2017 Annual Report | Tassal Group Limited and Controlled Entities Contents
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ANNUAL REPORT 2017 Company Directory Directors Stock Exchange Listing Allan McCallum, Dip.Ag Science, FAICD (Chairman) Tassal Group Limited is listed on the Australian Securities Exchange. Trevor Gerber, B.Acc CA (SA) The Home Exchange is Melbourne, Victoria. Christopher Leon, BScEng, MEngSci, FAICD ASX Code: TGR Mark Ryan, B.Com, CA, MAICD, FAIM (Managing Director) Michael Carroll, BAgSc, MBA, FAICD Share Registry Raelene Murphy, BBus CA GAICD Register of Securities is held at the following address: Computershare Investor Services Pty Limited Chief Executive Officer Yarra Falls Mark Ryan, B.Com, CA, MAICD, FAIM 452 Johnston Street Abbotsford Company Secretary Victoria 3067 Monika Maedler, BEc, LLB, FCIS Enquiries (within Australia) 1300 850 505 Enquiries (outside Australia) 61 3 9415 4000 Registered Office* Investor Enquiries Facsimile 61 3 9473 2555 Level 9 Website www.computershare.com 1 Franklin Wharf Hobart Executive Directory Tasmania 7000 Mark Ryan Managing Director and Telephone (03) 6244 9099 Chief Executive Officer Facsimile (03) 6244 9002 E-mail [email protected] Mark Asman Head of Aquaculture Website www.tassal.com.au Andrew Creswell Chief Financial Officer ABN 15 106 067 270 Ben Daley Head of Supply Chain and (*Also principal administration office) Commercial Services Auditors Dale Williams Head of Sales and Marketing Deloitte Touche Tohmatsu Level 8 22 Elizabeth Street Hobart Tasmania 7000 Bankers Westpac Banking Corporation Level 7 150 Collins Street Melbourne Victoria 3000 BankWest Level 6 600 Bourke Street Melbourne Victoria 3000 Coöperatieve Rabobank U.A. Level 9 1 Collins Street Melbourne Victoria 3000 2017 Annual Report | Tassal Group Limited and Controlled Entities Contents Chairman’s and Chief Executive Officer’s Report 2 Directors’ Report 8 Auditor’s Independence Declaration 26 Table of Contents 27 Income Statement 28 Statement of Comprehensive Income 29 Statement of Financial Position 30 Statement of Changes in Equity 31 Statement of Cashflows 32 Notes to the Financial Statements 33 Directors’ Declaration 76 Independent Auditor’s Report 77 Additional Securities Exchange Information 80 Tassal Group Limited and Controlled Entities | 2017 Annual Report 1 Chairman’s and Chief Executive Officer’s Report 1. REVIEW OF OPERATIONS possible earn-out for FY2017, year two of a three year earn- out (FY2016: 2.1 million shares issued equating to 65.6% of The Directors of Tassal Group Limited (Tassal) are pleased the maximum possible earn-out for FY2016). to present the Company’s Appendix 4E: Full Year Report to 30 June 2017 (FY2017). • Increased review and scrutiny of salmon farming in Tasmania: Tassal welcomes the increased scrutiny into Tassal continues to execute on its strategy to be a world its industry, which by and large has been positive and leading seafood company by leveraging: constructive with respect to the communities in which • industry leading scientific know how; Tassal operates, the scientific community, Government, • sustainable and efficient production; the Company’s employees, customers, suppliers and shareholders. As a business and industry we have a lot • respect for the earth’s resources and the communities in to be proud of in terms of the sustainability and health which it operates; and benefits of salmon as a global protein, world standard • prudent commercial management. accreditations, high level of innovation, continued investment in farming and processing in Australia, and the As Tassal and the Tasmanian Salmon industry seek to grow economic contribution brought to Tasmania. salmon farming output, stakeholder interest will increase. Growth will also bring an element of risk to optimal growth and • Maintained Aquaculture Stewardship Council forecast plans, particularly as Tassal grows into newer regions (ASC) certification across all Tassal’s operations or increases the level of farming in existing regions. Ensuring for harvest fish: ASC is the standard with the most social license/community value and operational planning are independent processes, the best international recognition co-dependent through strategic planning processes will be and the greatest community and consumer acceptance. critical. Maintaining this level of standard is challenging. Tassal also renewed and strengthened its partnership Operational overview with World Wildlife Fund-Australia (WWF). • Favourable salmon pricing in wholesale and export • Macquarie Harbour is recovering: In late calendar markets: Local and global salmon stocks were adversely year 2016, conditions at Macquarie Harbour required affected by environmental factors in calendar year 2016 careful response and adaption. The challenges at that lead to lower harvests, smaller sized fish and increased Macquarie Harbour are complex and Tassal takes costs of growing, more than countered by significantly its responsibilities seriously – as clearly seen by the higher salmon prices. Prices are at historically high levels Company’s acknowledgement of unforeseen environmental for the domestic wholesale market, and are anticipated to non-compliances over the summer of 2016-17 at one continue in FY2018. Export pricing, which is volatile, was of its marine leases in Macquarie Harbour. As predicted also on average higher than previous periods. all leases in Macquarie Harbour have now returned to compliance from an ‘out of compliance’ perspective and • Favourable growing conditions allowed a focus on in-fauna abundance is returning. optimising biomass and size: Salmon was kept in the water longer to optimise growth and deliver optimised • Tassal continues to evolve practices: Tassal is margins in FY2017. Tassal has achieved a ‘step change’ in determined to ensure the health of Macquarie Harbour its underlying biomass and fish size with fish size harvested remains a priority. Lessons have been learnt from this by the end of FY2017 being circa 4.80kg Head on Gutted experience that will improve future performance, not just (HOG). Underlying biomass and fish size is expected to in Macquarie Harbour, but across Tassal’s operations. continue to improve in FY2018 and beyond. Ultimately, fish What happened in Macquarie Harbour was unexpected size matched to sales market demand both domestically and at odds with Tassal’s record of sustainable production, and internationally to support sales mix flexing will optimise science-based processes and careful stewardship that the contribution margin Tassal achieves. saw Tassal achieve consistently high compliance ratings that were of global leadership standard. Successful • Sales mix managed to optimise returns and deliver implementation of the waste capture system at Macquarie growing earnings: During FY2017, Tassal successfully Harbour is allowing Tassal to ensure it can both maintain lowered retail sales to around 51.9% of total sales (FY2016: its operational capacity and importantly, ensure that the 68.3%). The combination of high wholesale/export pricing system supports improved environmental and biological and favourable sales mix allowed Tassal to optimise margins outcomes. despite the increased cost of growing. Operational EBITDA was up 8.3% to $88.97 million (FY2016: $82.18 million) even • Maintained commitment to sustainability reporting: though Salmon volume sold was down 6.2%. Tassal has been reporting to the Global Reporting Initiative (GRI) framework since 2012 and in the 2017 Sustainability • De Costi Seafoods driving seafood sales and Report will further enhance its climate related disclosure. category growth: Focus on highly innovative product and packaging formats, together with higher margin products • Successful capital raising: $82.3 million (net of fees) was is delivering results. EBITDA for De Costi Seafoods as raised in March 2017. These funds will support a range a standalone operation was up 11.4% to $12.7 million of working capital and capital investment initiatives that (FY2016: $11.4 million). Given De Costi Seafoods’ FY2017 are expected to deliver an additional 2,500 – 3,000 HOG result, Tassal will issue 2 million shares under the provisions tonnes of harvested salmon each year to FY2021. Around of the Contingent Consideration. The issue of the shares $270 million of forecast capital expenditure to FY2021 is under the earn-out equates to 60% of the maximum expected to deliver returns exceeding current levels. 2 2017 Annual Report | Tassal Group Limited and Controlled Entities Financial results Statutory, Underlying and Operational Financial Performance Tassal has followed the guidance for underlying profit as issued by the Australian Institute of Company Directors and Financial Services Institute of Australasia in March 2009 and ASIC Regulatory Guide RG 230 ‘Disclosing non-IFRS financial information’. The key financial results for FY2017 were: Statutory Non Recurring Underlying AASB 141 Operational Full Year ended 30 June 2017 Profit $'000 Items $'000 Profit $'000 Impact $'000 Profit $'000 Revenue (from all sources) $450,453 $0 $450,453 $0 $450,453 EBITDA $114,553 $6,727 $121,280 ($32,312) $88,968 EBIT $93,618 $6,727 $100,345 ($32,312) $68,033 Profit before income tax expense $85,556 $6,727 $92,283 ($32,312) $59,971 Income tax expense ( $ 27,473) $0 ( $ 27,473) $9,694 ( $17,779) NPAT $58,083 $6,727 $64,810 ($22,618) $42,192 This compares to the following FY2016 results: Statutory Non Recurring Underlying AASB 141 Operational Full Year ended 30 June 2016 Profit $'000 Items $'000 Profit $'000 Impact $'000 Profit $'000 Revenue (from all sources) $430,924 $0 $430,924 $0 $430,924 EBITDA $ 97,29 4