For personal use only
CONTENTS
EXECUTIVE CHAIRMAN’S REPORT ...........................................................................................................3
RESULTS FOR ANNOUNCEMENT TO THE MARKET ...................................................................................7
OPERATIONS REPORT .............................................................................................................................9
DIRECTORS’ REPORT ............................................................................................................................. 18
FINANCIAL REVIEW ............................................................................................................................... 22
REMUNERATION REPORT...................................................................................................................... 35
DIRECTORS’ DECLARATION ................................................................................................................... 46
AUDITOR’S INDEPENDENCE DECLARATION ........................................................................................... 47
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ................................................................. 48
CONSOLIDATED STATEMENT OF FINANCIAL POSITION .......................................................................... 49
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ........................................................................... 50
CONSOLIDATED STATEMENT OF CASH FLOWS ...................................................................................... 51
NOTES TO THE FINANCIAL STATEMENTS ................................................................................................ 53
INDEPENDENT AUDITOR’S REPORT ....................................................................................................... 94
ASX ADDITIONAL INFORMATION ......................................................................................................... 100
CORPORATE DIRECTORY ..................................................................................................................... 102
For personal use only EXECUTIVE CHAIRMAN’S REPORT
For personal use only
EXECUTIVE CHAIRMAN’S REPORT
MESSAGE FROM THE EXECUTIVE CHAIRMAN
Wellard is heading in the right direction, but there is still more work to do.
Four things were particularly pleasing in FY2020.
1. We were able to record the first full year profit since the Company listed on the
ASX. At $0.2 million it was admittedly a small profit, but it was profit nonetheless
and a vastly superior result than the $48.4 million loss in the prior financial year.
2. Continued earnings growth. Our EBITDA of $23.3 million was almost double the
$12.0 million achieved in FY2019 which in turn was higher than the $9.9 million
posted in FY2018.
John Klepec
Executive Chairman
3. The completion of our balance sheet repair task. We entered FY2020 with net
debt of $111.8 million; breaches of our financial covenants which in turn
continued to create going concern issues; $33.8 million of shipping debt due
and payable in the upcoming six months; and noteholders whose interests were
not aligned with our business. We finished FY2020 with $8.9 million of net debt; no covenant breaches; a
repayment profile on the remaining debt that better reflects our earnings; and the noteholders are gone.
B.Comm, MAICD
Also, total ship debt now represents 37.6% of the book value of the Group’s shipping assets compared to
57.4% in the year prior.
4. One of the highest success delivery rates in our history:
• Of the 335,250 head of cattle loaded during the period, our vessels delivered 334,882 cattle,
recording a success rate of 99.9%; and
• Of the 95,360 sheep loaded during the period, our vessels delivered 95,164 sheep, recording a
success rate of 99.8%.
These achievements have placed Wellard in a far more resilient position, to both weather any issues that may arise
and to assess and capitalise on opportunities.
We are however far from ‘mission accomplished’. The board, management and staff are absolutely focussed on the
need to increase our earnings and generate an acceptable return on assets for our shareholders, with our ability to
achieve this objective enhanced by the completion of the balance sheet restructure that materially reduces the net
finance cost.
They are also enhanced by the cost savings that we continue to identify and implement. General and administrative
expenses reduced to $11.0 million in FY2020, down from $22.8m in FY2019, $32.7m in FY2018 and $50.8m in
FY2017. In FY2020 we completed the relocation of the finance function to our Singapore office and the outsourcing
of the technical management of our ships, which will further reduce our cost base in FY2021.
Those cost savings also reflect the change in focus from trading to chartering and a reduction in fleet size. For the
moment, the fleet is right-sized. The US$53.0 million sale of the M/V Ocean Shearer was a win for both seller and
buyer, Livestock Transport & Trading Co KSC, Kuwait, a company controlled by Al Mawashi Limited.
In June 2020, shortly after the purchase, Al Mawashi was able to use the vessel’s outstanding ventilation, speed and
history of excellent performance in animal welfare outcomes to secure the departure of a delayed voyage during the
new Northern Hemisphere summer suspension, which returned them exceptional results.
With the continued limited live cattle trade occurring between South America and Turkey, Wellard struggled to find
work for the M/V Ocean Shearer prior to its sale, leading to a costly relocation to Australia where the vessel
completed only six FY2020 voyages before it was sold in March 2020 – its last voyage to the Middle East being a
relocation voyage at an approximately A$0.9 million operating loss which was part of the sale terms.
There is nothing to indicate that the vessel would have been chartered for the remainder of FY2020 or into FY2021.
Wellard’s remaining fleet comprising the M/V Ocean Swagman, M/V Ocean Drover and M/V Ocean Ute, however,
have all had high rates of utilisation for FY2020. The M/V Ocean Swagman completed its planned Dry Dock in
February before any Covid-19 related issues impacted the Singapore shipyards and it is chartered out through to
December 2020. This is both vindication of Wellard’s decision to enter into a sale and leaseback agreement with the
vessel’s acquirer when it sold the ship for US$22 million to the Heytesbury Group in November 2019 and testament
to the quality of the vessel and operational and animal welfare results that it provides to those who charter her.
4 | WELLARD ANNUAL REPORT 2020
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EXECUTIVE CHAIRMAN’S REPORT
Wellard predominantly transacts in US Dollars (“US$”). Charter contracts, fuel purchases, the majority of crew
wages, insurance and finance are all transacted in US Dollars, which is then converted to Australian Dollars (“AUD”)
at the prevailing exchange rate to enable financial reports to be released in AUD. So that investors can make a
better evaluation of the underlying business and financial results without the noise created by fluctuating exchange
rates, the Board has determined to change the Group’s presentation currency of its financial information from the
Australian Dollar to the United States Dollar with effect from 1 July 2020. As a result, this annual report for the year
ended 30 June 2020 will be the last report presented in Australian Dollars.
Covid-19 impacts
Covid-19 has had sporadic but limited impact on Wellard as demand for imported livestock, and therefore the
Company’s vessels, has remained largely unaffected. Food security is the core driver of our industry and Covid-19
has only highlighted how vital live export is to many countries.
Despite the demand fundamentals remaining the same, the Covid-19 pandemic has seen unprecedented levels of
economic and logistical uncertainty resulting in heavily fluctuating exchange rates and oil prices, and the Company’s
operations being restricted in its ability to undertake crew changes and longer berthing times at each port of call as
countries adopted new procedures.
We are very grateful to all our crews who have remained on board for extended periods, some for beyond twice the
usual rotation periods. We have only recently been able to divert our vessels to ports where crew changes could be
achieved. This has increased ballast voyage sailing times which has both a direct and opportunity cost.
Only one voyage experienced a direct demand-related Covid-19 impact, when two charterers on a multi-charter
voyage to Indonesia materially reduced the area chartered at late notice due to an importing customer issue with
Covid-19. No other charters have been directly impacted in this manner. Management of all regulatory changes and
logistical demands resulting from the Covid-19 pandemic certainly add to the difficulty of negotiating, securing and
delivering the ongoing chartering of our fleet.
Outlook
The outlook for ship utilisation for FY2021 is good for Q1 and promising for Q2, but then becomes less certain as
contract horizons extend. We expect international trade and markets to continue to be impacted by Covid-19.
However, at this stage all vessels are fully chartered in Q1 (noting the M/V Ocean Ute will spend six weeks in
scheduled dry dock beginning this month), with the M/V Ocean Swagman chartered through to December and the
M/V Ocean Drover chartered through to the end of October.
Exports of live beef and dairy breeder cattle from Australia and New Zealand to China were particularly strong in
FY2020 (Australian exports were up 50% on year ago levels). Wellard was active in this market in FY2020 and
forward indications are that this market will remain strong throughout FY2021.
In addition, the M/V Ocean Swagman is close to completing a very successful charter from Chile to China with beef
and dairy breeding cattle. This will be the second such voyage undertaken by a Wellard vessel from South America
to China and is a potential expanding market opportunity.
There is less certainty in FY2021 about Wellard’s two other core markets – Australian feeder cattle to Indonesia and
Australian slaughter cattle to Vietnam. Throughout 2019 the prolonged drought in Australia kept supply high and cattle
prices competitive with alternatives. The underlying demand for beef protein in these destination markets and others in
the region remains high, including because African Swine Fever continues to negatively impact pork supply.
In 2020 Australian cattle prices started to rise and at present are the highest in the world, presenting challenges for
exporters servicing the Indonesia and Vietnam markets as they seek to compete with alternative proteins.
5 | WELLARD ANNUAL REPORT 2020
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EXECUTIVE CHAIRMAN’S REPORT
Figure 1: Global cattle prices
IPCVA
Source:
(Argentina); MLA’s NLRS
(Australia); Esalq/Cepea
(Brazil); INAC (Uruguay);
USDA/Steiner
Consulting Group (US).
Finished cattle (steer)
specifications
vary
between indicators.
Exacerbating this issue, the supply of Australian saleable cattle is expected to contract over the next 12-24 months
as producers who have been in drought enter a herd rebuilding phase. This will put pressure on both livestock
numbers and prices in markets where alternative protein options are available to end consumers.
The key South America to Turkey trade continues to remain uncertain. Turkey, which was importing more than a
million cattle a year in 2018, has not reopened anywhere near that level since its temporary closure in December
2018. Indications are that permits for larger shipments will be issued in Q2 however currently there is only
intermittent releasing of permits for 2000-3000 cattle a time, which are only small suitable for small vessels that lack
the economies of scale of the larger vessels such as Wellard’s, that traditionally have been employed on this route.
If Turkey starts to release more import permits, the M/V Ocean Drover could be deployed from its Australian base to
that trade if it is commercially preferential to its planned Australian-based chartering. At present though, most large
livestock vessels are at anchor awaiting Turkey import permits to be issued. The restriction on exports of sheep from
Australia to the Middle East during June to September adds to the excess capacity in the international livestock
shipping fleet, and together, these factors will continue to keep global livestock ship charter rates subdued. Until the
idle shipping capacity is utilised in the market there is no likelihood of any improvement on ship charter rates in
FY2021.
Finally, we remain alert to the medium and long-term opportunities for the Company’s involvement in the logistics of
supplying sheep from Australia to the Middle East. Whilst current supply constraints exist, requiring a major flock
expansion over time, the demand has never been greater and we note the Australian Governments shared concerns
about the value of international trade between Australia and the Middle East, food security for the region, and the
important role Australia can play in the future, as evidenced by the recent M/V Al Kuwait exemption granted to load
in June.
Conclusion
There are both opportunities and challenges ahead for Wellard. We are however in the fortunate position that
Wellard’s vessels are the ships of choice when exporters and importers need medium or large livestock carriers, our
balance sheet is robust, and our cash position is strong.
I would like to extend my thanks to Wellard’s hard-working team for their dedication and resilience over the past 12
months to get the Company to its present position. Their support for the strategy has been unwavering and no task
has been too big or small in their efforts to keep the fleet moving and return the Company to profitability.
Our customers have also played an important part in the Wellard turnaround and I thank them for their continued
loyalty as we look forward to FY2021.
John Klepec
Executive Chairman
27 August 2020
6 | WELLARD ANNUAL REPORT 2020
For personal use only
RESULTS FOR ANNOUNCEMENT TO THE MARKET
Provided below are the results for announcement to the market in accordance with Australian Securities Exchange
(ASX) Listing Rule 4.2A and Appendix 4E for the consolidated entity Wellard Limited ABN 53 607 708 190 (Wellard
or Company) and its controlled entities (Wellard Group or Group or Consolidated Group), for the year ended 30
June 2020 (FY2020) compared with the year ended 30 June 2019 (FY2019).
The financial statements are presented in Australian dollars (unless otherwise stated).
Financial results and key financial items from continuing operations:
FOR THE YEARS ENDED 30 JUNE
AUD
2020
2019
Movement
Revenue
Chartering1
Trading
Other revenue
Gross profit
General and Administrative expenses2
Restructuring costs3
Other gains/(losses) from trading and chartering
activities
EBITDA4
Other gains/(losses) from other activities
Depreciation and amortisation expenses
EBIT
Net finance costs
Income tax expense
Profit/(Loss) from continuing operations after tax
Profitability analysis
Gross Profit margin
Operating Profit margin
Net Profit margin
Interest coverage5
Balance Sheet analysis
Working capital
Current ratio
Net tangible assets
Net tangible assets per security
Net Debt6
Debt to capital ratio7
Ship loan to asset book value ratio8
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
Times
$m
Times
$m
Cps
$m
%
%
87.6
83.3
4.1
0.2
27.9
(11.0)
(1.0)
7.4
23.3
0.5
(13.1)
10.7
(10.4)
-
0.3
31.8
26.6
0.3
2.2
3.0
1.2
57.7
10.9
8.9
29.9%
37.6%
235.1
51.9
181.7
1.5
38.8
(22.8)
(1.9)
(2.1)
12.0
(26.1)
(16.2)
(30.3)
(11.3)
(5.4)
(47.0)
16.5
5.1
(20.0)
1.1
(84.6)
0.4
54.7
10.3
111.8
67.4%
57.4%
(62.7%)
60.5%
(97.7%)
(86.7%)
(28.1%)
(51.8%)
(47.4%)
(452.4%)
94.2%
(101.9%)
(19.1%)
135.3%
(8.0%)
(100.0%)
(100.6%)
92.7%
421.6%
101.5%
100.0%
103.5%
200.0%
5.5%
5.8%
(92.0%)
(55.6%)
(34.5%)
1 Chartering revenue refers to external chartering activity and excludes revenue arising from intercompany transactions.
2 Separated into Operational expenses and Administration expenses in prior years.
3 Included in Operational expenses in prior years.
4 EBITDA equals profit/(loss) from continuing operations before income tax, less depreciation and amortisation expenses, less net finance costs, less
other gains/(losses) arising from other activities and less impairment expenses.
5 Interest coverage equals EBITDA divided by net finance costs.
6 Net debt equals loans and borrowings less cash and cash equivalents. Loans and borrowings include liabilities directly associated with assets held
for sale.
7 Debt to capital ratio equals loans and borrowings divided by total equity plus loans and borrowings. Loans and borrowings include liabilities directly
associated with assets held for sale
8 Includes asset held for sale and associated liabilities. (The ratio reported in the FY19 Annual report was net of asset held for sale and associated
liabilities).
7 | WELLARD ANNUAL REPORT 2020
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Commentary on the consolidated results and outlook are set out in the Operating and Financial Review section of
the Directors' Report.
DIVIDENDS
The Company does not intend to pay any dividends in respect of the year ended 30 June 2020 (2019: Nil).
AUDIT STATUS
The Consolidated Financial Statements upon which this Appendix 4E is based have been audited.
WELLARD
The Group is an agribusiness that connects primary producers of cattle, sheep and other livestock to international
customers through a global supply chain.
The Group is a supplier of seaborne transportation for livestock globally, predominantly from Australia, and holds
export licences to trade and ship live cattle and sheep on its own account.
LIVESTOCK LOGISTICS SERVICES:
Wellard’s predominant activity in FY2020 was as a livestock logistics services business. When pursuing this
business activity, Wellard charters its ships to third parties earning freight income by carrying livestock on their
behalf. To support its operations, the Group owns and/or controls a fleet of medium and large livestock transport
vessels.
LIVESTOCK EXPORT:
Wellard retains its Australian livestock export licenses and capabilities but reduced this activity from July 2019. When
pursuing this business activity, Wellard sources livestock in markets where production is surplus to domestic
requirements (including Australia, Chile, Brazil and Uruguay) and sells livestock to customer markets where demand
exceeds local production (including Indonesia, Vietnam, the Middle East, Turkey and China), utilising its own and
third-party vessels.
8 | WELLARD ANNUAL REPORT 2020
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OPERATIONS REPORT
For personal use only
OPERATIONS REPORT
OPERATIONS REPORT
The year in summary
Wellard achieved its third year in a row of positive EBITDA and its first statutory full year profit.
The Company’s FY2020 EBITDA of $23.3 million was 94.2% higher than the $12.0 million EBITDA last year.
The improvement in Net Profit After Tax was even greater. The Company’s FY2020 NPAT of $0.2 million was a
considerable improvement on the $48.4 million loss in FY2019, though it is important to note the FY2019 result
included $22.4 million of impairments.
Wellard has achieved its principal 2020 goal of restructuring the balance sheet (including remedying and resetting
debt covenant breaches), reducing earnings volatility and reducing its cost base. It also concluded an important
functional and operational restructure to align with the new streamlined business model.
The Wellard fleet reported one of the highest success delivery rates in its history:
• Of the 335,250 head of cattle loaded during the period, our vessels delivered 334,882 cattle, recording a
success rate of 99.9%; and
• Of the 95,360 sheep loaded during the period, our vessels delivered 95,164 sheep, recording a success
rate of 99.8%.
With a restructured balance sheet, a significantly stronger cash position and a leaner cost structure, the Board can
now refocus on earnings growth. The primary areas of focus for the Board in FY2021 will be:
• Delivering higher earnings; and
• Achieving growth.
Goals achieved in FY2020
i. Balance sheet restructure
Wellard ended FY2020 with a simplified, more robust balance sheet and a strengthened working capital position – a
core aim of its balance sheet restructure program.
During FY2020 Wellard repaid $111.9 million of borrowings to end the reporting period with net debt of $8.9 million.
This was a 92% reduction in net debt from $111.8 million on 30 June 2019 and a 90% reduction on $84.5 million of
net debt on 31 December 2019.
This completes the debt restructure program as the Board considers the Company’s debt levels and repayment
schedules are now both manageable and sustainable.
Whilst various non-core assets were disposed of in prior periods, the debt reduction was principally completed
through the sale of two assets, the M/V Ocean Swagman and the M/V Ocean Shearer.
After receiving shareholder approval, the M/V Ocean Swagman settlement occurred in November 2019 to Wellard
shareholder Heytesbury Group for US$22.0 million. The sale agreement was accompanied by a bareboat charter
agreement which enables Wellard to lease the vessel back from Heytesbury until 31 March 2022, with a further 3-
year option available by negotiation. The charter agreement with Heytesbury provides Wellard with the continued
ability to derive earnings from the vessel as part of its charter fleet offer.
The US$53.0 million sale of the M/V Ocean Shearer to Livestock Transport & Trading Co KSC, Kuwait, a company
controlled by Al Mawashi Limited, was completed in March 2020. Al Mawashi has since renamed the vessel to the
M/V Al Kuwait.
The debt reduction these asset sales enabled was significant in their own right, however each provided additional
benefits to Wellard’s business as proceeds of the sales were in part used to pay out in full the debt owed both to
noteholders and to Intesa Sanpaolo S.p.A. (“Intesa”).
Noteholder payments
Management spent considerable time throughout CY2019 negotiating with noteholders whose financial objectives
diverged considerably from Wellard’s own strategic and financial objectives.
10 | WELLARD ANNUAL REPORT 2020
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OPERATIONS REPORT
These negotiations resulted in several standstill agreements, forced note redemptions, the imposition of penalty
interest rates, payment of their advisor fees and the risk of loan cross defaults.
The sale of the M/V Ocean Swagman and M/V Ocean Shearer enabled Wellard to repay all outstanding notes in
March 2020 and dedicate its focus to managing the Company.
Intesa repayment
Wellard had been paying approximately US$8 million every year in principal and interest on the residual of its
US$38.4 million M/V Ocean Shearer loan from Intesa.
The full repayment of the Intesa loan in March 2020 therefore reduces annual principal & interest (P&I) payments
considerably, allowing better translation of operating earnings into profit.
In addition, at 31 December 2019 the financial covenants relating to the Intesa loan remained the only breached
covenants that had not been remedied or waived. The full repayment of this loan enabled Wellard to achieve full
compliance with the covenants of all remaining financing arrangements on 30 June 2020. This is the first time since
IPO that Wellard has lodged accounts that were not in breach of debt covenants. We note that throughout this
period, Wellard has made all its P&I payments on time and in full.
Finally, a subsequent impact of the full discharge of the Intesa loan was that the remaining “key-man” restrictions
relating to Mr. Mauro Balzarini, and the Balzarini family shareholding ceased to exist. Under the “key man”
restrictions, parties owned or controlled by former Wellard CEO Mr. Mauro Balzarini were required to hold a
minimum 12.5% shareholding in Wellard Limited. With this restriction is lifted, disposal of those shares was enabled,
and creditors associated with Mr. Balzarini’s private interests have taken possession of the majority of those
previously restricted shares.
Remaining vessel finance - Ruchira
In August 2019 Wellard reached an agreement with Ruchira Ships Limited (Ruchira) to extend the repayment
schedules for the M/V Ocean Ute and M/V Ocean Drover by 28 and 24 months respectively, until December 2021.
Ruchira effectively provides vessel finance through sale and leaseback contracts in relation to the two vessels. The
agreement allowed Wellard to reschedule the balloon repayments of approximately US$17.5 million that was due to
be paid by December 2019, over an additional 24-28 months.
The extension reduced amortisation payments and deferred the requirement to buy back the M/V Ocean Drover and
M/V Ocean Ute until December 2021. As such, a total of $10.9 million debt attached to these vessels is now
classified as non-current.
Impact on cash
The asset sales have enabled Wellard to significantly increase its year end cash position, even after the repayment
of around $118.6 million in borrowings and interest. Cash at the end of the period increased by $9.4 million and
resulted in a closing cash balance of $16.8 million.
EBITDA cash conversion remained strong with $20.6 million in net operating cashflow relative to EBITDA of $23.3
million for the period. This compares to last year’s EBITDA of $12.0 million relative to $30.4 million net operating
cashflow which was largely due to the release of working capital associated with discontinued business activities.
ii. Reducing earnings volatility
Livestock prices are subject to global market forces and are inherently volatile. They are affected by a range of
macro and micro factors which impact both supply and demand on a daily basis.
The trading (i.e. the buying and selling) of livestock as a part of the livestock logistics process magnifies the volatility
impact, both positive and negative. To manage downside risk, and as part of its balance sheet restructure, the Group
has reduced its exposure to trading.
Wellard does however retain its licences, permits and competencies to trade and export livestock. While the Group’s
focus will remain on working with other exporters as customers rather than as competitors, a return to livestock
trading remains an option.
11 | WELLARD ANNUAL REPORT 2020
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The Group mitigates its risk of exposure to single market disruptions by diversifying its livestock logistic operations
across several supply and demand regions. While the Group continued to operate across the globe in FY2020, the
prolonged interruption to the South America – Turkey live cattle trade has prompted Wellard to concentrate its
activity in its home Australasian market.
OPERATIONS REPORT
In FY2020, Wellard loaded 38 external charter voyages (FY2019: 26 external charter voyages) to the following
destinations:
•
14 voyages to Indonesia, delivering 176,258 head of cattle, including 9 multi-exporter voyages on the M/V
Ocean Drover and M/V Ocean Shearer;
11 voyages to Vietnam, delivering 52,880 head of cattle;
9 voyages to China, delivering 58,968 head of cattle;
2 voyages to Turkey delivering 41,132 head of cattle; and
2 voyages to the Middle-East delivering 5,644 cattle and 95,164 sheep.
•
•
•
•
Pleasingly, charter revenue (as opposed to capacity) increased both in comparison to last year (by 60.5% compared
to FY2019) as well as a proportion of total revenue, representing 95.1% of the current period’s total revenue. This
reflects Wellard’s change in strategic direction as well as more efficient voyage operations.
Most of the external charter voyages originated from Australia, which accounted for 86.8% of voyage capacity, compared
to 65.1% in the previous financial year, confirming this market as the most important for the Group and reasserting, once
again, that customers in this region recognise the economic and welfare benefits that our ships can deliver.
Through this external chartering activity, Wellard supplied the following markets throughout FY2020: Asia 83.8%;
Mediterranean Basin 9.9% and the Middle East 6.3%. This compares to the FY2019 destinations of 42.7% in
Australia; 34.9% in the Mediterranean Basin; 13.2% in Russia and 9.2% in the Middle East.
Figure 2: Charter revenue by origins
Figure 3: Charter revenue by destinations
Market diversification and a focus on chartering over trading smooths, but cannot eliminate, earnings volatility for
Wellard.
Changes in livestock supply and pricing in both supply and customer markets, fluctuating foreign exchange rates,
market interruption, consumption levels, and competing protein pricing and supply all impact on exporter/importer
profitability, and therefore their demand for Wellard’s vessels. Freight rates are influenced by both shortages and
excess shipping capacity, and bunkers (fuel costs) also vary across ports and different times of the year, further
impacting revenue and costs.
Example of pricing volatility in FY2020:
Category
Darwin feeder steers1
Indonesian slaughter steers2
AUD vs US$3
Very Low Sulphur Fuel Oil (ex Singapore)4
Low
260c/Kg
High
385c/kg
Rp38,000/Kg
Rp40,500/Kg
0.58
0.71
US$206/Mt
US$741/Mt
% change
48%
7%
22%
260%
Sources: 1) MLA/Landmark; 2) Beef Central; 3) https://openexchangerates.org – operated by Open Exchange Rates (UK) Limited;
and 4) Wellard Ships internal record based on available fuel prices.
Wellard can smooth some of these costs, but most impact Wellard either directly or indirectly through the Company’s
customers.
12 | WELLARD ANNUAL REPORT 2020
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OPERATIONS REPORT
iii. Reducing cost base
Reducing the Company’s cost base has been an area of focus for the Board and management over the past three
years.
The FY2020 result was aided by a halving in general and administrative expenses as part of the Company’s ‘Cost
Out’ program which delivered A$11.8 million or 51.8% in savings, predominately labour reductions.
Wellard expects this will reduce further in FY2021 through the outsourcing of the in-house technical management of
the fleet which became inefficient and not financially viable following the sale of the M/V Ocean Shearer.
Outsourcing the service was implemented through the sale of the Wellard’s wholly-owned subsidiary, Welltech
Marine Pte. Ltd. (“Welltech”) to Ishima Pte. Ltd. (“Ishima”) and took effect from the mid of April 2020. Ishima,
accredited with ISO 9001, ISO 14001 and BS OHSAS 18001 standards, is managing about 36 vessels, mostly oil
tankers, chemical tankers and bulk carriers. The strict compliance – as a Tankers’ operator - with the very strict
vetting inspections required by the Oil Majors is an assurance of the highest-quality standard philosophy followed by
Ishima and now transferred to the Wellard’s fleet.
This outsourcing will allow Wellard to reduce its fixed cost for FY2021 with five specialist staff transferred from
employment with Wellard to Ishima, to benefit from the economies of scale and technical expertise of a larger
technical ship manager, and to focus solely on core revenue generating activities.
Work ongoing into FY2021
iv. Delivering higher earnings
High ship utilisation and charter rates are key to delivering on higher earnings for 2021.
These two metrics are achieved by solidifying the Company’s position as the mid and large livestock charterer of
choice. Over many years, Wellard has led the way globally in live export animal welfare, particularly for voyages ex-
Australian ports commissioned by Australian-based exporters. Wellard was at the forefront of design and
implementation of the ESCAS supply chain tracing and responsibility system, recognised as world’s best practise for
international livestock. Wellard has built strong customer relationships over multiple, successful voyages and the
Group’s continued high performance will be vital to keeping these relationships.
The Company’s EBITDA is trending in the right direction, growing from $9.8m in FY2018 to $12m in FY2019 to
$23.3m in FY2020. That trajectory needs to continue so the Company’s earnings can generate a sufficient return on
its assets for shareholders. The Board is confident that the Company is now well placed to deliver that outcome.
v. Achieving Growth
Wellard’s strategy allows for the targeting of both organic and inorganic growth.
The Australian cattle trade to Indonesia and Vietnam is important to Wellard, and despite expected high cattle prices
in FY2021 there will still be a volume of cattle shipped, albeit lower than previous years. Wellard has established a
strong position in this market and is intent on defending and even growing that position.
Shipments of breeding cattle to China was a FY2020 success story for Wellard, which the Company believes is likely
to continue in FY2021 with the potential to change sourcing from Australia to South America due to high pricing,
which would be beneficial to Wellard due to longer journey times and larger shipments on our purpose-built vessels.
The supply of sheep from Australia to the Middle East remains an area of opportunity for Wellard, albeit with increased
regulatory oversight. That region’s concerns over food security grows by the year and has only increased given the
current impact of Covid-19 on international supply chains. This major opportunity requires the development of a solution
to the current sheep supply issue if Australia is to play a significant part, but the sheer size of this market makes it
impossible to ignore. Wellard’s potential involvement in meeting this need will be very different to the past.
Notably, no new large or mid-size purpose-built live export ships have been built since the M/V Ocean Shearer was
launched by Wellard in 2017, and nor are any under construction. Given the minimum two-year lead time to design
and construct a purpose-built vessel, this is a potential area of opportunity given the expected sustained level of
underlying demand but can only be done on the right commercial terms.
13 | WELLARD ANNUAL REPORT 2020
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OPERATIONS REPORT
Coronavirus impact on operations
Covid-19 has had a small impact on the costs side of Wellard’s business, however demand for its vessels has
remained largely, but not totally, unaffected.
The biggest impact on the Company’s operations has been the restricted ability to conduct crew changes as some
port authorities are preventing personnel from leaving vessels and the logistics for repatriation flights are almost
impossible to achieve. As a result all our crews who have remained on board for extended periods, some for beyond
twice the usual rotation periods, until only recently when we have been able to divert our vessels to ports where crew
changes could be achieved. This has both a direct and opportunity cost.
Only one voyage in the past six months experienced a demand-related Covid-19 impact, when two charterers on a
multi-charter voyage to Indonesia materially reduced the area chartered at late notice due to a importing customer
issue with Covid-19. No other charters have been impacted in this manner.
Operationally, we remain very aware of the potential exposure to Covid-19 infections to our on-board crew and have
implemented very strict protocols and procedures implemented to limit any infection and spread of Covid-19 aboard
our vessels. In the event that any ship had Covid-19 infected crew members that needed to be replaced on board
before departure from a port, then there would be a delay until suitable crew replacements can present to the port or
the crew member is cleared to continue. Given the ever-changing country restrictions regarding people movements
the impacts of this are unclear, however up to 14 days quarantine might be considered likely. There are increased
costs to provide the additional personal protective equipment to our crews, and there are associated training
requirements and implementation risks.
Along with the majority of other businesses internationally, Covid-19 has impacted our people and continues to do
so. There is substantial management time required to track, understand and implement all regulatory changes and
logistical demands resulting from the Covid-19 pandemic, and there is heightened uncertainly in our customer base,
which adds to the difficulty of negotiating, securing and delivering profitable charters for our fleet. Our people in
Singapore continue to work, principally from home, and we are increasingly reliant on new technologies to
communicate with our staff, customers and regulators.
It is difficult to estimate the effect Covid-19 will have on business development. We are unable to meet face to face
with prospective new customers, and it is increasingly difficult to build customer relationships in such circumstances.
Nevertheless, we will focus on delivering excellent results for customers and will continue to meet and exceed their
demands.
Outlook
i. Livestock export and charter opportunities
The outlook for FY2021 is very much market dependant.
a) Dairy and beef breeder cattle to China
Shipments of breeder cattle from Australia to China increased by 50% in FY2020, to total 150,000 head.
Wellard was active in this market, as well as shipping similar type cattle from New Zealand to China, with 10
individual shipments to China in FY2020. Present indications are that the trade will remain at these levels, or will
possibly increase.
Subsequent to the end of FY2020, and at the time of this report’s release, Wellard’s M/V Ocean Swagman is
transporting a consignment of dairy and beef cattle from Chile to China. At the time of writing, indications are that
this will be a successful shipment both in terms of voyage results and animal welfare. As mentioned, if Australian
prices remain elevated or increase, the likelihood of further shipments from South American countries increases.
b) Australian slaughter and feeder cattle to Indonesia and Vietnam
Total Australian exports of feeder and slaughter cattle rose slightly in FY2020, by 86,597 head (8.3%), to 1,298,4387
head. Feeder and slaughter cattle exports to Indonesia were relatively stable (down 1.9%) in FY2020 at 628,140
head, while the number of head exported to Vietnam increased by 44.5% to 314,670 cattle. Combined those two
countries import more than 80% of the feeder and slaughter cattle exported from Australia.
14 | WELLARD ANNUAL REPORT 2020
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OPERATIONS REPORT
Figure 4: Australian feeder and slaughter cattle export
Cattle exports to Indonesia continue to be impacted by imports of competing cheap Indian Buffalo Meat (“IBM”). IBM
has acted as a cap on quantity and price of Australian cattle imports to Indonesia. The level of Indonesian IBM
imports and how the recently approved importation of frozen beef from Brazil impacts the Indonesian market will in
part determine the demand for fresh beef from Australian cattle imports and therefore demand for Wellard’s vessels
from exporters in FY2021.
Margin pressure on exporters shipping cattle to Indonesia has increased the attractiveness of multi-exporter voyages
on board the M/V Ocean Drover, due to the economies of scale, performance and animal welfare benefits that this
large vessel provides to exporters with cattle on-board. Wellard continues to facilitate multi-exporter characters as a
way of allowing several exporters to club together and take advantage of the benefits of our vessels without the
impact of individually funding an entire voyage, or having to secure a large offtake sale.
The strong growth in cattle exports to Vietnam was a product of strong economic growth and increased demand for
beef, particularly as African Swine Flu substantially reduced the amount of pork produced and sold in that country.
On the supply side, Meat & Livestock Australia’s 2020 beef projections predict there will be a 16% contraction in
CY2020 live cattle exports, due principally to contracting supply in the northern regions of Australia (see supply
comments below). Given total live cattle exports in the first half of CY2020 were marginally lower (down 1%)
compared to the prior corresponding period, MLA is therefore forecasting a significant contraction in live cattle
exports in H2 CY2020 (or H1 FY2021). Wellard is also expecting a reduction in numbers, but potentially less than
forecast by MLA, due to a higher drop in Australian processed volumes resulting from importing market regulation
issues and higher local supply in the key destination markets. If this was to occur it would lead to greater supply
availability for live export markets and therefore demand for Wellard vessels.
This contraction is largely a product of the Australian cattle herd entering a rebuilding phase after years of drought
impacted cattle numbers. MLA is estimating the herd size is now at 24.6 million head. The last time the herd size
shrank to below 25 million head was 1992.
Figure 5: National cattle herd
Source:
estimates.
ABS, MLA
The Australian cattle
herd
is entering a
rebuilding phase after
drought-
years
impacted
cattle
numbers.
of
As producers seek to rebuild their herds and use available grass to increase the weight of any cattle they are selling,
MLA is forecasting that total adult cattle slaughter will fall by 17% in CY2020. This is expected to push up prices as
abattoirs and exporters compete amongst themselves and with each other to secure the constrained supply.
If this does occur, it is likely to create product substitution in price-conscious overseas markets which will drive down
the volume of imports, and therefore demand for shipping capacity.
15 | WELLARD ANNUAL REPORT 2020
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OPERATIONS REPORT
Weather
Forced destocking may be the offsetting factor against the herd rebuild. Monsoonal rains (the wet season) were late
and short in 2020 in the main live cattle export supply areas (the Northern Territory, western and northern
Queensland) depriving pastoralists of the bank of feed that would normally carry them through the dry season.
This is necessitating early weaning and earlier surplus cattle sales in some areas as these cattle producers allocate
the feed they do have to their breeding herd.
We believe that this is likely to continue until the onset of the 2020/2021 wet season when supply traditionally dries
up due to accessibility.
c) Australian sheep and cattle exports to the Middle East
The export of Australian sheep to the Middle East in FY2020 remained stable at one million head.
Excellent voyage results achieved by the M/V Ocean Drover and M/V Al Kuwait (formerly the M/V Ocean Shearer)
indicates that Wellard-designed vessels with superior ventilation provide exceptional animal welfare outcomes.
While Wellard considers those voyage results appealing to potential clients in the Middle East, existing importers
already own and operate their own vessels so are reluctant to charter vessels from third parties unless necessary.
Recent high Australian sheep prices have compressed margins in this trade and Meat & Livestock Australia’s June
2020 Sheep Projections forecasts indicate there is unlikely to be any relief given the expectation for fewer lambs and
sheep available for slaughter, strong restocker demand for ewe lambs, limited competition from New Zealand,
generally strong demand (despite some disruptions) and a low A$.
MLA’s estimates place the national flock at 63.5 million head, the lowest level in over a century and 12% below June
2017. This will impact on sheep availability as the flock also enters a rebuilding phase.
In addition, a substantial number of sheep have been trucked from Western Australia – which supplies 98% of all
sheep exported live – to Australia’s Eastern States. This will likely impact on turnoff from WA in the next 1-3 years.
Recent recognition by the Australian Government that restrictions placed on the supply of sheep to the Middle East
have broader ramifications for trade to the region was welcome. Wellard hopes this recognition leads to a more
refined assessment of risk, and therefore greater ability to supply for operators with quality shipping infrastructure
and demonstrated track record of success.
d) South American cattle to Turkey
This route remains a ‘swing’ market for Wellard. At present Turkey is intermittently releasing import permits for small
consignments of cattle from South America. Indications are that permits for larger shipments will be released in Q2
FY2021, however this is speculative and formal confirmation is yet to be received.
Although this is a promising sign compared to the complete shutdown of the trade that has previously occurred, it is
not yet conducive to relocating the M/V Ocean Drover from Australia.
When combined with the current seasonal pause in Australian live exports to the Middle East, it has caused the
short-term idling of most long haul, larger livestock vessels, which in turn is negatively impacting freight rates in this
sector.
If Turkey was to reopen this market, it would likely have a considerable positive impact on Wellard.
Impact of Covid-19 on the Outlook
While it is difficult to forecast what the impact of Covid-19 may have on demand for imported livestock, some trends
have emerged to give a possible guide, notably relatively uninterrupted household consumption of protein (including
beef and lamb/mutton) and reduced demand from food service industries. Wellard is mostly exposed to the former.
Government-mandated closure of restaurants to reduce the spread of Covid-19 is occurring internationally, which is
impacting on demand from this sector. Outbreaks of Covid-19 at Australian and South American abattoirs and meat-
processing facilities may also impact the normal supply chains.
However, demand from the household sector has remained relatively robust and there has been no widespread,
government-mandated closure of abattoirs or wet markets reported in the Asian destinations that Wellard’s ships
service.
16 | WELLARD ANNUAL REPORT 2020
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OPERATIONS REPORT
Covid-19 has had little to no impact on demand for beef or dairy breeding cattle to China. In fact, Wellard sees this
as a market opportunity. Given the impact Covid-19 has had on international trade and export supply chains,
countries are becoming increasingly focused on food security, increasing their desire to become more self-sufficient
and therefore to increase their own herd/flock sizes. This is reflected in steadily growing Chinese demand for
imported female breeder cattle.
Regulation, legislation and legal
No reportable mortality voyages or Exporter Supply Chain Assurance System (ESCAS) breaches (from previously
exported cattle) were recorded by Wellard during the current reporting period.
Regulations governing live exports from Australian continue to change, and in the main increase operational and
compliance costs. There have been additional Covid-19 regulatory and compliance issues in almost every
jurisdiction in which we operate.
Some of the changes implemented throughout the year included:
- Reduced sheep stocking densities
- Removal of the requirement for Independent Observers on low risk voyages, such as beef cattle voyages to
-
Indonesia
The creation of exemptions for double-tiered vessels from higher ventilation performance standards and
from the previously announced phase out of double tiered vessels
Additional changes planned for implementation late in CY2020 include:
- Reduced cattle stocking densities
-
Increased pre-export quarantine periods
Wellard continues to advocate a shift towards risk-based regulation to incentivise investment in animal welfare and
good operational performance.
Under international regulations, from 1 January 2020 the International Maritime Organization’s (IMO) 0.5% global
cap on sulphur dioxide (SOx) content in fuels for shipping has entered into force. Limiting sulphur oxide emissions
from ships reduces air pollution and particulate matter (tiny harmful particles) resulting in a cleaner environment.
In order to meet IMO requirements, ships need to use fuel oil which is inherently low enough in sulphur or install
exhaust gas cleaning systems, also known as “scrubbers” which are designed to remove sulphur oxides from the
ship’s engine and boiler exhaust gases. Wellard opted to buy low sulphur fuel oil rather than install scrubbers to
remove sulphur from heavy fuel oil, expecting that the capital cost of installing the scrubbers would not be offset by
the low sulphur price differential.
During the early introduction of the regulations the differential between low sulphur fuel oil and heavy fuel oil was
US$367/tonne. That differential has narrowed considerably as we expected. With a recent fall in global fuel prices
due to increased oil production and reduced demand due to Covid-19, the June 2020 monthly average price of low
sulphur fuel oil (ex Singapore) is below the December 2019 monthly average price of heavy fuel oil by approx. 5.6%.
In June 2020, the Federal Court of Australia ruled in favour of class action plaintiffs in legal action against then
Federal Agriculture Minister Joe Ludwig’s decision to ban the live export of cattle to Indonesia in 2011.
Wellard is a member of the class and was the largest cattle exporter to Indonesia at the time.
At this stage it is unclear what the quantum of damages awarded to the class of plaintiffs might be or when any
payments would occur.
Wellard has lodged its defence in response to a class action launched against the Company (see ASX
announcement 10 March 2020).
The Company has been asked by a number of shareholders whether it possesses Directors and officers (D&O)
liability insurance. The specific arrangements Wellard has with its insurers are confidential, however, as would be
expected of a listed public company, Wellard has various insurances in place to deal with a variety of risks and the
Company would be expected to give ongoing consideration to its entitlements under any potentially relevant
insurance.
17 | WELLARD ANNUAL REPORT 2020
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DIRECTORS’ REPORT
For personal use only
The Directors present their report together with the financial report of Wellard Limited (ABN 53 607 708 190) (Wellard
or the Company) and the entities controlled during the financial year ended 30 June 2020 (FY2020) and the
independent auditor’s report thereon. The above operations report forms a part of this Director’s Report.
DIRECTORS’ REPORT
DIRECTORS
John Klepec
Executive Chairman
B.Comm, MAICD
John Stevenson
Non-Executive Director
FCA, GAICD, FGIA,
BBus.
Philip Clausius
Non-Executive Director
BA (Hons) Business
Administration
John Klepec possesses considerable expertise in commercial management,
business development and finance across a wide range of industry groups including
agriculture, logistics and commodities.
He has considerable public company experience, including, most recently as a Non-
Executive Director and alternate Director of Ten Network Holdings Limited for three
years.
Mr Klepec manages his private agricultural developments and was previously the
Chief Development Officer for Hancock Prospecting from 2010 to 2016, and prior to
that held senior management positions with major Australian publicly listed
companies BHP Billiton Limited, Mayne Group Limited and with the BGC Group.
During his time at Hancock Prospecting he was responsible for developing
Hancock’s substantial agricultural portfolio, including the acquisition of 50% of
Bannister Downs Dairy, three major Kimberley Beef Pastoral Stations (Fossil
Downs, Liveringa and Nerrima) and two premier Wagyu herds. He also led the sale
of a 30% equity interest in Roy Hill to Japanese, Korean and Taiwanese interests
for $3.5 billion; the rationalisation of Hancock’s coal interests; and was integral to
securing the $7 billion of project finance for Roy Hill.
John Stevenson possesses considerable experience in the agribusiness sector,
notably as CFO and Director for Australia’s largest privately-owned pastoral
company, Consolidated Pastoral Company. He has also worked for one of
Australia’s largest cattle producers, Heytesbury Beef Pty Ltd.
His experience working in Asia, particularly Indonesia, Singapore and China, is of
considerable value to Wellard given the Company’s extensive operations in those
markets, and he has worked for both listed and private companies. He has
considerable expertise in debt and equity markets.
John is currently a Non-Executive Director at RIFA Salutary Pty Ltd a large foreign
investor in cattle, sheep and cropping properties in Eastern Australia, and is Audit
and Risk Committee Chairman of Rifa Investment Pty Ltd and its subsidiaries. John
is also the Chief Financial Officer of Namoi Cotton Limited (ASX: NAM).
Philip Clausius is the Founder & Managing Partner of Singapore based Transport
Capital Pte. Ltd., an investment management and advisory firm focused on the
global marine transport, aviation and offshore industries. Prior to this, he was Co-
Founder and CEO of the FSL Group, a Singapore-based provider of leasing services
to the international shipping industry where he oversaw the acquisition and financing
of approximately US$1 billion in maritime assets as well as the IPO of FSL Trust in
March 2007, which raised about US$330 million in equity proceeds in a globally
marketed offering.
As well as a Non-Executive Director of Wellard, Philip currently serves as Director
and CEO of Nasdaq OMX Copenhagen listed Nordic Shipholding. He is also the
Chairman of the Singapore War Risks Mutual and holds directorships in the
Standard Club, Standard Asia and Bengal Tiger Line.
Philip graduated from the European Business School, Germany in 1992 with the
“Diplom-Betriebswirt” (Business Administration) degree.
19 | WELLARD ANNUAL REPORT 2020
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DIRECTORS’ REPORT
Kanda Lu possesses considerable expertise in commerce and financial institutions.
His recent position was Vice President for Morgan Stanley China GCM. Kanda Lu
currently runs his own boutique asset management firm in Hangzhou China.
In addition to his Executive Director role, Kanda is responsible for the development
and growth of Wellard’s entry into the Chinese market and other business initiatives.
Kanda Lu
Executive Director
Business Development
Manager China
B. Comm., M.
International Relations
with M. Commercial Law,
Macquarie University
COMPANY SECRETARY
Michael Silbert
General Counsel and Company Secretary
B.Juris, B. LLB, B.A. (Hons)
Michael Silbert was appointed as General Counsel and Company Secretary on 17 October 2016. Michael has
extensive experience in equity capital markets, mergers and acquisitions, banking and finance and general commercial
matters. Michael has strong legal and company secretarial experience, having been general counsel and company
secretary for a significant Western Australian and ASX-listed engineering and mining services business, an iron ore
miner, and a listed winery business.
20 | WELLARD ANNUAL REPORT 2020
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DIRECTORS’ REPORT
PRINCIPAL ACTIVITIES
The Group is an agribusiness that connects primary producers of cattle, sheep and other livestock to international
customers through a global supply chain.
The Group is a supplier of seaborne transportation for livestock globally, predominantly from Australia, and holds
export licences to trade and ship live cattle and sheep on its own account.
LIVESTOCK LOGISTICS SERVICES:
Wellard’s predominant activity in FY2020 was as a livestock logistics services business. When pursuing this
business activity, Wellard charters its ships to third parties earning freight income by carrying livestock on their
behalf. To support its operations, the Group owns and/or controls a fleet of medium and large livestock transport
vessels.
LIVESTOCK EXPORT:
Wellard retains its Australian livestock export licenses and capabilities but reduced this activity from July 2019. When
pursuing this business activity, Wellard sources livestock in markets where production is surplus to domestic
requirements (including Australia, Chile, Brazil and Uruguay) and sells livestock to customer markets where demand
exceeds local production (including Indonesia, Vietnam, the Middle East, Turkey and China), utilising its own and
third-party vessels.
Wellard’s EBITDA of $23.3 million is a $11.3 million improvement on last year with a full year profit after tax from
continuing operations of $0.3 million. It is a pleasing improvement on the Group’s performance when compared to
the result for the prior corresponding years, reflecting the substantial balance sheet and operational restructure
which was substantially completed during the reporting year.
Wellard experienced mixed trading conditions throughout the year. Vessel utilisation ex M/V Ocean Shearer was
strong but there was sustained downward pressure on charter rates due to an oversupply of capacity in the large
vessel sector of the industry due to the ongoing restriction of livestock import permits by Turkey.
Wellard’s restructure was aligned around the strategy of simplifying the business model and accordingly the
Company now focusses on chartering the vessels to third parties. The pivot has helped Wellard to form productive
business relationships with livestock exporters which were previously strong competitors, and to continue to
demonstrate that Wellard can be the charterer of choice to parties who value exceptional animal welfare outcomes
and professional logistics services.
The above Operations Report forms a part of this Directors’ Report.
21 | WELLARD ANNUAL REPORT 2020
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FINANCIAL REVIEW
FINANCIAL REVIEW
OPERATING PERFORMANCE FROM CONTINUING OPERATIONS
FOR THE YEARS ENDED 30 JUNE
AUD
2020
2019
Movement
Revenue
Chartering1
Trading
Other revenue
Gross profit
General and Administrative expenses2
Restructuring costs3
Other gains/(losses) from trading and chartering
activities
EBITDA4
Other gains/(losses) from other activities
Depreciation and amortisation expenses
EBIT
Net finance costs
Income tax expense
Profit/(Loss) from continuing operations after tax
Profitability analysis
Gross Profit margin
Operating Profit margin
Net Profit margin
Interest coverage5
Balance Sheet analysis
Working capital
Current ratio
Net tangible assets
Net tangible assets per security
Net Debt6
Debt to capital ratio7
Ship loan to asset book value ratio8
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
Times
$m
Times
$m
Cps
$m
%
%
87.6
83.3
4.1
0.2
27.9
(11.0)
(1.0)
7.4
23.3
0.5
(13.1)
10.7
(10.4)
-
0.3
31.8
26.6
0.3
2.2
3.0
1.2
57.7
10.9
8.9
29.9%
37.6%
235.1
51.9
181.7
1.5
38.8
(22.8)
(1.9)
(2.1)
12.0
(26.1)
(16.2)
(30.3)
(11.3)
(5.4)
(47.0)
16.5
5.1
(20.0)
1.1
(84.6)
0.4
54.7
10.3
111.8
67.4%
57.4%
(62.7%)
60.5%
(97.7%)
(86.7%)
(28.1%)
(51.8%)
(47.4%)
(452.4%)
94.2%
(101.9%)
(19.1%)
135.3%
(8.0%)
(100.0%)
(100.6%)
92.7%
421.6%
101.5%
100.0%
103.5%
200.0%
5.5%
5.8%
(92.0%)
(55.6%)
(34.5%)
1 Chartering revenue refers to external chartering activity and excludes revenue arising from intercompany transactions.
2 Separated into Operational expenses and Administration expenses in prior years.
3 Included in Operational expenses in prior years.
4 EBITDA equals profit/(loss) from continuing operations before income tax, less depreciation and amortisation expenses, less net
finance costs, less other gains/(losses) arising from other activities and less impairment expenses.
5 Interest coverage equals EBITDA divided by net finance costs.
6 Net debt equals loans and borrowings less cash and cash equivalents. Loans and borrowings include liabilities directly associated
with assets held for sale.
7 Debt to capital ratio equals loans and borrowings divided by total equity plus loans and borrowings. Loans and borrowings include
liabilities directly associated with assets held for sale
8 Includes asset held for sale and associated liabilities. (The ratio reported in the FY19 Annual report was net of asset held for sale
and associated liabilities).
22 | WELLARD ANNUAL REPORT 2020
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FINANCIAL REVIEW
OVERVIEW
FY2020 has been a year of significant financial progress as Wellard’s Board and management focussed on
restructuring the Group’s debts and restoring its profitability. During the current financial year, Wellard has achieved:
• Net Profit after Tax of $0.3 million from continuing operations, the first profit since listing on the ASX;
• A gross profit margin increase of 92.7% driven by the focus on external chartering activity;
•
The highest EBITDA of $23.3 million (up by 94.2% from FY2019) recorded since listing;
• Positive working capital of $3.0 million or 103.5% from FY2019 negative $84.6 million;
• A net debt reduction of $102.9 million or 92.0% to $8.9 million;
• No financial covenant breaches as of 30 June 2020 following the repayment of all bank and noteholder
debt, and completion of its recapitalisation program.
The Group’s strategic realignment and continued efforts on its ‘Cost Out’ program delivered positive results with its
focus during the reporting period directed towards finalising the Group’s restructuring, principally by means of asset
sales to reduce debt levels.
The agreement reached on 20 September 2019 with Ruchira Ships Limited (“Ruchira”) to extend the repayment
schedules for the M/V Ocean Ute and M/V Ocean Drover until December 2021 allowed Wellard to reschedule the
balloon repayments of approximately US$17.5 million that was due to be paid by December 2019, over an additional
24-28 months. The new arrangements provided significant cash flow benefits from lower monthly repayment
obligations; along with the previous breaches on the financing facilities for these two vessels being waived.
The sale of the M/V Ocean Swagman to Heytesbury Singapore Pte Ltd (Heytesbury) for a consideration of US$22.0
million – announced on 4 July 2019 and completed on 4 November 2019 – allowed Wellard to fully repay the vessel’s
financier Nord LB; to repay US$10 million to the noteholders; and at the same time, maintain full control of the vessel
until March 2022 (with a 3-year option to extend thereafter by negotiation).
Finally, the sale of the M/V Ocean Shearer to the Kuwaiti company Livestock Transport & Trading Co KSC for a
consideration of US$53.0 million – announced on 12 December 2019 and completed on 26 March 2020 – allowed
Wellard to fully repay the vessel’s financier Intesa Sanpaolo; to fully redeem its remaining unlisted notes, and to
increase cash in hand by US$12.2 million. The sale also completed Wellard’s recapitalisation program and significantly
strengthened the Group’s working capital position.
REVENUE AND SEGMENTAL PERFORMANCE
Following the Company’s decision to suspend Wellard’s livestock trading activity, total revenue in FY2020 decreased
by 62.7% to $87.6 million (2019: $235.1 million). However, gross profit margin increased by 92.7% in the current
financial year as a result of refocusing on external charter activity, which now represents 95.1% of total revenue (2019:
22.1%).
Figure 6: Revenue vs Gross profit margin
Revenue decreased by
62.7% to $87.6 million.
However, gross profit
increased by
margin
92.7%
in the current
financial year
23 | WELLARD ANNUAL REPORT 2020
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FINANCIAL REVIEW
Trading
In FY2020, trading activities represented only 5% of total revenue at $4.1 million (2019: 77% at $181.7 million) and
were primarily related to the recognition of an M/V Ocean Swagman voyage which loaded at the end of FY2019 and
discharged in the current financial year. The contribution from trading activity, defined as revenue less cost of sales,
was $1.0 million (2019: $36.0 million) reflecting the reduced trading activities from July 2019.
Chartering
Charter revenue increased by 60.5% to $83.3 million as compared to FY2019 and now constitutes the bulk of total
revenue. The contribution from chartering activity was $26.7 million (2019: $1.3 million). The growth is a consequence
of more efficient utilisation of the available shipping capacity and the increase of external chartering versus the
traditional intergroup vessel utilisation. In FY2020, external chartering activities absorbed almost the entire available
shipping capacity, reflecting the increased external demand for space on our vessels.
Figure 7: Revenue by segment
Figure 8: Internal vs external utilisation
In FY2020, off-hire days were almost double in number compared to the same period in the previous year, mainly due
to the dry-dock timing of the M/V Ocean Swagman, pre-sale inspections of the M/V Ocean Swagman and the M/V
Ocean Shearer, technical stoppages to comply with mandatory regulations other than minor repairs, and maintenance.
Charter-related variable costs increased by $4.5 million or 14.9% to $34.7 million (FY2019 $30.2 million) primarily due
to the average increase in bunker price (marine fuel oil) and contributed to by the increased number of port calls during
the period. The Group benefited from lower fuel costs in Q4 in line with lower global oil prices which offset the higher
prices of Q3 when switching to very low sulphur fuel. Other vessel-operating costs, mainly consisting of crew, insurance
and other technical expenses, remained stable and within the approved operational budget.
The adoption of AASB16 ‘Leases’ reduced the Group’s operating costs by $2.6 million in FY2020 due to the recognition
of the right-of-use assets and liabilities for the M/V Ocean Swagman’s operating lease, which are now included in
depreciation and amortisation expenses and finance costs.
EARNINGS PERFORMANCE
The ‘Cost Out’ program delivered another $11.8 million in savings in FY2020, with general and administrative expenses
reduced to $11.0 million (FY2019: $22.8 million). These costs relate mainly to personnel and office costs,
consultancies, travel expenses and others. Labour expenses recorded the single largest reduction in FY2020,
decreasing by $4.6 million or 41.4% versus last year, given reduced staff numbers post-restructuring. The adoption of
AASB16 ‘Leases’ reduced general and administrative expenses by $0.7 million in FY2020 due to the recognition of
the right-of-use assets and liabilities for some office and IT equipment leases, which are now included in depreciation
and amortisation expenses and finance costs.
EBITDA
Group EBITDA from continuing operations – defined as earnings from continuing operations before the impact of
income tax, depreciation and amortisation expenses, finance costs and excluding other gains or losses from other
activities and impairment expenses – increased by 94.2% to $23.3 million (FY2019: $12.0 million) driven by improved
operational efficiency and a lower cost structure achieved by Wellard. Operating profit margin increased substantially
to 26.6% (FY2019: 5.1%), reflecting that a significant portion of revenue is now translated into operating income.
FY2020 EBITDA represents the highest level recorded since its listing on the ASX, continuing the positive trend from
the past three financial years. EBITDA is included in the Group’s KPIs.
24 | WELLARD ANNUAL REPORT 2020
For personal use only
Figure 9: Track record
General and Administrative costs
EBITDA
Operating profit margin
FINANCIAL REVIEW
Other gains/(losses) from other activities
During the current financial year, the Group incurred a series of one-off expenditures in a number of areas of the
business. These included a net gain on the disposal of property plant and equipment and other financial assets,
impairment expenses and the net result of foreign exchange gains and losses.
The Australian Dollar continued to weaken against the US Dollar during the period, falling another 2.1% in FY2020
after a 5.1% fall in FY2019. This was despite a recovery in the Australian Dollar in the second half of the financial year.
This led to a more contained $1.5 million net foreign exchange loss in FY2020 (FY2019: $3.5 million loss) of which
$0.3 million was unrealised gain (FY2019: $4.3 million loss).
Figure 10: Monthly average US$/AUD
Source: Open exchange
rates
The United States Dollar
(US$) slowed down its
growth recently even if
current
during
the
it has
financial year,
gain
to
continued
strength
the
over
Australian Dollar.
Depreciation and amortisation expenses
During the current financial year depreciation and amortisation expenses decreased by a further 19.1% to $13.1 million
(FY2019: $16.2 million) as a consequence of the non-core asset sales. This includes the depreciation of right-of-use
assets amounting to $3.0 million without a comparative in FY2019 as it arises from the application of AASB16 ‘Leases’
from 1 July 2019.
Net finance costs
Net financial costs reduced by a further 8.0% or $0.9 million in the current financial year, falling to $10.4 million
(FY2019: $11.3 million). Exceptional items recorded in this financial year included a $2.5 million one-off loss related
to the write-off of the capitalised borrowing costs of the Intesa loan following the sale of the M/V Ocean Shearer, $1.7
million one-off loss related to the modification of borrowing facilities following the extension of the original lease terms
for the M/V Ocean Ute and the M/V Ocean Drover until December 2021. Net finance costs also included the interest
expense of right-of-use assets amounting to $0.5 million without a comparative in FY2019 as it arises from the
application of AASB16 ‘Leases’ from 1 July 2019.
Interest coverage improved significantly from 1.1 times in FY2019 to 2.2 times in FY2020 on a year-on-year basis as
a result of an improved EBITDA, debt reduction and better capital management.
25 | WELLARD ANNUAL REPORT 2020
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FINANCIAL REVIEW
Profit/(loss) from continuing operations after tax
For the first time since listing in 2015, Wellard reported a profit after tax of $0.3 million (FY2019: loss of $47.0 million)
after recognising $4.8 million of net non-recurring gains.
Of this, $7.9 million was a gain on derecognition of net contract liabilities of Sri Lanka project, $1.7 million was a one-
off loss on the modification of borrowing facilities following the extension of the original lease terms for the M/V Ocean
Ute and M/V Ocean Drover until December 2021 and $0.5 million was a net loss related to sale of the M/V Ocean
Shearer which includes the write-off of the capitalised borrowing costs of $2.5 million. The remaining $0.9 million was
the net loss related to the disposal of a subsidiary and restructuring costs.
Figure 11: Track record
Net finance costs
Interest coverage
Profit/(loss) from continuing operations
ASSETS AND LIABILITIES
Non-current assets
Non-current assets are mainly related to the net book value (“NBV”) of Wellard’s vessels – including right-of-use leased
assets – and related dry-dock costs capitalised. The application of AASB16 ‘Leases’ resulted in the recognition of an
additional $6.6 million in assets as at the end of June 2020. The current year reduction includes the derecognition of
the NBV of the M/V Ocean Shearer for $76.1 million following its sale, announced on 12 December 2019 and
completed on 26 March 2020.
The Group assesses the carrying value of its vessels by obtaining independent market valuations by two primary
brokers, considering market offers, as well as considering forecast earnings over the vessel’s lifetime. The average
estimated market value of Wellard’s owned fleet provided by the brokers as at 30 June 2020 was of US$46.8 million
compared to a net book value of US$40.3 million.
Capital expenditure
Capital expenditure – with the exclusion of additions due to the application of AASB16 ‘Leases’ – was $3.1 million
(FY2019: $2.3 million) and was mainly related to dry-dock costs for the M/V Ocean Swagman.
Net debt
During the period net debt was reduced by $102.9 million or 92.0% to $8.9 million as at 30 June 2020 (30 June 2019:
$111.8 million). The continued focus on capital efficiency resulted in a significant reduction in Group debt levels as a
proportion of funding. At the end of the period, total debt represented 29.9% of the Group’s funding (30 June 2019:
67.4%), while total ship debt represented 37.6% of the book value of the Group’s shipping assets (30 June 2019:
57.4%). At the end of FY2020, the adoption of AASB16 led to the recognition of additional liability of $6.8 million.
The major reduction in the Group’s indebtedness stems from a series of successful strategic measures adopted by
the Board, including the finance-extension agreement with Ruchira and the sale of the M/Vs Ocean Swagman and
Ocean Shearer that allowed the full repayment of the respective financing facilities, the full redemption of the notes
and the completion of the Group’s recapitalisation program.
As 30 June 2020, Wellard had no financial covenant breaches. As a result, no reclassification of its non-current loans
and borrowings to current was required, which reverses the treatment which was applied in previous financial years.
The Group maintains a US$4.0 million working capital facility with UOB in Singapore to fund ship operating costs as
well as foreign-exchange transactions which, as of 30 June 2020, has not been utilised (30 June 2019: $1.6 million).
The Group also maintains banking and credit-card facilities in Singapore. These facilities remain available to the Group.
26 | WELLARD ANNUAL REPORT 2020
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FINANCIAL REVIEW
Debt Position
AUD
2020
2019
Movement
Intesa Sanpaolo - M/V Ocean Shearer term loan facility
NordLB - M/V Ocean Swagman term loan facility
M/V Ocean Drover borrowing
M/V Ocean Ute borrowing
Notes
UOB Bunker facility
Lease liabilities recognised in accordance with AASB16
Total Loans and borrowings
Cash and cash equivalents
Net Debt
$‘000
$‘000
$‘000
$‘000
$‘000
$‘000
$‘000
$’000
$‘000
$‘000
-
-
15,939
2,981
-
-
6,786
25,706
16,796
56,191
9,132
24,754
4,822
22,756
1,567
-
119,222
7,424
8,910
111,798
(56,191)
(9,132)
(8,815)
(1,841)
(22,756)
(1,567)
6,786
(93,516)
9,372
(102,888)
During FY2020, Wellard met all of its scheduled ship debt servicing commitments and made an early redemption of
its unlisted notes.
Figure 12: Track record
Working capital
Net Debt
Ship loan to asset book value
CASH FLOWS
Operating activities generated net cash of $20.6 million in FY2020, which is $9.8 million down from $30.4 million in
FY2019, mainly impacted by the decreased livestock trading activities and by a reduced fleet contribution following
the disposal of M/V Ocean Shearer. Investing activities generated a net cash inflow of $108.7 million (FY2019: $12.7
million), due to the sale of two vessels as announced during the year. Financing activities resulted in a net cash use
of $118.6 million (FY2019: $41.7 million) reflecting the full repayment of the financing facilities of the disposed vessels
and the full redemption of the Company’s notes.
During the current financial year, Wellard generated a $10.7 million net increase in cash held, which is $9.4 million up
from $1.3 million net increase in FY2019. At 30 June 2020, the Group’s cash and cash equivalents stood at $16.8
million (30 June 2019: $7.4 million) plus $1.4 million (30 June 2019: Nil) held in trust in escrow accounts until the
completion of certain voyages.
Condensed Consolidated Statement of Cash Flows
Net cash inflow from operating activities
Net cash inflow from investing activities
2020
$‘000
20,606
108,702
2019
$’000
30,378
12,652
Net cash (outflow) from financing activities
(118,563)
(41,735)
Net increase in cash held
Cash at the beginning of the financial year
Effects of exchange rate changes
Cash at the end of the financial year
10,745
7,424
(1,373)
16,796
1,295
8,297
(2,168)
7,424
27 | WELLARD ANNUAL REPORT 2020
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FINANCIAL REVIEW
Free Cash Flow statement
2020
$‘000
2019
$’000
Net cash inflow from operating activities
20,606
30,378
Income tax paid
Net interest paid
Free cash flow
0
(6,684)
13,922
0
(8,412)
21,966
36.6%
Cash conversion ratio (FCF/Revenue)
15.9%
9.4%
69.1%
Free cash flow (“FCF”) for the year, defined as cash flow from operating activities less income taxes paid and net
interest payments, was $8.0 million or 36.6% lower than in the previous year mainly due to the reduction in livestock
trading activity. However, the cash conversion ratio, defined as FCF divided by total revenue, increased by 69.1% to
15.9% in the current financial year, showing that the Group can generate more cash out of its sales following its refocus
on external chartering activities.
Figure 13: Free cash flow to sales (cash conversion) ratio
The cash conversion
ratio
increased by
69.1% to 15.9% in the
current financial year,
showing
the
Group can generate
more cash out of its
sales
its
following
refocus on external
chartering activities.
that
ALTERNATIVE PERFORMANCE MEASURES (APM)
Certain analyses included in this annual report are based on measures that are not defined in the applicable reporting
framework, but that are regularly used by Wellard for management purposes like communicating performance and
decision-making. Wellard believes that complementing IFRS measures with APM may enhance financial
communication and add value to users by explaining the Company’s performance from the management’s perspective
and, in some cases, provide comparability with peers. APM should not be considered in isolation from, or as a
substitute for, financial information presented in compliance with Australian Accounting Standards.
EBITDA and Operating profit margin
EBITDA is defined as profit/(loss) from continuing operations before the impact of income taxes, depreciation and
amortisation expenses, net finance costs, other gains/(losses) arising from other activities and impairment expenses.
Operating profit margin is defined as EBITDA divided by total revenue. Wellard believes that EBITDA and Operating
profit margin are important measures that focus on the business’ profitability from its core operations before the impact
of capital structure, leverage, and non-cash items.
EBIT
EBIT is defined as profit/(loss) from continuing operations before the impact of income taxes and finance costs. EBIT
is considered an important measure to analyse a Company’s performance without the costs of the capital structure
and taxes.
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FINANCIAL REVIEW
Free cash flow (FCF) and cash conversion ratio
Free cash flow is defined as cash flow from operating activities, less income taxes paid and net interest payments. It
does not represent residual cash flows entirely available for discretionary purposes. The repayment of principal
amounts borrowed is not deducted from FCF. Cash conversion ratio is defined as FCF divided by total revenue.
Wellard believes that FCF and cash conversion ratio are useful to investors because they represent cash flows that
could be used for capital expenditures, distribution of dividends, repayment of debt, or to fund strategic initiatives.
Interest Coverage
Interest coverage is defined as EBITDA divided by net finance costs and provides a measure of the Group’s capability
to service its debt through its operating profitability.
Net Debt
Net debt is defined as loans and borrowings (including liabilities directly associated with assets held for sale) less cash
and cash equivalents. Wellard believes Net debt is a relevant measure to determine the level of leverage given the
Company’s liquid assets.
GROUP PRESENTATION CURRENCY
The completion of Wellard’s strategic move from livestock trading to livestock logistics services and the consequent
refocus on the chartering activity of its Singapore-based subsidiaries means nearly all of the Group’s revenue and
expenses are conducted in US Dollars (“US$”). The Board has therefore decided to change the Group’s presentation
currency of its financial information from the Australian Dollar to the United States Dollar with effect from 1 July 2020.
This annual report will be the last report presented in Australian Dollars. The Board believes that the change in the
reporting currency will provide shareholders with a more accurate reflection of Wellard Limited’s underlying
performance while reducing the impact of currency fluctuations.
At the release of the FY2021 interim and full-year financial results, the FY2020 accounts will be restated in US$ to
provide shareholders with meaningful comparisons with the prior corresponding period.
MATERIAL BUSINESS RISKS
Wellard is subject to a number of risks which can lead to unplanned costs and loss of income and that are both:
a) specific to its business activities, including risks associated with its marketing and export activities, political
and regulatory risks and operational and financing risks; and
b) of a more general nature, applicable to many listed companies and to the ownership of shares.
The material business risks flow from its current circumstances; the nature of its business activities as an international
shipper and trader of live animals; and general risks that apply to international companies involved in maritime
transportation and cross-border trade.
The decision of the Company to temporarily suspend the Group’s trading activities and the consequent shift to the
chartering business, caused a change in Wellard’s risk profile, with the Group that is now more exposed to risks that
can arise from its shipping operations.
The FY2020 Risk Assessment underlined the following risk categories as the most significant for the Group:
Vessel Breakdown or Damage Risk
The operation of an ocean-going vessel carries inherent risks. Wellard’s vessels and their cargoes could be at risk of
being damaged or lost because of events such as marine disasters, bad weather, mechanical failures, grounding, fire,
collisions, human error, war, terrorism, piracy, force majeure and other circumstances or events. If Wellard’s vessels
suffer damage, they may need to be repaired. The costs and timing of repairs may be substantial, partially due to their
scale and need for specialised repair infrastructure. Wellard may have to pay repair costs if the Group’s insurance and
contractual indemnification provisions are unavailable or insufficient to cover such liability. The loss of revenues while
these vessels are being repaired, as well as the actual cost of these repairs, may adversely affect Wellard’s business
and financial condition and performance. The Company seeks to mitigate this risk by taking out relevant insurance
policies with first-class insurers and adopting a Planned Maintenance System, through the engagement of our fleet
technical manager Welltech Marine Pte. Ltd. (“Welltech”), and by maintaining the strategic objective to continue to
operate a young fleet. As noted elsewhere in this Report, Welltech has been sold and is now operated by Ishima Pte.
Ltd.
29 | WELLARD ANNUAL REPORT 2020
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Failure to adequately maintain the Wellard fleet of vessels
If Wellard fails to adequately maintain its fleet of vessels, this may result in mechanical problems or failure to comply
with safety regulation and Port State Control or loss of its Class Certificate, causing disruptions to business operations,
higher operating costs or deterioration in Wellard’s ability to provide transport to a standard which complies with
relevant regulations to enable the movement of livestock commodities. These circumstances may materially and
adversely affect Wellard’s reputation, profitability and growth. To mitigate the impact of this risk, Wellard has entrusted
the technical management of its fleet to a primary technical manager, Welltech, and through the adoption of a rigorous
Planned Maintenance System. As noted elsewhere in this Report, Welltech has been sold and is now operated by
Ishima Pte. Ltd.
Bunker Price Risk
Fuel is a material operating costs, and the Group is exposed to bunker price fluctuations through its shipping
operations. The price and supply of fuel are unpredictable and fluctuate based on events outside Wellard’s control,
including geopolitical developments, supply and demand for oil and gas, actions by Intergovernmental organization
like OPEC and other oil and gas producers, war and unrest in oil-producing countries and regions, regional production
patterns and environmental concerns. There is a risk that there could be significant increases to fuel price that could
significantly increase Wellard’s cost of operations, including third-party freight costs. As a general principle, bunker
adjustment factors in customer contracts price are the main mechanism to manage bunker price risk in the Group. In
addition, Wellard hedges its bunker price risk by the implementation of financial and physical hedges for the cost of
fuel directly related to its ships’ operations.
Customer Risk
In general, the Company operates in a spot market, and its material customers have no long-term contract, and so
there is a risk the Company’s level of sales with customers could decrease. The loss (wholly or partially) of a material
customer could negatively impact the Company’s financial performance if the Company were not able to replace such
a customer.
The Company seeks to mitigate the impact of this risk by building and maintaining strong customer relationships by
delivering superior customer value and satisfaction and by having a range of customers in numerous countries.
Social and Political Risk
Animal welfare activism and public reports regarding the poor treatment of animals and high stress/mortality events
continues to place increased focus on the live export industry. The high level of public sensitivity to animal welfare
issues means public pressure could lead to further export restrictions and changes to applicable laws and regulations.
Changes to the regulatory system may require the Company to incur material costs or could become the basis for new
or increased liabilities that could adversely affect the Company’s financial performance.
Animal rights activists have increasingly engaged in aggressive litigation to attempt to prevent or impede livestock
export, including taking action against Federal and State regulators. Although Wellard is satisfied such threats do not
present a material risk to the Company given it is compliant with all regulations required to export livestock, including
the Australian regulations prohibiting sheep exports to the Gulf states during the northern summer, increased animal
rights activism may extend to other areas in which the Company is active. Where such activism is successful in
delaying, disrupting and complicating the government’s approvals and/or regulatory processes, the resulting
uncertainty to the likelihood of successful trading may mean it no longer remains commercial for the Company to
continue to trade in some markets.
The Company seeks to mitigate this risk by continuing to maintain a specialised fleet of high-quality purpose-built
livestock transport vessels, and by building and maintaining strong customer relationships with a range of customers
in numerous countries, and by ensuring that it is always in compliance with all laws and regulations, as well as engaging
actively to understand community expectations around livestock export.
Exchange Rate Risk
The Company’s financial reports are prepared in Australian dollars, however, a substantial portion of the Company’s
sales revenue, expenditures and cashflows are generated in various other currencies, principally in United States
dollars. Any adverse exchange rate fluctuations or volatility in the currencies in which the Company generates its
revenues and cash flows, and incurs its costs, could have an adverse effect on its future financial performance and
position.
30 | WELLARD ANNUAL REPORT 2020
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FINANCIAL REVIEW
The Company seeks to mitigate this risk by putting in place, where it deems necessary, appropriate hedging
arrangements. In addition, loans are stipulated by the operating companies in the same currency as the revenues,
where possible, in order to attenuate exchange rate oscillations. It worth noting that the Board, after considering all
the criteria, factors and indicators articulated in AASB21, has determined to change the Group’s presentation currency
of its financial information from the Australian Dollar to the United States Dollar with effect from 1 July 2020. As a
result, this annual report for the year ended 30 June 2020 will be the last report presented in Australian Dollars. The
Board opines that the change in the presentation currency will provide shareholders with a more accurate reflection of
Wellard Limited’s underlying performance.
Credit Risk
The Company’s operations generally involve charter shipments for third parties to transport livestock a great distance.
The inherent nature of these arrangements involves a low number of contracts with a high dollar value. There is a risk
therefore that if a counterparty to such a contract defaults on its contractual obligations, a material financial loss to the
Company may result.
To minimise the credit risk, financial vetting is undertaken for all major customers, and adequate security is required
for commercial counterparties which rating is below the minimum acceptable standard.
The Coronavirus (COVID-19)
The outbreak of COVID-19 introduced additional challenges and risks to Wellard’s operations. In particular, measures
implemented by some countries to prevent the further spread brought new and complicated operational consequences
for our ships and crews. Travel restrictions and quarantine requirements due to the coronavirus pandemic have made
it difficult to effect crew-change on ships and made it challenging to inspect and service the vessels. Supply chain
disruptions, shortage of workforce and implementation of social distancing measures in ports and shipyards are
causing delays. Ports are operating with their own individual approaches to managing the coronavirus situation, making
it difficult to prepare the vessel – or the crew – for the challenges facing them when they prepare to berth. In addition,
a further outbreak of the virus could pose an economic risk to Wellard’s operations and its trade volumes.
The Company has already undertaken specific measures to ensure the health and safety of its employees globally.
The Company provided a comprehensive summary of the material business risks which are likely to have an effect on
the prospects of the Wellard Group in its Offer Document for its fully underwritten non-renounceable pro-rata
entitlement offer of one new share for every four shares (Offer Document) dated 3 April 2017. A copy of this document
is available on the Company’s website at www.wellard.com.au. In addition to the risks set out in this document, the
Directors consider that the risks set out in the Offer Document continue to apply to the business and operations of the
Company.
Each of the risks referred to could, in isolation or in combination, if they eventuate, have a material adverse impact on
Wellard’s business, results of operations, financial condition, financial performance, prospects and share price. The
risks described here and in the Offer Document were based on an assessment of a combination of the probability of
the risk occurring and the impact of the risk if it did occur. The assessment was based on the knowledge of the Directors
at the time of approving this document, but there is no guarantee or assurance the importance of these risks will not
change, or other risks will not emerge. The risks referred to and in the Offer Document do not purport to be a list of
every risk that may be associated with an investment in Wellard shares now or in the future, and that the occurrence
or consequences of some of the risks are partially or completely outside the control of Wellard, its Directors and
Management.
An investment in the Wellard Group may be considered highly speculative and carries no guarantee with respect to
the payment of dividends or returns of capital. An investment in the Company is not risk-free and the Directors strongly
recommend that potential investors consult their professional advisers and consider the risks described herein when
making decisions relating to an investment in Wellard shares.
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FINANCIAL REVIEW
DIRECTORS’ MEETINGS
The following table sets out the number of Directors’ meetings (including meetings of Board committees) held during
the year ended 30 June 2020, and the number of meetings attended by each Director:
Board
Nomination and
remuneration
committee
Audit and risk
committee
Conflicts of interest
committee
Directors
held
present
held
present
held
present
held
present
John Klepec
Philip Clausius
Kanda Lu
John Stevenson1
17
17
17
17
17
17
17
17
4
4
-
-
4
4
-
-
6
6
-
6
6
6
-
6
-
-
-
-
-
-
-
-
Notes:
1. Mr Stevenson changed his role from Executive Director to Non-Executive Director on 23 November 2019.
In addition to the above meetings, a number of matters were dealt with by way of a circular resolution during the
year.
DIRECTORS’ INTEREST IN SECURITIES OF THE GROUP
The interests of each Director in the shares and options of the Wellard Group as notified by the Directors to the ASX
in accordance with Section 205G(1) of the 2001 (Cth) Corporations Act as at the date of this report are as follows:
Directors
John Klepec1
Philip Clausius
Kanda Lu
John Stevenson
Ordinary shares held
2020
2019
437,500
437,500
-
-
-
-
-
-
Notes:
1. These shares are held by Rezone Pty Ltd as
Trustee for the Kakulas-Klepec Superannuation
Fund. Mr Klepec has a voting power of greater
than 20% in this company and is a beneficiary of
this superannuation fund.
INDEMNITIES AND INSURANCE
Rule 18.1 of the Wellard Constitution requires Wellard to indemnify each Director and Officer on a full indemnity
basis and to the extent permitted by law against liability incurred by them in their capacity as an officer of any
member company of the Wellard Group. The Directors, Company Secretary and Officers of the Company have
the benefit of this indemnity (as do any individuals who may have formerly held one of those positions).
As permitted by Wellard’s Constitution, the Company has entered into deeds of indemnity, access and insurance
with each Director, Company Secretary and Officer. Wellard has also insured against amounts that the Company
may be liable to pay to Directors, Company Secretaries and certain employees or that Wellard otherwise agrees
to pay by way of indemnity. Wellard’s insurance policy also insures Directors, Company Secretaries and relevant
employees against certain liabilities (including legal costs) they may incur in carrying out their duties. The
Directors of the Company are satisfied the terms of these insurances and agreements are standard for their type.
No indemnity payment has been made under any of the documents referred to above during the financial year.
DIVIDENDS
The Company does not intend to pay any dividends in respect of the year ended 30 June 2020 (2019: Nil).
EQUITY ISSUES DURING THE YEAR
At 30 June 2020 the Company had authorised share capital totalling 531,250,312 ordinary shares issued and
paid.
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EVENTS OCCURING AFTER REPORTING PERIOD END
There have been no significant events occurring since 30 June 2020. Reference is made to the Company’s
website and to the ASX’s announcements platform for any and all material disclosures which are required under
ASX’s Listing rules.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Company is committed to the protection of the environment and good environmental practice and
performance. To deliver on this commitment, the Company seeks to comply with all applicable environmental
laws and regulations.
The Company’s subsidiary, Wellard Ships Pte. Ltd. (“Wellard Ships”) operates three vessels internationally that
conform to MARPOL (International Convention for the Prevention of Pollution from Ships, 1973 as modified by
the Protocol of 1978) and ISM (International Safety Management) Code requirements for pollution prevention and
environmental maritime protection. Wellard Ships’ management system complies with ISO 9001 standard
established by the International Organisation for Standardization, as certified by the international classification
society RINA S.p.A. (Registro Italiano Navale).
Wellard Ships contracts with Welltech Marine Pte. Ltd. (“Welltech”), a company previously owned by Wellard
Ships and now owned by Ishima Pte. Ltd., which is responsible for the technical management of Wellard’s owned
and bareboat chartered vessels pursuant to a ship management agreement entered in April 2020. Welltech
complies with ISO 9001:2015 – Quality Management system – and ISO 14001:2015 – Environmental
Management system – standards established by the International Organisation for Standardization, as certified
by the international classification society RINA S.p.A. (Registro Italiano Navale).
ENVIRONMENTAL PROSECUTIONS
The Company has not been involved with any environmental prosecutions this year.
ROUNDING
Wellard is an entity of the kind specified in the ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191. In accordance with that legislative instrument, amounts in the Financial Report and the
Directors’ Report have been rounded to the nearest thousand dollars unless specifically stated otherwise.
All amounts are in Australian dollars only unless specifically stated otherwise.
NON-AUDIT SERVICES
The Auditor’s independence declaration has been included on page 47.
Details of the non-audit services undertaken by, and amounts paid to, the Auditor, are detailed in Note 31 to the
financial statements.
The Directors have formed the view that the provision of non-audit services during the financial year ended 30
June 2020 is compatible with and does not compromise the general standard of auditor independence for the
following reasons:
(a)
the non-audit services provided do not involve reviewing or auditing the Auditor’s own work or acting in a
management or decision-making capacity for the Company; and
(b) all non-audit services were subject to the corporate governance procedures and policies adopted by the
Company and have been reviewed by the Audit and Risk Committee to ensure they do not affect the
integrity and objectivity of the Auditor.
In accordance with Section 307C of the Corporations Act, the Auditors of the Company have provided a signed
Auditor’s Independence Declaration to the Directors in relation to the year ended 30 June 2020. This Auditor’s
Independence Declaration has been attached to the Independent Auditor’s Report to the members of the
Company.
CORPORATE GOVERNANCE STATEMENT
The Company will disclose its Corporate Governance Statement on the Company’s website at
www.wellard.com.au at the same time it lodges its Annual Report with the ASX.
33 | WELLARD ANNUAL REPORT 2020
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DIRECTORS’ DECLARATION
In accordance with Section 298(2) of the Corporations Act, the Directors have provided a signed Directors’
Declaration in relation to the year ended 30 June 2020. This Directors’ Declaration is included on page 46 of this
Annual Report.
FINANCIAL REVIEW
On behalf of the Directors
Mr John Klepec
Executive Chairman
Mr Paolo Triglia
Group Chief Financial Officer
Dated: 27 August 2020
34 | WELLARD ANNUAL REPORT 2020
For personal use only
The following sections form the Remuneration Report for the Wellard Group for the financial year ended 30 June
2020. The information provided in the Remuneration Report has been audited as required by the Corporations
Act 2001 (Cth) (Act) and forms part of the Directors’ Report.
REMUNERATION REPORT
1. Remuneration report overview
2. Remuneration governance
3. Remuneration of executive key management personnel
4. Remuneration of non-executive directors
5. Key management personnel shareholding
6. Transactions with key management personnel
1. REMUNERATION REPORT OVERVIEW
This Remuneration Report has been prepared in accordance with section 300A of the Act.
The disclosure in this Remuneration Report relates to the remuneration of the Wellard Group’s key management
personnel (KMP), being those people that have the authority and responsibility for planning, directing and
controlling Wellard’s activities, either directly or indirectly.
This report focuses on the remuneration arrangements of the Wellard Group, including its remuneration policy
and framework. The table below sets out details of those persons who were KMP of the Wellard Group during the
financial year ended 30 June 2020.
Key Management Personnel covered in this report
Name
Position(s) held
NON-EXECUTIVE DIRECTORS
Philip Clausius
Non-Executive Director (19 November 2015 – present)
John Stevenson1 Non-Executive Director (23 November 2019 – present)
EXECUTIVE DIRECTORS
John Klepec
John Stevenson1
Non-Executive Director (15 November 2016 – 26 April 2018)
Non-Executive Chairman (27 April 2018 – 3 August 2018)
Executive Chairman (3 August 2018 – present)
Chief Financial Officer (7 November 2016 – 22 November 2019)
Executive Director (6 August 2018 – 22 November 2019)
Kanda Lu
OTHER KMP
Paolo Triglia
Paolo Bianchi2
Business Development Manager China (24 November 2015 – present)
Executive Director (12 May 2017 – present)
Managing Director – Wellard Ships Pte Ltd (18 November 2015 – present)
Chief Financial Officer (22 November 2019 – present)
Managing Director – WellTech Marine Pte Ltd (3 August 2018 – 30 June
2020)
KMP term
FY2020
Full year
Part year
Full year
Part year
Full year
Full year
Full year
Notes:
1. Mr Stevenson resigned as Chief Financial Officer and Executive Director effective 22 November 2019 and was appointed
Non-Executive Director on 23 November 2019.
2. Mr Bianchi was appointed Technical Director of WellTech Marine Pte Ltd (a wholly owned subsidiary) on 23 March 2015.
He became a KMP effective 3 August 2018. He resigned from WellTech Marine effective 8 April 2020 and transferred
employment to Wellard Ships Pte Ltd. He ceased his employment with the Group on 30 June 2020
2. REMUNERATION GOVERNANCE
(a) Nomination and Remuneration Committee
The Board is responsible for ensuring the remuneration arrangements for the Wellard Group are aligned with its
business strategy and shareholders’ interests.
The Nomination and Remuneration Committee (NR Committee) is delegated responsibility to advise the Board
on composition (ensuring the Board has an appropriate balance of skills, knowledge, experience, independence
35 | WELLARD ANNUAL REPORT 2020
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and diversity), succession planning, and an appropriate level and composition of remuneration for Directors and
senior executives.
The NR Committee was formed on 19 November 2015 and comprises the following Directors:
REMUNERATION REPORT
• Philip Clausius – Committee Chair; and
•
John Klepec – Committee Member.
The Board considers it preferable that the NR Committee is independent from management when making
decisions affecting the remuneration of KMP and other senior employees, however following John Klepec’s
appointment as Executive Chairman on 3 August 2018, Philip Clausius was the only Non-Executive /
Independent Director. Mr Stevenson became a Non-Executive Director on 23 November 2019, and in due
course, the Board intends to consider a restructure of its various Board sub-committees. Now that the Company’s
financial and operational restructure is substantially complete, the Board may consider sourcing another
Independent Director.
Decisions relating to remuneration of KMP and senior employees will be made only by NR Committee members
and Board members who are not conflicted in the circumstance.
The NR Committee meets throughout the year as required, and when necessary is briefed by management but
makes all decisions free of management’s influence. The NR Committee may, from time to time, seek
independent advice from remuneration consultants, and in so doing will directly engage with the relevant
consultant without management involvement. The NR Committee has not taken independent advice from
remuneration consultants in the financial year ended 30 June 2020.
Further information regarding the objectives and role of the NR Committee is contained in its Charter, which is
available on the Corporate Governance Policy section of the Company’s website at www.wellard.com.au.
(b) Independent Remuneration Consultants
Remuneration is regularly compared with the external market by participation in industry salary surveys and
during recruitment activities generally. In FY2020, the Board did not engage an independent consulting firm to
provide independent advice regarding remuneration or incentive structures.
There were no short-term (STIP) and long-term (LTIP) plans or programmes in place for the financial year ended
30 June 2020. The NR Committee retains the ability, at its discretion, to make ad-hoc STI awards to individuals
outside of any company-wide plan.
In FY2020, no remuneration recommendations, as defined by the Corporations Act, were provided by any
independent remuneration consultant.
3. REMUNERATION OF KMP
(a) Remuneration policy
The Board and the NR Committee recognise that remuneration has an important role to play in supporting the
implementation and achievement of Wellard’s strategy.
The Board is committed to driving alignment between the remuneration arrangements of its KMP with the
expectations of Wellard’s shareholders, its employees and the Company’s sustainability.
Wellard’s executive remuneration policy aims to reward KMP fairly and responsibly in accordance with the
Australian and Singaporean markets, and to ensure that Wellard:
(i) provides competitive rewards that attract, retain, and motivate KMP of the highest calibre;
(ii) sets demanding levels of performance that are linked to KMP’s remuneration;
(iii) structures remuneration at a level that reflects the KMP’s duties and accountabilities and is competitive;
(iv) benchmarks remuneration against appropriate comparator groups;
(v) aligns KMP incentive rewards with the creation of value for shareholders; and
(vi) complies with applicable legal requirements and appropriate standards of governance.
(b) Remuneration framework
Wellard’s remuneration comprises the following elements:
36 | WELLARD ANNUAL REPORT 2020
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REMUNERATION REPORT
Element
Fixed annual
remuneration
Short term
incentives
Long term
incentives
Purpose
Potential Value
Provide competitive market salary including
superannuation and non-monetary benefits
Cash reward for current year performance
Maintain balance between the interests of
shareholders and the reward of executives
Reviewed and
benchmarked annually
50% of total fixed
remuneration
Determined by share
price
Changes for
FY2020
No changes
No changes
No changes
(c) Elements of remuneration
Fixed annual remuneration
Each KMP receives a fixed salary or consultancy fees. The quantum of salary or consultancy reflects the
individual’s responsibilities, location, skills, experience and performance and is aligned with salaries for
comparable roles in global companies of similar complexity, size, geographic footprint, listing jurisdictions, reach
and industry.
Each executive’s fixed remuneration is reviewed and benchmarked annually. In FY2020, this process did not
result in any change in any executives fixed remuneration.
Short-term incentives
All short-term incentives for the Group in FY2020 were discretionary and based on the completion of significant
transactions that enabled the Company to complete its balance sheet and operational restructure.
No STIP was implemented in FY2020.
Long-term incentives
Wellard’s Long-Term Incentive Plan (LTIP) was amended during the 2019 financial year, to ensure that the
Company can continue to attract and retain the necessary talent to deliver its value proposition. The FY2018
LTIP of a Zero-Priced Options Plan (ZEPO Plan) was replaced by a Premium Priced Options Plan (PPO) in
October 2018.
No options in Wellard’s LTIP were granted to KMP’s in FY2020.
Following its balance sheet and operational restructure, in the coming financial year, the Board and the NR
Committee intend to re-examine the structure of and participation in its LTIP, which is anticipated to be designed
to align the interest of key employees with the interests of shareholders of the Company by:
• Enabling key executives and senior management to be involved with and share in the future growth of
the Company; and
• Assisting the Company to attract, reward and retain high quality staff.
The Board will use its discretion to invite key employees to participate in the LTIP. A future LTIP is anticipated to
provide key employees with an opportunity to acquire Options in the Company, with the opportunity to convert the
Options into ordinary shares, on satisfaction of Vesting Conditions set by the Board and Exercise of Options by
paying the required Exercise Price.
Statutory performance indicators
Wellard aims to align its executive remuneration to strategic and business objectives and the creation of shareholder
wealth. The below table shows measures of the Group’s financial performance over the last five years as required by the
Corporations Act 2001. However, these are not necessarily consistent with measures used in determining the variable
amounts of remuneration to be awarded to the KMPs. As a consequence, there may not always be a direct correlation
between the statutory key performance measures and the variable remuneration awarded.
Profit/(loss) for the year attributable to
owners of Wellard Limited ($’000)
Basic earnings/(loss) per share (cents)
Dividend payments ($’000)
Dividend payout ratio (%)
2020
2019
2018
2017
2016
245
0.1
-
-
(48,443)
(36,437)
(75,337)
(23,323)
(8.8)
(6.6)
(17.7)
(6.4)
-
-
-
-
-
-
-
-
Increase / (decrease) in share price (%)
+50.0
(76.0)
(39.4)
(55.4)
(72.8)
37 | WELLARD ANNUAL REPORT 2020
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REMUNERATION REPORT
(d) Key terms of KMP agreements
Remuneration and other terms of employment for each of the KMP are contained in contracts of employment or consultancy agreements as summarised in the table set out below.
Key management personnel agreements summary:
Name
KMP term
Short-term incentives
Long term incentives
Notice period
termination
Notice period
resignation
Year
Total fixed
remuneration1
Currency
EXECUTIVE DIRECTORS
John Klepec
John Stevenson2
Kanda Lu
OTHER KMP
Paolo Triglia
Paolo Bianchi3
Notes:
3 Aug 18 -
present
7 Nov 16 -
22 Nov 19
12 May 17 -
present
18 Nov 15 -
present
3 Aug 18 -
30 Jun 20
At the Board’s Discretion
At the Board’s Discretion
2 weeks
2 weeks
At the Board’s Discretion
At the Board’s Discretion
3 months
3 months
At the Board’s Discretion
At the Board’s Discretion
4 weeks
4 weeks
At the Board’s Discretion
At the Board’s Discretion
3 months
3 months
At the Board’s Discretion
At the Board’s Discretion
3 months
3 months
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
607,000
607,000
269,699
500,000
178,840
178,840
350,004
350,004
240,000
240,000
AUD
AUD
AUD
AUD
AUD
AUD
SGD
SGD
SGD
SGD
This is inclusive of superannuation payments where applicable.
1.
2. Mr Stevenson ceased to be an Executive Director effective 22 November 2019, when his CFO role finished. He remains on the board as a Non-Executive Director.
3. Mr Bianchi resigned as Managing Director of Welltech Marine Pte Ltd effective 8 April 2020 and was continued to be employed under Wellard Ships Pte Ltd. He ceased his employment with the Group on 30
June 2020
38 | WELLARD ANNUAL REPORT 2020
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(e) Executive KMP remuneration table
The table below sets out the remuneration received by Wellard KMP for FY2020 during the portion of the year for which KMP were employed by the Wellard Group. The table includes the statutory
disclosures required under the Act and in accordance with the Accounting Standards. Mr. Balzarini, Mr.Troncone and Mr Braithwaite are included in the table as they were KMPs in FY 2019. They
have all since left the Wellard Group, with details as noted below.
REMUNERATION REPORT
Key management personnel remuneration table for FY2020:
Short-term benefits
Long-term benefits
Post-
employment
benefits
STI1
Other2
Accrued
annual
leave3
Long
service
leave4
Termination
benefits
super-
annuation
Share based
payments
value of shares
received
%
Total
remuneration
Remuneration
“at risk”
-
-
83,551
-
-
-
-
-
-
-
62,663
-
-
126,329
-
-
146,214
126,329
-
-
27,270
13,929
-
-
-
11,496
-
-
159,740
164,683
110,460
101,957
-
-
297,470
292,065
-
-
-
2,797
-
40,577
-
4,576
3,623
3,600
25,827
17,142
-
11,175
-
-
29,450
79,867
-
-
-
6,088
-
7,210
-
-
250
466
-
-
-
-
-
-
250
13,764
-
-
190,213
-
469,379
-
-
-
-
-
-
-
138,485
-
-
-
798,077
-
20,388
18,506
12,580
26,107
-
47,440
-
3,813
15,516
15,516
-
-
-
-
-
-
-
-
-
3,942
-
-
-
-
-
-
-
-
-
-
-
-
48,484
111,382
-
3,942
607,000
554,307
579,542
521,636
469,379
943,210
-
551,176
182,713
182,906
601,650
538,073
499,598
469,233
-
166,668
2,939,882
3,927,209
-
-
14.4%
0.8%
-
-
-
-
-
-
10.4%
-
-
26.9%
-
-
5.0%
3.3%
Name
Year
EXECUTIVE DIRECTORS
John Klepec5
John Stevenson6
Mauro Balzarini7
Fred Troncone8
Kanda Lu
OTHER KMP
Paolo Triglia9
Paolo Bianchi10
Scot Braithwaite11
Total
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Base
salary
586,612
535,801
265,928
468,773
-
847,983
-
531,291
163,324
163,324
353,420
356,248
250,653
229,772
-
166,668
1,619,937
3,299,860
39 | WELLARD ANNUAL REPORT 2020
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REMUNERATION REPORT
Notes:
1. This includes cash bonuses provided to KMP.
2. This includes short-term benefits such as parking, vehicle, travel, internet and accommodation.
3. This includes statutory leave for Executive Directors and other KMP.
4. Represents the net accrual movement for Long Service Leave (LSL) over the twelve-month period, which will only be paid
if the KMP meets legislative service conditions. LSL has been separately categorised and is measured on an accrual basis
and reflects the movement in the accrual over the twelve-month period.
5. Mr Klepec was appointed Executive Chairman on 3 August 2018, and thus commenced acting as a KMP on that date.
6. Mr Stevenson was appointed to the Board on 6 August 2018. In addition to his remuneration as CFO, Mr Stevenson
commenced receiving director fees of $100,000 per annum. Mr Stevenson ceased the role of Group CFO on 22 November
2019 and continued his board role as a Non-Executive Director on 23 November 2019.
7. Remuneration paid to Mr Balzarini in FY2019 included a component paid in US$, and this figure has been converted to
AUD using an exchange rate of 0.6711. Mr Balzarini ceased his role as CEO (and thus ceased acting as a KMP) on 3 June
2019. All remuneration obligations up until the date of termination, including leave have been paid. All additional unvested
STI or LTI benefits, including accrued leave and notice of termination payout (12 months), have been forfeited. Mr Balzarini
was paid $469,379 by way of a negotiated settlement with the Group.
8. Mr Troncone ceased his role as Executive Director – Operations (and thus ceased acting as a KMP) on 3 August 2018, all
outstanding entitlements were paid at this time.
9. Mr Triglia is employed as an expatriate and pursuant to his employment contract he is not paid superannuation and
receives additional benefits for accommodation, school fees and travel expenditure. Remuneration was paid to Mr Triglia in
SGD, and this figure has been converted to AUD using an exchange rate of 0.9575 (2019: 0.9499).
10. Mr Bianchi became a KMP on 3 August 2018. Mr Bianchi was employed as an expatriate and pursuant to his employment
contract he was not paid superannuation. He received additional benefits for accommodation, school fees and travel
expenditure. Remuneration was paid to Mr Bianchi in SGD, and this figure has been converted to AUD using an exchange
rate of 0.9575 (2019: 0.9499). Mr Bianchi ceased employment (and thus ceased acting as a KMP) on 30 June 2020.
11. Mr Braithwaite was paid as a consultant to the Wellard Group. Accordingly, he did not receive any leave entitlements or
superannuation. Mr Braithwaite ceased employment (and thus ceased acting as a KMP) on 31 October 2018.
40 | WELLARD ANNUAL REPORT 2020
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REMUNERATION REPORT
(f) Terms and conditions of share-based payments
Under the Company’s Long-term Incentive Plan (LTIP), share options are granted to employees as determined, in its
absolute discretion, by the Board. Eligibility to participate in the LTIP is limited to the Executive and Senior
Management team. The following information is provided for compliance. No employee share options were issued to
any Wellard employee vested during the period.
Executive Share Options may be granted with an exercise price as determined by the Board, including, for the
avoidance of doubt, with no exercise price.
The Company may determine, in its discretion, whether to settle the vested and exercised Executive Share Options
in cash or shares and may either issue new Shares or acquire Shares on market.
The Executive Share Options may be subject to milestone dates prior to which performance conditions must be
satisfied.
Movement in number of unissued ordinary shares of the Company under option during the year:
FOR THE YEARS ENDED 30 JUNE
Options at
beginning of
the period
Granted
during the
period
Expired /
Vested /
cancelled
exercised
during the
period
during the
period
Options at
end of the
period
2020
John Stevenson1
1,500,000
1,500,000
-
-
(1,500,000)
(1,500,000)
-
-
-
-
Details of unissued ordinary shares of the Company under option during the year:
Performance condition
Tranche 1
Tranche 2
Tranche 3
Grant date
Maturity date
Vesting period from grant date
Knock in price (AUD/share) (30 day VWAP)
Exercise price
Share price
Risk free rate
Volatility
Fair value at grant date
Entitled no of employees2
1 Nov 2018
1 Nov 2022
3 years
0.25
0.00
0.045
2.14%
71.53%
4,734
7
1 Nov 2018
1 Nov 2022
3 years
0.40
0.00
0.045
2.14%
71.53%
3,965
7
1 Nov 2018
1 Nov 2022
3 years
0.60
0.00
0.045
2.14%
71.53%
1,814
7
Notes:
1.
2.
Mr Stevenson ceased his executive role on 22 November 2019 hence the option had lapsed.
Three entitled employees declined the invitation to participate in the Executive Share Option Plan. One entitled employee
had left in prior year, followed by two entitled employees left during the financial year.
Subject to “Good Leaver” provisions, a participant’s options lapse on termination of employment.
Vested options may be exercised from the time of Vesting (three years from issue) until the Last Exercise Date. The
Board has exercised its discretion under the Plan and determined that the Last Exercise Date for Vested Options is
four (4) years after issue.
41 | WELLARD ANNUAL REPORT 2020
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REMUNERATION REPORT
4. REMUNERATION OF NON-EXECUTIVE DIRECTORS
(a) Remuneration policy and arrangements
The Board considers the following policy objectives when determining its remuneration profile for Non-Executive
Directors:
(i) offering market competitive remuneration to attract and retain high quality directors with the appropriate
expertise and skillset to complement the Wellard Group business;
(ii) safeguarding the independence of Non-Executive Directors by limiting performance-related remuneration of
Non-Executive Directors; and
(iii) ensuring the Company is not paying excessive remuneration.
No element of the Non-Executive Directors’ remuneration is linked to the performance of the Company. However, to
create alignment with shareholders, Non-Executive Directors are encouraged to hold equity securities in the
Company. All Directors are subject to the Company’s Security Trading Policy.
(b) Aggregate fees
Under the Constitution, the Non-Executive Directors will be remunerated for their services by:
(i) an amount or value of remuneration each year as Wellard in a general meeting determines; or
(ii) an aggregate amount or value of remuneration not exceeding the maximum amount or value as Wellard in
a general meeting determines, to be divided among the Non-Executive Directors in such proportion and
manner as they agree, or if they do not agree, equally.
Wellard has currently fixed the maximum aggregate fee pool for Non-Executive Directors at $800,000 per annum,
which has been approved by Shareholders.
(c) Remuneration review
The Board will periodically review the level of fees paid to Non-Executive Directors, including seeking external advice
where appropriate.
A review of the remuneration of Non-Executive Directors was undertaken as part of the NR Committee’s review of
senior remuneration and the Company’s operating budget for FY2020. No change was made to Non-Executive
Director fees, or fees paid to members of any Board Committee.
(d) Non-executive director fees and benefits
Set out below is a description of each component of total remuneration for Directors and how each component
impacts remuneration.
Fees /
Benefits
Description
BOARD FEES
Wellard board
Chairman
Members
COMMITTEE FEES
Audit and risk compliance committee
Chairman
Members
Nomination and remuneration committee
Chairman
Members
42 | WELLARD ANNUAL REPORT 2020
2019
Super-
annuation
$
Fees
$
Included in
shareholder
approved cap?
182,648
91,324
17,352
8,676
22,831
9,132
22,831
9,132
2,169
868
2,169
868
Yes
Yes
Yes
Yes
Yes
Yes
For personal use only
REMUNERATION REPORT
OTHER FEES / BENEFITS
Short-term incentives
Non-Executive Directors are eligible to participate in short-term or long-term incentive
arrangements.
Long-term incentives
Non-Executive Directors are eligible to participate in short-term or long-term incentive
arrangements.
Other group fees
Non-Executive Directors are not paid additional fees for participation on the board of any of the
Wellard Group’s subsidiary companies.
Termination payments
Termination benefits are not payable to Non-Executive Directors.
Other benefits
Non-Executive Directors are entitled to reimbursement for business-related expenses, including
travel expenses, and also receive the benefit of coverage under the Wellard Group’s directors and
officer’s insurance policy.
(e) Non-executive director remuneration
The fees paid or payable to the Non-Executive Directors in relation to the 2020 financial year are set out below.
Name
Year
NON-EXECUTIVE DIRECTORS
John Klepec2
Philip Clausius
John Stevenson3
Total
2020
2019
2020
2019
2020
2019
2020
2019
Short-term benefits
Board and committee
fees
$
Superannuation1
$
Total
$
-
19,810
123,288
123,288
60,714
-
184,002
143,098
-
1,882
11,712
11,712
-
-
11,712
13,594
-
21,692
135,000
135,000
60,714
-
195,714
156,692
Notes:
1. Superannuation contributions are made on behalf of Non-Executive Directors in accordance with the Wellard Group’s
statutory superannuation obligations. Also included are any Director’s fees that have been sacrificed into superannuation.
2. On 3 August 2018 Mr Klepec was appointed Executive Chairman.
3. On 23 November 2019 Mr Stevenson was appointed Non-Executive Director.
43 | WELLARD ANNUAL REPORT 2020
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REMUNERATION REPORT
5. KMP SHAREHOLDING
(a) Equity based remuneration
The Board considers equity-based remuneration an important element of the Wellard executive remuneration
framework. The Board believes equity-based remuneration helps align the interests of Wellard shareholders and
senior executives and encourages executives to carefully consider the interests of Wellard shareholders while
performing their duties as senior executives.
At its AGM on 23 November 2018, shareholders approved the issue of up to 1,500,000 executive share options to
Chief Financial Officer, Mr Stevenson on terms and conditions set out in the relevant Notice of AGM. On 22
November 2019, Mr Stevenson ceased his executive role resulting in the lapse of the executive share options.
The table below sets out the number of shares held directly, indirectly or beneficially by current directors and KMP
including their related parties and shows the effect that departing directors and KMP have had on the aggregate
balance of all Shares held directly, indirectly or beneficially by directors and KMP when compared to the previous
financial year.
Name
NON-EXECUTIVE DIRECTORS
Philip Clausius
John Stevenson
EXECUTIVE DIRECTORS
John Klepec
Kanda Lu
OTHER KMP
Paolo Triglia
Paolo Bianchi
Total
Notes:
Balance at
1 July 2019
Change to
aggregate KMP
balance
Balance at
30 June 2020
-
-
437,500
-
960,000
400,000
1,797,500
-
-
-
-
216,800
-
216,800
-
-
437,500
-
1,176,800
400,000
2,014,300
1. Mr Bianchi ceased to be a KMP on 30 June 2020.
(b) Prohibition on hedging shares and equity instruments
KMP are not allowed to protect the value of any unvested or restricted equity awards allocated to them. KMP are
also not permitted to use unvested or restricted equity awards as collateral in any financial transaction, including
hedging and margin loan arrangements.
Any securities that have vested and are no longer subject to restrictions or performance conditions may be subject to
hedging arrangements or used as collateral provided that the consent, notification and other restrictions on dealings
set out in the Wellard Security Trading Policy are complied with in advance of the KMP entering into the
arrangement.
6. TRANSACTIONS WITH KMP
At 30 June 2019, Mr Balzarini, had an indirect 15.06% shareholding interest in Wellard. Mr Balzarini also controlled
the entity WGH Holdings (WGH), which owned a pre-export quarantine and other property previously leased by
Wellard. Wellard no longer leases any property or has any commercial relationship with WGH, with Mr Balzarini, or
any entity owned or controlled by Mr Balzarini. The pre-export quarantine facility lease has now ended, as has the
former head office lease in Fremantle, Western Australia. Wellard has made various announcements, including on
26 March 2020 and 24 April 2020, detailing the circumstances by which WGH has transferred its entire shareholding
in Wellard Limited.
In December 2015, Wellard entered into a sublease with WGH in relation to the Wellard headquarters in Fremantle,
Western Australia. On 31 July 2019, the sublease was assigned from WGH to a third party, which is not a related
party. Monthly rent payable to WGH was $17,471 (excluding GST). That sub-lease expired on 31 July 2020 and has
44 | WELLARD ANNUAL REPORT 2020
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REMUNERATION REPORT
not been extended. Following the Company’s financial and operational restructure, Wellard has relocated its
Australian head office to newer, smaller premises. The new Landlord is an independent third-party entity.
As at 30 June 2020, Mr. Balzarini’s controlled entity, WGH Pty Ltd (and its owned or controlled subsidiaries,
including previous Wellard Limited shareholder WGH Commodities Land & Transport Pty Ltd) do not own any shares
in Wellard Limited.
(a) Transactions with other related parties
FOR THE YEARS ENDED 30 JUNE
ENTITIES CONTROLLED BY KEY MANAGEMENT PERSONNEL
Sales to
Purchases from
Lease payments and outgoings made to
2020
$
2019
$
-
-
-
(7,089)
(105,278)
(292,882)
(b) Purchases from entities controlled by key management personnel
Nil
(c) Outstanding balance from sales / purchases of goods and services
Nil
(d) Loans/ to from related parties
Nil
45 | WELLARD ANNUAL REPORT 2020
For personal use only
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of Wellard Limited, we declare that:
a)
the attached financial statements, notes and the additional disclosures included in the Directors’ Report
designated as audited of the Group are in accordance with the Corporations Act, including:
i.
giving a true and fair view of the financial position and performance of the Group as at 30 June
2020 and of its performance for the year ended on that date; and
ii.
complying with Accounting Standards and the Corporations Act 2001; and
b)
c)
d)
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 1; and
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they
become due and payable; and
this declaration has been made after receiving the declarations required to be made to the Directors in
accordance with Section 295A of the Corporations Act for the financial year ended 30 June 2020.
Signed in accordance with a resolution of the Directors.
Mr John Klepec
Executive Chairman
27 August 2020
46 | WELLARD ANNUAL REPORT 2020
For personal use only
AUDITOR’S INDEPENDENCE DECLARATION
AU
DITOR’S INDEPENDENCE DECLARATION
47 | WELLARD ANNUAL REPORT 2020
For personal use only
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED 30 JUNE
NOTE
2020
$’000
2019
$’000
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross profit
Other gains/(losses)
Net finance costs
Depreciation and amortisation expenses
General and administrative expenses
Profit/(loss) from continuing operations before income tax
Income tax expense
Profit/(loss) from continuing operations
DISCONTINUING OPERATIONS
Loss from discontinued operations, net of tax
Profit/(loss) for the period after tax
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss
Gain from foreign currency translation
Other comprehensive income for the period, net of tax
Total comprehensive income/(loss) for the period
5
6(A)
6(B)
6(C)
6(D)
9
8
87,600
(59,722)
27,878
6,862
(10,407)
(13,094)
(10,975)
264
(5)
259
(14)
245
235,091
(196,336)
38,755
(30,147)
(11,266)
(16,157)
(22,820)
(41,635)
(5,354)
(46,989)
(1,454)
(48,443)
2,144
2,144
2,389
4,827
4,827
(43,616)
Cents
Cents
Earnings/(loss) per share from continuing operations attributable
to ordinary equity holders of the Company
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
10
10
0.1
0.1
(8.8)
(8.8)
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
48 | WELLARD ANNUAL REPORT 2020
For personal use only
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Biological assets
Other assets
Assets held for sale
Total current assets
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Other assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Provisions
Contract liabilities
Liabilities directly associated with assets held for sale
Total current liabilities
NON-CURRENT LIABILITIES
Loans and borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Accumulated losses
Total equity
NOTE
2020
$’000
2019
$’000
12
17
15
16
18
19
22
23
18
20
11
24
5(B)
19
11
24
14
33
34
16,796
1,491
1,338
-
1,578
-
21,203
67,746
2,462
846
71,054
92,257
3,267
11,876
174
2,910
-
18,227
13,830
16
13,846
32,073
60,184
7,424
2,278
4,597
1,941
10,404
31,330
57,974
139,150
3,082
139
142,371
200,345
5,606
110,090
439
17,262
9,132
142,529
-
21
21
142,550
57,795
572,132
(382,346)
(129,602)
60,184
572,132
(384,484)
(129,853)
57,795
The accompanying notes form an integral part of this consolidated statement of financial position.
49 | WELLARD ANNUAL REPORT 2020
For personal use only
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 30 JUNE
NOTE
2020
Opening balance
Comprehensive income for the period:
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Share options lapsed
Closing balance
2019
Opening balance
Comprehensive loss for the period:
Loss for the period
Other comprehensive income
Total comprehensive loss for the period
Transactions with owners in their capacity as owners:
Share options lapsed
Closing balance
34
33
33
34
33
33
ISSUED
CAPITAL
$’000
ACCUMULATED
LOSSES
$’000
SHARE BASED
PAYMENTS
$’000
RESERVES
OTHER
RESERVES
$’000
COMMON
CONTROL
$’000
TOTAL
$’000
572,132
(129,853)
18,020
8,513
(411,017)
57,795
-
-
-
-
245
-
245
6
-
-
-
(6)
-
2,144
2,144
-
-
-
-
-
245
2,144
2,389
-
572,132
(129,602)
18,014
10,657
(411,017)
60,184
572,132
(81,410)
18,104
3,686
(411,017)
101,495
-
-
-
-
(48,443)
-
(48,443)
-
572,132
(129,853)
-
-
-
(84)
18,020
-
4,827
4,827
-
-
-
-
-
8,513
(411,017)
(48,443)
4,827
(43,616)
(84)
57,795
The accompanying notes form an integral part of this consolidated statement of changes in equity.
50 | WELLARD ANNUAL REPORT 2019
For personal use only
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED 30 JUNE
NOTE
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Income tax (paid)/returned
2020
$’000
2019
$’000
88,387
(67,754)
8
(35)
293,029
(262,659)
-
8
Net cash inflow from operating activities
13
20,606
30,378
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
Proceeds from sale of discontinued operations
Net cash inflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of borrowings
Principal payment of lease liabilities
Interest paid
Transfers from restricted cash
Net cash outflow from financing activities
Net increase in cash held
Cash at the beginning of the financial year
Effects of exchange rate changes on cash and cash
equivalents
Cash at the end of the financial year
12
(3,064)
(30)
111,796
-
108,702
-
(109,134)
(2,745)
(6,684)
-
(118,563)
10,745
7,424
(1,373)
16,796
(2,288)
(63)
646
14,357
12,652
8,213
(44,025)
-
(8,412)
2,489
(41,735)
1,295
8,297
(2,168)
7,424
The cashflow is presented on a gross basis, including continuing and discontinuing operations.
The accompanying notes form an integral part of this consolidated statement of cashflows.TO
51 | WELLARD ANNUAL REPORT 2019
For personal use only
Reconciliation of liabilities arising from financing activities:
Non-cash changes
FOR THE YEAR ENDED 30 JUNE 2020
Loan and borrowings (Note 11)
Bank loans
Borrowings
Lease liabilities
Other loans
Notes
Deferred borrowing costs
Liabilities directly associated with assets held for sale (Note 19)
Borrowings
Total borrowings
Less: Cash and cash equivalents
Net debt
FOR THE YEAR ENDED 30 JUNE 2019
Loan and borrowings (Note 11)
Bank loans
Borrowings
Trade asset finance
Other loans
Notes
Deferred borrowing costs
Liabilities directly associated with assets held for sale (Note 19)
Borrowings
Total borrowings
Less: Cash and cash equivalents
Net debt
Opening
balance
$’000
Principal and
interest
payments
$’000
Adoption of
AASB 16
$’000
Addition
during the
year
$’000
Interest
expense
$’000
Effect of
movement in
exchange
$’000
Non-cash
movement
$’000
Closing
balance
$’000
58,815
29,576
-
1,567
22,756
(2,624)
110,090
(63,773)
(14,901)
(3,278)
(1,744)
(25,139)
-
(108,835)
9,132
119,222
(9,728)
(118,563)
-
-
1,138
-
-
-
1,138
-
1,138
-
-
8,519
-
-
-
8,519
-
8,519
2,232
1,599
533
105
1,293
-
5,762
173
5,935
2,726
916
(126)
72
1,090
(126)
4,552
423
4,975
-
1,730
-
-
-
2,750
4,480
-
4,480
-
18,920
6,786
-
-
-
25,706
-
25,706
(16,796)
8,910
Non-cash changes
Opening
balance
$’000
Principal and
interest
payments
$’000
Addition during
the year
$’000
Interest expense
$’000
Effect of
movement in
exchange
$’000
Non-cash
movement
$’000
Closing balance
$’000
75,327
43,313
48
3,340
26,016
(3,099)
144,945
(15,599)
(17,951)
(8,261)
(2,081)
(8,545)
-
(52,437)
-
144,945
-
(52,437)
-
-
8,213
-
-
-
8,213
-
8,213
4,076
1,841
-
125
3,979
-
10,021
-
10,021
4,143
2,373
-
183
1,306
(148)
7,857
-
7,857
(9,132)
-
-
-
-
623
(8,509)
9,132
623
58,815
29,576
-
1,567
22,756
(2,624)
110.090
9,132
119,222
(7,424)
111,798
The accompanying notes form an integral part of this consolidated statement of cashflows.TO TH
52 | WELLARD ANNUAL REPORT 2019
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
TATEMENTS
1. CORPORATE
INFORMATION
AND BASIS OF
PREPARATION
A. CORPORATE INFORMATION
This consolidated financial report
relates to the Group, comprising
Wellard Limited (Company or
Wellard) and the entities that it
controlled (Group) during the year
ended 30 June 2020, that were
authorised for issue in accordance
with a resolution of the Directors
on 27 August 2020.
The Company is a company
limited by shares incorporated in
Australia whose shares are
publicly traded on the Australian
Securities Exchange.
The nature of operations and
principal activities of the Group are
an agribusiness that connects
primary producers of cattle, sheep
and other livestock to international
customers through a global supply
chain. The Group is a supplier of
seaborne transportation for
livestock globally, predominantly
from Australia, and holds export
licences to trade and ship live
cattle and sheep on its own
account.
The registered office address is
Manning Buildings,
Suite 20, Level 1,
135 High Street, Fremantle,
Western Australia 6160.
Comparative financial information
has been reclassified and/or
renamed for better comparability
purposes.
B. BASIS OF PREPARATION
The financial report is a general-
purpose financial report, which has
been prepared in accordance with
the requirements of the
Corporations Act 2001, applicable
Australian Accounting Standards
and other authoritative
pronouncements of the Australian
Accounting Standards Board.
The financial report has been
prepared on a historical cost basis,
except for:
a) Biological assets – measured
at fair value;
53 | WELLARD ANNUAL REPORT 2019
b) Share based payments –
measured at fair value; and
c) Assets held for sale –
measured at fair value less
costs to sell.
The financial report is presented in
Australian dollars and all values
are rounded to the nearest
thousand dollars ($’000) unless
otherwise stated, under the option
available to the Company under
Australian Securities and
Investment Commission (ASIC)
Instrument 2016/191. The
Company is an entity to which the
instrument applies.
For the purposes of preparing the
consolidated financial statements,
the Company is a for-profit entity.
C. GOING CONCERN
The consolidated financial
statements have been prepared on
the going concern basis, which
contemplates the continuity of
normal business activity and the
realisation of assets and the
settlement of liabilities in the
normal course of business.
During the current financial year,
the Group has made significant
positive steps in its turnaround,
completing the Group’s
reorganisation program and
strengthening the Group’s working
capital position. At 30 June 2020,
the Group had net current assets
of $3.0 million (2019: $84.6 million
deficiency).
During the current financial year,
Wellard has made significant
positive steps in its turnaround,
completing the Company’s
recapitalisation program and
strengthening the Company’s
working capital position.
Following the finance-extension
agreement with Ruchira Ships
Limited (the financier of the M/V
Ocean Ute and M/V Ocean
Drover), the previous covenant
breaches on the financing facilities
for these two vessels have been
waived.
The successful sale of the Group’s
vessel, M/V Ocean Shearer, has
resulted in the full repayment of
the financing facility to Intesa and
the full repayment of the Group’s
notes, resulting in no breaches of
financial covenants and
undertakings as of 30 June 2020.
The sale of MV Ocean Shearer,
the sale and lease-back of MV
Ocean Swagman, and the
extension of the repayment terms
in relation to MV Ocean Ute and
MV Ocean Drover has positioned
the Group to meet its debt
servicing requirements in the
coming 12 months.
The Group maintains a US$4.0
million ($5.8 million) working-
capital facility with a financial
institution in Singapore to fund
ship-operating costs and foreign-
exchange transactions. As of 30
June 2020, this facility has not
been utilised (30 June 2019: $1.6
million was utilised). The Group
has commenced activities to obtain
additional facilities with the same
financial institution to provide
financial flexibility in the Group’s
operations and growth in face of
practical uncertainties.
The Group has also prepared a
cash flow forecast, which indicates
that the Group is expected to have
sufficient cash to meet their
operating cash flow requirements
for at least twelve months from the
date of these financial statements.
The Group’s ability to achieve its
cash flow forecast is based on the
following key considerations:
•
The Group is able to secure
livestock charters and utilise
the capacity of their vessels
at pricing and utilisation that
are expected to be in line
with Group management’s
expectations;
•
• Collections from customers
are to be maintained at
normal operating cycles;
The Group is able to maintain
and extend the already
established business
relationships with its
customers and suppliers
around the world; and
The Group is able to extend
existing financing facilities or
establish new facilities.
•
Wellard’s chartering activity is
exposed to liquidity risk due to its
exposure to spot market. Freight
rates earned may not be sufficient
to cover its operating costs,
leading to a reduction in cash
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
Accounting Standards Board
(IASB).
obligation, the following
requirements are considered:
On 1 July 2019, the Group has
adopted the new or amended IFRS
and Interpretations of IFRS that
are mandatory for application for
the financial year. Changes to the
Group’s accounting policies have
been made as required. The
adoption of these new or amended
IFRS and Interpretations of IFRS
did not have any impact on the
amounts recognised in prior
periods and are not expected to
significantly affect the current or
future periods except for the
adoption of AASB 16 Leases. The
Group had to change its
accounting policies as a result of
adopting AASB 16.
The Group elected to adopt the
new rules retrospectively but
recognised the cumulative effect of
initially applying the new standard
on 1 July 2019. This is disclosed
in Note 4.
2. SIGNIFICANT
ACCOUNTING
POLICIES AND
ESTIMATES
The significant accounting policies
adopted in the preparation of the
financial statements have been
consistently applied to all the
periods presented, unless
otherwise stated. In addition to
these accounting policies, the
following policies and critical
accounting estimates were
applied:
A. REVENUE FROM
CONTRACTS WITH
CUSTOMERS
AASB 15 Revenue from Contracts
with Customers, states that an
entity shall recognise revenue (or
as) the entity satisfies a
performance obligation by
transferring a promised good or
service (i.e. an asset) to a
customer. An asset is transferred
when (or as) the customer obtains
control of the asset.
If revenue is not recognised over
time, it is recognised at a point in
time. To determine the point in
time at which a customer obtains
control of a promised asset and
the entity satisfies a performance
a) The entity has a present right
to payment for an asset;
b) The customer has legal title
to the asset;
c) The entity has transferred
physical possession of the
asset, however physical
possession may not coincide
with control of the asset;
d) The customer has significant
risks and rewards of
ownership of the asset; and
e) The customer has accepted
the asset
Sale of goods
Revenue is determined on a per
shipment or per contract basis and
is recognised in line with the
customer trading terms.
Wellard trades using CIF contract
terms (cost, insurance and freight).
Control of the assets does not
pass until unloading of the vessel,
as such shipping is not a separate
performance obligation. Revenue
is recognised on discharge.
Vessel chartering
Freight revenue for external
shipments meets the criteria of a
performance obligation satisfied
over time.
Voyage charter revenue is
recognised on a percentage of
completion basis which is
determined on a time proportion
method of each individual voyage.
Any demurrage and dispatch are
recognised when considered
probable.
Contract liabilities
The timing of revenue recognition,
cash collections results in invoiced
accounts receivable and customer
advances and deposits (contract
liabilities) on the consolidated
statement of financial position.
Generally, amounts are invoiced,
and deposits received in advance
of providing the good or service.
Deposits received are recognised
on a per shipment basis, these
deposits are recorded as a liability
on the balance sheet and
liquidated on discharge when the
revenue is recognised.
Deposits received at the time of
booking a vessel for charter are
recorded as a liability on the
balance sheet and liquidated on a
balance. The uncertainties in the
market exacerbate the need to
provide the financial flexibility
needed to meet the operational
needs and financial obligations.
The Group’s management has
considered the impact of the
COVID-19 global pandemic
outbreak and is constantly
monitoring the evolving global
situation. Although the
unprecedented and unpredictable
nature of this global pandemic
makes it very difficult to report on
the complete range of effects for
the livestock industry, for the time
being, the impacts to the Group
have been limited. However, the
economic effects of the
Coronavirus are still uncertain and
the Group’s management has
maintained a prudent approach on
the impact of the pandemic on the
Group’s operations in its cash flow
forecast.
These factors indicate the
existence of a material uncertainty
which may cast significant doubt
about the Group’s ability to
continue as a going concern.
In the event that the Group is
unable to operate as a going
concern, the Group may be unable
to discharge their liabilities or
realise their assets in the normal
course of business, and additional
liabilities may arise. In addition, the
Group may have to reclassify non-
current assets and liabilities as
current assets or liabilities. No
such adjustments have been made
in the financial statements for the
financial year ended 30 June 2020.
However, the Directors and
management of the Group expect
that the future net cash inflows
from operating activities and the
continued availability of credit
facilities from its principal banker
will be sufficient to cover the
Group’s net current liability position
and support the Group’s current
level of operations. Accordingly,
these financial statements have
been prepared on a going concern
basis.
D. COMPLIANCE WITH IFRS
This financial report complies with
Australian Accounting Standards
and International Financial
Reporting Standards (IFRS) as
issued by the International
54 | WELLARD ANNUAL REPORT 2019
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
legislation and the anticipation that
the Group will derive sufficient
future assessable income to
enable the benefit to be realised
and comply with the conditions of
deductibility imposed by the law.
E. DEFERRED TAX ASSETS
AND LIABILITIES
Deferred tax assets and liabilities
are recognised for temporary
differences at the applicable tax
rates when the assets are
expected to be recovered or
liabilities are settled, based on the
tax rates (and tax laws) that have
been enacted or substantially
enacted by the end of the reporting
period. The measurement of
deferred tax liabilities and assets
reflects the tax consequences that
would follow from the manner in
which the Group expects, at the
end of the reporting period, to
recover or settle the carrying
amount of its assets and liabilities.
No deferred tax asset or liability is
recognised in relation to temporary
differences if they arose in a
transaction, other than a business
combination, that at the time of the
transaction did not affect either
accounting profit or taxable profit
or loss.
Deferred tax assets are recognised
for deductible temporary
differences and unused tax losses
only if it is probable that future
taxable amounts will be available
to utilise those temporary
differences and losses.
Deferred tax assets and liabilities
are offset when there is a legally
enforceable right to set off current
tax assets against current tax
liabilities and when they relate to
the income taxes levied by the
same taxation authority and the
Group intends to settle its current
tax assets and liabilities on a net
basis.
Current and deferred tax balances
attributable to amounts recognised
directly in equity are also
recognised directly in equity.
F. TAX CONSOLIDATION
Wellard Limited, and its Australian
subsidiaries formed a tax
consolidated Group with effect
from 11 December 2015.
The parent entity and subsidiaries
in the tax consolidated Group have
entered into a tax funding
agreement such that each entity in
the tax consolidated Group
recognises the assets, liabilities,
revenues and expenses in relation
to its own transactions, events and
balances only. This means that:
•
•
•
the parent entity recognises
all current and deferred tax
amounts relating to its own
transactions, events and
balances only;
the subsidiaries recognise
current or deferred tax
amounts arising in respect of
their own transactions,
events and balances; and
current tax liabilities and
deferred tax assets arising in
respect of tax losses, are
transferred from the
subsidiary to the parent entity
as intercompany payables or
receivables.
Adjustments may be made for
transactions and events occurring
within the tax consolidated Group
that do not give rise to a tax
consequence for the Group or that
have a different tax consequence
at the head entity level of the
Group. The tax consolidated
Group will enter into a tax sharing
agreement to limit the liability of
subsidiaries in the tax consolidated
Group arising under the joint and
several liability requirements of the
tax consolidation system, in the
event of default by the parent
entity to meet its payment
obligations.
G. EARNINGS PER SHARE
Basic earnings per share is
calculated by dividing:
•
by
•
the profit / (loss) attributable
to the owners of the
Company, excluding any
costs of servicing equity other
than ordinary shares,
the weighted average
number of ordinary shares
outstanding during the
financial year, adjusted for
bonus elements in ordinary
shares issued during the year
and excluding treasury
shares.
Diluted earnings per share
Diluted earnings per share adjusts
the figures used in the
determination of basic earnings
per share to take into account the
after income tax effect of interest
percentage complete basis when
the revenue is recognised.
B. BORROWING COSTS
Borrowing costs can include
interest, amortisation of discounts
or premiums relating to
borrowings, ancillary costs
incurred regarding the
arrangement of borrowings and
foreign exchange losses net of
hedged amounts on borrowings.
Borrowing costs are expensed as
incurred, except for borrowing
costs incurred as part of the cost of
the construction of a qualifying
asset which are capitalised until
the asset is ready for its intended
use or sale.
Loan establishment costs have
been capitalised to deferred
borrowing costs and are amortised
over the life of the loan facility.
Borrowing costs relating to loans
extinguished during the period
have been expensed.
C. INTEREST REVENUE
Interest revenue is recognised as
interest accrued using the effective
interest method. This is a method
of calculating the amortised cost of
a financial asset and allocating the
interest income over the relevant
period using the effective interest
rate, which the rate that exactly
discounts estimated future cash
receipts through the expected life
of the financial asset to the net
carrying amount of the financial
asset.
D. INCOME TAX EXPENSE
Income tax expense comprises
current and deferred tax. Current
income tax expense or benefit is
the tax on the current period’s
taxable income/loss based on the
applicable income tax rate
adjusted by changes in deferred
tax assets and liabilities. It is
calculated based on tax laws that
have been enacted or are
substantially enacted by the end of
the reporting period.
Current tax payable is the
expected tax payable on the
taxable income for the year, using
tax rates enacted or substantially
enacted at the reporting date, and
any adjustment to tax payable in
respect of previous years. Income
tax benefits are based on the
assumption that no adverse
change will occur in the income tax
55 | WELLARD ANNUAL REPORT 2019
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
the net realisable value when the
market price falls below cost if the
overall shipping activity is
expected to be profitable.
All other inventories are measured
at the lower of cost or net
realisable value.
Costs incurred in bringing each
product to its present location and
condition is accounted for as
follows:
•
•
•
fuel: purchase cost on a first
in, first out basis;
raw materials and
consumables: purchase cost
on a first in, first out basis;
and
finished goods and work in
progress: cost of direct
material and labour and an
appropriate portion of
variable and fixed overheads.
Overheads are applied on the
basis of normal operating
capacity. Costs are assigned
on the basis of weighted
average costs.
Net realisable value is the
estimated selling price in the
ordinary course of business, less
estimated costs of production and
the estimated costs necessary to
complete the sale.
L. BIOLOGICAL ASSETS
Biological assets in the statement
of financial position comprise cattle
and sheep and are measured on
initial recognition and at each
reporting date at their fair value
less estimated point of sale costs.
The fair value is determined on the
actual selling prices approximating
those at period end less estimated
point of sale costs. Fair value
increments or decrements are
recognised in profit or loss.
Where fair value cannot be
measured reliably, biological
assets are measured at cost. Net
increments and decrements in the
fair value of the biological assets
are recognised as income or
expense in profit or loss,
determined as:
•
the difference between the
total fair value of the
biological assets recognised
at the beginning of the period
and the total fair value of the
biological assets recognised
at the end of the period; and
•
costs incurred in maintaining
or enhancing the biological
assets recognised at the
beginning of the period and
the total fair value of the
biological assets recognised
at the end of the period.
Livestock on hand that have not
yet been sold at the reporting date
are valued internally by the Group
as there is no observable market
for them. The value is based on
the estimated price per kilogram
and the changes for the weight of
each animal class as it changes
through natural biological
transformation. The key factors
affecting the value of each animal
are price per kilogram and weight.
Significant increases or decreases
in any of the significant
unobservable valuation inputs for
livestock in isolation would result in
significant lower or higher fair
value measurement.
Valuation of biological assets
To provide an indication about the
reliability of the inputs used in
determining fair value, the Group
classifies its biological assets into
the three levels prescribed under
the accounting standards.
M. DERIVATIVE FINANCIAL
ASSETS AND LIABILITIES
The Group classifies its financial
assets into the following
categories: financial assets at fair
value through profit or loss, loans
and receivables and available-for-
sale financial assets. The
classification depends on the
purpose for which the instruments
were acquired. Management
determines the classification of the
financial instruments at initial
recognition.
Derivative financial instruments
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 the end of
each reporting period.
Foreign exchange contracts
The Group enters into foreign
exchange contracts to manage its
exposure against foreign currency
risk in line with the entity’s risk
management strategy.
and other financial costs
associated with dilutive potential
ordinary shares.
Potential ordinary shares are only
considered dilutive if the loss per
share decreases on conversion to
ordinary shares.
H. LOANS AND BORROWINGS
All loans and borrowings are
initially recognised at the fair value
of the consideration received less
directly attributable transaction
costs. After initial recognition,
interest-bearing loans and
borrowings are subsequently
measured at amortised cost using
the effective interest method.
Borrowings are classified as
current liabilities unless the Group
has an unconditional right to defer
settlement of the liability for at
least 12 months after the reporting
date.
I. CASH
Cash comprises cash on hand and
demand deposits. Cash
equivalents comprise short-term
and highly liquid cash deposits that
are readily convertible to known
amounts of cash and which are
subject to an insignificant risk of
change in value. For the purposes
of the statement of cash flows,
cash includes cash on hand,
demand deposits and cash
equivalents.
Cash at bank earns interest at
floating rates based on daily bank
deposit rates. Short-term deposits
are made for carrying periods of
between one day and three
months, depending on the
immediate cash requirements of
the Group, and earn interest at the
respective short-term deposit
rates. For cash subject to
restriction, assessment is made on
the economic substance of the
restriction and whether they meet
the definition of cash and cash
equivalents.
J. ISSUED CAPITAL
Ordinary shares are classified as
equity. Incremental costs directly
attributable to the issue of ordinary
shares are recognised as a
deduction from equity, net of any
tax effects.
K. INVENTORIES
Bunker fuel used for the operation
of the vessels and with a high
turnover rate is not written-down to
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NOTES TO THE FINANCIAL STATEMENTS
P. TRADE AND OTHER
PAYABLES
These amounts represent liabilities
for goods and services provided to
the Group prior to the end of the
financial year that are unpaid.
The amounts are unsecured and
are usually paid within 14 days of
recognition. Trade and other
payables are presented as current
liabilities unless payment is not
due within 12 months after the end
of the reporting period.
They are recognised initially at
their fair value and subsequently
measured at amortised cost using
the effective interest method.
Due to the short-term nature of
trade and other payables, their
carrying amount approximates fair
value.
Q. DEFERRED REVENUE
These amounts represent
payments collected but not earned
at the end of the reporting period.
These payments are recognised in
line with AASB15 Revenue
Recognition.
R. PROPERTY, PLANT AND
EQUIPMENT
Each class of property, plant and
equipment is carried at cost less,
where applicable, any
accumulated depreciation and any
accumulated impairment losses.
Vessels
Vessels are measured on a cost
basis. Depreciation rate: 4.0% -
5.0%, straight-line basis after
deducting expected scrap value of
the vessel.
Land and Buildings
Land and buildings are measured
on a cost basis. Depreciation rate:
2.5% - 20.0%, straight-line basis.
Plant and Equipment
Plant and equipment is measured
on a cost basis. Depreciation rate:
4.5% - 40.0%, straight line basis.
Improvements
Improvements are measured on a
cost basis. Depreciation rate: 6.0%
- 11.2%, straight line basis.
Depreciation
The depreciable amount of all fixed
assets is depreciated over their
estimated useful lives commencing
from the time the asset is held
ready for use. Land owned by the
Group is freehold land and
accordingly is not depreciated.
Leasehold improvements
Are depreciated over the shorter of
either the unexpired period of the
lease or the estimated useful lives
of the improvements.
Assets under construction
Are measured at cost and not
depreciated until the assets are
ready for use.
S. INTANGIBLE ASSETS
Goodwill
Goodwill is recognised initially at
the excess over the aggregate of
the consideration transferred, the
fair value of the non-controlling
interest, and the acquisition date
fair value of the acquirer’s
previously held equity interest (in
the case of a step acquisition), less
the fair value of the identifiable
assets acquired, and liabilities
assumed.
Goodwill is not amortised but is
tested for impairment annually or
more frequently if events or
changes in circumstances indicate
that it might be impaired and is
carried at cost less accumulated
impairment losses.
Software
Software is measured initially at
the cost of acquisition and
amortised over the useful life of the
software. Expenditure on software
development activities is
capitalised only when it is
expected that future benefits will
exceed the deferred costs, and
these benefits can be reliably
measured. Capitalised
development expenditure is stated
at cost less accumulated
amortisation. Amortisation is
calculated using the straight-line
method to allocate the cost of the
intangible asset over its estimated
useful life (not exceeding ten
years) commencing when the
intangible asset is available for
use. Other development
expenditure is recognised as an
expense when incurred.
Assets acquired separately or from
a business combination
Intangible assets acquired
separately are capitalised at cost
and from a business combination
are capitalised at fair value as at
the date of acquisition. Following
initial recognition, intangible assets
N. TRADE AND OTHER
RECEIVABLES
The Group applied the simplified
approach permitted by AASB 9
Financial Instruments, which
requires expected lifetime losses
to be recognised from initial
recognition of the receivables.
Credit loss allowance is based on
12-month expected credit loss if
there is no significant increase in
credit risk since initial recognition
of the receivables. If there is a
significant increase in credit risk
since initial recognition, lifetime
expected credit loss will be
calculated and recognised.
O. ASSETS HELD FOR SALE
Non-current assets are classified
as held for sale if their carrying
amount will be recovered
principally through a sale
transaction rather than continuing
use and a sale is considered highly
probable.
Assets held for sale are stated at
the lower of their carrying amount
and fair value less costs to sell.
An impairment loss is recognised
for any initial or subsequent write-
down of the asset, or disposal
group, to fair value less costs to
sell. A gain is recognised for any
subsequent increases in fair value
less costs to sell, but not in excess
of any cumulative impairment loss.
Non-current assets, including
those as part of a disposal group,
are not depreciated or amortised
while they are classified as held for
sale.
Non-current assets are held for
sale and the assets of the disposal
group classified as held for sale
are presented separately from the
other assets in the balance sheet.
The liabilities of a disposal group
classified as held for sale are
presented separately from the
liabilities in the balance sheet.
A discontinued operation is a
component of the entity that has
been disposed of or is classified as
held for sale and that represents a
separate major line of business, is
part of a single co-ordinated plan
to dispose of such line of business.
The results of the discontinued
operations are presented
separately in the statement of
profit or loss.
57 | WELLARD ANNUAL REPORT 2019
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
calculations are based on
projected cash flows approved by
management covering a period of
ten years. Management’s
determination of cash flow
projections and gross margins is
based on past performance and its
expectation for the future.
Recoverability of non-financial
assets other than goodwill
All assets are assessed for
impairment at each period end by
evaluating whether indicators of
impairment exist in relation to the
continued use of the asset by the
Group. Impairment triggers include
declining product or manufacturing
performance, technology changes,
adverse changes in the economic
or political environment or future
product expectations. If an
indicator of impairment exists, the
recoverable amount of the asset is
determined.
T. PROVISIONS
Provisions are recognised if, as a
result of a past event, the Group
has a present legal or constructive
obligation that can be estimated
reliably, and it is probable that an
outflow of economic benefits will
be required to settle the obligation.
Provisions are determined by
discounting the expected future
cash flows at a pre-tax rate that
reflects current market
assessments of the time value of
money and the risks specific to the
liability. When discounting is used,
the increase in the provision due to
the passage of time is recognised
as a finance cost.
Short-term employee benefit
obligations
Liabilities arising in respect of
wages and salaries, annual leave,
long service leave and any other
employee benefits expected to be
settled within 12 months of the end
of the period are measured at their
nominal amounts based on
remuneration rates which are
expected to be paid when the
liability is settled. The expected
cost of short-term employee
benefits in the form of
compensated absences such as
annual leave is recognised in the
provision for employee benefits. All
other short-term employee benefit
obligations are presented as
payables.
Long-term employee benefit
obligations
Liabilities arising in respect of long
service leave and annual leave
which are not expected to be
settled within 12 months of the end
of the period are measured at the
present value of the estimated
future cash outflow to be made in
respect of services provided by
employees up to the end of the
period. Employee benefit
obligations are presented as
current liabilities in the statement
of financial position if the entity
does not have an unconditional
right to defer settlement for at least
12 months after the end of the
period, regardless of when the
actual settlement is expected to
occur.
Termination benefits
Termination benefits are payable
when employment of an employee
or group of employees is
terminated before the normal
retirement date, or when the Group
provides termination benefits as a
result of an offer made and
accepted in order to encourage
voluntary redundancy. The Group
recognises a provision for
termination benefits when the
entity can no longer withdraw the
offer of those benefits, or if earlier,
when the termination benefits are
included in a formal restructuring
plan that has been announced to
those affected by it.
U. BUSINESS COMBINATIONS
The Group accounts for business
combinations using the acquisition
method when control is transferred
to the Group. Cost is measured as
the fair value of the assets
acquired and liabilities assumed,
or shares issued at the acquisition
date. Transaction costs are
expensed as they are incurred,
except if they relate to the issue of
debt or equity securities.
V. CONSOLIDATION
Transactions eliminated on
consolidation
Intercompany balances and
transactions, and any unrealised
income and expenses arising from
intercompany transactions, are
eliminated in preparing the
consolidated financial statements.
are carried at cost less any
accumulated amortisation and any
accumulated impairment losses.
Internally generated intangible
assets are capitalised when the
Group is certain that there are
future economic benefits that will
arise from these assets. Other
internally generated intangible
assets that do not fit this
recognition criterion are charged
against profit or loss in the period
in which the expenditure is
incurred.
The useful lives of intangible
assets are assessed to be either
finite or indefinite. Intangible
assets with finite lives are
amortised over the useful life and
assessed for impairment whenever
there is an indication that the
intangible asset may be impaired.
The amortisation period and the
amortisation method for an
intangible asset with a finite useful
life are reviewed at least at each
period end. Changes in the
expected useful life or the
expected pattern of consumption
of future economic benefits
embodied in the asset are
accounted for by changing the
amortisation period or method, as
appropriate, which is a change in
accounting estimate.
The amortisation expense on
intangible assets with finite lives is
recognised in profit or loss in the
expense category consistent with
the nature of the intangible asset.
Intangible assets with indefinite
useful lives are tested for
impairment annually either
individually or at the Cash
Generating Unit (CGU) level.
Such intangible assets are not
amortised. The useful life of an
intangible asset with an indefinite
life is reviewed each period to
determine whether indefinite life
assessment continues to be
supportable. If not, the change in
useful life assessment from
indefinite to finite is accounted for
as a change in an accounting
estimate and is thus accounted for
on a prospective basis.
Recoverability of goodwill
Goodwill is allocated to CGUs
according to applicable business
operations. The recoverable
amount of a CGU is based on
value-in-use calculations. These
58 | WELLARD ANNUAL REPORT 2019
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
directly attributable costs). Costs
incurred in investigating and
evaluating acquisitions up to
formal commitment are expensed
as incurred. Where the carrying
value of an investment exceeds
the recoverable amount, an
impairment charge is recognised in
profit or loss which can
subsequently be reversed in
certain conditions.
X. SHARE BASED PAYMENTS
The fair value of shares granted is
recognised as an employee
benefits expense with a
corresponding increase in equity.
The total amount to be expensed
is determined by reference to the
fair value of the shares granted,
which includes any market
performance conditions and the
impact of any non-vesting
conditions but excludes the impact
of any service and non-market
performance vesting conditions.
The total expense is recognised
over the vesting period, which is
the period over which all of the
specified vesting conditions are to
be satisfied.
Y. LEASES
As explained in Note 1(D) above,
the Group has changed its
accounting policy for leases where
the Group is the lessee. The
impact of the change in Note 4.
The group leases office space,
office equipment and vessels.
Rental contracts are typically made
for fixed periods but may have
extension options as described
below.
Lease terms are negotiated on an
individual basis and contain a wide
range of different terms and
conditions.
Until the financial year 2019,
leases of property, plant and
equipment were classified as
operating leases, see Note 25 for
details. From 1 July 2019, leases
are recognised as right-of-use
assets and corresponding lease
liabilities at the date at which the
leased assets are available for use
by the Group.
Assets and liabilities arising from
leases are initially measured on a
present value basis. Lease
liabilities include the net present
value of the following lease
payments:
•
•
fixed payments (including in-
substance fixed payments),
less any lease incentives
receivable, and
the exercise price of a
purchase option if the group
is reasonably certain to
exercise that option.
Lease payments to be made under
reasonably certain extension
options are also included in the
measurement of the liability.
The lease payments are
discounted using the interest rate
implicit in the lease. If that rate
cannot be readily determined,
which is generally the case for
leases in the group, the lessee’s
incremental borrowing rate is used,
being the rate that the individual
lessee would have to pay to
borrow the funds necessary to
obtain an asset of similar value to
the right-of-use asset in a similar
economic environment with similar
terms, security and conditions.
To determine the incremental
borrowing rate, the Group uses
recent third-party financing
received as a starting point,
adjusted to reflect changes in
financing conditions since third
party financing was received.
Lease payments are allocated
between principal and finance
cost. The finance cost is charged
to the consolidated statement of
comprehensive income over the
lease periods so as to produce a
constant periodic rate of interest
on the remaining balance of the
liabilities for each period.
Right-of-use assets are measured
at cost comprising the following:
•
•
the amount of the initial
measurement of lease
liability, and
any lease payments made at
or before the commencement
date less any lease
incentives received.
Right-of-use assets are generally
depreciated over the shorter of the
asset's useful life and the lease
term on a straight-line basis. If the
Group is reasonably certain to
exercise a purchase option, the
right-of-use asset is depreciated
over the underlying asset’s useful
life.
Foreign currency translation and
balances
Functional and presentation
currency
The financial statements of each
entity within the Group are
measured using the currency of
the primary economic environment
in which that entity operates
(functional currency). The
consolidated financial statements
are presented in Australian dollars
which is Wellard’s functional and
presentation currency.
Transactions and balances
Transactions in foreign currencies
of entities within the Group are
translated into functional currency
at the rate of exchange ruling at
the date of the transaction.
Foreign currency monetary items
that are outstanding at the
reporting date (other than
monetary items arising under
foreign currency contracts where
the exchange rate for that
monetary item is fixed in the
contract) are translated using the
spot rate at the end of the period.
Except for certain foreign currency
transactions, all resulting
exchange differences arising on
settlement or restatement are
recognised as revenues and
expenses for the period.
Entities that have a functional
currency different from the
presentation currency are
translated as follows:
•
• assets and liabilities are
translated at period-end
exchange rates prevailing at
that reporting date;
income and expenses are
translated at actual exchange
rates or average exchange
rates for the period, where
appropriate; and
• all resulting exchange
differences are recognised as a
separate component of equity.
Goodwill and fair value
adjustments arising on the
acquisition of a foreign operation
are treated as assets and liabilities
of the foreign operation and
translated at the closing rate.
W. INVESTMENTS IN
SUBSIDIARIES
Investments in subsidiaries are
initially recognised at cost (fair
value of consideration paid plus
59 | WELLARD ANNUAL REPORT 2019
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NOTES TO THE FINANCIAL STATEMENTS
An impairment loss in respect of a
financial asset measured at
amortised cost is calculated as the
difference between its carrying
amount and the present value of
the estimated future cash flows
discounted at the asset’s original
effective interest rate. Losses are
recognised in profit or loss and
reflected in an allowance account
against loans and receivables.
Interest on the impaired asset
continues to be recognised. When
an event occurring after the
impairment was recognised,
causing the amount of the
impairment loss to decrease, the
decrease in impairment loss is
reversed through profit or loss.
Useful life and residual value of
livestock carrying vessels
Management reviews the
appropriateness of the useful life
and residual value of vessels at
each balance date. Certain
estimates regarding the useful life
and residual value of vessels are
made by management based on
past experience and these are in
line with the industry. Changes in
the expected level of usage, scrap
value of steel and market factors
could impact the economic useful
life and residual value of the
vessels. When there is a material
change in the useful life and
residual value of vessels, such a
change will impact both the
depreciation charges in the period
in which the changes arise and
future depreciation charges.
An impairment loss in respect of
goodwill is not reversed. For other
assets, an impairment loss is
reversed only to the extent that the
asset’s carrying amount does not
exceed the carrying amount that
would have been determined, net
of depreciation or amortisation, if
no impairment loss had been
recognised.
Investment in subsidiaries
All assets are assessed for
impairment at each period end by
evaluating whether indicators of
impairment exist in relation to the
continued use of the asset by the
Group. Impairment indicators
include market capitalisation,
declining product or processing
performance, technology changes,
adverse changes in the economic
or political environment or future
product expectations.
3. CRITICAL
ACCOUNTING
ESTIMATES AND
JUDGEMENTS
The preparation of financial
statements requires the use of
accounting estimates which, by
definition, will seldom equal the
actual results. Management also
needs to exercise judgement in
applying the Group’s accounting
policies.
Estimates and underlying
assumptions are reviewed on an
ongoing basis. Revisions to
accounting estimates are
recognised in the period in which
the estimates are revised and in
any future periods affected.
A. DEFERRED TAX ASSET
Management assesses the extent
to which it is probable that future
taxable profits will be available
against which the deferred tax
assets can be utilised.
In the previous financial year,
management has assessed that
there is sufficient uncertainty in the
recovery of the deferred tax asset
and has therefore decided to
derecognise all current deferred
tax assets and liabilities from
temporary assets and carry
forward losses.
The Wellard Limited Australian tax
consolidated group derecognised
deferred tax assets and deferred
tax liabilities of $3.9 million and
$0.5 million, respectively, during
the financial year ended 30 June
2019.
Deferred tax assets, of $71.3
million, (2019: $65.7 million)
relating to the tax losses of the
Australian tax consolidated group,
$9.0 million (2019: $9.4 million)
relating to Uruguay, $3.3 million
(2019: $4.7 million) relating to
Brazil and $3.2 million (2019: $4.9
million) relating to Singapore have
not been recognised. There is no
expiration date for these amounts
except for Uruguay and Brazil.
B. VALUATION OF
BIOLOGICAL ASSETS
Biological assets are measured on
initial recognition and at each
reporting date at their fair values
less estimated point of sale costs.
Payments associated with short-
term leases of equipment are
recognised on a straight-line basis
as an expense in consolidated
statement of comprehensive
income. Short-term leases are
leases with a lease term of 12
months or less.
Extension options are included in
the right-of-use assets across the
Group. These are used to
maximise operational flexibility in
terms of managing the assets used
in the Group’s operations. The
majority of extension options held
are exercisable only by the Group
and not by the respective lessor.
Z. GOODS AND SERVICES
TAX
Revenues, expenses, assets and
liabilities are recognised net of the
amount of GST, except where the
amount of GST incurred is not
recoverable from the ATO. In
these circumstances, the GST is
recognised as part of the cost of
acquisition of the asset or as part
of an item of the expense.
Receivables and payables in the
statement of financial position are
shown inclusive of GST.
AA. IMPAIRMENT
Financial assets measured at
amortised cost
The Group considers evidence of
impairment for financial assets
measured at amortised cost (loans
and receivables) at both a specific
asset and collective level. All
individually significant assets are
assessed for specific impairment.
Those found not to be specifically
impaired are then collectively
assessed for any impairment that
has been incurred but not yet
identified. Assets that are not
individually significant are
collectively assessed for
impairment by grouping together
assets with similar risk
characteristics.
In assessing collective impairment,
the Group uses historical trends of
the probability of default, timing of
recoveries and the amount of loss
incurred, adjusted for
management’s judgement as to
whether current economic and
credit conditions are such that the
actual losses are likely to be
greater or lesser than suggested
by historical trends.
60 | WELLARD ANNUAL REPORT 2019
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
is determined based on its value-
in-use (VIU) calculations, taking
into account the individual facts
and circumstances of the
investment, economic and
industry-related factors and
management plans for the
investment.
The VIU is determined using cash
flow projections based on the
financial budget prepared by
management covering the
remaining useful lives of the
vessel. In making these estimates,
management has relied on its past
performance and its current
expectations of market
development. Cash flow in the VIU
calculation was discounted at 10%
per annum.
If the estimated EBITDA co-
efficient index used in the VIU
calculation had been 0.50% lower
than the management’s estimates,
the recoverable amounts of the
asset would decrease by $50,200.
If the estimated discount rate
applied to the discounted cash
flows had been 1% higher than
management’s estimates, the
recoverable amounts of the asset
would decrease by $117,000.
The Group has not recognised
impairment charges on its vessels
during the year.
Investments in subsidiaries
We have estimated the
recoverable amount based on the
value-in-use of the subsidiaries.
No impairment (2019: $19.7
million) has been recognised in
respect of the recoverable amount
of investment in subsidiaries.
Impairment of investments in
subsidiaries has been eliminated
on consolidation in the Group
accounts. The impairment of
investment in subsidiaries is
considered a critical accounting
estimate for the parent entity only
and not for the Group.
The fair value is determined based
on the actual selling prices
approximating those at year end
less estimated point-of-sale costs.
C. SRI LANKAN PROJECT
During the year, the Group
recognised a net gain of $7.9
million in other gains/losses from
trading and chartering activities in
relation to the Sri Lankan project.
After legal, commercial and
technical assessment, the Group
concluded that during the currency
of the contract, the counterparty
had failed to fulfil contractual
obligations; that subsequently the
contract has expired; and that
there are now no remaining
enforceable performance
obligations under the contract.
Under this analysis, the Group has
determined that its obligations to
perform the contract have ceased
and that the existing contract
assets and liabilities are not able to
meet the revenue recognition
criteria in accordance with AASB
15.
The Group also concluded that (i)
neither a provision nor a disclosure
of contingent liabilities in
accordance with AASB 137 is
required, as the Group no longer
has any obligations under the
terms of the contract which has
ceased; and (ii) the probability of
an outflow of resources embodying
economic benefits to settle any
obligation related to this contract is
remote.
Consequently, the Company
Group concluded that it was
appropriate to recognise the net
amount of $7.9 million in Other
gains/(losses) within the
consolidated statement of
comprehensive income.
IMPAIRMENT
D.
Impairment of non-financial assets
In order to assess the fair value
less cost of sale for the vessel fleet
CGU, management requested and
received two independent market
valuations for its vessels with
purchase obligation.
For the vessel which the Group
leases in from third party with no
purchase obligation, management
has compared the carrying amount
of the asset with its recoverable
amount. The recoverable amount
61 | WELLARD ANNUAL REPORT 2019
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
4. CHANGE IN ACCOUNTING POLICY
This note explains the impact of the adoption of AASB 16 Leases on the Group’s consolidated financial statements.
As indicated in Note 1(D) above, the Group has adopted AASB 16 Leases from 1 July 2019, but has not restated
comparatives for the 2019 reporting period, as permitted under the specific transition provisions in this standard. The
reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance
sheet on 1 July 2019.
On adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had previously been classified
as “operating leases” under the principles of AASB 117 Leases. These liabilities were measured at the present value of
the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 July 2019. The weighted
average lessee’s incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 6%.
Title
Practical
expedient
applied
AASB 16 Leases
In applying AASB 16 for the first time, the Group has used the following practical expedients
permitted by the standard:
(i) On a lease-by-lease basis, the Group has:
•
•
•
•
applied a single discount rate to a portfolio of leases with reasonably similar characteristics
relied on previous assessments on whether leases are onerous as an alternative to
performing an impairment review – there were no onerous contracts as at 1 July 2019
applied accounting for operating leases with a remaining lease term of less than 12
months as at 1 July 2019 as short-term leases
excluded initial direct costs for the measurement of the right-of-use asset at the date of
initial application, and
(ii) The Group has also elected not to reassess whether a contract is, or contains a lease at the
date of initial application. Instead, for contracts entered into before the transition date the
Group relied on its assessment made applying AASB 16 and Interpretation 4 Determining
whether an Arrangement contains a Lease.
Measurement
of lease
liabilities
Operating lease commitments disclosed as at 30 June 2019
Discounting effect using the lessee’s incremental borrowing rate
Less: short-term leases not recognised as a liability
Lease liabilities recognised as at 1 July 2019
Of which are:
Current lease liabilities
Non- current lease liabilities
2020
$’000
1,434
(180)
(116)
1,138
593
545
1,138
Measurement
of right-of-
use assets
On a lease-by-lease basis, the Group chose to measure its right-of-use assets at the amount equal
to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments relating to
that lease recognised in the balance sheet as at 30 June 2019.
Adjustments
recognised in
the balance
sheet on 1
July 2019
Property, plant and equipment
Loans and borrowings
Increase
$’000
1,138
1,138
62 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
5. REVENUE FROM CONTRACTS WITH CUSTOMERS
A) DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS
FOR THE YEARS ENDED 30 JUNE
REVENUES
Chartering
Trading
Other revenue
2020
$’000
83,276
4,067
257
87,600
2019
$’000
51,866
181,735
1,490
235,091
Trading revenue is derived at a point in time and includes revenue generated from the buying and selling of livestock
and livestock products by the Group and related logistics.
Charter revenue is derived over time and includes revenue generated from the sale of space on the Group’s vessels
for the carriage of cargo owned by third parties.
B) LIABILITIES RELATED TO CONTRACTS WITH CUSTOMERS
The Group has recognised the following assets and liabilities related to contracts with customers:
AS AT 30 JUNE
CONTRACT LIABILITIES
Chartering
Trading
Revenue from contracts for services
2020
$’000
2,910
-
-
2,910
2019
$’000
1,741
14,779
742
17,262
Trading contract liabilities refer to an advance received by Wellard in 2018 in respect of Tranche 2 of the multi-year
contract with the Sri Lankan Government. The advance was for the delivery of livestock and technical management.
Due to a review of the program currently being undertaken in Sri Lanka, no cattle were delivered for Tranche 2 during
the financial year 2019.
During the financial year 2020, the Group derecognised the contract liabilities and its related fulfilment costs pertaining
to project Sri Lanka due to expiry. As a result, a non-recurring gain of $7.9 million (Note 6(B)) was recorded.
Chartering contract liabilities refer to deposits received from chartering of vessels.
Deferred revenue from contracts for services has been disaggregated as follows:
AS AT 30 JUNE
REVENUE FROM CONTRACTS FOR SERVICES
Opening balance
Recognised during the year
Effect of movement in foreign exchange
Closing balance
2020
$’000
742
(742)
-
-
2019
$’000
698
-
44
742
63 | WELLARD ANNUAL REPORT 2020
For personal use only
6. EXPENSES
FOR THE YEARS ENDED 30 JUNE
A) COST OF SALES
Chartering
Trading
NOTES TO THE FINANCIAL STATEMENTS
2020
$’000
2019
$’000
56,608
3,114
59,722
50,586
145,750
196,336
Within the cost of sales, there were $0.5 million inventories being written off during the financial year 2020 (2019:
$Nil).
B) OTHER (GAINS)/LOSSES
(Gains)/losses arising from chartering and trading activities
Net loss from changes in fair value of biological assets
Net loss from changes in fair value of fuel hedge
Net gain on release from contract liabilities
5(B)
Inventories write-off
Loss arising from other activities
Net (gain)/loss on disposal of property, plant and equipment
Fair value gain on other financial assets
Net loss on disposal of a subsidiary
Net foreign exchange losses
Impairment expenses
Restructuring and integration costs
Share-based payments
C) NET FINANCE COSTS
Interest income
Interest expense
Borrowing costs
Loss on extinguishment of loan
D) GENERAL AND ADMINISTRATIVE EXPENSES
Consulting costs
Occupancy costs
Travel expenses
(Reversal)/allowance for impairment loss
Labour expenses
Motor vehicle expenses
Repairs and maintenance costs
General and administrative costs
64 | WELLARD ANNUAL REPORT 2020
6(E)
6(F)
-
-
(7,946)
583
(7,363)
(2,173)
-
218
1,471
34
951
-
501
(6,862)
(8)
5,935
2,028
2,452
10,407
2,897
561
455
(992)
6,462
29
4
1,559
10,975
2,077
1
-
-
2,078
533
(255)
-
3,511
22,444
1,920
(84)
28,069
30,147
-
10,021
1,245
-
11,266
3,017
1,932
710
3,483
11,143
211
250
2,074
22,820
For personal use only
FOR THE YEARS ENDED 30 JUNE
E) IMPAIRMENT EXPENSES
Impairment loss on:
Property, plant and equipment
Inventories
Intangible assets
F) LABOUR EXPENSES
Wages and salaries
Employee entitlements and on costs
Superannuation
Payroll tax
NOTES TO THE FINANCIAL STATEMENTS
2020
$’000
2019
$’000
-
-
34
34
5,544
499
335
84
6,462
20,421
253
1,770
22,444
9,668
494
575
406
11,143
Impairment loss on property, plant and equipment
Wellard regularly assesses its property, plant and equipment for triggers of impairment. In 2019, an impairment expense
of $20.4 million was recorded for the M/V Ocean Swagman and M/V Ocean Ute vessels to record their assets at fair
value less costs of sale.
Impairment loss on goodwill
In 2020, the impairment expense on intangible assets pertains to goodwill that relates to the investment in Portimor S.A..
In 2019, the impairment relates to the investment by Wellard in the Wellao feedlot and Pre-Export Quarantine (PEQ)
facility (Wellao Feedlot). The Wellao Feedlot was leased on a long-term basis from the Nandagang government in China
with the rights for land use owned by Wellard’s wholly-owned Chinese subsidiary (Wellao). The capital required to
develop this project within China is not readily available, and hence Wellao has entered into negotiations with the relevant
authorities in China for them to buy back the land and rights held by Wellard. The buyback was completed in March
2019. Subsequently the Chinese government agreed to wind up the Wellao subsidiary in June 2019, and the remaining
investment funds were returned to Wellard.
7. SEGMENT INFORMATION
Segment information is presented based on the information reviewed by senior management for performance
measurement and resource allocation.
The Group is structured into two business segments, Chartering and Trading. Meat processing and distribution, as well
as corporate services are not considered to be reportable operating segments and have been presented in the ‘other
segments’ column.
Description of segments and principal activities
a) Chartering: This segment is engaged in the business of livestock transportation required to deliver livestock
globally. In the table below, this segment is further reported as charter revenue, being revenue generated from
the sale of space on the Group’s vessels for the carriage of cargo owned by third parties. This segment was
formerly reported as “Trading and Chartering”.
b) Trading: This segment is engaged in the business of livestock marketing, buying livestock from multiple sources
for export to buyers in international markets globally. In the table below, this segment is further reported as
trading revenue, being revenue generated from the buying and selling of livestock by the company including
related logistics. This segment was formerly reported as “Trading and Chartering”.
c) Other segments: This segment consists of corporate services. Corporate services consist of a centralised
support function which provides specialised services across several disciplines to the rest of the Group, including
human resources, finance and payroll, information technology and communication, legal services and the board
of directors in the prior periods. The segment also includes meat processing and distribution, which is a
discontinued operation.
These classifications are in accordance with AASB 8 guidelines.
65 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
Management primarily uses a measure of statutory net profit / (loss) before income tax to assess the performance of
the operating segments. However, management also receives financial information about segment revenue, EBITDA,
interest expense, assets and liabilities on a monthly basis.
FOR THE YEAR ENDED 30 JUNE 2020
Revenues
Depreciation and amortisation expenses
Net finance costs
Profit / (Loss) from continuing operations
before income tax
Chartering
$’000
Trading
$’000
Other
$’000
83,276
(12,418)
(9,102)
4,067
(42)
-
257
(634)
(1,305)
Total
$’000
87,600
(13,094)
(10,407)
1,198
6,607
(7,541)
264
Total segment assets
Total segment liabilities
89,301
31,414
1,065
372
1,891
287
92,257
32,073
FOR THE YEAR ENDED 30 JUNE 2019
Revenues
Depreciation and amortisation expenses
Net finance costs
Loss from continuing operations before
income tax
51,866
(15,553)
(6,413)
181,735
(173)
-
1,490
(431)
(4,853)
235,091
(16,157)
(11,266)
(16,072)
(12,669)
(12,894)
(41,635)
Total segment assets
Total segment liabilities
180,627
101,634
15,033
12,745
4,685
28,171
200,345
142,550
Revenues of approximately $57.3 million were derived from four external customers of the chartering segment, which
individually account for greater than 9.0% of total revenue (2019: revenue of approximately $83.9 million from four
external customers, which individually account for greater than 7.0% of total revenue).
An impairment expense of $22.4 million was recognised in financial year 2019 in respect of the chartering segment.
Refer to Note 6(E).
Geographical information
Wellard operates in several geographical locations around the world, spanning multiple continents for both
procurement and sales of livestock, as well as sale of space on the Group’s vessels.
External revenues based on the origin country of sale are as follows:
FOR THE YEARS ENDED 30
JUNE
Australia
$’000
Singapore
$’000
Uruguay
$’000
Brazil
$’000
Total
$’000
2020
2019
4,324
133,057
83,276
83,724
-
18,129
-
181
87,600
235,091
The non-current assets of the Group (excluding deferred tax assets) are located across the following countries:
AS AT 30 JUNE
2020
2019
Australia
$’000
Singapore
$’000
Brazil
$’000
Other
$’000
Total
$’000
2,615
3,216
68,434
139,093
5
8
-
54
71,054
142,371
66 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
8. DISCONTINUED OPERATIONS
The discontinued operations for 2019 were related to the sale of Wellard Feeds and ‘La Bergerie’ Pre-Export Quarantine
businesses to Ausvision Rural Services which was completed on 28 February 2019. On 1 April 2019, Wellard
announced it had contracted to sell its Beaufort River Meats (‘BRM’) business after the counterparty to the original sale
agreements defaulted on the sales contract. The BRM sale was completed on 8 April 2019. On 18 January 2019,
Wellard contracted to sell back the Wellao feedlot in China to the Nandagang government. The sale was completed on
1 March 2019.
FOR THE YEARS ENDED 30 JUNE
Revenue
Other losses
General and administrative expenses
Losses before income tax
Income tax expenses
Losses after income tax of discontinued operations
Gain on sale of the discontinued operations after income tax
Losses from discontinued operations
Exchange differences on translation of discontinued operations
Other comprehensive income from discontinued operations
Basic loss per share from discontinued operations (cents)
Diluted loss per share from discontinued operations (cents)
Net cash (outflow)/inflow from operating activities
Net cash inflow from investing activities
Net cash outflow from financing activities
Net cash flows for the year generated by discontinued operations
(a) Details of the sale of the discontinued operations
FOR THE YEARS ENDED 30 JUNE
Consideration received or receivable:
Cash – land, property, plant and equipment
Cash – inventory
Total disposal consideration
Carrying amount of net assets sold
Other expenses directly attributable to the sale of discontinued
operations
Gain on sale before income tax and reclassification of foreign
currency translation reserve
Reclassification of foreign currency translation reserve
Gain on sale after income tax
67 | WELLARD ANNUAL REPORT 2020
2020
$’000
-
-
(14)
(14)
-
(14)
-
(14)
-
-
-
-
(14)
-
-
(14)
2020
$’000
-
-
-
-
-
-
-
-
2019
$’000
48,974
(158)
(51,110)
(2,294)
(585)
(2,879)
1,425
(1,454)
231
231
(0.3)
(0.3)
825
10,636
(11,899)
(438)
2019
$’000
11,989
2,368
14,357
(12,402)
(299)
1,656
(231)
1,425
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
(b) Assets and liabilities of the discontinued operations
The carrying amounts of assets and liabilities as at the respective date of sales were:
FOR THE YEARS ENDED 30 JUNE
Property, plant and equipment
Land
Intangibles
Inventory
Total assets
Net assets
9. TAXATION
INCOME TAX EXPENSE
FOR THE YEARS ENDED 30 JUNE
INCOME TAX EXPENSE
Income tax expense comprises:
Current tax
Deferred tax
Under provision for income tax in prior years
Income tax expense reported during the year
Income tax expense is attributable to:
Continuing operations
Discontinued operations (Note 8)
NUMERICAL RECONCILIATION
2020
$’000
-
-
-
-
-
-
2019
$’000
5,183
1,598
3,253
2,368
12,402
12,402
2020
$’000
2019
$’000
5
-
-
5
5
-
5
45
2,919
2,975
5,939
5,354
585
5,939
The prima facie tax on profit/(loss) from ordinary activities before income tax is reconciled to the income tax as follows:
FOR THE YEARS ENDED 30 JUNE
Profit/(loss) from continuing operations before income tax
(Loss) from discontinued operations before income tax
Tax at the Australian tax rate of 30% (2019: 30%)
Add/(deduct) the effect of other assessable items
Attributable foreign income
Exempt foreign shipping activities
Under provision for deferred income tax in prior years
Current year losses and temporary differences not recognised
Utilisation of carried forward tax losses
68 | WELLARD ANNUAL REPORT 2020
2020
$’000
264
(14)
250
2019
$’000
(41,635)
(1,100)
(42,735)
75
(12,821)
934
(2,831)
-
1,256
(27)
475
(3,811)
2,975
10,268
-
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
Income not subject to tax
Expenses not deductible for tax purposes
Share based payments
Total other assessable items
Add / (less) the effect of other non-assessable items
Effect of different tax rates in other countries
Total other non-assessable items
Income tax expense reported during the year
DEFERRED TAX BALANCES
(1,828)
2,715
-
294
(289)
(289)
5
(22)
6,748
(25)
3,787
2,152
2,152
5,939
FOR THE YEAR
ENDED
Unrealised
foreign
exchange
gains /
losses
$’000
Provisions
and
accruals
$’000
Borrowing
costs
$’000
Other
$’000
Property,
plant and
equipment
$’000
Assessed
tax losses
carried
forward
$’000
Deferred tax liabilities (“DTL”)
2019
Opening
balance
Movement in
profit and loss
Derecognition
of DTL
Closing balance
FOR THE YEAR
ENDED
-
-
-
-
-
(509)
509
-
-
-
-
-
-
(4)
4
-
-
-
-
-
-
-
-
-
Unrealised
foreign
exchange
gains /
losses
$’000
Provisions
and
accruals
$’000
Borrowing
costs
$’000
Property,
plant and
equipment
$’000
Other
$’000
Assessed
tax losses
carried
forward
$’000
Total
$’000
-
(513)
513
-
Total
$’000
Deferred tax assets (“DTA”)
2019
Opening
balance
Movement in
profit and loss
Derecognition
of DTA
4,130
636
(3,128)
1,462
(1,002)
(2,098)
Closing balance
-
-
100
(45)
(55)
-
989
(293)
(696)
-
39
(39)
-
-
-
-
-
-
5,894
(2,043)
(3,851)
-
At the reporting date, the Group has unused tax losses of $86.8 million (2019: $84.7 million) available for offset against
future profits. No deferred tax asset has been recognised as it is not probable that future taxable profits will be
available against which the Group can use the benefits therefrom. Included in unrecognised tax losses are losses of
$12.3 million (2019: $ 14.1 million) that will expire in 2021 - 2025 (2019: 2020 - 2024). The remaining tax losses do not
expire under current tax legislation but are subject to satisfaction of loss utilisation rules.
69 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
10. EARNINGS PER SHARE
FOR THE YEARS ENDED 30 JUNE
BASIC EARNINGS/(LOSS) PER SHARE
From continuing operations, attributable to the ordinary equity
holders of the Company
DILUTED EARNINGS/(LOSS) PER SHARE
From continuing operations, attributable to the ordinary equity
holders of the Company
WEIGHTED AVERAGE ORDINARY SHARES
Weighted average number of ordinary shares used as the
denominator
11. LOANS AND BORROWINGS
AS AT 30 JUNE
CURRENT
Secured
Bank loans (i)
Borrowings (ii)
Un-secured
Lease liabilities (iii)
Other loans (iv)
Notes (v)
Borrowing costs
Deferred borrowing costs
Total Current Loans and Borrowings
NON-CURRENT
Secured
Borrowings (ii)
Un-secured
Lease liabilities (iii)
Total Non-current Loans and Borrowings
2020
cents
0.1
0.1
2019
cents
(8.8)
(8.8)
number
number
531,250,312
531,250,312
2020
$’000
2019
$’000
-
8,048
3,828
-
-
-
11,876
10,873
2,957
13,830
58,815
29,576
-
1,567
22,756
(2,624)
110,090
-
-
-
Total Loans and Borrowings
25,706
110,090
At 30 June 2019, due to the Group breaching financial covenants, all loans and borrowings were reclassified as current
as at the period end, which is in accordance with AASB 101, reflected the potential for the relevant financiers to
accelerate and enforce their facilities. At 30 June 2020, the Group has complied with all financial covenants and hence
there was no reclassification from non-current loans and borrowings to current loans and borrowings.
For bank loans and borrowings, the fair values are not materially different from their carrying amounts since the interest
payable on the loans and borrowings are close to the current market rates.
70 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
(i) Bank loans
Secured bank loans relate to a term loan facility granted by Intesa Sanpaolo to finance M/V Ocean Shearer and secured
by the carrying amount of its pledged asset and supported by a guarantee from the Company. The loan was fully repaid
on 26 March 2020 following the sale of the vessel.
(ii) Borrowings
Secured
Borrowings from a non-related party, Ruchira Ships Limited (Ruchira) refer to the lease obligations on the bareboat
charter contracts for M/V Ocean Drover and M/V Ocean Ute, following a distinct sale and finance lease back arrangement
in prior years. It was assessed in accordance with SIC – 27 “Evaluating the substance of transactions involving the legal
form of a lease”. The vessels have been reported in the consolidated statement of financial position as plant and
equipment at their original costs less accumulated depreciation and the lease obligation presented as borrowings.
In August 2019, the Group renegotiated an agreement with Ruchira to extend the repayment schedules until December
2021. Through this arrangement, the Group incurred a loss on loan modification of $1.7 million. The Group will maintain
full control of the vessels until the end of the term of the bareboat charter agreement and exercise the purchase
obligations on the two vessels at the end of the charter period. The arrangements are secured by the carrying amounts
of its pledged assets and are supported by a guarantee from Wellard Limited.
(iii) Lease liabilities
Un-secured
On 4 November 2019, the Group entered into a sale and leaseback agreement of the M/V Ocean Swagman with
Heytesbury Singapore Pte Ltd. Through this transaction, the Group will maintain full control of the vessel until 31 March
2022 and no purchase obligations have been granted.
At 30 June 2019, the Group leased office space and office equipment under operating leases, see note 22. From 1 July
2019, such leases are recognised as right-of-use assets and corresponding lease liabilities in accordance to the adoption
of AASB 16 Leases.
(iv) Other loans
Other loans represent a bunker facility from United Overseas Bank Singapore.
(v) Notes
On 11 April and 6 June 2017, Wellard issued tranche one and tranche two convertible notes of US$7.35 million and
US$12.65 million respectively, totalling US$20.0 million.
On 18 December 2018, the Company entered into a standstill agreement under which the noteholders agreed not to
take any enforcement action in respect of outstanding breaches during a Standstill Period which ended on 31 March
2019. Those breaches remained outstanding at the end of the Standstill Period, and the noteholders were entitled to
take enforcement action in respect of those breaches from the end of the Standstill Period. The standstill agreement also
called for early redemption of 3.5 million convertible notes, worth US$3.5 million.
On 1 April 2019, Wellard announced the extension of the Standstill Period from 31 March 2019 to 30 September 2019.
This standstill agreement required monthly redemption of US$400,000 worth of convertible notes and a coupon rate of
14% per annum on the face value of the outstanding notes. The parties also agreed that the notes are no longer
convertible into shares in the Company. Redemptions of 1.0 million notes, worth US$1.0 million, were made during this
period. The Second Standstill Period ended on 7 June 2019, as Wellard were not able to grant certain security to the
noteholders, as required under the terms of the standstill agreement.
As at 30 June 2019, the Standstill Period had ended, and the noteholders were entitled under the terms of the note
documentation to demand immediate repayment of their outstanding notes, due to the defaults. As such, the outstanding
balance of the notes on 30 June 2019 represents the value of the outstanding notes and accrued interest payable.
On 22 August 2019, Wellard announced that it had reached an agreement with the noteholders for a further Standstill
Period. The standstill agreement required a payment of US$10 million worth of notes upon settlement of the sale of the
M/V Ocean Swagman, followed by monthly redemptions of US$500,000 worth of notes for five months, followed by the
redemption of the remaining balance owing to noteholders in the sixth month after settlement of the M/V Ocean Swagman
sale.
On 30 March 2020, following the proceeds from the sale of the vessel M/V Ocean Shearer, Wellard redeemed all
remaining notes completing the redemption of all notes on issue. During the current financial year, a total of 15.5 million
notes brought forward from the prior year were fully redeemed. Movement in convertible notes are shown in the
consolidated statement of cash flows.
71 | WELLARD ANNUAL REPORT 2020
For personal use only
AS AT 30 JUNE
LOANS AND BORROWINGS
Secured
Bank loan1
Borrowings2
Un-secured
Lease liabilities
Lease liabilities
Other loans
Notes
Borrowing costs
NOTES TO THE FINANCIAL STATEMENTS
Currency
Financial year of
maturity
2020
$’000
2019
$’000
USD
USD
USD
AUD
USD
USD
2020
2022
2022
2021
2020
2020
-
18,921
6,767
18
-
-
-
25,706
58,815
29,576
-
1,567
22,756
(2,624)
110,090
Deferred borrowing costs
USD
2020
Notes:
1. Secured bank loan was fully repaid in the year, following the sale of M/V Ocean Shearer.
2. On 19 August 2019, Wellard announced that it has reached an agreement to extend the repayment schedules until December
2021 (i.e. FY2022).
The maturity profile of principal repayments is set out in Note 21(c).
12. CASH AND CASH EQUIVALENTS
AS AT 30 JUNE
Cash at bank and in hand
Cash at bank earns interest at floating rates based on daily bank deposit rates.
2020
$’000
16,796
16,796
2019
$’000
7,424
7,424
72 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
13. RECONCILIATION OF CONSOLIDATED STATEMENT OF CASH FLOWS
Reconciliation of net profit/(loss) after tax to net cash flows from operating activities.
FOR THE YEARS ENDED 30 JUNE
Profit/(loss) after tax
Adjustment for:
Depreciation and amortisation
Income tax expense
Interest income
(Reversal)/allowance for impairment loss
Net (gain)/loss on disposal of property, plant and equipment
Net gain on fair value of derivatives
Net loss on disposal of a subsidiary
Share-based payments expenses
Impairment expense
Inventories write-off
Loss on extinguishment of loan
Interest expense and borrowing costs
Unrealised foreign exchange losses
Reversal of deferred revenue
Change in assets and liabilities, net of the effects of purchase and
of subsidiaries
Change in trade and other receivables and other current assets
Change in inventories and biological assets
Change in trade and other payables and provisions
Change in deferred revenue
Interest received
Income tax (paid)/returned
Net cash flows from operating activities
2020
$’000
2019
$’000
245
(48,443)
13,094
5
(8)
(992)
(2,682)
-
218
-
34
1,078
2,452
7,963
981
(7,946)
1,773
4,433
(1,805)
1,790
20,633
8
(35)
20,606
16,157
5,354
-
3,483
533
(255)
-
(84)
22,444
-
-
11,266
3,600
-
19,896
21,317
(13,911)
(10,987)
30,370
-
8
30,378
73 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
14. ISSUED CAPITAL
As at 30 June 2020, the share capital of Wellard amounting to $572,132,000 (2019: $572,132,000) ordinary shares
issued and fully paid. Issued share capital consists of ordinary shares only, with equal voting rights. Ordinary shares
have no par value. Ordinary shares entitle the holder to participate in dividends and to share in the proceeds of winding
up the Company in proportion to the number of and amounts paid on the shares held.
No shares were issued during the financial year 2020.
Movements in ordinary shares:
FOR THE YEARS ENDED 30 JUNE
ORDINARY SHARES
Opening balance
Ordinary shares issued
Closing balance
15. INVENTORIES
AS AT 30 JUNE
Raw materials
Finished goods
2020
number
2019
number
531,250,312
531,250,312
-
-
531,250,312
531,250,312
2020
$’000
1,338
-
1,338
2019
$’000
4,247
350
4,597
Inventories reported at the lower of cost and net realisable value. Write-downs of inventory to net realisable value
during the year were $1,078,253 (2019: Nil). Refer to Notes 6(A) and 6(B).
16. BIOLOGICAL ASSETS
FOR THE YEARS ENDED 30 JUNE
LIVESTOCK
Opening balance
Purchases
Fair value adjustments
Sales
Closing balance
LIVESTOCK
Cattle
Closing balance
LIVESTOCK
Cattle
74 | WELLARD ANNUAL REPORT 2020
2020
$’000
2019
$’000
1,941
-
-
(1,941)
-
-
-
18,264
155,249
(2,077)
(169,495)
1,941
1,941
1,941
number
number
-
2,147
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
Cattle and sheep were held for short-term trading and feeding purposes and at the reporting date a fair value increment
of $Nil measured in Level 2 and $(0.007) million measured in Level 3 was recognised in the consolidated statement of
comprehensive income during the year ended 2019.
At 30 June 2020, no cattle and sheep were held for trading.
Valuation of biological assets
In 2019, Wellard provide an indication about the reliability of the inputs used in determining fair value by classifying its
biological assets into the three levels prescribed under the accounting standards. An explanation of each level follows
underneath the table.
Refer to Note 21(a)(ii) for commodity price risk management.
The following table presents the biological assets measured and recognised at fair value at 30 June 2019 on a
recurring basis.
AS AT 30 JUNE
BIOLOGICAL ASSETS
2019
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
9
1,932
1,941
Level 2: The fair value of biological assets that are not traded in an active market is determined using valuation
techniques. These valuation techniques maximise the use of observable market data where it is available and rely as
little as possible on entity specific estimates. If all significant inputs required to fair value biological assets are
observable, the biological asset is included in Level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the biological asset is included
in Level 3.
Management determined that Level 2 is the most appropriate measurement for livestock on hand where the market
data of unit prices are available, and sales information can be referenced for valuation purposes. Where such
information cannot be reliably determined, Level 3 measurement is used. At 30 June 2019, livestock on the M/V Ocean
Swagman have been recorded as Level 3.
Reconciliation of Level 3 Biological Assets:
FOR THE YEARS ENDED 30 JUNE
Opening balance
Purchases
Sales
Closing balance
17. TRADE AND OTHER RECEIVABLES
AS AT 30 JUNE
CURRENT
Trade receivables
Allowance for impairment loss
Related party receivable
Other receivables
75 | WELLARD ANNUAL REPORT 2020
2020
$’000
1,932
-
(1,932)
-
2018
$’000
14,436
1,932
(14,436)
1,932
2020
$’000
2019
$’000
3,161
(2,452)
-
782
1,491
4,661
(4,042)
5
1,654
2,278
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
Trade and other receivables are non-interest bearing and are on various terms depending on the market. Charter
customers are generally required to pay a deposit on signing of the booking note, and the balance payable before delivery
of the vessel or provision of the Bill of Lading. Export customers have payment terms ranging from a percentage payable
on load of vessel, to percentage payable 14 days after discharge of livestock. Non-export trading terms are generally 14
days. An allowance for doubtful debts is made when there is objective evidence that a trade receivable is impaired, in
excess of expected credit losses.
Due to the short-term nature of trade and other receivables, their carrying amount approximates fair value less expected
credit losses.
The ageing analysis of these trade receivables is as follows:
AS AT 30 JUNE
1 to 3 months
3 to 6 months
Information on the Group’s credit risk is disclosed in Note 21(b).
18. OTHER ASSETS
AS AT 30 JUNE
CURRENT
Prepayments
Restricted cash
Fulfilment cost
NON-CURRENT
Deposits
19. ASSETS HELD FOR SALE
FOR THE YEARS ENDED 30 JUNE
ASSETS HELD FOR SALE
Property, plant and equipment – Vessel
LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS HELD
FOR SALE
Borrowings
2020
$’000
637
72
709
2020
$’000
1,578
-
-
1,578
846
846
2020
$’000
-
-
-
2019
$’000
1,097
36
1,133
2019
$’000
1,774
100
8,530
10,404
139
139
2019
$’000
31,330
(9,132)
22,198
Assets held for sale
Continuing the Group's restructure and recapitalisation program, on 4 July 2019, Wellard signed a term sheet with
Heytesbury Holding Company Pty Ltd on the key terms and conditions for the sale and leaseback of the M/V Ocean
Swagman for US$22.0 million.
76 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
In accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations, an impairment of US$7.6
million (A$10.6 million) was recognised in the 2019 financial year to write down the asset to its fair value less costs to
sell.
On 4 November 2019, Wellard completed the sale of the vessel. The sale agreement to Heytesbury includes a Bareboat
Charter of the M/V Ocean Swagman for a fixed period ending 31 March 2021, with an option to extend until 31 March
2022. In accordance with AASB 16 Leases, the Bareboat Charter has created a right-of-use asset, equal to the lease
liability during the year.
There are no assets held for sale as at 30 June 2020.
20. TRADE AND OTHER PAYABLES
AS AT 30 JUNE
CURRENT
Trade payables
Sundry payables and accrued expenses
Trade and other payables are non-interest bearing.
21. FINANCIAL RISK MANAGEMENT
2020
$’000
1,217
2,050
3,267
2019
$’000
2,501
3,105
5,606
Like all companies, Wellard is subject to a range of risks associated with its activity which could, in isolation or in
combination, if they eventuate, have a material adverse impact on Wellard’s business, results of operations, financial
condition, financial performance, prospects and share price. To carry out its business and achieve its objectives,
Wellard needs to take risks but tries to do so by identifying, assessing, responding and monitoring them to ensure the
Group's long-term success.
Wellard’s financial risk management objective is to minimise the potential adverse effects on financial performance
arising from changes in financial risk. Financial risks are managed centrally by Wellard’s finance team under the
direction of the Directors and the Board’s Audit, Risk and Compliance Committee. The finance team regularly monitors
Wellard’s exposure to any of these financial risks and where practicable, takes steps to mitigate or manage certain
risks. While mitigation steps are taken, these steps will not remove the risk but are aimed at reducing its impact in the
short and longer-term.
This section provides qualitative and quantitative disclosure on the effects that those risks may have on the Group.
A) MARKET RISK
i) Chartering
Wellard is exposed to fluctuations in market freight rates in respect of vessels trading on the spot market. Particularly,
when chartering-out vessels, the freight rates may be too low to ensure an adequate return or to cover costs. The
following risk management strategies are applied: (i) the vessels trade on a worldwide basis to reduce the effect of
different regional market conditions. (ii) Wellard pursues long-standing relationships of trust with its customers and tries
to adapt its chartering policy to their requirements in order to support reciprocal and continuous value creation.
ii) Commodity price risk
Livestock
Commodity price risk arises from fluctuations in domestic and international livestock market prices. These can be
caused by a change in prices due to timing differences between entering into a sales contract and procuring the
livestock required to fill its orders from customers or environmental factors in the countries the livestock is sourced
from and can impact the number of livestock. This can result in losses or reduced profitability on individual shipments
and on Wellard’s overall financial performance.
Wellard manages this risk through a combination of business processes, including the terms of its contracts with
customers who may permit some changes in prices, its market knowledge and the structure of its business model
which reduces as much as possible the time between contracting to supply and purchasing of livestock. These risk
77 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
management strategies reduce commodity price risk relating to the procurement of inventory but does not eliminate the
risk.
Commodity price risk can be affected by environmental and geopolitical factors. Wellard has access to diversified
international supply bases which reduces commodity price risk from environmental and geopolitical factors relating to
the procurement of inventory.
For the financial year ended 30 June 2020 $Nil (2019: $1.9 million) of livestock on hand was exposed to fluctuations in
market prices.
Fuel
Wellard is exposed to commodity price volatility for the fuel required to operate its fleet of vessels. In the previous financial
year, Wellard management managed this risk with commodity swaps and physical hedge to partially hedge its exposure
to fuel price volatility.
iii) Foreign exchange risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in
a currency that is not the entity's functional currency (i.e. Australian dollars).
Wellard operates internationally and is exposed to foreign exchange risk arising predominantly from currency
exposures to the US dollars which is the currency the Wellard’s sales are mainly denominated in.
The purchase of livestock and related services in Australian dollars is subject to foreign exchange risk when sold to
customers in US dollars.
Wellard operates its chartering activity in Singapore, whose the majority of its transactions are denominated in US dollars.
The balance sheet translation risk is managed by designating borrowings in US dollars which act as a ‘natural’ hedge
against movements in US dollars receivables from Australian sales.
The Group monitors its exposure to currency risk on a regular basis and may enter into short-term forward exchange
contracts to manage the exposure.
The following table shows the foreign currency risk arising from the financial assets and liabilities, which are denominated
in currencies other than the Australian dollars. The financial assets and liabilities consist of cash and cash equivalents,
trade and other receivables, trade and other payables, loans and borrowings. The table excludes loans to subsidiaries
that are considered part of the net investment in a foreign operation, as exchange differences arising on these are
recognised in the foreign currency translation reserve in other comprehensive income.
The Group’s exposure to US dollar currency risk, expressed in Australian dollars was as follows:
FOR THE YEARS ENDED 30 JUNE
Australian dollar
Brazilian real
Uruguayan peso
2020
$’000
2019
$’000
(8,092)
(68,648)
-
46
(114)
-
(8,046)
(68,762)
Based on the Group’s net financial liabilities, a +/- 10% movement in the Australian dollar against the US dollar, with all
other variables held constant, would increase / (decrease) profit before taxation and equity as follows:
FOR THE YEARS ENDED 30 JUNE
+10%
-10%
2020
$’000
731
(894)
2019
$’000
6,251
(7,640)
The Group’s balance sheet exposure to other foreign exchange risk is not significant.
Amounts recognised in profit or loss
78 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
During the year, the following foreign exchange related amounts were recognised in the consolidated statement of
comprehensive income:
FOR THE YEARS ENDED 30 JUNE
2020
$’000
2019
$’000
Net foreign exchange loss/(gain) included in other (gains)/losses
1,471
3,511
iv)
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial asset or financial liability will change as
a result of changes in market interest rates. Wellard’s exposure to market interest rate risk relates primarily to its loan
and borrowings.
Changes to interest rates will affect borrowings which bear interest at a floating rate. Any increase in interest rates will
affects Wellard’s cost of servicing these borrowings which may adversely affect its financial position.
Wellard’s net interest rate exposure does not have a significant effect on the result; therefore, Wellard does not enter
into interest rate swaps on debt instruments subject to floating interest rates. Lease liabilities carry interest at their fixed
rates.
Sensitivity:
The exposure of Wellard’s borrowings to variable interest rate changes at the end of the reporting period are as
follows:
AS AT 30 JUNE
Loans and borrowings
Liabilities directly associated with assets held for sale
2020
$’000
-
-
-
2019
$’000
60,382
9,132
69,514
Based on Wellard’s variable borrowings a change of 10 basis points (0.1%) in interest rates, with all other variables
held constant, would increase/(decrease) profit before taxation and equity as follows:
FOR THE YEARS ENDED 30 JUNE
+0.1%
-0.1%
B) CREDIT RISK
2020
$’000
-
-
2019
$’000
70
(70)
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to
Wellard. Wellard is exposed to some counterparty credit risk arising from its operating activities, primarily from trade
receivables. The ageing of these receivables is as follows:
AS AT 30 JUNE
0 to 3 months
3 to 6 months
Over 6 months
2020
$’000
720
-
2,441
3,161
2019
$’000
2,096
961
1,604
4,661
The risk of non-payment by customers is an inherent risk of Wellard’s business, due to sales typically involving
individual high-value shipments. Wellard seeks to mitigate the impact of this risk by building long-term relationships
with its customers, obtaining partial payment before loading, requiring letters of credit to partially secure payment in a
number of jurisdictions and through a systematic credit assessment of counterparties and regular monitoring of their
creditworthiness.
79 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
Each analysis results in an internal rating, which is subsequently used for determining the allowed scope of the
commitment. The internal ratings are based both on a financial and a non-financial assessment of the counterparty’s
profile. In addition, trade receivable balances are monitored on a fortnightly basis by management.
Owing to the nature of long-term client relationships which relies on a shared commitment to continuing trade and
future growth there has historically been a low number of debtor impairment provisions and bad debts expressed as a
percentage of revenue. The timing of customer payments for shipments and the requirement to pay a deposit mitigates
the risk of large debtor impairments.
Set out below is a summary of the concentration of receivables by currency:
AS AT 30 JUNE
United States dollar
Australian dollar
Other
2020
$’000
3,089
72
-
3,161
2019
$’000
4,282
249
130
4,661
Movements in the provision for impairment of trade receivables that are assessed for impairment collectively are as
follows:
FOR THE YEARS ENDED 30 JUNE
Opening balance
Allowance for impairment recognised during the year
Receivables collected during the year
Receivables written-off during the year as uncollectable
Closing balance
2020
$’000
4,042
64
(1,056)
(598)
2,452
2019
$’000
3,483
3,483
-
(2,924)
4,042
Impaired trade receivables
The impairment of the Group’s financial assets that are subject to credit losses where the expected credit loss model
has been applied is not material.
To measure the expected credit losses, the Company has applied the simplified approach to measure the lifetime
expected credit losses for trade receivables using a provision matrix, estimated based on the Group’s historical credit
loss experience, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. The
Group has identified the Gross Domestic Product (“GDP”) of the countries in which it operates to be the most relevant
factors.
Receivables are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in
a repayment plan with the Group. Where receivables have been written off, the Group continues to engage in
enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognised in
the consolidated statement of comprehensive income.
Amounts recognised in profit or loss
During the year, the following losses were recognised in profit or loss in relation to impaired receivables:
FOR THE YEARS ENDED 30 JUNE
IMPAIRMENT LOSSES
Individually impaired trade receivables
80 | WELLARD ANNUAL REPORT 2020
2020
$’000
64
64
2019
$’000
3,483
3,483
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
C) LIQUIDITY RISK
Liquidity risk arises from Wellard’s financial liabilities and the subsequent ability to repay the financial liabilities as and
when they fall due.
In particular, Wellard’s chartering activity is exposed to liquidity risk due to its exposure to the spot market. Freight
rates earned might not be sufficient to cover its operating costs, required investments and financial commitments,
leading to a reduction in cash balances.
As part of its financial planning process, Wellard manages the liquidity risk through an appropriate financial planning
and liquidity risk management which are regularly reviewed and updated. Prudent liquidity risk management implies
maintaining sufficient availability of funding through an adequate amount of cash and committed credit facilities to meet
the Wellard’s financial obligations.
Wellard manages its liquidity risk by monitoring and forecasting the total cash inflows and outflows expected on a
fortnightly basis. The forecast includes projections of cash outflows from overhead and supplier payments, interest
obligations, the repayment of debt facilities and capital expenditure when they fall due.
Maturities of financial liabilities
The following tables details for the years 2020 and 2019, respectively, Wellard’s prospective cashflows for
its financing liabilities based on contractual repayment terms. The tables have been drawn up on the basis of
undiscounted cash-flows on the earliest date in which Wellard can be required to pay.
FOR THE YEAR
ENDED 30 JUNE
<6
MONTHS
$’000
6-12
MONTHS
$’000
1-2
YEARS
$’000
2-5
YEARS
$’000
OVER 5
YEARS
$’000
TOTAL
$’000
CARRYING
AMOUNT
$’000
2020
Non-interest bearing
Fixed rate
Variable rate
3,267
6,792
-
-
-
6,510
14,176
-
-
10,059
6,510
14,176
-
-
-
-
-
-
-
-
3,267
27,478
-
3,267
25,706
-
30,745
28,973
FOR THE YEAR
ENDED 30 JUNE
<6
MONTHS
$’000
6-12
MONTHS
$’000
1-2
2-5
YEARS
$’000
YEARS
$’000
OVER 5
YEARS
$’000
TOTAL
$’000
CARRYING
AMOUNT
$’000
2019
Non-interest bearing
Fixed rate
Variable rate
2,501
56,140
7,578
66,219
-
-
-
-
-
-
5,835
5,835
11,277
11,277
30,770
30,770
-
-
17,955
2,501
56,140
73,415
2,501
52,313
60,382
17,955
132,056
115,196
Working capital facility
Wellard’s working capital facilities include bunker trade finance facility with United Overseas Bank (UOB) with a limit of
US$4.0 million and credit card facility of S$0.2 million.
D) CAPITAL MANAGEMENT
Wellard’s objectives in managing capital are to:
•
safeguard Wellard’s ability to continue as a going concern, so to provide returns for shareholders and benefits for
other stakeholders;
ensuring a satisfactory return is made on any new capital invested; and
•
• maintain an optimal capital structure to reduce the cost of capital.
Capital is defined as the combination of shareholders’ equity, reserves and net debt. The Board is responsible for
monitoring and approving the capital management framework within which management operates.
81 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
Wellard manages its capital through various means, including:
•
•
•
raising or returning capital;
raising or repaying debt for working capital requirements, capital expenditure and acquisitions; and
adjusting the amount of ordinary dividends paid to shareholders
22. PROPERTY, PLANT AND EQUIPMENT
AS AT 30 JUNE
2020
Opening net book amount
Adoption of AASB 16
Additions
Disposals
Disposals of a subsidiary
Foreign exchange revaluation
Depreciation expense
Closing balance
Cost
Accumulated depreciation and impairments
Closing balance
SHEDS AND
BUILDINGS
$’000
PLANT AND
EQUIPMENT
$’000
162
-
162
46
(15)
-
4
(67)
130
619
(489)
130
138,988
1,138
140,126
11,537
(76,317)
(1)
4,865
(12,594)
67,616
165,037
(97,421)
67,616
AS AT 30 JUNE
2019
Opening net book amount
Additions
Disposals
Foreign exchange revaluation
Impairment expense
Depreciation expense
Transfer to assets held for sale
Closing balance
Cost
Accumulated depreciation and
impairments
Closing balance
FREEHOLD
LAND
$’000
SHEDS AND
BUILDINGS
$’000
PLANT AND
EQUIPMENT
$’000
200,525
2,286
(7,140)
10,653
(20,421)
(15,585)
(31,330)
138,988
4,052
-
(4,052)
-
-
-
-
-
-
-
-
2,255
2
(1,976)
8
-
(127)
-
162
625
(463)
162
252,097
252,722
(113,109)
138,988
(113,572)
139,150
A)
Property, plant and equipment with a carrying amount of $58,579,000 (2019: $138,584,000) are pledged as
security for the current liabilities as disclosed in Note 11.
B)
Leased assets – The Group as a lessee
82 | WELLARD ANNUAL REPORT 2020
TOTAL
$’000
139,150
1,138
140,288
11,583
(76,332)
(1)
4,869
(12,661)
67,746
165,656
(97,910)
67,746
TOTAL
$’000
206,832
2,288
(13,168)
10,661
(20,421)
(15,712)
(31,330)
139,150
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
(i)
Nature of the Group’s leasing activities
Property
The Group leases office space for the purpose of back office operations.
Equipment and vessel
The Group leases office equipment for back office operation and vessel to render chartering services.
(ii)
Carrying amounts
The balance sheet shows the following amounts relating to leases:
ROU assets classified within the Plant and Equipment
Property
Equipment
Vessel
Lease liabilities
Current
Non-current
30 June
2020
$’000
530
12
6,056
6,598
30 June
2020
$’000
3,828
2,957
6,785
(iii)
Depreciation during the year
The consolidated statement of comprehensive income shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Property
Equipment
Vessels
2020
$’000
620
23
2,318
2,961
Interest expense on lease liabilities during the financial year 2020 was $533,000.
Lease expense not capitalised in lease liabilities – short-term leases was $162,000.
Total cash outflow for all the leases in 2020 was $3,278,000.
(iv)
(v)
(vi)
(vii) Additions of ROU assets during the financial year 2020 were $8,519,000.
1 July
2019
$’000
1,102
36
-
1,138
1 July
2019
$’000
593
545
1,138
2019
$’000
-
-
-
-
83 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
23. INTANGIBLE ASSETS
AS AT 30 JUNE
2020
Opening net book amount
Additions
Disposal of a subsidiary
Foreign exchange revaluation
Impairment expense
Amortisation expense
Closing balance
Cost
Accumulated amortisation
Closing balance
AS AT 30 JUNE
2019
Opening net book amount
Additions
Disposals
Foreign exchange revaluation
Impairment expense
Amortisation expense
Closing balance
Cost
Accumulated amortisation
Closing balance
GOODWILL
$’000
SOFTWARE
$’000
TOTAL
$’000
36
-
-
(2)
(34)
-
-
-
-
-
3,046
30
(188)
7
-
(433)
2,462
4,007
(1,545)
2,462
3,082
30
(188)
5
(34)
(433)
2,462
4,007
(1,545)
2,462
GOODWILL
$’000
RIGHTS FOR
LAND USE
$’000
CLIENT
RELATION-
SHIPS
$’000
SOFTWARE
$’000
TOTAL
$’000
461
-
-
20
(445)
-
36
36
-
36
4,418
-
(3,053)
3
(1,325)
(43)
-
-
-
-
-
-
-
-
-
-
-
3,300
(3,300)
-
3,505
63
(1)
(119)
-
(402)
3,046
4,476
(1,430)
3,046
8,384
63
(3,054)
(96)
(1,770)
(445)
3,082
7,812
(4,730)
3,082
Software consists of amounts spent on the implementation and maintenance of an enterprise resource planning
system in use since May 2016. Software is amortised over ten years.
84 | WELLARD ANNUAL REPORT 2020
For personal use only
24. PROVISIONS
AS AT 30 JUNE
CURRENT
Employee entitlements
NON-CURRENT
Employee entitlements
NOTES TO THE FINANCIAL STATEMENTS
2020
$’000
2019
$’000
174
174
16
16
439
439
21
21
A provision has been recognised for employee entitlements related to annual and long service leave. In calculating the
present value of future cash flows in respect of long service leave, the probability of long service leave being taken is
based upon historical data. This is discounted using market yields at the reporting date on corporate bonds with terms
to maturity and currency that match, as closely as possible, the estimated future cash outflows.
The current provision for employee benefits includes accrued annual leave and long service leave. For long service
leave it covers all unconditional entitlements where employees have completed the required period of service and also
those where employees are entitled to pro-rata payments in certain circumstances. A provision of $174,000 (2019:
$439,000) is presented as current, since the Group does not have an unconditional right to defer settlement for any of
these obligations.
25. COMMITMENTS
Capital commitments
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities are as
follows:
AS AT 30 JUNE
Software – Implementation and license fee for chartering system
2020
$’000
120
120
2019
$’000
-
-
Commitments for non-cancellable leases
Commitments for non-cancellable leases contracted for at the end of the reporting period but not recognised as
liabilities are as follows:
AS AT 30 JUNE
Within 1 year
1 to 5 years
Greater than 5 years
2019
$’000
917
517
-
1,434
As at 30 June 2019, the Group’s non-cancellable operating leases include IT equipment, office and accommodation
which expires between one to twenty-nine months.
As disclosed in Note 4, the Group has adopted AASB 16 Leases on 1 July 2019. These lease payments have been
recognised as ROU assets and lease liabilities on the balance sheet as at 30 June 2020, except for short-term and low-
value leases.
85 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
26. SUBSEQUENT EVENTS
There have been no significant events occurring since 30 June 2020. Reference is made to the Wellard Limited’s
website and ASX’s announcements for any and all material disclosures which are required under ASX’s listing rules.
27. SIGNIFICANT ITEMS
There are no other significant items to be disclosed for the financial year ended 30 June 2020.
28. CONTROLLED ENTITIES
(a) Subsidiaries
Subsidiaries are entities controlled by Wellard Limited. Wellard Limited controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity.
The financial statements of subsidiaries are included in the consolidated financial report from the date that control
commences until the date that control ceases.
Interests held in controlled entities is set out below:
COUNTRY OF
INCORPORATION
2020
%
2019
%
PARENT ENTITY
Wellard Limited
SUBSIDIARIES OF WELLARD LIMITED
Wellard Feeds Pty Ltd
Wellard Rural Exports Pty Ltd
Wellard Animal Processing Pty Ltd
Wellard NZ Ltd
Wellard Singapore Pte Ltd
Wellard Ships Pte Ltd
Ocean Drover Pte Ltd
Ocean Shearer Pte Ltd
Niuyang Express Pte Ltd
Welltech Marine Pte Ltd1
Ocean Swagman Pte Ltd2
Wellard do Brasil Agronegocios Ltda
Portimor SA
Best Hayvancilik Sanayi Ticaret AŞ
Australia
Australia
Australia
Australia
New Zealand
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Brazil
Uruguay
Turkey
100
100
100
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Notes:
1. Welltech Marine Pte Ltd was sold to Ishima Pte Ltd on 9 April 2020.
2. Ocean Swagman Pte Ltd was deregistered on 19 June 2020.
86 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
(b) Disposal of a subsidiary
On 9 April 2020, the Group disposed off its 100% wholly-owned subsidiary, Welltech Marine Pte Ltd. The effects of the
disposal on the cash flows of the Group were:
Carrying amounts of assets and liabilities as at the date of
disposal:
Trade and other receivables
Other assets
Property, plant and equipment
Intangible assets
Total assets
Other payables
Total liabilities
Net assets disposed of
Cash outflow arising from disposal:
Cash proceeds on disposal
Less: Net assets disposed of (as above)
Loss on disposal
Costs related to disposal
Net loss on disposal
* Amount less than $1,000
Group
At
9 April 2020
$’000
6
775
1
188
970
804
804
166
*
(166)
(166)
(52)
(218)
29. RELATED PARTY TRANSACTIONS
All transactions with related parties are recorded on an arms-length basis at commercial terms and conditions.
(a) Subsidiaries
Interests in subsidiaries are set out in Note 28(a).
(b) Key management personnel compensation
FOR THE YEARS ENDED 30 JUNE
Short-term benefits
Long-term benefits
Termination benefits
Post-employment benefits
Share-based payments
2020
$’000
2019
$’000
2,064
3,718
30
798
48
-
94
-
111
4
2,940
3,927
Detailed remuneration disclosures are available in the Remuneration Report on page 39.
87 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
(c) Transactions with other related parties
FOR THE YEARS ENDED 30 JUNE
ENTITIES CONTROLLED BY KEY MANAGEMENT PERSONNEL
Sales to
Purchases from
Lease payments made to
2020
$’000
2019
$’000
-
-
-
7
(84)
(314)
(d) Purchases from entities controlled by key management personnel
In the prior financial year, the Group acquired the following goods and services from entities that are controlled by
members of the Group's key management personnel:
rental of office buildings in Australia;
rental of feedlot premises;
•
•
• purchases of bulls, calves and heifers;
• purchases of sheep and lambs; and
• purchases or lupins, grains and feedstock.
(e) Outstanding balance from sales / purchases of goods and services
AS AT 30 JUNE
CURRENT RECEIVABLES (SALES OF GOODS AND SERVICES)
Entities controlled by key management personnel
2020
$’000
2019
$’000
-
-
5
5
88 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
30. PARENT ENTITY
(a) Summary financial information
The individual financial statements for the parent entity (Wellard Limited) show the following aggregate amounts:
AS AT 30 JUNE
NET ASSETS
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
FOR THE YEARS ENDED 30 JUNE
EQUITY
Issued capital
Share issue costs capitalised
Share based payment reserve
Accumulated losses
Total equity
Loss for the period
Total comprehensive loss
2020
$’000
2019
$’000
1,789
26,051
(1,395)
(1,401)
24,650
2020
$’000
581,656
(9,524)
18,014
(565,496)
24,650
33,144
33,144
3,083
88,952
(1)
(31,158)
57,794
2019
$’000
581,656
(9,524)
18,020
(532,358)
57,794
43,612
43,612
(b) Guarantees provided by the parent entity
At 30 June 2020, the parent entity had provided guarantees to support the banking facilities in Singapore and
borrowings set out in Note 11.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2020 (2019: $Nil).
(d) Contractual commitments for the acquisition of property, plant and equipment
None.
(e) Determining the parent entity financial information
The financial information of the parent entity has been prepared on the same basis as the consolidated financial
statements. The current subsidiaries information can be found in Note 28.
89 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
31. AUDITORS REMUNERATION
During the year the following fees were paid or payable for services provided by the auditor, PricewaterhouseCoopers
Australia and Singapore of the parent entity, its related practices and non-related audit firms:
FOR THE YEARS ENDED 30 JUNE
(a) PricewaterhouseCoopers Australia
Audit and review of financial statements
Other assurance services
Total remuneration of PricewaterhouseCoopers Australia
(b) Network firms of PricewaterhouseCoopers Australia
Audit and review of financial statements
Other assurance services
Total remuneration of network firms of PricewaterhouseCoopers Singapore
2020
$’000
2019
$’000
82
-
82
267
18
285
385
10
395
188
14
202
90 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
32. SHARE BASED PAYMENTS
Under the Company’s Executive Share Option Plan, share options are granted to employees as determined, in its
absolute discretion, by the Board.
Executive Share Options may be granted with an exercise price as determined by the Board, including, for the
avoidance of doubt, with no exercise price.
The Company may determine, in its discretion, whether to settle the vested and exercised Executive Share Options in
cash or shares and may either issue new Shares or acquire Shares on market.
The Executive Share Options may be subject to milestone dates prior to which performance conditions must be
satisfied.
Movement in the number of unissued ordinary shares of the Company under option during the year:
FOR THE YEARS ENDED 30 JUNE
2020
LTIP - 2019
OPTIONS AT
BEGINNING
OF PERIOD
GRANTED
DURING
PERIOD
EXPIRED /
CANCELLED
DURING
PERIOD
VESTED /
EXERCISED
DURING
PERIOD
OPTIONS AT
END OF
PERIOD
3,250,000
3,250,000
-
-
(2,250,000)
(2,250,000)
-
-
1,000,000
1,000,000
Details of unissued ordinary shares of the Company under option during the year:
Performance condition
Tranche 1
Tranche 2
Tranche 3
Grant date
Maturity date
Vesting period from grant date
Knock in price (A$/share) (30-day VWAP)
Exercise price
Share price
Risk free rate
Volatility
Fair value at grant date
Entitled no of employees1
1 Nov 2018
1 Nov 2022
3 years
0.25
0.00
0.045
2.14%
71.53%
4,734
7
1 Nov 2018
1 Nov 2022
3 years
0.40
0.00
0.045
2.14%
71.53%
3,965
7
1 Nov 2018
1 Nov 2022
3 years
0.60
0.00
0.045
2.14%
71.53%
1,814
7
Notes:
1. Three entitled employees declined the invitation to participate in the Executive Share Option Plan. One entitled employee had left
in prior year, followed by two entitled employees left during the financial year.
Subject to “Good Leaver” provisions, a participant’s options lapse on termination of employment.
Vested options may be exercised from the time of Vesting (three years from issue) until the Last Exercise Date. The
Board has exercised its discretion under the Plan and determined that the Last Exercise Date for Vested Options is
four years after issue.
91 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
COMMON
CONTROL
$’000
SHARE
BASED
PAYMENTS
$’000
FOREIGN
CURRENCY
TRANSLATION
$’000
(411,017)
-
(411,017)
(411,017)
-
(411,017)
18,020
(6)
18,014
18,104
(84)
18,020
8,513
2,144
10,657
3,686
4,827
8,513
TOTAL
$’000
(384,484)
2,138
(382,346)
(389,227)
4,743
(384,484)
33. RESERVES
AS AT 30 JUNE
2020
Opening balance
Current year
movements
Closing balance
2019
Opening balance
Current year
movements
Closing balance
Common control reserve
The acquisition of all subsidiaries as part of the Group Restructure Event gives rise to the common control reserve.
Common control reserve is the difference between the purchase consideration and the carrying value of the net assets
acquired is recorded directly in equity in a separate reserve.
Foreign currency reserve
Exchange differences arising on translation of the foreign-controlled entity are recognised in other comprehensive
income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when
the net investment is disposed off.
Share based payments
Share based payments represent cumulative value of employee services received for the issue of share options. When
the option is exercised, the amount from the share based payments reserve is transferred to share capital. When the
share options expire, the amount from the share-based payment reserve is transferred to retained earnings.
34. ACCUMULATED LOSSES
FOR THE YEARS ENDED 30 JUNE
Opening balance
Share options lapsed
Net profit/(loss) for the year
Closing balance
2020
$
2019
$
(129,853)
(81,410)
6
245
(129,602)
-
(48,443)
(129,853)
92 | WELLARD ANNUAL REPORT 2020
For personal use only
NOTES TO THE FINANCIAL STATEMENTS
35. CONTINGENT ASSETS/LIABILITIES
The Company’s Singaporean subsidiary, Wellard Ships Pte Ltd, has commenced arbitration proceedings in the UK in
respect of the now terminated contract for the building of the planned livestock vessel to have been known as the M/V
Ocean Kelpie. The arbitration proceedings are against the contracted builder of the vessel, a Croatian shipyard named
Uljanik d.d. (“Uljanik”), which is now the subject of bankruptcy proceedings in Croatia. Wellard’s position is that Uljanik
has breached its building contract obligations. Uljanik’s performance is secured by two Bank Refund Guarantees
issued by its bank, Hrvatska banka za obnovu i razvitak (HBOR). Wellard is seeking a refund of all advance payments
made under the relevant contract. Wellard is currently awaiting an award on preliminary issues, following a virtual
hearing in May 2020. The decision is expected imminently.
Wellard has lodged its defence in response to a class action launched against the Company (see ASX announcement
10 March 2020). There is no indication from the class action claimant as to the quantum of the claim. It is not
anticipated that any quantum will become apparent until the parties progress much further with various procedural and
preparatory matters in respect of this litigation. No contingency has been raised in these accounts in respect of the
class action. The Company has been asked by a number of shareholders whether it possesses Directors and officers
(D&O) liability insurance. The specific arrangements Wellard has with its insurers are confidential, however, as would
be expected of a listed public company, Wellard has various insurances in place to deal with a variety of risks and the
Company would be expected to give ongoing consideration to its entitlements under any potentially relevant insurance.
93 | WELLARD ANNUAL REPORT 2020
For personal use only
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
94 | WELLARD ANNUAL REPORT 2020
For personal use only
INDEPENDENT AUDITOR’S REPORT
95 | WELLARD ANNUAL REPORT 2020
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INDEPENDENT AUDITOR’S REPORT
96 | WELLARD ANNUAL REPORT 2020
For personal use only
INDEPENDENT AUDITOR’S REPORT
97 | WELLARD ANNUAL REPORT 2020
For personal use only
INDEPENDENT AUDITOR’S REPORT
98 | WELLARD ANNUAL REPORT 2020
For personal use only
INDEPENDENT AUDITOR’S REPORT
99 | WELLARD ANNUAL REPORT 2020
For personal use only
ASX ADDITIONAL INFORMATION
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report
is as follows. The information is accurate as at 25 August 2020.
SUBSTANTIAL SHAREHOLDERS
No.
Shareholder
1.
2.
3.
4.
Hongkong Fulida International Trading Company Limited
Heytesbury Pty Ltd
BNP Paribas Nominees Pty Ltd
Innovation Bloom Limited
Number of shares
held
% of all shares
130,094,894
81,200,729
50,663,450
36,881,588
24.49
15.28
9.54
6.94
SHARES ON ISSUE
The total number of shares on issue is 531,250,312 and these shares are held by a total of 1,653 registered
shareholders.
DISTRIBUTION OF SHAREHOLDING
The distribution of all shareholders is set out below.
Range
Total holders
Shares
% of all
shareholders
1 - 1000
1001 - 5000
5001 – 10,000
10,001 – 100,000
100,001 and over
Total
105
313
270
701
264
1,653
33,235
1,000,299
2,168,192
25,825,902
502,222,684
531,250,312
6.35
18.94
16.33
42.41
15.97
100
UNMARKETABLE PARCEL
The minimum parcel size at 25 August 2020 is per unit is 10,204 shares.
There are 690 shareholders that hold unmarketable parcels.
An “unmarketable parcel” is a parcel of shares that is worth less than $500.
100 | WELLARD ANNUAL REPORT 2020
For personal use only
ASX ADDITIONAL INFORMATION
TOP 20 SHAREHOLDERS
The top twenty registered shareholders of the Company are set out below.
No.
Shareholder
Number of
shares held
% of all shares
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
15.
16.
17.
18.
19.
20.
Hongkong Fulida International Trading Company Limited
130,094,894
Heytesbury Pty Ltd
BNP Paribas Nominees Pty Ltd
Innovation Bloom Limited
Vine Street Investments Pty Ltd
One Managed Invt Funds Ltd
Citicorp Nominees Pty Limited
Mr Rakesh Tulshyan
HSBC Custody Nominees (Australia) Limited
Mr Zixiao Zhao
National Nominees Limited
Mr Orlando Berardino Di Iulio & Ms Catharina Maria Koopman
Brazil Farming Pty Ltd
Ms Giovanna Boventi Faroni
Dynamic Supplies Investments Pty Ltd
Ms Xia Zhao
HSBC Custody Nominees (Australia) Limited – A/C 2
Mr Steven Boyd Taylor
Velkov Funds Management Pty Ltd
Mr David Allan Dixon & Ms Catherine Louise Ramm
FLST Pty Ltd
81,200,729
50,663,450
36,881,588
19,848,049
15,118,909
11,718,900
11,550,000
9,229,526
5,700,000
4,029,573
3,837,676
3,500,000
3,180,895
3,000,000
3,000,000
2,790,758
2,675,093
2,500,000
2,192,341
2,161,590
Total
404,873,971
Balance of Register
Grand Total
126,376,341
531,250,312
24.49
15.28
9.54
6.94
3.74
2.85
2.21
2.17
1.74
1.07
0.76
0.72
0.66
0.60
0.56
0.56
0.53
0.50
0.47
0.41
0.41
76.21
23.79
100
OPTIONS
The Company has no options on issue.
VOTING RIGHTS
All ordinary shares (whether fully paid or not) carry one vote per share without restriction. There are no voting rights
attaching to any convertible note. There is no other class of security in the Group.
101 | WELLARD ANNUAL REPORT 2020
For personal use only
CORPORATE DIRECTORY
CORPORATE DIRECTORY
DIRECTORS
John Klepec
Executive Chairman
John Stevenson
Non-Executive Director
Kanda Lu
Executive Director
Philip Clausius
Non-Executive Director
COMPANY SECRETARY
Michael Silbert
AUDITORS
PricewaterhouseCoopers
Level 15
125 St Georges Terrace
Perth WA 6000
Phone:
Facsimile:
Website:
+61 8 9238 3000
+61 8 9238 3999
www.pwc.com.au
REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS
Manning Buildings
Suite 20, Level 1
135 High Street
Fremantle WA 6160
Phone:
Facsimile:
Website:
+61 8 9432 2800
+61 8 9432 2880
www.wellard.com.au
SHARE REGISTRY
Link Market Services
Level 12, QVI Building
250 St Georges Terrace
Perth WA 6000
Phone: +61 1300 554 474 (toll free within Australia)
General Shareholder Enquiries: +61 1300 554 474
Website:
www.linkmarketservices.com.au
SECURITIES EXCHANGE LISTING
Shares in Wellard Limited are listed on the Australian Securities Exchange (ASX: WLD).
102 | WELLARD ANNUAL REPORT 2020
For personal use only