WELLARD LIMITED
30 JUNE 2023
CONTENTS
EXECUTIVE CHAIRMAN’S REPORT ......................................................................................................... 2
RESULTS FOR ANNOUNCEMENT TO THE MARKET .............................................................................. 7
OPERATIONS REPORT .............................................................................................................................. 9
DIRECTORS’ REPORT ............................................................................................................................. 21
FINANCIAL REVIEW ................................................................................................................................. 25
REMUNERATION REPORT ...................................................................................................................... 39
DIRECTORS’ DECLARATION ................................................................................................................... 47
AUDITOR’S INDEPENDENCE DECLARATION ....................................................................................... 48
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .......................................................... 50
CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................................................... 51
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .................................................................... 52
CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................................. 53
NOTES TO THE FINANCIAL STATEMENTS ........................................................................................... 56
INDEPENDENT AUDITOR’S REPORT ..................................................................................................... 83
ASX ADDITIONAL INFORMATION ........................................................................................................... 88
CORPORATE DIRECTORY ...................................................................................................................... 91
1 | WELLARD ANNUAL REPORT 2023
PICTURE
EXECUTIVE CHAIRMAN’S REPORT
EXECUTIVE CHAIRMAN’S REPORT
MESSAGE FROM THE EXECUTIVE CHAIRMAN
To record a loss of US$15.5 million after three consecutive profitable financial years was
disappointing for the Company and its shareholders. Unfortunately, the result wasn’t
surprising given the predicted very tough live export trading conditions all exporters, ship
operators and importers experienced combined with some one-offs which exacerbated the
loss (see the Company’s previous Outlook statements in the FY2022 annual report,
FY2023 Interim Result and May 2023 Market Update).
We are commencing FY2024 with a more promising charter book, and therefore growth
outlook, than in previous years. This is largely due to the increased trading activity from
South America to Turkiye, where two of our ships are positioned, and a decline in fuel
prices. However, charter rates are still subdued and the increased acvitity we are
currently experiencing has yet to translate into confirmed charters for Q2 FY2024.
So that provides some promise for FY2024 to recover from a disappointing FY2023.
Principally the FY2023 loss was caused by:
John Klepec
Executive Chairman
− A second year of depressed live cattle exports from Australia and South America that directly impacted both
charter rates and number of voyages. Consequently, we scheduled longer times at anchor and completed
some ‘break-even’ and sub-profitable voyages in H2 FY2023.
− The breakdown of the M/V Ocean Swagman’s starboard engine and subsequent 87.5 days off-hire period
with repair costs incurred in FY2023, and any insurance recovery from Hull & Machinery and Loss of Hire to
be booked in FY2024.
− The cost of relocation of two ships to South America in June 2023.
− The ongoing oversupplied livestock shipping market keeping charter rates very low with an inability to pass
on volatile or inflation-linked operating cost increases such as crew and marine fuel costs (noting that although
spot fuel prices decreased throughout FY2023, total fuel spend increased in FY2023 when compared to
FY2022).
At a macro level there were 611,324 cattle exported by sea from Wellard’s principal market of Australia in FY2023, a
number very similar to the 608,903 cattle shipped in FY2022, and therefore still at 10 year lows1.
Even though the total size of the market remained relatively stable, the trend of smaller consignments became further
entrenched, as feedlotters in Australia’s largest live cattle export destination, Indonesia, continued to buy small
consignments. This was for fear that an outbreak of Foot and Mouth Disease (FMD) or Lumpy Skin Disease (LSD)
would be financially devastating if they held large numbers on-hand and which, if found to be subject to those diseases,
would be euthanized; and because Australian cattle prices were materially higher than imported frozen Indian Buffalo
Meat and Brazilian beef.
Illustrating this trend was that 10 voyages departed the Port of Darwin in June 2023, with an average consignment
size of just 1,448 head. For context, this average consignment would take up less than one deck on the M/V Ocean
Drover, leaving its remaining 8 decks empty. Or, alternatively, all the cattle on those 10 voyages would have fitted on
a single M/V Ocean Drover voyage, with room to spare.
Wellard operates mid to large-sized carriers, so demand for these small shipment sizes has made trading conditions
difficult for the Company.
To date, the recent fall in Australian live export feeder steer A$ prices – they were A$450 cents a kilogram liveweight
at the start of FY20232 and most recent shipments have been at A$290-300c/kg has not prompted a change to
Indonesia’s cattle buying patterns. This is in contrast to previous years when a drop in live cattle prices would have
stimulated a commensurate pick-up in volumes. The sustained very high Australian cattle prices which were
exacerbated when producers directed feeders to southern restocker markets in FY2022-23 have led to closures of
some Indonesian feedlots which could not continue to sustain the trading losses.
1 Total cattle exported from Australia: https://www.agriculture.gov.au/biosecurity-trade/export/controlled-goods/live-animals/live-animal-
export-statistics/livestock-exports-by-market
2 www.beefcentral.com price graphs
3 | WELLARD ANNUAL REPORT 2023
EXECUTIVE CHAIRMAN’S REPORT
Despite the fall in Australian cattle prices, Indian Buffalo Meat and frozen Brazilian beef still remain cheaper for
Indonesian consumers than freshly processed Australian cattle. Therefore, Indonesian importers remain reluctant to
commit to large orders of Australian cattle or increase their importing capacity to previous levels. Producers will need
to release cattle for export at prices that are competitive to stimulate feedlot demand.
For these reasons, in June 2023 Wellard relocated the large-sized M/V Ocean Drover, and subsequently the mid-sized
M/V Ocean Swagman, to the reactivated South America to Turkiye trade.
This was part of a reasonably significant refocusing of the routes that Wellard vessels serviced in FY2023 to reflect
the underlying market demand.
Fortunately fuel prices eased considerably in the second half of FY2023, albeit from record highs in late FY2022 and
early FY2023. The fall in fuel prices has enabled Wellard to start to normalise its charter rates, whereas in late FY2022
and early FY2023 it was forced to absorb some of the high fuel prices rather than passing them onto customers.
Wellard ended the financial year with US$7.4 million cash and cash equivalents. Loans and borrowings amounted to
just US$2.6 million (FY2022: US$7.7 million) and coupled with the US$7.4 million of cash at bank, once again resulting
in a negative net debt (i.e. cash surplus) position of US$4.8 million.
Voyage success rates remain an important KPI for Wellard and the customers who charter our vessels. Through a
combination of a dedicated focus on animal welfare, voyage planning and vessel management, the effort and attention
of our officers and crew, the quality of our vessels, and the hard work of our suppliers, Wellard recorded another year
with a 99.95% success rate, this year from the 142,086 cattle that boarded our vessels.
Voyage success rates such as these are integral to the continued demand for Wellard vessels from live export
companies.
Outlook
Our vessels are expected to be fully booked for Q1 FY2024. The level of inquiry currently being received for future
charters is promising but has not yet translated into confirmed charters for Q2 FY2024.
The Company’s cost of sales will be aided by the recent reduction in Very Low Sulphur Fuel Oil (VLSFO) prices.
As noted previously, the M/V Ocean Drover and M/V Ocean Swagman have been relocated to service the
Brazil/Uruguay to Turkiye market. After the 2023 elections and the country’s subsequent return to stability, the Turkish
Government’s release of new quotas for cattle to be imported in CY2023 to combat food inflation has stimulated this
market, and most large AMSA-accredited and non-AMSA-accredited vessels are now employed on this route.
A decision on CY2024 Turkiye import quotas has not been announced.
With the M/V Ocean Drover and M/V Ocean Swagman operating in the Atlantic Ocean, the Company’s smallest vessel,
the M/V Ocean Ute, will service the three main markets Wellard has traditionally allocated its vessels to, breeder cattle
to North Asia, feeder cattle to Indonesia and slaughter cattle to Vietnam.
The outlook for each of those markets indicates a continuation of present, challenging market conditions.
Trading conditions to Indonesia are likely to remain focused on small shipments, due to the aforementioned price
competition from frozen Indian Buffalo Meat and Brazilian beef and the ongoing concern from Indonesian importers of
the financial ramifications if their cattle were to contract either of Lumpy Skin Disease (LSD) and Foot and Mouth
Disease (FMD). Notwithstanding a concerted campaign to vaccinate Australian cattle in Indonesian feedlots, which
commenced in May 2022, in July 2023, Indonesian trade was disrupted following the detection of LSD in Australian
cattle recently imported into Indonesia. Australia’s Chief Veterinary Officer confirmed that Australia remains LSD free3,
however the Indonesian Agricultural Quarantine Agency (IAQA) has advised that it will not accept the importation of
cattle prepared for export to Indonesia from four Registered Establishments until Australia conducts a surveillance and
testing investigation for LSD to their satisfaction. At this time, Indonesia is continuing to accept cattle prepared at a
further 28 Australian Registered Establishments approved by Indonesia. The situation remains fluid as testing and
discussions between Australia and Indonesia will determine when the trade is fully recommenced.
3 https://www.agriculture.gov.au/about/news/lsd-detection-in-cattle-exported-to-indonesia
4 | WELLARD ANNUAL REPORT 2023
EXECUTIVE CHAIRMAN’S REPORT
The market has seen some charters for opportunistic
consignments of slaughter cattle to Vietnam. There
are competing supply/demand fundamentals in this
market. End consumption remains depressed post-
COVID, however, the inability of Queensland cattle
producers to secure either a price or abattoir slots
from local processors has provided exporters access
to cattle and the ability to complete shipments with
some profitability.
Wellard expects that this market will continue to ebb
and flow in FY2024.
After a rush to secure New Zealand beef and dairy
genetics before that Government’s live export ban
came into effect on 30 April 2023, China’s demand for
breeding cattle all but dried up immediately after the
ban came into force. We expect charter demand for
Wellard vessels to return to the Chinese market in the
2024.
Sheep voyages on Wellard vessels in FY2024 appear
unlikely. The trade in sheep from Australia to the
Middle East improved in FY2023, increasing by 34%
from 464,664 shipped sheep in FY2022 to 620,558
sheep in FY2023.
Shipping activity on this route remains limited to
vertically integrated sheep enterprises that own their
own vessels.
Finally, whilst Wellard has long-term operational
control and possession of the M/V Ocean Drover via
its bareboat charter (BBC), which lasts until 30 June
2032, the Company continues to negotiate the return
of legal title of the vessel from financier, Ruchira Ships
Limited (Ruchira), which holds legal title under a sale
and leaseback financing structure. There are no
further charter hire payments to be made to Ruchira
under the BBC.
The Company is working hard in its negotiations with
Ruchira and Ruchira’s financier to secure transfer of
unencumbered title back to Wellard.
M/V Ocean Swagman V148, Singapore Drydock, April 2023
Advocacy on shipping standards and livestock exporting
As a global leader in livestock shipping, Wellard continues to advocate to Australian and International regulators for
improved global shipping standards.
Wellard remains engaged with various regulatory authorities to improve global standards but progress has been slow.
Wellard made a substantial submission to the Australian Federal Government’s panel on its proposed phase out of
live sheep exports from Australia, which was one of 4,100 submissions received. The panel has published an update
on the consultation process on 27 July 2023, and Wellard’s submission can be found online4. No final decision on
implementation of its policy has been announced by Government.
4 https://www.agriculture.gov.au/about/news/update-from-independent-panel-consulting-phase-out-live-sheep-exports
5 | WELLARD ANNUAL REPORT 2023
EXECUTIVE CHAIRMAN’S REPORT
Fleet modernisation
Wellard has always prided itself on operating a modern, technologically advanced, shipping fleet, and the Company
has been progressing studies and planning for new replacement livestock vessels, with a focus on animal welfare,
engine efficiency, and reduced emissions.
Although modernisation of Wellard’s shipping fleet remains important to the Company’s directors, the lack of
opportunities to fund new vessels, quoted high costs of new ship builds and the poor trading conditions has focused
the Board’s attention on the Company’s shorter-term, operational and financial priorities. Improvements are made to
our existing vessels regularly, particularly during their regular drydocks. These include the implementation of advanced
energy management systems, to optimise energy consumption, reduce emissions, and improve overall efficiency (i.e.
fuel system and lighting system upgrade), ventilation upgrade, and real-time cargo area monitoring to improve safety,
security, and welfare during animal transportation (i.e. real-time monitoring of temperature, CO2, and Ammonia).
Unmarketable share sale facility
On 15 May 2023, Wellard established an Unmarketable Parcel Sale Facility (Facility) for shareholders who hold less
than A$500 worth of fully paid, ordinary shares in the Company (Shares), (Unmarketable Parcel).
The Company opened this facility to enable holders of unmarketable parcels to sell their Shares without having to act
through a broker or incurring any brokerage or handling costs that would otherwise make a sale of their shares
uneconomic or difficult, while at the same time assisting Wellard by reducing administrative costs, including printing
and mailing costs and share registry expenses associated with maintaining a large number of Unmarketable Parcels.
It was conducted on an ‘opt out’ basis, whereby unmarketable parcels were automatically sold for the shareholder
unless they elected to retain their shares by advising the Company by 30 June 2023.
Based on the price of Wellard shares at the close of trading on Friday, 12 May 2023 (Record Date) of A$0.048, a
holding of less than 10,416 Shares constituted an Unmarketable Parcel, making 567 shareholders eligible to
participate in the Facility.
The final number of shares sold under the Facility was 1,877,398 ordinary shares comprising 434 shareholders, which
represents approximately 76.53% of eligible shareholders on 12 May 2023. The shares were sold on market by Euroz
Hartleys at an average of A$0.044 per share.
Payment was dispatched to participating shareholders on 8 August 2023.
Conclusion
Finishing the Company’s run of three profitable years to record a significant loss was disappointing, but not surprising
given the tough trading conditions that Wellard endured, and sought to manage, throughout all of FY2023.
Wellard has been nimble in its response to limit the financial impact of those macro-conditions.
Trading conditions are improving as we enter FY2024, however the recent developments with Indonesian Government
suspending livestock imports from four Australian facilities and stations due to positive Lumpy Skin Disease testing is
a concern for that market.
Finally, Wellard’s onshore team and on-vessel crew continue to work hard to achieve the best operational and financial
results in their power, and it is important to acknowledge their hard work and dedication to those goals. The past year
has been very difficult, but they have remained focused on achieving the best outcomes from the trading conditions
they have been forced to contend with.
We also thank our loyal business partners for their continued support.
John Klepec
Executive Chairman
28 August 2023
6 | WELLARD ANNUAL REPORT 2023
RESULTS FOR ANNOUNCEMENT TO THE MARKET
Provided below are the results for announcement to the market in accordance with Australian Securities Exchange
(ASX) Listing Rule 4.2A and Appendix 4E for the consolidated entity Wellard Limited ABN 53 607 708 190 (Wellard
or Company) and its controlled entities (Wellard Group or Group or Consolidated Group), for the year ended 30
June 2023 (FY2023) compared with the year ended 30 June 2022 (FY2022).
The financial statements are presented in United States dollars (unless otherwise stated).
FINANCIAL RESULTS AND KEY FINANCIAL ITEMS FROM CONTINUING OPERATIONS:
FOR THE YEARS ENDED 30 JUNE (US$ thousand)
2023
2022
Movement
Revenue
Cost of Sales
Gross (loss)/profit
Other income1
General and Administrative expenses
Restructuring costs
Other losses from chartering and trading activities
EBITDA2
Other gains/(losses) from other activities
Depreciation and amortisation expenses
EBIT
Net finance costs
Income tax expense
(Loss)/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
Loans and borrowings
Negative net debt4
Debt to capital ratio5
Ship loan to asset book value ratio
38,655
(38,930)
(275)
-
(3,850)
-
(306)
(4,431)
112
(10,578)
(14,897)
(222)
(368)
(15,487)
(0.7)
(11.5)
(40.1)
(20.0)
3,195
1.4
37,017
7.0
2,588
(4,832)
6.4%
0%
45,048
(30,760)
14,288
12,023
(4,643)
(23)
(3)
21,642
(394)
(10,532)
10,716
(771)
(12)
9,933
31.8
48.0
22.0
28.1
11,660
2.2
52,364
9.9
7,738
(7,541)
12.6%
13.6%
%
%
%
Times
$’000
Times
$’000
Cps
$’000
$’000
%
%
(14.2%)
26.5%
(101.9%)
(100.0%)
(17.1%)
(100.0%)
10100.0%
(120.5%)
(128.5%)
0.4%
(239.0%)
(71.2%)
2966.7%
(255.9%)
(102.2%)
(124.0%)
(282.3%)
(171.2%)
(72.6%)
(36.4%)
(29.3%)
(29.3%)
(66.6%)
(35.9%)
(49.2%)
(100.0%)
1 Other income refers to the arbitration award obtained in London against the Croatian Bank for Reconstruction and Development (Hrvatska banka za
obnovu i razvitak, or “HBOR”).
2 EBITDA equals (loss)/profit 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. A negative net debt indicates that the cash and cash equivalents exceed the
entire debt balance.
5 Debt to capital ratio equals loans and borrowings divided by total equity plus loans and borrowings.
7 | WELLARD ANNUAL REPORT 2023
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 2023 (2022: 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 is an agribusiness that connects primary producers of
cattle, sheep and other livestock to international customers through a global supply chain. The Group is a supplier of
seaborne transportation for livestock globally and holds export licences to trade and ship live cattle and sheep on its
own account.
LIVESTOCK LOGISTICS SERVICES:
Wellard’s predominant activity in FY2023 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 has reduced this activity since July 2019.
When pursuing this business activity, Wellard sources livestock in markets where production is surplus to domestic
requirements (including Australia, New Zealand, Chile, Brazil and Uruguay) and sells livestock to customer markets
where demand exceeds local production (including Indonesia, Vietnam, the Middle East, Turkiye and China), utilising
its own and third-party vessels.
8 | WELLARD ANNUAL REPORT 2023
OPERATIONS REPORT
PICTURE
OPERATIONS REPORT
OPERATIONS REPORT
The year in summary
Employee safety remains a core focus. The Company recorded zero lost time injuries and zero medically treated
injuries for all of FY2023, which extends the nil-nil result achieved in FY2022, and which the Company will seek to
replicate in FY2024.
The Wellard fleet again achieved excellent voyage success rates for the livestock that it delivered.
Of the 142,086 head of cattle loaded globally during the period, our vessels recorded a success rate of 99.95%.
No sheep were loaded in FY2023, as was the case in both FY2021 and FY2022.
Due to the continued difficult live export trading conditions for exporters and vessel charterers (more detail below),
Wellard continued to focus on:
−
−
−
−
a lean operating model
strong balance sheet
dynamic chartering
adapting the pursuit of growth to current market conditions
The Company’s strong balance sheet and healthy cash position, combined with a lean cost structure, has enabled the
Company to weather the poor trading conditions of the past two years.
Lean operating model
Wellard’s focus on a lean operating model, and taking costs out of the business, has provided substantial benefits in
recent years.
However, the company has not been immune from global inflation which materially affected the majority of our costs,
including crew costs, spare parts, and servicing.
Strong balance sheet
Previous work to fix Wellard’s balance sheet has considerably reduced Wellard’s interest payments and cost base,
and the benefits of that work continue to be evident.
There was a significant increase in financial outflow in FY2023 with balloon payments made to Ruchira Ships Limited
(Ruchira), which has provided vessel finance on the M/V Ocean Drover and M/V Ocean Ute through sale and
leaseback contracts. On 8 July 2022 Wellard made a final US$0.9 million payment to Ruchira to finalise its previous
financing arrangements and secure the re-transfer of the M/V Ocean Ute. On the same date, Wellard paid US$1.9
million to complete all payments due under the financing of the M/V Ocean Drover, inclusive of a (then) 10 year
bareboat charter at effectively no cost to Wellard if the official title transfer was delayed. As discussed further below,
the redelivery of the M/V Ocean Drover has been delayed, and Wellard is working to address that issue and secure
the return of full legal title.
Vessel financing arrangements
Wellard completed the repurchase of the M/V Ocean Ute on 19 August 2022, and legal title has been handed to
Wellard.
The long-term bareboat charter for approximately nine years, remains in place for the M/V Ocean Drover. This locks
in Wellard’s exclusive long-term access to the vessel until 2032, unless it is transferred to Wellard earlier under the
MoA. The long-term bareboat charter serves to mitigate the risk that Ruchira delays or cannot complete its resale
obligations. Wellard provided updates to shareholders on its negotiations with Ruchira on 28 June 2023, 3 July 2023
and 4 August 2023.
At the time of writing, Wellard has agreed to an extension of time for Ruchira and some of its associated group
companies to conduct a sale of its various secured assets, and to make appropriate arrangements with its secured
lending bank, United Overseas Bank Limited (UOB), to release UOB’s mortgages over the M/V Ocean Drover, in order
to facilitate the delivery of clear title. Ruchira has a legal obligation to redeliver title of the vessel to Wellard, and Wellard
is monitoring Ruchira’s progress in this regard.
10 | WELLARD ANNUAL REPORT 2023
OPERATIONS REPORT
M/V Ocean Swagman moved from long-term bareboat charter to short-term time
charter
Wellard’s bareboat charter of the M/V Ocean Swagman from Heytesbury Singapore Pte Ltd expired on 30 June 2023,
at which time the vessel was time chartered by the Company for four months, with the option of an additional three
months, at predetermined rates. Under these arrangements, Wellard has the ability to continue operating the M/V
Ocean Swagman until early 2024.
In FY2023, prior to its redeployment to South America, the M/V Ocean Swagman was underutilised in the Australian
market. The Company will continue to assess whether there is merit in extending its charter of the vessel as the
calendar year progresses. Wellard may negotiate a further extension with Heytesbury should the market demand be
sufficient to do so.
Heytesbury Singapore Pte Ltd is a related party of Heytesbury Pty Ltd, which remains a 15.28% shareholder in Wellard.
The Wellard fleet
Ocean
Drover
Ocean
Swagman
Ocean
Ute
Main Particulars:
Year built
Year converted
Length overall
Summer draft
Speed
Cargo Area for Cattle:
Pens
Cargo surface area (net)
Number of animals
Cargo Area for Sheep:
Pens
Cargo surface area (net)
Number of animals
Fresh-water production:
Fresh water tank capacity
Fresh water production m3/day
Fodder storage:
Silo Fodder at 100% full
capacity
Silo Fodder at 80% full
capacity
Sundeck:
Sundeck surface area
available
Sundeck maximum load
Bareboat Chartered
to 30 June 2032
Time Chartered
to beginning 2024
Owned
2002
N.A.
176.7 m
8.7 m
18.0 Knots
1,415
23,372 m2
20,000 approx.
799
23,665 m2
75,000 approx.
2009
N.A.
136.5 m
7.8 m
15.0 Knots
451
7,967 m2
8,000 approx.
424
8,084 m2
25,000 approx.
1994
2011
139.9 m
7.2 m
13.5 Knots
414
6,986 m2
6,500 approx.
124
2,155 m2
7,000 approx.
3,190 m3
800 m3/day
2,664 m3
360 m3/day
1,120 m3
300 m3/day
5,181 m3
4,145 m3
1,126 m2
1 Ton/m2
2,433 m3
1,946 m3
300 m2
1 Ton/m2
1,234 m3
987 m3
200 m2
1 Ton/m2
11 | WELLARD ANNUAL REPORT 2023
OPERATIONS REPORT
Dynamic chartering and adapting to market conditions
A snapshot of livestock vessel activity at the start of FY2023 shone a spotlight on the poor state of trading conditions
in the live export sector, with just under 25% of Wellard’s AMSA-accredited competitor vessels active (loaded or ballast
voyages to awaiting charter) on 28 July 2022, and many of the competitor vessels having been at anchor for an
extended period of time5.
“AMSA-accredited competitor vessels” are categorised by Wellard as active livestock vessels which possess an
Australian Accreditation for the Carriage of Livestock issued by AMSA (the Australian Maritime Safety Authority).
Effectively one of the highest standard of accreditation in the world, only AMSA-accredited vessels are allowed to load
livestock in Australian ports.
These trading conditions continued throughout most of FY2023, with the M/V Ocean Ute and M/V Ocean Swagman
spending some periods at anchor, or completing ‘break-even’ and sub-profitable voyages for strategic reasons as
shipping companies competed with each other for the few orders available whilst striving to keep import markets open to
enable future activity.
Trading conditions improved late in the financial year, due largely to a resurgent Brazil/Uruguay to Turkiye market.
Wellard’s operates a competitor vessel monitoring program which provides insights into changing route dynamics and
equips the Company with an ability to respond to market trends and ensure Wellard’s vessels are deployed to the
areas of greatest activity and profitability.
As part of this monitoring programme, a snapshot was taken of voyages every six months and analysed on a square
metre basis (rather than ship-by-ship) to ensure the movement of larger carriers was appropriately weighted.
The route-by-route comparison revealed a marked shift in the routes travelled by ASMA-accredited vessels.
The resultant heatmapping revealed three key trends:
•
•
Trend One: Shipping capacity between Australia and South East Asia (largely Indonesia and Vietnam) more
than halved from June 2021 to June 2022 and into December 2022.
This route represented 38% of AMSA-accredited shipping capacity in June 2021, but fell to just 17% and 18%
in June 2022 and December 2022 respectively.
There has been a small increase to 24% in June 2023, most likely from vessels that were previously engaged
on the North Asia breeder cattle route.
Reasons for this trend:
Due to the combination of sustained very high Australian cattle prices, issues with FMD and LSD, and strong
competition from Indian Buffalo Meat and Brazilian beef, Indonesian importers have only been buying small
consignments of cattle at a time, taking bigger ships out of the equation on this route. Plus, the trade to
Vietnam has only been small and sporadic for the past two years due to the very high Australian cattle prices.
Trend Two: The market for breeder cattle trade to China is almost at a standstill, when just a year ago half
of the AMSA-accredited shipping capacity was engaged on this route from both Australia and New Zealand.
It was 22% in June 2021 and rose to 53% in June 2022. In June 2023 just 4% of capacity was engaged on
this route.
Reasons for this trend:
With the looming New Zealand ban on live exports, importers ramped up their purchases in 12 months prior
to its April 2023 closure to acquire significant breeding cattle numbers while they were available.
This created a backlog in China, which will eventually move through the system, and we expect the trade to
return to a more ‘normal’ cadence of activity and capacity in 2024.
5 Monitoring is by way of publicly available data on websites such as www.marinetraffic.com; and based on vessels listed as “active” with a
functional Automated Identification System (AIS)
12 | WELLARD ANNUAL REPORT 2023
OPERATIONS REPORT
•
Trend three: There has been a significant shift to South America, with almost half of the AMSA fleet deployed
there from a zero base just six months ago. It was 26% in June 2021, dipping to just 2% in June 2022 and
zero in December 2022, but now 44%.
Reasons for this trend:
The release of import permits by the Turkish Government to combat food inflation created considerable
demand for tonnage, both for AMSA-accredited and non AMSA-accredited vessels.
As a long-haul route, exporters and importers are seeking to charter larger, more economic vessels through
until the end of the year.
It is unlikely that these vessels will return to Australia anytime soon given the demand and relocation costs.
Figure 1: Live-export trade by region (based on cattle square meters)
Modernising the Wellard fleet without stressing the Wellard balance sheet
The lack of funding opportunities to fund new vessels and the recent poor trading opportunities have focused the
Board’s attention on the Company’s shorter-term, operational and financial priorities. Nonetheless, fleet modernisation
remains important to the Company, and it continues to be strategically implemented on our existing vessels during
their mandatory periodic surveys (drydocks).
Reforming global shipping standards
Wellard continued activity in this area, and will continue to do so, but reform is not easy.
It remains of considerable concern to Wellard that aging, substandard livestock vessels are allowed to continue to
conduct this trade in many countries, placing the lives of the shipboard crew and its livestock cargo at peril, as well as
failing to meet globally accepted safety and animal welfare standards.
There remains limited to no coordinated international oversight and regulation of this sector, to the detriment of human
and animal lives and the long-term future of the live export industry, and although this has been acknowledged by the
International Maritime Organization (IMO) and the Australian Maritime Safety Authority, change has not occurred with
either the IMO global standards or Marine Orders 43 which are the relevant Australian standards which AMSA
administers.
Without an effective IMO regulatory regime setting mandatory standards for all international livestock vessels, animal
welfare on the non-AMSA-accredited fleet is likely to be at a higher risk 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.
It is encouraging to note that in recent years some individual exporting jurisdictions such as Romania and Brazil have
implemented animal welfare standards for managing livestock density onboard ships.
Unfortunately, the lack of truly global standards and failure to overcome the deficiencies in Australia’s own standards
creates a disincentive to build new vessels because new vessels are unable to compete on price with old, substandard
vessels which can operate in unregulated or substandard markets.
The last new livestock ship entered service six years ago, no new vessels are under construction, and to the best of
our knowledge, none are planned.
Unless standards are improved and enforced there is no or low financial incentive to replace old, outdated ships with
new, state-of-the-art vessels, and those who place our valuable livestock and the long-term sustainability of the
livestock export industry at risk will continue to ply the trade.
13 | WELLARD ANNUAL REPORT 2023
OPERATIONS REPORT
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, based on the use of
modern ships which deliver superior safety and animal welfare standards, and which meet or exceed the expectations
of stakeholders, to allow good operators to fulfil the market’s continued demand for best quality protein.
Our very real fear is that history will be repeated, and thousands of cattle, crew, and the future of the live cattle trade
will suffer from an entirely preventable situation because successive governments have relied on a false sense of
security and failed to listen to experienced industry experts who want a sustainable trade.
Of note, the National Party in New Zealand, which wants to overturn that country’s ban on all livestock exports if
elected, has proposed a Gold Standard which includes purpose-built vessels and an age limit6, two changes that
Wellard is seeking in Australia. If implemented, Australia will no longer be able to lay claim to possessing the best
livestock shipping standards in the world.
Voyages in FY2023
In FY2023, Wellard loaded 22 external charter voyages (FY2022: 20 external charter voyages) which includes 21
voyages ex Australia or New Zealand to the following destinations:
•
•
•
12 voyages to China delivering 79,816 head of cattle;
6 voyages to Indonesia delivering 30,246 head of cattle;
3 voyages to Vietnam delivering 10,570 head of cattle.
There was also a single voyage from Brazil to Turkiye from the repositioned M/V Ocean Drover, which delivered
21,390 head of cattle.
Figure 2: Charter revenue by origins
Figure 3: Charter revenue by destinations
In early July 2023, the M/V Ocean Ute completed its 100th voyage for Wellard.
Bought by Wellard in 2014, the vessel has travelled more than 715,524 nautical miles since it joined the Wellard fleet,
carrying 450,018 cattle during that time. It has recorded an overall voyage success rate of 99.9%.
Its 100th voyage was a charter from Townsville to Jakarta and Panjang in Indonesia, carrying 5,406 cattle. Notably,
5,405 cattle walked off the ship.
Although closer to the end than the start of the vessel’s working life, the M/V Ocean Ute has played an important role
helping Wellard to keep commercial relationships on foot during the recent difficult trading conditions.
Australian live export market in FY2023
As noted above, the combination of historically very high prices for live export feeder and slaughter cattle and reduced
availability has caused a significant decline in shipping activity on Wellard’s core routes from Australia to Indonesia
and Vietnam.
In FY2021, 164 cattle voyages departed Australia, carrying 887,964 feeder and slaughter cattle. In FY2022, there were
133 voyages carrying 608,903 cattle. FY2023 almost mirrored FY2022 with 611,324 cattle on 128 voyages.7
6 https://www.nzherald.co.nz/nz/politics/national-leader-christopher-luxon-releases-farming-policy-resume-live-animal-exports-cut-red-tape-
scrap-migrant-worker-median-wage/3TQTFNHWLFFL3BZPSH6BA247KQ/
7 https://www.agriculture.gov.au/biosecurity-trade/export/controlled-goods/live-animals/live-animal-export-statistics/livestock-exports-by-
market
14 | WELLARD ANNUAL REPORT 2023
OPERATIONS REPORT
The supply of breeder cattle (beef and dairy) to North Asia has separate supply and demand dynamics to the supply
of feeder and slaughter cattle to Indonesia and Vietnam.
Similar to FY2021, charters transporting breeding cattle from Australia, New Zealand and South America to North Asia
comprised Wellard’s largest market in FY2022. Wellard delivered 105,739 breeder cattle (beef and dairy) to
destinations in North Asia in that period.
There was however an uptick in total industry shipments from Australia to North Asia in FY2023, with 114,546 breeding
cows and heifers shipped, up 12% from the 102,603 cattle shipped the year prior.
In the New Zealand market8, the monthly volume of cattle shipments rose ahead of the trade’s closure in April 2023.
A total of 112,597 cattle were shipped in the 9-month period between 1 July 2022 and 30 April 2023, compared to
135,501 cattle shipped in the full 12 months of FY2022.
This was a product of the “rush” to secure New Zealand beef and dairy genetics while they still could be accessed
ahead of the ban.
This year Wellard delivered 79,816 breeding cattle from Australia and New Zealand to North Asia, representing a shift
to other markets.
While there was some expectation that North Asian importers would seamlessly switch to Australia and South America
once New Zealand has closed, that hasn’t occurred yet. In fact, total number of head shipped from Australia to North
Asia halved between H1 and H2 FY2023 (76,526 head vs 38,020 head)
Official cattle export statistics from Uruguay to North Asia are difficult to source. Wellard’s own vessel movements,
monitoring of competitors’ vessels, and anecdotal in-market advice indicate that export numbers increased, however
numbers will be constrained by voyage times and distance, which impacts the landed price of the livestock.
Wellard conducted no voyages from South America to North Asia in FY2023, compared to 3 voyages from this market
in FY2022, 3 voyages the year prior, and 2 voyages in FY2020.
Shipping fuel prices
Fuel (or “bunker”) prices remain Wellard’s single largest operational cost. The Very Low Sulphur Fuel Oil (VLSFO)
price is a key determinant of the charter rates Wellard quotes and charges its customers.
Falling bunker prices throughout FY2023 provided some respite for Wellard and the Company’s customers.
At the start of FY2023 VLSFO ex-Singapore was priced at around US$1,100/tonne, largely driven by a global spike in
post COVID-19 shipping activity and high oil prices. It finished the year just below US$600/tonne, a considerable fall,
but still higher than the ~US$350/tonne paid in July 2020.
Note that there is a difference in VLSFO prices at different ports throughout Wellard’s operating destinations, and we
cannot always access the cheapest bunker fuel when it is needed. As a regional hub, Singapore bunker prices are
often cheaper than bunker price paid by Wellard and other operators at the regional ports Wellard’s ships transit,
however the price trend is illustrative.
Bunker prices at most ports Wellard takes on fuel fell about 45% throughout FY2023, except for Gladstone, in
Queensland, Australia, which only fell by 28%.
Impact of COVID-19
The impact of COVID-19 on the business and operations of Wellard has receded.
COVID-19’s biggest impact on the Company’s operations was the Company’s restricted ability and higher costs to
undertake crew changes. This is no longer the case, and crews are able to move freely to get to and from Wellard
vessels.
At the end of FY2023, Wellard is not experiencing longer berth times at any port of call due to COVID-19 procedures,
and there are no longer any mandatory quarantine requirements in place for crew members and stockmen.
COVID-19 specific regulatory compliance requirements are no longer delaying vessels and the industry has returned
largely to pre-COVID port protocols.
8 https://www.mpi.govt.nz/export/animals/live-animal-and-germplasm-export-statistics-and-reports/
15 | WELLARD ANNUAL REPORT 2023
OPERATIONS REPORT
Due to the reduced impact of COVID-19, at the front-end of the financial year, Wellard estimates that costs directly
related to COVID-19 in FY2023 were approximately US$0.7 million.
At least one market analyst has proposed that there has been a structural change in south-east Asian markets during
the COVID-19 pandemic, which is effectively a shift in consumer behaviour away from fresh meat purchased at wet
markets, and towards boxed beef especially in Indonesia. This observation, however, also speculates that the impact
of animal diseases also has had some effect in traditional wet markets. Certainly, as observed elsewhere in this report,
there has been a downturn in Indonesian demand for live Australian cattle.9
M/V Ocean Swagman V148, Singapore Drydock, April 2023
Operational and market outlook
As the route heat map outline indicates, the outlook for each market is very different according to the supply and
demand fundamentals relevant to that market.
Wellard commences FY2024 with reasonable demand for charters to transport cattle from Brazil and Uruguay,
principally to Turkiye. Australian routes to Indonesia, Vietnam and China – remain under pressure, but with just one
Wellard vessel trading from Australia, Wellard expects that the combined demand from all three markets should keep
that single vessel on-hire for at least the first half of FY2024 providing the suspension of four major export facilities
imposed by Indonesia in July 2023 are lifted. Note that as at the time of this report, Indonesia is continuing to accept
cattle prepared on a further 28 Australian Registered Establishments approved by Indonesia.
a) South America to the Mediterranean (Turkiye and Egypt)
The demand from Turkiye and Egypt for cattle, and therefore the demand for larger vessels to transport them from
cattle producing countries, such as those in South America, at the end of FY2023 continued into the start of FY2024,
but whether that activity continues into Q2 FY2024 is uncertain, as is Turkiye’s plans for FY2024 quotas.
With substantial quotas for imported cattle for Turkiye, and a combined voyage time of one month (loaded and ballast),
importers/exporters have contracted a significant fleet of mid and large-sized vessels to complete the task. Charter
rates have improved, but not the extent that Wellard is seeking.
Turkish government authorities do not publish total annual import quota figures, and do not provide ongoing data on
remaining capacity.
Whether Turkiye will continue to import such large numbers of cattle in H2 FY2024 is less certain and Wellard will be
monitoring developments in Turkiye closely to assess likely demand in the transition period.
9 Dr Michael Patching’s SE Asia Report in Beef Central 110th Edition, March 2023: https://www.beefcentral.com/live-export/se-asia-report/se-
asia-report-live-export-markets-uncertain-road-to-new-normal-trading-10-march-2023/
16 | WELLARD ANNUAL REPORT 2023
OPERATIONS REPORT
b) Dairy and beef breeder cattle to North Asia
The heightened activity prior to the closure of the New Zealand market to exports of cattle created a backlog in late
FY2023, and effectively caused the trade to grind to a halt.
Market intelligence from China indicates this is a short-term phenomenon, and trading volumes are expected to start
again in 2024. Wellard has started receiving inquiries about charters to North Asia but does not have any contracted
voyages to that market.
The trade in breeder cattle from Uruguay to North Asia remains sporadic and is being conducted on a shipment-by-
shipment basis.
In addition, although the large distance between the supply and destination markets is the greatest barrier to increased
trade between the South America and North Asia, Uruguay and China have commenced bilateral negotiations on a
free trade agreement between the two countries. The signing of bilateral FTA’s generally has a positive impact on
diplomatic and trading relations between the signatories.
c) Australian slaughter and feeder cattle to Indonesia and Vietnam
Wellard does not envisage any significant changes to the current trading environment in the short-term, with small
numbers and shipments anticipated due to the impact of LSD and reluctance of Australian producers to accept lower
market pricing.
Even though feeder cattle prices have fallen by one-third, from A$450c/kg10 liveweight at the start of FY2023 to
~A$300c/kg at the start of FY2024, there has not been a commensurate lift in demand.
The main reason for that stagnation is that due to food inflation, customers are preferring cheaper sources of protein,
such as pork or chicken. And if they are choosing beef, they are choosing the cheaper frozen Indian Buffalo Meat and
frozen Brazilian beef.
Price will be the primary basis of any demand stimulation for Australian beef into Indonesia as the sustained high
prices and lack of supply by Australian producers who looked elsewhere for those willing to pay over the last two years,
has resulted in shutdowns and removed Indonesian feedlot capacity for the cattle that would historically go into this
market.
The supply of cattle to Vietnam effectively dried up in late H1 FY2023 and early H2 FY2023, with just one shipment in
each of October and December and no shipments in February 2023.
It is unclear whether the recent Vietnam uptick in June 2023 (4 shipments) will be extended, or even expanded, in H1
FY2024. The falling slaughter cattle price (heavy cow prices fell from A$313c/kg liveweight a year ago to ~A$200c/kg
currently), and inability of Australian producers to gain a processing slot at local abattoirs, has provided an improved
supply-side trading environment to facilitate shipping activity.
In its June 2023 Cattle Industry Projections11, Meat and Livestock Australia indicated the Australian herd remains in a
rebuilding phase (as it was this time last year), which will have a positive impact on cattle availability in future years,
while reducing the number of cattle currently being marketed for sale, whether for slaughter or for export, in the near
term.
According to MLA, the Australian cattle herd will reach its highest level since 2014 this year (28.7 million head) and,
in 2025, is expected to hit its highest level since 1978 (29.24 million head).
10 www.beefcentral.com price graphs
11 https://www.mla.com.au/globalassets/mla-corporate/prices--markets/documents/trends--analysis/cattle-projections/mla_june-
2023_australian-cattle-industry-projections_200623.pdf
17 | WELLARD ANNUAL REPORT 2023
Figure 4: National cattle herd
OPERATIONS REPORT
Source: ABS, MLA
estimates.
In its June 2023
Cattle Projections,
MLA predicted the
Australian cattle
herd will reach its
highest level since
2014 this year.
Live export numbers are actually ahead of MLA’s year ago predictions. In June 2022 it predicted cattle exports would
be 500,000 head in CY2022, increasing by 6% to 530,000 head in CY2023.
In fact, 600,000 head were exported in CY2022 (still a large drop on 772,000 head in CY2021). The forecaster now
expects live exports to increase marginally on this figure in CY2023, up by 3% to 619,000 head, followed by 681,000
head in CY2024 and 750,000 head in CY2025 (a 25% increase on CY2022 levels).
Figure 5: Australia live cattle exports
thousand head
1500
1000
500
0
Source: MLA
estimates.
Cattle export
numbers in 2023
were similar in
number to 2022.
2016
2017
2018
2019
2020
2021
2022
2023 (f) 2024 (f) 2025 (f)
d) Australian sheep exports to the Middle East
Similar to FY2021 and FY2022, Wellard did not conduct any voyages of Australian sheep to the Middle East in FY2023.
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 FY2024.
A total of 620,55812 sheep were exported by sea from Australia to the Middle East in FY2023, an increase on the
464,664 sheep shipped in FY2022 and 570,614 sheep shipped in FY2021, but a decrease on the 947,984 sheep
shipped in FY2020.
The increase was driven by a fall in sheep prices and increase in availability as processors struggled to absorb
increased numbers (a product of labour shortage issues and full customer freezers).
MLA’s June 2023 Sheep Projections predicted little change in export numbers to the Middle East in the next two years,
with an extra 1-2 shipments a year the extent of the increase.
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.
As noted in our ASX announcement on 11 May 2023, although our Company is no longer an active participant in the
live sheep trade, Wellard has always opposed the Federal Labor Government’s policy to close the valuable live sheep
export trade. This issue is discussed further, below, under “Regulation”.
12 https://www.agriculture.gov.au/export/controlled-goods/live-animals/live-animal-export-statistics/livestock-exports-by-market
18 | WELLARD ANNUAL REPORT 2023
OPERATIONS REPORT
The live export sector has proven that it can export sheep in a manner that meets mandated welfare standards and
community expectations, while providing a valuable export market for sheep farmers. Whilst the responsible Federal
minister has given public reassurances that the closure of the live sheep export trade does not endanger the live cattle
export industry, Wellard’s position remains that the phase out of the live sheep export trade is misconceived, and that
this important industry can be managed extremely safely and with high animal welfare outcomes.
Elsewhere, MLA is reporting a number of positive developments for trade from Australia to the Middle East in the form
of reduced supply from the Horn of Africa due to drought and higher prices for European sheep. These issues,
combined with a falling sheep price, may see Australian sheep regain some of their price and supply competitiveness
in the Middle Eastern markets.
e) Impact of COVID-19 on the outlook
Wellard does not expect any deviation to either its current operating costs or demand for live cattle and sheep exports
to occur in FY2024 due to COVID-19. COVID-19 impacts have largely receded, as discussed separately above.
Regulation
Continuing its excellent record of safe delivery of livestock for our customers, Wellard had no reportable mortality
incidents in FY2023.
Wellard does however remain concerned the cost of Government regulation is placing added financial stress on its
customers.
Although live exports of sheep and cattle combined are close to historical lows, there does not appear to have been a
commensurate reduction in the number of Departmental staff monitoring the trades.
Therefore, the regulatory cost per animal has increased.
The Australian Federal Department of Agriculture, Water and Environment (DAWE or DAFF13) undertook a number of
reviews and consultations throughout FY2023 which either impacted or have the potential to impact Wellard’s
operations, or those of its clients.
1. Phase out of live sheep exports by sea
As noted above, Wellard has not participated in this trade for some time, but is opposed to the banning of the trade.
Noting that view, if the trade is going to be phased out, Wellard is of the view that the industry must be given sufficient
time to plan and implement an orderly transition, and a 10-15 year phase out.
In its detailed submission on this matter to the Federal Government’s panel on the proposed live sheep export phase-
out.14, Wellard also noted that the Government must take full legal responsibility for the direct and indirect
consequences of the ban, which Wellard believes has been made out of political expediency, and is not based on
sound economic analysis, or a thorough examination of the science around obtainable animal welfare outcomes.
In particular, the Government must, concurrently to the consideration of any phase out, also thoroughly consider the
alternative, which preserves the industry, and improves the regulations around animal welfare and the requirements
of live export vessels (including the removal of sub-standard vessels from the market).
There is no good evidence that the proposed Australian ban will encourage or force our existing live-sheep customers
to instead import boxed, processed sheep meat. Instead they will turn to alternative suppliers of live sheep from
countries with lower animal welfare and shipping standards.
The proposed ban will effectively end an important financial, cultural and historical practice which has sustained
generations of WA sheep producers. In turn, we predict that it will further degrade the strength and viability of our
regional and rural communities, further hollow-out regional economies, and potentially force industry participants from
their homes and farms.
It will also mean greater reliance on grain for traditional ‘mixed’ farmers and expose them to greater seasonal and
price risk of a single commodity production than if they continued with mixed farming enterprises.
13 The relevant department has now changed its name to the Department of Agriculture, Fisheries and Forestry, or “DAFF” following the
change in Australian Federal Government in May 2022.
14 https://www.agriculture.gov.au/biosecurity-trade/export/controlled-goods/live-animals/livestock/live-sheep-exports-phase-out#daff-page-
main
19 | WELLARD ANNUAL REPORT 2023
OPERATIONS REPORT
Assuming an eventual ban, all supply chain participants must be compensated by the Government individually and
fully for the diminution in their business value, and for any and all future opportunity cost losses which can be modelled.
The proposed ban is not based on science or economics, but instead, on politics.
In such a case, there must be fulsome and individually tailored compensation for the compulsory obligation to close
some or all of a participant’s business.
Compensation must not be delayed or denied. Compensation must take into account the overall effect of the ban on
a business, not just the immediate forfeiture of a revenue stream. Whilst the ban may only effect one part of a business,
the stresses and impacts on the overall viability and longevity of the whole enterprise must be compensated for.
2. Australian Standards for the Export of Livestock (ASEL) 2023 update
ASEL sets out the minimum animal health and welfare conditions for export. It manages risk throughout all stages of
the supply chain. ASEL standards are regulated by the Australian Federal Department of Agriculture, Fisheries and
Forestry (DAFF). These standards are under regular review and update, in a process which includes consultation with
industry.
Proposed changes by DAFF, and currently subject to comment by industry, focus on a number of areas including
accredited veterinarians and stockperson/s, definition of near and far markets, escaped livestock, horned cattle,
laboratory tests, rejection criteria and reserve fodder requirements.
Most, if not all the changes, relate to how exporters manage their livestock pre-export and during the voyage, rather
than impacting Wellard’s operations.
3. Inspector-General of Animal Welfare and Live Animal Exports
As currently established, the Inspector-General of Live Animal Exports (IGLAE) independently reviews the
performance of functions and exercise of powers by the Federal Department of Agriculture, Fisheries and Forestry in
regulating livestock exports under the Export Control Act 2020 and the Export Control (Animals) Rules 2021.
The IGLAE monitors the trade, conducts inquiries and makes recommendations to improve the operations of the
trade. The Government has announced that it intends to expand the role to strengthen animal welfare assurance in
the export of livestock, through additional animal welfare related objectives, following the passage of relevant
legislation. The expanded role will be re-named as the Inspector General of Animal Welfare and Live Animal Exports
(IGAWLAE).
Fire hose testing by crew on M/V Ocean Drover V209, Sao Sebastiao, Brazil, August 2023
20 | WELLARD ANNUAL REPORT 2023
DIRECTORS’ REPORT
PICTURE
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 2023 (FY2023) and the independent auditor’s report thereon.
DIRECTORS’ REPORT
DIRECTORS
John Klepec
Executive Chairman
B.Comm
John Stevenson
Non-Executive Director
FCA, GAICD, FGIA,
BBus.
Philip Clausius
Non-Executive Director
BA (Hons) Business
Administration
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 since March 2021.
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 any commercial
position.
Mr Klepec is a Non-Independent Director.
John Stevenson has extensive experience as an executive in publicly listed organisations as well
as large family and private equity businesses in Australia and Asia.
John’s expertise in the agribusiness and livestock sectors includes having previously been the
Chief Executive Officer of Namoi Cotton Limited (ASX: NAM) until 30 June 2023, and the Chief
Financial Officer of Wellard Limited (ASX: WLD) and Consolidated Pastoral Company.
John is a Fellow of the Chartered Accountants of Australia and New Zealand, a Fellow of the
Governance Institute of Australia, and a graduate of the Australian Institute of Company Directors.
Mr Stevenson is an Independent Director.
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 being a Non-Executive Director of Wellard, Philip is the Chairman of the Singapore War
Risks Mutual and a Director of the Bengal Tiger Line. He served as Director and CEO of Nasdaq
OMX Copenhagen listed Nordic Shipholding until 1 January 2023 and was a Director of the
Standard Club and Standard Asia until 20 February 2023.
Philip graduated from the European Business School, Germany in 1992 with the “Diplom-
Betriebswirt” (Business Administration) degree and completed the Advanced Management
Programme by INSEAD in July 2023.
Mr Clausius is an Independent Director.
22 | WELLARD ANNUAL REPORT 2023
DIRECTORS’ REPORT
Kanda Lu possesses considerable expertise in commerce and financial institutions. His recent
position was Vice President for Morgan Stanley China GCM. Kanda Lu currently runs his own
boutique asset management firm in Hangzhou China.
In addition to his Executive Director role, Kanda is responsible for the development and growth of
Wellard’s entry into the Chinese market and other business initiatives.
Mr Lu is a Non-Independent Director.
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.
23 | WELLARD ANNUAL REPORT 2023
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 and holds export licences to trade and ship live cattle and sheep on its own account.
LIVESTOCK LOGISTICS SERVICES:
Wellard’s predominant activity in FY2023 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 continues to place reduced 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, Turkiye and North Asia), utilising its own and third-party vessels.
OPERATIONS AND FINANCIAL REVIEW:
Full details of Wellard’s operations can be found in the Operations Report commencing on page 9. Both Operations Report
commencing on page 9 and Financial Review commencing on page 25, form a part of this Directors’ Report.
24 | WELLARD ANNUAL REPORT 2023
PICTURE
FINANCIAL REVIEW
FINANCIAL REVIEW
A summary of the financial results and key financial items are set out below. All amounts in this Financial Review are
presented in US$ unless stated otherwise.
FINANCIAL RESULTS AND KEY FINANCIAL ITEMS FROM CONTINUING OPERATIONS:
FINANCIAL REVIEW
FOR THE YEARS ENDED 30 JUNE (US$ thousand)
2023
2022
Movement
Revenue
Cost of Sales
Gross (loss)/profit
Other income1
General and Administrative expenses
Restructuring costs
Other losses from chartering and trading activities
EBITDA2
Other gains/(losses) from other activities
Depreciation and amortisation expenses
EBIT
Net finance costs
Income tax expense
(Loss)/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
Loans and borrowings
Negative net debt4
Debt to capital ratio5
Ship loan to asset book value ratio
38,655
(38,930)
(275)
-
(3,850)
-
(306)
(4,431)
112
(10,578)
(14,897)
(222)
(368)
(15,487)
(0.7)
(11.5)
(40.1)
(20.0)
3,195
1.4
37,017
7.0
2,588
(4,832)
6.4%
0%
45,048
(30,760)
14,288
12,023
(4,643)
(23)
(3)
21,642
(394)
(10,532)
10,716
(771)
(12)
9,933
31.8
48.0
22.0
28.1
11,660
2.2
52,364
9.9
7,738
(7,541)
12.6%
13.6%
%
%
%
Times
$’000
Times
$’000
Cps
$’000
$’000
%
%
(14.2%)
26.5%
(101.9%)
(100.0%)
(17.1%)
(100.0%)
10100.0%
(120.5%)
(128.5%)
0.4%
(239.0%)
(71.2%)
2966.7%
(255.9%)
(102.2%)
(124.0%)
(282.3%)
(171.2%)
(72.6%)
(36.4%)
(29.3%)
(29.3%)
(66.6%)
(35.9%)
(49.2%)
(100.0%)
1 Other income refers to the arbitration award obtained in London against the Croatian Bank for Reconstruction and Development (Hrvatska banka za
obnovu i razvitak, or “HBOR”).
2 EBITDA equals (loss)/profit 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. A negative net debt indicates that the cash and cash equivalents exceed the
entire debt balance.
5 Debt to capital ratio equals loans and borrowings divided by total equity plus loans and borrowings.
26 | WELLARD ANNUAL REPORT 2023
FINANCIAL REVIEW
OVERVIEW
For the financial year ended 30 June 2023 ("FY2023"), Wellard is reporting a net loss after tax of US$15.5 million
(FY2022: profit after tax of US$9.9 million) amid extremely difficult market conditions. These include Australia's tight
cattle supply, high prices that remained above the 5 and 10-year averages for the whole calendar year 2022
(“CY2022”), and the unprecedented simultaneous and significant outbreaks of foot-and-mouth disease (“FMD”) and
lumpy skin disease (“LSD”) in Indonesia, which have significantly impacted Indonesian importers. Moreover, significant
global economic and geopolitical challenges, such as rising global inflation (from 4.7% in CY2021 to 8.7% in
CY202215), the ongoing Russo-Ukrainian conflict and the COVID-19 pandemic, had profound effects on energy prices
and impacted consumer confidence in Wellard’s export markets.
The result includes a non-cash depreciation and amortisation expense of US$10.6 million (FY2022: US$10.5 million),
primarily relating to the depreciation of two of the Group’s vessels (M/V Ocean Ute and M/V Ocean Drover) and
including the amortisation of right-of-use assets (including the M/V Ocean Swagman) amounting to US$2.8 million
(FY2022: US$2.6 million) arising from the application of AASB16 ‘Leases’ from 1 July 2019.
In addition to the already mentioned challenging market conditions, other factors that impacted Wellard’s FY2023
results include:
• US$3.4 million in repairs and ancillary costs, as well as 87.5 days off-hire, for the M/V Ocean Swagman's
engine breakdown in February 2023. Although insurance claims for repair and loss of hire (excluding
deductibles) were submitted to the insurers, they were not yet recognised in the FY2023 income statement
pending the determination of the final amount;
the derecognition of US$1.9 million previously capitalised costs for the M/V Ocean Swagman's intermediate
mandatory survey, now expensed in the income statement in FY2023, due to the short-term nature of the
vessel’s time charter renewal in June 2023;
35 days off-hire of the M/V Ocean Ute while she underwent a mandatory dry-dock for her special survey class
renewal;
•
•
•
• US$0.7 million in COVID-19 related costs, which continued to disrupt global shipping operations in FY2023
with restrictions on crew changes and personnel movement. These were progressively relaxed as FY2023
progressed;
the global headline inflation rate, reported by the International Monetary Fund, reached 8.7% in CY2022 and
is projected to stay slightly below 7.0% in the calendar year 2023 (“CY2023”). This inflationary environment
had a substantial impact on shipping costs, particularly crew costs, spare parts, and fleet servicing expenses,
with Wellard’s fleet operating expenses (“OPEX”) in FY2023 experienced an increase of US$1.8 million on a
year-on-year basis;
• marine fuel costs (bunker), which during the first half of FY2023 exceeded US$1,000 per metric tonne (“mt”)
in Singapore and US$1,500/mt in Australia. This made it challenging for Wellard to entirely pass on the
additional costs to customers, as it would have rendered their business and/or supply agreements unviable.
Finally, Wellard has strategically chosen to reposition the M/V Ocean Drover and the M/V Ocean Swagman to cater
to the growing South America to Turkiye trade. These vessels have already been booked for multiple voyages, which
is expected to yield favourable outcomes in the upcoming financial year. However, it is important to acknowledge that
this repositioning has had timing implications for FY2023, primarily in the form of additional costs and time lost during
the extensive ballast passages to the respective loading ports that will be recovered from revenue earned in FY2024.
REVENUE AND OPERATING PERFORMANCE
Revenue declined 14.2% to US$38.7 million (FY2022: US$45.0 million), with income from chartering activities
accounting for 99.9% of the Group’s revenue (FY2022: 99.8%) and with the shipping capacity fully absorbed by
external chartering activities. This decrease was caused by lower fleet activity due to Wellard's exposure to the spot
market and reduced commercial availability of the vessels following an increase in technical off-hire days. The
percentage of technical off-hire days in FY2023 (12.3% or 135.1 days) was nearly double compared to FY2022 (6.3%
or 69.3 days) and included 41.9 days for the M/V Ocean Ute while it underwent a mandatory dry-dock for her special
survey class renewal and 87.5 days for the M/V Ocean Swagman that stopped in Singapore to repair her starboard
side engine and complete the intermediate survey class renewal. Chartering activity represents the entirety of the
Group's operating revenue in FY2023, as it did the previous year; thus, no segment reporting is provided in this section
of the Annual Report.
15 https://www.imf.org/en/Publications/WEO/Issues/2022/10/11/world-economic-outlook-october-2022;
https://www.imf.org/en/Publications/WEO/Issues/2023/07/10/world-economic-outlook-update-july-2023
27 | WELLARD ANNUAL REPORT 2023
FINANCIAL REVIEW
Gross Profit registered a negative US$0.3 million result (FY2022: positive US$14.3 million), mainly driven by the
previously mentioned decrease in revenue and by a 26.5% increase in the costs of sales to US$38.9 million (FY2022:
US$30.8 million) heavily burdened by US$3.4 million repairs to the M/V Ocean Swagman engine and by a dramatic
increase in both variable costs (bunker and port expenses) and vessels’ OPEX.
Variable costs: In FY2023, despite a decrease in chartering activity, overall bunker costs increased by 15.6% to
US$19.3 million (FY2022: US$16.7 million), resulting in a record-high 49.9% incidence on revenue (FY2022: 37.9%).
The consumption of Very Low Sulphur Fuel Oil (“VLSFO”), the main fuel used since the IMO 2020 regulation went into
effect in January 2020, decreased by 4.4% year-over-year, primarily due to lower consumption of the M/V Ocean
Swagman during the three-month stop, but the average price per metric tonne ("mt") consumed in FY2023 recorded
a 17.7% increase. Similarly, Marine Diesel Oil consumption decreased by 10.8% while its average price per metric
tonne increased by 25.1%.
Throughout FY2023, marine fuel prices started to decline in line with the drop in crude oil prices. Singapore VLSFO
prices, began FY2023 at approximately US$1,100/mt, and decreased to just below US$600/mt by the end of June
2023. However, prices remain high by historical standards. It is important to note that the dynamic of bunker prices is
affected by other variables, such as trading patterns, vessel consumption, and inventory measurement methods. In
FY2023, despite prices in Singapore and China falling below US$700/mt in the second half of the financial year, prices
in Indonesia and Australia remained above US$900/mt for most of the year, with peaks exceeding US$1,200/mt.
Similarly, port costs experienced a notable 18.4% surge, reaching US$2.3 million in the current financial year (FY2022:
US$1.9 million) despite declining charter activity levels.
Vessels’ operating expenses (OPEX) – mainly consisting of crew wages, insurance, repair and maintenance costs,
and other operating expenses – increased by US$1.8 million or 15.4% to US$ 13.6 million (FY2022: US$11.8 million).
Most of the ordinary increase was attributed to crew costs, which were pushed up by general economic factors such
as inflation and were still impacted by COVID-19 extraordinary costs for changes and personnel movement due to
travel restrictions, quarantine measures, and air ticket increases.
In addition, FY2023 was burdened by US$3.4 million incurred for repairs and ancillary expenses resulting from the
engine breakdown on the M/V Ocean Swagman in February 2023. This incident significantly impacted the Company's
overall profitability due to the repair costs incurred and loss of income from the vessel during the nearly three-month
off-hire period. The vessel successfully returned to normal operating capability in the final quarter of FY2023. The
Company expects to receive insurance reimbursement for a significant portion of the repair cost and the loss of hire,
however the final amounts have not been determined and cannot be included in the Company’s FY2023 income
statement.
Figure 6: Track record
Revenue Cost of Sales
Gross Profit
General and administrative expenses recorded a 17.1% decrease to US$3.8 million (FY2022: US$4.6 million),
demonstrating the Group's constant effort in lowering its cost structure. These expenses primarily relate to personnel
and office costs, consultancies, travel, and other miscellaneous costs.
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 – recorded a negative result of US$4.4 million as a consequence of the negative operating
performance. The result is a 120% decrease from the US$21.6 million positive EBITDA recorded in FY2022, noting
FY2022 was influenced positively by the receipt of US$12.0 million from successful arbitration proceedings in London
against the Croatian Bank for Reconstruction and Development (Hrvatska banka za obnovu i razvitak, or HBOR) for
the M/V Ocean Kelpie.
28 | WELLARD ANNUAL REPORT 2023
Figure 7: Track record
General and Administrative Expenses
EBITDA
Operating Profit Margin
FINANCIAL REVIEW
EARNINGS PERFORMANCE
Depreciation and amortisation expenses marginally increased by 0.4% to US$10.6 million (FY2022: US$10.5
million) and include the derecognition of US$1.9 million costs for the M/V Ocean Swagman's intermediate mandatory
survey, previously capitalised under AASB 16 and expensed in the income statement in FY2023, due to the short-term
nature of the vessel’s time charter renewal in June 2023. These expenses include the depreciation of right-of-use
assets totalling US$2.8 million (FY2022: US$2.6 million) as a result of the application of AASB16 'Leases' beginning
on 1 July 2019. In FY2023, during the annual evaluation of the fleet's useful life, Management decided to extend the
expected useful life of new purpose-built livestock vessels from 25 to 30 years. The decision relied on surveys and
technical inspections conducted during Wellard's decades-long experience in livestock vessel management, as well
as the Company's ongoing investments in the vessels' care and maintenance, which indicated that the expected
physical wear and tear over the five-year extension would not compromise the assets' capacity to operate safely and
profitably. At the same time, Management believes that it is reasonable to anticipate that no technical or commercial
obsolescence resulting from changes or improvements in technological advancements, regulatory requirements, or
industry trends will impair Wellard's fleet's expected capacity to operate safely and economically over a 30-year useful
life. Currently, the change will only affect the expected useful life of the M/V Ocean Drover with a reduced yearly
depreciation of US$1.5 million.
Net finance costs were reduced by a further 71.2% in the current financial year, to US$0.2 million (FY2022: US$0.8
million), mainly due to the full repayments of the ships loans. Net finance costs included the interest expense of right-
of-use assets amounting to US$0.1 million (FY2022: US$0.4 million) for the application of AASB16 ‘Leases’ from 1
July 2019.
(Loss)/profit from continuing operations after tax reported in this financial year represents a setback after two
consecutive years of upward trends. Despite Wellard's unwavering efforts, we report a loss from continuing operations
after tax of US$15.5 million in FY2023 (FY2022: profit of US$9.9 million) as a result of the previously mentioned array of
exceptional events and challenges in the global economic landscape, including unforeseen industry disruptions and
geopolitical uncertainties. It is worth once again mentioning that the result includes US$3.4 million in repair costs for the
M/V Ocean Swagman engine breakdown but excludes any expected proceeds that should derive from the insurance
claims for the repair and loss of hire (excluding deductibles) that have been submitted to the insurer pending their final
amount determination.
Figure 8: Track record
Depreciation
Net Finance Costs
Loss/(profit) from Continuing Operations
29 | WELLARD ANNUAL REPORT 2023
FINANCIAL REVIEW
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 vessels’ lifetime. It is worth noting that, as announced to the ASX, Wellard completed the
repurchase of the M/V Ocean Ute, which Ruchira Ships Limited previously owned under a sale-and-leaseback
arrangement on 19 August 2022. Furthermore, on 8 July 2022, Wellard paid all remaining balances (US$1.9 million)
to Ruchira under M/V Ocean Drover's sale-and-leaseback arrangement, which means there will be no further
payments to Ruchira between now and the M/V Ocean Drover's title transfer date, which remains scheduled for 1
September 2023.
Capital expenditure – with the exclusion of additions due to the application of AASB16 ‘Leases’ – was US$3.2 million
(FY2022: US$1.5 million), most of which related to drydock costs for the M/V Ocean Swagman (US$1.3 million) and
the M/V Ocean Ute (US$ 1.9 million). However, a total amount of US$1.9 million related to the capitalisation of the
M/V Ocean Swagman's intermediate mandatory survey was derecognised and accounted in the income statement in
FY2023 due to the short-term nature of the vessel’s time charter renewal in June 2023.
Negative Net Debt decreased by US$2.7 million or 35.9% as a result of a US$5.1 million decrease in loans and
borrowings and a decrease of US$7.9 million in cash and cash equivalent to US$7.4 million as of 30 June 2023 (30
June 2022: US$15.3 million).
As a result, the Company has a "negative net debt" – hence, cash available for the Company – of US$4.8 million (30
June 2022: US$7.5 million) and US$3.2 million working capital as of 30 June 2023 (30 June 2022: US$11.7 million).
The continued focus on capital efficiency further reduced Group debt levels as a proportion of funding. As of 30 June
2023, total debt represented 6.4% of the Group’s funding (30 June 2022: 12.6%), while the Group has successfully
repaid all ship debt, which accounted for 13.6% of the Group's shipping assets as of 30 June 2022. This outstanding
achievement reflects the Group's commitment to sound financial management and positions it well for future growth
and opportunities.
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 2023, was utilised for US$2.4 million. Wellard also retains a
US$19.1 million facility with the same institution to be used for commodity swaps to hedge against bunker price swings
which was not utilised as of 30 June 2023.
Debt Position
M/V Ocean Drover borrowing
M/V Ocean Ute borrowing
M/V Ocean Swagman lease
Bunker facility
Other lease liabilities
Total Loans and borrowings
Cash and cash equivalents
Negative Net Debt
Figure 9: Track record
US$
$‘000
$‘000
$’000
$‘000
$‘000
$’000
$‘000
$‘000
2023
0
0
0
2,439
149
2,588
7,420
(4,832)
2022
1,968
879
2,656
1,964
271
7,738
15,279
(7,541)
Movement
(1,968)
(879)
(2,656)
475
(122)
(5,150)
7,859
(2,709)
Working Capital
Loans and Borrowings
Ship Loan to Asset Book Value
30 | WELLARD ANNUAL REPORT 2023
FINANCIAL REVIEW
CASH FLOWS
Cash flow from operating activities generated net cash of US$1.5 million in FY2023 (FY2022: US$17.1 million which
included US$12.0 million proceeds from arbitration proceedings). As already mentioned, the FY2023 result includes
the outflow of US$2.4 million related to the repairs and ancillary costs of the M/V Ocean Swagman engine breakdown.
Cash flow used for investing activities was US$3.7 million (FY2022: US$1.4 million), including US$2.4 million and
US$1.3 million paid during the year for dry docking costs of M/V Ocean Ute and M/V Ocean Swagman, respectively.
Cash flow from financing activities resulted in a net cash use of US$5.5 million (FY2022: US$7.2 million), primarily
due to borrowing and lease repayment.
During the current financial year, there was a US$7.7 million decrease in cash held (net of the effects of exchange
rate changes), down from the increase in cash held of US$8.6 million reported in FY2022. On 30 June 2023, the
Group’s cash and cash equivalents stood at US$7.4 million (30 June 2022: US$15.3 million).
Condensed Consolidated Statement of Cash Flows
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net (decrease)/increase in cash held
Cash at the beginning of the financial year
Effects of exchange rate changes
Cash at the end of the financial year
Free Cash Flow Statement
Net cash inflow from operating activities
Income tax paid
Net interest paid
Free cash flow
2023
US$‘000
2022
US$’000
1,535
(3,711)
(5,538)
(7,714)
15,279
(145)
7,420
17,111
(1,367)
(7,168)
8,576
6,736
(33)
15,279
2023
US$‘000
2022
US$’000
1,535
(5)
(229)
1,301
17,111
(3)
(772)
16,336
(92.0%)
Cash conversion ratio (FCF/Revenue)
3.4%
36.3%
(90.6%)
Free cash flow (“FCF”) for the year – defined as cash flow from operating activities less income taxes paid and net
interest payments – decreased by 92.0% to US$1.3 million (FY2022: US$16.3 million). However, the results of this
financial year must be interpreted in light of the lack of insurance proceeds for the M/V Ocean Swagman, pending their
final definition and that the US$12.0 million receipt from the successful arbitration award contributing the largest portion
of the cash inflow from operating activities of FY2022.
Figure 10: Free cash flow to sales (cash conversion) ratio
The cash conversion
ratio decreased
to
3.4% in the current
financial
year;
however, the results
of this financial year
must be interpreted in
light of the lack of
insurance
proceeds
for M/V the Ocean
Swagman,
pending
their final definition.
31 | WELLARD ANNUAL REPORT 2023
Alternative Performance Measures (APM)
Group Presentation Currency
FINANCIAL REVIEW
like
purposes
Certain analyses included in this annual report are
based on measures not defined in the applicable
reporting framework but regularly used by Wellard for
management
communicating
performance and decision-making. Wellard believes that
complementing IFRS measures with APM may enhance
financial communication and add value to users by
the
the Company’s performance
explaining
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.
from
EBITDA and Operating profit margin
the
income
impact of
EBITDA is defined as profit/(loss) from continuing
taxes,
operations before
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
the business’
profitability from its core operations before the impact of
capital structure, leverage, and non-cash items.
focus on
that
EBIT
is defined as profit/(loss)
EBIT
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.
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
is not
repayment of principal amounts borrowed
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.
32 | WELLARD ANNUAL REPORT 2023
The financial information included in the Group’s Annual
Report is presented in United States Dollar (“US$”), the
presentational currency of the Group, unless otherwise
specified.
Material Business Risks
The Wellard Board defines risk management as the
identification, assessment and management of risks that
have the potential to materially impact on Wellard’s
people, environment, operations, assets, reputation,
and
therefore on Wellard’s
shareholders.
financial results, and
Given the international nature of Wellard’s operations a
wide range of risk factors have the potential to impact
the Company. While Wellard attempts to mitigate and
manage risks where it is efficient and practicable to do
so, there is no guarantee these efforts will be successful.
Outlined below is an overview of the material risks facing
Wellard.
The material business risks flow from the Company’s
current circumstances; the nature of its business
activities as an international shipper of live animals; and
general risks that apply to international companies
involved in maritime transportation, cross-border trade,
and the ownership of shares in listed companies.
These risks are not set out in any particular order and do
not comprise every risk that Wellard could encounter
when conducting its business. As such, they 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. Also, the occurrence or consequences of some
of the risks are partially or completely outside the control
of Wellard, its Directors and Management. Rather, they
are the most significant risks that, in the opinion of the
Board, should be considered and monitored by both
existing shareholders and potential shareholders in the
Company.
Each of the risks referred to could, in isolation or in
combination, if they eventuate, have a material adverse
impact on Wellard’s business, results of operations,
financial condition, financial performance, prospects and
share price. The risks described here are based on an
assessment of a combination of the probability of the risk
occurring and the impact/consequence 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.
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 or on 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.
Supply, Demand & Market Risks
Wellard operates in often volatile spot markets which
can involve rapid market demand changes and declines
leading to lower demand for specialised livestock
vessels. There is a risk of alternative protein markets
developing, and of key markets deciding to become
more self-sufficient.
Wellard monitors supply and demand markets to
understand, measure and manage freight market risk.
The Company can redeploy ships to alternative markets.
Wellard maintains its fleet at high standards to retain
AMSA licensing and gain competitive advantage on
voyage outcomes.
Vessel Breakdown or Damage Risk
The operation of ocean-going vessels 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 (PMS),
through the engagement of our fleet technical manager
Welltech Marine Pte. Ltd. (Welltech), to ensure safe and
reliable vessel operations, and asset protection.
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 regulations and Port State Control or
loss of its Class Certificate, causing animal welfare
issues, 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 PMS. Welltech is operated by the
Singapore-based
ship
professional
management company Ishima Pte. Ltd.
technical
Bunker Price Risk
Fuel is a material operating cost, and the Group is
exposed to bunker price fluctuations through its shipping
fuel are
operations. The price and supply of
unpredictable and fluctuate based on events outside
33 | WELLARD ANNUAL REPORT 2023
FINANCIAL REVIEW
Wellard’s control, including geopolitical developments,
supply and demand for oil and gas, actions by
organisations such as OPEC and other oil and gas
producers, war and unrest in oil-producing countries and
regions, regional production and consumption 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 may hedge its bunker
price risk by implementing financial and physical hedges
for the cost of fuel directly related to its ships’ operations.
However, on occasions Wellard maybe to absorb the
cost of increased bunkers into its operating margins.
Customer and Commodity Price 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 by 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
international markets, which
continue to be volatile. Should customers not be able to
secure livestock at a price which allows for profitable
international sale, Wellard bears the risk of lower charter
rates, or of no or fewer charter bookings.
in
Social, Political and Regulatory Risk
Animal welfare activism and public reports regarding the
poor treatment of animals and high-stress/mortality
events continue to place increased focus on the live
export industry in which Wellard operates. 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. In addition,
negative perceptions of the live export trade could
impact the attitude of banks, insurers and investors.
Animal rights activists have increasingly engaged in
aggressive lobbying and litigation to attempt to prevent
or impede livestock export, including taking action
against Australian Federal and State regulators. In
Australia, the Federal Government continues to pursue
a policy of closing the live sheep export trade in coming
years. At present, the Australian Federal Government
has assured the live cattle industry that it is not under
similar threat. Wellard minimises these risks in Australia
by remining compliant with all regulations required to
export livestock, including the Australian regulations
prohibiting sheep exports to the Gulf states during the
northern summer, however animal rights activism
continues in areas in which the Company is active.
in delaying,
Where such activism
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. In April 2023, New Zealand
closed its livestock export market entirely, and Wellard’s
ships were redeployed to other markets.
is successful
At an operational level, if the Company was to fail to
meet certain requirements with respect to animal welfare
or shipping performance standards, its vessels may be
subject to a range of regulatory responses which remove
or compromise its ability to operate efficiently.
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
in respect of
transactions denominated in currencies other than
United States Dollars.
to currency risk
in order
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,
to attenuate
exchange rate oscillations.
Vessel Financier Risk
The M/V Ocean Drover is operated by the Company
under a long-term bareboat charter agreement (BBC),
which runs until 30 June 2032 and allows Wellard full
access to offer the M/V Ocean Drover to customers for
the transport of livestock. The BBC is part of a standard
hire-purchase style financing arrangement with Ruchira
Ships Limited (Ruchira), and includes a Memorandum of
Agreement (MoA) in which Ruchira is legally obliged to
redeliver the vessel to Wellard on 1 September 2023.
Ruchira has included the M/V Ocean Drover in a
package of secured assets under its own arrangements
with its lending bank, United Overseas Bank Limited
(UOB). UOB has placed two registered mortgages on
the M/V Ocean Drover, which must be discharged or
compromised or lifted by court order before the Vessel
can be delivered to Wellard by Ruchira in accordance
with its legal obligations under the MoA.
There is a risk that Ruchira cannot satisfy UOB
sufficiently to clear the mortgages on the M/V Ocean
Drover. In such circumstances, the redelivery of full
34 | WELLARD ANNUAL REPORT 2023
FINANCIAL REVIEW
legal title to the M/V Ocean Drover to Wellard will be
delayed or potentially prevented. Wellard does not have
full visibility of the debt position between Ruchira and its
bank. Should Ruchira become insolvent, or any party
seek to appoint liquidators to Ruchira, it is possible that
liquidators may challenge the continuation of Wellard’s
BBC and/or MoA.
Wellard has mitigated this position so far by (i) putting
the long-term BBC in place, and preserving Wellard’s
legal right to operate the vessel until 2032 at effectively
no additional cost; and (ii) allowing Ruchira more time to
conduct asset sales and otherwise deal with UOB in a
manner which discharges the Drover mortgages and
redeliver legal title of the vessel to Wellard.
The consequences of not receiving full legal title to the
vessel include that the Company cannot refinance or
offer the vessel for sale.
Trade, Cattle Diseases and Biosecurity Risk
Wellard’s operations rely on the ability to transport cattle
from one country to another. Each destination country
has specific sanitary and phytosanitary protocols under
which trade in animals is conducted, on either a global
or country-by-country basis.
Disease outbreaks in a supply country can cause a
customer country to impose quarantine-based trade
barriers on that country, either restricting or preventing
trade in livestock between the two countries in totality or
until various mitigation or prevention measures are
agreed.
Trade disputes can occur between trading nations which
prevent or restrict trade of goods including livestock
between two countries. Countries may open and close
their borders to livestock imports, or place restrictions on
the volume of imports through the imposition of quotas,
for various domestic reasons. This can impact the level
of shipping activity to that destination.
Australian livestock exports have always benefited from
the nation’s high biosecurity standards. However there
is an increasing risk posed by the spread of Lumpy Skin
Disease (LSD) and Foot and Mouth Disease (FMD)
throughout Australia’s northern neighbours. LSD and
FMD have been detected in cattle in Indonesia, and
recently, in July 2023, there have been reports that
Australian cattle imported into Indonesia have tested
positive for LSD. Australia’s Chief Veterinary Officer has
issued a statement that LSD has never been detected in
Australia, and that the country remains free of the
disease.
In response to the detection of LSD in Australian cattle
after importation to Indonesia, there has been a rigorous
local testing regime commenced, and Australia’s well
planned biosecurity response has been activated.
is
in Australia
The risk if such diseases are detected or become
endemic
the market will be
constrained or, at worst, closed for a period of time, and
that the country’s export protocols with importing nations
which depend on Australia being disease free will be
invalidated and need to be re-negotiated.
that
Wellard’s principal mitigation for these trade and disease
risks is to deploy its vessels into other supply and
demand markets. Although the Company may focus its
activity on a particular trading route at a particular point
in time, it has a policy of continuous assessment of
alternative routes. At the time of writing, Wellard’s major
markets are in South America to Turkiye, not due to
biosecurity
to economic drivers.
However the closure of any market due to disease would
mean that Wellard has fewer opportunities to turn to
alternative markets.
issues, but due
Credit Risk
The Company’s operations generally involve charter
shipments for third parties to transport livestock over
these
long distances. The
arrangements involves a low number of contracts with a
high dollar value. There is a risk therefore that if a
counterparty
its
contractual obligations, a material financial loss to the
Company may result.
to such a contract defaults on
inherent nature of
the credit risk,
financial vetting
To minimise
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 worldwide 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 caused considerable logistical
impediments and delays. Ports operated 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. To a large extent, these issues are greatly
diminished at the end of FY2023.
A further outbreak of the COVID-19 virus, new variants,
or similar pandemics could pose an economic risk to
Wellard’s operations and its trade volumes.
There remains an ongoing possibility that COVID-19 or
another similar variant or virus will arise and have an
impact on international demand and the free flow of
products. Should such virus impacts 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.
The Company undertakes specific measures to ensure
the health and safety of its ship’s crews and employees
globally, and along with all other participants in global
35 | WELLARD ANNUAL REPORT 2023
FINANCIAL REVIEW
trade, monitors the particular requirements of the market
destinations it services.
Climate Change Risk
The Group is exposed to various risks which arise under
the general heading of climate change risk.
At present, there is an increasing focus by governments,
regulators and industry on laws and regulations based
on climate change and greenhouse gas emission
reductions, which will impact both the shipping and
livestock industries.
International Maritime Organization (IMO)
The
is
seeking to reduce CO2 emissions per transport work, as
an average across international shipping, by at least
40% by 2030, compared to 2008.
Measures the IMO has raised to achieve this goal
include:
•
a technical element, namely a goal-based marine
fuel standard regulating the phased reduction of the
marine fuel's greenhouse gases (GHG) intensity;
and
an economic element, on the basis of a maritime
GHG emissions pricing mechanism.
•
As a way of mitigating against the impact of planned
changes to regulations which penalise greenhouse gas
emissions in shipping, Wellard commenced a feasibility
study for a fleet renewal project 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. At the time of writing,
that major project is paused, pending changes to vessel
affordability, however the Company continues to monitor
all essential elements, such as international alternative
fuel availability and the evolution in the design of greener
marine propulsion systems. 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
the
appropriate, evidence-based standards required to
manage and minimise such emissions. Wellard’s ships
utilise lower sulphur-content bunker fuels, and on-board
systems are being assessed for replacement by cleaner
solutions as these are developed.
to meet
Climate change also presents
to various
participants in the Wellard supply chain, which may
impact supply, demand and the continued ability to
operate.
risks
Guidance and Outlook
Wellard may provide forecasts and predictions about its
business outlook or future performance (“Guidance”) on
the basis of various assumptions which may
subsequently prove to be incorrect. Guidance is not a
guarantee of future performance, and is subject to
known and unknown risks, many of which are beyond
the control of Wellard.
FINANCIAL REVIEW
and supply related logistics disruption. The rate of these
price increases can be material and if Wellard does not
recover price inflation from its clients, there is a risk of
negative impact on Wellard’s financial performance.
Cyber Security Risk
Cyber attacks, information misuse and release of
sensitive information pose ongoing and real risks to
Wellard’s on-shore and vessel systems. Cyber breaches
have the potential to cause disruptions to operations and
there is a risk of liability for misuse or unauthorised
disclosure of sensitive information. To address these
risks, Wellard has implemented resilient information
technology systems equipped with suitable detection
and protective measures. Additionally, the Company has
obtained insurance coverage to safeguard against
potential cyber incidents. The implementation of ongoing
training and frequent evaluation of management and
staff serves to enhance the Company's ability to
withstand potential cyber security breaches, thereby
fortifying the business’ overall security stance.
Wellard’s actual results may differ materially from its
Guidance and the assumptions on which any Guidance
is based.
Key Personnel Risk
Wellard’s growth and profitability may be limited by loss
of key management and operating personnel, inability to
recruit and retain skilled and experienced employees or
by increases in compensation costs.
increased
Current economic conditions reflect an
demand
for quality people resources, creating a
tightening labour market and upward pressures to
secure skilled leaders, professionals and personnel.
Price Inflation
Wellard procures goods and services that are critical to
business operations from a range of suppliers. Cost
increases, or price inflation, can occur in respect of
goods and services over a certain time period for a range
of reasons
including strong demand and supply
shortages, the cost of inputs to the production process
increasing (including labour related wages and salaries),
DIRECTORS’ MEETINGS
The following table sets out the number of Directors’ meetings (including meetings of Board committees) held during
the year ended 30 June 2023, 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 Stevenson
10
10
10
10
10
10
9
10
2
2
-
2
2
2
-
2
2
2
-
2
2
2
-
2
-
-
-
-
-
-
-
-
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
2023
2022
437,500
437,500
-
-
-
-
-
-
Notes:
1. These shares are held by Rezone Pty Ltd as Trustee
for the Kakulas-Klepec Superannuation Fund. Mr
Klepec has a voting power of greater than 20% in this
company and is a beneficiary of this superannuation
fund.
36 | WELLARD ANNUAL REPORT 2023
FINANCIAL REVIEW
INDEMNITIES AND INSURANCE
Rule 18.1 of the Wellard Constitution requires Wellard to indemnify each Director and Officer on a full indemnity
basis and to the extent permitted by law against liability incurred by them in their capacity as an officer of any
member company of the Wellard Group. The Directors, Company Secretary and Officers of the Company have the
benefit of this indemnity (as do any individuals who may have formerly held one of those positions).
As permitted by Wellard’s Constitution, the Company has entered into deeds of indemnity, access and insurance
with each Director, Company Secretary and Officer. Wellard has also insured against amounts that the Company
may be liable to pay to Directors, Company Secretaries and certain employees or that Wellard otherwise agrees
to pay by way of indemnity. Wellard’s insurance policy also insures Directors, Company Secretaries and relevant
employees against certain liabilities (including legal costs) they may incur in carrying out their duties. The Directors
of the Company are satisfied the terms of these insurances and agreements are standard for their type.
No indemnity payment has been made under any of the documents referred to above during the financial year.
DIVIDENDS
The Company does not intend to pay any dividends in respect of the year ended 30 June 2023 (2022: Nil).
EQUITY ISSUES DURING THE YEAR
At 30 June 2023, the Company had authorised share capital totalling 531,250,312 ordinary shares issued and
paid.
EVENTS OCCURRING AFTER REPORTING PERIOD END
Other than matters after 30 June 2023 disclosed in the Operations Report, there are no other significant events
which have occurred after reporting period end. 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
maritime environmental 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.
37 | WELLARD ANNUAL REPORT 2023
FINANCIAL REVIEW
NON-AUDIT SERVICES
The Auditor’s independence declaration has been included on page 48.
Details of the non-audit services undertaken by, and amounts paid to, the Auditor, are detailed in Note 23 to the
financial statements.
The Directors have formed the view that the provision of non-audit services during the financial year ended 30
June 2023 is compatible with and does not compromise the general standard of auditor independence for the
following reasons:
(a)
the non-audit services provided do not involve reviewing or auditing the Auditor’s own work or acting in a
management or decision-making capacity for the Company; and
(b) all non-audit services were subject to the corporate governance procedures and policies adopted by the
Company and have been reviewed by the Audit and Risk Committee to ensure they do not affect the
integrity and objectivity of the Auditor.
In accordance with Section 307C of the Corporations Act, the Auditors of the Company have provided a signed
Auditor’s Independence Declaration to the Directors in relation to the year ended 30 June 2023. 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 2023. This Directors’ Declaration is included on page 47 of this
Annual Report.
On behalf of the Directors
Mr John Klepec
Executive Chairman
Mr Paolo Triglia
Group Chief Financial Officer
Dated: 28 August 2023
38 | WELLARD ANNUAL REPORT 2023
PICTURE
REMUNERATION REPORT
The following sections form the Remuneration Report for the Wellard Group for the financial year ended 30 June 2023.
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 2023.
KMP term
FY2023
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
Michael Silbert
General Counsel and Company Secretary (18 October 2016 – 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 (independent from management);
•
•
John Stevenson – Committee Member (independent from management); and
John Klepec – Committee Member (not independent from management)
40 | WELLARD ANNUAL REPORT 2023
REMUNERATION REPORT
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.
The Board continues to assess its own structure and that of its various sub-committees.
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 2023.
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
In FY2023, 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 2023. 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 FY2023 are included in 3(c) below.
In FY2023, 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
FY2023
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
Reviewed annually
No changes
Up to 50% of total fixed
remuneration, determined by
EBITDA hurdles.
Determined by share price
No changes
No changes
41 | WELLARD ANNUAL REPORT 2023
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 FY2023, KMP Mr Triglia and Mr Silbert were 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 them to earn an STI of between 20% and 50%
of their base salary. Based on the STI programme, no bonuses were earned in FY2023.
The Board also retains the ability, at its discretion, to make ad-hoc STI awards to individuals outside of any company-
wide plan. No ad-hoc awards were earned in FY2023.
Long-term incentives
No options in Wellard’s LTIP were granted to KMP’s in FY2023.
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.
2023
2022
2021
2020
2019
(Loss)/profit for the year attributable to owners of
Wellard Limited (A$’000)
Basic (loss)/earnings per share (A$ cents)
Dividend payments (A$’000)
Dividend payout ratio (%)
(22,998)
(4.33)
-
-
13,688
2.58
-
-
2,493
0.5
-
-
245
0.1
-
-
(48,443)
(8.8)
-
-
Increase / (decrease) in share price (%)
(46.2)
+21.9
+77.8
+50.0
(76.0)
(d) Key terms of KMP agreements
Remuneration (in the currency of each KMP’s contract) and other terms of employment for each of the KMP are
contained in contracts of employment or consultancy agreements as summarised in the table set out below.
Short / Long term
incentives
Notice period
termination
Notice period
resignation Year
Total fixed
remuneration1 Currency
2023
2022
2023
2022
2023
2022
2023
2022
400,000
400,000
105,525
105,154
364,008
350,004
400,573
385,166
A$
A$
A$
A$
SGD
SGD
A$
A$
Name
John Klepec
Kanda Lu
Paolo Triglia
KMP term
3 Aug 18 -
present
12 May 17 -
present
At the Board’s
Discretion
At the Board’s
Discretion
18 Nov 15 - STI Program and at
present
the Board’s
Discretion
2 weeks
2 weeks
4 weeks
4 weeks
3 months
3 months
Michael Silbert
18 Oct 16 - STI Program and at
6 months
3 months
present
the Board’s
Discretion
1. This is inclusive of superannuation payments where applicable.
42 | WELLARD ANNUAL REPORT 2023
REMUNERATION REPORT
(e) Executive KMP remuneration table
The table below sets out the remuneration received by Wellard KMP for FY2023 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. See previous table for details of each KMP’s remuneration in the original currencies of their contracts of
employment or consultancy agreements.
Key management personnel remuneration table for FY2023 is presented in United States Dollars:
Name
EXECUTIVE DIRECTORS
John Klepec
Kanda Lu
OTHER KMP
Paolo Triglia5
Michael Silbert
Total in US$
Year
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Short-term benefits
Long-term benefits
Base salary
US$
STI1
US$
Other2
US$
Accrued
annual leave3
US$
Long service
leave4
US$
Termination
benefits
US$
Post-employment
benefits
Superannuation
US$
Total remuneration
US$
%
Remuneration
“at risk”
262,961
283,679
64,308
69,600
266,981
257,064
252,714
235,911
846,964
846,254
-
-
-
-
-
125,649
-
126,996
-
252,645
-
-
-
-
92,841
81,046
-
-
92,841
81,046
-
-
259
98
11,871
1,933
8,450
15,630
20,580
17,661
-
-
168
181
-
-
4,084
5,112
4,252
5,293
-
-
-
-
-
-
-
-
-
-
6,399
6,597
6,753
6,709
-
-
17,032
16,126
30,184
29,432
269,360
290,276
71,488
76,588
371,693
465,692
282,280
399,775
994,821
1,232,331
-
-
-
-
-
27.0%
-
31.8%
-
20.5%
1. This includes cash bonuses provided to KMP in relation to FY2022.
2. This includes short-term benefits such as leave passage and accommodation.
3. This includes statutory leave for Executive Directors and other KMP.
4. Represents the net accrual movement for Long Service Leave (LSL) over the twelve-month period, which will only be paid if the KMP meets legislative service conditions. LSL has been separately categorised and is measured on an accrual
basis and reflects the movement in the accrual over the twelve-month period.
5. Mr Triglia is employed as an expatriate and pursuant to his employment contract he is not paid superannuation and receives additional benefits for accommodation, school fees and travel expenditure.
43 | WELLARD ANNUAL REPORT 2023
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$800,000 per annum,
which has been approved by Shareholders.
(c) Remuneration review
The Board will periodically review the level of fees paid to Non-Executive Directors, including seeking external advice
where appropriate.
A review of the remuneration of Non-Executive Directors was undertaken as part of the NR Committee’s review of
senior remuneration and the Company’s operating budget for FY2023. No change was made to Non-Executive
Director fees, or fees paid to members of any Board Committee.
(d) Non-executive director fees and benefits
Set out below is a description of each component of total remuneration for Directors and how each component
impacts remuneration in Australian dollars:
2023
Fees
A$
Superannuation
A$
Included in
shareholder
approved cap?
190,498
90,498
25,000
9,050
22,624
10,000
9,502
9,502
-
950
2,376
-
Yes
Yes
Yes
Yes
Yes
Yes
Fees /
Benefits
Description
BOARD FEES
Wellard board
Chairman
Members
COMMITTEE FEES
Audit and risk compliance committee
Chairman
Members
Nomination and remuneration committee
Chairman
Members
44 | WELLARD ANNUAL REPORT 2023
REMUNERATION REPORT
OTHER FEES / BENEFITS
Short-term incentives
Non-Executive Directors are eligible to participate in short-term incentive arrangements.
Long-term incentives
Non-Executive Directors are eligible to participate in 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 2023 financial year are set out below in
Australian dollars.
Name
Year
NON-EXECUTIVE DIRECTORS
Philip Clausius
John Stevenson
Total
2023
2022
2023
2022
2023
2022
Short-term benefits
Board and committee fees
A$
Superannuation1
A$
122,172
122,727
125,000
125,000
247,172
247,727
12,828
12,273
-
-
12,828
12,273
Total
A$
135,000
135,000
125,000
125,000
260,000
260,000
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.
45 | WELLARD ANNUAL REPORT 2023
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
Michael Silbert
Total
Balance at
1 July 2022
Change to
aggregate KMP
balance
Balance at
30 June 2023
-
-
437,500
-
1,126,800
-
1,564,300
-
-
-
-
-
-
-
-
-
437,500
-
1,126,800
-
1,564,300
(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, ended on 30 September 2021. Ad-hoc technical advisory services
were provided post 30 September 2021. The technical service fee rendered during the year was US$1,777 (2022:
US$15,503).
(c) Outstanding balance from services rendered.
As at 30 June 2023, there was no outstanding due to Transport Capital Pte Ltd (30 June 2022: US$4,379).
(d) Loans to / from related parties
Nil
46 | WELLARD ANNUAL REPORT 2023
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.
giving a true and fair view of the financial position and performance of the Group as at 30 June
2023 and of its performance for the year ended on that date; and
ii.
complying with Accounting Standards and the Corporations Act 2001; and
b)
c)
d)
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 1; and
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they
become due and payable; and
this declaration has been made after receiving the declarations required to be made to the Directors in
accordance with Section 295A of the Corporations Act for the financial year ended 30 June 2023.
Signed in accordance with a resolution of the Directors.
Mr John Klepec
Executive Chairman
28 August 2023
47 | WELLARD ANNUAL REPORT 2023
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
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2023, 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 28th day of August 2023.
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 | 48
picture
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED 30 JUNE
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross (loss)/profit
Other income
Other losses
Net finance costs
Depreciation and amortisation expenses
General and administrative expenses
(Loss)/profit from continuing operations before income tax
Income tax expense
(Loss)/profit for the period after tax
OTHER COMPREHENSIVE (LOSS)/INCOME
Items that may be reclassified to profit or loss
(Loss)/gain from foreign currency translation
Other comprehensive (loss)/ income for the period, net of tax
NOTE
2023
US$’000
2022
US$’000
4(A)
6(A)
5
6(B)
6(C)
6(D)
8
38,655
(38,930)
(275)
-
(194)
(222)
(10,578)
(3,850)
(15,119)
(368)
(15,487)
45,048
(30,760)
14,288
12,023
(420)
(771)
(10,532)
(4,643)
9,945
(12)
9,933
(178)
(178)
207
207
Total comprehensive (loss)/income for the period
(15,665)
10,140
(Loss)/earnings per share from continuing operations
attributable to ordinary equity holders of the Company
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
US$ Cents
US$ Cents
9
9
(2.92)
(2.92)
1.87
1.87
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
50 | WELLARD ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Contract assets
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
2023
US$’000
2022
US$’000
10
13
12
4(B)
14
17
18
14
15
11
19
4(B)
11
19
20
28
29
7,420
974
1,210
639
705
10,948
33,830
840
64
34,734
45,682
3,713
2,545
55
1,440
7,753
43
29
72
7,825
37,857
15,279
1,132
3,631
545
980
21,567
40,747
1,158
63
41,968
63,535
1,976
7,652
79
200
9,907
86
20
106
10,013
53,522
412,259
(277,126)
(97,276)
37,857
412,259
(276,948)
(81,789)
53,522
The accompanying notes form an integral part of this consolidated statement of financial position.
51 | WELLARD ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 30 JUNE
NOTE
2023
Opening balance
Comprehensive loss for the period:
Loss for the period
Other comprehensive loss
Total comprehensive loss for the period
Closing balance
2022
Opening balance
Comprehensive income for the period:
Profit for the period
Other comprehensive income
Total comprehensive income for the period
29
28
29
28
ISSUED
CAPITAL
US$’000
ACCUMULATED
LOSSES
US$’000
SHARE-BASED
PAYMENTS
US$’000
RESERVES
OTHER
RESERVES
US$’000
COMMON
CONTROL
US$’000
TOTAL
US$’000
412,259
(81,789)
12,963
5,857
(295,768)
53,522
-
-
-
412,259
(15,487)
-
(15,487)
(97,276)
-
-
-
12,963
-
(178)
(178)
5,679
-
-
-
(295,768)
(15,487)
(178)
(15,665)
37,857
412,259
(91,722)
12,963
5,650
(295,768)
43,382
-
-
-
9,933
-
9,933
-
-
-
-
207
207
-
-
-
9,933
207
10,140
53,522
Closing balance
412,259
(81,789)
12,963
5,857
(295,768)
The accompanying notes form an integral part of this consolidated statement of changes in equity.
52 | WELLARD ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED 30 JUNE
NOTE
2023
US$’000
2022
US$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Income tax paid
Net cash inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash outflow 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
10
39,708
(38,200)
32
(5)
1,535
(3,711)
-
(3,711)
(2,397)
(2,912)
(229)
(5,538)
(7,714)
15,279
(145)
7,420
55,593
(38,488)
9
(3)
17,111
(1,367)
-
(1,367)
(3,802)
(2,594)
(772)
(7,168)
8,576
6,736
(33)
15,279
The accompanying notes form an integral part of this consolidated statement of cash flows.
53 | WELLARD ANNUAL REPORT 2023
RECONCILIATION OF CONSOLIDATED STATEMENT OF CASH FLOWS
Reconciliation of (loss)/profit after tax to net cash flows from operating activities.
FOR THE YEARS ENDED 30 JUNE
(Loss)/profit after tax
Adjustment for:
Depreciation and amortisation
Income tax expense
Interest income
Allowance for impairment loss
Interest expense and borrowing costs
Net loss on disposal of property, plant and equipment
Unrealised foreign exchange losses
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
Change in trade and other payables and provisions
Change in deferred revenue
Interest received
Income tax paid
Net cash flows from operating activities
2023
US$’000
2022
US$’000
(15,487)
9,933
10,578
10,532
368
(32)
306
254
1
24
25
2,421
1,810
1,240
1,508
32
(5)
1,535
12
(9)
3
780
-
363
(975)
(1,806)
(421)
(1,307)
17,105
9
(3)
17,111
The accompanying notes form an integral part of this consolidated statement of cash flows.
54 | WELLARD ANNUAL REPORT 2023
Reconciliation of liabilities arising from financing activities:
Non-cash changes
Opening
balance
US$’000
Principal and
interest
payments
US$’000
Addition
during the
year
US$’000
Interest
expense
US$’000
Effect of
movement in
exchange
US$’000
Non-cash
movement
US$’000
Closing
balance
US$’000
2,845
2,929
1,964
7,738
(2,852)
(3,037)
(16,579)
(22,468)
-
137
16,930
17,067
5
125
124
254
-
(5)
-
(5)
2
-
-
2
-
149
2,439
2,588
(7,420)
(4,832)
Non-cash changes
Opening
balance
US$’000
Principal and
interest
payments
US$’000
Addition
during the
year
US$’000
Interest
expense
US$’000
Effect of
movement in
exchange
US$’000
Non-cash
movement
US$’000
Closing
balance
US$’000
7,512
5,391
1,116
14,019
(4,990)
(2,963)
(18,188)
(26,141)
-
135
18,973
19,108
358
369
63
790
-
(3)
-
(3)
(35)
-
-
(35)
2,845
2,929
1,964
7,738
(15,279)
(7,541)
The accompanying notes form an integral part of this consolidated statement of cash flows.
FOR THE YEAR ENDED 30 JUNE 2023
Loan and borrowings (Note 11)
Borrowings
Lease liabilities
Other loans
Total borrowings
Less: Cash and cash equivalents
Negative Net debt
FOR THE YEAR ENDED 30 JUNE 2022
Loan and borrowings (Note 11)
Borrowings
Lease liabilities
Other loans
Total borrowings
Less: Cash and cash equivalents
Negative Net debt
55 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
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. 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).
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 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.
2. SIGNIFICANT
ACCOUNTING
POLICIES AND
ESTIMATES
The significant accounting policies
adopted in the preparation of the
financial statements have been
consistently applied to all the
periods presented unless
otherwise stated. In addition to
these accounting policies, the
following policies and critical
accounting estimates were
applied:
A. REVENUE FROM
CONTRACTS WITH
CUSTOMERS
AASB 15 Revenue from Contracts
with Customers states that an
entity shall recognise revenue (or
as) the entity satisfies a
performance obligation by
transferring a promised good or
service (i.e. an asset) to a
customer. An asset is transferred
when (or as) the customer obtains
control of the asset.
If revenue is not recognised over
time, it is recognised at a point in
time. To determine the point in
time at which a customer obtains
control of a promised asset and
the entity satisfies a performance
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 the 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
and 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 are 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
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 2023, that were
authorised for issue in accordance
with a resolution of the Directors
on 28 August 2023.
The Company is a company
limited by shares incorporated in
Australia whose shares are
publicly traded on the Australian
Securities Exchange (ASX:WLD).
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 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
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
56 | WELLARD ANNUAL REPORT 2023
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
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
57 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
legislation and the anticipation that
the Group will derive sufficient
future assessable income to
enable the benefit to be realised
and comply with the conditions of
deductibility imposed by the law.
E. DEFERRED TAX ASSETS
AND LIABILITIES
Deferred tax assets and liabilities
are recognised for temporary
differences at the applicable tax
rates when the assets are
expected to be recovered or
liabilities are settled, based on the
tax rates (and tax laws) that have
been enacted or substantially
enacted by the end of the reporting
period. The measurement of
deferred tax liabilities and assets
reflects the tax consequences that
would follow from the manner in
which the Group expects, at the
end of the reporting period, to
recover or settle the carrying
amount of its assets and liabilities.
No deferred tax asset or liability is
recognised in relation to temporary
differences if they arose in a
transaction, other than a business
combination, that at the time of the
transaction did not affect either
accounting profit or taxable profit
or loss.
Deferred tax assets are recognised
for deductible temporary
differences and unused tax losses
only if it is probable that future
taxable amounts will be available
to utilise those temporary
differences and losses.
Deferred tax assets and liabilities
are offset when there is a legally
enforceable right to set off current
tax assets against current tax
liabilities and when they relate to
the income taxes levied by the
same taxation authority and the
Group intends to settle its current
tax assets and liabilities on a net
basis.
Current and deferred tax balances
attributable to amounts recognised
directly in equity are also
recognised directly in equity.
F. TAX CONSOLIDATION
Wellard Limited and its Australian
subsidiaries formed a tax
consolidated Group with effect
from 11 December 2015.
The parent entity and subsidiaries
in the tax consolidated Group have
entered into a tax funding
agreement such that each entity in
the tax consolidated Group
recognises the assets, liabilities,
revenues and expenses in relation
to its own transactions, events and
balances only. This means that:
•
•
•
the parent entity recognises
all current and deferred tax
amounts relating to its own
transactions, events and
balances only;
the subsidiaries recognise
current or deferred tax
amounts arising in respect of
their own transactions,
events and balances; and
current tax liabilities and
deferred tax assets arising in
respect of tax losses, are
transferred from the
subsidiary to the parent entity
as intercompany payables or
receivables.
Adjustments may be made for
transactions and events occurring
within the tax consolidated Group
that do not give rise to a tax
consequence for the Group or that
have a different tax consequence
at the head entity level of the
Group. The tax consolidated
Group will enter into a tax sharing
agreement to limit the liability of
subsidiaries in the tax consolidated
Group arising under the joint and
several liability requirements of the
tax consolidation system, in the
event of default by the parent
entity to meet its payment
obligations.
G. EARNINGS PER SHARE
Basic earnings per share is
calculated by dividing:
•
by
•
the profit / (loss) attributable
to the owners of the
Company, excluding any
costs of servicing equity other
than ordinary shares,
the weighted average
number of ordinary shares
outstanding during the
financial year, adjusted for
bonus elements in ordinary
shares issued during the year
and excluding treasury
shares.
Diluted earnings per share
Diluted earnings per share adjusts
the figures used in the
determination of basic earnings
per share to take into account the
after-income tax effect of interest
and other financial costs
associated with dilutive potential
ordinary shares.
NOTES TO THE FINANCIAL STATEMENTS
All other inventories are measured
at the lower of cost or net
realisable value.
requires expected lifetime losses
to be recognised from the initial
recognition of the receivables.
Costs incurred in bringing each
product to its present location and
condition are 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
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
Credit loss allowance is based on
12-month expected credit loss if
there is no significant increase in
credit risk since the 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. 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.
O. 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.
P. PROPERTY, PLANT AND
EQUIPMENT
Each class of property, plant and
equipment are initially recorded at
cost. Subsequent to recognition,
property, plant and equipment are
measured at cost less
accumulated depreciation and any
accumulated impairment losses.
The cost of property, plant and
equipment includes its purchase
price and any costs directly
attributable to bringing the asset to
the location and condition
necessary for it to be capable of
operating in the manner intended
by the management.
Dismantlement, removal or
restoration costs are included as
part of the cost of property, plant
and equipment if the obligation for
dismantlement, removal or
restoration is incurred as a
Potential ordinary shares are only
considered dilutive if the loss per
share decreases on conversion to
ordinary shares.
H. LOANS AND BORROWINGS
All loans and borrowings are
initially recognised at the fair value
of the consideration received, less
directly attributable transaction
costs. After initial recognition,
interest-bearing loans and
borrowings are subsequently
measured at amortised cost using
the effective interest method.
Borrowings are classified as
current liabilities unless the Group
has an unconditional right to defer
settlement of the liability for at
least 12 months after the reporting
date.
I. CASH
Cash comprises cash on hand and
demand deposits. Cash
equivalents comprise short-term
and highly liquid cash deposits that
are readily convertible to known
amounts of cash and which are
subject to an insignificant risk of
change in value. For the purposes
of the statement of cash flows,
cash includes cash on hand,
demand deposits and cash
equivalents.
Cash at bank earns interest at
floating rates based on daily bank
deposit rates. Short-term deposits
are made for carrying periods of
between one day and three
months, depending on the
immediate cash requirements of
the Group, and earn interest at the
respective short-term deposit
rates. For cash subject to
restriction, assessment is made on
the economic substance of the
restriction and whether they meet
the definition of cash and cash
equivalents.
J. ISSUED CAPITAL
Ordinary shares are classified as
equity. Incremental costs directly
attributable to the issue of ordinary
shares are recognised as a
deduction from equity, net of any
tax effects.
K. INVENTORIES
Bunker fuel used for the operation
of the vessels and with a high
turnover rate is not written-down to
the net realisable value when the
market price falls below cost if the
overall shipping activity is
expected to be profitable.
58 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
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.
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.
R. PROVISIONS
Provisions are recognised if, as a
result of a past event, the Group
has a present legal or constructive
obligation that can be estimated
reliably, and it is probable that an
outflow of economic benefits will
be required to settle the obligation.
Provisions are determined by
discounting the expected future
cash flows at a pre-tax rate that
reflects current market
assessments of the time value of
money and the risks specific to the
liability. When discounting is used,
the increase in the provision due to
the passage of time is recognised
as a finance cost.
Short-term employee benefit
obligations
Liabilities arising in respect of
wages and salaries, annual leave,
long service leave and any other
employee benefits expected to be
settled within 12 months of the end
of the period are measured at their
nominal amounts based on
remuneration rates which are
expected to be paid when the
liability is settled. The expected
cost of short-term employee
benefits in the form of
compensated absences such as
annual leave is recognised in the
provision for employee benefits. All
other short-term employee benefit
obligations are presented as
payables.
Long-term employee benefit
obligations
Liabilities arising in respect of long
service leave and annual leave
which are not expected to be
settled within 12 months of the end
of the period are measured at the
present value of the estimated
future cash outflow to be made in
respect of services provided by
employees up to the end of the
period. Employee benefit
obligations are presented as
current liabilities in the statement
of financial position if the entity
does not have an unconditional
right to defer settlement for at least
12 months after the end of the
period, regardless of when the
actual settlement is expected to
occur.
Termination benefits
Termination benefits are payable
when 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.
S. 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
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
consequence of acquiring or using
the property, plant and equipment.
Vessels
Vessels are measured on a cost
basis. Depreciation rate: 3.33% -
5%, straight-line basis after
deducting the expected scrap
value of the vessel.
The vessels are subjected to major
overhauls at regular intervals. Dry-
docking expenditures incurred in
the major overhauls are capitalised
as additional component costs to
the vessels and amortised on a
straight-line basis over the period
up to the next dry-docking, which
is generally 2.5 to 3 years.
Deferred expenses are
derecognised upon the next dry-
docking or when no future
economic benefits are expected
from the dry-docking costs
previously recognised.
Plant and Equipment (excluding
Vessels)
Plant and equipment are
measured on a cost basis.
Depreciation rate: 4% - 32%,
straight-line basis.
Improvements
Improvements are measured on a
cost basis. Depreciation rate: 10%
- 50%, straight-line basis.
Right-of-use assets
Right-of-use assets are measured
as disclosed in Note 2V.
Depreciation rate: 17% - 51%,
straight-line basis.
Depreciation
The depreciable amount of all fixed
assets is depreciated over their
estimated useful lives commencing
from the time the asset is held
ready for use.
Q. INTANGIBLE ASSETS
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
59 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
over the vesting period, which is
the period over which all of the
specified vesting conditions are to
be satisfied.
V. LEASES
The Group assesses at contract
inception whether a contract is, or
contains, a lease. That is, if the
contract conveys the right to
control the use of an identified
asset for a period of time in
exchange for consideration.
a) As lessee
The Group applies a single
recognition and measurement
approach for all leases, except for
short-term leases and leases of
low-value assets. The Group
recognises lease liabilities
representing the obligations to
make lease payments and right-of-
use assets representing the right
to use the underlying assets.
Right-of-use assets
The Group recognises right-of-use
assets at the commencement date
of the lease (i.e. the date the
underlying asset is available for
use). Right-of-use assets are
measured at cost, less any
accumulated depreciation and
impairment losses, and adjusted
for any remeasurement of lease
liabilities. The cost of right-of-use
assets includes the amount of
lease liabilities recognised, initial
direct costs incurred, and lease
payments made at or before the
commencement date, less any
lease incentives received. Right-of-
use assets are depreciated on a
straight-line basis over the shorter
of the lease term and the
estimated useful lives of the
assets.
If the ownership of the leased
asset transfers to the Group at the
end of the lease term or the cost
reflects the exercise of a purchase
option, depreciation is calculated
using the estimated useful life of
the asset. The right-of-use assets
are also subject to impairment, as
disclosed in Note 2X.
The Group’s right-of-use assets
are presented within property,
plant and equipment in Note 16.
Lease liabilities
At the commencement date of the
lease, the Group recognises lease
liabilities measured at the present
value of lease payments to be
made over the lease term. The
lease payments include fixed
payments less any lease
incentives receivable, variable
lease payments that depend on an
index or a rate, and the amount
expected to be paid under residual
values guarantees. The lease
payments also include the exercise
price of a purchase option
reasonably certain to be exercised
by the Group. Variable lease
payments that do not depend on
an index or a rate are recognised
as expenses in the period.
In calculating the present value of
lease payments, the Group uses
the implicit rate in the lease if the
rate can be readily determined. If
the rate cannot be readily
determined, the Group shall use its
incremental borrowing rate. After
the commencement date, the
amount of lease liabilities is
increased to reflect the accretion of
interest and reduced for the lease
payments made. In addition, the
carrying amount of lease liabilities
is remeasured if there is a
modification, a change in the lease
term, a change in the lease
payments or a change in the
assessment of an option to
purchase the underlying assets.
The Group’s lease liabilities are
included in Note 11.
Short-term leases and leases of
low-value assets
The Group applies the short-term
lease recognition exemption to its
short-term leases of leasehold
residential property, which have a
lease term of 12 months or less
and do not contain a purchase
option.
It also applies the lease of low-
value assets recognition
exemption to the lease of office
equipment that is considered to be
low value.
Lease payments on short-term
leases and leases of low-value
assets are recognised as
expenses on a straight-line basis
over the lease term.
W. GOODS AND SERVICES TAX
Revenues, expenses, assets and
liabilities are recognised net of the
amount of GST, except where the
amount of GST incurred is not
recoverable from the ATO. In
these circumstances, the GST is
recognised as part of the cost of
acquisition of the asset or as part
of an item of the expense.
Receivables and payables in the
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.
T. 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.
U. 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
60 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
statement of financial position are
shown inclusive of GST.
X. 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, the 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 occurs 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
61 | WELLARD ANNUAL REPORT 2023
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 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$60.7
million (FY2022: US$44.9 million)
relating to the tax and capital
losses of the Australian tax
consolidated group and US$2.0
million (FY2022: US$2.0 million)
relating to Singapore have not
been recognised.
IMPAIRMENT
B.
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 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 11.0% 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$0.3
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$2.6 million.
The Group has not recognised
impairment charges on its vessels
during the year.
NOTES TO THE FINANCIAL STATEMENTS
M/V Ocean Swagman V149, on route to Turkiye, July 2023
Investments in subsidiaries
We have estimated the recoverable
amount based on the value-in-use of
the subsidiaries. No impairment
(2022: Nil) has been recognised in
respect of the recoverable amount of
investment in subsidiaries.
Impairment of investments in
subsidiaries has been eliminated on
consolidation in the Group accounts.
The impairment of investment in
subsidiaries is considered a critical
accounting estimate for the parent
entity only and not for the Group.
C. USEFUL LIFE OF PURPOSE-
BUILT LIVESTOCK VESSEL
Management reviews the
appropriateness of the useful live
and residual value of vessels at each
balance sheet date. Certain
estimates regarding the useful life
and residual value of vessels are
made by the management based on
past experience, and these are in
line with the industry. Changes in the
expected level of usage, scrap value
of steel and market factors could
impact the economic useful life and
residual value of the vessels.
During the financial year, the
estimated useful lives of the livestock
vessels were revised from 25 years
to 30 years for purpose-built vessels
to better reflect the economic period
during which the vessel is capable of
operating, considering the historical
operating experience and currently
available livestock vessels in the
market. The change in accounting
estimate has been applied
prospectively. The effect of these
changes has decreased the
depreciation charge of one vessel by
approximately US$ 1.5 million in the
current period.
62 | WELLARD ANNUAL REPORT 2023
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
Other revenue
2023
US$’000
2022
US$’000
38,619
36
38,655
44,965
83
45,048
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) ASSETS AND LIABILITIES RELATED TO CONTRACTS WITH CUSTOMERS
The Group has recognised the following assets and liabilities related to contracts with customers:
AS AT 30 JUNE
CHARTERING
Contract assets
Contract liabilities
2023
US$’000
2022
US$’000
639
1,440
545
200
Chartering contract assets refer to bunker and agency costs incurred for the contracted voyages and are yet to load
at the end of the reporting period. Chartering contract liabilities refer to deposits received from chartering of vessels.
5. OTHER INCOME
FOR THE YEARS ENDED 30 JUNE
Arbitration award received
2023
US$’000
-
2022
US$’000
12,023
This refers to the arbitration award obtained in London against the Croatian Bank for Reconstruction and
Development (Hrvatska banka za obnovu i razvitak, or “HBOR”) in favour of Wellard’s subsidiary, Wellard Ships Pte
Ltd, relating to refund guarantees supporting Wellard’s terminated 2015 contract for the building of the planned
livestock vessel to have been known as the “M/V Ocean Kelpie” with the Uljanik d.d shipyard (Uljanik).
6. EXPENSES
FOR THE YEARS ENDED 30 JUNE
A)
COST OF SALES
Chartering
Trading
63 | WELLARD ANNUAL REPORT 2023
2023
US$’000
38,930
-
38,930
2022
US$’000
30,780
(20)
30,760
NOTES TO THE FINANCIAL STATEMENTS
6. EXPENSES (continued)
FOR THE YEARS ENDED 30 JUNE
B)
OTHER LOSSES
Losses arising from chartering and trading activities
Allowance for impairment loss
(Gains)/losses arising from other activities
Net foreign exchange (gains)/losses
Net loss on disposal of property, plant and equipment
Restructuring and integration costs
C)
NET FINANCE COSTS
Interest income
Interest expense
Borrowing costs
D)
GENERAL AND ADMINISTRATIVE EXPENSES
Labour expenses
Consulting costs
General and administrative costs
Travel expenses
Occupancy costs
Motor vehicle expenses
Repairs and maintenance costs
E)
LABOUR EXPENSES
Wages and salaries
Employee entitlements
Superannuation
2023
US$’000
2022
US$’000
306
306
(113)
1
-
(112)
194
(32)
254
-
222
6(E)
2,470
544
478
223
73
58
4
3
3
394
-
23
417
420
(9)
790
(10)
771
3,087
824
511
90
86
44
1
3,850
4,643
2,012
328
130
2,470
2,538
409
140
3,087
7. SEGMENT INFORMATION
Segment information is presented based on the information reviewed by senior management for performance
measurement and resource allocation.
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.
64 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
7. SEGMENT INFORMATION (continued)
b) Other: This segment consists of trading and corporate services. Trading refers to the business of livestock
marketing, buying livestock from multiple sources for export to buyers in international markets globally.
Although Wellard retains its Australian livestock export licenses and capabilities, trading activity has reduced
since July 2019 and is now very marginal. 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.
These classifications are in accordance with AASB 8 guidelines.
Management primarily uses a measure of statutory net (loss)/profit 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 2023
Revenue
Depreciation and amortisation expenses
Net finance costs
Loss from continuing operations before income
tax
Total segment assets
Total segment liabilities
FOR THE YEAR ENDED 30 JUNE 2022
Revenue
Depreciation and amortisation expenses
Net finance costs
Profit from continuing operations before income
tax
Total segment assets
Total segment liabilities
Chartering
US$’000
Other
US$’000
Total
US$’000
38,619
(10,235)
(222)
36
(343)
-
38,655
(10,578)
(222)
(12,826)
(2,293)
(15,119)
41,893
7,410
44,965
(10,173)
(769)
1,877
57,282
9,564
3,789
415
83
(359)
(2)
8,068
6,253
449
45,682
7,825
45,048
(10,532)
(771)
9,945
63,535
10,013
Revenue of approximately US$34.2 million were derived from four external customers of the chartering segment,
which individually account for greater than 10.0% of total revenue (FY2022: revenue of approximately US$41.0
million from four external customers, which individually account for greater than 8.0% of total revenue).
Geographical information
Wellard operates in several geographical locations around the world, spanning multiple continents for both
procurement and sales of livestock, as well as sale of space on the Group’s vessels.
External revenue based on the origin country of sale are as follows:
FOR THE YEARS ENDED 30 JUNE
2023
2022
Australia
US$’000
5
14
Singapore
US$’000
38,630
45,034
Brazil
US$’000
20
-
The non-current assets of the Group are located across the following countries:
AS AT 30 JUNE
2023
2022
Australia
US$’000
916
1,232
Singapore
US$’000
33,818
40,736
Total
US$’000
38,655
45,048
Total
US$’000
34,734
41,968
65 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
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
2023
US$’000
2022
US$’000
11
357
368
368
-
368
5
7
12
12
-
12
NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACE TAX PAYABLE
FOR THE YEARS ENDED 30 JUNE
2023
US$’000
2022
US$’000
(Loss)/profit from continuing operations before income tax
(15,119)
9,945
Tax at the Australian tax rate of 30% (2022: 30%)
(4,536)
2,984
Add/(deduct) the effect of other assessable items
Attributable foreign income
Exempt foreign shipping activities
Current year losses and temporary differences not recognised
Income not subject to tax
Statutory stepped income exemption
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
363
895
321
(43)
(11)
1,347
357
(1,307)
1,675
1,675
368
841
(1,694)
522
(2,459)
(6)
1,541
7
1,736
(1,724)
(1,724)
12
The under provision for income tax in prior years includes US$361K income tax on the receipt of arbitration award as
disclosed in Note 5.
At the reporting date, the Group has unused tax losses of US$46.2 million (FY2022: US$46.9 million) and capital
losses of US$16.5 million (FY2022: Nil) available for offset against future profits. No deferred tax asset has been
recognised as it is not probable that future taxable profits will be available against which the Group can use the benefits
therefrom. The tax losses do not expire under current tax legislation but are subject to the satisfaction of loss utilisation
rules.
66 | WELLARD ANNUAL REPORT 2023
9. (LOSS)/EARNINGS PER SHARE
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE
2023
2022
BASIC (LOSS)/EARNINGS PER SHARE
From continuing operations attributable to the ordinary
equity holders of the Company
DILUTED (LOSS)/EARNINGS PER SHARE
From continuing operations attributable to the ordinary
equity holders of the Company
US$
cents
US$
cents
(2.92)
1.87
(2.92)
1.87
WEIGHTED AVERAGE ORDINARY SHARES
Weighted average number of ordinary shares used as the
denominator
number
531,250,312
531,250,312
10. 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.
11. 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
2023
US$’000
2022
US$’000
7,420
7,420
15,279
15,279
2023
US$’000
2022
US$’000
-
2,845
106
2,439
2,545
-
43
43
2,843
1,964
7,652
-
86
86
Total Loans and Borrowings
2,588
7,738
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.
67 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
11. LOANS AND BORROWINGS (continued)
(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.
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. In June 2022, the Group and Ruchira mutually agreed to extend the purchase obligation
of M/V Ocean Ute and M/V Ocean Drover to 29 July 2022 and 30 June 2023 respectively. On 8 July 2022, Wellard
paid all remaining balances (US$2.8 million) to Ruchira.
On 19 August 2022, Wellard subsidiary Niuyang Express Pte Ltd completed the repurchase of the M/V Ocean Ute,
and that vessel is now owned unencumbered by Wellard. The underlying bareboat charter agreement of this vessel
from Ruchira was also cancelled, as the vessel is now operated by Wellard as principal.
On 30 June 2023, the title transfer of the M/V Ocean Drover was extended to 4 August 2023 and on 4 August 2023, it
was further extended to 1 September 2023. See Note 17(B) for information on bareboat charter arrangement.
The Group will maintain full control of the M/V Ocean Drover until the end of the term of its bareboat charter agreement
and the exercise of the purchase obligation on the vessel at the end of the charter period. The arrangement is secured
by the carrying amount of its pledged asset and is supported by a guarantee from Wellard Limited. There will be no
further payments to Ruchira between now and the title transfer date of the M/V Ocean Drover, which is scheduled for
1 September 2023.
(ii) Lease liabilities
Un-secured
In 2023, 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 maintained full control of the vessel until 31 March
2022 and no purchase obligation was granted. On 15 June 2021, the Group modified the existing arrangement to
exercise the extension options until 30 June 2023. This transaction expired on 30 June 2023, at which time the vessel
was time chartered by the Company for four months, with the option of an additional three months, at predetermined
rates. Under these arrangements, Wellard has the ability to continue operating the M/V Ocean Swagman until early
2024.
(iii) Other loans
Other loans represent a bunker facility from United Overseas Bank Singapore.
AS AT 30 JUNE
Currency
Financial year of
maturity
2023
US$’000
2022
US$’000
LOANS AND BORROWINGS
Secured
Borrowings
Borrowings
Un-secured
Lease liabilities
Lease liabilities
Lease liabilities
Other loans
US$
US$
US$
SGD
A$
US$
2023
2023
2023
2024
2026
2024
-
-
-
88
61
2,439
2,588
878
1,967
2,656
248
25
1,964
7,738
The maturity profile of principal repayments is set out in Note 16(C).
68 | WELLARD ANNUAL REPORT 2023
12. INVENTORIES
AS AT 30 JUNE
Raw materials
NOTES TO THE FINANCIAL STATEMENTS
2023
US$’000
2022
US$’000
1,210
1,210
3,631
3,631
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 (FY2022: Nil).
13. TRADE AND OTHER RECEIVABLES
AS AT 30 JUNE
CURRENT
Trade receivables
Allowance for impairment loss
Other receivables
2023
US$’000
2022
US$’000
979
(306)
301
974
756
-
376
1,132
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
0 to 3 months
3 to 6 months
Over 6 months
Information on the Group’s credit risk is disclosed in Note 16(B).
2023
US$’000
2022
US$’000
619
5
355
979
707
-
49
756
69 | WELLARD ANNUAL REPORT 2023
14. OTHER ASSETS
NOTES TO THE FINANCIAL STATEMENTS
AS AT 30 JUNE
CURRENT
Prepayments
Deposit
NON-CURRENT
Deposits
15. TRADE AND OTHER PAYABLES
AS AT 30 JUNE
CURRENT
Trade payables
Sundry payables and accrued expenses
Trade and other payables are non-interest bearing.
16. FINANCIAL RISK MANAGEMENT
2023
US$’000
2022
US$’000
705
-
705
64
64
480
500
980
63
63
2023
US$’000
2022
US$’000
2,756
957
3,713
523
1,453
1,976
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 long 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.
70 | WELLARD ANNUAL REPORT 2023
16. FINANCIAL RISK MANAGEMENT (continued)
NOTES TO THE FINANCIAL STATEMENTS
A) MARKET RISK (continued)
ii) Commodity price risk
Fuel
Wellard is exposed to commodity price volatility for the fuel required to operate its fleet of vessels. Wellard
management monitors the market and, when appropriate, can manage 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$”). The Group monitors its exposure to currency risk on a regular basis and may enter into
short-term forward exchange contracts to manage the exposure.
iv)
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial asset or financial liability will change as
a result of changes in market interest rates. Wellard’s exposure to market interest rate risk relates primarily to its loans
and borrowings.
Changes to interest rates will affect borrowings which bear interest at a floating rate. Any increase in interest rates will
affect Wellard’s cost of servicing these borrowings which may adversely affect its financial position.
Wellard’s net interest rate exposure does not have a significant effect on the result; therefore, Wellard does not enter
into interest rate swaps on debt instruments subject to floating interest rates. Lease liabilities carry interest at their
fixed rates.
Sensitivity:
The exposure of Wellard’s borrowings to variable interest rate changes at the end of the reporting period are as follows:
AS AT 30 JUNE
Loans and borrowings
2023
US$’000
2,439
2,439
2022
US$’000
1,964
1,964
Based on Wellard’s variable borrowings a change of 10 basis points (0.1%) in interest rates, with all other variables
held constant, would increase/(decrease) profit before taxation and equity as follows:
FOR THE YEARS ENDED 30 JUNE
+0.1%
-0.1%
B) CREDIT RISK
2023
US$’000
2022
US$’000
2
(2)
2
(2)
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to
Wellard. Wellard is exposed to some counterparty credit risk arising from its operating activities, primarily from trade
receivables. The ageing of these receivables is as follows:
AS AT 30 JUNE
0 to 3 months
3 to 6 months
Over 6 months
71 | WELLARD ANNUAL REPORT 2023
2023
US$’000
2022
US$’000
619
5
355
979
707
-
49
756
NOTES TO THE FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT (continued)
B) CREDIT RISK (continued)
The risk of non-payment by customers is an inherent risk of Wellard’s business, due to sales typically involving
individual high-value shipments. Wellard seeks to mitigate the impact of this risk by building long-term relationships
with its customers, obtaining partial payment before loading, requiring letters of credit to partially secure payment in a
number of jurisdictions and through a systematic credit assessment of counterparties and regular monitoring of their
creditworthiness.
Each analysis results in an internal rating, which is subsequently used for determining the allowed scope of the
commitment. The internal ratings are based both on a financial and a non-financial assessment of the counterparty’s
profile. In addition, trade receivable balances are monitored on a fortnightly basis by management.
Owing to the nature of long-term client relationships which relies on a shared commitment to continuing trade and
future growth there has historically been a low number of debtor impairment provisions and bad debts expressed as a
percentage of revenue. The timing of customer payments for shipments and the requirement to pay a deposit mitigates
the risk of large debtor impairments.
Set out below is a summary of the concentration of receivables by currency:
AS AT 30 JUNE
United States dollar
Australian dollar
2023
US$’000
2022
US$’000
927
52
979
746
10
756
Movements in the provision for impairment of trade receivables that are assessed for impairment collectively are as
follows:
FOR THE YEARS ENDED 30 JUNE
Opening balance
Allowance for impairment recognised during the year
Receivables collected during the year
Receivables written off during the year as uncollectable
Closing balance
2023
US$’000
2022
US$’000
-
306
-
-
306
1,678
-
(3)
(1,675)
-
Impaired trade receivables
The impairment of the Group’s financial assets that are subject to credit losses where the expected credit loss model
has been applied is not material.
To measure the expected credit losses, the Company has applied the simplified approach to measure the lifetime
e expected credit losses for trade receivables using a provision matrix, estimated based on the Group’s historical credit
loss experience, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. The
Group has identified the Gross Domestic Product (“GDP”) of the countries in which it operates to be the most relevant
factors.
Receivables are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in
a repayment plan with the Group. Where receivables have been written off, the Group continues to engage in
enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognised in
the consolidated statement of comprehensive income.
72 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT (continued)
B) CREDIT RISK (continued)
Amounts recognised in profit or loss
During the year, the following losses were recognised in profit or loss in relation to impaired receivables:
FOR THE YEARS ENDED 30 JUNE
IMPAIRMENT LOSSES
Individually impaired trade receivables
C) LIQUIDITY RISK
2023
US$’000
2022
US$’000
306
306
-
-
Liquidity risk arises from Wellard’s financial liabilities and the subsequent ability to repay the financial liabilities as and
when they fall due.
In particular, Wellard’s chartering activity is exposed to liquidity risk due to its exposure to the spot market. Freight
rates earned might not be sufficient to cover its operating costs, required investments and financial commitments,
leading to a reduction in cash balances.
As part of its financial planning process, Wellard manages the liquidity risk through an appropriate financial planning
and liquidity risk management which are regularly reviewed and updated. Prudent liquidity risk management implies
maintaining sufficient availability of funding through an adequate amount of cash and committed credit facilities to
meet Wellard’s financial obligations.
Wellard manages its liquidity risk by monitoring and forecasting the total cash inflows and outflows expected on a
fortnightly basis. The forecast includes projections of cash outflows from overhead and supplier payments, interest
obligations, the repayment of debt facilities and capital expenditure when they fall due.
Maturities of financial liabilities
The following tables detail for the years 2023 and 2022, respectively, Wellard’s prospective cashflows for
its financing liabilities based on contractual repayment terms. The tables have been drawn up on the basis of
undiscounted cash flows on the earliest date in which Wellard can be required to pay.
FOR THE YEAR ENDED
30 JUNE 2023
<6
MONTHS
US$’000
6-12
MONTHS
US$’000
1-2
YEARS
US$’000
2-5
YEARS
US$’000
TOTAL
US$’000
CARRYING
AMOUNT
US$’000
Non-interest bearing
Fixed rate
Variable rate
3,713
99
2,468
6,280
-
12
-
12
-
22
-
22
-
23
-
23
3,713
156
2,468
6,337
3,713
149
2,439
6,301
FOR THE YEAR ENDED
30 JUNE 2022
<6
months
US$’000
6-12
months
US$’000
1-2
years
US$’000
2-5
years
US$’000
TOTAL
US$’000
Carrying
amount
US$’000
Non-interest bearing
Fixed rate
Variable rate
1,976
4,346
1,978
8,300
-
1,469
-
1,469
-
87
-
87
-
-
-
-
1,976
5,902
1,978
9,856
1,976
5,774
1,964
9,714
Working capital facility
Wellard’s working capital facilities include bunker trade finance facility with United Overseas Bank Limited (UOB) with
a limit of US$4.0 million and credit card facility of S$0.2 million.
73 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT (continued)
D) CAPITAL MANAGEMENT
Wellard’s objectives in managing capital are to:
•
safeguard Wellard’s ability to continue as a going concern, so to provide returns for shareholders and benefits
for other stakeholders;
ensuring a satisfactory return is made on any new capital invested; and
•
• maintain an optimal capital structure to reduce the cost of capital.
Capital is defined as the combination of shareholders’ equity, reserves and net debt. The Board is responsible for
monitoring and approving the capital management framework within which management operates.
Wellard manages its capital through various means, including:
•
•
•
raising or returning capital;
raising or repaying debt for working capital requirements, capital expenditure and acquisitions; and
adjusting the amount of ordinary dividends paid to shareholders
17. PROPERTY, PLANT AND EQUIPMENT
IMPROVEMENTS
US$’000
PLANT AND
EQUIPMENT
US$’000
RIGHT-OF-
USE ASSETS
US$’000
AS AT 30 JUNE 2023
Opening net book amount
Additions
Disposals
Foreign exchange revaluation
Depreciation expense
Closing balance
Cost
Accumulated depreciation and
impairments
Closing balance
AS AT 30 JUNE 2022
Opening net book amount
Additions
Foreign exchange revaluation
Depreciation expense
Closing balance
Cost
Accumulated depreciation and
impairments
Closing balance
81
2
-
(1)
(59)
23
536
(513)
23
37,886
3,247
(1)
(1)
(7,482)
33,649
107,285
(73,636)
33,649
75
71
(3)
(62)
81
538
(457)
81
43,973
1,448
(9)
(7,526)
37,886
110,217
(72,331)
37,886
1,160
108,981
(1,002)
158
(75,151)
33,830
TOTAL
US$’000
40,747
3,386
(1)
(3)
(10,299)
33,830
TOTAL
US$’000
49,297
1,696
(14)
(10,232)
40,747
2,780
137
-
(1)
(2,758)
158
5,249
177
(2)
(2,644)
2,780
9,930
120,685
(7,150)
2,780
(79,938)
40,747
IMPROVEMENTS
US$’000
PLANT AND
EQUIPMENT
US$’000
RIGHT-OF-
USE ASSETS
US$’000
A)
There is no property, plant and equipment pledged as security for the liabilities as disclosed in Note 11 (2022:
US$36,735,094).
74 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
17. PROPERTY, PLANT AND EQUIPMENT (continued)
B) The M/V Ocean Drover is operated by the Company under a long-term bareboat charter agreement (BBC), which
runs until 30 June 2032 and allows Wellard full access to offer the M/V Ocean Drover to customers for the transport
of livestock. The BBC is part of a standard hire-purchase style financing arrangement with Ruchira Ships Limited
(Ruchira), and includes a Memorandum of Agreement (MoA) in which Ruchira is legally obliged to redeliver the
vessel to Wellard on 1 September 2023.
Ruchira has included the M/V Ocean Drover in a package of secured assets under its own arrangements with its
lending bank, United Overseas Bank Limited (UOB). UOB has placed two registered mortgages on the M/V Ocean
Drover, which must be discharged or compromised or lifted by court order before the Vessel can be delivered to
Wellard by Ruchira in accordance with its legal obligations under the MoA.
There is a risk that Ruchira cannot satisfy UOB sufficiently to clear the mortgages on the M/V Ocean Drover. In
such circumstances, the redelivery of full legal title to the M/V Ocean Drover to Wellard will be delayed or
potentially prevented. Wellard does not have full visibility of the debt position between Ruchira and its bank.
Should Ruchira become insolvent, or any party seek to appoint liquidators to Ruchira, it is possible that liquidators
may challenge the continuation of Wellard’s BBC and/or MoA.
Wellard has mitigated this position so far by (i) putting the long-term BBC in place, and preserving Wellard’s legal
right to operate the vessel until 2032 at effectively no additional cost; and (ii) allowing Ruchira more time to conduct
asset sales and otherwise deal with UOB in a manner which discharges the Drover mortgages and redeliver legal
title of the vessel to Wellard.
The consequences of not receiving full legal title to the vessel include that the Company cannot refinance or offer
the vessel for sale.
C) 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:
Assets classified within Right-of-Use Assets
Property
Equipment
Vessel
Motor Vehicle
Lease liabilities
Current
Non-current
75 | WELLARD ANNUAL REPORT 2023
2023
US$’000
2022
US$’000
154
4
-
-
158
302
8
2,468
2
2,780
2023
US$’000
2022
US$’000
106
43
149
2,843
86
2,929
NOTES TO THE FINANCIAL STATEMENTS
17. PROPERTY, PLANT AND EQUIPMENT (continued)
(iii)
Depreciation during the year
The consolidated statement of comprehensive income shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Property
Equipment
Vessels
Motor Vehicle
2023
US$’000
2022
US$’000
208
5
2,543
2
2,758
205
5
2,422
12
2,644
Interest expense on lease liabilities during the financial year 2023 was US$125,365 (2022: US$368,989)
Lease expense not capitalised in lease liabilities – short-term leases was US$86,615 (2022:US$74,369).
Total cash outflow for all the leases during the financial year 2023 was US$3,037,480 (2022: US$2,963,740).
(iv)
(v)
(vi)
(vii) Additions of Right-of-use assets during the financial year 2023 was US$136,914 (2022: US$177,236).
18. INTANGIBLE ASSETS
AS AT 30 JUNE 2023
Opening net book amount
Additions
Foreign exchange revaluation
Amortisation expense
Closing balance
Cost
Accumulated amortisation
Closing balance
AS AT 30 JUNE 2022
Opening net book amount
Additions
Foreign exchange revaluation
Amortisation expense
Closing balance
Cost
Accumulated amortisation
Closing balance
SOFTWARE
US$’000
TOTAL
US$’000
1,158
-
(39)
(279)
840
2,677
(1,837)
840
1,158
-
(39)
(279)
840
2,677
(1,837)
840
SOFTWARE
US$’000
TOTAL
US$’000
1,574
-
(116)
(300)
1,158
2,782
(1,624)
1,158
1,574
-
(116)
(300)
1,158
2,782
(1,624)
1,158
Software consists of amounts spent on the implementation and maintenance of an enterprise resource planning
system in use since May 2016. Software is amortised over ten years.
76 | WELLARD ANNUAL REPORT 2023
19. PROVISIONS
AS AT 30 JUNE
CURRENT
Employee entitlements
NON-CURRENT
Employee entitlements
NOTES TO THE FINANCIAL STATEMENTS
2023
US$’000
2022
US$’000
55
55
29
29
79
79
20
20
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$54,863 (2022:
US$78,645) is presented as current, since the Group does not have an unconditional right to defer settlement for any
of these obligations.
20. ISSUED CAPITAL
The Company’s share capital comprises fully paid-up 531,250,312 (2022: 531,250,312) ordinary shares with no par
value, amounting to a total US$412,258,944 (2022: US$412,258,944). Fully paid ordinary shares carry one vote per
share and carry a right to dividends as and when declared by the Company.
No shares were issued during the financial year 2023.
21. COMMITMENTS
There was no significant capital commitment contracted and not recognised as liabilities at the end of the reporting
period.
22. SIGNIFICANT ITEMS
There are no other significant items to be disclosed for the financial year ended 30 June 2023.
23. AUDITOR’S REMUNERATION
FOR THE YEARS ENDED 30 JUNE
Fees in respect of the audit of the consolidated and parent
company financial statements
Other audit fees, principally in respect of audits of accounts of
subsidiaries in Singapore
Other assurance services
Total auditor’s remuneration
2023
US$’000
2022
US$’000
110
18
4
132
108
18
4
130
77 | WELLARD ANNUAL REPORT 2023
24. CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS
(a) Subsidiaries
Subsidiaries are entities controlled by Wellard Limited. Wellard Limited controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity.
The financial statements of subsidiaries are included in the consolidated financial report from the date that control
commences until the date that control ceases.
Interests held in controlled entities is set out below:
COUNTRY OF
INCORPORATION
2023
%
2022
%
PARENT ENTITY
Wellard Limited
SUBSIDIARIES OF WELLARD LIMITED
Wellard Feeds Pty Ltd1
Wellard Rural Exports Pty Ltd
Wellard Animal Processing Pty Ltd1
Wellard NZ Ltd
Wellard Singapore Pte Ltd
Wellard Ships Pte Ltd
Ocean Drover Pte Ltd
Niuyang Express Pte Ltd
Wellard do Brasil Agronegocios Ltda
Wellard Uruguay S.A.
Best Hayvancilik Sanayi Ticaret AŞ
Australia
Australia
Australia
Australia
New Zealand
Singapore
Singapore
Singapore
Singapore
Brazil
Uruguay
Turkiye
-
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Notes:
1. Wellard Feeds Pty Ltd and Wellard Animal Processing Pty Ltd were deregistered on 17 August 2022.
25. RELATED PARTY TRANSACTIONS
All transactions with related parties are recorded on an arms-length basis at commercial terms and conditions.
(a) Subsidiaries
Interests in subsidiaries are set out in Note 24(a).
(b) Key management personnel compensation
FOR THE YEARS ENDED 30 JUNE
Short-term benefits
Long-term benefits
Post-employment benefits
2023
US$’000
2022
US$’000
940
25
30
995
1,180
23
29
1,232
Detailed remuneration disclosures are available in the Remuneration Report on page 43.
78 | WELLARD ANNUAL REPORT 2023
25. RELATED PARTY TRANSACTIONS (continued)
NOTES TO THE FINANCIAL STATEMENTS
(c) Transactions with other related parties
FOR THE YEARS ENDED 30 JUNE
2023
US$’000
2022
US$’000
ENTITIES CONTROLLED BY KEY MANAGEMENT PERSONNEL
Technical shipping consultancy service rendered
2
16
(d) Outstanding balance from services rendered from related parties
As at 30 June 2023, there was no outstanding balance from services rendered from related parties (2022: US$4,379).
26. PARENT ENTITY
(a) Summary financial information
The individual financial statements for the parent entity (Wellard Limited) show the following aggregate amounts in
Australian Dollars:
AS AT 30 JUNE
NET ASSETS
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
FOR THE YEARS ENDED 30 JUNE
EQUITY
Issued capital
Share issue costs capitalised
Share-based payment reserve
Accumulated losses
Total equity
Loss for the period
Total comprehensive loss
2023
A$’000
2022
A$’000
4,150
12,849
(310)
(419)
7,535
16,602
(575)
(603)
12,430
15,999
2023
A$’000
2022
A$’000
581,656
(9,525)
18,014
581,656
(9,525)
18,014
(577,715)
(574,146)
12,430
15,999
3,569
3,569
4,627
4,627
(b) Guarantees provided by the parent entity
At 30 June 2023, the parent entity had provided guarantees to support the banking facilities in Singapore and
borrowings set out in Note 11.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2023 (30 June 2022: Nil).
79 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
26. PARENT ENTITY (continued)
(d) Contractual commitments for the acquisition of property, plant and equipment
None.
(e) Determining the parent entity’s 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.
27. 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, at 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 the 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
2023
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. The vested options were expired on 1 November 2022.
80 | WELLARD ANNUAL REPORT 2023
28. RESERVES
AS AT 30 JUNE
2023
Opening balance
Current year
movements
Closing balance
2022
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$’000
12,963
-
12,963
12,963
-
12,963
5,857
(178)
5,679
5,650
207
5,857
TOTAL
US$’000
(276,948)
(178)
(277,126)
(277,155)
207
(276,948)
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.
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.
29. ACCUMULATED LOSSES
AS AT 30 JUNE
Opening balance
Share options lapsed
Net (loss)/profit for the year
Closing balance
30. SUBSEQUENT EVENTS
2023
US$’000
2022
US$’000
(81,789)
(91,722)
-
(15,487)
(97,276)
-
9,933
(81,789)
Other than matters after 30 June 2023 disclosed in Note 11(i) and Note 17(B), there are no other significant events
occurred after balance sheet date.
81 | WELLARD ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
31. CONTINGENT ASSETS/LIABILITIES
(a) ALPHA COMMODITIES
In October 2017, Wellard Ships 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 obtained a judgment in the U.K. High Court proceedings against Alpha
Commodities S.A. in the amount of US$10,380,722.93 plus interest and costs.
Wellard no longer expects to be able to recover against this judgement.
Wellard has not been able to identify Alpha as being an entity with any financial substance in Brazil or elsewhere,
and cannot track any responsible persons who might be effectively pursued.
(b) SHAREHOLDER CLASS ACTION
Wellard has continued to prepare 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, pre-trial preparatory
work has been undertaken and both expert and lay-witness evidence has been prepared and exchanged between
the parties in advance of a mediation which is scheduled to take place in September 2023.
There is a possibility that the matter may settle at or after mediation. If that does not eventuate, the court has
set the matter down for trial in around June/July 2024.
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.
(c) CLAIM AGAINST THE AUSTRALIAN FEDERAL GOVERNMENT RE 2011 INDONESIAN CATTLE BAN
Wellard remains active in preparing a legal claim relating to losses incurred due to the 2011 ban on Australian
livestock exports to the Republic of Indonesia. On 2 June 2020, the Federal Court of Australia found in favour of
the lead applicant, Brett Cattle Company Pty Limited in representative proceedings (also known as a ‘class
action’) before the Federal Court brought against the former Minister for Agriculture, Forestry and Fisheries
Senator Joe Ludwig and the Commonwealth of Australia as the Respondents. Wellard’s claim is being made
following this successful litigation brought by the Brett Cattle Company.
Progress on this matter has been slow, and the Federal Court has ordered the parties to proceed concurrently
by way of both mediation and Court process to resolve various foundational issues that remain in dispute. The
concurrent processes are being undertaken in an attempt to assist the parties reach a global settlement sum and
to prevent unnecessary delay.
As reported in the Australian press, the Commonwealth has proposed an all-inclusive settlement sum to the
remaining claimant group of A$215 million.
The parties continue to work towards a resolution, with a further Court date yet to be set for consideration of the
foundational issues in dispute. The determination of these issues will be fundamental to the progression and
finalisation of the matter. Wellard cannot reliably anticipate the outcome of its legal claim at the date of this report.
It remains too early to make any estimate of the amount which may be recovered by Wellard. No contingency
has been raised in these accounts in respect of this class action.
(d)
INSURANCE CLAIM ON THE M/V OCEAN SWAGMAN STARBOARD ENGINE REPAIR
On 10 February 2023, the M/V Ocean Swagman experienced starboard engine failure after discharging cargo in
China. The vessel was navigated to Singapore, where she completed the repairs and her intermediate class
survey in early May 2023 over a period of 87.5 off-hire days. The Company has incurred costs amounted to
US$3.4 million, which was included in the consolidated statement of comprehensive income – Cost of Sales.
Insurance claims under the Hull & Machinery and Loss of Hire policies were submitted to insurers. The insurers
are processing the insurance claims and the final settlement amount has not been determined however
management expects that an amount of approximately US$3.5 million to US$4.0 million to be received and
accounted in FY2024.
82 | WELLARD ANNUAL REPORT 2023
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 2023, 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 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 2023 and of its
financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report.
We 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
terms such as services
contract
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
of contractual conditions and
to accurately
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
Ownership and Carrying value of Property, Plant and Equipment
Refer to Note 2.X and Notes 17 Property, Plant and Equipment
Property, plant and equipment (PPE) totalled
$33.8 million, the majority of which related to
vessels, as disclosed in Note 17.
One vessel is owned, the other is subject to a
bareboat charter financing arrangement until
June 2032 which allows Wellard full access to
offer
transport of
livestock. The bareboat charter includes a
MoA in which the third party is legally obliged
to customers
the
for
Our procedures included, amongst others:
• Verifying ownership of the two vessels and related
Bare Boat Charter and repurchase arrangements.
• 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 2023,
consideration of the utilisation, performance and
results derived from operating the vessel fleet and
Page | 84
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WELLARD LIMITED (CONTINUED)
Key Audit Matters (continued)
Ownership and Carrying value of Property, Plant and Equipment
Refer to Note 2.X and Notes 17 Property, Plant and Equipment
to redeliver the vessel to Wellard at 1
September 2023. The vessel has been
included in a package of secured assets
under an arrangement with the 3rd parties’
bank. The 3rd party must discharge the two
registered mortgages over the vessel before
it is able to meet its obligations under the MoA
to redeliver the vessel to Wellard. There is a
risk that the 3rd party can not clear the
mortgages and therefore the redelivery of the
legal title of the vessel to Wellard may be
delayed or potentially prevented. Wellard has
mitigated this position by putting the long-term
bareboat charter in place, preserving the legal
right to operate the vessel until 2032 which
allows the 3rd party more time to discharge the
vessel mortgages.
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 conditions.
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 2023.
losses were recorded
consideration
conditions.
of
any
adverse
economic
• 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
• Regarding the bareboat charter arrangement for
the Ocean Drover, we have:
̶ Held multiple discussions with the directors
regarding the current situation and the assets’
accounting treatment;
̶ Obtained legal correspondence and advice
regarding Wellard’s position up until audit
sign off; and
̶ assessed the appropriateness of the relevant
disclosures included in the financial report.
• Assessing the appropriateness of the relevant
disclosures included in Notes 2.X & 17 to the
financial report.
This was a key audit matter because of the
significance of the asset class to the Group
and the significant judgement involved in
indicators and
considering
estimating the recoverable amounts of these
assets,
the key
including determining
assumptions supporting the expected future
cash flows from these assets.
impairment
Page | 85
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WELLARD LIMITED (CONTINUED)
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Company’s annual report for the year ended 30 June 2023 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.
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 Company
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 Company 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_2021.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 2023.
In our opinion, the Remuneration Report of Wellard Limited, for the year ended 30 June 2023 complies
with section 300A of the Corporations Act 2001.
Page | 86
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WELLARD LIMITED (CONTINUED)
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 28th day of August 2023.
Page | 87
ASX ADDITIONAL INFORMATION
PICTURE
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 21 August 2023.
ASX ADDITIONAL INFORMATION
SUBSTANTIAL SHAREHOLDERS
No.
Registered Shareholder
1.
2.
3.
4.
Hongkong Fulida International Trading Company Limited
Bell Potter Nominees Ltd
BNP Paribas Noms Pty Ltd
One Managed Invt Funds Ltd
Number of shares
held
% of all shares
130,094,894
83,950,729
50,935,700
38,967,981
24.49
15.80
9.59
7.34
SHARES ON ISSUE
The total number of shares on issue is 531,250,312 and these shares are held by a total of 845 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
55
42
40
511
197
845
7,688
137,209
322,914
18,863,342
511,919,159
531,250,312
6.51
4.97
4.74
60.47
23.31
100
UNMARKETABLE PARCEL
The minimum parcel size at 21 August 2023 is per unit is 10,638 shares.
There are 141 shareholders that hold unmarketable parcels.
An “unmarketable parcel” is a parcel of shares that is worth less than A$500.
89 | WELLARD ANNUAL REPORT 2023
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.
17.
18.
19.
20.
Hongkong Fulida International Trading Company Limited
130,094,894
Bell Potter Nominees Ltd
BNP Paribas Noms Pty Ltd
One Managed Invt Funds Ltd
Innovation Bloom Limited
Vine Street Investments Pty Ltd
One Fund Services Ltd
Mr Zixiao Zhao
Mr Steven Boyd Taylor
Citicorp Nominees Pty Limited
Hamsar Holdings Pty Ltd
HSBC Custody Nominees (Australia) Limited
Mr David Allan Dixon & Ms Catherine Louise Ramm
Brazil Farming Pty Ltd
Dynamic Supplies Investments Pty Ltd
Ms Xia Zhao
BNP Paribas Nominees Pty Ltd
Jastal Family Investments Pty Ltd
Bultitude Investment Pty Ltd
Mr Lei Wang
Mr Feng Shi
Mr Ross Maxwell Hargreaves
83,950,729
50,935,700
38,967,981
36,881,588
34,126,009
18,320,453
7,250,000
5,937,097
5,127,307
4,799,100
4,158,163
3,960,588
3,500,000
3,000,000
3,000,000
2,734,036
2,000,000
2,000,000
1,835,992
1,835,723
1,800,000
Total
446,215,360
Balance of Register
85,034,952
Grand Total
531,250,312
24.49
15.80
9.59
7.34
6.94
6.42
3.45
1.36
1.12
0.97
0.90
0.78
0.75
0.66
0.56
0.56
0.51
0.38
0.38
0.35
0.35
0.34
84.00
16.00
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.
90 | WELLARD ANNUAL REPORT 2023
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).
91 | WELLARD ANNUAL REPORT 2023