Walgreens Boots Alliance Annual Report 2017

Plain-text annual report

Annual Report 2017 B Contents 02 Where we operate 04 Chairman’s review 06 Horticulture 12 Agriculture 18 Directors’ Report 31 Directors’ Declaration 32 33 Auditor Reports 38 Financial Statements 83 ASX Additional Information 85 Contact us Independence Declaration by Auditor Webster is a leading Australian agribusiness company with a rich, diverse history spanning over 180 years. In that time, Webster has been involved in a diverse range of activities but we have always maintained a strong connection to the land and Australia’s agricultural industry which is the platform for our company. 1 Where we operate Bengerang, Garah Sydney Kalabity Darling Farms, Bourke Tandou, Menindee Mildura Bringagee and Benermbah Station, Carrathool Tabbita Griffith Pevensey, Glenmea and South Farm, Hay Leeton Avondale West Kooba Station, Darlington Point Albury Swansea “We’re passionate about our business, our products and most importantly, the natural resources which are fundamental to what we do and how we do it, every day” Webster has an extensive portfolio of land assets located in Australia’s premier agriculture precinct of the Murray Darling Basin. This portfolio, comprising some 400,000 hectares, provides diversity and scale for the Group. Our cropping portfolio encompasses holdings across the Gwydir Valley, Bourke, Menindee, Riverina district and Hay. Our walnut operations are located in the Riverina at Leeton and Grifﬁth, and also in Tasmania. Webster’s water holdings stretch across the northern and southern areas of the Murray Darling Basin. 2 Portfolio mix of the Group Walnut Holdings We are the southern hemisphere’s largest producer of premium in-shell and kernel walnuts and account for around 90 per cent of Australia’s annual walnut crop. Agriculture Holdings We are one of the largest irrigated farming producers in Australia with more than 40,000 irrigable hectares of prime fertile land holdings across southern QLD and NSW focusing on cotton, corn and other cereals and livestock. Livestock Holdings We are one of the largest organic sheep farmers in Australia and run breed cattle as an adjunct to our cropping activities. Water Holdings We own a diverse portfolio of over 200,000 megalitres of water entitlement which underpins all of our businesses. It provides our competitive advantage in providing crop diversity, maximising yield and developing further growth opportunities across our business. River source Bengerang, Garah Sydney Kalabity Darling Farms, Bourke Tandou, Menindee Mildura Bringagee and Benermbah Station, Carrathool Tabbita Griffith Pevensey, Glenmea and South Farm, Hay Leeton Avondale West Kooba Station, Darlington Point Albury Swansea 3 Chairman’s review Webster has made some solid progress during the past 15 months in consolidating the acquisitions undertaken in 2015. Most importantly we have built a platform for future sustainable growth in our core businesses. Our people have been integral to the continued improvement and success of the company. We are fortunate to have a depth of management that are committed and with great industry knowledge. Season conditions in 2016-17 brought mixed blessings for our businesses and this only served to underline the beneﬁts of some diversiﬁcation both geographically and by product. Our Horticultural business, which is focused on walnut production in Tasmania and the Riverina, had a very successful season with record average yields across our properties of 5.5 tonnes per hectare and 5.9 tonnes per hectare, across both owned and managed properties. This compares with 2.8 tonnes and 2.6 tonnes respectively in the previous year. Tasmania, which suffered heavy rainfall during the growing season was below expectations but the pollination in the Riverina was very successful and the yields very encouraging. 4 The walnut results this season underline the high probability that the poor yields in the Riverina of the previous two years were related to unusual seasonal conditions during pollination rather than some unidentiﬁed causation. We are hopeful of mitigating a recurrence by using pollination accelerators but these will need to be cleared by the horticultural bureaucracy and will not be available in the coming season. Following trials, we are also making some signiﬁcant changes to our pruning methodology, which we hope will increase yields over the coming seasons. Walnut pricing, whilst well below the record 2015 levels, has nevertheless been a little ﬁrmer than anticipated at the commencement of the season. The consolidation of the Motspur Park orchard, which adjoins our Tabitta orchard into the Webster portfolio, will enhance our orchard scale. Furthermore, our Avondale orchard should also see the ﬁrst harvest of some varieties in the coming year. An additional 170 hectares of land, adjacent to our Leeton property, is being acquired and will be planted out in 2018. Our Agricultural business had a difﬁcult year on several fronts. First, the wet and cool early seasonal conditions in the Riverina meant a slow start to our cotton crop and bowl counts failed to develop fully throughout the growing season. Secondly, very high and sustained temperatures in the northern and western growing areas affected bowl development and impacted signiﬁcantly on yield. Across all of our irrigated cotton growing properties average yield performance was 9.45 bales per hectare compared with 13.28 bales per hectare in the previous year. As previously announced Webster agreed to sell 21,901 ML of Lower Darling water entitlements and decommission our Lake Tandou irrigation system after the 2018 growing season. This was a difﬁcult decision but we believe shareholders are being adequately compensated for the surrender of these economic opportunities and the change in the operation of the Menindee Lakes system will have a beneﬁcial impact on Murray Darling basin water use. “Our people have been integral to the continued improvement and success of the company. We are fortunate to have a depth of management are committed and with great industry knowledge” Optimal development of our existing property assets at both the Darlington Point and Hay aggregations is continuing with a further 2,700 hectares of irrigated cropping land coming on stream for the 2018 growing season. Water availability for the 2018 summer growing season is reasonable in the Riverina but restricted in the northern and western properties. On balance we are expecting to plant a 50% larger area in the coming summer season compared with 2017. Our livestock operations have beneﬁted from strong prices in both sheep and cattle although drier than normal conditions towards the end of 2017 and into the 2018 season in both the Riverina and our western properties is placing some strain on the operations. Webster added to its dorper sheep business during the year with the previously announced purchase of Kalabity Station, which is a property of some 185,000 hectares south east of the Flinders Ranges in South Australia. With the consolidation of our organisational systems, the strengthening of our management team, the reﬁnancing and rescaling of our banking facilities and the strengthening of our balance sheet, Webster is now in a position to re-focus organically on expanding both its footprint and scale of operations. For the 15-month period to September 30, 2017, Webster has booked a Statutory Proﬁt before tax of $49.1 million, which includes the sale of the water entitlements and decommissioning at Lake Tandou operations and also includes the impairment of assets at Lake Tandou. Chris Corrigan Executive Chairman 5 Horticulture 6 The Horticulture business includes Webster’s Walnut business – the southern hemisphere’s largest producer of premium in-shell and kernel walnuts. Sourced from company orchards in Tasmania and NSW, production accounts for over 90 per cent of Australia’s annual walnut crop. Our walnut operation is completely vertically integrated from nursery through to processing and marketing, where we sell our produce to customers in Australia, Europe, the Middle East and Asia. 15-Month Period in Review As a result of higher yields, production nearly doubled to 12,004 tonnes compared to 6,203 tonnes in the prior year. Average selling prices were marginally higher than the prior year. Proﬁt for the 15-month period for the Horticulture division of $18.9 million was signiﬁcantly ahead of the prior year’s 12-month result of $2.2 million. Webster continues to expand its walnut orchard portfolio. The completion of stage 3 at the Avondale West orchard in NSW has added approximately 200 hectares, comprising new varieties while the orchard remains on schedule to produce its ﬁrst commercial harvest in 2018. Meanwhile, Webster acquired the 250-hectare Motspur Park walnut orchard, water entitlements and plant and equipment in March 2017 for $23.1 million. This orchard is located adjacent to Webster’s existing orchard at Tabbita, NSW and is highly complementary to Webster’s existing walnut operations. Left: Derek Goullet and Francisco Garcia Huidobro at the Walnut Drying Bins in Leeton 7 Horticulture continued Avondale West, New South Wales Ben Hayward is the Manager of Webster’s Avondale West walnut orchard. When completed, the orchard will be 880 hectares based in the Riverina district of NSW and produces a variety of walnuts. Avondale West continues to expand with the completion of stage 3 involving 200 hectares of development. For Ben, a former irrigation manager who lives on-site, the expansion typiﬁes the opportunities at Webster to leverage the scale of its walnut operations to grow the business further. “At Avondale West we have our own machinery on-site and we’re focused on the consistency of our trees out of the nursery which assists with yields,” he says. One of the exciting initiatives at Avondale West is its ﬁrst commercial harvest which is currently on track for production for April 2018. “We started planting for that harvest in 2014 and it will be a very exciting day when we wave the ﬁrst truck “out the door” with our walnuts next year,” said Ben. “ We started planting for that harvest in 2014 and it will be a very exciting day when we wave the ﬁrst truck “out the door” with our walnuts next year” 8 Ben Hayward at Avondale Orchard Colin Bruss at Tabbita Orchard Tabbita Orchard, New South Wales The Tabbita orchard near Grifﬁth is Webster’s largest walnut orchard in the portfolio stretching across 900 hectares. The orchard is managed by Colin Bruss who has managed Tabbita for the past 6 years, having originally come from Zimbabwe where he managed tobacco and citrus farming operations. The Tabbita orchard currently produces 7 varieties of walnuts plus one other variety which is presently in the trial stage. “Weather is always a challenge in any agricultural operation and here at Tabbita we’re really focused on how we can use technology to optimise our yields.” Colin is excited about the recent acquisition of the 250-hectare Motspur Park walnut orchard which is located adjacent to Tabbita. “I think that the acquisition demonstrates Webster’s commitment to investing in our walnut business and the ability we have to leverage our scale and technical expertise. Colin says the focus at Tabbita has been on investing in technical expertise, particularly in managing water appropriately. “It’s an orchard we know well and it is highly complementary to our Tabbita operation,” he said. “ I think that the acquisition demonstrates Webster’s commitment to investing in our walnut business and the ability we have to leverage our scale and technical expertise” 9 Horticulture continued Leeton Orchard, New South Wales Webster’s 763-hectare Leeton orchard is managed by Carl Rademeyer. The orchard produces many varieties of walnuts and at peak harvest employs around 30 people. Carl has been with the business for 9 years and in that time, he has seen signiﬁcant changes in the business, particularly over the past couple of years. “I would say Webster today is a very progressive company,” he says. “We’re really investing for the future and bringing the best available technology to our agricultural operations to maximise performance. “For us at the Leeton orchard, that means investments in technology such as putting load cells on our harvesters. That provides us with critical information such as more accurate weight data for our walnuts which is important for yield monitoring. “We’re also looking at capturing speciﬁc data points from airplane technology for topography and soil types. “The scale of our operations means we’re now able to make that level of capital investment which is a fundamental part of the success of our business. “It’s an exciting time to be part of a business which has a strong commitment to expanding its operations and investing in leading edge technology,” he says. Leeton Cracking and Processing Facility, New South Wales Dean Trembath is the Processing Manager at Webster’s cracking and processing facility at Leeton. In the past year, the Leeton facility processed 12,004 tonnes, which was double the prior year’s production. Fitted with the latest technology, the 7,000-square metre facility allows Webster to efﬁciently harvest and process Australia’s largest walnut crop to global standards for customers in Australia and across the world. “We’re really proud of what we’re achieving here at Leeton,” says Dean who has been with Webster for 3 years. “Webster has been investing in this facility to ensure the highest quality of our walnuts. That includes a world-ﬁrst, three-way free fall walnut laser sorter which mean less handling to improve kernel quality and multi-stage walnut shellers.” “It also includes a new cool-room and loading dock which are all part of our commitment to ensure our produce is the freshest and highest quality.” “That increase in volume was a big challenge but one that our people were ready to accept,” he says. “It’s a strong culture here and we’re focused on ensuring everyone knows the part they have to play in driving the success of the business.” Dean says the increased investment has ensured Webster’s competitiveness in the industry. “We can now pack for a range of different markets, from traditional bulk cartons to retail pre-packs and the increased investment is giving us greater ongoing efﬁciencies to ensure our product gets to the market in the shortest possible time to optimise freshness and product consistency.” Above: Dean Trembath at Leeton Processing Plant Right: Carl Rademeyer at Leeton Orchard 10 “ It’s an exciting time to be part of a business which has a strong commitment to expanding its operations and investing in leading edge technology” 11 Agriculture 12 Webster is one of the largest irrigated farming producers in Australia with more than 40,000 irrigable hectares of prime fertile land holdings across NSW. Our focus is on long term, sustainable farming, whilst maximising proﬁtability from crop mix and yield to harnessing our water portfolio. Our primary crop focus is on cotton, using technology and expertise to maximise yield and water efﬁciency, with capability to produce over 200,000 bales of cotton annually. Webster also owns extensive grazing farmland to produce 1,800 head of cattle and 40,000 lambs annually. Webster maintains a diverse portfolio of over 200,000 megalitres of water entitlements, stretching from southern Queensland, through New South Wales to northern Victoria. This portfolio is fundamental to Webster’s strategy of streaming water to areas where the Company can generate greatest return for each megalitre of water applied. Webster continually reﬁnes its portfolio mix of water to ensure it best meets our farming and cropping activities. Webster is planning an irrigated cotton crop of 5,700 hectares at Lake Tandou this season, which will be our last at this property following the sale of our water entitlements and de-commissioning of the property in 2018. The total planted area of irrigated cotton in the current season is expected to be around 16,500 hectares. 15-Month Period in Review Very wet conditions in the southern region at Kooba and Hay delayed planting and shortened the growing season. In the northern region at Bourke and Moree, extremely hot weather in the summer months resulted in low fruit retention, ultimately leading to lower cotton yields at the end of the season. Average yield performance across our irrigated cotton growing properties was 9.45 bales per hectare compared with 13.28 bales per hectare in the previous period. In March 2017, Webster acquired 185,00 hectares of land and organic stock of 13,500 breeding dorper ewes with a $12.5 million acquisition of Kalabity station in South Australia. Kalabity is a strong complement to Webster’s existing dorper sheep business at Lake Tandou. The company’s water assets totalled approximately 205,000 ML of entitlements held across a range of water systems and water products as at 30 September 2017. While the book value of water intangibles as at 30 September 2017 was approximately $212.8 million, directors estimate the market value of the water portfolio to be greater than $290.0 million. 13 Agriculture continued Kooba – Cotton, New South Wales For Glenn Lok, it all starts with the plant stand. “Getting the right plant stand is critical when you’re growing cotton,” he says. “The seeds need to be just at the right depth and at the right width between the seeds to optimise cotton yields.” Fortunately, Glenn has plenty of experience when it comes to growing cotton. He has been General Manager at Kooba since 1980 and has also worked in the US responsible for cotton growing operations. Glenn is responsible for Webster’s cotton business at the Kooba and Hay operations which encompasses over 14,800 developed hectares. He says Webster is focused on investing in its cotton operations to expand its operations further and optimise yields. “We’re very much focused on growth and you can see that in the increased level of capital investment here at Kooba,” he says. “We have plans to grow our cotton business here from 3,000 planted hectares annually to over 6,000 hectares and we’re very excited about the opportunity that presents for everyone involved in the business. “The scale of our operation also gives us increased leverage to grow the business further, with the technical expertise to maximise yields.” “ We’re very much focused on growth and you can see that in the increased level of capital investment here at Kooba” 14 Glenn Lok at Kooba Station Steve Porter at Garah “ The sheer size of Webster’s operations provides signiﬁcant opportunities for growth” Bengerang, New South Wales Steve Porter is responsible for the day-to-day running of Webster’s Bengerang aggregation near Moree and Darling Farms and Carbu properties near Bourke in NSW. The Bengerang aggregation includes 4,500 hectares of irrigation and 2,100 hectares of dry land cropping, with a primary focus on cotton and also winter crops such as barley, chickpeas and wheat. Webster also owns 4,850 hectares at Bourke focused on irrigated cotton. Steve has seen many weather cycles during his 38-year career managing properties in northern NSW. “Weather is always a challenge in this industry,” he says. “That requires us to manage every hectare to maximise yield across our cropping operations.” Steve says the diversity and scale of Webster’s operations across NSW provide signiﬁcant opportunity for the company. “The sheer size of Webster’s operations provides signiﬁcant opportunities for growth. But the breadth and variety of our operations, particularly between the north and the south of NSW, means we can also diversify risk which is another important factor to our business,” he said. 15 Agriculture continued Kalabity, South Australia Sophie Wardle and Emily Western are station hands on the Kalabity property and are not averse to hard work. “We do a bit of everything,” explains Sophie. “That includes checking water pipelines and tanks, grading pipelines, mustering livestock and stock work.” “It can be pretty hard work sometimes but it’s also very rewarding at the same time,” she says. For Emily, the opportunity to learn from station manager, Paul is one of the key attractions of the job. “That’s a really good opportunity for us to learn from someone like Paul.” Both Sophie and Emily would like to manage their own stations one day and they believe their experience at Webster is invaluable towards achieving that goal. “Kalabity is so vast and that means there’s always something that needs to be done. So we’re getting experience across all areas of running a station which is great for us,” says Sophie. “Paul is also really focused on ecological farming processes so we’re also learning a lot about that aspect of farming which is really interesting.” Above: Paul Martin at Kalabity Station Right: Emily Western and Sophie Wardle at Kalabity Station Kalabity, South Australia Kalabity station is vast. So vast in fact, it can take station manager, Paul Martin 6 hours to complete the northern water run across the property. “That means using technology focused on bio-diversity and innovations such as embryo transfer programs as part of our integrated production system. Webster acquired Kalabity for $12.5 million in 2017. Stretching across 185,000 hectares, the property sits near the intersection of the border between South Australia and New South Wales. Paul moved across to Kalabity with his wife, Jane, after spending the last 6 years managing the Webster property at Lake Tandou. He and Jane live on-site, together with station hands, Sophie Wardle, Emily Western and Keith Rowe. The focus at Kalabity is on breeding its organic stock of dorper ewes and lambs. Currently the station has 13,500 breeding dorper ewes and this is a strong complement to Webster’s dorper sheep business at Lake Tandou. “We’re focused on positive ecological outcomes here,” says Paul. “We also have a strong emphasis on low-stress stock handling, which is important in optimising our production.” Paul says dorper sheep are a very economical breed with excellent feed conversion and are relatively low maintenance with the ability to produce fast-growing lambs. “We have the opportunity to leverage our scale and expertise and have a target to produce around 100,000 organic lambs per year in the future,” he says. Most of the livestock is exported to Asian markets and Australian dorper lambs are recognised for their quality. “We have just applied for certiﬁcation for Korea which will open up another market destination for us,” says Paul. “We’re very excited for the future of this business. We have real opportunity to leverage our current scale to grow our operations further and it’s a good time to be part of the Webster Group,” he says. 16 17“ Kalabity is so vast and that means there’s always something that needs to be done. So we’re getting experience across all areas of running a station which is great for us”Directors’ Report For the 15-month period ended 30 September 2017 The directors of Webster Limited (ACN 009 476 000) submit herewith the annual financial report of the Company for the 15-month period ended 30 September 2017. In order to comply with the provisions of the Corporations Act 2001, the Directors’ Report follows: 1. Directors The directors of the Company at any time during or since the end of the 15-month period are: Chris Corrigan – BEc (Executive Chairman) Mr. Corrigan was appointed non-executive director in November 2007 until July 2010 and again from 15 October 2012. Mr Corrigan was appointed Executive Chairman on 29 February 2016. Mr Corrigan was Managing Director of Patrick Corporation Limited, Australia’s largest stevedore company with interests in rail transportation and aviation from March 1990 to May 2006. Prior to that, he had a career with Bankers Trust spanning 20 years, including periods as Managing Director of Bankers Trust in Australia and for the Asia-Paciﬁc region. In September 2011, Mr Corrigan was appointed Chairman of Qube Logistics Holdings Limited. Directorships of other listed companies held during the last three years: Qube Logistics Holdings Limited – from March 2011 to June 2017 Hawthorn Resources Limited – from October 2017 Rod Roberts – BEc, MBA, FAICD (Non-executive Director) Mr Roberts was appointed Managing Director in October 1996 until 2001 and Chairman from October 2001 to August 2007 and again from November 2008 to June 2015. Mr Roberts retired from the Board on 31 March 2017. Mr Roberts has previously held roles including Head of Corporate Finance at Bain & Co, Director of County NatWest Australia Limited, Chairman of Harris & Company Limited, Director of Tassal Group Limited and Deputy Chancellor of University of Tasmania. He is a director of the Australian Institute of Company Directors and President of the Tasmanian branch. David Cushing – BCom, ACA (Non-executive Director) Mr Cushing was appointed non-executive director on 31 October 2012. Mr Cushing is Executive Chairman of Rural Equities Limited, one of New Zealand’s largest rural property companies, and is also a director of the private investment company H & G Limited. Mr Cushing was formerly an investment banker with National Australia Bank Limited subsidiary, Bank of New Zealand. Mr Cushing has considerable experience in the agricultural sector having previously been a director of horticultural company Fruitfed Supplies Limited, rural services company Williams & Kettle Limited and New Zealand Farming Systems Uruguay Limited. He has also acted as an alternate director of rural services and seed company PGG Wrightson Limited for the Chinese company Agria Corporation. Chris Langdon – BCom (Econ) (Non-executive Director) Mr Langdon was appointed non-executive director on 14 March 2013. Mr Langdon is a major shareholder and Chief Executive of Langdon Group Pty Ltd. The Langdon Group is 160 years old and is a leading company in its sector, primarily involved in food ingredient distribution, and herb & spice processing. Mr Langdon’s early career was in investment banking with roles in Australia, London and New York. Since the early 1990s, apart from his corporate role at Langdon Group, Mr Langdon has been involved in various external corporate directorships. He has also held directorships at the listed Text Media Limited and Fresh Food Industries Holdings Limited, as well as Nutshack Group Pty Ltd. 18 Directorships of other listed companies held during the last three years: Panoramic Resources Limited – from August 2004 to June 2016 John Joseph Robinson – BFA (Non-executive Director) Mr J Robinson was appointed non- executive director on 23 June 2016. Mr Robinson is the Managing Director of Australian Food and Fibre Limited and has over 20 years’ experience in irrigated and dry land farming, prior to which he traded futures with Bankers Trust. He is currently the Chairman of the Gwydir Valley Irrigators Association, Chairman of the Gwydir Customer Advising Groups, the Presiding Member of the Cotton Research and Development Corporation Selection Committee and a member of The Primary Industries Ministerial Advisory Council. Joseph Corrigan – BA MCA (Alternate for Chris Corrigan) Mr Corrigan was appointed alternate for Mr Chris Corrigan on 14 October 2013. Mr Corrigan holds a bachelor and masters in creative arts and has interests and experience in the agricultural industry particularly wheat, canola and beef. Mr Corrigan is also managing director of an entertainment production company. The above-named directors held ofﬁce during the whole of the 15-month period ﬁnancial year and since the end of the 15-month period year except for Mr R Roberts who retired 31 March 2017. Director’s Shareholdings Director’s shareholdings are disclosed on page 28 of the Directors Report. There has been no change in Director’s shareholdings between the end of the 15-month period and the date of this Director’s Report. 2. Company Secretary Mr Maurice Felizzi – BA Acc, CPA AGIM joined Webster Limited on 18 April 2016 and was appointed Company Secretary from 28 April 2016. He is a member of CPA Australia, Institute of Chartered Secretaries and holds a Bachelor of Arts from the University of Canberra. 3. Principal Activities The principal activity of the consolidated entity during the year was the production, processing and marketing of walnuts, cotton, crops and livestock. 4. Review of Operations The consolidated entity’s ﬁnancial performance resulted in a net proﬁt before tax for the 15-month period of $49.1 million (2016 Loss $81.6 million). 5. Directors’ Meetings The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during the 15-month period and the number of meetings attended by each director (while they were a director or committee member). During the 15-month period ended 30 September 2017, 8 Board Meetings and 3 Audit and Risk Committee Meetings were held. Directors CD Corrigan CD Langdon RJ Roberts (i) BD Cushing JJ Robinson (i) RJ Roberts retired on 31 March 2017 6. Corporate Governance Board of Directors Audit and Risk Committee Held Attended Held Attended 8 8 8 8 8 8 8 5 8 8 3 3 3 3 3 1 3 2 3 3 In fulﬁlling its obligations and responsibilities to its various stakeholders, the Board of Webster Limited recognises the need to implement and maintain a robust system of governance. The Board has established a program that aims to meet best practice in standards of accountability, disclosure, responsibility and transparency. The Australian Securities Exchange (“ASX”) Corporate Governance Council has released guidelines under which companies are now obliged to report on whether they comply with their published “Corporate Governance Principles and Recommendations”, as outlined in those guidelines. The Company complies with most of the principles outlined in the ASX guidelines and the Board remains committed to reviewing all practices to ensure that an appropriate and functional solution is in place for a company of Webster Limited’s size and type of operation. Set out below is a summary of the Company’s current practices in each of the areas identiﬁed in the ASX guidelines. 6.1 Lay solid foundations for management and oversight The Webster Limited Board of Directors is responsible for the overall corporate governance of the consolidated Group including its strategic direction, establishing goals for management and monitoring the achievement of these goals. The relationship between the Board and management is a partnership that is crucial to the Company’s long-term success. The separation of responsibilities between the Board and management is clearly understood and respected. 19 Directors’ Report continued 6.2 Structure the Board to add value Audit and Risk Committee The Company has recognised the importance of having a balanced Board comprised of directors with an appropriate range of backgrounds, skills and experience. As at the date of this report the Board comprises one executive director and three non-executive directors. It is the intention of the Board to maintain a majority of non-executive directors on the Board. The Board is of the view that directors possess an appropriate mix of skills, experience, expertise and diversity to enable the Board to discharge its responsibilities. The Board considers the independence of directors to be assessed on their capacity to act in accordance with their duties and put the interests of the Company and its shareholders ﬁrst, so that they are objectively capable of exercising independent judgement. The Board considers that each of the current directors has this capacity. The Board notes the deﬁnition of “independence” contained in the ASX guidelines and recognises that Mr C Langdon meets the guidelines’ deﬁnition of “independent”. The directors as a group are responsible for reviewing membership of the Board and for selecting new directors. The constitution requires that any new non-executive director appointed by the Board must seek election at the next Annual General Meeting. The Board of Webster Limited is supported by the Audit and Risk Committee. This committee, has its own charter and operating procedures and assists the Board in the discharge of its obligations by the review of ﬁnancial reports, audit, risk and compliance. In addition, directors meet outside normal Board and Committee Meetings from time to time, in accordance with good corporate governance practice. The Audit and Risk Committee monitors internal control policies and procedures designed to safeguard company assets and to ensure the integrity of ﬁnancial reporting. It advises on the establishment and maintenance of a framework of internal controls and appropriate ethical standards for the management of the consolidated Group. The Committee is also responsible for identifying areas of signiﬁcant business risk and ensuring arrangements are in place to manage them. It reviews the annual and half-year ﬁnancial statements before the Board considers them. It is also responsible for ensuring compliance with the Corporations Act 2001, ASX Listing Rules and any other matters with external governing or statutory bodies. Among its speciﬁc responsibilities, the Committee reviews and advises the Board on the nomination and remuneration of external auditors and the adequacy of existing external and internal audit arrangements including the scope and quality of audits. The Audit and Risk Committee Charter is available on the Company’s website and contains information on procedures for the selection and appointment of the external auditor, and for the rotation of external audit engagement partners. The Committee met three times during the 15-month period ended 30 September 2017. Current members of the Audit & Risk Committee are Messrs C D Langdon (Chairman) and B D Cushing. Details of the names and qualiﬁcations of those appointed to the Audit and Risk Committee are contained on page 19 of the Directors’ Report. The number of meetings of the Audit and Risk Committee and names of the attendees is contained on page 19. The Executive Chairman, other independent Directors, Chief Financial Ofﬁcer and the external audit partner in charge of the Webster Limited audit attend meetings of this Committee by invitation. The Committee also meets from time to time with the external auditors, independent of management. 20 6.3 Promote ethical and responsible decision making As part of the Board’s continuing commitment to promote ethical and responsible decision making, the Company has a Code of Conduct which establishes a range of procedures and guidelines to ensure that the highest ethical standards, corporate behaviour, and accountability are maintained. The Code of Conduct was established in 1994 to guide executives, management and employees in carrying out their duties and responsibilities. The Code of Conduct covers such matters as: responsibilities to shareholders; conﬂict of interest; conﬁdentiality; protection of the company assets; relations with customers and suppliers; employment practices; and responsibilities to the community. Webster Limited has developed and adopted a Securities Trading Policy that prohibits employees trading the Company’s shares due to knowledge of undisclosed information. At other times, directors and employees are permitted to trade in Webster Limited securities subject to compliance with the Securities Trading Policy, statutory and other relevant regulatory restrictions. Directors refer all trading of company shares by them to the Company Secretary for ASX lodgement requirements. Directors may, after prior approval of the Chairman, obtain independent professional advice at the Company’s expense for the purpose of the proper performance of their duties. The Company is an equal opportunity employer and recruit’s personnel from a diverse range of backgrounds. Workplace diversity includes, but is not limited to gender, age, race, ethnicity, disability and cultural background. The Company is committed to further enhancing the Group’s diversity and recognises that embracing diversity in its workforce contributes to the achievement of the Group’s objectives. Although the Company has a rich diversity amongst its employees, the Board recognise the need to improve the diversity at senior executive and Board level. As at 30 September 2017, the Chair and the Company Secretary of AGW Funds Management Limited (a wholly owned subsidiary of Webster Limited that acts as the Responsible Entity for three Managed Investment Schemes) were female. The Company is an equal opportunity employer and the number of female employees has increased over recent years and now females comprise approximately 22% of senior executives, 19% of permanent employees and 40% of seasonal/casual employees. To further enhance the commitment to gender diversity the Company had developed the following objectives which will be monitored and evaluated by the Board. Aim to increase the number of females in executive positions which become vacant, subject to identifying candidates with appropriate skills Review means by which the Company can identify and develop high performing female employees to prepare them for senior/executive roles Increase the focus on gender participation across the Company 6.4 Safeguard integrity in ﬁnancial reporting The Board is responsible for the integrity of ﬁnancial data and has instigated an internal control framework to ensure accurate ﬁnancial reporting of monthly actual results against budgets approved by directors and revised forecasts. In accordance with section 295A of the Corporations Act 2001, the Executive Chairman and Chief Financial Ofﬁcer stated in writing to the Board that the consolidated entity’s ﬁnancial reports present a true and fair view, in all material respects, of the consolidated entity’s ﬁnancial condition and operational results and are in accordance with relevant accounting standards. The Audit and Risk Committee provides assistance to directors in fulﬁlling their responsibility to the Company’s shareholders and potential investors in relation to the ﬁnancial risk, audit, corporate accounting and reporting practices of the Company. 6.5 Make timely and balanced disclosures Webster Limited places considerable importance on accurate and effective communication with its existing and potential shareholders. Webster Limited is committed to complying with the continuous disclosure obligations of the Corporations Act 2001 and the ASX Listing Rules. The Company has developed and adopted a continuous disclosure policy and procedure, which ensures all material matters concerning the Company are conveyed immediately and effectively. Webster Limited understands and respects the fact that timely disclosure of relevant information is central to the efﬁcient operation of the securities market. Consistent with best practice disclosure and continuous disclosure requirements, all market-sensitive data, annual and half yearly reports and addresses by the Chairman and are released to the stock exchange through ASX On-Line. Webster Limited also posts reports, newsletters, ASX releases, Annual General Meeting and other major presentations on its website – www.websterltd.com.au. The external audit partner in charge of the Webster Limited audit is invited to attend the Annual General Meeting and is available to answer shareholder questions related to the conduct of the audit, and the preparation and content of the auditor’s report. 6.6 Respect the rights of shareholders Webster Limited is committed to providing shareholders with comprehensive information about the Company and its activities, and to fulﬁlling its obligations to the broader market for continuous disclosure. The Company publishes a comprehensive Annual Report incorporating ﬁnancial and other information. This is sent to shareholders on request and is available to the public, as well as being posted on the Company’s website. A Half-Year Report incorporating abbreviated ﬁnancial data and market commentary is also made available on the same basis. The Company maintains a website (www.websterltd.com.au) that contains shareholder and stakeholder information in addition to information about the Company’s products. Previous Annual and Half-Year Reports are available on the site. The Company Secretary’s Ofﬁce is responsible for the distribution of material and responding to requests for information from shareholders and the public. The Board, and in particular the Chairman, bear responsibility for communication with shareholders and members. This occurs formally through the Annual Report and the Annual General Meeting. At other times, senior management and the Chairman liaise between the Board and key shareholders and analysts. Notice of the Company’s Annual General Meeting is sent to shareholders, as well as being posted on the website and released to the ASX. The Company’s auditor attends the Annual General Meeting and is invited to answer relevant questions and make statements to the meeting. The directors and senior management attend all General Meetings and are available to shareholders and other stakeholders. The public and the media are welcome to attend General Meetings as observers. 6.7 Recognise and manage risk The Audit and Risk Committee is responsible for the establishment of a group-wide risk proﬁle. The objective is to identify, evaluate, and monitor material risks that the Company is facing, and to ensure effective management or monitoring of those risks. The Board is responsible for the Company’s system of internal controls and monitors the operational and ﬁnancial aspects of the Company’s activities through the Audit and Risk Committee. 21 Directors’ Report continued The Board and the Audit and Risk Committee are both involved in identifying key areas of risk such as insurance, interest rate and exchange exposure and ensuring that appropriate measures of protection are taken. The Company has in place a number of risk management controls which include the following: risk management policy and practices; policies and procedures for the management of ﬁnancial risk and treasury operations including exposures to foreign currencies, ﬁnancial instruments, and movements in interest rates; guidelines and limits for the approval of capital expenditure and investments; and a comprehensive insurance program. Management is required to provide regular reports on each of these matters. 6.8 Remunerate fairly and responsibly The Company recognises that the process of enhancing shareholder value is dependent upon the performance of directors and management. Ensuring they each have the knowledge and information required to perform their duties, together with the regular review of performance, are important factors in meeting the Company’s objectives. The only beneﬁts currently paid to non- executive directors are the base fee and superannuation, approved in aggregate by shareholders. There is no scheme for the payment of retirement beneﬁts to executive and non-executive directors. 7. Remuneration Report The Non-Executive Directors are responsible for reviewing the compensation arrangements for all senior executives and Directors. The review is conducted annually, having regard to management performance and comparative, external compensation levels. Independent advice may be sought on compensation packages and Directors’ fees. The compensation of key management personnel includes salary/fees, movements in accrued annual and long service leave, beneﬁts (including the provision of motor vehicles, superannuation and fringe beneﬁts) and incentive schemes (including performance-related bonuses). 7.1 Remuneration Policy The objective of the Company’s executive remuneration policy is to set remuneration levels to attract and retain appropriately qualiﬁed and experienced Directors and senior executives. The policy aligns executive rewards with achievement of speciﬁc business goals and key performance indicators, which include both ﬁnancial and operational targets. Remuneration packages include a mix of ﬁxed remuneration and performance-based remuneration. Senior executives may receive short-term incentives. Remuneration packages are reviewed and determined by the Board, with due regards to current rates, and are benchmarked against comparable industry salaries. The Board may obtain independent advice with regard to the appropriateness of remuneration packages. Non-Executive Directors receive fees but do not receive any performance-related remuneration. Non-Executive Directors’ fees are reviewed by the Board annually to ensure that they are appropriate and in line with market expectations. The total amount of remuneration provided to Non-Executive Directors must not exceed an aggregate maximum of $500,000 per annum. 7.2 Performance Based Remuneration Short-Term Incentives A cash-based Short-Term Incentive (STI) program continued to be adopted for the 2017 ﬁnancial period. In the 2017 ﬁnancial period executive bonus payments of $444,874 have been earned (2016: $176,176). The Program is applicable to key management personnel that act in an executive capacity. The executive STI Program is linked to the budget which aims to align executive performance to the ﬁnancial performance of the Company. Executives are eligible for personal Incentives up to a maximum of 50% of their total cost to company (TCC) package based on achieving speciﬁc goals and/ or KPIs. The Board is responsible for assessing whether the KPIs are met based on detailed reports on performance prepared by management. Financial targets ensure that reward is only available when value has been created for shareholders. Operational targets allow for the recognition of efﬁciencies that will provide for future shareholder value. Short-term incentives are payable 50% following approval with the remaining 50% payable after 12-months on the condition the executive is still employed by the Company. Long-Term Incentives On 27 August 2013 the Board adopted an Executive Long-Term Incentive Plan (ELTIP) to provide eligible executives the opportunity to acquire shares in the Company. Under the ELTIP, eligible executives are invited to apply for a set number of Webster Limited ordinary shares and a non-recourse interest free loan will be made available to them by the Company for this purpose. The Board may from time to time determine which executives are entitled to participate in the ELTIP based on individual performance as assessed under the annual review process. Shares issued to eligible executives under the ELTIP are subject to a holding lock from their issue date until applicable vesting conditions (eligible executive must be employed by the Company) have been satisﬁed and the loans applicable to them repaid. The issue price of shares under the ELTIP is determined on the basis of trading in Webster Limited ordinary shares over the ﬁve trading days prior to the date of issue. Shares issued under the ELTIP rank pari passu with existing ordinary shares and are entitled to participate in dividends as well as future rights and bonus issues. The ELTIP rewards participating executives against the extent of the consolidated entity’s achievement against improvement in share price and hence shareholder value over the long term. 22 Details of ELTIP shares granted/vested as compensation to key management personnel: 30 September 2017 Executive Share Rights Issued Share Rights Vested Issue/ Exercise Price Issue Date Vesting/ Expiry Date Revised Vesting Date Current Period Expense Total Value Granted(i) D C Goullet 387,500(ii) $0.86 05/09/2013 05/09/2016 05/09/2018 $4,284 $70,079 387,500(ii) 193,750 193,750 200,000 200,000 $0.86 05/09/2013 05/09/2017 05/09/2018 $23,575 $79,728 $1.21 21/09/2016 21/09/2019 $19,791 $57,943 $1.21 21/09/2016 21/09/2020 $16,662 $65,089 $1.34 25/09/2017 25/09/2020 $1.34 25/09/2017 25/09/2021 $245 $208 $53,812 $60,698 M Felizzi 250,000 $1.10 30/05/2016 30/05/2019 $31,458 $75,376 250,000 250,000 250,000 250,000 250,000 350,000 350,000 B Barry G J Lok $1.10 30/05/2016 30/05/2020 $26,436 $84,513 $1.21 21/09/2016 21/09/2019 $25,536 $74,766 $1.21 21/09/2016 21/09/2020 $21,500 $83,986 $1.21 21/09/2016 21/09/2019 $25,536 $74,766 $1.21 21/09/2016 21/09/2020 $21,500 $83,986 $1.34 25/09/2017 25/09/2020 $1.34 25/09/2017 25/09/2021 $430 $94,171 $364 $106,222 $245 $208 $53,812 $60,698 $217,978 $1,179,645 W Andreatta 200,000 $1.34 25/09/2017 25/09/2020 200,000 4,162,500 $1.34 25/09/2017 25/09/2021 (i) The value of beneﬁts granted under the LTIP during the period is calculated at the issue date using the Black-Scholes pricing model. This value is allocated to the remuneration of key management personnel on a straight-line basis over the period from issue to vesting date. (ii) In accordance with the ELTIP plan rules Mr D C Goullet requested a further extension of 12-months to the loan relating to the ELTIP shares. The request was granted by the Company. 23 Directors’ Report continued 30 June 2016 Executive Share Rights Issued Share Rights Forfeited Issue/ Exercise Price Issue Date Vesting/ Expiry Date Current Year Expense Total Value Granted(i) J C Hosken (ii) 625,000 625,000 $0.86 05/09/2013 30/06/2016 625,000 625,000 $0.86 05/09/2013 30/06/2016 – – – – S J Stegmann (iii) 550,000 275,000 $0.86 05/09/2013 05/09/2016 $16,608 $99,467 550,000 275,000 $0.86 05/09/2013 05/09/2017 $14,174 $113,162 D C Goullet M Felizzi 387,500 387,500 250,000 250,000 $0.86 05/09/2013 05/09/2016 $23,402 $70,079 $0.86 05/09/2013 05/09/2017 $19,973 $79,728 $1.10 30/05/2016 30/05/2019 $2,134 $75,376 $1.10 30/05/2016 30/05/2020 $1,793 $84,513 C Barnes (ii) 367,500 367,500 $1.28 05/09/2014 30/06/2016 367,500 367,500 $1.28 05/09/2014 30/06/2016 4,360,000 – – – – $78,084 $522,324 (i) The value of beneﬁts granted under the LTIP during the year is calculated at the issue date using the Black-Scholes pricing model. This value is allocated to the remuneration of key management personnel on a straight-line basis over the period from issue to vesting date. (ii) J Hosken’s entitlements were forfeited on 30 June 2016. (iii) S J Stegmann’s entitlements were forfeited on 25 February 2016. (ii) C Barnes resigned during the ﬁnancial year (16 November 2015); therefore the full value of his share rights was forfeited. 7.3 Relationship between remuneration policy and Company performance The following tables set out summary information about the consolidated entity’s earnings and movements in shareholder wealth for the ﬁve ﬁnancial periods to 30 September 2017. Analysis of the ﬁgures shows that 2017 was affected by the sale of the water entitlements at Lake Tandou and 2016 year was affected by the impairment of goodwill. The 2015 year was affected by acquisition costs from the purchase of Bengerang Limited and takeover of Tandou Limited. The Company’s performance over the ﬁve ﬁnancial periods has been reﬂected in an increase in the Company’s share price over the same period. 30 September 2017 $’000 30 June 2016 $’000 30 June 2015 $’000 30 June 2014 $’000 30 June 2013 $’000 Revenue and other income 275,761 175,964 77,503 Net proﬁt/(loss) before tax Net proﬁt/(loss) after tax 49,059 58,284 (81,554) (80,669) 8,568 5,759 65,650 11,977 8,328 61,774 9,922 6,967 24 Share price at start of year Share price at end of year Interim Dividend Final Dividend 30 September 2017 $’000 30 June 2016 $’000 30 June 2015 $’000 30 June 2014 $’000 30 June 2013 $’000 $1.12 $1.30 – $1.57 $1.12 – $0.86 $1.57 $0.70 $0.86 – 1.50 cps 3.00 cps 1.00 cps 1.00 cps 2.00 cps $0.50 $0.70 1.00 cps 1.50 cps Basic earnings per share 16.44 cps (23.28) cps 3.70 cps 6.21 cps 5.62 cps 7.4 Key Management Personnel details The Directors and other key management personnel of Webster Limited during the ﬁnancial period were: Directors C D Corrigan (Executive Chairman) B D Cushing (Non-Executive Director) C D Langdon (Non-Executive Director) J J Robinson (Non-Executive Director) R J Roberts (Non-Executive Director) – retired 31 March 2017 Executives M Felizzi (Chief Financial Ofﬁcer and Company Secretary) D C Goullet (General Manager Operations, Walnuts Australia) B Barry (General Manager, Water Operations) G J Lok (General Manager, Webster Southern Ag) – appointed 1 July 2017 W Andreatta (Development Director) – appointed 1 July 2017 Except as noted, the named persons held their current position for the whole of the ﬁnancial period and since the end of the ﬁnancial period. 25 Directors’ Report continued 7.5 Remuneration details of Key Management Personnel The following tables disclose compensation of key management personnel of the consolidated entity. The term “Key Management Personnel” refers to those persons having authority and responsibility for planning, directing and controlling the activities of the consolidated entity, directly or indirectly, including any Director (whether executive or otherwise) of the consolidated entity. 2017 Short-Term Post Employment Terminat- ion Share- Based Amounts Fixed Rem- uneration Rem- uneration Linked to Performance Total Key Management Personnel Directors Salary and fees Bonus Paid Bonus Deferred Non- Monetary Super LTIP (iv) C D Corrigan 87,500 B D Cushing 87,500 R J Roberts (i) 52,500 C D Langdon 96,250 J J Robinson 87,500 Executives – – – – – – – – – – 11,936 8,315 11,936 8,315 7,162 4,988 11,936 9,144 11,936 8,315 – – – – – – – – – – 107,751 100% 107,751 100% 64,649 100% 117,330 100% 107,751 100% B Barry 267,176 53,750 53,750 36,311 24,902 – 47,036 482,924 M Felizzi 419,224 87,500 87,500 11,936 25,006 – 104,930 736,097 D C Goullet 289,480 90,619 71,755 36,311 28,052 G J Lok (ii) 46,570 W Andreatta (iii) 59,550 – – – – 2,387 4,424 2,387 – – – – 64,765 580,982 794 54,176 453 62,390 Total 1,493,250 231,869 213,005 144,238 121,460 – 217,978 2,421,801 68% 62% 61% 99% 99% – – – – – 32% 38% 39% 1% 1% (i) Mr R J Roberts retired on 31 March 2017. (ii) Mr G J Lok appointed on 01 July 2017. (iii) Mr W Andreatta appointed on 01 July 2017. (iv) The value of the Long-Term Incentive Plan beneﬁts granted to key management personnel as part of their remuneration is calculated as at the issue date using the Black-Scholes pricing model. The amounts disclosed as part of the remuneration for part of the ﬁnancial year have been determined by allocating the issue date value on a straight-line basis over the period from issue date to vesting date. 26 2016 Short-Term Post Employment Terminat- ion Share- Based Amounts Fixed Rem- uneration Rem- uneration Linked to Performance Total Key Management Personnel Directors Salary and fees Bonus Paid Bonus Deferred Non- Monetary Super LTIP (iv) 7,418 7,144 7,418 6,204 7,418 10,510 7,418 6,413 7,418 – 4,896 15,482 141 – – – – – – – – – – – – – – – 89,762 100% 78,929 100% 96,418 100% 81,336 100% 71,964 100% 210,051 100% 141 100% 2,626 12,223 148,643 61,375 356,468 12,001 12,196 240,185 26,918 12,581 1,484 3,342 – – 397,021 – – 180,618 100% 3,927 70,027 10,251 9,123 10,299 – 136,006 26,918 20,567 – 43,375 263,049 61% 86% 94% 70% 84% 15,856 14,573 156,340 – 369,330 100% 138,180 130,358 555,467 108,677 2,401,118 – – – – – – – 39% 14% – 6% 30% 16% – – – – – – – – – – – – – – – – C D Corrigan 75,200 B D Cushing 65,307 R J Roberts 78,490 D W Robinson (i) 67,505 C D Langdon 64,546 R Haire (ii) 189,673 J J Robinson (iii) – Executives – – – – – – – S J Stegmann (iv) 53,748 77,853 J Hosken (v) 75,468 57,171 B Barry 141,119 M Felizzi (vi) 61,274 – – C D Barnes (vii) 65,181 41,152 D C Goullet 172,189 A T Reilly (viii) 182,561 – – Total 1,292,260 176,176 (i) Mr D W Robinson retired on 23 June 2016. (ii) Mr R A G Haire retired on 29 February 2016. (iii) Mr J J Robinson was appointed on 23 June 2016. (iv) Ms S J Stegmann retired on 30 September 2015. (v) Mr C J Hosken retired on 18 November 2015. (vi) Mr M Felizzi was appointed on 18 April 2016. (vii) Mr C D Barnes retired on 16 November 2015. (viii) Mr A T Reilly was appointed on 28 August 2015 and retired on 31 March 2016. (ix) The value of the Long-Term Incentive Plan beneﬁts granted to key management personnel as part of their remuneration is calculated as at the issue date using the Black-Scholes pricing model. The amounts disclosed as part of the remuneration for part of the ﬁnancial year have been determined by allocating the issue date value on a straight-line basis over the period from issue date to vesting date. 27 Directors’ Report continued 7.6 Transactions with Key Management Personnel During the ﬁnancial period where, Directors, their Director-related entities and executives purchased goods that were domestic or trivial in nature from the Company, they did so on the same terms and conditions available to other employees and customers. The Company entered into management agreements with Australian Food and Fibre Ltd (pursuant to the purchase of the Kooba Aggregation, Bengerang Ltd and Tandou Ltd) a company in which Mr Joe Robinson is an associate. The original management agreement was a for a 2 year term expiring 30 June 2017 with an annual fee of $550,000 plus bonus incentives based on performance to a maximum potential of $500,000 (100% of incentive achieved). The agreement was renewed on 01 July 2017 for a 3 year term with an annual fee of $300,000 plus bonus incentives based on performance to a maximum potential of $500,000. Australian Food and Fibre also incurred expenses on behalf of the Company and were reimbursed at cost for those expenses amounting to $854,760. The Company entered into an agreement with Corrigan Air, a company which Mr Christopher Corrigan and Mr Joseph Corrigan are associates. The current agreement is for the provision of the use of light aircraft to transport management to its properties. The arrangement is charged at cost which amounted to $272,140 for the 15-month period ended 30 September 2017. The Company supplied walnuts to Langdon Ingredients, Bakery Craft and The Natural Foods Trading Company, all companies which Mr Chris Langdon is an associate. The goods were supplied at arms length on normal commercial terms. The value of goods supplied was $326,893 for the 15-month period ended 30 September 2017. Other than the above, and contracts of employment, no other key management personnel have entered into a contract with the Company during the ﬁnancial period. 7.7 Equity Holdings of Key Management Personnel The following tables disclosed details and movements in equity holdings of key management personnel of the consolidated entity: 2017 Number of ordinary shares (ORD) held directly, indirectly or beneﬁcially Type Balance at 1/7/16 Received on exercise of options Share Rights ELTIP Net other change Balance at 30/9/17 Directors C D Corrigan B D Cushing R J Roberts (i) C D Langdon J J Robinson Executives Options M Felizzi D C Goullet B Barry G J Lok W Andreatta ORD ORD ORD ORD ORD ORD ORD ORD ORD ORD 45,132,434 20,244,413 5,143,187 1,444 52,702,351 123,223,829 500,000 776,232 – – – 1,276,232 – – – – – – – – – – – – – – – – – – 500,000 787,500 500,000 700,000 400,000 2,887,500 – – – – – – – – – – – – 45,132,434 20,244,413 5,143,187 1,444 52,702,351 123,223,829 1,000,000 1,563,732 500,000 700,000 400,000 4,163,732 (i) Closing balance for R J Roberts is at the respective retirement date. 28 2016 Number of ordinary shares (ORD) held directly, indirectly or beneﬁcially Type Balance at 1/7/15 Received on exercise of options Share Rights ELTIP Net other change Balance at 30/6/16 Directors C D Corrigan B D Cushing R J Roberts D W Robinson (ii) C D Langdon J J Robinson (i) Executives Options C D Barnes (iii) M Felizzi D C Goullet J C Hosken (iv) S J Stegmann (v) ORD ORD ORD ORD ORD ORD ORD ORD ORD ORD ORD 43,106,493 20,244,413 5,143,187 54,031,899 1,444 – 122,527,436 735,000 – 776,232 1,250,000 1,105,113 3,866,345 – – – – – – – – – – – – – – – – – – – – 2,025,941 45,132,434 – – 20,244,413 5,143,187 (54,029,399) – 2,500 1,444 52,702,351 52,702,351 698,893 123,226,329 (735,000) 500,000 – (1,250,000) (550,000) (2,035,000) – – – – – – – 500,000 776,232 – 555,113 1,831,345 (i) Opening balance for J J Robinson is at the respective appointment date. (ii) Closing balance for D W Robinson is at the respective retirement date. (iii) C D Barnes retired 16/11/15. (iv) J C Hosken retired 18/11/15. (v) S J Stegmann retired on 30/9/15. 29 Directors’ Report continued 8. Issue of Shares 13. Likely Developments In March 2017, 9,000,000 ordinary shares were issued as part consideration for the acquisition of Motspur Park. In September 2017, 1,500,000 ordinary shares were issued for the purposes of the Executive Long Term Incentive Plan. 9. Share Options No shares of any controlled entity were issued during or since the end of the 15-month period by virtue of the exercise of any options. 10. Dividends During the period, directors declared and paid the following dividends: Dividends of 9.0 cents per share on the cumulative non-redeeming preference shares were paid on 24 March 2017. Dividends of 3.0 cents per ordinary share, fully franked, was declared in regard to the 15-month period ended 30 September 2017 for payment on 8 December 2017. 11. Changes in State of Affairs Other than as disclosed in this report or in the accompanying ﬁnancial statements and notes thereto, there has been no signiﬁcant change in the state of affairs of the consolidated Group during the period. 12. Subsequent Events The directors are not aware of any other matter or circumstance that has arisen, other than that which has been described above, that has signiﬁcantly or may signiﬁcantly affect the operations of the consolidated Group, the results of those operations or the state of affairs of the consolidated Group in subsequent ﬁnancial years. Likely developments in the consolidated Group’s operations known at the date of this report have been covered elsewhere within this report. 14. Ofﬁcers’ Indemnities and Insurance During the 15-month period, the Company paid a premium in respect of a contract insuring the directors of the Company (as named above), the Company Secretary, and all executive ofﬁcers of the Company and of any related body corporate against a liability incurred as such a director, secretary or executive ofﬁcer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since 30 September 2017, indemniﬁed or agreed to indemnify an ofﬁcer or auditor of the Company or of any related body corporate against a liability incurred as such an ofﬁcer or auditor. 15. Environmental Regulations The consolidated Group operates various processing facilities that are subject to environmental controls. There are no known issues that are outstanding with regulatory authorities and the Group is operating within accepted guidelines. 16. Non-Audit Services The directors are satisﬁed that the provision of non-audit services during the year by the auditors (or by another person or ﬁrm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Details of amounts paid or payable to the auditor for non-audit services provided during the 15-month period by the auditor are outlined in note 4 to the ﬁnancial statements. The directors are of the opinion that the services disclosed in note 4 to the ﬁnancial statements do not compromise the external auditor’s independence, based on the advice received from the Audit and Risk Committee, for the following reasons: All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor, and None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditors own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. 17. Rounding Off of Amounts The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations instrument, amounts in the director’s report and the ﬁnancial statements are rounded off to the nearest thousand dollars, unless otherwise indicated. 18. Independence Declaration by Auditor The auditor’s independence declaration is included on page 32. Signed in accordance with a resolution of the directors made pursuant to s.298(2) of the Corporations Act 2001. On behalf of the Directors C D Corrigan Executive Chairman Leeton, 2 November 2017 30 Directors’ Declaration For the 15-month period ended 30 September 2017 The directors declare that: (a) In the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; (b) In the directors’ opinion, the attached ﬁnancial statements are in compliance with International Financial Reporting Standards, as stated in note 1 to the ﬁnancial statements; (c) In the directors’ opinion, the attached ﬁnancial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the ﬁnancial position and performance of the consolidated entity; and (d) The directors have been given the declarations required by section 295A of the Corporations Act 2001. At the date of this declaration, the company is within the class of companies affected by legislative instrument 2016/191. The company is within the class of company as affected by ASIC Class Order 98/1418. 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. In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which the ASIC Class Order applies, as detailed in note 17 to the ﬁnancial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee. Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001. On behalf of the Directors C D Corrigan Executive Chairman Leeton, 2 November 2017 31 32Independence Declaration by Auditor Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited Dear Board Members Webster Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Webster Limited. As lead audit partner for the audit of the financial statements of Webster Limited for the 15 month period ended 30 September 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU John Leotta Partner Chartered Accountants Sydney, 2 November 2017 Deloitte Touche Tohmatsu A.C.N. 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1217 Australia DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au The Board of Directors Webster Limited 61 Kurrajong Avenue Leeton NSW 2705 33 Deloitte Touche Tohmatsu A.C.N. 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1217 Australia DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited Independent Auditor’s Report to the Members of Webster Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Webster Limited (the “Company”) and its subsidiaries (the “Group”), which comprises the consolidated statement of financial position as at 30 September 2017, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the 15 month period then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 September 2017 and of its financial performance for the 15 month period ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Auditor Reports34Auditor Reports continued 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. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How the scope of our audit responded to the Key Audit Matter Carrying Value of Permanent Water Licences Refer to Note 9 ‘Intangibles’ As at 30 September 2017 the Group’s Consolidated Statement of Financial Position includes Permanent Water Rights amounting to $212.9 million. The assessment of impairment of the Group’s Permanent Water Rights involves the exercise of significant judgement in respect of key assumptions relating to current market prices of water licences. Management has disclosed its basis for determining the recoverable amount of Permanent Water Rights in note 9 (d). Our procedures included, but were not limited to: (cid:120) evaluating management and the Board’s determination to use current market price as an appropriate methodology to estimate recoverable amount; (cid:120) evaluating management’s impairment analysis based on current market prices; (cid:120) agreeing the current market prices used in the impairment assessment to market data and where appropriate, values achieved in the Group’s most recent sale of Permanent Water Rights; and (cid:120) assessing the appropriateness of the related disclosures included in Note 9 to the financial statements. Goodwill Agriculture Refer to Note 9 ‘Intangibles’ As at 30 September 2017 the Group’s Consolidated Statement of Financial Position includes Goodwill relating to Agriculture of $23.3 million. Management has assessed the recoverable amount of goodwill utilising a discounted cash flow model which incorporates significant judgement in respect of key assumptions such as discount rate, the terminal growth rate, commodity prices and forecast future cash flows. Our procedures included, but were not limited to: (cid:120) obtaining an understanding of the key controls associated with the preparation of the valuation model used to assess the recoverable amount of the Group’s goodwill relating to Agriculture: (cid:120) evaluating the ‘fair value less costs to sell’ discounted cash flow model developed by management to assess the recoverable amount of goodwill including assessing the following assumptions: (cid:131) the discount rate; (cid:131) the terminal growth rate; (cid:131) commodity prices; and (cid:131) forecast cash flows; (cid:120) testing on a sample basis the mathematical accuracy of the cash flow models and agreeing relevant data to Board approved budgets; (cid:120) assessing the historical accuracy of forecasting of the Group in relation to cash flows; (cid:120) performing a sensitivity analysis on key assumptions. 35 (cid:120) assessing the appropriateness of the disclosures included in Note 9 in the financial report. Change in Bearer Plants Accounting Policy Refer to Note 27 “Application of new and revised accounting standards” Walnut Orchards of $50.5 million are used by the business for the long-term production of walnuts. Pursuant to a change in Australian Accounting Standards relating to Bearer Plants walnut trees that make up the Group’s Walnut Orchards are now required to be treated as an item of Property, Plant and Equipment. This mandated change represents a change in the Group’s accounting policy for its Walnut Orchards and has been disclosed in note 27. As a result of the above change and the transition in the accounting treatment of walnut trees, management is required to exercise significant judgement in respect to key assumptions used, including: (cid:120) determining the remaining useful lives of walnut trees at the date of adoption of the new accounting standard; (cid:120) selecting the depreciation method to be applied based on the way in which the Group will consume the benefit embodied in the walnut tree; (cid:120) determining the point at which walnut trees are in a location and condition ready to produce commercial volumes of walnuts; and (cid:120) assessing the accounting treatment for ongoing expenditure to cultivate walnut trees. Our procedures included, but were not limited to: (cid:120) evaluating management’s methodologies and documented basis for key judgements used in developing key estimates of: (cid:131) useful lives of walnut trees at the date of transition to new accounting standard; (cid:131) expected pattern of consumption; (cid:131) the point in time at which walnut trees are in a location and condition ready to produce commercial volumes of walnuts; and (cid:131) accounting treatment for ongoing expenditure to cultivate walnut trees. (cid:120) reading external expert reports used by management to assist them develop key assumptions noted. (cid:120) agreeing the opening cost of walnut orchards transferred into property plant and equipment to prior year fair value less costs to sell value measurement. We also assessed the appropriateness of the disclosures included in Note 26 to the financial statements. Other Information (a) The auditor has obtained all of the other information prior to the date of the auditor’s report and has not identified a material misstatement of the other information. Directors’ Responsibilities for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the 36Auditor Reports continued 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 has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (cid:120) Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (cid:120) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. (cid:120) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. (cid:120) Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. (cid:120) Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. (cid:120) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. 37 We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 22 to 29 of the directors’ report for the 15 month period ended 30 September 2017. In our opinion, the Remuneration Report of Webster Limited, for the 15 month period ended 30 September 2017, 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. DELOITTE TOUCHE TOHMATSU J A Leotta Partner Chartered Accountants Sydney, 2 November 2017 Financial Statements 38 Consolidated statement of proﬁt or loss and other comprehensive income For the 15-month period ended 30 September 2017 15-months to 30 September 2017 $’000 12-months to 30 June 2016 $’000 Note 2(a) 2(c) 166,087 119,782 (136,318) (91,655) 29,769 2(b) 109,674 (3,552) (426) 28,127 56,182 (3,902) (671) (51,315) (51,473) (4,100) (7,976) (102) (6,182) (6,927) (258) 2(c) 2(d) (22,913) (96,450) 49,059 (81,554) 3 9,225 885 58,284 (80,669) 58,284 58,284 58,284 58,284 (80,669) (80,669) (80,669) (80,669) 15 15 16.44 16.44 (23.28) (23.28) Continuing Operations Revenue Cost of sales Gross proﬁt Other income Distribution expenses Marketing expenses Operational expenses Administration expenses Finance costs Other expenses Impairment loss Proﬁt/(loss) before income tax expense Income tax beneﬁt Net proﬁt/(loss) for the period from continuing operations Proﬁt/(loss) attributable to: Owners of the parent Total comprehensive income/(loss) attributable to: Owners of the parent Earnings/(loss) per share Basic (cents per share) Diluted (cents per share) Notes to the ﬁnancial statements are included on pages 43 to 84. 39 Consolidated statement of ﬁnancial position As at 30 September 2017 Current Assets Cash and cash equivalents Trade and other receivables Inventories Other assets Total current assets Non-Current Assets Trade and other receivables Property, plant and equipment Investments Intangibles – water Intangibles – goodwill Intangibles – other Total non-current assets Total assets Current Liabilities Trade and other payables Borrowings Current tax liability Provisions Other liability Total current liabilities Non-Current Liabilities Borrowings Net deferred tax liability Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings/(accumulated losses) Total equity Notes to the ﬁnancial statements are included on pages 43 to 84. 40 Note 20(a) 5 6 7 5 8 9 9 9 10 11 3 12 13 11 3 12 2017 $’000 2016 $’000 15,442 24,593 47,259 811 12,450 25,535 60,353 8,223 88,105 106,561 – 751 305,587 277,159 78 52 212,871 240,450 25,896 1,763 24,700 1,920 546,195 545,032 634,300 651,593 14,229 16,334 3,796 1,583 1,433 15,231 44,694 1,038 1,296 – 37,375 62,259 103,608 152,257 8,455 85 112,148 149,523 484,777 19,847 374 172,478 234,737 416,856 14 477,865 462,844 (1,380) 8,292 371 (46,359) 484,777 416,856 Consolidated statement of changes in equity For the 15-month period ended 30 September 2017 Share capital $’000 Cash ﬂow hedging reserve1 $’000 Equity settled employee beneﬁts reserve2 $’000 Retained earnings/ (accumulated losses) $’000 Attributable to the owners of the parent $’000 Non- controlling interests $’000 Total $’000 Balance at 1 July 2015 459,468 (396) 367 37,812 497,251 3,840 501,091 Proﬁt or loss for the year Other comprehensive income for the year, net of tax Total comprehensive income/(loss) for the year Payment of dividends – – – – Equity issued as consideration for acquisition of subsidiaries 3,376 Non Controlling interest divestiture Foreign Exchange Contracts closed Forfeiture of share based payments Recognition of share based payments(3) – – – – Balance at 30 June 2016 462,844 Proﬁt or loss for the 15-month period Other comprehensive income for the period, net of tax Total comprehensive income for the period Payment of dividends – – – – Equity issued as consideration for acquisition of subsidiaries 15,021 Recognition of share based payments(3) – Balance at 30 September 2017 477,865 – 566 566 – – – (170) – – – – – – – – – – – – – – – – – (197) 201 – – – – – (80,669) (80,669) – (80,669) – 566 – 566 (80,669) (80,103) – (80,103) (3,502) (3,502) 3,376 – – (3,502) 3,376 – – – – – – (3,840) (3,840) (170) (197) 201 – – – (170) (197) 201 371 (46,359) 416,856 – 416,856 58,284 58,284 – 58,284 – – – – 58,284 58,284 – 58,284 (3,508) (3,508) – 15,021 (1,751) (125) (1,876) – – – (3,508) 15,021 (1,876) (1,380) 8,292 484,777 – 484,777 1. The hedging reserve represents hedging gains or losses recognised on the effective portion of cash ﬂow hedges. The cumulative deferred gain or loss on the hedge is recognised in proﬁt or loss when the hedged transaction impacts the proﬁt or loss, or is included as a basis adjustment to the non-ﬁnancial hedged item, consistent with the applicable accounting policy. 2. Equity settled employee beneﬁts reserve relates to the Long Term Incentive Plan 3. The recognition of share based payments represents the 15-month period expense for all members of the Long Term Incentive Plan for the period whilst they were a participant. It also recognises the cost associated with the shares being allocated. Notes to the ﬁnancial statements are included on pages 43 to 84. 41 Consolidated statement of cash ﬂows For the 15-month period ended 30 September 2017 Cash Flows from Operating Activities Receipts from customers Payments to suppliers and employees Interest paid Income tax refund Net cash provided by operating activities Cash Flows from Investing Activities Interest Received Payment for biological assets, property, plant and equipment Payment for water entitlements Net cash outﬂow on acquisition of subsidiaries Proceeds from sale property, plant and equipment Proceeds from government grants – development works Proceeds from loans Proceeds from sale of investments Proceeds from sale water entitlements 15-months to 30 September 2017 $’000 12-months to 30 June 2016 $’000 Note 247,707 150,550 (168,014) (103,310) (7,976) 2,758 (6,927) – 20(e) 74,475 40,313 97 97 (64,849) (38,350) (9,754) (19,904) (10,000) 14,446 1,433 – – 77,786 – 5,983 1,140 2,207 53 6,970 Net cash provided by/(used) in investing activities 9,159 (41,804) Cash Flows from Financing Activities Proceeds from borrowings from others Repayment of borrowings from others Dividends paid Net cash used in ﬁnancing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at 30 September 2017 20(a) Notes to the ﬁnancial statements are included on pages 43 to 84. 279,772 (356,781) (3,633) (80,642) 2,992 12,450 15,442 217 – (3,502) (3,285) (4,776) 17,226 12,450 42 Notes to the Financial Statements For the 15-month period ended 30 September 2017 1. Basis of preparation This section sets out the basis upon which the Webster Group’s ﬁnancial statements are prepared as a whole. Signiﬁcant and other accounting policies that summarises the measurement basis used and are relevant to an understanding of the ﬁnancial statements are provided throughout the notes to the ﬁnancial statements. All other accounting policies are outlined throughout the relevant notes. Statement of Compliance: Webster Ltd is a limited company incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The general purpose ﬁnancial report is prepared in accordance with the Corporations Act 2001 and Applicable Accounting Standards and Interpretation, and complied with other requirements of the law. Webster Limited is a “for proﬁt entity”. The ﬁnancial report includes the consolidated ﬁnancial statements of Webster Ltd and its controlled entities Webster Group. Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures the ﬁnancial statements and notes of the company and the Webster Group comply with International Financial Reporting Standards. The ﬁnancial report has been prepared on the basis of historical cost, except for biological assets and inventories at realisable value and the revaluation of certain non-current assets and ﬁnancial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. Basis of consolidation: The consolidated ﬁnancial statements incorporate the ﬁnancial statements of Webster Limited and entities controlled by the company and its subsidiaries (referred to as ‘Webster Limited in these ﬁnancial statements). Control is achieved when Webster Limited: Has power over the investee; Is exposed, or has rights, to variable returns from our involvement with the investee; and Has the ability to use our power to affect its returns. The company has the power to govern the ﬁnancial and operating policies of an entity so as to obtain beneﬁts from its activities. The results of subsidiaries acquired or disposed of during the 15-month period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, we make adjustments to the ﬁnancial statements of subsidiaries to bring their accounting policies into line with those used by other members of Webster. We eliminate all intra-group transactions, balances, income and expenses in full on consolidation. In the separate ﬁnancial statements of Webster Limited, intra-group transactions (‘common control transactions’) are generally accounted for by reference to the existing (consolidated) book value of the items. Where the transaction value of common control transactions differs from their consolidated book value, we recognise the difference as a contribution by or distribution to equity participants by the transacting entities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, Webster Limited takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated ﬁnancial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 2 or value in use in AASB 136. In addition, for ﬁnancial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the signiﬁcance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. Webster Limited is a company of the kind referred to in Legislative Instrument 2016/191, dated 24 March 2016. The accounting policies adopted are consistent with those of the previous year, unless otherwise stated. 43 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 Comparative Information: Where applicable, comparative information has been reclassiﬁed in order to comply with current period disclosure requirements, the impact of which is not material to the ﬁnancial report. Rounding: Unless otherwise shown in the ﬁnancial statements, amounts have been rounded to the nearest tenth of a thousand dollars and are shown by $’000. Webster Limited is a company of the kind referred toiin the Australian Securities and Investment Commission (ASIC) Class Order 98/1418. Currency: Unless otherwise shown in the ﬁnancial statements, amounts are in Australian dollars, which is Webster’s Group functional currency. Critical accounting judgements and key sources of estimation uncertainty: In the application of the Group’s accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. We review the estimates and underlying assumptions on an ongoing basis. We recognise revisions to accounting estimates in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The following are key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next ﬁnancial year. 2. Proﬁt/(loss) from Operations Proﬁt from operations before income tax includes the following items of revenue and expense: 2017 $’000 2016 $’000 166,087 119,782 166,087 119,782 22,609 28,409 (1,059) 4,627 7,338 97 1,463 39,999 6,191 3,550 37,116 (15) 2,415 7,937 97 565 – 4,517 109,674 56,182 (a) Revenue Revenue from the sale of goods Total revenue (b) Other Income Gain on disposal of permanent water rights and PPE Increment in net market value of agricultural assets Net foreign exchange loss Net Income from sales of unused water allocations Revenue from the rendering of services lnterest revenue Rental revenue Income from sale of property compulsory acquired Other Total other income 44 (c) Expenses Cost of sales Interest on loans Dividends on instruments classiﬁed as ﬁnancial liabilities Other ﬁnance costs Total ﬁnance costs Depreciation of non-current assets Amortisation of non-current assets Total depreciation and amortisation Equity settled share based payments Post-employment beneﬁts Other employee beneﬁts Total employee beneﬁts expense (d) Signiﬁcant items Proﬁt/(loss) before tax beneﬁt includes the following speciﬁc expenses for which disclosure is relevant in explaining the ﬁnancial performance of Webster Ltd: Impairment of goodwill Impairment of property, plant and equipment Total impairment 2017 $’000 2016 $’000 136,318 6,674 18 1,284 7,976 14,293 156 14,449 213 1,722 23,187 25,122 91,655 6,533 32 362 6,927 7,505 483 7,988 201 1,512 15,914 17,627 – 96,450 22,913 22,913 – 96,450 The impairment of property, plant and equipment in the current period relates to assets to be decommissioned following an agreement entered with the Commonwealth of Australia in May 2017 in respect of its Lake Tandou operations. Recognition and measurement Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, stock rotation, price protection, rebates and other similar allowances. Sale of goods – Revenue from the sale of goods and disposal of other assets is recognised when the consolidated entity has transferred to the buyer the signiﬁcant risk and rewards of ownership of the goods. Rendering of services – Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. The stage of completion of the contract is determined as revenue from a time and material basis and is recognised at the contractual rates as labour hours are delivered and direct expenses are incurred. Dividend and interest revenue – Dividend revenue from investments is recognised when Webster Limited’s right to receive the payment has been established. Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the ﬁnancial asset. Borrowing Costs – Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of speciﬁc borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the proﬁt and loss in the period in which they are incurred. 45 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 Employee Beneﬁts – We recognise for beneﬁts accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably. We measure liabilities in respect of employee beneﬁts expected to be settled wholly within 12-months at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of employee beneﬁts which are not expected to be settled within 12-months, are measured as the present value of the estimated future cash outﬂows to be made by Webster Limited in respect of services provided by employees up to reporting date. Deﬁned contribution plans – Contributions to deﬁned contribution superannuation plans are expensed when incurred. Interest income and expense are accrued on a time basis, by reference to the principal outstanding and at the applicable effective interest rates. Funding costs are capitalised and subsequently amortised over the term of the facility. Depreciation of non-current assets includes the depreciation of biological assets (Walnut Trees) resulting from the adoption of accounting standard AASB 2014-6 as from July 1, 2016. 3. Income Taxes (a) Income tax recognised in proﬁt or loss Tax (expense)/beneﬁt comprises: Current tax (expense) Adjustments recognised in the current year in relation to the current tax of prior years Deferred tax (expense)/beneﬁt relating to the origination and reversal of temporary differences Total tax beneﬁt (relating to continuing operations) The prima facie income tax (expense)/beneﬁt on pre-tax accounting (loss)/proﬁt from operations reconciles to income tax beneﬁt in the ﬁnancial statements as follows: Proﬁt/(loss) before tax Income tax (expense)/beneﬁt calculated at 30% Non-deductible expenses Restatement of tax costs of assets Non assessable gain Utilisation of previously unrecognised losses Change in recognition of (deferred tax asset)/deferred tax liability Under/(over) provision of income tax in previous year Other 2017 $’000 2016 $’000 (3,796) 13,583 (562) 9,225 (1,038) – 1,923 885 49,060 (81,554) (14,718) 24,466 (6,963) (28,781) – 5,557 17,034 289 12,307 1,080 196 9,225 453 – (204) (606) – 885 The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period. 46 Opening balance $’000 Charged to income $’000 Charged to equity $’000 Acquisitions/ disposals $’000 Closing balance $’000 946 732 11,217 12,895 (14,351) – 1,285 (319) (2,217) (1,251) (1,908) (101) Opening balance $’000 Charged to income $’000 Charged to equity $’000 574 586 4,314 7,402 12,876 372 (586) (3,582) 3,815 19 – – – – – – – – – – – – – – – – – – – – – – – – – 2,231 413 9,000 11,644 (1,476) (17,735) – – – (1,476) (1,476) Other $’000 – – – – – – – – – – – (101) (2,263) – 20,099 (8,455) Closing balance $’000 946 – 732 11,217 12,895 (14,351) – (18,381) (10) (32,742) (19,847) Deferred tax assets and liabilities 2017 Deferred tax assets: Provisions Other Assets Unused tax losses Deferred tax liabilities: Property, plant & equipment Financial assets – non receivables 2016 Deferred tax assets: Provisions Financial assets – receivables Other Unused tax losses Deferred tax liabilities: Inventory & biological assets (18,381) 16,118 Other (10) 10 (32,742) 14,119 (19,847) 12,868 Property, plant & equipment (22,662) 8,311 Financial assets – non receivables Inventory & biological assets Other (46) (10,641) (898) (34,247) (21,371) 46 (7,740) 888 1,505 1,524 47 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 Recognition and measurement Webster Limited and its wholly-owned Australian resident entities became a tax-consolidated group with effect from 1 December 2010 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Webster Limited. The members of the tax-consolidated group are identiﬁed in note 17. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate ﬁnancial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate ﬁnancial statements of each entity and the tax values applying under tax consolidation. Any current tax liabilities, current assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax-consolidated group are recognised by the company (as head entity in the tax-consolidated group). The directors have implemented a tax sharing agreement and tax funding agreement between members of the consolidated group. On the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the Parent Entity and the other members of the tax-consolidated group in accordance with the arrangement. Under the terms of the tax funding arrangement, Webster Limited and each of the entities in the tax-consolidated group will agree to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. The tax sharing agreement will provide for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity should leave the tax-consolidated group. The effect of the tax sharing agreement is that each member’s liability for tax payable by the tax consolidated group is limited to the amount payable to the head entity under the tax funding arrangement. Current tax – Current tax is calculated by reference to the amount of income tax payable or recoverable in respect of the taxable proﬁt or tax loss for the period. We calculate using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred tax – We account for Deferred tax using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability to tax purposes. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufﬁcient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) that affects neither taxable income nor accounting proﬁt. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries except where Webster is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufﬁcient taxable proﬁts against which to utilise the beneﬁts of the temporary differences and they are expected to reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the periods when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reﬂects the tax consequences that would follow from the manner in which Webster Limited expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and Webster intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period –We recognise current and deferred tax as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case we take into account in the determination of goodwill or excess. 48 4. Remuneration of Auditors Auditor of the Parent Entity Audit or review of the ﬁnancial report (i) Taxation services Other services Auditor of the subsidiary companies Bengerang Limited (ii) AGW Funds Management Limited (ii) 2017 $ 2016 $ 425,000 382,000 286,017 47,985 – 62,215 711,017 492,200 – 48,000 22,600 14,000 The auditor of Webster Limited Group is Deloitte Touche Tohmatsu. Other services include services relating to general advice. (i) Fees for audit services in respect of the 15-month period ended 30 September 2017 are fees incurred in respect of the half year review and the audit for the 15-month period ended 30 September 2017. (ii) The 12-month to 30 June 2016 has been restated to include fees for audit services and other services relating to the prior year paid in the 15-month period ended to 30 September 2017. 49 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 5. Trade and Other Receivables Current Trade receivables Other receivables (Lake Tandou Agreement) Goods and services tax (GST) recoverable/(payable) The average credit period on sales of goods of the operating divisions within the company is 60 days. Non-Current Trade receivables Allowance for doubtful debts Ageing of past due but not impaired 61 – 90 days 91 – 120 days 121 + days Total Movement in allowance for doubtful debts Balance at the beginning of the year Impairment losses recognised on receivables Amounts written off as uncollectible Balance at the end of the year Ageing of impaired 91 – 120 days 121 + days Total 2017 $’000 2016 $’000 15,321 25,287 8,000 1,272 – 248 24,593 25,535 – – – 1,661 3,605 239 5,505 (2,213) (1,596) – 2,965 (2,214) 751 69 55 907 1,031 (2,084) (129) – (3,809) (2,213) 771 3,038 3,809 2,213 2,213 In determining the recoverability of a trade receivable, the consolidated entity considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the reporting date. The Group has recognised an allowance for doubtful debts against receivables from Managed Investment Scheme (MIS) growers. The non-current trade receivable balance relates to fees owing from MIS investors. Recognition and measurement Trade receivables – are recognised initially at fair value and subsequently measured at amortised cost. An allowance for doubtful debts is raised based on a review of outstanding balances at balance date. Bad debts are written off against the allowance account and any other change in the allowance account is recognised in the statement of proﬁt or loss and other comprehensive income. 50 6. Inventories Raw materials Raw materials at cost Walnut stocks Walnut stock at cost Cropping stocks Cropping stock at cost Cropping preparation – at cost Livestock (Biological asset) Livestock at fair value Water Water allocation Recognition and measurement 2017 $’000 2016 $’000 4,163 2,811 12,414 9,091 522 14,834 7,275 31,706 13,662 9,470 1,664 47,259 – 60,353 Inventories are valued at the lower of cost and net realisable value except for walnut and cotton stocks which are measured at fair value less estimated cost to sell at the point of harvest, and subsequently net realisable value under AASB 102 Inventories. We account for costs incurred in bringing each product to its present location and condition as follows: We value walnut stocks in accordance with AASB 141 Agriculture whereby the cost of the non-living (harvested)produce is deemed to be its fair value less cost to sell immediately after it becomes non-living. This valuation takes into account current walnut selling prices and current processing and selling costs. We value cotton stocks in accordance with AASB 141 Agriculture whereby the cost of the non-living (harvested produce is deemed to be its fair value less cost to sell immediately after it becomes non-living. This valuation takes into account current cotton selling prices and current processing and selling costs. We value livestock stock in accordance with AASB 141 Agriculture whereby its fair value less cost to sell is determined by an independent valuation at each reporting date. Costs associated with the preparation for future crop, pre biological transformation are held at cost. 7. Other Assets Current Prepayments Development Funding Due 2017 $’000 2016 $’000 811 – 811 500 7,723 8,223 The consolidated entity has entered into several On Farm Irrigation Efﬁciency Programs (OFIEP), with the Commonwealth of Australia and its representatives in relation to the OFIEP pursuant to which funding will be provided to improve the efﬁciency of irrigation systems on its properties in return for the permanent assignment of selected Water Access Entitlements. Development Funding Due, represents the value of outstanding development works to be undertaken equal to the value of the Permanent Water Entitlements assigned. 51 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 8. Property, Plant and Equipment Freehold land $’000 Land improvements $’000 Buildings $’000 Leasehold improve- ments at cost $’000 Plant and equipment at cost $’000 Capital work in progress $’000 Equipment under ﬁnance lease at cost $’000 Walnut Orchards $’000 Total $’000 Gross carrying amount Balance at 1 July 2015 88,392 48,392 29,020 306 59,234 5,060 2,225 – 232,629 Additions Disposals 10,383 7,829 (3,652) – 567 (963) 134 4,733 4,730 880 43,642 72,898 – (1,015) (4) (6) (708) – – – (6,342) – Reclassiﬁcation of assets 28,549 (28,109) 8,007 (440) (8,001) Balance at 30 June 2016 123,672 28,112 36,631 – 54,951 9,780 2,397 43,462 299,185 Accumulated depreciation/amortisation and impairment Balance at 1 July 2015 Depreciation expense Disposal Balance at 30 June 2016 Net book value – – – – (29) (825) (52) (13,299) (798) (1,188) – (5,519) – – 52 – (827) (2,013) – (18,818) – – – – (368) – (14,573) – – – – (7,505) 52 (368) – (22,026) As at 30 June 2015 88,392 48,363 28,195 254 45,935 5,060 1,857 – 218,056 As at 30 June 2016 123,672 27,285 34,618 – 36,133 9,780 2,029 43,642 277,159 Gross carrying amount Balance at 1 July 2016 123,672 28,112 36,631 Additions Disposals 11,975 3,310 810 (9,840) (509) (995) Impairment loss (3,044) (12,094) (5,722) Reclassiﬁcation of assets – 502 (982) – – – – – 54,977 9,780 2,397 43,642 299,211 19,729 35,128 – 9,411 80,363 (4,497) (2,161) (422) – (18,424) (475) (1,578) – – (22,913) 11,246 (10,368) (398) – – Balance at 30 September 2017 122,763 19,321 29,742 – 80,980 30,801 1,577 53,053 338,237 Accumulated depreciation/amortisation and impairment Balance at 1 July 2016 Disposals Depreciation expense Balance at 30 September 2017 Net book value – – – – (827) (2,013) 105 282 (1,105) (1,000) (1,827) (2,731) As at 30 June 2016 123,672 27,285 34,618 As at 30 September 2017 122,763 17,494 27,011 (18,844) 3,308 (9,256) (24,792) – – – – (368) – (22,052) – – 3,695 (407) (2,525) (14,293) (775) (2,525) (32,650) 36,133 9,780 2,029 43,642 277,159 56,188 30,801 802 50,528 305,587 – – – – – – 52 Finance lease assets are amortised on a straight-line basis over the estimated useful life of the asset. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic beneﬁts from the leased asset are consumed. Lease incentives – In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate beneﬁts of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic beneﬁts from the leased asset are consumed. Recognition and measurement Land improvements and buildings – After initial recognition the asset is carried at cost less accumulated depreciation and any accumulated impairment losses. Depreciation on buildings is charged to proﬁt or loss. Plant and equipment, leasehold improvements and equipment under ﬁnance lease – are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, we determine cost by discounting the amounts payable in the future to their present value as at the date of acquisition. Orchard – During the year Orchard Assets previously classiﬁed as Biological Assets have been reclassiﬁed as Plant and Equipment in accordance with Accounting Standard AASB 2014 effective from 1 July, 2016. Refer Note 26, Other accounting policies. Depreciation – is provided on property, plant and equipment, including freehold buildings but excluding land. We calculate depreciation on a straight-line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period. We use the following estimated useful lives in the calculation of depreciation: Land improvements (years) Buildings (years) Leasehold improvements (years) Plant and equipment (years) Orchards (years) 5-20 4-25 2-20 3-25 7-27 Leased assets – Leases are classiﬁed as ﬁnance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. We classify all other leases as operating leases. Lease payments are apportioned between ﬁnance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Webster’s general policy on borrowing costs. Webster Limited as lessee – Assets held under ﬁnance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a ﬁnance lease obligation. Webster Limited as lessor – Purchased assets where Webster Limited is a lessor under operating leases, are carried at cost and depreciated over their useful lives, which vary depending on the class of assets. Operating lease income is recognised on a straight-line basis over the period of the lease unless another systematic basis is more appropriate. Assets leased out under operating leases are included in property, plant and equipment. 53 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 9. Intangibles Net book value Balance at 1 July 2015 Amortisation expense Impairment Additions Disposals Goodwill $’000 Licences $’000 Contracts $’000 Permanent Water Rights $’000 Total $’000 121,150 100 1,944 231,741 354,935 – (96,450) – – – – – – (125) – – – – – (125) (96,450) 19,904 19,904 (11,195) (11,195) Balance at 30 June 2016 24,700 100 1,819 240,450 267,069 Amortisation expense Additions Disposals Transfers Balance at 30 September 2017 (a) Impairment test for goodwill – 2,565 – (1,369) 25,896 – – – – (156) – (156) – – – 17,141 19,706 (46,089) (46,089) 1,369 – 100 1,663 212,871 240,530 Goodwill amounts recognised arose from the purchase of Bengerang Ltd and Tandou Ltd. The goodwill has been allocated to the Agriculture cash-generating unit. Webster tests the recoverable amount of the goodwill at least annually or where there is an indication that the asset may be impaired (which is assessed at least each reporting date). The recoverable amount of the cash generating unit has been determined based on the fair value less costs to dispose which was derived using a discounted cash ﬂow model. Management judgement is required in these valuations to forecast future cash ﬂows and a suitable discount rate to calculate the present value of these future cash ﬂows. The ﬁrst ﬁve years represent ﬁnancial plans forecast by management with years six to ten applying average assumptions to ensure cash ﬂows in year 10 are sufﬁciently stable to apply the terminal value. These are: A post-tax annual discount rate of 8.9%; Annual growth rate of 2.5% Whilst the Agriculture CGU has a surplus the directors estimate that if EBITDA was to reduce by 2.5% from ﬁnancial year 2018 across all the forecast periods, it would result in the aggregate carrying amount of the CGU exceeding the recoverable amount by a range of $8 million to $10 million. (b) Licences Licences are measured at cost and tested for impairment on an annual basis. (c) Contracts Contracts are measured at cost and amortised on a straight-line basis over the term of the contract. (d) Permanent water rights The value of permanent water rights is an integral part of land and irrigation infrastructure required to grow both walnuts and annual crops. The fair value of permanent water rights used for impairment testing is supported by the tradeable market value, which at current market prices is higher than the carrying value. 54 If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in proﬁt or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss is subsequently reversed, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in proﬁt or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. Recognition and measurement Goodwill – we recognise goodwill arising in a business combination as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identiﬁable assets acquired and the liabilities assumed. If, after reassessment, the Group’s interest in the fair value of the acquiree’s identiﬁable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in proﬁt or loss as a bargain purchase gain. Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, we allocate goodwill to each of Webster’s cash generating units expected to beneﬁt from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount, the impairment loss is allocated ﬁrst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the proﬁt or loss on disposal. Contracts – We measure contracts at cost. After initial recognition the asset is carried at cost less accumulated amortisation and any accumulated impairment losses. We amortise contracts on a straight line basis over the term of the contract. Permanent water rights – we record permanent water rights at cost. Such rights have an indeﬁnite life, and are not depreciated. As an integral component of the land and irrigation infrastructure required to grow walnuts, the carrying value is tested annually for impairment. If events or changes in circumstances indicate impairment, the carrying value is adjusted to take account of any impairment losses. Licences – are measured at cost and tested for impairment on an annual basis. Impairment of Assets – At each reporting date, Webster Limited reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any indication exists, we estimate the recoverable amount of the asset in order to determine the extent of the impairment loss (if any). Where the assets do not generate cash ﬂows that are independent from other assets, we estimate the recoverable amount of the cash-generating unit to which the assets belong. We test goodwill for impairment annually and whenever there is an indication that the asset has been impaired. An impairment of goodwill is not subsequently reversed. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash ﬂows are discounted to their present value using a pre-tax discount rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset for which the estimate of future cash ﬂows have not been adjusted. 55 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 10. Trade and Other Payables Current Trade payables Goods and services tax (GST) payable 2017 $’000 2016 $’000 14,229 – 14,229 12,794 2,437 15,231 The average credit period on purchases is 30 days. Interest is charged on a creditor by creditor basis. The consolidated entity has ﬁnancial risk management policies in place to ensure that all payables are paid within the credit time frame. Recognition and measurement Trade and other payables – are recognised when the Webster Group becomes obliged to make future payments resulting from the purchase of goods and services. Payables are stated at their amortised cost. Note 2017 $’000 2016 $’000 (i) (ii) (i) (ii) (iii) 16,088 43,887 246 807 16,334 44,694 102,635 150,000 579 1,863 394 394 103,608 152,257 11. Borrowings (a) Current At amortised cost Secured Bank loans Finance lease liabilities (b) Non-Current At amortised cost Secured Bank loans Finance lease liabilities Unsecured Non-redeemable cumulative preference shares (i) Secured by mortgage over property and ﬂoating charge over assets, the value of which exceeds the loan. (ii) Secured by assets leased, the value of which exceeds the lease liability. (iii) 394,000 9% non-redeemable cumulative preference shares at a par value of $1.00 per share. 56 Credit facilities – At 30 September 2017 the Webster Group had a total of $220.0 million (30 June 2016: $250 million) committed credit facilities with external ﬁnancial institutions. These facilities have ﬁxed maturity dates as follows: $70 million in July 2018, $150 million in January 2022. As at 30 September 2017 $100.7 million of the facilities available to Webster was undrawn. Recognition and measurement Borrowings – are recorded initially at fair value, net of transactions costs. Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in proﬁt and loss over the period of the borrowing using the effective interest rate method. 12. Provisions Current Employee beneﬁts Quality Claims Non-Current Employee beneﬁts Movements in provisions Balance at 1 July 2016 Reductions arising from payments/other sacriﬁces of future economic beneﬁts Balance at 30 September 2017 Recognition and measurement Note 2017 $’000 2016 $’000 1,430 153 1,583 85 85 1,296 – 1,296 374 374 1,668 1,670 1,670 (2) 1,668 2,658 (988) 1,670 Provisions are recognised when the Group has a present obligation (legal or constructive) and, as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash ﬂows estimated to settle the present obligation, its carrying amount is the present value of those cash ﬂows. When some or all of the economic beneﬁts required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably. Employee beneﬁts provisions is made for beneﬁts accruing to employees in respect of wages and salaries, annual leave, long service leave and other employee obligations when it is probable that settlement will be required and they are capable of being reliably measured. Provisions made in respect of employee beneﬁts expected to be settled within 12-months are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. 57 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 13. Other Liabilities Current Commonwealth grants received 14. Issued Capital 2017 $’000 2016 $’000 1,433 1,433 – 361,245,163 (2016: 350,745,163) fully paid ordinary shares (i) 477,865 462,844 477,865 462,844 Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the company does not have a limited amount of authorised capital and issued shares do not have a par value. Note 2017 $’000 2016 $’000 (i) Fully paid ordinary share capital Balance at 1 July 2016 Shares issued 2017 2016 Note Number $’000 Number $’000 350,745,163 462,844 347,705,383 459,468 (ii) 10,500,000 15,021 3,039,780 3,376 Balance at 30 September 2017 361,245,163 477,865 350,745,163 462,844 Fully paid ordinary shares carry one vote per share and carry the right to dividends. (ii) Share capital issued during the 15-month period ended 30 September 2017 9,000,000 ordinary shares were issued during the 15-month period ended 30 September 2017 (March 2017) for the acquisition of shares in Motspur Park 1,500,000 ordinary shares were issued during the 15-month period ended 30 September 2017 for the Executive Long-Term Incentive Plan 58 15. Earnings/(loss) per share Basic earnings/(loss) per share Diluted earnings/(loss) per share (a) Basic earnings/(loss) per share Note (a) (b) Cents per share 2017 16.44 16.44 2016 (23.28) (23.28) The earnings and weighted average number of ordinary shares used in the calculation of basic earnings/(loss) per share are as follows: Earnings used in the calculation of basic earnings/(loss) per share Weighted average number of ordinary shares for the purposes of basic earnings/(loss) per share (b) Diluted earnings/(loss) per share 2017 $’000 2016 $’000 58,284 (80,669) 2017 2016 354,523,062 346,510,396 The earnings and weighted average number of ordinary and potential ordinary shares used in the calculation of diluted earnings/(loss) per share are as follows: Earnings used in the calculation of diluted earnings/(loss) per share Weighted average number of ordinary and potential ordinary shares for the purpose of diluted earnings/(loss) per share 2017 $’000 2016 $’000 58,284 (80,669) 2017 2016 354,523,062 346,510,396 59 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 16. Dividends (a) Dividends paid during the year Fully paid ordinary shares Final Dividend – FY 2016: paid October 2016, (FY2015 paid October 2015) 2017 2016 Cents per share Total $’000 Cents per share Total $’000 1.0 3,508 1.0 3,438 3,508 3,438 (b) Dividends proposed The Directors have declared a fully franked 3.0 cent per share dividend on ordinary shares for the 15-month period ended 30 September 2017. The Directors have declared an unfranked 9.0 cent per share dividend on cumulative preference shares paid on 24 March 2017. (c) Franking credits balance Franking account balance at 1 July 2016 Tax paid/(refunded) Dividends paid Net Franking credits available at 30 September 2017 Impact on franking account balance of dividends not recognised 2017 $’000 2016 $’000 1,281 940 (1,474) 747 – 2,908 (124) (1,503) 1,281 (1,503) 60 17. Subsidiaries Parent Entity Webster Limited Controlled Entities AGW Finance Pty Ltd AGW Funds Management Ltd AGW Walnuts Pty Ltd Bengerang Ltd Clements and Marshall Pty Ltd Clements Marshall Consolidated Limited Cygnet Canning Company Pty Ltd Motspur Park Pty Limited Tandou Ltd Walnuts Australia Pty Ltd Country of Incorporation Ownership Interest 2017 % 2016 % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 100 100 All the above entities are audited by Deloitte Touche Tohmatsu. All entities carry on business in Australia. These wholly-owned controlled entities have obtained approval under the ASIC Class Order granting relief from the requirement to produce audited ﬁnancial reports and are party to a cross guarantee. The Parent Entity has entered into a range of cross guarantees and registered mortgage debentures over assets and capital of Webster Limited, which include the above entities other than AGW Funds Management Ltd, under its banking arrangements with ANZ and Rabo Bank. 61 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 (a) Financial performance The following statement of ﬁnancial performance represents the consolidated ﬁnancial position of subsidiaries of Webster Ltd (Parent Entity) and are party to the deed of cross guarantee. AGW Funds Management Ltd is not a party to the cross guarantee. Revenue Cost of sales Gross Proﬁt Other income Distribution expenses Marketing expenses Operational expenses Administration expenses Finance costs Impairment loss Other expenses Proﬁt before income tax expense Income tax (expense)/beneﬁt Total comprehensive income for the period 2017 $’000 2016 $’000 166,087 119,782 (136,318) (91,655) 29,769 104,495 (3,552) (425) 28,127 56,406 (3,902) (671) (40,803) (50,154) (1,323) (147) (29,268) (56) (1,807) (1,750) – (323) 58,690 25,926 – (81) 58,690 25,845 62 (b) Financial position The following statement of ﬁnancial position represents the consolidated ﬁnancial position of subsidiaries of Webster Ltd (Parent Entity) and are party to the deed of cross guarantee. AGW Funds Management Ltd is not a party to the cross guarantee. Current Assets Cash and cash equivalents Trade and other receivables Inventories Other assets Total current assets Non-Current Assets Property, plant and equipment Investments Intangibles – water Total non-current assets Total Assets Current Liabilities Trade and other payables Borrowings Provisions Other liability Total current liabilities Non-Current Liabilities Borrowings Net deferred tax liability Provisions Intercompany Loans Total non-current liabilities Total Liabilities Net Assets Equity Issued capital Reserves Retained earnings Total Equity 63 2017 $’000 2016 $’000 6,489 22,613 47,259 249 2,441 18,012 60,353 8,223 76,610 89,029 299,366 277,313 78 52 170,745 199,693 470,189 477,058 546,799 566,087 11,944 13,199 246 1,021 1,433 807 817 – 14,644 14,823 579 7,740 64 1,863 7,740 339 123,259 220,901 131,642 230,843 146,286 245,666 400,513 320,421 240,200 236,069 42,909 117,404 27,347 57,005 400,513 320,421 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 18. Commitments for Expenditure (a) Lease commitments Non-cancellable operating leases Not longer than one year Longer than one year and not longer than ﬁve years Finance lease liabilities Not longer than one year Longer than one year and not longer than ﬁve years Minimum lease payments Less: Future ﬁnance charges Less: Goods and services tax (GST) Finance lease liabilities Present value of minimum future lease payments: Not longer than one year Longer than one year and not longer than ﬁve years (i) Operating lease commitments relate to properties and equipment with lease terms of up to 10 years. (ii) Finance lease liabilities relate to various plant and equipment with lease terms of up to 5 years. (b) Capital expenditure commitments Not longer than one year Longer than one year and not longer than ﬁve years Longer than ﬁve years 64 Note 2017 $’000 2016 $’000 (i) (ii) 187 95 282 273 608 881 (56) – 825 274 565 839 130 227 357 807 1,863 2,670 (139) (218) 2,313 699 1,614 2,313 56,891 16,721 – – – – 56,891 16,721 19. Segment Information (a) Segments Following the purchase of the Kooba Ag assets and the acquisition of Bengerang Ltd and Tandou Ltd, the Group manages and reports its business operations under two main reportable segments, Agriculture and Horticulture. The Agriculture segment products are primarily annual row crops including cotton, wheat and maize as well as livestock, where as the Horticulture segment pertains to tree crops which are currently walnuts. (b) Segment revenue and results The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment. Agriculture Horticulture Total for continuing operations Unallocated income/(expense) Corporate and directors costs Finance costs Segment Revenue and Other Income 2017 $’000 2016 $’000 193,590 136,108 82,256 39,856 275,846 175,964 Segment Results 2017 $’000 45,658 18,850 64,508 (85) (7,388) (7,976) 2016 $’000 (71,628) 2,202 (69,426) 97 (5,298) (6,927) Proﬁt/(loss) before tax (continuing operations) 49,059 (81,554) Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the current year (2016: nil). The accounting policies of the reportable segments are the same as the Group’s accounting policies. (c) Segments assets and liabilities Assets Agriculture Horticulture Total segment assets Unallocated Consolidated total assets Liabilities Agriculture Horticulture Total segment liabilities Unallocated Consolidated total liabilities 65 2017 $’000 2016 $’000 424,377 520,850 144,893 120,423 569,270 641,273 65,030 10,320 634,300 651,593 34,958 23,827 9,830 44,788 6,085 29,912 104,735 204,825 149,523 234,737 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 (d) Information on geographical areas The consolidated entity’s goods are sold in both domestic and international markets. The following table details the consolidated entities revenues from continuing operations and non-current assets by geographical location. Australia Europe Other 20. Notes to the Cash Flow Statement Revenue from Customers Non-Current Assets 2017 $’000 2016 $’000 2017 $’000 2016 $’000 236,582 162,832 546,195 545,032 30,889 10,909 8,375 2,223 – – – – 275,846 175,964 546,195 545,032 (a) Reconciliation of cash and cash equivalents For the purpose of the cash ﬂow statement, cash and cash equivalents include cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the 15-month period ended 30 September 2017 as shown in the cash ﬂow statement is reconciled to the related items in the balance sheet as follows: Cash and cash equivalents 2017 $’000 2016 $’000 15,442 15,442 12,450 12,450 (b) Non-cash ﬁnancing and investing activities During the 15-month period ended 30 September 2017, the consolidated entity did not acquire equipment via ﬁnance leases. (c) Financing facilities Secured bank loan rolling facilities – Amount used (i) – Amount unused (i) Amount used is gross of bank establishment fees. (d) Cash balances not available for use There were no cash balances unavailable for use at balance date. 66 119,272 193,887 100,728 56,113 220,000 250,000 (e) Reconciliation of proﬁt/(loss) for the period to net cash ﬂows from operating activities Proﬁt/(loss) for the period Depreciation of non-current assets Amortisation of non-current assets Adjustments relating to agricultural/biological assets Repayment of foreign exchange forward contract Net proﬁt relating to non-current assets Proﬁt on the sale of water rights Impairment of goodwill Impairment of property, plant and equipment Interest income received or receivable Movements in working capital Decrease/(increase) in receivables Decrease/(increase) in inventories Decrease/(increase) in other assets Increase/(decrease) in payables Increase/(decrease) in provisions Increase/(decrease) in tax balances Net cash ﬂows from/(used) in operating activities 2017 $’000 58,284 14,293 156 2016 $’000 (80,669) 7,505 483 (28,409) (49,039) 259 (2,172) 400 (52) (23,497) (3,498) – 96,450 22,913 (97) 1,694 41,503 (814) (1,002) 2,756 (11,392) 74,475 – (97) 10,770 70,138 1,729 (11,713) 50 (2,144) 40,313 67 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 21. Related Party Disclosures (a) Key management personnel compensation The aggregate compensation of the key management personnel of the consolidated entity and the company is set out below: Short-term employee beneﬁts Long-term employee beneﬁts Post-employment beneﬁts Termination beneﬁts 2017 $’000 2016 $’000 1,938 1,606 218 266 – 109 130 556 2,422 2,401 (b) Transactions with key management personnel During the ﬁnancial period where, Directors, their Director-related entities and executives purchased goods that were domestic or trivial in nature from the Company, they did so on the same terms and conditions available to other employees and customers. The Company entered into management agreements with Australian Food and Fibre Ltd (pursuant to the purchase of the Kooba Aggregation, Bengerang Ltd and Tandou Ltd) a company in which Mr Joe Robinson is an associate. The management agreement was for a 2 year term expiring 30 June 2017 with an annual fee of $550,000 plus bonus incentives based on performance to a maximum potential of $500,000. The agreement was renewed on July 1, 2017 with an annual fee of $300,000 plus bonus incentives based on performance to a maximum potential of $500,000. Australian Food and Fibre also incurred expenses on behalf of the Company and were reimbursed at cost for those expenses amounting to $854,760. The Company entered into an agreement with Corrigan Air, a company which Mr Christopher Corrigan and Mr Joseph Corrigan are an associate. The current agreement is for the provision of the use of light aircraft to transport management to its properties. The arrangement is charged at cost which amounted to $272,140 for the 15-month period ended 30 September, 2017. The Company supplied walnuts to Langdon Ingredients, Bakery Craft and The Natural Foods Trading Company, all companies which Mr Chris Langdon is an associate. The goods were supplied at arms length on normal commercial terms. The value of goods supplied was $326,893 for the 15-month period ended 30 September 2017. Other than the above, and contracts of employment, no other key management personnel have entered into a contract with the Company during the ﬁnancial period. (b) Equity interests in related parties Details of percentage of ordinary shares held in controlled entities are disclosed in note 17 to the ﬁnancial statements. (c) Parent Entity The Parent Entity in the consolidated entity is Webster Limited. The ultimate Australian Parent Entity is Webster Limited. There are no contingent liabilities. 68 22. Parent Entity Disclosures (a) Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Reserves Retained Earnings Total Equity (b) Financial Performance Loss for the period Other comprehensive income/(loss) Total comprehensive loss 23. Business Combinations (a) Subsidiaries acquired 2017 $’000 2016 $’000 10,644 9,268 76,006 295,135 86,650 304,403 22,833 47,497 (14,526) 162,539 8,307 210,036 237,615 226,725 (44,290) (26,976) (114,982) (105,382) 78,343 94,367 (4,270) (106,105) – – (4,207) (106,105) Principal Activity Date Acquired Proportion of shares acquired % Consideration transferred $’000 Motspur Park Pty Limited Horticulture 23/3/17 100 23,100 Motsur Park Pty Limited was acquired to continue the expansion of the Group’s activities in horticulture. (b) Consideration transferred Cash Equity Issued Total Acquisition related costs have been excluded from the consideration. 69 $’000 10,000 13,011 23,011 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 (c) Assets acquired and liabilities recognised at the date of acquisition Non-current assets Property Plant and Equipment Water Entitlements Non-current liability Deferred Tax Liability Total (d) Goodwill arising on acquisition Consideration Transferred Less Fair value of identiﬁable net assets Goodwill arising on consolidation $’000 5,251 7,846 8,864 (1,515) 20,446 $’000 23,011 (20,446) 2,565 Goodwill arose in the acquisition of Motspur Park Pty Limited because consideration paid for the combination effectively included amounts in relation to the beneﬁts of expected synergies and revenue growth. These beneﬁts are not recognised separately from goodwill because they do not meet the recognition criteria for identiﬁable intangible assets. None of the goodwill arising through acquisition is expected to be tax deductible. (e) Net Cash Outﬂow on acquisition of subsidiaries Consideration paid in cash Less: cash and cash equivalent balances acquired (f) Impact of acquisitions on the results of the Group $’000 10,000 – 10,000 Included in the proﬁt for the year is a loss of $380,000 attributable to the additional business generated by Motspur Park. There was no revenue attributable from orchard operations for the period to 30 September, 2017. There was revenue of $8,783,000 and proﬁt of $3,522,000 realised from the purchase of the walnuts by the Group from Motspur Park at the time of acquisition. Had these business combinations been effected at 1 July 2017, the Revenue of the Group from Orchard operations at Motspur Park would have been $8,783,000 and the proﬁt for the period for a ﬁnancial year would have been $3,233,000. The directors consider these proforma numbers to represent an approximate measure of the performance of the combined Group on an annualised, basis and to provide a reference point for comparison in future periods. In-determining the ‘pro-forma’ revenue and proﬁt of the Group had Motspur Park been acquired at the beginning of the current year, the directors have calculated depreciation of plant and equipment acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognised in the pre-acquisition ﬁnancial statements. 70 24. Financial Instruments (a) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 30 June 2016. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 11, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital as disclosed in note 14, reserves and retained proﬁts. The Group operates globally, primarily through subsidiary companies established in the markets in which the Group trades. None of the Group’s entities are subject to externally imposed capital requirements. Gearing ratio The Group’s Board of Directors reviews the capital structure on an annual basis. As a part of this review the committee considers the cost of capital and the risk associated with each class of capital. The Board of Directors of the Group in considering its overall capital structure takes into account the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt. The gearing ratio at year end was as follows: Note 2017 $’000 2016 $’000 (i) 119,942 196,951 (15,442) (12,450) 104,500 184,501 (ii) 484,777 418,018 21.5% 44% 2017 $’000 2016 $’000 15,442 12,450 24,593 26,287 14,229 15,231 119,942 196,951 Financial assets Debt Cash and cash equivalents Net debt Equity Net debt to equity ratio (i) Debt is deﬁned as long- and short-term borrowings, as detailed in note 11 (ii) Equity includes all capital and reserves. (b) Categories of ﬁnancial instruments Financial assets Cash and cash equivalents Loans and receivables Financial liabilities Trade and other payables Borrowings 71 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 (c) Financial risk management objectives The Group’s key management personnel co-ordinate access to domestic and international ﬁnancial markets and manage the ﬁnancial risks relating to the operations of the consolidated entity. The Group does not enter into or trade ﬁnancial instruments, including derivative ﬁnancial instruments, for speculative purposes. The Group’s activities expose it primarily to the ﬁnancial risks of changes in foreign currency exchange rates and interest rates. The Group enters into forward foreign exchange contracts to hedge the exchange rate risks arising on the export of produce to Europe and Asia. (d) Market risk The Group’s activities expose it primarily to the ﬁnancial risks of changes in foreign currency exchange rates. The Group enters into derivative ﬁnancial instruments to manage its exposure to foreign currency risk, including: Forward foreign exchange contracts to hedge the exchange rate risk arising on foreign sales or exports There has been no change to the Group’s exposure to market risks or the manner in which these risks are managed and measured. (e) Foreign currency risk management The Group undertakes certain transactions denominated in foreign currencies, hence exposure to exchange rate ﬂuctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts and currency swap agreements. The Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts Trade and other receivables Cash at bank Trade and other payables Net Exposure Trade and other receivables Cash at bank Trade and other payables Net Exposure USD $’000 7,047 4,304 (220) EUR $’000 4,063 503 – 11,131 4,566 2017 2016 GBP $’000 – – – – JPY $’000 – 55 – 55 USD $’000 EUR $’000 GBP $’000 JPY $’000 2,770 2,483 447 – 880 – 3,217 3,363 – 1 – 1 – 5 – 5 72 Forward foreign exchange contracts It is the policy of all entities in the Group to enter into forward foreign exchange contracts to cover up to 100% of the exposure generated by speciﬁc foreign currency payments and receipts. The Group also enters into forward foreign exchange contracts to manage the risk associated with anticipated horticultural export transactions. A progressive cover strategy is adopted from the time of budgeting through to harvest when up to 90% of exposure is hedged. There were no outstanding forward foreign exchange contracts at the reporting date. Foreign exchange sensitivity analysis The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian dollar against the relative currency. 10% is the sensitivity rate used as it represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes outstanding foreign currency derivatives and adjusts their fair value at the year end for a 10% change in foreign currency rates. A positive number indicates an increase in other equity where the Australian Dollar strengthens against the respective currency. For a weakening of the Australian Dollar against the respective currency. Other comprehensive income – Euro – United States Dollar Proﬁt & Loss – Euro – United States Dollar 2017 2016 +10% $’000 -10% $’000 +10% $’000 -10% $’000 – – – – – – – – – – – – 2017 2016 +10% $’000 -10% $’000 +10% $’000 -10% $’000 (590) (1,281) (1,871) 721 1,566 2,287 (306) (292) (598) 374 357 731 There were no outstanding forward foreign exchange contracts at the reporting date (2016: nil). (f) Interest rate risk management The company and the Group are exposed to interest rate risk as it borrows funds at both ﬁxed and ﬂoating interest rates. This risk is managed by maintaining an appropriate mix between ﬁxed and ﬂoating rate borrowings. The company and Group’s exposures to interest rates on ﬁnancial assets and ﬁnancial liabilities are detailed in the maturity proﬁle of ﬁnancial instruments section of this note. Interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the reporting date and the stipulated change taking place at the beginning of the ﬁnancial year and held constant throughout the reporting period. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates. 73 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 At reporting date, if interest rates had been 100 basis points higher or lower and all other variables were held constant, the impact on the Group is as follows: Financial assets Cash & cash equivalents Financial liabilities Borrowings Effect on Proﬁt and Loss 2017 2016 +1% -1% +1% -1% 193 (90) 534 (534) (1,500) 4,452 (1,970) 1,970 The following tables detail the Group’s expected maturity for its non-derivative ﬁnancial assets and contractual maturity for non-derivative ﬁnancial liabilities. Weighted Average Effective Rate % Less than 1 year $’000 1 to 5 years $’000 More than 5 years $’000 Total $’000 2017 Financial Assets Non-interest bearing Trade and other receivables Variable interest rate – 24,593 Cash and cash equivalents 0.47 15,442 – – – – – – – 24,593 15,442 40,035 – 14,229 40,035 – 14,229 2.97 16,088 102,635 3.51 9.00 246 35 579 142 – – 394 118,723 825 571 30,598 103,356 394 134,348 74 Financial Liabilities Non-interest bearing Trade and other payables Other ﬁnancial liabilities Variable interest rate Bank loans Fixed interest rate maturity Finance lease liabilities Cumulative non-redeemable preference shares* Weighted Average Effective Rate % Less than 1 year $’000 1 to 5 years $’000 More than 5 years $’000 Total $’000 2016 Financial Assets Non-interest bearing Trade and other receivables Variable interest rate – 25,535 752 Cash and cash equivalents 1.40 12,450 Financial Liabilities Non-interest bearing Trade and other payables Other ﬁnancial liabilities Variable interest rate Bank loans Variable interest rate Bank loans Fixed interest rate maturity Finance lease liability Cumulative non-redeemable preference shares* 37,985 15,231 620 – – – – 752 – – – – – – – – – 26,287 12,450 38,737 15,231 620 – 2.83 44,694 152,257 – 196,951 4.60 9.00 807 35 1,863 142 – 394 2,670 571 61,387 154,262 394 216,043 * Amounts disclosed in more than 5 years represent principal amounts. There is no expiration term. 75 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 (g) Credit risk management Credit Risk refers to the risk that a counterparty will default on its contractual obligations resulting in ﬁnancial loss to the Group. The Group undertakes credit check prior to dealing with any new counterparty and obtains sufﬁcient collateral or other security, where appropriate, as a means of mitigating the risk of ﬁnancial loss from defaults. The Group exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded are spread amongst approved counterparties. Trade accounts receivable consist of a large number of customers, spread across diverse industries and geographical locations. Ongoing credit evaluation is performed on the ﬁnancial condition of accounts receivable and, where appropriate, credit guarantee insurance cover is purchased. The Group does not have any signiﬁcant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds and derivative ﬁnancial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit rating agencies. The carrying amount of ﬁnancial instruments recorded in the ﬁnancial statements, net of any allowances for losses, represent the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained. (h) Fair value of ﬁnancial instruments The directors consider that the carrying amount of ﬁnancial assets and ﬁnancial liabilities recorded in the ﬁnancial statements approximate their fair value. The fair values of ﬁnancial assets and ﬁnancial liabilities are determined as follows: The fair value of ﬁnancial assets and ﬁnancial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices. The fair value of other ﬁnancial assets and ﬁnancial liabilities are determined in accordance with generally accepted pricing models based on discounted cash ﬂow analysis. The fair value of derivative instruments, included in hedging assets and liabilities, are calculated using quoted prices. Where such prices are not available use is made of discounted cash ﬂow analysis using the applicable forward rates and yield curves for the duration of the instruments. Some of the Group’s ﬁnancial assets and ﬁnancial liabilities are measured at fair value are grouped into Levels 1 to 3 based on the degree to which the fair value is observable. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). There were no ﬁnancial assets and ﬁnancial liabilities measured at fair value that were outstanding at the end of the reporting period. (i) Liquidity risk management The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continually monitoring forecasts and actual cash ﬂows and matching the maturity proﬁles of ﬁnancial assets and liabilities. The following tables detail the contractual maturity (including future interest) for non-derivative ﬁnancial liabilities. The tables have been drawn up based on the undiscounted cash ﬂows of liabilities based on the earliest date on which the Group earned or required to pay. The following table details the Group’s liquidity analysis for its derivative ﬁnancial instruments. The table has been drawn up based on the undiscounted contractual net cash inﬂows and outﬂows on derivative instruments that settle on a net basis, and the undiscounted gross inﬂows and outﬂows on those derivatives that require gross settlement. The following tables detail the Group’s expected maturity for its non-derivatived ﬁnancial assets and contractual maturity for non-derivative ﬁnancials. 76 Weighted Average Effective Rate % Less than 1 year $’000 1 to 5 years $’000 More than 5 years $’000 Total $’000 – 14,229 – – 14,229 2.97 18,322 111,975 – 130,297 2017 Financial Liabilities Non-interest bearing Trade and other payables Variable interest rate Bank loans Fixed interest rate maturity Finance lease liabilities Cumulative non-redeemable preference shares* 9.00 204 35 579 142 – 394 783 571 32,790 112,696 394 145,880 2016 Financial Liabilities Non-interest bearing Trade and other payables Other ﬁnancial liabilities Variable interest rate Bank loans Fixed interest rate maturity Finance lease liabilities Cumulative non-redeemable preference shares* Weighted Average Effective Rate % Less than 1 year $’000 1 to 5 years $’000 More than 5 years $’000 Total $’000 15,231 620 – – – – 15,231 620 – – 1.88 48,808 152,428 – 201,236 4.60 9.00 807 35 1,863 142 – 394 2,670 571 65,501 154,433 394 220,328 * Amounts disclosed in more than 5 years represent principal amounts. There is no expiration term. 77 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 Recognition and measurement Webster enters into a variety of derivative ﬁnancial instruments to manage our exposure to foreign exchange rate risks and interest rate risk, including forward foreign exchange contracts and interest rate swaps. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in proﬁt immediately, unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in proﬁt and loss depends on the nature of the hedge relationship. Webster designates certain derivatives as hedges of highly probable forecast transactions (cash ﬂow hedges). Cash flow hedge – The effective portion of changes in the fair value of derivatives that are designated and qualify as cash ﬂow hedges is deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in proﬁt and loss. Amounts deferred in equity are recycled in proﬁt and loss in the period when the hedged item is recognised in proﬁt or loss. However, when the forecast transaction that is hedged results in the recognition of a non-ﬁnancial asset or non-ﬁnancial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. We discontinue hedge accounting when Webster Limited revokes the hedging relationship. The hedge instrument expires or is sold, terminates, or exercised, or no longer qualiﬁes for hedge accounting. Any cumulative gain or loss at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in proﬁt and loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in proﬁt and loss. When the Group revokes the hedging relationship, the hedge instrument expires or is sold, terminated, or exercised, or no longer qualiﬁes for hedge accounting. Any cumulative gain or loss at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in proﬁt or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in proﬁt or loss. Derivatives that do not qualify for hedge accounting – Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in proﬁt and loss. 25. Events after the reporting period There have been no other matters or circumstances, other than that referred to in the ﬁnancial statements or notes thereto, that have arisen since 30 September 2017 that have signiﬁcantly affected, or may signiﬁcantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future ﬁnancial years. 26. Other accounting policies Cash and cash equivalents – Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insigniﬁcant risk of changes in value and have a maturity of three months or less at the date of acquisition. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. Biological assets – Walnut Trees are classiﬁed as Property Plant and Equipment and are valued in accordance with AASB 141 Agriculture. Up until 30 June 2016 the Biological Assets were valued in accordance with AASB 141 Biological Assets. The values of the Biological Assets at 30 June 2016 have been adopted as the value for Property Plan and Equipment from 1 July 2016. All further additions to the Walnut Orchards will be valued at cost and will commence depreciating from the year they bear their ﬁrst commercial crop. Growing Crop – We value the growing walnut crop in accordance with AASB 141 Agriculture. This valuation takes into account current selling prices and current growing, processing and selling costs. The calculated crop value is then discounted to take into account that it is only partly developed, and then further discounted by a suitable factor to take into account the agricultural risk until crop maturity. Where little biological transformation has occurred in the growing crop, cost is used as an estimate of fair value. The fair value of walnuts and cotton harvested during the period and recognised in revenue is determined as the fair value of walnuts and cotton after harvest and picking less estimated point of sale costs. The fair value of livestock at the reporting date has been determined by using an external valuation. 78 Financial Assets – Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value. Subsequent to initial recognition, investments in subsidiaries are measured at cost in the company ﬁnancial statements. Effective interest method – The effective interest method is a method of calculating the amortised cost of a ﬁnancial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the ﬁnancial asset or, where appropriate, a shorter period. We recognise income on an effective interest rate basis for debt instruments other than those ﬁnancial assets ‘at fair value through proﬁt or loss.’ Financial assets at fair value through proﬁt or loss –we classify ﬁnancial assets as ﬁnancial assets at fair value through proﬁt or loss where the ﬁnancial asset: has been acquired principally for the purpose of selling in the near future; is a part of an identiﬁed portfolio of ﬁnancial instruments that Webster manages together and has a recent actual pattern of short-term proﬁt- taking; or is a derivative that is not designated and effective as a hedging instrument. Financial assets at fair value through proﬁt or loss are stated at fair value, with any resultant gain or loss recognised in proﬁt or loss. The net gain or loss recognised in proﬁt or loss incorporates any dividend or interest earned on the ﬁnancial asset. We determine fair value in the manner described in note 24. Loans and receivables – Trade receivables, loans, and other receivables that have ﬁxed or determinable payments that are not quoted in an active market are classiﬁed as ‘loans and receivables.’ We record loans and receivables at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate. Impairment of ﬁnancial assets – Financial assets, other than those at fair value through proﬁt and loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the ﬁnancial asset the estimated future cash ﬂows of the investment have been impacted. For ﬁnancial assets carried at amortised cost, the amount of impairment is the difference between the asset’s carrying amount and the present value of estimated future cash ﬂows, discounted at the original effective interest rate. The carrying amount of the ﬁnancial asset is reduced by the impairment loss directly for all ﬁnancial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When the trade receivable is uncollectible, it is written off against the allowance account. We credit subsequent recoveries of amounts previously written off against the allowance account. Changes in the carrying amount of the allowance account are recognised in proﬁt and loss. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through proﬁt and loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. Financial Instruments – Debt and equity instruments – We classify debt and equity instruments as either liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. We record equity instruments issued by Webster as the proceeds received, net of direct issue costs. Financial guarantee contract liabilities – We measure ﬁnancial guarantee contract liabilities initially at their fair value and subsequently at the higher of: the amount of the obligation under the contract, as determined under AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’; and the amount initially recognised less, where appropriate, cumulative amortisation in accordance with revenue recognition policies described in note 1.5(b). Financial liabilities – We classify ﬁnancial liabilities as either ﬁnancial liabilities ‘at fair value through proﬁt or loss’ or other ﬁnancial liabilities. Other ﬁnancial liabilities – Other ﬁnancial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other ﬁnancial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. Foreign currency – In preparing the ﬁnancial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance date. 79 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in proﬁt or loss in the period in which they arise except for: exchange differences which relate to assets under construction for future productive use are included in the cost of those assets where they are regarded as an adjustment to interest costs on foreign currency borrowings; exchange differences on transactions entered into in order to hedge certain foreign currency risks (refer note 1(k)); and exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, are recognised in the foreign currency translation reserve and recognised in proﬁt or loss on disposal of the net investment. Goods and Services Tax – Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or for receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. We include cash ﬂows in the cash ﬂow statement on a gross basis. The GST component of cash ﬂows arising from investing and ﬁnancing activities which is recoverable from, or payable to, the taxation authority is classiﬁed as operating cash ﬂows. Government Grants – are assistance by the government in the form of transfers of resources to Webster Limited in return for past or future compliance with certain conditions relating to the operating activities. Government Grants include government assistance where there are no conditions speciﬁcally relating to the operating activities of the consolidated entity other than the requirement to operate in certain regions or industry sectors. We recognise government grants relating to income as income over the periods necessary to match them with related costs. Government Grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate ﬁnancial support to Webster with no future related costs are recognised as income of the period in which they become receivable. Government Grants whose primary condition is that Webster Limited should purchase, construct or otherwise acquire non-current assets are recognised as a reduction in the cost of non-current assets in the statement of ﬁnancial position. Business Combinations – We account for acquisitions of subsidiaries and businesses using the acquisition method. We measure the consideration for each acquisition at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by Webster Limited in exchange for control of the acquiree. We recognise acquisition-related costs in proﬁt or loss as incurred. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition date fair value. We adjust subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classiﬁed as an asset or liability are accounted for in accordance with relevant Standards. Changes in the fair value of contingent consideration classiﬁed as equity are not recognised. Where a business combination is achieved in stages, we measure Webster Limited’s previously held interests in the acquired entity to fair value at the acquisition date (that is the date Webster attains control) and recognise the resulting gain or loss, if any. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassiﬁed to proﬁt or loss, where such treatment would be appropriate if that interest were disposed of. The acquiree’s identiﬁable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 are recognised at their fair value at the acquisition date, except that: deferred tax assets or liabilities and liabilities or assets related to employee beneﬁt arrangements are recognised and measured in accordance with AASB 112 Income Taxes and AASB 119 Employee Beneﬁts respectively; liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment awards are measured in accordance with AASB 2 Share-based Payment; and assets (or disposal groups) that are classiﬁed as held for sale in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. 80 If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, Webster Limited reports provisional amounts for the items for which the accounting is incomplete. We adjust those provisional amounts during the measurement period (see below), or additional assets or liabilities are recognised, to reﬂect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year. Share-based payments – We measure equity-settled share-based payments to employees at the fair value of the equity instruments at the issue date. Fair value is measured by use of a Black Scholes pricing model taking into account the terms and conditions upon which the equity-settled share-based payments were granted. The fair value determined at the issue date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. We recognise the impact of the revision of the original estimates, if any, is recognised in proﬁt or loss such that the cumulative expense reﬂects the revised estimate, with a corresponding adjustment to the equity- settled employee beneﬁts reserve. Material prior period errors shall be retrospectively corrected in the ﬁrst ﬁnancial statements authorised for issue after their discovery by: (a) restating the comparative amounts for the prior period(s) presented in which the error occurred; or (b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented. The critical judgements and key assumptions that management has made that have the most signiﬁcant effect on the amounts recognised in the ﬁnancial statements are: Biological Assets (Walnut Orchards) Refer to note 8 Impairment of goodwill Refer to note 9 Carrying value of permanent water rights Refer to note 9 However, to the extent that it is impracticable to determine either: 27 Adoption of new and revised Accounting Standards Application of New and Revised Accounting Standards In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current reporting period. Other than AASB 2014-6 Amendments to Australian Accounting Standards – Agriculture: Bearer Plants, the adoption of the standard did not have a signiﬁcant impact on the consolidated ﬁnancial statements. New and revised Australian Accounting Standards in issue but not yet effective At the date of authorisation of the ﬁnancial statements, the Group has not applied the following new revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet effective. (a) the period-speciﬁc effects of an error on comparative information for one or more prior periods presented, the entity shall restate the opening balances of assets, liabilities and equity for the earliest period for which retrospective restatement is practicable (which may be the current period); or (b) the cumulative effect, at the beginning of the current period, of an error on all prior periods, the entity shall restate the comparative information to correct the error prospectively from the earliest date practicable. The correction of a prior period error is excluded from proﬁt or loss for the period in which the error is discovered. Any information presented about prior periods, including any historical summaries of ﬁnancial data, is restated as far back as is practicable. Critical accounting judgements and key sources of estimation uncertainty – In the application of the Group’s accounting policies, management is required to make judgement’s, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. 81 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 Standards and Interpretations in Issue Not Yet Adopted Standard/Interpretation Effective for Annual reporting periods beginning on or after Expected to be initially applied in the ﬁnancial year ending AASB 9 ‘ Financial Instruments’ and the relevant amending standards 1 January 2018 30 September 2019 AASB 15 Revenue from Contracts with Customers’ and AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15”, AASB 2015-8 ‘Amendments to Australian Accounting Standards – Effective date of AASB 15’ 1 January 2018 30 September 2019 AASB 16 ‘Leases’ 1 January 2019 30 September 2020 Impact of New and Revised Requirements Management is currently assessing the potential impact of the following standards: AASB 9 “Financial Instruments’ (December 2009, and three relevant amending standards AASB 9 applies to annual periods beginning on or after 1 January 2018. The directors of the Company anticipate that the application of AASB 9 in the future is not anticipated to have a material impact on amounts reported, based on current transactions, in respect of the Groups ﬁnancial assets and ﬁnancial liabilities, but will affect the disclosures made in the Groups consolidated ﬁnancial statements. AASB 15 Revenue form Contracts with Customers, AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15, AASB 2015-8 Amendments to Australian Accounting Standards – Effective Date of AASB 15, and AASB 2016-3 Amendments to Australian Accounting Standards – Clariﬁcations to AASB 15. AASB 15 applies to annual periods beginning on or after 1 January 2018. The directors of the Company anticipate that the application of AASB 15 in the future will not have a material impact on the amounts reported, based on current transactions, but will affect disclosures made in the Group’s consolidated ﬁnancial statements. AASB 16 ‘Leases’ AASB 16 provides a comprehensive model for identiﬁcation of lease arrangements and their treatment in the ﬁnancial statements of both lessees and lessors. The accounting model for lessees to recognise all leases on balance sheet, except for short term leases of low value assets AASB 16 applies to annual periods beginning on or after 1 January 2019. The directors of the Company anticipate that the application of AASB 16 in the future will not have a material impact on the amounts reported, based on current transactions, but will affect disclosures made in the Group’s consolidated ﬁnancial statements. Comparative Balances Effective from 1 July 2016 the Group has adopted AASB2014-6 Amendments to Australian Accounting Standards – Agriculture: Bearer Plants, and the consequential amendments to AASB 116 Property, Plant and Equipment and AASB 141 Agriculture. These amendments distinguish bearer plants (i.e. Walnut trees) from other biological assets (i.e. Walnuts). The updated standards consider bearer plants, which are solely used to grow produce over their productive lives, as similar to an item of machinery. Bearer plants are now accounted for under AASB 116. Agricultural produce growing on bearer plants remains within the scope of AASB 141 and continues to be measured at fair value less costs to sell. Comparative ﬁnancial information has been restated to reﬂect the above in accordance with relevant transitional requirements and AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The changes reﬂect: Reclassiﬁcation of the value of bearer plants from Agricultural assets to Property Plant and Equipment; Depreciation expense in connection with bearer plants; and The consequential tax impact of the above. 82 ASX Additional Information Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows: Number and distribution of shareholders Number and distribution of shareholders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total number of shareholders Total number of issued shares listed Number of shareholders holding less than a marketable parcel Voting Rights Ordinary Cummulative Preference 610 1,351 778 1,274 162 4,175 163 13 5 10 0 191 361,245,163 394,000 161 131 Articles 63 to 70 of the Company’s Constitution govern the voting rights of members. In summary, but without prejudice to the provisions of the Constitution, at any meeting of the Company every member present in person or by proxy or by power of attorney or by duly authorised representative shall on a show of hands be entitled to vote and, on a poll be entitled to one vote for each share held. Preference shareholders’ voting rights are limited to matters affecting rights of such shareholders. Substantial shareholders Number of Shares % Class of Shares AFF Properties No 1 Pty Ltd ATF The AFF Operations Trust 52,067,654 14.41 Ordinary Verolot Limited Mr Peter Robin Joy Belfort Investment Advisors Limited Mr Bevan David Cushing as trustee of the KD Cushing Family Trust 32,215,862 30,462,790 21,272,722 20,244,413 8.92 8.43 5.89 5.60 Ordinary Ordinary Ordinary Ordinary 83 Notes to the Financial Statements continued For the 15-month period ended 30 September 2017 Twenty largest shareholders Listed Ordinary Shares AFF Properties No 1 Pty Ltd atf The AFF Operations Trust Bell Potter Nominees Ltd Verolot Limited Mr Peter Robin Joy National Nominees Limited Belfort Investment Advisors Limited Sir Selwyn John Cushing and Mr Bevan David Cushing HSBC Custody Nominees (Australia) Limited Sandhurst Trustees Ltd Rel-Trust Management Limited The Tasmania Gifts Company Pty Ltd Eagle Securities Limited Rathvale Pty Limited J P Morgan Nominees Australia Limited Ashﬁeld Farm Limited Mr Andrew Roy Newbery Sisson Citicorp Nominees Pty Limited Xetrov Pty Limited Tasman Super Pty Limited Mr Derek Goullet Twenty largest shareholders Listed 9% Cumulative Preference Shares Mr David Calvert and Mrs Lorne Calvert Winpar Holdings Limited Mr Brian David Faulkner and Mrs Wendy Jean Faulkner Mr Brian David Faulkner Mr Leonard Wallace Boyd Mr James Gordon Maxwell Moffatt Meggsies Pty Ltd Mrs Frances Lorne Calvert Mrs June Lorimer Tutty Lesley Patricia Colman Wilcorp No 41 Pty Limited Dr Gordon Bradley Elkington Mary Graham Neild Mr David John Doberer and Mrs Joyce Lynette Carrey Anchorﬁeld Nominees Pty Ltd Ladon Pty Ltd Mrs Gwendoline Mabel Shelton Seven Bob Investments Pty Ltd Dr David Megirian Luaz Pty Limited 84 Number of Shares 52,067,654 37,140,914 32,215,862 30,462,790 28,969,212 21,272,722 11,431,136 9,215,184 5,742,401 5,559,529 5,133,699 4,933,469 4,314,336 3,282,437 3,253,748 3,170,000 2,716,899 2,636,267 1,947,836 1,563,732 Number of Shares 73,155 55,278 50,000 35,019 15,556 14,921 14,334 14,156 14,062 11,800 7,800 7,340 6,800 5,800 5,787 4,822 4,062 3,500 2,666 2,664 % 14.41 10.28 8.92 8.43 8.02 5.89 3.16 2.55 1.59 1.54 1.42 1.37 1.19 0.91 0.9 0.88 0.73 0.73 0.54 0.43 % 18.57 14.03 12.69 8.89 3.95 3.79 3.64 3.59 3.57 2.99 1.98 1.86 1.73 1.47 1.47 1.22 1.03 0.89 0.68 0.68 Contact us Board of Directors Chris Corrigan, Executive Chairman David Cushing, Non-Executive Director Chris Langdon, Non-Executive Director John Joseph Robinson, Non-Executive Director Joseph Corrigan, Alternate for Chris Corrigan Company Secretary Maurice Felizzi corporate@websterltd.com.au Registered Ofﬁce 148 Colinroobie Road Leeton NSW Australia 2705 ACN 009 476 000 T +61 2 6951 3000 F +61 2 6951 3001 www.websterltd.com.au corporate@websterltd.com.au Share Registry Computershare Investor Services Pty Ltd 152 Johnston Street Abbotsford VIC Australia 3067 Investor enquiries within Australia 1300 850 505 Investor enquiries outside Australia T +61 3 9415 4000 www.computershare.com web.queries@computershare.com Webster Limited shares are listed on the Australian Securities Exchange (ASX) 85

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