AUSTRALIAN AGRICULTURAL COMPANY LIMITED ABN 15 010 892 270
Directors' Report 3
Auditor's independence declaration 14
Consolidated Income Statement 16
Consolidated Statement of Comprehensive Income 17
Consolidated Statement of Financial Position 18
Consolidated Statement of Changes in Equity 19
Consolidated Statement of Cash Flows 20
Notes to the financial statements 21
Directors' declaration 28
Independent auditor's review report to the members 29
Company information 31
This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the financial report for the year ended 31 March 2015 and any public announcements made by Australian Agricultural Company Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.
Your Directors present their report on the Group consisting of Australian Agricultural Company Limited and the entities it controlled (AACo) at the end of, or during, the half-year ended 30 September 2015.
The following persons were Directors of Australian Agricultural Company Limited during the half-year and up to the date of this report. Directors were in office for this entire period unless otherwise stated.
Donald McGauchie AO (Non-executive Chairman) Jason Strong (Managing Director)
Stuart Black AM David Crombie AM Tom Keene
Dr Shehan Dissanayake Anthony Abraham
The first 6 months of the 2016 financial year contain several positives that are a direct result of the transformation of AACo from a production-led pastoral Company into a vertically integrated beef business. The company reports a H1 FY16 Operating EBITDA of $11.5 million (compared to a loss of $8.2 million for the prior corresponding period) and Statutory EBITDA of $92.1 million (compared to a loss of $4.5 million).
Total sales revenue increased by $107.2 million in H1 FY16 compared to H1 FY15. Quality of earnings and growth is an important difference between being a seasonal seller of live cattle in domestic markets and a weekly exporter of high quality branded beef into global markets.
Beef sales as a percentage of total revenue over the last 2 years have increased from 47% to over 84%. We are now predominantly selling into international beef markets that are not influenced by Australian domestic seasonal conditions that create highly variable live cattle and slaughter markets in Australia.
Net internal transfers of cattle from Grassfed to both Grainfed and Northern Beef have increased from 12.3 to 24.1 million kg LW over the last 2 years.
The Grassfed cow breeding herd has increased slightly since H1 FY14 and is now over 170,000 head, while the average age has fallen from nearly 7 to 6 years. We will continue to invest significant resources into research and development projects to optimise the productivity of our breeding herd.
The company's lost-time injury frequency rate has fallen by 50% since July 2014. We remain focused on continued improvements.
Sales of AACo branded beef are up over 88% compared to the prior corresponding period, driven by increased volumes at improved prices. The quantity of meat sold more than doubled in H1 FY16 principally due to increased demand from established Grainfed Wagyu and Shortfed markets, as well as manufacturing beef markets supplied from the Livingstone Beef processing plant.
Livingstone Beef accounted for 16% of total beef sales and was consistently processing in excess of 400 head per day by the end of the period. The current focus for the plant has now shifted towards operational efficiency and stability of earnings. We are committed to the continuous improvement of our waste water treatment process to improve compliance with regulations.
While less of a focus than in the past, live cattle sales have increased by $8.2 million with a 25% increase in the average sell price on the back of rising live cattle prices in domestic and export markets.
During the period the company secured improved bank terms to provide greater funding flexibility and reduce the cost of funding.
Our operational leverage has improved in H1 FY16, with a reduction in corporate overheads despite a significant increase in total sales revenue. However we expect an increase in corporate overheads in H2 FY16 as we continue to invest in growth projects including branding, innovation and technology and the integrated operating plan.
We look forward to being in a position to demonstrate further progress against our stated strategic objectives at the full year.
OPERATING AND FINANCIAL REVIEW 30 September 2015 Key Financial Results | ||||
6 months to 30 September 2015 | 6 months to 30 September 2014 | Movements | Favourable/ Unfavourable Movements | |
$'000 | $'000 | $'000 | % | |
Meat sales | 217,619 | 115,476 | 102,143 | 88% |
Cattle sales | 36,375 | 28,188 | 8,187 | 29% |
Admin. and other non-station operating costs | (7,450) | (11,281) | 3,831 | 34% |
Statutory EBITDA(1) | 92,097 | (4,532) | 96,629 | 2132% |
Statutory EBIT | 81,980 | (10,987) | 92,967 | 846% |
Net profit/(loss) after tax | 49,827 | (13,588) | 63,415 | 467% |
Net cash outflow from operating activities | (3,028) | (55,375) | 52,347 | 95% |
Operating EBITDA(1) | 11,478 | (8,190) | 19,668 | 240% |
(1) Refer to page 5 and page 6 for the definition of Statutory EBITDA and Operating EBITDA.
Operating EBITDA is a key indicator which is used to monitor and manage the company. It eliminates unrealised cattle valuation adjustments being recorded in the financial results, and is a better reflection of underlying financial performance under the control of management.
Statutory EBITDA was a profit of $92.1m in H1 FY16 ($4.5m loss in H1 FY15) and Operating EBITDA was a profit of
$11.5m ($8.2m loss in H1 FY15). The difference between the two measures is the unrealised livestock valuation gains.
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