics, procurement and finance, and this increased capability has enabled many initiatives to be implemented to the benefit of the Company. It is with regret that we accepted the resignation of our Chief Financial Officer, Shona Croucher, however we are pleased that we were able to find a well credentialed replacement in Joshua Fletcher. We thank Shona for her efforts in the past 15 months in helping implement key strategic and operational initiatives that are fundamental to the future success of TasFoods. The Company’s newly implemented ERP system is now operational across Meander Valley Dairy, Pyengana Dairy, Shima Wasabi, e-Commerce and Shared Services business units. Betta Milk will be operational in H1 2023 and will enable integration of all Dairy businesses to maximise efficiency and effectiveness measures. The Company was proud to accept numerous gold and silver awards at the Australian Grand Dairy Awards. Pyengana Traditional Cheese, Pyengana Milk, Betta Milk Lactose Free and Meander Valley Dairy Sour Cream all won gold awards. Numerous other Meander Valley Dairy, Betta Milk and Pyengana Cheese products received silver awards. These awards are a great testament to the high quality of our authentic products. Recognising the rising consumer demand for online gifting and direct to consumer food offerings, the Company is investing in the growth of its e-Commerce capability. The Company has re-branded and re-launched its authentic real wasabi brand, Shima, and initiated a chef ambassador program, partnering with some of Australia’s most recognisable culinary identities and restaurants, including Luke Burgess and Tetsuya’s Restaurant. To better service consumer desire for authentic offerings with provenance, the Company has relaunched its premium cheese brand, Pyengana, through a new identity, online platform and social presence, with multiple award-winning cheddar and blue cheese offerings now available direct to home. During October the Company launched a new luxury and corporate gifting brand, ‘Boxolove’, targeted at the consumer and corporate gifting market. The online channel will deliver curated hampers, with extensive selections of food and beverages from Tasmania’s finest producers. These changes, combined with an increased digital media spend, resulted in a growth of 209% in online sales for the year. TASFOODS ANNUAL REPORT 20220 9 CHAIRMAN & CEO’S REPORT, CONT. STRATEGY At the beginning of 2022, the Company re-purposed our strategic intent as shown below: Reimagining authentic provenance To create the most reputable, sustainable, and authentic premium products collective Our Vision Our Mission Create a world leading growth platform for premium provenance brands to deliver superior consumer and customer experience and market leading shareholder returns Our Winning Capabilities People and Capability TasFoods will invest in our people and their capability to ensure they thrive, develop and grow in the support of our business. Brand building TasFoods will invest behind our premium brands to ensure we remain relevant to evolving consumer needs. Customer service TasFoods will deliver exceptional service to all customers and be known for being easy to do business with for mutual growth. Operational excellence TasFoods will deliver the highest quality products and be known for being best in class in efficiency and effectiveness. Capital management TasFoods will pro actively manage our portfolio of business’ and brands to maximise returns to all stakeholders. Our Values Passion We are passionate about our people, products and brands. Respect We have respect for each other, our stakeholders, the animals and the environment. Accountability Our people are accountable for their actions and focused on results that deliver on our strategy. Together Working together as a team we achieve amazing outcomes. 1 We are very proud of the team at TasFoods and they have shown great resilience in the face of many challenges during 2022. We always strive to deliver outstanding products of the highest quality with the team upholding our values of passion, respect, accountability and togetherness. Against a very challenging external environment in 2022, we have made significant progress on simplifying and strengthening the business, and whilst the financial result for the year is not reflective of the many improvements that have been made we can see the initiatives coming through in the latter period of the year which give us continued confidence in the unique opportunity that Tasmanian brands have to offer. The Board and management team, with improved capability in process, systems and people, are well equipped to implement initiatives to respond to these changing market conditions. Whilst the business transformation agenda has been progressed very quickly, it is a multi-year programme that will deliver significant benefits over time and it will adapt to evolving market conditions, to best provide improved returns for shareholders. We would like to thank all stakeholders, our customers, suppliers, employees and shareholders for their continued support to the business. John Murphy Non-Executive Chair Scott Hadley Chief Executive Officer TASFOODS ANNUAL REPORT 2022 1 0 1 0 OPERATING & FINANCIAL REVIEW TA S F O O D S A N N U A L R E P O R T 2 0 2 2 TA S F O O D S A N N U A L R E P O R T 2 0 2 2 1 1 1 1 POULTRY DIVISION TA S F O O D S A N N U A L R E P O R T 2 0 2 2 TA S F O O D S A N N U A L R E P O R T 2 0 2 2 1 2 POULTRY DIVISION TOTAL REVENUE FOR THE POULTRY DIVISION GREW BY 1.9% ON THE PCP IN 2022 TO $39.8 MILLION. REVENUE GROWTH WAS LARGELY DRIVEN BY STRATEGIES IMPLEMENTED DURING THE YEAR, INCLUDING PRICE RISES AND THE IMPLEMENTATION OF MINIMUM ORDER QUANTITIES, PARTIALLY OFFSET BY A SKU RATIONALISATION PROGRAM AIMED AT SIMPLIFYING THE PRODUCT OFFERING AND IMPROVING EFFICIENCIES. NICHOLS POULTRY WAS ESTABLISHED IN THE EARLY 1980S. THE BUSINESS HAS GROWN TO BECOME ONE OF THE MOST TRUSTED AND RESPECTED MEAT BRANDS IN TASMANIA. The operating and efficiency measures implemented in the poultry business unit in Q3 have started to show positive results, resulting in a gross margin improvement of 1.4% on the PCP. Gross margin was significantly impacted in this division by increased input costs including grain costs associated with feed, increased labour processing costs as the business dealt with continued COVID-19 related operating implications in Q1 and Q2, and significant increases in freight and distribution. Volume sold decreased on 2021 levels by 6%, driven by the decision to cease organic farming, however revenue per kg increased by 9% which facilitated the increase in gross margin. During 2022 the business made the decision to exit the organic poultry operations and discontinue sales from July 2022. The organic poultry operation placed a significant financial and operational stress on the broader Nichols business unit. The Company incurred one- off expenditure of $0.9 million relating to operating losses and the closure of organic poultry operations in 2022. Organic poultry has not been profitable for Nichols since inception and using the TasFoods Capital Management Framework it was decided to deploy the resources in other areas of the business. The Poultry division reported an operating EBITDA loss for 2022 primarily due to the increased input costs. Other contributors to the result were an increase in repairs and maintenance and material increases in distribution costs. As a result of strategic changes implemented in the Nichols business unit in 2H 2022, overtime costs have reduced by 50% compared to 1H 2022 (an annualised savings of $0.5m). TASFOODS ANNUAL REPORT 20221 3 POULTRY DIVISION, CONT. The Company further extended its partnership with Coles during the year with distribution into Victoria, which is a great testament to the quality of our product and the service we provide to this valued partner. Mainland sales increased in Q4 2022 by 21 % from the PCP, which was driven by new mainland customer acquisitions. We believe Nichols Poultry is uniquely placed in the market given its chemical and chlorine free characteristics as a result of our air-chilling process. We believe Nichols has strong consumer cut-through not only in Tasmania but importantly in the mainland market where customers are demanding better tasting poultry products. Poultry remains Australian consumers first choice for protein and Nichols is well placed to gain more share of this market. TA S F O O D S A N N U A L R E P O R T 2 0 2 2 1 4 1 4 DAIRY DIVISION TA S F O O D S A N N U A L R E P O R T 2 0 2 2 TA S F O O D S A N N U A L R E P O R T 2 0 2 2 1 5 DAIRY DIVISION, CONT. OUR DAIRY DIVISION COMPRISES THREE BUSINESS UNITS, BETTA MILK, MEANDER VALLEY DAIRY AND PYENGANA DAIRY. EACH BUSINESS UNIT PLAYS A UNIQUE ROLE WITHIN THE TASFOODS DAIRY DIVISION HOWEVER THERE ARE OPPORTUNITIES FOR FURTHER GROWTH AND EFFICIENCIES AS WE CONTINUE TO CONSOLIDATE THE DAIRY DIVISION. The division reported a reasonable financial contribution at both the revenue and EBITDA levels. Total revenue for the Dairy division grew by 2.4% to $31.2 million. The sales growth was primarily driven by increases in Pyengana Cheese and Milk and Meander Valley Butter and Cream range. THE DAIRY DIVISION HAS THREE CENTRES OF EXCELLENCE; • PYENGANA DAIRY – CHEESE AND TOURISM CAFE • MEANDER VALLEY DAIRY – SPECIALTY CREAMS AND BUTTER • BETTA MILK BURNIE – FRESH MILK BOTTLING Input costs in the Dairy division increased significantly during the year, predominately on the back of rises in farm gate milk prices (23.5%). During 2022, the business absorbed the majority of these increases which resulted in gross margin decline from 2021. This translated into a lower operating EBITDA contribution of $1.5 million, a 37% decline on 2021 results. Increased logistics, marketing and repairs and maintenance costs similarly contributed to the lower level of EBITDA performance. As part of the ERP implementation across the Dairy unit, Pyengana inventory was devalued by $0.3m, with some of this relating to prior periods. The Company continues to focus on implementing initiatives to reduce manufacturing conversion costs in its dairy processing facilities through efficiency and effectiveness measures. As a result of strategic changes implemented in the Betta Milk business unit in 2H 2022, overtime costs have reduced by 30% compared to 1H 2022 (an annualised savings of $0.2m). The Pyengana business unit produced a solid result with sales increasing by 8% which flowed through to an improve EBITDA performance from PCP. The premium brand positioning of this high-quality product resonates strongly with customers who are looking for more indulgent experiences, particularly after COVID-19 lockdowns. Management is buoyed by the growth of this brand and believes it will provide a platform for future growth into the Hotel, Restaurant and Café sector, both state-wide and mainland. The Meander Valley Dairy business unit recorded sales growth across its key categories of Butter and Cream. Total butter volumes increased by 36% compared to PCP, resulting in a 35% increase in sales compared to PCP. Total cream volume reduced by 6% compared to PCP, mainly as a result of the Company’s decision to delete loss making flavoured cream range which negatively impacted sales by 1%. The butter and cream range makes up the majority of sales in this division and continues to grow on the back of national distribution in key distribution channels, along with an increased ranging in independent channels. TA S F O O D S A N N U A L R E P O R T 2 0 2 2 1 6 DAIRY DIVISION, CONT. White milk volume under the Betta Milk brand declined from 2021 levels by 6% on PCP. Price rises have been implemented to offset the substantial increases in input costs, as competition intensified within the Tasmanian market in this dairy commodity category. White milk remains a competitive category but new products such as Lactose Free has helped maintain the relevance of the Betta Milk brand. Management is confident in Betta Milk continuing to contribute to the overall group performance given the strong brand equity within Tasmania, however Management will look to explore new product development to take the brand into less cost-competitive adjacencies. TA S F O O D S A N N U A L R E P O R T 2 0 2 2 1 7 TA S F O O D S A N N U A L R E P O R T 2 0 2 2 1 8 WASABI TA S F O O D S A N N U A L R E P O R T 2 0 2 2 1 9 HORTICULTURE - SHIMA WASABI SHIMA WASABI IS POSITIONED AS A UNIQUE, PREMIUM, PROVINCIAL OFFERING WHICH OPENS ACCESS TO PREMIUM FOOD CHANNELS SUCH AS HIGH-END RESTAURANTS FOR OTHER TASFOODS PRODUCTS. SHIMA SALES WERE CONSISTENT WITH 2021 WITH A SLIGHT DECLINE IN EBITDA CONTRIBUTION, MAINLY ATTRIBUTED TO INCREASED LABOUR COSTS. A UNIQUE, PREMIUM, PROVINCIAL OFFERING Our unique ready-to-use wasabi paste made from real wasabi is a key driver of growth for this business unit after being launched in 2021. This provides customers with a premium and authentic wasabi flavour. There are few alternative options within the Australian domestic food market and our access to the premium route trade market is assisted by having Shima Wasabi in our product portfolio. The Company’s newly implemented ERP system has been in operation since Q4 2022 at Shima Wasabi. As the market conditions improve during 2023, we expect an improvement in Shima sales revenue and profitability. TA S F O O D S A N N U A L R E P O R T 2 0 2 2 2 0 CORPORATE SHARED SERVICES BALANCE SHEET AND CASHFLOWS The Head Office Centre of Excellence for TasFoods saw an increase in expenditure compared to 2021, particularly in regard to investment in people, capability and IT infrastructure and systems. The TasFoods business has undergone significant change in FY2022 and there is an expectation of continued evolution as the Management team build capability in process, systems and personnel. These changes are expected to further improve efficiencies, leading to improved financial performance for shareholders and a platform for future growth. Whilst the business transformation agenda is moving at pace, it will be a multi-year programme and will deliver further significant benefits over time. The Group is supported by a balance sheet with net assets at 31 December 2022 of $18.3 million (31 December 2021: $28.6 million), including fixed asset balances of $25.8 million. Cash balances were $0.3 million (31 December 2021: $1.4 million) and the Group had an undrawn overdraft facility of $3.2 million. The decrease in group net assets is mainly due to the operating loss of $16.5 million, which includes a non-cash impairment charge of $6.8 million. Inventory at 31 December 2022 was $4.6 million (31 December 2021: $4.6 million). Net cash outflows from operating activities were $5.7 million (2021: $4.5 million). This is reflective of the implementation of selling price increases which have been offset by increased input costs including grain costs associated with feed, farm gate milk price for milk, increased labour processing costs and significant increases in freight and distribution costs. Net cash inflows from investing activities were $0.7 million (2021: $2.8 million outflow). During 2022 the group invested $0.9 million into fixed assets including upgrades to increase butter capacity for Meander Valley Dairy, and other general upgrades of equipment as required. 2H 2022 also saw the sale of one of a non-core distribution asset based in Launceston as part of the Company’s sale and leaseback strategy. Net cash inflows from financing activities were $4.0 million (2021: $1.4 million). This included a successful capital raise of $5.5 million placement along with a $0.5 million Share Purchase Plan to fund initial stages of the Company’s new strategy and working capital requirements. Management continue to focus on a disciplined approach to working capital management to ensure improved profitability and cash flows. TASFOODS ANNUAL REPORT 20222 1 2 1 2023 OUTLOOK TA S F O O D S A N N U A L R E P O R T 2 0 2 2 TA S F O O D S A N N U A L R E P O R T 2 0 2 2 2 2 2023 OUTLOOK The ERP will provide vital information to ensure profitable decision making, whilst making TasFoods easier to do business with. The ERP will provide the foundational support to improve operational efficiencies, particularly in the areas of logistics, customer service and manufacturing. TasFoods will be able to operate as one integrated Dairy business for the first time and it will help un-lock our true potential. Recognising the rising consumer demand for online gifting and direct to consumer food offerings, the Company will continue to focus on the growth of its e-Commerce capability. The Company has re- branded and re-launched its authentic real wasabi brand, Shima, we have relaunched our premium cheese brand, Pyengana, through a new identity, online platform and social presence, and we launched a new luxury and corporate gifting brand, ‘Boxolove’, targeted at the consumer and corporate gifting market. The online channel will deliver curated hampers, with extensive selections of food and beverages from Tasmania’s finest producers. 2022 was a year to establish new foundations for the business. We are now in a position to capitalise on our strength in Tasmania through delivering a positive financial return, aggressively expanding our interstate and on-line offerings, and being continuously aware of opportunities in adjacent categories that fit with the strategy of TasFoods premium authentic business. We believe that delivering on these initiatives will put TasFoods on the path to profit and sustainable returns to shareholders. THE PERFORMANCE OF THE BUSINESS IN 2022 WAS CHALLENGED BY NUMEROUS FACTORS BOTH INTERNAL AND EXTERNAL. CONSUMER SENTIMENT AND SPENDING CONTINUES TO BE IMPACTED BY THE MACROECONOMIC BACKDROP OF RISING INFLATION AND INTEREST RATES HOWEVER MANAGEMENT ARE FOCUSSED ON ENSURING THE COMPANY BUILDS ON OUR NOW SOLID FOUNDATIONS TO DELIVER STRONG GROWTH. TasFoods is an integrated business distributing premium, authentic brands with a rich provincial story that consumers trust and love. Understanding the consumer and meeting their needs will be at the heart of what we do, and we need to communicate our unique story and attributes to them in a compelling way. We have made fundamental changes to our business that establish the foundations for profitable growth. We are implementing cost reduction programmes in manufacturing and logistics that will deliver benefits in 2023, we are expanding our portfolio of products through 3rd party licensing and we continue to build capability in our Sales & Marketing team. A major initiative for 2022 was the implementation of a TasFoods enterprise resource planning (ERP) system. It is now operational across Meander Valley Dairy, Pyengana Dairy, Shima Wasabi, e-Commerce and Shared Services business units. We have begun the implementation planning for Betta Milk, which will be operational in H1 2023 and enable integration of all Dairy businesses to maximise efficiency and effectiveness measures. Management have made the decision to not implement the same ERP (SAP Business 1) into Nichols Poultry at this time as we feel this will not facilitate the same benefits as we will see in the Dairy division. TASFOODS ANNUAL REPORT 20222 3 2 3 RISK TA S F O O D S A N N U A L R E P O R T 2 0 2 2 2 4 RISK TasFoods is committed to the effective management of risk to reduce uncertainty in the Group's business outcomes and to protect and enhance shareholder value. There are various internal and external risks that may have a material impact on the Group's future financial performance and economic sustainability The Company 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 2022 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. Identified risks remain relatively stable, with no expectation of increases or decreases in the foreseeable future unless specifically noted below. The material business risks 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 chicken 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. PANDEMIC RISK Ensuring the safety of our employees, contractors and customers in a pandemic environment as well as securing input supplies and managing the impact of market volatility. TasFoods operates on a number of different sites with varying levels of pandemic impact risk. The Group has developed site specific multi scenario pandemic plans for each operational location that respond to updated health, Government and industry advice as well as emerging market conditions. Each site plan prioritises the health and safety of employees, site visitors and customers, follows recommended advice from Government and Health Officials relating to pandemic safety measures including; n Removal of all non-essential employees from sites to work from home; n Non-essential visitors not permitted on processing sites; n Provision of relevant protective equipment to employees; n Temperature testing of employees; n Payment of standard wages to all employees awaiting COVID or other relevant test results; n Pandemic/COVID-specific daily cleaning and sanitation programs; n Additional staff facilities provided on large work sites to allow for isolation of work groups; and n Identification of social and commuting groups within the workforce to ensure employees likely to have contact outside of work remain in contained work groups. TASFOODS ANNUAL REPORT 20222 5 RISK, CONT. MARKET RISK CLIMATE 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 the quality of its relationships with key customers, and ensuring we manufacture product in accordance with our customer’s required specification and standard. The Company continues to grow and diversify its customer base. In addition, TasFoods responds to changing customer compliance requirements through the upgrading of its facilities and operating processes. TasFoods has also developed a point of difference in our products which reduces the risk of substitution. BIOSECURITY RISK Minimising the risks to the business from a changing climate that is contributing to increased extreme weather events. TasFoods operations are geographically dispersed across Northern Tasmania which mitigates the impact of any one climatic influenced event on its production capabilities. Business continuity plans have been established for each business operation that include policies and procedures to manage biological assets in extreme weather events to minimise the risk of losses. Investment in irrigation infrastructure across the Tasmanian agricultural landscape provides surety of crop for key inputs such as grain and dairy. Drought or extreme weather events in other regions of Australia may impact commodity pricing for inputs to TasFoods operations. Minimising the risk of disease and infection impacting our animals, manufacturing facilities and inputs. ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) RISK Careful site management, biosecurity measures and good animal 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., These systems are overseen by highly skilled staff within 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. Minimising the risk to the business of by focusing on environmental and social impacts of business operations. TasFoods has a moral and business imperative to understand and manage its ESG risks. To consider TasFoods physical and social environment is not only the right thing to do, but it is expected by employees, customers, investors and regulatory bodies. As the speed and pace of change on these issues have increased, so have the expectations of our stakeholders. TasFoods is not only expected to do the right thing, insufficient action on these issues can have a negative financial implication. ESG risks bring a high degree of uncertainty in the form of potentially severe disruption to the environmental, financial, and social environment which may create immediate and unforeseen outcomes for TasFoods and its various stakeholders. TasFoods is focussed on reducing its carbon footprint by utilising on-site wind turbine electricity generation at it Sassafras facility to help reduce electricity costs to the business. TASFOODS ANNUAL REPORT 20222 6 FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2022 TA S F O O D S A N N U A L R E P O R T 2 0 2 2 2 7 BOARD OF DIRECTORS JOHN MURPHY INDEPENDENT NON-EXECUTIVE CHAIR Appointed Independent Non-Executive Director on 23 June 2021 Appointed Deputy Chair on 31 January 2022. Appointed Acting Chair on 31 May 2022 Appointed Chair on 26 August 2022 John has over 35 years’ experience in the Australian and International Beverage, Food, Fast Moving Consumer Goods and Packaging Industries. He has held a range of leadership roles in large multinational organisations including Managing Director of Coca-Cola Amatil Australia; the CEO of Visy Industries Australian business; and the Managing Director of Carlton & United Breweries Australian beer business after an extensive career with the company. John has served on the boards of both public and private companies and has previously served as a board member/advisor of PFD Foods, Bellamy’s Organic and Tribe Breweries and is currently a start-up founding advisor of the Turner Stillhouse craft distillery in Tasmania. BEN SWAIN NON-EXECUTIVE DIRECTOR Appointed Non-Executive Director on 4 June 2020. Ben is a partner of Tasmanian law firm Murdoch Clarke. His practice areas include corporate advice, transactional mergers and acquisitions, real property and private client matters. Ben is a director of various Pty Ltd companies and trusts including the Elsie Cameron Foundation Pty Ltd which has investment in entities including TasFoods Limited. With a passion for Tasmania’s finest foods and produce and the companies that grow and produce them, Ben gets great fulfilment from assisting, in his professional capacity, various Tasmanian food and agriculture business to achieve their goals. JOHN O’HARA INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed Independent Non-Executive Director on 23 June 2021. John is a highly accomplished Executive and Non-Executive Director with a track record of substantive contribution to strategic development and growth, cultural reform, value creation, building reputation and stakeholder relationships. John’s Director experience spans across large private entities, corporations, and Not For Profit. His executive roles have encompassed ASX organisations, Co-Operatives and large private companies with national and international operations. John spent the last 18 years with Sunny Queen Australia, the last 8 as CEO & Managing Director. Prior to that he has held Senior Executive roles in both Dairy Farmers Cooperative and National Foods. He was previously Chair of Mulgowie Farming Company and is currently Advisory Board Chair of Morgan's Pastoral Company, Preistley's Gourmet Delights and Simon George & Sons. CRAIG TREASURE NON-EXECUTIVE CHAIR Appointed Non-Executive Chair on 4 June 2020. Ceased being a Director on 30 May 2022. Craig has had over 35 years experience in business and property development. His most recent executive role was as CEO and Managing Director of ASX listed Villa World Limited (VLW). He is an experienced ASX Director and has had many roles in private and public sectors as a business owner and director. He is a Member of the Australian Institute of Company Directors and a Fellow of the Urban Development Institute of Australia. TASFOODS ANNUAL REPORT 20222 8 EXECUTIVE TEAM SCOTT HADLEY CHIEF EXECUTIVE OFFICER Appointed CEO in October 2021. Scott is a proud Tasmanian with over 20 years experience in a range of companies in Australia building premium brands, leading teams and developing go to market and supply chain organisations. Scott was previously CEO of Asahi Beverages Alcohol Division and has held senior positions with TT-Line, Fosters Group, GlaxoSmithKline and Cadbury. Scott is a member of the AICD, has an MBA (Executive) from AGSM, completed the Senior Executive Programme at London Business School and is a CPA. SHONA CROUCHER CHIEF FINANCIAL OFFICER & COMPANY SECRETARY Appointed CFO in October 2021. Appointed Company Secretary in November 2021. Shona is an experienced professional. Shona has previously worked at Bellamy’s Organic where she has held the roles of Chief Financial Officer, and Director of Finance and People. Prior to these roles, Shona was a Director at KPMG where she specialised in taxation, corporate business advisory, and business valuation. Shona’s advisory experience covered a diverse range of industry sectors including agriculture, manufacturing, and professional services. Shona holds a Master of Applied Finance, is a Fellow of the Taxation Institute of Australia, has a Graduate Diploma of Financial Planning, and is a member of the Institute of Chartered Accountants Australia and New Zealand (CA ANZ). Shona has also completed the Emerging CFO: Strategic Leadership Financial Program at the Stanford University Graduate School of Business. TASFOODS ANNUAL REPORT 20222 9 DIRECTORS’ REPORT 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 2022 In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows: DIRECTORS John Murphy Experience and qualifications Independent Non-Executive Chair John became the Deputy Chair on 31 January 2022, Acting Chair on 31 May 2022 and Chair on 26 August 2022 John was appointed to the Board as an Independent Non-Executive Director on 23 June 2021. John was Chair of the Audit and Risk Committee until 29 September 2022. During FY22 John was a member of both the Audit and Risk Committee and the Nomination and Remuneration Committee. John has over 35 years’ experience in the Australian and International Beverage, Food, Fast Moving Consumer Goods and Packaging Industries. He has held a range of leadership roles in large multinational organisations including Managing Director of Coca-Cola Amatil Australia; the CEO of Visy Industries Australian business; and the Managing Director of Carlton & United Breweries Australian beer business after an extensive career with the company. John has served on the boards of both public and private companies and has previously served as a board member/advisor of PFD Foods, Bellamy’s Organic and Tribe Breweries and is currently a start-up founding advisor of the Turner Stillhouse craft distillery in Tasmania. Other Directorships in listed entities: Former Directorships in listed entities in the last 3 years: Nil Nil Interest in shares and options: 2,106,061 Share Appreciation Rights Ben Swain Non-Executive Director Experience and qualifications Ben was appointed to the Board as a Non-Executive Director on 4 June 2020. During FY22 Ben was a member of both the Audit and Risk Committee and the Nomination and Remuneration Committee. Ben became Chair of the Audit and Risk Committee on 29 September 2022. Ben is a partner of Tasmanian law firm Murdoch Clarke. His practice areas include corporate advice, transactional mergers and acquisitions, real property and private client matters. Ben is a director of various private companies and trusts including the Elsie Cameron Foundation Pty Ltd which has an investment in entities including TasFoods Limited. With a passion for Tasmania’s finest foods and produce and the companies that grow and produce them, Ben gets great fulfilment from assisting, in his professional capacity, various Tasmanian food and agriculture business to achieve their goals. Other Directorships in listed entities: Former Directorships in listed entities in the last 3 years: Nil Nil Interest in shares and options: 1,578,571 Ordinary Shares 2,106,061 Share Appreciation Rights TASFOODS ANNUAL REPORT 20223 0 DIRECTORS’ REPORT, CONT. DIRECTORS John O’Hara Experience and qualifications Independent Non-Executive Director since 23 June 2021 John was appointed to the Board as an Independent Non-Executive Director on 23 June 2021. During FY22 John was a member of both the Audit and Risk Committee and the Nomination and Remuneration Committee. John became Chair of the Nomination and Remuneration Committee on 31 January 2022. John is a highly accomplished Executive and Non-Executive Director with a track record of substantive contribution to strategic development and growth, cultural reform, value creation, building reputation and stakeholder relationships. John’s Director experience spans across large private entities, corporations, and Not For Profit. His executive roles have encompassed ASX organisations, Co-Operatives and large private companies with national and international operations. John spent the last 18 years with Sunny Queen Australia, the last 8 as CEO & Managing Director. Prior to that he has held Senior Executive roles in both Dairy Farmers Cooperative and National Foods. He was previously Chair of Mulgowie Farming Company and is currently Advisory Board Chair of Morgan's Pastoral Company, Preistley's Gourmet Delights and Simon George & Sons. Other Directorships in listed entities: Former Directorships in listed entities in the last 3 years: Nil Nil Interest in shares and options: 2,106,061 Share Appreciation Rights Craig Treasure Non-Executive Chair until 30 May 2022 Experience and qualifications Craig joined the Board on 4 June 2020 and was appointed by the Board as Independent Non-Executive Chair on this date. During FY21 Craig joined the Board of substantial shareholder CVC Limited as Executive Chairman. The TasFoods Board designated Craig a Non-Independent Non-Executive Director and Chair on 31 January 2022. Craig was a member of the Audit and Risk Committee and during FY22 was the Chair of the Nomination and Remuneration Committee. Craig ceased to be a Director on 30 May 2022. Craig has over 35 years’ experience in business and property development. Craig’s most recent executive role was as CEO and Managing Director of ASX listed Villa World Limited. Craig is an experienced ASX Director and has had many roles in the public and private sectors as a business owner and director. He is a member of the Australian Institute of Company Directors and a Fellow of the Urban Development Institute of Australia. Other Directorships in listed entities: CVC Limited Former Directorships in listed entities in the last 3 years: Villa World Limited; Eildon Capital Limited Interest in shares and options: 721,861 Ordinary Shares (at the time of resignation) TASFOODS ANNUAL REPORT 20223 1 DIRECTORS’ REPORT, CONT. COMPANY SECRETARY Shona Croucher Experience and qualifications Company Secretary and Chief Financial Officer Shona joined the Company as Chief Financial Officer on 25 October 2021. She was appointed as Company Secretary on 26 November 2021. Shona is an experienced finance professional. Previously Shona has worked at Bellamy’s Organic where she has held the roles of Chief Financial Officer and Director of Finance and People. Prior to this role, Shona was a Director at KPMG where she specialised in taxation, corporate business advisory, and business valuation. Shona holds a Master of Applied Finance (Kaplan Professional), is a Fellow of the Taxation Institute of Australia, has a Graduate Diploma of Financial Planning (Securities Institute of Australia), and is a member of the Institute of Chartered Accountants Australia and New Zealand (CA ANZ). TASFOODS ANNUAL REPORT 20223 2 DIRECTORS’ REPORT, CONT. MEETING OF DIRECTORS The following table sets out the number of meetings of the Company’s Directors during the year ended 31 December 2022 and the number of meetings attended by each Director during that time. Board Meetings were held in addition to the Company’s Annual General Meeting held on 30 May 2022. Director Board Meeting Audit And Risk Committee Nomination & Remuneration Committee J Murphy1 B Swain1 J O’Hara1 C Treasure2 Held during time on Board Attended Held during time on Board Attended Held during time on Board Attended 19 19 19 8 19 19 19 8 7 7 7 3 7 7 7 1 4 4 4 3 4 4 4 3 1Mr Murphy, Mr O’Hara and Mr Swain were on the Board for the entire financial year. 2Mr Treasure resigned from the Board effective 30 May 2022. PRINCIPAL ACTIVITIES The principal activities of the Group are the processing, manufacture and sale of Tasmanian-made food products. OPERATING RESULTS AND FINANCIAL POSITION A comprehensive review of operations is set out in Operating and Financial Review section of this Annual Report. SIGNIFICANT CHANGE IN STATE OF AFFAIRS There were no significant changes in the state of affairs of the Group during the financial year, other than those outlined in the Operating and Financial Review. AFTER BALANCE DATE EVENTS There are no matters or circumstances that have arisen since 31 December 2022, which have significantly affected the Group’s operations, results or state of affairs, or may do so in future years. TASFOODS ANNUAL REPORT 20223 3 DIRECTORS’ REPORT, CONT. REMUNERATION REPORT Message from the Chairman of the Remuneration & Nominations Committee Dear Shareholder On behalf of the Board, I am pleased to present the Remuneration Report for the financial year ended 31 December 2022, outlining the nature and amount of remuneration for Tasfood’s Non-Executive Directors and other Key Management Personnel (“KMP”). TasFood’s remuneration strategy is designed to be responsible and sufficiently competitive to attract and retain valued Executives and directors who create value for shareholders whilst maintaining alignment with the short term and long term objectives of the Company. In May 2022 Craig Treasure stepped down as Chair and Non-Executive Director of the Company and John Murphy assumed the role of Non-Executive Acting Chair until he was formally appointed as Non- Executive Chair on 26 August 2022. I wish to thank Craig for his leadership and contribution during his tenure. During 2022 Tasfoods CEO, Scott Hadley, continued to build the leadership team including key appointments in marketing, Operations and Sales divisions to support sustainable business growth and implementation of strategic initiatives. Adopting independent expert advice received early in the year, FY22 saw the implementation of new short term and long term incentive plans designed to improve strategy alignment and support sustainability of returns for shareholders. This included a grant of restricted equity to Directors in the form of sacrificed Board Fees as well as a one-off grant aimed at retention of key Directors during the business turnaround. The new long term incentive plan was approved by shareholders at the May 2022 AGM. It is especially important that any reward for Executives under the long-term incentive plan is clearly linked to business performance and our shareholders’ expectations. The Board will, over the course of FY23, consider what further improvements to remuneration governance, policies, procedures and practices could be made, implement them, provide updates and respond to feedback in future Remuneration Reports. We look forward to your comments, and support for remuneration related resolutions, at the upcoming AGM. On behalf of the Committee, I recommend the Report to you. Yours sincerely, John O’Hara Chair – Remuneration and Nomination Committee TASFOODS ANNUAL REPORT 2022 3 4 DIRECTORS’ REPORT, CONT. REMUNERATION REPORT (AUDITED) The Directors of TasFoods Limited present the Remuneration Report for the Company and its controlled entities for the financial year ended 31 December 2022, 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 2022 the Company’s main activity related to developing Tasmanian branded food businesses (including Nichols Poultry, Betta Milk, Meander Valley Dairy, Pyengana Dairy and Shima Wasabi). 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 4.2. Remuneration mix and linking pay to performance 4.3. 2022 fixed remuneration 4.4. 2022 short-term incentive arrangements 4.5. 2022 long-term incentive arrangements 4.6. KMPs 2022 short-term incentive arrangement results 4.7. Company financial performance 5. Executive contracts 6. Non-executive directors’ remuneration structure 6.1. Current fee levels and fee pool 6.2. 2022 long-term incentive arrangements 7. Restrictions on long-term incentive plan shares prior to vesting 8. Remuneration tables – Directors and KMP Executives TASFOODS ANNUAL REPORT 2022 3 5 DIRECTORS’ REPORT, CONT. 1. KEY MANAGEMENT PERSONNEL 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 2022 were: Current Non-Executive Directors Role Appointment Date John Murphy1 Ben Swain John O’Hara Non-executive Chair Non-executive Director Non-executive Director Former Executive and Non-Executive Directors Role Craig Treasure2 Non-executive Chair Current KMP Executives Role Scott Hadley Shona Croucher Chief Executive Officer Chief Financial Officer 23 June 2021 4 June 2020 23 June 2021 End Date 30 May 2022 Appointment Date 1 October 2021 25 Octoer 2021 1 John Murphy was appointed Acting Chair on 31 May 2022, and appointed as Chair on 26 August 2022 2 Craig Treasure resigned as Directot and Chair on 30 May 2022 2. ROLE OF THE NOMINATION AND REMUNERATION COMMITTEE 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: n Assessment of necessary and desirable competencies of Board members; n Review of Board succession plans to maintain an appropriate balance of skills, experience and expertise; n 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 n Recommendations for the appointment or replacement of Directors. Additional responsibilities of the Committee include reviewing and reporting to the Board on: n 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; n The review of the Audited Remuneration Report to be included in the annual report; n Remuneration policies and practices for the Company generally; n Superannuation arrangements; n Board remuneration; and n Such other matters as the Board may refer to the Committee from time to time. TASFOODS ANNUAL REPORT 20223 6 DIRECTORS’ REPORT, CONT. 3. ENGAGEMENT OF REMUNERATION CONSULTANTS The Nomination and Remuneration Committee periodically engages independent external consultants to advise and assess KMP remuneration arrangements. During 2022 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. During 1H22, the Remuneration Committee engaged Godfrey Remuneration Group Pty Ltd (GRG) to provide supporting documentation for the implementation of the short term and long-term incentive plan (previously designed by GRG in 2021). GRG was paid $29,000 for these services. GRG have confirmed that any remuneration recommendations have been made free from undue influence by members of the group’s key management personnel. The following arrangements were made to ensure that the remuneration recommendations were free from undue influence: n GRG was engaged by, and reported directly to, the chair of the remuneration committee. The agreement for the provision of remuneration consulting services was executed by the chair of the remuneration committee under delegated authority on behalf of the Board. n GRG’s report, including supporting documentation was provided directly to the chair of the remuneration committee; and n GRG was permitted to speak to management throughout the engagement to understand company processes, practices and other business issues and obtain management perspectives. However, GRG was not permitted to provide any member of management with a copy of their draft or final report that contained the remuneration recommendations. As a consequence, the Board is satisfied that the recommendations were made free from undue influence from any members of the key management personnel. TASFOODS ANNUAL REPORT 20223 7 DIRECTORS’ REPORT, CONT. 4. REMUNERATION STRATEGY AND FRAMEWORK 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, by providing a fixed remuneration component together with specific short-term and long-term incentives (including equity based remuneration to Directors) 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 (via both cash and a newly implemented salary sacrifice mechanism) and are encouraged to hold shares in TasFoods. 4.1. Executive remuneration structure 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: n Provide competitive rewards to attract high calibre Executives; n Focus on creating sustained shareholder value; n Place a portion of executive remuneration at risk by linking reward with the strategic goals and performance of the Company; n Differentiate individual rewards commensurate with contribution to overall results and according to individual accountability, performance and potential; and n Ensure total remuneration is competitive by market standards. Executives’ total remuneration package may be comprised of the following elements: n Total Fixed Remuneration (base salary and superannuation) n At-Risk Remuneration: • Short-Term Incentive (STI) • Long-Term Incentive (LTI) TASFOODS ANNUAL REPORT 20223 8 DIRECTORS’ REPORT, CONT. 4. REMUNERATION STRATEGY AND FRAMEWORK, CONTINUED. 4.1. Executive remuneration structure, continued. Performance Condition Remuneration Strategy/ Performance Link 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) Annual incentive opportunity delivered in cash Performance is measured against: • Financial Group performance (i.e. sales revenue, gross profit margin and EBITDA); and • Non-Financial KPIs (i.e. WH&S (LTIFR) and other operational KPIs). 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 2022 can be found in section 4.6. Long Term Incentive (LTI) LTI awards for the 2022 grants were provided under the LTIP approved by shareholders at the 2022 AGM. An award of rights with performance assessed over 3 years 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 and profitable growth, two measures (Total Shareholder Return (TSR) and EBITDA growth) were chosen for the 2022 grant. Fixed remuneration is set to attract, motivate and 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 20223 9 DIRECTORS’ REPORT, CONT. 4. REMUNERATION STRATEGY AND FRAMEWORK, CONTINUED. 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 2022 were as follows: TFR Short Term Incentive (At-Target)1 Short Term Incentive (Stretch)2 Long Term Incentive (Target Opportunity)3 Long Term Incentive (Maximum Opportunity) Current KMP Executives Scott Hadley Shona Croucher $450,000 $292,000 50.0% 40.0% 75.0% 60.0% 90.0% 40.0% 180.0% 80.0% 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. TASFOODS ANNUAL REPORT 20224 0 DIRECTORS’ REPORT, CONT. 4. REMUNERATION STRATEGY AND FRAMEWORK, CONTINUED. 4.2. Remuneration mix and linking pay to performance, continued. 38% 21% 41% TFR STI LTI 23% 22% 55% TFR STI LTI Scott Hadley Shona Croucher 4.3. 2022 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 2022 (and 31 December 2021) can be found in the ‘Remuneration Tables’ section of this report. 4.4. 2022 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 – ccash 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). TASFOODS ANNUAL REPORT 20224 1 DIRECTORS’ REPORT, CONT. 4. REMUNERATION STRATEGY AND FRAMEWORK, CONTINUED. 4.4. 2022 short-term incentive arrangements, continued. 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 2022 are set out in section 4.6. 4.5. 2022 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 value creation (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 Executive LTI plan are: Participants: the CEO, 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 Performance Share Appreciation Rights (PSARs) 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 PSARs will be satisfied in Restricted Shares. The option to settle in cash is only at the discretion of the Board. Maximum number of Performance Rights: The maximum number of PSARs 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 the relative value of the PSAR. The value of a PSAR is calculated using the Black Scholes option pricing model, and for the FY22 grant calculation, the value of the PSAR was determined to be $0.0298. Measurement Period: The Measurement Period is the three financial years from 1 January 2022 to 31 December 2024. Vesting Conditions: In order for PSARs 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 conditions in relation to the 2022 grant of PSARs are Total Shareholder Return (TSR) and EBITDA growth as outlined below: TASFOODS ANNUAL REPORT 20224 2 DIRECTORS’ REPORT, CONT. 4. REMUNERATION STRATEGY AND FRAMEWORK, CONTINUED. Total Shareholder Return The vesting percentages (of the grant/stretch/maximum level of LTI) to be determined by the following scale: Performance Level Absolute TSR (CAGR) Indicative TFL Share price % of Maximum vesting Stretch Between Target and Stretch Target 25% >19%, <25% 19% $0.14 >$0.12 and <$0.14 $0.12 Between Threshold and Target >14%, <19% >$0.10 and <$0.12 Threshold Below Threshold 14% <14% $0.10 <$0.10 100% Pro-Rata 50% Pro-Rata 25% 0% The targets for share price growth are based on a starting share price of $0.07 (being the average share price of the capital raisings undertaken by the Company in 1H 2022) which is a Compound Annual Growth Rate (CAGR) from June 2022 of 19.6% to achieve ‘target’ share price and a CAGR of 26.0% to achieve ‘stretch’ share price. Share Price will be determined by a ten 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. EBITDA Growth The Company’s compound annual growth in EBITDA, and achievement against the EBITDA Hurdle, will be determined by the Board in its absolute discretion, having regard to matters it considers relevant. It is intended that EBITDA for each relevant financial year will be calculated as EBITDA for that financial year, adjusted to exclude the costs of servicing equity (other than dividends), adjusted for any bonus elements. For relevant financial years, the calculation may be adjusted to take into account one-off items associated with equity raising, if considered appropriate by the Board. The Board also reserves the right to make any other adjustments it thinks fit to the calculation of EBITDA having regard to the impact of any other exceptional items. Retesting: Retesting is not permitted under the terms of the Invitations. Exercise Price: The exercise price for the PSARs is $0.066 however this price is notional and no amount needs to be paid by the Participant in order to exercise the PSARs. Instead it is accounted for in the calculation of the Exercised PSARs Value which is as follows: (Share Price - Exercise Price) x Number of PSARs Exercised Cessation of Employment: In the event of a termination of employment by the Company for cause, all unvested PSARs will be forfeited unless otherwise determined by the Board. Subject to the Rules, in other cases cessation of employment will generally result in pro-rata forfeiture of the PSARs reflecting the remaining portion of the first year of the Measurement Period that will not be served, with the excess staying on foot for testing at the end of the measurement period, unless otherwise determined by the Board. Following a Participant ceasing employment with the Group, 90 days after the first date that all PSARs that the Participant holds are fully vested and not subject to Exercise Restrictions, all PSARs they hold will be automatically exercised on a date determined by the Board, unless otherwise specified in an Invitation or the Board determines that they may be held for any remainder of the Term specified in the Invitation. TASFOODS ANNUAL REPORT 20224 3 DIRECTORS’ REPORT, CONT. 4. REMUNERATION STRATEGY AND FRAMEWORK, CONTINUED. 4.6. KMPs 2022 short-term incentive arrangement results. The measures and targets for the 2022 STI were set by the Board in February 2022 and were based on the priorities for 2022. The key performance indicators were based upon stretch targets, with operating EBITDA set as a hurdle requirement (or gate) for payment of the 2022 STI. The following table shows the Company’s 2022 STI performance measures and weightings as applied to KMP. Performance Measure Description Weighting Comment Operating EBITDA Gross Profit Margin ($) Gross Profit Margin (%) WHS - Lost time injury frequency rate (LTIFR) Statutory EBITDA adjusted for acquisition costs, capital raising costs and incentive payments Statutory gross profit margin in dollars excluding biological asset movements Statutory gross profit margin percentage excluding biological asset movements 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 Other Non-Financial Targets Including capital management, capability build and operational KPIs 4.7. Company financial performance 40% 20% 20% 5% 15% EBITDA is seen as a key factor of trading performance and operational sustainability. Operating EBITDA is a hurdle requirement for STI payments The gross profit margin is seen as a key outcome of sales effectiveness and operational efficiency The gross profit margin is seen as a key outcome of sales effectiveness and operational efficiency Employees are a key asset to TasFoods and their safety is paramount. A reduction in LTIFR is a key outcome of the WHS program A number of others non-financial KPIs were set to focus on both capability and operational efficiencies across the TasFoods business. The following table shows the relationship between KMP Executives’ at-risk remuneration and TasFoods overall financial performance: Financial Year Ended 31 December 2022 2021 2020 2019 2018 Revenue ($000) $70,587 $69,441 $67,436 $51,105 $38,920 Net (loss)/profit before tax ($'000) ($16,399) ($10,741) ($7,709) ($3,202) ($2,273) Net (loss)/profit after tax ($'000) ($16,478) ($10,741) ($6,407) ($3,459) ($1,358) 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 $0.105 $0.040 $0.120 $0.105 -61.90% -12.50% $0.00 $0.00 (4.03) (4.03) 0% (3.05) (3.05) 0% $0.120 $0.120 0.00% $0.00 (2.56) (2.56) N/A $0.135 $0.120 -11.11% $0.00 (1.48) (1.48) 0% $0.190 $0.135 -28.95% $0.00 (0.67) (0.67) 0% The average STI payout as a % of the at-target for eligible KMP Executives for FY22 was 0% as the EBITDA hurdle was not met. The EBITDA hurdle was also the gate for all non-financial STI awards. TASFOODS ANNUAL REPORT 20224 4 DIRECTORS’ REPORT, CONT. 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. Name KMP Executives Notice Period by TasFoods Notice Period by Executive Termination / Redundancy Payment Scott Hadley 6 months 6 months Shona Croucher 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 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. TASFOODS ANNUAL REPORT 20224 5 DIRECTORS’ REPORT, CONT. 6. NON-EXECUTIVE DIRECTORS’ REMUNERATION STRUCTURE TasFoods remuneration policy for 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. 6.1. Current fee levels and pool Within the aggregate amount of $400,000, (not including securities issued to a non-executive director) non- executive director and the former Executive Chair’s 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 December 2021, based on the benchmark data of a market capitalisation comparator group. During the 2022 financial year non-executive and the former Executive Chair’s directors’ fees (inclusive of superannuation) were: Director John Murphy1 Ben Swain John O’Hara Former Directors Craig Treasure2 Base Fee Committee Chair Fee Fees sacrificed into Equity in FY22 One-off Equity grant in FY223 Total 70,000 45,000 45,000 70,000 - - - - 28,000 28,000 28,000 69,300 69,300 69,300 167,300 142,300 142,300 70,000 1 John Murphy was appointed Chair on 26 August 2022. From 1 July 2022 his Directors fees increased from $45,000 pa to $70,000 pa to reflect appointment to the new role of Chair. 2 Craig Treasure ceased as NED/Chair on 30 May 2022. 3 Includes a one-off equity grant which was vested on grant and fully expensed in FY22. The FY22 equity grant to Directors included a one-off retention component. As both the salary sacrificed equity grant and the one-off equity grant vested immediately on grant date, the cost was fully expensed in FY22. 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 2022 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. TASFOODS ANNUAL REPORT 2022 4 6 DIRECTORS’ REPORT, CONT. 6. NON-EXECUTIVE DIRECTORS’ REMUNERATION STRUCTURE, CONTINUED. 6.2. 2022 long-term incentive arrangements The key elements of the Non-Executive Directors LTI plan are: Participants: Non-Executive Directors of TasFoods Limited (NED’s) Instrument: Performance Share Appreciation Rights (PSARs) which are an entitlement, when exercised, to a Share or Restricted Share (a Share which is subject to disposal restrictions). Generally, it is expected that vested PSARs will be satisfied in Restricted Shares. Grants of SARs under the TLRP are intended to be a component of Board Fees that are part of the remuneration of NEDs, based on an exchange of future cash remuneration, in return for a future grant of Share Appreciation Rights. Maximum number of Performance Share Appreciation Rights: The maximum number of PSARs is calculated by dividing the Annual Directors Cash Fee Sacrifice by the relative value of the PSAR. The value of a PSAR is calculated using the Black Scholes option pricing model, and for the FY22 grant calculation, the value of the PSAR was determined to be $0.0462. Term: The SARs have a term that ends on 31 December 2026, and if not exercised within the term the SARs will lapse. Vesting Conditions: The SARs are fully vested at Grant, but are subject to Specified Disposal Restrictions that facilitate long term holding of equity interests. Specified Disposal Restrictions: A Specified Disposal Restriction applies to the PSARs (and resulting Restricted Shares that may flow from exercising them) such that the Restricted Shares may not be disposed of until the earlier of: • the Participant ceasing to hold office or employment with the Company, and • the elapsing of 15 years from the Grant Date. Exercise Price: The exercise price for the PSARs is $0.065 however this price is notional and no amount needs to be paid by the Participant in order to exercise the PSARs. Instead it is accounted for in the calculation of the Exercised PSARs Value which is as follows: (Share Price - Exercise Price) x Number of PSARs Exercised Exercise Restriction: An exercise restriction applies to the SARs until 31 December 2024. Cessation of Holding the office of NED: If a Participant ceases to hold the office of NED or employed position with the Company and is not immediately re-appointed, Exercise Restrictions and Specified Disposal restrictions attaching to Restricted Shares will cease to apply at the date of cessation of holding the office of NED and the Company will remove any CHESS holding lock. 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 20224 7 DIRECTORS’ REPORT, CONT. 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 2022 Short Term Employee Benefits Year Salary/ Fees STI Payment Non- monetary benefits Long Term Employee Benefits Annual Leave and Long Service Leave Post-employment Benefits Share Based Payments Superannuation Long term employment benefits Shares Share Appreciation Rights/ Options Total Performance Related % Current Non-Executive Directors $ John Murphy1 2022 52,175 2021 21,519 Ben Swain 2022 40,770 2021 41,114 John O'Hara 2022 45,000 2021 23,548 Former Executive Chair and Non-executive Directors Craig Treasure2 2022 26,278 2021 63,955 Roger McBain 2022 - 2021 19,478 Current KMP Executives Scott Hadley3 2022 426,432 2021 108,248 Shona Croucher4 2022 267,179 2021 49,314 Former KMP Executives Jane Bennett5 2022 - 2021 368,244 Donna Wilson5 2022 - 2021 227,418 $ - - - - - - - - - - - - - - - - - - $ - - - - - - - - - - - - - - - - - - $ - - - - - - - - - - $ 5,428 2,152 4,230 4,061 - - 2,681 6,317 - 1,850 27,881 7,065 25,246 5,983 14,595 24,608 3,034 4,532 - - 13,561 36,266 - - 14,142 20,636 $ - - - - - - - - - - - - - - - - - - $ - - - - - - - - - - - - - - - - - - $ $ 79,609 137,212 - 23,671 79,609 124,609 - 45,175 79,609 124,609 - 23,548 - - - - 28,959 70,272 - 21,328 119,046 598,605 20,531 141,827 26,439 332,821 - 56,880 - - 21,221 439,292 - - 15,326 277,522 % 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1 John Murphy was appointed to Acting Chair on 31 May 2022 and Chair on 26 August 2022. 2 Craig Treasure ceased as Chair effective from 30 May 2022. An equity grant to Craig was not put to vote at the 2022 AGM due to his resignation as a Director on 30 May 2022. 3 The 2021 share based payment amount for Scott Hadley has been amended to amortise the fair value of the award over the 3 year service period it is to be earned. In prior years an estimate of the fair value of the award was amortised for 3 years from his employment contract date. The 2021 share based payment amount has decreased by $16,119. 4 Due to the resignation of Shona Croucher on 7 December 2022, the FY22 value of share based payments includes acceleration to her estimated departure date in 2023. 5 The 2021 share based payment for the former KMP executives Jane Bennett and Donna Wilson have been amended to accelerate their SBP expense to the end of their employment. The 2021 share based payment amounts have increased $10,540 and $7,686 respectively. TASFOODS ANNUAL REPORT 2022 4 8 DIRECTORS’ REPORT, CONT. 8. REMUNERATION TABLES – DIRECTORS AND KMP EXECUTIVES, CONTINUED. Table B: Shareholdings Current Non-Executive Directors John Murphy Ben Swain John O'Hara Former Executive Chair and Non-executive Directors Craig Treasure1 Current KMP Executives Scott Hadley Shona Croucher Year 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Shares held at Start of Year Net other changes Shares held at End of Year No. - - - - No. - - 1,150,000 428,571 1,578,571 1,150,000 - - 721,861 721,861 - - - - - - - - - - - - - 1,150,000 - - 721,861 721,861 - - - - 1 number of shares disclosed as being held at end of year is reflective of the number of shares held at the time of cessation of employment. TASFOODS ANNUAL REPORT 20224 9 DIRECTORS’ REPORT, CONT. 8. REMUNERATION TABLES – DIRECTORS AND KMP EXECUTIVES, CONTINUED. Table C: Movements during 2022 in performance rights or options over shares in the Company held, directly, indirectly or beneficially, by each KMP, including their related parties. Current Executive Chair and Non- executive Directors John Murphy Ben Swain John O'Hara Former Executive Chair and Non- executive Directors Craig Treasure Former KMP Executives Scott Hadley Shona Croucher Year 2022 2021 2022 2021 2022 2021 2021 2020 Year 2022 2021 2022 2021 Share Appreciation Rights held at Start of Year Granted as remuneration Vested and exercisable Exercised during the reporting period Forfeited Share Appreciation Rights held at End of Year No. No. No. No. No. - - - - - - - - 2,106,061 - 2,106,061 - 2,106,061 - - - - - - - - - - - - - - - - - - - - - - - - - - - Performance Share Appreciation Rights or Options held at Start of Year No. Granted as remuneration Vested and exercisable Exercised during the reporting period Forfeited 5,000,000 27,181,208 - - - 5,000,000 7,838,926 - No. - - - - No. - - - - No. - - - - 2,106,061 - 2,106,061 - 2,106,061 - - - Performance Share Appreciation Rights or Options held at End of Year No. 32,181,208 5,000,000 7,838,926 - TASFOODS ANNUAL REPORT 20225 0 DIRECTORS’ REPORT, CONT. 8. REMUNERATION TABLES – DIRECTORS AND KMP EXECUTIVES, CONTINUED. Table D: Share-based payments granted as remuneration to KMP Year Grant Date Number Granted Exercise Price Expiry Date Date when Options/ SAR's may be exercised Value of Performance Share Appreciation Rights or Options Granted Unamortised amount as at 31 December 2022 Number Vested Percentage of Grant Forfeited Current Non-executive Directors No. $ No. John Murphy 2022 30-May-22 2,106,061 $0.065 30-May-27 31-Dec-24 79,609 2021 Nil Ben Swain 2022 30-May-22 2,106,061 $0.065 30-May-27 31-Dec-24 79,609 2021 Nil John O'Hara 2022 30-May-22 2,106,061 $0.065 30-May-27 31-Dec-24 79,609 0 0 0 2021 Nil Current KMP Executives Scott Hadley 2022 7-Jun-22 27,181,208 $0.066 7-Jun-27 31-Dec-24 649,631 73,842 2021 27-Aug-21 5,000,000 $0.10 283,750 Shona Croucher 2022 7-Jun-22 7,838,926 $0.066 7-Jun-27 31-Dec-24 187,350 181,094 5,505 2021 Nil 0 0 0 0 0 0 No. 0% 0% 0% 0% 0% 0% End of Remuneration Report (Audited) 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. TASFOODS ANNUAL REPORT 2022 5 1 DIRECTORS’ REPORT, CONT. SHARE OPTIONS AND PERFORMANCE RIGHTS Share Options and Performance Rights over ordinary shares of TasFoods Limited at the date of this report are as follows: Grant Date Grant Instrument Expiry Date Exercise Price Number Granted 30-May-22 Share Appreciation Rights 31-Dec-26 $ 0.065 6,318,183 7-Jun-22 Performance Share Appreciation Rights 7-Jun-27 $ 0.066 40,187,920 No. 27-Aug-21 Options 27-Aug-21 Options 6-Sep-21 Performance Rights 27-Aug-26 27-Aug-26 $ 0.010 $ 0.010 6-Sep-26 $ - 2,500,000 2,500,000 1,851,707 53,357,810 Further details regarding share options and performance rights granted are contained within the Remuneration Report and in note 30. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of the Court under Section 237 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 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 Other assurances services 2022 $ 2021 $ 278,500 - 278,500 172.250 - 172,250 TASFOODS ANNUAL REPORT 2022 5 2 DIRECTORS’ REPORT, CONT. 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 48 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 John Murphy Non-Executive Chair 27 February 2023 TASFOODS ANNUAL REPORT 20225 3 Auditor’s Independence Declaration As lead auditor for the audit of TasFoods Limited for the year ended 31 December 2022, 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. Brad Peake Partner PricewaterhouseCoopers Melbourne 27 February 2023 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. TASFOODS ANNUAL REPORT 2022 tasfoods.com.au 5 4 FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2022 Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes In Equity Consolidated Statement of Cash Flows Notes to Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information 55 56 57 58 59 96 97 102 TA S F O O D S A N N U A L R E P O R T 2 0 2 2 5 5 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the Year Ended 31 December 2022 Revenue from operations Other income Fair value adjustment of biological assets Impairment Raw materials used Employment and contractor expense Freight Occupancy costs Depreciation and amortisation Finance costs Insurance Legal and professional fees Marketing and event expenses Repairs and maintenance 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: Owners of TasFoods Limited Total comprehensive income for the year is attributable to: Owners of TasFoods Limited Note 6 6 10 13 7 8 2022 $'000 70,587 1,028 375 (6,835) (41,863) (22,296) (5,472) (1,520) (2,099) (542) (796) (856) (610) (1,463) (4,037) (16,399) (79) (16,478) - (16,478) 2021 $’000 69,441 626 (76) (3,907) (40,840) (20,230) (5,048) (1,422) (2,037) (314) (591) (637) (730) (1,091) (3,885) (10,741) - (10,741) - (10,741) - (16,478) - (10,741) (16,478) (16,478) (10,741) (10,741) (16,478) (16,478) (10,741) (10,741) 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) 4 4 4 4 (4.03) (4.03) (4.03) (4.03) (3.05) (3.05) (3.05) (3.05) The above statement should be read in conjunction with the accompanying notes TASFOODS ANNUAL REPORT 2022 5 6 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2022 Current Assets Cash and cash equivalents Trade and other receivables Biological assets Inventory Prepayments Total Current Assets Non-Current Assets Property, plant and equipment Right of use assets Intangible assets Biological assets Deferred tax assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Borrowings Lease Liabilities Provisions Total Current Liabilities Non-Current Liabilities Borrowings Lease Liabilities Provisions Deferred tax liabilities Total Non-Current Liabilities Total Liabilities Net Assets Equity Contributed Equity Reserves Accumulated Losses Total Equity Note 2022 $'000 2021 $’000 19 9 10 11 12a 12b 13 10 8 14 15 12b 16 15 12b 16 8 17 18 351 4,734 2,557 4,574 1,144 13,360 23,713 1,541 556 14 - 25,824 39,184 11,645 1,022 373 1,362 14,402 4,739 1,494 219 - 6,452 20,854 1,450 4,973 2,145 4,647 976 14,191 25,904 1,418 7,195 30 - 34,547 48,738 9,605 1,047 193 1,365 12,210 6,422 1,339 169 - 7,930 20,140 18,330 28,598 66,834 1,121 (49,625) 18,330 61,053 691 (33,146) 28,598 The above statement should be read in conjunction with the accompanying notes TASFOODS ANNUAL REPORT 2022 5 7 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the Year Ended 31 December 2022 At 1 January 2021 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 2021 At 1 January 2022 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 2021 Contributed Equity $’000 Reserves $’000 Accumulated Losses $’000 61,054 - - - - - - 61,054 61,054 - - - 5,964 (184) - 66,834 594 - - - - - 97 691 691 - - - - - 430 1,121 (22,406) (10,741) - (10,741) - - - (33,147) (33,147) (16,478) - (16,478) - - - (49,625) Total $’000 39,241 (10,741) - (10,741) - - 97 28,598 28,598 (16,478) - (16,478) 5,964 (184) 430 18,330 The above statement should be read in conjunction with the accompanying notes TASFOODS ANNUAL REPORT 2022 5 8 CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended 31 December 2022 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Other Net cash used in operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for leases Payments for other non-current assets Proceeds from sale of property, plant, and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Cost of issuing shares Proceeds from borrowings Principal elements of borrowing payments Principal elements of lease payments Transaction costs related to 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 2022 $'000 2021 $’000 19 71,722 (76,987) 1 (435) (111) (5,810) (972) - - 1,593 621 5,964 (153) 925 (2,304) (320) (21) 4,091 69,587 (73,969) 1 (127) 51 (4,457) (2,436) - (159) - (2,595) - (14) 2,136 (450) (392) (23) 1,257 (1,098) (5,795) 19 1,450 351 7,245 1,450 The above statement should be read in conjunction with the accompanying notes TASFOODS ANNUAL REPORT 2022 5 9 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the Year Ended 31 December 2022 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 2023 by the Directors of the Company. All press releases and other information are available on our website www.tasfoods.com.au. Going Concern These financial statements have been prepared on the basis the Company is a going concern. For the year ended 31 December 2022 the consolidated entity incurred losses of $16.48 million after tax (2021: $10.74 million) and incurred net cash outflows from operations of $5.81 million (2021: $4.84 million). At 31 December 2022, the consolidated entity had cash and cash equivalents on hand of $0.35 million (31 December 2021: $1.45 million), external borrowings of $5.76 million (31 December 2021: $7.47 million) and unused finance facilities of $3.26 million. The consolidated entity was in a net current liability position of $1.04 million (31 December 2021: net current asset position of $1.98 million). The ability of the Company to continue as a going concern is dependent on the continuing implementation of its strategic initiatives, a disciplined approach to managing input cost increases and other profitability enhancement initiatives and obtaining funding from alternative sources should it be required to ensure the Company can continue to meet its working capital requirements. The strategic objectives include: • Implementation of the new Dairy and Poultry business ways of working, focusing on consolidation of logistics networks and warehousing efficiencies, and implementation of further cost savings/ways of working improvements across both divisions (including wastage reduction and yield improvement initiatives). • Finalisation of the implementation of an integrated ERP system for the Dairy business unit which will facilitate the integration of the businesses, provide cost saving opportunities and allow the Dairy business to operate as an integrated dairy unit. • On-going assessment of customer and product profitability with low or negative margin products exited. • Increasing gross margins through negotiated sales price increases with customers and execution of identified cost savings over raw material inputs, distribution and logistics. • Continued new product development in the dairy business focussed on both the Pyengana and Meander Valley Dairy brands. • Continued acceleration of mainland growth initiatives and customer acquisition. • Implementation of the 2023 Marketing and Brand Investment Plans. Focussed marketing on a simplified brand pyramid to build brand awareness of key brands. • Continued adoption of the developed capital management framework and a disciplined approach to assessing all opportunities to ensure strategic alignment, financial return, risk management and capability to execute. Some progress was made during 2022 towards the above strategies, noting the benefits of which were already evident in 2H 2022. Initiatives include SKU rationlisation of low volume/loss making products, successful implementation of price rises in 2022, implementation of minimum order quantities as well as implementation of a number of distribution network profit improvement strategies in in 2H 2022. The Directors are of the opinion the Company will be successful in the continued implementation of further enhancements to the above strategic objectives during 2023. The consolidated entity's ability to repay current borrowings and meet its working capital requirements is based on a forecast EBITDA and cash flow requirements, which is based on meeting sales forecasts and margin. Partial debt repayment has also occured as part of the sale and lease back arrangements. The Company's bank overdraft facility will decrease from $3.26m to $2.56m at 30 June 2023. To the extent further asset sales occur, some of the net proceeds generated by the sale will be used to further repay debt. The consolidated entity's forecasted EBITDA is based on a combination of historic trends, engagement with key customers and internal demand analysis and includes judgement in relation to future pricing and demand for new products. Future forecasts incorporate recently agreed price increases with additional growth to be achieved through increased brand awareness and increased distribution, whilst costs will be managed through a combination of previously implemented restructuring activities and cost reduction strategies to be employed across the business, the exiting of unprofitable business operations and SKU rationalisation. Given the risk associated with the timing and quantum of profitability improvement initiatives and the agricultural risk associated with key drivers of input costs and gross profit margins, there is material uncertainty which may cast significant doubt on the Company’s ability to continue as a going concern, and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. Based on the forecast the Directors believe the Company is well positioned to achieve its EBITDA forecast, cash flow forecasts, and working capital requirements. Accordingly, the consolidated annual report has been prepared on a going concern basis. TASFOODS ANNUAL REPORT 20226 0 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 2. SIGNIFICANT CHANGES IN THE CURRENT REPORTING PERIOD During December 2022 and January 2023, a sale and lease-back arrangement occurred in relation to the two non-core distribution properties owned by Van Diemen's Land Dairy Pty Ltd. A portion of the proceeds was used to repay term debt with ANZ. Other than the above, there were no significant changes in the state of affairs of the Group during the financial year. There have been no changes in accounting policies since the previous financial report at 31 December 2021. 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 four identifiable and reportable segments each of which are outlined below: • The Dairy segment incorporates the Meander Valley Dairy, Pyengana Dairy and Betta Milk (Van Diemen’s Land Dairy) businesses, the assets of which were acquired in September 2015, October 2017 and July 2019, 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, Real Milk, Robur Farm Dairy, Betta Milk and Tassie Taste 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 from the sale of poultry meat products sold under the Nichols Poultry and Nichols Kitchen brands. • The Shared Services 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 Horticulture Segment, which comprises the net assets and business operations of Shima Wasabi Pty Ltd, which were acquired in June 2016. Management measures the performance of the segments identified at the ‘net profit before tax’ level. Consolidated - 2022 Revenue Total segment sales revenue Other income Segment profit/(loss) Profit after tax from discontinued operation Loss before income tax expense Income tax (expense)/benefit Loss after income tax expense Assets Segment assets Unallocated assets from continuing operations: Total Assets Total assets include: Liabilities Segment liabilities Deferred tax liability/(asset) Total liabilities Dairy $'000 Poultry Horticulture $’000 $’000 Shared Services $’000 30,553 660 31,213 39,535 323 39,858 391 32 423 108 12 120 (3,354) (5,480) (117) (7,449) Total $’000 70,587 1,028 71,615 (16,399) - (16,399) (79) (16,478) (3,756) 1,499 (2,578) 44,020 39,185 - 39,185 6,422 11,740 160 2,532 20,854 - 20,854 TASFOODS ANNUAL REPORT 2022 6 1 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 3. SEGMENT INFORMATION, CONT. Consolidated - 2021 Revenue Total segment sales revenue Other income Segment profit/(loss) Loss before income tax expense Income tax (expense)/benefit Loss after income tax expense Assets Segment assets Unallocated assets from continuing operations: Total Assets Total assets include: Liabilities Segment liabilities Deferred tax liability/(asset) Total liabilities Dairy $'000 Poultry Horticulture $’000 $’000 Shared Services $’000 30,362 134 30,496 38,636 448 39,083 392 20 412 51 24 76 (1,367) (3,563) (59) (5,752) 383 8,194 (2,586) 42,749 5,580 12,544 55 1,961 Total $’000 69,441 626 70,067 (10,741) (10,741) 0 (10,741) 48,738 - 48,738 20,140 - 20,140 TASFOODS ANNUAL REPORT 2022 6 2 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. SHAREHOLDER RETURNS 4. EARNINGS PER SHARE Basic loss per share Diluted loss per share Net (loss)/profit from continuing operations attributable to the shareholders of TasFoods Limited used in calculation of basic and diluted earnings per share for: All operations 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 basic earnings per share Information Concerning the Classification of Securities Potential ordinary shares: 2022 Cents (4.03) (4.03) 2022 $’000 2021 Cents (3.05) (3.05) 2021 $’000 (16,478) (10,741) 2022 Number 2021 Number 408,941,536 351,902,660 408,941,536 351,902,660 a) There were no options (other than those referred to in note 29) or other forms of potential shares on issue at 31 December 2022 (31 December 2021: Nil). b) Options granted (as referred to in note 29) are not included in the calculation of diluted earnings per share as the share price as at 31 December 2022 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 shareholders, 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 shareholders, 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. TASFOODS ANNUAL REPORT 2022 6 3 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 5. DIVIDENDS TO SHAREHOLDERS No dividends have been paid or declared during the year ended 31 December 2022 (31 December 2021: Nil). PROFIT AND LOSS INFORMATION 6. REVENUE Revenue from continuing operations Sales revenue Other income Interest received Profit/Loss on Sale of Property, Plant & Equipment Sundry income 2022 $’000 2021 $’000 70,587 69,441 - 664 364 1,028 - 3 623 626 Profit on sale of property, plant and equipment includes sale of non-core property assets of $0.614 million. Sundry income includes freight recovered, fuel tax credits, rent received, freight equalisation recoveries received as well as other sundry items. Recognition and measurement Sales revenue 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 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. Delivery occurs when the products have been shipped to the customer, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products, the acceptance provisions have lapsed, or the group has objective evidence that all criteria for acceptance have been satisfied. 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. A gain on Sale of Property, Plant and Equipment is recognised when title has transferred and the purchaser has the right to control the asset. Revenue on sale of freehold land and buildings is recognised when title has transferred and the purchaser has the right to control the asset. Interest revenue Interest revenue is recognised on a proportional basis using the effective interest rate method. TASFOODS ANNUAL REPORT 2022 6 4 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 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 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% (2021: 30%) Tax effect of amounts which are not deductible in calculating taxable income Deferred tax on taxable losses not brought to account (b) Income tax benefit recognised directly in equity during the period Deferred tax arising from share issue costs 2022 $’000 2021 $’000 19,051 1,233 430 1,582 22,296 18,366 395 97 1,372 20,230 2022 $’000 2021 $’000 - - - (1,842) 1,842 - (16,399) (4,920) 142 4,857 79 (79) (79) - - - 238 (238) - (10,741) (3,222) 1,198 2,024 - - - TASFOODS ANNUAL REPORT 2022 6 5 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 8. INCOME TAX, CONT. (c) Deferred tax balances Taxable and deductible temporary differences arise from the following: Gross deferred tax assets: Provisions Trade and other payables Share issue expenses Trade and other receivables Property, plant and equipment Intangibles Tax Losses Interest bearing liabilities Acquisition costs Lease liability Gross deferred tax liabilities: Biological assets Inventory Property, plant and equipment Intangibles Other Net deferred tax asset/(liability) Unused tax losses Opening Balance $000 Charged to Income $000 Charged to Equity $000 Closing Balance $000 484 36 99 11 - - 2,743 - 96 30 3,499 (733) (36) (684) (2,040) (7) (3,499) - 83 22 11 9 240 - (2,274) - - 68 (1,842) (134) 31 14 2,040 (110) (1,842) - 567 57 110 20 240 - 469 - 96 98 1,657 (867) (5) (669) - (116) - - - (1,657) - The Group has recognised tax losses in the year ended 31 December 2022 only to the extent of the Groups taxable temporary differences. After recognition of these losses the Group had a further $45.85 million of carry forward tax losses for which no deferred tax asset has been recognised (31 December 2021: $29.59 million). The losses relate to both Group’s current operations and 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 finalise the application of the continuity of ownership and continuity of business tests. (d) Tax losses Unused tax losses for which no deferred tax asset has been recognised: Capital losses Revenue losses Potential tax benefit at 30% 2022 $’000 - 45,852 45,852 2021 $’000 - 29,589 29,589 13,752 8,877 TASFOODS ANNUAL REPORT 2022 6 6 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 8. INCOME TAX, CONT. 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 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 the loss allowance were as follows: Carrying value at the beginning of the year Increase/(decrease) in loss allowance recognised Carrying value at the end of the year Trade receivables past due but not impaired Under one month One to three months Over three months 2022 $’000 2021 $’000 4,487 (67) 313 4,734 4,120 (47) 900 4,973 47 20 67 774 296 131 1,201 13 34 47 744 55 91 890 TASFOODS ANNUAL REPORT 2022 6 7 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 9. TRADE AND OTHER RECEIVABLES, CONT. Recognition and measurement Trade receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade receivables are initially recognised at fair value and subsequently recognised less any expected loss allowance. The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the number of days outstanding. The expected loss rates applied are based upon the payment sales profiles over a 12-month period and the historical credit losses experienced in this period. Historical loss rates are adjusted to reflect current and forward-looking information including macroeconomic factors affecting the ability of the customers to settle the receivables. The loss allowance is determined as follows for trade receivables: 31 December 2022 Expected Loss Rate Trade Receivables Gross Carrying Amount ($’000) Loss Allowance ($’000) 31 December 2021 Expected Loss Rate Trade Receivables Gross Carrying Amount ($’000) Loss Allowance ($’000) Current 30 days 60 days 90+ days Total 0% 3,285 - 0% 744 - 0% 296 - 51% 131 67 4,487 67 Current 30 days 60 days 90+ days Total 0% 3,231 - 0% 744 - 0% 55 - 51% 91 47 4,120 47 The amount of the impairment loss is recognised in the consolidated statement of profit or 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 2022 6 8 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 10. BIOLOGICAL ASSETS Balance as at 1 January 2021 Increases due to purchases and production Decreases due to sales/processing/mortality (i) Movement in fair value as a result of physical and/or price changes (ii) Balance as at 31 December 2021 Current Non-current Balance as at 1 January 2022 Increases due to purchases and production Decreases due to sales/processing/mortality (i) Movement in fair value as a result of physical and/or price changes (ii) Balance as at 31 December 2022 Current Non-current Poultry $’000 Goats $’000 Wasabi Plants $’000 2,037 2,029 (2,037) (113) 1,916 1,916 - 1,916 1,916 1,929 (1,916) 298 2,227 2,227 - 2,227 167 - (135) (32) - - - - - - - - - - - - 172 20 (2) 69 259 229 30 259 259 37 (28) 77 345 331 14 345 Total $’000 2,376 2,049 (2,174) (76) 2,175 2,145 30 2,175 2,175 4,459 (4,438) 375 2,571 2,558 14 2,571 (i) includes biological assets reclassified as inventory at the point of harvest and/or processing. (ii) 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 2022, the Group held 510,494 live poultry (2021: 517,693), 7,847 mature wasabi plants (2021: 6,650) and 1,489 immature wasabi plants (2021: 2,543) that are less than 12 months of age and not suitable for harvest. TASFOODS ANNUAL REPORT 2022 6 9 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 10. BIOLOGICAL ASSETS, CONT. Poultry For live poultry with an age of below 26 days (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 age of greater than 26 days 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 2022, with all other variables held constant, the Group’s net profit/(loss) for the period would have been impacted by $88,201 (2021: $78,867) by a pricing or dressed weight increase/decrease of 5%. 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. On 31 December 2022 the Group’s wasabi plants were an average of 27 months of age (31 December 2021: 22 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. AASB 141 Agriculture applies to all biological assets (excluding bearer plants) and agricultural produce at the point of sale, and is applied to the valuation of the wasabi crop (the biological asset) as well as harvested material. Changes in market conditions due to COVID-19 and the resulting change in product sales mix necessitated a review of the crop valuation focused on fair value less costs to sell in June 2020. This review resulted in a movement in fair value of biological assets of $1.179 million (recorded in 30 June 2020), primarily driven by a reduction in the selling price per kilogram as the Company transitions from high value fresh wasabi sales, towards industrial and ingredient powder commodity markets. The write-down was non-cash in nature and did not impact the biomass of the wasabi crop available for future use. Based on market prices and estimated yields utilised within the valuation methodology at 31 December 2022, with all other variables held constant, the Group’s net profit/(loss) for the period would have been impacted by $17,177 (31 December 2021: $12,901) by a price increase/ decrease of 5%. TASFOODS ANNUAL REPORT 20227 0 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 10. BIOLOGICAL ASSETS, CONT. Fair value measurement Recurring fair value measurements - Poultry - Wasabi plants Total biological assets recognised at fair value Recurring fair value measurements - Poultry - Wasabi plants Total biological assets recognised at fair value Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 2022 - - - 2,227 - 2,227 - 345 345 2,227 345 2,571 Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 2021 - - - 1,916 - 1,916 - 259 259 1,916 259 2,175 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 Relationship to unobservable inputs to fair value Average yield per wasabi plant used in fair value measurement: 0.28 kilograms (31 December 2021: 0.37 kilograms) An increase/decrease in yield would result in a direct increase/decrease in the fair value AASB 141 Agriculture applies to all biological assets (excluding bearer plants) and agricultural produce at the point of sale, and is applied to the valuation of the wasabi crop (the biological asset) as well as harvested material. TASFOODS ANNUAL REPORT 2022 7 1 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 11. INVENTORY Finished goods Raw materials and packaging Other Recognition and measurement 2022 $’000 2021 $’000 1,641 2,363 570 4,574 1,921 2,244 482 4,647 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: valued at purchase cost. NON-CURRENT ASSETS 12. PROPERTY, PLANT AND EQUIPMENT (a) 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 2022 $’000 2021 $’000 15,260 (1,784) 13,476 16,639 (7,155) 9,484 290 (224) 67 692 (318) 374 312 16,021 (1,435) 14,586 16,311 (5,871) 10,440 256 (194) 62 913 (370) 543 273 Total Property, Plant and Equipment 23,713 25,904 TASFOODS ANNUAL REPORT 2022 7 2 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 12. PROPERTY, PLANT AND EQUIPMENT, CONT. 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 $000$ Total $000 13,186 1,748 - - (348) 14,586 14,586 69 - (830) (349) 13,476 10,987 821 - - (1,368) 10,440 10,440 432 - (105) (1,283) 9,484 61 28 - - (27) 62 62 35 - - (29) 67 535 105 - - (97) 543 543 19 - (238) 50 374 539 1,876 (2,142) - - 273 25,308 4,578 (2,142) - (1,840) 25,904 273 39 - - - 312 25,904 594 - (1,174) (1,611) 23,713 Carrying value As at 1 January 2021 Additions Capitalisation to asset categories Disposals Depreciation expense Balance as at 31 December 2021 As at 1 January 2022 Additions Capitalisation to asset categories Disposals Depreciation expense Balance as at 31 December 2022 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% 5-50% 10-50% 13.33-20% 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. During the year a sale and lease-back transaction occured in relation to one of the non-core properties owned by Van Diemen's Land Dairy Pty Ltd. TASFOODS ANNUAL REPORT 2022 7 3 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 12. PROPERTY, PLANT AND EQUIPMENT, CONT. (b) Right of Use Assets and Lease Liabilities Right of Use Assets Recognised right-of-use assets relate to the following types of assets: Right of use assets Land and buildings Motor vehicles Total right-of-use assets 31 December 2022 $’000 31 December 2021 $'000 1,166 375 1,541 1,418 - 1,418 Set out below are the carrying amounts of the Group’s right-of-use assets and the movements during the period: Balance at 1 January Additions Disposals Depreciation expense Net carrying amount at 31 December 2022 Balance at 1 January Additions Disposals Depreciation expense Net carrying amount at 31 December 2021 Lease Liabilities Current Non-Current Right-of-use assets Land and buildings $’000 Motor vehicles $’000 Total $’000 1,418 360 (400) (212) 1,166 - 409 (33) 375 1,418 769 -400 (246) 1,541 Right-of-use assets Land and buildings $’000 Motor vehicles $’000 Total $’000 968 647 0 (197) 1,418 - - - - - 968 647 - (197) 1,418 31 December 2022 $’000 31 December 2021 $’000 373 1,494 1,867 193 1,339 1,532 TASFOODS ANNUAL REPORT 2022 7 4 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 12. PROPERTY, PLANT AND EQUIPMENT, CONT. Recognition and measurement The Group leases property. Rental contracts are typically agreed for periods of 2 years to 5 years, but may have options to extend as described below. Contracts agreed contain both lease and non-lease components. The Group allocated consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has elected not to separate lease and non-lease components, instead accounts for these as a single lease component. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • Fixed payments (including in-substance fixed payments), less any lease incentives receivable; • Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date; • Amounts expected to be payable by the Group under residual guarantees; • The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and • Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability each period. Right-of-use assets are measured at cost comprising the following: • The amount of the initial measurement of the lease liability; • Any lease payments made at or before the commencement date less any lease incentives received; • Any initial indirect costs; and • Restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s life. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and small items of office furniture. Extension and termination options are included in a number of property leases of the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. TASFOODS ANNUAL REPORT 202275 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 13. INTANGIBLE ASSETS Goodwill Brands and trademarks Other Gross carrying value At cost Accumulated impairment and amortisation Total net carrying amounts Reconciliations Carrying amount at beginning Additions Impairment and amortisation during the year Carrying amount at end 2022 $'000 - 4 552 556 17,553 (16,997) 556 7,195 192 (6,831) 556 2021 $’000 - 6,835 360 7,195 17,341 (10,146) 7,195 10,953 160 (3,918) 7,195 Brands and trademarks are predominantly associated with the Nichols Poultry brand acquired in 2016 and the Betta Milk brand acquired in 2019. Other intangible assets include water rights and intellectual property. Water rights are considered to have an indefinite life and intellectual property is amortised over 5 years. Intangible assets are assessed as having an indefinite useful life are allocated to the Group’s cash generating units (CGUs) as follows: 2022 2021 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Goodwill Brands & Trademarks Other Total Goodwill Dairy Poultry Corporate and Other Total - - - - - - 4 4 - 196 356 552 - 196 360 556 - - - - Brands & Trademarks 3,925 2,910 - 6,835 Other Total 1 194 166 361 3,925 3,104 166 7,195 TASFOODS ANNUAL REPORT 2022 7 6 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 13. INTANGIBLE ASSETS, CONT. 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 and Dairy CGU’s have an indefinite useful life. This assessment was based on factors including independent expert advice, historical business growth rates, performance and future strategy associated with the brands 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. Recoverable amount of goodwill and indefinite life intangibles In accordance with the Company’s accounting policy, impairment testing has been undertaken at 31 December 2022 in accordance with AASB 136 Impairment of Assets 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 external market information, financial budgets and forecasts approved by management covering a five-year period before any fair value adjustments for biological assets. TASFOODS ANNUAL REPORT 20227 7 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 13. INTANGIBLE ASSETS, CONT. Key assumptions used in the value-in-use calculations for the dairy CGU include: Dairy Sales Growth Rate (5 year avg) Production Costs (5 year avg) Indirect Cost Growth Rate per annum Long-term Growth Rate Pre-tax Discount Rate 31 December 2022 31 December 2021 6.2% 67.8% 5.0% 2.5% 16.1% 4.3% 65.3% 5.0% 2.5% 15.4% Based on the above assumptions the recoverable amount of the CGU at 31 December 2022 is estimated to be $9.8 million, which is a deficit of $3.8 million when compared to the CGU’s carrying amount of $13.7 million. 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 external market information, 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: Poultry Sales Growth Rate (5 year avg) Production Costs (5 year avg) Indirect Cost Growth Rate per annum Long-term Growth Rate Pre-tax Discount Rate 31 December 2022 31 December 2021 6.9% 79.5% 5.0% 2.5% 16.1% 6.7% 76.1% 5.0% 2.5% 15.4% Based on the above assumptions the recoverable amount of the CGU at 31 December 2022 is estimated to be $14.7 million, which is a deficit of $2.8 million when compared to the CGU’s carrying amount of $17.5 million. Changes to Key Inputs Changes to key inputs within the value-in-use calculations include: • Sales Growth Rate –Sales growth rates were reduced at 31 December 2022 to reflect both market growth rates and historical CGU growth rates achieved. • Production Costs – Production costs as a percentage of revenue are forecast to decrease over the forecast period which is reflective of gross margin improvement through a focus on value chain profitability, customer profitability and management of input costs inline with • Managements revised strategy. • Long-term Growth Rate – Was maintained at 2.5% which is in line with the Reserve Bank of Australia’s economic outlook. • Pre-tax Discount Rate – The discount rate represents 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 a pre-tax discount rate of 16.1% (11.3% post tax). The discount rate includes a risk premium to allow for overall uncertainty in the wider economy, together with company specific risks related to operations in the agricultural industry. TASFOODS ANNUAL REPORT 2022 7 8 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 13. INTANGIBLE ASSETS, CONT. Review outcome Based on the above an impairment charge is being recognised to reduce the value of brands and trademarks of both the Dairy and Poultry CGU to nil. This conclusion is based on a current assessment of industry growth rates, market inflationary pressures and volatility in commodity pricing which form the basis of key inputs into the modelling. LIABILITIES 14. TRADE AND OTHER PAYABLES Trade and other payables Recognition and measurement 2022 $'000 11,645 11,645 2021 $’000 9,605 9,605 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. 15. BORROWINGS Current Bank Overdraft Bank Loans Other Non-Current Bank Loans Total borrowings 2022 $'000 2021 $’000 - 473 549 1,022 4,739 4,739 5,761 - 592 455 1,047 6,422 6,422 7,469 TASFOODS ANNUAL REPORT 2022 7 9 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 15. BORROWINGS, CONT. Financing arrangements Commitments in relation to financing arrangements are payable as follows: At 31 December 2022 Non-derivatives Trade payables Bank Overdraft Bank Loans Other Finance lease liabilities (refer to note 12b) At 31 December 2021 Non-derivatives Trade payables Bank Overdraft Bank Loans Other Available facilities: Equipment Finance Liabilities (refer to note 12b) Bank Bill Facility Bank Loan Facilities Bank Overdraft Less than 12 months $’000 Between 1 and 5 years $’000 Over 5 years $’000 Total contracted cash flows $’000 Carrying Amount $’000 11,645 - 473 549 - 12,667 9,605 - 592 455 10,652 - - 4,739 - - 4,739 - - 6,422 - 6,422 - - - - - - - - - - - 11,645 - 5,212 549 - 17,407 9,605 - 7,014 455 17,074 11,645 - 5,212 549 - 17,407 9,605 - 7,014 455 17,074 2022 $’000 2021 $’000 Limit 1,183 3,500 1,712 3,260 9,655 Undrawn Balance - - - 3,260 3,260 Limit - 3,000 4,014 2,500 9,514 Undrawn Balance - - - 2,500 2,500 The bank overdraft facility with ANZ was increased to $3.26 million in November 2022. The facility will reduce to $2.56m from July 2023. As part of the sale and leaseback arrangements regarding non-core property assets, a reduction in ANZ term debt facilities of $1.0 million was made during December 2022. The largest bank loan, $3.5m, is due for repayment on 29 June 2026. Recognition and measurement Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the 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. TASFOODS ANNUAL REPORT 2022 8 0 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 15. BORROWINGS, CONT. Secured liabilities and assets pledged as security The Group has a number of finance facilities with ANZ which were renewed during the reporting period. Available facilities include overdrafts, a bank bill and bank loan facilities which are secured by mortgage over the property and water rights owned by Nichols Poultry Pty Ltd and property owned by Van Diemen’s Land Dairy Pty Ltd. The facilities are also secured by a general security agreement over the property of Nichols Poultry Pty Ltd and Van Diemen’s Land Dairy Pty Ltd not otherwise secured. Financial covenants At the start of the financial year the Company was required to comply with an interest cover ratio financial covenant, which had an assessment date of 31 December 2022. In July 2022, ANZ agreed to remove all debt covenants in relation to the ANZ facility. 16. PROVISIONS Current Employee benefits Other provisions Non-current Employee benefits 2022 $’000 2021 $’000 1,362 - 1,362 219 219 1,365 - 1,365 169 169 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. 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. TASFOODS ANNUAL REPORT 2022 8 1 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 16. PROVISIONS, CONT. 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) 437,095,516 351,902,660 Total share capital 2022 2021 2022 $'000 66,834 66,834 Movements in ordinary share capital: Date 1/1/22 Details Balance at beginning of period Share Issue Deferred tax arising from share issue costs Terms and Conditions of Issued Capital Ordinary Shares Ordinary Shares 351,902,660 85,192,856 - 437,095,516 2021 $'000 61,053 61,053 $’000 61,053 5,702 79 66,834 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 TASFOODS ANNUAL REPORT 20228 2 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 17. CONTRIBUTED EQUITY, CONT. Share Options and Performance Rights Share options and 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 5,000,000 share options on issue, 42,039,627 performance rights and 6,318,183 share appreciation rights granted as at 31 December 2022 (2021: 5,000,000 share options and 1,653,571 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 Nature and Purpose of Reserves Employee share option reserve 2022 $’000 2021 $’000 1,121 1,121 691 691 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 30. Balance at start of year Net Movement during the year Balance at end of year 2022 $’000 2021 $’000 691 430 1,121 594 97 691 TASFOODS ANNUAL REPORT 2022 8 3 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. OTHER NOTES 19. ADDITIONAL CASH FLOW INFORMATION Cash and cash equivalents Recognition and measurement 2022 $’000 2021 $’000 351 1,450 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 2022 $’000 2021 $’000 351 - 351 1,450 - 1,450 TASFOODS ANNUAL REPORT 2022 8 4 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 19. ADDITIONAL CASH FLOW INFORMATION, CONT. b) Reconciliation of operating profit after income tax to net cash flows from operating activities: Net loss after income tax Depreciation and amortisation Impairment Movement in fair value of biological assets Share based payments Interest on leased assets Other Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables (Increase)/decrease in inventories (Increase)/decrease in prepayments (Increase)/decrease in deferred taxes (Decrease)/Increase in trade and other payables Increase/(decrease) in provisions Net cash (outflow)/inflow from operating activities (c) Non-cash activities There were no non-cash financing activities. 20. FINANCIAL RISK MANAGEMENT 2022 $'000 2021 $’000 (16,478) (10,741) 2,099 6,835 (375) 430 95 (647) 239 74 (169) - 2,040 47 (5,810) 2,037 3,907 76 97 47 173 (480) (143) (70) - 430 210 (4,457) 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 analysis 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. 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. TASFOODS ANNUAL REPORT 2022 8 5 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 20. FINANCIAL RISK MANAGEMENT, CONT. 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. Loans and Receivables Loan and receivables are measured at fair value at inception and subsequently at amortised cost using the effective interest rate method. 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 principal 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 2022 $’000 2021 $’000 351 351 1,450 1,450 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 2022, 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) 2022 $’000 2021 $’000 20 (20) 26 (26) 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. TASFOODS ANNUAL REPORT 2022 8 6 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 20. FINANCIAL RISK MANAGEMENT, CONT. 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 $20.854 million (2021: $20.140 million) of which $14.402 million (2021: $12.211 million) is recorded as current liabilities, and Total Current Assets of $13.361 million (2021: $14.191 million) of which $0.351 million (2021: $1.450 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. Refer to Note 1 for information in relation to initiatives that will allow management to achieve their EBITDA forecasts, cash flow forecasts and net working capital requirements. All current liabilities fall due within normal trade terms, which are generally 30 days. 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. TASFOODS ANNUAL REPORT 20228 7 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 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 2022 $’000 5,761 11,645 17,407 (351) 17,055 25,165 66,834 2021 $’000 7,469 9,605 17,074 (1,450) 15,624 28,598 61,053 Gearing ratio (total debt / total equity) 69.2% 59.7% The Group is not subject to any externally imposed capital requirements, other than those referred to in Note 15. TASFOODS ANNUAL REPORT 2022 8 8 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 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 Deed of Cross Guarantee 2022 $'000 2021 $’000 28,849 4,431 33,280 3,297 467 3,764 29,516 66,834 1,121 (38,439) 29,516 4,942 (9,506) (9,506) 28,316 3,572 31,888 2,862 264 3,126 28,762 61,053 691 (32,982) 28,762 5,185 (8,078) (8,078) 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 2022 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 There were no non-cancellable capital expenditure contracted for but not in the financial statements. Contingent Liabilities TasFoods Limited is not subject to any liabilities that are considered contingent upon events known at balance sheet date. TASFOODS ANNUAL REPORT 2022 8 9 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 23. SUBSIDIARIES Country of Incorporation Principal Activity Equity Holding Van Diemen's Land Dairy Pty Ltd Nichols Poultry Pty Ltd Shima Wasabi Pty Ltd Tasmanian Food Co Dairy Pty Ltd Australia Australia Australia Australia Dairy Poultry Wasabi Dairy 2022 % 100% 100% 100% 100% 2021 % 100% 100% 100% 100% UNRECOGNISED ITEMS 24. 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. 25. COMMITMENTS FOR EXPENDITURE Capital Commitments – Capital Expenditure Projects There were no non-cancellable capital expenditure contracted for but not in the financial statements. 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 2022 $’000 2021 $’000 - - - - - - - - TASFOODS ANNUAL REPORT 2022 9 0 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 26. EVENTS OCCURRING AFTER REPORTING DATE During January 2023, a sale and lease-back arrangement occurred in relation to the Hobart based non-core distribution property owned by Van Diemen’s Land Dairy Pty Ltd. From the proceeds received, $1.2 million was used to repay term debt facilities with ANZ in January 2023. To the extent further asset sales occur, some of the net proceeds generated by the sale will be used to further repay debt. Other than the above, 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 27. 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 28. 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 Other assurance services 29. SHARE BASED PAYMENTS Performance Rights (a) Share based payment arrangements 2022 $ 2021 $ 900,310 62,193 384,312 - 1,346,815 828,640 81,797 54,971 132,000 1,097,408 2022 $ 2021 $ 278,500 - 278,500 172,250 - 172,250 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. TASFOODS ANNUAL REPORT 2022 9 1 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 29. SHARE BASED PAYMENTS, CONT. 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 vesting conditions as follows: • 50% of the grant is based on Total Shareholder Return (TSR) growth and • 50% of the grant is based on EBITDA growth. Vesting percentages for the TSR hurdle (threshold/stretch/maximum level of LTI) are to be determined by the following scale: Performance Level Absolute TSR (CAGR) Indicative TFL Share price % of Maximum vesting Stretch 25% $0.14 Between Target and Stretch >19%, <25% >$0.12 and <$0.14 Target 19% $0.12 Between Threshold and Target >14%, <19% >$0.10 and <$0.12 Threshold Below Threshold 14% <14% $0.10 <$0.10 100% Pro-Rata 50% Pro-Rata 25% 0% The targets for share price growth are based on a starting share price of $0.07 (being the average share price of the capital raisings undertaken by the Company in 1H 2022) which is a Compound Annual Growth Rate (CAGR) from June 2022 of 19.6% to achieve ‘target’ share price and a CAGR of 26.0% 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. EBITDA Growth Vesting percentages for the EBITDA hurdle (threshold/stretch/maximum level of LTI) are to be determined by the following scale: Performance Level Absolute EBITDA growth % of Maximum vesting Stretch Between Target and Stretch Target Between Threshold and Target Threshold 36.0% >23%, >36% 23% >8%, <23% 8% 100% Pro-Rata 50% Pro-Rata 25% The targets for EBITDA growth are based on the Company’s budget for the 2022 year. The Company's compound annual growth in EBITDA, and achievement against the EBITDA Hurdle, will be determined by the Board in its absolute discretion, having regard to matters it considers relevant. It is intended that EBITDA for each relevant financial year will be calculated as EBITDA for that financial year, adjusted to exclude the costs of servicing equity (other than dividends), adjusted for any bonus elements. For relevant financial years, the calculation may be adjusted to take into account one-off items associated with equity raising, if considered appropriate by the Board. The Board also reserves the right to make any other adjustments it thinks fit to the calculation of EBITDA having regard to the impact of any other exceptional items. TASFOODS ANNUAL REPORT 20229 2 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 29. SHARE BASED PAYMENTS, CONT. Grant to Non-Executive Directors Following shareholder approval in May 2021, the Directors sacrificed cash fees in return for a grant of Performance Share Appreciation Rights (PSARs). The SARs are fully vested at Grant, but are subject to Specified Disposal Restrictions that facilitate long term holding of equity interests. b. Performance rights granted Below is a summary of Share Appreciation Rights and Performance Rights granted under the LTIP. 2022 Grant Date 7/6/22 7/6/22 30/5/22 6/9/21 24/10/19 2021 Grant Date 6/9/21 24/10/19 Equity Intrument Performance Share Appreciation Rights Performance Share Appreciation Rights Share Appreciation Rights Performance Rights Performance Rights Equity Intrument Performance Rights Performance Rights Performance Period From To Balance at start of Year Granted During Year Forfeited Vested Balance at End of Year Fair Value per Share 1/1/22 31/12/25 - 20,093,960 - - 20,093,960 $0.032 1/1/22 31/12/25 20,093,960 20,093,960 $0.016 1/1/22 31/12/22 - 6,318,183 1/1/21 31/12/23 1,851,707 1/1/19 31/12/21 1,653,571 - - - - (1,653,571) - - - 6,318,183 $0.038 1,851,707 $0.037 - $0.042 Performance Period From To Balance at start of Year Granted During Year Forfeited Vested Balance at End of Year Fair Value per Share 1/1/21 31/12/23 - 1,851,707 1/1/19 31/12/21 1,653,571 - - - - - 1,851,707 $0.037 1,653,571 $0.042 The Share Appreciation Rights and Performance Rights hold no voting or dividend rights and are not transferable. TASFOODS ANNUAL REPORT 20229 3 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 29. SHARE BASED PAYMENTS, CONT. c. Fair value of performance rights granted For the performance rights granted during the 2022 financial year, the fair value was measured at the grant date of 30 May 2022 for the Non- Executive Directors and 7 June 2022 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 Non-Executive Directors, Chief Executive Officer and senior management for the year ended 31 December 2022 is $320,625 (31 December 2021: $11,419). Share Options a. Share options granted Share options outstanding at 31 December 2022 are as follows: Options - 2022 Grant Date Expiry Date Exercise Price 27/08/2021 1/10/2024 27/08/2021 1/10/2024 $0.10 $0.10 Balance at start of Year 2,500,000 2,500,000 5,000,000 Granted Exercised Expired/ forfeited/ other Balance at End of Year 2,500,000 2,500,000 5,000,000 Weighted average exercise price - - - $ 0.10 b. Fair value of share options granted For share options granted during the 2021 financial year, the fair value was measured at the grant date of 27 August 2021. The fair value of the options 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 2022 is $110,700 (31 December 2021: $74,349). c. Share Options at 31 December 2022 There are 5,000,000 share options held by KMP as at 31 December 2022. TASFOODS ANNUAL REPORT 20229 4 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 29. SHARE BASED PAYMENTS, CONT. 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/Share Appreciation 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 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). 30. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation 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 2022. 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. (b) Compliance with IFRS The financial statements comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (c) Historical Cost Convention The financial statements have been prepared under the historical cost convention. All amounts are presented in Australian dollars unless otherwise noted. (d) Principles of Consolidation 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. TASFOODS ANNUAL REPORT 20229 5 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS, CONT. 30. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONT. (e) Critical Accounting Estimates, Judgements and Errors 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. 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. (f ) Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. (g) New Standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have not yet been adopted by the Group. There are no 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. (h) Rounding Amounts 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. TASFOODS ANNUAL REPORT 20229 6 DIRECTORS’ DECLARATION 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. ii. Giving a true and fair view of the Group’s financial position as at 31 December 2022 and of its performance for the year ended on that date; and 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. 3. 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 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 2022. 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. John Murphy Non-Executive Chair 27 February 2023 TASFOODS ANNUAL REPORT 2022 9 7 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 2022 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: (cid:3511) (cid:3511) (cid:3511) (cid:3511) (cid:3511) (cid:3511) the consolidated statement of financial position as at 31 December 2022 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 or loss and other comprehensive income for the year then ended the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 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 Liability limited by a scheme approved under Professional Standards Legislation. TASFOODS ANNUAL REPORT 2022 9 8 Material uncertainty related to going concern We draw attention to Note 1 in the financial report, which indicates that the Group incurred a net loss of $16.48 million and a net cash outflow from operations of $5.81 million during the year ended 31 December 2022 and as of that date had net current liabilities of $1.04 million. These conditions, along with other matters set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. 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 (cid:3511) For the purpose of our audit we used overall Group materiality of $700,000, which represents approximately 1% of the Group’s total revenue. We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. (cid:3511) We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. (cid:3511) We chose Group revenue as, in our view, it is the benchmark against which the performance of the Group is most commonly measured given the Group remains in a growth phase. (cid:3511) We utilised a 1% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. TASFOODS ANNUAL REPORT 2022 9 9 Audit Scope (cid:3511) Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. (cid:3511) We performed an audit of the most significant operating business units of the Group, being Poultry and Dairy. We performed specific risk focused audit procedures over Horticulture and shared services business units. 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. We communicated the key audit matters to the Audit and Risk Committee. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matter described below to be the key audit matters to be communicated in our report. Key audit matter How our audit addressed the key audit matter Valuation of indefinite lived intangible assets (Refer to note 13) We performed the following procedures, amongst others, in respect of the Dairy and Poultry CGUs: During the period, the Group held indefinite lived intangible assets comprised of brands and trademarks ($6.8 million) across its Dairy and Poultry Cash Generating Units (CGUs). Under Australian Accounting Standards, the Group is required to assess indefinite life intangible assets for impairment at least annually. At 31 December 2022 the Group assessed the carrying value of the assets based on the value-in-use methodology using forecast future cash flows, discounted to present value. The impairment assessment resulted in impairment losses of $2.9 million for the Poultry CGU and $3.9 million for the Dairy CGU, as disclosed in note 13, reducing the brand value, patents and trademarks balance to nil for these CGUs. The impairment assessment involved significant judgements, including sales growth rate, production costs, indirect cost growth rate per annum, long-term growth rate and pre-tax discount rate. This was a key audit matter due to the financial significance of the indefinite lived intangibles and the (cid:120) 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. (cid:120) Assessed whether each CGU appropriately included all directly attributable assets and liabilities. (cid:120) Assessed whether the valuation methodology, which utilised discounted cash flow models to estimate the recoverable amount of each CGU, was consistent with Australian Accounting Standards. Tested the mathematical accuracy of key data in the models and compared key data to the latest budget, third party information or historical actual costs. (cid:120) (cid:120) With the assistance of PwC valuation experts, assessed whether the discount rates used in the models were appropriate by comparing them to market data, comparable companies and industry research. (cid:120) Evaluated the reasonableness of the disclosures made in note 13 considering the requirements of Australian Accounting Standards. TASFOODS ANNUAL REPORT 2022 1 0 0 Key audit matter How our audit addressed the key audit matter significant judgements and assumptions applied in estimating future cash flows, 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 2022, 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report. TASFOODS ANNUAL REPORT 2022 1 0 1 Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 33 to 50 of the directors’ report for the year ended 31 December 2022. In our opinion, the remuneration report of TasFoods Limited for the year ended 31 December 2022 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Brad Peake Partner Melbourne 27 February 2023 TASFOODS ANNUAL REPORT 2022 1 0 2 SHAREHOLDER INFORMATION The shareholder information set out below was applicable as at 13 February 2023. A. DISTRIBUTION OF EQUITY SECURITIES Analysis of numbers of equity security holders by size of holding: HOLDING DISTRIBUTION As at 13 February 2023 Range 100,001 and over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Unmarketable Parcels Securities 413,954,840 20,278,983 1,648,460 1,139,696 73,537 437,095,516 3,777,448 % 94.71 4.64 0.38 0.26 0.02 100.00 0.86 No of Holders 248 534 208 362 237 1,589 883 % 15.61 33.61 13.09 22.78 14.92 100.00 55.57 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 Units Percentage % 1 2 3 4 5 6 7 8 9 MUTUAL TRUST Includes entities associated with JANET CAMERON NATIONAL NOMINEES LIMITED Includes TASPLAN SUPERANNUATION FUND CVC LIMITED 97,295,851 81,517,736 63,269,514 MELBOURNE SECURITIES CORPORATION 47,908,375 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 HELBERN INVESTMENTS PTY LTD MR JIMMY THOMAS AND MS IVY RUTH PONNIAH NICHOLS INVESTMENTS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 10 SHANE ALEXANDER NOBLE 10,612,126 10,400,000 8,382,684 5,117,496 3,158,630 2,968,055 22.26 18.65 14.47 10.96 2.43 2.38 1.92 1.17 0.72 0.68 TASFOODS ANNUAL REPORT 20221 0 3 SHAREHOLDER INFORMATION B. EQUITY SECURITY HOLDERS, CONT. Rank Name Units Percentage % 11 12 13 14 15 16 17 18 19 BARANA PTY LTD DARIUS ISAAC QUALITY LIFE PTY LTD ELPHINSTONE HOLDINGS PTY LTD BOB WILSON BENJAMIN SCOTT SWAIN & ANN YEO RUM SWAIN A.C.N. 136 965 538 PTY LTD CHARDON LODGE PTY LTD Entity associated with Jane Frances Bennett CUSTODIAL SERVICES LIMITED (various private holders) 20 ALISON SHIRLEY WHITELEY Totals: Top 20 holders of TFL ORDINARY FULLY PAID Total Remaining Holders Balance Total Holders Balance 2,891,718 2,810,316 2,541,070 2,000,000 1,600,000 1,578,571 1,575,776 1,351,086 1,306,001 1,250,000 349,535,005 87,560,511 437,095,516 As at 13 FEBRUARY 2023, the 20 largest shareholders held ordinary shares representing 79.97% of the issued share capital. SUBSTANTIAL SHAREHOLDERS Substantial holders in the Company are set out below: Name Janet H Cameron CVC Limited Tasplan Superannuation Fund Melbourne Securities Corporation Number Of Shares Held 97,295,851 63,269,514 55,493,605 47,908,375 0.66 0.64 0.58 0.46 0.37 0.36 0.36 0.31 0.30 0.29 % 22.26 14.48 13.90 10.79 C. VOTING RIGHTS The voting rights attached to ordinary shares are set out below: On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. D. USE OF CASH Cash and assets readily convertible to cash held by the Company for the reporting period were used in a way consistent with its business strategy and objectives. TASFOODS ANNUAL REPORT 2022 1 0 4 TASFOODS ANNUAL REPORT 20221 0 5 TASFOODS ANNUAL REPORT 20221 0 6 tasfoods.com.au TASFOODS ANNUAL REPORT 2022

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