contents chairman s address 3 shareholder listing 4 annual financial report 5 corporate directory 55

Transcription

1 annual report 2016

2 contents chairman s address 3 shareholder listing 4 annual financial report 5 corporate directory 55

3 Dear Shareholder, chairman s address It is with a great sense of accomplishment that we end FY16 and report on what has been another productive and successful year. We posted a profit of $3.5m for the period a 50% improvement on our maiden profit in FY15; and finally, over 4.5 years on from the State Government announcement of the development of aquaculture zones, we have now secured the majority share of the Kimberley zone and are fully licenced to produce 15,000 tonnes finfish per annum at our Cone Bay farm. In line with our projected expansion plans, much of the focus this year has been on increasing the fish biomass at the farm almost doubling the value of our stock over last year; and on expanding the farm infrastructure capacity to support the increased biomass. We have built an additional 12 80m cages this year, bringing our total to 34 cages - currently holding almost 2,000 tonnes of our iconic Cone Bay Barra. We have also added a new 10-cage anchoring system at the farm to accommodate the increased cage numbers, and now have 3 cage systems on our lease. You will see that our harvest volume was kept relatively low for FY16, and that we only harvested a little over 600 tonnes. This was a measured approach to ensuring that future increased harvest volumes did not come at the expense of fish size, and that we can continue to harvest fish over 4kg. We now have a significant harvestable biomass at the farm and expect to double our annual harvest tonnage this year. We have invested significantly this year in improved feeding and cage cleaning equipment and shortly will be installing our first automated feed barge at the farm. This feed system has been purpose built and will be used to feed cages from a single anchored barge. We have made this investment in automated equipment sooner than originally planned, and expect it will significantly improve the efficiency and effectiveness of our feeding. In November we will be welcoming two new senior members to our Perth team. Hank Poeschl joins us as General Manager, and will oversee all farming operations and expansion plans. Hank comes with over 25 years of sea cage farming experience from countries across the world. We are also gaining a new Chief Financial Officer, Helen Chow, who has near 20 years senior financial management experience. We are greatly looking forward to having both Hank and Helen as integral members of our group. I would like to make special mention of the continued hard work of all our staff; in particular our Managing Director Dr Desiree Allen whose persistence, hard work and focus deserve our great thanks. She is joined in her efforts by the dedicated MPA team both at Cone Bay and in the Perth office and I extend our gratitude to each and every one. This is going to be another very busy but exciting year for MPA and we look forward to reporting sustained improvements and ongoing expansion plans as the year continues. Yours faithfully, Miles Kennedy 3

4 Top 20 Shareholders shareholder listing Holder Name Securities % 1 LASBOROUGH INVESTMENTS LIMITED 10,765, % 2 WEYBRIDGE PTY LTD 4,476, % 3 MS DENISE M HUTTON 2,819, % 4 FAUSTUS NOMINEES PTY LTD 2,208, % 5 ILLOVO 2009 LIMITED 2,168, % 6 MAXIMA PEARLING COMPANY PTY 1,933, % 7 KENNEDY HOLDINGS PTY LTD 1,830, % 8 SUNDEN PTY LTD 1,314, % 9 MS JANE ELIZABETH SOMES & 871, % 10 JCO INVESTMENTS PTY LTD 842, % 11 EMERALD RIVER PTY LTD 606, % 12 LENTAL PTY LTD 602, % 13 NUTSVILLE PTY LTD 557, % 14 T & E ALLEN INVESTMENTS PTY 465, % 15 AWB NOMINEES PTY LTD 421, % 16 MATHRY PTY LTD 380, % 17 LOGICA (OVERSEAS) SA 375, % 18 NORVEST PROJECTS PTY LTD 300, % 19 MAKO BAY HOLDINGS PTY LTD 200, % 20 KCS SUPERANNUATION PTY LTD 198, % 6

5 Annual Financial Report Year Ended 30 June 2016 marine produce australia limited 34 Bagot Road Subiaco WA 6008 telephone fax admin@marineproduce.com web marineproduce.com abn

6 DIRECTORS REPORT 1 LEAD AUDITOR S INDEPENDENCE DECLARATION 10 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 11 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 12 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 13 CONSOLIDATED STATEMENT OF CASH FLOWS 14 NOTES TO THE FINANCIAL STATEMENTS 15 DIRECTORS DECLARATION 45 AUDITOR S INDEPENDENT AUDIT REPORT 46

7 DIRECTORS REPORT The directors present their report together with the consolidated financial report of Marine Produce Australia Limited (the Company or MPA), and its subsidiaries (the Group), for the financial year ended 30 June 2016 and the auditor s report thereon. 1 DIRECTORS The directors of the Company at any time during or since the end of the financial year are: Mr Miles Kennedy Chairman Appointed 11 June 2008 Dr Desiree Allen Managing Director Appointed 5 December 2012 Mr Kennedy has held directorships of Australian listed resource companies for over 30 years. He is the non-executive Chairman of Lucapa Diamond Company Limited and was previously the executive Chairman of Sandfire Resources NL, Kimberley Diamond Company NL and RNI NL. Mr Kennedy practised as a Barrister and Solicitor of the Supreme Court of Western Australia and the High Court of Australia and as an Attorney of the Supreme Court of South Africa. Dr Allen joined MPA in 2011 with a strong background in both genetics (animal breeding) and environmental toxicology. She has a Bachelor of Science from Murdoch University (Australia), a Masters in Environmental Biology from the University of North Carolina (USA), and a PhD in Genetics from Indiana University (USA). Prior to joining MPA she was a Research Fellow at the University of Edinburgh (UK). Mr Damien Kelly Non-Executive Director Appointed 18 August 2014 Mr Kelly is director of Western Tiger Corporate Advisers, a Perth-based corporate advisory and financial services firm. He has broad corporate and commercial experience spanning over 17 years, providing professional services to ASX and AIM listed companies predominately in the mining and energy sector. Mr Kelly has a MBA, Bachelor of Commerce, a Graduate Diploma in Applied Finance and Investment, full CPA qualifications and is a former officer in the Australian armed services, having graduated from the Royal Military College, Duntroon. He is also a fellow of the Financial Services Institute of Australia (FINSIA) and a member of CPA Australia. 1 Page

8 DIRECTORS REPORT 2 COMPANY SECRETARY Mr Mark Clements Company Secretary Appointed 16 February 2015 Mr Clements gained a Bachelor of Commerce degree from the University of Western Australia. He is a Fellow of the Institute of Chartered Accountants and a member of both the Australian Institute of Company Directors and the Institute of Chartered Secretaries in Australia. Mr Clements currently holds the position of Company Secretary of a number of publicly listed companies and has experience in corporate finance, accounting and administration, capital raising and ASX Compliance and regulatory requirements. 3 DIRECTORS MEETINGS The number of directors meetings and number of meetings attended by each of the directors of the Company during the financial year are: Board Meetings Director Attended Held while a director Mr M Kennedy 5 5 Dr D Allen 5 5 Mr D Kelly REMUNERATION REPORT 4.1 Principles of compensation Remuneration is referred to as compensation throughout this report. Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Group, including directors of the Company and other executives. Key management personnel comprise the directors of the Company and senior executives for the Group. Compensation levels for key management personnel and the Company Secretary are competitively set to attract and retain appropriately qualified and experienced directors and executives. The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account: the capability and experience of the key management personnel; the key management personnel s ability to influence and control performance of the business; and the Group s performance including the Group s earnings, growth in share price and returns on shareholder wealth and amount of incentives within each key management person s compensation. Shares and options may only be issued to directors subject to approval by shareholders in general meeting. The Board has no established retirement or redundancy schemes. Fixed compensation Fixed compensation consists of base compensation as well as employer contributions to superannuation funds. Non-executive directors Total compensation for all non-executive directors is not to exceed $150,000 per annum and is set with reference to fees paid to other non-executive directors of comparable companies. Non-executive directors may receive performance related compensation for particular board approved objectives. 2 Page

9 DIRECTORS REPORT 4.2 Directors remuneration All the directors and relevant executives of the Group receive their remuneration from the Company. Details of the nature and amount of each major element of remuneration of each director of the Group during the financial year are: In dollars Directors Executive directors Dr Desiree Allen (appointed 5 Dec 2012) Salary & fees $ STI cash bonus $ Short-term Nonmonetary benefits $ Total $ Postemployment Superannuation benefits $ Other long term $ Termination benefits $ Share based payments Shares and options $ , ,560 25, , , ,124 22, ,365 Total $ Proportion of remuneration performance related % Mr Justin Clarke (Managing Director) , ,325 2,215-41,008-66,548 - (appointed 23 Nov 2010; resigned 18 August 2014) Non-executive directors Mr Miles Kennedy (Chairman) (appointed 11 Jun 2008) Mr Damien Kelly (Nonexecutive director) (appointed 18 Aug 2014) , , , , , , , , , , , ,110 - Totals , ,012 25, , , ,559 24,456-41, , An amount of $28,132 was accrued and unpaid at the date of the 2015 report; this is now paid in full and excluded in the 2016 report. 2. An amount of $25,000 was accrued and unpaid at the date of the 2015 report; this is now paid in full and excluded in the 2016 report. 3 Page

10 DIRECTORS REPORT In dollars Executives Salary & fees $ STI cash bonus $ Short-term Nonmonetary benefits $ Total $ Postemployment Superannuation benefits $ Other long term $ Termination benefits $ Share based payments Shares and options $ Total $ Proportion of remuneration performance related % Value of options as proportion of remuneration % Mark Clements (Company , , , Secretary) , , , (appointed 16 February 2015) Tamar Kennedy (Company Secretary) (appointed 3 June , ,061 1, , , resigned 16 February 2015) Totals , , , , ,561 1, , Page

11 DIRECTORS REPORT 4.3 Equity instruments (i) Options and rights over equity instruments granted as compensation On 23 November 2015, 2,200,000 unlisted $0.75 options expiring 30 November 2018 were issued to the Directors following shareholder approval at the Company s Annual General meeting held 23 November (ii) Exercise of options granted as compensation No options were exercised during the reporting period or the prior period. No options lapsed in the current or prior period. 5 PRINCIPAL ACTIVITIES This past year has been one of ongoing progress and development for MPA. We continue to focus on our production expansion plans, with improved equipment, greater fish inputs, key staff appointments, and continued development of workplace health and safety and staff training. (i) OPERATING REVIEW - Applied for, and were granted, a new Department of Fisheries Licence that allows the production of up to 15,000 tonnes finfish per annum. This approval includes additional 644 hectares of lease area adjacent to our existing 699 hectare water lease. - Strengthened our farm management team with the promotion of Alasdair Connor to co-manager of Marine Farming, and Nick Brearley to Innovator Skipper (Master IV). - Expanded our farming capacity with the addition of new infrastructure, including: o o New 10-cage capacity anchoring system (now have 3 anchoring systems on our lease) 12 additional 80m cages (now have 34 cages in total). - Improved our cage cleaning options with two new pressure washers and disk-drive cleaners - Commissioned our first automated feed delivery system (feed barge), and updated our feed delivery equipment on existing boats - Ongoing research into: feeding behaviour for optimal feed conversion and growth; cage materials for stock security; nursery conditions and fingerling genetics for improved production; and environmental conditions for optimising growth. - Streamlined the cage building process in Derby with the continued assistance of the Derby Shire (with special thanks to all involved). - Filed a trademark application for Cone Bay in relation to fish production to ensure our iconic name, as we are known throughout Australia, is secured, and the value of that brand retained for our shareholders. 5 Page

12 DIRECTORS REPORT (ii) REVIEW OF FINANCIAL RESULTS Results from Operating Activities and Loss for the Period The Group s profit for the period was $3,530,000 (2015: $2,401,701). There was no impairment of property, plant and equipment or intangible assets in the year (2015: $516,787) and depreciation and amortisation was $398,106 (2015: $169,589). Net cash provided by operating activities was ($2,659,141) (2015: $246,376). The results from operating activities (excluding impairment and depreciation) included: 12 months ended June months ended June 2015 Profit / (loss) from farming operations (excluding impairment and depreciation) 1,368,297 (502,494) Administration and marketing expenses (1,857,847) (2,715,726) Other income 76,120 4,085 Other expense - - Results from operating activities excluding impairment and depreciation (413,430) (3,214,135) Impairment and depreciation (398,106) (686,376) Loss before tax (811,536) (3,900,511) Non IFRS unaudited 12 months ended June months ended June 2015 Farm cash operating costs (AUD) 13,154,499 10,719,168 Fish biomass growth before harvest (kg) 1,410, ,523 Farm cash operating cost per kg Revenue Revenue from sales Revenue from the sale of fish was $7,253,391 for the period from the sale of 638,805kg. A total of 641,078kg of fish was harvested for the period. As part of the production planning, the harvest volume was intentionally kept low for part of the year so as to ensure we are able to attain the preferred size of our harvestable fish. (iii) REVIEW OF FINANCIAL CONDITION At 30 June 2016, the Group had a working capital surplus of $19,741,261 represented significantly by biological assets of $16,141,615 and cash and cash equivalents of $1,473,322. The Group s working capital will be utilised to fund operating and capital expenditure to continue to develop the Cone Bay farm site and increase profitability with scale. The Group has the ability to slow its expansion strategy and/or harvest fish at less than the targeted harvest size to maintain sufficient cash reserves, with a resulting delay in the growth of the scale of the operations. The Group also has the ability, and is planning, to raise new equity or debt capital and to seek research and development tax refunds as it has in prior years. The financial statements have been prepared on a going concern basis which the directors believe to be appropriate. The directors are confident that the Group will maintain sufficient levels of working capital to continue as a going concern and continue to pay its debts as and when they fall due. If the Group is unable to continue as a going concern, it will be required to realise its assets and extinguish its liabilities other than in the ordinary course of business and at amounts that may be different to those stated in the financial statements. 6 Page

13 DIRECTORS REPORT (iv) SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS In the interval between the end of the financial year and the date of this report, there has not been any item, transaction or effect of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. 6 DIVIDENDS No dividends were paid or declared during the current or prior financial years. 7 DIRECTORS INTERESTS The relevant interest of each Director in the shares, debentures, interests in registered schemes and rights or options over such instruments issued by the companies within the consolidated entity and other related bodies corporate at the date of this report is as follows. Marine Produce Australia Limited Ordinary shares Options over ordinary shares Mr M Kennedy 1,830,000 1,056,484 Dr D Allen 136,726 1,000,000 Mr D Kelly 62, ,000 On 23 November 2015, 2,200,000 unlisted $0.75 options expiring 30 November 2018 were issued to the Directors following shareholder approval at the Company s Annual General meeting held 23 November INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS Indemnification The Group has agreed to indemnify the current and former Directors of the Company against all liabilities to another person (other than the Company or related body corporate) that may arise from their position as Directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. The Group has also agreed to indemnify the current Directors of its controlled entities for all liabilities to another person (other than the Company or related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Insurance premiums Since the end of the previous financial year the Group has paid insurance premiums in respect of Directors and officers liability and legal expenses insurance contracts, for current and former Directors and officers, including senior executives of the Company and Directors, senior executives of and secretaries of its controlled entities. The insurance premiums relate to: costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; and other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain personal advantage. The value of the premium paid is not disclosed subject to an existing confidentiality agreement between the insurer and the Directors of the Group. 7 Page

14 DIRECTORS REPORT 9 DETAILS OF PROCEEDINGS UNDERTAKEN ON BEHALF OF THE COMPANY At the date of this report, there are no proceedings brought on behalf of the Company under section 237 of the Corporations Act ENVIRONMENTAL REGULATION MPA s operations are subject to the environmental quality monitoring and maintenance outlined in Ministerial Statement 996 and the Department of Fisheries Kimberley Aquaculture Development Zone Environmental Monitoring and Management Plan. MPA measures water and sediment quality during 8 months of the year, and has these samples independently tested against the quality standards set by the Environmental Protection Authority (EPA), outlined in the DoF 2014 EMMP. MPA is required to report any results that exceed the standards, and if that were the case, implement further testing and subsequent remedial action. MPA submits a yearly compliance report to the EPA with sample test results and details of any non-compliance. 11 LEAD AUDITOR S INDEPENDENCE DECLARATION The lead auditor s independence declaration is set out on page 10 and forms part of the Directors Report for the financial year ended 30 June SUBSEQUENT EVENTS In the period subsequent to year end the Group has drawn down upon existing loans by an additional $1,756,603. The Group also received the payment of the R&D tax refund of $4,412,782 on 9 September No other matter or circumstance has arisen since 30 June 2016 that has significantly affected or may significantly affect the Group s operations, the results of those operations or the Group s state of affairs in future years. 13 NON-AUDIT SERVICES Details of the amounts paid to the auditor of the Company and their related practices for audit services provided during the year are set out below. Audit services: Audit and review of financial reports 58,823 50,899 58,823 50,899 The following non-audit services were provided by the Company s auditor, Grant Thornton Australia. 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 The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Grant Thornton Australia received or is due to receive the following amounts for the provision of non-audit services: Non-audit services: Tax compliance services 25,848 14,450 25,848 14,450 8 Page

15 DIRECTORS REPORT Signed in accordance with a resolution of the Directors. DESIREE ALLEN MANAGING DIRECTOR Dated at Subiaco 29 th September Page

16 Level 1 10 Kings Park Road West Perth WA 6005 Correspondence to: PO Box 570 West Perth WA 6872 Auditor s Independence Declaration To the Directors of Marine Produce Australia Limited T F E info.wa@au.gt.com W In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Marine Produce Australia Limited for the year ended 30 June 2016, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants M A Petricevic Partner - Audit & Assurance Perth, 29 September 2016 Grant Thornton Audit Pty Ltd ACN a subsidiary or related entity of Grant Thornton Australia Ltd ABN Grant Thornton refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another s acts or omissions. In the Australian context only, the use of the term Grant Thornton may refer to Grant Thornton Australia Limited ABN and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.

17 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Consolidated Note Revenue from sales 7,253,391 9,015,943 Raw materials and consumables (9,340,477) (7,119,679) Farm personnel expenses 9 (3,814,022) (3,599,490) Fair value gain on biological assets 7,269,405 1,200,732 Impairment of property, plant and equipment 8 - (516,787) Depreciation and amortisation (398,106) (169,589) Administrative and marketing expenses (1,857,847) (2,715,726) Other income 76,120 4,085 Results from operating activities (811,536) (3,900,511) Finance income 7 37,066 40,280 Finance costs 6 (108,312) (79,224) Net finance costs (71,246) (38,944) Loss before income tax (882,782) (3,939,455) Income tax benefit research and development tax incentive Profit for the period: attributable to owners of the Company 11 4,412,782 6,341,156 3,530,000 2,401,701 Other comprehensive income for the period, net of tax - - Total comprehensive income for the period: attributable to owners of the Company 3,530,000 2,401,701 The notes to the financial statements are an integral part of these consolidated financial statements. 11 Page

18 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016 Consolidated Note Assets Cash and cash equivalents 12 Trade and other receivables 13 Inventories 14 Biological assets 15 Total current assets Property, plant and equipment 8/17 Other assets Biological assets 15 Total non-current assets Total assets Liabilities Trade and other payables 20 Loans and borrowings 21 Employee benefits 22 Total current liabilities Loans and borrowings 21 Provision for restoration 19 Employee benefits 22 Total non-current liabilities Total liabilities Net assets 1,473,322 2,063,069 5,688,011 4,837, , ,489 16,141,615 8,658,598 24,063,256 16,001,116 4,949,139 2,914,323 94,737 91,380 70, ,329 5,114,592 3,290,032 29,177,848 19,291,148 3,509,439 2,066, ,702 1,164, , ,331 4,321,995 3,457,144 1,182, , , ,384 60,230-1,362, ,743 5,684,776 4,258,887 23,493,072 15,032,261 Equity Share capital 23 60,505,645 55,699,560 Reserves 124,726 - Accumulated losses (37,137,299) (40,667,299) Total equity 23,493,072 15,032,261 The notes to the financial statements are an integral part of these consolidated financial statements. 12 Page

19 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Note Share capital Share options reserve Accumulated Losses Total equity Balance at 1 July ,481,090 1,473,020 (44,542,020) 11,412,090 Profit for the period - - 2,401,701 2,401,701 Other comprehensive income Total comprehensive profit for the year - - 2,401,701 2,401,701 Transactions with owners in their capacity as owners: Share issues 23 Share issue costs Exercise of options Expiry of options Balance at 30 June 2015 Balance at 1 July 2015 Profit for the period 820, ,243 (14,462) - - (14,462) 412, ,689 - (1,473,020) 1,473,020-55,699,560 - (40,667,299) 15,032,261 55,699,560 - (40,667,299) 15,032, ,530,000 3,530,000 Other comprehensive income Total comprehensive profit for the year - - 3,530,000 3,530,000 Transactions with owners in their capacity as owners: Share issues 23 4,902, ,902,739 Share issue costs (96,654) - - (96,654) Reserves - 124, ,726 Balance at 30 June ,505, ,726 (37,137,299) 23,493,072 The notes to the financial statements are an integral part of these consolidated financial statements. 13 Page

20 CONSOLIDATED STATEMENTS OF CASH FLOWS Consolidated Note Cash flows from operating activities Cash receipts from customers 6,978,503 9,775,142 Cash paid to suppliers and employees (13,588,449) (13,515,166) Cash used in operations (6,609,946) (3,740,024) Interest received 37,066 40,280 Research and development tax incentive receipts 3,913,739 3,946,120 Net cash used in operating activities 28 (2,659,141) 246,376 Cash flows from investing activities Acquisition of property, plant and equipment 17 (2,427,417) (1,652,730) Net cash used in investing activities (2,427,417) (1,652,730) Cash flows from financing activities Proceeds from issue of share capital 23 4,902,739 1,232,932 Payment of transaction costs 23 (96,654) (14,462) Proceeds from borrowings ,293 2,078,169 Repayment of borrowings 21 (404,296) (674,000) Interest paid on borrowings (108,271) (79,224) Net cash provided by financing activities 4,496,811 2,543,415 Net decrease in cash and cash equivalents (589,747) 1,137,061 Cash and cash equivalents at 1 July 2,063, ,008 Cash and cash equivalents at 30 June 12 1,473,322 2,063,069 The notes to the financial statements are an integral part of these consolidated financial statements. 14 Page

21 1 Reporting entity Marine Produce Australia Limited (the Company) is a company domiciled in Australia. The address of the Company s registered office is 34 Bagot Road, Subiaco WA The consolidated financial statements of the Group as at and for the year ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as the Group and individually as Group entities ). The Group is a for-profit entity involved in the seafood and aquaculture industry, specifically including the farming of fin fish (Barramundi) in sea cages. 2 Basis of preparation (a) Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 (Cth). The consolidated financial report of the Group complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were approved and authorised for issue by the Board of Directors on 29th September (b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position: biological assets are measured at fair value less costs to sell; property plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses; and share based payments are measured at fair value of services provided. The methods used to determine fair values are discussed further in Note 3 (m). (c) Functional and presentation currency These consolidated financial statements are presented in Australian Dollars, which is the Group s functional currency. (d) Use of estimates and judgements The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes: Note 8 - Impairment of property, plant and equipment and intangible assets Note 15 - Biological assets Note 23 - Share Capital Note 3(b) - Depreciation methods and rates 15 Page

22 (e) Going concern The financial statements have been prepared on a going concern basis which the Directors believe to be appropriate. The Directors are confident that the Group will be able to maintain sufficient levels of working capital to continue as a going concern and continue to pay its debts as and when they fall due. For the period ended 30 June 2016, the Group made a profit of $3,530,000 (2015: $2,401,701). At 30 June 2016, the Group had a working capital surplus of $19,741,261 represented significantly by biological assets of $16,141,615 and cash and cash equivalents of $1,473,322. The Directors are confident that the Group can continue as a going concern and as such are of the opinion that the financial report has been appropriately prepared on a going concern basis. The Group s 2017 cash flow forecast assumes an increase in the working capital spending required to support its ongoing expansion plans. These increased costs specifically include feeding and growing the fish biomass to sustain increasing harvest volumes. This ongoing expansion is expected to be funded by sales of fish, further research and development tax refunds, and some equity and/or debt investment. During 2016 the Group also secured an additional rolling capital expenditure loan from National Australia Bank. Key risks associated with Barramundi farming and the ability to successfully grow and harvest fish for sale are discussed in Note 15. The directors believe that it is appropriate to prepare the financial statements using the going concern basis as the Group has the ability to slow its expansion strategy and/or harvest fish at less than the targeted harvest size to maintain sufficient cash reserves, with a resulting delay in the growth of the scale of the operations. In any case, the Group is planning to raise new equity or debt capital. Should the Group be unable to undertake the initiatives disclosed above, there is uncertainty which may cast doubt as to whether or not the Group will be able to continue as a going concern and whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern. 3 Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities. (a) Subsidiaries Basis of consolidation Subsidiaries are entities controlled by the Group. During the reporting period the Company had a 100% interest in the following subsidiaries: MPA Fish Farms Pty Ltd; MPA Marketing Pty Ltd; The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. In the Company s financial statements, investments in subsidiaries are carried at cost. 16 Page

23 Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. (b) Property, plant and equipment Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials; direct labour;; and, an appropriate proportion of production overheads. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within other income in profit or loss. Subsequent costs Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred. Depreciation Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on an adjusted reducing balance basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods are as follows: Plant and equipment 5 15 years Fixtures and fittings 5 10 years Major components 3 5 years Boats 15 years Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. (c) Intangible assets Research and development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the profit or loss as incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and accumulated impairment losses. 17 Page

24 Subsequent costs Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred. Amortisation Amortisation is calculated over the costs of the asset, less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods is 10 years. Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. (d) Biological assets Biological assets (fish 400 grams and larger) are measured at fair value less costs to sell, with any change therein recognised in profit or loss. Fair value is determined based on average market sales price. Costs to sell include all costs that are necessary to sell the assets, including costs necessary to get the assets to market. As the fair value of the assets is based on its present location and condition, the Group applies direct costing to estimate fair value of fish in cages where they have not yet reached a saleable size: Fish up to 400 grams are measured at cost plus direct feed cost and direct fish management costs. (e) Inventories Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and costs to sell. The cost attributed to harvested fish is equal to the fair value less estimated selling costs previously recorded in biological assets at the date of harvest, determined in accordance with the accounting policy for biological assets. Any change in value at the date of harvest is recognised in the income statement. Once harvested, fish inventories are accounted for as normal inventories. The cost of other inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Cost includes an appropriate share of overheads based on normal operating capacity. (f) Impairment Non-derivative financial assets (including receivables) The carrying amounts of the Group s non-derivative financial assets, other than biological assets (see accounting policy (d)), inventories (see accounting policy (e)) and deferred tax assets (see accounting policy (k)) are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. For intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis (except for individual assets or groups of assets have been valued separately). 18 Page

25 Calculation of recoverable amount The recoverable amount of the Group s investments and receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted. Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significant receivables are individually assessed for impairment. Impairment testing of receivables that are not impaired individually is performed by placing them into portfolios of receivables with similar risk profiles and undertaking a collective assessment of impairment. Non-significant receivables are not individually assessed. Instead, impairment testing is performed by placing non-significant receivables in portfolios of similar risk profiles based on objective evidence from historical experience adjusted to for any effects of conditions existing at each balance sheet date. Non-financial assets The carrying amounts of the Group s non-financial assets, other than biological assets, investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. Goodwill and indefinite life intangible assets are tested annually for impairment. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (CGU) exceeds its recoverable amount. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (or group of CGUs) on a pro rata basis (except for individual assets or groups of assets have been valued separately). An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (g) Employee benefits Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution superannuation funds are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Short-term benefits Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the reporting date represent present obligations resulting from employees services provided to reporting date, are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at the reporting date including related on-costs, such as workers compensation, insurance and payroll tax. Non-monetary benefits, such as medical care, housing, cars and free or subsidised goods and services, are expensed based on the net marginal cost to the Group as the benefits are taken by the employees. 19 Page

26 Termination benefits Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date. Termination benefits for voluntary redundancies are recognised if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. (h) Provisions A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (i) Revenue Sale of goods Revenue from the sale of goods is recognised in profit or loss when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, the costs incurred or to be incurred cannot be measured reliably, there is a risk of return of goods or there is continuing management involvement with the goods. Transfers of risks and rewards vary depending on the individual terms of the contract of sale. For sales of Barramundi, transfer usually occurs when the product is received by the customer. Gain from change in fair value of biological assets Biological assets relating to aquaculture activities and products are stated at fair value less estimated point-of-sale costs, with any resultant gain or loss recognised in the income statement. Point-of-sale costs include all costs that would be necessary to sell the assets, including costs necessary to get the assets to market. As the fair value of the assets is based on its present location and condition, the Company applies direct costing to estimate fair value of Barramundi in cages where they have not yet reached a saleable size of 400 grams. (j) Expenses Financing income and expenses Financing costs comprise interest payable on borrowings (calculated using the effective interest method), facilities and interest receivable on funds invested that are recognised in the income statement. Borrowing costs are expensed as incurred and included in financing costs. Interest income is recognised in the income statement as it accrues, using the effective interest method. (k) Income tax Income tax on profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Research and development incentive is recognised as an income tax benefit in the year in which it is earned. The corresponding receivable is held within other receivables. 20 Page

27 Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that the future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Tax consolidation The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2004 and are therefore taxed as a single entity from that date. The head entity within the taxconsolidated group is Marine Produce Australia Limited. Current tax expense/income and deferred tax assets arising from unused tax losses of the subsidiaries is assumed by the head entity and are recognised in the separate financial statements of the members of the tax consolidated group using the separate tax payer within group approach by reference to the carrying amount of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries is assumed by the head entity in the tax consolidated group and are recognised as amounts payable (receivable) to (from) other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution or distribution. The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised. Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only. Nature of tax funding arrangements and tax sharing arrangements The head entity, in conjunction with other members of the tax-consolidated group, has not entered into a tax funding or sharing arrangement with members of the tax-consolidated group in respect of tax amounts. (l) Goods and services tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows are included in the 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, the ATO are classified as operating cash flows. 21 Page

28 (m) Determination of fair values A number of the Group s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values of assets and liabilities are disclosed in the notes specific to that asset or liability. Biological assets The fair value of fish is set out in Note 3(d). Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. (n) Financial instruments Non-derivative financial assets The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit and loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. The Group has the following non-derivative financial assets: trade and other receivables, and cash and cash equivalents. Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Non-derivative financial liabilities The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group has the following non-derivative financial liabilities: payables. loans and borrowings, and trade and other Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest rate method. Financial assets and liabilities are offset and then net amount presented in the Statement of Financial Position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. 22 Page

29 Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Dividends Dividends are recognised as a liability in the period in which they are declared. (o) Government grants An unconditional government grant is recognised in profit or loss as other income when the grant becomes receivable. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same period in which the expenses are recognised. Research and development tax incentives are recognised in the statement of profit or loss when received or when the amount to be received can be reliably estimated. 4 New standards and interpretations not yet adopted A number of new and revised standards are effective for the current reporting period, however there was no need to change accounting policies or make retrospective adjustments as a result of adopting these standards. Information on these new standards is presented below. AASB Amendments to Australian Accounting Standards Annual Improvements to Australian Accounting Standards Cycle These amendments arise from the issuance of Annual Improvements to IFRS Cycle in September 2014 by the IASB. Among other improvements, the amendments clarify that when an entity reclassifies an asset (or disposal group) directly from being held for sale to being held for distribution (or vice-versa), the accounting guidance in paragraphs of AASB 5 Non-current Assets Held for Sale and Discontinued Operations does not apply. The amendments also state that when an entity determines that the asset (or disposal group) is no longer available for immediate distribution or that the distribution is no longer highly probable, it should cease held-for-distribution accounting and apply the guidance in paragraphs of AASB 5. AASB Amendments to Australian Accounting Standards Accounting for Acquisitions of Interests in Joint Operations The amendments to AASB 11 Joint Arrangements state that an acquirer of an interest in a joint operation in which the activity of the joint operation constitutes a business, as defined in AASB 3 Business Combinations, should; apply all of the principles on business combinations accounting in AASB 3 and other Australian Accounting Standards except principles that conflict with the guidance of AASB 11. This requirement also applies to the acquisition of additional interests in an existing joint operation that results in the acquirer retaining joint control of the joint operation (note that this requirement applies to the additional interest only, i.e., the existing interest is not re-measured) and to the formation of a joint operation when an existing business is contributed to the joint operation by one of the parties that participate in the joint operation; and provide disclosures for business combinations as required by AASB 3 and other Australian Accounting Standards. 23 Page

30 AASB Amendments to Australian Accounting Standards Clarification of Acceptable Methods of Depreciation and Amortisation The amendments to AASB 116 prohibit the use of a revenue-based depreciation method for property, plant and equipment. Additionally, the amendments provide guidance in the application of the diminishing balance method for property, plant and equipment. The amendments to AASB 138 present a rebuttable presumption that a revenue-based amortisation method for intangible assets is inappropriate. This rebuttable presumption can be overcome (ie., a revenue-based amortisation method might be appropriate) only in two (2) limited circumstances: intangible asset is expressed as a measure of revenue, for example when the predominant limiting factor inherent in an intangible asset is the achievement of a revenue threshold; or when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. AASB Amendments to Australian Accounting Standards Equity Method in Separate Financial Statements The amendments introduce the equity method of accounting as one of the options to account for an entity s investments in subsidiaries, joint ventures and associates in the entity s separate financial statements. AASB Amendments to Australian Accounting Standards Disclosure Initiative: Amendments to AASB 101 The Standard makes amendments to AASB 101 Presentation of Financial Statements arising from the IASB s Disclosure Initiative project. The amendments: Clarify the materiality requirements in AASB 101, including an emphasis on the potentially detrimental effect of obscuring useful information with immaterial information Clarify that AASB 101 s specified line items in the statement(s) of profit or loss and other comprehensive income and the statement of financial position can be disaggregated Add requirements for how an entity should present subtotals in the statement(s) of profit and loss and other comprehensive income and the statement of financial position clarify that entities have flexibility as to the order in which they present the notes, but also emphasise that understand-ability and comparability should be considered by an entity when deciding that order remove potentially unhelpful guidance in AASB 101 for identifying a significant accounting policy AASB Amendments to Australian Accounting Standards Financial Reporting Requirements for Australian Groups with a Foreign Parent AASB amends AASB 128 Investments in Associates and Joint Ventures to ensure that its reporting requirements on Australian groups with a foreign parent align with those currently available in AASB 10 Consolidated Financial Statements for such groups. AASB 128 will now only require the ultimate Australian entity to apply the equity method in accounting for interests in associates and joint ventures, if either the entity or the group is a reporting entity, or both the entity and group are reporting entities. 24 Page

31 AASB 1057 Application of Australian Accounting Standards In May 2015, the AASB decided to revise Australian Accounting Standards that incorporate IFRSs to minimise Australian specific wording even further. The AASB noted that IFRSs do not contain application paragraphs that identify the entities and financial reports to which the Standards (and Interpretations) apply. As a result, the AASB decided to move the application paragraphs previously contained in each Australian Accounting Standard (or Interpretation), unchanged, into a new Standard AASB 1057 Application of Australian Accounting Standards. AASB Amendments to Australian Accounting Standards Scope and Application Paragraphs removes the application paragraphs from each Australian Accounting Standard. Impact of standards issued but not yet applied New and revised accounting standards and amendments that are currently issued for future reporting periods that are relevant to the Company include: AASB 9 Financial Instruments AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The effective date is for annual reporting periods beginning on or after 1 January The Company is yet to undertake a detailed assessment of the impact of AASB 9. However, based on the Company s preliminary assessment, the Standard is not expected to have a material impact on the transactions and balances recognised in the financial statements when it is first adopted for the year ending 30 June AASB 15 Revenue from Contracts with Customers AASB 15 replaces AASB 118: Revenue, AASB 111 Construction Contracts and some revenue-related Interpretations. In summary, AASB 15: establishes a new revenue recognition model; changes the basis for deciding whether revenue is to be recognised over time at a point in time; provides a new and more detailed guidance on specific topics (eg multiple element arrangements, variable pricing, rights of return and warranties); and expands and improves disclosures about revenue. The Company is yet to undertake a detailed assessment of the impact of AASB 15. However, based on the Company s preliminary assessment, the Standard is not expected to have a material impact on the transactions and balances recognised in the financial statements when it is first adopted for the year ending 30 June AASB 16 Leases AASB 16 replaces AASB 117 Leases and some lease-related Interpretations. In summary, AASB 16: requires all leases to be accounted for on-balance sheet by lessees, other than short-term and low value asset leases; provides new guidance on the application of the definition of lease and on sale and lease back accounting; largely retains the existing lessor accounting requirements in AASB 117; and requires new and different disclosures about leases. 25 Page

32 The Company is yet to undertake a detailed assessment of the impact of AASB 16. However, based on the Company s preliminary assessment, the Standard is not expected to have a material impact on the transactions and balances recognised in the financial statements when it is first adopted for the year ending 30 June AASB Amendments to Australian Accounting Standards Accounting for Acquisitions of Interests in Joint Operations This amendment impacts on the use of AASB 11 when acquiring an interest in a joint operation. The effective date is for annual reporting periods beginning on or after 1 January When these amendments are first adopted for the year ending 30 June 2017, there will be no material impact on the transactions and balances recognised in the financial statements. AASB Amendments to Australian Accounting Standards Clarification of Acceptable Methods of Depreciation and Amortisation The amendments to AASB 116 prohibit the use of a revenue-based depreciation method for property, plant and equipment. Additionally, the amendments provide guidance in the application of the diminishing balance method for property, plant and equipment. The effective date is for annual reporting periods beginning on or after 1 January When these amendments are first adopted for the year ending 30 June 2017, there will be no material impact on the transactions and balances recognised in the financial statements. AASB Amendments to Australian Accounting Standards Equity Method in Separate Financial Statements The amendments introduce the equity method of accounting as one of the options to account for an entity s investments in subsidiaries, joint ventures and associates in the entity s separate financial statements. The effective date is for annual reporting periods beginning on or after 1 January When these amendments are first adopted for the year ending 30 June 2017, there will be no material impact on the financial statements. AASB Amendments to Australian Accounting Standards Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address a current inconsistency between AASB 10 Consolidated Financial Statements and AASB 128 Investments in Associates and Joint Ventures (2011). The amendments clarify that, on a sale or contribution of assets to a joint venture or associate or on a loss of control when joint control or significant influence is retained in a transaction involving an associate or a joint venture, any gain or loss recognised will depend on whether the assets or subsidiary constitute a business, as defined in AASB 3 Business Combinations. Full gain or loss is recognised when the assets or subsidiary constitute a business, whereas gain or loss attributable to other investors interests is recognised when the assets or subsidiary do not constitute a business. The effective date is for annual reporting periods beginning on or after 1 January When these amendments are first adopted for the year ending 30 June 2017, there will be no material impact on the financial statements. 26 Page

33 5 Parent company disclosure As at, and throughout, the financial year ending 30 June 2016 the parent company of the Group was Marine Produce Australia Limited. Company Result of the parent entity Profit for the period 3,530,000 2,401,701 Other comprehensive income - - Total comprehensive income for the period 3,530,000 2,401,701 Financial position of parent entity at year end Current assets 5,505,234 5,924,891 Total assets 26,153,569 18,249,235 Current liabilities (159,319) (306,014) Total liabilities (2,660,497) (3,216,974) Total equity of the parent entity comprising of: Share capital 60,505,645 55,699,560 Option reserve 124,726 - Accumulated losses (37,137,299) (40,667,299) Total equity 23,493,072 15,032,261 Marine Produce Australia Limited has a guarantee in place under a facility agreement refer to Note 21. For disclosures of capital and operating commitments refer Note 25 and Note 26, respectively. 6 Finance costs Interest expense 108,312 79,224 Interest expense 108,312 79,224 Interest charges for Capital Finance and NAB Finance, for the provision of secured working capital facilities refer to Note 21 for further details of movements, terms and conditions of these facilities. 7 Finance income Interest income from cash and cash equivalents 37,066 40,280 37,066 40, Page

34 8 Impairment of property, plant and equipment and intangible assets Note Carried values prior to impairment: Property, plant and equipment 4,949,139 3,431,110 4,949,139 3,431,110 Impairment charges: Property, plant and equipment - (516,787) - (516,787) Carried value following impairment: Property, plant and equipment 4,949,139 2,914, ,949,139 2,914,323 The Group has undertaken a review of the carrying value of its property, plant and equipment to assess whether any impairment triggers existed at balance date. In assessing impairment, management estimates the recoverable amount of each asset or cash-generating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate. Expected future cash flows are based on management s best estimates based on prior period actual results with the application of a growth rate of 2.5% (2015: 2.5%). The discount rate applied is equivalent to 14% (2015: 14%). In 2016, the Group did not recognise impairment (2015: $516,787). Refer to Note 2(d), 2(e) and Note 15 for additional details around estimates and assumptions. 9 Farm personnel expenses Wages and salaries 2,768,062 2,658,448 Other associated personnel expenses 608, ,323 Superannuation costs 262, ,553 Increase in liability for annual leave 174,753 53,166 3,814,022 3,599, Auditor s remuneration Audit services Audit and review of financial reports Grant Thornton Audit Pty Ltd 58,823 50,899 Total auditors remuneration 58,823 50, Income tax expense recognised in the income statement Current tax expense Current period (4,412,782) (4,119,725) Current tax of prior period - (2,221,431) (4,412,782) (6,341,156) Deferred tax expense Origination and reversal of temporary differences - - Total income tax expense (4,412,782) (6,341,156) 28 Page

35 Numerical reconciliation between tax-expense and pre-tax net profit Accounting loss before tax (881,480) (3,939,455) Loss excluding income tax (881,480) (3,939,455) Income tax (benefit) using the Company s domestic tax rate of 30% (2015:30%) (264,444) (1,181,837) Non-deductible expenses 39,212 2,067 Recoupment of prior year tax losses not brought to account (373,235) (2,221,431) Research and development offset income tax rate variance (1,470,927) (1,373,242) Assessable research and development feedstock adjustment 48, ,451 Deferred tax asset not brought to account (2,392,209) 62,742 Deferred tax loss not brought to account 403,815 - Research and development tax refund amendment prior year (2,096,906) Feedstock adjustment amendment of prior year (403,815) - Income tax expense (benefit) (4,412,782) (6,341,156) 12 Cash and cash equivalents Cash at bank 1,473,322 2,063,069 Cash in the statement of cash flows 1,473,322 2,063,069 The Group currently maintains a $400,000 overdraft facility with NAB. This amount of the facility used at 30 June 2016 was nil (2015: nil). The Group s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note Trade and other receivables Trade receivables 1,058, ,448 Provision for doubtful debt - (19,440) Other receivables 16,600 3,411 Research and development tax refund (1) 4,412,782 3,913,739 GST receivable 199, ,802 5,688,011 4,837,960 The research and development tax refund has been received subsequent to reporting date. Refer note 30. The Group s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in Note Page

36 14 Inventories Stock of feed - at cost 485, ,425 Consumable stock - at cost 49,684 56,152 Harvested fish stock - at net realisable value 225, , , , Biological assets Barramundi (tonnes) Barramundi AUD Balance at 1 July 944, ,405 8,942,927 7,742,194 Increase due to net growth 1,410, ,677 14,194,829 9,826,087 Increase due to acquisitions , ,589 Decrease due to harvest (641,078) (824,799) (7,253,391) (9,015,943) Balance at 30 June 1,713, ,283 16,212,331 8,942,927 Gain from changes in fair value 7,269,405 1,200,732 Biological assets have been classified as both a current and non-current asset in the Consolidated Statement of Financial Position. Current biological assets are those which are expected to be harvested within the next 12 months and non-current biological assets will be harvested in later financial years. Group exposure to risk Aquaculture contains elements of significant risk. The ultimate success of aquaculture depends, amongst other things, on the ability to obtain a sufficient yield of juveniles from hatcheries and harvesting an economic yield from a marketable size, the possibility of high mortality rates due to a variety of factors, maintenance of the necessary licences, adhering to other government regulations, conditions and approvals and obtaining and servicing suitable funding arrangements. The performance of the Group s aquaculture operations, and the value of the Group s biological assets, could be impacted by a number of factors, including: weather conditions; predator risks; possibility of disease and high mortality rates; sales price of and market for its products; exchange rates affecting international market pricing; unexpected developments in aquaculture development and operating costs; general economic and stock market conditions in Australia and worldwide, particularly relating to the availability of capital; and access to sufficient funding to allow grow-out to marketable size. The Group is exposed to a number of risks related to its Barramundi farming operations, which can be summarised into the following key areas. Regulatory and environmental risks The Group is subject to laws and regulations of Australia, and specifically Western Australia. Although the Group has currently obtained all required approvals it is possible that future legislative and regulatory changes may have a possible adverse impact on the Group s operation and profitability. 30 Page

37 There are a number of environmental conditions which the Group must comply with and failure to meet such conditions could lead to forfeiture of key operating licences and leases and significant liability could be imposed on the Group for damages or penalties for non-compliance by the Group with environmental laws or regulations. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks. Supply and demand risks The Group is exposed to risks arising from fluctuations in the price and sales volume of fish. MPA s financial position and future development depends, to a considerable extent, on the price of Barramundi and demand for the fish is affected by a large number of different factors, over which the Group has little control. Where practicable, the Group manages this risk by aligning its harvest volume to market supply and demand. Management performs regular industry trend analysis to ensure that the Group s pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand. Climate and other risks The Group s fish farm is exposed to the risk of damage from climatic conditions as it is located in a tropical cyclone threat area. Although the main impacts of tropical lows and cyclones in the Derby region are heavy rainfall and associated flooding, there is still the risk that a severe cyclone may impact the Group s operation. During the past twelve years of operating, the Group has had firsthand experience of cyclones and has subsequently developed and established procedures aimed at monitoring and mitigating those risks, including insuring itself against damage to its assets caused by natural disasters. Basis of estimation and valuation The measurement of the number, weight and value of fish stock involves: sample counting of fish in cages during cage transfers and grading; sample weighing of fish in cages and extrapolation of results to total holding in sampled cage; and current market values and selling costs. In line with industry practice there is a degree of estimation in these processes which requires management and staff to make judgments, estimates and assumptions that affect the reported quantities and value of the Group s biological assets. Fish numbers are estimated allowing for cannibalism, stock losses and under delivery of small fish at time of purchase. Actual results, for example at later harvest, may differ positively or negatively from those estimates. The estimates and assumptions applied are reviewed on an ongoing basis. There is inherent uncertainty in the biomass estimate and resultant live fish valuation. This is common to all such valuations and best practice methodology is used to facilitate reliable estimates. Biomass is estimated using a model that simulates fish growth. Actual growth will invariably differ to some extent, which is monitored and stock records adjusted via harvest counts and weights, periodic sample weight checks, physical counts on transfer to sea cages and subsequent splitting of cages, mortality counts and reconciliation of the perpetual records after physical counts and on cage closeout. Competition Competition from domestic and foreign fish producers may pose a risk to the Group. The Group can provide no assurance that it will be able to compete effectively with existing or new competitors or that increased competition will not have a material adverse effect on the Group s future operating and financial performance. Similarly, no assurances can be given regarding future Barramundi prices. 31 Page

38 Adverse movements in feed pricing and supply A substantial proportion of the Group s marine-based costs of growing Barramundi are represented by the cost of fish feed required. Any material disruptions in the supply of feed or adverse movements in feed pricing have the potential to materially impact on the Group. Disease and predators There is always a possibility of disease and high mortality rates caused by the introduction of diseases to fish stocks. In addition, the Group s farming operations are subject to the activities of natural predators. 16 Deferred tax assets and liabilities Movement in temporary differences during the year Balance 1 July 2014 Recognised in other comprehensive income Balance 30 June 2015 Recognised In loss Recognised in other comprehensive income Balance 30 June 2016 Property, plant and equipment (819,534) - (787,431) 145,805 - (641,626) Intangible assets (515,071) - (515,071) - - (515,071) Inventory ,573 2,149,572-2,197,145 Payables (29,877) - (12,463) 13 - (12,450) Pension and other employee obligations - - (93,254) (28,017) - (121,271) Provisions (53,892) - (14,377) 13,332 - (1,045) Capital raising costs (26,254) (4,339) (19,120) (7,085) (28,996) (55,201) Tax loss carryforwards (9,409,526) - (2,283,100) (30,580) - (2,313,680) (10,854,154) (4,339) (3,677,243) 2,243,040 (28,996) (1,463,199) Deferred tax assets not brought to account 10,854,154 4,339 3,677,243 (2,243,040) 28,996 1,463, Movement in unrecognised deferred tax assets and liabilities during the year Balance 1 July 2014 Additions Balance 30 June 2015 Additions Balance 30 June 2016 Taxable temporary - (47,573) (47,573) (2,149,572) (2,197,145) differences Deductible temporary 1,445,076 (3,360) 1,441,716 (95,052) 1,346,664 differences Tax income losses 8,644,586 (6,361,486) 2,283,100 30,580 2,313,680 Tax capital losses 764,940 (764,940) ,854,602 (7,177,359) 3,677,243 (2,214,044) 1,463,199 No deferred tax asset has been recognised in respect to the losses disclosed above. The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect to these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits there from. 32 Page

39 17 Property, plant and equipment Gross carrying amount Plant and equipment Capital works in progress Total Balance at 1 July ,887,356-9,887,356 Acquisitions 736, ,500 1,681,199 Balance at 30 June ,624, ,500 11,568,555 Depreciation and impairment losses Balance at 1 July ,972,946-7,972,946 Depreciation 164, ,499 Impairment 516, ,787 Balance at 30 June ,654,232-8,654,232 Carrying amount at 30 June ,969, ,500 2,914,323 Gross carrying amount Balance at 1 July ,624, ,500 11,568,555 Transfers from capital works in progress 944,500 (944,500) - Acquisitions 1,586, ,677 2,427,419 Balance at 30 June ,155, ,677 13,995,974 Depreciation and impairment losses Balance at 1 July ,654,232-8,654,232 Depreciation 392, ,603 Balance at 30 June ,046,835-9,046,835 Carrying amount at 30 June ,108, ,677 4,949,139 Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utility of certain assets. 33 Page

40 18 Intangible assets Development assets Barramundi Total Cost At 1 July , ,160 Amortisation and impairment losses (823,160) (823,160) At 30 June At 1 July At 30 June 2016 (Note 8) Environmental provision Cost Site Restoration Total Balance at 1 July , ,384 Provisions made during the year 9,202 9,202 Balance at 30 June , ,586 Site restoration A provision of $110,384 was made during 2015 in respect of the Group s obligation to remove operating equipment and rehabilitate environmental sites used in the production of Barramundi at Cone Bay. This was reviewed during the current year and an additional provision of $9,202 has been made based on management s best estimates of future cost incurred. In accordance with the lease of land and waters agreement, all operating equipment must be removed and affected environmental sites must be rehabilitated to the satisfaction of the Department of Fisheries at the cessation of the lease, which expires in 21 years. Because of the long-term nature of the liability, the biggest uncertainty in estimating the provision is the costs that will be incurred. In particular, the Group has assumed that the site will be restored using technology and materials that are available currently. 20 Trade and other payables Trade payables 3,278,231 1,742,221 Other payables and accrued expenses 231, ,282 3,509,439 2,066,503 There were no amounts due and payable to Directors of the entity included in the above amounts refer to Note 29. The Group s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note Page

41 21 Loans and borrowings Current interest-bearing loans 471,702 1,164,310 Non-current interest bearing loans 1,182, ,359 Movements in loans and borrowings during 2016 Facility Opening 1-Jul-15 Drawn in cash 1,654,667 1,855,669 Repaid in cash Closing 30-Jun-16 NAB Finance - Innovator 977, , ,010 NAB Finance Work Vessels 878, , , ,283 Capital Finance - Crown Forklifts - 44,000 1,496 42,504 Capital Finance - Net & Pressure Cleaning - 46,113 1,243 44,870 Total 1,855, , ,295 1,654,667 This note provides information about the contractual terms of the Group s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group s exposure to interest rate and liquidity risk, see Note 24. NAB Finance During the period the Group received further funds of $113,180 from National Australia Bank (NAB) which completed previously secured payments for vessels, and $90,113 from Capital Finance. The Group has honoured its covenant obligations with existing finance provider National Australia Bank (NAB), including maintaining capital ratios and minimum equity levels since the agreements were entered into. The loan agreements are with MPA Fish Farms Pty Ltd and the parent company, Marine Produce Australia Ltd, acted as guarantor. The following is a list of security interests held by NAB in relation to the agreements: - General security charge over all present and future rights, property and undertakings of MPA Fish Farms Pty Ltd. - General security charge over all present and future rights, property and undertakings of Marine Produce Australia Ltd - General security charge over all present and future rights, property and undertakings of MPA Marketing Pty Ltd - 1 st Registered Ships Mortgage given by MPA Fish Farms Pty Ltd over the Innovator vessel. - Guarantee and Indemnity for $1,985,569 given by Marine Produce Australia Limited and MPA Marketing Pty Ltd supported by: Security interest and Charge over all present and future rights, property and undertakings of MPA Marketing Pty Ltd Security interest and Charge over all present and future rights, property and undertakings of Marine Produce Australia Ltd 35 Page

42 Subsequent to reporting date, MPA Fish Farms Pty Ltd entered equipment loans over each new vessel, superseding the original loan. NAB has security of each vessel for each loan in addition to each loan being secured by the a general security charge over all present and future rights, property and undertakings of MPA Fish Farms Pty Ltd, Marine Produce Australia Pty Ltd and MPA Marketing Pty Ltd. 22 Employee benefits Current Provision for annual leave 288, ,330 Provision for long service leave 112, , ,330 Defined superannuation contribution funds The Group makes contributions to defined contribution superannuation funds. The amount recognised as an expense during the period was $335,160 (2015: $333,645). 23 Share capital Ordinary Shares Options No. shares $ No. options $ On issue at 1 July ,900,231 54,481,090 20,118,583 1,473,020 Consolidation 1:4 23,725,292 54,481,090 5,029,673 1,473,020 Issue of share capital 1,598, , Issue of share capital for no cash consideration ,428 - Share application funds received - 21, Transaction costs - (14,462) - - Exercise of options 515, ,689 (515,862) - Expiry of options - - (4,513,811) (1,473,020) On issue at 30 June ,839,956 55,699, ,428 - On issue at 1 July ,839,956 55,699, ,428 - Rights issue 42,000-21,000 - Issue of shares (i) 309, Issue of options to directors (ii) - - 2,200, ,726 Issue of shares pursuant to rights issue (iv) 9,805,477 4,902, Transaction costs - (96,654) - - On issue at 30 June ,996,950 60,505,645 3,020, ,726 Note (i) On 7 August 2015 the Company issued 309,517 fully paid ordinary shares (Loyalty Shares), made on the basis of 3 Loyalty Shares for every 5 unlisted $0.80 options which option holders exercised prior to expiry on 31 October 2014; 36 Page

43 (ii) The assessed fair value at grant date of options granted during the year ended 30 June 2016 was $ per option (2015 nil). The fair value at grant date is independently determined using an adjusted form of the Black Scholes Model that takes into account the exercise price, the term of the option, the impact of the dilution (where material), the share price at grant date and expected price volatility of the underlying share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk free rate for the term of the option and the correlations and volatilities of the peer group companies. The use of this valuation technique was utilised in place of a valuation method equivalent to the fair value of services for which these issuances pertain as the fair value of services could not readily be attributable. The model inputs for options granted during the year ended 30 June 2016 included: (a) Options are granted for no consideration and vest immediately. (b) Exercise price: $0.75 (c) Grant date: 23 November 2015 (d) Expiry date: 30 November 2018 (e) Share price at grant date: $0.50 (f) Expected price volatility of the company s shares: 33% (g) Expected dividend yield: nil (h) Risk-free interest rate: 1.89% The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information; (iii) The Company issued 9,805,477 fully paid ordinary shares pursuant to the prospectus for a non-renounceable offer ( Offer ) of new shares dated 16 November 2015, at an issue price of $0.50 per share to raise up to approximately $5,238,295 (before the expenses of the Offer) of which 9,805,477 fully paid ordinary shares were issued. Dividends No dividends were proposed or paid during the current or previous financial year. Issue of options The number and weighted average exercise prices of share options are as follows: Weighted average exercise price Number of options Weighted average exercise price Number of options Outstanding at the beginning of the period , ,118,583 Consolidation 1: ,029,673 Issued for no cash consideration ,221, ,428 Options exercised (515,862) Options lapsed (4,513,811) Outstanding at the end of the period ,020, , Page

44 24 Financial risk management Exposure to credit and interest rate risks arises in the normal course of the Group s businesses. The Group and Company are not exposed to foreign currency risk as sales, purchases and borrowings are made in the functional currency, being AUD. The Company and Group have exposure to the following risks from their use of financial instruments: Credit risk Liquidity risk Market risk Interest rate risk Operational risk This note presents information about the Group s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial report. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed to reflect changes in market conditions and the Group s activities. The Group, through its training and management standards and procedures, aim to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. (i) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group s receivables from customers and investment securities. Exposure to credit risk The carrying amount of the Group s financial assets represents the maximum credit exposure. The Group s maximum exposure to credit risk at the reporting date was: Carrying amount Trade and other receivables 5,688,011 4,837,960 Cash and cash equivalents 1,473,322 2,063,069 7,161,333 6,901,029 Trade and other receivables The Group s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group s customer base, including the default risk of the industry. The Group s revenue is not significantly attributable to sales transactions with a single customer. The Group does not require collateral in respect of trade and other receivables. The Group s maximum exposure to credit risk for trade receivables at the reporting date by geographic region, being within Australia, was $1,058,837 (2015: $818,448). All sales are made to wholesale customers. 38 Page

45 Impairment losses The Group s trade receivables that are past due $334,636 (2015: $818,448). The ageing of the Group s receivables at the reporting date was: Gross Impairment Gross Impairment Not past due 724, Past due 0-30 days 310, ,982 - Past due days 24, ,022 18,996 Past due 121 days ,058, ,448 19,440 The Group has reviewed its receivables at period end for impairment. The Group believes that no impairment is necessary (2015: $19,440). (ii) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group s reputation. The Group projects revenue and costs, which assists it in monitoring cash flow requirements and optimising its cash return on investments. Typically the Group seeks to ensure that it has sufficient cash on demand to meet expected operational expenses for a period of at least 30 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: 2016 Carrying amount Contractual cash flows 6 months or less 6-12 months 1-2 years 2-5 years More than 5 years Non-derivative financial liabilities Secured loans 1,654,667 1,654, , , ,619 - Trade and other payables 2015 Non-derivative financial liabilities 3,509,439 3,509,439 3,509, ,164,106 5,164,106 3,509, , , ,619 - Carrying amount Contractual cash flows 6 months or less 6-12 months 1-2 years 2-5 years More than 5 years Secured loans 1,855,669 1,855,669 1,164, , Trade and other payables 2,066,503 2,066,503 2,066, ,922,172 3,922,172 2,066,503 1,164, , Page

46 (iii) Market risk Market risk is the risk that changes in market prices, such as interest rates will affect the Group s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. (iv) Interest rate risk At the reporting date the interest rate profile of Group s interest-bearing financial instruments was: Carrying amount Fixed rate instruments Financial assets 1,473,322 2,063,069 Financial liabilities (1,654,667) (1,855,669) (181,345) 207,400 Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change in interest rates at the reporting date would not affect profit or loss. A change of 100 basis points in interest rates would have increased or decreased the Group s equity by an immaterial amount in the current and prior period. Fair values versus carrying amounts The fair value of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows. Consolidated Carrying amount Fair value Carrying amount Fair value Trade and other receivables 5,688,011 5,688,011 4,837,960 4,837,960 Current tax assets - - Cash and cash equivalents 1,473,322 1,473,322 2,063,069 2,063,069 Secured loans (1,654,667) (1,654,667) (1,855,669) (1,855,669) Trade and other payables (3,509,439) (3,509,439) (2,066,503) (2,066,503) 1,997,227 1,997,227 2,978,857 2,978,857 Interest rates used for determining fair value For all the financial assets and liabilities, that are expected to be settled within 12 months, estimated cash flows have not been discounted to determine fair value. For all the financial assets and liabilities, that are expected to be settled after 12 months and later, estimated cash flows have been discounted applying their interest rate. (v) Capital management The Board s policy is to maintain a working capital base so as to maintain investor, creditor and market confidence. Practices have been established to ensure: capital and operating expenditure and revenue commitments above a certain size obtain prior Board approval; financial exposures are controlled; business transactions are properly authorised and executed; the quality and integrity of personnel; and financial reporting accuracy and compliance with the financial reporting regulatory framework. 40 Page

47 There were no changes in the Group s approach to working capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. Refer Note 2(e) for the directors assessment of going concern. 25 Capital and other commitments Capital expenditure commitments Plant and equipment Contracted but not provided for and payable within one year - 47, Operating leases as lessee The Group has operating leases in place for island access and infrastructure, office rent, use of the transit sheds at Derby Wharf, aquaculture lease for the operation in Cone Bay, work vehicles and miscellaneous office rentals. The future minimum lease payments are as follows; Within 1 year Minimum lease payments due After 5 1 to 5 years years Total 30 June , , ,867 1,380, June , , ,375 1,886,833 Lease expense during the period amounted to gross amounts of $580,379 (2015: $606,379) representing the minimum lease payments. In the current period, credit notes granted from lessors totalled $635,000 (2015: nil), which included credits for prior period charges. 27 Consolidated entities Country of Incorporation Ownership interest Parent entity Marine Produce Australia Limited Subsidiaries MPA Fish Farms Pty Ltd Australia 100% 100% MPA Marketing Pty Ltd Australia 100% 100% 41 Page

48 28 Reconciliation of cash flows from operating activities Profit for the period 3,530,000 2,401,701 Adjustments for: Finance costs 108,312 79,224 Depreciation and amortisation 398, ,589 Impairment loss - 516,787 Operating profit before changes in working capital and provisions 4,036,418 3,167,301 Increase in biological assets (7,269,404) (1,200,732) Increase in trade and other receivables (850,051) (1,632,744) Increase in inventories (318,819) (263,128) Increase in other assets (3,356) (28,469) Increase in trade and other payables 1,442, ,981 Increase in provisions and employee benefits 303,135 53,167 Net cash used in/provided by operating activities (2,659,141) 246, Related parties The following were key management personnel of the Group at any time during the reporting period and unless otherwise indicated in the directors report were key management personnel for the entire period: Non-executive directors Mr M Kennedy (Chairman) Mr D Kelly (Non-executive Director) Executives Dr D Allen (Managing Director) Mr M Clements (Company Secretary) Key management compensation disclosures Information regarding individual Directors and executives compensation and some equity instruments disclosures is provided in the remuneration report section of the Directors Report. Key management personnel and directors transactions The terms and conditions of the transactions with key management personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm s length basis. The aggregate amounts recognised during the year relating to key management personnel and their related parties were as follows: Key management personnel and their Transaction related parties Mr M Kennedy The Bagot Road Property Partnership Rent and outgoings 74,567 47,766 The Bagot Road Group Payroll recovery & management fee - 239,984 Kennedy Holdings Rent and outgoings 25,433 - Mr D Kelly Western Tiger Corporate Advisors Corporate advisory & consulting services 50,349 20, Page

49 An amount of $74,567 (30 June 2015: $47,766) was paid to The Bagot Road Property Partnership, associated with director Miles Kennedy, relating to office rent and associated costs during the period. No payments were made to The Bagot Road Group during the period. The contract arrangement with Bagot Road Group Pty Ltd, a company 50% owned by director Miles Kennedy until 31 May 2014 and thereafter wholly owned was terminated on 31 January 2015 and all staff were transferred to the Marine Produce Australia payroll. An amount of $25,433 was paid to Kennedy Holdings, a company owned by director Miles Kennedy, relating to office rent and associated costs during the period. An amount of $50,349 (30 June 2015: $20,000) was paid to Western Tiger Corporate Advisors, a company owned by director Damien Kelly, relating to corporate advisory and consulting services. Amounts receivable from and payable to key management personnel and other related parties at reporting date arising from the transactions were as follows. In AUD Assets and liabilities arising from the above transaction Other related parties Current receivables - - Key management personnel Current receivables - - Other related parties Current payables 1,688 76,910 Total payments/total liabilities 1,688 76,910 From time to time, key management personnel of the Company or its controlled entities, or their related entities, may purchase goods from the Group. These purchases are of the same terms and conditions as those entered into by other consolidated entity employees or customers and are trivial or domestic in nature. Subsidiaries Loans are made by the Company to wholly owned subsidiaries. Loans outstanding between the Company and its controlled entities are callable on demand, have no fixed date of repayment and are non-interest bearing. At 30 June 2016, such loans to subsidiaries totalled $50,097,945 (2015: $44,879,594). These loans have been recognised as a non-current receivable of $18,163,033 (2015: $9,413,383) after provision for non-recovery. Interest-free loans made by the Company to its subsidiaries are repayable on demand. The Company has no intention to demand the loans within the next 12 months. Shares and options over equity instruments The movement during the reporting period in the number of shares in MPA held directly, indirectly or beneficially by each key management person, including their related parties is as follows. Shares held at 1 July 2015 Purchases Share Purchase Plan/Rights Issue Shares Held at 30 June 2016 Directors M Kennedy 694, , ,405 1,729,918 D Allen 61,250 2,850 54, ,600 D Kelly - 42,000 20,800 62,800 Company Secretary M Clements Page

50 The movement during the reporting period in the number of options over ordinary shares in MPA held directly, indirectly or beneficially by each key management person, including their related parties is as follows. Options Held at 1 July 2015 Options Held at 30 June 2016 Issued and vested during the year Vested and exercisable at 30 June 2016 Directors M Kennedy 110,002 1,110,002 1,000,000 1,110,002 D Allen 18,125 1,018,125 1,000,000 1,018,125 D Kelly - 221, , ,000 Company Secretary M Clements Transactions with key management personnel Key management of the Group are the executive members of Board of Directors and members of the Executive Council. Key management personnel remuneration includes the following expenses; Short term employee benefits: - salaries including bonuses 390, ,120 Total short term employee benefits 390, ,120 Post-employment benefits: - superannuation benefits 25,716 26,257 Total post-employment benefits 25,716 26,257 Termination benefits - 41,008 Total remuneration 415, , Subsequent Events In the period subsequent to year end the Group has drawn down upon existing loans by an additional $1,756,603. The Group also received the payment of the R&D tax refund of $4,412,782 on 9 September No other matter or circumstance has arisen since 30 June 2016 that has significantly affected or may significantly affect the Group s operations, the results of those operations or the Group s state of affairs in future years. 44 Page

51 DIRECTORS DECLARATION In accordance with a resolution of the Directors of Marine Produce Australia Limited, I state that: 1. In the opinion of the Directors: (a) the financial statements and notes of Marine Produce Australia Limited for the financial year ended 30 June 2016 are in accordance with the Corporations Act 2001, including: (b) (c) (i) (ii) giving a true and fair view of the Group s financial position as at 30 June 2016 and of its performance; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a); there are reasonable grounds to believe that the Group 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 ended 30 June On behalf of the Board. DESIREE ALLEN MANAGING DIRECTOR Dated at Subiaco 29th September Page

52

53

54

55 corporate directory australian business number auditors grant thornton australia 1/10 kings park road board of directors miles kennedy non-executive chairman desiree allen managing director damien kelly non-executive director west perth 6005 western australia telephone: (+61 8 ) facsimile: (+61 8 ) company secretary mark clements lawyers drummond law registered office and principle place of business 34 bagot road subiaco 6008 western australia postal address po box 1008 west perth 6872 western australia communication details telephone: (+61 8 ) facsimile: (+61 8 ) general@marineproduce.com web: 48 matheson road applecross 6153 western australia telephone: (+61 8 ) facsimile: (+61 8 ) jwd@drummond-law.com share registry security transfer registrars pty ltd 770 canning highway applecross 6153 western australia telephone: (+61 8 ) facsimile: (+61)

56