First Meeting of Creditors Orlc 92 Pty Ltd 12 April 2018 Red Lea - PowerPoint PPT Presentation

DRAFT Red Lea Chickens Pty Ltd First Meeting of Creditors Orlc 92 Pty Ltd 12 April 2018 Red Lea Franchise Pty Ltd Red Lea Franchising Pty Ltd Red Lea Logistics Pty Ltd Red Lea Leasing Pty Ltd Red Lea Hatchery Pty Ltd Red Lea Feed Pty Ltd Red Lea Corrugation & Flexo Pty Ltd Red Lea Retail Holding Pty Ltd (All Administrators Appointed) (collectively “the Red Lea Group”) Red Lea Group

Agenda Formalities  Resolution (concurrent meetings)  Purpose of meeting  Purpose of administration  Background  Financial position and performance  Administrators’ actions since appointment  Wind down strategy and asset realisation  Employees  Investigations  DOCA v Liquidation  Indicative DOCA  Questions  Resolutions (Committee and replacement of Voluntary Administrators)  Red Lea Group 2

Formalities Open meeting  Administrator Chairperson: IPR 75-50  Introductions:  Barry Kogan (Administrator)  Jonathan Henry (McGrathNicol Director)  Cameron Cheetham (Corrs Chambers Westgarth)  Quorum: IPR 75-105  Attendance register  Voting  Time and place convenient: IPR 75-30  Proofs of debt and proxies  Red Lea Group 3

Resolution – meetings to be held concurrently “ That the meetings of creditors of each of the Red Lea Group companies, being: Red Lea Chickens Pty Ltd  Orlc 92 Pty Ltd  Red Lea Franchise Pty Ltd  Red Lea Franchising Pty Ltd  Red Lea Logistics Pty Ltd  Red Lea Leasing Pty Ltd  Red Lea Hatchery Pty Ltd  Red Lea Feed Pty Ltd  Red Lea Retail Holding Pty Ltd  Red Lea Corrugation & Flexo Pty Ltd  (All Administrators appointed) be held concurrently.” Red Lea Group 4

Purpose of meeting Convened under Section 436E of the Corporations Act to:  determine whether to appoint a Committee of Inspection to each Company,  and if so, who are to be the Committees’ members; and consider the removal of the Administrators and appoint an alternative  Administrator who has consented to act This meeting has no authority to consider any other business  At the second statutory meeting, a decision is made regarding the Red Lea  Group’s future Red Lea Group 5

Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) and remuneration DIRRI DIRRI dated 29 March 2018 - distributed with notice of meeting  DIRRI is available for inspection  We remain of the view that we are free of any potential conflict of interest  $500,000 cash indemnity received on 3 April 2018 from a related company, Red  Lea Holdings Pty Ltd DIRRI tabled  Remuneration Schedule of rates provided with meeting information  Comprehensive remuneration report will be provided prior to the second meeting  of creditors Red Lea Group 6

Purpose of administration Directors’ powers are suspended and Administrators are in control  Voluntary Administration provides moratorium period for investigation /  determination of companies’ future: Return company to Director;  Deed of Company Arrangement; and  Liquidation.  Red Lea Group 7

Voluntary Administration timeline VA appointed Within 8 business days Within 25 business days Within 20 business days 29 March 2018 7 May 2018 12 April 2018 14 May 2018 1 st meeting of Complete 2 nd meeting of Administrators take preliminary control of Red Lea creditors held creditors held investigation Group and its assets Purpose: Options: (i) Replace VA (i) DOCA Receive any DOCA (ii) Consider the (ii) Liquidation proposals appointment Written notice of first (iii) Return to director of a meeting mailed to Issue Administration Committee of creditors and Report and form Inspection employees on 7 April opinion as to future 2018 of the Red Lea Group The Easter holiday period impacted the Voluntary Administration timeline Red Lea Group 8

Background Founded in Western Sydney in 1957  Processing plant in Blacktown, NSW  The Asif family acquired the Group in 2015  Significant losses post acquisition, funded by related parties and debt  Key activities:  Management of farming operations and livestock grower network;  Processing of chicken livestock into wholesale and retail chicken products;  Distribution of chicken products to retailers and wholesale customers; and  Operation and management of retail and franchise network.  Red Lea Group 9

Timeline April 2015 July 2016 Early 2016 Late 2016 Dec 2016 April 2017 Late 2017 Statutory $30m Properties Logistics Asif family Working YTD18 trading Acquisition by transferred business took over day demand capital loss of $17.2m the Asif family out of commenced to day served, challenges operating (brought in- management leading to addressed entities house) and major through retail business suppliers debtor finance commenced requiring COD Jan 2016 March 2017 29 Mar 2018 Major Offered Voluntary customers business for Administrators enter into sale, process appointed insolvency, was June 2016 June 2017 June 2015 $4m bad debt unsuccessful Net loss of Net profit of Net profit of exposure $3.9m $2.0m $17.5m Red Lea Group 10

Corporate structure Assad Ullah Asif (45%) Hequ Trading Pte. Ltd (Singaporean entity) Muhammad Asif (45%) Fatima Batool (10%) Redlea Group Holding Pty Ltd Red Lea Red Lea Red Lea Red Lea Red Lea Red Lea Red Lea Red Lea Corrugation Red Lea Retail Holding Chickens Logistics Franchise Franchising Leasing Pty Hatchery Feed Pty & Flexo Pty Ltd Pty Ltd Pty Ltd Pty Ltd Pty Ltd Ltd Pty Ltd Ltd Pty Ltd Orlc 92 Pty Ltd Appointment group Largely Dormant Entity Shareholders Main Trading Entity Logistics Entity Stores and Franchise Network Red Lea Group

Operations Operations and assets Creditors  Main trading entity and  Trade creditors: c.$15m processing facility  Employee creditors: $9.7m  Employed majority of the Red Lea Chickens staff Secured creditors: $12m  Management of farming operations  7 company owned stores  Trade creditors: c.$7m  22 franchise stores  Employee creditors: c.$0.4m Red Lea Retail and Franchise  Logistics and distribution to  Trade creditors: c.$1.3m support operations  Employee creditors: c.$0.2m Red Lea Logistics  c.70 vehicles  Finance lease: c.$7m 12 Red Lea Group

Financial performance – trading companies Summary Profit and Loss for the period 1 July 2017 to 28 February 2018 Franchise & Red Lea Red Lea Red Lea $m Chickens Logistics Franchising Total Total revenue 71.2 3.7 1.0 76.0 Cost of sales (79.7) (3.3) (0.1) (83.2) Gross margin (8.5) 0.4 0.9 (7.2) Net other expenses (8.5) (1.2) (0.3) (10.0) Profit/(Loss) before interest and taxation (17.0) (0.8) 0.6 (17.2) Source: Management Accounts, MCN normalisation adjustments Red Lea Group 13

Financial position – trading companies Summary Balance Sheet as at February 2018 Red Lea Red Lea Red Lea Francise & Red $m Chickens Logistics Lea Franchising Total Assets Inventory 5.8 - - 5.8 Trade debtors 8.5 - 0.1 8.6 Less: Receivables finance (7.2) - - (7.2) Motor vehicles 0.2 8.0 0.0 8.2 GST and other receivables 1.9 0.1 0.0 2.0 Total Assets 9.2 8.1 0.2 17.5 Liabilities Trade creditors (17.1) (1.2) (0.0) 9.5 Employees (5.3) (0.2) (0.1) (5.5) Secured creditors (3.9) (7.3) - (11.2) Total Liabilities (26.3) (8.6) (0.1) (7.3) Net Assets/(Liabilities) (17.1) (0.5) 0.1 (17.6) Source: Management Accounts, MCN normalisation adjustments Red Lea Group 14

Administrators’ actions since appointment Secured and insured site  Attended to wind-down of trading operations (leases, staff, assets)  Communicated with employees  Commenced investigations and secured records  Reviewed secured creditor position  Red Lea Group 15

Wind down strategy Limited funding to continue to trade the business:  Livestock realised  Stock sold  Staff made redundant  Fixed assets valued  Company owned stores closed  Franchise stores operate independently  Red Lea Group

Employees 400 people employed upon appointment  Majority of staff made redundant  Over $10m of entitlements owed:  Type of entitlement Estimate ($m) Superannuation 1.6 Annual leave 2.1 Long service leave 1.7 Pay in lieu of notice 1.3 Redundancy 3.7 Total 10.4 Red Lea Group 17

Employees (cont’d) Separation Certificates sent to all employees  Retained c.30 staff to assist Administrators  Continued engagement with employees providing:  updates on creditors meetings;  third parties employment opportunities; and  draft employee entitlements calculations  Employee counselling session after meeting  Ongoing liaison with Patricia Fernandez of the Australasian Meat Industry  Employees Union Red Lea Group 18