Announcement PDF FY24 ANNUAL REPORT Pure Foods Tasmania Limited (ASX : PFT) and Controlled Entities For the financial year ended 30 June 2024 Table of Contents Corporate Directory ................................................................................................................. 3 Who is Pure Foods Tasmania? ................................................................................................. 4 Executive Chairman’s Report ................................................................................................... 5 Directors’ Report ....................................................................................................................... 7 Remuneration Report ............................................................................................................ 11 Auditor’s Independence Declaration .................................................................................... 16 Consolidated Statement of Profit or Loss and Other Comprehensive Income................. 17 Consolidated Statement of Financial Position ..................................................................... 19 Consolidated Statement of Changes in Equity ..................................................................... 20 Consolidated Statement of Cash Flows ................................................................................ 21 Notes to and Forming Part of the Financial Statements ..................................................... 22 Consolidated Entity Disclosure Statement ........................................................................... 51 Independent Auditor’s Report ............................................................................................... 52 Shareholder Information ....................................................................................................... 56 Pure PureFoods FoodsTasmania TasmaniaLimited LimitedABN ABN13 13112 112682 682158 158 || Annual AnnualReport Reportfor forthe theFinancial FinancialYear Yearending ending30 30June June2023 2024 22 Corporate Directory Corporate Directory Registered Office Postal Address Corporate Office 2/179 Murray Street Hobart, Tasmania 7000 Australia 100-104 Mornington Road Mornington, Tasmania 7018 Australia 100-104 Mornington Road Mornington, Tasmania 7018 Bankers Share Registry Stock Exchange Listing Commonwealth Bank of Australia Automic Registry Services Pure Foods Tasmania Limited is listed on the Australian Securities Exchange, code PFT. Level 2, 267 St Georges Terrace Perth, Western Australia 6000 Australia Tel: +61 (3) 6231 4233 Auditor Solicitors Board of Directors Wise Lord & Ferguson Page Seager 160 Collins Street Hobart, Tasmania 7000 Australia 2/179 Murray Street Hobart, Tasmania 7000 Australia Malcolm McAully Non-Executive Chairman Michael Cooper Managing Director and CEO Ken Fleming Non-Executive Director Justin Hill Company Secretary Pure PureFoods FoodsTasmania TasmaniaLimited LimitedABN ABN1313112 112682 682158 158 | | Annual AnnualReport Reportfor forthe theFinancial FinancialYear Yearending ending3030June June2024 2024 33 Who is Pure Foods Tasmania? Who is Pure Foods Tasmania? Pure Foods Tasmania Pty Ltd (PFT) was formed in 2015 with the aim to enhance and promote Tasmania’s food and beverage businesses. PFT’s strategy is to develop new products within its existing brands and in the plant-based food market, to acquire complementary brands and businesses and to increase its market penetration and distribution for its suite of brands and products globally. PFT’s stable of brands and businesses include Woodbridge Smokehouse, Tasmanian Pate, Daly Potato Co., and The Cashew Creamery. Strategy PFT’s growth strategy encompasses several key themes: 1. organically grow its existing brands; 2. improve margins and capacity via automation of its production as products and brands reach scale; 3. secure key assets; and 4. grow via the acquisition of complementary/scalable products/brands/businesses to exploit product expansion opportunities. PFT brands are targeted at the “conscious consumer”, offering convenience and indulgent home entertaining products with a uniquely Tasmanian focus. Organic growth will be achieved through increased penetration of existing markets, entry into new markets and new product development. Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 4 Executive Chairman’s Report Executive Chairman’s Report Overview I was appointed Executive Chairman by the Board of Pure Foods Tasmania Limited (PFT) on 28 August 2024 following the decision by Michael Cooper to step down from the role of Managing Director. On 11 October, it was further announced that Michael will also be stepping down from the Board of PFT. In the light of these decisions, I have combined the Managing Director’s and Chairman’s reports. The 2024 financial year has been a transformative period for PFT. In the wake of the difficult economic climate and unrelenting inflationary pressures, the Company pivoted its medium-term strategy mid-year to address declining profitability and unsustainable operating costs. Since then and beyond the end of the FY24 year, PFT has reduced annual operating costs by $1.2m and further savings are planned to be realised in FY25. We remain committed to our ongoing longer-term strategy of continuing to refine our operations, focusing on sustainable profitability, and positioning the Company for future growth, which includes organic and non-organic growth. Financial Performance Revenue fell by 23% compared to FY23, primarily due to the strategic decision to cull products where margins were challenged, including: • several unprofitable product lines at Woodbridge Smokehouse, leading to a 38% drop in sales for the Division; and • discontinuing production of Daly Frozen and Potato & Gravy in the early part of Q3. While these decisions negatively impacted our topline, it was a necessary step to build a more sustainable operating base which will eventually result in improving our overall profitability. EBITDA for the year was a disappointing loss of $3.9m due to several factors, including: • Daly Potato orders exceeding production capacity and substantial increases in input costs, including labour overtime cost when the Company had to move to seven days production and three shifts a day in late 2023; incurring up to $1.3m loss; • a significant component ($450k) of the almost $1m write down of goodwill was attributed to Lauds Plant Based Foods which followed the sale of the division in December 23; • substantially elevated raw material/freight and packaging costs, particularly for salmon and dairy which have been at all-time highs, pressuring margins; and • continuing equipment sealing issues causing losses of more than $500k due to poor labour utilisation, low productivity and excessive overtime. To address these issues the Company ceased production of several SKU’s and took legal steps against the equipment supplier while implementing alternative packaging methods. The Board also initiated a preliminary review of other business units not performing well and the decision was made to sell Lauds Plant Based Foods. Outlook Looking ahead, PFT is well positioned for growth, and we anticipate an improvement in both the revenue and operating performance for the Company this financial year. We have also observed some easing of price pressures in the early months of FY25. We maintain ongoing dialogue with our advisors regarding acquisition opportunities. As stated above, the Company’s principal focus remains the existing business and aligning costs and revenues to build a more sustainable business. Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 5 Executive Chairman’s Report Other Matters On 16 October 2024, the ASX advised that the securities of PFT will be suspended from quotation in accordance with Listing Rule 17.3. The ASX determined that PFT’s financial position is not adequate to warrant the continued quotation of its securities and therefore PFT was in breach of Listing Rule 12.2. This decision was made following a detailed letter that the Company had submitted to the ASX in response to the concerns it had raised in relation to the Audit report. On 18 October, the Company released a statement advising that it was working with various stakeholders and advisers in respect of its financial position. These discussions are ongoing. The Company is focused on reducing costs and improving its operating performance and it is confident its FY25 results will be a substantial improvement on its FY24 results. Our People Michael Cooper announced his resignation as Managing Director and is stepping down from the Board on 14 October 2024. Michael and I worked closely now for several years to build a Tasmanian-based, premium food business. This last 12 months have been difficult and while the Board regrettably accepted Michael’s decision to step down, it was fully understandable. The Board thanks Michael for his leadership and support. During his tenure, he grew the customer base to over 3,000 and launched 25 new SKU’s into the market, while sales had grown by 65% over the previous four years. We wish him all the best. I was pleased to welcome the appointment of Robert Knight (Rob) to the Board of PFT as a Director, effective from Monday 14 October 2024. Rob has a strong background in marketing and in the retail sector. In tandem, the Company also announced that it had issued 13.33M shares at $0.03 per share (equal to $400,000) to Rob. The issue of shares represents approximately 9.85% of the then issued shares in the Company. The Board appreciates Robert’s confidence in the Company which was reinforced by the premium he paid for his investment, being 86% above the then 15-day VWAP of $0.016 share. The shares will be subject to voluntary escrow for a period of 12 months from their issue date. On behalf of the Board, I recognise our staff for their resilience, flexibility and their willingness to adapt to changing circumstances. Turning around a company is only possible if you have a great team of dedicated people working together. We look forward to achieving a positive future and making PFT a successful Company for the shareholders. Malcolm McAully Non-executive Chairman Pure Foods Tasmania Limited Date: 31 October 2024 Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 6 Directors’ Report Directors’ Report Pure Foods Tasmania Limited and its Controlled Entities Your Directors present their report on the consolidated entity (referred to herein as the Group) consisting of Pure Foods Tasmania Limited and its controlled entities for the financial year ended 30 June 2024. The information in the preceding operating and financial review forms part of this Directors’ report for the financial year ended 30 June 2024 and is to be read in conjunction with the following information: General Information Directors The following persons were Directors of the Group during or since the end of the financial year up to the date of this report: • Malcolm McAully Non-executive Chairman1 • Michael Cooper2 Managing Director • Ken Fleming Non-executive Director Dividends Paid or Recommended No dividends were paid or declared during the financial year. Indemnifying Officers or Auditor During the financial year, the Group paid a premium in respect of a contract insuring the Directors of the Group, the Group Secretary and all Executive Officers of the entity and any related body corporate against a liability incurred as 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 Group has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Group or of any related corporate against a liability incurred as an officer or auditor. Proceedings on Behalf of the Group No person has applied for leave of court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year. 1 2 Executive Chairman from 30 August 2024. Resigned as Managing Director on 30 August 2024 and as a Director on 14 October 2024. Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 7 Directors’ Report Non-Audit Services The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external auditor’s independence. The following fees were paid or payable to WLF Accounting & Advisory for non-audit services provided during the year ended 30 June 2024: Details $ Advisory taxation services 23,500 Accounting assistance 4,600 28,100 Auditor’s Independence Declaration The lead auditor’s independence declaration for the year ended 30 June 2024 has been received and can be found on page 16 of the financial report. Information Relating to Directors and Group Secretary Director Details and Experience Malcolm McAully Malcolm McAully is an experienced Company Director having held roles over a diverse range of industry backgrounds including financial services, energy generation, waste management, agribusiness, technology manufacturing, human resource management, property development and food manufacturing. Malcolm was the Chairman of ASX Listed Pinnacle VRB (ASX: PCE) from 2004 to 2005 and remained Chairman when the company (following an acquisition) changed its name to Cougar Energy Limited (ASX: CXY) until 2013 when he resigned. Malcolm is also Chairman of Chaucer Energy Limited and several privately owned companies. Malcolm has held various executive management positions including National Manager of MLC Life when owned by the Lend Lease Group. He holds an MBA and qualifications in accounting, business management, mediation, turn around management and GAICD. Michael Cooper Michael Cooper is the Managing Director of PFT. Michael has over 29 years’ experience in senior executive roles in the food and beverage industry. He was the CEO and later Managing Director of Juicy Isle Pty Ltd (JI) and sold his family interest to Myer Family Investments. JI was the largest supplier of organic juice in Australia to Woolworths, Coles, and Costco. He was also a director (2012 – 2017) of Ausfec Ltd, a $550m revenue business. Ausfec was the major route to market distribution channel for global brands such as Cadbury, Nestle, Mars, Wrigley, Smith and SBA Snack Foods, Red Bull, and V Energy drinks. Michael is also a Director of Brand Tasmania, a Tasmanian State Authority created under the Brand Tasmania Act 2018. Michael joined the PFT Board in February 2017 and was appointed Managing Director on a part time basis in October 2018 and full time from April 2019. Ken Fleming Ken Fleming has extensive experience in capital markets and has held senior roles at Deutsche Bank (including Director; Global Co-ordinator – Telecommunications Technology), James Capel Australia and Tricom (Head of Research). He has also worked in the Australian public service (Canberra) and at KPMG (Melbourne). He is a Director of Castray Capital Pty Ltd and holds an Honours Degree in Economics and post graduate qualifications in economics and finance and is also a Fellow of the Financial Services Institute of Australia (FFIN). Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 8 Directors’ Report Director Details and Experience Justin Hill Justin is a Principal at Page Seager Lawyers – the largest law firm in Tasmania. Justin advises clients in a number of key industry sectors, including agribusiness, financial services, energy, and the not-for-profit sector. He specialises in mergers and acquisitions, governance and corporate structures and restructures. Justin also has significant experience in finance (including derivative transactions) and advising on raising capital for companies by way of equity and debt. He also assists with preparing contracts of employment and provides employment advice on transfer of businesses. Justin has a first-class honours degree in Commerce, a Master’s in Law from the University of Melbourne and a Graduate Diploma in Applied Finance and Investment. Before joining Page Seager as a Partner/Principal, Justin worked as in-house counsel for the investment banking division of Deutsche Bank in Sydney. Prior to working with Deutsche Bank, Justin was principal counsel in the institutional markets and investment division of National Australia Bank. Justin also practised for a number of years in the mergers and acquisitions team of Mallesons Stephen Jaques (now King & Wood Mallesons). Meetings of Directors During the financial year, 11 meetings of Directors (including committees of Directors) were held. Attendance by each Director during the year was as follows: Directors’ Meetings Eligible Meetings Meetings Attended Malcolm McAully 11 11 Michael Cooper 11 11 Ken Fleming 11 11 Remuneration of Directors and Senior Management Information about the remuneration of Directors and senior management is set out in the Remuneration Report. Review of Operations and Principal Activities The Group's principal activities at the commence of the financial year are outlined in the Chairman's report and listed in the Events Subsequent to Balance Date. Operating Results The loss after tax of the Group for the financial year attributable to the members of Pure Foods Tasmania Limited was ($3.9m) (2023: ($1.8m)). Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 9 Directors’ Report State of Affairs and Likely Developments In the opinion of the Directors there were no significant changes in the state of affairs of the Group and its controlled entities that occurred during the financial year under review not otherwise disclosed in this report or the accompanying financial report. Reference should be made to the subsequent events note for changes in the state of affairs after balance date. Events Subsequent to Balance Date There were no other matters or circumstances arising since the end of the reporting period that have significantly affected or may significantly affect the operations of the Group and the results of those operations or the state of the affairs of the Group in the financial period subsequent to 30 June 2024. On behalf of the Directors Malcolm McAully Non-executive Chairman Date: 30 September 2024 Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 10 Remuneration Report Remuneration Report Remuneration Policy The remuneration policy of the Group has been designed to align key management personnel (KMP) objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the Group’s financial results. The Board of the Group believes the remuneration policy to be appropriate and effective in its ability to attract and retain high-quality KMP to run and manage the Group, as well as create goal congruence between Directors, executives, and shareholders. The Board’s policy for determining the nature and amount of remuneration for KMP of the Group is based on the following: • • • • • The remuneration policy is to be developed by the Board after professional advice is sought from independent external consultants. All KMP receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, options, and performance incentives. Performance incentives are generally only paid once predetermined key performance indicators (KPIs) have been met. Incentives paid in the form of options or rights are intended to align the interests of the Directors and Group with those of the shareholders. In this regard, KMP are prohibited from limiting risk attached to those instruments by use of derivatives or other means. The Board reviews KMP packages annually by reference to the Group’s performance, executive performance, and comparable information from industry sectors. The performance of KMP is measured against criteria agreed biannually with each executive and is based predominantly on the forecast growth of the Group’s profits and shareholders’ value. All bonuses and incentives must be linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses, and options. Any change must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance results leading to long-term growth in shareholder wealth. KMP receive, at a minimum, a superannuation guarantee contribution required by the government, which, during the 2024 financial year was 11.0% of the individual’s average weekly ordinary time earnings (AWOTE). Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to KMP is valued at the cost to the Group and expensed. Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 11 Remuneration Report Performance-based Remuneration KPIs are set annually, with a certain level of consultation with KMP. The measures are specifically tailored to the area each individual is involved in and has a level of control over. The KPIs target areas the Board believes hold greater potential for Group expansion and profit, covering financial and non-financial as well as short and long-term goals. The level set for each KPI is based on budgeted figures for the Group and respective industry standards. Performance Conditions Linked to Remuneration The Group seeks to emphasise reward incentives for results and continued commitment to the Group through the provision of various cash bonus reward schemes, specifically the incorporation of incentive payments based on the achievement of revenue targets, return on equity ratios and continued employment with the Group. Employment Details of Members of Key Management Personnel The term Key Management Personnel refers to those persons having the authority and responsibility for planning, directing, and controlling activities of the Group, directly or indirectly, and includes any Director of the Group (whether executive or otherwise). The KMP of the Group for the year ended 30 June 2024 were: 3 4 Key Management Personnel Role Appointment Date Malcolm McAully Non-executive Chairman 1 September 2017 Michael Cooper3 Managing Director 1 February 2017 Ken Fleming Non-executive Director 29 July 2015 Phillip Excell4 Chief Financial Officer 20 March 2023 Resigned 30 August 2024 as Managing Director and as a Director on 14 October 2024. Resigned 17 September 2024. Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 12 Remuneration Report Remuneration Expense Details for the Year Ended 30 June 2024 Post-employment benefits Short-term benefits Long-term benefits Equity-settled sharebased payments Salary, fees, and leave Profit share and bonuses Nonmonetary Pension and superannuation Other Incentive plans LSL Shares/units Options/ rights Cash-settled share-based payments Terminati on benefits Total KMP Year $ $ $ $ $ $ $ $ $ $ $ $ Malcolm McAully 2024 50,000 - - 5,500 - - - - - - - 55,500 2023 50,000 - - 5,250 - - - - - - - 55,250 Michael Cooper5 2024 302,732 - - 33,000 - - - - - - - 335,732 2023 300,771 - - 31,499 - - - - - - - 332,270 Ken Fleming 2024 36,000 - - 3,960 - - - - - - - 39,960 2023 36,000 - - 3,780 - - - - - - - 39,780 Charles Hughes6 2024 - - - - - - - - - - - - 2023 174,270 - - 17,779 - - - - - - - 192,049 Phillip Excell7 2024 200,600 - - 22,000 - - - - - - - 222,600 2023 57,842 - - 6,057 - - - - - - - 63,899 2024 589,332 - - 64,460 - - - - - - - 653,792 2023 618,883 - - 64,365 - - - - - - - 683,248 Total KMP Securities Received that are not Performance-Related No members of KMP are entitled to receive securities that are not performance-based as part of their remuneration package. 5 Resigned 30 August 2024. Resigned 21 April 2023. 7 Resigned 17 September 2024. 6 Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 13 Remuneration Report KMP Shareholdings The number of ordinary shares held by each KMP of the Group during the financial year is as follows: Balance at Beginning of the Year 8 Granted as Remuneration During the Year Issued on Exercise of Options During the Year Purchases During the Year Balance at End of Year Malcolm McAully8 2,599,518 - 280,886 - 2,880,404 Michael Cooper8 4,404,682 - 1,382,230 - 5,786,912 Ken Fleming8 2,668,975 - 625,500 - 3,294,475 Phillip Excell8 - 255,102 - - 255,102 Includes indirect shareholdings. Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 14 Remuneration Report Other Equity-Related KMP Transactions There have been no other transactions involving equity instruments apart from those described in the tables above relating to options, rights, and shareholdings. Other Transactions with KMP and/or their Related Parties There were no other transactions conducted between the Group and KMP or their related parties, apart from those disclosed above relating to equity, compensation, and loans, that were conducted other than in accordance with normal employee, customer, or supplier relationships on terms no more favourable than those reasonably expected under arm’s length dealings with unrelated persons. This Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors: Malcolm McAully Non-executive Chairman Date: 30 September 2024 Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 15 Auditor’s Independence Declaration Auditor’s Independence Declaration In accordance with section 307C of the Corporations Act 2001, we are pleased to provide the following declaration of independence to the Directors of Pure Foods Tasmania Limited. As the lead audit partner for the audit of the financial report of Pure Foods Tasmania Limited for the year ended 30 June 2024, we declare that, to the best of our knowledge and belief, there have been no contraventions of: i. ii. the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. This declaration is in respect of Pure Foods Tasmania Limited and the entities it controlled during the period. Wise Lord & Ferguson Nick Carter Partner Wise Lord & Ferguson Date: 30 September 2024 Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 16 Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2024 Notes 2024 $ 2023 $ Revenue from continuing operations 6 7,442,902 8,748,338 Other income 6 51,816 979,190 7,494,718 9,727,528 7,346,394 7,701,421 1,685,313 1,670,135 238,066 187,896 798 16,983 Depreciation and amortisation 920,028 752,918 ASX listing fees and expenses 32,312 45,425 Finance costs 388,922 317,173 Impairment of assets 956,090 - Insurance 194,891 165,731 Legal and professional fees 191,986 245,804 Marketing expenses 55,301 85,916 Motor vehicle expenses 35,999 44,323 Repairs and maintenance 283,780 209,271 Other expenses 405,110 521,982 Total Expenses 12,734,990 11,964,978 Net Loss Before Income Tax (5,240,272) (2,237,450) 8 1,358,877 410,117 Net Loss After Tax for the Year from Continuing Operations (3,881,395) (1,827,333) (62,943) - (3,944,338) (1,827,333) - - (3,944,338) (1,827,333) Revenue Total Revenue Expenses Cost of goods sold 7 Employment expenses Occupancy, electricity, and telephone costs Bad debts Income tax benefit Discontinued Operations Loss from discontinued operations after tax Net Loss After Tax for the Year Other Comprehensive Income Other comprehensive loss net of tax Total Comprehensive Income Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 17 Consolidated Statement of Profit or Loss and Other Comprehensive Income Notes 2024 $ 2023 $ Net Profit for the Period Attributable to: Non-controlling interest Owners of Pure Foods Tasmania Limited - - (3,944,338) (1,827,333) (3,944,338) (1,827,333) Total Comprehensive Income for the Year is Attributable to: Non-controlling interest Owners of Pure Foods Tasmania Limited - - (3,944,338) (1,827,333) (3,944,338) (1,827,333) Earnings per Share From Continuing and Discontinued Operations: Basic loss per share (cents per share) 4 (0.033) (0.01