Annual Report 2020
Creating ingredients
that bring people
together
Contents
Letter from the Chairman
COVID-19 Response
United Malt Overview
2
4 Managing Director & CEO’s Review
7
8
10 Where We Operate
12 Our Purpose & Values
13 Our History of Established Brands
14 Our Malts
16 Our Strategy
17 Sustainability Highlights
18 Board of Directors
20 Executive Leadership Team
22 Directors’ Report
24 Operating and Financial Review
34 Remuneration Report
47 Financial Report
88 Shareholder Information
90 Corporate Directory
Our Values:
Safety, Quality,
Integrity & Passion
Letter from
the Chairman
Graham Bradley AM
Chairman and Non-Executive Director
We are proud
of our industry,
our business and
our people.
We bring a spirit
of innovation and
continuous
improvement to
everything that
we do.
2
| United Malt Annual Report 2020
Letter from the Chairman
Fellow Shareholders,
It is my pleasure to present our 2020
Annual Report, our first since United Malt
Group Limited (United Malt) listed on
23 March this year.
It is an understatement to say that the
past year has been an extraordinary one
for our Company, for our people and our
customers, as it has for all the world.
Not only has our management team been
called upon to adapt to unprecedented
disruptions to normal operations
caused by the health challenges of the
COVID-19 (COVID) pandemic, as have
so many management teams across
our economies, our team has also been
busy putting in place all the policies and
procedures necessary for our new life
as a listed company.
I would like to say at the outset of my report
that our executive and management teams,
and our people throughout United Malt,
have responded magnificently to these
dual challenges. While much remains to
be done, and we have not yet seen the end
of this global crisis, the Board and I are
very pleased with the progress we have
made towards our growth strategies and
towards realising the opportunities that
present themselves now that we are an
independent company.
Financial Results
After a solid first-half, both product volumes
shipped and revenues were negatively
impacted, particularly in the April‒June
period, by the closure of on-premises dining
in most of the Group’s key markets in North
America, Australia and the United Kingdom.
Pleasingly, sales and revenues recovered
well over the last quarter and, while still
below those of the corresponding periods
last year, are demonstrating the resilience
of demand for our quality products.
Accordingly, the Group’s full-year revenues in
FY20 were $1,289 1 million, 2 per cent down
on FY19. Full-year Underlying Earnings Before
Interest, Tax, Depreciation and Amortisation
(EBITDA) for the Group, including the first half-
year as a division of GrainCorp, was $156 11
million, down 11 per cent compared with
$175.51 million in 2019, before application
of the new accounting standard AASB 16
in FY20. For the second half-year to
30 September 2020 the Underlying EBITDA
was $78.21 million, down 24 per cent
from $102.8 million in 2H19. Removing
the impact of AASB 16 for the full-year
in FY20, Underlying EBITDA would have
been $143.5 million, down 18 per cent
compared with $175.51 million in 2019.
The Group’s Underlying Net Profit After Tax
(NPAT) for the half-year was $29.12 million.
Dividend
Notwithstanding the uncertain outlook
we continue to face in 2021, the Board
has resolved to pay a final dividend of
3.9 cents per share in respect of our
earnings in the second half of FY20. This
represents a payout ratio of 40 per cent
of our after tax profit for the second half.
Our policy in future periods will be to
distribute approximately 60 per cent of
Underlying NPAT to shareholders. Our aim
will be, subject always to trading conditions,
to provide shareholders with a steady
increase to the dividend as our profits grow.
Share Placement
Last May the Board undertook a placement
of shares to institutional investors to raise
$140.0 million, coupled with a shareholder
purchase plan (SPP) which raised a further
$30.6 million. Both components of the
capital raising were over-subscribed. The
equity raising was undertaken in order
to strengthen the Group’s balance sheet
against possible reduced revenues and
increased costs resulting from the COVID
crisis at a time of heightened uncertainty
about the trajectory of return to normal
trading conditions. The capital raising also
aimed to ensure that we were in a position
to progress our strategic investment
priorities and pursue new opportunities
1 Underlying EBITDA is earnings before interest,
tax, depreciation and amortisation, and excluding
material non-recurring items related to the demerger.
2 Underlying NPAT is net profit after tax, and excluding
material non-recurring items related to the demerger.
while maintaining our leverage in our target
range of 2.0—2.5 times net debt/Underlying
EBITDA. As a result of the capital raising,
our leverage ratio stood at 1.7 times as at
30 September 2020 however, as we move
into the first half of FY21 when we typically
build up our barley inventories and increase
our working capital usage, we anticipate
that our leverage will be within our target
range by March 2021. We acknowledge
the support of our shareholders for the
placement and SPP.
Operational Safety
I am pleased to report that as at
30 September 2020 we experienced no
material shutdowns or other COVID-driven
interruptions at our production or distribution
facilities. Some logistics disruptions were
encountered in transporting product and
maintaining our warehouse distribution
network in some regions. I am also pleased
to report that the COVID-safe policies
we implemented (working from home,
reduced travel, increased sanitisation and
others) have minimised safety issues for
our employees and our customers.
Sustainability
The Board and management continue to
focus on achieving sustainability across
all our operations, including maintaining a
safe working environment for our people,
our customers and others with whom we do
business, contributing as a good corporate
citizen to the communities in which we
operate, and minimising our impact on
the physical environment through careful
management and use of energy and water
resources. Maintaining the safety and
quality of our product is all-important to
us. Our sustainability actions are set out
in more detail in our FY20 Sustainability
Report published on our website.
Outlook
Our Board and management are excited
about the opportunities that lie ahead
for United Malt as the world’s fourth-
largest commercial maltster providing
high quality products and service to our
brewing, distilling and food manufacturing
customers around the world. Despite the
disruptions in FY20, we have continued
to progress the expansion of our malt
production facilities in Arbroath and
Inverness in Scotland, and we recently
announced a major kiln replacement
project at our Perth malting plant.
We continue to progress other
investments to expand our production and
improve cost efficiency, as well as improve
energy efficiency. We are also progressing
important profit-improvement initiatives in
our warehouse and distribution operation.
Board Matters
I would like to thank all my Board colleagues
for their commitment and contribution
during a year like no other, particularly my
new Board colleagues, Jane McAloon and
Terry Williamson, who have, respectively,
chaired our Nominations & Remuneration
and Audit & Risk Committees during the
year. Thanks also to Barbara Gibson for
her chairmanship of our Environmental,
Health & Safety Committee.
I would like to welcome our newly
announced director, Gary W. Mize, who
brings a wealth of relevant industry
experience to our boardroom, including his
knowledge of the North American markets
in which we operate.
As previously announced, Simon Tregoning
who joined us from the GrainCorp board
where he served 10 years, has elected to
retire at our AGM next year. I thank Simon
sincerely for his contributions and his
assistance during the demerger process
over the past year.
Once again, on behalf of all shareholders,
the Board sincerely thanks our executive
leadership team and our people
right across the Company who have
demonstrated great adaptability and
agility in the face of unprecedented
disruptions over the past year.
I look forward to providing a further report
to you at our annual general meeting in
February 2021.
In the meantime, thank you for your
continued support of United Malt.
Yours sincerely,
Graham Bradley AM
Chairman
3
We remain in a strong financial position to
withstand the duration of COVID and any broader
macroeconomic weakness, while continuing to invest
in our business for medium to longer term growth.
Mark Palmquist
Managing Director and CEO
Managing Director
& CEO’s Review
4
| United Malt Annual Report 2020
Introduction
I am pleased to present the Managing
Director and CEO’s report for United Malt’s
first Annual Report.
United Malt successfully demerged from
GrainCorp Limited on 23 March 2020 to
form a stand-alone entity listed on the
Australian Securities Exchange. I would
like to extend a warm welcome to new
shareholders to the Company and also
acknowledge those shareholders who have
maintained their shareholding in United Malt
from their previous investment in GrainCorp.
Our focus is to balance the rich heritage
of our established brands and market
positions with future growth opportunities
to create value for our shareholders over
the medium to longer term.
Safety
The safety of our people remains paramount,
and this remains a particular focus of
United Malt during the COVID pandemic.
During FY20 we made continued progress
in implementing our safety strategy, which is
focused on site leadership and behavioural
aspects of safety, as well as identifying
and mitigating physical risks on site.
The number of recordable injuries in FY20
was 16. The Recordable Injury Frequency
Rate (RIFR) for FY20 was 1.453, an
improvement from 1.54 in the prior year.
The Lost Time Injury Frequency Rate
(LTIFR) was 3.634 for FY20.
FY20 Financial Results
Our financial performance was impacted
in the second half of the year by the
COVID pandemic. Government imposed
containment restrictions adversely
affected on-premise alcohol consumption,
particularly for small craft beer brands.
While off-premise consumption increased,
this was not sufficient to mitigate the
decline in on-premise consumption.
This resulting impact on volume caused a
decline in Group revenue of 2 per cent to
$1.3 billion.
Underlying EBITDA was $156.15 million;
down 11 per cent on the prior year.
In the processing segment, revenue fell
by 1 per cent to $989.4 million reflecting
$156.1m
Underlying EBITDA
$1.3b
Revenue
$101.7m
Operating Cash Flow
$57.4m
Underlying NPAT
1.7times
Gearing
$261.7m
Net Debt
volume declines compared to the prior
year. Underlying segment EBITDA declined
by 12 per cent to $119.76 million reflecting
lower volume, change in customer mix and
additional costs associated with enhanced
hygiene and social distancing measures
keeping our employees safe.
Revenue in the warehouse & distribution
segment reduced by 6 per cent to
$328.9 million. Underlying segment
EBITDA was down by 27 per cent to
$28.36 million, impacted in the second
half by COVID stay-at-home restrictions
which reduced demand from craft brewers
servicing only the on-premise market.
The Group delivered an Underlying Net Profit
After Tax of $57.47 million compared to
$59.0 million for FY19.
United Malt remains in a strong financial
position to manage in the current
environment and to continue our
investment in strategic growth initiatives.
The Group successfully completed a
$170.6 million equity raising in May 2020
which comprised an institutional placement
($140 million) and a Share Purchase Plan
($30.6 million). Part of the proceeds of the
raising were used to repay debt.
As a result, net debt at 30 September
2020 was $261.7 million compared
to $584.1 million at 31 March 2020.
The gearing ratio (net debt/underlying
EBITDA5) was 1.7 times which is below the
Company’s target ratio of 2.0 to 2.5 times,
reflecting the seasonal impact of lower
working capital draw vs the 1H higher draw
as we build up our barley inventories and
increase our working capital usage.
The Company maintains comfortable
headroom within its banking covenants
and no significant near-term refinancing
commitments with long-term debt facilities
not maturing until November 2022.
Progressing Strategic Priorities
We continued to implement our growth
strategy, including upgrading and
expanding the capacity of our malting
facilities.
The £51 million investment in the Bairds
Scottish malting facilities will add 79,000t
of capacity across our Arbroath and
Inverness sites, bringing Baird’s total
3
4
5
6
7
RIFR is calculated as the number of injuries
per 200,000 hours worked, on a rolling
12-month basis. Includes lost time injuries,
medical injuries and restricted work injuries.
Includes permanent and casual employees and
United Malt controlled contractors.
LTIFR is calculated as the number of lost time
injuries per 1,000,000 hours worked, on a rolling
12-month basis. Includes permanent and casual
employees and United Malt controlled contractors.
Underlying EBITDA is earnings before interest,
tax, depreciation and amortisation, and
excluding material non-recurring items related
to the demerger.
Underlying EBITDA is earnings before interest,
tax, depreciation and amortisation, and excluding
material non-recurring items related to the
demerger. The impact of AASB 16 Leases, which
came into effect 1 October 2019 is excluded.
Underlying NPAT is net profit after tax, and
excluding material non-recurring items related
to the demerger.
5
We are
uncompromising in
our pursuit of quality
whether it’s a product,
service, relationship,
experience or
interaction.
Managing Director
& CEO’s Review
continued
capacity to approximately 300,000t per
annum. Following a delay due to COVID
restrictions, construction recommenced
in August 2020. Commissioning of the
Arbroath facility is planned for December
2020 to facilitate full production
capability from January 2021. We
expect commissioning of Inverness in
December 2021.
In Australia, we announced a $27 million
investment in Barrett Burston Malting’s
Perth malting plant.
The existing kiln at the site will be
replaced with a new and indirect heating
source kiln. This renewal provides
immediate operating efficiencies and
safer technology and allows for future
production capacity expansion of up to
110,000mt from 50,000mt currently, with
further investment. The project is expected
to be completed by October 2021.
We have entered into an in-principle
agreement with our existing Mexican
distribution partner for an expanded
partnership to further grow United Malt’s
penetration into the Mexican market. The
expanded distribution will provide on the
ground access to the growing craft market
in Mexico, enhanced customer experience,
and more efficient logistics.
Looking to the Future
United Malt remains in a strong financial
position to withstand the duration of
COVID and any broader macroeconomic
weakness, while continuing to invest in our
business for medium to longer-term growth.
As conditions stabilise, we remain well
placed to return to growth, supported by
our strong market positions and malting
assets and our market-leading distribution
platform, which is well positioned to service
our customers’ ingredient requirements.
We maintain a quality customer base
which is diversified by product, end-market
and geography, and we continue to focus
on high-value markets where the long-term
outlook for growth remains supportive for
our business.
Conclusion
Our performance over the past year
reflects the resilience of our business
operations and customer relationships,
despite the impact of COVID.
I would like to acknowledge and thank
all our people across the Group for their
efforts and commitment in our first year
as a stand-alone entity. I would also like to
thank our shareholders for your continued
support of the business.
REVENUE
UNDERLYING EBITDA
RECORDABLE INJURY
FREQUENCY RATE(1) (RIFR)
m
5
.
6
1
3
,
1
$
m
1
.
9
8
2
,
1
$
m
5
.
5
7
1
$
m
1
.
6
5
1
$
4
5
.
1
5
4
.
1
FY19
FY20
FY19
FY20
FY19
FY20
1
Recordable Injury Frequency Rate (RIFR) is calculated as the number of injuries per 200,000 hours worked,
on a rolling 12-month basis. Includes lost time injuries, medical injuries and restricted work injuries. Includes
permanent and casual employees and United Malt controlled contractors.
6
| United Malt Annual Report 2020
COVID-19
Response
COVID-19 Response
As a result of the COVID pandemic, a major
focus of United Malt’s agenda has been on
the health and safety of all our staff and
visitors to our sites across our business.
We are also continuing to work with our
key suppliers and customers to support
their response efforts to COVID.
United Malt acted swiftly to implement
business resilience plans to ensure the
continued safe operation of our production
and distribution services.
All our production and warehouses staff
are working in split shifts with enhanced
hygiene measures including consistent
cleaning between shifts and social
distancing protocols to meet the needs
of our staff.
The majority of office-based staff continue
to work remotely and have been provided
with the necessary tools to facilitate
remote working.
The Company has been required
to implement some operational
changes, including cost reduction, staff
redeployment and aligning production
with demand.
Our priority is to continue to ensure
that United Malt operates in a safe
and compliant manner to ensure the
sustainability of our business and
continuity of employment for our people
where possible.
The Company did not access any
government wage assistance in Australia
and in the US; however, approximately
A$4.4 million in government wage support
was received in various forms in Canada,
the UK and New Zealand.
During the pandemic to date, United
Malt has continued to pay in full for
product from all our suppliers globally
while honouring previously agreed
payment terms.
We will continue to closely monitor
and adjust our business operations as
required and in accordance with the latest
government and regulatory health and
safety advice.
7
United Malt
Overview
OVERVIEW
United Malt is the fourth-largest
commercial maltster globally, producing
ingredients for the brewing, distilling and
food markets.
United Malt has approximately 1.25Mtpa
of capacity across 13 processing plants
in Canada, United States of America
(US), Australia and the United Kingdom
(UK). United Malt also operates an
international warehouse and distribution
business, which provides a full service
offering for craft brewers and distillers,
including malt, hops, yeast, adjuncts and
related products.
We are one of the leading malt suppliers
to the craft brewing sector, supported
by a distribution network comprising
21 warehouses (both Company-operated
and through third party logistics
providers) and have international craft
distribution partnerships throughout
North America, South America, Europe,
Asia and Australia.
United Malt generates earnings along
the malt supply chain, from barley
procurement and handling, malt
processing, and sale and distribution of
value-added malt and related products.
United Malt benefits from having high
quality, low operating cost processing
assets that are strategically located in
premium barley growing regions, allowing
it to source high quality barley and access
a diverse range of customers, including
global brewers, craft brewers, distillers
and food companies.
Our customer base is diversified by
product, end-market and geography,
and comprises a range of high quality
customers including global brewers, craft
brewers, distillers and food companies.
We sell into both domestic and export
markets. Export markets (particularly
Asia) are an important source of demand
for malt produced in Australia.
REVENUE BY
CUSTOMER GEOGRAPHY
REVENUE BY
CUSTOMER GROUP
North America
61%
Europe
17%
Australasia
7%
Asia
14%
Other
1%
Distillers
12%
Major Brewers Domestic
26%
Major Brewers Export
26%
Micro Brewers
34%
Other
2%
KEY OPERATING BRANDS – PROCESSING
5 facilities
3 facilities
3 facilities
Established 1823
Established 1902
Established 1912
2 facilities
Established 1934
8
| United Malt Annual Report 2020
In each of our operating geographies we have
local brands that represent United Malt. Each
of these brands has a long and rich history
within the malting industry and represents
who we are today as a Company.
Fourth largest commercial
maltster globally
85%+ utilisation average
rate across all plants
Exposure to high growth craft
beer and Scotch whisky market
13 processing facilities
across three continents
21 warehouse and distribution
facilities
Largest commercial maltster
in North America
Only listed maltster with exposure
to predominantly US dollar earnings
KEY OPERATING BRANDS – WAREHOUSE AND DISTRIBUTION
12 facilities
Established 1995
8 facilities
Established 1995
1 facility
Established 2013
9
Where we
Operate
PROCESSING
Our malting assets are strategically
located across major barley growing
regions providing access to high quality
barley and in close proximity to critical
transport infrastructure proving better
access to customers.
The Processing division services over
600 customers including major brewers,
national craft brewers, distillers and
food companies with high visibility of
earnings underpinned by long-term
contracts.
WAREHOUSE AND DISTRIBUTION
Our Warehouse and Distribution segment
generates revenue from the sales and
distribution of bagged malt, hops, yeast,
adjunctions and related products.
The Company owned distribution network
is supported by international craft
distribution partners focused on regions
exhibiting growth in craft.
United Malt’s competitive advantage is
its ability to deliver all ingredients to the
brewer on a just-in-time basis.
10
| United Malt Annual Report 2020
Key barley growing
regions
Processing facility
Storage facility
Distribution facility
PROCESSING
~750kt
Production capacity
~250kt
Production capacity
~250kt
Production capacity
WAREHOUSE AND DISTRIBUTION
12
Facilities
8
Facilities
1
Facility
11
Our Purpose
& Values
We are focused on
creating ingredients that
bring people together
Safety
The safety of our people is paramount.
Safety is part of our way of life and requires the commitment of
everyone throughout the organisation.
Safety extends to the health and wellbeing of ourselves and
everyone around us and to the environment in which we operate.
It is part of everything that we do as well as the way that we do it.
It is our way of coming together as a community.
Quality
We provide outstanding ingredients and unsurpassed
service that, together, deliver premium value to our
customers.
At every step in the process and in all our roles, we come
together as a team to make sure that we always provide
the best.
Integrity
Passion
We believe that nothing is more important than our
reputation, and behaving with the highest levels of integrity
is fundamental to who we are.
We are honest, open, ethical and fair at all times.
We are proud of our industry, our business and our people.
We are proud to be part of a wider community and are
positive stewards in the way we work.
We bring a spirit of innovation and continuous improvement
to everything that we do.
12
| United Malt Annual Report 2020
Our History of
Established Brands
1823
Established
Year of inclusion in United Malt
1990
1912
Established
Year of inclusion in United Malt
1995
1967
Established
Year of inclusion in United Malt
1999
1995
Established
Year of inclusion in United Malt
2017
1902
Established
Year of inclusion in United Malt
1995
1934
Established
Year of inclusion in United Malt
1989
1995
Established
Year of inclusion in United Malt
2007
2013
Established
Year of inclusion in United Malt
2013
13
Our Malts
We maintain a
diverse range
of grower
relationships, over
multiple growing
regions. We
contract directly
with growers for
production acres
and planting of
specific varieties
to meet the needs
of our customers.
Base Malts
Malt Variety: Pilsen Malt
Malt attributes: very light
in colour, this malt typically
tastes crisper than Pale
Malt, which carries over into
the beer.
Typically found in:
Pilseners, Lagers
Malt Variety: Distilling Malt
Plain
Malt attributes: clean,
crisp, and with a fresh
spirit character.
Typically found in:
Distilled spirit production
Malt Variety: Wheat Malt
Malt attributes: premium
white wheat is malted in
the same way as barley and
is used as a base in the
production of classic wheat
beers. At lower percentages
of the grist, wheat malt can
also be added to any number
of beer styles to enhance
foam stability and mouthfeel.
Typically found in: Weissbier,
Witbier, Lambic, Berliner,
Weisse and Gose
Malt Variety: Ale Malt
Malt Variety: Pale Malt
Malt attributes: rich malty
complexity for beer flavour
and aroma. Used as a base
malt adding a golden colour;
slightly darker colour and
fuller flavoured.
Typically found in: Traditional
British Pale Ales, Porters
and Stouts
Malt attributes: light golden
colour and smooth clean
flavour make this malt a
perfect base for most brews.
It is kilned slightly higher
than Pilsen Malt and imparts
slightly richer flavours.
Typically found in: Pale Ales,
Pilseners and IPAs
14
Specialty Malts
Roasted Malts
Malt Variety: Distilling Peated
Malts
Malt attributes: smoke from a
peat fire is circulated through
malt, where it is absorbed into
the malt surface.
Typically found in: Distilled
spirit production
Malt Variety: Vienna Malt
Malt attributes: light golden to
orange colour and a distinctive
nutty aroma.
Typically found in: Vienna
Lager, Märzen, Dunkelweizen
and Bock
Malt Variety: Crystal/Cara
Malts
Malt Variety: Caramel Steam
Malt
Malt attributes: from a light,
honey shade to a deep gold
depending on the length of
the final roasting. Provides
sweet caramel and toffee
character.
Typically found in: Pale Lagers
to Darker Ales
Malt attributes: creates a
delicate sweetness with
reduced astringency imparting
nutty, graham cracker,
caramel, and plum flavours.
Typically found in: Red IPA,
Irish Red, English Bitter,
Porter and Barley Wine
Malt Variety: Munich Malt
Malt Variety: Oat Malt
Malt Variety: Roasted Malts
Malt Variety: Chocolate Malt
Malt attributes: robust, malty
flavour and rich golden to
dark colour. Depth and body
without excessive sweetness.
Malt attributes: the flavour of
both a traditional Pale Malt,
as well as the toasty flavours
of granola.
Typically found in: Dark lagers,
Märzen, Octoberfests
Typically found in: Northeast
IPA, Belgian Wit, Stouts
Malt attributes: varying colour
and flavour profiles depending
on the temperature and
length of the final roasting
stage but will generally impart
a smooth roasted flavour
without excessive bitterness.
Typically found in: Dark Ales,
Stouts and Bock
Malt attributes: lightly roasted
product with subtle notes of
coffee, cocoa and chocolate
and a rich brown colour.
Typically found in: Golden
Lagers to Darker Ales
15
Our
Strategy
Strategic Priorities
Our strategy is focused on keeping our customers at the centre of everything we do, whist targeting those high value markets where the
long-term outlook for growth remains supportive
CREATE NE W VALU E
Develop innovative
products and solutions
for customers
Leverage our rich pedigree and expertise
in malting to create innovative product
solutions for our customers
Be the supplier of choice
for our customers
Leverage distribution capability to supply
customers domestically and in export markets
Maximise customer-centric offering,
experience and scale in existing and
new markets
O
P
T
I
M
I
S
E
T
H
E
C
O
R
E
Drive penetration
in the distilling market
Capture growth from increasing
demand for whisky in emerging
markets and higher value, single malt
whiskies
Expand craft distribution
business into new geographies
Expand into the growing craft beer market in
Latin America and Asia by leveraging extensive
craft distribution experience
Supported by other bolt-on acquisitions,
start-up opportunities and new
distribution partnerships
Proactively use technology to
transform the way we operate
and create new sources of value
Invest in technology-led operations and
supply chains
Harvest and structure data to enhance
decision making
Proactively assess acquisitive
growth opportunities
Take a disciplined approach to
evaluating acquisitive growth
opportunities to extend
our geographic reach, product
offering and/or customer base,
creating value
Investment in our assets to
create best in class operations
enhancing our customer experience
Continue to optimise our asset and
environmental footprint and draw on recent
experience in plant investment projects
Enhance processes, structure
and systems to deliver
competitive advantage
T
R
A
N
S
F
O
R
M FOR TOMORROW
16
| United Malt Annual Report 2020
Sustainability
Highlights
We recognise that conducting
our business in a sustainable
and responsible way is
important for us to earn and
maintain the ongoing respect
of our stakeholders, including
our people, customers,
supply partners, shareholders
and the communities
where we operate.
~10,000
Safety leader observations
26%
35%
Female representation in
United Malt (up from 25% in FY19)
Target of female
representation by 2025
Indigenous
scholarship
28,500
MT CO2e
Partnership with Indspire
to provide scholarship support
to indigenous students in
Canada to help support pursuit
of their educational and
professional goals
Commenced 3-year
agreement with electricity
utility in the US to offset
approximately 28,500 MT CO2e
from Vancouver and Pocatello
facilities through to 2023
6%
Reduction in number of recordable
injuries and reduction in Recordable
Injury Frequency Rate (RIFR) to
1.45 compared to 1.54 in FY19
Further details on our sustainability agenda can be found in our Sustainability Report.
17
Board of
Directors
MR GRAHAM BRADLEY AM
MR MARK PALMQUIST
MS BARBARA GIBSON
Independent Chairman
and Non-Executive Director
BA, LLB (Hons. Sydney University),
LLM (Harvard)
Appointed to the Board on 13 January 2020.
Skills and experience: Mr Bradley has over
30 years of business, executive leadership
and governance experience at senior
executive and board levels across banking
and financial services, manufacturing,
infrastructure, resources, agribusiness and
corporate strategy consulting. Mr Bradley
has previously held the position of Managing
Director of Perpetual and senior roles at
Blake Dawson and McKinsey & Company.
Mr Bradley is currently a Non-Executive
Chairman of Energy Australia Holdings (since
June 2012), Virgin Australia International
Holdings (since March 2012), and Shine
Justice Limited (since May 2020).
Mr Bradley is also a Director of Hong Kong and
Shanghai Banking Corporation (since November
2012), the Chairman of Infrastructure NSW
(since July 2013), a member of the Advisory
Council of the Australian School of Business
at UNSW and was made a member of The
Order of Australia in 2009.
He is a former Chairman of GrainCorp
(March 2017 until March 2020), Chairman
of HSBC Bank Australia (October 2012 until
October 2020) and Chairman of Stockland
Corporation (until October 2016). Mr Bradley
was the President of the Business Council
of Australia and the Deputy President of the
Takeovers Panel, among other notable roles.
Board Committee memberships:
Member of the Nominations and
Remuneration Committee
Managing Director &
Chief Executive Officer
Bec, GAICD
Appointed to the Board on 13 January 2020.
Skills and experience: Mr Palmquist has
over 30 years experience in food processing
and agricultural sectors and has held a
number of senior leadership roles prior
to commencing his role at United Malt.
Mr Palmquist is focused on building a
sustainable business aligned to meeting
the needs of our customers in each of our
markets, whilst ensuring strong governance,
risk management and continued innovation.
Prior to his role at United Malt, Mr Palmquist
was the Managing Director and CEO of
GrainCorp Limited from 2014 until 2020,
which demerged its malt business that
is now United Malt. Prior to this, he was
Executive Vice President and Chief Operating
Officer, Ag Business, for CHS Inc., a leading
global agribusiness, diversified in energy,
grains, and food. He has held a variety of
global leadership roles for a broad range of
CHS agricultural inputs and marketing areas,
retail businesses, and grain-based food and
food ingredients operations.
Mr Palmquist is currently a director of
Telesense, Inc (September 2020) and is a
former director of GrainCorp Limited (from
October 2014 until March 2020).
Independent Non-Executive Director
B.Sc MAACB FTSE MAICD
Appointed to the Board on 13 January 2020.
Skills and experience: Ms Gibson has
over 30 years of business experience at
senior executive and board levels across
the chemicals, health care, agriculture and
manufacturing sectors.
Ms Gibson is an experienced executive
having spent 20 years with Orica Limited.
Prior to this, she held positions in medical
diagnostics, pharmaceuticals and fine
chemicals.
Ms Gibson is currently a fellow of the
Australian Academy of Technology and
Engineering. In 2003, Ms Gibson was
awarded a Centenary of Federation Medal
for services to Australian society in medical
technology. She is a Member of the
Australian Institute of Company Directors.
She is a former director of GrainCorp Limited
(March 2011 until March 2020), and Chair
of Warakirri Asset Management Pty Ltd (July
2006 until December 2018).
Board Committee memberships:
Chair of the Environment, Health and Safety
Committee
Member of the Audit and Risk Committee
18
| United Malt Annual Report 2020
MR TERRY WILLIAMSON
MS JANE MCALOON
MR SIMON TREGONING
Independent Non-Executive Director
MBA, BEc, FCANZ, FGIA, FAICD
Independent Non-Executive Director
BEc (Hons), LLB, GDip CorpGov, FAICD
Independent Non-Executive Director
BCom, FAICD
Appointed to the Board on 23 March 2020.
Appointed to the Board on 13 January 2020.
Skills and experience: Mr Williamson
has an extensive background in financial
reporting and risk management with prior
roles as senior audit partner of Price
Waterhouse, Chief Financial Officer Bankers
Trust Australia, Member of the Global
Controls Group Bankers Trust New York
Group, Chair of Audit and Risk Committee
Stockland Property Group, Avant Insurance
and Member of the Audit Committee of the
Reserve Bank Australia and financial advisor
to a number of not-for-profit organisations.
Mr Williamson is a Fellow of The Australian
Institute of Company Directors, Fellow
Chartered Accountants in Australia and
New Zealand, Fellow CPA Australia, Fellow
Governance Institute of Australia and
Member Australian Computer Society.
Mr Williamson is currently a Director of
Stockland Capital Partners and Stockland
Direct Retail Trust No. 1 (since April 2018),
Member of the Building Estates Committee
of the University of Sydney, and Finance
Advisor to the Society of the Divine Word.
Mr Williamson has had no other public
company directorships in the last three years.
Board Committee memberships:
Chair of the Audit and Risk Committee.
Member of the Environment, Health and
Safety Committee
Skills and experience: Ms McAloon has
over 25 years of business, government and
regulatory experience at senior executive and
board levels across the energy, infrastructure
and natural resources sectors. Ms McAloon
was an executive at BHP Billiton and AGL.
Prior to this, she held positions in government
in energy, rail and natural resources.
Ms McAloon is currently a Non-Executive
Director of Energy Australia (since June 2012),
Home Consortium (since October 2019),
Viva Energy (since June 2018) and Allianz
Australia (since July 2020). Jane is also a
board member of the Allens Advisory Board.
She is a former director of Healthscope
Limited (February 2016 to June 2019),
Cogstate Limited (January 2017 to November
2019), Civil Aviation Safety Authority
(December 2017 to December 2019), Port
of Melbourne (February 2018 to February
2020) and GrainCorp (December 2019 to
March 2020).
Board Committee memberships:
Chair of the Nominations and Remuneration
Committee
Member of the Audit and Risk Committee
Appointed to the Board on 13 January 2020.
Skills and experience: Mr Tregoning has
over 30 years of experience at senior
executive and board level across the fast
moving consumer goods, agriculture and
energy sectors.
He was previously Vice President of
Kimberly-Clark Corporation and has
extensive overseas senior executive
experience and is an experienced company
Director.
Mr Tregoning is a former director of
GrainCorp (December 2008 until March
2020) and Capilano Honey (July 2006 until
November 2018).
Board Committee memberships:
Member of the Nominations and
Remuneration Committee
Member of the Environment, Health and
Safety Committee
19
Board of Directors
continued
Executive
Leadership Team
MR GARY W. MIZE
MR MARK PALMQUIST
MR DARREN SMITH
Independent Non-Executive Director
BA, Advance Executive Program
(Northwestern University), NACD
Managing Director &
Chief Executive Officer
B.ec, GAICD
Appointed to the Board on 23 October 2020.
See page 18.
Skills and experience: Mr Mize has
over 36 years of experience managing
commodity-based trading and processing
businesses at the senior executive and
board levels.
He was previously the Global Chief Operating
Officer of Noble Group Hong Kong, President
of Conagra Foods Grain Processing Group,
CEO Conagra Malt and President Cargill
Worldwide Juice Group. Mr Mize has lived
in Hong Kong, Sao Paulo and Geneva.
Mr Mize is currently an Independent Director
of Gevo Inc (a company listed on NASDQ)
(since September 2011); Ceres Global (a
company listed on TSX) (since September
2013) and Darling Ingredients (a company
listed on NYSE) (since May 2016).
MS AMY SPANIK
Chief Financial Officer
Qualifications: Bachelor of Arts in Education
from the University of Portland and Post
Baccalaureate Certificate in Accounting from
Washington State University. Licensed CPA.
Appointed: March 2020
Priorities: Amy is responsible for the
Group’s finance, treasury, tax, investor
relations, information technology and risk
functions. Her priorities are ensuring her
team provides accurate, independent and
objective analysis to drive decision making,
performance and value creation for all the
Group’s stakeholders.
Experience: Prior to the demerger of
United Malt, Amy held the position of Chief
Financial Officer of GrainCorp Malt since
2015. Previously, Amy was Global Financial
Controller and Assistant Controller at
GrainCorp Malt.
Amy started her career with Ernst & Young
where she had nine years’ experience.
President, Processing
Qualifications: Bachelor of Science in Food
Science from the University of Alberta and
a General Certificate in Brewing from the
UK Institute of Brewing and Distilling.
Appointed: March 2020
Priorities: Darren is responsible for the
Processing Operation of United Malt and
responsible for serving the needs of the
Group’s major brewing, distilling and food
customers, by providing the full range of
base and specialities malts for the Group’s
customers at the right quality to meet
their food and beverage requirements. His
priorities are to ensure the Group leverages
its assets and capabilities and continuously
innovate to meet the changing needs of the
Group’s customers.
Experience: Prior to the demerger of United
Malt, Darren held the position of Chief
Operations Officer of GrainCorp since 2014.
Prior, to that Darren was a Managing Partner
at RMI Analytics.
Darren was previously Director of Sales at
Canada Malting Company and has held
various production roles in that business.
Darren has extensive experience with the
brewing and malting industries in both
operations and sales, along with consulting
on various projects including malt trans-load
and malt product warehouse design.
20
| United Malt Annual Report 2020
MR BRYAN BECHARD
MS MARY WELLE
MR DONALD MCBAIN
President, Warehouse & Distribution
Qualifications: Bachelor of Applied Science
from the Madden School of Business at
LeMoyne College.
Vice President, Human Resources
Qualifications: Bachelor of Arts in
Journalism from the University of Oregon
and a Master of Organizational Management
from Antioch University.
Vice President, Strategy
and Business Development
Qualifications: Bachelor of Arts in Marketing
and Communications from the Glasgow
Caledonian University.
Appointed: March 2020
Priorities: Bryan is responsible for the
Warehouse & Distribution operations of
United Malt serving the needs of its craft
brewing, distilling and food customers.
Providing market leading services, and
outcomes for the Group’s customers in
the craft segment is a primary focus.
His priorities are to ensure the Group’s
warehouse and distribution business
continually provides the one-stop-shop
of ingredient solutions of branded and
innovative products through its network
of distribution facilities and a portfolio
of services geared to the needs of its
customers.
Experience: Bryan joined GrainCorp in 2009
and was appointed President of the Global
Craft business in February 2019.
As one of the co-founders of the North
Country Malt Supply business in 1995, which
formed the basis of today’s North American
Country Malt Group, Bryan has been involved
in ingredient distribution to the craft brewing
industry for over 25 years. He previously held
the role of President, Country Malt Group
beginning in October 2014.
Appointed: March 2020
Appointed: March 2020
Priorities: Donald is responsible
for overseeing the formulation and
implementation of Group-wide strategies
including mergers and acquisitions and
major Group-wide programs. He also has
responsibility for customer experience and
group analytics.
Experience: Prior to the demerger of
United Malt, Donald held the position of
GM Customer Experience of GrainCorp since
2015. Prior to that, Donald held several
senior marketing and strategy positions
in the UK, Europe and Australasia. These
included Lion (Brewing and Beverage
company), General Motors (UK & Europe)
and the Suncorp Financial Services Group.
Priorities: Mary is responsible for the
Group’s Human Resources and Payroll
functions, taking care of the people who take
care of the Group’s customers. Her priorities
are both strategic and operational, with an
overall goal of building and developing a
workforce with the capability and capacity
to help the Group meet its goals.
Experience: Prior to the demerger of United
Malt, Mary was Vice President, Human
Resources of GrainCorp Malt since 2014.
Mary has also held several senior HR
positions in her career including VP roles
with HWR, DuraTherm and Siemens-US Filter.
She also served as HR Manager for Great
Western Malting from September 2010 to
May 2012.
Mary has been responsible for building
and leading the full HR function across a
variety of service-related industrial and
manufacturing businesses since 1994
including malting, water treatment, IT
outsourcing, transport and industrial
waste treatment/disposal.
21
Directors’ Report
Directors
The Directors in office at the date of this report are:
Name
Position held
Graham Bradley AM Chairman and Independent
and Non-executive Director
Mark Palmquist
Managing Director and Chief Executive Officer
Barbara Gibson
Independent Non-executive Director
Jane McAloon
Independent Non-executive Director
Terry Williamson
Independent Non-executive Director
Gary W. Mize
Independent Non-executive Director
Simon Tregoning
Independent Non-executive Director
Period as Director during FY20
Appointed 13 January 2020
Appointed Managing Director 13 January 2020
and Chief Executive Officer on 23 March 2020
Appointed 13 January 2020
Appointed 13 January 2020
Appointed 23 March 2020
Appointed 23 October 2020 (not a Director during FY20)
Appointed 13 January 2020
(will retire at the 2021 AGM in February 2021)
Details of current Directors, including their experience, qualifications, special responsibilities and term of office are included on
pages 18 to 20 of the Annual Report.
Details of Directors’ interests in shares and options of United Malt Group are set out in Section 45 of the Remuneration Report.
The following persons were also Directors during FY20. As they were Directors during a period in which the Company was a subsidiary
of GrainCorp Limited they were not separately remunerated for acting as Directors. There were no meetings of the Board held during the
financial year prior to the resignation of these Directors.
Name
Alistair Bell
Catherine Hathaway
Klaus Pamminger
Position held
Period as Director during FY20
Director
Director
Director
Resigned 13 January 2020
Resigned 13 January 2020
Resigned 13 January 2020
Company Secretary
Ms Lisa Jones
Qualifications: LLB, University of Sydney
Lisa was appointed Company Secretary of United Malt at the time of its listing on ASX in March 2020 and is based in Sydney.
Lisa is an experienced corporate lawyer and corporate governance professional with more than 20 years’ experience in commercial
law and corporate affairs, working with both public and private companies in Australia and in Europe.
She has held executive positions with private and public listed companies in Australia and in Italy and prior to that was a senior
associate in the corporate and commercial practice at Allens.
22
| United Malt Annual Report 2020
Board and Board Committee Meetings
Membership of each of United Malt’s Committees of Directors is set out below:
Environment, Health and Safety Committee
Audit and Risk Committee
Nominations and Remuneration Committee
Membership
Barbara Gibson (Chair)
Simon Tregoning
Terry Williamson
Terry Williamson (Chair)
Barbara Gibson
Jane McAloon
Jane McAloon (Chair)
Graham Bradley
Simon Tregoning
The number of United Malt Board meetings (including meetings of committees of Directors) and the number of meetings attended by
each of the Directors of the Company to 30 September 2020 are set out below:
Board
Environment, Health and
Safety Committee
Audit and Risk Committee
Nominations and
Remuneration Committee
Name
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Graham Bradley AM
Mark Palmquist
Barbara Gibson
Jane McAloon
Simon Tregoning
Terry Williamson1
10
10
10
10
10
7
10
10
10
10
9
7
7
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
2
2
1
1
Terry Williamson was appointed a Non-executive Director, United Malt Group Limited Board on 23 March 2020.
All Directors are sent Board committee agendas and papers and may attend any meeting. The Chairman of the Board and the CEO
attend Board committee meetings by invitation as a matter of course. The above table excludes the attendance of Directors at Board
Committee meetings of which they are not a member.
From time to time, additional Board sub-committees are established, for example, to consider material transactions or material issues
which may arise, and meetings of those subcommittees are held throughout the year. These subcommittee meetings are not included
in the above table.
23
Operating and Financial Review
About United Malt
Overview
United Malt is the fourth largest commercial maltster globally, producing ingredients for the brewing, distilling and food
markets. United Malt has approximately 1.25Mtpa of capacity across 13 processing plants in Canada, US, Australia and
the UK. United Malt also operates an international warehouse and distribution business, which provides a full service
offering for craft brewers and distillers, including malt, hops, yeast, adjuncts and related products.
We are one of the leading malt suppliers to the craft brewing sector, supported by a distribution network comprising 21
warehouses (both Company-operated and through third party logistics providers) and international craft distribution
partnerships throughout North America, South America, Europe, Asia and Australia.
United Malt generates earnings along the malt supply chain, from barley procurement and handling, malt processing, and
sale and distribution of value-added malt and related products. United Malt benefits from having high quality, low
operating cost processing assets that are strategically located in premium barley growing regions, allowing it to source
high quality barley and access a diverse range of customers.
Our customer base is diversified by product, end-market and geography, and comprises a range of high-quality
customers including global brewers, craft brewers, distillers and food companies.
We sell into both domestic and export markets. Export markets (particularly Asia) are an important source of demand for
malt produced in Australia.
United Malt successfully demerged from GrainCorp Limited on 23 March 2020 to form a stand-alone entity listed on the
Australian Securities Exchange. The financial reports contain two full years of results for FY19 and FY20, although only
the second half earnings in FY20 are to the benefit of United Malt as a standalone listed entity. United Malt has two
operating segments: Processing and Warehouse & Distribution.
Our Business Model
United Malt’s business model, strategic positioning and expertise in leveraging key inputs into our business creates value
for our customers, shareholders and employees.
United Malt generates earnings along the malt value chain, from barley procurement and handling, barley processing,
and sale and distribution of value-added malt products and related products.
Our Processing assets are strategically located in premium quality barley growing regions and in close proximity to a
diverse range of customers, including global brewers, craft brewers, distillers, and food companies. We benefit from
having high quality and low operating cost processing assets.
Our Warehouse & Distribution segment has established itself as one of the leading malt and ingredient suppliers to the
craft brewing sector and has a strong market position in our key markets.
United Malt has a highly capable team of ~1,000 employees across our operating geographies; this, combined with the
long and rich history of our operating brands, delivers a business model to capitalise on growth trends to deliver
shareholder returns over the medium to longer term.
Our Strategy
Our strategy is focused on keeping our customers at the centre of everything we do, whilst targeting those high value
markets where the long-term outlook for growth remains supportive.
Our strategic priorities are centred on three areas, whilst remaining agile in times of uncertainty:
• Optimise the core
• Transform for tomorrow
• Create new value
24
| United Malt Annual Report 2020
United Malt Group Limited
(cid:513) (cid:18)(cid:146)(cid:135)(cid:148)(cid:131)(cid:150)(cid:139)(cid:144)(cid:137) (cid:131)(cid:144)(cid:134) (cid:9)(cid:139)(cid:144)(cid:131)(cid:144)(cid:133)(cid:139)(cid:131)(cid:142) (cid:21)(cid:135)(cid:152)(cid:139)(cid:135)(cid:153)
Focus Area
Strategic Priorities
Strategic Action
Be the supplier of choice for
our customers
Leverage distribution capability to supply customers
domestically and in export markets
Maximise customer-centric offering, experience and scale in
existing and new markets
Optimise the core
Drive penetration in the
distilling market
Capture growth from increasing demand for whisky in
emerging markets and higher value, single malt whiskies
Expand craft distribution
business into new
geographies
Expand into the growing craft beer market in Latin America
and Asia by leveraging extensive craft distribution experience
Supported by other bolt-on acquisitions, start-up opportunities
and new distribution partnerships
Proactively use technology
to transform the way we
operate and create new
sources of value
Invest in technology-led operations and supply chains
Harvest and structure data sources to enhance decision
making
Investment in our assets, to
create best in class
operations, enhancing our
customer experience
Continue to optimise our asset and environmental footprint
and draw on recent experience in plant investment projects
Enhance processes, structure and systems to deliver
competitive advantage
Proactively assess
acquisitive growth
opportunities
Take a disciplined approach to evaluating acquisitive growth
opportunities to extend our geographic reach, product offering
and /or customer base, creating value
Develop innovative products
and solutions for customers
Leverage our rich pedigree and expertise in malting to create
innovative product solutions for our customers
Transform for
tomorrow
Create new value
Group Financial Summary
Key Results ($ M)
Revenue
EBITDA1
EBIT2
Net Finance costs3
Tax Expense
Net profit after tax
Shareholder Returns
Basic earnings per ordinary share
Return on equity
Return on capital employed (ROCE)
Dividend per ordinary share
cents
%
%
cents
2020
1,289.1
156.1
92.0
(14.6)
(20.0)
45.6
16.8
4.4%
7.5%
3.9
2019
Change %
1,316.5
175.5
123.2
(36.5)
(27.7)
56.9
22.4
6.8%4
11.6%5
-
-2.1%
-11.1%
-25.3%
60.0%
27.8%
-19.9%
-25.0%
-2.3pp
-1.6pp
>100%
1 EBITDA is a non-IFRS measure representing earnings before net interest, tax, depreciation and amortisation, and excluding significant items related to the
demerger.
2 EBIT is earnings before interest, tax, and excluding significant items related to the demerger.
3 Net finance costs include intercompany interest of $26.8m whilst part of GrainCorp Limited.
4 2019 equity adjusted to include impact of 2020 extinguishment $427 million of debt.
5 2019 capital employed adjusted to include impact of 2020 extinguishment $427 million of debt and FY19 net debt excludes the $633.8m related party
loan.
25
United Malt Group Limited
(cid:513) (cid:18)(cid:146)(cid:135)(cid:148)(cid:131)(cid:150)(cid:139)(cid:144)(cid:137) (cid:131)(cid:144)(cid:134) (cid:9)(cid:139)(cid:144)(cid:131)(cid:144)(cid:133)(cid:139)(cid:131)(cid:142) (cid:21)(cid:135)(cid:152)(cid:139)(cid:135)(cid:153)
Segment Results
($ M)
2020
2019
% Change
Revenue
EBITDA6
Revenue
EBITDA6
Revenue
EBITDA
Processing
989.4
126.0
1,001.4
136.7
-1.2%
-7.8%
Warehousing & Distribution
Corporate and eliminations
328.9
(29.2)
34.6
(4.5)
349.8
38.8
-6.0%
-10.8%
(34.7)
-
-15.9%
na
Total
1,289.1
156.1
1,316.5
175.5
-2.1%
-11.1%
Reconciliation of Underlying EBITDA to Statutory NPAT
($ M)
Underlying EBITDA
Net interest
Depreciation and amortisation
Significant items6
Profit before income tax
Income tax expense
Net Profit After Tax
2020
156.1
(14.6)
(64.1)
(11.8)
65.6
(20.0)
45.6
2019
175.5
(36.5)
(52.3)
(2.1)
84.6
(27.7)
56.9
Financial Analysis and Commentary
Between October 2019 and February 2020, United Malt’s operating environment remained generally consistent with prior
years and was uninterrupted by the COVID pandemic.
COVID began impacting United Malt in March 2020, as the pandemic spread across Europe and North America, followed
by Australasia. The impact varied across each of our geographies depending on the severity and duration of the lock
down measures introduced by each respective government.
Group Financial Results
Demand was impacted by the lock down measures and changes in consumer behaviours, with a shift to at home
consumption across all regions, initial pantry filling and restrictions with on-premise consumption.
Revenue was down 2 per cent to $1.3 billion for the full year, driven by COVID related declines in the 2H after a firm
performance delivered in the 1H.
EBITDA (post adoption of the AASB16 Lease accounting standard) was $156.16 million; down 11 per cent on the prior
year.
The results included a $12.6 million uplift to Underlying EBITDA relating to the AASB 16 Lease accounting standard.
Excluding the impact of this standard, underlying EBITDA fell by 18 per cent.
The 2H performance was characterised by lower volumes and a change in sales mix reducing EBITDA delivery, caused
by the impact of COVID on our customers.
In addition, the Group results reflected an increase in corporate costs, associated with being a separately listed entity
and higher Director & Officer insurance costs in FY20.
These increased costs were partially offset by cost-saving initiatives in the 2H20. Direct cost savings of $5.9 million were
realised, and a further $4.4 million in government wage support schemes was accessed in Canada, the UK and New
Zealand supporting retained staff who would have otherwise been furloughed. No government wage assistance was
received in Australia and in the US.
The Company delivered an Underlying Net Profit After Tax of $57.47 million compared to $59.0 million for FY19.
Underlying earnings per share were 16.8 cents compared to 22.4 cents in the prior year, reflecting lower net profit and an
increase in the weighted average number of shares on issue following the equity raising conducted in the second half.
Reported Net Profit After Tax for the period was $45.6 million.
6 EBITDA is a non-IFRS measure representing earnings before net interest, tax, depreciation and amortisation, and excluding significant items related to
he demerger.
7 Underlying NPAT is net profit after tax, and excluding significant items related to the demerger.
26
| United Malt Annual Report 2020
United Malt Group Limited
(cid:513) (cid:18)(cid:146)(cid:135)(cid:148)(cid:131)(cid:150)(cid:139)(cid:144)(cid:137) (cid:131)(cid:144)(cid:134) (cid:9)(cid:139)(cid:144)(cid:131)(cid:144)(cid:133)(cid:139)(cid:131)(cid:142) (cid:21)(cid:135)(cid:152)(cid:139)(cid:135)(cid:153)
Segment Financial Results
In the Processing segment, revenue fell by 1 per cent to $989.4 million reflecting volume declines compared to the prior
year. Underlying segment EBITDA declined by 8 per cent to $126.08 million as a result of the impact of COVID in key
markets. Underlying EBITDA margin was impacted by a change in sales mix and increased costs associated with hygiene
and social distancing measures put in place to keep our workforce safe. In addition, some higher costs associated with
operating at reduced utilisation and continued delays with containers and higher freight costs attributable to COVID.
Revenue in the Warehouse & Distribution segment reduced by 6 per cent to $328.9 million. Underlying segment
EBITDA was down by 11 per cent to $34.68 million, impacted in the second half by COVID stay-at-home restrictions, which
reduced demand from craft brewers servicing only the on-premise market.
The Underlying EBITDA margin was impacted by change in sales mix and higher costs associated with operating at
reduced volumes. In addition, during the 1H20 $3 million aged hops inventory was written off.
Interest expense has benefited from reduced global interest rates, and loan forgiveness as part of the demerger, along
with paying down debt with capital proceeds.
Financial Position and Balance Sheet
Key Results ($ M)
Financial Position
Total assets
Total equity
Net assets per ordinary share9
Net debt to net debt and equity10
2020
2019
% Change
$ M
$ M
$
%
1,886.8
1,031.3
3.4
20.2%
1,763.3
413.7
3.3
20.8%
7.0%
>100%
4.3%
-0.6pp
United Malt remains in a strong financial position to manage in the current environment and to continue our investment in
strategic growth initiatives. The Company successfully completed a $170.6 million equity raising in May 2020 which
comprised an institutional placement ($140 million) and a Share Purchase Plan ($30.6 million). Part of the proceeds of
the raising were used to repay debt.
As a result, net debt at 30 September 2020 was $261.7 million compared to $584.1 million at 31 March 2020. The gearing
ratio (net debt/ Underlying EBITDA11) was 1.7 times, which is below the Company’s target ratio of 2.0 to 2.5 times, reflecting
the seasonal impact of working capital.
The Company maintains comfortable headroom within its banking covenants and has no significant near-term refinancing
commitments with long-term debt facilities not maturing until November 2022.
Dividend
The Board has resolved to pay a final dividend of 3.9 cents per share. No interim dividend was paid during the reporting
period. The dividend payment represents a payout ratio of 40 per cent of Underlying NPAT for the second half. The
Company’s dividend policy in future periods will be to distribute approximately 60 per cent of Underlying NPAT, subject to
trading conditions.
Operating Cash Flow
Operating cash flow remained positive during FY20. Working capital in the second half was lower, reflecting the typical
seasonal unwinding vs the first half and the lower barley price.
Interest paid was lower in FY20, due to debt restructure including debt forgiveness (FY19 internal interest payment of
$9.4 million whilst part of GrainCorp), and partially paid down inventory funding commitments as part of the capital raise
use of funds.
Tax paid was lower, due to lower earnings and timing of payments.
8 EBITDA is a non-IFRS measure representing earnings before net interest, tax, depreciation and amortisation, and excluding significant items related to
the demerger.
9 Net assets per ordinary share in 2019 has been adjusted to reflect the number of shares issued as part of the demerger from GrainCorp Limited and
equity adjusted to include impact of 2020 extinguishment $427 million of debt.
10 2019 equity adjusted to include impact of 2020 extinguishment $427 million of debt and FY19 net debt excludes the $633.8m related party loan.
11 Net debt included the value of capital leases and EBITDA is a non-IFRS measure representing earnings before net interest, tax, deprecia ion and
amortisation, and excluding significant items related to the demerger and is post the impact of AASB16.
27
United Malt Group Limited
(cid:513) (cid:18)(cid:146)(cid:135)(cid:148)(cid:131)(cid:150)(cid:139)(cid:144)(cid:137) (cid:131)(cid:144)(cid:134) (cid:9)(cid:139)(cid:144)(cid:131)(cid:144)(cid:133)(cid:139)(cid:131)(cid:142) (cid:21)(cid:135)(cid:152)(cid:139)(cid:135)(cid:153)
Future Business Prospects
The Company continued to implement its growth strategy, including upgrading and expanding the capacity of its malting
facilities. Underway is the £51 million investment in the Bairds Scottish malting facilities, which will add 79,000t of
capacity across the Arbroath and Inverness sites, bringing total Bairds capacity to ~300,000t per annum.
In Australia, the Company announced a $27 million investment renewing the Perth kiln, providing safety and efficiency
benefits and the opportunity for future production capacity expansion at the plant with further investment.
United Malt entered into an in-principle agreement with its existing Mexican distribution partner for an expanded
partnership to further grow United Malt’s penetration into the Mexican market. The new agreement will provide on the
ground access to the growing craft market in Mexico, enhanced customer experience, and more efficient logistics.
United Malt continues to be well positioned to manage through the current market uncertainty, which is expected to
continue throughout FY21. Some signs of recovery have emerged in the Company’s markets, and the business remains
prepared for the evolving impact of COVID, and the potential for second and third waves, which could continue to disrupt
demand, supply chains and operations.
United Malt remains well placed to return to growth, once conditions stabilise supported by:
• Strong market positions, strategically located malting assets and our market leading distribution platform, that is well
positioned to service customers’ ingredient requirements
• High quality customer base diversified by product, end-market and geography
• Disciplined investment in our assets to lower production costs, enhance efficiencies and expand capacity where
necessary as we continue to focus on targeting those high value markets.
Rounding of amounts
The Directors’ Report is presented in Australian dollars, with all amounts rounded to the nearest one hundred thousand
dollars (unless specifically stated otherwise) under the option available to the Company under ASIC Corporations
(Rounding in Financial/Director’s Report) Instrument 2016/191. The Company is an entity to which this legislative
instrument applies.
Risks
There are various risks associated with owning shares in United Malt. Some of these risks are specific to United Malt and
its business, while others are risks of a more general nature that apply to any investment in publicly traded shares. The
list of risks set out below is not exhaustive and does not consider the personal circumstances of shareholders. The list of
risks set out below is also not arranged in any hierarchical manner. Shareholders should seek professional advice if they
are in any doubt about the risk associated with holding shares in United Malt.
As a new standalone company, senior leadership at United Malt have agreed a Risk Management Framework that will sit
under the aegis of the Audit and Risk Committee. This Committee meets quarterly and reviews the treatment of risk
through Operation and Strategic Risk Registers and compares those to the risk appetite stance of the Board.
Risks affecting United Malt’s business
Risks
COVID.
The COVID pandemic will continue to
adversely impact the global economy and our
customers, suppliers and employees. It has
the potential to temporarily close down a
production facility if a worker became infected.
Also, the impact on global and regional
economic conditions could disrupt the supply
chain, operations, or industries of our
customers which could reduce demand for our
products.
Action
Actions: United Malt has a strong balance sheet and is well positioned to
respond to the current pandemic. We recently completed a capital raise to
ensure that we had a stronger balance sheet to both respond to the pandemic
and to continue our strategic capital plans.
Our people are a key asset, and their safety has been of paramount concern to
us during the pandemic. We have taken consistent and measurable steps to
keep them safe in order to keep our production facilities open. This includes
pre-shift screening, contract tracing, cohort working, partnerships with expert
vendors and pre-negotiated testing agreements.
We have also formed a standing committee of the Executive Leadership Team
who meet regularly to monitor the pandemic and calibrate our response.
28
| United Malt Annual Report 2020
United Malt Group Limited
(cid:513) (cid:18)(cid:146)(cid:135)(cid:148)(cid:131)(cid:150)(cid:139)(cid:144)(cid:137) (cid:131)(cid:144)(cid:134) (cid:9)(cid:139)(cid:144)(cid:131)(cid:144)(cid:133)(cid:139)(cid:131)(cid:142) (cid:21)(cid:135)(cid:152)(cid:139)(cid:135)(cid:153)
Risks
Action
Climate and Environmental Risks.
We are intrinsically linked to the barley crops
grown around the globe. Climate Change can
imperil the global barley supply which we
depend on for our core functions of processing
and distributing malted products. Climate
Change could lead to higher costs, lower
margins and potentially increased costs
associated with our business functions.
Water Access Risks.
Water is an essential component of the
malting process. Access to high-quality water
may be impacted by Climate Change, long-
term drought or wide-spread contamination of
local aquifers. This could lead to adverse
financial impacts in the form of higher costs or
reduction in product quality.
Customer and Supplier Risks.
There is a risk to United Malt that a loss of key
customers or suppliers could result in an
adverse impact on our financial performance
through either a reduction in revenue or an
increase in costs associated with running the
business.
Seasonal Fluctuation in Working Capital
Risk.
We face variations throughout the year in the
draw on our working capital, relating to
customer purchasing behaviour, payment
terms and commodity prices. Historically,
United Malt’s working capital levels have
peaked around 31 March and unwind in the
second half to 30 September.
Transportation and Supply Chain Risks.
We rely on our supply chain to store and
transport barley to our production sites and
finished products to our customer. There is a
risk that disruption to the supply of raw
materials to our processing plants, and/or
finished goods through our network, could
adversely impact our financial results or
increase the costs associated with running the
business.
Actions: Our reporting is guided by the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations and climate risk is emerging as a
consideration in our customer and supplier contracts as well as in our future
capital expenditure projects. We are also tracking proposed policy, legal and
technological changes that are on the horizon during the transitional phase of a
coordinated global response to climate change.
We are investigating the feasibility of a Climate Change Impact Assessment of
the North American barley production areas from which we source.
We continue to review and, where poss ble, reduce our consumption of water
and fossil fuels. Future capital expenditures managed by the Project
Management Office do review opportunities for reduced consumption.
Actions: We understand the critical importance of water to us all. United Malt is
keenly focused on consumption reduction strategies, recycle, reclamation and
effluent management regimes; all to reduce our consumption of water and
creation of wastewater. Each of our processing facilities closely monitors and
reports their consumption of water. We are committed to evaluating and rating
the impact of our future capital expenditure projects’ changes to water
consumption and effluent treatment. Furthermore, all capital expenditure
projects are evaluated for their access to abundant quality water supplies.
Actions: This is a relationship business. We enjoy strong partnerships with our
key customers and suppliers in our production and distribution businesses. The
majority of these relationships are codified in the form of long-term agreements.
They provide us with the stability in the form of forward orders that allow us to
control costs and deliver savings to our customers, while also providing our
suppliers with certainty. Our senior leaders regularly engage with their
counterparts to find innovative ways to improve our commercial relationships.
United Malt’s Innovation Centre is driving product development, improving
processes and quality; all with the goal of maintaining key customers. A recent
marketing and branding refresh, combined with customer segmentation work,
has also been a key focus during the current fiscal year.
Actions: We closely monitor and manage our receivables and the timing of
receipt of payment throughout the year. We are also mindful of, and constantly
review, our inventory levels during harvest in each of the jurisdictions in which
we operate, the requirements of our processing facilities and the timeliness of
accounts payables to ensure that we meet our obligations.
Actions: Our business is implementing a Transportation Management System
(TMS) geared towards ensuring timely and safe delivery of our products to our
customers. The TMS should allow us to be nimbler and more responsive to
potential disruptions to our Supply Chain.
All warehouses are subject to audit procedures relating to food safety
standards. Food safety risks have been identified and are covered by
Statements of Procedure (SOP) or contract. Also, where possible, we are
shifting towards using owned and managed facilities, instead of 3PLs, to give
us greater control of this risk.
Inventory and stock controls that United Malt has in place include procedures
such as inventory reconciliation against third-party logistics, stocktakes/cycle
counts, site visits, due diligence conducted for new facilities and audit
procedures. We also purchase appropriate insurances against loss of our stock
in transit or while stored.
29
United Malt Group Limited
(cid:513) (cid:18)(cid:146)(cid:135)(cid:148)(cid:131)(cid:150)(cid:139)(cid:144)(cid:137) (cid:131)(cid:144)(cid:134) (cid:9)(cid:139)(cid:144)(cid:131)(cid:144)(cid:133)(cid:139)(cid:131)(cid:142) (cid:21)(cid:135)(cid:152)(cid:139)(cid:135)(cid:153)
Risks
Action
Capital Requirement Risk.
Like most businesses, we require significant
capital to operate and fund capital
expenditures. If United Malt is unable to
generate sufficient cash flows or raise
sufficient external financing, then we may be
forced to limit our operations and growth
plans.
Actions: United Malt strives to ensure strict cash management and has built-up
cash reserves, and, when appropriate, will continue to build up those reserves
up. We look to pay down debt when doing so is prudent.
Our Group Strategy and Group Finance teams actively seek to optimise
portfolio management. Meetings are held to review, prioritise and select capital
projects based on an assessment of business needs and customer and
financial benefits.
The result of our recent capital raise in May of this year was a promising sign
that we still enjoy strong support of shareholders and the wider market.
Commodity Pricing and Agricultural Risks.
Barley growing and procurement are subject
to a variety of agricultural factors beyond our
control, such as disease, pests, rainfall, and
extreme weather conditions. To the extent that
any of these factors impact the quality and
quantity of barley available to United Malt for
malting, its operations could be adversely
affected.
Actions: United Malt seeks to mitigate this risk by maintaining a diversified
network of growers and leveraging its strong supplier relationships, allowing it
to import barley when necessary in each jurisdiction it operates if necessary, to
respond to local impacts to agricultural yields.
We enter into forward contracts with multiple growers, co-operatives and grain
companies in all geographies where we currently source barley, and we seek to
renew these well in advance of expiry. We continually review options to
diversify our procurement footprint.
We also malt other cereal grains, which further mitigates this risk.
Project Management Risks.
There is a risk that a lack of proper oversight
or controls, delays to or increased costs of
construction projects, or changes to
government or regulatory approval regimes
could result in future projects failing to achieve
their intended benefits.
Actions: United Malt has a proven track record of managing large capital
expenditure projects. This includes expansions and upgrades to production
facilities, as well as, the continued deployment of our distribution businesses.
We created a Project Management Office (PMO) to oversee large capital
expenditure projects. This office works with local stakeholders, including
business unit Presidents and specifically assigned construction and installation
managers, to oversee the day to day progress of our expansion and
improvement builds.
For our larger projects, we form steering committees, which include Executive
Leadership Team members and technical experts, and they meet on a regular
basis before, during and after the build. The cadence of meetings is designed
to ensure that our strategic objectives are met, the estimated returns are
achieved. The post-completion meetings are as important and seek to extract
key learnings that can be implemented in future projects. We utilise internal and
external auditing support, as well as, engage with technical experts including
engineers, brokers and other third parties as part of the PMO process.
Actions: Senior Leadership of the United Malt and our UK business, Bairds
Malt, meet regularly to discuss the ongoing revisions to the Brexit Withdrawal
Agreement. We have reviewed the potential impacts on our customers and
suppliers and will respond when the outcome is known.
Actions: In the financial year 2019, United Malt worked with internal auditors
and external parties to undertake a review of the food safety quality
management (FSQM) processes and procedures of our distr bution businesses.
We have implemented the findings of that review to include quality assurance
accreditation and ISO9001 compliance, improved plant and warehouse
housekeeping and hygiene procedures. We are also investing in increased staff
training and assessments.
United Malt will undertake a similar FSQM audit and review for our processing
facilities globally in the coming financial year.
The goals of both reviews are to deliver more consistent higher quality products
to our customers and to strengthen our resilience while reducing potential
business and financial performance impacts.
Hard Brexit.
One of the United Malt companies, Bairds Malt
Limited, operates in the UK and has key
customer and supplier contracts throughout
Europe. There is considerable risk that a Hard
Brexit could have a material impact on the
performance of the business.
Product and Food Safety Risks.
United Malt operates malting and warehouse
facilities globally and is subject to food and
stock handling risks. These include spoilage,
contamination, misappropriation, damage to
food and stock through insurable and non-
insurable risks, incorrect grading, product
tampering, product recall, changes to
government, industry or destination standards
regarding product specification, product
liability claims or perceived obsolescence of
stock. Any of these occurrences could result in
an adverse impact on our business and
financial performance.
30
| United Malt Annual Report 2020
United Malt Group Limited
Risks
Position Risk.
(cid:513) (cid:18)(cid:146)(cid:135)(cid:148)(cid:131)(cid:150)(cid:139)(cid:144)(cid:137) (cid:131)(cid:144)(cid:134) (cid:9)(cid:139)(cid:144)(cid:131)(cid:144)(cid:133)(cid:139)(cid:131)(cid:142) (cid:21)(cid:135)(cid:152)(cid:139)(cid:135)(cid:153)
Action
We take large holding positions of
commodities at various times of the year. In
addition to these, United Malt also hedges
energy and utilities prices, interest rates and
foreign exchange rates. There is a risk that our
hedging management strategies might not
successfully minimise exposure to these risks.
Moreover, there is the risk that an inadequate
segregation of duties or improper oversight of
these positions could lead to an adverse
impact on United Malt’s business and financial
performance.
Systems, Reporting and Controls Risks.
There is a chance that a major system outage
to one of the business’ core software or
system platforms could increase United Malt’s
costs and could lead to regulatory or
government intervention in the form of costs,
investigations, penalties or liabilities. We rely
on IT systems that, if breached, could lead to
a loss of confidential data, deterioration in
reputation and impacts on suppliers or
customers. All of these outcomes would have
an adverse impact on our business and
financial performance.
Taxation and Regulatory Change Risks.
Changes in taxation laws (or their
interpretation) where we have operations
could materially affect our financial
performance. In addition, governments may
review and impose additional or higher excise
or other taxes on beer or whisky, which may
have an adverse effect on consumer buying
patterns and may adversely impact United
Malt’s financial results.
Market Preference Risks.
United Malt is a food and beverage company
specialising in the production of malted
products for brewing and distilling customers.
There is a risk that we may not optimally align
with consumers, or that beer consumption
could fall or that our products could be used
less often in customer’s end products. These
risks could lead to a reduction in market share
which could have an adverse impact on United
Malt’s business and financial performance.
Skills and Capabilities Risks.
People capability or capacity could impact the
effective execution of United Malt’s strategic
plans and future operation of the business.
Actions: United Malt has put into place a robust Position & Trading Risk
Management Policy (PTRMP) that is overseen by the company CFO and the
Audit and Risk Committee. We continually monitor the positions and associated
risks of each geography through daily tracking and weekly meetings of senior
leadership.
In each geography, we have appointed utility brokers to reduce the volatility of
the group’s utility pricing. We also utilize enterprise risk management software
programs to track and hedge these risks.
In addition, we have implemented a clear Segregation of Duties Protocol
between the front, middle and back offices that clearly delineates the authority
levels of all decision makers as sanctioned by the Audit and Risk Committee.
Actions: United Malt deploys many methods to protect its systems, including
but not limited to, security infrastructures such as firewalls, virus scanning, data
back-up systems, network performance monitoring, improved and
geographically dispersed redundancies, an Information Security Management
System, Access Control Standards, Global Disaster Recovery and, in some
jurisdictions, Business Continuity Plans.
United Malt has completed an internal audit focusing on Information
Technology General Controls (ITGC), and external penetration testing audits
are performed annually. The learnings from the ITGC audit are being reviewed
and incorporated into the business in aligning with ISO 27001.
Actions: United Malt works closely with our advisors in all geographies to
thoughtfully consider and confirm that we adhere to tax regulations and
potential liabilities associated with doing business in each of the countries in
which we operate.
Our Legal Counsel provides guidance on compliance and governance matters
and consults with us on ramifications of any potential changes in the
jurisdictions where we operate. Where appropriate, our obligations and consent
registers kept by our EHS colleagues are reviewed. Moreover, clearly defined
compliance oversight respons bilities are assigned to specific job roles. Lastly,
our internal audit program reviews compliance matters as required.
Actions: United Malt is actively involved in industry forums and trade groups
that shape and influence consumer trends. In addition, market research and
competitor intelligence are incorporated into the Strategic Planning Process at
all levels of the company. The recent implementation of the Net Promotor Score
tracking methodology gives us early warning systems to see where we could
better align with market or consumer trends.
Our employees gather and act on customer feedback at all times. This includes
formal research (utilising NPS and other research methods), as well as,
providing training to members of staff in managing customer relationships.
Actions: We recently formalised our Strategy and Purpose Statements as a
new stand-alone organisation, and our business model now clearly defines and
communicates who and what United Malt wants to become. We are
implementing a Global System of Record which will allow for standardisation
and simplification of processes, automation, employee self-service and
enhanced colleague development. The business undertakes a succession
planning exercise annual to identify key individual related dependencies and
works towards reducing those risks.
31
United Malt Group Limited
(cid:513) (cid:18)(cid:146)(cid:135)(cid:148)(cid:131)(cid:150)(cid:139)(cid:144)(cid:137) (cid:131)(cid:144)(cid:134) (cid:9)(cid:139)(cid:144)(cid:131)(cid:144)(cid:133)(cid:139)(cid:131)(cid:142) (cid:21)(cid:135)(cid:152)(cid:139)(cid:135)(cid:153)
Risks
Action
Foreign Exchange Risks.
United Malt and its related entities enter into
foreign currency transactions, typically in the
purchase of raw materials or in the sale of
malt. Additionally, a significant proportion of
United Malt’s income is denominated in
foreign currency. Therefore, our reported net
income in Australian dollars will fluctuate
inversely to the Australian dollar’s relationship
with the other foreign currencies in which we
do business.
Utility Pricing.
Some of our largest expenditures are power
and natural gas utilities costs. There is a risk
that these costs could substantially increase
due to factors largely outside of our control,
and these higher costs could impact the
business.
Actions: United Malt leverages a multi-desk foreign exchange processing
platform to facilitate entering and sourcing of foreign exchange trades to
improve operating efficiency and reduced foreign exchange exposure in
purchases or sales. These actions and procedures are reviewed by the Board
Audit and Risk Committee and monitored by internal audit for efficacy and
compliance.
Translation risk of the earnings of the overseas subsidiaries is mitigated by the
fact that the assets and liabilities of those businesses, including external debt,
are held in local currencies. Any change in exchange rates will not impact a
business unit’s ability to repay its debts or suppliers in its local currency.
Actions: United Malt has undertaken a review of utilities pricing in each
geography. We have appointed local expert energy brokers who are working
tireless to reduce the volatility of these costs. In addition to the efforts of our
utility brokers, our finance teams at times will hedge these costs in an effort to
further mitigate this risk.
As part of a longer-term strategy, a management working group has been
formed which is developing a wholistic energy management plan and is
reviewing alternative and renewable sources of energy.
General Risks
In addition to the risks specific to the United Malt noted above we also monitor the below risks which are generally
associated with any investment in publicly traded shares. These risks are reviewed by the Audit and Risk Committee, as
well as, Executive Leadership Team of the business. The Group Risk and Insurance Manager also provides guidance on
the below matters as part of the annual reporting regime.
Risk
Economic Risks.
General economic conditions, fluctuations in interest and inflation rates, commodity prices, currency exchange rates, energy costs,
changes in government, including the change in US administration, changes in fiscal, monetary and regulatory policies, the
development of new technologies and other changes to the general market conditions may have an adverse effect on United Malt, its
future business activities and the value of United Malt shares.
Market Conditions Risks.
Share market conditions may affect the value of shares regardless of United Malt’s financial or operating performance. Share market
conditions can be unpredictable and are affected by many factors including changes in investor sentiment towards market sectors (in
particular food and beverage supply) and the domestic and international outlooks.
Significant Events Risks.
Significant events may occur in Australia or internationally that could impact the market for United Malt’s products and its operations,
the share price and the overall economy generally. These events include war, terrorism, civil disturbance, political actions and natural
events such as earthquakes, floods and pandemic risks.
Global, Regional and Country Specific Sovereign Risks.
As an international maltster, United Malt is vulnerable to geopolitical tensions that may impact global trading patterns and flows. There
is a risk that United Malt’s financial performance may be impacted when those tensions affect markets or commodities that United Malt
purchases. United Malt is also vulnerable to country / oversight risks such as the imposition of tariffs, foreign exchange restrictions or
nationalisation of assets.
Subsequent Events
No matters or circumstances have arisen since 30 September 2020 which have significantly affected or may significantly
affect: a) The Group's operations in future financial years; or b) The results of those operations in future financial years;
or c) The Group’s state of affairs in future financial years.
32
| United Malt Annual Report 2020
United Malt Group Limited
| Operating and Financial Review
Additional Disclosures
Reporting relief for half year ended 31 March 2020
As United Malt advised in its ASX announcement on 14 May 2020, and as disclosed in the Demerger Scheme Booklet
dated 6 February 2020 that was despatched to shareholders of GrainCorp Limited (ASX:GNC) (GrainCorp) in connection
with the demerger of United Malt from GrainCorp on 1 April 2020, the Australian Securities and Investments Commission
(ASIC) made an order under subsection 340(1) of the Corporations Act 2001 (Cth) (Act) that United Malt did not have to
comply with section 302, 306 or 320 of the Act for the half-year ended 31 March 2020 (HY20) (ASIC Order). The effect of
the ASIC Order was that United Malt did not have to comply with the requirements under the Act to prepare and lodge
with ASIC a half-year financial report and half-year directors’ report for HY20. The Company relied on the ASIC Order
and did not prepare or lodge with ASIC a half-year financial report or half-year directors’ report for HY20. As disclosed in
the Company’s ASX announcements on 24 March and 14 May 2020, ASX Limited (ASX) also provided a waiver from
ASX Listing Rule 4.2A to UMG to allow United Malt to not lodge with ASX a half-year report and Appendix 4D in respect
of HY20.
Indemnification and Insurance of officers
Under the Company’s constitution, the Company may indemnify, to the extent permitted by law, each director and
company secretary of United Malt or its related bodies corporate as the directors determine, for all losses and liabilities
incurred by the person as an officer to the extent that such losses and liabilities are not covered by insurance. If the
directors so determine, Company may also extend this indemnity to its auditor or former auditors.
The Company has entered Deeds of Access, Indemnity and Insurance with its directors, company secretary and certain
executives.
The Company has paid a premium in respect of a contract insuring current and former directors, company secretaries
and executives of the Company and its subsidiaries against liability that they may incur as an officer of the Company,
including liability for costs and expenses incurred by them in defending civil or criminal proceedings involving them as
such officers, with certain exceptions. It is a condition of the insurance contract that no details of the premiums payable
or the nature of the liabilities insured are disclosed.
No proceedings
No application has been made under section 237 of the Corporations Act 2001 (Cth) in respect of United Malt, and there
are no proceedings that a person has brought or intervened in on behalf of United Malt under that section.
Audit services
Audit services during the year have been provided by PricewaterhouseCoopers (PwC), led by partner Kristin Stubbins.
Details of the amounts paid to PwC for audit services are set out in note 4.5 of the financial report.
Non-audit services
The Company may decide to engage the external auditor on assignments additional to its statutory audit duties where
the auditor’s expertise and experience with the Company are important. Details of the amounts paid to the external
auditor PwC for non-audit services provided during the year are set out in note 4.5 to the financial report.
In accordance with advice received from the Audit & Risk Committee (ARC), the Board is satisfied that the provision of
non-audit services by PwC during the year is compatible with the auditor independence requirements of the Corporations
Act 2001 (Cth) The Board is satisfied that the provision of non-audit services by the auditor did not compromise the
auditor independence requirements of the Corporations Act 2001 (Cth) for the following reasons:
all non-audit services have been reviewed by the ARC to ensure that they do not impact the integrity and objectivity
of the auditor;
none of the services undermine the general principles relating to auditor independence as set out in the APES 110
Code of Ethics for Professional Accountants.
A copy of the external auditor’s independence declaration as required by s307C of the Corporations Act 2001 (Cth) is set
out on page 46 and forms part of this report.
Corporate Governance Statement
From the date of the Company’s admission to the Australian Securities Exchange on 23 March 2020 to the year ended
30 September 2020, the Company’s corporate governance framework was consistent with the 4th edition of the
Corporate Governance Principles and Recommendations released by the ASX Corporate Governance Council. United
Malt’s corporate governance statement can be viewed at www.unitedmalt.com//corporate-governance.
33
Remuneration Report
Introduction
This Report covers the remuneration of Non-Executive Directors, the Managing Director and Chief Executive Officer
(CEO) and senior executives, who are considered Key Management Personnel (KMP), who have authority for and are
accountable for planning, directing and controlling the activities of United Malt consistent with the Australian Accounting
Standards Board 124 (Related Party Disclosures (‘AASB 124’) definition).
This report outlines the remuneration structure in place for FY20 and refinements planned for FY21. It focuses on
remuneration outcomes from United Malt’s listing on 23 March 2020. It also references the pre-demerger period as
relevant.
FY20 Year in Review
In a year of significant transition, as well as, significant disruption, our
remuneration policies continue to be based on the sound principles that were well
established pre-demerger. The demerger period was a busy one and taken as a
whole, FY20 was not an easy year for the Company. Demerging and establishing
United Malt as an independent business listed on the ASX was achieved through
the effort and commitment of the entire GrainCorp and United Malt teams.
United Malt’s policies, systems and processes for the listed environment were being established
for the first time amid the challenges from COVID. Urgent action was taken to ensure the safety of
our customers, people and products, as well as actions to address the rapidly unfolding market
and commercial impacts.
We are pleased to report that, despite these challenges, safety was not compromised, and our
FY20 safety and environmental performance was strong. Across all aspects of the business a great
deal has been achieved in a difficult external environment. This is a credit to all our people.
COVID response
Our management team responded quickly to the pandemic with a focus on efficiencies and cost control to
preserve cash. Employee furloughs (stand downs) were necessary and implemented in a timely manner. Many
employees effectively reduced their base pay by 20 per cent for five months by taking the equivalent in leave,
including some KMP. The base salary of the CEO was reduced by 20 per cent from 1 May to 30 September 2020.
Non-Executive Directors also reduced their base fees by 20 per cent during this period.
Performance
As we look back at FY20, we are pleased with the performance of the leadership of the newly formed management team.
While financial performance targets set pre-pandemic were not met, the Company performed strongly in the key areas of
safety, customer engagement, product quality and cost-management.
In early 2020, both on-premise and craft customers experienced real time significant disruptions to their markets,
requiring our teams across the USA, Canada, United Kingdom, New Zealand and Australia to respond flexibly and
rapidly. The Board is particularly pleased that customer engagement feedback has been positive over the period.
FY20 Remuneration outcomes
The Board believes that the overall performance fully merits the moderate awards that
were made under our Short Term Incentive (STI) plan for FY20 and recognises the
strong performance, leadership and resilience demonstrated across the year. This is
not withstanding below-target financial results which were negatively impacted by
COVID disruptions. The payments reflect the achievement of the non-financial metrics
in the STI and, while the Board actively considered whether the exercise of discretion
was appropriate, ultimately it decided that the outcomes were appropriate.
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Under normal circumstances our STI Plan grants half of any STI
awarded to Executive KMP in cash and the other 50% as deferred
equity in the Company. In recognising the current circumstances,
the Board decided that 100% of STI awards will be paid in deferred
equity, with 50% vesting after 12 months and 50% vesting after 24
months. In line with our new mandatory shareholding policy
adopted during the year, KMP will be required to retain equity.
Recognising that past and future market conditions will continue to be challenging
as markets and customer demand adjusts, the Board made the following
remuneration decisions:
• Moderate STI awards for the Executive KMP group for achieving non-financial
•
•
•
objectives as per the FY20 STI scorecard
No increase in base pay for FY21 for CEO and KMP
No increases to Non-Executive Director fees for FY21
Proposed changes to the FY21 Long Term Incentive (LTI) plan to better align
with shareholder interests.
Remuneration in FY21
For FY21 we will continue with the current structure of our STI program as outlined in this report.
Our commitment to a focus on a strong financial outcome, as well as our Environment, Health and
Safety (EH&S) and Customers outcomes, have not changed.
In terms of the LTI Plan, we committed in the Demerger Scheme Booklet to publish the FY20 LTI
performance standards related to each of these performance conditions. That detail is provided in
the Executive Remuneration Policy section of this report.
For the FY21 LTI plan we propose to adjust the performance hurdles as we believe this will enhance
alignment between KMP LTI vesting outcomes and longer-term outcomes for the business. It is
incumbent upon the Board to have a long term incentive plan that both drives outcomes for
shareholders and supports alignment to business priorities for Executive KMP. We believe that the
proposed changes will achieve both outcomes.
Specifically, we propose in FY21 to:
•
•
•
Retain the current measure of return on capital employed (ROCE) with a weighting of 50%
Retain absolute total shareholder return (aTSR) with a reduction of weighting to 25%
Add an additional measure weighted at 25% based on delivering quantified outcomes from execution of
strategic growth projects. This measure will be assessed by the Board based on specific and quantified targets.
While these targets are commercially sensitive, we will disclose them more fully at the end of the three-year
performance period. The proposed approach is explained further in this report.
A key rationale for demerging the Malt business from GrainCorp was to unlock value by establishing a standalone
business which could pursue an independent strategy as outlined in detail in the Scheme Booklet. It includes
maintaining and developing relationships with global brewers, continuing to be the maltster of choice for craft
brewers, expanding our craft business in new geographies, driving penetration in the Scottish distilling market,
proactively assessing expansion and acquisition opportunities, as well as, driving operational excellence and
continuous improvement.
The Board and management team believe that there are critical strategic projects that must be delivered over the
next three years, particularly in relation to streamlining operating cost structures and investing in strategic growth
projects. The proposed change to our LTI targets aims to focus on repositioning the business for growth and
robust financial performance.
Our existing measures of ROCE and aTSR affirm the importance of improving returns to our shareholders and our
long-term financial performance. The additional measure, Strategic Execution, is being included to emphasise the
importance of the achievement of our Strategic Plan in evolving the business.
.
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Key Management Personnel (KMP)
KMP are listed in the table below. The CEO and other Executives considered KMP are collectively referred to as
‘Executive KMP’ in this report.
Non-Executive Directors
Role
Period as KMP
Graham Bradley AM
Chairman and Non-Executive Director
Appointed 13 January 2020
Barbara G bson
Non-Executive Director
Appointed 13 January 2020
Jane McAloon
Non-Executive Director
Appointed 13 January 2020
Simon Tregoning
Non-Executive Director
Appointed 13 January 2020
Terry Williamson
Non-Executive Director
Appointed 23 March 2020
Executive KMP
Role
Period as KMP
Mark Palmquist
Managing Director and Chief Executive
Officer
Appointed Managing Director 13 January 2020
and Chief Executive Officer on 23 March 2020
Amy Span k*
Chief Financial Officer
Bryan Bechard^
President, Warehouse & Distr bution
Darren Smith#
President, Processing
Appointed as United Malt Chief Financial Officer
on 23 March 2020
Appointed as United Malt President, Warehouse &
Distr bution on 23 March 2020.
Appointed as United Malt President, Processing
on 23 March 2020.
* Amy Spanik was Chief Financial Officer for the GrainCorp Malt business in the period prior to her appointment as United Malt Chief Financial Officer.
^ Bryan Bechard was President Global Craft for the GrainCorp Malt business in the period prior to his appointment as United Malt President, Warehouse & Distribution.
# Darren Smith was President GrainCorp Malt for the GrainCorp Malt business in the period prior to his appointment as United Malt President, Processing. Darren Smith gave notice
of resignation post balance date and ceased to be a KMP at this time. He has a six months’ notice period.
FY20 Executive Remuneration Outcomes
FY20 Base Salary
Remuneration for the Executive KMP was set prior to demerger after a comprehensive review of relevant benchmarks.
The Chief Financial Officer received a 19% increase in base salary due to the increase in the scope of the role as a
result of becoming a listed Company. No other Executive KMP received an increase in base pay. Full details of
commencing remuneration were provided in the Demerger Scheme Booklet. There have been no increases to any
Executive KMP base salaries since demerger.
For the period from May to September 2020 all Executive KMP took a 20% base pay reduction, either as a cash or leave
reduction. This initiative was taken to assist in absorbing the financial impact of COVID and to acknowledge the reduced
pay outcomes of some United Malt employees.
FY20 Short Term Incentive
The United Malt Corporate Scorecard outcomes were measured across the full FY20 year. At the time of demerger, the
FY20 scorecard was reviewed to reflect the standalone United Malt business and to align with United Malt targets,
allowing STI participants to be measured against United Malt performance for the full year. FY20 outcomes are set out in
the next table:
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Executive KMP
Financial measures
weighting (%) and
performance
Environment, Health
& Safety weighting
(%) and performance
Customer
weighting (%)
and performance
Individual
weighting (%)
and performance
Name
Position Title
EBIT
RIFR, EH&S
Engagements &
Critical Risk Reviews
NPS &
Customer Action
Plan
Agreed objectives
included people
leadership, public
company establishment,
project completion, and
management of COVID
Mark Palmquist
Managing Director &
CEO
Amy Spanik
Chief Financial Officer
Bryan Bechard
President, Warehouse
& Distribution
Darren Smith
President, Processing
(50%)
(15%)
(15%)
(20%)
(50%)
(15%)
(50%)
(50%)
(15%)
(15%)
(15%)
(15%)
(15%)
(20%)
(20%)
(20%)
Minimum performance
threshold not achieved
Threshold performance
achieved
Target performance
achieved
Stretch performance
achieved
In determining the final scorecard results the Committee and the Board believe the right outcome for senior management
and shareholders was to award a modest STI. The outcome for the CEO was achievement at 42% of target STI (28% of
maximum potential), and the remaining Executive KMP have been assessed at 46% of target STI (31% of maximum
potential).
There are several reasons for this outcome:
•
•
•
•
The Company demerged in March 2020, requiring significant and sustained management effort to set United Malt up
for success. This is a considerable achievement and was included in the Board’s final assessment of performance,
particularly in the individual component on the scorecard.
Disappointingly, the EBIT metric was not achieved. No COVID-related government assistance was received in the
USA or in Australia during FY20, but modest assistance was received in Canada, the UK and New Zealand. The
Company’s financial performance was underpinned by concerted management efforts to reduce costs and manage
cash, as well as retain and develop customer relationships.
Environment, Health and Safety performance during FY20 was strong with both the number of safety engagements
and the Reportable Injury Frequency Rate outcomes being achieved well above the stretch targets. In a trying last
few months, the whole management team worked together to achieve this positive outcome.
Focusing on customers when they most needed our help resulted in an improvement in our Net Promoter Score
(NPS), and there was good progress made on the development of our Customer Action Plan.
The Board considered whether there should be downwards discretion, given the impact of COVID. After reviewing the
achievements of our Executive KMP, the Board believed the outcome was appropriate and balanced and did not apply
any discretion and paid STI awards according to achievement of the scorecard. The CEO result, at 42% of target rather
than 46% of target, is the outcome of the lower individual score which reflects his overall responsibility for Company
performance. The Board believes these results fairly reflect both Company and individual Executive KMP performance in
a challenging year.
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Statutory Remuneration outcomes for FY20
Remuneration for Executive KMP for FY20 is shown in the table below.
Amount
AU$
Short-Term Benefits
l
y
r
a
a
S
e
s
a
B
I
T
S
h
s
a
C
y
r
a
t
e
n
o
M
-
n
o
N
s
t
i
f
e
n
e
b
Post-Employment
Benefits
Share-based
Payments
k
1
0
4
n
o
i
t
a
n
m
r
e
T
i
s
t
i
f
e
n
e
B
l
a
r
r
e
f
e
d
I
T
S
8
1
Y
F
d
n
a
I
T
L
s
d
r
a
w
a
P
E
D
l
a
t
o
T
r
a
e
Y
l
l
u
F
Mark
Palmquist
From 23
March 2020
$550,766
$0
$10,660
$12,267
$0
$144,453
$347,807
$1,065,953
Amy
Span k*
Bryan
Bechard*
Darren
Smith*
Full Year
$437,787
$0
$31,193
$13,134
$0
$34,840
$37,884
$554,838
Full Year
$396,067
$10,729
$31,193
$8,812
$0
$18,617
$20,861
$486,279
Full Year
$605,380
$0
$21,151
$12,301
$0
$51,278
$88,771
$778,881
Explanatory notes to the Statutory Remuneration outcomes for FY20 table:
i.
ii.
iii.
iv.
v.
vi.
vii.
The MD & CEO is reported from his commencement as CEO of United Malt on 23 March 2020. Prior to this date he was not a
KMP of the Malt business. The CEO’s annual base salary is US$885,500 (AU$1,301,810). The FY20 STI deferral outcome is
equivalent to 42% of annual base salary.
*These KMP have been reported for the full financial period in accordance with AASB 124.
The Cash STI payment for Bryan Bechard is relating to a FY18 STI deferred cash payment.
Non-monetary benefits include the gross value of health insurance and vehicle. All KMP are based in the US and have no
superannuation or long service leave entitlements.
The LTI Awards amounts for Amy Spanik and Darren Smith include an award relating to FY18 STI deferred equity. Details are
provided in the Movement of Rights Granted table.
The value of the STI deferral and the LTI awards represents the accounting value rather than the cash value to participants.
Balance excludes accelerated accounting expense of $109,226 for Darren Smith due to cancelled GrainCorp legacy awards.
Amounts have been converted using the average exchange rate for the period the remuneration is reported. For all short-term
benefits, for Mark Palmquist the exchange rate was USD = AUD1.4701 and for the other Executive KMP the exchange rate
applied was USD1 = AUD1.4765. For the STI deferral and LTI awards the exchange rate was USD = AUD1.4563.
viii.
No prior year comparisons have been provided as this is the first year of reporting for United Malt.
Executive Remuneration Policy
Our remuneration policy aims to engage and retain executive talent, while motivating to deliver business strategy and
key performance targets that create value for shareholders. It seeks to provide remuneration that is structured in a
manner that also encourages behaviours consistent with United Malt’s corporate values.
The Board affirmed its commitment to the following principles underlying the Company’s Remuneration Policy:
•
•
•
Fixed remuneration is determined at a level to attract and retain top talent with a market competitive offering. It is
determined regarding the complexity, responsibility, competence and levels that are competitive with remuneration
levels for employees in comparable roles in the relevant market.
Variable remuneration plans link outcomes to achievement of business and individual goals, as well as the
behaviours through which goals are achieved, consistent with United Malt values.
United Malt aims to position Executive KMP at the median of the relevant market for fixed remuneration with a
range up to the 75th percentile of total remuneration for outstanding performance.
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Remuneration framework
Remuneration for Executive KMP comprises fixed and variable (‘at risk’) elements. A significant proportion of the total
remuneration for Executive KMP is ‘at-risk’ to create alignment with United Malt’s strategic objectives and Shareholder
interests.
The executive remuneration framework elements and their links to performance are outlined below:
Base Salary
Variable Remuneration (At-Risk)
Elements
Salary
(and benefits as relevant
to local conditions)
Short Term Incentive (STI)
Long Term Incentive (LTI)
Delivery Method
Cash
Cash & Equity
(Deferred Rights)
Equity
(Performance Rights)
Intent
Attract & retain talent by
providing competitive package,
recognising job size, complexity
and capability.
Link to
Performance
Suitable and appropriate
reward commensurate with
the role.
Performance
Measures
Position requirements and
accountabilities that align to
achieving business strategy.
How it works
•
•
Set in relation to relevant
external market
considering experience &
performance.
Target median of the
market for base salary
with range up to 75th
percentile of base plus
variable for outstanding
performance.
Reward for short-term
business and personal goals
with equity deferral, alignment
with sustainable shareholder
return performance.
A balanced scorecard of key
business measures and
individual measures aligned
to core accountabilities.
Financial (EBIT),
Environment, Health &
Safety, Customer & Individual
measures.
•
•
50% paid in cash.
50% deferred over 24
months into equity.
• Measured against
scorecard (financial,
customer, safety and
individual measures).
Alignment with long-term business goals
and shareholder value creation.
Key measures set with three year targets
to focus on cost efficiency and sustainable
improvement.
•
•
•
•
aTSR
ROCE
Delivered as Rights.
Vest after three years subject to
performance conditions of 50%
aTSR and 50% ROCE.
Remuneration mix
The tables on the next page show the breakdown of total remuneration at target achievement by our three remuneration
elements in accordance with our policy. The split of cash and equity is considered important for building alignment with
shareholder value creation. The balance of the pay mix, and the cash and equity mix, will continue to be reviewed
over time.
The decision to allocate 100% of FY20 STI awards to deferred equity increases the equity component of our Executive
remuneration pay mix. For FY20 the split of total remuneration for the CEO will be one-third cash and two-thirds equity.
It is envisaged that this will apply for this year only.
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Variable Remuneration - Short Term Incentive
The United Malt STI Plan rewards achievement against annual business goals. It forms a part of our attraction strategy
and provides for both recognition and retention. The terms of the STI plan are outlined below:
Term
Details
Eligibility
All Executive KMP are eligible to participate in the STI. The United Malt Board determines the employees who
are elig ble to participate in the STI from time to time.
Opportunity
The opportunity is a set as a percentage of base salary. Maximum opportunity is 1.5 times target (150%).
The CEO has a target opportunity of 100% and a maximum opportunity of 150%.
The KMP opportunity ranges from a target of 40% up to 70% and a maximum opportunity from 60% to 105%.
Form of award
Deferred STI
award and
deferral period
Performance
period
The proportion of the STI award that vests is delivered:
• 50% as cash; and
• 50% deferred into rights to acquire United Malt shares.
Deferred rights do not carry any voting or dividend rights.
The deferred rights will vest in two tranches – 50% of the deferred awards vest after 12 months and 50% after
24 months.
Performance will be tested over one financial year.
The United Malt STI scorecard measures four key financial and non-financial elements and each element is
weighted the same for the CEO and the other KMP.
Performance
measures
Financials (EBIT) 50% weighting
Environment, Health & Safety (RIRF, EH&S Engagements & Critical Risk Reviews) 15% weighting
Customers (NPS & Customer Surveys & Customer Action Planning) 15% weighting
Individual performance (including people leadership, project completion) 20% weighting
Malus
The United Malt Board in its discretion may determine that some, or all, of an employee’s deferred STI should
be forfeited for gross misconduct, material misstatement or fraud.
Cessation of
employment
Change of
Control
Unless the United Malt Board determines otherwise, STI awards will:
a. Remain on foot to be paid, or be awarded in full, at their normal payment or grant date for cessation of
employment due to any other reason (including redundancy, disability, death or retirement), or
b. Lapse where the participant ceases employment due to resignation or termination for cause.
All deferred STI awards will vest upon a change of control, unless the United Malt Board determines otherwise.
Variable Remuneration Long Term Incentive
The LTI Plan awards are granted under the United Malt Employee Incentive Plan Rules and are intended to reward
superior long term performance and encourage retention and alignment with United Malt shareholders.
The terms of the Long Term Incentive Plan are outlined below.
Term
Details
Eligibility
The United Malt Board determines the employees who are eligible to participate. Currently, the LTI is open to
Executive KMP.
Instrument
Performance rights, each being a right to acquire a United Malt share for nil consideration, upon specified
performance measures being satisfied over the relevant performance period. Performance rights will not carry
voting or dividend rights.
Opportunity
The number of performance rights granted to each participant is determined by dividing the dollar value of a
participant’s LTI opportunity by the Volume Weighted Average Price (VWAP) of shares over a period defined in the
LTI plan. For the FY20 LTI the VWAP was the 20 consecutive days period from 7 April 2020 to 6 May 2020
(inclusive).
For FY20 the target opportunity for the CEO was 100% (maximum was 150%).
The other Executive KMP had a target opportunity of 40% (maximum of 60%).
Performance
period
The FY20 LTI performance period commenced on the date on which United Malt shares commenced trading on
the ASX (24 March 2020) and ends on 30 September 2022. Future grants will have a three-year vesting period.
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Term
Details
Vesting of performance rights under the FY20 LTI plan will be subject to the participant’s continued employment
with United Malt and satisfaction of specified performance conditions. The performance conditions applicable to
the FY20 award under the LTI plan are a combination of:
a. aTSR (applicable to 50% of the grant of performance rights) defined as the compound annual growth rate of
United Malt’s TSR over the performance period; and
b. ROCE (applicable to 50% of the grant of performance rights) defined as EBIT divided by capital employed.
Earnings includes interest on commodity inventory funding. The average achieved for the five relevant financial
half years ROCE outcomes will be calculated to determine the ROCE over the performance period.
Performance
conditions
The vesting schedule for both the aTSR and the ROCE performance conditions is as follows:
Performance attained
Percentage of rights to vest
Below the minimum of the target range
At the minimum of the target range
Nil
50%
Within target range
Straight line between 50% and 100%
At or above the target range
100%
The proportion of rights that may vest based on aTSR performance is determined by the Board, based on
the vesting schedule. The aTSR vesting schedule for the FY20 LTI is:
Absolute TSR (CAGR)
Percentage of TSR rights to vest
Below threshold Absolute TSR CAGR target
Less than 6%
Equals threshold Absolute TSR CAGR target
6%
Between target and maximum Absolute TSR
CAGR target
At or above maximum Absolute TSR CAGR
target
Greater than 6%; up to 9%
Equal to or greater than 9%
FY20
Vesting
schedules
The proportion of rights that may vest based on ROCE performance is determined by the Board, based on
the vesting schedule. The ROCE vesting schedule for the FY20 LTI is:
ROCE achieved over Period
Percentage of ROCE rights to vest
Below threshold ROCE target
Equals threshold ROCE target
Less than 8.6%
8.6%
Between threshold and maximum ROCE target
Greater than 8.6%; up to 11.4%
At or above maximum ROCE target
Equal to or greater than 11.4%
Vesting
Malus
Cessation of
employment
Based on performance relative to the performance conditions, the relevant number of performance rights will vest,
and each participant will receive a United Malt share in respect of each vested performance right (unless the
United Malt Board, in its sole discretion, determines to settle vested performance rights by making a cash
equivalent payment in lieu of the allocation of United Malt shares.
The United Malt Board in its discretion may vary downwards the number of an employee’s shares due to vest, if
the Board determines that the performance of the Group, any member of the Group, any business, area or team,
and the conduct, capability, or performance of the Participant, justifies the variation.
Unless the United Malt Board determines a different treatment, where a participant ceases employment with
United Malt:
a.
b.
as a result of resignation or termination for cause, all unvested performance rights will lapse;
for any other reason (including redundancy, disability, death or retirement), a pro-rata number of the
participant’s unvested performance rights (based on the proportion of the performance period that has
elapsed at the time of cessation) will remain on foot and will be eligible to vest on the original vesting date.
Change of
Control
In the event of a change of control all unvested performance rights will vest, unless the United Malt Board
determines otherwise.
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Remuneration in FY21
As described in our overview section at the beginning of the report, the Board and management team believe that there
are critical strategic projects that must be delivered over the next three years. As a newly listed Company, the need to
evolve to enable sustainable growth and managing for the changing business environment is essential. To drive the
achievement of our Strategic Plan and provide an appropriate incentive to our Executive KMP, an additional measure will
be added to our LTI plan for FY21.
Our existing measures will remain. ROCE is a measure of profitability and efficient use of capital efficiency; both are
important to our business. aTSR is a clear indicator of improved shareholder value. The weightings and definitions for
our FY21 measures are summarised below.
Measure
Weighting
Definition
Return on Capital Employed
(ROCE)
Absolute Total Shareholder
Return (aTSR)
Strategic Execution
50%
25%
25%
Earnings before interest and taxes (EBIT) divided by capital employed (being
the sum of United Malt’s total borrowings net of cash assets and average
shareholders’ equity). An average of the three financial year ROCE outcomes
will be calculated to determine the ROCE over the three-year vesting period.
The compound annual growth rate of United Malt’s TSR over the performance
period.
Realisation of the pre-determined agreed metrics that will demonstrate the
achievement of our Strategic Plan. Comprises three elements that are all
underpinned by quantifiable metrics.
•
Profitability and customer performance – realign and enhance our
marketing and decision making capabilities with a focus on customer
efficiencies and increased profitability.
• Operating Model – reposition our operating model to reflect the needs of
United Malt as a stand-alone, listed Company involved in Malt and
beverage products.
• Growth – establishing and executing strategic growth opportunities.
Vesting of the Strategic Execution measure will be assessed by the Board against a set of predetermined financial and strategic metrics
including cost savings and increased revenue. The release of these measures and the performance assessment will be provided at the
completion of the three-year performance period due to the commercially sensitive nature of the targets.
Legacy Equity awards
As a stand-alone Company, there were no United Malt prior year LTI awards able to vest. During the first half of the year
the achievement of the GrainCorp FY18 LTI was assessed and did not vest. The GrainCorp FY19 LTI plan was
cancelled due to the timing of the demerger. The CEO and the President, Processing were participants in these LTI
plans.
Under the United Malt Employee Incentive Plan Rules three awards were made in FY20.
United Malt FY20 Long Term Incentive and One-off Award
The first United Malt LTI (the FY20 LTI) was offered to Executive KMP post demerger. Due to the timing of the grant and
demerger, it has a slightly shortened performance period (2.5 years) ending 30 September 2022.
As there were no LTI awards due to vest until FY22, to encourage retention of Executive KMP and to support alignment
with United Malt shareholders during the period following the demerger, a One-off Award was granted to the CEO and
the President Processing. The Chief Financial Officer and the President, Warehouse & Distribution had not been eligible
for LTI prior to the offering of the United Malt FY20 LTI, and as such they were not offered participation in the One-off
Award.
The performance period for this award commenced on the date United Malt shares commenced trading on the ASX (24
March 2020) and ends on 30 September 2021. All other terms and conditions, including performance conditions and
measures, are as per the FY20 LTI.
The performance conditions, measures and terms for the FY20 LTI and the One-off Award have been outlined in the
Variable Remuneration section of this report and were documented in the Scheme Booklet.
Discretionary Equity Award
Also, as a result of the demerger, all share rights held by United Malt employees under GrainCorp’s deferred equity plan
lapsed for nil consideration. After the demerger, a one-off grant of rights to United Malt shares was made to employees
who had previously held rights under GrainCorp’s deferred equity plan (including two Executive KMP) so that their
interests were aligned with the interests of United Malt and its shareholders. Rights granted under this One-off Award
42
| United Malt Annual Report 2020
United Malt Group Limited
Remuneration Report
(cid:513)
were subject to a service condition and vested the day after the announcement of United Malt’s financial results for the
financial year ended 30 September 2020.
Non-Executive Director Fees
Full-year Non-Executive Director fees are set out below. They reflect the approach agreed as a result of the review
undertaken in preparation for the demerger. The fees were positioned at market median for base fees, committee chair
and membership fees, and aligned with positioning against companies of a similar size.
Fees are paid from the $1,500,000 aggregate annual fee pool. This pool value was set to allow for growth and changes
within the structure of the United Malt Board over time. This fee pool was approved as part of the Scheme approved by
shareholders in November 2019. Total Director fees paid during the period from listing to 30 September was $418,527.
This represented 28% of the fee pool.
In response to the significant impact of COVID, the Board implemented a 20% reduction in base fees for the period 1
May to 30 September 2020.
In view of the current business environment, no changes to Board fees will be made for FY21.
Function
Board
Audit and Risk Committee
Nominations and Remuneration Committee
Safety, Health & Environment Committee
Role
Chairman
Non-Executive Director
Chair
Committee Member
Chair
Committee Member
Chair
Committee Member
Fees AU$ (including superannuation)
$340,000
$120,000
$22,000
$11,500
$22,000
$11,500
$22,000
$11,500
Superannuation contributions are made in accordance with Australian superannuation legislation at a rate of 9.5% up to
the maximum contribution limit. Superannuation is included in the fees presented above.
Committee fees are not paid to the Chairman of the Board.
Actual fees paid to Non-Executive Directors in FY20 for the period commencing on 23 March 2020 are shown in the table
below. While most Non-Executive Directors were appointed to the United Malt Board on 13 January 2020 (Terry
Williamson was appointed from 23 March 2020), no payment was received by any Non-Executive Director from United
Malt for the period between appointment and formalisation of the demerger in March 2020.
Non-Executive Directors
Board and
Committee Fees
Superannuation
Other Benefits
Total Fees
Graham Bradley AM
$137,736
$13,085
Barbara Gibson
Jane McAloon
Simon Tregoning
Terry Williamson
$62,184
$62,184
$57,930
$62,184
$5,907
$5,907
$5,503
$5,907
0
0
0
0
0
$150,821
$68,091
$68,091
$63,433
$68,091
Remuneration Governance
The Board has ultimate responsibility for the Company’s remuneration policies and takes that responsibility very
seriously. Strong governance and oversight processes have been established for remuneration, assisted by the
Nominations and Remuneration Committee which comprises three Non-Executive Directors. The Committee assists the
Board to satisfy itself that the Company:
•
•
has coherent remuneration and people management policies and practices which are aligned with the Company’s
purpose, values, strategic objectives and risk appetite and which enable the Company to attract, motivate and retain
capable and talented Directors, executives and employees;
fairly and responsibly remunerates Directors, executives and employees having regard to the performance of the
Company and best market practices; and
43
United Malt Group Limited
Remuneration Report
(cid:513)
•
delivers on its overall people strategy, with regard to the Company’s succession planning, talent management,
diversity, performance management and employee relations policies.
The Committee operates under a Charter which was established at the commencement of the Company and will be
reviewed every two years. The Charter is available on the Company’s website.
Minimum Shareholding Policy
A Minimum Shareholding Policy was approved in July 2020 in recognition of the importance of aligning the interests of
United Malt’s Non-Executive Directors and Executives with the long-term interests of the Company’s shareholders. Non-
Executive Directors must hold a share ownership equal to one times base fees within five years, Executive KMP must
hold one times base salary, and the CEO must hold two times base salary also within five years from commencement of
the policy or appointment. As the Policy is in its first year of operation, compliance was not assessed. A full copy of the
Policy is available on the Company website.
Remuneration Advisers
The Board and the Nominations and Remuneration Committee may seek advice from external advisers as required.
In the period since demerger no remuneration recommendations relating to KMP remuneration were obtained.
Employment Terms
•
•
The Executive KMP are employed under employment contracts which are open-ended.
The Non-Executive Directors have a letter of appointment which outlines their duties and their remuneration.
• Non-executive Directors are not eligible to receive variable pay, bonuses or termination payments.
A summary of the key employment terms for the Executive KMP is shown in the table below.
Executive KMP
Notice period
Company
Notice period
KMP
Termination entitlements
Managing Director & CEO
6 months
Other Executive KMP
3 months
6 months
6 months
Redundancy – 6 months
Redundancy – 6 months
Shareholdings and other mandatory disclosures
Movement of Rights held during the reporting period
Details of the issue of Performance Rights in the Company are shown in the table below. As this is the first year of
operation, the opening balance is zero.
KMP
Mark Palmquist
Amy Span k
Bryan Bechard
Darren Smith
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Forfeited or
lapsed
during the
year
Balance at
the end of
the year
Vested and
exercisable at the
end of the year
0
0
0
0
576,610
48,221
36,358
119,186
0
0
0
0
0
0
0
0
576,610
48,221
36,358
119,186
0
2,861
0
4,740
Number of rights granted, vested and forfeited under the deferred STI and LTI awards
Details of the number of rights granted to Executive KMP, as well as, the number of rights that vested or were forfeited
during the year are provided on the following page:
44
| United Malt Annual Report 2020
United Malt Group Limited
Remuneration Report
(cid:513)
Equity granted
Vested in FY20
Plan
Number of
rights
Grant date
Fair value at
grant
Financial year in
which rights may
vest
Vested
in the
year
(%)
Forfeited
in the
year (%)
Number
of
ordinary
shares
Current
Executive
KMP
Mark
Palmquist
Bryan
Bechard
Darren
Smith
FY20 LTI
296,067
1 Sept 2020
789,019
One-Off
Award
280,543
1 Sept 2020
758,869
FY20 LTI
45,360
1 Sept 2020
120,884
2022
2021
2022
0
0
0
Amy Spanik
Discretionary
Equity Award
2,861
1 Sept 2020
11,015
2020
100%
FY20 LTI
36,358
1 Sept 2020
96,084
FY20 LTI
57,223
1 Sept 2020
153,499
57,223
1 Sept 2020
154,788
2022
2022
2021
0
0
0
4,740
1 Sept 2020
18,249
2020
100%
One-Off
Award
Discretionary
Equity Award
0
0
0
0
0
0
0
0
0
0
0
2,861
0
0
0
4,740
Shares held by KMP
The table below details the number of Company shares, in which KMP have a relevant interest, as at the date of this
report.
Executive KMP
&
Non-Executive Directors
Balance
as at
23 March 2020
Received
During
the year
Purchases
and
Sales
Balance
as at
30 September 2020
Mark Palmquist
302,000
Amy Spanik
Bryan Bechard
Darren Smith
Graham Bradley AM
Barbara Gibson
Jane McAloon
Simon Tregoning
Terry Williamson
8,182
2,898
23,066
58,500
22,000
6,038
40,000
5,000
0
0
0
0
0
0
0
0
0
125,000
427,000
0
0
0
22,895
7,895
6,038
32,895
29,586
8,182
2,898
23,066
81,395
29,895
12,076
72,895
34,586
Transactions and Loans to KMP
No transactions or loans involving Directors or Executive KMP, or their related parties, were made.
Signed on behalf of the Board in accordance with a resolution of Directors.
Graham Bradley AM
Chairman
18 November 2020
45
Auditor’s Independence Declaration
As lead auditor for the audit of United Malt Group Limited for the year ended 30 September 2020,
I declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001
in relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of United Malt Group Limited and the entities it controlled during the
period.
Kristin Stubbins
Partner
PricewaterhouseCoopers
Sydney
18 November 2020
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
46
| United Malt Annual Report 2020
Financial
Report
47
Financial Report
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 September 2020
Revenue
Other income / (loss)
Raw materials and consumables used
Employee benefits expense
Finance costs
Depreciation and amortisation
Occupancy costs
Repairs and maintenance
Other expenses
Profit before income tax
Income tax expense
Profit for the year attributable to equity holders of parent entity
Other comprehensive income
Items that will not be reclassified to profit and loss:
Remeasurement of retirement benefit obligations
Income tax relating to these items
Items that may be reclassified to profit and loss:
Changes in fair value of cash flow hedges
Income tax relating to these items
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the equity holders of the parent
entity
Earnings per share
Basic earnings per share
Diluted earnings per share
Note
1.2
1.3
1.3
3.2,3.3,3.4
1.3
1.4
3.6
1.4
1.4
2020
$ M
1,289.1
4.5
(956.0)
(122.3)
(15.8)
(64.1)
(4.5)
(17.8)
(47.5)
65.6
(20.0)
45.6
(0.2)
(0.2)
5.6
(1.3)
(26.6)
(22.7)
22.9
2019
$ M
1,316.5
4.2
(967.7)
(108.5)
(40.2)
(52.3)
(12.3)
(19.1)
(36.0)
84.6
(27.7)
56.9
(14.9)
3.0
(12.1)
2.7
38.2
16.9
73.8
Note
Cents
Cents
1.5
1.5
16.8
16.8
22.4
22.4
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
48
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
Consolidated Statement of Financial Position
As at 30 September 2020
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Current tax assets
Total current assets
Non-current assets
Trade and other receivables
Derivative financial instruments
Deferred tax assets
Property, plant and equipment
Intangible assets
Right of use assets
Retirement benefit asset
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Derivative financial instruments
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Income received in advance
Borrowings
Lease liabilities
Derivative financial instruments
Deferred tax liabilities
Provisions
Retirement benefit obligations
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Note
2.1
3.1
3.1
2.5
2.5
1.4
3.2
3.3
3.4
3.6
3.1
2.1
3.4
2.5
3.5
2.1
3.4
2.5
1.4
3.5
3.6
2.2
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
2020
$ M
262.1
245.4
318.5
4.4
5.2
835.6
0.2
2.4
21.7
620.8
337.6
66.4
2.1
2019
$ M
181.4
245.5
347.9
4.6
12.4
791.8
0.4
0.3
4.5
609.8
353.7
-
2.8
1,051.2
1,886.8
971.5
1,763.3
178.4
107.3
12.4
4.9
0.7
12.9
316.6
19.1
348.1
56.0
5.2
93.3
4.0
13.2
538.9
855.5
1,031.3
166.9
452.6
411.8
1,031.3
170.7
776.6
-
10.2
-
8.8
966.3
19.6
260.0
-
5.3
78.7
2.5
17.2
383.3
1,349.6
413.7
-
47.5
366.2
413.7
49
United Malt Group Limited
| Financial Report
Consolidated Statement of Changes in Equity
For the year ended 30 September 2020
Hedging
reserve
Pension
reserve
$ M
$ M
Share
option
reserve
$ M
Common
Control
Reserve
$M
Translation
reserve
Total
reserves
$ M
$ M
Contributed
equity
$ M
Retained
earnings
$ M
Total
equity
$ M
At 30 September 2018
Profit for the year
Other comprehensive income:
Exchange differences on translation of
foreign operations
Changes in fair value of cash flow
hedges
Remeasurements of retirement benefit
obligations (note 3.6)
Tax effect of above items
3.0
-
(14.2)
-
(1.4)
(0.3)
(12.1)
-
-
(14.9)
2.7
3.0
Total other comprehensive income
(10.8)
(12.2)
Total comprehensive income for the
year
Transactions with owners:
Demerger-related loan extinguishment1
At 30 September 2019
Profit for the year
Other comprehensive income:
Exchange differences on translation of
foreign operations
Changes in fair value of cash flow
hedges
Remeasurements of retirement benefit
obligations (note 3.6)
Tax effect of above items
Total other comprehensive income
Total comprehensive income for the
year
Transactions with owners:
Shares issued
Share-based payments (note 1.3)
Demerger-related loan extinguishment1
(10.8)
(12.2)
-
-
(7.8)
(26.4)
0.2
0.7
5.6
-
-
(0.2)
(1.3)
(0.2)
4.5
4.5
-
-
-
0.3
0.3
-
-
-
At 30 September 2020
(3.3)
(26.1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.8
-
0.8
-
-
-
-
-
-
-
-
27.3
-
16.1
-
39.9
38.2
-
-
-
39.9
(12.1)
(14.9)
5.7
16.9
39.9
16.9
14.5
14.5
-
67.2
14.5
47.5
(27.5)
(26.6)
-
-
-
5.6
(0.2)
(1.5)
(27.5)
(22.7)
(27.5)
(22.7)
-
-
-
-
-
-
-
-
427.0
441.5
309.3
56.9
325.4
56.9
-
-
-
-
-
38.2
(12.1)
(14.9)
5.7
16.9
56.9
73.8
-
366.2
45.6
-
-
-
-
-
14.5
413.7
45.6
(26.6)
5.6
(0.2)
(1.5)
(22.7)
45.6
22.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39.7
-
0.8
427.0
452.6
166.9
-
-
-
-
-
166.9
0.8
427.0
166.9
411.8
1,031.3
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
1 As part of the Demerger from GrainCorp Limited, the intercompany loans were repaid or forgiven as part of the establishment of the new standalone operating
structure of United Malt. The impact of the loans forgiven is recognised in a separate reserve within equity.
50
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
Consolidated Statement of Cash Flows
For the year ended 30 September 2020
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Repayment of inventory funding loans
Interest received
Interest paid
Lease payments (interest component)
Income taxes paid
Net inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for computer software
Proceeds from sale of property, plant and equipment
Net outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Lease payments (principal component)
Proceeds from capital raise
Net inflow / (outflow) from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
2.1
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Note
2020
$ M
2019
$ M
1,351.1
1,349.1
(1,191.1)
(1,194.9)
2.1
160.0
(32.9)
1.4
(10.0)
(3.3)
(13.5)
101.7
(58.1)
(1.4)
-
(59.5)
220.1
(322.8)
(18.8)
166.9
45.4
87.6
181.4
(6.9)
262.1
154.2
(20.0)
3.5
(20.9)
-
(23.8)
93.0
(46.3)
(1.4)
1.2
(46.5)
41.6
(183.4)
-
-
(141.8)
(95.3)
268.8
7.9
181.4
51
Notes to the Financial Statements
For the year ended 30 September 2020
Overview
The financial report includes consolidated financial statements for United Malt Group Limited (‘United Malt’ or the ‘Company’) and its
controlled entities (collectively the ‘Group’). United Malt Group Limited is a for-profit company incorporated and domiciled in Australia,
limited by shares which are publicly traded on the Australian Securities Exchange. The financial report of United Malt Limited for the
period ended 30 September 2020 was authorised for issue in accordance with a resolution of the Directors on 18 November 2020.
a) Basis of preparation
This general purpose financial report has been prepared in accordance with Australia Accounting Standards issued by the Australian
Accounting Standards Board (AASB) and the Corporation Act 2001. The report also complies with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board.
United Malt successfully demerged from GrainCorp Limited on 23 March 2020 to form a stand-alone entity listed on the Australian
Securities Exchange. While the Group has historically complied with AASB standards, this is the first year of preparing standalone
financial statements under AASB 1 First-time Adoption of Australian Accounting Standards.
The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments
measured at fair value and the defined benefit plan assets and liabilities, which are recognised as the net total of the plan assets, plus
unrecognised past service costs less the present value of the defined benefit obligation.
The report is presented in Australian dollars, with all amounts rounded to the nearest one hundred thousand dollars (unless specifically
stated otherwise) under the option available to the Company under ASIC Corporations (Rounding in Financial/Director’s Report)
Instrument 2016/191. The Company is an entity to which this legislative instrument applies. Comparative information has been
reclassified where necessary to conform to changes in the current year. Comparative information was not restated to reflect the
adoption of AASB 16 Leases.
b)
Impact of the COVID pandemic
During the reporting period, a global pandemic (COVID) has impacted people and businesses across the globe. United Malt has
considered the impact of COVID on the disclosures included in this financial report. The financial performance of the Group was
impacted in the second half of the year by the COVID pandemic. Government imposed containment restrictions adversely affected on-
premise alcohol consumption, particularly for small craft beer brands. While off-premise consumption increased, this was not sufficient
to mitigate the decline in on-premise consumption. Despite this, United Malt remains in a strong financial position to manage in the
current environment and to continue with investment in strategic growth initiatives.
c) New and amended standards adopted
The Group has adopted all mandatory amended Accounting Standards issued that are relevant and effective for the current reporting
period but does not early adopt any Australian Accounting Standards and Interpretations that have been issued or amended but are not
yet effective.
AASB 16 Leases
The Group adopted AASB 16 Leases from 1 October 2019, which is reflected in the financial statements. For a qualifying lease, there
is now a right of use asset and a lease liability based on the present value of the future lease payments, excluding variable payments.
The Group elected to adopt the modified retrospective approach in transitioning to the standard which means there is no restatement of
comparative information.
On adoption of the standard, the Group assessed whether existing contracts contained leases at the date of inception. These contracts
were then measured at the present value of the remaining fixed lease payments, discounted using the Group’s incremental borrowing
rate at 1 October 2019. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow over a similar
term, with a similar security, the funds necessary to purchases an asset of similar value to the right of use asset in a similar economic
environment. It is permitted under the standard to use the incremental borrowing rate when the rate implicit in the lease is not readily
determinable. The weighted average incremental borrowing rate applied to the lease liabilities at 30 September 2020 is 3.6%.
The Group has also elected to use the following practical expedients as allowed under the standard:
exemptions on lease contracts for which the lease term ends within 12 months;
exemptions on lease contracts for which the underlying asset is of low value;
application of a single discount rate to a portfolio of leases with similar characteristics;
use of hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease; and
exclusion of initial direct costs for the measurement o the right of use asset at the date of initial application.
52
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
The adoption of AASB 16 as outlined above resulted in the following changes to the balance sheet on 1 October 2019:
Increase in right of use assets
Increase in lease liabilities (current and non-current)
The lease liabilities at 1 October 2019 can be reconciled to the operating lease commitments as 30 September 2019 as below:
Operating lease commitments at 30 September 2019
Impact of discounting
Short-term leases exempted
Lease liabilities at 1 October 2019
$m
69.0
(69.0)
$m
96.5
(27.0)
(0.5)
(69.0)
For the year-ended 30 September 2020, the Company recorded depreciation of $12.5 million and interest expense of $2.6 million
related to the right of use assets and lease liabilities respectively. These expenses replace what would have previously been recoded
as operating lease expense prior to the adoption of AASB 16. For the year-ended 30 September 2020, an expense of $4.5m relating to
leases of low value or terminating in less than 12 months was recorded. For the purposes of the statement of cash flows, the lease
payments are separated in principal repayments (financing activities) and interest payments (operating activities). These cashflows
would have all been included in operating activities prior to the adoption of AASB 16.
Refer to note 3.4 for more information of right of use assets and lease liabilities for the year ended 30 September 2020.
d) Key judgements and estimates
In applying the Group’s accounting policies, management has made a number of judgements and applied estimates of future events.
Judgement and estimations which are material to the financial report relate to the following areas:
Taxation
Financial instruments and risk management
Intangible assets
Right of use assets and lease liabilities
Retirement benefit obligations
Note
1.4
2.5
3.3
3.4
3.6
e) Foreign currency
These consolidated financial statements are presented in Australian dollars, which is the functional currency of the United Malt Group
Limited and its Australia subsidiaries. Each entity in the Group determines its own functional currency, reflecting the currency of the
primary economic environment in which it operates.
Foreign currency transactions are translated into the functional currency using the exchange rates at the transaction date. Foreign
exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities
denominated in foreign currencies at reporting date exchange rates, are recognised in profit or loss.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the
initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate when the
fair value was determined.
The assets and liabilities of foreign subsidiaries are translated into Australian dollars by applying the rate ruling at balance sheet date
and revenue and expense items are translated at the average rate calculated for the period. Transactions in equity are translated by
applying the rate on the date of the transaction with no subsequent revaluation. Foreign exchange differences resulting from translation
are initially recognised in the foreign currency translation reserve and subsequently transferred to profit or loss on disposal of the
foreign operation.
53
United Malt Group Limited
| Financial Report
1. Group Performance
This section provides information on the performance of the Group, including segment results, line items in the consolidated income
statement, earnings per share, and income tax.
1.1 Operating segments
Description of segments
The Group is organised into two segments based on operational activity. These segments are consistent with internal reports that are
reviewed and used by the Group’s chief operating decision maker, the Chief Executive Officer, in assessing performance and
determining the allocation of resources.
The operating segments are as follows:
Processing: generates earnings from the production and sale of bulk malt to major brewers, craft brewers, distillers, and food
companies.
Warehousing & Distribution: generates revenue for the distribution and sale of bagged malt, hops, yeast, adjuncts, and related
products to craft brewers, distillers and food companies.
Corporate includes costs associated with the corporate office function for the group. Segment performance is based on a measure of
EBITDA2.
a) Performance of segments
2020
Reportable segment revenue
External revenue
Intersegment revenue
Total reportable segment revenue
Segment EBITDA2
Net interest
Depreciation and amortisation
Significant items related to the demerger3
Profit / (loss) before income tax
Other segment information
Capital expenditure
Reportable segment assets
Reportable segment liabilities
Processing
$ M
Warehousing &
Distribution
$ M
Reportable
segments
$ M
Corporate &
Eliminations
$ M
960.2
29.2
989.4
126.0
-
(53.5)
-
72.5
54.2
1,336.0
(287.3)
328.9
-
328.9
34.6
-
(10.6)
-
24.0
5.3
272.4
(99.5)
1,289.1
29.2
1,318.3
160.6
-
(64.1)
-
96.5
59.5
1,608.4
(386.8)
-
(29.2)
(29.2)
(4.5)
(14.6)
-
(11.8)
(30.9)
-
278.4
(468.7)
Total
$ M
1,289.1
-
1,289.1
156.1
(14.6)
(64.1)
(11.8)
65.6
59.5
1,886.8
(855.5)
2 EBITDA is a non-IFRS measure representing earnings before net interest, tax, depreciation and amortisation, and excluding significant items related to the
demerger
3 The Group defines significant items as those items not in the ordinary course of business, non-recurring and material in nature and amount. The amounts are
included in other expense in the consolidated income statement and relate to costs incurred to execute the demerger from GrainCorp Limited.
54
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
1.1 Operating segments (continued)
2019
Reportable segment revenue
External revenue
Intersegment revenue
Total reportable segment revenue
Segment EBITDA4
Net interest
Depreciation and amortisation
Significant items related to the demerger5
Profit / (loss) before income tax
Other segment information
Capital expenditure
Reportable segment assets
Reportable segment liabilities
b) Geographical information
North America
Europe
Australasia
Asia
Other
Processing
$ M
Warehousing &
Distribution
$ M
Reportable
segments
$ M
Corporate &
Eliminations
$ M
966.7
34.7
1,001.4
136.7
-
(48.7)
-
88.0
37.2
1,312.2
(383.5)
349.8
-
349.8
38.8
-
(3.6)
-
35.2
10.5
253.7
(40.2)
1,316.5
34.7
1,351.2
175.5
-
(52.3)
-
123.2
47.7
1,565.9
(423.7)
-
(34.7)
(34.7)
-
(36.5)
-
(2.1)
(38.6)
-
197.4
(925.9)
Total
$ M
1,316.5
-
1,316.5
175.5
(36.5)
(52.3)
(2.1)
84.6
47.7
1,763.3
(1,349.6)
Revenue by customer location
Non-current assets:6
2020
$ M
792.3
214.0
91.1
175.2
16.5
2019
$ M
798.4
217.9
97.3
183.2
19.7
2020
$ M
719.7
144.9
160.4
-
-
2019
$ M
696.7
119.1
148.1
-
-
1,289.1
1,316.5
1,025.0
963.9
4EBITDA is a non-IFRS measure representing earnings before net interest, tax, depreciation and amortisation, and excluding significant items related to the
demerger
5 The Group defines significant items as those items not in the ordinary course of business, non-recurring and material in nature and amount. The amounts are
included in other expense in the consolidated income statement and relate to costs incurred to execute the demerger from GrainCorp Limited.
6 Excludes deriva ive financial instruments, retirement benefit assets and deferred tax assets.
55
United Malt Group Limited
| Financial Report
1.2 Revenue
Total revenue from external customers
Revenue from sale of finished goods
Service and other revenue
Revenue from contracts with customers
Revenue recognised at point in time
Revenue recognised over time
Total revenue from external customers
2020
Total
$M
1,273.2
15.9
1,289.1
1,286.4
2.7
1,289.1
2019
Total
$M
1,300.3
16.2
1,316.5
1,310.6
5.9
1,316.5
Revenue from the sale of goods and services is recognised when the control of the goods has transferred to the customer in
accordance with shipping terms. Service revenue is recorded at the point in time that the service is performed. Revenue is recorded at
the value of consideration receivable net of discounts and goods and services tax (GST).
1.3 Other income and expenses
a) Other income
Interest income
Net gain/(loss) on foreign currency derivatives
Sundry income
Total other income
2020
$ M
1.2
(2.5)
5.8
4.5
2019
$ M
3.7
(3.8)
4.3
4.2
Interest income is recognised as it accrues using the effective interest method. Gain/loss on foreign currency derivatives are
recognised through the P&L as the derivatives are revalued to fair value. The derivatives are mainly purchased to hedge future sales
and purchases in foreign currency. Sundry income is comprised of items not in the course of normal operations such as proceeds
from asset sales and government grants.
b)
Other expenses
Employee benefits expense
Defined contribution superannuation & defined benefit superannuation expenses
Share-based payment expense
Other employee benefits
Total employee benefits expense
Other expenses
Travel
Consulting7
Marketing costs
Legal expenses7
Communication
Insurance
Financing arrangements restructuring7
Intercompany management fees from GrainCorp Limited (refer note 4.4)
Other
Total other expenses
2020
$ M
8.8
0.8
112.7
122.3
3.3
7.8
1.7
2.1
6.7
5.8
5.3
0.8
14.0
47.5
2019
$ M
7.4
0.2
100.9
108.5
5.6
4.5
2.5
1.6
4.2
3.0
-
1.5
13.1
36.0
7 Some expense items in these categories are included in note 1.1 as Significant Items, as they are included in transaction costs related to the demerger from
GrainCorp Limited.
56
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
1.3 Other income and expenses (continued)
Employee benefits expense includes salaries and wages, superannuation contributions, share-based payments and other
entitlements. The Group’s accounting policy for retirement benefit obligation plans is set out in note 3.6.
Share-based payment expense is determined by the grant date. The fair value of equity-settled share-based payments is recognised
as an expense proportionally over the vesting period, with a corresponding increase in equity. The fair value of instruments with market-
based performance conditions (aTSR) is calculated at the date of grant using the Monte Carlo simulation model, which is a commonly
used valuation technique. The probability of achieving market-based performance conditions is incorporated into the determination of
the fair value per instrument. The fair value of instruments with non-market-based performance conditions (ROCE) and service
conditions is calculated using the Black-Scholes option pricing model. The amount recognised as an expense over the vesting period is
adjusted to reflect the actual number of instruments that vest. The expense is recognised in full if the awards do not vest due to market
condition not being met.
Share based payment expense has two components, the long-term incentive plan (LTIP) and the deferred equity plan (DEP).
LTIP
Under the Group’s LTIP, senior executives have the opportunity to be rewarded with fully paid ordinary shares, provided the LTIP
minimum pre-determined hurdles for aTSR and ROCE covering a three-year period, as set by the Board of Directors. These shares are
generally purchased on market once the LTIP vests.
The fair value of performance rights is determined as described above using the following inputs:
Grant date
Fair value at grant date (aTSR)
Fair value at grant date (ROCE)
Estimated vesting date
Share price at grant date
Volatility
Risk free interest rate
Dividend yield
1 September 2020
1 September 2020
One-off award
$1.66
$3.75
LTIP
$1.72
$3.61
30 September 2021
30 September 2022
$3.85
42%
0.23%
2.23%
$3.85
42%
0.25%
2.96%
Set out in the table below is a summary of the number of rights granted under the LTIP. The exercise price on outstanding options is
zero.
Grant date
Expiry date
Balance at
Granted
Exercised during
Forfeited during
Balance at end
Exercisable at
start of year
during year
the year
year
of year
end of year
1 Sep 2020
1 Sep 2020
30 Sep 2021
30 Sep 2022
-
-
337,766
435,008
772,774
-
-
-
-
-
-
337,766
435,008
772,774
-
-
-
DEP
All senior executives are required to have a portion of their short-term incentives deferred and awarded in the form of performance
rights. The deferred component is awarded over two years as rights i.e. 50% deferred component at the end of year one and 50% of
deferred component at the end of year 2. For the short-term incentive earned in FY20, the DEP grants will be issued in FY21. In
addition, there are 37,197 rights which have been issued as compensation for the FY18 DEP under GrainCorp on 1 September 2020,
which will be exercisable at the date of this report. The fair value used for determining the share-based payment expense is $3.85.
For more information on the share-based payment remuneration scheme, refer to the Remuneration Report. The expense recorded in
2019 relates to the entitlements of UMG employees under the GrainCorp scheme which have been cancelled in 2020 immediately prior
to the demerger from GrainCorp.
57
Note
United Malt Group Limited
| Financial Report
1.4 Taxation
a)
Income tax expense
Income tax expense recognised in the consolidated income statement
Current tax
Deferred tax
Under / (over) provision in prior years
Reconciliation to effective tax rate
(Loss) / profit subject to tax
Income tax expense calculated at 30% (2019: 30%)
Tax effect of amounts which are not deductible / (taxable) in calculating taxable income
Non-deductible / non-assessable items
Adjustment for tax base reset8
Under provision in prior years
Difference in overseas tax rates
Income tax expense
Effective tax rate9
Tax (credit) / expense relating to items of other comprehensive income
Change in fair value of cash flow hedges
Remeasurement of retirement benefit obligations
b) Deferred tax assets and liabilities
Deferred tax assets
The balance comprises temporary differences attributable to:
Tax losses
Retirement benefit obligation
Provisions and accruals
Inventories
Deferred revenue
Lease liabilities
Other
Set-off deferred tax liabilities pursuant to set-off provision
Net deferred tax assets
Movements:
Opening balance at 1 October
Recognised in the income statement
Recognised in other comprehensive income
Closing balance at 30 September
2020
$ M
20.2
(0.5)
0.3
20.0
65.6
19.7
4.7
0.4
0.3
(5.1)
20.0
30.5%
1.3
0.2
1.5
2020
$ M
6.0
3.0
3.7
2.0
-
16.7
2.1
(11.8)
21.7
4.5
18.4
(1.2)
21.7
2019
$ M
21.7
4.6
1.4
27.7
84.6
25.4
6.8
-
1.4
(5.9)
27.7
32.7%
(2.7)
(3.0)
(5.7)
2019
$ M
-
2.8
3.3
2.6
1.2
-
2.1
(7.5)
4.5
0.6
2.4
1.5
4.5
8 The adjustment for the tax base reset is the effect from the exit of the GrainCorp Ltd tax consolidation group and the forma ion of the United Malt tax consolidation
group.
9 Effective tax rate is calculated as the income tax expense divided by profit subject to tax.
58
| United Malt Annual Report 2020
United Malt Group Limited
1.4 Taxation (continued)
Deferred tax liabilities
| Financial Report
The balance comprises temporary differences attributable to:
Property, plant and equipment
Right of use assets
Intangible assets
Set-off deferred tax liabilities pursuant to set-off provision
Net deferred tax liabilities
Movements:
Opening balance 1 October
Recognised in the income statement
Recognised in other comprehensive income
Exchange differences
Closing balance at 30 September
c) Accounting policy
2020
$ M
88.1
15.7
1.3
(11.8)
93.3
78.7
17.9
0.3
(3.6)
93.3
2019
$ M
84.2
-
2.0
(7.5)
78.7
68.3
7.0
(4.2)
7.6
78.7
Income tax expense is calculated at the applicable income tax rate for each jurisdiction and recognised in profit for the year, unless it
relates to other comprehensive income or transactions recognised directly in equity.
The tax expense comprises both current and deferred tax. Current tax represents the tax expense paid or payable for the current year,
using tax rates which are enacted or substantially enacted at the reporting date. Deferred tax is recognised using the balance sheet
liability method, providing for temporary differences between the carrying amount of the assets and liabilities for financial reporting
purposes and the amounts for taxation purposes. Temporary differences generally occur when there is a timing difference in recognition
between income and expenses as recognised by tax authorities and accounted for in different periods. The amount of deferred tax
provided is based on the expected manner of realisation of the carrying amount of the assets and liabilities, using tax rates enacted or
substantially enacted at the reporting date.
Deferred tax assets, including those arising from tax losses, are recognised to the extent it is probable that sufficient taxable profits will
be available to utilise the related tax assets in the foreseeable future. Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be utilised.
As the Group is subject to income taxes in Australia and jurisdictions where it has foreign operations, management consider the
estimation of the worldwide tax provision and recognition of deferred tax balances in the consolidated statement of financial position to
be an area of judgement. Changes in circumstances will alter expectations, which may impact the amount of provision for income
taxes and deferred tax balances recognised.
Tax consolidation
For the period up to 23 March 2020, United Malt’s Australian entities were part of the GrainCorp group’s taxation arrangements. Upon
demerger, United Malt’s Australian entities exited the GrainCorp Australian income tax consolidated group. The entities exited clear
from any further income tax liability and any future tax obligations that may arise in respect of the period when they were members of
the GrainCorp group. On 24 March 2020, the Company formed a new income tax group for its 100% Australian resident subsidiaries,
with United Malt Group Limited being the head entity. The new tax consolidated group uses the group allocation approach whereby the
current and deferred tax assets for the group are allocated among each entity within the group.
1.5 Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
Weighted average number of ordinary shares – basic
Add: adjustment for calculation of diluted earnings per share (performance rights)
Weighted average number of ordinary shares – diluted
2020
16.8
16.8
2019
22.4
22.4
270,507,607
254,284,032
64,354
-
270,571,961
254,284,032
Basic earnings per share (EPS) is calculated by dividing profit for the year attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the financial year. The weighted average number of ordinary shares for the year
ended 30 September 2019 has been restated to reflect the change in the Company’s capital structure as a result of the demerger from
GrainCorp, as if the change had occurred at the comparative period.
Diluted EPS is calculated on the same basis except that it includes the impact of any potential commitments the Group has to issue
shares in the future. For the year ended 30 September 2020, these relate to the performance rights granted. Refer to the
Remuneration Report for more details on performance rights outstanding.
59
United Malt Group Limited
| Financial Report
2 Capital and Financial Risk Management
The Group manages its capital to safeguard its ability to maintain an optimal capital structure so that it can continue to provide returns
for shareholders and benefits for other stakeholders. The Group’s capital consists of net debt and equity. Net debt is calculated as total
borrowings and lease liabilities, net of cash assets.
The capital structure of the Group is continuously monitored and can be changed by adjusting the amount of dividends paid to
shareholders, returning capital to shareholders or issuing new shares.
2.1 Net debt
Total borrowings (note 2.1(a))
Cash and cash equivalents (note 2.1(b))
Net debt
Lease liabilities (note 3.4)
Net debt including lease liabilities
Net debt reconciliation
2020
$ M
455.4
(262.1)
193.3
68.4
261.7
2019
$ M
1,036.6
(181.4)
855.2
-
855.2
Cash and cash
Inventory
Borrowing
Lease
Loans with
equivalents
$M
funding
facilities
facilities
$ M
liabilities
$ M
GrainCorp
Ltd10
Net debt as at 1 October 2018
Cash flows
Extinguishment as a result of demerger
Foreign exchange movements
Net debt as at 30 September 2019
Cash flows
Extinguishment as a result of demerger
Additions for AASB 16
Foreign exchange movements
(268.8)
95.3
-
(7.9)
(181.4)
(87.6)
-
-
6.9
Net debt as at 30 September 2020
(262.1)
a) Borrowings
$M
159.1
(19.9)
-
3.6
142.8
(32.9)
-
-
(2.6)
107.3
248.8
-
-
11.2
260.0
104.1
-
-
(16.0)
348.1
-
-
-
-
-
(18.8)
-
88.6
(1.4)
68.4
Current
Commodity inventory funding facilities
Loans with GrainCorp Ltd10
Total current borrowings
Non-current
Term debt facilities
Total non-current borrowings
$M
732.8
(97.3)
(14.5)
12.8
633.8
(206.8)
(427.0)
-
-
-
2020
$ M
107.3
-
107.3
348.1
348.1
Total
$M
871.9
(21.9)
(14.5)
19.7
855.2
(242.0)
(427.0)
88.6
(13.1)
261.7
2019
$ M
142.8
633.8
776.6
260.0
260.0
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost using the effective interest method.
The undrawn commodity inventory funding facilities were $103.0 million at 30 September 2020. Working capital facilities of $160.0
million were also undrawn at the balance date.
The commodity inventory funding facilities are secured by the related inventory. The carrying amounts of inventory pledged as security
at the reporting date is $109.9 million (2019: $150.7 million).
Loans under term and working capital funding facilities are secured by a negative pledge, and these facilities provide the related entities
in the Group, that are party to the pledge, the flexibility in funding their respective liquidity requirements as needed. The facilities impose
certain financial covenants on the Group. All covenant ratios have been complied with during the financial year.
10 Loans with GrainCorp were in place as part of the capital structure prior to the demerger. Prior to the demerger, all of the intercompany funding arrangements
were extinguished.
60
| United Malt Annual Report 2020
United Malt Group Limited
2.1 Net debt (continued)
b) Cash and cash equivalents
| Financial Report
Cash and cash equivalents on hand at 30 September 2020 was 262.1 million (2019: 181.4 million). Cash and cash equivalents
include cash on hand, deposits held at call with banks, and short-term investments with maturities three months or less.
Reconciliation of profit after income tax to net cash flow from operating activities
Note
2020
2019
Profit for the year
Net profit on sale of non-current assets
Non-cash employee benefits expense – share-based payments
Depreciation and amortisation
Derivative mark-to-market
Deferred tax expense
Changes in operating assets and liabilities (net of acquired entities):
(Increase) / decrease in inventories
(Increase) / decrease in deferred tax
(Increase) / decrease in derivatives
(Increase) in receivables
Increase / (decrease) in trade payables
Increase in other liabilities
Increase / (decrease) in provision for income tax
(Decrease) in defined benefit pension plan liability
(Decrease) in provisions
Net cash (outflow) / inflow from operating activities
$ M
45.6
0.1
0.8
64.1
2.0
1.3
$ M
56.9
(0.3)
0.2
52.3
1.4
8.4
113.9
118.9
(13.8)
(0.1)
(5.1)
(24.7)
17.1
(9.4)
7.5
(3.3)
19.6
101.7
2.6
(7.1)
0.1
13.9
(18.0)
(1.1)
(4.4)
7.8
(19.7)
93.0
61
United Malt Group Limited
2.2 Contributed equity
Consolidated and Company
| Financial Report
At 1 October 2019
Shares issued as a result of the demerger from GrainCorp Ltd
New shares issued from capital raising
Balance at 30 September 2020
Ordinary shares
Ordinary shares
Number
100
254,283,932
44,895,103
299,179,135
$ M
-
-
166.9
166.9
Ordinary shares issued are classified as equity and are fully paid, have no par value, carry one vote per share and the right to
dividends.
Capital raising
On 14 May 2020, the Group announced a capital raising comprising of both an Institutional Placement (IP) and a Share Purchase Plan
(SPP). The IP completed on 15 May 2020 for a value of $140 million, and the SPP completed on 23 June 2020 for a value of $30.6
million. The costs ($3.7 million) associated with the capital raise are presented net of the funds raised in contributed equity.
2.3 Dividends
The Company considers current earnings and future cash flow requirements in determining the amount of dividends to be paid.
Dividends are recognised in the Statement of Financial Position in the period in which they are declared by the Board. Since the
reporting date, the Directors have declared a dividend of 3.9 cents per fully paid ordinary share. As this dividend was declared after the
reporting date, there is no liability recorded at 30 September 2020. The aggregate amount to be paid is $11.7 million, based on the
record date of 14 December 2020 and payable on 30 December 2020.
Franking credits available
Immediately after the Demerger from GrainCorp, the Group’s franking account balance was nil. There have been no additions to the
franking account balance during the period, therefore the dividend declared above is unfranked.
The Group intends to frank future dividends to the extent practicable, although it is anticipated that there will be limited capacity for
franking credits with a substantial proportion of the Group’s earnings being derived outside Australia and which therefore may not be
subject to Australian income tax.
2.4 Commitments and guarantees
Financial commitments
Capital expenditure commitments
Total capital expenditure contracted for at the reporting date but not provided for in payables:
- Not later than one year
Total capital expenditure commitments
Operating lease commitments
Total non-cancellable operating leases contracted for at the reporting date but not recognised as liabilities:
- Not later than one year
- Later than one year and not later than five years
- Later than five years
Total non-cancellable operating lease commitments
Financial guarantees
Financial guarantees are provided by Group entities as follows:
2020
$ M
35.9
35.9
-
-
-
-
2019
$ M
11.8
11.8
13.5
40.3
42.7
96.5
The Group enters into guarantees as part of the normal course of business. At 30 September 2020, these guarantees amounted to $5.1
million (2019: $5.3 million). The Directors do not believe any claims will arise in respect of these guarantees.
United Malt Limited and the wholly owned entities listed in note 4.1 are parties to a deed of cross guarantee as described in note 4.2.
The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees, to each creditor, payment
in full of any debt in accordance with the deed of cross guarantee. No deficiency of net assets existed for the Group as at 30
September 2020.
No liability was recognised by the Group in relation to these guarantees as the fair value of the guarantees is immaterial.
62
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
2.5 Financial instruments and risk management
The Group’s Treasury function is responsible for managing the liquidity requirements of the Group and mitigating any financial risks
relating to the Group’s operations through continuous monitoring and evaluation. The Treasury function is governed by the Board
approved Treasury Policy. The Policy requires periodic reporting of financial risks to the Board, and its application is subject to
oversight from the Chief Financial Officer and the Chair of the Audit and Risk Committee. Financial risks include:
› Market risk (refer to note 2.5(b))
› Liquidity risk (refer to note 2.5.(c))
› Credit risk (refer to note 2.5(d))
a) Classification of financial instruments
United Malt classifies its financial instruments into categories in accordance with AASB 9 Financial instruments depending on the
purpose for which the financial instruments were acquired, which is determined at initial recognition based on the business model. The
following table presents the Group’s financial assets and liabilities measured and recognised at fair value.
$M
Derivative assets
Derivative financial instruments – fair value through profit and loss
Commodity futures and options
Foreign currency derivatives
Derivative financial instruments – cash flow hedge
Foreign currency derivatives
Total derivative assets
Derivative liabilities
Derivative financial instruments – fair value through profit and loss
Commodity futures and options
Foreign currency derivatives
Derivative financial instruments – cash flow hedge
Foreign currency derivatives
Interest rate swap contracts
Total derivative liabilities
30 September 2020
30 September 2019
Current Non-current
Current Non-current
-
2.9
1.5
4.4
0.1
2.8
2.0
-
4.9
-
0.6
1.8
2.4
-
0.6
2.5
2.1
5.2
0.2
4.1
0.3
4.6
5.4
4.8
-
10.2
-
0.1
0.2
0.3
0.2
3.0
2.1
5.3
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered. Subsequently, at
each reporting date, the gain or loss on remeasurement to fair value is recognised immediately in the consolidated income statement,
unless they qualify for hedge accounting as outlined in AASB 9 Financial Instruments.
The Group enters into certain cash flow hedges to hedge exposure to variability in cash flows that are attributable to the risk
associated with the cashflows of recognised assets or liabilities and highly probably forecast transactions caused by interest rate and
foreign currency movements. The Group’s cash flow hedges include:
-
-
Interest rate swap contracts
Forward foreign exchange contracts
When a derivative financial instrument is designated as a cash flow hedge, the effective part of any gain or loss on the derivative
financial instrument is recognised in other comprehensive income and accumulated in the cashflow hedge reserve within equity. The
gain or loss relating to the ineffective portion is recognised immediately in consolidated income statement, within other income/loss.
Amounts accumulated in equity are reclassified to the consolidated income statement in the periods when the hedged item affects profit
or loss.
The Group’s derivative instruments are measured at fair value at the end of each reporting period. Derivative instruments are grouped
into Levels 1 to 3 based on the degree to which fair value measurement inputs are observable. The fair value of derivative instruments
has been determined as follows:
› Level 1 financial instruments held by the Group are instruments which are traded on an active market. The fair value of these
financial instruments is the quoted market settlement price on the reporting date.
› Level 2 financial instruments held by the Group are financial instruments that are not traded on an active market. The fair value is
determined using valuation techniques which maximise observable market data and rely as little as possible on entity-specific
estimates.
63
United Malt Group Limited
| Financial Report
2.5 Financial instruments and risk management (continued)
› Level 3 financial instruments do not have quoted market prices available. If one or more of the significant inputs is not based on
observable market data, the instrument is level 3. The fair value of financial assets and liabilities that are not traded in an active
market is determined using valuation techniques. Management considers the valuation of these financial instruments to be an area
of judgement.
All derivative financial instruments are considered Level 2 financial instruments.
b) Market risk
The Group’s activities expose it to the financial risks of changes in (i) commodity prices, (ii) foreign currency and (iii) interest rates.
Commodity price risk
The Group enters into forward physical purchase and sales contracts, along with commodity derivative contracts, to manage the
underlying price risks in the purchase of barley for malt production and the subsequent sale of malt. These contracts are entered into,
and continue to be held, for the purpose of delivery of raw materials and subsequent sale of processed malt and are therefore classified
as non-derivative and not fair valued.
Foreign currency risk
The Group has exposure to movement in exchange rates through:
› Purchase of barley and other goods from suppliers in foreign currency;
› Sale of malt in foreign currency; and
› Translation of net investments in foreign subsidiaries denominated in foreign currencies.
To manage exposure to this risk, the Group enters into forward exchange contracts, foreign currency options and swap contracts, with
the contracted time to mature when the relevant underlying contracts expire.
Expressed in Australian Dollars, the following table indicates exposure and sensitivity to movements in exchange rates on the profit or
loss and equity of the Group, based on the foreign currency exposure of each entity against its functional currency at 30 September.
The tables are based upon the Group’s financial asset and liability profile at 30 September, which fluctuates over the course of normal
operations.
2020
Exposure at
Impact on profit / (loss) after tax
Impacts on other
reporting date
$ M
components of equity
Movement in exchange rate
US Dollar
Canadian Dollar
UK Pound Sterling
New Zealand Dollar
Euro
Yen
Total
2019
Movement in exchange rate
US Dollar
Canadian Dollar
UK Pound Sterling
New Zealand Dollar
Euro
Yen
Total
$M
(38.8)
278.9
73.2
3.1
9.8
(28.3)
297.9
+10%
(16.2)
16.6
1.0
0.2
0.7
(2.0)
0.3
-10%
16.2
(16.6)
(1.0)
(0.2)
(0.7)
2.0
(0.3)
Exposure at
Impact on profit / (loss) after tax
reporting date
$M
(10.9)
163.8
2.0
1.6
18.5
(54.8)
120.2
$ M
-10%
4.1
(8.1)
4.2
(0.1)
(1.3)
3.8
2.6
+10%
(4.1)
8.1
(4.2)
0.1
1.3
(3.8)
(2.6)
+10%
13.5
2.9
4.1
-
-
-
$ M
-10%
(13.5)
(2.9)
(4.1)
-
-
-
20.5
(20.5)
Impacts on other
components of equity
+10%
3.4
3.3
4.4
-
-
-
$ M
-10%
(3.4)
(3.3)
(4.4)
-
-
-
11.1
(11.1)
64
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
2.5 Financial instruments and risk management (continued)
Interest rate risk
The Group has exposure to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by
maintaining between 40% and 75% of long-term borrowings at fixed rates through the use of interest rate swap contracts.
Under interest rate swap contracts, the Group is entitled to receive interest at variable rates and is obliged to pay interest at fixed rates.
The contracts require settlement of net interest receivable or payable at each reset period. The settlement dates coincide with the dates
on which interest is payable on the underlying debt.
At 30 September 2020, after taking into account the effect of interest rate swap contracts, approximately 74% ($257.2 million) of the
Group's long-term borrowings are at a fixed rate of interest (2019: 47%, $122.4 million).
The Group continuously monitors its interest rate exposure with consideration given to cash flows impacting on rollovers and
repayments of debt, alternative hedging instruments and the mix of fixed and variable interest rates.
At balance date, the Group had the following mix of financial liabilities with interest at variable rates:
Current instruments
Commodity inventory facilities
Non-current instruments
Term debt facilities
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
Interest rate sensitivity analysis
2020
2019
Weighted
average
Balance
$ M
Weighted
average
interest rate %
interest rate %
Balance
$ M
0.97%
(107.3)
2.02%
(142.8)
1.63%
0.25%
1.27%
(348.1)
257.2
(198.2)
2.08%
1.83%
2.05%
(260.0)
122.4
(280.4)
At balance date, if interest rates had moved as illustrated in the table below, with all other variables held constant, profit and equity
would have been affected as follows:
+ 100 basis points
– 100 basis points
2020
2019
Profit / (loss)
Increase /
Profit / (loss)
Increase /
(decrease) in
equity
(decrease) in
equity
$ M
(2.3)
2.3
$ M
2.6
(2.6)
$ M
(1.0)
1.0
$ M
1.2
(1.2)
65
United Malt Group Limited
| Financial Report
2.5 Financial instruments and risk management (continued)
c) Liquidity risk
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank
loans, finance leases and committed available credit facilities. The Group manages liquidity risk by regularly monitoring actual and
forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Group Treasury aims at maintaining flexibility in funding by keeping committed credit lines available with a variety of counterparties. At
balance date, the Group had approximately $263.0 million of unused credit facilities available for immediate use.
The tables below show the contractual maturities of financial liabilities, including estimated interest payments. The amounts disclosed in
the table are the contractual undiscounted cash flows.
Carrying
Total
Less than 1
Between
Between 2
Over 5 years
30 September 2020
Non-derivatives:
Borrowings11
Trade and other payables
Lease liabilities12
Derivatives:
Interest rate swap contracts
Foreign currency derivatives
(Outflow)
Inflow
Foreign currency derivatives
(Outflow)
Inflow
30 September 2019
Non-derivatives
Borrowings11
Trade and other payables
Derivatives
Interest rate swap contracts
Foreign currency derivatives
(Outflow)
Inflow
Value
$M
(455.4)
(176.4)
(68.4)
(2.1)
(7.9)
(0.1)
1 and 2 years
and 5 years
$ M
$M
(466.3)
(176.4)
(81.4)
year
$ M
(112.5)
(176.4)
(13.0)
$ M
-
-
(8.7)
$ M
(353.8)
-
(26.2)
(2.1)
-
-
(2.1)
(362.8)
354.9
(14.1)
14.0
(242.5)
237.6
(14.1)
14.0
(85.9)
83.5
(34.4)
33.8
-
-
-
-
Carrying
Total
Less than 1
Between
Between 2
Value
$M
(402.8)
(166.6)
(2.1)
(13.4)
$M
year
$ M
1 and 2 years
and 5 years
$ M
$ M
(415.0)
(166.6)
(148.1)
(166.6)
(2.1)
-
-
-
-
(379.5)
366.1
(229.5)
219.3
(101.9)
100.0
(266.9)
-
(2.1)
(48.1)
46.8
-
-
(33.5)
-
-
-
-
-
Over 5
years
$ M
-
-
-
-
-
11 The Group’s bank borrowings facilities are set out in note 2.1a. Cash outflows associated with bank borrowings are inclusive of principal and interest.
12 Cash outflows associated with leases are inclusive of principal and interest.
66
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
2.5 Financial instruments and risk management (continued)
d) Credit risk
Credit risk is the risk of loss that would be recognised if a counterparty were to default on its contractual obligations. The Group has a
Board approved Credit Policy which provides guidelines for the management and diversification of the credit risk to the Group. The
Group is exposed to credit risk from its operating activities and financing activities. The Group’s maximum exposure for credit risk is the
carrying amount of all trade and other receivables, derivative asset balances, and cash assets as set out in the consolidated statement
of financial position.
Trade receivables
The credit risk on trade and other receivables which has been recognised on the consolidated statement of financial position is the
carrying amount of trade debtors, net of allowances for impairment and further disclosed in note 3.1. The Group minimises credit risk
associated with trade and other receivables by performing a credit assessment for all customers that wish to trade on credit terms.
Credit limits are determined for each individual customer based on their credit assessment and as per the Credit Policy. The Group
does not have any significant credit risk exposure to a single customer or group of customers.
The Group applies the simplified approach to provision for expected credit losses prescribed by AASB 9, which permits the use of the
lifetime expected loss provision for all trade receivables. Under this method, determination of the loss allowance provision and expected
loss rate incorporates past experience, forward-looking information, and market data. In FY20 the Group considered the impact of the
COVID pandemic on the forward-looking information and market data when applying these rates.
The aging of the trade receivables at the reporting date was:
Current
More than 30 days past due
More than 60 days past due
More than 90 days past due
Total
The movement in the allowance for doubtful debts was:
Balance at 1 October
Provisions made during the year
Loss recognised during the year
Provisions reversed during the year
Exchange differences
Balance at 30 September
Financial instruments and cash deposits
2020
Gross
$ M
201.9
8.6
6.5
9.9
226.9
2019
Loss
Gross
Loss
allowance
$ M
allowance
$M
(0.7)
(0.1)
(0.2)
(0.4)
(1.4)
212.0
6.5
4.9
7.9
231.3
2020
$M
(2.0)
(1.9)
2.4
-
0.1
(1.4)
$M
-
-
-
(2.0)
(2.0)
2019
$M
(1.8)
(0.5)
0.3
0.2
(0.2)
(2.0)
To minimise the credit exposure to financial institutions that are counterparties to derivative contracts and cash, the Group has a panel
of authorised counterparties who are principally large banks and recognised financial intermediaries with acceptable credit ratings
determined by a ratings agency. The Group’s net exposure and credit assessment of its counterparties are continuously monitored to
ensure any risk is minimised.
The Group may also be subject to credit risk for transactions that are not included in the consolidated statement of financial position,
such as when a guarantee is provided for another party.
67
United Malt Group Limited
| Financial Report
3 Operating Assets and Liabilities
This section shows the assets used to generate the Group’s operating performance and liabilities incurred as a result. Liabilities relating
to the Group’s financing activities are addressed in Section 2 Capital and Financial Risk Management.
3.1 Working capital
Trade receivables
Inventories
Trade and other payables
a) Trade and other receivables
Trade receivables
Allowance for doubtful receivables
Prepayments
Other receivables
Total current trade and other receivables
2020
$ M
245.4
318.5
(178.4)
385.5
2020
$ M
226.9
(1.4)
225.5
15.7
4.2
245.4
2019
$ M
245.5
347.9
(170.7)
422.7
2019
$ M
231.3
(2.0)
229.3
7.3
8.9
245.5
Trade and other receivables are recognised at the face value of amounts due less an allowance for doubtful receivables. Doubtful
receivables are determined using an expected credit loss model whereby trade and other receivables that share the same or similar
credit risk characteristics and debt ageing are grouped and then assessed for collectability as a whole. Refer to note 2.5 for details of
the Group’s credit exposures.
b) Inventories
Raw materials
Work in progress
Finished goods
Total inventories
2020
$ M
185.1
9.9
123.5
318.5
2019
$ M
184.9
11.2
151.8
347.9
Inventories are valued at lower of cost and net realisable value, unless stated otherwise. Cost includes direct labour, other direct costs,
and production overheads, where applicable. Net realisable value is the estimated selling price less cost of completion and variable
selling expenses. Write-downs of inventories to net realisable value recognised as an expense during the year ended 30 September
2020 amounted to $6.6 million (2019: $1.6 million), which is included in raw materials and consumables used in the consolidated
income statement.
c) Trade and other payables
Current
Trade payables
Accrued expenses
Trade payables to related party (note 4.4)
Income received in advance
Other payables
Total current trade and other payables
2020
2019
$ M
88.7
86.4
-
2.0
1.3
$ M
90.5
67.9
5.9
4.1
2.3
178.4
170.7
Trade and other payables are carried at the amount payable. Accrued expenses are amounts payable in relation to goods received or
services rendered which have not been billed at the reporting date.
68
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
3.2 Property, plant and equipment
Land
Buildings &
Leasehold
Plant and
Capital works in
At 30 September 2018
Cost
Accumulated depreciation
Net book value
Movement
Transfer between asset categories
Additions
Disposals
Depreciation
Exchange differences
Closing net book value
At 30 September 2019
Cost
Accumulated depreciation
Net book value
Movement
Transfer between asset categories
Additions
Transfer from leased assets (note 3.4)
Disposals
Depreciation
Exchange differences
Closing net book value
At 30 September 2020
Cost
Accumulated depreciation
Net book value
$ M
33.4
-
33.4
-
-
(0.3)
-
0.8
33.9
33.9
-
33.9
-
1.5
11.0
-
-
(1.1)
45.3
45.3
-
45.3
structures
improvements
equipment
progress
$ M
193.2
(31.8)
161.4
4.3
-
-
(7.1)
8.1
166.7
207.0
(40.3)
166.7
6.5
1.9
-
-
(7.9)
(7.3)
159.9
206.2
(46.3)
159.9
$ M
18.3
(6.2)
12.1
2.1
-
-
(0.8)
0.2
13.6
21.0
(7.4)
13.6
2.8
-
-
-
(0.9)
(0.3)
15.2
23.2
(8.0)
15.2
$ M
566.2
(212.2)
354.0
23.5
8.8
(0.1)
(36.1)
13.4
363.5
618.8
(255.3)
363.5
22.3
1.8
-
(0.2)
(37.1)
(11.5)
338.8
622.1
(283.3)
338.8
$ M
21.6
-
21.6
(29.9)
39.0
-
-
1.4
32.1
32.1
-
32.1
(31.6)
63.7
-
-
-
(2.6)
61.6
61.6
-
61.6
Total
$ M
832.7
(250.2)
582.5
-
47.8
(0.4)
(44.0)
23.9
609.8
912.8
(303.0)
609.8
-
68.9
11.0
(0.2)
(45.9)
(22.8)
620.8
958.4
(337.6)
620.8
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Subsequent costs are
capitalised when it is probable that future economic benefits associated with the expenditure will flow to the Group.
Property, plant and equipment assets, other than land, are depreciated on a straight-line basis over the useful lives of the assets.
Useful lives are reviewed on an annual basis and have been assessed as follows:
Buildings and structures:
Leasehold improvements:
Plant & equipment:
30-50 years
Term of lease
5-20 years
Tests for impairment on items of property, plant and equipment are conducted in accordance with the policy for impairment of non-
financial assets. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.
69
United Malt Group Limited
3.3 Intangible assets
| Financial Report
At 30 September 2018
Cost or fair value
Accumulated amortisation
Net book value
Movement
Transfer between asset categories
Additions
Amortisation charge
Exchange differences
Closing net book value
At 30 September 2019
Cost or fair value
Accumulated amortisation
Net book value
Movement
Transfer between asset categories
Additions
Amortisation charge
Exchange differences
Closing net book value
At 30 September 2020
Cost or fair value
Accumulated amortisation
Net book value
Computer
Trade name
Customer
Goodwill
Capital works
software
$ M
21.9
(13.3)
8.6
4.6
-
(4.1)
0.3
9.4
27.4
(18.0)
9.4
0.1
-
(3.9)
(0.2)
5.4
26.6
(21.2)
5.4
$ M
relationship
$ M
in progress
$ M
119.2
(113.3)
5.9
-
-
(4.2)
-
1.7
122.2
(120.5)
1.7
-
-
(1.7)
-
-
118.7
(118.7)
-
323.3
-
323.3
-
-
-
12.9
336.2
336.2
-
336.2
-
-
-
(11.9)
324.3
324.3
-
324.3
2.5
(0.7)
1.8
(0.9)
-
-
-
0.9
1.5
(0.6)
0.9
-
-
(0.1)
-
0.8
1.5
(0.7)
0.8
$M
7.2
-
7.2
(3.7)
1.6
-
0.4
5.5
5.5
-
5.5
(0.1)
2.1
-
(0.4)
7.1
7.1
-
7.1
Total
$ M
474.1
(127.3)
346.8
-
1.6
(8.3)
13.6
353.7
492.8
(139.1)
353.7
-
2.1
(5.7)
(12.5)
337.6
478.2
(140.6)
337.6
Intangible assets include definite life and indefinite life intangibles. The accounting treatment for each of the asset categories is:
› Computer software is costs capitalised in developing products or systems and costs incurred in acquiring software and licenses
that will contribute to future period financial benefits. Amortisation is calculated on a straight-line basis over an estimated useful life
of 3 to 7 years.
› Trade names are acquired as part of a business combination and recognised separately from goodwill. Trade names are carried at
fair value at the date of acquisition less accumulated amortisation, which is calculated on a straight-line basis over an estimated
useful life of 3 to 9 years.
› Customer relationships are acquired as part of a business combination and recognised separately from goodwill. They are carried
at the fair value at the acquisition date less accumulated amortisation. Amortisation is calculated on a straight-line basis over an
estimated useful life of 5 to ten years.
› Goodwill is measured on acquisition as part of a business combination as the difference between the consideration paid and the fair
value of the net assets acquired. Goodwill is tested for impairment as described in note 3.3 a).
70
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
3.3 Intangible assets (continued)
Impairment test for goodwill
a)
For purposes of impairment testing, goodwill acquired through business combination is allocated to cash-generating units (CGUs) as
below:
Processing
Warehousing & Distribution
Total goodwill
2020
$ M
224.9
99.4
324.3
2019
$ M
233.1
103.1
336.2
Goodwill and intangible assets with indefinite lives are tested for impairment annually or more frequently if circumstances indicate that
an asset may be impaired. In assessing impairment, the recoverable amount of assets is estimated to determine the extent of the
impairment loss. The recoverable amount for goodwill is assessed at the Group of CGUs level and is based on value in use (VIU)
calculations. Management uses judgement in determining the recoverable amount of assets including expected future cash flows, long
term growth rates and discount rates.
In assessing VIU, estimated future cash flows are based on the Group’s most recent Board approved business plan covering a period
of five years. Projected cash flows are based on past performance and management’s future expectations, taking into account the
Group’s production capacity, long-term customer agreements, and market information in key geographies. Cash flows beyond the five-
year period are extrapolated using an estimated growth rate of 2.0% to 2.5%. The growth rate does not exceed the long-term average
growth rate for the business in which the CGUs operate.
In performing the VIU calculations for each CGU, the Group has applied post-tax discount rates to the discount the forecasted future
post-cash cashflows; 8.83% for the Processing CGU and 8.72% for the Warehousing & Distribution CGU. These discount rates reflect
the current market assessment of the time value of money and risks specific to the relative segment and its country of operation.
Any reasonably possible change to the above key assumptions would not cause the carrying value of a CGU to exceed its recoverable
amount.
3.4 Leases
The Group enters into non-cancellable leases on properties, motor vehicles, railcar leases, and other plant and equipment. There are
leases in all of the Group’s operating geographies.
This is the first year of the Group’s adoption of AASB 16. Refer to page 52 section c) in the overview of the notes to the financial
statements for further details of the impact of the new standard.
Right of use assets
The following table shows the movements of the right of use asset during the year:
Opening balance arising from the adoption of AASB 16
Additions to right of use asset
Transfers to property, plant, and equipment (note 3.2)
Depreciation expense
Exchange rate differences
Right of use assets at 30 September 2020
Lease liabilities
Balance at 1 October 2019
Interest expense
Additions
Repayments
Exchange rate differences
Lease liabilities at 30 September 2020
Property leases
Equipment
Motor vehicle
$m
leases
leases
8.0
11.0
(11.0)
(1.1)
(0.2)
6.7
$m
50.0
9.9
-
(6.7)
(2.5)
50.7
$m
11.0
3.2
-
(4.7)
(0.5)
9.0
Total
$m
69.0
24.1
(11.0)
(12.5)
(3.2)
66.4
Total
$m
69.0
3.3
19.6
(22.1)
(1.4)
68.4
71
United Malt Group Limited
| Financial Report
3.5 Provisions
At 1 October 2019
Additional provisions
Amounts used
Unused amounts reversed
Exchange differences
At 30 September 2020
Current
Non-current
Provisions are:
Employee benefits
Other
Total provisions
$ M
8.7
17.0
(12.8)
-
(0.4)
12.5
10.7
1.8
$ M
2.6
2.8
(0.7)
(0.1)
(0.2)
4.4
2.2
2.2
$ M
11.3
19.8
(13.5)
(0.1)
(0.6)
16.9
12.9
4.0
•
Recognised when the Group has a legal or constructive obligation as a result of a past event, it is probable that cash will be
required to settle the obligation, and the amount can be reliably estimated.
• Measured at the present value of the estimated cash outflow required to settle the obligation. For non-current provisions, the
nominal amount is discounted, and the financing impact is recognised in the Consolidated Income Statement.
3.6 Retirement benefit obligations
The Group operates pension plans for some employees in US, Canada, UK and Australia. The plan is funded through contributions to
the defined benefit plan as determined by annual actuarial valuations. A defined benefit plan is a pension plan that defines the amount
of pension benefit an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and
compensation.
a) Retirement benefit liability recognised in the consolidated statement of financial position
2020
$ M
(201.6)
190.5
(11.1)
2.1
(13.2)
(11.1)
2020
%
2%
38%
59%
1%
100%
2019
$ M
(211.4)
197.0
(14.4)
2.8
(17.2)
(14.4)
2019
%
1%
34%
64%
1%
100%
Present value of the defined benefit obligations
Fair value of defined benefit plans assets
Net defined benefit obligation
Recognised in the consolidated statement of financial position as:
Retirement benefit asset
Retirement benefit obligation
Net defined benefit obligation
b) Categories of plan assets
The major categories of plan assets are as follows:
Cash
Equity instruments
Debt instruments
Other assets
Total
72
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
3.6 Retirement benefit obligations (continued)
c) Reconciliations
Reconciliation of the present value of the defined benefit obligations:
At 1 October
Current service cost
Interest cost
Scheme participants contributions
Remeasurements
Benefits paid
Past service cost
Exchange differences
At 30 September
Reconciliation of fair value of plan assets:
At 1 October
Interest income
Remeasurements
Contributions by Group companies
Scheme participants contributions
Actual plan administration expense
Benefits paid
Exchange differences
At 30 September
d) Amounts recognised in the consolidated income statement
The amounts recognised in the income statement are as follows:
Current service cost
Net interest expense
Past service cost
Total expense included in employee benefits expense
e) Amounts recognised in other comprehensive income
Remeasurements of retirement benefit obligations
Cumulative remeasurements recognised
f) Principal actuarial assumptions
2020
Principal actuarial assumptions used (expressed as weighted averages):
Discount rate
Future salary increases
2019
Principal actuarial assumptions used (expressed as weighted averages):
Discount rate
Future salary increases
2020
$ M
2019
$ M
211.4
178.7
1.5
4.4
0.1
4.4
(16.1)
1.1
(5.2)
201.6
197.0
4.1
4.2
6.5
0.1
(0.4)
(16.1)
(4.9)
190.5
2020
$ M
1.5
0.3
1.1
2.9
2020
$ M
(0.2)
(31.3)
1.2
5.6
0.1
33.5
(11.9)
0.4
3.8
211.4
172.1
5.5
18.6
9.2
0.1
(0.3)
(11.9)
3.7
197.0
2019
$ M
1.2
0.1
0.4
1.7
2019
$ M
(14.9)
(31.1)
North
UK
Australia
America
2.61%
2.00%
1.70%
2.80%
1.90%
3.00%
North
UK
Australia
America
2.98%
2.00%
1.80%
3.10%
4.10%
3.00%
73
United Malt Group Limited
| Financial Report
3.6 Retirement benefit obligations (continued)
g) Sensitivity analysis
Changes in the following principal actuarial assumptions would have the following effect on the defined benefit pension obligation:
Discount rate:
0.25% increase
0.25% decrease
Inflation:
0.25% increase
0.25% decrease
2020
$ M
Increase/(decrease)
2019
$ M
Increase/(decrease)
(7.6)
8.0
3.1
(3.1)
(7.7)
8.1
3.4
(3.3)
The sensitivity information has been derived for all plans using projected cash flows valued using the relevant assumptions and
membership profiles as at 30 September 2020. Extrapolation of these results beyond the sensitivity figures shown may not be
appropriate.
h) Employer contributions
Based on the recommendations of the plan’s actuaries, total employer contributions expected to be paid by the Group for the year
ended 30 September 2021 are $6.6 million (2020: $5.7 million).
i) Accounting treatment
The asset or liability recognised in the consolidated statement of financial position in respect of defined plan benefits is the present
value of the defined benefit obligation at the balance sheet date minus the fair value of plan assets. The present value of the pension
liability is determined by discounting the estimated future cash flows using interest rates of high quality corporate or government bonds
that:
•
•
Are denominated in the currency in which the benefits will be paid; and
Have terms to maturity approximating the terms of the related pension liability.
The defined benefit obligation is calculated at least annually by independent actuaries using the projected unit credit method, which in
simple terms proportions the benefit based on years of service provided. Management consider the valuation of defined benefit plans to
be an area of judgement as a number of key assumptions must be adopted to determine the fair value.
Actuarial gains and losses arise when there is a difference between previous estimates and actual experience or a change to
assumptions in relation to demographic and financial trends. Gains and losses are recognised directly in other comprehensive income
as remeasurements in the period in which they occur.
The Group determines the net interest expense (income) on the net defined benefit liability for the period by applying the discount rate
at the beginning of the period to the net defined benefit liability, considering any changes during the period because of contributions and
benefit payments. Net interest expense (income), service cost and other expenses related to defined benefit plans are recognised in the
consolidated income statement.
74
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
4 Group Structure & Other
This section provides information on how the Group structure affects the financial position and performance of the Group. The
disclosures detail the types of entities and transactions included in the consolidation and those which are excluded.
4.1 Subsidiaries
The Company, which is the ultimate parent of the Group, is incorporated in Australia. Subsidiaries are consolidated from the date of
acquisition, being the date the Company obtains control, and continue to be consolidated until the date control ceases. Control exists
where the Company has power to govern the financial and operating policies of the entity in order to obtain benefits from its activities.
Below are the subsidiaries within the Group.
Controlled entities are fully consolidated from the date control is obtained until the date that control ceases. All subsidiaries incorporated
in Australia, along with the United Malt Group Limited, form part of the Closed Group (note 4.2). All entities were wholly owned at 30
September 2020 unless otherwise stated.
Subsidiaries controlled at 30 September 2020
Name of entity
Country of incorporation
Australia Malt Finco Pty Ltd
Australia Malt Holdco Pty Ltd
Barrett Burston Malting Co. Pty. Ltd.
Barrett Burston Malting Company WA Pty Limited
United Malt Australia Pty Ltd
Malt Real Property Pty Limited
Security Superannuation Fund Pty Limited
Canada Malting Co. Limited
Schill Malz GmbH Co. KG13
Schill Malz Verwaltungs-GmbH13
Barrett Burston Malting Co (NZ) Limited
Bairds Malt Limited
Bairds Malt (Pension Trustees) Limited
Brewers Select Limited
United Malt (Canada) Holdings UK Limited
United Malt UK Limited
Malt UK Holdco Limited
Maltco 3 Limited
Mark Lawrence (Grain) Limited
Moray Firth Maltings Limited
Norton Organic Grain Limited
Scotgrain Agriculture Limited
Ulgrave Limited
United Malt Holdings USA
United Malt USA
Great Western Malting Co
Malt US Holdco Inc
13 Subject to voluntary liquidation.
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Germany
Germany
New Zealand
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
USA
USA
USA
USA
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4.2 Deed of cross guarantee
The Company and the subsidiaries, as disclosed in note 4.1, have entered a Deed of Cross Guarantee on 9 April 2020 under which
each of the companies guarantees the debts of the other and are relieved from the requirement to prepare financial statements under
ASIC Class Order No. 2016/785. These are collectively known as the Closed Group.
A Statement of Comprehensive Income and Retained Earnings, and a Statement of Financial Position, comprising the Company and
controlled entities which are party to the Deed, after eliminating all transactions between the parties to the Deed, for the year ended 30
September 2020, are set out below.
Statement of Comprehensive Income and Retained Earnings
Revenue
Other income
Raw materials and consumables used
Employee benefits expense
Depreciation and amortisation
Finance costs
Repairs and maintenance
Other expenses
Profit before income tax
Income tax benefit
Profit for the year
Other comprehensive income:
Changes in the fair value of cash flow hedges
Remeasurements of retirement benefit obligations
Income tax (expense) / benefit relating to components of other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Summary of movements in consolidated retained earnings
Retained losses at the beginning of the financial year
Income for the year
Dividends paid
Retained losses at the end of the financial year
2020
$ M
204.8
142.1
(167.1)
(17.5)
(12.8)
(3.7)
(4.5)
(9.0)
132.3
2.7
135.0
2.2
(0.1)
(1.1)
1.0
136.0
(155.9)
135.0
-
(20.9)
76
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
4.2 Deed of cross guarantee (continued)
Set out below is the consolidated statement of financial position of the Closed Group as at 30 September 2020.
Consolidated Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Current tax assets
Total current assets
Non-current assets
Trade and other receivables
Investment in subsidiaries
Property, plant and equipment
Intangible assets
Lease assets
Derivative financial instruments
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Lease liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Provisions
Deferred tax liabilities
Retirement benefit obligations
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained losses
Total equity
2020
$ M
116.7
53.5
58.8
2.2
0.4
231.6
337.8
238.6
134.8
24.0
1.4
0.8
737.4
969.0
35.0
1.5
0.5
0.5
4.2
41.7
348.1
0.9
2.3
2.7
2.8
0.1
356.9
398.6
570.4
166.9
424.4
(20.9)
570.4
77
United Malt Group Limited
| Financial Report
4.3 Parent entity financial information
Summary financial information for the Company is set out below:
Non-current assets
Total assets
Non-current liabilities
Total liabilities
Shareholders’ equity
Contributed equity
Reserves
Retained earnings earned in 2020
Retained losses prior periods
Total shareholders’ equity
Profit for the year
Total comprehensive income
2020
$ M
547.1
547.1
-
-
166.9
393.0
144.1
(156.9)
547.1
144.1
144.1
2019
$ M
376.4
376.4
533.3
533.3
-
-
-
(156.9)
(156.9)
4.4
4.4
The parent entity is party to the Deed of Cross Guarantee and is subject to the terms of the deed as described in note 4.2. At 30
September 2020, the parent entity did not provide any other guarantees (2019: nil), contingent liabilities (2019: nil) or capital
commitments (2019: nil).
78
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
4.4 Related party transactions
a)
Transactions with GrainCorp Limited and its controlled entities (GrainCorp Group)
The ultimate parent entity of the Group is United Malt Group Limited, which is domiciled and incorporated in Australia. Prior to the
demerger from GrainCorp and subsequent listing as a standalone entity on the ASX, the ultimate parent entity of the Group was
GrainCorp Limited. Transactions with entities as part of the GrainCorp Group have been identified as related party transactions up until
the date of demerger on 23 March 2020.
Prior to Demerger, the Group had a number of intercompany loan agreements where interest was payable to the benefit of the
GrainCorp Group. These loans have been extinguished prior to the Demerger on 23 March 2020. The impact of the loans
extinguished is recognised in a separate reserve within equity.
Transactions with GrainCorp Group entities:
Sale of goods
Purchase of raw materials and services
Interest expense
Other charges
Loan extinguishment
Outstanding balances in relation to transactions with GrainCorp Group:
Trade and other receivables (note 3.1a))
Trade and other payables (note 3.1c))
Loan agreements (note 2.1)
b) KMP compensation
Consolidated
2020
$’000
2
16,087
440
3,031
427,065
2019
$’000
16
32,302
26,844
6,440
14,500
Consolidated
2020
$’000
-
-
-
2019
$’000
132
5,946
633,755
Disclosures relating to KMP are provided in the Remuneration Report. There were no other transactions with KMP during the period.
2020 compensation is from the date at which KMPs were appointed as KMPs during the period. 2019 compensation relates only to
United Malt KMPs who were acting in similar roles prior to the Demerger, being Amy Spanik, Darren Smith, and Bryan Bechard.
Short-term employee benefits
Post-employment benefits
Share-based payments
Total KMP compensation
2020
$’000
2,477
83
745
3,305
2019
$’000
1,219
22
185
1,426
79
United Malt Group Limited
| Financial Report
4.5 Remuneration of auditor
PwC Australia
Audit and review of financial reports and other work under the Corporations Act 2001
Total remuneration of PwC Australia
Overseas practices of PwC Australia
Audit and review of financial reports
Other services (company secretarial services)
Total remuneration of related practices of PwC Australia
Total auditors’ remuneration
4.6 Events subsequent to reporting date
No significant events subsequent to the balance date have occurred.
2020
$’000
420
420
1,697
19
1,716
2,136
2019
$’000
62
62
1,057
24
1,081
1,143
80
| United Malt Annual Report 2020
United Malt Group Limited
| Financial Report
Directors’ Declaration
In the Directors’ opinion:
a)
The financial statements and notes set out on pages 47 to 80 are in accordance with the Corporations Act 2001, including:
i.
ii.
Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
Giving a true and fair view of the consolidated entity’s financial position as at 30 September 2020 and of its performance for
the financial year ended on that date; and
b)
c)
There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
At the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in note
4.2 will be able to meet any obligation or liabilities to which they are, or may become, subject to by virtue of a deed of cross
guarantee described in note 4.2.
The Basis of Preparation note as disclosed on page 52 confirms that the financial statements also comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of
the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
G J Bradley AM
Chairman
Sydney
18 November 2020
81
Independent auditor’s report
To the members of United Malt Group Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of United Malt Group Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 September 2020 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the consolidated statement of financial position as at 30 September 2020
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial report
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
82
| United Malt Annual Report 2020
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.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial report as a whole, taking into account the geographic and management structure of the
Group, its accounting processes and controls and the industry in which it operates.
Materiality
For the purpose of our audit we used overall Group materiality of $3.6 million, which represents approximately
5% of the Group’s adjusted profit before tax.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial
report as a whole.
We chose Group profit before tax because, in our view, it is the benchmark against which the performance of the
Group is most commonly measured. We adjusted for demerger costs as they are unusual or infrequently
occurring items impacting profit before tax.
We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
Local component auditors in the United States and the United Kingdom assisted in the audit work performed,
acting under instruction from the group audit team.
83
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for the current period. The key audit matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. Further, any commentary on the outcomes of a particular audit
procedure is made in that context. We communicated the key audit matters to the Audit and Risk
Committee.
Key audit matter
How our audit addressed the key audit matter
Goodwill Impairment assessment
(Refer to note 3.3) $324m
Our audit procedures included the following procedures:
This was a key audit matter due to the financial size of
the goodwill balances and the significant judgements
involved with key assumptions including:
-
Estimated future cashflows
- Discount rates
-
Long term growth rates
The Group performed an impairment assessment over
the goodwill balance by:
- Determining the group of cash generating units
(Group of CGUs) and the amount of goodwill
attributed from business combinations.
-
Calculating the value in use for each Group of
CGUs using discounted cash flow models (the
models). The models estimated cash flows for
each Group of CGUs for 5 years, with a terminal
growth rate applied to the 5th year. These cash
flows were then discounted to net present value
using the Group’s discount rates, taking into
account the specific countries in which the
Group of CGUs operates.
-
Comparing the calculated value in use of each
Group of CGUs to their respective carrying
amounts.
-
-
-
-
-
-
-
Assessed whether the Group of CGUs were
consistent with our understanding of the
Group’s operations and internal Group
reporting.
Considered whether the methodology applied
in the models was consistent with the basis
required by Australian Accounting Standards.
Compared the cash flow forecasts for 2021 in
the models to those in the latest Board
approved business plan.
Evaluated the Group’s ability to forecast future
results for impairment models by comparing
budgets with reported actual results for the
previous year.
Compared the Group’s key assumptions for
growth rates in the model forecasts to historical
results and economic and industry forecasts.
Evaluated the discount rates in the models,
with the assistance of PwC experts by assessing
the reasonableness of the relevant inputs in the
calculation against available market data and
industry research.
Evaluated the appropriateness of the terminal
growth rate in the models by comparison to the
long term average growth rates of the countries
that the Group operates in.
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| United Malt Annual Report 2020
Key audit matter
Taxation
(Refer to note 1.4)
Income taxes and deferred tax balances were a key audit
matter because the Group has established a new tax
structure following its demerger from GrainCorp
Limited, involving complexity in the tax calculation
including:
-
-
Creation of a new standalone group and an
Allocable Cost Amount (ACA) calculation.
Assessment and revaluation of tax base of
assets and liabilities to correctly record
deferred tax for the new tax consolidated entity.
The Group also operates across multiple jurisdictions
with different laws, regulations and authorities.
How our audit addressed the key audit matter
Our audit procedures included the following procedures:
-
-
-
-
-
Support from tax experts in Australia and the
United States with the audit of tax balances.
For the Group tax consolidation agreed key
inputs to supporting documentation including
underlying entity tax calculations. Tested the
mathematical accuracy of the consolidation
model.
For those individual entities identified with
significant income tax expense or recorded tax
payable, agreed the key inputs in the tax
calculations to the relevant general ledger
balance and assessed the completeness of
permanent differences included in the
calculation of the income tax expense and
accounting and tax bases included in the
calculation of deferred tax assets and liabilities.
Evaluated the analysis conducted by the Group
for judgements made in respect of the ultimate
amounts expected to be paid to tax authorities.
Assessed the appropriateness of the Group’s
disclosure in the financial report in light of
Australian Accounting Standard requirements.
Accounting for the demerger from GrainCorp
Limited
Our audit procedures included the following procedures:
During the year the Group demerged from GrainCorp
Limited. The accounting for the demerger was a key
audit matter as it gave rise to some complex accounting
and financial reporting implications, including
-
-
Initial adoption of Australian Accounting
Standards and associated disclosures as a new
reporting entity
Assessment of new segments (Processing,
Warehouse and Distribution)
- Recognition of demerger-related loan
forgiveness
Assessment of related party disclosures
Audit of opening balances
-
-
-
-
-
-
Consultation with technical accounting
specialists to assess adequacy of disclosures
and appropriate treatment of significant
transactions associated with the demerger.
Evaluation of management reporting structures
and internal reporting to assess the
appropriateness of segment reporting.
Evaluation of related party disclosures in
accordance with Australian Accounting
Standards.
Substantive audit procedures performed over
all material opening balances and demerger
related transactions.
85
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report for the year ended 30 September 2020, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Other matters
As disclosed in the Basis of Preparation section of the financial report, United Malt Group Limited did not,
nor was required to, produce a financial report for the year ended 30 September 2019. United Malt Group
Limited successfully demerged from GrainCorp Limited on 23 March 2020 to form a stand-alone entity
listed on the Australian Securities Exchange. While the Group has historically complied with AASB
standards, this is the first year of preparing standalone financial statements under AASB 1 First-time
Adoption of Australian Accounting Standards. The comparatives included in this financial report have
therefore not previously been included in a financial report.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with the Australian Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the financial report.
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| United Malt Annual Report 2020
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 34 to 45 of the directors’ report for the year
ended 30 September 2020.
In our opinion, the remuneration report of United Malt Group Limited for the year ended 30 September
2020 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing
Standards.
PricewaterhouseCoopers
Kristin Stubbins
Partner
Sydney
18 November 2020
87
Shareholder Information
Listing Information
United Malt is listed and our issued shares are quoted on the Australian Securities Exchange (ASX) under the code: UMG.
Unless otherwise stated all information set out below is current as at 30 October 2020.
The Company has on issue 299,179,135 ordinary fully paid shares and a total of 14,142 shareholders.
Substantial shareholders
The following organisations have a substantial shareholding in United Malt Group Limited based on substantial holding notices
lodged on or before 30 October 2020.
Name
Perpetual Limited
GrainCorp Limited
Ethical Partners
Notice date
Shares held
Issued capital %
30 October 2020
3 July 2020
7 May 2020
29,449,959
25,428,404
17,141,967
16,179,133
9.84
8.5
6.74
5.41
Platypus Asset Management
30 October 2020
Twenty largest ordinary fully paid shareholder as at 30 October 2020
Rank
Name
Shares held
Issued capital %
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
GRAINCORP LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
UBS NOMINEES PTY LTD
BRISPOT NOMINEES PTY LTD
JARJUMS HOLDINGS PTY LIMITED
MRS INGRID KAISER
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
WARBONT NOMINEES PTY LTD
98,854,066
39,856,816
39,497,472
25,428,404
18,996,546
8,243,842
4,908,292
3,049,086
2,185,971
2,077,611
1,945,189
1,700,000
1,133,976
957,302
687,896
542,858
531,799
33.04
13.32
13.20
8.50
6.35
2.76
1.64
1.02
0.73
0.69
0.65
0.57
0.38
0.32
0.23
0.18
0.18
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| United Malt Annual Report 2020
United Malt Group Limited
(cid:513) (cid:22)(cid:138)(cid:131)(cid:148)(cid:135)(cid:138)(cid:145)(cid:142)(cid:134)(cid:135)(cid:148) (cid:12)(cid:144)(cid:136)(cid:145)(cid:148)(cid:143)(cid:131)(cid:150)(cid:139)(cid:145)(cid:144)
AMP LIFE LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
18
19
20
Total for top 20
shareholders
Holding distribution as at 30 October 2020
463,227
425,000
252,564
251,737,917
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Securities
%
No. of Holders
255,518,154
85.41
20,037,209
9,244,581
11,657,847
2,721,344
6.70
3.09
3.90
0.91
46
964
1,291
4,835
7,006
0.15
0.14
0.08
84.14
%
0.33
6.82
9.13
34.19
49.54
299,179,135
100.00
14,142
100.00
There were 1,457 shareholders holding less than a marketable parcel of shares.
Voting rights
On a show of hands, every member present in person or proxy shall have one vote, and upon each poll, each share shall have
one vote.
Unquoted Equity Securities
The Company has a total of 791,702 unquoted performance rights issued pursuant to the Company’s Long Term Incentive
Offer, One-off Award Offer and Discretionary Equity Offer as further described in the remuneration report. There were a total of
seven holders of the unquoted performance rights.
Corporate Governance Statement
United Malt has reviewed its corporate governance practices against the Corporate Governance Principles and
Recommendations (4th edition) published by the ASX Corporate Governance Council.
The 2020 corporate governance statement is dated 17 November 2020 and reflects the corporate governance practices in place
for the six month period from the time of the Company’s admission to ASX on 23 March 2020 through to the end of the financial
year. The 2020 corporate governance statement was approved by the Board on 17 November 2020. United Malt’s 2020
corporate governance statement and key governance documents such as charters, policies and United Malt’s Appendix 4G Key
to Disclosures under the Corporate Governance Principles and Recommendations for the year ending 30 September 2020 can
be viewed at www.unitedmalt.com/corporate-goverance.
.
89
Corporate Directory
Board of Directors
Graham J Bradley AM
(Chairman)
Mark L Palmquist
(Managing Director & CEO)
Barbara J Gibson
(Non-executive Director)
Terry W Williamson
(Non-executive Director)
Jane F McAloon
(Non-executive Director)
Simon L Tregoning
(Non-executive Director)
Gary W Mize
(Non-executive Director)
Company Secretary
Lisa Jones
Registered Office
ABN 61 140 174 189
Level 28
175 Liverpool Street
Sydney NSW 2000
AUSTRALIA
Tel: + 61 2 8073 3160
Company website
www.unitedmalt.com
Share Registry
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Tel: +61 2 8280 711
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