Walgreens Boots Alliance
Annual Report 2018

Plain-text annual report

Annual Report 2018 Balance and Diversity For personal use onlyCover image: Almond blossoms on Webster’s Sandy Valley Orchard For personal use onlyChairman’s review CEO and Managing Director’s review Where we operate Horticulture Agriculture Water Livestock Directors’ report Directors’ declaration Auditor’s independence declaration Financial statements Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the financial statements Auditor’s report ASX additional information 2 4 6 8 12 14 15 18 31 32 33 34 35 36 37 38 78 85 1 Webster Limited – Annual Report 2018For personal use onlyChairman’s review Webster reported a statutory net profit after tax for the 12-month period to 30 September 2018 of $27.1 million compared to $58.3 million for the prior 15-month period ended 30 September 2017. The underlying operating profit before tax was $38.9 million compared with $13.0 million for the 15 months of the prior period. During the year, directors and management have been engaged in a reassessment of our business strategy and direction, which has led to a rebalancing of our asset portfolio. Webster’s core business continues to be the ownership of water entitlements and the application of the annual water allocations from those entitlements to both permanent and annual irrigated crops. Our belief is that the conversion of the annual water allocations into horticultural and agricultural products, rather than selling the water allocations, will likely provide shareholders with a higher return on their funds in the medium to long term. During the year the Company has rebalanced the portfolio towards a greater concentration in permanent crops, both walnuts and almonds, and reduced its involvement somewhat in annual cropping in areas where the reliability of water flows are not as optimal as in other areas of the Company’s operations. Furthermore, the Company, by selling the northern properties at Garah and Bourke together with their water entitlements, has reduced the variability of climatic outcomes within our portfolio. While the northern properties did provide Webster with some geographical and climatic diversification, which will now be more concentrated, they also introduced a greater degree of variability than might be expected in the southern connected basin. Leeton Orchard 2 For personal use onlyDuring the course of the year, Webster has: Acquired a small almond operation in the Riverina with additional land for planting — Acquired additional land for development as orchards — Continued the development of our cropping properties at Darlington Point (Kooba) and Hay — Modestly increased its water entitlements in the southern connected basin — Sold its northern properties (Garah and Bourke) and their associated water entitlements. The combination of these transactions leaves Webster in a strong financial position with minimal gearing and an ability to develop and expand its asset portfolio. Looking ahead to next year, the sale of our northern properties, the sale of water entitlements and the decommissioning of irrigation at Tandou will have the result of reducing our potential annual planted cropping area from more than 17,000 hectares to around 10,000 hectares. In 2018/19 the area planted is 4,145 hectares. This decision was a function of the relatively dry conditions and significantly lower than normal water allocations. However, on the positive front, earnings in our horticultural activities next year should be improved by the continued maturity of both our Avondale and Sandy Valley orchards and hopefully a stronger return on yields in our mature walnut orchards in line with longer term expectations. As I mentioned last year, Webster is fortunate to have committed staff, with great industry knowledge, who have the ability to resolve issues that consistently and unexpectedly arise and contribute to the direction of the Company, and I thank them for their continuing efforts. Chris Corrigan Chairman 3 Webster Limited – Annual Report 2018For personal use onlyCEO and Managing Director’s review It is my pleasure to provide you with a report on the 2018 financial year, my first as the Chief Executive Officer (CEO) and Managing Director. The business delivered a strong underlying operating profit of $38.9 million for the 2018 financial year compared to an underlying operating profit of $13.0 million for the 15-month period ending 30 September 2017. Agriculture The cotton operations were a significant contributor to earnings with a total of 17,162 hectares planted, producing 201,748 bales at an average yield of 11.76 bales per hectare across all properties. Lint price achieved in 2018 was an average of $550 per bale. The 2018 cotton crop included the final planting at Lake Tandou. Horticulture The walnut orchards produced their second-largest yields in 2018, having produced 9,508 tonnes compared to 12,005 tonnes in 2017. Webster currently owns 1,642 hectares of mature producing orchards and 880 hectares of immature orchards. Webster also has 423 hectares of walnut orchards under management. Sale prices per tonne achieved in 2018 (combined in-shell and kernel sales) improved by 20% compared to 2017. We have been experiencing downward pressure on walnut pricing for the 2019 crop. I am also pleased to report that we are achieving higher domestic sales than previous years and with it, a greater demand for walnut kernel. This has the added benefit of greater utilisation of the investment made in our processing plant and reduced distribution costs. The initial harvest from the recently acquired almond orchard Sandy Valley was encouraging, having achieved 0.7 tonnes per hectare for the 3-year-old trees, which are still 3 years away from full maturity. The yield achieved was ahead of our initial expectations prior to acquiring the property. We look forward to this current year’s harvest as the trees progress towards full maturity. We have added extra almond orchards, having planted an additional 230 hectares this year. Livestock Our livestock business has been impacted by the drought gripping New South Wales (NSW) and South Australia (SA). Levels of livestock were reduced in 2018 to appropriate levels, commensurate with available feed. Cattle levels were reduced by 2,487 and sheep by 5,336 during the year. Sale prices achieved were reduced due to an oversupply of livestock in the market. The cost of feed had also markedly increased, impacting on the profitability of this business line. Capital investment Capital investment during the year totalled $94.2 million of which $23.4 million represented additional development of our properties, both in the Agriculture and the Horticulture divisions. A further $28.1 million was invested in acquisitions, being the almond orchard, other land suitable for horticultural development and an additional Dorper sheep property, Packsaddle. The successful installation of additional drying facilities at the Leeton walnut processing plant was undertaken this year. This will cater for the additional volume to be delivered from our Avondale orchard as it reaches maturity, but also capacity to ensure the quality of the walnuts are maintained at a high standard post-harvest. “Capital investment during the year totalled $94.2 million of which $23.4 million represented additional development of our properties, both in the Agriculture and the Horticulture divisions.” 4 For personal use onlyWebster is continuing the development program to maximise the properties’ earning potential. Development works on the irrigated property program for annual cropping will be completed in the 2019 financial year and a detailed expansion program has been established for our orchard developments. Water Water entitlements underpin our business and with the development and expansion program underway we continue to acquire appropriate water entitlements as required. During the 2018 financial year an additional $25.2 million of water entitlements were acquired. The Company also sold Barwon-Darling and Gwydir water entitlements, valued at $83 million, as a result of the sale of Bengerang Limited, post 30 September 2018. As reported, the sale of Bengerang Limited and its associated land and water entitlements settled on 7 November 2018 for $132.7 million. All sale proceeds were used to retire debt. The finance facilities remain unaltered and will be utilised to continue to grow our assets through development activity. This year’s performance could not have been achieved without the commitment and hard work of the management team, our colleagues and business partners. It has been an extremely busy year but certainly a rewarding one for all. Maurice Felizzi CEO and Managing Director Cotton picking on Kooba Station Webster Limited – Annual Report 2018 5 For personal use onlyTandou Livestock Packsaddle Station Livestock Kalabity Station Livestock Avondale Orchards Walnuts Tabbita Orchard Walnuts Sandy Valley Orchard Almonds South Farm, Glenmea and Pevensey Crop/livestock Bringagee and Benerembah Crop/livestock Leeton Orchard Walnuts Kooba Station Crop/livestock Swansea Orchard Walnuts 6 6 For personal use onlyWhere we operate Webster owns a balanced and diverse portfolio of land and water assets, located across NSW, SA and Tasmania. Our horticultural operations include over 3,000 hectares of walnut and almond orchards in the Riverina district of NSW and also in Tasmania. Following the sale of Bengerang, Webster now has a more geographically concentrated portfolio of cropping operations of around 17,160 hectares at Darlington Point (Kooba) and Hay in NSW. Webster’s livestock operations, including cattle and organic lamb, are located across more than 320,000 hectares of grazing land in NSW and eastern SA. Underpinning these operations is Webster’s investment in water which includes over 153,000 megalitres of water entitlement, primarily in the southern area of the Murray-Darling basin. 7 Webster Limited – Annual Report 2018For personal use onlyHorticulture The Horticulture business includes Webster’s walnut operations, a vertically integrated business that produces premium in-shell and kernel walnuts sourced from Company and managed orchards in NSW and Tasmania. Webster is Australia’s largest producer of premium walnuts, producing around 90% of Australia’s annual walnut crop. The Horticulture business also includes the Company’s recently acquired almond orchards in NSW. Walnut drying after harvest at our Leeton facility 8 For personal use onlyOverview of result Revenue for 2018 was $53.4 million compared to $82.3 million for the prior 15-month period. The Horticulture business reported a profit of $10.7 million compared to the prior 15-month result of $18.8 million. Yields of the 2018 walnut crop represented the second-largest yields achieved behind only the 2017 crop. Production achieved was 9,508 tonnes compared to 12,005 tonnes achieved in the prior year. The program to strengthen the trees at the Swansea orchard in Tasmania resulted in significantly improved performance, with the orchard delivering its highest ever production during 2018. Yields at the Riverina orchards were impacted at the start of the season by the re-occurrence of a non-pollination event which affected the later- flowering variety. Webster recorded strong domestic sales growth, with volumes increasing by 28% on the prior season. The business secured a major retail chain as a domestic customer which provides an additional domestic sales channel and also opens up further opportunities for sales in the Asian market through that customer. In the international market, sales into Europe reflect Webster’s robust systems and commitment to quality assurance in providing quality product to this market. Sales to the Italian market increased and there is strong interest from China and Japan for walnut products. Average selling prices were higher than the prior year. 9 Webster Limited – Annual Report 2018For personal use onlyExpansion and diversity Webster continues to expand and diversify its horticultural operations. This includes further investment in the acquisition of an almond orchard and development of additional walnut and almond orchards. In walnuts, the development of the Avondale West orchard in NSW will be completed in the 2018/19 financial year, concluding the 880-hectare development program. Webster also acquired a 150-hectare adjoining parcel of land at its Leeton orchard. Development of this land is expected to be completed in 2019. A 1,000-hectare property located near the existing Avondale property, called Avondale North, was also acquired in the 2018 financial year. During the year, Webster diversified its horticultural operations with the $16.8 million acquisition of the Sandy Valley almond orchard in NSW. Sandy Valley is close to the Company’s existing walnut operations at Tabbita in the Riverina. The property has 934.7 hectares of developable planting area, including 100 hectares of 4-year-old trees and 160 hectares of 3-year-old trees planted. The first harvest of approximately 70 tonnes at Sandy Valley was achieved at above-industry yields, which is encouraging for future crop potential and demonstrates the quality and excellent location of the orchard. The long-term fundamentals for almonds are positive and complementary to Webster’s existing walnut business and horticultural strategy. Sandy Valley almond orchard in full bloom 10 For personal use only Investment in orchards and processing facilities During the year, Webster continued to invest in its operations to maintain efficiency and ensure its walnuts are processed to global standards. This included the $4.8 million investment in constructing and commissioning a new coolroom and drying and hulling facilities at the Leeton cracking and processing facility. The investment is part of the Company’s ongoing commitment to ensuring product consistency and freshness for in-shell and kernel products for domestic and international markets. The Company also continued its investment in soil and tree health at its orchards, including a pruning program and new drainage facilities to improve orchard health and longevity. 11 Webster Limited – Annual Report 2018For personal use onlyAgriculture Webster’s agricultural business is focused on annual row crops, primarily cotton, and also wheat and maize as well as livestock. Webster’s focus is on long-term sustainable farming while maximising profitability from crop mix and yield, harnessing our extensive water portfolio. Following the divestment of the Bengerang assets, Webster’s geographic focus is on agricultural and grazing operations in the Riverina district, western NSW and SA. Holdings comprise of 17,160 irrigable hectares for annual crop farming operations and over 320,000 hectares of grazing land for its Dorper sheep business. Overview of result Revenue for 2018 was $153.7 million compared to $193.6 million for the prior 15-month period. The Agriculture division contribution for 2018 was $43.1 million compared to $45.7 million in the prior 15-month period. The division contribution in the prior period includes the one-off profit of $36.1 million, resulting from the Tandou sale of water entitlements, decommissioning revenue and impairment costs. Cotton The cotton business uses technology and expertise to maximise yield and water efficiency, with the capability to produce over 200,000 bales of cotton annually. In 2018, the business benefited from favourable weather and growing conditions in the southern region, Tandou and Bourke properties, which allowed for a significant planting of cotton in the current year. Average yield performance across the Company’s irrigated cotton growing properties was above expectations, with an average yield of 11.76 bales per hectare compared to an average of 9.47 bales per hectare for the prior period. The Company capitalised on the growing conditions during the season and managed to produce above- average yields, including the newly developed area. Webster’s continued investment on the development of channel structures and river pumps in the Riverina assisted in driving yields and efficient water use across the crop. Cotton lint average sale price of A$550 per bale (compared to A$480 in 2017) contributed to improved earnings. Webster announced in June 2017 that it had entered into an agreement with the Commonwealth Government to decommission the Lake Tandou irrigation system and sell water entitlements associated with the property, south of Menindee, NSW. As a result, the final cotton crop at Lake Tandou was harvested in the 2017/18 year and the site will now be used for expanding Webster’s organic Dorper lamb business. 12 For personal use only Development works The Company has continued its capital development works focused on expanding its operations across the Kooba and Hay properties, which is expected to be complete in 2019. In total, this represents a $78 million capital works investment by Webster. The Company has continued the development of its southern cotton properties which, following the sale of Bengerang, remain the primary geographic focus of Webster’s cotton growing area. In total, this program will add an additional 8,100 irrigable hectares and 30,000 megalitres of water storage. During the year a total of 2,734 hectares of new works were completed, including new irrigation land and supporting infrastructure to add growing capacity and increase productivity across the properties. The Company also completed works for 1,500 megalitres of new water storage. Upon receipt of regulatory approvals, future planned water storage construction will be undertaken in 2019. Further development works of 1,400 hectares are expected to be completed in 2020. In addition, the Company completed 1,860 hectares of re-levelling of land to improve future crop performance. Outlook A total of 4,145 hectares has been planted for the 2019 crop in the Kooba and Hay properties. This compares with a total planted area of 17,162 hectares in 2018. The reduction in planted area in 2019 not only reflects the sale of the northern properties and the decommissioning of Lake Tandou but also the significantly dryer climatic conditions forecast for the 2019 growing season. Most of the expected cotton crop has been forward sold at a price of A$565 per bale. Cotton growing on Bringagee Station Webster Limited – Annual Report 2018 13 For personal use only Water Webster owns a diverse portfolio of over 153,000 megalitres of water entitlements which underpins its horticultural and agricultural operations. It provides competitive advantage in providing crop diversity, maximising yield and developing further growth opportunities across our business. Webster continued to optimise its water entitlements to support its cropping businesses. The allocations which flow from these water entitlements are used to grow both permanent and annual crops as the water allocation allows. In 2018, Webster sold water entitlements associated with Bengerang assets in northern NSW, which totalled 61,346 megalitres. However, the Company continued to invest in its water portfolio and selectively add to its water assets with acquisitions of water entitlements in the southern connected basin. This consisted of a mix of high, general and supplementary entitlements in the Murrumbidgee catchment and also high and general security water in the Murray region. The Company’s water assets as at 30 September 2018 were 153,653 megalitres of entitlements held across a range of water systems and water products. While the book value of water intangibles is approximately $162 million, directors estimate the market value of the water portfolio to be greater than $350 million. Webster continues to focus on utilising its water assets to produce valuable horticultural and agricultural products which the Company believes are likely to provide shareholders with a higher return on their funds in the medium to long term. 14 For personal use onlyLivestock Webster’s livestock business includes cattle breeding in the Riverina district and a Dorper sheep breeding business in far western NSW and eastern SA. In April 2018, Webster acquired Packsaddle, a 50,000-hectare property located approximately 180 km north of Broken Hill that will allow for 5,000 breeding Dorper sheep. This property complements the Kalabity and Lake Tandou Dorper sheep operations. The extensive drought across Australia had a significant impact on Webster’s livestock business in 2018. The Company’s focus has been to ensure livestock levels are aligned to available feedstock and to adjust breeding operations to ensure the Company manages through the current conditions and remains well positioned for when conditions improve. Financial results were impacted by significantly higher grain fodder prices as a direct result of the drought conditions. In the Riverina district, cattle and calf levels were de-stocked to maintain a core breeding enterprise during the drought conditions. The business sold cattle earlier than usual to maintain an appropriate level of stock. The business remains focused on fertility and weight gain to ensure livestock is also appropriate for market specifications at its Kooba and Bringagee properties. In western NSW, the Tandou and Packsaddle properties recorded the driest ever conditions since weather records commenced in 1901. In response, the business concentrated on de-stocking Dorper breeding sheep numbers to align with carrying capacity. The business continues to focus on ecological outcomes including managing ground cover and rotational grazing. This has also included further investments in infrastructure improvements to fence off paddocks and control grazing. At Tandou, the business is building feedlot capacity for finishing lambs before sale. The Company’s current focus for the Dorper sheep business is to maintain an appropriate level of stock across Kalabity, Tandou and Packsaddle commensurate with available feed and current climate conditions. 15 Webster Limited – Annual Report 2018For personal use only16 For personal use only17 Webster Limited – Annual Report 2018For personal use onlyDirectors’ report For the year ended 30 September 2018 The directors of Webster Limited (the “Company” or “Webster” or the “Group”) (ACN 009 476 000) submit herewith the preliminary annual financial report of the Company for the year ended 30 September 2018. The registered office of Webster is 148 Colinroobie Road, Leeton, New South Wales 2705. In order to comply with the provisions of the Corporations Act 2001, the Directors’ report follows. 1. Directors The directors of Webster at any time during or since the end of the year are: Chris Corrigan – BEc (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 and the Chairman on 19 December 2017. 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. Directorships of other listed companies held during the last 3 years: Qube Logistics Holdings Limited – from March 2011 to June 2017 Hawthorn Resources Limited – from October 2017 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 retired from the Board on 30 April 2018. 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 and 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. Directorships of other listed companies held during the last 3 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 J Robinson retired from the Board on 7 November 2018. 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. David Fitzsimons – (Non-Executive Director) Mr David Fitzsimons was appointed Non-Executive Director on 30 April 2018. Mr Fitzsimons has over 30 years’ investment and finance experience and has been a director of several companies in the United Kingdom and Australia in the media, publishing and retail sectors. Ross Leslie Burling – (Non-Executive Director) Mr Ross Burling was appointed Non- Executive Director on 7 November 2018. Mr Burling is an Executive Director, shareholder and CEO of Stahmann Farms, the largest vertically integrated Pecan and Macadamia Food business in the southern hemisphere. Mr Burling joined the board of Stahmann Farms in February 2010 and has led the Company as its Chief Executive Officer since March 2013. Mr Burling has been in management leadership roles for over 25 years and is also a Director with Australian Certified Organic Limited, a member of the Gwydir Valley Irrigators Association, and a graduate of the AICD Company director’s course. Maurice Felizzi – BA Acc, CA AGIM (Executive Director) Mr Maurice Felizzi was appointed Executive Director on 30 April 2018. Mr Felizzi joined Webster as Chief Financial Officer and Company Secretary in April 2016 and was subsequently appointed as Chief Executive Officer in December 2017. Mr Felizzi is a member of CA Australia and the Institute of Chartered Secretaries and holds a Bachelor of Arts from the University of Canberra. 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 master’s 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. Directors’ shareholdings Directors’ shareholdings are disclosed on pages 28–29 of the Directors’ report. The only change in directors’ shareholdings between the end of the financial year and the date of this Directors’ report was Mr Robinson having sold all his shares, post year end. 18 For personal use only2. Company Secretary Mr Maurice Felizzi – BA Acc, CA AGIM Mr Felizzi joined the Group on 18 April 2016 and was appointed Company Secretary from 28 April 2016. He is a member of CA Australia, Institute of Chartered Secretaries and holds a Bachelor of Arts from the University of Canberra. 3. Principal activities The principal activities of the Group during the year was the production, processing and marketing of walnuts, cotton and other annual crops and livestock. 4. Review of operations The Group’s financial performance resulted in a net profit before tax for the year ended on 30 September 2018 of $38.9 million (15 months to 30 September 2017 profit $49.1 million). 5. Directors’ meetings The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during the year and the number of meetings attended by each director (while they were a director or committee member). During the year ended 30 September 2018, 9 Board meetings, 3 Audit and Risk Committee meetings and 1 Remuneration Committee meeting were held. 2018 Board of directors Audit and Risk Committee Remuneration Committee Directors C D Corrigan C D Langdon(i) B D Cushing J J Robinson(ii) D Fitzsimons(iii) M Felizzi (iv) Held Attended Held Attended Held Attended 9 4 9 9 5 5 9 3 9 5 5 5 3 2 3 3 1 – 3 2 3 2 1 – 1 – 1 – 1 – 1 – 1 – 1 – (i) Mr C D Langdon retired on 30 April 2018 (ii) Mr J J Robinson retired on 7 November 2018 (iii) Mr D Fitzsimons appointed on 30 April 2018 (iv) Mr M Felizzi appointed on 30 April 2018 6. Corporate governance In fulfilling its obligations and responsibilities to its various stakeholders, the Board of the Group 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 Group 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 Group’s current practices in each of the areas identified in the ASX guidelines. 6.1 Lay solid foundations for management and oversight The Group’s Board of Directors is responsible for the overall corporate governance of the Company 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 Group’s long-term success. The separation of responsibilities between the Board and management is clearly understood and respected. 19 Webster Limited – Annual Report 2018For personal use onlyDirectors’ report continued 6.2 Structure the Board to add value The Group 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 of one executive director and four 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 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 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 Board is also supported by the Remuneration Committee. This committee has its own charter and operating procedures and assists the Board in the discharge of its obligations in relation to remuneration matters of the Company. Audit and Risk Committee 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 Group. 20 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 year ended 30 September 2018. Current members of the Audit and Risk Committee are Messrs C D Corrigan, B D Cushing and D Fitzsimons. Details of the names and qualifications of those appointed to the Audit and Risk Committee are contained on page 18 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 Chairman, other directors, Chief Financial Officer and the external audit partner in charge of the Group’s audit attend meetings of this Committee by invitation. The Committee also meets from time to time with the external auditors, independent of management. Remuneration Committee The Board has established a Remuneration Committee. The remuneration charter provides that the Committee must consist of a minimum of 3 members and must have a majority of independent directors. Attendance at committee meetings by management is at the invitation of the committee. Directors who are non- committee members may attend any meeting of the committee. The committee reports to the Board on its consideration and recommendations. 6.3 Promote ethical and responsible decision-making As part of the Board’s continuing commitment to promote ethical and responsible decision-making, the Group 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. The Group 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 the Company’s 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 Group’s expense for the purpose of the proper performance of their duties. The Group is an equal opportunity employer and recruits personnel from a diverse range of backgrounds. Workplace diversity includes, but is not limited to, gender, age, race, ethnicity, disability and cultural background. The Group is committed to further enhancing the diversity and recognises that embracing diversity in its workforce contributes to the achievement of the Group’s objectives. For personal use onlyAlthough the Group has a rich diversity among its employees, the Board recognises the need to improve the diversity at senior executive and Board level. As at 30 September 2018, the Chair of AGW Funds Management Limited (a wholly owned subsidiary of Webster Limited that acts as the Responsible Entity for two Managed Investment Schemes) is female. The Group is an equal opportunity employer and the number of female employees comprise approximately 12% of senior executives, 16% of permanent employees and 45% of seasonal/casual employees. To further enhance the commitment to gender diversity, the Group has 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; and • 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 Chairman and Chief Executive Officer stated in writing to the Board that the Group’s financial reports present a true and fair view, in all material respects, of the Group’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 Group’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 The Group places considerable importance on accurate and effective communication with its existing and potential shareholders. The Group is committed to complying with the continuous disclosure obligations of the Corporations Act 2001 and the ASX Listing Rules. The Group has developed and adopted a continuous disclosure policy and procedure, which ensures all material matters concerning the Group are conveyed immediately and effectively. The Group 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 are released to the stock exchange through ASX On-Line. The Group 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 Group’s 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 The Group is committed in providing shareholders with comprehensive information about its activities, and in fulfilling its obligations to the broader market for continuous disclosure. The Group 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 Group’s website. A Half-Year Report incorporating abbreviated financial data and market commentary is also made available on the same basis. The Group 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, bears 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 Group’s Annual General Meeting is sent to shareholders, as well as being posted on the website and released to the ASX. The Group’s auditor attends the Annual General Meeting and is invited to answer relevant questions and make statements to the meeting. The directors attend 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 Group’s system of internal controls and monitors the operational and financial aspects of its activities through the Audit and Risk Committee. 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. 21 Webster Limited – Annual Report 2018For personal use onlyDirectors’ report continued The Group 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 Remuneration Committee is 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, fringe benefits) and short-term and long-term incentive schemes (including performance-related bonuses). 22 7.1 Remuneration policy The objective of the Group’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 2018 financial period. In the 2018 financial period, bonus payments of $635,488 have been paid to key management personnel (15 months to September 2017: $444,874). The program is applicable to key personnel that influence earnings. The STI Program is linked to the budget which aims to align 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 key performance indicators (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 that the recipient is still employed by the Company, if the value of the short-term incentive represents more than 40% of the employees’ total employment compensation (“TEC”) package. Long-term incentives On 27 August 2013, the Board adopted an Executive Long-Term Incentive Plan (ELTIP) to give 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 Group 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 based on 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 Group’s achievement against improvement in share price and hence shareholder value over the long term. For personal use onlyDetails of ELTIP shares granted/vested as compensation to key management personnel are shown in the table below. 30 September 2018 Executive D C Goullet Share rights issued 387,500 (ii) (iii) 193,750 193,750 200,000 200,000 250,000 250,000 250,000 250,000 250,000 250,000 350,000 350,000 M Felizzi B Barry G J Lok W Andreatta 200,000 200,000 3,775,000 Share rights vested Issue/ exercise price Issue date Vesting/ expiry date $0.86 $1.21 $1.21 $1.34 $1.34 $1.10 $1.10 $1.21 $1.21 $1.21 $1.21 $1.34 $1.34 $1.34 $1.34 Current period expense $0 05/09/2013 05/09/2017 21/09/2016 21/09/2019 $19,314 21/09/2016 21/09/2020 $16,261 25/09/2017 25/09/2020 $17,921 25/09/2017 25/09/2021 $15,164 30/05/2016 30/05/2019 $25,125 30/05/2016 30/05/2020 $21,114 21/09/2016 21/09/2019 $24,922 21/09/2016 21/09/2020 $20,982 21/09/2016 21/09/2019 $24,922 21/09/2016 21/09/2020 $20,982 25/09/2017 25/09/2020 $31,362 Total value granted (i) $79,728 $57,943 $65,089 $53,812 $60,698 $75,376 $84,513 $74,766 $83,986 $74,766 $83,986 $94,171 25/09/2017 25/09/2021 $26,537 $106,222 25/09/2017 25/09/2020 $17,921 25/09/2017 25/09/2021 $15,164 $53,812 $60,698 $297,691 $1,109,566 (i) The value of benefits granted under the ELTIP 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. (iii) The vesting date incremental value of the shares extended amounts to $14,484. 23 Webster Limited – Annual Report 2018For personal use onlyDirectors’ report continued 15 months to 30 September 2017 Executive D C Goullet M Felizzi B Barry G J Lok Share rights issued 387,500 (ii) (iii) 387,500 (ii) (iii) 193,750 193,750 200,000 200,000 250,000 250,000 250,000 250,000 250,000 250,000 350,000 350,000 W Andreatta 200,000 200,000 4,162,500 Share rights vested Issue/ exercise price Issue date Vesting/ expiry date $0.86 $0.86 $1.21 $1.21 $1.34 $1.34 $1.10 $1.10 $1.21 $1.21 $1.21 $1.21 $1.34 $1.34 $1.34 $1.34 Current period expense $4,284 05/09/2013 05/09/2016 05/09/2013 05/09/2017 $23,575 21/09/2016 21/09/2019 $19,791 21/09/2016 21/09/2020 $16,662 25/09/2017 25/09/2020 25/09/2017 25/09/2021 $245 $208 30/05/2016 30/05/2019 $31,458 30/05/2016 30/05/2020 $26,436 21/09/2016 21/09/2019 $25,536 21/09/2016 21/09/2020 $21,500 21/09/2016 21/09/2019 $25,536 21/09/2016 21/09/2020 $21,500 25/09/2017 25/09/2020 25/09/2017 25/09/2021 25/09/2017 25/09/2020 25/09/2017 25/09/2021 $430 $364 $245 $208 Total value granted (i) $70,079 $79,728 $57,943 $65,089 $53,812 $60,698 $75,376 $84,513 $74,766 $83,986 $74,766 $83,986 $94,171 $106,222 $53,812 $60,698 $217,978 $1,179,645 (i) The value of benefits granted under the ELTIP 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. (iii) The vesting date incremental value of the shares extended amounts to $14,484. 24 For personal use only7.3 Relationship between Company performance and shareholder wealth The following tables set out summary information about the Group’s earnings and movements in shareholder wealth for the five financial periods to 30 September 2018. Analysis of the figures shows that 2017 was affected by the sale of the water entitlements at Lake Tandou and 2016 year was affected by the impairment of goodwill. The 2015 year was affected by acquisition costs from the purchase of Bengerang Limited and takeover of Tandou Limited. The Group’s performance over the five financial periods has been reflected in an increase in the Company’s share price over the same period. 30 September 2018 ($’000) 15-month period to 30 September 2017 ($’000) 30 June 2016 ($’000) 30 June 2015 ($’000) 30 June 2014 ($’000) Revenue and other income Net profit/(loss) before tax Net profit/(loss) after tax 207,262 38,902 27,085 275,761 49,059 58,284 175,964 (81,554) (80,669) 77,503 8,568 5,759 65,650 11,977 8,328 30 September 2018 ($’000) 15-month period to 30 September 2017 ($’000) 30 June 2016 ($’000) 30 June 2015 ($’000) 30 June 2014 ($’000) Share price at start of year Share price at end of year Interim dividend Final dividend Basic earnings per share $1.30 $1.73 – 3.00 cps  7.60 cps  $1.12 $1.30 – 3.00 cps 16.66 cps $1.57 $1.12 – $0.86 $1.57 – 1.00 cps 1.00 cps (23.28) cps 3.70 cps $0.70 $0.86 1.50 cps 2.00 cps 6.21 cps 7.4 Key management personnel details The directors and other key management personnel of Webster Limited during or since the end of the year are as follows. Directors • C D Corrigan (Chairman) • B D Cushing (Non-Executive Director) • C D Langdon (Non-Executive Director) – retired 30 April 2018 • J J Robinson (Non-Executive Director) – retired 7 November 2018 • D Fitzsimons (Non-Executive Director) – appointed 30 April 2018 • R Burling (Non-Executive Director) – appointed 7 November 2018 • M Felizzi (Executive Director) – appointed 30 April 2018 Executives • M Felizzi (Chief Executive 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) • W Andreatta (Development Manager) 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 Webster Limited – Annual Report 2018For personal use onlyDirectors’ report continued 7.5 Remuneration details of key management personnel The following tables disclose compensation of key management personnel of the Group. The term “key management personnel” refers to those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. 2018 Short-term Post employment Termin- ation Share- based amounts Total Remun- eration linked to perform- ance Fixed remun- eration Key management personnel Salary and fees Bonus paid Bonus deferred Non- monetary Super ELTIP(i) Non-executive directors C D Corrigan 105,010 B D Cushing 70,000 C D Langdon(ii) 49,184 J J Robinson 70,000 D Fitzsimons(iii) 32,083 – – – – – – – – – – 8,960 7,601 8,960 6,652 5,227 – 8,960 6,652 3,733 3,049 Executive director and executive key management personnel M Felizzi(iv) 378,971 105,097 105,097 8,960 20,179 B Barry 210,502 53,438 53,438 28,460 19,375 D C Goullet 240,509 74,518 – 28,460 20,179 G J Lok 262,068 65,700 65,700 8,960 21,055 W Andreatta 226,217 56,250 56,250 8,960 – Total 1,644,544 355,003 280,485 119,640 104,742 – – – – – – – – – – – – – – – – 121,571 100% 85,612 100% 54,411 100% 85,612 100% 38,865 100% 92,143 710,447 57% 45,904 411,117 63% 68,660 432,326 67% 57,899 481,382 61% 33,085 380,762 62% 297,691 2,802,105 – – – – – 43% 37% 33% 39% 38% (i) The value of the ELTIP benefits granted to key management personnel as part of their remuneration is calculated as at the grant 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 grant date value on a straight-line basis over the period from grant date to vesting date. (ii) Mr C D Langdon retired on 30 April 2018. (iii) Mr D Fitzsimons appointed on 30 April 2018. (iv) Mr M Felizzi appointed on 30 April 2018. 26 For personal use only15 months to September 2017 Key management personnel Directors C D Corrigan B D Cushing R J Roberts(ii) C D Langdon J J Robinson Executives B Barry M Felizzi Short-term Post employment Termin- ation Share- based amounts Total Remun- eration linked to perform- ance Fixed remun- eration Salary and fees Bonus paid Bonus deferred Non- monetary Super ELTIP(i) 87,500 87,500 52,500 96,250 87,500 – – – – – – – – – – 11,936 8,315 11,936 8,315 7,162 4,988 11,936 9,144 11,936 8,315 267,176 53,750 53,750 36,311 24,902 419,224 87,500 87,500 11,936 25,006 D C Goullet 289,480 90,619 71,755 36,311 28,052 G J Lok(iii) W Andreatta(iv) 46,570 59,550 – – – – 2,387 4,424 2,387 – Total 1,493,250 231,869 213,005 144,238 121,461 – – – – – – – – – – – – – – – – 107,751 100% 107,751 100% 64,650 100% 117,330 100% 107,751 100% 47,036 482,925 68% 104,930 736,096 62% 64,765 580,982 61% 794 453 54,175 99% 62,390 99% 217,978 2,421,801 – – – – – 32% 38% 39% 1% 1% (i) The value of the ELTIP benefits granted to key management personnel as part of their remuneration is calculated as at the grant 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 grant date value on a straight-line basis over the period from grant date to vesting date. (ii) Mr R J Roberts retired on 31 March 2017. (iii) Mr G J Lok appointed on 1 July 2017. (iv) Mr W Andreatta appointed on 1 July 2017. How the Group’s performance was assessed for the 2018 financial year The individual KPIs and financial year 2018 achievements as determined by the Remuneration Committee for the executive key management personnel (KMP) are provided in the following table. Strategic objective Description of measure Weighting Actual performance achievement Financial Operational Underlying earnings before interest and taxes (EBIT) target for the Group and division Achievement of established operational strategies 60% 120% 40% Varied: Dependant on individual performance. 27% to 82.5% of applicable weighting was achieved. Commentary on performance The full-year underlying EBIT result of $46.2 million exceeded budget by greater than 110%. Each KMP were assigned strategies pertinent to their business line. Assessment was made based on measurable outcomes. The STI measures selected (financial and operational) are designed to align individual performance to the achievement of the Company’s strategy and the increase in shareholder value. 27 Webster Limited – Annual Report 2018For personal use onlyDirectors’ report continued 7.6 Transactions with key management personnel During the financial year, where directors, their director-related entities and executives purchased goods, the purchases were domestic or trivial in nature, from the Group on the same terms and conditions available to other employees and customers. The Group entered into management agreements with Australian Food and Fibre Ltd (“AFF”) (pursuant to the purchase of the Kooba Aggregation, Bengerang Ltd and Tandou Ltd), a company in which Mr Joe Robinson is an associate. The agreement was renewed on 1 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. During the financial year ended 30 September 2018 management fees of $275,000 was paid to AFF. A further management agreement was entered into with AFF for the management of the Tandou operations for the 2018 crops only. The value of the management services was $200,000 with a bonus potential of $2,000,000 based on various performance achievements. During the financial year, the management fees and bonus were paid in accordance with the agreement. For the management of the Tandou operations, AFF also incurred expenses on behalf of the Company and were reimbursed at cost for those expenses amounting to $2,191,131, the majority of this expenditure related to harvesting costs. The Company entered into an agreement with Air Corrigan, a company which Mr Chris 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 $507,371 for the year ended 30 September 2018. The Company supplied walnuts to Langdon Ingredients, Bakery Craft and The Natural Foods Trading Company, all companies in which Mr Chris Langdon is an associate. The goods were supplied at arm’s length on normal commercial terms. The value of goods supplied was $733,808 for the year ended 30 September 2018. 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 disclose details and movements in equity holdings of key management personnel of the Group. 2018 Number of ordinary shares (ORD) held directly, indirectly or beneficially Directors C D Corrigan B D Cushing C D Langdon(i) J J Robinson D Fitzsimons(ii) Executives M Felizzi D C Goullet B Barry G J Lok W Andreatta Type ORD ORD ORD ORD ORD ORD ORD ORD ORD ORD Balance at 1/10/2017 Received on exercise of options Share rights ELTIP Net other change Balance at 30/9/2018 45,132,434 20,244,413 1,444 52,702,351 38,561,181 156,641,823 1,000,000 1,563,732 500,000 700,000 400,000 4,163,732 – – – – – – – – – – – – – – – – – – – – – – – – – – – 45,132,434 20,244,413 1,444 12,616,803 65,319,154 – 38,561,181 12,616,803 169,258,626 – – – – – – 1,000,000 1,563,732 500,000 700,000 400,000 4,163,732 (i) Closing balance for C Langdon is at the respective retirement date (30 April 2018). (ii) Opening balance for D Fitzsimons is at the date of appointment (30 April 2018). 28 For personal use only2017 Number of ordinary shares (ORD) held directly, indirectly or beneficially Directors C D Corrigan B D Cushing R J Roberts(i) C D Langdon J J Robinson Executives M Felizzi D C Goullet B Barry G J Lok W Andreatta Type ORD ORD ORD ORD ORD ORD ORD ORD ORD ORD Balance at 1/7/2016 Received on exercise of options Share rights ELTIP Net other change Balance at 30/9/2017 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. 8. Issue of shares No ordinary shares were issued during the year ended on 30 September 2018. 9. Share options No shares of any controlled entity were issued during the year ended on 30 September 2018 by the exercise of any options. 10. Dividends During the year, directors declared and/or paid the following dividends. • Dividends of 9.0 cents per share on the cumulative non-redeeming preference shares were paid on 27 June 2018. • Dividends of 3.0 cents per ordinary share, fully franked, were declared in regard to year ended 30 September 2018 to be paid on 21 December 2018. 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 Group during the period. 12. Subsequent events The Group entered into a sale of one of its subsidiaries, Bengerang Pty Limited, to AFF Water Pty Limited, a related party, as trustee for AFF Water Trust for $132.7 million. On 31 October 2018, at an Extraordinary General Meeting, the shareholders voted in favour of the sale of Bengerang Pty Limited and this transaction was completed on 7 November 2018. The assets and liabilities of the Company are classified as held for sale as at 30 September 2018 in the Consolidated statement of financial position. 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 Group, the results of those operations or the state of affairs of the Group in subsequent financial years. 29 Webster Limited – Annual Report 2018For personal use onlyDirectors’ report continued 13. Likely developments 16. Non-audit services Likely developments in the Group’s operations known at the date of this report have been covered elsewhere within this report. 14. Indemnification and insurance of officers and auditor During the year, 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. To the extent permitted by law, Webster Limited has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims made by third parties from the audit. The indemnity does not extend to any liability resulting from negligent, wrongful or wilful acts or omissions by Ernst & Young. No payment has been made to indemnify Ernst & Young during or since the end of the financial year. 15. Environmental regulations The 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. The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are important. Amounts paid or payable by the Group to the auditor, Ernst and Young, for non-audit services during the year were $98,421. The Board of Directors has considered this position and in accordance with the advice received from the Audit and Risk Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non- audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor; • the non-audit services provided do not undermine the general principles relating to auditor’s independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management decision-making capacity for the group, acting as an advocate of the group or jointly sharing the risks and rewards. The lead auditor’s independence declaration is set out on page 32 of the Directors’ report for the financial year ended 30 September 2018. 17. Rounding off of amounts The Group is of a 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 Directors’ 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 Chairman Sydney, 4 December 2018 30 For personal use onlyDirectors’ declaration The directors declare that: (a) in the directors’ opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; (b) in the directors’ opinion, the attached consolidated 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 consolidated 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 Group; 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 Australian Securities and Investments Commission (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 2016/785 applies, as detailed in note 18 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 Chairman Sydney, 4 December 2018 31 Webster Limited – Annual Report 2018For personal use onlyAuditor’s independence declaration Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Auditor’s Independence Declaration to the Directors of Webster Limited As lead auditor for the audit of Webster Limited for the financial year ended 30 September 2018, I declare to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Webster Limited and the entities it controlled during the financial year. Ernst & Young Gregory J Logue Partner Sydney, 4 December 2018 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 32 For personal use only Financial statements 33 Webster Limited – Annual Report 2018For personal use onlyConsolidated statement of profit or loss and other comprehensive income For the year ended 30 September 2018 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 before income tax expense Income tax (expense)/benefit Net profit for the year/period from continuing operations Note 2018 ($’000) 15 months to 30 September 2017 ($’000) 2(a) 2(c) 2(b) 2(c) 2(d) 3 145,263 166,087 (123,883) (136,318) 21,380 61,999 (3,380) (395) 29,769 109,674 (3,552) (426) (29,784) (51,315) (3,225) (7,457) (236) – 38,902 (11,817) 27,085 (4,100) (7,976) (102) (22,913) 49,059 9,225 58,284 Total comprehensive income for the year/period 27,085 58,284 Profit attributable to: Owners of the parent Total comprehensive income attributable to: Owners of the parent Earnings per share Basic (cents per share) Diluted (cents per share) 27,085 27,085 58,284 58,284 27,085 27,085 58,284 58,284 16 16 7.60 7.57 16.66 16.44 The above Consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 34 For personal use onlyConsolidated statement of financial position As at 30 September 2018 Current assets Cash and cash equivalents Trade and other receivables Inventories Other assets Assets classified as held for sale Total current assets Non-current assets Property, plant and equipment Investments Intangibles – water Intangibles – goodwill Intangibles – other Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Current tax liability Provisions Other liability Liabilities directly associated with assets classified as held for sale Total current liabilities Non-current liabilities Borrowings Net deferred tax liability Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity Note 21(a) 5 6 7 14 8 9 9 9 10 11 12 13 14 11 3 12 2018 ($’000) 2017 ($’000) 11,008 17,735 80,361 218 109,322 133,772 15,442 24,593 47,259 811 88,105 – 243,094 88,105 327,773 305,587 91 78 161,952 212,871 25,896 1,638 25,896 1,763 517,350 546,195 760,444 634,300 19,555 163,844 3,120 2,237 7,090 14,229 16,334 3,796 1,583 1,433 195,846 37,375 2,905 – 198,751 37,375 46,743 13,333 133 103,608 8,455 85 60,209 112,148 258,960 149,523 501,484 484,777 15 477,865 477,865 (921) 24,540 (1,380) 8,292 501,484 484,777 The above Consolidated statement of financial position should be read in conjunction with the accompanying notes. 35 Webster Limited – Annual Report 2018For personal use onlyConsolidated statement of changes in equity For the year ended 30 September 2018 Balance at 1 July 2016 Profit or loss for the 15-month period Total comprehensive income/(loss) for the period Payment of dividends Equity issued as consideration for acquisition of subsidiaries Recognition of share-based payments(ii) Balance at 30 September 2017 Profit or loss for the year ended 30 September 2018 Total comprehensive income for the year Payment of dividends Recognition of share-based payments(ii) Share capital ($’000) 462,844 – – – 15,021 – 477,865 – – – – Balance at 30 September 2018 477,865 (i) Equity-settled employee benefits reserve relates to the ELTIP. Equity- settled employee benefits reserve(i) ($’000) (Accumulated losses)/ retained earnings ($’000) Attributable to the owners of the parent ($’000) Total ($’000) 371 (46,359) 416,856 416,856 – – – – (1,751) (1,380) – – – 459 (921) 58,284 58,284 (3,508) – (125) 58,284 58,284 (3,508) 15,021 (1,876) 58,284 58,284 (3,508) 15,021 (1,876) 8,292 484,777 484,777 27,085 27,085 27,085 27,085 27,085 27,085 (10,676) (10,676) (10,676) (161) 298 298 24,540 501,484 501,484 (ii) The recognition of share-based payments represents the 12-month period expense for all members of the ELTIP for the period while they were a participant. It also recognises the cost associated with the shares being allocated. The balance includes treasury shares. The above Consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 36 For personal use onlyConsolidated statement of cash flows For the year ended 30 September 2018 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest paid Interest received Income tax (payment)/refund Net cash provided by operating activities 21(e) 25,168 Cash flows from investing activities 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 sale of water entitlements Net cash (used in)/provided by investing activities Cash flows from financing activities Proceeds from borrowings from others Repayment of borrowings from others Dividends paid Net cash provided/(used in) by financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at end of the period Less: Cash balance classified as held for sale Note 2018 ($’000) 15 months to 30 September 2017 ($’000) 171,638 247,707 (133,586) (168,014) (7,407) 155 (5,632) (94,202) (25,210) – 2,565 7,327 – (109,520) (7,976) 97 2,758 74,572 (64,849) (9,754) (10,000) 14,446 1,433 77,786 9,062 128,000 279,772 (37,405) (10,676) 79,919 (4,433) 15,442 11,009 (1) (356,781) (3,633) (80,642) 2,992 12,450 15,442 – 21(a) 11,008 15,442 The above Consolidated statement of cash flows should be read in conjunction with the accompanying notes. 37 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements For the year ended 30 September 2018 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 summarise 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 Limited 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 Limited (“Webster” or the “Company”) and its controlled entities (“Webster Group” or the “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 walnut inventories and cropping inventories that are measured at net realisable value after harvest. Any costs incurred for walnut and cropping inventories prior to harvest are recorded at cost. Livestock is accounted for in accordance with AASB 141, fair value less costs to sell. Certain non-current assets and financial instruments are revalued at year end. 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. 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, the Group 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 102 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. Basis of consolidation: The consolidated financial statements incorporate the financial statements of Webster Limited and entities controlled by the Company (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 12-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, the Group makes adjustments to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of Webster. The Group eliminates 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. 38 For personal use only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. Webster was granted relief under section 340(1) of the Corporations Act 2001 by ASIC to change its financial year end from 30 June to 30 September in the prior year. The change in year end was to align the nature of Webster’s growing season with its financial reporting period. Hence, prior reporting period was for the 15 months to 30 September 2017. Current reporting period is 12 months (30 September 2018) in comparison to 15-month prior period (30 September 2017) and hence the amounts presented in the financial statements are not entirely comparable. 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 to in the ASIC Class Order 2016/191. Currency: Unless otherwise shown in the financial statements, amounts are in Australian dollars, which is Webster’s 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. The Group reviews 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. Significant events: The Group entered into a sale of one of its subsidiaries, Bengerang Pty Limited (“Bengerang”) to AFF Water Pty Limited for $132.7 million. On 31 October 2018 at an Extraordinary General Meeting the shareholders voted in favour of the sale of Bengerang and this transaction was completed on 7 November 2018. The associated assets and liabilities of the Bengerang have been disclosed as held for sale as at 30 September 2018 in the Consolidated statement of financial position. The shares in Bengerang have not been disposed of as at 30 September 2018, and their assets and liabilities have been included in the Consolidated statement of financial position as at 30 September 2018. 2. Profit/(loss) from operations Profit from operations before income tax includes the following items of revenue and expense. (a) Revenue Revenue from the sale of goods Total revenue (b) Other income Gain on disposal of permanent water rights and property, plant and equipment Increment in net market value of agricultural assets Net foreign exchange gains/(loss) Net income from sales of unused water allocations Revenue from the rendering of services lnterest revenue Rental revenue Income from sale of property compulsorily acquired Other Total other income 2018 $’000 15 months to 30 September 2017 $’000 145,263 166,087 145,263 166,087 2,243 49,829 831 518 5,545 155 89 – 2,789 22,609 28,409 (1,059) 4,627 7,338 97 1,463 39,999 6,191 61,999 109,674 39 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued (c) Expenses Cost of sales Finance costs Interest on loans Dividends on instruments classified as financial liabilities Other finance costs Total finance costs Depreciation and amortisation expense Depreciation of non-current assets Amortisation of non-current assets Total depreciation and amortisation Employee benefits expense Equity-settled share-based payments Post-employment benefits Other employee benefits Total employee benefits expense (d) Significant items Profit/(loss) before tax expenses includes the following specific expenses for which disclosure is relevant in explaining the financial performance of Webster Ltd: Impairment of property, plant and equipment Total impairment 2018 $’000 15 months to 30 September 2017 $’000 123,883 136,318 6,164 36 1,257 7,457 6,674 18 1,284 7,976 14,322 14,293 125 156 14,447 14,449 298 1,520 27,985 29,803 213 1,722 23,187 25,122 – – 22,913 22,913 The impairment of property, plant and equipment in the 15-month prior period relates to assets decommissioned and impaired following an agreement entered with the Commonwealth of Australia in May 2017 in respect of its Lake Tandou operations. Recognition and measurement Revenue – This 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 Group 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. This is in relation to walnut lot supervision and management for the Managed Investment Schemes. Dividend and interest revenue – Dividend revenue from investments is recognised when the Group’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. Finance costs – Finance 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. 40 For personal use onlyOperational expenses – The Group categorises direct costs in relation to operational activities as operational expenses. These costs include growing input costs, salary and wages, depreciation expense for plant and equipment, diesel, harvesting costs, processing and selling costs, repair and maintenance of machinery and costs associated with field earthworks. Employee benefits – The Group recognises 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. The Group measures 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 – These are accrued on a time basis, by reference to the principal outstanding and at the applicable effective interest rates. Fees paid on the establishment of loan facilities are deferred and expensed over the term of the respective agreement while all other finance costs are expensed. Depreciation of non-current assets – This includes the depreciation of biological assets (walnut trees) resulting from the adoption of accounting standard AASB 2014-6 as from 1 July 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 (expense) benefit in the financial statements as follows: Profit from continuing operations Total profit from operations Income tax expense calculated at 30% Non-deductible expenses Non-assessable gain Utilisation of previously unrecognised losses Change in recognition of (deferred tax asset)/deferred tax liability Over provision of income tax in previous year Other 2018 $’000 15 months to 30 September 2017 $’000 (4,809) (148) (6,860) (11,817) (3,796) 13,583 (562) 9,225 38,902 38,902 49,059 49,059 (11,671) (14,718) (214) – 14 (317) 370 1 (11,817) (6,963) 17,034 289 12,307 1,080 196 9,225 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. 41 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued Deferred tax assets and liabilities 2018 Deferred tax assets: Provisions Other assets Unused tax losses Deferred tax liabilities: Property, plant and equipment Financial assets – non-receivables Inventory and biological assets Less: Classified as held for sale 2017 Deferred tax assets: Provisions Other assets Unused tax losses Deferred tax liabilities: Property, plant and equipment Financial assets – non-receivables Inventory and biological assets Other 42 Opening balance $’000 Charged to income $’000 Classified as held for sale $’000 Closing balance $’000 2,231 413 9,000 11,644 (17,735) (101) (2,263) (20,099) (8,455) – 380 (209) (4,170) (3,999) (5,154) 138 2,155 (2,861) (6,860) – (8,455) (6,860) – – – – – – – – – 1,982 1,982 2,611 204 4,830 7,645 (22,889) 37 (108) (22,960) (15,315) 1,982 (13,333) Opening balance $’000 Charged to income $’000 Other $’000 Closing balance $’000 946 732 11,217 12,895 (14,351) – 1,285 (319) (2,217) (1,251) (1,908) (101) (18,381) 16,118 (10) (32,742) (19,847) 10 14,119 12,868 – – – – 2,231 413 9,000 11,644 (1,476) (17,735) – – – (1,476) (1,476) (101) (2,263) – (20,099) (8,455) For personal use only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. 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. The Group calculates 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 – The Group accounts 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 the Group 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 – The Group recognises 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 the determination of goodwill or excess. 43 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 4. Remuneration of auditors Amounts received or due and receivable by Ernst & Young for: An audit or review of the financial report of the parent entity(i) Amounts received or due and receivable by Ernst & Young for: AGW Funds Management Limited Other audit service in relation to the entity and any other entity in the consolidated Group Tax services Amounts received or due and receivable by non Ernst & Young audit firms Review of financial report Taxation services Other non-audit services 2018 $ 220,000 47,500 98,421 365,921 152,302 4,390 6,500 163,192 529,113 15 months to 30 September 2017 $ – – – – 447,600 286,017 – 733,617 733,617 The auditor of the Group is Ernst & Young. The auditor for the 15 months ended 30 September 2017 was Deloitte. Other services include services relating to general advice. (i) Fees for audit services in respect of the year ended 30 September 2018 are fees incurred in respect of the half-year review and fees incurred to date in respect of the audit for the year ended 30 September 2018. 44 For personal use only5. Trade and other receivables Current Trade receivables Other receivables (Lake Tandou Agreement) Goods and services tax (GST) recoverable 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 61–90 days 91–120 days 121+ days Total 2018 $’000 2017 $’000 17,735 15,321 – – 8,000 1,272 17,735 24,593 227 – 938 1,165 (3,809) – 3,777 (32) – 32 – 32 2,232 1,778 4,031 8,041 (2,213) (1,596) – (3,809) – 771 3,038 3,809 In determining the recoverability of a trade receivable, the Group 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. Recognition and measurement Trade receivables – These 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. 45 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 6. Inventories Inventories Raw materials Cropping inventories Walnut inventory Walnut nursery trees Water allocation Biological assets Cropping Walnuts Livestock 2018 Biological assets Opening inventories Preparation costs Transfer to finished good inventory Closing inventories 2018 Opening Net natural increase Purchases Sales Net market value increase Closing 46 Fair value input level 3 3 2 2018 $’000 2017 $’000 2,081 36,052 12,439 1,200 – 51,772 13,583 7,168 7,838 28,589 80,361 4,163 522 9,651 280 1,664 16,280 14,834 2,483 13,662 30,979 47,259 Cotton $’000 Walnuts $’000 14,834 66,158 (67,409) 13,583 2,483 33,022 (28,337) 7,168 Sheep Cattle $’000 5,498 – 1,162 (3,143) 711 4,228 Head 41,067 20,671 5,518 (31,525) – 35,731 $’000 8,164 – 366 (7,739) 2,819 3,610 Head 5,924 4,307 295 (7,089) – 3,437 For personal use only Recognition and measurement Inventories are valued at the lower of cost and net realisable value except for walnut and cropping inventories, 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. The Group accounts for costs incurred in bringing each product to its present location and condition as follows: • The Group values walnut inventories 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. • The Group values cropping inventories 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 crop selling prices and current processing and selling costs. • The Group values livestock 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, as the best indication of fair value less cost to sell. Biological asset at fair value At the end of each reporting period, the Group measures unharvested produce of walnuts and crop at fair value less cost to sell. The Group also measures livestock at fair value less cost to sell. The net increments or decrements in the market value of biological assets are recognised as either revenue or expense in the income statement. Fair value inputs are summarised as follows. • Level 1 price inputs – are quoted prices (unadjusted in active markets for identical assets or liabilities) that can be accessed at the measurement date. • Level 2 price inputs – are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The value of the livestock is determined by independent valuation with reference to prices received from representative sales of breeding cattle similar to the Company’s herd. Independent valuations were undertaken. In performing the valuation, consideration is given to the class, age, quality and location of the herd. • Level 3 price inputs – are inputs for the asset or liability that are not based on observable market data (unobservable inputs). Costs associated with the preparation for future crop, pre-biological transformation are held at cost, as the best indication of fair value less cost to sell. 7. Other assets Current Prepayments 2018 $’000 218 218 2017 $’000 811 811 47 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 8. Property, plant and equipment Freehold land ($’000) Land improvements ($’000) Buildings ($’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 2016 123,672 28,112 36,631 54,977 9,780 2,397 43,642 299,211 Additions Disposals 11,975 3,310 (9,840) (509) 810 (995) 19,729 35,128 – 9,411 80,363 (4,497) (2,161) (422) Impairment loss (3,044) (12,094) (5,722) (475) (1,578) – Reclassification of assets – 502 (982) 11,246 (10,368) (398) – – – (18,424) (22,913) – 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) 105 (1,105) (1,827) (2,013) (18,844) 282 3,308 (1,000) (9,256) (2,731) (24,792) – – – – (368) – (407) (775) – – (22,052) 3,695 (2,525) (14,293) (2,525) (32,650) As at 30 June 2016 123,672 27,285 34,618 36,133 9,780 2,029 43,642 277,159 As at 30 September 2017 122,763 17,494 27,011 56,188 30,801 802 50,528 305,587 Gross carrying amount Balance at 1 October 2017 122,763 19,321 29,742 80,980 30,801 1,577 53,053 338,237 Additions Disposals 18,572 3,371 4,426 30,557 23,926 – 13,350 94,202 (273) – (515) (3,709) – (101) – (4,598) 141,062 22,692 33,653 107,828 54,727 1,476 66,403 427,841 Less: Classified as assets held for sale (38,199) (8,212) (3,399) (11,090) – – – (60,900) Balance at 30 September 2018 102,863 14,480 30,254 96,738 54,727 1,476 66,403 366,941 Accumulated depreciation/amortisation and impairment Balance at 1 October 2017 Disposals Depreciation expense Less: Classified as assets held for sale Balance at 30 September 2018 Net book value – – – – – – (1,827) (2,731) (24,792) – 39 2,282 (1,195) (3,022) (782) (9,668) (3,474) (32,178) 927 482 4,015 (2,095) (2,992) (28,163) – – – – – – (775) (2,525) (32,650) 59 (235) (951) – 2,380 (2,442) (14,322) (4,967) (44,592) – – 5,424 (951) (4,967) (39,168) As at 30 September 2017 122,763 17,494 27,011 56,188 30,801 As at 30 September 2018 102,863 12,385 27,262 68,575 54,727 802 525 50,528 305,587 61,436 327,773 48 For personal use only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 – These 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 – The asset is carried at cost less accumulated depreciation and any accumulated impairment losses. Depreciation on orchards is charged to profit or loss. Depreciation – This 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. The Group uses the following estimated useful lives in the calculation of depreciation: Land improvements (years) Buildings (years) 1–20 5–40 Leasehold improvements (years) 2–20 Plant and equipment (years) Orchards (years) 2–40 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 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 the Group 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. 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. 49 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 9. Intangibles Net book value Balance at 1 July 2016 Amortisation expense Additions Disposals Transfers Balance at 30 September 2017 Amortisation expense Additions Disposals Balance at 30 September 2018 Less: Classified as assets held for sale (a) Impairment test for goodwill Goodwill $’000 Licences $’000 Contracts $’000 Permanent water rights $’000 Total $’000 24,700 100 – 2,565 – (1,369) 25,896 – – – 25,896 – 25,896 – – – – 100 – – – 100 – 100 1,819 (156) – – – 1,663 (125) – – 240,450 267,069 – 17,141 (46,089) 1,369 (156) 19,706 (46,089) – 212,871 240,530 – (125) 25,210 25,210 – – 1,538 238,081 265,615 – (76,129) (76,129) 1,538 161,952 189,486 Goodwill amounts recognised arose from the purchase of portfolios of agricultural assets. The goodwill has been allocated to the cropping cash generating unit (CGU). The Group 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 CGU has been determined based on fair value less costs of disposal. This assessment comprises the valuation of assets using the direct comparison method of valuation where applicable with external valuations being obtained. These are based on Level 2 fair value inputs. Management has corroborated the value of each asset of the CGU through reference to external market prices. No reasonably possible change in a key assumption on which management has based its determination of the unit’s recoverable amount would cause the unit’s carrying amount to exceed its recoverable amount. (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 value of permanent water rights is attributable to both the Horticulture ($136.6 million) and Agriculture cropping ($25.3 million) CGUs. 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. The recoverable amount of the permanent water rights has been determined based on the fair value of less costs of disposal. This assessment comprises the valuation of assets using the direct comparison method of valuation where applicable with external valuations being obtained. These are based on Level 2 inputs. Management has corroborated the value of each asset of the CGU through reference to external market prices. No reasonably possible change in a key assumption on which management has based its determination of the unit’s recoverable amount would cause the unit’s carrying amount to exceed its recoverable amount. 50 For personal use onlyRecognition and measurement Goodwill – The Group recognises 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, the Group allocates goodwill to the cropping CGU that is expected to benefit from the synergies of the combination. CGUs 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 CGU 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 – The Group measures contracts at cost. After initial recognition the asset is carried at cost less accumulated amortisation and any accumulated impairment losses. The Group amortises contracts on a straight- line basis over the term of the contract. Permanent water rights – The Group records 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 and cotton, the carrying value is tested annually for impairment with reference to market values. If events or changes in circumstances indicate impairment, the carrying value is adjusted to take account of any impairment losses. Licences – These are measured at cost and tested for impairment on an annual basis. Impairment of assets – At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any indication exists, the Group estimates 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 CGU to which the assets belong. The Group tests 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. The fair value less costs to sell is assessed with respect to the market value of the underlying assets, including properties and water rights, less estimated costs to sell, relative to the carrying value of the assets and liabilities attributable to the CGU. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (CGU) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately. Where an impairment loss is subsequently reversed, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. 51 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 10. Trade and other payables Current Trade payables 2018 ($’000) 2017 ($’000) 19,555 19,555 14,229 14,229 The average credit period on purchases is 30 days. Interest is charged on a creditor-by-creditor basis. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. Recognition and measurement Trade and other payables – These are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services. Payables are stated at their amortised cost. 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 Note 2018 $’000 2017 $’000 (i) (ii) (i) (ii) (iii) 163,653 191 163,844 16,088 246 16,334 46,075 102,635 274 394 579 394 46,743 103,608 (i) Secured by mortgage over property and floating charge over assets, the value of which exceeds the loan. The bank loan amount of $132.5 million was repaid on the settlement of the sale of Bengerang Pty Limited on 7 November 2018. (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. Credit facilities – At 30 September 2018 the Group had a total of $250.0 million (30 June 2017: $220 million) committed credit facilities with external financial institutions. These facilities have fixed maturity dates as follows: $70.0 million in July 2019, $180.0 million in January 2022. As at 30 September 2018, $39.7 million of the facilities available to Webster was undrawn. Recognition and measurement Borrowings – These 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. 52 For personal use only12. Provisions Current Employee benefits Quality claims Other Non-current Employee benefits (NC) Movements in provisions Balance at 1 October 2017 Less: Transfer to liabilities directly associated with assets classified as held for sale Increase/(reductions) arising from payments Balance at 30 September 2018 Recognition and measurement 2018 $’000 1,623 250 364 2,237 133 133 2,370 1,668 (106) 808 2,370 2017 $’000 1,430 153 – 1,583 85 85 1,668 1,670 – (2) 1,668 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 are 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. 13. Other liabilities Current Commonwealth grants received 2018 $’000 7,090 7,090 2017 $’000 1,433 1,433 Commonwealth grants received relate to capital work in progress and will be offset against property, plant and equipment at the completion of the development projects. 53 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 14. Assets and liabilities of disposal entity classified as held for sale Assets classified as held for sale Cash and cash equivalents Trade and other receivables Inventories Other assets Property, plant and equipment Investments Intangibles – water Total assets of disposal entity held for sale Liabilities directly associated with assets classified as held for sale Trade and other payables Provisions Net deferred tax liability Total liabilities of disposal entity held for sale 2018 $’000 2017 $’000 1 253 1,763 83 55,476 67 76,129 133,772 817 106 1,982 2,905 – – – – – – – – – – – – In August 2018, the Group entered into an agreement subject to certain conditions precedent, to sell one of its subsidiaries, Bengerang Pty Limited to AFF Water Pty Limited for $132.7 million. The associated assets and liabilities have been classified as held for sale as at 30 September 2018. Recognition and measurement Assets (or disposal entity) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement. An impairment loss is recognised for any initial or subsequent write down of the asset (or disposal entity) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal entity), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non- current asset (or disposal entity) is recognised at the date of derecognition. Non-current assets (including those that are part of a disposal entity) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of a disposal entity classified as held for sale are presented separately from the other assets in the Consolidated statement of financial position. The liabilities of a disposal entity classified as held for sale are presented separately from other liabilities in the Consolidated statement of financial position. 54 For personal use only15. Issued capital 361,245,163 fully paid ordinary shares Note (i) 2018 $’000 477,865 477,865 2017 $’000 477,865 477,865 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. (i) Fully paid ordinary share capital Balance at 1 October 2017 Shares issued Note Number $’000 Number $’000 2018 2017 361,245,163 477,865 350,745,163 462,844 (ii) – – 10,500,000 15,021 Balance at 30 September 2018 361,245,163 477,865 361,245,163 477,865 Fully paid ordinary shares carry one vote per share and carry the right to dividends. (ii) Share capital issued during the year ended 30 September 2018 No ordinary shares were issued during the year ended 30 September 2018 (15-month period ended 30 September 2017 – 10,500,000 ordinary shares were issued). 16. Earnings per share Basic earnings per share Diluted earnings per share (a) Basic earnings per share Cents per share Note (a) (b) 2018 7.60 7.57 2017 16.66 16.44 The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows. Earnings used in the calculation of basic earnings per share 27,085 Weighted average number of ordinary shares for the purposes of basic earnings per share 2018 $’000 (b) Diluted earnings per share 2017 $’000 58,284 2018 15 months to 30 September 2017 356,515,163 349,825,562 The earnings and weighted average number of ordinary and potential ordinary shares used in the calculation of diluted earnings per share are as follows. Earnings used in the calculation of diluted earnings per share 27,085 Weighted average number of ordinary and potential ordinary shares for the purpose of diluted earnings per share 2018 $’000 2017 $’000 58,284 2018 15 months to 30 September 2017 357,763,620 354,523,062 55 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 17. Dividends (a) Dividends paid during the year Fully paid ordinary shares Final dividend – FY 2017: paid December 2017 (FY 2016 paid October 2016) (b) Dividends proposed 2018 2017 Cents per share Total $’000 Cents per share Total $’000 3.0 10,676 1.0 3,508 10,676 3,508 The directors have declared a fully franked 3.0 cent per share dividend on ordinary shares for the year ended 30 September 2018. The directors have declared an unfranked 9.0 cent per share dividend on cumulative preference shares paid on 27 June 2018. (c) Franking credits balance Franking account balance at 1 October 2017 Tax paid Dividends paid Net franking credits available at 30 September 2018 Impact on franking account balance of dividends not recognised 2018 2017 747 5,632 (4,660) 1,719 – 1,281 940 (1,474) 747 – 56 For personal use only18. Subsidiaries Parent entity Webster Limited Controlled entities AGW Finance Pty Ltd AGW Funds Management Limited 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 PrimeAg Fund Operations Pty Ltd Webster Southern Ag Pty Ltd Ownership interest Country of incorporation 2018 (%) 2017 (%) Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 All the above entities are audited by Ernst & Young. All entities carry on business in Australia. These wholly owned controlled entities other than AGW Funds Management Limited, Motspur Park Pty Limited, PrimeAg Fund Operations Pty Ltd and Webster Southern Ag Pty Ltd have obtained approval under the ASIC Class Order 2016/785 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 Limited, Motspur Park Pty Limited, PrimeAg Fund Operations Pty Ltd and Webster Southern Ag Pty Ltd under its banking arrangements with ANZ and Rabobank. 57 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued (a) Financial performance The following statement of financial performance represents the consolidated position of profit or loss and other comprehensive income of subsidiaries of Webster Limited (parent entity) that are party to the deed of cross guarantee. AGW Funds Management Limited, Motspur Park Pty Limited, PrimeAg Fund Operations Pty Ltd and Webster Southern Ag Pty Ltd are 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 2018 $’000 91,461 (77,466) 13,995 33,103 (3,298) (395) 15 months to 30 September 2017 $’000 97,639 (77,628) 20,011 87,914 (3,480) (422) (15,261) (33,720) (2,481) (7,431) – (233) 17,999 (11,817) 6,182 (3,271) (7,933) (22,913) (98) 36,088 9,225 45,313 58 For personal use only(b) Financial position The following statement of financial position represents the consolidated financial position of subsidiaries of Webster Ltd (parent entity) that are party to the deed of cross guarantee. AGW Funds Management Limited, Motspur Park Pty Limited, PrimeAg Fund Operations Pty Limited and Webster Southern Ag Pty Limited are not a party to the cross guarantee. Current assets Cash and cash equivalents Trade and other receivables Inventories Other assets Assets classified as held for sale Total current assets Non-current assets 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 Liabilities directly associated with assets classified as held for sale 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 Total equity 2018 $’000 2017 $’000 10,176 12,466 49,844 139 72,625 133,772 206,397 14,707 21,462 30,686 849 67,704 – 67,704 294,990 282,679 23,100 23,102 161,952 212,871 24,283 1,638 24,283 1,763 505,963 544,698 712,360 612,402 18,327 163,653 3,120 1,500 12,453 16,130 3,796 942 186,600 33,321 2,905 – 189,505 33,321 90,001 8,961 90 146,937 4,083 62 99,052 151,082 288,557 184,403 423,803 427,999 477,865 477,865 (9,454) (44,608) (9,913) (39,953) 423,803 427,999 59 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 19. Commitments for expenditure (a) Lease commitments Non-cancellable operating leases Not longer than 1 year Longer than 1 year and not longer than 5 years Finance lease liabilities Not longer than 1 year Longer than 1 year and not longer than 5 years Minimum lease payments Less: Future finance charges Finance lease liabilities Present value of minimum future lease payments: Not longer than 1 year Longer than 1 year and not longer than 5 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 1 year Note 2018 $’000 2017 $’000 (i) (ii) 88 9 97 208 282 490 (24) 466 208 263 471 187 95 282 273 608 881 (56) 825 274 565 839 29,786 29,786 56,891 56,891 60 For personal use only20. 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, whereas the Horticulture segment pertains to tree crops which are currently walnuts and almonds. (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 Profit before tax Segment revenue and other income 2018 $’000 15 months to 30 September 2017 $’000 153,726 193,590 53,354 82,256 207,080 275,846 Segment results 2018 $’000 43,124 10,727 53,851 182 (7,711) (7,420) 15 months to 30 September 2017 $’000 45,658 18,850 64,508 (85) (7,388) (7,976) 38,902 49,059 Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the current year (2017: 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 2018 $’000 2017 $’000 505,721 184,400 690,121 70,323 424,377 144,893 569,270 65,030 760,444 634,300 25,821 12,257 38,078 220,882 258,960 34,958 9,830 44,788 104,735 149,523 61 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued (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 Revenue from customers Non-current assets 2018 $’000 15 months to 30 September 2017 $’000 2018 $’000 15 months to 30 September 2017 $’000 123,010 126,823 517,350 546,195 18,843 3,410 30,889 8,375 – – – – 145,263 166,087 517,350 546,195 The revenue of $48.0 million (30 September 2017: Nil) was derived from two of the Group’s major external customers. No other customer contributed to more than 10% of the Group’s revenue. 21. Notes to the cash flow statement (a) Cash and cash equivalents Cash and cash equivalents 2018 $’000 2017 $’000 11,008 11,008 15,442 15,442 (b) Non-cash financing and investing activities During the year ended 30 September 2018, 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. 210,259 39,741 250,000 119,272 100,728 220,000 62 For personal use only(e) Reconciliation of profit/(loss) for the period to net cash flows from operating activities Profit for the period Depreciation of non-current assets Amortisation of non-current assets Finance costs in relation to borrowings Fair value of investments Repayment of foreign exchange forward contract Net profit relating to non-current assets Profit on the sale of water rights Share-based payments expenses Impairment of property, plant and equipment Movements in working capital – Decrease/(increase) in trade and other receivables – Decrease in inventories – Decrease/(increase) in other assets – Increase/(decrease) in trade and other payables – Increase in provisions – Decrease in tax balances Net cash flows from operating activities 2018 $’000 27,085 14,322 125 50 (80) – (348) (1,670) 298 – 6,605 (34,865) 510 6,143 808 6,185 25,168 2017 $’000 58,284 14,293 156 – – 259 (2,172) (23,497) – 22,913 1,694 13,094 (814) (1,002) 2,756 (11,392) 74,572 (f) Changes in liabilities arising from financing activities Current borrowings Current obligation under finance leases 1 October 2017 Cash flows Other 30 September 2018 16,088 246 20,123 127,442 163,653 (66) 11 191 Non-current borrowings 102,635 70,864 (127,425) 46,074 Non-current obligations under finance leases Cumulative non-redeemable preference shares 579 394 (326) – 119,942 90,595 22 – 50 275 394 210,587 63 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 22. Related party disclosures (a) Key management personnel compensation Short-term employee benefits Long-term employee benefits Post-employment benefits 2018 $’000 2,280 298 224 2,802 15 months to 30 September 2017 $’000 1,938 218 266 2,422 (b) Transactions with key management personnel During the financial year, where directors, their director-related entities, and executives purchased goods, the purchases were domestic or trivial in nature, from the Group on the same terms and conditions available to other employees and customers. The Group entered into management agreements with Australian Food and Fibre Ltd (“AFF”) (pursuant to the purchase of the Kooba Aggregation, Bengerang Ltd and Tandou Ltd), a company in which Mr Joe Robinson is an associate. The agreement was renewed on 1 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. During the financial year ended 30 September 2018 management fees of $275,000 were paid to AFF. A further management agreement was entered into with AFF for the management of the Tandou operations for the 2018 crops only. The value of the management services was $200,000 with a bonus potential of $2,000,000 based on various performance achievements. During the financial year, the management fees and bonus were paid in accordance with the agreement. For the management of the Tandou operations AFF also incurred expenses on behalf of the Company and were reimbursed at cost for those expenses amounting to $2,191,131, the majority of this expenditure related to harvesting costs. The Company entered into an agreement with Air Corrigan, a company in 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 $507,371 for the year ended 30 September 2018. The Company supplied walnuts to Langdon Ingredients, Bakery Craft and The Natural Foods Trading Company, all companies in which Mr Chris Langdon is an associate. The goods were supplied at arm’s length on normal commercial terms. The value of goods supplied was $733,808 for the year ended 30 September 2018. 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. (c) Equity interests in related parties Details of percentage of ordinary shares held in controlled entities are disclosed in note 18 to the financial statements. (d) Parent entity The parent entity of the Group is Webster Limited. The ultimate Australian parent entity is Webster Limited. There are no contingent liabilities. 64 For personal use only23. 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 Total comprehensive loss 24. Business combinations No subsidiaries were acquired during the year ended on 30 September 2018. 2018 $’000 2017 $’000 5,464 397,472 402,936 173,155 29,446 202,601 10,644 309,696 320,340 25,822 68,279 94,101 477,865 477,865 (910) (1,369) (276,620) (250,257) 200,335 226,239 15,526 15,526 10,625 10,625 65 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 25. 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 September 2017. 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 15, 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. 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 Trade and other receivables Financial liabilities Trade and other payables Borrowings Note 2018 $’000 2017 $’000 (i) 210,587 119,942 (11,008) (15,442) 199,579 501,484 28.5% 104,500 484,777 17.7% (ii) 2018 $’000 2017 $’000 11,008 17,735 15,442 24,593 19,555 14,229 210,587 119,942 66 For personal use only(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 Forward foreign exchange contracts USD $’000 1,048 486 (453) 1,081 USD $’000 7,047 4,304 (220) 11,131 2018 GBP £’000 JPY ¥’000 – – – – – 55 – 55 2017 GBP £’000 JPY ¥’000 – – – – – 55 – 55 EUR ¤’000 2,927 49 – 2,976 EUR ¤’000 4,063 503 – 4,566 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 and 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. As at 30 September 2018, there were USD$500,000 and EUR€1,700,000 forward foreign exchange contracts outstanding. 67 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 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. The sensitivity rate used is 10% 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 and loss – Euro – United States dollar 2018 15 months to 30 September 2017 10% $’000 –10% $’000 10% $’000 –10% $’000 – – – – – – – – – – – – 2018 15 months to 30 September 2017 10% $’000 –10% $’000 10% $’000 (306) (76) (382) 250 62 312 (590) (1,281) (1,871) –10% $’000 721 1,566 2,287 There were no outstanding forward foreign exchange contracts at the reporting date (2017: 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 the 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. 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. Effect on profit and loss 2018 15 months to 30 September 2017 +1% –1% 1% –1% 110 (110) 154 (154) (1,967) 2,028 (1,500) 4,452 Financial assets Cash and cash equivalents Financial liabilities Borrowings 68 For personal use only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 2018 Financial assets Non-interest bearing Trade and other receivables Assets classified as held for sale Variable interest rate Cash and cash equivalents Financial liabilities Non-interest bearing Trade and other payables Other financial liabilities Liabilities directly associated with assets classified as held for sale Variable interest rate Bank loans Fixed interest rate maturity Finance lease liabilities Cumulative non-redeemable preference shares* – – 1.17 17,735 321 11,008 29,064 19,555 – 817 – – – – – – – 3.24 163,653 46,075 3.51 9.00 191 35 274 142 184,251 46,491 – – – – – – – – – 394 394 17,735 321 11,008 29,064 19,555 – 817 209,728 465 571 231,136 *Amounts disclosed in more than 5 years represent principal amounts. There is no expiration term. 69 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 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 – 24,593 Variable interest rate Cash and cash equivalents 0.47 15,442 40,035 Financial liabilities Non-interest bearing Trade and other payables – 14,229 – – – Variable interest rate Bank loans Fixed interest rate maturity Finance lease liabilities Cumulative non-redeemable preference shares* 2.97 16,088 102,635 3.51 9.00 246 35 579 142 30,598 103,356 – – – – – 394 394 24,593 15,442 40,035 14,229 118,723 825 571 134,348 *Amounts disclosed in more than 5 years represent principal amounts. There is no expiration term. (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’s exposure and the credit ratings of its counterparties are continuously monitored, and the aggregate value of transactions concluded are spread among 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. 70 For personal use only(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. The following tables detail the fair value of financial assets and financial liabilities. Financial assets Trade and other receivables Financial liabilities Cumulative non-redeemable preference shares Trade and other payables Bank loans Finance lease liabilities Carrying amount 2018 ($’000) 17,735 17,735 394 19,555 Fair value 2018 ($’000) 17,735 17,735 394 19,555 Carrying amount 2017 ($’000) 24,593 24,593 394 14,229 Fair value 2017 ($’000) 24,593 24,593 394 14,229 209,728 209,728 118,723 118,723 465 465 825 825 230,142 230,142 134,171 134,171 Some of the Group’s financial assets and financial liabilities are measured at fair value and 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. 71 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued (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 was 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-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 2018 Financial liabilities Non-interest bearing Trade and other payables Liabilities directly associated with assets classified as held for sale Variable interest rate Bank loans Fixed interest rate maturity Finance lease liabilities Cumulative non-redeemable preference shares* 2017 Financial liabilities Non-interest bearing – – 19,555 817 – – 3.24 167,806 52,983 3.51 9.00 208 35 282 142 188,421 53,407 – – – – 394 394 19,555 817 220,789 490 571 242,222 Weighted average effective rate % Less than 1 year $’000 1 to 5 years $’000 More than 5 years $’000 Total $’000 Trade and other payables – 14,229 – Variable interest rate Bank loans Fixed interest rate maturity Finance lease liabilities Cumulative non-redeemable preference shares* 2.97 18,322 111,975 3.51 9.00 204 35 579 142 32,790 112,696 – – – 394 394 14,229 130,297 783 571 145,880 *Amounts disclosed in more than 5 years represent principal amounts. There is no expiration term. Projection is based on the likely outcome of the facilities given the interest rates and margins at the reporting date up until the contractual maturity of the facilities. The projection is based on the undiscounted cash flows. 72 For personal use only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. The Group 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 discontinued 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. 26. Events after the reporting period The Group entered into a sale of one of its subsidiaries, Bengerang Pty Limited (“Bengerang”) to AFF Water Pty Limited, a related party, for $132.7 million. On 31 October 2018 at an Extraordinary General Meeting the shareholders voted in favour of the sale of Bengerang. The associated assets and liabilities of Bengerang have been classified as held for sale as at 30 September 2018 in the Consolidated statement of financial position. 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 2018 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. 27. 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 3 months or less at the date of acquisition. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. Walnut Orchards – Walnut Orchards are classified as property, plant and equipment. Additions to the Walnut Orchards are valued at cost and are depreciated from the year reach maturity. Growing Crop – The Group values 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. 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. 73 Webster Limited – Annual Report 2018For personal use onlyNotes to the financial statements continued 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. The Group recognises 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. The Group determines fair value in the manner described in note 25. 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. The Group records 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 – The Group classifies 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. The Group records equity instruments issued by Webster as the proceeds received, net of direct issue costs. Financial guarantee contract liabilities – The Group measures 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 2. Financial liabilities – The Group classifies 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. Non-monetary items – 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. 74 For personal use onlyExchange differences – These 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 to note 25(e)); 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. The Group includes 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 – These 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. The Group recognises 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 upon completion of the project. Business combinations – The Group accounts 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. The Group recognises 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. The Group adjusts 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, the Group measures its 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. 75 Webster Limited – Annual Report 2018For personal use only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 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. 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 impairment of goodwill (note 9), Carrying value of permanent water rights (note 9) and inventories and biological assets (note 6). Notes to the financial statements continued 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. However, to the extent that it is impracticable to determine either: (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. 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 1 year. Share-based payments – The Group measures equity-settled share-based payments to employees at the fair value of the equity instruments at the grant 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 grant 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. The Group recognises 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. 76 For personal use only28. New accounting standards New and amended standards and interpretations Amendments to AASB 107 Statement of Cash Flows: Disclosure Initiative The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The Group has provided the information for the current period in note 21 (f). Certain new accounting standards and interpretations have been published that are not mandatory for the reporting year ended 30 September 2018. These have not been adopted early by Webster. The assessment of the impact of these new standards is set out below. Standards and interpretations in issue not yet adopted Standard/interpretation Nature of change Impact on financial statements AASB 9 Financial Instruments (effective for Webster accounting period starting on 1 October 2018) AASB 15 Revenue from Contracts with Customers’ (effective for Webster for the accounting period starting on 1 October 2018) AASB 16 Leases (effective for Webster for the accounting period starting on 1 October 2019) AASB 9 introduces various new concepts including: • amended rules for hedge accounting; • changes to the categorisation and measurement of financial assets particularly affecting those measured as available for sale (“AFS”) or held to maturity (“HTM”); • new methods of calculating impairment losses of financial assets; and • a change to the rules surrounding the modification of financial liabilities measured at amortised cost. AASB 15 is based on the principle that revenue is recognised when control of a good or service transfers to a customer. This new standard requires a five-step analysis of transactions to determine whether, how much and the point at which revenue is recognised. It applies to all contracts with customers except leases, financial instruments and insurance contracts. AASB 16 requires recognition of a right-of use asset along with the associated lease liability where the entity is a lessee. An interest expense will be recognised in the profit or loss using the effective interest rate method, and the right-of-use asset will be depreciated. Lessor accounting will largely remain unchanged. The Group will first apply AASB 9 in the financial year beginning 1 October 2018. The Group is in the process of finalising its assessment of the requirements of the new standard and its impact on the Group’s financial assets or financial liabilities for the year ended 30 September 2019. The Group will first apply AASB 15 in the financial year beginning 1 October 2018. The Group is in the process of finalising its assessment of the requirements of the new standard and its impact on the Group’s financial statements for the year ended 30 September 2019. The Group will first apply AASB 16 in the financial year beginning 1 October 2019. The Group is in the process of finalising its assessment of the requirements of the new standard and its impact on the Group’s financial statements for the year ended 30 September 2020. 77 Webster Limited – Annual Report 2018For personal use onlyAuditor’s report Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au 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 (collectively the Group), which comprises the consolidated statement of financial position as at 30 September 2018, the consolidated statement of profit or loss and comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, 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: a) b) giving a true and fair view of the consolidated financial position of the Group as at 30 September 2018 and of its consolidated financial performance for the year ended on that date; and 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 78 For personal use only 1. Assets and liabilities classified as held for sale Report on the Audit of the Remuneration Report Opinion on the Remuneration Report Why significant How our audit addressed the key audit matter We have audited the Remuneration Report included in pages 22 to 29 of the directors' report for the year ended 30 September 2018. Our audit procedures included the following: On 17 August 2018, the Group entered into a share purchase agreement to divest its wholly owned subsidiary, Bengerang Limited (‘Bengerang’). Bengerang holds both agricultural and water assets in northern NSW. In our opinion, the Remuneration Report of Webster Limited for the year ended 30 September 2018, complies with section 300A of the Corporations Act 2001. • We considered the Group’s assessment of the Bengerang assets and liabilities as being classified as ‘held for sale’ in accordance with Australian Accounting Standards. Responsibilities • We assessed whether all assets and liabilities related to Bengerang were identified and The directors of the Company are responsible for the preparation and presentation of the Remuneration included in the held for sale classification and Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an disclosures. opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. The sale was classified in accordance with Australian Accounting Standards, as ‘held for sale’. Accordingly, all assets and liabilities of Bengerang are presented as current at 30 September 2018. Furthermore, bank loans of $132.5m, secured against the Bengerang assets, are classified as current on the basis this debt has been repaid on the sale of Bengerang. secured against the Bengerang assets as a current liability. • We assessed the classification of loans • We assessed the value of the ‘held for sale’ assets to ensure their carrying value is recoverable. • We considered the adequacy of the disclosures included in Note 14 of the financial report. The sale was conditional upon a number of factors including the approval of Shareholders, which was achieved on 31 October 2018. Settlement occurred on 7 November 2018 and as such this is disclosed in Note 26 of the financial report as a subsequent event. Ernst & Young The sale of Bengerang is significant for the year ended 30 September 2018 due to the value of the anticipated proceeds from the sale, together with the impact of the classification of the assets and liabilities of $133.8m and $2.9m respectively, being presented as current. Note 14 of the financial report sets out the nature of the amounts comprising the ‘held for sale’ assets and liabilities. Gregory J Logue Partner Sydney, 4 December 2018 A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation 79 Webster Limited – Annual Report 2018For personal use only Auditor’s report continued 2. Recoverability of Goodwill Report on the Audit of the Remuneration Report Opinion on the Remuneration Report Why significant How our audit addressed the key audit matter We have audited the Remuneration Report included in pages 22 to 29 of the directors' report for the year ended 30 September 2018. At 30 September 2018, goodwill of $25.9m was recorded in the Group’s consolidated statement of financial position. Our audit procedures included the following: • We assessed the determination of the In our opinion, the Remuneration Report of Webster Limited for the year ended 30 September 2018, complies with section 300A of the Corporations Act 2001. Group’s cash generating units (CGUs) used in the impairment assessment. All of the goodwill is attributable to the ’Agricultural – Cropping’ cash generating unit (‘CGU’) of the Group. Responsibilities assets and liabilities included in the carrying value of the Agricultural Cropping CGU, to The directors of the Company are responsible for the preparation and presentation of the Remuneration which the goodwill is attributed. Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an • We tested the mathematical accuracy of the opinion on the Remuneration Report, based on our audit conducted in accordance with Australian FVLCD calculation, including the consistency Auditing Standards. of relevant data. In accordance with Australian Accounting Standards, goodwill should be tested for impairment annually to ensure it is not recorded at an amount in excess of its recoverable amount. • We considered the appropriateness of the The recoverable amount is the higher of the fair value less costs to dispose (FVLCD) and value in use (VIU). The Group has relied on the FVLCD in their assessment of the impairment of goodwill. Ernst & Young The assessment of impairment of goodwill was considered a key audit manner as the assessment involves assumptions used to determine the market value of the property assets and Water Right assets used in the FVLCD calculation. Gregory J Logue Partner Sydney, 4 December 2018 • We assessed whether the FVLCD of the underlying properties and Water Right asset exceeded the carrying value of the Agriculture Cropping’ CGU, inclusive of goodwill. • We reviewed a sample of property and Water Right asset valuations applied in deriving the FVLCD of the CGU, as determined by the Directors using an independent valuation expert. This review included the involvement of our real estate and valuation specialists in its execution. • We considered the competence, capabilities and objectivity of the Group’s independent valuation expert. • We considered the adequacy of the disclosures included in Note 9 of the financial report. A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation 80 For personal use only Report on the Audit of the Remuneration Report 3. Carrying Value of Water Rights Opinion on the Remuneration Report Why significant How our audit addressed the key audit matter Responsibilities We have audited the Remuneration Report included in pages 22 to 29 of the directors' report for the year ended 30 September 2018. The carrying value of the Water Right assets are significant given the size of those assets relative to total assets. At 30 September 2018, Water Right assets of $161.9m were recorded on the Group’s consolidated statement of financial position. This represents 21.3% of the Group’s total assets. In our opinion, the Remuneration Report of Webster Limited for the year ended 30 September 2018, complies with section 300A of the Corporations Act 2001. Our audit procedures included the following: • We assessed the Group’s accounting policies with respect to Water Right assets for compliance Australian Accounting Standards. • We considered the competence, capabilities and objectivity of those responsible for determining the market value of the Water Right assets. The directors of the Company are responsible for the preparation and presentation of the Remuneration • We assessed the market value assessment by Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an selecting a sample of the water right asset opinion on the Remuneration Report, based on our audit conducted in accordance with Australian valuations and compared these to recent sales Auditing Standards. evidence. This work included the involvement of Ernst & Young valuation specialists in its execution. These assets are considered to have an indefinite useful life and are assessed for impairment by the Group at least annually. The impairment assessment involves ensuring the Fair Value of these Water Right assets meets or exceeds their carrying value. Fair Value has been assessed by the Group with respect to the current market prices of water licenses. • We considered the adequacy of the disclosures included in Note 9 of the financial report. Ernst & Young The Group has disclosed the basis for determining the recoverable amount of Water Rights within Note 9(d) of the financial report. Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information Gregory J Logue included in the Company’s 2018 Annual Report, but does not include the financial report and our Partner auditor’s report thereon. Sydney, 4 December 2018 Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation 81 Webster Limited – Annual Report 2018For personal use only Auditor’s report continued Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:    Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 82 For personal use only    Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. 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. 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 to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 83 Webster Limited – Annual Report 2018For personal use only Auditor’s report continued Report on the Audit of 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 year ended 30 September 2018. In our opinion, the Remuneration Report of Webster Limited for the year ended 30 September 2018, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Gregory J Logue Partner Sydney, 4 December 2018 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 84 For personal use only 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 Cumulative preference 629 1,289 688 1,182 155 3,943 163 13 5 10 0 191 361,245,163 394,000 134 131 Section 44 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 AFF Properties No 1 Pty Ltd atf The AFF Operations Trust Belfort Investment Advisors Limited Verolot Limited Kaplan Equity Limited Mr Bevan David Cushing as trustee of the KD Cushing Family Trust Mr Peter Robin Joy Number of shares 65,260,215 45,132,434 38,561,181 32,474,953 20,244,413 20,140,116 % 18.07 12.49 10.67 8.99 5.60 5.58 Class of shares Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 85 Webster Limited – Annual Report 2018For personal use onlyASX additional information continued Twenty largest shareholders Listed ordinary shares AFF Properties No 1 Pty Ltd atf The AFF Operations Trust Bell Potter Nominees Ltd Verolot Limited National Nominees Limited Belfort Investment Advisors Limited Mr Peter Robin Joy Sir Selwyn John Cushing and Mr Bevan David Cushing HSBC Custody Nominees (Australia) Limited Rel-Trust Management Limited Eagle Securities Limited Rathvale Pty Limited Sandhurst Trustees Ltd Xetrov Pty Limited J P Morgan Nominees Australia Limited Ashfield Farm Limited Mr Andrew Roy Newbery Sisson Ossa Pty Ltd Citicorp Nominees Pty Limited Tasman Super Pty Limited BNP Paribas Noms (NZ) Ltd Number of shares 65,260,215 37,140,914 32,215,862 29,979,725 21,272,722 20,140,116 11,431,136 9,577,484 5,559,529 4,933,469 4,362,236 4,308,121 3,910,000 3,813,420 3,253,748 3,018,769 3,000,000 2,758,916 1,947,836 1,850,000 % 18.07 10.28 8.92 8.00 5.89 5.58 3.16 2.65 1.54 1.37 1.21 1.19 1.08 1.06 0.90 0.84 0.83 0.76 0.54 0.51 86 For personal use only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 Common Sense Investments Pty Ltd Mr Leonard Wallace Boyd Meggsies Pty Ltd Mrs Frances Lorne Calvert Mrs June Lorimer Tutty Anchorfield Nominees Pty Ltd Lesley Patricia Colman Wilcorp No 41 Pty Limited Dr Gordon Bradley Elkington Mary Graham Neild Mr David John Doberer and Mrs Joyce Lynette Carrey Mrs Gwendoline Mabel Shelton Seven Bob Investments Pty Ltd Dr David Megirian J P Morgan Nominees Australia Limited Ms Annabel Peta Sophie Catto Number of shares 73,155 55,278 50,000 35,019 15,908 15,556 14,334 14,156 14,062 12,034 11,800 7,800 7,340 6,800 5,800 4,062 3,500 2,666 2,664 2,232 % 18.57 14.03 12.69 8.89 4.04 3.95 3.64 3.59 3.57 3.05 2.99 1.98 1.86 1.73 1.47 1.03 0.89 0.68 0.68 0.57 87 Webster Limited – Annual Report 2018For personal use onlyBoard of Directors Chris Corrigan, Chairman Maurice Felizzi, Executive Director David Cushing, Non- Executive Director David Fitzsimons, Non-Executive Director Ross Burling, Non-Executive Director Joseph Corrigan, Alternate Director for Chris Corrigan Company Secretary Maurice Felizzi corporate@websterltd.com.au For personal use onlyRegistered office 148 Colinroobie Road Leeton NSW 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 452 Johnston Street Abbotsford VIC Australia 3067 Investor enquiries within Australia T 1300 850 505 Investor enquiries outside Australia T + 61 3 9415 4000 www.computershare.com/au web.queries@computershare.com Webster Limited shares are listed on the Australian Securities Exchange (ASX) For personal use onlyFor personal use only

Continue reading text version or see original annual report in PDF format above