WELLARD LIMITED
ACN 607 708 190
Annual Report
2021
CONTENTS
EXECUTIVE CHAIRMAN’S REPORT ......................................................................................................... 2
RESULTS FOR ANNOUNCEMENT TO THE MARKET ............................................................................. 7
OPERATIONS REPORT ............................................................................................................................. 9
DIRECTORS’ REPORT ............................................................................................................................. 17
FINANCIAL REVIEW ................................................................................................................................. 21
REMUNERATION REPORT ..................................................................................................................... 34
DIRECTORS’DECLARATION ................................................................................................................... 43
AUDITOR’S INDEPENDENCE DECLARATION ....................................................................................... 44
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ......................................................... 46
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................... 47
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................................... 48
CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................................ 49
NOTES TO THE FINANCIAL STATEMENTS ........................................................................................... 52
INDEPENDENT AUDITOR’S REPORT .................................................................................................... 83
ASX ADDITIONAL INFORMATION........................................................................................................... 87
CORPORATE DIRECTORY ...................................................................................................................... 90
EXECUTIVE CHAIRMAN’S
REPORT
EXECUTIVE CHAIRMAN’S REPORT
MESSAGE FROM THE EXECUTIVE CHAIRMAN
Wellard has realised the benefits of its balance sheet restructure efforts and continuing
its sole focus on shipping operations over the last two years to record a second
successive profit in FY2021. The Company is heading in the right direction and is looking
at its longer-term strategy.
The three most rewarding aspects of FY2021 were:
1. The financial resilience of the business, due largely to the Company’s ability to
further benefit from its previous restructure of its balance sheet and cost base;
2. The momentum we carry into FY2022 with a strong H2 FY2021 financial
performance and a good existing book of charters deep into H1 FY2022,
despite very challenging market conditions for livestock vessel operators; and
3. Wellard’s stronger operational performance which allowed the board to turn
some of its attention to future growth, and in particular fleet modernisation.
John Klepec
Executive Chairman
B.Comm, MAICD
After posting a very small, maiden profit in FY2020, the board was acutely aware of the need to build on that
financial performance in FY2021. So, it is pleasing that Company was able to record a consecutive and significantly
improved profit of US$1.9 million in the financial year.
The increased profit was hard-won. As I noted in my 2020 AGM address, two issues in October 2020 would weigh
down Wellard’s H1 FY2021 results, namely the extended dry-dock and off hire duration of the M/V Ocean Ute and
the sudden, temporary closure of the New Zealand live export industry after the tragic sinking and loss of life on the
Gulf Livestock 1.
Those two events ultimately contributed to a first half loss of US$1.6 million in H1 FY2021. Crucially, the business
bounced back in H2 FY2021 with a US$3.5 million profit for that half, despite the Company’s largest vessel, the M/V
Ocean Drover undertaking her scheduled mandatory special survey for six weeks during that period.
The increased profit was achieved despite a 26% fall in both revenue and EBITDA from FY2020, due to the events
outlined above and the absence of the large M/V Ocean Shearer from the Wellard fleet post her sale in March 2020.
The ability to achieve higher NPAT from lower EBITDA stemmed from a substantial reduction in principal and
interest payment requirements achieved through a restructure of Wellard’s balance sheet over the preceding two
years, and good ship utilisation rates following the sale of the M/V Ocean Shearer.
In FY2019 the Company’s financing costs were US$8.1 million, which fell to US$7.0 million in FY2020. This year
finance costs reduced a further US$5.9 million, falling to just US$1.1 million, on the back of net debt of just US$7.3
million (as at 30 June 2021).
It has been our goal to reduce Wellard’s debt levels to better match its revenue profile and volatility, and the result is
that the Company can now weather issues such as those experienced in October 2020.
The shipboard performance with respect to animal welfare was another outstanding result. Of the 186,985 head of
cattle loaded during the period, our vessels delivered a success rate of 99.9%.
The number of voyages undertaken by Wellard vessels were largely driven by demand for breeding cattle from North
Asia. The increased activity in this sector helped keep vessel utilisation rates high, despite a fall in live feeder and
slaughter cattle exports from Australia to Southeast Asia.
Normally this is Wellard’s core market, but a 30 per cent fall in the number of cattle exported from northern
Australian ports to Indonesia and Vietnam reduced Wellard’s activity in this sector of the industry. The fall in
numbers was caused by the reduction in the supply of cattle marketed by Australian producers who are in a herd
rebuilding phase after a period of prolonged drought, and consequently high Australian cattle prices rendering
imports of Australian cattle financially problematic for their overseas buyers.
Australian cattle prices remain the highest in the world at the time of writing.
3 | WELLARD ANNUAL REPORT 2021
EXECUTIVE CHAIRMAN’S REPORT
Figure 1: Global cattle prices
Source: MLA:
IPCVA
(Argentina); MLA’s NLRS
(Australia); Esalq/Cepea
(Brazil); INAC (Uruguay);
USDA/Steiner Consulting
Finished
Group
(US).
(steer)
cattle
specifications
vary
between indicators.
Outlook
Wellard is approaching FY2022 with some positive momentum.
Our H2 FY2021 profit of US$3.5m, without the M/V Ocean Drover for six weeks, demonstrates the underlying
profitability of the Wellard business.
All Wellard’s vessels are fully chartered for all of Q1 FY2022 and we expect to fill the few remaining gaps for Q2
FY2022 shortly.
Charters transporting breeding cattle from Australia, New Zealand and South America to North Asia comprised
Wellard’s largest market in FY2021. Wellard delivered more than 100,000 cattle to destinations in North Asia in that
period.
Locked in charters and additional inquiries indicates that this trend will continue in FY2022 as importers seek to
accelerate their breeding programs with quality genetics.
In contrast, total live cattle exports from Northern Australia to Indonesia and Vietnam contracted by 30% in FY2021
as tight Australian supply and resultant high prices impacted on the number of cattle exported. In its July 2021 Cattle
Projections, Meat & Livestock Australia did forecast that Australian live cattle exports to these markets would
rebound to their FY2020 levels in FY2022. Any pick-up in activity in this sector will provide additional demand for
Wellard’s vessels, though Wellard expects that if it is to occur, it would most likely be in H2 FY2022 and FY2023.
The pricing dynamic of Australian Beef is causing considerable issues in the traditional markets of Indonesia and
Vietnam which are price-driven, with alternative sources continuing to build material market share. Only when the
volume of Australian beef increases, as it will when the local herd rebuild is completed and there is surplus stock
available, will we know whether the loss of market share in Southeast Asia is entrenched. Our expectation is that this
will not occur until FY2023.
Wellard is watching rather than participating in the supply of sheep from Australia to the Middle East. The number of
sheep shipped by other shipping companies/exporters on this route halved in FY2021, and there are few signs that it
will rebound to previous levels quickly, as despite very strong demand, which we have noted on in prior years, the
sheep flock has continued to decline, especially in the export-focussed Western Australian market.
The regulatory framework for Australian live export remains an issue of finding the right balance. Whilst we agree
with the intention of the Australian Government, led by the Minister of Agriculture and the congestion-busting
activities initiated, we believe the Department of Agriculture, Water and Environment is currently overreaching and
needs to refocus on outcomes and enforcement, not on the policy and process with seemingly endless reviews.
Regulating to the lowest common denominator needs to be changed to efficient regulation based on the risk
involved. We will continue to work with the Department in this regard.
Australia’s live export regulatory framework leads the world, and with some further adjustments to shipping
standards, we believe should be the blueprint for worldwide, at-sea livestock movements. Driven by small, but vocal
and politically persuasive animal activist lobbyists, some countries are reviewing and tightening their regulatory
standards, and as a world leader in animal welfare on livestock vessels, Wellard is very well placed to demonstrate
that this important trade can be carried on economically, responsibly, and in alignment with the societal values and
expectations of the large majority of stakeholders.
4 | WELLARD ANNUAL REPORT 2021
EXECUTIVE CHAIRMAN’S REPORT
COVID‐19 impacts
COVID-19 has not impacted on demand for Wellard’s vessels, but it has increased some of the Company’s
operating costs.
Overall, we calculate that COVID-19 direct costs to Wellard since the beginning of the pandemic in 2020 are
approximately US$900,000.
The largest impact has continued to be the restricted ability to undertake crew changes, which has required Wellard
to divert vessels on their ballast voyages via Manila to enable a crew change out. Pre-COVID our crew flew to/from
the next port of call, but COVID restrictions on crew disembarkations and reduced international flights across the
world has prompted the Company to alter these crew change-out operations. The diversion to Manila increases
ballast voyage sailing times, which has both a direct and an opportunity cost to the Company.
There are also longer berth times at each port of call to comply with COVID-19 procedures and the considerable
stringent operational changes that we have made on board all our ships.
We have also introduced more intensive health and safety regimes to ensure that our people are healthy, and we
have a general policy of mandatory vaccinations for our onshore and offshore staff, when it is possible and
appropriate vaccines are available. Testing for COVID also features as part of our boarding and on-board regimes
for ships crews. Additional Personal Protective Equipment (PPE) for staff has also increased the expense of
provisioning our ships.
Various support services, such as inspections, maintenance and repairs on board ships are increasingly
complicated, as all non-crew visits to our vessels must be conducted according to very strict protocols. There has
been a shift to virtual inspections (e.g. via remote video technologies) for some purposes, however some services
which absolutely require physical attendance on board can take longer and impact our ships’ time in port.
In addition, our exporter customers must manage the onboarding, repatriation and quarantining of stockpersons and
veterinarians for each voyage. Given the difficulty of finding available international airline flights, many such
personnel are making their way back to their ports of origin in Australia or New Zealand by way of our returning
ships. Wellard does not bear these costs, however they erode the margins of our customers, making business more
difficult.
As noted previously, COVID-19 has had little to no impact on demand for beef or dairy breeding cattle. In fact,
Wellard sees this as a current market opportunity. Given the impact COVID-19 has had on international trade and
export supply chains, countries are becoming increasingly focused on food security. It is possible that in the longer
term, countries may seek to become more self-sufficient.
Fleet modernisation
Wellard has always prided itself on operating a modern, technologically advanced shipping fleet.
The advantages of operating modern vessels include:
-
-
-
-
-
Enhanced animal welfare outcomes from improved livestock services
Increase demand from more progressive livestock exporter customers
Reduced operating costs
Reduced maintenance costs
Improved reliability, safety and therefore availability
Late in FY2021 Wellard began the process of identifying a replacement strategy for the M/V Ocean Ute, which is
now 27 years old.
As part of this process, the Company has commissioned an initial technical study into the most ideal vessel design
and specifications. The preliminary technical study concluded that the optimum pen area of a newbuild vessel is a
new sizing for the market – larger than the M/V Ocean Swagman and smaller than the M/V Ocean Drover. The
newbuild would likely be powered by alternative fuels with very low sulphur content and capable of steaming at more
than 17 knots.
5 | WELLARD ANNUAL REPORT 2021
EXECUTIVE CHAIRMAN’S REPORT
The above photograph is an artist’s rendering of a previous new vessel project and does not represent the indicative or final design of the possible
replacement vessel. No conclusions should be drawn from this illustration.
The recent global maritime industry move from Heavy Fuel Oil to Very Low Sulphur Fuel Oil has significantly
reduced the shipping industry’s emissions, and Wellard’s intended move to alternative fuels will further reduce the
Company’s environmental footprint.
At present, alternative fuels are not widely available, and are unlikely to be available in some of Wellard’s load or
destination ports, so a dual-fuel system is required. There are a range of alternative materials and fuels being
examined by the shipping industry, and we will be assessing other new and sustainable technologies for use in the
project, including for other ancillary power requirements on board.
It is important to note that given the experience of the Company created by previous high debt loads, the board has
resolved that Wellard will explore alternative funding sources for the construction of a new vessel.
Several off-balance sheet funding alternatives are being actively considered that will allow us to maintain an
appropriate balance sheet for a Ship Operator without shareholder equity dilution or large debt increases for any new
build ships. The intention is that such funding solutions would provide adequate rates of return to the vessel’s
funders while providing Wellard with long-term access to a modern livestock shipping fleet.
I look forward to updating shareholders as we progress this exciting initiative.
Conclusion
With two years of positive financial results, improved after tax profit in FY2021, a healthy forward charter book and a
robust balance sheet, Wellard is approaching the new financial year with more optimism than it has for previous
financial years.
However, we remain mindful that the environment in our industry can change very quickly so we need to be
adaptable, we need to have the right cost base for the environment we operate in, and we need to work closely with
all our stakeholders, including regulators and importantly, the customers who have played an important part in the
turnaround achieved to date.
Thanks must go to Wellard’s hard-working team both on and off the ships for their unwavering dedication over the
past 12 months to get the Company to its present position, and as we look forward to FY2022.
John Klepec
Executive Chairman
23 August 2021
6 | WELLARD ANNUAL REPORT 2021
EXECUTIVE CHAIRMAN’S REPORT
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 2021 (FY2021) compared with the year ended 30 June 2020 (FY2020).
The financial statements are presented in United States dollars (unless otherwise stated).
FINANCIAL RESULTS AND KEY FINANCIAL ITEMS FROM CONTINUTING OPERATIONS:
FOR THE YEARS ENDED 30 JUNE (US$ million)
2021
2020
Movement
Revenue
Chartering1
Trading
Other revenue
Gross profit
General and Administrative expenses
Restructuring costs
Other gains from trading and chartering activities
EBITDA2
Other gains from other activities
Depreciation and amortisation expenses
EBIT
Net finance costs
Income tax expense
Profit from continuing operations after tax
Profitability analysis
Gross Profit margin
Operating Profit margin
Net Profit margin
Interest coverage3
Balance Sheet analysis
Working capital
Current ratio
Net tangible assets
Net tangible assets per security
Net Debt4
Debt to capital ratio5
Ship loan to asset book value ratio
43.4
42.9
0
0.5
16.1
(4.4)
(0.1)
0
11.6
0.1
(8.7)
2.9
(1.1)
0
1.9
37.1
26.7
4.4
10.8
(3.2)
0.8
41.8
7.9
7.3
24.4%
25.5%
58.8
55.9
2.7
0.2
18.7
(7.4)
(0.6)
4.9
15.6
0.4
(8.8)
7.2
(7.0)
0
0.2
31.8
26.6
0.3
2.2
2.1
1.2
39.7
7.5
6.1
29.9%
37.6%
(26.2%)
(23.3%)
(100.0%)
150.0%
(13.9%)
(40.5%)
(83.3%)
(100.0%)
(25.6%)
(75.0%)
(1.1%)
(59.7%)
(84.3%)
850.0%
16.7%
0.4%
1366.7%
390.9%
(252.4%)
(33.3%)
5.3%
5.3%
19.7%
(18.4%)
(32.2%)
%
%
%
Times
$m
Times
$m
Cps
$m
%
%
1 Chartering revenue refers to external chartering activity and excludes revenue arising from intercompany transactions.
2 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.
3 Interest coverage equals EBITDA divided by net finance costs.
4 Net debt equals loans and borrowings less cash and cash equivalents.
5 Debt to capital ratio equals loans and borrowings divided by total equity plus loans and borrowings.
7 | WELLARD ANNUAL REPORT 2021
EXECUTIVE CHAIRMAN’S REPORT
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 2021 (2020: Nil).
AUDIT STATUS
The Consolidated Financial Statements upon which this Appendix 4E is based have been audited.
WELLARD
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.
Following the Group’s decision to suspend livestock trading activities, in FY2021 external chartering activity
represents 99% of the Group’s revenue (FY2020: 95% of total revenue).
LIVESTOCK LOGISTICS SERVICES:
Wellard’s predominant activity in FY2021 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 2021
OPERATIONS REPORT
OPERATIONS REPORT
OPERATIONS REPORT
The year in summary
Wellard achieved its second successive profitable year and fourth year of positive EBITDA. The sustained
improvement in profitability has been underpinned by the restructure of the cost base and balance sheet undertaken
over the last two years to better align the business with current market conditions.
The Company’s FY2021 EBITDA of US$11.6 million was 25.6% lower than the US$15.6 million EBITDA last year,
primarily due to a reduction in revenue, following the sale of M/V Ocean Shearer in March 2020 and the planned
drydocks of M/V Ocean Ute and M/V Ocean Drover. However, due to the reset of Wellard’s balance sheet and
reduced overheads following the bedding down of the Group’s restructure, Net Profit After Tax (NPAT) rose from
US$0.2 million to US$1.9 million.
The half-year NPAT split is worthy of note, with the Company booking a Net Loss of US$1.6m in the first half of
FY2021 and a US$3.5 million NPAT in the second half of the financial year.
Wellard has achieved its principal 2020 goals of restructuring its balance sheet (including remedying and resetting
historical debt covenant breaches), reducing earnings volatility and reducing its cost base.
Employee safety has also continued as a core focus of the Company in recent years, and pleasingly, the Company
recorded just one medically treated injury and achieved a Lost Time Injury Frequency Rate (LTIFR) of 1.27 in
FY2021.
In FY2021, Wellard loaded 25 external charter voyages (FY2020: 38 external charter voyages) to the following
destinations:
•
15 voyages to North Asia, delivering 105,576 head of cattle:
7 voyages to Indonesia, delivering 70,895 head of cattle, including three multi-exporter voyages on the M/V
Ocean Drover and M/V Ocean Ute;
3 voyages to Vietnam, delivering 10,255 head of cattle.
Due to continuing high cattle prices in Australia, the greater proportion of revenues originated outside of Australia in
FY2021 (59.3%), compared to the previous year when 86.8% of voyage capacity emanated from Australia.
One hundred per cent of the voyages were to Asia in FY2021, compared to FY2020 when the following applied: Asia
83.8%; Mediterranean Basin 9.9% and the Middle East 6.3%. This is a result of the limited activity in the live sheep
sector and the lack of consistent trade in the South America to the Mediterranean Basin in FY2020, which prompted
Wellard to relocate the M/V Ocean Drover back to Australia.
Figure 2: Charter revenue by origins
Figure 3: Charter revenue by destinations
The Wellard fleet reported one of the highest success delivery rates in its history. Of the 186,985 head of cattle
loaded during the period, our vessels delivered 186,726 cattle, recording a success rate of 99.9%. No sheep were
loaded during the period.
The M/V Ocean Drover underwent its scheduled dry dock in February/March 2021, which resulted in it being off-hire
for five weeks and the M/V Ocean Ute completed her scheduled dry dock in October 2020 being off-hire for 81 days.
10 | WELLARD ANNUAL REPORT 2021
OPERATIONS REPORT
With a restructured balance sheet, a significantly stronger cash position and a leaner cost structure, the Board can
now refocus on profitable revenue growth and long-term strategy. The primary areas of focus for the Board in
FY2022 will be:
• Achieving sustainable and profitable growth;
Modernising the Wellard fleet without restressing the balance sheet; and
Reform of global and local livestock vessel standards in support of an economically and socially sustainable
livestock trade.
Goals achieved in FY2021
i. Balance sheet restructure benefits realised
Restructuring Wellard’s balance sheet and reducing the Company’s cost base has been a core focus of the Wellard
board in the previous two financial years.
The benefits of that work were evident in FY2021.
Both Wellard’s FY2021 revenue and EBITDA fell 26% compared to FY2020 on the back of lower revenue, primarily
due to the sale of the M/V Ocean Shearer in March 2020. Yet, the Company’s profit increased from US$0.2 million to
US$1.9 million demonstrating a business that is substantially more financially resilient than it was in previous years.
This was largely due to excellent utilisation of Wellard’s vessels and lower finance (predominately interest)
repayments required to service the Company’s debt.
In FY2019, the Company paid US$8.1 million in finance costs, which fell to US$7.0 million in FY2020 with net debt
(as at 30 June 2020) of US$6.1 million.
Finance costs reduced a further US$5.9 million in FY2021, falling to just US$1.1 million.
Wellard ended FY2021 with net debt of just US$7.3 million, which was a US$1.3 million decrease on its December
31, 2020, levels.
ii. Remaining vessel finance and leasing
In June 2021, Wellard reached an agreement with Ruchira Ships Limited (“Ruchira”) to extend the repayment
schedule for the M/V Ocean Drover by an additional year. Ruchira effectively provides vessel finance on the M/V
Ocean Drover and M/V Ocean Ute through sale and leaseback contracts. Previously the M/V Ocean Drover
financing agreement matured in December 2021 with a US$4.3 million balloon payment. The amended agreement is
for a December 2022 maturity with remaining payments fully amortised over the remaining term of the lease.
Wellard will make its final US$0.9 million payment on the M/V Ocean Ute in December 2021, at which time the full
ownership of the vessel will revert to Wellard.
Wellard has also finalised negotiations with Heytesbury Singapore Pte Ltd to extend the long-term bareboat charter
of the M/V Ocean Swagman from March 2022 to June 2023. The charter extension is on the same terms previously
approved by shareholders.
Work ongoing into FY2022
i. Achieving growth
Achieving a second successive profitable year is an important step for Wellard but does not mark the completion of
the journey. Further improvements are required to generate the returns that our stakeholders expect.
The Company continues to target growth in existing markets and identifying new opportunities.
In particular, the supply of breeding cattle from South America to North Asia has been identified as an opportunity
that the Company has begun to capitalise in FY2021 and is likely to grow our chartering business on that route in the
future.
With Australian cattle prices still at historical record highs and the most expensive in the world during FY2021, the
South America to North Asia market is likely to grow further.
Wellard vessels completed two of these South America to North Asia voyages in FY2021 as the pricing differential
between Australian and NZ cattle prices and South American cattle prices opened to such a degree that the landed
price in North Asia of South American cattle was still competitive, despite the additional freight cost.
11 | WELLARD ANNUAL REPORT 2021
OPERATIONS REPORT
The benefit of this route to Wellard is twofold. It provides demand for Wellard’s larger vessels – the M/V Ocean
Drover and, to a lesser degree, the M/V Ocean Swagman – and removes those vessels from the more frequent short
route charter fleet negotiations for an extended period due to the longer distances involved.
ii. Modernising the Wellard fleet without restressing the Wellard balance sheet
A modern shipping fleet provides numerous advantages, including:
Leads to increase demand from progressive livestock exporter customers;
• Maintenance of industry leading animal welfare outcomes from improvement of livestock services;
•
• Reduced operating costs;
• Reduce maintenance costs; and
•
Improved reliability, safety and therefore availability.
At an industry level, the shipping fleet servicing the Australian livestock industry is ageing, with seven AMSA-
approved vessels older than 30 years. The last newbuild livestock vessel was launched in 2016, the M/V Al Kuwait
(formerly known as Ocean Shearer).
Wellard’s own fleet profile is beginning to age, in particular the M/V Ocean Ute, which is 27 years old. Wellard has
therefore commenced planning for the replacement of the M/V Ocean Ute.
This has included a preliminary technical study into optimum vessel design. The technical study favours a vessel
with a medium to large optimum pen area, when compared to our existing fleet; and likely to be powered by
alternative fuel in a low sulphur content; and capable of steaming at more than 17 knots. A large range of efficient
and sustainable inputs and systems are to be auditioned to enhance operations and animal welfare.
The use of alternative fuel with a low sulphur content is consistent with the International Maritime Organisation’s
(IMO) target to reduce greenhouse gas emissions from shipping activities by at least 50% by 2050.
The propulsion system in the preliminary design will look to reduce fuel usage and CO2 (and other greenhouse gas)
emissions from the fuel that is consumed, providing Wellard with operating cost efficiencies.
A dual-fuel system has been identified as a possibility because some alternative fuels are not yet widely available
and may not be readily or economically available in some of Wellard’s load or destination ports.
As a preferred financing approach, several off-balance-sheet funding alternatives are being actively considered
which would provide adequate rates of return to the vessel’s funders while providing Wellard with long-term access
to a modern livestock shipping fleet.
iii. Reforming global shipping standards
Wellard believes that in order to maintain a viable international livestock shipping industry, high standards for ships
and for animal welfare must be met and those standards must reflect modern community expectations. A long term
approach to reform must be taken.
Recent research indicates that the average EU-approved livestock carrier is a 41-year old vessel, built as a general
cargo carrier and converted for livestock transport at the age of 29. In comparison, the average age of the container
ship fleet is 13 years.
The international livestock carrier fleet is regulated by the International Maritime Organisation (IMO), whose
oversight is minimal and tends to deliver barely compliant livestock handling and low animal welfare outcomes.
Wellard believes that IMO standards are outdated and not consistent with current community expectations.
By contrast, Australia has one of the most rigorous livestock shipping standards regimes in the world, largely through
the Australian Maritime Safety Authority’s Marine Orders 43 and the Australian Standards for the Export of Livestock
(ASEL). Livestock carriers such as Wellard’s, which service Australian ports are required to comply with these AMSA
standards. The average age of the AMSA-compliant fleet is between 21 and 22 years.
Under the current IMO regulatory regime, animal welfare is likely to be compromised because stocking densities are
largely unregulated; there are no minimum standards for the supply of air, feed and water; and old, inferior vessels
are used to transport sheep and cattle to their destinations, and these vessels are most likely to suffer vessel or
system breakdowns.
This results in a disincentive to build new vessels because new vessels are unable to compete on price with old
vessels which were converted cheaply and are at the end of their working lives.
12 | WELLARD ANNUAL REPORT 2021
OPERATIONS REPORT
Unfortunately for Wellard, and the Australian livestock sector, global references to livestock shipping rarely differentiate
between operators/countries with high standards and those with low or no standards. Instead, it is often treated as a
globally homogenous industry, to the Australian industry’s detriment. Incidents such as the capsize of the Queen Hind
and the sinking of the Gulf Livestock 1 create negative impacts for the whole of industry, not just the operators involved.
Wellard has long campaigned for higher shipping standards throughout the entire global industry and will continue
this campaign which has the ultimate goal of protecting the long term sustainability of the trade.
Outlook
Livestock export and charter opportunities
Similar to FY2021, the outlook for FY2022 is very much market dependant.
a) Dairy and beef breeder cattle to North Asia
Shipments of breeder cattle from Australia to China fell by 20% in FY2021 to 114,926 head, which is also below
FY2019 exports levels, however increased shipments from New Zealand and South America provided more than
enough replacement demand for livestock vessel operators.
In total, only 56,373 cattle were exported from New Zealand in FY2020. According to the New Zealand Ministry of
Primary Industry’s figures and forecasts, that figure will climb to 147,000 cattle in FY2021. The almost threefold
increase is despite a trade suspension following the sinking of the Gulf Livestock One in September 2020.
Wellard’s own activity from New Zealand is indicative of this growing trade.
In FY2021, Wellard operated 7 voyages from New Zealand, compared to only 1 voyage in FY2020.
Similarly, in FY2020 no Wellard voyages occurred between South America and China, but in FY2021 Wellard
conducted two of these voyages.
As FY2022 commences, the M/V Ocean Drover remains deployed on this route, to which itis ideally suited: its large
deck area provides economies of scale for charterers; its high cruising rate reduces time at sea and therefore costs;
and it achieves excellent animal welfare success rates despite the long distances involved (99.94% on its most
recent South America to China voyage).
Wellard is one of the most active vessel operators in this market. Our vessels transported more than 100,000 cattle
to China in FY2021. For reference, in CY2020 China imported 199,000 cattle.
Charter bookings already contracted and inquiries from exporters indicate the supply of breeding heifers to China will
continue to be a key market for Wellard in FY2022. This is consistent with the US Department of Agriculture Global
Agricultural Information Network Report in March 2021 which forecast that Chinese demand for breeding cattle
would remain strong throughout CY2021.
b) Australian slaughter and feeder cattle to Indonesia and Vietnam
Total Australian exports of feeder and slaughter cattle fell by 30% in FY2021, as reduced supplies of Australian
cattle, and resultant high prices, weighed heavily on the live export market out of Australia.
Both of Australia’s primary feeder and slaughter export markets, Indonesia and Vietnam, were impacted to the same
degree. Australian feeder and slaughter cattle exports to Indonesia dropped from 625,000 to 438,000 head (29.9%)
in FY2021, while exports of these cattle to Vietnam dropped by 32% to 214,000 head in FY2021.
Compared to Indonesia, Vietnamese importers tend to import more slaughter-weight cattle, so they cannot use
weight gain to offset high prices versus other proteins. Indonesian importers import lighter weight cattle to be lot-fed,
but the continuing presence of competing Indian Buffalo Meat does place a cap on beef prices locally.
The reduction in the number of cattle exported from Australia during FY2021 was caused by two interrelated factors.
Firstly, the cattle are not physically available to either live export or abattoir buyers as cattle producers continue to
rebuild their herds after a prolonged period of northern Australian drought. Australia’s cattle herd dropped to 24.6
million head in 2020. In its July 2021 Cattle Projections, Meat and Livestock Australia predicted that the size of the
Australian herd will grow to 28 million head by 2023. During the herd rebuild phase, there will be fewer cattle being
marketed for sale, whether for slaughter or for export.
13 | WELLARD ANNUAL REPORT 2021
OPERATIONS REPORT
Figure 4: National cattle herd
Source: ABS, MLA
estimates.
The Australian cattle
herd dropped to 24.6
million head in 2020.
In its April 2020 Cattle
Projections, MLA
predicted that the size
of the Australian herd
will grow to 28 million
head by 2023.
Also in its July 2021 Projections, MLA forecast that cattle exports will start to rebound from the 2022 financial year
onwards, growing by 30% in FY2022 (from a forecast base of 720,000 cattle) and a further 13% in FY2023, taking
total exports from Australia back to 950,000 head by FY2023.
Figure 5: Australia live cattle exports
Source: MLA
estimates.
In its July 2021
Projections MLA
forecast that cattle
exports will start to
rebound from the
2022 financial year
onwards.
This would be an important development for Wellard, creating additional vessel charter opportunities and providing
welcome competition to the Company’s current focus on shipping breeder cattle to North Asia.
Secondly, the lack of available supply with a consistent demand from processors that continue to operate at financial
losses has resulted in very high pricing as supply has hit a low point of the rebuild with the Eastern Young Cattle
Indicator (EYCI) braking through the 1000c/kg hot standard carcase (i.e. slaughtered) price barrier in July 2021, a
price never seen before.
Live export prices for light steers from Darwin averaged 355c/kg liveweight in FY2021, 10c/kg more than in FY2020,
and with surprisingly little variation through the year. Usually, live cattle prices fall in the middle of the calendar year,
when cattle supplies are more plentiful, and rise during the wet season.
The average price for light steers from Townsville jumped from 338c/kg in CY2020 to 400c/kg in CY2021.
High landed prices of Australian cattle in export markets limit importers’ ability to compete with domestically
produced proteins such as chicken and pork. Demand for Australian cattle therefore drops, and with it the market for
charter opportunities contracts.
Average to above-average rainfall in much of the traditional northern cattle supply areas led to the herd rebuild
activity across northern Australia, with most producers able to benefit from good feed banks.
The Bureau of Meteorology’s most recent long-range weather forecasts indicates that most cattle producing areas in
central and eastern Australia have an above-average chance of exceeding their median rainfall, which will support
the continuation of the National cattle herd at higher levels.
14 | WELLARD ANNUAL REPORT 2021
OPERATIONS REPORT
c) Australian sheep and cattle exports to the Middle East
Wellard did not conduct any voyages of Australian sheep to the Middle East in FY2021.
Due to the continuing low level of exports to the Middle East and the vertical integration of competing vessel owners,
Wellard does not expect that this will change in FY2022.
Just 570,000 sheep were exported from Australia to the Middle East in FY2021, down from the one million head in
the year prior.
MLA’s June 2020 Sheep Projections indicated little expected material change in export numbers to the Middle East
in the next two years.
Similar to the northern Australian cattle market landscape discussed above, very low supply from sheep producing
areas and the resultant high prices, combined with some demand issues in the Middle East related to COVID-19 and
low oil prices, largely contributed to the substantial fall in export numbers.
The Australian ban on live exports to the Middle East during the northern summer also continues to impact demand
as Middle East Customer confidence in Australia’s long term position regarding sheep exports has suffered greatly
and remains low.
In a positive development for the industry and confidence in the sector, the Australian Government and the Kingdom
of Saudi Arabia signed a pathway agreement in April 2021 to enable the resumption of live sheep exports from
Australia to Saudi Arabia.
According to MLA, Saudi Arabia is estimated to have imported approximately five million sheep in 2019, most from
East Africa, so this has the potential to be a high-volume market.
Wellard does not expect the signing of the Australia-Saudi pathway market agreement will result in an immediate,
material recommencement of the sheep trade between the two countries, due to high sheep prices from a significant
decrease in supply and country-specific vaccination protocols, but it is nevertheless a positive development for future
trade.
d) South American cattle to Turkey
There has been an improvement in trading activity between South America and Turkey recently, but not of a size or
duration which would prompt Wellard to relocate the M/V Ocean Drover from supplying Asian markets to this trade.
Instead, the biggest benefit to Wellard from this recent market change is that many of the large livestock carriers
which had previously been idle are now moving again, reducing the negative impact they were having on charter
rates.
Impact of COVID-19 on the Outlook
COVID-19 continues to increase operating costs for Wellard, but experience to date indicates the global pandemic
has had little impact on market demand for exported livestock and therefore for Wellard’s vessels.
COVID-19’s biggest impact on the Company’s operations remains the restricted ability to undertake crew changes.
Continuing restrictions on crew disembarkations and reduced international flights across the world has required
Wellard vessels to transit via Manila on their ballast voyages to complete crew changes of our predominantly Filipino
crews, where previously joining and leaving crew flew to meet the vessel or return home. This increases ballast
voyage sailing times, which has both a direct and an opportunity cost to the Company.
There are also longer berth times at each port of call to comply with COVID-19 procedures.
There are increased regulatory compliance requirements, and a constant need to remain current on rapidly changing
port protocols and similar regulations in all jurisdictions. This increases the demand on management time, and
increases operational complexity of our fleet. There have been some increased costs due to the need for greater
PPE to be supplied to ships. Overall, we calculate that COVID-19 direct costs to Wellard in FY2020 are
approximately US$0.9 million. As previously noted, Government-mandated closure of restaurants to reduce the
spread of COVID-19 is occurring internationally, is impacting on demand from this sector.
However, demand from the household sector has remained relatively robust and there has been no widespread
long-term government-mandated closure of abattoirs or wet markets reported in the destinations that Wellard’s ships
service. At the time of this report, the situation remains dynamic, however, with spikes in COVID-19 outbreaks seen
in both Indonesia and Vietnam. The position of those respective governments is subject to rapid change.
15 | WELLARD ANNUAL REPORT 2021
OPERATIONS REPORT
COVID-19 has had little to no impact on international demand for beef or dairy breeding cattle. In fact, Wellard sees
this as a current market opportunity given the impact COVID-19 has had on international trade and export supply
chains countries are becoming increasingly focused on food security. It is possible that in the longer term, countries
may seek to become more self-sufficient.
As noted elsewhere, Wellard has an ongoing policy that all onshore and offshore staff and crews should be
vaccinated wherever possible. We have not had any detected infections of COVID-19 amongst staff or crews.
Regulation
Wellard will no longer report on Exporter Supply Chain Assurance System (ESCAS) compliance as it no longer has
livestock it exported in-market in foreign jurisdictions.
Wellard had no reportable mortality incidents in FY2021.
The Australian Department of Agriculture and Water Resources is about to undertake a formal review of the
regulations for live sheep exports to or through the Middle East during the Northern Hemisphere summer after the
2021 Northern Hemisphere summer.
This review will consider voyage outcomes and the appropriateness of existing regulatory conditions.
Wellard continues to advocate a shift towards risk-based regulation to incentivise investment in animal welfare and
good operational performance.
In May 2021, the Australian Government notified livestock exporters that it intended to move towards full cost
recovery to regulate the live export industry. This will substantially increase the charges that livestock exporters incur
for regulatory compliance activities such as application processing, registrations and livestock inspections.
The increased charges do not impact Wellard directly, but they will invariably affect the future profitability of some of
Wellard’s primary clients, Australian exporters, as well as Australian cattle producers when at least some of these
costs are inevitably passed onto cattle suppliers in the form of lower prices.
While Wellard supports the concept of cost recovery, it did raise concerns during the consultation process about the
large size of the live export division within the federal Department of Agriculture, Water and the Environment, and
resultant inflated cost impost. Of particular concern to Wellard is the time and cost exporters spend on compliance
which has little impact on either animal welfare or health protocol compliance.
16 | WELLARD ANNUAL REPORT 2021
DIRECTORS’ REPORT
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 2021 (FY2021) and the
independent auditor’s report thereon. The above operations report forms a part of this Director’s Report.
DIRECTORS
DIRECTORS’ REPORT
John Klepec has over thirty years commercial management experience across a
range of industry groups including construction, resources, media, health care,
logistics, transport, shipping, livestock trading, construction materials, building
products and agriculture.
He has considerable public company experience, including, most recently being
appointed as Chairman of Fleetwood Limited in March 2021.
John Klepec
Executive Chairman
B.Comm, MAICD
Mr Klepec 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 private BGC Group. He is also a previous Non-Executive Director of Ten
Network Holdings Limited.
From his prior successful executive and Board roles Mr Klepec brings extensive
financial expertise, corporate development, operational leadership and strategic
thinking to his position as Executive Chairman.
John Stevenson has over 25 years’ experience in Executive and Finance leadership
roles in Australia and Asia within the publicly listed and private sectors, as well as
with private equity funds.
John has extensive executive experience in the agribusiness and livestock sectors
having previously been the Chief Financial Officer of Consolidated Pastoral
Company and Wellard (ASX: WLD). He is currently the Chief Executive Officer of
Namoi Cotton Limited (ASX: NAM).
John is a Fellow of the Chartered Accountants of Australia and New Zealand as well
as the Governance Institute of Australia and a graduate of the Australian Institute of
Company Directors.
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, Bengal Tiger Line and Gram Car Carriers.
Philip graduated from the European Business School, Germany in 1992 with the
“Diplom-Betriebswirt” (Business Administration) degree.
John Stevenson
Non-Executive Director
FCA, GAICD, FGIA,
BBus.
Philip Clausius
Non-Executive Director
BA (Hons) Business
Administration
18 | WELLARD ANNUAL REPORT 2021
DIRECTORS’ REPORT
Kanda Lu possesses considerable expertise in commerce and financial institutions.
Prior to Wellard, his most 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.
19 | WELLARD ANNUAL REPORT 2021
DIRECTORS’ REPORT
PRINCIPAL ACTIVITIES
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.
Following the Group’s decision to suspend livestock trading activities, in FY2021 external chartering activity
represents 99% of the Group’s revenue (FY2020: 95% of total revenue).
LIVESTOCK LOGISTICS SERVICES:
Wellard’s predominant activity in FY2021 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 purpose-built livestock transport vessels.
LIVESTOCK EXPORT:
Wellard retains its Australian livestock export licenses but has reduced the emphasis on this business activity. 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.
OPERATIONS REVIEW:
Wellard delivered a full year profit after tax from continuing operations of US$1.9 million despite a decrease of
EBITDA of 25.6% from US$15.6 million to US$11.6 million. The Group’s operations delivered an improvement on
previous years, and the business saw further benefits as the recent balance sheet and operational restructure
delivered lower risk revenues from the simplified charter-only business model. Whilst pricing of Australian livestock
markets remained high for exporters, Wellard’s fleet engaged with both long-term and some newer customers to
export from other international markets. Despite the ongoing uncertainties created by the global COVID-19
pandemic, Wellard continued to invest in business relationships with livestock exporters who value exceptional
animal welfare outcomes and professional logistics services.
The above Operations Review forms a part of this Directors’ Report.
20 | WELLARD ANNUAL REPORT 2021
FINANCIAL REVIEW
FINANCIAL REVIEW
FINANCIAL REVIEW
As stated in Wellard’s FY2020 Annual Report and following the Group’s previously reported decision to focus on
chartering activity, the presentation currency of the Group’s financial information has changed from the Australian
Dollar (“A$”) to the United States Dollar (“US$”) with effect from 1 July 2020. Following the Group’s restructure, nearly
all revenue and expenses of the Group are now reported in United States Dollars.
All amounts in this Financial Report are presented in US$ unless stated otherwise, whilst the prior corresponding
period amounts that were previously presented in A$ have been restated in US$ to provide shareholders with
meaningful comparisons.
OPERATING PERFORMANCE FROM CONTINUING OPERATIONS
FOR THE YEARS ENDED 30 JUNE (US$ million)
2021
2020
Movement
Revenue
Chartering1
Trading
Other revenue
Gross profit
General and Administrative expenses
Restructuring costs
Other gains from trading and chartering activities
EBITDA2
Other gains from other activities
Depreciation and amortisation expenses
EBIT
Net finance costs
Income tax expense
Profit from continuing operations after tax
Profitability analysis
Gross Profit margin
Operating Profit margin
Net Profit margin
Interest coverage3
Balance Sheet analysis
Working capital
Current ratio
Net tangible assets
Net tangible assets per security
Net Debt4
Debt to capital ratio5
Ship loan to asset book value ratio
43.4
42.9
0
0.5
16.1
(4.4)
(0.1)
0
11.6
0.1
(8.7)
2.9
(1.1)
0
1.9
37.1
26.7
4.4
10.8
(3.2)
0.8
41.8
7.9
7.3
24.4%
25.5%
58.8
55.9
2.7
0.2
18.7
(7.4)
(0.6)
4.9
15.6
0.4
(8.8)
7.2
(7.0)
0
0.2
31.8
26.6
0.3
2.2
2.1
1.2
39.7
7.5
6.1
29.9%
37.6%
(26.2%)
(23.3%)
(100.0%)
150.0%
(13.9%)
(40.5%)
(83.3%)
(100.0%)
(25.6%)
(75.0%)
(1.1%)
(59.7%)
(84.3%)
850.0%
16.7%
0.4%
1366.7%
390.9%
(252.4%)
(33.3%)
5.3%
5.3%
19.7%
(18.4%)
(32.2%)
%
%
%
Times
$m
Times
$m
Cps
$m
%
%
1 Chartering revenue refers to external chartering activity and excludes revenue arising from intercompany transactions.
2 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.
3 Interest coverage equals EBITDA divided by net finance costs.
4 Net debt equals loans and borrowings less cash and cash equivalents.
5 Debt to capital ratio equals loans and borrowings divided by total equity plus loans and borrowings.
22 | WELLARD ANNUAL REPORT 2021
FINANCIAL REVIEW
OVERVIEW
FY2021 has been another year of significant financial progress where Wellard achieved:
US$1.9
million
Net Profit After Tax from continuing operations (FY2020: US$0.2 million)
850%
Net Profit Margin increase to 4.4% (FY2020: 0.3%)
0.4%
Steady Operating Profit Margin of 26.7%
41% Reduction in General and Administrative expenses to US$4.4 million
(FY2020: US$7.4 million)
10.8
times
Interest Coverage ratio (FY2020: 2.2 times)
39% Cash Conversion ratio (FCF/Revenue) increase to 22.1% (FY2020: 15.9%)
The Group’s strategic realignment and continued efforts on cost containment delivered positive results in the face of
some adverse external events that impacted our operations, even without taking into account the opportunity costs for
the time lost during off-hire periods:
At the beginning of September 2020, the livestock vessel Gulf Livestock 1 sunk during a typhoon in the East
China Sea. After the tragic loss of 42 people and almost 6,000 cattle onboard, an immediate temporary
suspension of live cattle export from New Zealand was implemented. Two planned and profitable New
Zealand voyages of Wellard’s M/V Ocean Drover and M/V Ocean Swagman, which were in transit or had
New Zealand as the next voyage, had to be rescheduled, and the vessels were redirected to load from
Australian ports for replacement voyages, negatively impacting Wellard’s profitability.
In the first half of the financial year, an unscheduled extension to the dry docking of the M/V Ocean Ute
negatively impacted its availability, increasing costs and reducing revenue. The planned drydocking operation
of the M/V Ocean Ute was challenged by travel restrictions and/or quarantines for our crew, surveyors, and
technicians and by the increasing cost of spare parts and services. This longer-than-expected technical stop
caused the M/V Ocean Ute to remain off-hire for almost three months but, at the same time, allowed Wellard
to bring significant improvement to the safety and the operational efficiency of the vessel.
In addition, the COVID-19 pandemic continued to challenge our operations with regulatory restrictions and logistics
challenges, requiring our vessels to incur costly and time-consuming deviations to complete crew changes in ports
outside our trading routes. Many ports which would otherwise host regular international crew changes now ban such
changes or impose rigorous quarantine conditions, resulting in the requirement to deviate to, for example, the
Philippines to change out Filipino crews.
Nonetheless, thanks to effective commercial contingency plans, good underlying cost containment and excellent
utilisation of Wellard’s vessels throughout the second half of the year, Wellard recorded a Profit After Tax (PAT) of
US$1.9 million in FY2021 vs a PAT of US$0.2 million in FY2020.
On 15 June 2021, Wellard finalised negotiations with Heytesbury Singapore Pte Ltd to extend the bareboat charter of
the M/V Ocean Swagman from March 2022 to June 2023 on the same terms previously approved by shareholders.
Finally, on 21 June 2021, an agreement reached with Ruchira Ships Limited (“Ruchira”) to extend the repayment
schedules for the M/V Ocean Drover until December 2022 allowed Wellard to reschedule the balloon repayment of
US$4.3 million – originally due to be paid by December 2021 – over an additional 12 months, providing significant
cash flow relief and ensuring a sustainable debt service profile over the medium term.
23 | WELLARD ANNUAL REPORT 2021
FINANCIAL REVIEW
REVENUE AND OPERATING PERFORMANCE
FY2021 was the first full year of Wellard’s strategic transition from being one of Australia’s largest live cattle exporters
to become a leading livestock vessel charter company.
Revenue in FY2021 recorded a 26.2% decrease to US$43.4 million (FY2020: US$58.8 million) as a result of the fleet
reduction, following the sale of M/V Ocean Shearer in March 2020. In addition, the percentage of off-hire days in
FY2021 (15.8%) was higher than in the previous year (8.9%) due to the planned drydocks of the M/V Ocean Drover
and M/V Ocean Ute and other minor repairs and maintenance. In absolute terms, Wellard’s vessels recorded 173 off-
hire days out of 1,095 available days during FY2021, compared to 122 off-hire days out of the 1,367 days of the
previous year. In FY2021, external chartering activities absorbed the total shipping capacity, reflecting the increased
external demand for space on our vessels.
Following the Group’s decision to suspend livestock trading activities, in FY2021 external chartering activity represents
99% of the Group’s revenue (FY2020: 95% of total revenue). For this reason, no segmental reporting is provided in
this section of the Annual Report.
Figure 6: Revenue by segment
Figure 7: Revenue by segment
Gross Profit margin continued its upward trend notwithstanding the decrease in revenue, increasing by 16.7% in the
current financial year to 37.1% (FY2020: 31.8%), thanks to efficient chartering and operation activities and more
efficient utilisation of available shipping capacity.
Figure 7: Revenue vs Gross profit margin
Revenue decreased by
26.2% to $43.4 million.
the gross
However,
profit margin increased
by 16.7% to 37.1% in
the current financial
year
EARNINGS PERFORMANCE
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 – decreased by US$4.0 million or 25.6% to US$11.6 million (FY2020: US$15.6 million).
However, excluding non-recurring gain on the derecognition of net contract liabilities of a trading-related project from
FY2020 (US$5.3 million), FY2021 EBITDA would have been US$1.3 million higher than the previous year. Despite a
reduced EBITDA, FY2021 recorded a 0.4% increase in Operating Profit Margin to 26.7% (FY2020: 20.6%) as a result
of an increased proportion of revenue translated into operating income.
24 | WELLARD ANNUAL REPORT 2021
Figure 8: Track record
General and Administrative expenses
EBITDA
Operating profit margin
FINANCIAL REVIEW
Depreciation and amortisation expenses decreased by a further 1.1% to US$8.7 million (FY2020: US$8.8 million)
with the reduction due to the sale of the M/V Ocean Shearer partially offset by the depreciation of a higher volume of
drydock costs. These expenses include the depreciation of right-of-use assets amounting to US$2.7 million (FY2020:
US$2.0 million) arising from the application of AASB16 ‘Leases’ from 1 July 2019.
Net financial costs drastically reduced by a further 84.3% or US$5.9 million in the current financial year, dropping to
US$1.1 million (FY2020: US$7.0 million) following last year’s sale of the M/V Ocean Shearer, which allowed the full
repayment of all its debt to the vessel’s financier and the full redemption of Wellard’s unlisted notes. Net finance costs
also included the interest expense of right-of-use assets amounting to US$0.3 million (FY2020: US$0.4 million) for the
application of AASB16 ‘Leases’ from 1 July 2019. These finance costs reductions coupled with a solid EBITDA also
drove a significant interest coverage improvement from 2.2 times in FY2020 to 10.8 times in FY2021.
Profit from continuing operations after tax continued last financial year’s positive trend and recorded the highest level
since Wellard’s 2015 listing on the ASX of US$1.9 million (FY2020: US$0.2 million), despite a very challenging year.
Figure 9: Track record
Net finance costs
Interest coverage
Profit/(loss) from continuing operations
ASSETS AND LIABILITIES
Non-current assets are mainly related to the net book value (“NBV”) of Wellard’s vessels – including right-of-use
leased assets – and related drydock costs capitalised. The Group assesses the carrying value of its vessels by
obtaining independent market valuations by two primary brokers, considering any market offers, as well as considering
forecast earnings over the vessel’s lifetime.
Capital expenditure – with the exclusion of additions due to the application of AASB16 ‘Leases’ – was US$7.7 million
(FY2020: US$2.1 million) the vast majority of which related to drydock costs for the M/V Ocean Ute and M/V Ocean
Drover.
Net debt increased by US$1.2 million or 19.4% to US$7.3 million as of 30 June 2021 (30 June 2020: US$6.1 million)
despite the US$3.6 million reductions in Loans and Borrowing and as the result of the US$4.8 million decrease in cash
and cash equivalent that – as of 30 June 2021 – stood at US$6.7 million (30 June 2020: US$11.5 million). The
reclassification of US$0.9 million from non-current to current liabilities of the purchase obligations of the M/V Ocean
Ute coupled with the decrease in cash following the repayment of US$7.3 million in drydock costs resulted in the Group
reporting a working capital deficiency of US$3.2 million (30 June 2020: positive US$2.1 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 24.4% of the Group’s funding (30 June 2020: 29.9%), while
total ship debt represented 25.5% of the book value of the Group’s shipping assets (30 June 2020: 37.6%).
The Group maintains a US$4.0 million trade facility with a financial institution in Singapore to fund ship operating costs
and foreign-exchange transactions, which as of 30 June 2021, was utilised for US$1.1 million. Wellard also retains a
US$5.0 million facility to be used for commodity swaps to hedge against bunker price swings which, as of 30 June
2021, was not utilised.
25 | WELLARD ANNUAL REPORT 2021
Debt Position
M/V Ocean Drover borrowing
M/V Ocean Ute borrowing
M/V Ocean Swagman lease
UOB Bunker facility
Other lease liabilities
Total Loans and borrowings
Cash and cash equivalents
Net Debt
Figure 10: Track record
FINANCIAL REVIEW
2020
Movement
10,953
(4,663)
2,049
4,285
-
378
17,665
11,542
6,123
(827)
609
1,116
119
(3,646)
(4,806)
1,160
US$
$‘000
$‘000
$’000
$‘000
$‘000
$’000
$‘000
$‘000
2021
6,290
1,222
4,894
1,116
497
14,019
6,736
7,283
Working capital
Net Debt
Ship loan to asset book value
CASH FLOWS
Cash flow from operating activities generated net cash of US$10.6 million in FY2021, which is US$3.2 million down
from US$13.8 million in FY2020, mainly due to a reduced fleet contribution following the disposal of M/V Ocean
Shearer in March 2020.
Cash flow used for investing activities was US$7.4 million (FY2020: positive with US$73.0 million) due to the
drydocking expenditures of M/V Ocean Ute and M/V Ocean Drover.
Cash flow from financing activities resulted in a net cash use of US$8.1 million (FY2020: negative with US$79.6
million), primarily due to borrowing and leases repayment.
During the current financial year, Wellard generated a US$4.9 million net decrease in cash held, which is US$12.1
million down from the US$7.2 million net increase reported in FY2020. On 30 June 2021, the Group’s cash and cash
equivalents stood at US$6.7 million (30 June 2020: US$11.5 million).
Condensed Consolidated Statement of Cash Flows
Net cash inflow from operating activities
Net cash (outflow)/inflow from investing activities
Net cash (outflow) from financing activities
Net (decrease)/ increase in cash held
Cash at the beginning of the financial year
Effects of exchange rate changes
2021
US$‘000
2020
US$’000
10,621
(7,396)
13,829
72,950
(8,120)
(79,567)
(4,895)
11,542
89
7,212
5,213
(883)
Cash at the end of the financial year
6,736
11,542
26 | WELLARD ANNUAL REPORT 2021
FINANCIAL REVIEW
Free Cash Flow statement
Net cash inflow from operating activities
Income tax paid
Net interest paid
Free cash flow
2021
US$‘000
2020
US$’000
10,621
13,829
0
0
(1,013)
(4,486)
9,608
9,343
2.8%
Cash conversion ratio (FCF/Revenue)
22.1%
15.9%
39.0%
Free cash flow (“FCF”) for the year – defined as cash flow from operating activities less income taxes paid and net
interest payments – increased by 2.8% to US$9.6 million (FY2020: US$9.3 million), thanks to the material reduction
in net interest paid and despite the lower cash flow generated from operating activities. This allowed the cash
conversion ratio – defined as FCF divided by total revenue – to increase by 39.0% to 22.1% in the current financial
year (FY2020: 15.9%), showing that the Group can generate more cash out of its sales following its refocus on external
chartering activities and Group’s debt restructuring.
Figure 11: Free cash flow to sales (cash conversion) ratio
The cash conversion
ratio
increased by
39.0% to 22.1% in the
current financial year,
showing
the
Group can generate
more cash out of its
sales
its
refocus on external
chartering activities.
following
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.
27 | WELLARD ANNUAL REPORT 2021
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 changed 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 is the first report presented in United States Dollars, and the FY2020 accounts have been restated in
US$ to provide shareholders with meaningful comparisons with the corresponding prior period. 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.
MATERIAL BUSINESS RISKS
Wellard is subject to a number of risks that 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 livestock trading activities and the consequent shift
to the specialised livestock ship chartering business caused a change in Wellard’s risk profile, with risks now limited
to its shipping operations, and away from the volatility of livestock trading.
The FY2021 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 previously announced, in April 2020, Welltech, which was previously a subsidiary of the
Group, was sold and is now operated by Ishima Pte. Ltd.
28 | WELLARD ANNUAL REPORT 2021
FINANCIAL REVIEW
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 the
Singapore-based professional technical ship management company Ishima Pte. Ltd.
Bunker Price Risk
Fuel is a material operating cost, 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 organisations 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 in 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 implementing 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 that 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 having a range of customers in numerous countries.
Wellard is indirectly exposed to the risks of livestock traders, who are its customers. This includes livestock commodity
pricing in international markets, which continue to be volatile.
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 lobbying and 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 an immediate 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 extends 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 United States Dollars, and the majority of its transactions are
denominated in United States Dollars. The Group remains exposed to currency risk in respect of transactions
denominated in currencies other than United States Dollars.
29 | WELLARD ANNUAL REPORT 2021
FINANCIAL REVIEW
The Company monitors its exposure to currency risk on a regular basis and 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. As
noted elsewhere in this report, the Board, after considering all the criteria, factors and indicators articulated in AASB21,
has changed 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 2021 is the first
full-year annual report presented in United States Dollars. The Board believes that the change in the presentation
currency will provide shareholders with a more accurate reflection of Wellard Limited’s underlying performance.
Wellard’s ASX listed shares continue to be traded in Australian dollars.
Credit Risk
The Company’s operations generally involve charter shipments for third parties to transport livestock over long
distances. 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 whose rating is below the minimum acceptable standard. Various terms of payment,
including pre-payments and payments by way of letters of credit, are utilised, depending on the credit assessment and
trading history of various Wellard customers.
The Coronavirus (COVID-19)
The outbreak of COVID-19 in 2020 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 load, unload, 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, including new variants, 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.
There remains an ongoing possibility that COVID-19 will continue to have an impact on international demand and the
free flow of products. Should virus impacts continue to restrict availability of products or cause unsustainable increases
in pricing, there is likely to be a tendency for markets which previously relied on cheap and easy international supply
chains for their commodities globally to pivot towards greater self-sufficiency in the longer term.
Climate change risk
The Group is exposed to various risks which arise under the general heading of climate change risk. These include (i)
actual changes in climactic conditions in which the Group and its vessels operate, such as weather events at sea,
which could affect individual voyages, or in the longer term, make port facilities more difficult to access; and (ii)
increasing focus by governments, regulators and industry on regulations which may have the effect of restricting the
shipping and livestock industries, and possibly making them sub-economic.
As a way of mitigating against increasing the impact of regulations which may penalise greenhouse gas emissions in
shipping, Wellard has commenced a fleet renewal project which is centered on designing new livestock vessels which
utilise sustainable materials and inputs, such as lowest-possible greenhouse gas emission fuels, to enhance
operability, meet developing international shipping regulations, and provide best-in-class animal welfare standards.
Wellard recognises that there are high community expectations regarding greenhouse gas emissions in the livestock
and shipping industries, and that a social license to operate will be maintained when all stakeholders are satisfied that
industry participants are working to meet the appropriate, evidence-based standards required to manage and minimise
such emissions.
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.
30 | WELLARD ANNUAL REPORT 2021
FINANCIAL REVIEW
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.
DIRECTORS’ MEETINGS
The following table sets out the number of Directors’ meetings (including meetings of Board committees) held during
the year ended 30 June 2021, 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
10
10
10
10
10
10
10
10
2
2
-
-
2
2
-
-
4
4
-
4
4
4
-
4
-
-
-
-
-
-
-
-
1 John Stevenson was appointed to the Nomination and Remuneration Committee on 1 July 2021.
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
2021
437,500
2020
437,500
-
-
-
-
-
-
INDEMNITIES AND INSURANCE
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.
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.
31 | WELLARD ANNUAL REPORT 2021
FINANCIAL REVIEW
DIVIDENDS
The Company does not intend to pay any dividends in respect of the year ended 30 June 2021 (2020: Nil).
EQUITY ISSUES DURING THE YEAR
At 30 June 2021 the Company had authorised share capital totalling 531,250,312 ordinary shares issued and
paid.
EVENTS OCCURING AFTER REPORTING PERIOD END
There have been no significant events occurring since 30 June 2021. 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 United States dollars only unless specifically stated otherwise.
NON-AUDIT SERVICES
The Auditor’s independence declaration has been included on page 44.
Details of the non-audit services undertaken by, and amounts paid to, the Auditor, are detailed in Note 27 to the
financial statements.
The Directors have formed the view that the provision of non-audit services during the financial year ended 30
June 2021 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.
32 | WELLARD ANNUAL REPORT 2021
FINANCIAL REVIEW
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 2021. 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.
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 2021. This Directors’ Declaration is included on page 43 of this
Annual Report.
On behalf of the Directors
Mr John Klepec
Executive Chairman
Mr Paolo Triglia
Group Chief Financial Officer
Dated: 23 August 2021
33 | WELLARD ANNUAL REPORT 2021
REMUNERATION REPORT
The following sections form the Remuneration Report for the Wellard Group for the financial year ended 30 June
2021. 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 2021.
KMP term
FY2021
Full year
Full year
Full year
Full year
Key Management Personnel covered in this report
Name
Position(s) held
NON-EXECUTIVE DIRECTORS
Philip Clausius
Non-Executive Director (19 November 2015 – present)
John Stevenson Non-Executive Director (23 November 2019 – present)
EXECUTIVE DIRECTORS
Non-Executive Director (15 November 2016 – 26 April 2018)
Non-Executive Chairman (27 April 2018 – 3 August 2018)
Executive Chairman (3 August 2018 – present)
Business Development Manager China (24 November 2015 – present)
Executive Director (12 May 2017 – present)
John Klepec
Kanda Lu
OTHER KMP
Paolo Triglia
Managing Director – Wellard Ships Pte Ltd (18 November 2015 – present)
Chief Financial Officer (22 November 2019 – present)
Full year
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
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:
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. Given John Klepec’s appointment as
Executive Chairman on 3 August 2018, Philip Clausius became the only Non-Executive / Independent Director.
Mr Stevenson became a Non-Executive Director on 23 November 2019 and was appointed as a member of the
35 | WELLARD ANNUAL REPORT 2021
REMUNERATION REPORT
NR committee effective 1July 2021. Mr Stevenson is now a non-executive Director, having left an executive
position within the Company in November 2019, Mr Stevenson will exercise independent judgement in NR
Committee matters.
The Board may further consider a restructure of its various Board sub-committees, now that the Company’s
financial and operational restructure is substantially complete. In due course, 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 2021.
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 FY2021, the Board did not engage an independent consulting firm to
provide independent advice regarding remuneration or incentive structures.
There were no long-term (LTIP) plans or programmes in place for the financial year ended 30 June 2021. The NR
Committee retains the ability, at its discretion, to make ad-hoc STI awards to individuals outside of any company-
wide plan. Details of the short-term incentive programme (STIP) for FY2021 is included in Note 3(c).
In FY2021, 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:
Element
Purpose
Potential Value
Changes
for FY2021
Fixed annual
remuneration
Short term
incentives
Provide competitive market salary including
superannuation and non-monetary benefits
Cash reward for current year performance
Long term
incentives
Maintain balance between the interests of
shareholders and the reward of executives
36 | WELLARD ANNUAL REPORT 2021
No changes
Reviewed and
benchmarked annually
Up to 50% of total fixed
remuneration, determined
by EBITDA hurdles.
Determined by share price No changes
No changes
REMUNERATION REPORT
(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.
Short-term incentives
In FY2021, KMP Mr Triglia was eligible to earn bonuses under a Short-Term Incentive (STI) programme. STI’s
were available upon attainment of an escalating series of key Performance Indicators (KPIs) based on the Group
achieving nominated EBITDA hurdles which would allow Mr Triglia to earn an STI of between 35% and 50% of
his base salary. Based on the STI programme, no bonuses were earned in FY2021.
The Board also retains the ability, at its discretion, to make ad-hoc STI awards to individuals outside of any
company-wide plan.
Long-term incentives
No options in Wellard’s LTIP were granted to KMP’s in FY2021.
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)
owners of Wellard Limited (A$’000)
the year attributable
for
to
Basic earnings/(loss) per share (A$ cents)
Dividend payments (A$’000)
Dividend payout ratio (%)
2021
2020
2019
2018
2017
2016
2,493
0.5
-
-
245
(48,443)
(36,437)
(75,337)
(23,323)
0.1
(8.8)
(6.6)
(17.7)
(6.4)
-
-
-
-
-
-
-
-
-
-
Increase / (decrease) in share price (%)
+77.8
+50.0
(76.0)
(39.4)
(55.4)
(72.8)
37 | WELLARD ANNUAL REPORT 2021
REMUNERATION REPORT
(d) Key terms of KMP agreements
Remuneration and other terms of employment for each of the KMP are contained in contracts of employment or
consultancy agreements as summarised in the table set out below.
Name
John Klepec2
John
Stevenson3
Kanda Lu
Paolo Triglia
KMP term
3 Aug 18 -
present
7 Nov 16 -
22 Nov 19
12 May 17 -
present
18 Nov 15 -
present
Short / Long
term incentives
Notice
period
termination
Notice
period
Total fixed
resignation Year
remuneration1 Currency
At the Board’s
Discretion
At the Board’s
Discretion
At the Board’s
Discretion
At the Board’s
Discretion
2 weeks
2 weeks
2 weeks
2 weeks
4 weeks
4 weeks
3 months
3 months
2021
2020
2021
2020
2021
2020
2021
2020
503,500
607,000
-
269,699
108,213
178,840
350,004
350,004
A$
A$
A$
A$
A$
A$
SGD
SGD
1. This is inclusive of superannuation payments where applicable.
2. Mr Klepec’s executive remuneration (via a consultancy arrangement) was amended effective from 1 January 2021, decreasing from
A$31,000 per month to A$15,000 per month as a reflection of a lower number of days-per-week dedicated to Wellard following its restructure.
Mr. Klepec continues to receive fees in his role as Group Chairman.
3. Mr Stevenson ceased to be an Executive Director effective 22 November 2019 when his CFO role ended. He remains on the Board as a
Non-executive Director.
(e) Executive KMP remuneration table
The table below sets out the remuneration received by Wellard KMP for FY2021 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 Stevenson and Mr. Bianchi are included in the table as
they were KMPs in FY2020. Mr Balzarini ceased his roles in Wellard on 3 June 2019. Mr Stevenson ceased his KMP /
executive role as CFO of Wellard on 22 November 2019 but remains on the Board.
38 | WELLARD ANNUAL REPORT 2021
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9
3
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 A$800,000 per
annum, which has been approved by Shareholders.
(c) Remuneration review
The Board will periodically review the level of fees paid to Non-Executive Directors, including seeking external
advice where appropriate.
A review of the remuneration of Non-Executive Directors was undertaken as part of the NR Committee’s review
of senior remuneration and the Company’s operating budget for FY2020. No change was made to Non-
Executive Director fees, or fees paid to members of any Board Committee.
(d) Non-executive director fees and benefits
Set out below is a description of each component of total remuneration for Directors and how each component
impacts remuneration in Australian dollars:
Fees /
Benefits
Description
BOARD FEES
Wellard board
Chairman
Members
COMMITTEE FEES
Audit and risk compliance committee
Chairman
Members
Nomination and remuneration committee
Chairman
Members
40 | WELLARD ANNUAL REPORT 2021
2021
Fees
A$
Superannuation
A$
Included in
shareholder
approved cap?
182,648
91,324
22,831
9,132
22,831
9,132
17,352
8,676
2,169
868
2,169
868
Yes
Yes
Yes
Yes
Yes
Yes
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.
(d) Non-executive director remuneration
The fees paid or payable to the Non-Executive Directors in relation to the 2021 financial year are set out below
in Australian dollars.
Name
Year
NON-EXECUTIVE DIRECTORS
Philip Clausius
John Stevenson2
Total
2021
2020
2021
2020
2021
2020
Short-term benefits
Board and committee fees
A$
Superannuation1
A$
123,288
123,288
112,500
60,714
235,788
184,002
11,712
11,712
-
-
11,712
11,712
Total
A$
135,000
135,000
112,500
60,714
247,500
195,714
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 23 November 2019 Mr Stevenson was appointed Non-Executive Director.
41 | WELLARD ANNUAL REPORT 2021
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.
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
Total
Balance at
1 July 2020
Change to
aggregate KMP
balance
Balance at
30 June 2021
-
-
437,500
-
1,176,800
1,614,300
-
-
-
-
850,000
850,000
-
-
437,500
-
2,026,800
2,464,300
(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
(a) Transactions with other related parties
Nil
(b) Purchases from entities controlled by key management personnel
Transport Capital Pte Ltd, a transportation focused investment management and advisory firm, of which Mr
Philip Clausius is the founder and Managing Partner, provides technical shipping consultancy services to the
Group with effect from 1 July 2020 for a period of 15 months. During the financial year ended 30 June 2021, the
technical service fee rendered and paid to this related party by the Group was US$44,707 (30 June 2020: Nil).
(c) Outstanding balance from sales / purchases of goods and services
Nil
(d) Loans to / from related parties
Nil
42 | WELLARD ANNUAL REPORT 2021
DIRECTORS’ DECLARATION
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.
ii.
giving a true and fair view of the financial position and performance of the Group as at 30 June
2021 and of its performance for the year ended on that date; and
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 2021.
Signed in accordance with a resolution of the Directors.
Mr John Klepec
Executive Chairman
23 August 2021
43 | WELLARD ANNUAL REPORT 2021
Moore Australia Audit (WA)
Level 15, Exchange Tower,
2 The Esplanade, Perth, WA 6000
PO Box 5785, St Georges Terrace, WA 6831
T +61 8 9225 5355
F +61 8 9225 6181
www.moore-australia.com.au
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION
307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS
OF WELLARD LIMITED & CONTROLLED ENTITIES
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2021, there have been:
a) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001
in relation to the audit, and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
NEIL PACE
PARTNER
MOORE AUSTRALIA AUDIT (WA)
CHARTERED ACCOUNTANTS
Signed at Perth this 23rd day of August 2021.
Moore Australia Audit (WA) – ABN 16 874 357 907.
An independent member of Moore Global Network Limited - members in principal cities throughout the world.
Liability limited by a scheme approved under Professional Standards Legislation.
Page | 44
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED 30 JUNE
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross profit
Other gains
Net finance costs
Depreciation and amortisation expenses
General and administrative expenses
Profit from continuing operations before income tax
Income tax expense
Profit from continuing operations
DISCONTINUING OPERATIONS
Loss from discontinued operations, net of tax
Profit for the period
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 for the period
Earnings per share from continuing operations attributable to
ordinary equity holders of the Company
Basic earnings per share
Diluted earnings per share
NOTE
2021
US$’000
2020
US$’000
4
5(A)
5(B)
5(C)
5(D)
8
7
9
9
43,433
(27,370)
16,063
3
(1,072)
(8,715)
(4,410)
1,869
(7)
1,862
-
1,862
163
163
2,025
58,788
(40,079)
18,709
4,604
(6,984)
(8,787)
(7,366)
176
(3)
173
(9)
164
615
615
779
US$ Cents
US$ Cents
0.35
0.35
0.03
0.03
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
46 | WELLARD ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
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
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
2021
US$’000
2020
US$’000
11
14
13
15
18
19
15
16
12
20
4(B)
12
20
10
29
30
6,736
712
1,825
473
9,746
49,297
1,574
590
51,461
61,207
2,193
9,191
94
1,507
12,985
4,828
12
4,840
17,825
43,382
11,542
1,025
919
1,084
14,570
46,555
1,692
581
48,828
63,398
2,245
8,161
120
2,000
12,526
9,504
11
9,515
22,041
41,357
412,259
(277,155)
(91,722)
43,382
412,259
(277,318)
(93,584)
41,357
The accompanying notes form an integral part of this consolidated statement of financial position.
47 | WELLARD ANNUAL REPORT 2021
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8
4
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED 30 JUNE
NOTE
2021
US$’000
2020
US$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Income tax paid
43,743
(33,116)
1
(7)
59,316
(45,469)
5
(23)
Net cash inflow from operating activities
10,621
13,829
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
Net cash (outflow)/inflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments of borrowings
Principal payment of lease liabilities
Interest paid
Net cash outflow from financing activities
Net (decrease)/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
11
(7,365)
(31)
-
(7,396)
(4,414)
(2,693)
(1,013)
(8,120)
(4,895)
11,542
89
6,736
(2,056)
(20)
75,026
72,950
(73,239)
(1,842)
(4,486)
(79,567)
7,212
5,213
(883)
11,542
The cash flow is presented on a gross basis, including continuing and discontinuing operations.
The accompanying notes form an integral part of this consolidated statement of cash flows.
49 | WELLARD ANNUAL REPORT 2021
RECONCILIATION OF CONSOLIDATED STATEMENT OF CASH FLOWS
Reconciliation of profit after tax to net cash flows from operating activities.
FOR THE YEARS ENDED 30 JUNE
Profit after tax
Adjustment for:
Depreciation and amortisation
Income tax expense
Interest income
Allowance/(reversal) for impairment loss
Net gain on disposal of property, plant and equipment
Net loss on disposal of a subsidiary
Impairment expense
Inventories write-off
Loss on extinguishment of loan
Interest expense and borrowing costs
Unrealised foreign exchange (gains)/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 assets
Change in inventories and biological assets
Change in trade and other payables and provisions
Change in deferred revenue
Interest received
Income tax paid
Net cash flows from operating activities
2021
US$’000
2020
US$’000
1,862
8,715
7
(1)
6
-
-
-
-
-
1,073
(82)
-
895
(906)
(449)
(493)
10,627
1
(7)
164
8,787
3
(5)
(665)
(1,800)
146
23
723
1,645
5,344
659
(5,332)
1,190
2,975
(1,211)
1,201
13,847
5
(23)
10,621
13,829
The accompanying notes form an integral part of this consolidated statement of cash flows.TO
50 | WELLARD ANNUAL REPORT 2021
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R
NOTES TO THE FINANCIAL STATEMENTS
The financial report is presented in
the United States dollar (US$). All
values are rounded to the nearest
thousand dollars ($’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.
Having completed the Group’s
reorganisation program and
transitioned to operate as a
chartering company, in FY2021,
Wellard recorded an improved
profit of US$1.9 million (FY2020:
US$0.2 million) and remained
EBITDA and operating cash flow
positive. The reclassification of
US$0.9 million from non-current to
current liabilities for the purchase
obligation of the M/V Ocean Ute
that falls due in December 2021
and the payment of US$7.3 million
on drydock costs resulted in the
Group reporting a working capital
deficiency of US$3.2 million (30
June 2020: positive US$2.1
million).
The Group’s agreement reached
with Ruchira Ships Limited
(“Ruchira”) to reschedule over an
additional 12 months the balloon
repayment of US$4.3 million for
the M/V Ocean Drover until
December 2022 – originally due to
be paid by December 2021, will
provide a significant cash flow
buffer for the Group. As of 30 June
2021, there are no breaches in
financial covenants and
undertakings.
The Group maintains a US$4.0
million trade facility with a financial
institution in Singapore to fund ship
operating costs and foreign-
exchange transactions, which as of
30 June 2021, was utilised for
US$1.1 million. Wellard also
retains a US$5.0 million facility to
be used for commodity swaps to
hedge against bunker price swings
which, as of 30 June 2021, was
not utilised. The Group also
maintains credit-card facilities in
Singapore and a small cash-
backed A$ operating account in
Australia.
Wellard’s chartering activity is
exposed to operational risk due to
its exposure to the short term
focus of the livestock carrier
charter market. However, at the
time of this report, all Wellard’s
vessels are fully chartered for the
first quarter and most of the
second quarter of FY2022.
The Group’s management has
considered the impact of the
COVID-19 global pandemic
outbreak. The dynamic and
unpredictable nature of this global
pandemic makes it difficult to
anticipate the pandemic’s effects
on the livestock and shipping
industry. To date, Wellard has not
been impacted by any individual
material COVID event but has
instead been subjected to an
accretion of combined costs and
operational delays relating to the
need to manage ships, cargoes
and crew in a manner that meets
all relevant regulations and deliver
the highest possible health
outcomes for staff, crew and
livestock. Wellard is assuming that
the COVID pandemic will continue
to impact business internationally
throughout 2021, which is
incorporated in its cash flow
forecasts.
The Directors and management of
the Group expect that the future
net cash inflows from operating
activities and the continued
availability of credit facilities 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
Accounting Standards Board
(IASB).
On 1 July 2020, the Group has
adopted the new or amended IFRS
and Interpretations of IFRS that
are mandatory for application for
the financial year. The adoption of
NOTES TO THE FINANCIAL STATEMENTS
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 2021, that were
authorised for issue in accordance
with a resolution of the Directors
on 23 August 2021.
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
Australian Accounting Standards
and Interpretations issued by the
Australian Accounting Standard
Board and the Corporations Act
2001.
The financial report has been
prepared on a historical cost basis,
except for the following:
a) Share-based payments –
measured at fair value; and
b) Certain financial liabilities
(including derivative
instruments).
52 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
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
obligation, the following
requirements are considered:
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
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
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.
E. CHANGE IN PRESENTATION
CURRENCY
Wellard changed its presentation
currency from Australian Dollar
(“A$”) to United States Dollar
(“US$”) in the current financial
year. The financial report for the
year ended 30 June 2021 is the
first financial report with results
reported in US$. The change was
made to reflect that US$ is the
predominant currency for the
Group, counting for a significant
part of the Group’s net cash flow.
The change in presentation
currency is a change in accounting
policy which is accounted for
retrospectively. Information
included in the financial report for
the year ended 30 June 2020,
previously reported in A$ has been
restated into US$ using the
procedures outlined below:
b)
a) Asset and liabilities were
translated into US$ at the
closing foreign currency rates
on the relevant balance sheet
date.
Income statement and
Statement of Cash Flows
were translated at the
average foreign currency
rates prevailing during each
reporting period.
c) Shareholders’ equity
transactions were translated
using the rates of exchange
in effect as of the dates of the
various capital transactions.
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:
53 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
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
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.
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
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.
54 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
each reporting period. The Group
does not apply hedge accounting
for its derivative financial
instrument.
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.
M. 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.
N. 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 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.
O. 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.
P. 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.
Q. 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 are
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.
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
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. 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
55 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
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.
R. 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
56 | WELLARD ANNUAL REPORT 2021
and from a business combination
are capitalised at fair value as at
the date of acquisition. Following
initial recognition, intangible assets
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
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.
S. 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.
NOTES TO THE FINANCIAL STATEMENTS
measured using the currency of
the primary economic environment
in which that entity operates
(functional currency). The
consolidated financial statements
are presented in United States
Dollars. The Company’s functional
currency is the Australian Dollar.
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.
V. INVESTMENTS IN
SUBSIDIARIES
Investments in subsidiaries are
initially recognised at cost (fair
value of consideration paid plus
directly attributable costs). Costs
incurred in investigating and
evaluating acquisitions up to the
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.
W. 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.
X. LEASES
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.
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,
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 the 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.
T. 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.
U. 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.
Foreign currency translation and
balances
Functional and presentation
currency
The financial statements of each
entity within the Group are
57 | WELLARD ANNUAL REPORT 2021
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.
Payments associated with short-
term leases of equipment are
recognised on a straight-line basis
as an expense in the 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.
Y. 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
58 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
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.
Z. 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.
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.
Deferred tax assets, of US$55.3
million, (FY2020: US$59.6 million)
relating to the tax losses of the
Australian tax consolidated group
and US$2.1 million (FY2020:
US$2.2 million) relating to
Singapore have not been
recognised. Included in FY2020,
there were US$6.2 million relating
to Uruguay, US$2.3 million relating
to Brazil. There is no expiration
date for these amounts except for
Uruguay and Brazil.
B. SRI LANKAN PROJECT
In FY2020, the Group recognised
a net gain of US$5.3 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 US$5.3 million in Other
59 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
gains/(losses) within the
consolidated statement of
comprehensive income.
subsidiaries is considered a critical
accounting estimate for the parent
entity only and not for the Group.
IMPAIRMENT
C.
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
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 an
average rate of 10.42% 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 US$0.4
million. 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 US$2.2 million.
The Group has not recognised
impairment charges on its vessels
during the year.
Investments in subsidiaries
We have estimated the
recoverable amount based on the
value-in-use of the subsidiaries.
No impairment (2020: Nil) has
been recognised in respect of the
recoverable amount of investment
in subsidiaries. Impairment of
investments in subsidiaries has
been eliminated on consolidation
in the Group accounts. The
impairment of investment in
NOTES TO THE FINANCIAL STATEMENTS
4. REVENUE FROM CONTRACTS WITH CUSTOMERS
A) DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS
FOR THE YEARS ENDED 30 JUNE
REVENUES
Chartering
Trading
Other revenue
2021
US$’000
2020
US$’000
42,941
-
492
43,433
55,887
2,729
172
58,788
Trading revenue is derived at a point in time and includes revenue generated from the buying and selling of livestock
and livestock products by the Group and related logistics.
Charter revenue is derived over time and includes revenue generated from the sale of space on the Group’s vessels
for the carriage of cargo owned by third parties.
B) LIABILITIES RELATED TO CONTRACTS WITH CUSTOMERS
The Group has recognised the following assets and liabilities related to contracts with customers:
AS AT 30 JUNE
CONTRACT LIABILITIES
Chartering
Chartering contract liabilities refer to deposits received from chartering of vessels.
5. EXPENSES
FOR THE YEARS ENDED 30 JUNE
A)
COST OF SALES
Chartering
Trading
2021
US$’000
2020
US$’000
1,507
1,507
2,000
2,000
2021
US$’000
2020
US$’000
27,370
-
27,370
37,989
2,090
40,079
Within the Chartering cost of sales, there were US$0.3 million inventories being written off during the financial year
2020.
60 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
5. EXPENSES (continued)
FOR THE YEARS ENDED 30 JUNE
B)
(Gains)/losses arising from chartering and trading activities
OTHER GAINS
Net gain on release from contract liabilities
Inventories write-off
(Gains)/losses arising from other activities
Net gain on disposal of property, plant and equipment
Net (gain)/loss on disposal of a subsidiary (Disposal in FY2020)
Net foreign exchange (gains)/losses
Impairment expenses
Restructuring and integration costs
C)
NET FINANCE COSTS
Interest income
Interest expense
Borrowing costs
Loss on extinguishment of loan
D)
GENERAL AND ADMINISTRATIVE EXPENSES
Consulting costs
Occupancy costs
Travel expenses
Allowance/(reversal) for impairment loss
Labour expenses
Motor vehicle expenses
Repairs and maintenance costs
General and administrative costs
5(E)
5(F)
E)
IMPAIRMENT EXPENSES
Impairment loss on intangible assets
F) LABOUR EXPENSES
Wages and salaries
Employee entitlements and on costs
Superannuation
Payroll tax
61 | WELLARD ANNUAL REPORT 2021
2021
US$’000
2020
US$’000
-
-
-
-
(20)
(15)
-
32
(3)
(3)
(1)
1,033
40
-
1,072
804
210
-
6
2,870
26
3
491
4,410
-
-
2,351
355
157
7
2,870
(5,332)
391
(4,941)
(1,458)
146
988
23
638
337
(4,604)
(5)
3,983
1,361
1,645
6,984
1,944
376
305
(665)
4,337
20
3
1,046
7,366
23
23
3,721
335
225
56
4,337
NOTES TO THE FINANCIAL STATEMENTS
6. 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.
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.
c) Other segments: This segment consists of corporate services. Corporate services consist of a centralised
support function that 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.
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 2021
Revenues
Depreciation and amortisation expenses
Net finance costs
Profit/(loss) from continuing operations
before income tax
Chartering
US$’000
Trading
US$’000
Other
US$’000
Total
US$’000
42,941
(8,326)
(1,069)
-
(17)
-
492
(372)
(3)
43,433
(8,715)
(1,072)
4,863
(533)
(2,461)
1,869
Total segment assets
Total segment liabilities
58,399
17,424
816
115
1,992
286
61,207
17,825
FOR THE YEAR ENDED 30 JUNE 2020
Revenues
Depreciation and amortisation expenses
Net finance costs
Profit/(loss) from continuing operations
before income tax
Total segment assets
Total segment liabilities
55,886
(8,334)
(6,108)
804
61,367
21,588
2,729
(28)
-
4,434
732
256
173
(425)
(876)
58,788
(8,787)
(6,984)
(5,062)
176
1,299
197
63,398
22,041
62 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
6. SEGMENT INFORMATION (continued)
Revenues of approximately US$39.2 million were derived from three external customers of the chartering segment,
which individually account for greater than 7.0% of total revenue (FY2020: revenue of approximately US$38.5 million
from four external customers, which individually account for greater than 9.0% of total revenue).
Geographical information
Wellard operates in several geographical locations around the world, spanning multiple continents for both
procurement and sales of livestock, as well as sale of space on the Group’s vessels.
External revenues based on the origin country of sale are as follows:
FOR THE YEARS ENDED 30 JUNE
2021
2020
Australia
US$’000
114
2,902
Singapore
US$’000
43,319
55,886
Total
US$’000
43,433
58,788
The non-current assets of the Group are located across the following countries:
AS AT 30 JUNE
2021
2020
Australia
US$’000
Singapore
US$’000
Brazil
US$’000
Total
US$’000
2,200
1,795
49,256
47,028
5
5
51,461
48,828
7. DISCONTINUED OPERATIONS
The discontinued operations in FY2020 amounting to US$9,169 was related to general and administrative expenses
of Wellard Feeds, ‘La Bergerie’ Pre-Export Quarantine and Beaufort River Meats businesses which were sold in 2019.
This amount is included in net cash flow from operating activities in the consolidated statement of cash flow.
8. TAXATION
INCOME TAX EXPENSE
FOR THE YEARS ENDED 30 JUNE
INCOME TAX EXPENSE
Income tax expense comprises:
Current tax
Under provision for income tax in prior years
Income tax expense reported during the year
Income tax expense is attributable to:
Continuing operations
Discontinued operations
63 | WELLARD ANNUAL REPORT 2021
2021
US$’000
2020
US$’000
5
2
7
7
-
7
3
-
3
3
-
3
8. TAXATION (continued)
NOTES TO THE FINANCIAL STATEMENTS
NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACE TAX PAYABLE
FOR THE YEARS ENDED 30 JUNE
Profit from continuing operations before income tax
Loss from discontinued operations before income tax
Tax at the Australian tax rate of 30% (2020: 30%)
Add/(deduct) the effect of other assessable items
Attributable foreign income
Exempt foreign shipping activities
Current year losses and temporary differences not recognised
Utilisation of carried forward tax losses
Income not subject to tax
Expenses not deductible for tax purposes
Under provision for income tax in prior years
Total other assessable items
Add/(less) the effect of other non-assessable items
Effect of different tax rates in other countries
Total other non-assessable items
Income tax expense reported during the year
2021
US$’000
2020
US$’000
1,869
-
1,869
561
506
(1,887)
434
(9)
(84)
1,101
2
624
(617)
(617)
7
176
(9)
167
50
627
(1,900)
843
(18)
(1,227)
1,822
-
197
(194)
(194)
3
At the reporting date, the Group has unused tax losses of US$55.3 million (FY2020: US$59.6 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. In FY2020, included in
unrecognised tax losses are losses of US$8.5 million that will expire in 2021 - 2025. The remaining tax losses do
not expire under current tax legislation but are subject to the satisfaction of loss utilisation rules.
9. EARNINGS PER SHARE
FOR THE YEARS ENDED 30 JUNE
2021
2020
BASIC EARNINGS PER SHARE
From continuing operations, attributable to the ordinary
equity holders of the Company
DILUTED EARNINGS PER SHARE
From continuing operations, attributable to the ordinary
equity holders of the Company
US$
cents
US$
cents
0.35
0.03
0.35
0.03
WEIGHTED AVERAGE ORDINARY SHARES
Weighted average number of ordinary shares used as the
denominator
number
531,250,312
531,250,312
64 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
10. ISSUED CAPITAL
The Company’s share capital comprises fully paid-up 531,250,312 (2020: 531,250,312) ordinary shares with no par
value, amounting to a total US$412,258,944 (2020: US$412,258,944). Fully paid ordinary shares carry one vote per
share and carry a right to dividends as and when declared by the Company.
No shares were issued during the financial year 2021.
11. CASH AND CASH EQUIVALENTS
AS AT 30 JUNE
Cash at bank and in hand
Cash at bank earns interest at floating rates based on daily bank deposit rates.
12. LOANS AND BORROWINGS
AS AT 30 JUNE
CURRENT
Secured
Borrowings (i)
Un-secured
Lease liabilities (ii)
Other loans (iii)
Total Current Loans and Borrowings
NON-CURRENT
Secured
Borrowings (i)
Un-secured
Lease liabilities (ii)
Total Non-current Loans and Borrowings
2021
US$’000
2020
US$’000
6,736
6,736
11,542
11,542
2021
US$’000
2020
US$’000
5,521
5,530
2,554
1,116
9,191
2,631
-
8,161
1,991
7,472
2,837
4,828
2,032
9,504
Total Loans and Borrowings
14,019
17,665
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.
(i) 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 leaseback
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.
65 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
12. LOANS AND BORROWINGS (continued)
(i) Borrowings (continued)
In August 2019, the Group renegotiated an agreement with Ruchira to extend the repayment schedules of M/V Ocean
Drover and M/V Ocean Ute until December 2021. Through this arrangement, the Group incurred a loss on loan
modification of US$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.
In June 2021, the Group renegotiated with Ruchira to extend the repayment schedule of M/V Ocean Drover until
December 2022. This resulted in the recognition of a modification loss of US$0.04 million.
(ii) Lease liabilities
Un-secured
During the year, the Group renegotiated and modified an existing lease contract for office building by extending the
lease term at revised lease payments. As this extension is not part of the terms and conditions of the original lease
contract, it is accounted for as a lease modification with an addition to the right-of-use assets.
On 4 November 2019, the Group entered into a sale and leaseback agreement of the M/V Ocean Swagman with
Heytesbury Singapore Pte Ltd. Through this transaction, the Group will maintain full control of the vessel until 31 March
2022 and no purchase obligations have been granted. On 15 June 2021, the Group modified the existing arrangement
to exercise the extension options until 30 June 2023.
(iii) Other loans
Other loans represent a bunker facility from United Overseas Bank Singapore.
AS AT 30 JUNE
Currency
Financial year of
maturity
2021
US$’000
2020
US$’000
LOANS AND BORROWINGS
Secured
Borrowings1
Borrowings2
Un-secured
Lease liabilities
Lease liabilities
Lease liabilities
Other loans
US$
US$
US$
SGD
A$
US$
2022
2023
2023
2024
2022-2023
2022
1,222
6,290
4,894
448
49
1,116
14,019
2,049
10,953
4,285
365
13
-
17,665
Notes:
1. On 19 August 2019, Wellard entered into an agreement to extend the repayment schedules until December 2021 (i.e. FY2022).
2. On 1 June 2021, Wellard entered into an agreement to extend the repayment schedule until December 2022 (i.e. FY2023).
The maturity profile of principal repayments is set out in Note 17(C).
13. INVENTORIES
AS AT 30 JUNE
Raw materials
2021
US$’000
2020
US$’000
1,825
1,825
919
919
Inventories are reported at the lower of cost and net realisable value. No write-downs of inventory to net realisable
value were recognised during the year (FY2020: US$723,612). Refer to Notes 5(A) and 5(B).
66 | WELLARD ANNUAL REPORT 2021
14. TRADE AND OTHER RECEIVABLES
NOTES TO THE FINANCIAL STATEMENTS
AS AT 30 JUNE
CURRENT
Trade receivables
Allowance for impairment loss
Other receivables
2021
US$’000
2020
US$’000
2,221
(1,678)
169
712
2,172
(1,684)
537
1,025
Trade and other receivables are non-interest bearing and are on various terms depending on the market. Charter
customers are generally required to pay a deposit on signing of the booking note, and the balance payable before
delivery of the vessel or provision of the Bill of Lading. Export customers have payment terms ranging from a
percentage payable on vessel’s loading, to a percentage payable 14 days after discharge of livestock. Non-export
trading terms are generally 14 days. An allowance for doubtful debts is made when there is objective evidence that a
trade receivable is impaired, in excess of expected credit losses.
Due to the short-term nature of trade and other receivables, their carrying amount approximates fair value less
expected credit losses.
The ageing analysis of these trade receivables is as follows:
AS AT 30 JUNE
1 to 3 months
3 to 6 months
Information on the Group’s credit risk is disclosed in Note 17(B).
15. OTHER ASSETS
AS AT 30 JUNE
CURRENT
Prepayments
NON-CURRENT
Deposits
2021
US$’000
2020
US$’000
503
40
543
438
50
488
2021
US$’000
2020
US$’000
473
473
590
590
1,084
1,084
581
581
67 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
16. TRADE AND OTHER PAYABLES
AS AT 30 JUNE
CURRENT
Trade payables
Sundry payables and accrued expenses
Trade and other payables are non-interest bearing.
17. FINANCIAL RISK MANAGEMENT
2021
US$’000
2020
US$’000
1,011
1,182
2,193
836
1,409
2,245
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
Fuel
Wellard is exposed to commodity price volatility for the fuel required to operate its fleet of vessels. During the 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
Wellard’s exposure to currency risk is minimal as most of the sales and purchases transactions are denominated in
United States Dollars (“US$”). 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.
68 | WELLARD ANNUAL REPORT 2021
17. FINANCIAL RISK MANAGEMENT (continued)
NOTES TO THE FINANCIAL STATEMENTS
A) MARKET RISK (continued)
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 affect 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
2021
US$’000
2020
US$’000
1,116
1,116
-
-
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
2021
US$’000
2020
US$’000
1
(1)
-
-
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
2021
US$’000
2020
US$’000
451
-
1,770
2,221
495
-
1,677
2,172
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.
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.
69 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
17. FINANCIAL RISK MANAGEMENT (continued)
B) CREDIT RISK (continued)
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
2021
US$’000
2020
US$’000
2,215
6
2,221
2,123
49
2,172
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
2021
US$’000
2020
US$’000
1,684
14
(8)
(12)
1,678
2,778
44
(726)
(412)
1,684
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
70 | WELLARD ANNUAL REPORT 2021
2021
US$’000
2020
US$’000
14
14
44
44
NOTES TO THE FINANCIAL STATEMENTS
17. FINANCIAL RISK MANAGEMENT (continued)
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 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 detail for the years 2021 and 2020, 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
US$’000
6-12
MONTHS
US$’000
1-2
YEARS
US$’000
2-5
YEARS
US$’000
TOTAL
US$’000
CARRYING
AMOUNT
US$’000
2021
Non-interest bearing
Fixed rate
Variable rate
2,193
5,158
1,121
8,472
-
-
3,577
4,884
-
-
3,577
4,884
-
90
-
90
2,193
13,709
1,121
17,023
2,193
12,903
1,116
16,212
FOR THE YEAR ENDED
30 JUNE
<6
MONTHS
US$’000
6-12
MONTHS
US$’000
1-2
YEARS
US$’000
2-5
YEARS
US$’000
TOTAL
US$’000
CARRYING
AMOUNT
US$’000
2020
Non-interest bearing
Fixed rate
Variable rate
2,245
4,667
-
6,912
-
4,474
-
4,474
-
9,742
-
9,742
-
-
-
-
2,245
18,883
-
21,128
2,245
17,665
-
19,910
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$0.2 million.
D) CAPITAL MANAGEMENT
Wellard’s objectives in managing capital are to:
safeguard Wellard’s ability to continue as a going concern, so to provide returns for shareholders and benefits
for other stakeholders;
ensuring a satisfactory return is made on any new capital invested; and
maintain an optimal capital structure to reduce the cost of capital.
71 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
17. FINANCIAL RISK MANAGEMENT (continued)
D) CAPITAL MANAGEMENT (continued)
Capital is defined as the combination of shareholders’ equity, reserves and net debt. The Board is responsible for
monitoring and approving the capital management framework within which management operates.
Wellard manages its capital through various means, including:
raising or returning capital;
raising or repaying debt for working capital requirements, capital expenditure and acquisitions; and
adjusting the amount of ordinary dividends paid to shareholders
18. PROPERTY, PLANT AND EQUIPMENT
AS AT 30 JUNE
2021
Opening net book amount
Additions
Foreign exchange revaluation
Depreciation expense
Closing balance
Cost
Accumulated depreciation and
impairments
Closing balance
AS AT 30 JUNE
2020
Opening net book amount
Adoption of AASB 16
Additions
Disposals
Disposal of a subsidiary
Foreign exchange revaluation
Depreciation expense
Closing balance
Cost
Accumulated depreciation and
impairments
Closing balance
SHEDS AND
BUILDINGS
US$’000
PLANT AND
EQUIPMENT
US$’000
RIGHT-OF-
USE ASSETS
US$’000
TOTAL
US$’000
89
45
3
(62)
75
473
(398)
75
41,931
7,693
6
(5,657)
43,973
113,400
(69,427)
43,973
4,535
3,407
(3)
(2,690)
5,249
46,555
11,145
6
(8,409)
49,297
9,760
123,633
(4,511)
5,249
(74,336)
49,297
SHEDS AND
BUILDINGS
US$’000
PLANT AND
EQUIPMENT
US$’000
RIGHT-OF-
USE ASSETS
US$’000
TOTAL
US$’000
114
-
114
31
(10)
-
(1)
(45)
89
425
(336)
89
97,597
-
97,597
2,025
(51,216)
(1)
(9)
(6,465)
41,931
106,887
(64,956)
41,931
-
799
799
5,717
-
-
6
(1,987)
4,535
97,711
799
98,510
7,773
(51,226)
(1)
(4)
(8,497)
46,555
6,526
113,838
(1,991)
4,535
(67,283)
46,555
A)
Property, plant and equipment with a carrying amount of US$42,908,688 (2020: US$40,255,299) are pledged
as security for the liabilities as disclosed in Note 12.
72 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
18. PROPERTY, PLANT AND EQUIPMENT (continued)
B)
Leased assets – The Group as a lessee
(i)
Nature of the Group’s leasing activities
Property
The Group leases office space for the purpose of back office operations.
Equipment and vessel
The Group leases office equipment for back office operation and vessel to render chartering services.
(ii)
Carrying amounts
The balance sheet shows the following amounts relating to leases:
ROU assets classified within the Plant and Equipment
Property
Equipment
Vessel
Motor Vehicle
Lease liabilities
Current
Non-current
2021
US$’000
2020
US$’000
468
12
4,765
4
5,249
365
8
4,162
-
4,535
2021
US$’000
2020
US$’000
2,554
2,837
5,391
2,631
2,032
4,663
(iii)
Depreciation during the year
The consolidated statement of comprehensive income shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Property
Equipment
Vessels
Motor Vehicle
2021
US$’000
2020
US$’000
313
6
2,359
12
2,690
416
15
1,556
-
1,987
(iv)
(v)
(vi)
Interest expense on lease liabilities during the financial year 2021 was US$316,785 (FY2020: US$357,290)
Lease expense not capitalised in lease liabilities – short-term leases was US$69,636 (FY2020:US$108,618).
Total cash outflow for all the leases during the financial year 2021 was US$3,007,908 (FY2020:
US$2,199,725).
(vii) Additions of ROU assets during the financial year 2021 was US$3,407,329 (FY2020: US$5,717,454).
73 | WELLARD ANNUAL REPORT 2021
19. INTANGIBLE ASSETS
NOTES TO THE FINANCIAL STATEMENTS
AS AT 30 JUNE
2021
Opening net book amount
Additions
Foreign exchange revaluation
Amortisation expense
Closing balance
Cost
Accumulated amortisation
Closing balance
AS AT 30 JUNE
2020
Opening net book amount
Additions
Disposal of a subsidiary
Foreign exchange revaluation
Impairment expense
Amortisation expense
Closing balance
Cost
Accumulated amortisation
Closing balance
SOFTWARE
US$’000
TOTAL
US$’000
1,692
31
157
(306)
1,574
3,042
(1,468)
1,574
1,692
31
157
(306)
1,574
3,042
(1,468)
1,574
GOODWILL
US$’000
SOFTWARE
US$’000
TOTAL
US$’000
26
-
-
(3)
(23)
-
-
-
-
-
2,088
20
(126)
-
-
(290)
1,692
2,754
(1,062)
1,692
2,114
20
(126)
(3)
(23)
(290)
1,692
2,754
(1,062)
1,692
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.
74 | WELLARD ANNUAL REPORT 2021
20. PROVISIONS
AS AT 30 JUNE
CURRENT
Employee entitlements
NON-CURRENT
Employee entitlements
NOTES TO THE FINANCIAL STATEMENTS
2021
US$’000
2020
US$’000
94
94
12
12
120
120
11
11
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 on 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 US$94,159 (2020:
US$120,429) is presented as current, since the Group does not have an unconditional right to defer settlement for any
of these obligations.
21. COMMITMENTS
Capital commitments
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities are as
follows:
AS AT 30 JUNE
Software – Implementation and license fee for chartering system
2021
US$’000
2020
US$’000
-
-
82
82
22. SUBSEQUENT EVENTS
There have been no significant events occurring since 30 June 2021. Reference is made to Wellard Limited’s
website and ASX’s announcements for any and all material disclosures which are required under ASX’s listing rules.
23. SIGNIFICANT ITEMS
There are no other significant items to be disclosed for the financial year ended 30 June 2021.
75 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
24. 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
2021
%
2020
%
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
Wellard do Brasil Agronegocios Ltda
Wellard Uruguay S.A.
Best Hayvancilik Sanayi Ticaret AŞ
Australia
Australia
Australia
Australia
New Zealand
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
76 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
25. 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 24(a).
(b) Key management personnel compensation
FOR THE YEARS ENDED 30 JUNE
Short-term benefits
Long-term benefits
Termination benefits
Post-employment benefits
2021
US$’000
2020
US$’000
790
14
-
25
829
1,385
20
535
33
1,973
Detailed remuneration disclosures are available in the Remuneration Report on page 39.
(c) Transactions with other related parties
FOR THE YEARS ENDED 30 JUNE
2021
US$’000
2020
US$’000
ENTITIES CONTROLLED BY KEY MANAGEMENT PERSONNEL
Technical shipping consultancy service rendered
45
-
(d) Outstanding balance from purchases of goods and services
There was no outstanding balance from purchases of goods and services from related parties at the end of the
financial year ended 30 June 2021 (FY2020: Nil).
77 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
26. PARENT ENTITY
(a) Summary financial information
The individual financial statements for the parent entity (Wellard Limited) show the following aggregate amounts in
Australian Dollars:
AS AT 30 JUNE
NET ASSETS
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
FOR THE YEARS ENDED 30 JUNE
EQUITY
Issued capital
Share issue costs capitalised
Share-based payment reserve
Accumulated losses
Total equity
Loss for the period
Total comprehensive loss
2021
A$’000
2020
A$’000
1,751
25,683
(5,009)
(5,056)
20,627
2021
A$’000
1,789
26,051
(1,395)
(1,401)
24,650
2020
A$’000
581,656
(9,524)
18,014
581,656
(9,524)
18,014
(569,519)
(565,496)
20,627
4,023
4,023
24,650
33,144
33,144
(b) Guarantees provided by the parent entity
At 30 June 2021, the parent entity had provided guarantees to support the banking facilities in Singapore and
borrowings set out in Note 12.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2021 (30 June 2020: A$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 24.
78 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
27. AUDITOR’S REMUNERATION
FOR THE YEARS ENDED 30 JUNE
Fees in respect of the audit of the consolidated and parent
company financial statements
Other audit fees, principally in respect of audits of accounts of
subsidiaries in Singapore
Other assurance services
Total auditor’s remuneration
2021
US$’000
2020
US$’000
119
23
4
146
55
179
12
246
With effect from FY2021, Moore Australia Audit (MA) was appointed as auditor of the Company, replacing
PricewaterhouseCoopers (PWC). Auditor’s remuneration for FY2021 relates to Moore and for FY2020 to PWC.
79 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
28. 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 YEAR ENDED 30 JUNE
2021
LTIP - 2019
OPTIONS AT
BEGINNING
OF PERIOD
GRANTED
DURING
PERIOD
EXPIRED /
CANCELLED
DURING
PERIOD
VESTED /
EXERCISED
DURING
PERIOD
OPTIONS AT
END OF
PERIOD
1,000,000
1,000,000
-
-
-
-
-
-
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$/share) (30-day VWAP)
Exercise price
Share price
Risk free rate
Volatility
Fair value at grant date
Entitled no of employees1
1 Nov 2018
1 Nov 2022
3 years
0.25
0.00
0.045
2.14%
71.53%
4,734
7
1 Nov 2018
1 Nov 2022
3 years
0.40
0.00
0.045
2.14%
71.53%
3,965
7
1 Nov 2018
1 Nov 2022
3 years
0.60
0.00
0.045
2.14%
71.53%
1,814
7
Notes:
1. Three entitled employees declined the invitation to participate in the Executive Share Option Plan. Three entitled employees had
left in prior years.
Subject to “Good Leaver” provisions, a participant’s options lapse on termination of employment.
Vested options may be exercised from the time of Vesting (three years from issue) until the Last Exercise Date. The
Board has exercised its discretion under the Plan and determined that the Last Exercise Date for Vested Options is
four years after issue.
80 | WELLARD ANNUAL REPORT 2021
29. RESERVES
AS AT 30 JUNE
2021
Opening balance
Current year
movements
Closing balance
2020
Opening balance
Current year
movements
Closing balance
Common control reserve
NOTES TO THE FINANCIAL STATEMENTS
COMMON
CONTROL
US$’000
(295,768)
-
(295,768)
(295,768)
-
(295,768)
SHARE
BASED
PAYMENTS
US$’000
FOREIGN
CURRENCY
TRANSLATION
US$’000
12,963
-
12,963
12,967
(4)
12,963
5,487
163
5,650
4,872
615
5,487
TOTAL
US$’000
(277,318)
163
(277,155)
(277,929)
611
(277,318)
The acquisition of all subsidiaries as part of the Group Restructure Event gives rise to the common control reserve.
Common control reserve is the difference between the purchase consideration and the carrying value of the net
assets acquired is recorded directly in equity in a separate reserve.
Foreign currency reserve
Exchange differences arising on translation of the foreign-controlled entity are recognised in other comprehensive
income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss
when the net investment is disposed off.
Share-based payments
Share-based payments represent the cumulative value of employee services received for the issue of share options.
When the option is exercised, the amount from the share-based payments reserve is transferred to share capital.
When the share options expire, the amount from the share-based payment reserve is transferred to retained
earnings.
30. ACCUMULATED LOSSES
FOR THE YEARS ENDED 30 JUNE
Opening balance
Share options lapsed
Net profit for the year
Closing balance
2021
US$’000
2020
US$’000
(93,584)
(93,752)
-
1,862
4
164
(91,722)
(93,584)
81 | WELLARD ANNUAL REPORT 2021
NOTES TO THE FINANCIAL STATEMENTS
31. CONTINGENT ASSETS/LIABILITIES
The Company’s Singaporean subsidiary, Wellard Ships Pte Ltd, has succeeded in its arbitration proceedings in the
UK against Uljanik dd in respect of its claims for refunds of advance payments of US$8,000,000 and EUR1,637,648
plus interest and costs made in respect of the terminated contract for the building of the planned livestock vessel to
have been known as the M/V Ocean Kelpie. Recovery of those costs, however, is not immediately available because
Uljanik dd is in liquidation. Uljanik’s liquidator has agreed to pay SGD300,000 for awarded costs. As for the refunds
and interest awarded, these currently rank as unsecured low priority claims in the Uljanik liquidation. Refunds under
the original shipbuilding contract are separately secured by two Bank Refund Guarantees issued by Hrvatska banka
za obnovu i razvitak (HBOR). Wellard is now using the first arbitration award against Uljanik to claim a refund of the
advance payments and interest from HBOR, who are denying the claims and have not made payment. Wellard has,
therefore, commenced a second arbitration, this time against HBOR. This is in process in London and is currently
expected to conclude at the end of 2021 or the beginning of 2022. The Group cannot currently make any statement
about the likelihood of success of this second arbitration.
In October 2017, the Company’s Singaporean subsidiary, Wellard Ships Pte Ltd entered into a charter agreement
with Alpha Commodities S.A (“Alpha”) for the vessel M/V Ocean Shearer, and non-refundable deposits of US$2.0
million were received. Alpha subsequently defaulted on the remainder of its charter obligations, and the voyages the
subject of the charter did not proceed. In January 2021, the Company has obtained a judgment in the UK High Court
proceedings against Alpha Commodities SA in the amount of US$10,380,722.93 plus interest and costs.
Investigations into Alpha's assets in Brazil are still continuing, with a view to collecting directly or via a collection
agency without the further legal expense of enforcement in Brazil. This process should be completed during FY2022.
The likelihood of recoverability of funds in both cases is substantially uncertain, and the Group will not include any
estimate as to quantum or timing in either case.
As reported on 30 June 2020, Wellard has lodged its defence in response to a class action launched against the
Company (see ASX announcement 10 March 2020). Under the auspices of the Federal Court in Melbourne, there
has been significant preparatory work done on the class action, principally involving compliance with discovery
orders. The Claimant has not made any indication of the quantum of the claim. The status of the class action has
still not reached a stage where Wellard is able to reliably estimate the quantum of liability, if any, that Wellard may
incur in respect of the class action. No contingency has been raised in these accounts in respect of the class action.
Wellard 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.
82 | WELLARD ANNUAL REPORT 2021
Moore Australia Audit (WA)
Level 15, Exchange Tower,
2 The Esplanade, Perth, WA 6000
PO Box 5785, St Georges Terrace, WA 6831
T +61 8 9225 5355
F +61 8 9225 6181
www.moore-australia.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WELLARD LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Wellard Limited (the Company) and its subsidiaries (the “Group”),
which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies, and the directors’ declaration.
In our opinion:
a)
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its
financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b)
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 1 D.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards)
(the “Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our
other ethical responsibilities in accordance with the Code.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of our
audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Moore Australia Audit (WA) – ABN 16 874 357 907.
An independent member of Moore Global Network Limited - members in principal cities throughout the world.
Liability limited by a scheme approved under Professional Standards Legislation.
Page | 83
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WELLARD LIMITED (CONTINUED)
Key Audit Matters (continued)
Recognition of Revenue
Refer to Note 2.A and Note 4 “Revenue from Contracts with Customers”
The Group’s revenue is largely derived from the
charter of vessels, including revenue generated
from the sale of space on the Group’s vessels for
the carriage of cargo owned by third parties.
Revenue is recognised over a period of time,
determined using the time proportion method of
each voyage, and is based on contracts which
determine the services to be provided and rates
to be charged.
The accurate recording of revenue is highly
dependent upon the following key factors;
• Knowledge of the individual characteristics
and status of contracts;
• Management’s invoicing process including;
̶ accurate measurement of services and
provided each month
̶ invoices prepared in compliance with
contract
terms such as services
performed, cargo delivered and rates
charged; and
• Compliance with contractual terms and an
assessment of when the Group believes it is
has complied with its performance obligations
and thus is entitled to recognize the revenue.
We focused on this matter as a key audit matter
due to the significance of revenue to the Group
combined with the need to comply with a variety
to accurately
of contractual conditions and
measure the percentage of completion of each
voyage, leading to judgmental and estimation risk
associated with revenue recognition.
Our procedures included, amongst others:
valuation
occurrence,
• We evaluated management’s processes
regarding
and
recording of the Group’s contract revenues.
We tested internal controls in relation to
preparation and authorisation of monthly
revenue invoices for compliance with the
Group’s accounting policies in relation to
revenue;
• We selected a sample of sales invoices raised
during the year and performed the following
procedures:
̶ agreed to contractual terms and rates
̶ agreed to general ledger accounts and
subsequent receipts from the customer
̶ for variations or claims we checked they
were in accordance with contract terms
and evaluated for risk of non-recovery;
• We evaluated contract performance and the
timing of revenue recognition during and
subsequent to year end in order to test timing
of revenue recognition and the accuracy of
year end cut offs; and
• Ensured appropriate disclosure
the
financial statements of revenue policies and
significant estimates and judgement applied.
in
Page | 84
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WELLARD LIMITED (CONTINUED)
Key Audit Matters (continued)
Carrying value of Property, Plant and Equipment
Refer to Note 2.Z and Notes 18 Property, Plant and Equipment
Property, plant and equipment (PPE) totalled
$49.30 million, the majority of which related to
vessels, as disclosed in Note 18.
The Group considered whether there were
any indicators of impairment for individual
assets having regard to the performance of
those assets as well as any adverse industry
economic
any
associated with the COVID-19 pandemic.
conditions,
including
Accounting standards require the carrying
value of assets tested for impairment to be
compared to their recoverable amount. The
Group estimated recoverable amounts for
vessels by reference to external valuations
performed by external parties as well as
through
using
discounted cashflow projections.
value-in-use models
impairment
Based on the assessed recoverable amounts
no
in
respect off the Group’s vessel fleet for the
year ended 30 June 2021.
losses were recorded
This was a key audit matter because of the
significant judgement involved in considering
impairment indicators and estimating the
these assets,
recoverable amounts of
including determining the key assumptions
supporting the expected future cash flows
from these assets.
Our procedures included, amongst others:
• Evaluating the Group’s assessment of whether
there were any indicators of asset impairment, by
comparing market capitalisation to the net the
asset value of the Group as at 30 June 2021,
consideration of the utilisation, performance and
results derived from operating the vessel fleet and
consideration of any adverse economic conditions
arising from the COVID-19 pandemic;
• In relation to external valuations obtained from
third parties we;
̶ evaluated the competence, experience and
objectivity of the expert used;
̶ evaluated the scope and appropriateness of
the valuations obtained; and
̶ assessed whether the valuations obtained
were consistent with other audit evidence
obtained, including management’s value-in-
use calculations.
• In
relation
to value-in-use calculations we
assessed
and
the
significant
assumptions used in the cash flow models
including discount rates and residual values used,
based on our knowledge of the business and the
industry.
estimates
• Assessing the appropriateness of the relevant
disclosures included in Notes 2.Z & 18 to the
financial report.
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Page | 85
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WELLARD LIMITED (CONTINUED)
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located on the Auditing
and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report as included in the directors’ report for the year ended
30 June 2021.
In our opinion, the Remuneration Report of Wellard Limited, for the year ended 30 June 2021 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express
an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
NEIL PACE
PARTNER
MOORE AUSTRALIA AUDIT (WA)
CHARTERED ACCOUNTANTS
Signed at Perth this 23rd day of August 2021.
Page | 86
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 20 August 2021.
ASX ADDITIONAL INFORMATION
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 1,474 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
273
243
618
235
1,474
32,977
862,656
1,942,273
22,696,020
505,716,386
531,250,312
7.12
18.52
16.49
41.93
15.94
100
UNMARKETABLE PARCEL
The minimum parcel size at 20 August 2021 is per unit is 6,944 shares.
There are 445 shareholders that hold unmarketable parcels.
An “unmarketable parcel” is a parcel of shares that is worth less than A$500.
88 | WELLARD ANNUAL REPORT 2021
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
One Managed Invt Funds Ltd
Vine Street Investments Pty Ltd
One Fund Services Ltd
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Mr Zixiao Zhao
Mr Orlando Berardino Di Iulio & Ms Catharina Maria Koopman
Mr Steven Boyd Taylor
Brazil Farming Pty Ltd
Dynamic Supplies Investments Pty Ltd
Ms Xia Zhao
Mr David Allan Dixon & Ms Catherine Louise Ramm
HSBC Custody Nominees (Australia) Limited – A/C 2
BNP Paribas Noms Pty Ltd
Mr Feng Shi
Bultitude Investments Pty Ltd
Gregory James Wheeler
81,200,729
50,663,450
36,881,588
29,556,247
28,226,009
12,649,907
8,731,158
6,776,310
5,892,500
3,784,795
3,693,268
3,500,000
3,000,000
3,000,000
2,960,588
2,755,153
2,497,000
2,054,099
2,000,000
1,704,600
Total
421,622,295
Balance of Register
Grand Total
109,628,017
531,250,312
24.49
15.28
9.54
6.94
5.56
5.31
2.38
1.64
1.28
1.11
0.71
0.70
0.66
0.56
0.56
0.56
0.52
0.47
0.39
0.38
0.32
79.36
20.64
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.
89 | WELLARD ANNUAL REPORT 2021
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
Moore Australia Audit (WA)
Level 15, Exchange Tower,
2 The Esplanade
Perth WA 6000
Phone:
Facsimile:
Website:
+61 8 9225 5355
+61 8 9225 6181
www.moore-australia.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).
90 | WELLARD ANNUAL REPORT 2021
Wellard Limited
ACN 607 708 190
Suite 20, First Floor, Manning Buildings,
135 High Street, Fremantle WA 6160
Telephone +618 9432 2800
www.wellard.com.au