ANNUAL REPORT
For the year ended 30 June 2020
Terragen Holdings Limited and Controlled Entity
ABN 36 073 892 636
www.terragen.com.au
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
CHAIRMAN’S LETTER TO SHAREHOLDERS
DEAR SHAREHOLDER
On behalf of the Directors of Terragen Holdings Limited, I am pleased to present your company’s annual report for the
financial year ended 30 June 2020.
The past year has been a very significant one for the Company, with Terragen’s shares listing on the Australian Stock
Exchange on 11 December 2019 following a successful Initial Public Offering to raise $20 million.
Terragen develops and markets biological products for agricultural applications. Each product uses a unique combination
of naturally-occurring live microbe strains selected to address soil health or help boost the productivity, welfare and resil-
ience of farm production animals.
Terragen has two products on the market in Australia and New Zealand: a microbial feed supplement Mylo® for animals;
and a soil conditioner Great Land®. Sales growth of 56% during the year was driven by the sales of Mylo® to the dairy in-
dustry where it is used to supplement feed for milking cows as well as calves.
Terragen’s aim is to increase farm productivity through the use of its products, whilst providing improved environmental
sustainability that will be attractive to consumers. Biological products are now becoming accepted in mainstream agricul-
ture and Terragen is continuing to undertake research and development activities, including initiating preliminary studies
into the potential of Mylo® to reduce greenhouse gas emissions.
Terragen’s success has been due to the considerable efforts, collaboration and achievements of our employees, custom-
ers, suppliers, partners and advisors. On behalf of Terragen’s Board of Directors, I would like to express our appreciation
to each to you for your hard work, support and achievements throughout the year.
I would also like to express my thanks to my fellow Directors for their efforts in successfully guiding Terragen through its
Initial Public Offering.
Finally, thank you to my fellow Terragen shareholders who have recognised the strategic growth opportunities ahead for
Terragen and who have invested to help us execute on our plans.
With a strong cash position, excellent sales momentum for Terragen’s products in Australia and New Zealand, and a high-
ly skilled and committed team, Terragen is well placed to pursue further sales growth of its key products in Australia and
New Zealand.
I am excited about the year ahead and look forward to keeping you updated on our progress.
Travis Dillon
Chair of the Board of Directors
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
FINANCIAL REPORT CONTENTS
Directors’ Report
Auditor’s Independence Declaration
Independent Auditor’s Report
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
3
22
23
26
Consolidated Statement of Financial Position
27
Consolidated Statement of Changes in Equity
28
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Shareholder Information
Corporate Directory
2
29
30
60
61
64
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
DIRECTORS’ REPORT
The directors of Terragen Holdings Limited (the “Company” or “Terragen”) submit herewith the financial report of the
Company and the entity it controlled for the year ended 30 June 2020 (collectively “Group”). To comply with the provisions
of the Corporations Act 2001, the directors report as follows.
DIRECTORS
The following persons were directors of Terragen Holdings Limited during the whole of the year under review and up to
the date of this report, unless otherwise stated:
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Travis Dillon
Paul Schober
Sam Brougham
Ingrid van Dijken
Jim Cooper
Gregory Robinson
John Ryals
Justus Homburg
David Ryan
Non-Executive Chair (appointed director 1 May 2020 and Chair 27 July 2020)
Non-Executive Director
Non-Executive Director
Non-Executive Director (appointed 11 December 2019)
Managing Director (appointed 25 June 2020)
Non-Executive Director (resigned 27 July 2020)
Non-Executive Director (appointed 11 December 2019, resigned 27 July 2020)
Managing Director (resigned 25 June 2020)
Non-Executive Director (resigned 31 July 2019)
Information on directors and key management personnel in office at the end of the financial year and to the date of this
report.
Name and Position
Qualifications and
Experience
Travis Dillon
Non-Executive Chair
Appointed Director
on 1 May 2020.
Appointed Non-
Executive Chair on 27
July 2020
Mr Dillon holds extensive commercial and strategic expertise
in the agricultural distribution channel. Mr Dillon was the CEO
and Managing Director of Ruralco Holdings Limited until its
acquisition by Nutrien in September 2019. Prior to becoming
Ruralco’s Managing Director in 2015, he was the Executive
General Manager of Ruralco’s Operations. Over a career in
Agriservices, spanning nearly three decades, Travis has held
many positions including Branch Manager, Agronomist, and
numerous Category Manager roles. Travis is a Non-Executive
Director of Lifeline Australia.
Other directorships in past three years:
Ruralco Holdings Limited
Paul Schober
Non-Executive
Director
Appointed Non-
Executive Chair 11
December 2019 until
27 July 2020
Paul has had a 30-year career in the animal health industry,
including senior executive positions in which he established
global distribution agreements and implemented commercial
rigour for biotechnology research companies including
Peptech Animal Health, Anatara Lifesciences and Apex
Laboratories. Paul attained PhD and MBA degrees at the
University of Sydney.
Other directorships in past three years: Nil
Particulars of interests
in shares and options of
Terragen Holdings Limited
Shares#
Options
219,000 held
indirectly
Nil
152,000 held
indirectly
80,000
(investment
options) held
indirectly
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
Name and Position
Qualifications and
Experience
Sam Brougham
Non-Executive
Director
Appointed Non-
Executive Chair 1
July 2019 until 11
December 2019
Sam Brougham has an economics degree from the University
of Adelaide. Sam has over thirty years’ experience in private
and public investment and is currently a director of Ellerston
Global Investments and Ceres Capital, a private global equity
investment firm he co-founded in 1999. Sam also co-founded
Structured Asset Management in 1993. After receiving an
economics degree from the University of Adelaide, he spent
his early career with Price Waterhouse, and as a partner at JB
Were. Sam is a director of Ellerston Asian Investments Limited.
Other directorships in past three years:
Ellerston Global Investments Limited.
Particulars of interests
in shares and options of
Terragen Holdings Limited
Shares#
Options
14,721,616
held
indirectly
1,600,000
(investment
options) held
indirectly
Ingrid holds a Masters’ degree in International Relations from
the Graduate Institute in Geneva and an undergraduate degree
from the Universiteit Utrecht, in the Netherlands.
1,290,000
held
indirectly
100,000
(investment
options) held
indirectly
Ingrid has more than 20 years’ experience in private banking
and funds management both in Australia and Switzerland.
During these years she held senior management positions
and acquired an in-depth understanding of wealth
management for high net worth individuals.
She currently works at a privately held funds management
firm. From early 2014 until September 2018 she worked at the
Impact Investment Group (IIG) in Melbourne, an Australian
impact investment funds manager. She joined as the General
Manager and became the Chief Operating Officer & Head
of Investor Relations. She was instrumental in driving the
transformation from a start-up in 2014 to a medium sized
funds management business four years later. During her
tenure with IIG it was involved in transactions in excess of $1
billion across commercial real estate, large scale renewable
energy infrastructure and venture capital.
Ingrid is a Trustee of the St Peters Eastern Hill Melbourne
Charitable Foundation. She has been a non-executive board
member of Escala Partners, a Melbourne based wealth
management firm from 2015 until March 2019.
Other directorships in past three years: Nil
Greg Robinson holds a BSc (Hons) and PhD in Physics, is a
fellow of the Financial Services Institute of Company Directors
and a Member of the Australian Institute of Company Directors.
Greg has undertaken business development in many parts
of the globe, and has also managed businesses domiciled in
Hong Kong, Singapore, Japan, and the United States.
Other directorships in past three years: Nil
Nil
563,000 held
directly
3,195,000
held
indirectly
Ingrid van Dijken
Non-Executive
Director
Appointed 11
December 2019
Gregory Robinson
Non-Executive
Director
Resigned
27 July 2020
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
Particulars of interests
in shares and options of
Terragen Holdings Limited
Shares#
Options
Nil
Nil
Name and Position
Qualifications and
Experience
John Ryals
Non-Executive
Director
Appointed 11
December 2019
Resigned
27 July 2020
Dr. Ryals has a Bachelor of Arts in biology and chemistry
from the University of North Texas and masters and doctorate
degrees from the University of Texas at Dallas. Dr. Ryals served
as president and CEO at Metabolon from 2002 until 2018.
Dr Ryals has 30 years of experience in the biotechnology
industry, including senior research positions at Novartis and
Ciba-Geigy. He currently serves on the Board of Directors of
AgBiome, a provider of early-stage research and development
for agriculture, and the advisory board of the College of
Agriculture and Life Sciences at North Carolina State University.
Other directorships in past three years: Nil
Jim Cooper
Managing Director and
Chief Executive Officer
Jim is an experienced agribusiness, infrastructure, and
supply chain CEO with expertise in business development,
stakeholders, sustainability, and strategy. Jim’s experience in
infrastructure and supply chain comes from 13 years managing
privatised shipping ports in Portland and Melbourne.
200,000 held
indirectly
Nil
Appointed
25 June 2020
He has policy experience with 6 years as a Board member
of Ports Australia, and he has been a member of numerous
Government committees and advisory boards.
Other directorships in past three years:
Ports Australia Limited – Director and Deputy Chairman
Justus Homburg
Managing Director and
Chief Executive Officer
Justus holds an MBA from the University of Washington,
graduate degrees from the University of Utrecht and Southern
Illinois University, and is a Fulbright Scholar. Justus was
appointed to the Board in June 2017 and assumed the role of
CEO in July 2017.
275,000 held
directly
Resigned
25 June 2020
Justus’ thirty-year business career focused on
commercialisation of new technologies in agriculture and
human life sciences.
Other directorships in past three years:
Progen Pharmaceuticals Limited
2,000,000
(incentive A
options)
held directly
200,000
(investment
options) held
directly
Mr Stephen Kelly
Company Secretary and
Chief Financial Officer
Appointed
2 August 2019
Mr Kelly was appointed as the Company Secretary and Chief
Financial Officer of the Company on 2 August 2019. A qualified
Chartered Accountant, Mr Kelly has more than 30 years’
international experience in the areas of external and internal
audit, risk management and compliance, treasury, and corporate
finance across a range of industry sectors including mining,
infrastructure, property development and banking and finance.
60,000
Nil
COMPANY SECRETARY
Stephen Kelly (appointed 2 August 2019)
# Includes shares in which the Director has an indirect interest through associated entity.
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
MEETINGS OF DIRECTORS
The number of meetings of the Group's board of directors and each board committee held during the year ended 30 June
2020, and the numbers of meetings attended by each director were as follows:
Number of meetings eligible to attend
Number of meetings attended
BOARD MEETINGS: 8
Paul Schober
Sam Brougham
Gregory Robinson
Justus Homburg
Resigned 25 June 2020
John Ryals
Appointed 11 December 2019
Ingrid van Dijken
Appointed 11 December 2019
Travis Dillon
Appointed 1 May 2020
Jim Cooper
Appointed 25 June 2020
David Ryan
Resigned 31 July 2019
8
8
8
8
5
5
1
-
1
8
8
5
8
5
5
1
-
1
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
On 11 December 2019 Terragen established an Audit and Risk Committee and a
Nomination and Remuneration Committee. The members of those Committees
during the financial year were:
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Audit and Risk Committee: Gregory Robinson (Chairperson), Sam
Brougham and Paul Schober. The Audit and Risk Committee met once
during the year with all members in attendance.
Remuneration and Nomination Committee: Gregory Robinson
(Chairperson), Ingrid van Dijken and Sam Brougham. The Remuneration
and Nomination Committee did not meet during the year as
remuneration matters were considered by the full Board.
PRINCIPAL ACTIVITIES
The consolidated entity’s principal activities during the financial year were
research, development, and early market development of biological products in
the agriculture sector. There were no significant changes in the nature of these
activities during the financial year.
CORPORATE ACTIVITIES
During the year, the Group:
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Commenced trading on the Australian Stock Exchange (ASX) on 11
December 2019 after the Group raised $20 million through the issue of
80 million fully paid ordinary shares.
Issued 4,214,043 options in July 2019 to shareholders who participated
in a prior capital raising. The options are exercisable at $0.25 and have
an expiry date of 11 December 2022. No consideration was received by
the Group in relation to those options.
Made the following Board and Management Changes:
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Appointed Mr Stephen Kelly as the Company Secretary and Chief
Financial Officer on 2 August 2019.
Appointed Dr John Ryals and Ingrid van Dijken as Non-Executive
Directors on 11 December 2019.
Appointed Mr Travis Dillon as Non-Executive Director on 1 May
2020.
Appointed Mr Jim Cooper as Managing Director and Chief
Executive Officer on 25 June 2020 following the resignation on that
same date of Mr Justus Homburg.
On 27 July 2020 Mr Travis Dillon was appointed Non-Executive
Chair and Mr Gregory Robinson and Dr John Ryals resigned from
the board.
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•
OPERATING AND FINANCIAL REVIEW
The Group reported a loss after tax for the year of $4,925,615 (2019: loss of
$3,210,741). The significant items affecting the operating result were:
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Revenues, net of rebates, of $1,530,853 from the sale of the Company’s
Mylo® and Great Land® products in Australia and New Zealand. This
represents growth of 56% over sales revenue of $981,007 in the year
ended 30 June 2019.
Australian sales growth has been underpinned by the expansion of the
Retail Agency Partner network. In total, 73 individual retail outlets are
involved in the distribution of Great Land® and Mylo®, with each having
been accredited by Terragen Biotech Pty Ltd through a product training
program.
Sales in Australia and New Zealand also reflect the rollout of the ‘Mylo®’
microbial feed supplement. The strong growth of Mylo® sales has been
accompanied by positive feedback from farmers who have been trialing
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
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Mylo®, reinforcing the results of the studies that have been undertaken in conjunction with the University of
Queensland. Numerous farmers have committed to expanding the application of Mylo® to their herds.
Grant income of $315,655 (2019: $234,390) was received under a Commonwealth of Australia CRC Funding
program for a specific research project being undertaken in relation to banana crops.
Operating expenses of $7,469,456 in the year have increased from the prior year operating expenses of $5,083,337
due to the following:
•
Initial public offering costs of $428,691 (2019: $Nil) expensed during the year. These costs include legal fees,
printing and publishing costs and a portion of the costs of managing the initial public offer process.
An increase in employee benefits expense to $3,188,241 (2019: $2,639,643) as a consequence of the
appointment of additional members of the Board of Directors, and additional sales and manufacturing
personnel in line with the implementation of the Company’s commercialisation and development strategy.
ASX listing fees and share registry fees of $79,665 (2019: $Nil) incurred in the year in connection with the
initial public offering and listing of the Company’s shares on the ASX.
Advertising and marketing expenses of $260,568 (2019: $70,074) in line with the implementation of the
Company’s commercialisation and development strategy including the “Pumps for Mylo program”.
Depreciation and amortisation costs of $443,427, an increase of $170,417 compared with the prior year, as
a result of additions to Property, Plant and Equipment as well as the application of AASB 16 effective 1 July
2019 in which right-of-use assets are now capitalised for property and equipment leases, and subsequently
amortised over the life of the lease.
•
•
•
•
IMPACT OF COVID-19 PANDEMIC ON OPERATIONS
The outbreak of COVID-19 and the subsequent quarantine measures imposed by the Australian and other governments
as well as the travel and trade restrictions imposed by Australia and other countries in early 2020 have caused disruption
to businesses and economic activity. The COVID-19 pandemic has had a negligible impact on the Group’s operation and
results. The Group achieved significant sales growth over the prior financial year with sales and production activity in
Australia continuing throughout the COVID-19 pandemic. Sales in New Zealand were adversely impacted in April and May
2020 due to COVID-19 restrictions effectively stopping sales related activity in New Zealand which recommenced in late
May 2020.
In response to COVID-19, both the Federal Government and the State Government of Victoria have implemented
policies and measures with the aim of containing the virus. In an effort to contain the spread of the virus, the Victorian
Government, on 2 August 2020, implemented Stage 4 restrictions in Melbourne and Stage 3 restrictions in regional
Victoria with quarantine restrictions, travel restrictions, closure of businesses and other restrictive movement measures.
Given the principal operating location is in Queensland, these measures have only had a negligible impact on the
business.
The Group received a $50,000 cash boost grant from the Australian government during the financial year.
Earnings per share
Basic loss per share from continuing operations
Basic diluted loss per shares from continuing operations
2020
3.27 cents
3.27 cents
2019
3.38 cents
3.38 cents
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Terragen is focused on sales growth of its key products in Australia and New Zealand and is pursuing continued sales
growth in the coming year.
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
EVENTS SINCE THE END OF THE FINANCIAL YEAR
The outbreak of COVID-19 and the subsequent quarantine measures imposed by the Australian and other governments
as well as the travel and trade restrictions imposed by Australia and other countries in early 2020 have caused disruption
to businesses and economic activity. The impact of the COVID-19 pandemic is ongoing, and the Group will continue to
adjust to the varying restrictions and progress its sales growth initiatives accordingly. To the date of this report, the
COVID-19 pandemic has not had a material impact on the Group’s operations or results. As the situation remains fluid
(due to evolving changes in government policy and evolving business and customer reactions thereto) as at the date
these financial statements are authorised for issue, the directors of the Company considered that the financial effects of
COVID-19 on the Group’s consolidated financial statements cannot be reasonably estimated for future financial periods.
In response to COVID-19, both the Federal Government and the State Government of Victoria have implemented
policies and measures with the aim of containing the virus. In an effort to contain the spread of the virus, the Victorian
Government, on 2 August 2020, implemented Stage 4 restrictions in Melbourne and Stage 3 restrictions in regional
Victoria with quarantine restrictions, travel restrictions, closure of businesses and other restrictive movement measures.
Given the principal operating location is in Queensland, these measures have only had a negligible impact on the
business.
There has been no other matter or circumstance which has arisen since the end of the year that has significantly affected,
or may significantly affect the Group’s operations, the result of those operations or the Group’s state of affairs.
DIVIDENDS
No dividends were paid or declared during the year and no recommendation is made as to payment of dividends.
ENVIRONMENTAL REGULATION
The Group was not subject to any significant environmental regulation under a law of the Commonwealth or a State or
Territory of Australia.
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
SHARES UNDER OPTION
Unissued ordinary shares of the Group under option at the date of this report are as follows:
Option series
Grant Date
Expiry Date
Exercise price
of options
Number
under options
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Tranche 6
Tranche 7
Tranche 8
Tranche 9
Tranche 10
Tranche 11
Tranche 12
28/10/2016
28/10/2016
24/01/2017
01/02/2017
16/08/2017
01/09/2017
17/01/2018
01/07/2018
13/06/2019
10/07/2019
17/07/2019
31/10/2020
18/01/2022
24/01/2021
01/02/2021
16/08/2021
01/09/2021
17/01/2022
01/07/2022
31/12/2022
11/12/2022
11/12/2022
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.075
$0.25
$0.25
$0.25
400,000
350,000
75,000
450,000
600,000
2,000,000
1,990,000
1,030,000
8,100,000
3,000,000
1,214,043
19,209,043
No option holder has any right under the options to participate in any other share issue of the company or any other entity.
SHARES ISSUED ON THE EXERCISE OF OPTIONS
During the financial year, and up to the date of this report, 1,257,000 shares were issued as a result of the exercise of options.
REMUNERATION REPORT (AUDITED)
This remuneration report, which forms part of the Directors’ Report, sets out information about the remuneration of
Terragen Holdings Limited’s key management personnel for the financial year ended 30 June 2020. The term ‘key management
personnel’ refers to those persons having authority and responsibility for planning, directing, and controlling the activities of the
consolidated entity, directly or indirectly, including any director (whether executive or otherwise) of the consolidated entity. The
prescribed details for each person covered by this report are detailed below under the following headings:
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Key management personnel
Remuneration policy
Remuneration, Group performance and shareholder wealth
Remuneration of key management personnel
Key terms of employment contracts.
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
KEY MANAGEMENT PERSONNEL
A)
The directors and other key management personnel of the consolidated entity during or since the end of the financial year
were:
Non-executive directors
Position
Travis Dillon
Paul Schober
Sam Brougham
Gregory Robinson
John Ryals
Ingrid van Dijken
David Ryan
Chair (since 27 July 2020), Non-Executive Director (appointed 1 May 2020)
Non-Executive Director (Chair 11 December 2019 to 27 July 2020)
Non-Executive Director (Chair 1 July 2019 to 11 December 2019)
Non-Executive Director (resigned 27 July 2020)
Non-Executive Director (appointed 11 December 2019, resigned 27 July 2020)
Non-Executive Director (appointed 11 December 2019)
Non-Executive Director (resigned 31 July 2019)
Executive Directors
Position
Jim Cooper
Justus Homburg
Executive Director, Managing Director (appointed Managing Director 25 June 2020a
Executive Director, Managing Director (resigned 25 June 2020)
Other Key Management Personnel
Stephen Kelly
Company Secretary and Chief Financial Officer
a Prior to his appointment to Managing Director on 25 June 2020, Jim Cooper was employed by the
Group to provide consulting services commencing 5 March 2020.
Except as noted, the named persons held their current position for the whole of the financial year and since the end of the
financial year.
REMUNERATION POLICY
B)
The Board of Terragen Holdings Limited is responsible for determining and reviewing compensation arrangements for the
non-executive directors and the executive director. The Board’s remuneration policy is to ensure that the remuneration
package properly reflects the person’s duties and responsibilities, with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high-quality board and executive team. Such officers are given the opportunity
to receive their base emolument in a variety of forms. It is intended that the manner of payment chosen will be optimal
for the recipient without creating undue cost to the Group. In accordance with best practice corporate governance, the
structure of non-executive director and executive remuneration is separate and distinct.
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
NON-EXECUTIVE DIRECTOR REMUNERATION
OBJECTIVE
The Board seeks to set aggregate remuneration at a level which provides the
Group with the ability to attract and retain directors of high calibre, whilst
incurring a cost which is acceptable to shareholders.
STRUCTURE
Remuneration of non-executive directors is determined by the Board, within the
maximum amount approved by the shareholders from time to time (currently
set at an aggregate of $300,000 per annum as disclosed in the Prospectus dated
18 October 2019).
The amount of aggregate remuneration sought to be approved by shareholders
and the manner in which it is apportioned amongst directors is reviewed
annually. The Board considers the fees paid to non-executive directors of
comparable companies when undertaking the annual review process.
Each non-executive director receives a fee for being a director of the Company.
The non-executive chair receives an annual fee of $48,000, all other non-
executive directors receive an annual fee of $36,000. In addition, non-executive
directors receive an annual fee of $4,000 for each board sub-committee of which
they are a member. Non-executive directors who are called upon to perform
extra services beyond the director’s ordinary duties may be paid additional fees
for those services.
The following fees were paid to non- executive directors for additional services
during the year ended 30 June 2020 (2019: $Nil):
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$12,333 to Travis Dillon in relation to consulting services provided to the
Sales and Marketing Team since commencing his role with the Group on
1 May 2020.
Non-executive directors may also be granted equity incentives from time
to time. The options granted are considered by the Board to be an effective
means of appropriately compensating directors whilst preserving the Group’s
cash reserves and providing an alignment between Director and shareholder
interests. No equity incentives were issued to non-executive directors as
remuneration during the financial year.
EXECUTIVE DIRECTORS AND KEY MANAGEMENT PERSONNEL
REMUNERATION
OBJECTIVE
The Group aims to reward executives with a level and mix of remuneration
commensurate with their position and responsibilities within the Group so as to:
reward executives for Group and individual performance against agreed
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targets;
align the interest of executives with those of shareholders;
link reward with the strategic goals and performance of the Group; and
ensure total remuneration is competitive by market standards.
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STRUCTURE
In determining the level and make-up of executive remuneration, the Board has
had regard to market levels of remuneration for comparable executive roles. It
is the Board’s policy that employment contracts are entered into with all senior
executives.
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 VARIABLE REMUNERATION - SHORT AND LONG-TERM INCENTIVES
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
OBJECTIVE
The objectives of the incentives plan are to:
»
recognise the ability and efforts of the employees of the Group who have contributed to the success of the Group
and to provide them with rewards where deemed appropriate;
provide an incentive to the employees to achieve the long-term objectives of the Group and improve the
performance of the Group; and
attract persons of experience and ability to employment with the Group and foster and promote loyalty between
the Group and its employees.
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STRUCTURE
Long term incentives granted to senior executives are delivered in the form of share, options or performance rights in
accordance with an Employee Incentive Plan. As part of the Group’s annual strategic planning process, the Board and
Management agree upon a set of financial and non-financial objectives for the Group. The objectives form the basis of
the assessment of Management performance and vary but are targeted directly to the Group’s business and financial
performance and thus to shareholder value.
REMUNERATION, GROUP PERFORMANCE AND SHAREHOLDER WEALTH
C)
The development of remuneration policies and structures is considered in relation to the effect on Group performance
and shareholder wealth. They are designed by the Board to align director and executive behaviour with improving Group
performance and ultimately shareholder wealth. The Board considers at this stage in the Group’s development, that share
price growth itself is an adequate measure of total shareholder return.
Executives are currently remunerated by a combination of cash base remuneration and options. The options granted are
considered by the Board to provide an alignment between the employees and shareholders interests.
The table below shows for the current financial year and previous financial year the total remuneration cost of the key
management personnel, earnings per ordinary share (EPS), dividends paid or declared, and the closing price of ordinary
shares on ASX at year end.
Financial Year
Total Remuneration
$
2020
2019
766,416
488,211
EPS
(Cents)
(3.27)
(3.38)
1 The Company commenced trading on the ASX on 11 December 2019.
D)
REMUNERATION OF KEY MANAGEMENT PERSONNEL
Dividends
(cents)
Share Price
(cents)
-
-
17.5
n/a1
Compensation paid, payable or provided by the Group or on behalf of the Group, to key management personnel is set out
below. Key management personnel include all directors of the Group and certain executives who, in the opinion of the
Board and Managing Director, have authority and responsibility for planning, directing, and controlling the activities of the
Group directly or indirectly.
The Company’s Managing Director and other members of senior management are employed under individual contracts of
employment with the Company. The contracts set out:
»
The individual’s total fixed compensation, including fixed cash remuneration and the Company’s superannuation
contribution;
Notice and termination provisions; and
Employee entitlements including leave.
»
»
The Company makes contributions with respect to the senior executives to complying superannuation funds in accordance
with relevant superannuation legislation and the individual contracts of employment.
13
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
Summaries of material service agreements are set out below:
»
»
»
»
»
JIM COOPER, MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
»
Term of Agreement – Commencing from 25 June 2020 and ongoing unless terminated in accordance with its
terms.
Base Remuneration – Effective 25 June 2020 $301,125 per annum, including superannuation contributions, on a
full-time basis, subject to annual increases at the discretion of the Board of Directors.
Termination – By four months’ notice from either party.
Incentive benefits – Under the Employee Incentive Plan, to be determined by the Board of Directors after review of
the annual company result for the relevant calendar year, and Management’s performance
Equity – The Director shall be entitled to participate in the Employee Incentive Plan of the Company.
STEPHEN KELLY, CHIEF FINANCIAL OFFICER AND COMPANY SECRETARIAL SERVICES
The Company entered into a Consultancy Agreement with KCG Advisors Pty Limited pursuant to which Mr. Kelly was
engaged to provide Chief Financial Officer and Company Secretarial services to the Company effective from 2 August 2019.
The key terms of the Agreement are:
»
»
KCG Advisors Pty Limited to receive $10,000 per month, exclusive of GST, for services provided by Mr. Kelly.
Additional fee of $225 per hour for each additional hour of services provided over 60 hours in a calendar month.
No additional hours were billed during the period.
The Agreement is subject to a mutual 3-month notice period (but which may be immediately terminated by
Terragen in the event of serious misconduct).
JUSTUS HOMBURG, MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
»
Base Remuneration – Effective 29 August 2019 $301,125 per annum, including superannuation contributions, on a
full-time basis, subject to annual increases at the discretion of the Board of Directors.
Termination – By six months’ notice from either party.
Incentive benefits – Under the Employee Incentive Plan, to be determined by the Board of Directors after review of
the annual company result for the relevant calendar year, and Management’s performance
Equity – The Director shall be entitled to participate in the Employee Incentive Plan of the Company.
»
»
»
14
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 15
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
2020
Salary and
fees
Super-
annuation
Employee
entitlements
Other
(termination
benefits)
Total
remuneration
Proportion of
remuneration
that is
performance
based
NON-EXECUTIVE DIRECTORS
$
Paul Schober
Sam Brougham f
Gregory Robinson
David Ryan a
John Ryals b
Ingrid van Dijken b
Travis Dillon c, g
44,665
45,833
40,169
3,000
19,500
21,665
19,000
Total Non-Executive
Directors
193,832
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
$
44,665
45,833
40,169
3,000
19,500
21,665
19,000
193,832
-
-
-
-
-
-
-
-
EXECUTIVE DIRECTORS
Justus Homburg d
Jim Cooper e
Total Executive
Directors
290,785
3,466
21,048
301
294,251
21,349
6,717
267
6,984
140,000
-
458,550
4,034
140,000
462,584
OTHER KEY MANAGEMENT PERSONNEL
Stephen Kelly
110,000
-
-
110,000
-
-
-
-
110,000
110,000
%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Total Key
Management
Personnel
Total Director and
KMP Compensation
598,083
21,349
6,984
140,000
766,416
0%
a Resigned 31 July 2019
b Appointed 11 December 2019
c Appointed 1 May 2020
d Resigned 25 June 2020
e Appointed 25 June 2020
f Sam Brougham invoices director fees via Crofton Park Developments Pty Ltd atf Sam Brougham Family Trust.
g Travis Dillon invoices director fees via Dillon Consulting Company Pty Ltd.
16
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
2019
Salary and
fees
Super-
annuation
Employee
entitlements
Other
Total
remuneration
Proportion of
remuneration
that is
performance
based
NON-EXECUTIVE DIRECTORS
$
Paul Schober
Sam Brougham
Gregory Robinson
Wayne Finlayson
David Ryan
Total Non-Executive
Directors
36,000
48,000
36,000
12,000
36,000
168,000
$
-
-
-
-
-
-
-
-
-
-
-
-
EXECUTIVE DIRECTORS
Justus Homburg
291,486
21,048
Total Executive
Directors
291,486
21,048
7,677
7,677
Total Director and
KMP Compensation
459,486
21,048
7,677
$
-
-
-
-
-
-
-
-
-
$
36,000
48,000
36,000
12,000
36,000
168,000
320,211
320,211
%
0%
0%
0%
0%
0%
0%
0%
0%
488,211
0%
17
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
SHARE-BASED COMPENSATION
On 17 July 2019, Terragen established an employee incentive plan (Employee
Incentive Plan) to assist in the motivation, reward and retention of its Directors,
executive staff, and other selected employees.
Incentives under the Employee Incentive Plan may be offered to an Eligible
Employee which means:
»
»
an employee of a Group Company;
an executive director, a non-executive director, or a company secretary
of a Group Company; or
a contractor or consultant who provides services to a Group Company.
»
In selecting Eligible Employees to apply for, or otherwise receive incentives
(Incentives), the Board will have regard to:
»
the position in the Terragen Group held or to be held by the Eligible
Employee;
the Eligible Employee’s length of service with the Terragen Group;
the contribution made by the Eligible Employee to the Terragen Group;
the potential contribution to be made by the Eligible Employee to the
Terragen Group; and
any other matters which the Board considers relevant.
»
»
»
»
The following incentives may be issued under the Employee Incentive Plan:
»
»
»
a performance right;
an option; and
a share.
A grant of Incentives under the Employee Incentive Plan is subject to both the
rules of the Employee Incentive Plan and the terms of the specific grant.
Options or performance rights granted under the Employee Incentive Plan may
only be exercised if, at the time of exercise:
»
»
the options or performance rights have vested;
the options or performance rights have not been forfeited or lapsed;
and
the exercise price (for option or performance right (as adjusted if
applicable)) has been paid.
»
During the financial year no incentives were issued under the Employee
Incentive Plan.
There are no options affecting remuneration in the current reporting period.
At 30 June 2020 there are no options that have not yet been exercised, over
ordinary shares in the Group, which were provided as remuneration to directors
and key management personnel in prior years.
The Board has rules that contain restrictions on removing the ‘at risk’ aspect
of the options granted to executives. Executives may not enter into any
transactions designed to remove the ‘at risk’ aspect of an instrument before it
vests.
There are no vesting conditions attached to the options. In the event of
termination (specified circumstances) only vested options are entitled to be
exercised and must be exercised within thirty days of termination or such other
period as may be determined by the Board of Directors.
18
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from
grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are
determined using an option pricing model that takes into account the exercise price, the term of the option, the share
price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free
interest rate for the term of the option.
SHARES PROVIDED ON EXERCISE OF REMUNERATION OPTIONS
No shares were issued as a result of the exercise of options during the year.
UNLISTED OPTION HOLDINGS
The numbers of options over ordinary shares in the Group held during the financial year by each director and each key
management person of the Group, including their personally related parties, are set out below:
2020
Name
Balance
at start of
year
Granted as
remunera-
tion
Paul Schober
-
Sam Brougham
800,000
Gregory Robinson
John Ryals
Ingrid van Dijken
Travis Dillon
-
-
-
-
Justus Homburg
2,000,000
Jim Cooper
Stephen Kelly
-
-
Total
2,800,000
-
-
-
-
-
-
-
-
-
-
Acquired
other than
as remu-
neration
80,000
800,000
-
-
320,000
(320,000)
-
100,000
-
200,000
-
-
-
-
-
-
-
-
Exercised
Held at time
of ceasing
to be KMP
Balance at
end of year
Vested and
exercisable
-
-
-
-
-
-
(2,200,000)
-
-
80,000
80,000
1,600,000
1,600,000
-
-
-
-
100,000
100,000
-
-
-
-
-
-
-
-
1,500,000
(320,000)
(2,200,000)
1,780,000
1,780,000
2019
Name
Balance
at start of
year
Granted as
remunera-
tion
Paul Schober
Sam Brougham
Gregory Robinson
-
-
-
Wayne Finlayson
400,000
David Ryan
-
Justus Homburg
2,000,000
Total
2,400,000
-
-
-
-
-
-
-
Acquired
other than
as remu-
neration
800,000
-
-
-
-
800,000
Exercised
Held at time
of ceasing
to be KMP
Balance at
end of year
Vested and
exercisable
-
-
-
-
-
-
-
-
-
-
(400,000)
-
-
-
-
800,000
800,000
-
-
-
-
-
-
2,000,000
2,000,000
(400,000)
2,800,000
2,800,000
19
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
SHARE HOLDINGS
E)
The number of shares in the Group held during the financial year by each director of Terragen Holdings Limited and other
key management personnel of the Group, including their personally related parties, are set out below. There were no
shares granted during the reporting period as compensation (2019: nil).
2020
Balance at
start of year
Shares held
on appoint-
ment as KMP
Acquisitions
during the
year
Options
converted
Shares held
on ceasing to
be KMP
Balance at
the end of the
year
Key Management Personnel of Terragen Holdings Limited
Ordinary shares
Paul Schober
152,000
Sam Brougham
10,371,616
Gregory Robinson
3,363,000
David Ryan
John Ryals
Ingrid van Dijken
Travis Dillon
741,032
-
-
-
Justus Homburg
200,000
Jim Cooper
Stephen Kelly
-
-
-
-
-
-
-
1,290,000
-
-
200,000
-
-
4,350,000
-
-
75,000
320,000
-
-
-
219,000
75,000
-
60,000
-
-
-
-
-
-
-
-
-
-
(741,032)
-
-
-
152,000
14,721,616
3,758,000
-
-
1,290,000
219,000
(275,000)
-
-
-
200,000
60,000
14,827,648
1,490,000
4,779,000
320,000
(1,016,032)
20,400,616
2019
Balance at
start of year
Shares held
on appoint-
ment as KMP
Acquisitions
during the
year
Options
converted
Shares held
on ceasing to
be KMP
Balance at
the end of the
year
Key Management Personnel of Terragen Holdings Limited
Ordinary shares
Paul Schober
-
Sam Brougham
8,627,616
Gregory Robinson
3,120,000
Wayne Finlayson
David Ryan
480,000
741,032
Justus Homburg
-
12,968,648
-
-
-
-
-
-
-
152,000
1,744,000
243,000
-
-
200,000
2,339,000
-
-
-
-
-
-
-
-
-
-
152,000
10,371,616
3,363,000
(480,000)
-
-
-
741,032
200,000
(480,000)
14,827,648
LOANS TO KEY MANAGEMENT PERSONNEL
F)
There were no loans to key management personnel at any time during the financial year however unpaid director and
other fees amounted to $126,091.
END OF REMUNERATION REPORT
INSURANCE AND INDEMNIFICATION
To the extent permitted by law, the Group has indemnified (fully insured) each director and the secretary of the Group. The
liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings (that may be
brought) against the officers in their capacity as officers of the Company or a related body, and any other payments arising
20
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Directors’ Report for the year ended 30 June 2020
from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of
conduct involving a willful breach of duty by the officers or the improper use by the officers of their position or of information
to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the
premium between amounts relating to the insurance against legal costs and those relating to other liabilities.
PROCEEDINGS ON BEHALF OF THE GROUP
The Group is not aware that any person has applied to the court under section 237 of the Corporations Act 2001 for leave
to bring proceedings on behalf of the Group, or to intervene in any proceedings in which the Group is a party, for the pur-
pose of taking responsibility on behalf of the Group for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Group with leave of the court under section 237 of the
Corporations Act 2001.
NON-AUDIT SERVICES
The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Group are important. Details of amounts paid or payable to the auditor for audit and
non-audit services provided during the year by the auditor are set out below:
Other services
Advice on taxation and other matters and review and lodgement of corporate tax returns
Investigating accountants report for the IPO Prospectus
$
67,510
84,735
152,245
The directors are satisfied that the provision of non-audit services, during the year, by the auditor is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that
the services, as disclosed in note 2 to the financial statements, do not compromise the external auditor’s independence,
for the following reasons:
»
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110
‘Code of Ethics for Professional Accountants’, including reviewing or auditing the auditor’s own work, acting in a
management or decision-making capacity for the company, acting as advocate for the company or jointly sharing
economic risks and rewards.
»
Details of the amounts paid or payable to the auditor, Deloitte for audit services provided during the year are set out in
note 2 to the financial report.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is attached
to this report.
AUDITOR
Deloitte continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
On behalf of the Directors,
Jim Cooper
Managing Director
Melbourne, 28 August 2020
21
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
AUDITOR’S INDEPENDENCE DECLARATION
Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001 Australia
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
www.deloitte.com.au
The Board of Directors
Terragen Holdings Limited
Unit 6, 39 Access Street
COOLUM BEACH QLD 4573
28 August 2020
Dear Board Members,
Terragen Holdings Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of Terragen Holdings Limited.
As lead audit partner for the audit of the financial statements of Terragen Holdings Limited for
the financial year ended 30 June 2020, I declare to the best of my knowledge and belief, there
have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(ii)
any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Peter Glynn
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited
20
22
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001 Australia
DX: 111
Tel: +61 (0)3 9671 7000
Fax: +61 (0)3 9671 7001
www.deloitte.com.au
Independent Auditor’s Report to the members of
Terragen Holdings Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Terragen Holdings Limited (the “Company”), and its subsidiaries
(the “Group”) which comprises the consolidated statement of financial position as at 30 June 2020,
consolidated statement of profit or loss and other comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies, and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants
(including Independence Standards (the Code) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
We have determined that there are no key audit matters to communicate in our report.
Other Information
The directors are responsible for the other information. The other information comprises the Operating
and Financial Overview, Directors’ Report and ASX Announcement – Annual Results Announcement
which we obtained prior to the date of our auditors report, and also includes the following information
which will be included in the Group’s annual report (but does not include the financial report and our
auditor’s report thereon): Corporate Directory, Corporate Governance Report and Shareholder
Information, which is expected to be made available to us after that date.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
21
23
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Our opinion on the financial report does not cover the other information and we do not and will 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
identified above and, in doing so, consider whether the other information is materially inconsistent with
the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed on the other information that we obtained prior to
the date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
When we read the Corporate Directory, Corporate Governance Report and Shareholder Information, if
we conclude that there is a material misstatement therein, we are required to communicate the matter
to the directors and use our professional judgement to determine the appropriate action.
The Directors’ Responsibilities 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 Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
22
24
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
•
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the
Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 10 to 18 of the directors’ report for the
year ended 30 June 2020.
20
In our opinion, the Remuneration Report of Terragen Holdings Limited, for the year ended 30 June
2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of Terragen Holdings Limited 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.
DELOITTE TOUCHE TOHMATSU
Peter Glynn
Partner
Chartered Accountants
Melbourne, 28 August 2020
23
25
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
Revenue
Other income
Accounting and audit expenses
Advertising and marketing expenses
ASX and share registry expenses
Computer costs
Consulting costs
Depreciation and amortisation expense
Direct research expenses
Employee benefits expense
Finance costs
Insurance costs
Initial public offering costs
Legal costs
Motor vehicle costs
Occupancy costs
Raw materials and consumables used
Transport costs
Travel and accommodation
Other expenses
Loss before income tax expense from
continuing operations
Income tax benefit
Notes
3
3
4
5
7
2020
$
1,530,853
495,050
(231,324)
(260,568)
(79,665)
(88,292)
(361,740)
(443,427)
(584,309)
2019
$
981,007
254,205
(120,236)
(70,074)
-
(59,447)
(345,426)
(273,010)
(235,808)
(3,188,241)
(2,639,643)
(29,824)
(98,583)
(428,691)
(112,736)
(94,164)
(141,843)
(444,225)
(190,561)
(152,165)
(539,098)
(19,581)
(72,184)
-
(15,943)
(130,083)
(137,475)
(338,023)
(145,402)
(44,653)
(436,349)
(5,443,553)
(3,848,125)
9
517,938
637,384
Loss for the year after income tax benefit
(4,925,615)
(3,210,741)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Gain on translation of foreign operations
40
-
Total comprehensive loss for the year
(4,925,575)
(3,210,741)
Basic and diluted loss per share (cents per share)
10
(3.27)
(3.38)
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
26
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Current tax asset
Total current assets
Non-current assets
Right of use assets
Property, plant, and equipment
Intangible assets
Other assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Borrowings
Employee provisions
Total current liabilities
Non-current liabilities
Borrowings
Employee provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Notes
2020
$
2019
$
22
11
12
13
14
15
16
17
18
19
18
19
20
21
16,378,408
1,837,241
391,882
64,155
185,448
517,938
410,315
35,836
-
645,321
17,537,831
2,928,713
397,837
776,779
132,290
122,256
1,429,162
18,966,993
1,173,764
221,321
219,825
1,614,910
254,985
54,543
309,528
1,924,438
17,042,555
-
824,955
72,685
122,256
1,019,896
3,948,609
653,901
125,430
185,212
964,543
102,345
45,457
147,802
1,112,345
2,836,264
41,560,581
22,222,619
1,636,894
1,877,793
(26,154,920)
(21,264,148)
17,042,555
2,836,264
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
27
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2020
Issued Capital
$
Reserves
$
Accumulated
Losses
$
Total Equity
$
Balance as at 1 July 2019
22,222,619
1,877,793
(21,264,148)
2,836,264
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
-
-
-
Transactions with owners in their capacity as owners:
Issue of share capital
Capital raising costs
20,050,000
(918,134)
-
40
40
-
-
(4,925,615)
(4,925,615)
-
40
(4,925,615)
(4,925,575)
-
-
20,050,000
(918,134)
Options exercised or lapsed in relation
to employee incentive arrangements
Total transactions with owners in their
capacity as owners
206,096
(240,939)
34,843
-
19,337,962
(240,939)
34,843
19,131,866
Balance as at 30 June 2020
41,560,581
1,636,894
(26,154,920)
17,042,555
2019
Issued Capital
$
Reserves
$
Accumulated
Losses
$
Total Equity
$
Balance as at 1 July 2018
19,718,579
1,129,170
(18,053,407)
2,794,342
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
-
-
-
Transactions with owners in their capacity as owners:
Issue of share capital
Capital raising costs
2,650,968
(146,928)
-
-
-
-
-
Fair value of share options issued
-
748,623
Total transactions with owners in their
capacity as owners
2,504,040
748,623
(3,210,741)
(3,210,741)
-
-
(3,210,741)
(3,210,741)
-
-
-
-
2,650,968
(146,928)
748,623
3,252,663
Balance as at 30 June 2019
22,222,619
1,877,793
(21,264,148)
2,836,264
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
28
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Interest and other costs of finance paid
Interest received
Government grants received
Research and development tax concessions received
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
2020
$
2019
$
1,550,056
975,380
(6,472,549)
(4,550,902)
(29,824)
98,455
315,655
645,321
(19,581)
10,992
234,390
1,213,534
Net cash flows used in operating activities
22(b)
(3,892,886)
(2,136,187)
Cash flow from investing activities
Payments for property, plant, and equipment
Proceeds from sale of property, plant & equipment
Payments for intangible assets
Net cash used in investing activities
Cash flow from financing activities
Proceeds from share issue
Costs of issuing equity securities
Repayments of borrowings
Repayment of lease liabilities (refer note 1(e))
(376,581)
(637,032)
-
(64,868)
54,083
-
(441,449)
(582,949)
20
20
20,050,000
2,882,832
(918,134)
(93,207)
(163,239)
-
-
(4,323)
Net cash provided by financing activities
18,875,420
2,878,509
Cash and cash equivalents at the beginning of the year
1,837,241
1,677,868
Net increase in cash and cash equivalents
14,541,085
159,373
Foreign exchange difference on cash and cash equivalents
82
-
Cash and cash equivalents at the end of the year
22(a)
16,378,408
1,837,241
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
29
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
NOTES TO THE FINANCIAL STATEMENTS
INTRODUCTION
The financial report covers Terragen Holdings Limited (the “Company” or “Terragen”) and the entity it controlled for the
year ended 30 June 2020 (collectively “Group”).
Terragen Holdings Limited is a listed public company limited by shares, incorporated, and domiciled in Australia. The
presentation currency and functional currency of the Company is Australian dollars.
The principal activities of the Company during the financial year were research, development, and early market
development of biological products in the agriculture sector.
The Registered office and principal place of business address of the Company is Unit 6, 39 Access Crescent, Coolum
Beach, QLD, Australia, 4573.
The financial report was authorised for issue by the Board of Directors of Terragen on the date shown on the Declaration
by Directors attached to the Financial Statements.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
1.
The principal accounting policies which have been adopted in the preparation of these financial statements are set out
below.
STATEMENT OF COMPLIANCE
A.
The financial report is a general-purpose financial report which has been prepared in accordance with the Corporations
Act 2001, Australian Accounting Standards, and Interpretations, and complies with other requirements of the law.
These financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board (IASB).
BASIS OF PREPARATION
B.
The financial report has been prepared on historical cost basis. Cost is based on the fair values of the consideration given
in exchange for assets. All amounts are presented in Australian dollars unless otherwise noted. All values are rounded to
the nearest dollar.
The accounting policies have been consistently applied and, except where there is a change in accounting policy, are
consistent with those of the previous year.
GOING CONCERN
C.
The financial statements have been prepared in accordance with generally accepted accounting standards, which are
based on the Company continuing as a going concern.
EARNINGS PER SHARE
D.
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all
dilutive potential ordinary shares.
30
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
E.
The Group has adopted all the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board (the AASB) that are relevant to its operations and effective for the current year. New and revised
Standards and amendments thereof and Interpretations effective for the current year that are relevant to the Group
include:
»
»
AASB 16 Leases
Interpretation 23 Uncertainty over Income Tax Treatments and AASB 2017-4 Amendments to Australian
Accounting Standards – Uncertainty over Income Tax Treatment.
AASB 16 LEASES
The Group has adopted the new lease accounting standard AASB 16 Lease from 1 July 2019. AASB 16 introduces
significant changes to lessee accounting by removing the classification of leases as either operating or finance leases as
required by AASB 117 and instead introduces a single lessee accounting model.
Applying that model, a lessee is required to:
»
Recognise assets and liabilities for all leases with a term of more than 12 months in the Consolidated Statement
of Financial Position initially measured at the present value of the future lease payments, unless the underlying
asset is of low value or the leasing arrangement is short term.
Recognise amortisation of lease assets separately from interest on lease liabilities in the Statement of Profit or
Loss.
Separate the total amount of cash paid into a principal portion (presented within financing activities) and interest
(presented within operating activities) in the Consolidated Cash Flow Statement.
»
»
The Group has elected to apply the modified retrospective approach for leases. For leases, which were classified as
operating leases under AASB 117, the Group has recognised right-of-use assets and lease liabilities as at the transition
date (1 July 2019). The Group has reclassified assets previously classified as finance leases on the adoption date which
were previously classified as property, plant & equipment.
The effect as at 1 July 2019 of the recognition of the new right-of-use assets and lease liabilities is disclosed below:
Increase in right of use assets
Decrease in assets from property, plant & equipment (transferred to right-of-use assets)
Increase in lease liabilities – current
Increase in lease liabilities – non-current
Impact on retained earnings
The effect for the year ended 30 June 2020 was to:
Increase in depreciation and amortisation expense
Increase in finance costs
Decrease in occupancy costs (lease rentals)
1 July 2019
($)
421,386
(143,215)
(57,563)
(212,719)
-
(65,452)
(8,138)
65,701
The application of AASB 16 has an impact on the consolidated statement of cash flows of the Group. Under AASB 16,
lessees must present:
»
short-term lease payments, payments for leases of low-value assets and variable lease payments not included in
the measurement of the lease liability as part of operating activities;
cash paid for the interest portion of a lease liability as either operating activities or financing activities, as
permitted by AASB 107 (the Group has opted to include interest paid as part of financing activities); and
cash payments for the principal portion for a lease liability, as part of financing activities.
»
»
31
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
Under AASB 117, all lease payments on operating leases were presented as part of cash flows from operating activities.
Consequently, the net cash used by operating activities has decreased by $85,807, being the lease payments net of the
interest expense component, and net cash used in financing activities has increased by the same amount.
The adoption of AASB 16 did not have an impact on net cash flows.
INTERPRETATION 23 UNCERTAINTY OVER INCOME TAX TREATMENTS AND AASB 2017-4 AMENDMENTS TO
AUSTRALIAN ACCOUNTING STANDARDS – UNCERTAINTY OVER INCOME TAX TREATMENT
The Group has adopted IFRIC 23 for the first time in the current year. IFRIC 23 sets out how to determine the accounting
tax position when there is uncertainty over income tax treatments. The Interpretation requires the Group to:
»
»
determine whether uncertain tax positions are assessed separately or as a group; and
assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be
used, by an entity in its income tax filings:
-
If yes, the Group should determine its accounting tax position consistently with the tax treatment used or
planned to be used in its income tax filings; and
if no, the Group should reflect the effect of uncertainty in determining its accounting tax position using
either the most likely amount or the expected value method.
-
As there were no uncertain tax positions, the adoption of this Standard did not have any material impact on the financial
statements.
NEW AND REVISED IFRS STANDARDS IN ISSUE BUT NOT YET EFFECTIVE
The Directors do not consider that the adoption of any new Standards and Interpretations in issue but not yet effective at
the date of these financial statements will have a material impact on the financial statements of the Group.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
F.
In the application of the Group’s accounting policies, which are described below, Management is required to make
judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from
other sources. The estimates and associated assumptions are based on historical experience and various other factors
that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgements.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both current and future periods.
CRITICAL JUDGEMENTS AND ESTIMATES IN APPLYING THE GROUP’S ACCOUNTING POLICIES
The directors have made the following critical judgements and estimations in the process of applying the Group’s
accounting policies.
IMPACT OF COVID-19
The outbreak of COVID-19 and the subsequent quarantine measures imposed by the Australian and other governments
as well as the travel and trade restrictions imposed by Australia and other countries in early 2020 have caused disruption
to businesses and economic activity. However, as noted in the ‘Impact of COVID-19 pandemic on operations’ section of
the Directors’ Report, the Board and Management have considered the impact of COVID-19 on the consolidated entity’s
operations and financial performance and have noted that the Group has not been materially impacted. The COVID-19
pandemic has had a negligible impact on the Group’s operation or results. The Group achieved significant sales growth
over the prior financial year with sales and production activity in Australia continuing throughout the COVID-19 pandemic.
Sales in New Zealand were adversely impacted in April and May 2020 due to COVID-19 restrictions effectively stopping
sales related activity in New Zealand and which recommenced in late May 2020.
In response to COVID-19, both Federal and the State Government of Victoria have implemented policies and measured
with the aim of containing the virus. In an effort to contain the spread of the virus, the Victorian Government, on 2 August
2020, implemented Stage 4 restrictions in Melbourne and Stage 3 restrictions in regional Victoria with quarantine
32
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
restrictions, travel restrictions, closure of businesses and other restrictive movement measures. Given the principal
operating location is in Queensland, these measures have only had a negligible impact of the business.
The Group received a $50,000 cash boost grant from the Australian government related to COVID-19 during the financial year.
In preparing the consolidated financial report, Management has considered the impact of COVID-19 on the various
balances in the financial report, including the carrying values of trade receivables and finite life non-current assets.
Management determined that there was no significant impact of Covid-19 on the abovementioned balances and
accounting estimates.
JUDGEMENTS
With regard to research and development costs incurred during the financial year it has been determined that the
Group has not met the criteria as outlined in Note 1(v) as the ability to successfully commercialise Terragen’s products
is dependent on broadening the range of uses which is unlikely to occur until Terragen has data to validate the benefits
of its products in those wider applications. The research and development expenditure incurred by the Group during the
financial year was primarily designed to provide this additional evidence.
KEY SOURCES OF ESTIMATION UNCERTAINTY
In the following notes are the key assumptions concerning the future, and other key sources of estimation uncertainty at
the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year.
ESTIMATION UNCERTAINTY
Information about estimates and assumptions that have the most significant effect on recognition and measurement of
assets, liabilities, income, and expenses is provided in the following notes:
TAX RECEIVABLES
I.
Management estimated the amount receivable that can be claimed in respect of Research and Development tax offsets
based on application of the rules and requirements of the relevant tax legislation. Refer also to Note 1(p).
RECOVERABILITY OF DEFERRED TAX ASSET
II.
Deferred tax assets have not been recognised as Management does not believe that the members of the Group satisfy the
recognition criteria set out in paragraph 35 of AASB12 i.e. “that the entity has sufficient taxable temporary differences
or there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or
unused tax credits can be utilised by the entity”.
There have been no other significant estimates and judgements made in applying accounting policies that the Directors
consider would have a significant effect on the amounts recognised in the financial statements. There have been no key
assumptions made concerning the future, and there are no other key sources of estimation uncertainty at the reporting
date, that the Directors consider would have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
G.
PRINCIPLES OF CONSOLIDATION
SUBSIDIARIES
Subsidiaries are all entities over which the Group has control. The Group controls an entity where the group is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are deconsolidated from the date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
33
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of
profit or loss, statement of comprehensive income, statement of changes in equity and balance sheet, respectively.
When the Group ceases to consolidate or equity account for an investment because of a loss of control, joint control
or significant influence, any retained interest in the entity is re-measured to its fair value with the change in carrying
amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently
accounting for the retained interest as an associate, joint venture, or financial asset. In addition, any amounts previously
recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed
of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are
reclassified to profit or loss.
If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained,
only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit
or loss where appropriate.
FOREIGN CURRENCY TRANSLATION
H.
In preparing the financial statements of the Group, transactions in currencies other than the entity’s functional currency
(foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting
date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at
that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical
cost in a foreign currency are not retranslated.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within
finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis
within other expenses.
BORROWINGS
I.
Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are
measured at amortised cost with any difference between the initial recognised amount and the redemption value being
recognised in profit and loss over the period of the borrowing using the effective interest rate method.
CASH AND CASH EQUIVALENTS
J.
Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments, net
of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of
financial position.
EMPLOYEE BENEFITS
K.
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service
leave when it is probable that settlement will be required and they are capable of being measured reliably. Liabilities
recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate
expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are measured
as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by
employees up to reporting date. Payments to defined contribution retirement benefit plans are recognised as an expense
when employees have rendered service entitling them to the contributions.
L.
FINANCIAL INSTRUMENTS
RECOGNITION AND DERECOGNITION
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group
becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets
and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added
to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
34
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in profit or loss.
All recognised financial assets are measured subsequently in their entirety at amortised cost.
CLASSIFICATION OF FINANCIAL ASSETS
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
»
»
The financial asset is held within a business model whose objective is to hold financial assets in order to collect
contractual cash flows.
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are measured subsequently at fair value through other
comprehensive income (FVTOCI):
»
the financial asset is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling the financial assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
»
By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL). In the
preparation of these financial statements, all financial assets are measured at amortised cost.
INITIAL MEASUREMENT OF FINANCIAL ASSETS
Financial assets are classified according to their business model and the characteristics of their contractual cash flows.
IMPAIRMENT OF FINANCIAL ASSETS
The Group makes use of a simplified approach for trade and other receivables as well as contract assets and records the
loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Group uses
its historical experience, external indicators, and forward-looking information to calculate the expected credit losses.
FINANCIAL LIABILITIES
All financial liabilities are measured subsequently at amortised cost using the effective interest method or at FVTPL.
However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when
the continuing involvement approach applies, and financial guarantee contracts issued by the Group, are measured in
accordance with the specific accounting policies set out below.
FINANCIAL LIABILITIES MEASURED AT AMORTISED COST
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments (including all fees and points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where
appropriate) a shorter period, to the amortised cost of a financial liability.
TRADE PAYABLES
M.
Trade payables and other accounts payable are recognised when the Group becomes obliged to make future payments
resulting from the purchase of goods and services.
GOODS AND SERVICES TAX (GST)
N.
Revenues, expenses, and assets are recognised net of the amount of goods and services tax (GST), except:
i.
where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the
cost of acquisition of an asset or as part of an item of expense; or
for receivables and payables which are recognised inclusive of GST.
ii.
35
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows are included in the statement of cash flows on a net basis. The GST component of cash flows arising from
investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating
cash flows.
IMPAIRMENT OF ASSETS
O.
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can
be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to
the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at
least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows
have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in
which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit)
in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
P.
INCOME TAX
CURRENT TAX
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in
the consolidated statement of profit or loss and other comprehensive income because of items of income or expense that
are taxable or deductible in other years and items that are never taxable or deductible.
DEFERRED TAX
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred
tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised
for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which
those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in
a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not
recognised if the temporary difference arises from the initial recognition of goodwill.
CURRENT AND DEFERRED TAX FOR THE YEAR
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other
comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is included in the accounting for the business combination.
36
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
Management estimates the amount of Research and Development tax offsets based on application of the rules and
requirements of the legislation. The Group recognises the benefit in the determination of income tax expense/benefit.
TAX CONSOLIDATION
The company and its wholly-owned Australian resident entity are members of a tax-consolidated group under Australian
tax law. Terragen Holdings Limited is the head entity within the tax-consolidated group. In addition to its own current and
deferred tax amounts, the company also recognises the current tax liabilities and assets and deferred tax assets arising
from unused tax losses and relevant tax credits of the members of the tax-consolidated group.
Amounts payable or receivable under the tax-funding arrangement between the company and the entities in the tax
consolidated group are determined using a ‘separate taxpayer within group’ approach to determine the tax contribution
amounts payable or receivable by each member of the tax-consolidated group. This approach results in the tax effect of
transactions being recognised in the legal entity where that transaction occurred, and does not tax effect transactions that
have no tax consequences to the group. The same basis is used for tax allocation within the tax-consolidated group.
INVENTORIES
Q.
Inventories are valued at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and
variable overhead expenses, are assigned to inventory on hand by the method most appropriate to each class of inventory,
with the majority being valued on a first in first out basis. Net realisable value represents the estimated selling price less
all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
R.
LEASES
GROUP AS LESSEE
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-
of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for
short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets
and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease
payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is
more representative of the time pattern in which economic benefits from the leased assets are consumed. The right-of-use
asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end
of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets
are determined on the same basis as those of property, plant, and equipment with the exception that they factor in lease
renewals where relevant. In addition, the right-of-use assets are periodically reduced by impairment losses in accordance
with AASB 136 Impairment of Assets, if any, and adjusted for certain re-measurements of the lease liability.
LEASE LIABILITIES
The lease liability is initially measured at present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate as the discount rate. The discount rate is generally calculated using incremental borrowing
rates for the specific lease terms and currencies. The weighted average incremental borrowing rate used to calculate
the lease liabilities as of 1 July 2019 was 3.3%. Lease liabilities are disclosed as borrowings in the Statement of Financial
Position.
Lease payments included in the measurement of the lease liability comprise the following:
»
»
fixed payments, including in substance fixed payments less any lease incentives receivables;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement rate;
amounts expected to be payable under a residual value guarantee;
the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an
optional renewal period if the Group is reasonably certain to exercise an extension option; and
payment of penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
»
»
»
The lease liability is presented as a separate line in the consolidated statement of financial position.
37
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
The lease liability is measured at amortised cost using the effective interest method. It will be remeasured when there is a
change in index rate for future lease payments, a change in the Group’s estimated amount payable under a residue value
guarantee or changes in the Group’s assessment of probabilities of exercising a purchase, extension or termination option.
When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use
asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group
did not make any such adjustment during the period presented.
POLICIES APPLICABLE PRIOR TO 1 JULY 2019
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
GROUP AS LESSEE
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value
of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is
included in the statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss,
unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s
general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease
except where another more systematic basis is more representative of the time pattern in which economic benefits from
the lease asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the
period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability.
The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis over the lease
term, except where another systematic basis is more representative of the time pattern in which economic benefits from
the leased asset are consumed.
PROPERTY, PLANT, AND EQUIPMENT
S.
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and
any impairment in value.
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 flow to the Group and the cost of the item can be
measured reliably. All other repairs and maintenance are charged to the profit and loss during the financial period in
which they are incurred.
The depreciable amounts of all fixed assets including buildings, but excluding freehold land, are depreciated over their
estimated useful lives to the Group commencing from the time the asset is held ready for use.
The following depreciation rates are used in the calculation of depreciation:
Depreciation Rate
10 – 40%
10 – 50%
25%
20 – 33%
25%
Basis
Straight line
Straight line
Straight line
Straight line
Straight line
Class of Fixed Assets
Plant and equipment
Furniture & fittings
Motor vehicles
Plant and Equipment R&D
Leasehold improvements
38
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. If
a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to
exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
PROVISIONS
T.
Provisions are recognised when the Group has a present obligation, the future sacrifice of economic benefits is probable,
and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation at reporting date, considering the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation,
its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain
that recovery will be received and the amount of the receivable can be measured reliably.
U.
REVENUE RECOGNITION
SALE OF GOODS
Revenue is recognised at the time goods are delivered to the customer as this is the point in time that the Group satisfies
its performance obligations.
Gross revenue is reduced for sale rebates at the point of sale. Rebates are granted to agents who are members of the
Retail Agency Partner Network (having signed Retail Agency Partner Agreements).
GRANT REVENUE
Grant revenue is recognised at fair value when there is reasonable assurance that the grants will be received.
Grant revenue is recognised in profit or loss in the same period as the relevant expenses.
INTEREST REVENUE
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group
and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.
V.
INTANGIBLE ASSETS
INTERNALLY-GENERATED INTANGIBLE ASSETS - RESEARCH AND DEVELOPMENT EXPENDITURE
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project)
is recognised if, and only if, all of the following have been demonstrated:
»
»
»
»
»
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial, and other resources to complete the development and to use or
sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
»
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from
the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated
intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is
incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
39
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
COMPARATIVE FIGURES
W.
Where necessary, the comparative figures have been adjusted to conform to changes in presentation in the current
financial year.
REMUNERATION OF AUDITORS
2.
During the year, the following fees were paid or payable for services provided by the auditor of the parent entity and its
related practices:
Deloitte Touche Tohmatsu
i.
Audit and assurance services
Audit and review of financial reports
Investigating accountants report for the IPO Prospectus
2020
$
97,325
84,735
2019
$
28,500
-
Total remuneration for audit and assurance services
182,060
28,500
ii.
Other services
Advice on taxation and other matters and review and lodgement of corporate tax returns
67,510
Total Remuneration
249,570
40,000
68,500
3.
REVENUE AND OTHER INCOME
Sale of goods
Other income
Grant income
Interest received
COVID-19 grant received
Other income
Total Other Income
Total revenue and other income
2020
$
2019
$
1,530,853
981,007
315,655
98,455
50,000
30,940
234,390
10,992
-
8,823
495,050
254,205
2,025,903
1,235,212
The COVID-19 grant received is the ATO cash flow boost of $50,000. The Group did not receive any other COVID-19 related grants.
4.
DEPRECIATION AND AMORTISATION EXPENSE
Amortisation of Right-of-use assets (refer to note 1(e) and note 14)
Amortisation of property, plant, and equipment (refer to note 15)
Amortisation of intangible assets (refer to note 16)
Total depreciation and amortisation expense
2020
$
156,622
281,542
5,263
2019
$
-
267,747
5,263
443,427
273,010
40
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 5.
EMPLOYEE BENEFIT EXPENSE
Salaries and wages
Post-employment benefits
Termination benefits
Employee on-costs
Total employee benefit expense
6.
RESEARCH AND DEVELOPMENT EXPENSE
Direct research and development expenses
Employee benefits expense
Depreciation and amortisation expense
Other expenses
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
2020
$
2019
$
2,647,098
2,279,993
191,595
206,000
143,548
180,739
-
178,911
3,188,241
2,639,643
2020
$
584,309
536,369
36,437
104,103
2019
$
235,808
988,411
39,465
219,603
Total research and development expense
1,261,218
1,483,287
The above note shows total expenditure for the research and development by function contrasting with the Consolidated
Statement of Profit or Loss and Other Comprehensive Income which details expenses by nature.
7.
FINANCE COSTS
Interest on bank overdrafts and loans
Interest on lease liabilities
Other finance costs
2020
$
-
19,286
10,538
29,824
2019
$
5,861
11,487
2,233
19,581
OPERATING SEGMENTS
8.
The Group has identified its operating segments based on the internal reports that were reviewed and used by the Group’s
Chief Executive (the Chief Operating Decision Maker (CODM)) in assessing performance and determining the allocation of
resources during the year.
The Group is managed primarily on a geographic basis, that is, the countries in which products are sold. Operating
segments are therefore determined on the same basis. The CODM assesses the performance of the operating segments
based on revenue and expenditure that is recognised in the statement of profit or loss in these financial statements. The
measurement of gross expenditure does not include non-cash items such as depreciation expense and share based
payments expense.
Geographic locations from which reportable segments derive their revenues:
»
»
Australia
New Zealand
41
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
Both operating segments generated revenue during the year. Revenue is recognized at the point in time that the Group
satisfies its performance obligations by transferring the promised goods to its customers. Gross revenue is subsequently
reduced for sale rebates. Rebates are granted to agents who are members of the Retail Agency Partner Network (having
signed Retail Agency Partner Agreements).
Assets, liabilities, and cash flows are not allocated to segments in the internal reports that are prepared for the CODM.
The following tables present revenue and loss information for the Group’s operating segments for year ended 30 June
2020 and 30 June 2019, respectively.
III.
SEGMENT PERFORMANCE
30 June 2020
Total segment revenue
Segment other income
Segment expenditure
Segment result
Reconciliation of segment result to Group loss before tax:
Depreciation expense
Provision for expected credit losses
Other income
Net loss before tax
Australia
$
1,295,149
98,455
(6,615,419)
(5,221,815)
New Zealand
$
TOTAL
$
235,704
1,530,853
-
(330,440)
(94,736)
98,455
(6,945,859)
(5,316,551)
(443,427)
(80,171)
396,596
(5,443,553)
MAJOR CUSTOMERS
Included in revenues arising from the Australian segment, are the following revenues which arose from sales to the
Group’s three largest customers.
»
»
»
No other single customers contributed 10 per cent or more to the Group’s revenue.
Customer A - $349,300
Customer B - $163,484
Customer C - $161,280
30 June 2019
Total segment revenue
Segment other income
Segment expenditure
Segment result
Reconciliation of segment result to Group loss before tax:
Depreciation expense
Provision for expected credit losses
Other income
Net loss before tax
Australia
$
878,108
10,992
(4,637,507)
(3,748,407)
New Zealand
$
102,899
-
(105,873)
(2,974)
TOTAL
$
981,007
10,992
(4,743,380)
(3,751,381)
(273,010)
(66,947)
243,213
(3,848,125)
42
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
SEGMENT ASSETS
IV.
The following tables present assets and liabilities information for the Group’s operating segments as at 30 June 2020 and
30 June 2019, respectively.
30 June 2020
Segment assets
30 June 2019
Segment assets
Australia
$
New Zealand
$
TOTAL
$
18,713,496
253,497
18,966,993
Australia
$
3,829,708
New Zealand
$
TOTAL
$
118,901
3,948,609
9.
The income tax expense/benefit can be reconciled to the accounting profit/loss as follows:
INCOME TAX EXPENSE
a.
Components of tax benefit
Current tax
Deferred tax
b.
Prima facie tax benefit
Loss from continuing operations
Non-deductible expenditure
Income tax benefit calculated at 27.5%
Non-recognition of current year taxable loss
Over provision of prior year R&D offset
Research and Development tax offset
c.
Current tax asset
Opening balance
R&D Tax concession received
Over provision of prior year R&D offset
Research and Development tax offset accrual
Closing balance
2020
$
2019
$
1,458,174
1,079,544
(940,236)
(442,160)
517,938
637,384
(5,443,553)
(3,848,125)
1,566,994
1,729,453
(3,876,559)
(2,118,672)
1,066,054
582,635
(1,066,054)
(582,635)
-
517,938
517,938
(7,937)
645,321
637,384
645,321
1,221,471
(645,321)
(1,213,534)
-
517,938
517,938
(7,937)
645,321
645,321
Deferred tax assets associated with income tax losses have not been recognised due to uncertainty as to the timing
of their recoupment from sufficient future taxable income. Deferred tax assets relating to unused tax losses that may
potentially be available to the Group, subject to meeting the requirements under tax legislation, at 27.5% tax rate is
$3,353,232 as at 30 June 2020 (2019: $2,287,178).
43
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
LOSS PER SHARE
10.
Both the basic and diluted loss per share have been calculated using the loss for the year. The reconciliation of the
weighted average number of shares for the purpose of diluted loss per share to the weighted average number of ordinary
shares used in the calculation of basic loss per share is as follows:
Loss attributable to the owners of the Group
Weighted average number of shares used in basic loss per share
Weighted average number of shares used in diluted loss per share (i)
2020
$
2019
$
(4,925,615)
(3,210,741)
2020
Number
2019
Number
150,749,667
94,783,088
150,749,667
94,783,088
i.
There were no potential ordinary shares that are considered dilutive as they did not meet the requirements for
inclusion as per AASB 133 Earnings per share since the Group generated losses for the year ended 30 June 2020.
11.
TRADE AND OTHER RECEIVABLES
Trade receivables
Loss allowance
Other receivables
2020
$
410,585
(147,118)
263,467
128,415
391,882
2019
$
469,140
(66,947)
402,193
8,122
410,315
The average credit period on sales of goods is 47 days. No interest is charged on outstanding trade receivables. The Group
has provided 100% for trade receivables overdue by more than 3 months at year-end.
12.
OTHER CURRENT ASSETS
Deposits and guarantees
Prepayments
2020
$
109,398
76,050
185,448
2019
$
-
-
-
Prepayments relate principally to prepaid insurance premiums. Security deposits relate to leased properties as disclosed
in Note 14 and deposits held as security against a corporate credit card facility.
13.
CURRENT TAX ASSETS
Tax incentive on research and development
2020
$
2019
$
517,938
645,321
44
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
Movements in the tax incentive due during the year are set out below:
Opening balance at 1 July
Tax incentive on research and development received
Over provision of prior year research and development offset
Accrual of tax incentive for the year
Closing balance at 30 June
14.
RIGHT-OF-USE ASSETS
645,321
1,221,471
(645,321)
(1,213,534)
-
517,938
517,938
(7,937)
645,321
645,321
Cost
Balance at 30 June 2019
Initial application of AASB 16 (refer note 1(e))
Additions
At 30 June 2020
Accumulated amortisation
Balance at 30 June 2019
Initial application of AASB 16 (refer note 1(e))
Amortisation for the year
At 30 June 2020
Carrying amount at 30 June 2020
Buildings
$
Motor
vehicles
$
Research
equipment
$
Total
$
-
278,171
133,073
411,244
-
-
85,272
85,272
325,972
-
-
217,543
109,289
-
-
217,543
109,289
-
109,467
39,990
149,457
68,086
-
74,150
31,360
105,510
3,779
-
605,003
133,073
738,076
-
183,617
156,622
340,239
397,837
The consolidated entity leases several assets including buildings, motor vehicles and plant and equipment used in
manufacturing and research and development activities. Refer note 1 for further information on the consolidated entity’s
accounting policy for leases as a lessee.
A new lease contract was entered into for an additional building space in the Group’s operating premises, to expand the
original production and administration facility. This resulted in additions to right-of-use assets of $133,073.
The maturity analysis of lease liabilities is presented in note 23.
The following amounts were recognised in the loss for the year in relation to right-of-use assets:
Amortisation expense on right of use assets
Interest expense on lease liabilities
The Group does not sub-lease any right-of-use assets.
The total cash outflow, inclusive of interest, for leases amounted to $182,523 (2019: $74,116).
2020
$
156,622
19,286
45
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
15.
PROPERTY, PLANT, AND EQUIPMENT
CARRYING AMOUNTS OF
Plant and equipment
Office equipment
Motor Vehicles
Research equipment
Leasehold improvements
Written down value
2020
$
59,654
3,044
78,987
288,371
346,723
776,779
2019
$
25,915
6,210
108,076
454,088
230,666
824,955
MOVEMENTS IN CARRYING AMOUNTS
Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of
the current financial year:
Plant &
equipment
$
Office
equipment
$
Motor
vehicles
$
Research
equipment
$
Leasehold
improve-
ments
$
Total
$
Cost
Balance 1 July 2019
186,200
66,146
217,543
669,445
246,048
1,385,382
Transfer to right of use assets on initial
adoption of AASB 16 (refer note 1(e))
Additions
Disposals
-
56,250
-
-
791
-
(217,543)
(109,289)
-
(326,832)
88,471
30,819
200,250
376,581
-
-
-
-
Balance 30 June 2020
242,450
66,937
88,471
590,975
446,298
1,435,131
Accumulated depreciation
Balance 1 July 2019
(160,285)
(59,936)
(109,467)
(215,357)
(15,382)
(560,427)
Transfer to right of use assets on initial
adoption of AASB 16 (refer note 1(e))
-
-
109,467
74,150
-
183,617
Depreciation
Disposals
Balance 30 June 2020
Written down value
(22,511)
(3,957)
(9,484)
(161,397)
(84,193)
(281,542)
-
-
-
-
-
-
(182,796)
(63,893)
(9,484)
(302,604)
(99,575)
(658,352)
59,654
3,044
78,987
288,371
346,723
776,779
46
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
16.
INTANGIBLE ASSETS
Patents & trademarks
Accumulated amortisation
Total intangible assets
Balance at the beginning of the year
Additions from separate acquisitions
Amortisation charge for the year
Balance at the end of the year
2020
$
168,704
(36,414)
132,290
2020
$
72,685
64,868
(5,263)
132,290
Patents and trademarks are amortised over their estimated useful lives, which is on average 20 years.
17.
TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
Other payables
2020
$
289,461
774,733
109,570
2019
$
103,836
(31,151)
72,685
2019
$
77,666
282
(5,263)
72,685
2019
$
107,026
420,126
126,749
Trade payables have an average credit period of 37 days from invoice date. The carrying values of the trade and other payables
are considered to be a reasonable approximation of fair value.
1,173,764
653,901
47
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
18.
BORROWINGS
Current – at amortised cost
Insurance premium funding
Lease liabilities (refer note 1(e))
Non-current – at amortised cost
Lease liabilities (refer note 1(e))
2020
$
2019
$
38,021
183,300
221,321
2020
$
37,495
87,935
125,430
2019
$
254,985
102,345
MOVEMENTS IN LEASE LIABILITIES
Movement in the lease liabilities between the beginning and the end of the current financial year:
Balance at the beginning of the year
Lease liabilities recognised on initial adoption of AASB 16 (i) (refer to note 1(e))
New leases entered into during the period
Lease payments made
Portion of lease payments recognised as finance cost
Balance at the end of the year
Recognised as:
Current
Non-current
2020
$
190,280
278,171
133,073
(182,525)
19,286
438,285
183,300
254,985
438,285
2019
$
232,097
20,812
-
(74,116)
11,487
190,280
87,935
102,345
190,280
i.
The lease liabilities recognised on initial adoption of AASB 16 reconciles to operating lease commitments
disclosed in the financial statements for the year ended 30 June 2019 as follows:
Operating lease commitments at 30 June 2019
Less: Interest component of lease payments
Lease liability recognised on initial adoption of AASB 16
2020
$
284,183
(6,012)
278,171
48
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 19.
PROVISIONS
Current
Employee benefits
Non-current
Employee benefits
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
2020
$
2019
$
219,825
185,212
2020
$
2019
$
54,543
45,457
The provision for employee benefits relates to the Group’s liability for accumulated long service and annual leave entitlements.
20.
ISSUED CAPITAL
Ordinary shares (a)
‘B’ Class shares (b)
Total
2020
$
2019
$
41,560,581
22,200,119
-
22,500
41,560,581
22,222,619
ORDINARY SHARES
(A)
At shareholder meetings, each ordinary share has the right to attend and vote, one vote for every share held. Each ordinary
share has the right to participate in the dividends (if any) declared on that class of share.
Ordinary shares -issued and fully paid
Beginning of the year
Issue of shares
Shares issued on the exercise of options
(refer note 21(a))
2020
shares
2019
shares
2020
$
2019
$
104,508,902
91,754,859
22,200,119
19,696,079
80,200,000
12,214,043
20,050,000
2,515,968
1,112,000
-
206,096
-
Shares issued as remuneration
-
540,000
-
135,000
Shares issued on conversion of “B” Class shares
(refer note (b))
Capital raising costs
Balance at 30 June
1,000,000
-
-
-
22,500
-
(918,134)
(146,928)
186,820,902
104,508,902
41,560,581
22,200,119
At shareholder meetings, each ordinary share is entitled to attend and vote, one vote for every share held. Shares issued as
remuneration are issued at the market value of the shares with reference to recent capital raisings.
FULLY PAID CLASS B SHARES
(B)
During the year, the holders of “B” Class Shares converted their shares into fully paid ordinary shares. No consideration was
payable on the conversion as the holders had previous paid consideration for the “B” Class Shares. There were no class B
Shares on issue as at 30 June 2020 (2019: 1,000,000)
49
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
21.
RESERVES
Share based payments reserve (a)
Equity options reserve (b)
Foreign currency translation reserve
Total reserves
A)
SHARE BASED PAYMENT RESERVE
2020
$
2019
$
1,123,062
1,364,001
513,792
513,792
40
-
1,636,894
1,877,793
2020
options
2019
options
2020
$
2019
$
Options issued:
Outstanding at the beginning of the year
8,195,000
Issued during the year
Exercised during the year
Lapsed during the year
-
(1,112,000)
(188,000)
7,165,000
1,030,000
1,364,001
1,129,170
-
234,831
-
-
(206,096)
(34,843)
-
-
Outstanding at the end of the year
6,895,000
8,195,000
1,123,062
1,364,001
DETAILS OF THE EMPLOYEE INCENTIVE PLAN (EIP) OF THE GROUP
The Group has an EIP for directors, executives, employees, contractors and consultants of the Group and its subsidiaries (Eligible
Participants). As approved by the Board, disclosed in the Prospectus dated 18 October 2019, and in accordance with the terms
of the EIP, Eligible Participants may be granted options or performance rights to purchase ordinary shares (Awards). Each
Award converts into one ordinary share of the Group on exercise. No amounts are paid or payable by the recipient on receipt of
the Award. The Awards carry neither rights to dividends nor voting rights. Awards may be exercised at any time from the date of
vesting to the date of their expiry.
The number of Awards granted is calculated in accordance with service and performance-based criteria approved by the Group
and is subject to approval by the Board.
In July 2019, 1,112,000 Tranche 1 options were exercised which had previously been valued at $206,096, reducing Tranche 1
options outstanding to nil.
50
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
EMPLOYEE SHARES OPTIONS ON ISSUE
The following share-based payment arrangements were in existence as at 30 June 2020.
Option series
Number
Grant date
Vesting date
Expiry date
Exercise price
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Tranche 6
Tranche 7
Tranche 8
Tranche 9
400,000
350,000
75,000
450,000
600,000
2,000,000
1,990,000
1,030,000
28/10/2016
28/10/2016
31/10/2020
28/10/2016
28/10/2016
18/01/2022
24/01/2017
24/01/2017
24/01/2021
01/02/2017
01/02/2017
01/02/2021
16/08/2017
16/08/2017
16/08/2021
01/09/2017
01/09/2017
01/09/2021
17/01/2018
17/01/2018
17/01/2022
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
01/07/2018
01/07/2018
01/07/2022
$0.075
Fair Value at
grant date
$0.1500
$0.1554
$0.1559
$0.1559
$0.1563
$0.1581
$0.1562
$0.1854
B)
EQUITY OPTIONS RESERVE
Options issued:
2020
options
2019
options
2020
$
2019
$
Outstanding at the beginning of the year
8,100,000
-
513,792
-
Fair value of equity options issued during the year
4,214,043
8,100,000
-
Outstanding at the end of the year
12,314,043
8,100,000
513,792
513,792
513,792
DETAILS OF OTHER SHARE OPTIONS ISSUED BY THE GROUP
In July 2019, the Group issued 4,214,043 options over ordinary shares to shareholders who had participated in a prior capital
raising. The options are exercisable at $0.25 and have an expiry date of 11 December 2022. No consideration was received by the
Group in relation to those options.
The following equity options were in existence as at 30 June 2020:
Option series
Number
Grant date
Vesting date
Expiry date
Exercise price
Tranche 10
8,100,000
13/06/2019
13/06/2019
31/12/2022
Tranche 11
3,000,000
10/07/2019
10/07/2019
11/12/2022
Tranche 12
1,214,043
17/07/2019
17/07/2019
11/12/2022
$0.25
$0.25
$0.25
51
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
22.
CASH AND CASH EQUIVALENTS
RECONCILIATION OF CASH AND CASH EQUIVALENTS
(A)
For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and in banks and investments
in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as
shown in the statement of cash flows can be reconciled to the related items in the statement of financial position as follows:
Cash on hand
Cash at bank
Cash and bank balances
2020
$
98
2019
$
600
16,378,310
1,836,641
16,378,408
1,837,241
(B)
RECONCILIATION OF PROFIT FOR THE YEAR TO NET CASH FLOWS FROM OPERATING ACTIVITIES
2020
$
2019
$
(4,925,615)
(3,210,741)
443,427
80,171
-
-
-
273,010
66,947
18,132
135,000
234,831
(4,402,017)
(2,482,821)
(61,738)
(28,321)
(91,716)
127,384
(191,376)
2,129
(2,842)
576,150
519,823
43,699
(114,892)
77,465
(3,892,886)
(2,136,187)
Loss for the year
Adjustment for non-cash items
Depreciation and amortisation
Movement in loss allowance
Loss on sale of fixed assets
Share based payments – shares issued
Share based payments – expense
Changes in net assets and liabilities
(Increase)/decrease in assets:
Trade and other receivables
Inventories
Other assets
Current tax assets
Increase/(decrease) in liabilities:
Trade and other payables
Provisions
Net cash used in operating activities
52
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
23.
FINANCIAL INSTRUMENTS
FINANCIAL ASSETS AND LIABILITIES BY CATEGORIES
A)
The following table combines information about:
»
»
»
»
classes of financial instruments based on their nature and characteristics;
the carrying amounts of financial instruments (except where carrying amount approximates their fair value);
fair values of financial instruments (where applicable); and
fair value hierarchy levels of financial assets and financial liabilities for which fair value was disclosed.
All of the Group’s financial assets and financial liabilities are measured at amortised cost at 30 June 2020.
At 30 June 2020
Financial assets
Cash & cash equivalents
Trade and other receivables
Total other financial assets
Total financial assets
Financial liabilities
Trade and other payables
Total borrowings
Total financial liabilities
At 30 June 2019
Financial assets
Cash & cash equivalents
Trade and other receivables
Total other financial assets
Total financial assets
Financial liabilities
Trade and other payables
Total borrowings
Total financial liabilities
Note
TOTAL
$
Amortised cost
$
16,378,408
16,378,408
391,882
307,704
391,882
307,704
17,077,994
17,077,994
1,173,764
1,173,764
476,306
476,306
1,650,070
1,650,070
Note
TOTAL
$
Amortised cost
$
1,837,241
1,837,241
410,315
410,315
-
-
2,247,556
2,247,556
653,901
227,775
881,676
653,901
227,775
881,676
53
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
FINANCIAL RISK MANAGEMENT
B)
The Group manages its capital to ensure that the entity will be able to continue as a going concern whilst maximising the return
to shareholders through the optimisation of the debt and equity balances.
The Group’s capital includes issued capital less any accumulated losses. The Group policy is to maintain a capital base to
maintain investor, creditor and market confidence and to sustain future development of the business. The impact of the level of
capital on shareholders’ return is also recognised and the Group recognises the need to maintain a balance between the higher
returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position.
The Group is not subject to any externally imposed capital requirements.
CREDIT RISK
C)
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge
an obligation.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date of recognised
financial assets is the carrying amount of those assets, net of any provisions for impairment of those assets, as disclosed in the
statement of financial position and notes to financial statements.
The Group does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments
entered into by the Group.
The Group minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a large
number of customers.
CASH DEPOSITS
I.
Credit risk for cash deposits is managed by holding all cash deposits with major Australian banks.
TRADE RECEIVABLES
II.
Credit risk for trade receivables is managed by setting credit limits and completing credit checks for new customers.
Outstanding receivables are regularly monitored for payment in accordance with credit terms.
As the Group undertakes transactions with a range of customers and regularly monitors payment in accordance with credit
terms, the financial assets that are neither past due nor impaired, are expected to be received in accordance with the credit risk.
At 30 June 2020, we had 46 customers with outstanding invoices, of which 5 customers account for approximately 71% of all
trade receivables.
LIQUIDITY RISK
D)
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity
risk is managed by forecasting and monitoring cash inflows and outflows on a continuing basis.
MATURITY ANALYSIS
The table below represents the undiscounted contractual settlement terms for financial instruments and Management’s
expectation for settlement of undiscounted maturities.
54
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
Year ended 30 June 2020
< 6 months
$
6-12 months
$
1-5 years
$
Total
contractual
cash flows
$
Carrying
amount
$
Payables
Borrowings
Net maturities
1,173,764
148,292
1,322,056
-
88,823
88,823
-
1,173,764
1,173,764
266,622
266,622
503,737
476,306
1,677,501
1,650,070
Year ended 30 June 2019
< 6 months
$
6-12 months
$
1-5 years
$
Payables
Borrowings
Net maturities
653,901
81,729
735,630
-
55,019
55,019
-
108,192
108,192
Total
contractual
cash flows
$
653,901
244,940
898,841
Carrying
amount
$
653,901
227,775
881,676
FOREIGN EXCHANGE RISK
E)
The Group operates a branch in New Zealand and is exposed to foreign exchange risk arising from currency exposure. The
Group’s policy is to convert its local currency to the foreign currency at the time of the transaction. Foreign exchange risk arises
from future commercial transactions and recognised financial liabilities denominated in a currency that is not the Group’s
functional currency (which is the Australian dollar).
The Group manages foreign exchange risk on an as-needs basis. The risk is measured using sensitivity analysis and cash-flow
forecasting. The Group’s exposure to foreign currency risk, expressed in Australian dollars at the reporting date, was as follows:
At 30 June 2020
Cash and cash equivalents
Trade and other receivables
Total other financial assets
Total assets
Trade and other payables
Total borrowings
Net exposure
AUD Denominated
Balances in $AUD
NZ Denominated
Balances
converted to
$AUD
16,226,781
319,833
304,901
16,851,515
1,171,905
476,306
151,627
72,049
2,803
226,479
1,859
-
TOTAL
$AUD
16,378,408
391,882
307,704
17,077,994
1,173,764
476,306
15,203,304
224,620
15,427,924
55
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
At 30 June 2019
Cash and cash equivalents
Trade and other receivables
Total other financial assets
Total assets
Trade and other payables
Total borrowings
Net exposure
AUD Denominated
Balances in $AUD
NZ Denominated
Balances
converted to
$AUD
1,822,846
291,414
-
2,114,260
633,962
227,775
14,395
118,901
-
133,296
19,939
-
TOTAL
$AUD
1,837,241
410,315
-
2,247,556
653,901
227,775
1,252,523
113,357
1,365,880
The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian dollar against the relevant
foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel
and represents an assessment of the reasonably possible change in foreign exchange rates. A negative number in the table
represents a decrease in the operating profit before tax and reduction in equity where the Australian dollar strengthens
against the relevant currency. For a 10% strengthening of the Australian dollar against the relevant currency, there would be a
comparable impact on the loss or equity, and the balances below would be positive.
Profit / (loss) before tax and equity – 10% increase
Profit / (loss) before tax and equity – 10% decrease
2020
$
22,462
(22,462)
2019
$
11,336
(11,336)
INTEREST RATE RISK
F)
The Group’s exposure to interest rate risk arises predominantly from cash and cash equivalents bearing variable interest rates,
as the Group intends to hold any fixed rate financial assets to maturity. At the end of the reporting period the Group maintained
the following variable rate accounts:
30 June 2020
30 June 2019
Weighted average
interest rate
%
Balance
$
Weighted average
interest rate
%
Balance
$
Cash and cash equivalents
0.5%
16,378,408
0.5%
1,837,241
At the end of the reporting period, if the interest rates had changed, as illustrated in the table below, with all other variables
remaining constant, after-tax profit and equity would have been affected as follows:
After-tax loss higher / (lower)
Equity higher / (lower)
2020
$
81,892
(81,892)
2019
$
9,186
(9,186)
2020
$
81,892
(81,892)
2019
$
9,186
(9,186)
+0.5% (50bp)
-0.5% (50bp)
56
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
24.
RELATED PARTY TRANSACTIONS
The Group’s related parties include key management, post-employment benefit plans for the Group’s employees and others as
described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees
were given or received. Outstanding balances are usually settled in cash.
The aggregate compensation made to key management personnel of the Group is set out below:
Salary
Superannuation
Director fees
Termination benefits
Other
Total
2020
$
404,251
21,349
193,832
140,000
6,984
2019
$
291,486
21,048
168,000
-
7,677
766,416
488,211
Director fees for Sam Brougham are invoiced via Crofton Park Developments Pty Ltd atf Sam Brougham Family Trust. Sam
Brougham is a director of the trustee and beneficiary of the trust. Fees in 2020 were 45,833 (2019: $48,000).
Director fees for Travis Dillon are invoiced via Dillon Consulting Company Pty Ltd. Fees in 2020 were $19,000 comprising $6,666
in directors’ fees and $12,234 in other fees (2019: nil).
OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
»
Termination benefits in the amount of $140,000 accrued for Justus Homburg following his resignation on 25 June
2020. These termination benefits will be paid as consulting services to be provided to the Group over his notice
period although can be terminated with payment without notice by either party.
$12,333 (2019: $Nil) was paid to Travis Dillon in relation to consulting services provided to the Sales and
Marketing Team since commencing his role with the Group on 1 May 2020.
Two sales were made to Crofton Park Developments Pty Ltd during the year, totalling $7,409 (2019: $3,780).
Jim Cooper was employed by the Company to provide consulting services commencing 5 March 2020, before his
appointment to Managing Director on 25 June 2020. During this time, Mr Cooper was not a key management
person.
»
»
»
25.
Significant expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
COMMITMENTS
RESEARCH AND DEVELOPMENT PROJECTS
Within one year
Later than one year but not later than five years
Committed expenditure is for contracted research projects with The University of Queensland.
There were no capital expenditure commitments at 30 June 2020 (2019: $nil).
2020
$
2019
$
115,894
19,962
135,856
-
-
-
57
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
26.
There are no contingent liabilities as at 30 June 2020 (2019: nil).
CONTINGENT LIABILITIES
SUBSEQUENT EVENTS
27.
The outbreak of COVID-19 and the subsequent quarantine measures imposed by the Australian and other governments as well
as the travel and trade restrictions imposed by Australia and other countries in early 2020 have caused disruption to businesses
and economic activity. The impact of the COVID-19 pandemic is ongoing, and the Group will continue to adjust to the varying
restrictions and progress its sales growth initiatives accordingly. To the date of this report, the COVID-19 pandemic has had a
negligible impact on the Group’s operations or results. As the situation remains fluid (due to evolving changes in government
policy and evolving business and customer reactions thereto) as at the date these financial statements are authorised for issue,
the directors of the Company considered that the financial effects of COVID-19 on the Group’s consolidated financial statements
cannot be reasonably estimated for future financial periods.
In response to COVID-19, both the Federal Government and the State Government of Victoria have implemented policies and
measured with the aim of containing the virus. In an effort to contain the spread of the virus, the Victorian Government, on
2 August 2020, implemented Stage 4 restrictions in Melbourne and Stage 3 restrictions in regional Victoria with quarantine
restrictions, travel restrictions, closure of businesses and other restrictive movement measures. Given the principal operating
location is in Queensland, these measures have only had a negligible impact on the business.
There has been no other matter or circumstance which has arisen since the end of the year that has significantly affected, or
may significantly affect the Group’s operations, the result of those operations or the Group’s state of affairs.
INTERESTS IN SUBSIDIARIES
28.
The consolidated financial statements incorporate the assets, liabilities, and results of the following subsidiaries in accordance
with the accounting policy described in note 1(g).
Name of Subsidiary
Country of incorporation
Principal activity
Terragen Biotech
Pty Limited (i)
Australia
Agricultural biotech
Equity holding
2020
%
100
2019
%
100
(i) Terragen Biotech Pty Ltd operates in Australia however also operates through a branch in New Zealand.
58
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2020
29.
PARENT ENTITY
Information relating to Terragen Holdings Limited (‘the Parent Entity’):
Statement of financial position
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Total equity
Statement of profit or loss and other comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive income
The Parent Entity has no capital commitments at 30 June 2020 (2019: $Nil).
The Parent Entity had no contingent liabilities at 30 June 2020 (2019: $Nil).
2020
$
2019
$
15,693,959
17,507,693
465,098
465,098
2,388,552
2,461,207
-
-
17,042,595
2,461,207
41,560,581
22,222,619
1,636,894
1,877,793
(26,154,880)
(21,639,205)
17,042,595
2,461,207
(4,515,675)
(3,643,495)
-
-
(4,515,675)
(3,643,495)
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
DIRECTORS’ DECLARATION
In the directors’ opinion:
a.
b.
c.
d.
the attached financial statements and notes are in accordance with the Corporations Act 2001, including:
i.
ii.
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its performance, as
represented by the results of its operations and its cash flows, for the year ended on that date.
the financial report also complies with International Reporting Standards as disclosed in note 1 (a); and
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and
payable.
The Directors’ have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of directors.
Jim Cooper
Managing Director
Melbourne, 28 August 2020
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
SHAREHOLDER INFORMATION
In accordance with ASX Listing Rule 4.10, Terragen Holdings Limited (“Terragen”) provides the following information to
shareholders not elsewhere disclosed in the Annual Report. The shareholder information set out below was applicable as of
18 September 2020.
CORPORATE GOVERNANCE STATEMENT
A.
The Company has prepared a Corporate Governance Statement which sets out the corporate governance practices that
were in operation in the year ended 30 June 2020.
In accordance with ASX Listing Rule 4.10.3, the Corporate Governance Statement will be available for review on Terragen’s
website www.terragen.com.au and will be lodged with the ASX at the same time that this Annual Report is lodged with the ASX.
DISTRIBUTION AND NUMBER OF HOLDERS OF EQUITY SECURITIES
B.
The distribution and number of holders of equity securities on issue in the Company as at 18 September 2020, and the
number of holders holding less than a marketable parcel of the company’s ordinary shares based on the closing market
price as at 18 September 2020 is as follows:
Listed fully paid
ordinary shares
Unlisted Options
Unlisted Employee Options
Number of
holders
% of securities
Number of
holders
% of securities
Number of
holders
% of securities
16
67
94
214
220
611
0.00
0.12
0.39
5.43
94.05
100.00
-
1
1
11
11
24
0.00
0.02
0.05
4.95
94.98
100.00
-
-
-
2
9
11
0.00
0.00
0.00
1.40
98.60
100.00
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
There were no holders of less than a marketable parcel of fully paid ordinary shares as of 18 September 2020.
The total securities on issue in each class of equity securities as at 18 September 2020 are:
Listed fully paid
ordinary shares
Unlisted Options
Unlisted Employee Options
Total securities on issue
187,215,902
12,314,043
6,300,000
As of 18 September 2020, the total equity securities on issue as presented above included the following equity securities that
were subject to restrictions:
Fully paid ordinary shares restricted until 11 December 2020 (quoted)
Fully paid ordinary shares restricted until 11 December 2021 (unquoted)
Total fully paid ordinary shares subject to restrictions
Unlisted options restricted until 11 December 2020
Unlisted options restricted until 11 December 2021
Total unlisted options subject to restrictions
Number of securities
32,376,248
7,930,189
40,306,437
10,134,043
3,980,000
14,114,043
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
TWENTY LARGEST QUOTED EQUITY SECURITY HOLDERS
C.
Terragen has only one class of quoted equity securities, being fully paid ordinary shares (ASX:TGH). The names of the twenty
largest holders of fully paid ordinary shares, the number of fully paid ordinary shares and the percentage of fully paid ordinary
shares on issue as of 18 September 2020 was as follows:
Name
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
Stamina Pty Ltd
Rubi Holdings Pty Ltd
Crofton Park Developments Pty Ltd
Mr Scobie Dickinson Ward
Action Always Pty Ltd
P M Desmond Pty Ltd
East Mt Ada Pty Ltd
Stephen Mahken
Gardiole Pty Ltd
Mr Rodney John Loone & Mrs Diane Gaye Loone
Vautex Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
Netwealth Investments Limited
Milnar Pty ltd
Crofton Park Developments Pty Ltd
Dempsey Capital Pty Ltd
Utopia Land Co Pty Ltd
Total for top twenty holders
Balance of register
Total
Units
21,887,919
12,777,694
9,677,078
6,626,616
4,200,000
4,100,000
4,000,000
3,795,690
3,195,000
2,920,000
2,662,500
2,600,002
2,520,000
2,500,000
2,500,000
2,347,151
2,300,000
2,250,000
2,000,000
2,000,000
% of Units
11.69
6.83
5.17
3.54
2.24
2.19
2.14
2.03
1.71
1.56
1.42
1.39
1.35
1.34
1.34
1.25
1.23
1.20
1.07
1.07
96,860,650
90,355,252
187,215,902
51.74
48.26
100.00
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
D.
HOLDERS OF MORE THAN TWENTY PERCENT OF EACH CLASS OF UNQUOTED SECURITIES
Each unlisted option entitles the holder to acquire one fully paid ordinary share subject to the holder paying the exercise price
on or before the expiry date.
The names of the holders of more than 20% of each class of options or performance shares, other than under an Employee
Incentive Scheme, is set out below:
Holder
Rubi Holdings Pty Ltd
Unlisted
$0.25 options expiring 11 December 2022
Units
4,200,000
% of units
34.11
VOTING RIGHTS
E.
At a general meeting of the Company, every holder of ordinary shares present in person or by proxy, attorney or representative
has one vote on a show of hands, and on a poll, one vote for each ordinary share held.
Options do not carry any voting rights.
SUBSTANTIAL SHAREHOLDERS
F.
As of 18 September 2020, the names of the substantial shareholders of the Company and the number of equity securities in
which those substantial shareholders and their associates have a relevant interest, as disclosed in substantial shareholding
notices given to the Company were as follows:
Name
Scobie Dickinson Ward
Sam Brougham
One Funds Management Ltd atf Saville Capital Emerging Companies Fund
12,566,000
G.
The Company is not currently conduction an on-market buy-back.
ON-MARKET BUY-BACK
H.
The Company did not purchase securities on market during the reporting period.
ON-MARKET BUY-BACK
Number held
% of issued capital
16,347,114
13,721,616
8.75%
7.75%
6.73%
USE OF INITIAL PUBLIC OFFERING PROCEEDS
I.
The Company confirms that in the period since its listing on the Australian Stock Exchange on 11 December 2019 it has used its
cash and assets in a form readily convertible into cash that it had at the time of its admission to the ASX in a manner consistent
with its business objectives as set out in the Prospectus dated 18 October 2019.
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TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY
CORPORATE DIRECTORY
BOARD OF DIRECTORS
Mr Travis Dillon
Mr Sam Brougham
Mr Paul Schober
Ms Ingrid van Dijken
Mr Jim Cooper
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director
COMPANY SECRETARY
Ms Kara King
REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS
Unit 6
39 Access Crescent
Coolum Beach QLD 4573
PHONE NUMBER
1 300 837 724
POSTAL ADDRESS
PO Box 1304
Coolum Beach QLD 4573
WEBSITE
www.terragen.com.au
SHARE REGISTRY
Link Market Services Pty Ltd
Level 12
680 George Street
Sydney NSW 2000
PHONE NUMBER
1 300 554 474
STOCK EXCHANGE
Australian Securities Exchange 20 Bridge Street
Sydney, NSW 2000
ASX CODE
TGH
AUDITORS
Deloitte
64
TERRAGEN HOLDINGS LIMITED AND CONTROLLED ENTITY ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
www.terragen.com.au