ACN: 080 083 058 Financial Report for the year ended 30 June 2017
Financial Report TABLE OF CONTENTS Page Directors' report 3 Auditor's independence declaration 5 Financial report Statement of Profit or Loss and Other Comprehensive Income 6 Statement of Financial Position 7 Statement of Changes in Equity 8 Statement of Cash Flows 9 10 Directors' declaration 30 Independent auditor's report 31 2
Directors' Report for the financial year ended 30 June 2017 The directors present their report together with the financial report of for the year ended 30 June 2017 and auditor's report thereon. Directors names The names of the directors in office at any time during or since the end of the year are: Non-executive directors Mr T O'Hoy (appointed 25 Sept 2016) Mr C Beer Mr A Robinson (appointed 15 Jul 2016) Executive directors Mrs M Beer Position Chairman, Non-exectuive director Non-executive director Non-executive director Position Executive director The directors have been in office since the start of the year to the date of this report unless otherwise stated. Results The loss of the company for the year after providing for income tax amounted to $2,126,000 (2016: profit of $671,000). Review of operations The company continued to engage in its principal activity, the manufacture of foods for consumption in the Australian and overseas market, the results of which are disclosed in the attached financial statements. Significant changes in the state of affairs On the 15 July 2016, Primary Opinion Limited purchased 48% of the Company. Primary Opinion Limited purchased $5m of share capital (24%) directly from the Beer Family Trust, who currently owns 100% of the Company, with the remaining 24% via $10m of new Ordinary shares being issued to Primary Opinion Limited by the Company. There were no significant changes in the company's state of affairs that occurred during the financial year, other than those referred to elsewhere in this report. Principal activities The principal activity of the company during the year was the manufacture and sale of food products for consumption in the Australian and overseas markets. No significant change in the nature of these activities occurred during the year. After balance date events On 31 July 2017, the company purchased a vineyard and quince orchard in the Riverland region of South Australia for $429,000 from BC & M Beer Pty Ltd & Modene Pty Ltd, a related party. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years. 3
Directors' Report for the financial year ended 30 June 2017 Likely developments The company has been working on a number of new initiatives including development of kitchens, new products and expanding its distribution network with a view to enhancing the company's financial performance in the 2018 financial year. Environmental regulation The company's operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory. Dividends paid, recommended and declared A dividend of $1,469,000 in respect of the 2016 financial year was declared and paid during the financial year. This dividend was declared on the 14 July 2016 which was pre the investment by Primary Opinion Limited. No recommendation for payment of dividends has been made in respect of the 2017 financial year. Rounding off of amounts The company is a company of the kind referred to in Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated. Indemnification of officers and auditors During the financial year, the company paid a premium in respect of a contract insuring the directors of the company (as named above), and all executive officers of the company and of any related body corporate against a liability incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer of the company or of any related body corporate against a liability incurred as such an officer. During or since the end of the financial year the company has not indemnified or made a relevant agreement to indemnify an auditor of the company against a liability incurred as such an auditor. In addition, the company has not paid, or agreed to pay, a premium in respect of a contract insuring against a liability incurred by an auditor. Auditor's independence declaration A copy of the auditor's independence declaration under section 307C of the Corporations Act 2001 in relation to the audit for the financial year is provided with this report. Proceedings on behalf of the company No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. This directors report is signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001. On behalf of the Directors Antony Robinson Director Melbourne, 1 September 2017 4
Deloitte Touche Tohmatsu ABN 74 490 121 060 11 Waymouth Street Adelaide, SA, 5000 Australia Phone: +61 8 8407 7000 www.deloitte.com.au 1 September 2017 The Board of Directors Maggie Beer Products Pty Limited 2 Keith Street TANUNDA SA 5352 Dear Board Members, Maggie Beer Products Pty Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Maggie Beer Products Pty Limited. As lead audit partner for the audit of the financial statements of Maggie Beer Products Pty Limited for the financial year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU Darren Hall Partner Chartered Accountants Adelaide, 1 September 2017 Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 5
Statement of Profit or Loss and Other Comprehensive Income Notes 2017 2016 Revenue 4 17,925 19,169 Cost of sales (11,563) (12,176) Gross profit 6,362 6,993 Other income 4 381 191 Operational expenses (2,408) (2,293) Administration expenses (1,560) (1,476) Marketing expenses (1,210) (1,149) Sales expenses (1,054) (734) New product development expenses (734) (465) Other expenses 4 (130) (139) Finance costs (203) (151) Impairment charges 11 (1,785) - (8,702) (6,216) (Loss) / profit before income tax (2,340) 777 Income tax benefit / (expense) 10 214 (106) (Loss) / profit for the year (2,126) 671 Other comprehensive income - - Total comprehensive (loss)/income for the year (2,126) 671 6
Statement of Financial Position As at 30 June 2017 Notes 2017 2016 ASSETS Current assets Cash and cash equivalents 20(a) 7,369 364 Trade and other receivables 6 2,374 3,393 Inventories 7 3,325 3,244 Current tax asset - 46 Other 8 184 404 Total current assets 13,252 7,451 Non-current assets Plant and equipment 9 2,423 1,774 Deferred tax assets 184 51 Intangible assets 11 3,215 5,000 Other financial assets 12 32 - Total non-current assets 5,854 6,825 Total assets 19,106 14,276 LIABILITIES Current liabilities Trade and other payables 13 2,024 2,150 Borrowings 14 1,985 2,976 Provisions 15 556 605 Related party loans 16(b) 1,056 1,977 Total current liabilities 5,621 7,708 Non-current liabilities Provisions 15 55 11 Borrowings 14 524 96 Total non-current liabilities 579 107 Total liabilities 6,200 7,815 Net assets 12,906 6,461 Equity Issued capital 17 14,805 5,000 Contributed equity 19 235 - Retained earnings 18 (2,134) 1,461 Total equity 12,906 6,461 7
Statement of Changes in Equity SHARE CAPITAL CONTRIBUTED EQUITY RETAINED EARNINGS TOTAL Balance as at 1 July 2015 - - 1,240 1,240 Profit for the year - - 671 671 Total comprehensive income for the year - - 671 671 Transactions with owners in their capacity as owners: Dividends paid - - (450) (450) Issue of shares 5,000 - - 5,000 5,000 - (450) 4,550 Balance as at 30 June 2016 5,000-1,461 6,461 Balance as at 1 July 2016 5,000-1,461 6,461 Loss for the year - - (2,126) (2,126) Total comprehensive loss for the year - - (2,126) (2,126) Transactions with owners in their capacity as owners: Dividends paid - - (1,469) (1,469) Issue of ordinary shares 10,000 - - 10,000 Share issue costs (278) - - (278) Equity contributed - 337-337 Income tax relating to transactions with owners 83 (102) - (19) 9,805 235 (1,469) 8,571 Balance as at 30 June 2017 14,805 235 (2,134) 12,906 8
Statement of Cash Flows Notes 2017 2016 Cash flows from operating activities Receipts from customers 20,973 21,291 Payments to suppliers and employees (20,136) (21,385) Interest and other finance costs paid (147) (151) Income taxes received / (paid) 25 (68) Net cash provided by / (used in) operating activities 20(c) 715 (313) Cash flows from investing activities Interest income received 85 (7) Payments for plant and equipment (1,075) (313) Proceeds from sale of plant and equipment 30 - Payments for other financial assets (80) - Net cash (used in) investing activities (1,040) (320) Cash flows from financing activities Proceeds from issue of share capital 10,000 - Net proceeds (repayment) of/from borrowings (562) 716 Net proceeds (repayment) of/from related party loans (1,858) 332 Dividends paid to owners of the company (250) (185) Net cash provided by financing activities 7,330 863 Net increase in cash and cash equivalents 7,005 230 Cash and cash equivalents at the beginning of the financial year 364 134 Cash and cash equivalents at the end of the financial year 20(a) 7,369 364 9
1. General information is a proprietary company incorporated in Australia. The address of its registered office and principal place of business are as follows: Registered office 2 Keith Street, Tanunda SA 5352 Principal place of business 2 Keith Street, Tanunda SA 5352 2. Statement of significant accounting policies The financial report is a general purpose financial report that has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards - Reduced Disclosure Requirements, Interpretations and other applicable authoritative pronouncements of the Australian Accounting Standards Board. The financial report covers as an individual entity. Maggie Beer Products Pty Ltd is a company limited by shares, incorporated and domiciled in Australia. The company is a for profit entity for the purpose of preparing the financial statements. The financial report was approved by the directors as at the date of the directors' report. The following are the significant accounting policies adopted by the company in the preparation and presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. (a) Basis of preparation of the financial report Historical Cost Convention The financial report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain classes of assets and liabilities as described in the accounting policies. Fair Value Measurement For financial reporting purposes, fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants (under current market conditions) at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. When estimating the fair value of an asset or liability, the entity uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Inputs to valuation techniques used to measure fair value are categorised into three levels according to the extent to which the inputs are observable: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Significant accounting estimates and judgements The preparation of the financial report requires the use of certain estimates and judgements in applying the entity s accounting policies. Those estimates and judgements significant to the financial report are disclosed in Note 3 to the financial statements. 10
Statement of significant accounting policies (continued) (b) Revenue Revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer when the company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Interest revenue is measured in accordance with the effective interest method. (c) Income tax Current income tax expense or revenue is the tax payable on the current period's taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognised for temporary differences at the applicable tax rates when the assets are expected to be recovered or liabilities are settled. Deferred tax liabilities are not recognised if they arise from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. (d) Cash and cash equivalents Cash and cash equivalents include cash on hand and at banks, short term deposits with an original maturity of three months or less held at call with financial institutions, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. (e) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct material, direct labour and a proportion of manufacturing overheads based on normal operating capacity. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. (f) Financial instruments Classification The company classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, and available for sale financial assets. The classification depends on the nature of the item and the purpose for which the instruments are held. Initial recognition and measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. For financial assets, this is equivalent to the date that the entity commits itself to either the purchase or sale of the asset. 11
Statement of significant accounting policies (continued) (f) Financial instruments (continued) Financial instruments are initially measured at fair value adjusted for transaction costs, except where the instrument is classified as fair value through profit or loss, in which case transaction costs are immediately recognised as expenses in profit or loss. Fair value through profit or loss Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, are derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable fair value performance evaluation by key management personnel. Investments in listed securities are carried at fair value through profit or loss. They are measured at their fair value at each reporting date and any increment or decrement in fair value from the prior period is recognised in profit or loss of the current period. Fair value of listed investments are based on closing bid prices at the reporting date. Loans and receivables Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are subsequently measured at amortised cost using the effective interest rate method. Financial liabilities Financial liabilities include trade payables, other creditors and loans from third parties including inter company balances and loans from or other amounts due to director related entities. Non derivative financial liabilities are subsequently measured at amortised cost, comprising original debt less principal payments and amortisation. Financial liabilities are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Impairment of financial assets Financial assets are tested for impairment at each financial year end to establish whether there is any objective evidence for impairment as a result of one or more events having occurred and which have an impact on the estimated future cash flows of the financial assets. (g) Property, plant and equipment Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and any accumulated impairment losses. Plant and equipment Plant and equipment is measured on a cost basis. Depreciation The depreciable amount of all property, plant and equipment is depreciated over their estimated useful lives commencing from the time the asset is held available for use, consistent with the estimated consumption of the economic benefits embodied in the asset. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. 12
Statement of significant accounting policies (continued) (g) Property, plant and equipment (continued) The following useful lives are used in the calculation of depreciation: Class of asset Useful lives Depreciation basis Plant and equipment 3 15 years Straight line Leasehold improvements 10 years Straight line (h) Intangibles Brand names Brand names recognised by the company have an indefinite useful life and are not amortised. Each period, the useful life of this asset is reviewed to determine whether events and circumstances continue to support an indefinite useful life assessment for the asset. Such assets are tested for impairment in accordance with the policy stated in note 2 (i). (i) Impairment of non-financial assets Goodwill, intangible assets not yet ready for use and intangible assets with indefinite useful lives are not subject to amortisation and are therefore tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. For impairment assessment purposes, assets are generally grouped at the lowest levels for which there are largely independent cash flows ('cash generating units'). Accordingly, most assets are tested for impairment at the cash generating unit level. Because it does not generate cash flows independently of other assets or groups of assets, goodwill is allocated to the cash generating unit or units that are expected to benefit from the synergies arising from the business combination that gave rise to the goodwill. Assets other than goodwill, intangible assets not yet ready for use and intangible assets with indefinite useful lives are assessed for impairment whenever events or circumstances arise that indicate the asset may be impaired. An impairment loss is recognised when the carrying amount of an asset or cash generating unit exceeds the asset's or cash generating unit's recoverable amount. The recoverable amount of an asset or cash generating unit is defined as the higher of its fair value less costs to sell and value in use. Refer to Note 3 for a description of how management determines value in use. Impairment losses in respect of individual assets are recognised immediately in profit or loss unless the asset is carried at a revalued amount such as property, plant and equipment, in which case the impairment loss is treated as a revaluation decrease in accordance. Impairment losses in respect of cash generating units are allocated first against the carrying amount of any goodwill attributed to the cash generating unit with any remaining impairment loss allocated on a pro rata basis to the other assets comprising the relevant cash generating unit. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to present values in determining recoverable amounts. For an asset measured at cost, an impairment loss is recognised in profit or loss where the carrying amount of the asset exceeds its recoverable amount. Reversal of impairment loss for an asset measured at cost other than goodwill is recognised immediately in profit or loss. 13
Statement of significant accounting policies (continued) (j) Provisions Provisions are recognised when the company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. A provision for dividends is recognised when they have been declared by the directors. (k) Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Finance leases Leases of fixed assets, where substantially all of the risks and benefits incidental to ownership of the asset, but not the legal ownership, are transferred to the Company are classified as finance leases. Finance leases are capitalised, recording an asset and liability equal to the fair value or, if lower, the present value of the minimum lease payments, including any guaranteed residual values. The interest expense is calculated using the interest rate implicit in the lease, if this is practicable to determine; if not, the company s incremental borrowing rate is used. Interest expense on finance leases is included in finance costs in the statement of profit or loss. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely the company will obtain ownership of the asset, or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period in accordance with the effective interest method. Operating leases Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as an expense on a straight line basis over the term of the lease. Lease incentives received under operating leases are recognised as a liability and amortised on a straight line basis over the life of the lease term. (l) Employee benefits (i) Short term employee benefit obligations Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits (other than termination benefits) expected to be settled wholly before twelve months after the end of the annual reporting period are measured at the (undiscounted) amounts based on remuneration rates which are expected to be paid when the liability is settled. The expected cost of short term employee benefits in the form of compensated absences such as annual leave is recognised in the provision for employee benefits. All other short term employee benefit obligations are presented as payables in the statement of financial position. (ii) Long term employee benefit obligations The provision for other long term employee benefits, including obligations for long service leave and annual leave, which are not expected to be settled wholly before twelve months after the end of the reporting period, are measured at the present value of the estimated future cash outflow to be made in respect of the services provided by employees up to the reporting date. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee turnover, and are discounted at rates determined by reference to market yields at the end of the reporting period on high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. For currencies in which there is no deep market in such high quality corporate bonds, the market yields (at the end of the reporting period) on government bonds denominated in that currency are used. Any remeasurements for changes in assumptions of obligations for other long term employee benefits are recognised in profit or loss in the periods in which the change occurs. 14
Statement of significant accounting policies (continued) (l) Employee benefits (continued) (ii) Long term employee benefit obligations (continued) Other long term employee benefit obligations are presented as current liabilities in the statement of financial position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. All other long term employee benefit obligations are presented as non current liabilities in the statement of financial position. (iii) Retirement benefit obligations Defined contribution superannuation plan The company makes superannuation contributions (currently 9.50% of the employee s average ordinary salary) to the employee s defined contribution superannuation plan of choice in respect of employee services rendered during the year. These superannuation contributions are recognised as an expense in the same period when the related employee services are received. The company s obligation with respect to employee s defined contributions entitlements is limited to its obligation for any unpaid superannuation guarantee contributions at the end of the reporting period. All obligations for unpaid superannuation guarantee contributions are measured at the (undiscounted) amounts expected to be paid when the obligation is settled and are presented as current liabilities in the statement of financial position. (m) Borrowing costs Borrowing costs include interest expense calculated using the effective interest method, finance charges in respect of finance leases, and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Borrowing costs are expensed as incurred. (n) Goods and services tax (GST) Revenues, expenses and purchased assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (o) Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. (p) Rounding off of amounts The company is a company of the kind referred to in Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated. 15
Statement of significant accounting policies (continued) (q) New and revised accounting standards effective at 30 June 2017 The Company has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for an accounting period that begins on or after 1 July 2016. New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to the Company include: AASB 1057: Application of Australian Accounting Standards and AASB 2015-9: Amendments to Australian Accounting Standards Scope and Application Paragraphs. AASB 2014-4: Amendments to Australian Accounting Standards Clarification of Acceptable Methods of Depreciation and Amortisation AASB 2015-1: Amendments to Australian Accounting Standards Annual Improvements to Australian Accounting Standards 2012-2014 Cycle. AASB 2015-2: Amendments to Australian Accounting Standards Disclosure Initiative: Amendments to AASB 101. The application of these amendments does not have any material impact on the disclosures of amounts recognised in the Company's financial statements. (r) Accounting standards issued but not yet effective at 30 June 2017 The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Company. The Company has decided not to early adopt any of these new and amended pronouncements. The Company s assessment of the new and amended pronouncements that are relevant to the Company but applicable in future reporting periods is set out below. AASB 9: Financial Instruments (December 2014), AASB 2014-7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2014), AASB 2014-8: Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) Application of AASB 9 (December 2009) and AASB 9 (December 2010) (applicable for annual reporting periods commencing on or after 1 January 2018). These Standards will replace AASB 139: Financial Instruments: Recognition and Measurement. The key changes that may affect the Company on initial application of AASB 9 and associated amending Standards include: - simplifying the general classifications of financial assets into those carried at amortised cost and those carried at fair value; - permitting entities to irrevocably elect on initial recognition to present gains and losses on an equity instrument that is not held for trading in other comprehensive income (OCI); - simplifying the requirements for embedded derivatives, including removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost; - requiring an entity that chooses to measure a financial liability at fair value to present the portion of the change in its fair value due to changes in the entity s own credit risk in OCI, except when it would create an accounting mismatch ; - introducing a new model for hedge accounting that permits greater flexibility in the ability to hedge risk, particularly with respect to non-financial items; and - requiring impairment of financial assets carried at amortised cost to be based on an expected loss approach. Although the directors anticipate that the adoption of AASB 9 may have an impact on the Company's financial instruments it is impracticable at this stage to provide a reasonable estimate of such impact. 16
Statement of significant accounting policies (continued) (r) Accounting standards issued but not yet effective at 30 June 2017 AASB 15: Revenue from Contracts with Customers, AASB 2014-5: Amendments to Australian Accounting Standards arising from AASB 15, AASB 2015-8: Amendments to Australian Accounting Standards Effective Date of AASB 15, AASB 2016-3: Amendments to Australian Accounting Standards Clarifications to AASB 15 and AASB 2016-7: Amendments to Australian Accounting Standards Deferral of AASB 15 for Not-for-Profit Entities (applicable for annual reporting periods commencing on or after 1 January 2018). AASB 15 will provide (except in relation to some specific exceptions, such as lease contracts and insurance contracts) a single source of accounting requirements for all contracts with customers, thereby replacing all current accounting pronouncements on revenue. These Standards provide a revised principle for recognising and measuring revenue. Under AASB 15, revenue is recognised in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the provider of the goods or services expects to be entitled. To give effect to this principle, AASB 15 requires the adoption of the following 5- step model: - identify the contract(s) with a customer; - identify the performance obligations under the contract(s); - determine the transaction price; - allocate the transaction price to the performance obligations under the contract(s); and - recognise revenue when (or as) the entity satisfies the performance obligations. AASB 15 also provides additional guidance to assist entities in applying the revised principle to licences of intellectual property, warranties, rights of return, principal/agent considerations and options for additional goods and services. Although the directors anticipate that the adoption of AASB 15 may have an impact on the Company s reported revenue, it is impracticable at this stage to provide a reasonable estimate of such impact. AASB 116 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessors. The accounting model for leases will require leases to recognise all leases on balance sheet, except for short-term leases of low value assets. AASB 16 applies to annual periods beginning on or after 1 January 2019. The directors of the Company anticipate that the application of AASB 16 in the future may have a material impact on the amounts reported and disclosures made in the Company s financial statements. However, it is not practicable to provide a reasonable estimate of the effect of AASB 16 until the Company performs a detailed review. 17
3. Significant accounting estimates and judgements Certain accounting estimates include assumptions concerning the future, which, by definition, will seldom represent actual results. Estimates and assumptions based on future events have a significant inherent risk, and where future events are not as anticipated there could be a material impact on the carrying amounts of the assets and liabilities discussed below: (a) Impairment All assets, as the smallest identifiable group of assets that general cash inflows from continuing use are considered to be one cash generating unit (CGU). Within this CGU there is an intangible asset with an indefinite useful life, which is tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. As such the Company has carried out a review of the recoverable amount of the CGU as at the 30 June 2017. The review led to the recognition of an impairment loss of $1.785 million, which has been recognised in profit or loss. The recoverable amount of the CGU is determined based on a value in use calculation which uses cash flow projections based on financial budgets approved by the directors covering a five-year period, and a discount rate of 16.3% (pre-tax) / 12.35% (post-tax) per annum. 18
2017 2016 4 (Loss) / Profit for the year Revenue Revenue from operations includes the following items: Revenue from the sale of goods 21,004 22,311 Less Discounts and Promotions (3,079) (3,142) 17,925 19,169 Other income Interest income 175 7 Other income 206 184 Total other income 381 191 Employee benefits expense Other employee benefit 4,901 4,549 Post employment benefits 403 374 5,304 4,923 Depreciation expense Depreciation of plant and equipment and leasehold improvements 313 335 313 335 Other expense Loss on disposal 82 - Unrealised loss on financial assets 48 - Costs associated with share issues - 139 130 139 5 Dividends Dividends paid during the year on fully paid ordinary shares: Ordinary dividend 1,469 450 1,469 450 A dividend of $1,469,000 in respect of the 2016 financial year was declared and paid during the financial year. This dividend was declared on the 14 July 2016 which was pre the investment by Primary Opinion Limited. No recommendation for payment of dividends has been made in respect of the 2017 financial year. 19
2017 2016 6 Trade and other receivables Current Trade receivables 2,265 3,337 Provision for impairment - (2) Accrued interest 43-2,308 3,335 GST Receivable 66 58 2,374 3,393 Our largest customer, has 60 day trading terms, all other customers have 30 days trading terms. No interest is charged on trade receviables if overdue. The company has recognised an allowance for doubtful debts based on estimated irrecoverable amounts determined by reference to past default experience. Maggie Beer Products also has a debtor insurance policy in place with National Credit Insurance (Brokers) Pty Ltd. Movement in the allowance for doubtful debts Balance at the beginning of the year 2 35 Amount provided during the year - 2 Amounts written off during the year as uncollectible (2) (35) Balance at the end of the year - 2 7 Inventories Raw materials 557 697 Work in progress 489 105 Finished goods 1,730 1,834 Packaging materials 549 608 3,325 3,244 The cost of inventories recognised as an expense during the year in respect of continuing operations was $11.4 million (2016: $12.0 million). 8 Other assets Current Prepayments 88 55 Other 96 349 184 404 20
9 Plant and equipment Cost Plant & equipment at cost Leasehold Improvements Total Balance at 1 July 2015 3,499 151 3,650 Additions 307 6 313 Disposals - - - Balance at 30 June 2016 3,806 157 3,963 Additions 1,071-1,071 Disposals (282) - (282) Balance at 30 June 2017 4,595 157 4,752 Accumulated Depreciation Plant & equipment at cost Leasehold Improvements Total Balance at 1 July 2015 (1,763) (91) (1,854) Depreciation Expense (322) (13) (335) Balance at 30 June 2016 (2,085) (104) (2,189) Depreciation Expense (303) (10) (313) Disposals 173-173 Balance at 30 June 2017 (2,215) (114) (2,329) Net book value 30 June 2016 1,721 53 1,774 Net book value 30 June 2017 2,380 43 2,423 21
2017 2016 10 Income Taxes (a) Income tax recognised in profit or loss The income for the year can be reconciled to the accounting profit as follows: (Loss) / Profit from continuing operations (2,340) 777 Add: non-deductible expenses 11 30 Impairment of non current asset 1,785 - Income tax income calculated at 30% (163) 242 (Over) provision of income tax in previous year (51) (136) (214) 106 The tax rate used for the 2017 and 2016 reconciliations above is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. 22
2017 2016 11 Intangible assets Gross carrying amount Balance at the beginning of year 5,000 - Additions - 5,000 Balance at the end of the year 5,000 5,000 Net book value Balance at the beginning of year 5,000 - Additions - 5,000 Impairment (1,785) Balance at the end of the year 3,215 5,000 Intangible asset relates to trademark acquired from the Beer Family Trust No. 1 for consideration of 1,969 ordinary shares in 2016. The directors have determined the asset has an indefinite useful life due to relative stability of the industry in which it operates. In addition, due to the prominence of the Maggie Beer brand in the market place and significant marketing and promotional activity conducted there is expected to be continued future economic benefits. 12 Fair value measurements (a) Fair value hierarchy The following table provides the fair value classification of those assets and liabilities held by the Company that are measured either on a recurring or non recurring basis at fair value. Recurring fair value measurements Financial assets Financial assets at fair value through profit or loss 32 - (b) Valuation techniques and inputs used in Level 1 fair value measurements Financial assets Shares in Primary Opinion Limited Key Input Quoted bid prices in an active market. Fair value 32 - (c) Transfers between level 1 and level 2 There were no transfers between level 1 and level 2 of the fair value hierarchy during the year. 23
2017 2016 13 Trade and other payables Current Trade payables 1,583 1,170 Other payables and accruals 441 980 2,024 2,150 The average credit period on purchases is 30 days (2016: 30 days). No interest is charged on the trade payables for the first 30 days from the date of invoice. The company has financial risk management strategies in place to ensure that all payables are paid within the credit timeframe where possible. 14 Borrowings Finance Lease Liability Secured (i) 662 171 Debtor Finance Secured (ii) 1,560 2,408 Trade Finance Facility Secured (iii) 287 493 2,509 3,072 Current 1,985 2,976 Non Current 524 96 2,509 3,072 (i) Finance Lease is secured by the asset being leased. Interest rate is varied between 5.3% to 7.4%. (ii) During the year, the Company restructured the security for its Debtor Finance Facility, to obtain a more favourable interest rate of 2.65% pa customer margin on top of cash rate (2016: 3.77%). (iii) During the year, the Company increased the Trade Finance Facility to $1.2 million (2016: $0.5 million). This is a temporary facility for the purpose of paying deposits for new equipment, which will be subsequently refinanced by asset finance. Due to the temporary nature of this facility no extra security was required and is secured by the MBP GSA (general security agreement). 15 Provisions Current Employee benefits 410 487 Other 146 118 556 605 Non-current Employee benefits 55 11 55 11 24
16 Related party transactions The immediate parent and ultimate controlling party respectively of the Company is Beer Family Holdings Pty Ltd (52% ownership). (a) Trading transactions 2017 2016 2017 2016 During the year, entered into the following trading transactions with related parties that are not members of the Company: Sales of goods Purchases of goods Modene Pty Ltd 395 926 369 574 Beer Bros Pty Ltd - - 26 18 Sales of goods to Modene were made at cost plus 10%. Purchases of goods from Modene were made at cost plus 30% and purchases of goods from Beer Bros were at market price. Rental payments were made to Beer Family Holdings Pty Ltd during the year 2017 of $369,000 (2016: $369,000). Principle and interest payments were made to Beer Family Holdings Pty Ltd during the year 2017 of $187,000. Sales of goods to other related parties in financial year 2017 is $35,000 (2016: $9,000). Purchase of goods to other related parties in financial year 2017 is $26,000 (2016: $0). The following balances were outstanding at the end of the reporting period: Debtors Creditors Modene Pty Ltd 44 189 27 71 Beer Family Holdings Pty Ltd - 5-62 Beer Bros Pty Ltd - - 26 - The Farm Barossa Function Centre 3 - - - The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the current or prior periods for bad or doubtful debts in respect of the amounts owed by related parties. 25
2017 2016 16 Related party transactions (continued) (b) Related party loans Unsecured related party loans Beer Family Trust No. 1 (i) 1,056 1,667 Modene Pty Ltd - 310 1,056 1,977 (i) As part of the sale transaction detailed in the Director's report under significant changes in the state of affairs, the company entered into an unsecured related party loan of $1.46 million with the vendor. The loan primarily relates to the dividend paid by and subsequently loaned back by the vendor. The repayment of this loan will be made over the equivalent of 10 years and is interest bearing at a term deposit rate. The related party loan is net of contribution equity, refer to note 19. 17 Issued capital Number of shares Share Capital Balance at 1 July 2015 64 - Movements 8,305 5,000 Balance at 30 June 2016 8,369 5,000 Issue of shares 3,938 10,000 Costs associated with issue of shares - (195) Balance at 30 June 2017 12,307 14,805 Fully paid ordinary shares carry one vote per share and carry the right to dividends. 18 Retained earnings 2017 2016 Balance at the beginning of the year 1,461 1,240 Net (loss) / profit for the year (2,126) 671 Dividends paid (1,469) (450) Balance at the end of the year (2,134) 1,461 26
2017 2016 19 Contributed Equity Balance at the beginning of the year - - Equity contribution 235 - Balance at the end of the year 235 - Contributed equity is the difference between the market value of the interest calculated on the related party loan and the value of actual interest paid on this loan. 20 Notes to the statement of cash flows (a) Reconciliation of cash at the end of the year Cash at the end of the year as shown in the statement of cash flows is reconciled to the statement of financial position as follows: Cash and cash equivalents 7,369 364 (b) Financing facilities (c) Secured Debtor Financing Facility Amount used 1,560 2,408 Amount unused 1,440 592 3,000 3,000 Secured Trade Financing Facility Amount used 287 493 Amount unused 916 7 1,203 500 Reconciliation of net cash provided by operating activities to net result for the year (Loss) / Profit for the year (2,126) 671 Depreciation and amortisation expense 313 335 (Profit)/Loss on sale of plant and equipment 82 - Unrealised loss on financial assets 48 - Non-cash borrowing costs 55 - Impairment on intangible assets 1,785 - Interest Received (175) 7 27
2017 2016 (c) Reconciliation of net cash provided by operating activities to net result for the year Continued from previous note Changes in assets and liabilities (Increase)/decrease in trade and other receivables 1,108 (22) (Increase)/decrease in inventories (81) (447) (Increase)/decrease in current tax asset 46 29 (Increase)/decrease in other assets (58) (267) (Increase)/decrease in deferred tax assets (149) 11 (Decrease)/increase in trade and other payables (126) (670) (Decrease)/increase in provisions (7) 40 Net cash provided by / (used in) operating activities 715 (313) 21 Commitments Lease expenditure commitments Operating leases (non-cancellable) Minimum lease payments - Not later than one year 428 377 - Later than one year and not later than five years 1,531 1,481 - Later than five years and not later than ten years 1,676 2,065 Aggregate lease expenditure contracted for at reporting date 3,635 3,923 22 Commitments for expenditure Capital expenditure committments Plant and equipment 741-741 - 23 Key management personnel Amounts paid to directors and other members of key management personnel of the company and the company 830 530 28
2017 2016 24 Subsequent events On 31 July 2017, the company purchased a vineyard and quince orchard in the Riverland region of South Australia for $429,000 from BC & M Beer Pty Ltd & Modene Pty Ltd, a related party. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years. 29
Directors' Declaration for the financial year ended 30 June 2017 The directors of the company declare that: 1. In the directors opinion, the financial statements and notes thereto, as set out on pages 6-29, are in accordance with the Corporations Act 2001, including: 2 (a) complying with Australian Accounting Standards - Reduced Disclosure Requirements and the Corporations Regulations 2001; and (b) giving a true and fair view of the financial position as at 30 June 2017 and performance for the year ended on that date of the company. In the directors' opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. On behalf of the Directors Antony Robinson Director Melbourne, 1 September 2017 30
Deloitte Touche Tohmatsu ABN 74 490 121 060 11 Waymouth Street Adelaide, SA, 5000 Australia Phone: +61 8 8407 7000 www.deloitte.com.au Independent Auditor s Report to the members of Maggie Beer Products Pty Limited Opinion We have audited the financial report of Maggie Beer Products Pty Limited (the Company ), which comprises the statement of financial position as at 30 June 2017, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors declaration. In our opinion the accompanying financial report of the Company, is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the Company s financial position as at 30 June 2017 and of its financial performance for the year then ended; and complying with Australian Accounting Standards - Reduced Disclosure Regime and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Information The directors are responsible for the other information. The other information comprises the Directors report, but does not include the financial report and our auditor s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 31