ANNUAL REPORT 2020 For personal use only Company Directory Directors Stock Exchange Listing Allan McCallum AO, Dip.Ag Science, FAICD (Chairman) Tassal Group Limited is listed on the Australian Securities Exchange. James Fazzino, B.Ec (Hons), CPA (Appointed 29 May 2020) The Home Exchange is Melbourne, Victoria. Richard Haire, B.Ec, FAICD (Appointed 5 March 2020) ASX Code: TGR Trevor Gerber, B.Acc CA (SA) Christopher Leon, BScEng, MEngSci, FAICD Share Registry (Retired 29 October 2019) Register of Securities is held at the following address: Mark Ryan, B.Com, CA, MAICD, FAIM (Managing Director) Computershare Investor Services Pty Limited John Watson, AM Yarra Falls Jackie McArthur, B.Eng (Aero) 452 Johnston Street Georgina Lynch, BA.LLB Abbotsford Victoria 3067 Chief Executive Officer Enquiries (within Australia) 1300 850 505 Mark Ryan, B.Com, CA, MAICD, FAIM Enquiries (outside Australia) 61 3 9415 4000 Investor Enquiries Facsimile 61 3 9473 2555 Company Secretary Website www.computershare.com Monika Maedler, BEc, LLB, FCIS Executive Directory Registered Office* Mark Ryan Managing Director and Level 9 Chief Executive Officer 1 Franklin Wharf Hobart Mark Asman Head of Aquaculture Tasmania 7000 Andrew Creswell Chief Financial Officer Telephone (03) 6244 9099 Ben Daley Head of Supply Chain and Facsimile (03) 6244 9002 Commercial Services E-mail [email protected] Website www.tassalgroup.com.au Kaylene Little Head of People and Communities ABN 15 106 067 270 Dale Williams Head of Sales and Marketing (*Also principal administration office) Auditors Deloitte Touche Tohmatsu Level 8 22 Elizabeth Street Hobart Tasmania 7000 Bankers Westpac Banking Corporation Level 7 150 Collins Street Melbourne Victoria 3000 Commonwealth Bank of Australia Level 20, Tower 1 727 Collins Street Docklands For personal use only Victoria 3008 Coöperatieve Rabobank U.A. Level 9 1 Collins Street Melbourne Victoria 3000 Annual Report 2020 | Tassal Group Limited and Controlled Entities Contents Company Directory Inside front Chairman’s and Chief Executive Officer’s Report 2 - 9 Directors’ Report 10 - 27 Auditor’s Independence Declaration 28 Finanical Report Table of Contents 29 Income Statement 30 Statement of Comprehensive Income 31 Statement of Financial Position 32 Statement of Changes In Equity 33 Statement of Cashflows 34 Notes to the Financial Statements 35 - 75 Directors’ Declaration 76 Independent Auditor’s Report 77 - 79 Additional Securities Exchange Information 80 - 81 For personal use only Tassal Group Limited and Controlled Entities | Annual Report 2020 1 Chairman’s and Chief Executive Officer’s Report 1. REVIEW OF OPERATIONS Tassal’s Directors are pleased to present the Company’s COVID-19 presents a volatile and challenging environment Appendix 4E: Full Year Report to 30 June 2020 (FY20). in a world of unknowns, a recessionary environment, and potentially new consumption rules. The Directors believe The Company’s growth strategy is underpinned by 5 pillars: Tassal is as best prepared as it can be. While the Company 1. Being the market leader on all operational, financial, is not immune to global and local forces outside of its environmental and societal value metrics control, Tassal’s key strengths that will assist in mitigating this 2. Ensuring geographic and species diversification environment – diversification strategies across customers and consumers, growing and processing areas, and species 3. Driving domestic per capita consumption growth and products – combined with a focus on sustainability, 4. Maintaining an Eastern Seaboard supply chain: ensuring position the Company to continue its growth trajectory: we are freshest to market on a national basis with short • Salmon – through optimising Tassal branded sales, shelf life products sales mix and reducing cost $/kg via the improvements 5. Maintaining best practice aquaculture: being regarded implemented in Tassal’s farming and processing as global leaders in aquaculture production and operations. The Company’s new marketing campaign environmental stewardship. for FY21 focuses on the Tassal brand and branded retail product lines, and is expected to further improve domestic Tassal’s FY20 growth strategy was to increase operating market sales mix. The Well Boat, Feed Centre and further efficiencies within salmon production to lower costs, while improvements in fish husbandry should grow fish more diversifying operations by transferring the Company’s efficiently and effectively, improving their survival, increasing knowledge and skills to prawns. The Directors believe that biomass and reduce growing costs. These initiatives are Tassal’s FY20 results demonstrated that this strategy was planned to translate into increasing salmon returns in FY21. well implemented – generating strong increases across operational, financial, environmental and social parameters, • Prawns – the substantial lift in planned prawn harvest while successfully navigating through COVID-19, with the volumes in FY21 to circa 4,000 tonnes should underpin a key highlights being: material lift in prawn earnings. Like salmon, the marketing campaign for Tropic Co Tiger Prawns focusses on the 1. Delivered sustainable growth: Balancing strategic, brand’s Australian provenance, high quality and value. operational, financial, environmental and societal value The same approach to salmon – growing the domestic metrics market, leveraging current relationships, and using the 2. Strong growth in operating EBITDA to $138.6 million: export market as risk mitigation – is planned to further Reflecting the benefits of Tassal’s growth strategy underpin substantial growth for prawns in FY21. 3. Further growth investment: Supported by operating The Directors are mindful of Tassal’s social licence to operate, cashflows, debt headroom, comfortable gearing levels and responsibly balance the Company’s initiatives and and a strong balance sheet outcomes against scorecard objectives covering people, planet, product and performance. 4. Salmon delivering on strategy: Investment and subsequent 12.9% increase in live biomass, production In line with the United Nations’ Sustainable Development efficiencies and further optimised sales mix, positions well Goals, and supported by world-class partnerships and for further growth in returns certification programs, long-term financial, operational, social, biosecurity and environmental ambitions have been 5. Prawns exceeding expectations: Harvest of 2,460 established by Tassal that are centred on collaboration, tonnes was more than expected, with substantial uplift shared value and responsible growth. in planned FY21 harvest volume to circa 4,000 tonnes, with infrastructure in place 6. Industry world best ESG initiatives: Underpin sustainable growth for both salmon and prawns 7. Overall: Despite sales challenges imposed by COVID-19 market fractures, shareholder value was enhanced through optimising margins via sales mix and operating efficiencies. Salmon and prawn product and brand strategy aligns to consumer needs during and after COVID-19, and will continue driving domestic per capita consumption growth. Increasing harvest biomass, optimising margins via sales For personal use only mix and operating efficiencies, and a strong sustainable diversified operating platform, best position Tassal to navigate through COVID-19 and further grow earnings and returns in FY21. 2 Annual Report 2020 | Tassal Group Limited and Controlled Entities Operational & Financial Highlights Strong platform in place to drive increased earnings and returns in FY21. The strategy for FY21 is to reduce cost $/kg for both salmon and prawns via the improvements implemented in the Company’s farming operations through optimising biomass growth and size (cost efficiencies) and sales mix (higher margin markets and products). In addition, the substantial lift in planned prawn harvest volumes in FY21 to circa 4,000 tonnes should underpin a material lift in prawn earnings. Operating EBITDA: $138.6m; Salmon Operating EBITDA $/kg: $3.60/kg; (Pre AASB 16 $127.3m up 13.3%) (Pre AASB 16 $3.29/kg up 4.3%) A$m $/kg 160 4 138.6 $3.60 140 $3.29 127.3 $3.27 $3.04 $3.16 120 112.3 3 $2.92 99.8 100 89.0 82.2 80 2 60 40 1 20 0 0 FY16 FY17 FY18 FY19 FY20 FY20 FY16 FY17 FY18 FY19 FY20 FY20 (pre (post (pre (post AASB 16) AASB 16) AASB 16) AASB 16) Operating EBITDA: Split between salmon, Prawn Operating EBITDA $/kg: $6.42/kg prawns and seafood (Pre AASB 16 $6.11kg; flat) A$m Salmon Prawns Seafood $/kg 160 8 140 2.2 $6.12 $6.11 $6.42 120 2.1 6 2.7 2.8 12.9 100 6.5 12.3 5.7 123.4 2.7 80 106.8 112.9 4 93.3 60 79.4 83.3 40 2 20 0 0 FY16 FY17 FY18 FY19 FY20 FY20 FY19 FY20 FY20 (pre (post (pre (post AASB 16) AASB 16) AASB 16) AASB 16) • Salmon: delivering growth and increasing operating • Sales: EBITDA $/kg increased as operating and supply EBITDA $/kg. The FY20 strategy was to grow operating chain efficiencies flowed through and domestic per capita EBITDA $/kg through more efficient farming and processing consumption continued to grow operations, combined with optimising sales mix. Tassal was o 28,259 hog tonnes of domestic market sales able to drive growth in both sales and production levels in (FY19: 26,860 hog tonnes) - sales tonnage up 2H20 to provide a platform for planned earnings growth 5.2%, with domestic EBITDA up 13.5% as a result of in FY21. Increased salmon biomass at 30 June 2020 larger salmon and more efficient operating systems underpins planned sales and harvest growth in FY21, driving EBITDA $/kg returns with this supported by Tassal’s recently released