YOWIE GROUP LTD
ABN 98 084 370 669
ANNUAL REPORT
FOR THE YEAR ENDED
30 JUNE 2019
CONTENTS
Company Directory
Chairman’s Message
Chief Executive Officer’s Report
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Audit Report
ASX Additional Information
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78
(Expressed in US Dollars (US$), unless stated otherwise)
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COMPANY DIRECTORY
DIRECTORS:
KEY MANAGEMENT:
COMPANY
SECRETARY:
REGISTERED AND
PRINCIPAL OFFICE:
Mr Louis Carroll
Mr Mark Schuessler
Mr Neville Bassett
Mr Wayne Brekke
Ms Cynthia Thayer
Mr Neville Bassett
Level 4
216 St Georges Terrace
Perth WA 6000
Telephone: (08) 6268 2640
ABN:
98 084 370 669
COMPANY WEBSITE ADDRESS:
AUDITORS:
SHARE REGISTRY:
www.yowiegroup.com
www.yowieworld.com
Deloitte Touche Tohmatsu
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
Link Market Services Limited
Level 12, QV1 Building
250 St Georges Terrace
Perth WA 6000
Telephone: 1300 554 474 or +61 2 8280 7111
ASX CODE:
YOW
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CHAIRMAN’S MESSAGE
Fellow Shareholders,
The 2019 financial year has been a disappointing one for all of us. While we continue to make
progress on the road to profitability, the rate of that progress has been slower than we
planned.
We have maintained attractive gross margins and careful cost control but our modest sales
performance resulted in us not achieving positive cash from operations, as we told you that we
would. Nevertheless, the cash burn was reduced considerably to less than half that of the
previous year. At the end of June, we had cash of US$16.4 million and I am pleased to report
that our cash balance is still above US$16 million currently, after a positive operating cash flow
in the month of August. This is encouraging but it does not mean that we will be cash positive
for every month from now onwards.
However, our progress with cash management and conservation has provided us with the
confidence to make an initial capital return of 2c per share (AUD), which will be put up for your
approval at our AGM in November.
We have now diversified away from being a one SKU company, with our Bites product line
selling in successfully in May and our Gummies product launching next month.
Your board and management have very much appreciated your support in enabling us to
defeat the resolution for my removal from the board and to resist unwelcome takeover offers.
Please be assured that we are keenly aware of our responsibility to justify your continued
support. I assure you that we will be making every effort to do so as this financial year
progresses.
Louis Carroll
Non-Executive Chairman
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CHIEF EXECUTIVE OFFICER’S REPORT
Although financial year 2019 was difficult, we continue to make progress in our priority areas
to return Yowie to a positive sales growth trajectory and improved financial performance. Due
to heightened competition from confectionary competitors in the US and in the Australian
novelty confectionary category, global net sales were US$14.4 million, an 18% decline versus
the previous year.
The Group did make operating performance progress with an EBITDA loss, before share-based
payments expense, of US$2.8 million compared to US$5 million loss in FY2018. Yowie also
made considerable improvement in operating cash flow with an outflow of US$1.6 million, a
70% improvement compared to last year’s outflow of US$5.5 million.
Strategically, we made solid progress in delivering on our key priorities:
1. Continued distribution expansion in the US and Australia through aggressive retail trade
investment, focusing on the Grocery and Convenience/Petrol channels and portfolio
expansion. The stronger our distribution, the more available Yowie products to our
consumer.
2. Expanding our product portfolio with innovative surprise-inside treats, focusing on our
mission of teaching children about conservation and endangered species, to broaden
our self-presence and increase Yowie brand awareness.
3. Continued financial discipline is critical to our achieving profitability. Our focuses are:
a. Continual evaluation of our cost structure to become more efficient, sustain
healthy margins and allow for more marketing and retail trade investment.
b. Cash management, specifically in relation to the timing associated with toys and
other raw materials purchases.
4. Marketing investment to drive brand awareness, collectability and social media
optimization to deliver website traffic, YouTube views, Facebook reach and influencer
engagement.
We were successful delivering the following results:
1. Gained US distribution across all channels to 45.0% of stores carrying Yowie based on
Nielsen ACV (All Commodity Volume) xAOC (eXtended® All Outlets Combined: Food,
Drug, Mass and Convenience) from 39.8% the previous year.
a. Food channel increased to 20.8% from 16.2%
b. Convenience channel increased to 23.0% from 14.1%
c. Drug channel increased to 22.1% from 17.1%
d. Mass channel increased to 97.7% from 96.6%
We have commitments from the 2nd and 4th largest grocery chains and the largest dollar store
chain with ranging in FY2020. Though we saw increases during FY2019, there is still significant
opportunity for expansion, especially in the important Food and Convenience channels.
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CHIEF EXECUTIVE OFFICER’S REPORT
2. New product launches:
a. Successfully launched new single serve Yowie Bites into the US’s largest retailer,
along with other major retailers committing to Q2 and Q3 launches.
b. Announced a single serve Gummy + Pet Surprise with acceptance into the US’s
largest retailer starting October 2019 and other major retailers in Q2 and Q3.
c. Major AUS retailer has agreed to range Bite Sharebag and Gummy Sharebag in a
novelty set test in October.
3. Our new series, Wild Water, launched in the US and Australia simultaneously. We will
continue to launch 2 new series annually.
4. The Group made significant progress on our path to positive EBITDA and cash flow.
a. EBITDA loss, before share-based payments expense, was US$2.8 million, a 44%
reduction compared a loss of US$5 million in the previous year. Continued cost
reductions and overall fiscal discipline across the company trimmed losses.
b. Gross Margins continue to remain healthy and above industry standards near 50%
allowing confidence in investing in retail opportunities.
c. Operating cash flow for the year was an outflow of US$1.6 million, a 70%
improvement compared to last year’s outflow of US$5.5 million due to tighter
cash control and improved EBITDA.
In the US market, sales declined 20% due to the increased competitive activity in the
confectionary category. Several global competitors made large investments to respond to the
global surprise inside competitor which spent heavily on retail and media level for the 2018
Holiday period. The result was significant share gains by the surprise inside competitor
propelling it to the number 1 immediate consumption chocolate item in the US. Other novelty
competitors were also down overall. With the change in the category landscape, Yowie is still a
significant part of the category, as the #3 overall chocolate item in $’s per store per week and
notably #3 in Food and #14 at the largest US retailer.
We recorded an impairment charge of US$1.29 million to adjust the value of idle production
equipment. The production equipment became idle during the year as we commissioned new
equipment which resulted in an improved efficiency of the production plant and lower
production cost. In addition to this, we have completed an impairment testing, as required
under the Australian Accounting Standard, which indicated an impairment charge of US$0.5
million to be recorded against the Group’s non-current assets.
Our outlook continues to be aggressively meeting our strategic priorities to get us to
profitability and positive cash flow by expanding distribution, investing in the trade and
maintaining fiscal discipline. Our strategic priorities for FY2020 are:
1. Expanding distribution in the US and Australia across all channels of trade, including E-
Commerce, to provide more buying opportunities for consumers.
2. Developing and bringing to market new items consistent with our brand mission to
educate consumers about the natural world, conservation and endangered species.
3. Launching new series 2 times per year.
4. Investing in the retail trade to effectively compete with competition.
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CHIEF EXECUTIVE OFFICER’S REPORT
5. Improving our financial performance with revenue growth, cost savings and tighter cash
management.
We remain confident in our ability to grow the top line, get to profitability and turn cash flow
positive in the foreseeable future. As we have stabilized the business and have over US$16.4
million in cash, we announced a 2c per share (AUD) capital return that shareholders will vote
on at our Annual General Meeting, with scope for additional capital returns. We certainly
appreciate the support of the Yowie shareholders and are determined to provide a return on
their investment.
Mark Schuessler
Managing Director & Global Chief Executive Officer
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DIRECTORS’ REPORT
Your Directors submit their report together with the financial report of Yowie Group Limited
(“the Company”) and the consolidated entity (“the Group”) for the year ended 30 June 2019.
DIRECTORS
The names and details of the Company’s Directors in office during the financial year and until
the date of this report are as follows. Directors were in office for this entire period unless
otherwise stated.
As at the date of this report, the Company does not have an Audit, Remuneration or
Nomination Committee of the Board of Directors. The full Board assumes the responsibilities
of these individual committees. Given the size of the Company, it is felt that separate
committees cannot be warranted but as the Company grows, these committees may be
established.
Mr Louis Carroll
Non-Executive Chairman
Qualifications: BA (Hons) in English
Mr Carroll has had a successful international career, culminating in CEO and Chair roles, across
a range of private and publicly owned companies.
He has had executive roles with Mars in Australia and the United Kingdom, and is also a former
General Manager of AFTA Travel Insurance. He established the TeleTech business in Australia
which grew to become TeleTech Asia Pacific with revenues of more than A$200 million and
more than 4,000 employees in six countries under his leadership. He was a Director of Cover-
More through its Initial Public Offering in 2013, becoming Chairman two years later and driving
that Company’s successful sale in 2017 to Zurich. He now chairs Cover-More as a wholly
owned subsidiary of Zurich.
He also has numerous early stage technology investments and acts as an advisor to some of
these.
Mr Mark Schuessler
Global Chief Executive Officer
Managing Director
Qualifications: BSBA, MBA Finance
Mr Schuessler is an experienced senior executive leader with more than 30 years’ U.S. and
international markets experience. Mr Schuessler has extensive cross discipline and cross
category operational leadership experience in the consumer packaged goods industry with
Doumak Inc., The Campbell Soup Company, Procter and Gamble and early financial roles in
the printing and banking industries.
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DIRECTORS’ REPORT
DIRECTORS (continued)
Mr Mark Schuessler (continued)
Mr Schuessler was President and Chief Operating Officer of Doumak Inc. from 2013, a
privately held US$100+ million confectionery manufacturer of the Campfire brand, private
label marshmallows distributed throughout the U.S. and the Rocky Mountain brand
distributed in more than 70 countries globally. During his leadership period, the Company
experienced annual top line double digit growth and a significant increase in the bottom line
through increased productivity, new item launches and a global market focus. Prior to being
President and Chief Operating Officer, Mr Schuessler was Vice President and Chief Operating
Officer of Sales and Marketing with significant sales and profit growth.
Mr Neville Bassett AM
Non-Executive Director (appointed 5 August 2019)
Company Secretary
Qualifications: BCom, FCA
Mr Bassett is a chartered accountant with more than 30 years of experience. He has been
involved with a diverse range of Australian public listed companies in directorial, company
secretarial and financial roles.
Mr Glen Watts
Non-Executive Director (resigned 5 August 2019)
Qualifications: BEng (Chemical) (Hons)
Mr Watts is a highly strategic and commercial Senior Executive with a strong track record of
driving transformational business performance and profitability across multiple geographies
within a leading multinational across the fast-moving consumer goods (“FMCG”) and
manufacturing sectors.
Mr Tim Kestell
Non-Executive Director (appointed 17 May 2019; resigned 5 July 2019)
Qualifications: BCom
Mr Kestell has over 20 years’ experience in capital markets.
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DIRECTORS’ REPORT
DIRECTORS (continued)
Mr William Johnson
Non-Executive Director (resigned 8 October 2018)
Qualifications: MA (Engineering), MBA, MAICD
Mr Johnson has experience in corporate governance, business strategy and operations,
investment analysis, finance and execution.
Directorships of other listed companies during the past three years
Name
Company
Mr L Carroll
Mr M Schuessler
Mr N Bassett
Cover-More Group Limited
No other directorships
PharmAust Limited
Auris Minerals Limited
Pointerra Limited
Metalsearch Limited
Quantify Technology Holdings Limited
Longford Resources Limited
Meteoric Resources Limited
Vector Resources Limited
Ceased
13 Apr 2017
-
Current
Current
Current
Current
1 Mar 2017
31 Oct 2017
4 Dec 2017
4 Jan 2018
Interests in the shares and options of the Company
As at the date of this report, the Directors (including their personal related parties) held the
following ordinary shares, options and rights over ordinary shares in the Company as set out
below.
Name
Mr L Carroll
Mr M Schuessler
Mr N Bassett
Total
Number of
Ordinary Shares
1,021,739
1,075,323
100,000
2,197,062
Number of Options
-
-
-
-
Number of Rights
543,478
132,925
-
676,403
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DIRECTORS’ REPORT
SENIOR EXECUTIVES
Mr Wayne Brekke
Global Chief Financial Officer (appointed 14 November 2018)
Qualifications: BBA, MBA Finance, CPA
Mr Brekke is a senior finance executive with over 30 years of broad US and international
finance experience. Mr Brekke has held extensive finance leadership positions in food,
consumer products and manufacturing with global companies such as, McDonald’s, Kraft
Foods and AC Nielsen.
Prior to joining Yowie Group Limited, Mr Brekke was the Group Controller for the Garvey
Group, a subsidiary of Orora Limited (ASX: ORA) where he successfully implemented various
operational efficiencies.
Ms Cynthia Thayer
Global Chief Marketing Officer (appointed 3 December 2018)
Qualifications: BA
Ms Thayer has over 25 years of marketing expertise in key areas including brand architecture
development, market research, consumer packaged goods (CPG) advertising across traditional
and digital channels, retail and shopper marketing, licensing, toy design and new product
development. Ms Thayer also has broad marketing expertise in food, consumer products,
manufacturing and advertising agencies with the Chamberlain Group, TPN, Flair
Communications, Creata and the Marketing Store.
Ms Thayer came from the largest global manufacturer of garage door openers, The
Chamberlain Group, managing its newest product development growth area into the smart
home category. She was a key player in bringing their newest smart technology brand to life
from the ground up, then building out and implementing its go-to-market plan across TV
advertising, digital advertising, SEO, social media, PR and retail merchandising.
Mr Cove Overley
Global Chief Marketing Officer (resigned 26 December 2018)
Qualifications: BA (Toy Design) and AD (Industrial Design)
Mr Overley has extensive experience in commercial and brand experience in various
industries.
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DIRECTORS’ REPORT
PRINCIPAL ACTIVITY
Yowie Group Limited is a global brand licensing Company, specialising in the development of
consumer products designed to promote learning, understanding and engagement with the
natural world through the adventures and exploits of six endearing Yowie characters.
Educating children and adults about the environment and ecology and ‘Save the Natural
World’ is at the heart of the Yowie proposition. Yowie Group Limited employs its company-
owned intellectual property rights to supply Yowie branded chocolate confectionery product, a
digital platform and Yowie branded licensed consumer products. The Group’s vision for the
Yowie brand is to distribute on a widening basis the Yowie product in the US (United States of
America) and ANZ (Australia and New Zealand) with further international expansion.
OPERATING AND FINANCIAL REVIEW
During the financial year the Group continued to focus on building a strong sales and
distribution network both in the US and ANZ markets, with some updates below.
Sales and Distribution
Global net sales for the year ended 30 June 2019 were US$14.43 million, 18% lower than
the previous corresponding period.
The slowdown in sales is primarily due to increased significant competitive activity in the
US. Several competitors made large investments to respond to the global surprise-inside
competitor which launched in December 2017 and increased its investments again in
November 2018. The effect of this heavy investment was the global surprise-inside
competitor made large market share gains and is expanding its leadership as the #1
selling chocolate item. The Group’s other major competitors’ market share, despite
increasing their own investments, were flat or declined. Other novelty competitors were
down overall.
Despite the decline in sales during the current period, top lines sales are now being
driven by new customer distribution in the US and AUS, investments in key customer
retail programs and delivering more new products to grow brand awareness and expand
shelf presence of the Yowie brand.
US distributions across all channels continues to increase. The Group expanded to
divisions of Kroger (#2 Grocery in the US), Ahold (#4 Grocer in the US), and Dollar
General (#1 Dollar Store Chain with over 15,000 locations nationally).
Expansion into new retailers in the US market also include commitments from several
regional grocery chains, Bashas’ with 118 stores in Arizona, Homeland Stores with 90
stores in Oklahoma and Dierbergs Markets with 25 stores in Missouri.
There are still significant opportunities to expand distribution, with the Group’s focus on
the Food and Convenience channels.
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DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW (continued)
Sales and Distribution (continued)
For the 52 weeks ending 13 July 2019 compared to the same period last year, ACV%*:
2018
Channel
39.8
Total US
14.1
Convenience
16.2
Food
17.1
Drug
Mass
96.6
* Percentage relates to the Nielsen measurement of the numbers of stores that carry Yowie brand,
Change
+5.2
+8.9
+4.6
+5.0
+1.1
2019
45.0
23.0
20.8
22.1
97.7
indicating product availability to the consumer based on ACV (All Commodity Volume)
The Australian market continues to be a focal point for our growth. With full distribution
in Woolworths, the Group is getting more aggressive to compete nationally in a very
competitive and entrenched novelty segment. Yowie has been accepted in Caltex, the
largest service station operator in Australia. The Group expects more distribution
throughout Australia and growth in New Zealand.
Marketing
The Group continued to raise Yowie brand awareness by connecting with its core
consumer, families with children who are chocolate lovers and conscious about eco
conservation. To achieve this, the Group has realigned its social media campaign,
provided more family digital experiences and partnered with Wildlife Conservation
Society.
The Group’s social media optimisation has resulted in significantly higher traffics in
Yowie World website (www.yowieworld.com), Facebook page, Instagram page and
YouTube channel.
The Group also continued its focus on providing unique digital experiences to keep the
customers engaged with the Yowie brand by continuously improving its collector app,
YowieScopeTM, and its digital app game, Yowie YopterTM.
The Group successfully launched Yowie Bites in the US and the new Wild Water series in
both the US and Australian market.
The Group also announced a new product, a combination of single serve gummy and pet
surprise, which has already been accepted by its largest retail customer in the US.
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DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW (continued)
Corporate
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In November 2018, Mr Wayne Brekke joined the Group as Global Chief Financial Officer
(GCFO) with extensive financial leadership positions in food, consumer products and
manufacturing companies such as McDonald’s, Kraft Foods and AC Nielsen.
In December 2018, Ms Cynthia Thayer joined the Group as Global Chief Marketing
Officer (GCMO) with over 25 years of marketing expertise in key areas including brand
architecture development, market research, CPG consumer advertising across
traditional and digital channels, retail and shopper marketing, licensing, toy design and
new product development.
Ms Thayer replaced Mr Cove Overley who left the Group to pursue other interests. The
Board thank Mr Overley for his contribution to the Yowie brand during his tenure.
These organisational changes increase the Group’s operations capability while keeping
the cost neutral with other staff changes. This serves as a continuation of our
commitment to drive growth, reduce cost, expand distribution, improve efficiency and
enhance innovation.
Mr William Johnson resigned as Non-Executive Director on 8 October 2018.
Mr Tim Kestell joined the Board as Non-Executive Director on 17 May 2019 and resigned
subsequently on 5 July 2019.
Mr Glen Watts resigned as Non-Executive Director on 5 August 2019 and Mr Neville
Basset agreed to join the Board in an interim capacity.
During the financial year, on two separate occasions, the Group received off-market
takeover bids from Keybridge Capital Limited (“Keybridge”) and Aurora Funds
Management Limited (“Aurora”) offering a bid price of 9.2 cents and 9 cents per Yowie
share respectively. The Board considers the unsolicited approach by both Keybridge and
Aurora to be highly opportunistic. The advised bid price fundamentally undervalues
Yowie’s business, brand, intellectual property and significant cash balance.
Keybridge and Aurora had subsequently decided to not proceed with the bids.
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DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW (continued)
Corporate (continued)
On 8 August 2018, the Group received a request from Aurora to hold a general meeting
in accordance with Section 249D of the Corporations Act. Aurora had subsequently
withdrawn their request on 8 October 2018.
On 4 June 2019, the Group again received a request to hold a general meeting pursuant
to Section 249D of the Corporations Act from Keybridge. The result of the general
meeting which was held on 5 August 2019 showed that Resolution 2 which called for
removal of Mr Louis Carroll as a Director was defeated, while Resolutions 1 and 3 for the
removal of Mr Tim Kestell and Mr Glen Watts as Directors respectively were withdrawn.
The Group announced on 5 July 2019 to make a 2c per share (AUD) return of capital,
subject to shareholders’ approval, with scope for additional capital returns.
Outlook
The Group has plans in place to deliver net sales growth, positive EBITDA and positive cash run
rate in the next financial year based on continuing to deliver on our key priorities.
Expanding distribution in both the US and Australian markets. The Group has already
commitments from major retailers to range Yowie products beginning in Q1 of FY2020
as discussed under Sales and Distribution section.
Expanding Yowie product portfolio with innovative surprise inside treats, focusing on
our mission of teaching children and parents about conservation and endangered
species, will broaden shelf presence and increase Yowie brand awareness. The launch of
Yowie Bites and Yowie Gummies is the beginning of that portfolio innovation.
Investment in the retail trade is critical for us to succeed in the highly competitive
confectionary category. The Group has solid plans in place with major retailers in the US
and Australian to showcase Yowie brand with consumers.
Financial Overview
The Group maintained a very healthy Gross Margin at 48% of net sales allowing the
Group to invest with retailers and marketing where appropriate.
The Group made a significant improvement on EBITDA (Earnings before Interest, Taxes,
Depreciation and Amortisation) during the year compared to last year.
The Group’s EBITDA loss, before share-based payments expense, for the year ended 30
June 2019 was US$2.8 million, a 44% improvement compared to an EBITDA loss of US$5
million in the previous year. This was achieved by better fiscal discipline, with a focus on
cost-saving measure across all areas of the business.
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DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW (continued)
Financial Overview (continued)
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The Group recorded an impairment charge of US$1.29 million to adjust the value of idle
production equipment. The production equipment became idle during the year as we
commissioned new equipment which resulted in an improved efficiency of the
production plant and lower production cost.
In addition to this, The Group had also completed an impairment testing, as required
under the Australian Accounting Standard, following the identification of impairment
indicators, including the fact that the Group’s market capitalization is less than the net
assets of the Group. The result of this impairment testing indicated an additional
impairment charge of US$0.5 million to be recorded against the Group’s non-current
assets. Refer to Note 12 for further details on the impairment testing.
Income tax expense for the year ended 30 June 2019 of US$0.65 million relates largely
to the derecognition of deferred tax assets which is a non-cash expense.
Net loss after tax for the year ended 30 June 2019 is US$5.1 million compared to a net
loss after tax of US$4.9 million in the previous corresponding period. The increase in net
loss after tax is primarily due to non-cash expenses in relation to the impairment of non-
current assets and the derecognition of deferred tax assets as discussed above.
The net assets of the Group decreased by 19% to US$24 million as at 30 June 2019,
down from US$29.6 million as at 30 June 2018. The decrease in net assets is mainly due
to the same reasons stated in the previous point.
As at 30 June 2019 the Group’s consolidated cash position was US$16.4 million (30 June
2018: US$19.5 million).
The Group made a considerable improvement in its operating cash flow during the year.
Operating cash outflows for the year ended 30 June 2019 were US$1.6 million, a 71%
improvement compared to the previous year’s cash outflows of US$5.5 million. The
improvement in operating cash flow is consistent with the improvement in EBITDA
discussed above.
Capital, funding and liquidity are managed at the corporate level. A summary of the cash
flows for the Group is as follows:
Cash outflows used in:
- Operating activities
-
Investing activities
- Financing activities
Net cash outflows for the year
US$
(1.60 million)
(1.36 million)
-
(2.96 million)
Opening cash
Effect of foreign exchange movements
Closing cash balance
19.47 million
(0.15 million)
16.36 million
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DIRECTORS’ REPORT
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the Directors, there were no matters that significantly affected the state of
affairs of the Group during the financial year, other than those referred to in the review of
operations.
DIVIDENDS
The Directors recommend that no amount be paid by way of dividend. No dividend has been
paid or declared since the end of the financial year.
DIRECTORS' MEETINGS
The number of meetings attended by each Director during the year was as follows:
Director
Mr L Carroll
Mr M Schuessler
Mr N Bassett 1
Mr G Watts
Mr T Kestell
Mr W Johnson
1 Mr N Bassett attended the meetings in his capacity as the Company Secretary prior to his
Eligible to Attend
5
5
5
4
1
2
Attended
5
5
5
4
1
2
appointment as Non-Executive Director on 5 August 2019.
SHARES UNDER OPTION
There were no unissued ordinary shares under options.
Unissued ordinary shares under rights outstanding at 30 June 2019 are as follows:
Service and
Performance Rights
Service rights
Service rights
Service rights
Service rights
Number of
Securities
142,511
132,925
271,739
271,739
818,914
Exercise Price
(A$)
-
-
-
-
Expiry Date
12 Dec 2019
12 Jun 2020
18 Sep 2024
18 Sep 2025
Shares issued as a result of the exercise of options
No shares were issued as a result of the exercise of options during the year ended 30 June
2019, including the period up to the date of this report.
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DIRECTORS’ REPORT
EVENTS SUBSEQUENT TO BALANCE DATE
The Group announced on 5 July 2019 to make a 2c per share (AUD) return of capital, subject to
shareholders’ approval, with scope for additional capital returns.
On 5 August 2019, the Group held a general meeting at a request from Keybridge in pursuant
to Section 249D of the Corporations Act. The result of the meeting showed that Resolution 2
which called for removal of Mr Louis Carroll as a Director was defeated, while Resolutions 1
and 3 for the removal of Mr Tim Kestell and Mr Glen Watts as Directors respectively were
withdrawn.
Other than the matters noted above, no circumstances or events have arisen subsequent to
the end of the period, that have had, or are likely to have, a material impact on the financial
statements.
LIKELY DEVELOPMENTS
Information on likely developments in the operations of the Group is contained within the
operating and financial review.
REMUNERATION REPORT (audited)
This Remuneration Report outlines the Director and Executive remuneration arrangements of
the Company and the Group in accordance with the requirements of the Corporations Act
2001 and its Regulations. For the purposes of this report, Key Management Personnel (KMP) of
the Group are defined as those persons having authority and responsibility for planning,
directing and controlling the major activities of the Company and the Group, directly or
indirectly, including any Director (whether Executive or otherwise) of the parent company.
The Directors present the Yowie Group Limited FY2019 remuneration report, outlining key
aspects of our remuneration policy and framework, and remuneration awarded this year.
The report is structured as follows:
(a)
(b)
(c)
(d)
(e)
(f)
Key management personnel (KMP) covered in this report
Remuneration policy and link to performance
Elements of remuneration
Remuneration expenses for KMP
Contractual arrangements for KMP
Equity instrument disclosures relating to Key Management Personnel
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DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(a)
Key Management Personnel (KMP) covered in this report
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Name
Mr Louis Carroll
Mr Mark Schuessler
Mr N Bassett
Mr Glen Watts
Mr Tim Kestell
Mr William Johnson
Mr Wayne Brekke
Ms Cynthia Thayer
Mr Cove Overley
Position
Non-Executive Chairman
Global Chief Executive Officer
Managing Director
Non-Executive Director (appointed 5 August 2019)
Company Secretary (not considered as KMP)
Non-Executive Director (resigned 5 August 2019)
Non-Executive Director (appointed 17 May 2019; resigned 5 July 2019)
Non-Executive Director (resigned 8 October 2018)
Global Chief Financial Officer (appointed 14 November 2018)
Global Chief Marketing Officer (appointed 3 December 2018)
Global Chief Marketing Officer (resigned 26 December 2018)
(b)
Remuneration policy and link to performance
The Board of Directors
is responsible for determining and reviewing compensation
arrangements for the Directors and Executive officers. The Board will assess the
appropriateness of the nature and amount of emoluments of such officers on a periodic basis
by reference to relevant employment market conditions with the overall objective of ensuring
maximum stakeholder benefit from the retention of a high quality Board and Executive team.
From time to time, the Board engages an external remuneration consultant to assist with
reviewing of the Group’s remuneration policy.
In particular, the Board aims to ensure that remuneration practices are:
competitive and reasonable, enabling the Company to attract and retain key talent;
aligned to the Company’s strategic and business objectives and the creation of
shareholder value;
transparent and easily understood; and
acceptable to shareholders.
To assist in achieving these objectives, the Board has linked the nature and amount of
executive KMP remuneration to the Company’s financial and operational performance.
Remuneration paid to the Company's Directors and Executives is also determined having
regard to the cash available to the Company.
At the Annual General Meeting (“AGM”) held on 8 October 2018, shareholders holding
approximately 39% of eligible votes cast a ‘No’ vote in relation to the adoption of the
remuneration report for the year end 30 June 2018. The Company, therefore, received what is
known as a ‘First Strike’ under the Amendments to the Corporations Act. The resolution was
still passed as an ‘ordinary resolution’.
The Board has had careful regard to the outcome of the vote and decided that no bonus
incentives were granted to the KMPs during the current financial year.
17 |
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DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(b)
Remuneration policy and link to performance (continued)
D
Executive KMP are those directly accountable for the operational management and strategic
direction of the Company.
Having regard to the number of members currently comprising the Company’s Board and the
stage of the Company’s development, the Company does not have a separately established
remuneration committee. The functions that would be performed by a remuneration
committee are currently performed by the full Board.
Remuneration framework
Element
Fixed annual
remuneration
(FR)
Short-term
incentives
(STI)
Long-term
incentives
(LTI)
Purpose
Provide competitive market salary
monetary benefits.
including superannuation and non-
Reward available for meeting pre-determined performance hurdles within a
12-month time period.
Performance pay is ‘at risk’ such that if performance hurdles are not met, the
payment is not made, other than at the discretion of Directors to cover
unforeseen circumstances.
Performance pay may be paid in cash or in the form of share-based
compensation at the Board’s absolute discretion through participation in the
YOW Employee Incentive Plan (EIP) through participation in the annual grants
of service rights or performance rights where vesting are subject to
performance hurdles.
Performance hurdles are aligned to long-term shareholder value.
Performance rights are ‘at risk’ such that if performance hurdles are not met,
the performance rights do not vest.
The long term incentive once determined will be paid in cash or awarded as
fully vested service rights.
Performance rights are paid in the form of share-based compensation
through participation in the YOW Employee Incentive Plan (EIP).
Service Rights One off issuance subject to Board’s discretion to attract and retain high
calibre employee. Vesting of rights subject to Employee remaining employed
by the Company on the vesting date.
18 |
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D
DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(b)
Remuneration policy and link to performance (continued)
Balancing short-term and long-term performance
Annual incentives are set at a maximum of 100% of fixed remuneration, in order to drive
performance without encouraging undue risk-taking. Long-term incentives are assessed over a
two or three year period and are designed for the achievement of long-term growth in
shareholder returns.
Assessing performance
The Board is responsible for assessing performance against KPIs and determining the STI and
LTI to be paid. To assist in this assessment, the Board receives detailed reports on performance
from management, which are based on independently verifiably data such as financial
measures, market share and data from independently run surveys.
Minimum shareholding and holding conditions
All Directors and employees are encouraged to own Yowie shares. The Company does not have
a formal minimum shareholding policy or mandatory holding condition on awarded shares.
However, it is important to note that the nominal value of share rights is determined at the
commencement of the performance period motivating executives to hold shares and grow
shareholder value.
Use of remuneration consultants
On an as-needed basis, the Company may engage a remuneration consultant to provide
various services in relation to executive KMP remuneration and the Yowie Employee Incentive
Plan (EIP). During the year ended 30 June 2019, the Company has not engaged any
remuneration consultant.
19 |
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D
DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(c)
Elements of remuneration
(i)
Fixed annual remuneration (FR)
Fixed remuneration consists of a base remuneration package, which includes Directors’ fees (in
the case of Directors), salaries, consulting fees, employer contributions to superannuation
funds and non-monetary benefits such as health insurance and tax advisory services.
Fixed remuneration levels for Directors and Executive officers will be reviewed annually, or on
promotion by the Board through a process that considers the
individual’s personal
development, achievement of key performance objectives for the year, industry benchmarks
wherever possible and CPI data.
Total remuneration for Non-Executive Directors is determined by resolution of shareholders.
The Board determines actual payments to Directors and reviews their remuneration annually,
based on market relativities and the duties and accountabilities of the Directors. The maximum
available aggregate remuneration approved for Non-Executive Directors is A$200,000. Non-
Executive Directors do not receive any other retirement benefits other than a superannuation
guarantee contribution required by government regulation, which was 9.5% of their fees for
the year ended 30 June 2019.
Non-Executive Directors may provide specific consulting advice to the Company upon direction
from the Board. Remuneration for this work is made at market rates. No such advice was
provided in the year ended 30 June 2019.
(ii)
Short-term incentives (STI)
Feature
Max opportunity
Performance metrics
100% of fixed remuneration or as stipulated in the respective employment contract.
Description of STI
The STI metrics align with our strategic priorities of market competitiveness, achieving
financial budget, operational excellence, shareholder value and fostering talented and
engaged people.
Achievement of award
and Board’s discretion
The Board has discretion to adjust remuneration outcomes up or down to prevent any
inappropriate reward outcomes, including reducing (down to zero, if appropriate) any
deferred STI award.
Delivery of STI
Exercise price
Forfeiture and
termination
100% of the STI award is paid in cash or equity, subject to meeting vesting conditions of
performance hurdles. The mode of delivery is at the discretion of the Board and subject
to shareholders’ approval at AGM.
Exercise price of options is determined based on premium to share price at which the
company’s shares are traded on the Australian Stock Exchange on date of the grant.
Exercise price of performance rights are generally nil.
Options and performance rights will lapse if performance conditions are not met.
Options and performance rights will be forfeited on cessation of employment unless the
Board determines otherwise in its sole and absolute discretion, e.g. in the case of
retirement due to injury, disability, death or redundancy.
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D
DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(c)
Elements of remuneration (continued)
(iii)
Long-term incentives (LTI)
Feature
Max opportunity
100% of fixed remuneration or as stipulated in the respective employment contract.
Description of LTI
Performance metrics
The LTI metrics align with our strategic priorities of market competitiveness, achieving
financial budget, operational excellence and long-term shareholder value.
Delivery of LTI
Exercise price
Forfeiture and
termination
100% of the LTI award is paid in cash or equity, subject to meeting vesting conditions of
performance hurdles. The mode of delivery is at the discretion of the Board and subject
to shareholders’ approval at AGM.
Exercise price of options is determined based on premium to share price at which the
company’s shares are traded on the Australian Stock Exchange on date of the grant.
Exercise price of service rights and performance rights are generally nil.
Options and performance rights will lapse if performance conditions are not met. Options
and performance rights will be forfeited on cessation of employment unless the Board
determines otherwise in its sole and absolute discretion, e.g. in the case of retirement
due to injury, disability, death or redundancy.
(vi)
Service rights (SR)
Feature
Max opportunity
Description of SR
One off issuance subject to Board’s discretion to attract and retain high calibre
employee.
Performance metrics
Subject to employee remains employed by the Company on the vesting date.
Delivery of SR
Exercise price
Forfeiture and
termination
100% of the SR award is paid in cash or equity, subject to meeting vesting conditions of
performance hurdles. The mode of delivery is at the discretion of the Board and subject
to shareholders’ approval at AGM.
Exercise price of options is determined based on premium to share price at which the
company’s shares are traded on the Australian Stock Exchange on date of the grant.
Exercise price of service rights and performance rights are generally nil.
Options and service rights will lapse if performance conditions are not met. Options and
performance rights will be forfeited on cessation of employment unless the Board
determines otherwise in its sole and absolute discretion, e.g. in the case of retirement
due to injury, disability, death or redundancy.
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D
DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(c)
Elements of remuneration (continued)
Company performance
The table below shows the performance of the Company for the past five financial years.
FY2019
FY2018
FY2017
FY2016
FY2015
Total Income (US$)
14,701,672
17,606,600
19,896,944
13,062,662
2,376,983
Net Loss (US$)
(5,099,511)
(4,926,820)
(7,297,601)
(7,397,939)
(2,791,076)
Closing Share Price (A$)
0.05
0.07
0.31
0.93
0.98
Number of Shares
217,748,987
216,744,323
214,055,365
206,372,375
139,230,199
Market Capitalisation (A$)
11,322,947
14,738,614
66,357,163
191,926,309
136,445,595
(d)
Remuneration expenses for KMP
Remuneration packages may contain the following key elements:
a) Short-term benefits, including salary and fees, bonus and other benefits;
b) Post-employment benefits, including superannuation; and
c) Share-based payments, including options and rights granted as remuneration.
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DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(d)
Remuneration expenses for KMP (continued)
The following table discloses the remuneration of the key management personnel during the financial year:
2019
Short-Term Benefits
Salary and
Fees 1
(US$)
Bonus
(US$)
Post-
Employment
Superannuation
(US$)
Share-based Payments 2
Performance-
based
(US$)
Service-
based
(US$)
Options
Termination
Payments
(US$)
(US$)
D
Total
(US$)
Performance
based
(%)
Directors
Mr L Carroll
Mr M Schuessler
Mr N Bassett 3
Mr G Watts 4
Mr T Kestell 5
Mr W Johnson 6
Senior Executives
Mr W Brekke 7
Ms C Thayer 8
Mr C Overley 9
Total
71,852
522,600
-
54,393
-
4,395
130,149
128,423
148,119
1,059,931
-
-
-
-
-
-
-
-
-
-
6,826
-
-
5,167
-
418
-
-
1,229
13,640
-
(46,407)
-
-
-
-
-
-
(35,095)
(81,502)
36,796
30,810
-
(17,913)
-
-
-
-
-
49,693
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
115,474
507,003
-
41,647
-
4,813
-
-
4,419
4,419
130,149
128,423
118,672
1,046,181
-
-
-
-
-
-
-
-
-
1 This includes annual leave where applicable.
2 Calculated in accordance with AASB 2 Share-based Payments. Refer to Note 15.
Credit amounts refer to reversal of share-based payments expense in respect of the options or rights which have not vested due to resignation or forfeiture.
3 Appointed as Non-Executive Director on 5 August 2019. Mr N Bassett’s fees as the Company Secretary is not disclosed as he was not considered as KMP prior to his appointment to
the Board.
4 Resigned on 5 August 2019. Credit amount under his share-based payments refer to service rights which were granted under his employment contract and were subsequently
defeated at the AGM.
5 Appointed as Non-Executive Director on 17 May 2019 and resigned on 5 July 2019.
6 Resigned on 8 October 2018.
7 Appointed as Global Chief Financial Officer on 14 November 2018.
8 Appointed as Global Chief Marketing Officer on 3 December 2018.
9 Resigned on 26 December 2018.
23 |
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DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(d)
Remuneration expenses for KMP (continued)
2018
Short-Term Benefits
Salary and
Fees 1
(US$)
Bonus
(US$)
Post-
Employment
Superannuation
(US$)
Share-based Payments 2
Performance-
based
(US$)
Service-
based
(US$)
Options
Termination
Payments 9
(US$)
(US$)
D
Total
(US$)
Performance
based
(%)
Directors
Mr L Carroll 3
Mr M Schuessler
Mr G Watts 4
Mr W Johnson 5
Mr B Alfonso 6
Mr T Allen 7
Ms P Fields 7
Senior Executives
Mr C Overley
Mr S Alvarez 8
Total
60,952
522,600
22,632
3,741
186,300
34,976
64,537
275,000
41,667
1,212,405
-
-
-
-
-
-
-
-
-
-
5,790
-
2,150
355
-
3,323
5,704
-
(84,329)
-
-
(304,395)
-
(82,540)
54,463
85,090
17,913
-
(661,530)
-
-
1,184
-
18,506
(118,912)
-
(590,176)
-
-
(504,064)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93,150
-
121,205
523,361
42,695
4,096
(686,475)
38,299
(12,299)
-
375,000
468,150
157,272
416,667
604,821
-
-
-
-
-
-
-
-
-
1 This includes annual leave where applicable.
2 Calculated in accordance with AASB 2 Share-based Payments. Refer to Note 15.
Credit amounts refer to reversal of share-based payments expense in respect of the options or rights which have not vested due to resignation or forfeiture.
3 Appointed as Non-Executive Chairman on 18 September 2017.
4 Appointed as Non-Executive Director on 5 January 2018.
5 Appointed as Non-Executive Director on 10 April 2018.
6 Resigned on 2 January 2018.
7 Resigned on 5 January 2018.
8 Resigned on 13 July 2017.
9
Termination payments were made in cash based on contractual terms.
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D
DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(d)
Remuneration expenses for KMP (continued)
Share-based compensation to key management personnel
Shareholders approved the YOW Employee Incentive Plan (EIP) at the Annual General Meeting
held on 23 November 2015. The EIP is developed to meet contemporary equity design
standards and to provide the greatest flexibility in the design and offer choices available in the
various new equity schemes. The EIP enables the Company to offer employees a range of
different employee share scheme (“ESS”) interests. These ESS interests or awards include
options, performance rights, service rights, deferred shares, exempt shares, cash rights and
stock appreciation rights.
Whenever Shares are acquired under the EIP, they may be acquired and held by an Employee
Share Trust (“EST”). The EST will be governed by a trust deed (“EST Trust Deed”) outlining the
rules of the EST and the responsibilities of the Trustee, the Company and participants.
The Board believes that the grant of incentives under the EIP to eligible participants will
underpin the employment strategy of attracting and retaining high calibre staff capable of
executing the Company’s strategic plans, and will maximise the retention of key management
and operational staff; enhance the Company’s ability to attract quality staff in the future, link
the rewards of key staff with the achievement of strategic goals and the long term
performance objectives of the Company, and provide incentives to participants of the EIP to
deliver superior performance that creates shareholder value.
Where the participant is a Director or related party of the Company, specific shareholder
approval will have to be sought under the ASX Listing Rules prior to the grant of incentives
under EIP to such an individual.
The exercise price, if any will be determined by the Board in its discretion and set out in the
related invitation. The exercise price may be any amount and may be as low as zero, in which
case a statement to that effect will be set out in the related invitation.
Securities issued under the EIP will lapse or be forfeited on the earliest of:
a) Any expiry date applicable to the securities;
b) Any date which the Board determines that vesting conditions applicable to the
securities are not met or cannot be met;
c) The participant dealing in respect of the securities in contravention of the EIP; and
d) The Board determining that a participant has committed an act of fraud, is ineligible to
hold the office for the purposes of Part 2D.6 of the Corporations Act, or is found to
have acted in a manner that the Board considers to constitute gross misconduct.
25 |
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D
DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(d)
Remuneration expenses for KMP (continued)
Share-based compensation to key management personnel (continued)
No options or rights were granted to key management personnel as remuneration during the
year.
No options held by key management personnel were exercised during the year ended 30 June
2019
Details of options and rights that vested or lapsed during the year are set out below:
Name
Grant Date
Vesting
Date
Mr L Carroll
Mr M Schuessler
16 Nov 2017
18 Sep 2018
13 Jun 2016
12 Jun 2019
13 Jun 2016
30 Jun 2019
1 Jul 2017
30 Jun 2020
Mr C Overley
8 Sep 2016
30 Jun 2019
1 Jul 2017
30 Jun 2020
Number of
Options/Rights
Vested
271,739
132,925
-
-
-
-
Number of
Options/Rights
Lapsed/Forfeited
-
-
199,387
629,194
388,665
901,845
(e)
Contractual arrangements for KMP
Remuneration and other terms of employment for Executives are formalised in a service
agreement. The KMP are remunerated on a total fixed remuneration (TFR) basis inclusive of
superannuation and allowances.
Position
Executive
Total Annual Fixed
Remuneration
Contract
Duration
Termination Clause
Non-Executive
Chairman
Managing Director
and Global Chief
Executive Officer
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Global Chief
Financial Officer
Global Chief
Marketing Officer
Louis Carroll
A$110,000
Ongoing
Mark Schuessler
US$522,600
Ongoing
Neville Bassett
Glen Watts
Tim Kestell
A$60,000 + 9.5%
Superannuation
Interim
A$90,000
Ongoing
Nil
Ongoing
Duration of the contract
is ongoing
14 days written notice.
Three months of base
salary as severance pay in
the event of termination
by the Company
Joined the Board on an
interim basis
Duration of the contract
is ongoing
Duration of the contract
is ongoing
Wayne Brekke
US$207,600
Ongoing
14 days written notice
Cynthia Thayer
US$222,600
Ongoing
14 days written notice
26 |
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D
DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(f)
Equity Instrument Disclosures relating to Key Management Personnel
(i)
Option Holdings
No options over ordinary shares in the Company were held during the financial year by any of
the KMP and their personally related parties.
(ii)
Rights Holdings
The number of performance rights and service rights in the Company held during the financial
year by each KMP, including their personally related parties, is set out in the following table.
Name
Directors
Mr L Carroll
Balance at
Start of
Year
(No)
815,217
Mr M Schuessler
1,694,431
Mr N Bassett
Mr G Watts
Mr T Kestell
Mr W Johnson
Senior Executives
Mr W Brekke
Ms C Thayer
Mr C Overley
Total
-
-
-
-
-
1,290,510
4,300,159
Granted as
Remuneration
Exercised
Lapsed/
Forfeited
Balance at End
of Year
(No)
(No)
(No)
(No)
-
-
-
-
-
-
-
-
(271,739)
(732,925)
-
(828,581)
543,478
132,925
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,290,510)
-
-
-
-
-
-
-
500,001
(500,001) 1
(500,001)
(1,004,664)
(2,119,091)
676,403
1
This refers to service rights which were not approved by the shareholders.
27 |
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D
DIRECTORS’ REPORT
REMUNERATION REPORT (audited) (continued)
(f)
Equity Instrument Disclosures relating to Key Management Personnel (continued)
(iii)
Share Holdings (Ordinary Shares)
The number of shares in the Company held during the financial year by each KMP, including
their personally related parties, is set out in the following table. No shares were granted during
the reporting year as compensation.
Name
Directors
Mr L Carroll
Mr M Schuessler
Mr N Bassett 2
Mr G Watts
Mr T Kestell
Mr W Johnson
Senior Executives
Mr W Brekke
Ms C Thayer
Mr C Overley
Total
Balance at
Start of
Year
(No)
Granted as
Remuneration
Acquisition
(No)
(No)
Exercise of
Options/
Rights
(No)
Other
Changes 1
Balance at
End of Year
(No)
(No)
750,000
342,398
-
27,694
958,234 3
-
-
-
-
2,078,326
-
-
-
-
-
-
-
-
-
-
-
-
-
55,389
100,000
-
-
-
-
271,739
732,925
-
-
-
-
-
-
-
-
-
-
-
1,021,739
1,075,323
-
83,083
(1,058,234)
-
-
-
-
-
-
-
-
-
155,389
1,004,664
(1,058,234)
2,180,145
1
This movement refers to the resignation of KMP during the year. Disclosure of a KMP’s equity holding is not
required subsequent to his resignation.
2 Mr Bassett holds 100,000 shares at the beginning of his employment on 5 August 2019.
3
This refers to the number of shares held by Mr Kestell at the beginning of his employment on 17 May 2019.
Loans to and other transactions with key management personnel
There were no loans outstanding or other transactions with key management personnel and
their related parties during the year ended 30 June 2019.
END OF AUDITED REMUNERATION REPORT
28 |
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D
DIRECTORS’ REPORT
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, the Company maintained an insurance policy which indemnifies the
Directors and Officers of Yowie Group Limited in respect of any liability incurred in connection
with the performance of their duties as Directors or Officers of the Company to the extent
permitted by the Corporations Act 2001. The Company's insurers have prohibited disclosure of
the amount of the premium payable and the level of indemnification under the insurance
contract.
NON-AUDIT SERVICES
Details of amounts paid or payable to the auditor for non-audit services provided during the
year are outlined in Note 19 to the financial statements. The Directors are satisfied that the
provision of non-audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services do not compromise the auditor’s
independence as all non-audit services have been reviewed to ensure that they do not impact
the integrity and objectivity of the auditor and none of the services undermine the general
principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants issued by the Accounting Professional & Ethical Standards Board.
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is included on page 30 of the financial report.
Signed in accordance with a resolution of the Directors.
Louis Carroll
Non-Executive Chairman
27 September 2019
29 |
Page
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
The Directors
Yowie Group Limited
Level 4, 216 St Georges Tce
Perth WA 6000
27 September 2019
Dear Directors,
Yowie Group Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of Yowie Group Limited.
As lead audit partner for the audit of the financial statements of Yowie Group Limited for the
year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
David Newman
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
D
Sale of goods
Cost of sales
Gross profit
Selling and distribution
Marketing
Administration
Other income
Foreign exchange gains / (losses)
Write-down of inventory
(Impairment) / reversal of impairment of plant and
equipment
Impairment of intangible assets
Loss before income tax
Income tax expense
Loss after income tax for the year
Other comprehensive income for the year
Note
Consolidated
2019
US$
2018
US$
14,425,071
(7,437,662)
6,987,409
17,519,314
(9,077,116)
8,442,198
(4,477,735)
(1,439,933)
(3,595,710)
276,601
227,431
(633,463)
(4,963,371)
(2,375,404)
(4,099,925)
87,286
145,914
(1,134,364)
(1,698,370)
472,859
(93,695)
(1,203,393)
(4,447,465)
(652,046)
(4,628,200)
(298,620)
(5,099,511)
(4,926,820)
5
4
10
11
12
6
Items that may be reclassified subsequently to profit or loss
Movement in foreign currency translation reserve
(415,932)
(275,306)
Total comprehensive loss for the year
net of tax attributable to members of the Company
(5,515,443)
(5,202,126)
Loss per share attributable to members of the Company
Basic loss per share (cents)
Diluted loss per share (cents)
7
7
(2.34)
(2.34)
(2.29)
(2.29)
This consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes to the financial statements.
31 |
Page
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
D
Current Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventories
Total Current Assets
Non-Current Assets
Plant and equipment
Intangible assets
Deferred tax assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Current tax liabilities
Unearned income
Total Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Accumulated losses
Total Equity
Note
Consolidated
2019
US$
2018
US$
16(a)
8
9
10
16,360,661
1,219,425
1,384,994
4,193,416
23,158,496
19,466,956
2,870,777
1,621,423
3,307,782
27,266,938
11
12
6
13
3,494,835
752,097
-
4,246,932
4,447,954
860,931
680,604
5,989,489
27,405,428
33,256,427
3,316,682
16,023
23,239
-
3,355,944
3,566,675
3,548
51,298
45,684
3,667,205
3,355,944
3,667,205
24,049,484
29,589,222
14(a)
14(d)
55,703,545
(754,487)
(30,899,574)
24,049,484
55,635,991
23,383
(26,070,152)
29,589,222
This consolidated statement of financial position should be read in conjunction
with the accompanying notes to the financial statements.
32 |
Page
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
D
Consolidated
Note
Issued
capital
US$
Share-
based
payment
reserve
US$
Foreign
currency
translation
reserve
US$
Accumulated
losses
Total
US$
US$
Balance as at 1 July 2017
55,198,677
7,363,748
(2,256,273)
(24,112,586)
36,193,566
Loss for the year
Other comprehensive income
Foreign currency translation
Total comprehensive loss for
the year
Transactions with owners
recorded directly in equity
Shares issued under YOW
Employee Incentive Plan
Share issue transaction costs
Share-based payments
Expired options and rights
-
-
-
-
-
-
-
(4,926,820)
(4,926,820)
(275,306)
-
(275,306)
(275,306)
(4,926,820)
(5,202,126)
14(b)
14(b)
441,824
(4,510)
-
-
(675,197)
-
(1,164,335)
(2,969,254)
-
-
-
-
-
-
-
2,969,254
(233,373)
(4,510)
(1,164,335)
-
Balance as at 30 June 2018
55,635,991
2,554,962
(2,531,579)
(26,070,152)
29,589,222
Balance as at 1 July 2018
55,635,991
2,554,962
(2,531,579) (26,070,152)
29,589,222
Loss for the year
Other comprehensive income
Foreign currency translation
Total comprehensive loss for
the year
Transactions with owners
recorded directly in equity
Shares issued under YOW
Employee Incentive Plan
Share issue transaction costs
Share-based payments
Expired options and rights
-
-
-
-
-
-
-
(5,099,511)
(5,099,511)
(415,932)
-
(415,932)
(415,932)
(5,099,511)
(5,515,443)
14(b)
14(b)
70,273
(2,719)
-
-
(70,273)
-
(21,576)
(270,089)
-
-
-
-
-
-
-
270,089
-
(2,719)
(21,576)
-
Balance as at 30 June 2019
55,703,545
2,193,024
(2,947,511) (30,899,574)
24,049,484
This consolidated statement of changes in equity should be read in conjunction
with the accompanying notes to the financial statements.
33 |
Page
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 30 JUNE 2019
D
Cash flow from operating activities
Receipts from customers
Other receipts
Payments to suppliers and employees
Interest received
Income taxes paid
Net cash outflows used in operating activities
Cash flow from investing activities
Payments for plant and equipment
Payments for intangible assets
Net cash outflows used in investing activities
Cash flow from financing activities
Payment of share issue transaction costs
Net cash outflows used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of foreign exchange movements
Cash and cash equivalents at end of the year
16(a)
Note
Consolidated
2019
US$
2018
US$
15,259,346
6,053
(17,126,924)
262,800
5,107
(1,593,618)
17,752,274
9,344
(23,501,214)
79,231
164,634
(5,495,731)
16(b)
(928,073)
(431,836)
(1,359,909)
(728,863)
(1,059,241)
(1,788,104)
(2,954)
(2,954)
(9,712)
(9,712)
(2,956,481)
19,466,956
(149,814)
16,360,661
(7,293,547)
26,877,580
(117,077)
19,466,956
This consolidated statement of cash flows should be read in conjunction
with the accompanying notes to the financial statements.
34 |
Page
D
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
1.
CORPORATE INFORMATION
Yowie Group Limited (“the Company”) is a company limited by shares incorporated and
domiciled in Australia, whose shares are publicly traded on the Australian Securities
Exchange.
These financial statements are presented in United States Dollar. The financial report was
authorised for issue by the Directors on 27 September 2019 in accordance with a resolution
of the Directors.
The nature of the operations and principal activities of the Company are described in the
Directors’ Report on page 6.
2.
BASIS OF PREPARATION
The financial statements are a general purpose financial report which has been prepared in
accordance with the requirements of the Corporations Act 2001 and Australian Accounting
Standards and Accounting Interpretations. The financial statements have been prepared on
a historical cost basis. Yowie Group Limited is a for-profit entity for the purpose of
preparing these financial statements.
The financial statements of the Group also comply with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Reclassification of comparative financial information
Comparative information in the consolidated statement of profit or loss and other
comprehensive income relating to Selling and distribution expenses of $1,140,332 has been
reclassified from Marketing to Selling and distribution to be comparable to the current year
presentation, and to better align with the nature of the underlying expenses. This
reclassification has not impacted net profit, or the statement of cash flows or statement of
financial position previously presented.
35 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
3.
SEGMENT REPORTING
D
The Group has only one reportable segment, which relates to the operations of its
confectionery business, with production carried out under a contract manufacturing
arrangement. The net result is presented on a consolidated basis. All non-current assets are
located in one geographical location, the United States of America.
Major customer information
The revenue from major customers set out below arises from the sale of Yowie chocolate
confectionery product.
Major customer 1
% of Total Net Sales
Major customer 2
% of Total Net Sales
* After stock adjustment claim
4.
OTHER INCOME
Interest income
Other income
5.
ADMINISTRATION
Administration expenses include:
Employee benefits
Business development and travel
Legal, tax, listing, compliance and insurance
Share-based payments (refer to Note 15)
Depreciation and amortisation
Other administrative expenses
Consolidated
2019
US$
7,549,114
52%
1,158,033
8%
2018
US$
7,964,114 *
45%
2,598,147
15%
Consolidated
2019
US$
270,164
6,437
276,601
2018
US$
79,520
7,766
87,286
Consolidated
2019
US$
2018
US$
1,343,552
360,941
1,067,254
(21,576)
332,118
513,421
3,595,710
2,390,587
1,185,222
874,443
(1,164,335)
245,691
568,317
4,099,925
36 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
6.
TAXATION
(a)
The major components of income tax expense are:
Current income tax
Adjustments for current tax of prior periods
Total current tax expense
Deferred income tax
Decrease/(increase) in deferred tax assets
Income tax (benefit)/expense reported in the
statement of profit and loss and other comprehensive
income
D
Consolidated
2019
US$
-
(28,558)
(28,558)
680,604
680,604
2018
US$
25,363
(88,200)
(62,837)
361,457
361,457
652,046
298,620
(b)
The prima facie tax on operating loss differs from the income tax provided in the
accounts as follows:
Loss from ordinary activities before tax
Prima facie tax benefit on loss at 30%
Effect of different tax rates on overseas losses
Income tax benefit not recognised
Income tax benefit / (expense)
Consolidated
2019
US$
(4,447,465)
1,334,240
(318,568)
(1,667,718)
(652,046)
2018
US$
(4,628,200)
1,388,460
188,741
(1,875,821)
(298,620)
37 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
6.
TAXATION (continued)
(c) Deferred income tax at 30 June relates to the following:
D
Deferred tax assets
Share issue and acquisition costs
Plant and equipment
Inventory
Intercompany loans – unrealised foreign exchange losses
Provisions and accruals
Revenue tax losses
Deferred tax assets used to offset deferred tax liabilities
Deferred tax assets not brought to account 1
Deferred tax liabilities
Plant and equipment
Other assets
Intercompany loans – unrealised foreign exchange gains
Deferred tax assets used to offset deferred tax liabilities
Consolidated
2019
US$
2018
US$
754,888
-
257,351
611,392
332,921
7,274,617
(1,225,065)
(8,006,104)
-
759,088
26,157
439,819
(1,225,064)
-
479,438
163,522
254,708
461,182
230,035
6,835,432
(752,723)
(6,990,990)
680,604
579,335
-
173,388
(752,723)
-
1 Deferred tax assets have not been brought to account to the extent that it is not probable within the
immediate future that taxable profits will be available against which deductible temporary differences can
be utilised. This also applies to deferred tax assets for unused tax losses carried forward.
The Group’s unrecognised tax losses in Australia of US$2,789,591 and Hong Kong of
US$3,396,021 are available indefinitely for offset against future profits subject to
continuing to meet the relevant statutory tests. The Parent Company and its Australian
subsidiary have formed a tax consolidated group. Unrecognised tax losses in the US of
US$946,732 can be used for up to 20 years.
38 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
7.
LOSS PER SHARE
Classification of securities as ordinary shares
D
The Company has only one category of ordinary shares included in basic earnings per share.
Classification of securities as potential ordinary shares
There are currently no securities to be classified as dilutive potential ordinary shares on
issue, as the options on issue are anti-dilutive.
Weighted average number of ordinary shares used
in the calculation of basic and diluted earnings per
share
Basic loss attributable to ordinary equity holders of
the parent
Consolidated
2019
Number
2018
Number
217,588,308
215,123,720
US$
US$
(5,099,511)
(4,926,820)
This calculation does not include instruments that could potentially dilute basic earnings
per share in the future as these instruments are anti-dilutive, since their inclusion would
reduce the loss per share.
8.
TRADE AND OTHER RECEIVABLES
Current
Trade debtors
Other debtors
Security deposit
GST receivable
Accrued interest
Consolidated
2019
US$
1,197,537
7,618
-
6,610
7,660
1,219,425
2018
US$
2,761,897
-
73,822
35,058
-
2,870,777
Trade debtors generally have 30 day terms. GST receivables have repayment terms
applicable under the relevant government authority. No amounts are past due or impaired.
The maximum exposure to credit risk at the reporting date is the carrying amount of each
class of receivables mentioned above. The Group’s exposure to risks are summarised in
Note 22.
39 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
9.
PREPAYMENTS
Current
Prepayments – raw materials
Prepayments – other
10.
INVENTORIES
Current
Raw materials
Work in progress
Finished goods
Allowance for disposal
D
Consolidated
2019
US$
1,004,507
380,487
1,384,994
2018
US$
993,686
627,737
1,621,423
Consolidated
2019
US$
1,796,401
68,253
2,847,500
(518,738)
4,193,416
2018
US$
1,386,136
159,368
2,140,424
(378,146)
3,307,782
(i)
(ii)
Inventories are valued at the lower of cost or net realisable value.
Inventories recognised as an expense to cost of sales during the year ended 30 June 2019
amounted to US$7,437,662 (2018: US$9,077,116).
(iii) Write-downs of inventories to net realisable value during the year ended 30 June 2019
amounted to US$633,463 (2018: US$1,134,364). The write-downs were mostly due to disposal
(and allowance for disposal) of raw materials relating to outdated Yowie Series. Refer to Note
23(t) for key accounting estimate on allowance for disposal of inventories.
Movement in the allowance for disposal of inventories is set out below.
Balance at the beginning of the year
Disposal
Additional allowance
Balance at the end of the year
(378,146)
1,616
(142,208)
(518,738)
(84,000)
84,000
(378,146)
(378,146)
40 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
11. PLANT AND EQUIPMENT
Manufacturing plant and equipment
Cost
Accumulated depreciation
Accumulated impairment losses
Manufacturing plant and equipment under
construction
Cost
Office equipment
Cost
Accumulated depreciation
D
Consolidated
2019
US$
4,064,940
(404,181)
(405,533)
3,255,226
2018
US$
4,356,315
(420,136)
-
3,936,179
235,740
506,462
10,053
(6,184)
3,869
24,640
(19,327)
5,313
Total plant and equipment
3,494,835
4,447,954
Movements in the carrying amount of each class are set out below.
Manufacturing plant and equipment
Balance at the beginning of the year
Additions
Transfers from / (to) manufacturing plant and
equipment under construction
Depreciation
Reversal of provision for impairment 1
Impairment 2
Amounts written off
Foreign exchange adjustment
Carrying amount at the end of the year
Manufacturing plant and equipment under
construction
Balance at the beginning of the year
Additions
Transfers from / (to) manufacturing plant and
equipment
Provision for impairment 3
Foreign exchange adjustment
Carrying amount at the end of the year
3,936,179
198,650
(203,630)
(185,478)
-
(405,533)
(84,962)
-
3,255,226
506,462
733,523
203,630
(1,207,875)
-
235,740
3,501,400
160,550
-
(198,630)
499,377
-
(26,518)
-
3,936,179
-
506,462
-
-
-
506,462
41 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
11. PLANT AND EQUIPMENT (continued)
Office equipment
Balance at the beginning of the year
Additions
Depreciation
Disposals
Foreign exchange adjustment
Carrying amount at the end of the year
D
Consolidated
2019
US$
5,313
2,755
(4,194)
-
(5)
3,869
2018
US$
11,587
3,568
(5,328)
(4,539)
25
5,313
1 Reversal of provision for impairment is due to successful recovery of the wrapping machine from Whetstone
Chocolate Factory. Refer to Note 18 for details.
2 This relates to impairment losses recognised as a result of impairment testing performed following the
identification of impairment indicator, namely the Group’s market capitalization is less than the Group’s net
assets. Refer to Note 12 for details on the impairment testing.
3 Provision for impairment was recorded to adjust the net book value of idle production equipment. The
production equipment became idle during the year as the Group commissioned new equipment which
results in an improved efficiency of the production plant and lower production cost.
12.
INTANGIBLE ASSETS
Rights and licenses 1
Cost
Accumulated impairment losses
Software
Cost
Accumulated amortisation
Accumulated impairment losses
Product development 2
Cost
Accumulated amortisation
Accumulated impairment losses
Consolidated
2019
US$
225,398
(24,969)
200,429
349,051
(123,921)
(24,940)
200,190
845,065
(449,801)
(43,786)
351,478
2018
US$
225,398
-
225,398
456,749
(229,406)
-
227,343
632,179
(223,989)
-
408,190
Total intangible assets
752,097
860,931
1 Rights and licenses relate to Yowie trademark which management has assessed as having an indefinite
useful life.
2 Product development relates to capitalised costs associated with the development of Yowie collectables.
42 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
12.
INTANGIBLE ASSETS (continued)
Movements in the carrying amount of each class are set out below.
Rights and licenses
Balance at the beginning of the year
Impairment 1
Carrying amount at the end of the year
Software
Balance at the beginning of the year
Additions
Amortisation
Impairment 1
Foreign exchange adjustment
Carrying amount at the end of the year
Product development
Balance at the beginning of the year
Additions
Amortisation
Impairment 1
Amounts written off 2
Carrying amount at the end of the year
225,398
(24,969)
200,429
227,343
100,655
(102,112)
(24,940)
(756)
200,190
408,190
212,886
(225,812)
(43,786)
-
351,478
D
225,398
-
225,398
71,845
209,784
(53,611)
-
(675)
227,343
842,277
956,058
(186,752)
-
(1,203,393)
408,190
1 This relates to impairment losses recognised as a result of impairment testing performed following the
identification of impairment indicator, namely the Group’s market capitalization is less than the Group’s net
assets. Total impairment losses recognised under intangible assets were US$93,695.
2 Amounts written off during the year ended 30 June 2018 relates to the investment in the development of
Yowie book and Yowie cartoon. The Board reviewed the expected future economic benefits from these
investments and determined that it was highly unlikely that any future economic benefits would exceed the
net book value and, therefore, the investment has been written off. The Group will continue to utilise these
assets to broaden brand awareness and develop the Yowie character.
Impairment testing
As at 30 June 2019, impairment indicators have been identified, including the fact that the
Group’s market capitalisation is less than the net assets of the Group, and the Group’s
financial performance for the year ended 30 June 2019 was below budget.
An impairment loss is recognised for the amount by which the Group’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s Value
in Use (ViU) and Fair Value Less Costs of Disposal (FVLCD).
For the purpose of impairment testing as at 30 June 2019, the Group first performed an
assessment of the recoverable value using a ViU model which indicated that the carrying
value of the cash generating unit (CGU) exceeded its recoverable value. As a result of this
the Group engaged an independent valuation specialist to assess the recoverable value of
the CGU using a FVLCD approach, which resulted in a higher recoverable value.
43 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
12.
INTANGIBLE ASSETS (continued)
D
The Group has only one operating segment and CGU which relates to the operations of its
confectionery business. The result of this FVLCD assessment indicated an impairment loss
of US$499,228 (excluding the impairment of idle plant and equipment of US$1,292,837,
which had already been accounted for as disclosed in Note 11).
The impairment loss of US$499,228 reduced the carrying value of the Group’s plant and
equipment and
impairment has been
proportionately applied across the following classes of assets:
to US$4,246,932. The
intangible assets
Manufacturing plant and equipment
Intangible assets:
Rights and licences
Software
Product development
Total impairment loss
Note
11
12
12
12
US$
405,533
24,969
24,940
43,786
499,228
The carrying amount of intangible assets with indefinite useful lives allocated to the CGU is
US$225,398.
Assumptions – FVLCD
The key assumptions made were as follows:
FY2020 management approved budget adjusted to reflect current year to date sales
performance up to the beginning of September 2019;
Revenue growth rate estimates ranging between 3.5% - 10.6% per annum for FY2021 to
FY2027 driven by:
i) Increased market penetration within the US based on external performance data as
at July 2019. This data outlines that the Group’s current ACV*, a statistic
representative of the Group’s market penetration across different distribution
channels in the US, had experienced a significant improvement compared to July
2018, therefore underpinning future growth assumptions; and
ii) Assumed sales volumes per store across the expanded distribution network is based
on historic actual volumes for comparable stores.
EBITDA margin assumes a straight-line improvement from 2.2% in FY2020 to 10.0% in
FY2024, where EBITDA margins remain constant thereafter. This assumption is based on
benchmarking against various industry participants;
Terminal year growth rate of 2.1% based on long term CPI;
Discount rate of 13.0% post-tax;
Costs of disposal of 5.0% of the estimated recoverable amount; and
Projected cash flows covering FY2020 to FY2027.
Fair value was measured using Level 3 inputs under AASB 13.
* Percentage relates to the Nielsen measurement of the numbers of stores that carry the Yowie brand,
indicating product availability to the consumer based on ACV (All Commodity Volume).
44 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
12.
INTANGIBLE ASSETS (continued)
D
The key assumptions used are based on the judgement and experience of the Group with
the assistance of our independent valuations specialist, taking into account current market
and economic conditions, risks, uncertainties and opportunities for improvement.
Sensitivity Analysis
As the Group have recorded an impairment based on the FVLCD assessment, a reasonably
possible change to key assumptions would impact the recoverable amount which the Group
has considered and summarised below:
Sensitivity
12% adverse performance against projected net cash flows 2
1 year delay in achieving expected growth in number of units sold based on
targeted increase in distribution in ACV% 3
Discount rate + / - 1%
Impact of sensitivity
on recoverable value 1
US$
(1,127,655)
(308,200)
(858,204) / 1,041,096
1 The sensitivity analysis above illustrates the impact of each individual sensitivity on the recoverable value as
calculated using the FVLCD impairment modelling.
2 This sensitivity reflects the average underperformance exhibited over FY2018 and FY2019. However,
management notes actual performance experienced FY2020 YTD as at the date of this report has improved
compared to the past two financial years.
3
This sensitivity reflects a one year delay in achieving the growth targets assumed within the budgets
underpinning the FVLCD impairment assessment.
45 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
13.
TRADE AND OTHER PAYABLES
Current
Trade payables and accruals
Rebate allowances 1
Other
D
Consolidated
2019
US$
1,258,981
2,055,914
1,787
3,316,682
2018
US$
2,049,790
1,515,001
1,884
3,566,675
1 Rebate allowances include estimated accrual for promotional discounts, prompt payment discounts and
spoilage of goods. Refer to Note 23(t) for key accounting estimate on rebate allowances.
Trade creditor amounts represent liabilities for goods and services provided to the Group
prior to the end of the financial year and which are unpaid. The amounts are unsecured and
are usually paid within 30 days of recognition. The Group’s exposure to risks are
summarised in Note 22.
14.
ISSUED CAPITAL AND RESERVES
(a)
Issued capital
Ordinary shares, fully paid
(b) Movements in share capital
As at 1 June 2017
Conversion of rights
Share issue costs
As at 30 June 2018
Conversion of rights
Share issue costs
As at 30 June 2019
Consolidated
2019
US$
2018
US$
55,703,545
55,635,991
US$
55,198,677
441,824
(4,510)
55,635,991
70,273
(2,719)
55,703,545
Number
214,055,365
2,688,958
-
216,744,323
1,004,664
-
217,748,987
(c)
Terms and conditions of issued capital
Holders of ordinary shares are entitled to receive dividends as declared from time to time
and are entitled to one vote per share at shareholders’ meetings.
In the event of winding up of the Company, ordinary shareholders rank after all other
shareholders and creditors and are fully entitled to any proceeds of liquidation.
46 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
14.
ISSUED CAPITAL AND RESERVES (continued)
(d) Nature and purpose of reserves
D
Share-based payment reserve
The share-based premium reserve is used to recognise the value of options, service rights
and performance rights issued as share-based payments.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from
the translation balances of entities which have functional currency other than USD.
Share-based payment reserve
Foreign currency translation reserve
(e)
Capital management
Consolidated
2019
US$
2,193,024
(2,947,511)
(754,487)
2018
US$
2,554,962
(2,531,579)
23,383
When managing capital, management’s objective is to ensure the entity continues as a
going concern as well as to maintain optimal returns to shareholders and benefits for other
stakeholders. Management also aims to maintain a capital structure that ensures the
lowest cost of capital available to the entity. The Company under the direction of
management may issue new shares to provide for future development activity. The Group
currently has no debt other than trade payables.
15.
SHARE-BASED PAYMENTS
(a) Weighted average exercise prices
The following table illustrates the number and weighted average exercise prices (WAEP) of
share options granted as share-based payments during the year.
Outstanding at 1 July
Granted during the year
Exercised during the year
Lapsed/forfeited during the year
Outstanding as at 30 June
2019
Number
500,000
-
-
(500,000)
-
2019
WAEP (A$)
1.552
-
-
1.552
-
2018
Number
10,585,000
100,000
-
(10,185,000)
500,000
2018
WAEP (A$)
0.973
0.373
-
0.938
1.552
Vested and exercisable at 30 June
-
-
500,000
1.552
Rights granted as share-based payments during the year have weighted average exercise
prices of nil (2018: nil).
47 |
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
15.
SHARE-BASED PAYMENTS (continued)
(b)
Remaining contractual life
D
There were no share-based payment options outstanding as at 30 June 2019. The weighted
average remaining contractual life for the share-based payment options outstanding as at
30 June 2018 was 0.17 years.
The weighted average remaining contractual life for the share-based payment rights
outstanding as at 30 June 2019 was 4.03 years (2018: 3.31 years).
(c) Outstanding share options and rights under share-based payments
Share options outstanding at the end of the year have the following expiry date and
exercise prices:
Grant Date
Vesting Date
Expiry Date
23 Dec 2015
23 Dec 2015
23 Dec 2015
23 Dec 2015
24 Aug 2016
24 Aug 2017
08 Sep 2016
08 Sep 2017
24 Aug 2018
24 Aug 2018
08 Sep 2018
08 Sep 2018
Exercise
Price
(A$)
1.510
1.630
1.400
1.510
Share Options
30 June 2019
Share Options
30 June 2018
-
-
-
-
-
100,000
200,000
75,000
125,000
500,000
Service rights and performance rights outstanding at the end of the year have the following
expiry date:
Type
Grant Date
Vesting Date
Expiry Date
Service Rights
Service Rights
Performance rights LTI
Performance rights STI
Performance rights LTI
Service rights
Performance rights LTI
Service rights
Service rights
Service rights
Service rights
Service rights
Service rights
13 Jun 2016
13 Jun 2016
13 Jun 2016
1 Jul 2016
8 Sep 2016
12 Jun 2017
1 Jul 2017
16 Nov 2017
16 Nov 2017
16 Nov 2017
8 Jan 2018
8 Jan 2018
8 Jan 2018
12 Jun 2018
12 Jun 2019
30 Jun 2019
30 Jun 2017
30 Jun 2019
12 Dec 2018
30 Jun 2020
18 Sep 2018
18 Sep 2019
18 Sep 2020
8 Jan 2019
8 Jan 2020
8 Jan 2021
12 Jun 2019
12 Jun 2020
30 Jun 2020
30 Jun 2018
30 Jun 2020
12 Dec 2019
30 Jun 2021
18 Sep 2023
18 Sep 2024
18 Sep 2025
8 Jan 2024
8 Jan 2025
8 Jan 2026
Rights
30 June 2019
-
132,925
-
-
-
142,511
-
-
271,739
271,739
-
-
-
818,914
Rights
30 June 2018
132,925
132,925
199,387
600,000
388,665
142,511
1,531,039
271,739
271,739
271,739
166,667
166,667
166,667
4,442,670
48 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
15.
SHARE-BASED PAYMENTS (continued)
D
(d)
Expenses arising from share-based payment transactions
As a result of the options and rights cancelled due to resignation and forfeiture, the share-
based payments expense for the year is a credit of US$21,576 (2018: a credit of
US$1,164,335). The Group recognises the share-based payments expense over the vesting
period for any options and rights granted.
Options and rights issued to KMPs
Options and rights issued to other employees
Options and rights issued to consultants
Consolidated
2019
US$
(31,810)
10,234
-
2018
US$
(1,094,240)
(70,095)
-
(21,576)
(1,164,335)
Options and rights issued to KMPs, other employees and consultants were issued as
remuneration for future services. The Group fair valued the instruments granted.
(e)
Fair values
The weighted average fair value of options and rights granted during the year ended 30
June 2019 was nil (2018: A$0.264).
i)
Share-based payments during the year ended 30 June 2019
No new rights or options were issued during the year ended 30 June 2019.
49 |
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
15.
SHARE-BASED PAYMENTS (continued)
(e)
Fair values (continued)
D
ii)
Share-based payments during the year ended 30 June 2018
The following tables list the inputs to the models used for the valuation of options and
rights issued during the year ended 30 June 2018.
Options1
Service Rights
Service Rights2
Number of securities
Exercise price (A$)
Grant date
Expiry date
Share price at grant date (A$)
Expected volatility
Risk-free rate
Fair value per security (A$)
Valuation method
100,000
0.373
1 Jul 2017
30 Jun 2019
0.31
63%
1.78%
0.08
Binomial
815,217
-
16 Nov 2017
18 Sep 2023 -
18 Sep 2025
0.18
67%
1.80%
0.18
Binomial
500,001
-
8 Jan 2018
8 Jan 2024 -
8 Jan 2026
0.16
83%
1.92%
0.16
Binomial
1 The options were cancelled during the year due to termination of contract.
2
Subject to shareholders’ approval at AGM
Performance Rights STI
Performance Rights LTI
Number of securities
Exercise price (A$)
Grant date
Expiry date
Share price at grant date (A$)
Expected volatility
Risk-free rate
Fair value per security (A$)
Valuation method
TBD 1
-
1 Jul 2017
30 Jun 2019
N/A
N/A
N/A
N/A
N/A
2,999,1592
-
1 Jul 2017
30 Jun 2021
0.31
72%
1.78%
0.31
Binomial
1 The number of rights vested will be calculated based on the 5-day VWAP after the release of the
annual financial results for the year ending 30 Jun 2018. These rights were granted to Mr B
Alfonso, Mr M Schuessler and Mr C Overley. The rights for Mr B Alfonso were subsequently
cancelled during the year due to his cessation of employment. The rights for Mr M Schuessler
and Mr C Overley were subsequently forfeited during the year at Board’s discretion in light of
shareholder sentiment.
2 1,468,120 of these rights were granted to Mr B Alfonso and were subsequently cancelled during
the year due to his cessation of employment.
50 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
16.
CASH FLOW RECONCILIATION
(a)
Cash and cash equivalents
D
For the purposes of the statement of cash flows, cash and cash equivalents include cash at
bank and deposits at call.
Cash and cash equivalents at the end of the year as shown in the cash flow statement are
reconciled to the related item in the statement of financial position as follows:
Cash at bank
Short-term deposits
Consolidated
2019
US$
2018
US$
3,648,961
12,711,700
12,670,097
6,796,859
16,360,661
19,466,956
(b)
Reconciliation of operating loss after income tax to net cash used in operating
activities
Operating loss after income tax
Adjusted for:
Depreciation and amortisation as per profit or loss
Depreciation and amortisation in cost of sales and
closing inventories
Share-based payments
Cash-settled share-based payments
Foreign exchange (gain)/loss
Loss on disposal of asset
Net impairment of non-current asset
Changes in operating assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in prepayments
(Increase)/decrease in inventories
(Increase)/decrease in deferred tax assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in current tax liability
Increase/(decrease) in provisions
Increase/(decrease) in unearned revenue
Net cash used in operating activities
Consolidated
2019
US$
(5,099,511)
2018
US$
(4,926,820)
332,118
245,691
185,478
(21,576)
-
(294,342)
-
1,792,065
1,652,745
236,429
(885,634)
680,604
(110,726)
(28,059)
12,475
(45,684)
(1,593,618)
198,630
(1,164,335)
(233,374)
(132,780)
4,539
730,534
(1,358,450)
(450,012)
413,608
361,457
830,936
51,123
(24,675)
(41,803)
(5,495,731)
(c) Non-cash investing and financing activities
During the year there were no reportable non-cash financing and investing activities.
51 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
17. RELATED PARTY DISCLOSURES
(a)
Compensation of key management personnel
Short-term benefits
Post-employment benefits
Share-based payments expensed
Termination payments
D
Consolidated
2019
US$
1,059,931
13,640
(31,809)
4,419
1,046,181
2018
US$
1,212,405
18,506
(1,094,240)
468,150
604,821
(b) Other transactions with key management personnel
There are no other transactions with key management personnel.
18. COMMITMENTS AND CONTINGENCIES
(a) Commitments
The Group had no significant commitments at the end of the reporting year.
(b)
Contingencies
As reported previously, Yowie North America Inc. (“YNA”), a wholly owned subsidiary of the
Group, had brought claims against Whetstone Chocolate Factory (“WCF”) and Atlantic
Candy Company (“ACC”) for the release and return of the RASCH “Type FI” wrapping
machine (“Wrapper”) owned by the Group and located at ACC’s facility, as well as for
monetary damages. YNA negotiated a settlement agreement with ACC for the release and
return of the wrapper and the wrapper has been returned. Consequently, the provision for
impairment relating to the wrapping machine that was previously recognised was reversed
during the half-year ended 31 December 2017.
In this same case, ACC has filed a counterclaim alleging that YNA has breached the
Manufacturing Agreement between the parties and sent a Notice of Default to YNA alleging
that YNA is also in default under the Patent and Technology License Agreement. The
Company has disclaimed liability and is defending the action. The Company considers no
provision is warranted in relation to this counterclaim. No trial date is currently set for this
matter so YNA cannot make a determination as to when this matter will be resolved.
52 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
18. COMMITMENTS AND CONTINGENCIES (continued)
(b)
Contingencies (continued)
D
In a related matter, Mr. Whetstone, on 4 November 2016, filed suit in the Circuit Court for
the Seventh Judicial Circuit in and for St. John’s County, Florida against YNA. Whetstone
alleges that YNA owes him royalty fees from that time until 2027 under the Patent
Technology and License Agreement regardless of whether the Company uses Whetstone’s
patent. Because the Company
its
manufacturing process, it believes that there is no legal basis under YNA’s contract with Mr.
Whetstone to pay him any royalty. Both parties filed and argued cross-motions for
summary judgment on this issue in October 2017. On 13 September 2018, the Court
entered an order denying both parties motions for summary judgment. No trial date is
currently set for this matter so YNA cannot make a determination as to when this matter
will be resolved.
longer using Mr Whetstone’s patent
is no
in
On 16 November 2017, Whetstone Industries and Mr. Whetstone filed tortious interference
claims against the Group and former Directors, Wayne Loxton, Patricia Fields, and Trevor
Allen in Middle District of Florida. The Group, Wayne Loxton, Patricia Fields, and Trevor
Allen were served with copies of these lawsuits in February 2018 and filed motions to
dismiss for lack of personal jurisdiction in April 2018. On 25 July 2018, the court found
jurisdiction in Florida. On 17 August 2018, all defendants filed a motion to dismiss the
Complaint in its entirety for failure to state a claim upon which relief can be granted. The
Court has not yet issued a ruling on this motion. A scheduling order has been entered in this
matter and trial is currently set for April 2020.
Management is not able to reliably estimate the ultimate settlement amounts at this time
nor does management believe any material payments would be made as a result of these
cases, and therefore no provision in relation to the claim has been recognised in the
financial statements. The Company will incur ongoing legal costs due to these cases.
However, due to inherent uncertainties, no accurate quantification of any cost, or timing of
such cost, which may arise from the legal proceedings, we have not made any provision for
legal costs.
53 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
19.
AUDITOR’S REMUNERATION
The auditor of the Group is Deloitte Touche Tohmatsu Perth.
D
Amounts received or due and receivable:
Deloitte Touche Tohmatsu Perth
Audit and review of financial reports
Tax consulting
Network firms of Deloitte Touche Tohmatsu Perth
Tax consulting
Other non-audit services
Non Deloitte Touche Tohmatsu Perth and its
network firms
Audit and review of financial reports
Tax consulting
Consolidated
2019
US$
2018
US$
50,343
79,652
129,995
64,914
-
64,914
26,439
60,642
87,081
49,754
69,011
118,765
60,960
-
60,960
10,883
11,535
22,418
20. PARENT ENTITY AND SUBSIDIARY INFORMATION
(a)
Parent Entity Financial Information (Yowie Group Limited)
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Total equity
2019
US$
8,745,540
15,543,663
24,289,203
239,719
-
239,719
2018
US$
8,711,524
21,414,686
30,126,210
536,988
-
536,988
24,049,484
29,589,222
57,273,855
(3,745,792)
(29,478,579)
24,049,484
57,206,301
(1,112,527)
(26,504,552)
29,589,222
Loss of the parent entity
Total comprehensive loss of the parent entity
(3,244,116)
(5,515,443)
(3,532,206)
(4,603,366)
(b)
Commitment and Contingencies of the Parent Entity
The parent entity had no significant commitments or contingent liabilities as at 30 June
2019 or 30 June 2019. Refer to Note 18 for a discussion of contingencies of the Group.
54 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
20. PARENT ENTITY AND SUBSIDIARY INFORMATION (continued)
(c)
Subsidiaries
Name
Country of Incorporation
Yowie Enterprises Pty Ltd
Yowie North America, Inc.
Yowie Natural World, Inc.
Yowie Hong Kong Holdings Limited
Yowie Hong Kong Enterprises Limited
YOW Brands Limited
Australia
USA
USA
Hong Kong (China)
Hong Kong (China)
Hong Kong (China)
21.
SUBSEQUENT EVENTS
D
Percentage Interest
2018
%
100
100
100
100
100
100
2019
%
100
100
100
100
100
100
The Group announced on 5 July 2019 to make a 2c per share (AUD) return of capital,
subject to shareholders’ approval, with scope for additional capital returns.
On 5 August 2019, the Group held a general meeting at a request from Keybridge in
pursuant to Section 249D of the Corporations Act. The result of the meeting showed that
Resolution 2 which called for removal of Mr Louis Carroll as a Director was defeated, while
Resolutions 1 and 3 for the removal of Mr Tim Kestell and Mr Glen Watts as Directors
respectively were withdrawn.
Other than the matters noted above, no circumstances or events have arisen subsequent to
the end of the period, that have had, or are likely to have, a material impact on the financial
statements.
22.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise cash and cash equivalents, receivables
and payables.
The net fair values of the financial assets and liabilities at reporting date of the Group
approximate the carrying amounts in the financial statements, except where specifically
stated.
The Group manages its exposure to key financial risks, including interest rate, foreign
currency risk, credit risk and liquidity risk in accordance with the Group’s financial risk
management policy. The objective of the policy is to support the delivery of the Group’s
financial targets whilst protecting future financial security.
The main risks arising from the Group's financial instruments are interest rate risk, foreign
currency risk, credit risk and liquidity risk. The Group uses different methods to measure
and manage different types of risks to which it is exposed. These include monitoring levels
of exposure to interest rate and foreign exchange risk and assessments of market forecasts
for interest rate and foreign exchange rates. Liquidity risk is monitored through the
development of future rolling cash flow forecasts.
55 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
22.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
D
The Board reviews and agrees policies for managing each of these risks as summarised
below.
Primary responsibility for identification and control of financial risks rests with the Board.
The Board reviews and agrees policies for managing each of the risks identified below.
Risk exposures and responses
Interest rate risk
The Group's exposure to market interest rates relates primarily to the Group’s cash and
short-term deposits.
At reporting date, the Group had the following financial assets exposed to Australian
variable interest rate risk that are not designated in cash flow hedges:
Consolidated
Cash at bank
2019
US$
13,042,471
2018
US$
7,101,243
The following sensitivity analysis is based on the interest rate risk exposures in existence at
the reporting date.
At reporting date, if interest rates had moved as illustrated in the table below, with all
other variables held constant, post tax loss and equity would have been affected as follows:
+0.5% (2018: +0.5%)
-0.5% (2018: -0.5%)
Post tax loss
Higher / (lower)
Equity
Higher / (lower)
2019
US$
65,212
(65,212)
2018
US$
35,506
(35,506)
2019
US$
65,212
(65,212)
2018
US$
35,506
(35,506)
The movements are due to higher or lower interest revenue from cash balances. A
sensitivity of 0.5% is considered reasonable given the current level of both short term and
long term Australian Dollar interest rates.
Foreign currency risk
As a result of the Australian entities having a functional currency in Australian Dollar which
is different to the Group’s presentation currency of US Dollar, the Group’s statement of
financial position can be affected significantly by movements in the Australian Dollar/US
Dollar exchange rate.
The Group also has transactional currency exposures. Such exposure arises from sales or
purchases by an operating entity in currencies other than the functional currency.
56 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
22.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Risk exposures and responses (continued)
D
Operational transactions are denominated in US Dollar. The Group’s approach is to target
specific levels at which to convert Australian Dollar to United States Dollar by entering into
either spot or short term forward exchange contracts. The Group does not enter into
transactions that qualify as hedging for hedge accounting purposes, with the exception of a
number of spot and short term forward exchange contracts in relation to working capital
management.
The financial assets and liabilities of the US and Hong Kong subsidiaries are held in the
functional currency of these subsidiaries, which is US Dollar.
At 30 June, the US Dollar equivalence of assets and liabilities held in Australian Dollar and
subject to foreign exchange risk are as follows:
Consolidated
Assets and liabilities of entities with AUD functional
currencies
Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Plant and equipment
Total Assets
Liabilities
Trade and other payables
Provisions
Total Liabilities
2019
US$
2018
US$
2,729,783
14,530
27,637
13,702
2,785,652
223,694
16,024
239,718
8,941,634
100,119
30,696
14,647
9,087,096
533,439
3,549
536,988
Intercompany loans are denominated in Australian Dollar and US Dollar. These loans are
eliminated upon consolidation.
At 30 June, the effects on post tax profit or loss and equity from a change in the Australian
Dollar/US Dollar exchange rate would be as follows:
Exchange Rate + 10% (2018: +10%)
Exchange Rate - 10% (2018: -10%)
Profit or loss
Higher / (lower)
2019
US$
24,247
(24,247)
2018
US$
483,674
(483,674)
Equity
Higher / (lower)
2019
US$
(182,957)
182,957
2018
US$
190,066
(190,066)
57 |
Page
D
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
22.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Risk exposures and responses (continued)
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash
equivalents and trade and other receivables. The Group's exposure to credit risk arises from
potential default of the counter party, with a maximum exposure equal to the carrying
amount of these instruments.
The Group does not hold any credit derivatives to offset its credit exposure. It holds its cash
deposits with major banks with high credit ratings.
Cash at bank and short-term bank deposits
AAA rated banks
AA rated banks
A rated banks
Liquidity risk
Consolidated
2019
US$
4,605,700
8,748,558
3,006,403
16,360,661
2018
US$
3,500,744
13,430,113
2,536,099
19,466,956
Liquidity risk is the risk that the Group may encounter difficulty in meeting its financial
obligations. The Group’s objective is to maintain adequate funding to meet its needs,
currently represented by cash and short-term deposits sufficient to meet the Group’s
current cash requirements.
Maturity analysis for financial liabilities
Within one year
Between one and five years
Consolidated
2019
US$
3,316,682
-
3,316,682
2018
US$
3,566,675
-
3,566,675
Contractual cash flows for financial liabilities are the same as carrying value.
58 |
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
D
(a) New and amended accounting standards adopted by the Group
The Group has adopted all of the new and revised Standards and Interpretations, including
amendments to the existing standards issued by the Australian Accounting Standards Board
(the AASB) that are relevant to their operations and effective for the current reporting
period.
The adoption of these amendments has not resulted in any significant effect on the
measurement or disclosure of the amounts reported for the current or prior periods.
AASB 15 Revenue from Contracts with Customers
The Group has adopted this standard from 1 July 2018. The introduction of this standard
did not have any material impact on the consolidated entities financial statements given
there is a single performance obligation recognised at a point in time which does not differ
from the recognition under the previous standard, accordingly, there are no retrospective
adjustments.
Additional disclosure of the consolidated entities revenue accounting policies as required
by the standard are included in Note 23(m).
AASB 9 Financial Instruments
The Group has adopted this standard from 1 July 2018. The introduction of this standard
did not have any material impact on the Group’s financial statements given there is no
history of losses from receivables with customers and the short nature of the Group’s credit
terms, accordingly, there are no retrospective adjustments.
Additional disclosure of the Group’s Financial Instruments accounting policies as required
by the standard are included in Note 23(q).
59 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
D
(b) New accounting standards and interpretations issued but not yet effective
Australian Accounting Standards and Interpretations that have recently been issued or
amended but are not yet mandatory, have not been early adopted by the Group for the
annual reporting period ended 30 June 2019. Those which may be relevant to the Group are
set out below.
(i)
AASB 16 Leases (2016)
Effective for annual reporting periods beginning on or after 1 January 2019
AASB 16 introduces a single lessee accounting model and requires a lessee to recognise
assets and liabilities for all leases with a term of more than 12 months, unless the
underlying asset is of low value. A lessee is required to recognise a right of use asset
representing its right-to-use the underlying leased asset and a lease liability representing its
obligations to make lease payments. Management are in the process of assessing the
impacts of the changes to AASB 16, however, does not believe the changes to the standard
will have a material impact on the financial performance and financial position of the Group
given the current level of operating lease commitments.
(c)
Basis of consolidation
The consolidated financial statements comprise the financial statements of Yowie Group
Limited and its subsidiaries (“the Group”) as at 30 June 2019.
Subsidiaries are entities over which the Group has the power to govern the financial and
operating policies so as to obtain benefits from their activities. The existence and effect of
potential voting rights that are currently exercisable or convertible are considered when
assessing whether the group controls another entity.
The financial statements of the subsidiaries are prepared for the same reporting period as
the parent company, using consistent accounting policies.
In preparing the consolidated financial statements, all intercompany balances and
transactions, income and expenses and profits and losses resulting from intra-group
transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is obtained by the Group
and cease to be consolidated from the date on which control is transferred out of the
Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting.
The acquisition method of accounting involves recognising at acquisition date, separately
from goodwill, the identifiable assets acquired, the liabilities assumed and any non-
controlling interest in the acquiree. The identifiable assets acquired and the liabilities
assumed are measured at their acquisition date fair values.
60 |
Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c)
Basis of consolidation (continued)
D
The difference between the above items and the fair value of consideration (including the
fair value of any pre-existing investment in the acquiree) is goodwill or discount on
acquisition.
Non-controlling interests not held by the Group are allocated their share of net profit after
tax in the statement of profit or loss and other comprehensive income and are presented
within equity in the consolidated statement of financial position, separately from parent
shareholders’ equity.
(d)
Foreign currency translation
Functional and presentation currency
The functional currency of Yowie Group Limited and Yowie Enterprises Pty Ltd is Australian
Dollar (AUD). The functional currency of the other entities is United States Dollar (USD).
The presentation currency of Yowie Group Limited is United States Dollar (USD).
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by
applying the exchange rates ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling
at the reporting date.
All exchange differences in the consolidated financial report are taken to the statement of
profit or loss and other comprehensive income.
Group companies
The results and financial position of foreign operations (none of which has the currency of a
hyperinflationary economy) that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
assets and liabilities for each statement of financial position presented are translated
at the closing rate at the date of that statement of financial position;
income and expenses for each statement of profit or loss and other comprehensive
income are translated at average exchange rates, unless this is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the
transactions; and
all resulting exchange differences are recognised in the statement of profit or loss and other
comprehensive income.
(e)
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and
in hand and short-term deposits with an original maturity of three months or less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk
of changes in value.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(e)
Cash and cash equivalents (continued)
D
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash
and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts
are included within interest-bearing loans and borrowings in current liabilities on the
statement of financial position.
(f)
Trade and other receivables
Trade receivables, which generally have 30-60 day terms, are recognised initially at fair
value and subsequently measured at amortised cost using the effective interest method,
less an allowance for any uncollectible amounts. Refer to Note 23(q) for details on
assessment of uncollectible amounts.
(g)
Inventories
Inventories are measured at the lower of cost or net realisable value. Raw material
inventories are accounted for at purchase cost on a weighted average cost basis. Finished
goods and work in progress are accounted for at the purchase cost of direct materials plus
manufacturing costs, including depreciation of manufacturing equipment. Net realisable
value is the estimated selling price in the ordinary course of business, less estimated costs
of completion and the estimated costs necessary to make the sale.
(h)
Property, plant and equipment
Plant and equipment is stated at cost, less accumulated depreciation and accumulated
impairment losses.
The carrying amount of plant and equipment is reviewed annually to ensure it is not in
excess of the recoverable amount from these assets. The recoverable amount is assessed
on the basis of the expected net cash flows that will be received from the assets
employment and subsequent disposal. The expected net cash flows have been discounted
to their present values in determining recoverable amounts.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can be measured reliably. All
other repairs and maintenance are charged to profit or loss during the financial period in
which they are incurred.
Depreciation is calculated over the useful lives to the Group of the assets, commencing
from the time the asset is held ready for use, as follows:
Class
Manufacturing plant and equipment
Office equipment
Depreciation method
Units of production basis
Straight line basis over 2.5 years
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i)
Intangible assets
D
Intangible assets acquired separately are measured on initial recognition at cost. Following
initial recognition, intangible assets are carried at cost less any accumulated amortisation
and accumulated impairment losses. Internally generated intangible assets, excluding
capitalised development costs, are expensed to profit and loss as incurred.
Intangible assets with finite lives are amortised over the useful economic life and assessed
for impairment whenever there is an indication that the intangible asset may be impaired.
Rights and licenses
The Group made cash payments to purchase rights and licenses and they are valued at cost.
They are assessed as having an indefinite useful life.
Product development
Expenditure on product development is recognised as an intangible asset when the Group
can demonstrate:
the technical feasibility of completing the intangible asset so that it will be available
for use or sale
its intention to complete and its ability to use or sell the asset
how the asset will generate future economic benefits
the availability of resources to complete the asset
the ability to reliably measure expenditure during development.
Product development costs are recorded as intangible assets and amortised using the units
of production method from the point at which the asset is available for use.
Software
Costs associated with maintaining software programmes are recognised as an expense as
incurred.
Development costs that are directly attributable to the design and testing of identifiable
and unique software products controlled by the group are recognised as intangible assets
when the following criteria are met:
it is technically feasible to complete the software so that it will be available for use
management intends to complete the software and use or sell it
there is an ability to use or sell the software
it can be demonstrated how the software will generate probable future economic
benefits
adequate technical, financial and other resources to complete the development and
to use or sell the software are available, and
the expenditure attributable to the software during its development can be reliably
measured.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i)
Intangible assets (continued)
D
Other directly attributable costs that are capitalised as part of the software include
employee costs and an appropriate portion of other directly attributable costs.
Software costs are recorded as intangible assets and amortised from the point at which the
asset is available for use over 3 years.
(j)
Trade and other payables
Trade payables and other payables are carried at amortised cost. They represent liabilities
for goods and services provided to the Group prior to the end of the financial year that are
unpaid and arise when the Group becomes obliged to make future payments in respect of
the purchase of these goods and services. The amounts are unsecured and are usually paid
within 30 days of recognition.
(k)
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as
a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the
expenditure required to settle the present obligation at the reporting date. If the effect of
the time value of money is material, provisions are discounted using a current pre-tax rate
that reflects the time value of money and the risks specific to the liability.
(l)
Issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
(m) Revenue recognition
The Group recognises revenue predominately from the sale of goods.
Sale of goods
Revenue is recognised when control of the product is transferred, being either when the
product is delivered to the customer or, in some instance, when the customer picks up the
product, and there is no unfulfilled obligation that could affect the customer’s acceptance
of the products.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(m) Revenue recognition (continued)
D
Revenue from sales is recognised based on the arrangement between the customer and the
Group. The arrangements in place do not commit customers to purchasing a specified
quantity nor commit Yowie to deliver the same, but set out the terms and conditions that
apply between the parties at the time an order is placed by a customer and accepted by the
Group. The terms and conditions cover, as appropriate to the customer, pricing, settlement
of liabilities, rebate allowances and any other negotiated performance obligations.
The rebate allowances relate to the customers right to claim promotional discounts and
spoilage of goods. At the point of sale, promotional discounts, spoilage allowance and
corresponding adjustment to revenue is recognised for those allowances expected to be
claimed by customers. The Group uses its accumulated historical experience and, whenever
available, mutually agreed terms to estimate the rebate allowances on a per customer
basis.
No element of financing is present in the pricing arrangement. Settlement terms are
generally credit terms of 30 to 60 days. Terms reflect negotiations with customers, policies,
procedures and controls held by each business unit as it relates to customer credit risk. For
customers who purchase on credit, a receivable is recognised when the products are
delivered or picked up as this is the point in time that the consideration is unconditional
because only the passage of time is required before the payment is due.
Interest revenue
Revenue is recognised as interest accrues using the effective interest method. This is a
method of calculating the amortised cost of a financial asset and allocating the interest
revenue over the relevant period using the effective interest rate, which is 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.
(n)
Income tax and other taxes
Current tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities based on the
current period’s taxable income. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted by the reporting date.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n)
Income tax and other taxes (continued)
D
Deferred income tax is provided on all temporary differences at the reporting date between
the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
when the deferred income tax liability arises from the initial recognition of goodwill
or of an asset or liability in a transaction that is not a business combination and that,
at the time of the transaction, affects neither the accounting profit nor taxable profit
or loss; or
when the taxable temporary difference is associated with investments in subsidiaries,
associates or interests in joint ventures, and the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-
forward of unused tax credits and unused tax losses, to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences and the
carry-forward of unused tax credits and unused tax losses can be utilised, except:
when the deferred income tax asset relating to the deductible temporary difference
arises from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
when the deductible temporary difference is associated with investments in
subsidiaries, associates or interests in joint ventures, in which case a deferred tax
asset is only recognised to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and taxable profit will be available
against which the temporary difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each reporting date and are
recognised to the extent that it has become probable that future taxable profit will allow
the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to
apply to the year when the asset is realised or the liability is settled, based on tax rates (and
tax laws) that have been enacted or substantively enacted at the reporting date.
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Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n)
Income tax and other taxes (continued)
D
Current and deferred income tax is recognised in the Statement of Financial Position,
except to the extent that it relates to items recognised in other comprehensive income or
direct in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity respectively.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right
exists to set off current tax assets against current tax liabilities and the deferred tax assets
and liabilities relate to the same taxable entity and the same taxation authority.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless
the GST incurred is not recoverable from the taxation authority. In this case, it is recognised
as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST recoverable or payable.
The net amount of GST recoverable from, or payable to, the taxation authority is included
with other receivables or payables in the statement of financial position.
Cash flows are included in the consolidated statement of cash flows on a gross basis. The
GST components of cash flows arising from investing and financing activities which are
recoverable from or payable to taxation authorities are classified as operating cash flows.
(o)
Share-based payment transactions
The Group provides benefits to directors, employees and consultants in the form of share-
based payment transactions, whereby services are rendered in exchange for shares or
rights over shares (‘equity-settled transactions’).
The cost of these equity-settled transactions with directors, employees and consultants is
measured by reference to the fair value at the date at which they are granted. The fair
value is determined using an appropriate valuation model.
No expense is recognised for awards that do not ultimately vest, except for equity-settled
transactions for which vesting is conditional upon a market or non-vesting condition. These
are treated as vesting irrespective of whether or not the market or non-vesting condition is
satisfied, provided that all other performance and/or service conditions are satisfied.
The cost of equity-settled transactions is recognised, together with a corresponding
increase in equity, over the period in which the performance and/or service conditions are
fulfilled.
If the terms of an equity-settled award are modified, as a minimum an expense is
recognised as if the terms had not been modified. An additional expense is recognised for
any modification that increases the total fair value of the share- based arrangement, or is
otherwise beneficial to the recipient, as measured at the date of modification.
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Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(o)
Share-based payment transactions (continued)
D
If an equity-settled award is cancelled, it is treated as if it had vested on the date of
cancellation, and any expense not yet recognised for the award is recognised immediately.
However, if a new award is substituted for the cancelled award and designated as a
replacement award on the date that it is granted, the cancelled and new award are treated
as if they were a modification of the original award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in
the computation of diluted loss per share.
(p)
Earnings / loss per share
Basic earnings / loss per share is calculated as net profit or loss attributable to members of
the parent entity, adjusted to exclude any costs of servicing equity (other than dividends),
divided by the weighted average number of ordinary shares of the Company, adjusted for
any bonus element.
Diluted loss per share is calculated as net profit or loss attributable to members of the
parent, adjusted for:
costs of servicing equity (other than dividends);
the after tax effect of dividends and interest associated with dilutive potential
ordinary shares that have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that
would result from the dilution of potential ordinary shares.
divided by the weighted average number of ordinary shares and dilutive potential ordinary
shares, adjusted for any bonus element.
(q)
Financial instruments
Financial assets
AASB 9 has three classification categories for financial assets; amortised cost, fair value
through other comprehensive income (FVOCI) and fair value through profit or loss.
The classification is based on the business model under which the financial asset is
managed and its contractual cash flows. Compared to AASB 139, the FVOCI and amortised
cost categories have been added and the held-to-maturity, loans and receivables and
available for sale classification categories have been removed. The Group only have
financial assets measured at amortised cost.
Amortised cost
A financial asset is measured at amortised cost if both of the following conditions are met:
(i)
the financial asset is held within a business model whose objective is to hold
financial assets in order to collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows
that meet the sole payment of principal and interest (SPPI) requirements.
(ii)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(q)
Financial instruments (continued)
D
Impairment of financial assets
The Group assesses on a forward looking basis the expected credit losses associated with its
debt instruments carried at amortised cost. The impairment methodology applied depends
on whether there has been a significant increase in credit risk. For trade receivables,
contract debtors and lease receivables, the Group applies the simplified approach
permitted by AASB 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables.
Financial liabilities
AASB 9 largely retains the existing requirements of AASB 139 for the classification and
measurement of financial liabilities. Financial liabilities are measured at amortised cost,
except for those financial liabilities that are designated to be measured at fair value
through profit or loss.
Trade and other payables
Liabilities are recognised for amounts to be paid for goods or services received. Trade
payables are settled on terms aligned with the normal commercial terms in operations.
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Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(r)
Impairment of assets
D
At each reporting date, the Group reviews the carrying values of tangible assets and
intangible assets to determine whether there is any indication that those assets have been
impaired. If such an indication exists, the recoverable amount of the asset, being the higher
of the asset’s fair value less costs to sell and value in use, is compared to the asset’s
carrying value. Any excess of the asset’s carrying value over its recoverable amount is
expensed to profit or loss.
Where it is not possible to estimate the recoverable amount of an individual asset, the
Group estimates the recoverable amount of the cash-generating unit to which the asset
belongs.
(s)
Segment disclosures
Operating segments are presented in a manner consistent with the management reports
provided to the chief operating decision makers, which are currently represented by the full
Board.
The Group has only one reportable segment, which relates to the operations of its
confectionery business. All production and sales to date have taken place in the United
States, with production carried out under a contract manufacturing arrangement. The net
result is presented on a consolidated basis.
(t)
Significant accounting judgements, estimates and assumptions
The preparation of the Group’s consolidated financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts in the
financial statements. Management bases its judgements and estimates on historical
experience and on other factors it believes to be reasonable under the circumstances.
Actual results may differ from these estimates under different assumptions and conditions
and may materially affect financial results or the financial position reported in future
periods.
Management has identified the following critical accounting policies for which significant
judgements, estimates and assumptions are made.
Share-based payments
The Group measures the cost of equity-settled transactions by reference to the fair value of
the equity instruments at the date at which they are granted. Estimating fair value for
share-based payment transactions requires determining the most appropriate valuation
model, which is dependent on the terms and conditions of the grant. The estimate also
requires making assumptions about the most appropriate inputs to the valuation model,
including the expected life of the share option, volatility and dividend yield. The
assumptions and models used for estimating fair value for share-based payment
transactions are disclosed in Note 15.
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Page
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
23.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
D
(t)
Significant accounting judgements, estimates and assumptions (continued)
Income taxes
Judgement is required in assessing whether deferred tax assets are recognised in the
statement of financial position. Deferred tax assets are recognised only when it is
considered more likely than not that they will be recovered, which is dependent on the
generation of sufficient future taxable profits. Assumptions about the generation of future
taxable profits depend on management’s estimates of future cash flows. Judgements are
also required about the application of income tax legislation.
Impairment of non-financial assets
The Group tests annually whether non-financial assets have suffered any impairment, in
accordance with the accounting policy stated at Note 23(r). An impairment exists when the
carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is
the higher of its fair value less costs to sell and its value in use. The fair value less costs to
sell calculation is based on available data from binding sales transactions, conducted at
arm’s length, for similar assets or observable market prices less incremental costs for
disposing of the asset. The value in use calculation is based on a discounted cash flow
model. The assumptions used in the budget, such as growth rates, and the discount rate
used are subject to judgement and estimates.
Estimation of useful life of assets
Assessments of useful lives and estimates of remaining useful lives require significant
management judgement. Brand names are generally assessed as having an indefinite useful
life on the basis of brand strength, ongoing expected profitability and continuing support.
Rights and licenses to Yowie brands are expected to be renewed in line with business
continuity requirements.
Allowance for disposal of inventories
The allowance for disposal of inventories assessment requires a degree of estimation and
judgement. The level of the allowance is assessed by taking into account the recent sales
experience, the ageing of inventories and other factors that affect inventory obsolescence.
To the extent that these judgements and estimates prove incorrect, the Group may be
exposed to potential additional inventory write-downs or reversals in future periods.
Rebate allowances
The rebate allowances relate to the customers right to claim promotional discounts and
spoilage of goods. At the point of sale, promotional discounts, spoilage allowance and
corresponding adjustment to revenue is recognised for those allowances expected to be
claimed by customers. The Group uses its accumulated historical experience and, whenever
available, mutually agreed terms to estimate the rebate allowances on a per customer
basis.
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Page
DIRECTORS’ DECLARATION
D
In accordance with a resolution of the directors of Yowie Group Limited, I state that:
1.
In the opinion of the Directors:
(a)
the financial statements and notes of the consolidated entity are in accordance
with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity’s financial position as at
30 June 2019 and of its performance for the year ended on that date; and
complying with Accounting Standards, the Corporations Regulations 2001
and other mandatory professional reporting requirements; and
(b)
there are reasonable grounds to believe that the consolidated entity will be able to
pay its debts as and when they become due and payable.
2.
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 2001 for the
financial year ending 30 June 2019.
Note 2 confirms that the financial statements also comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
On behalf of the Board
Louis Carroll
Non-Executive Chairman
27 September 2019
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Page
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
Independent Auditor’s Report to the members of
Yowie Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Yowie Group Limited (the “Company”) and its
subsidiaries (the “Group”), which comprises the consolidated statement of financial position as
at 30 June 2019, 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:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of
its financial performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Act 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Financial Report section of our report. We are independent of the Group in accordance with
the auditor independence requirements of the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of
Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of the Company, would be in the same terms if given to the
directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report for the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
Key audit matter
Carrying value of non-current assets
As at 30 June 2019 the recoverable value
of the Group’s non-current assets was
assessed for impairment, resulting in an
impairment charge of $499,228 as
disclosed in Note 12.
The recoverable amount of the Group’s
non-current assets has been estimated
using a fair value less costs to dispose
impairment model as determined by an
independent valuation specialist using a
market participant’s use of the assets at
their highest and best use.
Determination of the recoverable amount
requires significant judgements and
estimates, specifically concerning factors
such as:
forecast sales volumes, and related
growth rates;
forecast pricing;
forecast production, sales and
distribution, marketing and general
and administrative costs; and
discount rates.
How the scope of our audit responded to
the Key Audit Matter
In conjunction with our valuation specialists, our
procedures included, but were not limited to:
• evaluating management’s assessment as to
whether an impairment indicator existed;
• assessing the integrity of the model used by
management and their independent
valuation specialist to calculate the
recoverable value of non-current assets with
reference to relevant accounting standards;
• assessing the competency, capability and
objectivity of the independent valuation
specialist engaged by management to
estimate the recoverable value of non-
current assets, including review of the terms
and scope of their engagement;
• assessing the reasonableness of forecast
cash flows used in the impairment models
compared to the latest Board approved
budget;
• assessing the historical budgeting accuracy
of the Group and, where appropriate,
challenging forecast cash flows with
reference to historical and recently observed
actual performance;
• assessing and challenging the assumptions
and methodologies adopted by management
to estimate recoverable amount of the non-
current assets, including:
o challenging key assumptions, including
forecast sales volumes and pricing, and
also underlying cost assumptions by
comparing them to historical results,
recently observed actual performance
and economic forecasts;
o cross checking the recoverable value
resulting from the impairment testing
against listed trading multiples and
recent market transactions; and
o assessing the reasonableness of the
discount rate applied.
• performing sensitivity analysis of the
recoverable value of the non-current assets
by applying reasonably possible changes in
key assumptions including reflecting:
o
further underperformance against
budget;
o delays in achieving forecast growth
plans; and
o changes to discount rates.
We also assessed the appropriateness of the
disclosures included in Note 12 to the financial
statements.
Key audit matter
Revenue recognition
For the year ended 30 June 2019 the
Group’s revenue from the sale of goods
was $14,425,071.
Significant judgement is required in
determining the timing of revenue
recognition, given the shipping terms, and
the related timing of when control passes
to the end customer, and also in
calculating the allowance for spoilage,
which arises due to customers ability to
return damaged or spoiled product.
How the scope of our audit responded to
the Key Audit Matter
Our procedures included, but were not limited
to:
obtaining an understanding of the key
controls management has in place to
address the risks of material misstatement
in relation to the timing and completeness
of the revenue recorded;
assessing the key contracts with significant
customers to understand the terms of those
contracts for the appropriate revenue
recognition;
testing revenue transactions on a sample
basis to address the risks of occurrence and
accuracy of the revenue recorded;
testing revenue transactions around the
year end to ensure that revenue
transactions are recorded in the correct
period; and
assessing the appropriateness of the
allowance for spoilage, compared to actual
claim rates.
We also assessed the appropriateness of the
disclosures included in Note 23(m) to the
financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the annual report, 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 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
group to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole
is free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with the Australian Auditing Standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether
due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in
the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of the financial report,
including the disclosures, and whether the financial report represents the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial
report. We are responsible for the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of
most significance in the audit of the financial report of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits
of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 16 to 28 of the Directors’ Report
for the year ended 30 June 2019.
In our opinion, the Remuneration Report of Yowie Group Limited, for the year ended 30 June
2019, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
David Newman
Partner
Chartered Accountants
Perth, 27 September 2019
ASX ADDITIONAL INFORMATION
D
Additional information as required by the Australian Securities Exchange Listing Rules and not
disclosed elsewhere in this report is set out below. This information is current as at 30 August
2019.
Distribution of Quoted Securities
Ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 – 100,000
100,000 and over
Total
No. of Holders of
Ordinary Shares
1,102
711
417
833
186
No. of
Ordinary Shares
298,985
2,052,396
3,366,504
29,346,854
182,684,248
3,249
217,748,987
There were 1,906 shareholders holding less than a marketable parcel of ordinary shares.
Quoted and Unquoted Equity Securities
Equity Security
Ordinary Shares
Employee Service Rights
Exercise Price: Nil
Expiry Date: 12 Dec 2019
Employee Service Rights
Exercise Price: Nil
Expiry Date: 12 Jun 2020
Employee Service Rights
Exercise Price: Nil
Expiry Date: 18 Sep 2024
Employee Service Rights
Exercise Price: Nil
Expiry Date: 18 Sep 2025
Quoted
217,748,987
-
Unquoted
-
142,511
-
-
-
132,925
271,739
271,739
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D
ASX ADDITIONAL INFORMATION
Unlisted Employee/Consultant Options/Rights
Exercise Price
Nil
Nil
Nil
Nil
Expiry Date
12 Dec 2019
12 Jun 2020
18 Sep 2024
18 Sep 2025
No.
142,511
132,925
271,739
271,739
No. of Holders
1
1
1
1
Twenty Largest Holders of Ordinary Shares
Name
Shares Held
Percentage
%
Huntsman Holdings Pty Ltd
BNP Paribas Nominees Pty Ltd
Keybridge Capital Limited
Norfolk Enchants Pty Ltd
Reash Pty Ltd
Bentley Capital Limited
Citicorp Nominees Pty Limited
The Commonwealth of Australia
Abdullah Hani Abdallah
1
2
3
4
5
6
7
8
9 Mr Keith Phillip Hudson & Mrs Ann Hudson
10
11 Wilson Asset Management (International) Pty Limited
12
13
14
15 Mr Asok Kumar & Mrs Renu Kumar
16
17 Mr Ian Morton & Mrs Deborah Morton
18
19
20
Patricia Mary Fields
HSBC Custody Nominees (Australia) Limited
Bart Superannuation Pty Limited
Kamga Pty Ltd
Agri Export Australia Pty Ltd
Zilstame Nominees Pty Ltd
TOTAL
Dr Gregory Bryan Makin
28,661,880
17,002,903
14,473,533
10,000,000
9,956,110
9,948,633
6,360,855
5,666,667
5,026,373
3,746,500
3,267,231
3,000,000
2,279,708
2,148,103
1,800,000
1,757,027
1,670,421
1,500,000
1,448,689
1,300,001
131,014,634
13.16
7.81
6.65
4.59
4.57
4.57
2.92
2.60
2.31
1.72
1.50
1.38
1.05
0.99
0.83
0.81
0.77
0.69
0.67
0.60
60.17
Substantial Shareholders
Substantial shareholders who have notified the Company in accordance with section 671B of
the Corporations Act 2001 are as follows:
Shareholder
Aurora Funds Management Limited in its capacity as
responsible entity of HHY Fund
Australian Style Group Pty Ltd
Bentley Capital limited
Keybridge Capital Limited
Norfolk Enchants Pty Ltd ATF Trojan Retirement Fund
Wilson Asset Management Group
No. of Shares
26,526,643
17,002,903
26,959,013
43,529,546
16,068,829
57,669,562
%
12.24
7.81
12.38
19.99
7.38
26.48
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D
ASX ADDITIONAL INFORMATION
Voting Rights
Ordinary shares carry one vote per share. There are no voting rights attached to the options in
the Company.
Stock Exchange
The Company is listed on the Australian Securities Exchange and has been allocated the code
“YOW”. The “Home Exchange” is Perth.
On-market Buy-back
There is no current on-market buy-back.
Other Information
Yowie Group Limited is incorporated and domiciled in Australia, and is publicly listed company
limited by shares.
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