ANNUAL REPORT 2021/2022
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TABLEOF CONTENTS Chair and CEO Report Performance Overview Strategic Direction Strategic Outcomes Subsequent Events Financial Report Corporate Governance Statement 3 4 6 10 11 12 13 52
COVID 19 continued to play its part in the local and wider communities with vaccine mandates from federal and state governments requiring the population to be fully vaccinated to gain access to certain establishments. Perth Markets was deemed critical infrastructure by state government Public Health Act 2016 requiring all persons entering having to comply with the vaccine mandate directive. The “no jab, no entry” phrase was widely used on site as PMGL went about ensuring the safety of users of Perth Markets. We are pleased to report that the majority of the site users, including tenants, growers, contractors and transporters supported the vaccine measures. The importance of the central market was demonstrated across the nation as food supplies were impacted in various ways. In February 2022, flooding in South Australia had washed out more than 300km of the only rail line that brings food supplies into Western Australia from the east coast. It was reported as Western Australia’s “food supply crisis” being the worst in living memory with the states umbilical cord to the eastern states severed, not by COVID or border closures, but by extreme weather. The shortages in staples rolled into substitution of fresh produce which drove pricing increases. It also demonstrated the benefits of locally grown produce in Western Australia. Patricia Skinner Chair, PerthMarkets Peter Cooper Chief Executive Officer,Perth Markets CHAIR CEO REPORT “ The 2021/22 Financial Year result was significantly improved by the revaluation gain on Investment property... ” 4
Financial Results The 2021/22 Financial Year result was significantly improved by the revaluation gain on Investment property, the highest revaluation since the privatisation of the Perth Markets in 2016. Revenue increased 5% on the prior year to $26.7m partially due to the full year effect of leasing of the S1Cold Chain and a further 6% increase in services revenue in the same period. Weekend Markets revenue continues to struggle following the periods of COVID-19 restrictions, despite the relaxing of mandatory isolation periods andmaskwearing requirements. 5 General operating costs were 8% up on the 2021/22 expenses due to a combination of increased professional fees, contracted services and recruitment costs. Commercial site management expenses (site operating expenses recovered from Tenants through variable outgoings) increased 5.5% due to rising utility costs and flow-on effects of higher diesel fuel prices. As a result, the net operating profit (before tax) from trading operations was $10.88m, a slight decrease of 0.12% on the prior year. The revaluation gain on the Investment Property of $58.2m (an increase of $50.8m on the prior year) offset by finance expense for the year of $2.77m contribute to the overall increase in net profit before tax of $66.6m vs the prior full year profit of $15.3m. Income tax expense from normal operations was $2.1m with a further $17.6m recognised as a deferred tax liability relating to the revaluation gain in the Investment property. Net Assets increased to $138.72m or $2.36/share, approximately 78c/share increase on the prior years Net Asset Value. A total of $4.048m was paid during the year in fully franked dividends (6.88c/share) representing a final 2021 dividend of $2.048m (3.48c/share) and an interim 2022 financial year dividend of $2.0m (3.4c/share). As at the 30 June 2022, there were 172 leases and licences in place at the Perth Markets and Market City site, with an occupancy rate of 99.2%. A total of 30 new leases / licences and 5 extensions of existing leases were executed through the year. PMGL undertakes an independent valuation of the property assets “Investment Properties” each financial year. The Independent valuer (CBRE) assessed the value of the Investment Properties as at 30 June 2022 at $250m, an increase of $61m on the prior year. Progress continues with the development of proposed cold chain warehouse S2. A prospective tenant has confirmed a requirement for 2,000m2 of the total 3,500m2 gross lettable building area. Property and Leasing The next steps entail finalisation of the memorandum of understanding with the tenant and commencement of the construction documentation to facilitate the tender process, expected in early 2023. In the interim, Property will continue to seek tenant/s for the remaining vacant area. The total site masterplan remains on track to be presented to the PMGL Board by the end of 2022 for approval. An important part of the masterplan is the future development of the land area outside the fence currently comprising retail, commercial, restaurant, tavern and service station uses. This area provides the opportunity within the short term to develop an anchor retail tenant within existing underutilised carpark. To permit this to occur the existing total maximum retail floor space permitted on site will need to be increased from 7,000m2 to 12,000m2 of Gross Floor Area. A scheme amendment seeking this increase has been lodged with the City of Canning and is currently being assessed with this process potentially taking 12 months. “ The February 2022 food supply crisis ….demonstrated the benefits of locally grown produce in Western Australia”
172 1 PERFORMANCE OVERVIEW OCCUPANCY RATE 99.18% LEASES AND LICENCES INVESTMENT PROPERTY REVALUATIONGAIN $58.2m FRESH PRODUCE TRADED 203,133t 16,510 WATER CONSUMED 60,590kl 1,040 SUNDAY PATRONS AVER AGE* 2,938 341 SUNDAY STALLS BOOKED AVER AGE* 156 48 SATURDAY CARS ATTENDING AVERAGE* 681 86 WASTE VOLUME 2,459t 64 ELECTRICITY CONSUMED 24,925mwh 1,069 *excluding days closed 6
Site Operations COVID-19 continued to provide its own set of challenges as the border closures remained in WA until March 2022. The mandatory vaccine requirements were enforced across the state leading up to the border removals. The government had classified the Perth Markets as a critical site due to its food distribution function. First and second inoculation dates were enforced and persons not complying were not allowed to enter the site in the interest of the safety of market users. The borders re-opened in late March 2022 which led to the introduction of COVID-19 to the broader community of WA. Most operations over the period were impacted with the loss of staff from COVID-19. The site has maintained its operations and the traders have continued to trade despite this backdrop. Sustainability Waste Management was centralised through the waste transfer station circa 2011 and has serviced the site well. A majority of the organic matter brought to the facility is diverted from landfill and recycled into organic products such as fertiliser or soil conditioner. A change of waste management contractor occurred this year with the engagement of Cleanaway. This change gives PMGL access to a new recycling initiative by FGS. Their organic recycling utilizes Black Soldier Fly larvae which can recycle organics, including waste contaminated with plastic, that would previously have gone to landfill. FGS's new Muchea facility is currently being built and will come online in 2023. Site Infrastructure and Maintenance Service providers to the Markets operation were also affected from the COVID-19 impacts, particularly site cleaning. The existing cleaning company, who had commenced in August 2021, did not have the depth of staff required to fulfill its contract requirements. The cleaning contract was terminated in April 2022 with a new contractor who had sufficient capacity was appointed at the same time. The site cleaning improved overnight, with continuous improvement the focus. PMGL has upgraded all the access control points on the site to include the provision of Bluetooth credentials to replace the manual access cards. The Bluetooth credential is loaded onto the market user’s mobile phone, and this becomes the virtual access card. The existing access cards will be removed into the future with the Bluetooth credentials providing the service. Weekend Markets The Weekend Markets had its own set of challenges operating in a pandemic environment. Public Venues in general had varying restrictions put in place on how they could operate and comply with heath directions and public markets were no exception. Mandatory vaccination was a condition of entry to the site, and this extended to include the Weekend Markets. The public attendance numbers were impacted from the initial closure due to lockdowns, the mandatory vaccine requirement, and the general avoidance of public gatherings. The Weekend Market attendance numbers were reduced in comparison to pre COVID-19 numbers. PMGL provided free entry for 6 weeks, but this had little impact on growing the attendance at the time. Boot sellers have been welcomed back to the Sunday Market after a number of years absence. PMGL has secured access to insurance, providing the opportunity for second-hand traders to sell their wares. Introduction of activations such as buskers, face painters and themed markets has also commenced. 7
PRIMARY WHOLESALERS INTRODUCTION Perth Markets is Western Australia’s only wholesale fresh food central trading market. The bulk of produce is traded through the Central Trading Area (CTA), which consists of 25 wholesalers. Produce is also bought and sold through 30 secondary wholesalers who are located on Site. The markets contribute significantly to the horticultural industry as well as Western Australia’s economy, with more than 194,000 tonnes of produce traded through the market annually. Market City, open seven days a week, is a consumer retail/commercial centre containing a diverse cluster of businesses, shops and eateries. Market City is proudly owned and operated by Perth Markets Group Limited. VISION Perth Markets and Market City – a developed, mixeduse, destination precinct. PURPOSE Deliver shareholder value asa property owner, manager and developer, primarily serving the fresh produce industry. REGISTERED TRANSPORT OPERATORS 311 125 25 1 TOTAL LETTABLE BUILDING AREA 87,517 sqm located in Central Trading Area 8
ACTIVE BUYER S GROUPS REGISTERED GROWERS 433 49 TENANT EMPLOYEES ON SITE NET ASSETS $138.7m $46m - 334 THE SITE 16km SOUTH OF THE PERTH CBD 51ha OF L AND SITUATED IN CANNING VALE 20km TO PERTH AIRPORT 1,867 85 TOTAL ASSE TS $273.4m $60.6m # VEHICLES ENTERING SITE 665,708 12,220 9
STRATEGIC DIRECTION OUR VISION TO ACHIEVE OUR PURPOSE OF WE WILL DELIVER WHICH IS ACHIEVED BY FOCUSING ON Strategic Plan PERTH MARKETS AND MARKET CITY– ADEVELOPED, MIXED USE , DESTINATION PRECINCT. Delivering shareholder value as a property owner, manager anddeveloper, primarily serving the fresh produce industry Sound sustainable returns to shareholders and a compelling value proposition to our customers Optimise Current Operations SafeSite Efficient andEffective Site Management Customer ExperienceFocus Implement Strategic Asset ManagementPlan Organisational Capability andSystems Future Sustainable Growth Develop Site Master Plan Actively Develop South-EastTriangle Develop Commercial/Retail Destination Precinct Diversify Tenant Mix/Product Offering (CTAandNon CTA) New Opportunities Expand Complementary Services Identify Metronet RelatedOpportunities National Markets Collaboration Strategies Beyond CurrentSite EnergyEfficiency IMPROVE I T DEVELOP I T IMAGINE I T 10
STRATEGIC OUTCOMES Strategic Asset Management Plan The Strategic Asset Management Plan was progressed throughout the year with the capital works program ensuring critical asset improvement. Close to $4 Million in capital was spent on asset upgrades with a further $4 Million due to be spent next financial year. The reinvestment by the organisation has been planned and executed well contributing to the increase in the value of the asset. Workplace Health and Safety The new WA Work Health and Safety Legislation came into effect in March 2022 which was the most significant change since the 1980’s. The change in legislation provided new definition of what was considered a “person conducting a business or undertaking”. A series of workshops were undertaken for the site users to gain an understanding of the new requirements. PMGL will continue working with the tenants to ensure the site is operated with the highest regard to safety. A Better Choice partnership As part of our strategic relationship with Market West we were pleased to continue our financial support of the “A Better Choice” national retailer marketing program. This included seasonal campaigns that add value for independent retailers who support the central market process. Additionally, and collectively, we support Market West’s daily produce sale pricing and statistics reporting which assists the industry along with other stakeholder initiatives, industry advocacy and events. Sustaining Capital There have been a number of roof upgrades and repairs that have been undertaken in recent months. The works were primarily driven to improve site safety and dilapidation in some areas of the sites roofs and gutters. These projects ran in parallel with the works being undertaken outside of Market trade hours. There were no impacts on the market traders with the project delivered on time and budget. The eastern warehouses, CTA and buyers roof structures undertook a roof fastener replacement project. The replacement program reduced the risk of failure either via leaks or lifting during high winds. The timing of this project was important as PMGL is currently working towards a solar panel installation. Key to the site operations is the bitumen surface covering the majority of the Perth Markets site. This bitumen has been in place since the site was built and is reaching the end of its useful life. Initial investigation works included geo technical engineering to determine the condition of the sub-base. Minimal rectification was required on the sub-base allowing for the surface area of bitumen repairs to be maximized for the cost. Circa $500,000 in upgrading was undertaken this financial year with a further $500,000 budgeted for 2022/23. As part of a risk audit, the requirement for improved pedestrian traffic infrastructure was identified. Specifically access points for pedestrians to cross roads were either in the wrong location, not adequately marked or have sufficient lighting. PMGL embarked on ensuring that this was rectified, and the risk of pedestrian versus vehicle incident was reduced. Installation of crossovers, swing gates and barriers, lighting control systems as well as improving the line marking and signage. Electronic Signage A commercial lease was secured for an electronic sign on the corner of Bannister and Ranford Road. The sign has significant presence and has provided a good exposure for both the market activities but also third-party advertising. Vacant Land The vacant land on the site has been utilized as a staging area for the Metronet works happening at both the Ranford Road and Nicholson Road stations. Access to the land for the contractor has been through the freight rail side of the site requiring no onsite access. It is anticipated that the land will be utilized for a further 12-month period. 11
Site Master Plan Strategically, the Board has focused on the future development of the Perth Markets site with the engagement of DWP Architects to assist in the Master Planning process. The recent annual revaluation of the site demonstrated the value in the landholding with an increase of 32% to $250 Million for the 12-month period. There are a number of opportunities being considered for the site primarily around the vacant 10 hectares, infilling existing site to increase density and life cycle replacement for major assets including buildings. The Masterplan will be completed by the end of 2022 and will define the next 20 years of the Perth Markets site. Above: PMGL vacant land on short term lease to Metronet. Left: Road resurfacing works 2022 BML Notice of Intent In March 2022 Brisbane Markets formally notified PMGL that it wishes to increase it’s shareholding to a majority 51% of PMGL’s issued capital over the next 18 to 24 months. The Board has been seeking clarity regarding BML’s future intentions for PMGL since March 2022 and continues to do so to ensure all Board decisions support the best interests of all PMGL shareholders. On 7 October, Perth Markets Group Limited received a Notice of Intention from Brisbane Markets Limited (BML) to make a Proportional Takeover Bid to acquire 65% of each shareholder’s shares in PMGL. A planned Informal Shareholder Meeting was deferred and PMGL shareholders were advised to take no action pending receipt of the Bidder’s Statement. SUBSEQUENT EVENTS Subsequent to the end of the financial year, Ms. Clarinda Ho stepped down as CFO/Company Secretary on 30 August. Mr. Quentin Hooper was appointed CFO/ Company Secretary on 27 September. Mr. Peter Cooper stepped down as CEO of PMGL on 14 October 2022. A recruitment process for a new CEO commenced and the Board expects to announce the CEO replacement at the Annual General Meeting in November 2022. The Board thanks Clarinda and Peter for their service to PMGL and we wish them all the best in their future endeavours. On 7 July 2022, the Board of Directors approved the terms of Reference for the establishment of the Corporate Transaction Sub-Committee. This Board Committee’s primary function is to review, manage and recommend to the Board corporate actions with respect to any proposed share transfers in PMGL On 30 August 2022, the Board of Directors declared a final dividend for the 2022 Financial Year of 3.5c/ share fully franked. The dividend was paid to shareholders on 19 October 2022. 12
FINANCIAL REPORT YEAR ENDED 30 JUNE 2022 13
14 DIRECTORS’ REPORT Your directors present their report on the consolidated entity consisting of Perth Markets Group Limited (PMGL) and the entities it controlled at the end of, or during, the year ended 30 June 2022, referred to throughout this report as the ‘Group’. Information about the Directors and Officers The following persons were directors or officers of Perth Markets Group Limited during the year and up to the date of this report: Name Role Date Appointed Date Resigned Directors Steven Cole Independent Non-Executive Chair 26 July 2021 Patricia Skinner Non-Executive Deputy Chair Acting Non-Executive Chair Non-Executive Chair 26 July 2021 13 August 2021 Andrew Young Non-Executive Director Miro Lendich Non-Executive Director Frank Romano Non-Executive Director Richard Thomas Non-Executive Director James Ryan Non-Executive Director Tony Ceravolo Non-Executive Director Officers Rebecca Moore Chief Executive Officer 26 July 2021 Mark Lindsay Acting Chief Executive Officer Company Secretary / CFO 29 July 2021 10 January 2022 22 March 2022 Peter Cooper Chief Executive Officer Company Secretary 10 January 2022 30 August 2022 14 October 2022 30 September 2022 Clarinda Ho Company Secretary / CFO 22 March 2022 30 August 2022 Quentin Hooper Company Secretary / CFO 27 September 2022 Principal Activities During the year, the principal continuing activities of the consolidated entity consisted of: • Management and development of the Perth Markets Site; and • Providing a marketing and distribution hub for fresh produce supply to the State of Western Australia (as the State’s primary trading centre for fruit and vegetables). The Site is home to a diverse cluster of businesses involved in wholesale trading, food retailing, business service providers and weekend consumer markets. The Group generates income from its owned properties and from services and activities provided to tenants at the Perth Markets site. There were no significant changes in principal activities during the financial year that are not otherwise disclosed in this report. Further information on the profile of Directors is available on the PMGL website https://perthmarket.com.au/corporate-information/board-management/:
15 Operating Results The net operating profit/(loss) of the consolidated entity after income tax for the year ended 30 June 2022 was $46.875 million, 30 June 2021: $8.104 million. Underlying net operating profit before income tax was $10.89 million (2021: $10.892 million). 2022 $’000 2021 $’000 %Change PMGL Operating Profit 10,879 10,892 (0.12)% Fair value gain on revaluation of investment properties 58,214 7,440 682% Fair value gain on revaluation of financial assets 582 57 921% Finance expenses (2,769) (2,759) (0.36)% Acquisition related costs (332) (319) (4.08)% Net Profit before income tax 66,574 15,311 334% Less income tax expense from continuing operations (2,060) (2,095) Less income tax expense arising from deferred tax liability due to Corporate Tax rate adjustment - (2,589) Less income tax expense from deferred tax liability due to revaluation of investment property during the current year (17,639) (2,523) Net Profit/(Loss) after income tax expense 46,875 8,104 The net profit/(loss) after income tax includes the following: » A gain on the revaluation of Investment Properties of $58.214 million following an independent valuation dated 30 June 2022. (30 June 2021: $7.440 million). » A gain on the revaluation of Financial Assets (Investment in Brisbane Markets Ltd shares) of $582k. » 2021: Adjustment from the increase in income tax rate from 27.5% to 30% on the carrying value of the Group’s tax liabilities including deferred tax liabilities as disclosed in Note 7 of the financial report. The restatement of the carry value of deferred tax liabilities to the 30% tax rate was a charge to the profit and loss of $2.589 million. Review of Operations The Group continued its focus of managing and developing the Perth Markets site; based on its strategic pillars of: » Optimising current operations: » Developing for sustainable growth, and » Seeking growth through new opportunities. The Group’s future development and growth initiatives will be framed by the Total Site Master Plan (review is targeted for completion by the end of calendar year 2022). The Perth Markets site was fully operational over the year with COVID-19 managed with minimal impact on financial and operating performance.
The Land and Buildings of the Perth Market Site were independently valued in June 2022 by CBRE at $250 million. The financial statements reflect the revaluation of “Investment Property” to $250 million at 30 June 2022 from $189 million at 30 June 2021. The revaluation gain of $58.214 million is unrealised and noncash. The vacancy rate at the Perth Markets Site at 30 June 2022 was 0.82% (2021: 0.9%). Capital works undertaken in the financial year included bitumen resurfacing, roof upgrades and replacements (Central Trading Area, Eastern Warehouses), the installation of a wet fire suppression system for the SE1 warehouse. Sustaining capital investment planned for the 2023 financial year will see further road resurfacing, the installation of a wet fire suppression system for the SE2 warehouse. Additionally, the Group is investigating renewable energy (solar) as a potential energy efficiency initiative. The feasibility study on solar is expected to be completed in the first half of the 2023 financial year. . Dividends Dividends paid to shareholders during the year were as follows: Paying Entity Payment Rate 2022 2021 PMGL – (December 2021 Interim Dividend for FY2021/22) PMGL – (Final dividend for FY 2020/21) 3.4 c/ share fully franked @30.0% Paid on March 2022 3.48 c/ share fully franked @ 30.0% Paid on October 2021 $2,000,564 Nil Nil $2,047,637 Significant Changes in the State of Affairs There were no other significant changes in the state of affairs of the Group during the financial year that are not otherwise disclosed in this report. Events Since the End of the Financial Year The COVID-19 pandemic (globally and within Australia) continues to provide a level of uncertainty that remains beyond the control of PMGL. The Group remains focused on managing the Perth Markets site, in conjunction with its tenants, in a way that minimises the risks associated with the spread of COVID-19 across the operations of the Perth Markets site. Other than the above, there has been no matter or circumstance occurring subsequent to the end of the financial year that has significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 16
Meetings of Directors The number of meetings of the Company’s board of directors held during the year ended 30 June 2022, and the number of meetings attended by each director were: No. of meetings eligible to attend No. of meetings attended S. Cole 1 1 P. Skinner (Chair) 10 10 A. Young 10 10 F. Romano 10 10 J. Ryan 10 6 M. Lendich 10 10 R. Thomas 10 10 T. Ceravolo 10 10 Meetings of Audit, Finance and Risk Committee (AF&RC) The number of meetings of the committee held during the year ended 30 June 2022, and the number of meetings attended by each member were: No. of meetings eligible to attend No. of meetings attended R. Thomas (Chair) 5 5 A. Young 5 5 P. Skinner 5 3 Meetings of Nominations & Remuneration Committee The number of meetings of the committee held during the year ended 30 June 2022, and the number of meetings attended by each member were: No. of meetings eligible to attend No. of meetings attended S. Cole 1 1 A. Young 3 3 F. Romano 3 3 P. Skinner (Chair) 2 2 Meetings of Master Planning Committee The number of meetings of the committee held during the year ended 30 June 2022, and the number of meetings attended by each member were: No. of meetings eligible to attend No. of meetings attended F. Romano (Chair) 7 7 A. Young 7 6 J. Ryan 7 5 M. Lendich 7 7 P. Skinner 7 5 S. Cole 1 1 17
CHAIR Patricia Skinner 30th August 2022 NON- EXECUTIVEDIRECTOR Richard Thomas 30th August 2022 Shares under Option (a) Unissued shares There are no unissued shares under option in Perth Markets Group Limited at the date of this report. (b) Shares issued on the exercise of options There were no shares in Perth Markets Group Limited issued on the exercise of options during the year ended 30 June 2022. Environmental Regulation The Group is subject to a number of environmental regulations as part of operating the Market City business, which the Group is committed to meeting. The Board is not aware of any significant or material breaches of environmental requirements during the period covered by this report. Indemnity and insurance of auditor The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. Insurance of Officers and Indemnities During the financial year, the Group paid a premium under a contract ensuring all Directors and Officers against liabilities incurred in that capacity. Disclosure of the nature of the liabilities insured and the premium is subject to a confidentiality clause under the contract of insurance. Proceedings on Behalf of the Company No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page. Rounding of Amounts The amounts contained in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) where noted ($000) under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191. TheCompany is an entity to which this legislative instrument applies.. This report is made in accordance with a resolution of directors. 18
AUDITOR’S INDEPENDENCE DECLARATION 19
CONSOLIDATED STATEMENTOF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2022 Note 2022 $’000 2021 $’000 Continuing operations Revenue 4a 26,215 24,780 Other income 4b 494 655 Total Revenue from continuing operations 26,709 25,435 Operating expenses Weekendmarkets expenses (483) (461) Operational expenses 5 (3,972) (3,676) Commercial site management expenses 6 (10,512) (9,961) Depreciation and amortisation expenses 10 (863) (445) Operating profit 10,879 10,892 Gain on revaluation of investment properties 11 58,214 7,440 Fair value gain on financial assets through profit or loss 9a 582 57 Finance expenses (2,769) (2,759) Acquisition related costs (332) (319) Profit before income tax 66,574 15,311 Income tax expense 7 (19,699) (7,207) Profit/(Loss) after income tax for the year 46,875 8,104 Other comprehensive income Items not reclassified subsequently to profit or loss: Changes in the fair value of cash flow hedges (net of tax) 18b 3,145 1,247 Total other comprehensive Income for the year 3.145 1,247 Total comprehensive Income/(Loss) for the year 50,020 9,351 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 20
CONSOLIDATED STATEMENTOF FINANCIAL POSITION As at 30 June2022 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. Note 30 Jun 2022 $’000 30 Jun 2021 $’000 Assets Current assets Cash and cash equivalents 20a 9,214 9,650 Receivables 8 789 486 Other Financial Assets 9a 1,900 1,783 Other assets 9b 848 662 Total current assets 12,751 12,581 Non-current assets Property, plant and equipment 10 4,784 5,157 Investment property 11 250,000 189,000 Deferred tax asset 7 750 1,906 Financial assets at fair value through profit or loss 9a 4,578 3,995 Other assets 9b 498 150 Total non-current assets 260,610 200,208 Total assets 273,361 212,789 Liabilities Current liabilities Payables 13 3,556 3,661 Employee benefit obligations 15 127 139 Other current liabilities 16 87 78 Total current liabilities 3,770 3,878 Non-current liabilities Borrowings 14 83,538 83,538 Employee benefit obligations 15 21 40 Deferred tax liability 7 36,584 18,408 Other non-current liabilities 16 10,730 14,179 Total non-current liabilities 130,873 116,165 Total liabilities 134,643 120,043 Net assets 138,718 92,746 Equity Contributed equity 18a 54,718 54,718 Reserves 18b 134 (3,011) Retained earnings 18b 83,866 41,039 Total equity 138,718 92,746 21
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2022 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Contributed equity Cash flow hedge reserve Retained earnings Total equity Note $’000 $’000 $’000 $’000 Consolidated Balance at 30 June 2020 54,718 (4,258) 36,407 86,867 Loss for the year - - 8,104 8,104 Other comprehensive income 18b - 1,247 - 1,247 Total comprehensive (Loss)/ Income for the year - 1,247 8,104 9,351 Dividends/Distributions paid - - (3,472) (3,472) Balance at 30 June 2021 54,718 (3,011) 41,039 92,746 Contributed Cash flow Retained Total equity hedge reserve earnings equity Note $’000 $’000 $’000 $’000 Consolidated Balance at 30 June 2021 54,718 (3,011) 41,039 92,746 Profit for the year - - 46,875 46,875 Other comprehensive income 18b - 3,145 - 3,145 Total comprehensive Income - 3,145 46,875 50,020 for the year Dividends paid - - (4,048) (4,048) Balance at 30 June 2022 54,718 134 83,866 138,718 22
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2022 Note 2022 $’000 2021 $’000 Cash flows from operating activities Receipts and Payments Receipts from customers 27,514 28,582 Payments to suppliers and employees (16,088) (16,457) 11,426 12,035 Interest income - - Interest payments (2,790) (2,725) Income tax (1,934) (1,703) Net cash flows from operating activities 20(b) 6,702 7,607 Cash flow from investing activities Payment for property, plant, equipment and assets under construction (3,275) (1,306) Payment for construction of cold chain warehouse - (7,373) Dividends received 185 165 Investment in Unlisted Securities - (535) Net cash flows used in investing activities (3,090) (9,049) Cash flow from financing activities Proceeds from borrowings - 7,207 Dividend / Distribution paid 19 (4,048) (3,472) Net cash flow used in financing activities (4,048) 3,735 Net increase in cash and cash equivalents (436) 2,293 Cash and cash equivalents at the beginning of the year 9,650 7,357 Cash and cash equivalents at the end of the year 20(a) 9,214 9,650 23
NOTESTOTHECONSOLIDATED FINANCIAL STATEMENTS 1. Corporate information The consolidated financial statements of Perth Markets Group Limited (PMGL) and its subsidiaries (Group) for the year ended 30 June 2022 were authorised for issue in accordance with a resolution of the directors on 30 August 2022. PMGL is a public unlisted for-profit company limited by shares and incorporated and domiciled in Australia. Further information on the nature of the operations and principal activities of the Group is provided in the Directors’ report. 2. Significant accounting policies 1. Basis of preparation The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standard Board (IASB). This financial report has been prepared on a historical cost basis, except for investment properties, derivative financial instruments, debt and equity financial assets, and contingent consideration that have been measured at fair value. The carrying values of recognised assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortised cost are adjusted to recognise changes in the fair values attributable to the risks that are being hedged in effective hedge relationships. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand ($k), except when otherwise indicated under the option available to the company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. 2. Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and each of its wholly owned subsidiaries as at 30 June 2022. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: » Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) » Exposure, or rights, to variable returns from its involvement with the investee » The ability to use its power over the investee to affect its returns Generally, there is a presumption that a majority of voting rights results in control. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. 24
2.3 Summary of Significant Accounting Policies (a) Current versus non-current classification The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is: » Expected to be realised or intended to be sold or consumed in the normal operating cycle, » Held primarily for the purpose of trading, » Expected to be realised within twelve months after the reporting period, or » Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when: » It is expected to be settled in the normal operating cycle » It is held primarily for the purpose of trading » It is due to be settled within twelve months after the reporting period, or » There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. (b) Fair value measurement The Group measures financial instruments such as derivatives, and non-financial assets such as investment properties, at fair value at each balance sheet date. 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 at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: » In the principal market for the asset or liability, or » In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques (including the engagement of an independent and qualified valuer) 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. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above. (c) Income Tax CURRENT INC OME TAX Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. 25
Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. DEFERRED TAX Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except: » When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss » In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. (d) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except: » When the GST incurred on a sale or purchase of assets or services is not payable to or recoverable from the taxation authority, in which case the GST is recognised as part of the revenue or the expense item or as part of the cost of acquisition of the asset, as applicable, or » When receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (e) Property, plant and equipment Construction in progress is stated at cost, net of accumulated impairment losses, if any. Plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals, the Group depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. 26
(f) Investment properties Investment properties (assets capable of generating lease income) are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the period in which they arise, including the corresponding tax effect. Fair values are determined based on an annual valuation performed by an accredited external independent valuer applying a valuation model recommended by the International Valuation Standards Committee. Investment properties are derecognised either when they have been disposed of (i.e., at the date the recipient obtains control) or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition. In determining the amount of consideration from the derecognition of investment property, the Group considers the effects of variable consideration, existence of a significant financing component, non-cash consideration, and consideration payable to the buyer (if any). Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. (g) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. (h) Derivative financial instruments and hedge accounting INITIAL REC OGN I T ION AND SUBSEQUENT MEA SUREMENT The Group uses derivative financial instruments, such as interest rate swaps to hedge its interest rate risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. For the purpose of hedge accounting, hedges are classified as: » Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment, » Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. FAIR VAL UE HED GE S The change in the fair value of a hedging instrument is recognised in the statement of profit or loss as other expense. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit or loss as other expense. For fair value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit or loss over the remaining term of the hedge using the Effective Interest Rate (EIR) method. The EIR amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. 27
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit or loss. (i) Provisions Provisions are liabilities of uncertain timing or amount and are recognised where there is a present legal or constructive obligation as a result of a past event and when the outflow of resources embodying economic benefits is probable and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at the end of each reporting period. (j) Sick leave Liabilities for sick leave are recognised when it is probable that sick leave paid in the future will be greater than the entitlement that will accrue in the future. Past history indicates that on average, sick leave taken each reporting period is less than the entitlement accrued. This trend is expected to continue in future periods. Accordingly, it is unlikely that existing accumulated entitlements will be used by employees and no liability for unused sick leave entitlements is recognised. As sick leave is non-vesting, an expense is recognised in the profit or loss for this leave as it is taken. (k) Superannuation The Group does not participate in any employer-sponsored defined benefit superannuation plans for its employees. All superannuation payments by the Group are in accordance with the relevant Superannuation Guarantee legislation. (l) Employment on costs Employment on-costs, including workers’ compensation insurance, are not employee benefits and are recognised separately as liabilities and expenses when the employment to which they relate has occurred. Employment on-costs are included as part of ‘Salaries and board fees’ and ‘staff costs’. The related liability is included in ‘Employee benefit obligations’ note 15. 3. Significant accounting judgements, estimates and assumptions The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Judgements In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements: Property lease classification – Group as lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the commercial property, that it retains substantially all the significant risks and rewards incidental to ownership of these properties and accounts for the contracts as operating leases. 28
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