2016 Annual Results announcement
Scales Corporation Limited
Head Office: 52 Cashel Street | Christchurch 8013 | New Zealand
Postal: PO Box 1590 | Christchurch 8140 | New Zealand
Phone: +64 3 379 7720
scalescorporation.co.nz
NZX & Media Release
28 February 2017
SCALES CORPORATION DELIVERS RECORD UNDERLYING PROFIT, 11 PER CENT ABOVE
2015
Highlights – 12 months to 31 December 2016
FY2016 financial results set new Group record:
o Net Profit for the Year of $38.2 million, 6 per cent above FY2015 (Restated).
o Underlying Net Profit
1
of $38.6 million, 11 per cent above FY2015 (Restated).
o Underlying EBITDA
2
of $67.9 million, 11 per cent above FY2015 (Restated).
Outstanding performance from Horticulture and Food Ingredients divisions.
Strategic acquisition of integrated Hawke’s Bay grower, packer and marketer of apples
Longview complements existing Asia and Middle East focus whilst also adding modern post-
harvest capacity to accommodate future growth.
China Resources Ng Fung Limited (China Resources) welcomed as a strategic shareholder
improving networks and access to Chinese market.
Shareholding in apple marketing business Fern Ridge Produce increased to approximately 73
per cent.
Own grown apple volumes of 3.55 million TCEs, achieving a target we had set for 2020 four
years ahead of schedule.
Inclusion in S&P NZX50 index in September 2016.
Diversified agribusiness group Scales Corporation Limited (NZX:SCL) today reported its FY2016 full
year results, achieving record profitability for the group which is now in its 105
th
year of trading.
At $38.6 million, Net Profit for the year (including non-cash IFRS adjustments) is 6 per cent ahead of
our restated FY2015 result. Earnings per share from continuing operations for FY2016 was 27.0
cents per share up from 25.7 cents per share in FY2015.
1
Net Profit excluding non-cash International Financial Reporting Standards (IFRS) adjustments. A reconciliation
between Net Profit and Underlying Net Profit is provided in the appendix of our annual results presentation pack
2
Earnings before interest, tax, depreciation and amortisation and excludes non-cash IFRS adjustments
2
Scales Corporation chairman Jon Mayson says: “We are pleased to deliver another record profit that
builds on the solid FY2015 result. Once again the entire Scales team, which now extends to more
than 600 permanent staff members, have excelled themselves to deliver an outstanding result.”
“Our Horticulture and Food Ingredients divisions produced excellent results, whilst our Storage and
Logistics division produced another consistent outcome.”
Scales Corporation managing director Andy Borland notes: “The FY2016 result outperforms the highly
successful FY2015 result by a significant margin. In addition to our strong financial results, Scales
made good progress on a number of strategic fronts. These include the acquisition of integrated
Hawke’s Bay grower, packer and marketer of apples Longview in November, welcoming China
Resources as a strategic shareholder in Scales with an approximately 15 per cent shareholding, and
an increase in our shareholding in apple marketing business Fern Ridge to approximately 73 per
cent.”
“Longview is well-regarded in the Hawke’s Bay with a strong and proud history spanning more than
100 years. The purchase also included 22 hectares of orchard immediately surrounding the Longview
packhouse as well as entering into a lease for a further 17 hectares of nearby apple orchards.
“Longview provides a compelling strategic rationale to Scales. Their plantings are complementary to
our Asian and Middle East consumer focus. During 2016, Longview sold approximately 62 per cent of
its apple crop to this region. In addition, Longview’s packing and coolstorage facilities ideally
complement our existing post-harvest facilities. The Longview operations are located nearby,
providing opportunities to improve post-harvest specialisation as well as increasing overall group-wide
capacity to meet expected production growth.
“We are also extremely pleased to have the strategic support of China Resources who, through their
extensive networks, are well positioned to assist us with our growth through China and the rest of
Asia. To further assist sales into this region, we have been making significant investments in
marketing resource, presence and collateral. A number of new initiatives were introduced in 2016
and these will continue to be developed through 2017 to enhance our leading market position.
“On the balance sheet net debt ended the year at $34.6 million. This low level of gearing places us in
a strong financial position with capacity to finance future growth opportunities that may present
themselves. In addition to the acquisition of Longview and its surrounding orchards, and the price
paid to increase our shareholding in Fern Ridge, the group invested a further $15.7 million in capital
expenditure projects to help deliver FY2016, and drive future, growth” Mr Borland says.
3
During the year Scales declared dividends of 14.5 cents per share.
3
An interim FY2016 dividend of
8.0 cents per share was declared in December and paid in January 2017. “As we have done in
previous years, the board expects to declare a final dividend in respect of FY2016 in May with
payment in July.” Mr Borland says.
Divisions
Horticulture
The Horticulture division delivered strong organic growth, with Underlying EBITDA increasing from
$40.0 million in FY2015 to $45.3 million in FY2016, an uplift of 13 per cent for the year, Mr Borland
says.
“This improvement in profit was largely driven by a significant increase in export volumes sold which
were up by 12 percent to 3.55 million TCEs. The growth in export volumes was mostly influenced by
a strong export ‘packout’ (percentage of fruit deemed suitable for export) due to a good crop
displaying positive colour, size and taste qualities.
“The weighted average price achieved for our apples was also up slightly on 2015 levels. This was
influenced by improving varietal and market mix as well as improved pricing on traditional varieties.
“In December we launched Dazzle, a large, red, sweet apple which has taken 20 years to develop.
This apple is aimed at Asian consumers in particular, but has also attracted attention worldwide. In
line with our strategic focus, Dazzle is the first of what we hope will be a succession of branded plant
variety rights in which we have an interest.” Mr Borland says.
Storage & Logistics
“The Storage & Logistics division delivered a consistent result with Underlying EBITDA of $16.2
million in FY2016 in line with FY2015 Underlying EBITDA of $16.3 million.
“This result included strong performances from both bulk liquid storage business Liqueo and our
freight forwarding operation Scales Logistics. These businesses benefitted from favourable market
conditions and a full year of contributions from 2015 initiatives to deliver meaningful improvements in
profit.
3
Scales declared a final dividend of 6.5 cents per share for FY2015 in May 2016, which was paid on 8 July 2016.
This followed the 6.5c interim and 4c special dividends for FY2015 which were declared in December 2015 and
paid on 20 January 2016.
4
“Our coldstore businesses were affected by higher product velocity and a slower start to the
2016/2017 cropping season affecting fourth quarter activity. We expect the performance from
coldstores to be more subdued in years where external market factors are generally favourable to
New Zealand agriculture. Scales is positioned to be a net beneficiary of these market conditions
through its Horticulture and Food Ingredients divisions. Through the somewhat counter-cyclical
coldstore activities, which tend to perform well in slower markets, we are managing our group-wide
exposure to external market factors.
“Nevertheless, we will be reviewing our activities to see if there are opportunities we should be
pursuing to enhance coldstore asset returns” Mr Borland says.
Food Ingredients
“Once again Scales’ Food Ingredients division has produced another strong result with Underlying
EBITDA of $9.2 million, 22 per cent ahead of FY2015.”
“Within the division Meateor sold nearly 23,000 tonnes of pet food ingredients, 14 per cent higher than
its previous record set in FY2015. Profruit also delivered another strong result with our share of Net
Profit from this business increasing by 11 per cent” Mr Borland says.
Outlook
Looking ahead, Mr Mayson says: “Apple picking for the FY2017 crop has recently begun. Early
indications are positive with very good brix (sweetness), colour, and fruit size characteristics. This,
coupled with generally supportive factors for other Scales’ entities allows us to reaffirm guidance
provided late last year for FY2017 EBITDA of between $55 million and $62 million.”
Contact
Andy Borland, Managing Director, Scales Corporation Limited, Mob: 021 975 999,
email: andy.borland@scalescorporation.co.nz
About Scales Corporation
Scales Corporation is a diversified agribusiness group. It currently comprises three operating
divisions: Horticulture, Storage & Logistics and Food Ingredients. The company’s diverse spread of
activities gives Scales broad exposure to New Zealand’s agribusiness sector. Scales Corporation
was founded in 1897 as a shipping business by George Herbert Scales. Today it employs more than
600 staff New Zealand wide. Find out more at www.scalescorporation.co.nz.
---
SCALES CORPORATION LIMITED
GROWING YOUR DIVERSIFIED AGRIBUSINESS
Annual Results Presentation
For the twelve months ended
31 December 2016
28 February 2017
February 2017Scales –2016 Full Year Results
AGENDA
•2016 Highlights
•Financial Performance
•Divisional Performance & Outlook
•Capital Management
•Strategy
•Outlook
•Appendices
2
1
2016 HIGHLIGHTS
February 2017Scales –2016 Full Year Results
HIGHLIGHTS
4
Financial Highlights for 2016
Record Underlying EBITDA of $67.9m, 11% ahead of 2015.
1
Record Underlying NPAT of $38.6m, 11% ahead of 2015
(Statutory NPAT of $38.2m).
2
A 24% increase in revenue to $374m. 29% increase in
revenue to $230m within the Horticulture division.
3
14.5 cps (fully imputed) cash dividends declared in 2016.
4
27.0c earnings per share.
5
February 2017Scales –2016 Full Year Results
HIGHLIGHTS
5
We’re Growing: Strategic and Operational Highlights for 2016
Significant strategic developments: Longview acquired in
November 2016, China Resources welcomed as a shareholder, Fern
Ridgeshareholding increased to 73%.
1
3.5m TCEs of Mr Apple’s own fruit exported: Meeting our 2020
production target 4 years ahead of plan.
2
Investing in our brands and developing new varieties:
Significant increase in Mr Apple brand development through 2016 to
continue, Dazzle launched December 2016 (more to come).
3
TEUs shipped and airfreight tonnes handled by Storage &
Logistics both up 17% on 2015: 24,713 TEUsand 3.3M tonnes
respectively.
4
Development of our sustainability reporting: Sustainability
materiality review undertaken and feedback received.
5
Entered the S&P NZX 50 Index in September.
6
SCALES BY THE NUMBERS
6
22,971MT
sold by petfood
ingredients manufacturer
Meateor, 14% above
2015
> half a
billion
apples picked from Mr
Apple’s orchards
UNDERLYING
EBITDA
$67.9m
11% above 2015
We used
6.2mL
of rainwater collected from our
Auckland coldstore, reducing our
burden on stormwaterand
Auckland’s fresh water supply
5.7m
litres of juice concentrate
sold by Profruit
24,713
twenty foot container
equivalents organised for
international transit by
Scales Logistics
2
FINANCIALS
February 2017Scales –2016 Full Year Results
5 YEAR PERFORMANCE TREND
•Underlying EBITDA has increased by 147% in the past 4 years.
•We are continuing to invest in growth both organically and by acquisition.
8
Our 2016 result maintains our steady progression in Group profitability
Underlying EBITDA*Underlying NPAT*
* Underlying Results exclude all IFRS non-cash adjustments (most notably fair value or revaluation gains and mark-to-market gains or losses on FX contracts not exercised during the period).
Management and the Board believe that Underlying results more accurately demonstrate the change in operational performance ofthe Group.
$27.4m
$42.8m
$39.8m
$61.4m
$67.9m
20122013201420152016
CAGR25%
$6.8m
$20.0m
$19.8m
$34.8m
$38.6m
20122013201420152016
CAGR54%
February 2017Scales –2016 Full Year Results
SUMMARY FINANCIAL PERFORMANCE
•Revenue $373.9m, up 24% on 2015:
Good organic revenue growth in all divisions.
~$35m due to consolidation of Fern Ridge
(previously equity accounted), a high-revenue,
low margin business.
Longview acquisition did not contribute revenue
in 2016.
•Underlying EBITDA $67.9m, up 11% on 2015:
Including an EBITDA of $2.1 million from Fern
Ridge.
•Underlying NPAT $38.6m, up 11% on 2015:
Underlying NPAT attributable to Scales’
shareholders $38.2m after deducting minority
interests of $406k (being 27% of Fern Ridge
profit after tax).
•Reported Net Profit for the year $38.2m, up
6% on 2015 (Restated).
9
Significantly ahead of 2015 results
Income Statement
2016
2015
(Restated)
$ MillionsActualGrowth %Actual
Revenue373.924%301.4
Cost of Sales(258.0)(194.1)
Underlying Gross Margin115.98%107.3
Underlying Gross Margin %31%36%
Underlying EBITDA67.911%61.4
Underlying EBIT55.811%50.1
Underlying Net Profit38.611%34.8
After tax impact of:
Non-cash IFRS adjustments(0.5)1.1
Net Profit38.26%35.9
Adj. capital employed*271.1209.5
Return on capital employed*21%24%
Underlying gross margin excludes fair value gains relating to Mr Apple’s unharvested
crop.
* Adj. capital employed / Return on capital employed excludes capital employed and
net losses from the Longview acquisition which, due to the timing of the acquisition,
did not contribute to 2016 profits.
February 2017Scales –2016 Full Year Results
DIVISIONAL EBITDA
•Favourable international demand environment:
Has resulted in ongoing strength in our Horticulture and Food Ingredients divisions which
continue to deliver strong growth.
Tends not to favour our storage activities within the Storage & Logistics division.
Diversified nature of our agribusiness reduces exposure to external effects.
10
Strong performances from our Horticulture and Food Ingredients divisions
Underlying Divisional EBITDA
201620152014
$ MillionsActualGrowth %ActualGrowth %
Horticulture45.313%40.067%
Storage & Logistics16.2-1%16.332%
Food Ingredients9.222%7.633%
Other(2.9)17%(2.4)18%
67.911%61.454%
February 2017Scales –2016 Full Year Results
DIVISIONAL EBITDA TREND
11
Strong growth in Horticulture and Food Ingredients. Storage & Logistics delivers
consistent performance
Trendsin Underlying Divisional EBITDA ($m)
HorticultureStorage & LogisticsFood Ingredients
$10.3m
$25.5m
$23.9m
$40.0m
$45.3m
20122013201420152016
CAGR45%
$14.0m
$13.9m
$12.3m
$16.3m
$16.2m
20122013201420152016
CAGR4%
$5.5m
$4.7m
$5.7m
$7.6m
$9.2m
20122013201420152016
CAGR14%
February 2017Scales –2016 Full Year Results
BALANCE SHEET
•Scales’ key assets are subject to periodic revaluation,
including:
742 ha. orchards owned by the Group (further 402 ha.
leased).
322,000 m3 of owned coldstoragespace.
•During 2016 we experienced a $84m increase in Capital
Employed. The majority of the increase in Capital Employed
is either due to acquisition activity or non-cash impacts from
applying accounting standards, including:
Acquisition of Longview and nearby orchards $20.5m.
Consolidation of Fern Ridge (including goodwill) $5.7m
(primarily a non-cash accounting adjustment).
Revaluation of orchard assets (apple trees and unharvested
produce) giving rise to a non-cash gain of $12.8m.
Revaluation of land & buildings giving rise to a non-cash gain
of $26.9m.
Non-cash gain from marking to market our financial
instruments of $9.4m.
12
An increase in capital employed is mostly influenced by the application of
accounting standards resulting in non-cash balance sheet adjustments
Balance Sheet
20162015
(Restated)
$ MillionsActualActual
Current Assets (excluding Cash)
Trade Debtors17.614.7
Inventory16.414.3
Unharvested Agricultural Produce18.415.5
Other12.18.4
64.552.9
Current Liabilities (excluding Overdraft and Dividends Declared)
Trade Creditors & Other Payables(22.0)(22.3)
Other(8.4)(6.7)
(30.4)(28.9)
Net Working Capital34.124.0
Non-Current Assets
Apple Trees31.017.3
Land & Buildings140.7100.1
Other PP&E55.050.6
Investments & Intangibles 21.311.2
Other11.46.2
259.3185.5
Capital Employed293.4209.5
February 2017Scales –2016 Full Year Results
BALANCE SHEET (CONTINUED)
•Scales continues to be in a strong financial
position.
•At 31 December 2016, Net Debt was
$34.6m.
•Average net debt for the year was $43.4m,
or 0.6x EBITDA.
•Our strong financial position enables us to
cash and debt finance strategic bolt-on
acquisitions, including:
Our increased stake in Fern Ridge which
was cash flow funded.
The acquisition of Longview, which was
financed from cash and debt.
13
Excellent financial position
Balance Sheet (continued)
20162015
(Restated)
$ MillionsActualActual
Non-Current or Other Liabilities
Deferred tax liabilities(28.2)(17.9)
Other financial liabilities(4.9)(2.9)
Dividends declared(11.0)(14.5)
(44.1)(35.3)
Net Debt
Cash less Overdraft6.413.8
Borrowings(41.0)(30.0)
Net Debt(34.6)(16.2)
Total Equity214.6158.0
Covenants
Interest Cover
Ratio28.0x22.6x
Covenant3.0x3.0x
Headroom833%653%
Senior Debt Coverage
Ratio0.6x0.5x
Covenant2.5x2.5x
Headroom317%400%
DIVISIONAL
PERFORMANCE &
OUTLOOK
3
February 2017Scales –2016 Full Year Results
HORTICULTURE –FINANCIAL PERFORMANCE
•Record revenue of $230m (29% above 2015 results), including approximately $35m of revenue
from subsidiary companyFern Ridge.
•Underlying divisional EBITDA of $45.3m
(13% above 2015 results).
•Record Mr Apple underlying EBITDA of
$43.6m (11% above 2015 results).
Excellent packoutrate, 87%
up from 78% in 2015.
•Solid performance from Fern Ridge
(EBITDA of $2.1m).
15
Another strong performance as premium orchards mature
Financial Performance - Horticulture
201620152014
$ MillionsActualGrowth %ActualGrowth %
Revenue230.129%178.112%
Underlying Gross Profit67.44%64.640%
Underlying Gross Profit Margin29%36%
Other income, administration and operating expenses(22.1)-13%(25.4)12%
Mr Apple Underlying EBITDA 43.611%39.267%
Fern Ridge Underlying EBITDA 2.1N/A - N/A
Longview Underlying EBITDA (0.4)N/A - N/A
Share of Fern Ridge Produce net profit after tax - -100%0.877%
Underlying Horticulture EBITDA45.313%40.067%
Depreciation and amortisation(6.2)(5.8)
Underlying Horticulture EBIT39.114%34.275%
February 2017Scales –2016 Full Year Results
HORTICULTURE –OWN-GROWN VOLUMES
•Total own grown volumes of 3.55m TCEs, up 12% on 2015.
•Growth concentrated in premium varieties where volumes were up by 200k TCEs (14% increase):
Volumes of NZ Queens, highly sought after in Asian markets, were up 60% to 343k TCEs.
16
Premium and traditional volumes both up during 2016
Mr Apple GrownExport Volumes (TCE 000s)Growth in Premium Volumes (TCE 000s)
Volumes may have changed slightly from half year as final sales data on unsold fruit was received.
214
343
119
185
245
245
282
301
273
393
585
574
831
866
536
741
1,059
1,036
1,454
1,656
201120122013201420152016
Other
High Colour Fuji and Royal Gala
Pink Lady
NZ Queen
CAGR25%
536
741
1,059
1,036
1,454
1,656
1,465
1,404
1,773
1,716
1,701
1,890
2,001
2,144
2,833
2,752
3,155
3,546
201120122013201420152016
Traditional Varieties
Premium Varieties
February 2017Scales –2016 Full Year Results
HORTICULTURE –STRATEGY
•During 2016 Mr Apple and Fern Ridge sold over half a billion (5.46 million TCEs) apples to more than 150
customers in approximately ~40 countries.
•Mr Apple’s sales to Asia & Middle East increased markedly in 2015, this position was solidified in 2016.
•The Asian and Middle Eastern markets are key markets for us going forward:
Marketing campaigns focus on food safety and apple quality of New Zealand apples.
China Resources is well positioned to assist with growth into the large China market and the rest of Asia.
•Longview’s activities and production is geared towards sales to Asia, with this region accounting for 62% of their
2016 sales.
17
Our strategy is focused on: (1) Sales to Asia & the Middle East...
FY15AFY16AFY14A
Europe
36%
UK
19%
North
America
8%
Asia & Middle
East
37%
Europe
29%
UK
13%
North
America
5%
Asia & Middle
East
53%
Europe
30%
UK
10%
North
America
7%
Asia & Middle
East
53%
Mr Apple –Sales by Region (TCEs)
February 2017Scales –2016 Full Year Results
HORTICULTURE –STRATEGY (CONTINUED)
•We have partnered with two other large New Zealand apple growers to secure proprietary rights to
new apple varieties. Through this partnership we have, and are, developing new apple brands:
Dazzle. Dazzle, a large red sweet apple which has taken 20 years to develop was launched in December
2016.
Diva. Diva are our premium high colour (red) Fuji apples marketed principally in Asia commanding a
significant premium.
We hope to have further announcements in the future around new exciting apple varieties and brands.
18
...and (2) Increasing sales of branded apples and Plant Variety Rights
February 2017Scales –2016 Full Year Results
HORTICULTURE –PRICES
•Across our entire apple crop, prices showed improvement over strong 2015 pricing. The increase in
the weighted average sale price for our apples was achieved by:
Attention to detail and care through the harvest and post-harvest process. We often pick the same tree a
number of times improving the overall quality (and therefore value) of apples from each tree.
A higher proportion of premium apples (47% of the total crop), including large growth in ultra-premium
varieties.
Firm pricing for premium varieties –broadly in line with 2015.
Small improvements in pricing from traditional varieties as customers in those markets compete for the supply
of New Zealand’s high quality apple produce.
19
Our strategy is delivering improvements in the weighted average selling price across
the crop
Apple Prices by Variety
201620152014
NZD / TCE, FOBActualGrowth %ActualGrowth %
Premium Varieties37.4-1%37.815%
Traditional Varieties29.35%28.013%
Total Mr Apple Orchards33.12%32.517%
Price uplift - Premium vs Traditional28%35%
February 2017Scales –2016 Full Year Results
HORTICULTURE –OTHER KPIS
•External grower volumes showed good growth with increased supply from both Hawke’s Bay and
Nelson external growers.
•Exchange rates displayed minor improvement over 2015.
•Foreign exchange exposure continues to be managed, however, if current spot FX rates are
maintained this will present a headwind for the business post 2017.
20
Key Performance Measures
201620152014
ActualGrowth %ActualGrowth %
Volumes (TCE 000s)
Mr Apple own-grown volumes3,54612%3,15515%
External grower volumes1,18717%1,019-16%
Total volume sold4,73313%4,1745%
FX Rates
NZD:USD0.70-4%0.73-11%
NZD:EUR0.601%0.600%
NZD:GBP0.47-3%0.48-2%
NZD:CAD0.860%0.86-5%
February 2017Scales –2016 Full Year Results
S&L –FINANCIAL PERFORMANCE
21
Another steady result from the Storage & Logistics division
•Revenues of $108.4m, 13% ahead of 2015.
•EBITDA of $16.2m, in line with 2015.
•Good growth from bulk liquid storage business Liqueo, EBITDA up 30% on 2015:
Full year contribution from 20-year edible oils storage contract.
Full year contribution from 2015 acquisition of Ahuriri(Napier) bulk liquid processing operation.
Rationalisation of Hawke’s Bay processing activities to Ahuriri.
•Excellent performance from Scales Logistics:
EBITDA up 17% on 2015 results due to
increases in TEUs shipped and airfreight
tonnes handled.
•ColdstoresEBITDA affected by:
Strong storage velocity (a factor that tends
to favour our other divisions).
A slower start to the 2016/2017 cropping
season affecting Q4 volumes.
Closure of South Island fish customer.
Financial Performance - Storage & Logistics
201620152014
$ MillionsActualGrowth %ActualGrowth %
Revenue108.413%95.66%
Cost of Sales(70.2)14%(61.5)-1%
Gross Profit38.212%34.120%
Gross Profit Margin35%36%
Other income, administration and operating expenses(22.0)24%(17.8)11%
EBITDA
All Coldstores11.7-7%12.623%
Liqueo2.330%1.838%
Scales Logistics2.317%1.9146%
Total Storage & Logistics EBITDA16.20%16.332%
EBITDA Margin15%17%
Total Storage & Logistics EBIT10.9-4%11.346%
February 2017Scales –2016 Full Year Results
S&L –STRATEGY
22
Storage & Logistics is characterised by extremely high barriers to entry
•Key strategies for 2017 include:
Reviewing existing coldstoreactivities to explore potential for improved financial performance and asset returns.
Complete rollout of FMCG capable warehouse management software and thus broaden our service offering.
Continue to expand our bulk liquid storage and logistics offerings through organic or acquisition growth
opportunities.
February 2017Scales –2016 Full Year Results
S&L –KPIS
23
•Key Performance Indicators in line with expectations:
Total coldstorespace up 8% on 2016 with increases in Christchurch based storage capacity.
—Note, a coldstorewe manage in Wellington was damaged by the November earthquake. This coldstorewas closed in the
early part of 2017.
Scales Logistics (and its airfreight division Balance Cargo) has achieved strong growth (volumes handled up 17%) due to:
—Increased trade from captive customers (Mr Apple and Meateor).
—Good horticulture volumes in 2016.
—Acquisition of new customers.
Liqueo’sinstalled capacity reflects rationalisation of Hawke’s Bay activities.
Key Performance Measures
201620152014
$ MillionsActualGrowth %ActualGrowth %
Coldstores
Total available refrigerated coldstore space 780.48%721.619%
Liqueo
Installed capacity of all tanks20,308-10%22,5001%
Logistics
TEUs shipped24,71317%21,12522%
Airfreight tonnes3,30617%2,83279%
February 2017Scales –2016 Full Year Results
FOOD INGREDIENTS –FINANCIAL PERFORMANCE
•Food Ingredients followed on from a solid 2015 result to deliver an even stronger 2016:
Meateorsold 22,971 MT of petfoodingredients, 14% ahead of 2015 to deliver $58.0m in revenue (19% ahead of 2015 results)
and $7.6m in Underlying EBITDA (24% ahead of 2015 results).
Profruitsold more than 5.7mL of juice concentrate –another strong result in light of good industry packouts(lower proportion of
fruit rejected during the grading process).
24
Continued growth from our agricultural by-products businesses
Financial Performance - Food Ingredients
2016
2015
2014
$ Millions
Actual
Growth %
Actual
Growth %
Meateor Revenue
58.0
19%
48.6
31%
Meateor Cost of Sales
(47.8)
19%
(40.0)
32%
Gross Profit
10.3
20%
8.6
24%
Gross Profit Margin
18%
0%
18%
-5%
Other income, administration and operating expenses
(2.7)
9%
(2.5)
10%
Meateor Underlying EBITDA
7.6
24%
6.1
31%
Meateor EBITDA Margin
13%
13%
Share of Profruit Net Profit
1.6
11%
1.5
40%
Underlying Food Ingredients EBITDA
9.2
22%
7.6
33%
Depreciation & Amortisation
(0.5)
1%
(0.5)
-11%
Underlying Food Ingredients EBIT
8.7
23%
7.1
38%
KPIs
Meateor Volume Sold (MT)
22,971
14%
20,220
23%
Juice Concentrate Sold (million Litres)
5.7
6.1
•We continue to review
opportunities to add value
through innovation to maximise
the potential of this division.
4
CAPITAL
MANAGEMENT
February 2017Scales –2016 Full Year Results
PERFORMANCE AGAINST BENCHMARKS
•Return on Capital Employed (ROCE) and EBITDA Margins are monitored for each division and the group.
•We target a long-run combined ROCE of 15% and EBITDA Margin of 13%.
•As previously discussed, groupwidecapital employed increased by 40% between 2015 and 2016 but this increase
was mostly due to acquisition or non-cash revaluation and other accounting gains.
26
Return on Capital Employed and EBITDA Margins
Capital employed / ROCE adjusted to
exclude Longview (due to timing of the
acquisition).
Adjusted Capital Employed increased by
29% between 2015 and 2016.
•ROCE from Horticulture and Food
Ingredients remains excellent,
notwithstanding increase in asset base due
to non-cash revaluation gains.
•Storage & Logistics continues to deliver
solid returns. ROCE is significantly
impacted by non-cash revaluation gains in
Land & Buildings.
•EBITDA margins comfortably met at group
and divisional levels.
Capital Management
20162015
ActualActual
Return on Capital Employed
Horticulture
1
28%34%
Storage & Logistics11%13%
Food Ingredients53%49%
Group21%24%
Target15%15%
EBITDA Margins
2
Horticulture20%22%
Storage & Logistics15%17%
Food Ingredients13%13%
Group18%20%
Target13%13%
2. Excluding share of profit from associate com pany and joint venture
1. Due to the tim ing of the acquisition, Longview has been excluded from the calculation of
Horticulture and Group 2016 ROCE
February 2017Scales –2016 Full Year Results
CAPITAL EXPENDITURE
•Operational capital expenditure at $7.0m was slightly higher than 2015 but includes certain projects that are
expected to improve operational effectiveness (for example rollout of the upgraded Mr Apple finance software).
•We also invested $8.7m in growth projects to enable us to deliver the improved 2016 result as well as to position us
for future earnings growth. Investments during 2016 include:
27
Investing in Growth
Horticulture:
—Redevelopment of ~30.5 hectares to
premium varieties.
—Improved camera grading technology at our
packhouseto improve throughput.
—Purchase of ~4 hectares of land
surrounding Mr Apple’s Whakatu
Packhouse.
Storage & Logistics:
—Ongoing work to upgrade of the warehouse
management system at Polarcold.
—Liqueoupgrades to accommodate the
long-term oil storage contract and
rationalise Hawke’s Bay activities to Ahuriri.
Capital Expenditure
20162015
ActualActual
Operational capital expenditure
Horticulture3.31.9
Storage & Logistics3.42.4
Food Ingredients0.40.2
Other0.00.0
Total operational capital expenditure7.04.5
Growth capital expenditure
Horticulture5.03.7
Storage & Logistics3.77.6
Food Ingredients - -
Total growth capital expenditure8.711.3
Total capital expenditure15.715.8
5
STRATEGY
February 2017Scales –2016 Full Year Results
UPDATE ON STRATEGIC OBJECTIVES
•In our 2016 Annual Report we outline updated objectives for the Group and each of our divisions.
We intend to assess ourselves against these objectives, and to create new objectives where targets have been met.
We will report on our assessed progress each year in our Annual Report.
•Our Group objectives are:
29
Meeting or Exceeding our Objectives
Sustainability
Developandevolveourreportingandmeasuringofkeysustainabilityaspectsaffecting
Scales’businesses
Developbest-in-classsustainabilityreporting
Demonstrateimprovementsinsustainability
SignificantProgress
Sustainabilityreportdevelopedandtobeincludedin
ourAnnualReport
GRIframeworkadopted
Financial
Positionourdiversifiedagribusinesstodeliverconsistentandsustainablegrowthin
financialperformance
Prudentlyutiliseleveragetosupportequityreturnswhilstbalancingrisk
GoodProgress
Strategicacquisitionsanddevelopmentsmadein
2016positionthegroupwellforsustainedgrowth.
Acquisitionsfinancedvialeverage
Shareholderreturns
Rewardourshareholderswithdividendsthatrepresentanattractiveyieldoncurrent
marketpricing
Delivercapitalgainsandshareholderliquiditythroughcarefulstrategicexecution,and
transparentandeasytounderstandstakeholdercommunications
GoodProgress
Sharepriceimproved,interimdividendincreasedto
8.0centspershare
FinalistinINFINZemergingcommunicatoroftheyear
6
OUTLOOK
February 2017Scales –2016 Full Year Results
WHAT WE KNOW ABOUT 2017
•Market dynamics remain supportive:
Horticulture:
—The apple harvest has just begun. Early indications are pleasing -brix (sweetness) is very high, colour is great, and fruit
size on par with previous years.
—Gross production is expected to be similar to or potentially higher than 2016 with the addition of Longview volumes and
ongoing orchard maturity (export volumes will be influenced by packoutand it remains too early to gauge performance
here).
—Marketing and branding efforts will continue throughout Asia.
—Foreign exchange rates create some headwinds, albeit some protection from contracts taken in previous periods.
Storage & Logistics:
—We expect that the 2017 result will improve upon 2016 as the performance from coldstoresreturns to longer run levels.
Food Ingredients:
—We continue to review ways that we can offer our customers a competitive advantage by remaining at the innovative edge
of petfoodand juice concentrate.
—We are exploring a number of opportunities to continue the growth of this division in the future.
•Based on factors known to us at the time of writing, the Directors support previously provided guidance for 2017
(EBITDA of $55 to $62 million).
31
The outlook for Scales remains positive
7
APPENDICES
February 2017Scales –2016 Full Year Results
RECONCILIATION TO STATUTORY ACCOUNTS
•This table reconciles Underlying EBITDA
and Underlying Net Profit to Net Profit as
Reported in our Financial Statements.
•In FY2016, IFRS rules around the
treatment of biological assets changed.
Rather than revaluing orchards as was
previously required, we now depreciate the
value of bearer plants over their economic
life in the same way as property, plant and
equipment.
•The produce growing on bearer plants
continues to be accounted for as
agricultural produce assets under NZ IAS
41.
•Revaluations of land and buildings will take
place on a 3-yearly basis as is currently the
case. This will not impact on cash profit,
but may result in an increase in our
reported depreciation expense.
33
Reconciliation of Underlying EBITDA to Net Profit
2016
2015
(Restated)
$'000ActualActual
Underlying EBITDA67,85661,405
RECONCILIATION TO GAAP INFORMATION
- Depreciation(11,438)(10,243)
- Amortisation(661)(1,088)
- Finance revenue167185
- Finance charges(2,533)(2,801)
- Taxation(14,752)(12,663)
Underlying Net Profit38,63834,795
- Foreign exchange contract revaluations / hedge ineffectiveness(1,258)1,759
- Fair value gain on apple inventory (pursuant to IAS 41)993n/a
- Equity settled employee benefits(270)(168)
- Taxation74(493)
(460)1,099
Net Profit as reported in Financial Statements 38,17835,894
February 2017Scales –2016 Full Year Results
DISCLAIMER
The information in this presentation has been prepared by Scales Corporation Limited with due care and attention. However, neither Scales Corporation Limited
nor any of its directors, employees, shareholders nor any other person shall have any liability whatsoever to any person for anyloss (including, without limitation,
arising from any fault or negligence) arising from this presentation or any information supplied in connection with it.
This presentation may contain projections or forward-looking statements regarding a variety of items. Such projections or forward-looking statements are based
on current expectations, estimates and assumptions and are subject to a number of risks, uncertainties and assumptions. Thereisno assurance that results
contemplated in any projections and forward-looking statements in this presentation will be realised. Actual results may differ materially from those projected in
this presentation. No person is under any obligation to update this presentation at any time after its release to you or to provide you with further information
about Scales Corporation Limited.
Our results are reported under NZ IFRS. This presentation includes non-GAAP financial measures which are not prepared in accordance with NZ IFRS. The
non-GAAP financial measures used in this presentation include:
•EBITDA. We calculate EBITDA by adding back (or deducting) depreciation, amortisation, finance charges / (revenue), and taxation expense to net
earnings / (loss) from continuing operations.
•EBIT. We calculate EBIT by adding back (or deducting) finance charges / (revenue), and taxation expense to net earnings / (loss) from continuing
operations.
•Underlying EBITDA and EBIT are calculated by adding back (or deducting) any non-cash IFRS adjustments.
•Underlying Net Profit is calculated by adding back or (or deducting) the after-tax effect of any non-cash IFRS adjustments.
We believe that these non-GAAP financial measures provide useful information to readers to assist in the understanding of our financial performance, financial
position or returns, but that they should not be viewed in isolation, nor considered as a substitute for measures reported inaccordance with NZ IFRS. Non-
GAAP financial measures may not be comparable to similarly titled amounts reported by other companies.
Forward-looking statements are subject to any material adverse events, significant one-off expenses or other unforeseeable circumstances.
The information in this presentation is of a general nature and does not constitute financial product advice, investment advice or any recommendation. Nothing in
this presentation constitutes legal, financial, tax or other advice.
---
Reporting Period
Previous Reporting Period
12 months ended 31
December 2016
12 months ended 31
December 2015
(Restated*)
$'000$'000
Revenue from ordinary activities$373,927$301,41024.1%
Profit (loss) from ordinary activities after
tax attributable to shareholders
$37,772$35,8945.2%
Net profit (loss) attributable to
shareholders
$37,772$35,8945.2%
Amount per shareImputed amount per
share
N/AN/A
Record Date
Dividend Payment Date
31 December 201631 December 2015
(Restated*)
139,779,006139,779,006
$1.41$1.09
Audit
** Note that it is the company's intention to pay a final dividend in July
2017. A decision on the final dividend is subject to the directors'
approval, taking into account all aspects of the group's performance
and financial position.
Comments
* December 2015 balances have been restated to reflect the adoption
of amendments to accounting standards NZ IAS16 Property, Plant and
Equipmentand NZ IAS41 Agriculture. For further details on the
restatement refer to Note H1 in the financial statements attached to
this announcement.
Please refer to the attached report for detailed commentary on the
results.
12 months to 31 December 2016
12 months to 31 December 2015
The financial statements attached to this report have been audited.
Percentage change
Dividend to shareholders
Final (for 2016 financial year) **
Net Tangible Assets
Number of shares
Net Tangible Assets per share
Scales Corporation Limited
NZX Appendix 1 - Prescribed Disclosure
Results for announcement to the market
N/A
N/A
---
1
Annual Financial Statements - Year Ended 31 December 2016
1
Contents
Comprehensive income 2
The income earned and operating expenditure incurred
by the Scales Group during the financial year (profit or
loss) followed by the other comprehensive income that
is taken to reserves in equity.
Changes in equity 3
The opening balance, details of movements during
the year and the balance of each component of
shareholders equity at the end of the financial year.
Financial position 4
The Scales Group assets, liabilities and equity at the
end of the financial year.
Cash flows 5
Cash generated and used in the operating, investing
and financing activities of the Scales Group.
Notes to the financial statements
About this report 7
A. Segment information 9
B. Financial performance 11
B1. Revenue
B2. Cost of sales, administration and operating
expenses
B3. Other income and losses
B4. Finance cost
B5. Taxation
B6. Foreign currency transactions
C. Key assets 15
C1. Property, plant and equipment
C2. Unharvested agricultural produce
C3. Investments accounted for using the equity
method
C4. Goodwill
C5. Inventories
C6. Impairment of assets
D. Capital funding 20
D1. Share capital
D2. Reserves
D3. Dividends
D4. Imputation credit account
D5. Earnings per share
E. Financial assets and liabilities 22
E1. Trade and other receivables
E2. Other financial assets
E3. Trade and other payables
E4. Borrowings
E5. Other financial liabilities
E6. Interest rate risk
E7. Foreign currency risk
E8. Categories of financial instruments
E9. Maturity profile of financial liabilities
F. Group structure 27
F1. Subsidiary companies
F2. Acquisition of subsidiaries
F3. Investments accounted for using the
equity method
G. Other 30
G1. Capital commitments
G2. Operating lease commitments
G3. Related party disclosures
G4. Events occurring after balance date
H. Adoption of amended
accounting standards
and resulting restatement 32
Independent auditor’s report 34
Directory 38
ANNUAL FINANCIAL STATEMENTS
for the year ended 31 December 2016
2
Annual Financial Statements - Year Ended 31 December 2016
2
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
20162015
NOTE$’000$’000
(Restated)
RevenueB1
373,927301,410
Cost of salesB2
(257,038) (194,142)
116,889 107,268
Share of profits of entities accounted for using the equity method
C3
1,612 2,268
Other incomeB3
2751,946
Administration and operating expensesB2
(50,197) (48,486)
Other lossesB3 (1,258) -
EBITDA
67,321 62,996
Amortisation
(661) (1,088)
Depreciation
C1 (11,438) (10,243)
EBIT
55,222 51,665
Finance revenue
167 185
Finance costB4
(2,533) (2,801)
PROFIT BEFORE INCOME TAX EXPENSE
52,856 49,049
Income tax expense B5
14,678 13,155
PROFIT FOR THE YEAR 38,178 35,894
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Gain (loss) on cash flow hedges
9,382 (8)
Income tax relating to cash flow hedges
(2,627) (27)
6,755 (35)
Items that will not be reclassified to profit or loss:
Revaluation of land and buildings
26,945-
Income tax relating to buildings (3,041)-
Revaluation of apple trees 11,839-
Income tax relating to apple trees (3,315)-
32,428-
OTHER COMPREHENSIVE INCOME (LOSS) FOR THE YEAR 39,183 (35)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
77,361 35,859
Profit for the Year Attributable to:
Equity holders of the Company 37,772 35,894
Non-controlling Interests 406-
38,178 35,894
Total Comprehensive Income for the Year Attributable to:
Equity holders of the Company 76,955 35,859
Non-controlling Interests 406-
77,361 35,859
EARNINGS PER SHARE:
D5
Basic and diluted earnings per share (cents)
27.0 25.7
The notes to the financial statements on pages 7 to 33 form part of and should be read in conjunction with this statement.
3
Annual Financial Statements - Year Ended 31 December 2016
3
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Share
Capital
Revaluation
Reserve
Hedging
Reserve
Equity-settled
Employee
Benefits
Reserve
Retained
Earnings
Attributable
to Owners
of the
Company
Non-
controlling
InterestsTotal
NOTE$’000$’000$’000$’000$’000$’000$’000$’000
Balance at
1 January 2015 90,915 25,289 2,245 65 27,816 146,330 146,330
Profit for the year
(Restated) - - - - 35,894 35,894 - 35,894
Other comprehensive
loss for the year - - (35) - - (35) - (35)
Total comprehensive
income for the year
(Restated) - - (35) - 35,894 35,859 - 35,859
Recognition of
share-based paymentsD2 - - - 168 - 168 - 168
Shares purchasedD1 (160) - - - - (160) - (160)
Dividends paidD3 - - - - (9,685) (9,685) - (9,685)
Dividends declaredD3 - - - - (14,527) (14,527) - (14,527)
Balance at
31 December 2015
(Restated)
90,755 25,289 2,210 233 39,498 157,985 - 157,985
Profit for the year - - - - 37,772 37,772 406 38,178
Other comprehensive
loss for the year - 32,428 6,755 - - 39,183 - 39,183
Total comprehensive
income for the year - 32,428 6,755 - 37,772 76,955 406 77,361
Recognition of
share-based payments D2 - - - 270 - 270 - 270
Shares purchasedD1(1,007) - - - - (1,007) - (1,007)
Dividends paidD3 - - - - (8,974) (8,974) - (8,974)
Dividends declaredD3 - - - - (11,045) (11,045) - (11,045)
Balance at
31 December 201689,748 57,717 8,965 503 57,251 214,184 406 214,590
The notes to the financial statements on pages 7 to 33 form part of and should be read in conjunction with this statement.
4
Annual Financial Statements - Year Ended 31 December 2016
4
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2016
20162015
NOTE$’000$’000
EQUITY
(Restated)
Share capitalD1 89,748 90,755
Revaluation reserveD2 57,717 25,289
Hedging reserveD2 8,965 2,210
Equity-settled employee benefits reserveD2 503 233
Retained earningsD2 57,251 39,498
Equity attributable to Scales Corporation Limited Shareholders 214,184 157,985
Equity attributable to Non-controlling Interests 406 -
TOTAL EQUITY
214,590 157,985
Represented By:
CURRENT ASSETS
Cash and bank balances 6,355 13,832
Trade and other receivablesE1 17,529 14,681
Other financial assetsE2 8,464 5,476
Unharvested agricultural produceC2 18,433 15,493
InventoriesC5 16,365 14,314
Prepayments 3,655 2,966
TOTAL CURRENT ASSETS
70,801 66,762
NON-CURRENT ASSETS
Property, plant and equipmentC1 226,652 168,067
Investments accounted for using the equity methodC3 4,131 4,962
GoodwillC4 16,222 5,319
Other financial assetsE2 11,561 6,192
Computer software
745 929
TOTAL NON-CURRENT ASSETS
259,311 185,469
TOTAL ASSETS
330,112 252,231
CURRENT LIABILITIES
Trade and other payablesE3
22,047 22,276
Dividend declaredD3
11,045 14,527
BorrowingsE4
11,000 -
Current tax liabilitiesB5
5,009 4,427
Other financial liabilitiesE5
3,357 2,229
TOTAL CURRENT LIABILITIES
52,458 43,459
NON-CURRENT LIABILITIES
BorrowingsE4
30,000 30,000
Deferred tax liabilitiesB5
28,187 17,933
Other financial liabilitiesE5
4,877 2,854
TOTAL NON-CURRENT LIABILITIES
63,064 50,787
TOTAL LIABILITIES
115,522 94,246
NET ASSETS
214,590 157,985
For and on behalf of the Board of Directors who authorised the issue of the financial statements on 27 February 2017.
The notes to the financial statements on pages 7 to 33 form part of and should be read in conjunction with this statement.
Jon Mayson, ChairmanAndy Borland, Managing Director
5
Annual Financial Statements - Year Ended 31 December 2016
5
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2016
20162015
$’000$’000
CASH FLOWS FROM OPERATING ACTIVITIES
(Restated)
Cash was provided from:
Receipts from customers
373,223 300,026
Dividends received
525 895
Interest received
167 185
373,915 301,106
Cash was disbursed to:
Payments to suppliers and employees
315,413 238,705
Interest paid
2,533 2,801
Income tax paid
14,627 10,616
332,573 252,122
NET CASH GENERATED BY OPERATING ACTIVITIES
41,342 48,984
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from:
Advances repaid 1,100 1,624
Sale of property, plant and equipment and computer software
216 920
1,316 2,544
Cash was applied to:
Net cash outflow on acquisition of businesses (Note F2) 16,414 -
Purchase of computer software 445 620
Purchase of shares in unlisted companies 53 9
Purchase of property, plant and equipment 19,715 17,210
36,627 17,839
NET CASH USED IN INVESTING ACTIVITIES
(35,311) (15,295)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was provided from:
Proceeds from borrowings
11,000 -
11,000 -
Cash was applied to:
Borrowings repaid
- 11,000
Dividends paid
23,501 9,685
Shares purchased
1,007 160
24,508 20,845
NET CASH USED IN FINANCING ACTIVITIES
(13,508) (20,845)
NET (DECREASE) INCREASE IN NET CASH (7,477) 12,844
Cash and cash equivalents at the beginning of the year
13,832 988
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
6,355 13,832
Represented by:
Cash and bank balances
6,355 13,832
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
6,355 13,832
The notes to the financial statements on pages 7 to 33 form part of and should be read in conjunction with this statement.
6
Annual Financial Statements - Year Ended 31 December 2016
6
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
for the year ended 31 December 2016
20162015
$’000$’000
NET CASH GENERATED BY OPERATING ACTIVITIES
(Restated)
Reconciliation of profit for the year to net cash generated by operating activities:
Profit for the year
38,178 35,894
Non-cash items:
Amortisation
661 1,088
Hedge ineffectiveness on cash flow hedges
1,258 (1,759)
Deferred tax
36 33
Depreciation
11,438 10,243
Share of equity accounted results
(1,612) (2,268)
Share-based payments
270 168
Items classified as investing and financing activities:
Working capital amounts included in acquisition of businesses (1,162) -
Dividends received from equity accounted companies 500 870
Gain on disposal of property, plant and equipment (50) (163)
Changes in net assets and liabilities:
Trade and other receivables
(2,848) (1,383)
Unharvested agricultural produce
(2,940) -
Inventories (2,051) (293)
Prepayments
(689) (288)
Trade and other payables
(229) 4,336
Current tax
582 2,506
NET CASH GENERATED BY OPERATING ACTIVITIES
41,342 48,984
Statement of Cash Flows
For the purpose of the statement of cash flows, cash and cash equivalents include cash and bank balances and investments in
money market instruments.
The following terms are used in the statement of cash flows:
Operating activities are the principal revenue producing activities of the Group and other activities that are not investing or
financing activities.
Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash
equivalents.
Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of
the Group.
7
Annual Financial Statements - Year Ended 31 December 2016
7
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
ABOUT THIS REPORT
IN THIS SECTION
The notes to the financial statements include information which is considered relevant and material to assist the reader
in understanding the financial performance and financial position of the Scales Corporation Limited Group (‘Scales’).
Information is considered relevant and material if:
• the amount is significant because of its size and nature;
• it is important for understanding the results of Scales;
• it helps to explain changes in Scales’ business; or
• it relates to an aspect of Scales’ operations that is important to future performance.
Scales Corporation Limited (the Company) is a for profit entity
domiciled and registered under the Companies Act 1993 in
New Zealand. It is an FMC reporting entity for the purposes
of the Financial Markets Conduct Act 2013. The Group
consists of Scales Corporation Limited, its subsidiaries and joint
venture. The principal activities of the Group are to provide
logistics services, grow apples, export products, provide
insurance services to companies within the Group and operate
storage and processing facilities.
The financial statements have been prepared:
• in accordance with Generally Accepted Accounting Practice
(GAAP), International Financial Reporting Standards (IFRS),
the New Zealand equivalents to International Financial
Reporting Standards (NZ IFRS) and other applicable financial
reporting standards, as appropriate for a Tier 1 for
profit entity;
• in accordance with the requirements of the Financial
Markets Conduct Act 2013;
• in accordance with accounting policies that are consistent
with those applied in the previous year except for the
changes described in note H1;
• on the basis of historical cost, except for certain assets and
financial instruments that are measured at fair values; and
• in New Zealand dollars with all values rounded to the
nearest thousand dollars.
Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
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, regardless of
whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value
of an asset or liability, the Group takes into account the
characteristics of the asset or liability if market participants
would take those characteristics into account when pricing the
asset or liability at the measurement date.
For financial reporting purposes, fair value measurements are
categorised into Level 1, 2 or 3 based on the degree to which
the inputs to the fair value measurements are observable. The
levels are described as:
• Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date:
• Level 2 inputs are inputs, other than quoted prices within
Level 1, that are observable for the asset or liability, either
directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset
or liability.
Key Judgements and Estimates
In the process of applying the Group’s accounting policies and
the application of financial reporting standards, Scales has
made a number of judgements and estimates. The estimates
and underlying assumptions are based on historical experience
and various other factors that are considered to be appropriate
under the circumstances. Actual results may differ from
these estimates.
Judgements and estimates which are considered material to
understanding the performance of Scales are explained in the
following notes:
• Unharvested agricultural produce C2.
• Apple trees in note C1.
• Land and buildings in note C1.
Basis of Consolidation
The Group financial statements incorporate the financial
statements of the Company and its subsidiaries (being entities
controlled by Scales Corporation Limited), and the equity
accounted result, assets and liabilities of the joint venture, as
listed in section F Group Structure.
The financial statements of members of the Group are
prepared for the same reporting period as the parent company,
using consistent accounting policies.
In preparing the Group financial statements, all material
intra-group transactions, balances, income, expenses and cash
flows have been eliminated. Subsidiaries are consolidated from
the date on which control is obtained to the date on which
control is lost.
Other Accounting Policies
Other accounting policies that are relevant to an
understanding of the financial statements are provided
throughout the notes to the financial statements.
Change in accounting policy on adoption of amendments
to accounting standards and resulting restatement
The Group has adopted the amendments to NZ IAS 16
Property, Plant and Equipment and NZ IAS 41 Agriculture
which are effective for periods beginning on 1 January 2016.
The amendments bring bearer plants (apple trees), which are
used to grow produce, into the scope of NZ IAS 16 and out
of the scope of NZ IAS 41 so that they are accounted for in
the same way as property, plant and equipment. The produce
growing on bearer plants continues to be accounted for as a
8
Annual Financial Statements - Year Ended 31 December 2016
8
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
biological asset (unharvested agricultural produce) under NZ
IAS 41. This amendment was applied to the Group’s apple
trees. These financial statements have been retrospectively
restated to reflect this accounting policy change. Note H1
provides further details of the effect of adopting
these amendments.
On adoption of the amendment, the Group elected to
measure its apple trees using the revaluation model.
Adoption of New and Revised Standards and
Interpretations - Standards and Interpretations in Issue
not yet Effective
The Group has reviewed all Standards, Interpretations and
Amendments to existing Standards in issue not yet effective
and, with the exception of NZ IFRS 9 (2014) Financial
Instruments which is effective for the financial year ending
31 December 2018, NZ IFRS 15 Revenue from Contracts with
Customers which is effective for the Financial year ending 31
December 2018 and NZ IFRS 16 Leases which is effective for
the financial year ending 31 December 2019, does not expect
these Standards to have a material effect on the financial
statements of the Group.
NZ IFRS 9 (2014) Financial Instruments establishes the
principles for hedge accounting and impairment of financial
assets. The Group has not yet determined the potential impact
of this Standard.
NZ IFRS 15 Revenue from Contracts with Customers provides
a single, comprehensive principles-based five-step model to
be applied to all contracts with customers. The five steps
in the model are: identify the contract with the customer;
identify the performance obligations in the contract; determine
the transaction price; allocate the transaction price to the
performance obligations in the contract; and, recognise
revenue when (or as) the entity satisfies a performance
obligation. The Group has not yet determined the potential
impact of this Standard.
NZ IFRS 16 Leases eliminates the distinction between operating
and finance leases for lessees and will result in lessees bringing
most leases onto their statement of financial position. The
accounting by lessors will remain largely unchanged. The
Group has not yet determined the potential impact of
this Standard.
9
Annual Financial Statements - Year Ended 31 December 2016
9
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
A. SEGMENT INFORMATION
IN THIS SECTION
This section explains the financial performance of the operating segments of Scales, providing additional information
about individual segments, including:
• total segment revenue and revenue from external customers;
• segment profit before income tax; and
• total segment assets and liabilities
SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker,
being the Managing Director. The Managing Director monitors the operating performance of each segment for the purpose of
making decisions on resource allocation and strategic direction.
Inter-segment pricing is determined on an arm’s length basis. Segment results include items directly attributable to a segment as well
as those that can be allocated on a reasonable basis.
No single external customer’s revenue accounts for 10% or more of the Group’s revenue.
All non-current assets are located in New Zealand.
The Group comprises the following operating segments:
Food Ingredients: processing and marketing of food ingredients such as pet food ingredients and juice concentrate. Meateor Foods
Limited, Meateor Foods Australia Pty Limited and Profruit (2006) Limited.
Horticulture: orchards, fruit packing and marketing. Mr Apple New Zealand Limited, New Zealand Apple Limited, Fern Ridge Produce
Limited, Longview Group Holdings Limited, Longview New Zealand Limited and Longview Packhouse Limited.
Storage & Logistics: cool, cold and bulk liquid storage and logistics services. Liqueo Bulk Storage Limited, Polarcold Stores Limited, Scales
Logistics Limited and Whakatu Coldstores Limited.
Other: Scales Corporation Limited, Geo. H. Scales Limited, Scales Employees Limited, Scales Holdings Limited and Selacs Insurance Limited.
Food
IngredientsHorticulture
Storage &
LogisticsOtherEliminationsTotal
$'000$'000$'000$'000$'000$'000
2016
Total segment revenue 58,038 230,077 108,383 3,525 (26,096) 373,927
Inter-segment revenue - (212) (23,131) (2,753) 26,096 -
Revenue from external customers 58,038 229,865 85,252 772 - 373,927
Gain (loss) on sale of non-current assets 1 70 (20) (1) - 50
Share of profits of entities accounted for
using the equity method 1,612 - - - - 1,612
EBITDA 9,016 45,258 16,182 (3,135) - 67,321
Amortisation expense (2) (278) (359) (22) - (661)
Depreciation expense (501) (5,950) (4,971) (16) - (11,438)
Finance revenue 1 108 15 43 - 167
Finance costs - (13) - (2,520) - (2,533)
Segment profit (loss) before income tax 8,514 39,125 10,867 (5,650) - 52,856
10
Annual Financial Statements - Year Ended 31 December 2016
10
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
Food
IngredientsHorticulture
Storage &
LogisticsOtherEliminationsTotal
$'000$'000$'000$'000$'000$'000
Segment assets 27,327 185,423 109,971 7,391 - 330,112
Segment liabilities 6,325 44,781 20,777 43,639 - 115,522
Segment carrying value of investments
accounted for using the equity method 4,131 - - - - 4,131
Segment acquisition of property, plant and
equipment and other intangible assets 370 12,722 7,060 8 - 20,160
Property, plant and equipment and other
intangible assets included in business
acquisitions (note F2) - 11,722 - - - 11,722
2015
Total segment revenue 48,570 178,126 95,622 3,354 (24,262) 301,410
Inter-segment revenue - - (21,648) (2,614) 24,262 -
Revenue from external customers 48,570 178,126 73,974 740 - 301,410
Gain (loss) on sale of non-current assets - 204 (38) (3) - 163
Share of profits of entities accounted for
using the equity method 1,454 814 - - - 2,268
EBITDA (Restated) 7,663 41,624 16,294 (2,585) - 62,996
Amortisation expense (6) (321) (723) (38) - (1,088)
Depreciation expense (Restated) (494) (5,470) (4,270) (9) - (10,243)
Finance revenue 1 41 15 128 - 185
Finance costs - - - (2,801) - (2,801)
Segment profit (loss) before income tax
(Restated) 7,164 35,874 11,316 (5,305) - 49,049
Segment assets (Restated) 24,964 120,472 96,013 10,782 - 252,231
Segment liabilities (Restated) 6,332 32,669 19,189 36,056 - 94,246
Segment carrying value of investments
accounted for using the equity method 3,019 1,943 - - - 4,962
Segment acquisition of property, plant
and equipment and other intangible
assets (Restated) 220 5,624 9,924 38 - 15,806
20162015
$'000$'000
The total revenues from external customers in New Zealand and other countries are:
New Zealand 107,111 95,965
Asia 83,511 67,907
Europe 76,530 64,704
North America 75,210 45,562
Other 31,565 27,272
373,927 301,410
SEGMENT REPORTING (continued)
11
Annual Financial Statements - Year Ended 31 December 2016
11
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
B. FINANCIAL PERFORMANCE
IN THIS SECTION
This section explains the financial performance of Scales, providing additional information about individual items in the
statement of comprehensive income, including:
• accounting policies, judgements and estimates that are relevant for understanding items recognised in the statement of
comprehensive income; and
• analysis of Scales’ performance for the year by reference to key areas including; revenue, expenses and taxation.
B1. REVENUE
20162015
$'000$'000
Revenue from the sale of goods
269,062 218,566
Revenue from the rendering of services
92,507 81,827
Fees and commission
681 454
Net foreign exchange gain (loss) 7,925 (6,929)
Net hail insurance proceeds
- 4,192
Rental revenue
3,752 3,300
373,927 301,410
Sale of Goods
Revenue from the sale of goods is recognised when the Group has transferred to the buyer the significant risks and rewards of
ownership of the goods, the amount of revenue and costs incurred can be measured reliably, management have effectively ceased
involvement or control over the goods sold and it is probable that the economic benefits associated with the transaction will flow to
the Group.
Rendering of Services
Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. The stage of
completion of the contract at reporting date is assessed based on the value of services performed to date as a percentage of the
total services to be performed.
Fees and Commission
Fees and commission are recognised as revenue when the Group’s right to receive payment becomes unconditional.
Net Hail Insurance Proceeds
Net hail insurance proceeds are recognised as revenue when the Group’s right to receive payment becomes unconditional.
Rental Income
Rental income is recognised on a straight-line basis over the term of the relevant lease.
B2. COST OF SALES, ADMINISTRATION AND OPERATING EXPENSES
Auditor's remuneration:
Audit of the financial statements
Audit of the annual financial statements 141 106
Review of interim financial statements 40 35
Other services
Acquisition due diligence services 89 -
Audit of solvency certificate for Selacs Insurance Limited 6 9
Review of financial statement presentation - 5
Risk management review 17 -
Tax compliance services 4 33
Tax services re employee share scheme 6 69
12
Annual Financial Statements - Year Ended 31 December 2016
12
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
20162015
$'000$'000
Bad debts (recovered) incurred (390) 225
Change in fair value of unharvested agricultural produce (993) -
Change in inventories
(2,051) (293)
Direct expenses
35,299 26,747
Directors' fees
434 360
Donations
14 19
Electricity
8,427 7,315
Employee benefits expense:
Post employment benefits - defined contribution plans
1,235 1,167
Salaries, wages and related benefits
68,777 59,917
Other employee benefits
314 366
Grower payments
58,972 30,827
Insurance
3,369 3,315
Management fees
108 114
Materials and consumables
44,238 34,169
Ocean and air freight
50,911 45,610
Operating lease expenses
14,998 11,894
Packaging
15,913 13,245
Repairs and maintenance
7,357 7,374
307,235 242,628
Disclosed as:
Cost of sales
257,038 194,142
Administration and operating expenses
50,197 48,486
307,235 242,628
Employee Benefits
An accrual is made for benefits due to employees in respect of wages and salaries, annual leave and long service leave when it is
probable that settlement will be required and they are capable of being measured reliably. Accruals are measured at their nominal
values using the remuneration rate expected to apply at the time of settlement.
Contributions to defined contribution plans are recognised as an expense when employees have rendered service entitling them to
the contributions.
The costs relating to shares issued in accordance with the Senior Executive Share Scheme are explained in note D2.
Leased Assets
Operating lease payments, where the lessors effectively retain substantially all the risks and benefits of ownership of the leased
items, are recognised as an expense on a straight-line basis over the lease term.
B3. OTHER INCOME AND LOSSES
Dividends
25 24
Gain on disposal of property, plant and equipment
50 163
Hedge ineffectiveness on cash flow hedges
(1,258) 1,759
Insurance proceeds 200 -
(983) 1,946
Disclosed as:
Other income 275 1,946
Other expenses (1,258) -
(983) 1,946
B2. COST OF SALES, ADMINISTRATION AND OPERATING EXPENSES (continued)
13
Annual Financial Statements - Year Ended 31 December 2016
13
B4. FINANCE COST
20162015
$'000$'000
Interest on loans 2,346 2,588
Other interest 41 36
Bank facility fees 146 177
2,533 2,801
Finance costs consist of interest and other costs incurred in connection with the borrowing of funds. Interest expense is accrued on a
time basis using the effective interest method.
B5. TAXATION
Income Tax Recognised in Profit or Loss
Income tax expense comprises:
Current tax expense 14,648 13,252
Adjustments recognised in the current year in relation to the current tax of prior years (6) (130)
Deferred tax expense relating to the origination and reversal of temporary differences 36 33
Total income tax expense recognised in profit or loss 14,678 13,155
The prima facie income tax expense on pre tax accounting profit reconciles to the income tax expense in the financial statements
as follows:
Profit before income tax expense 52,856 49,049
Income tax expense calculated at 28%
14,799 13,733
Non-assessable income
(448) (747)
Non-deductible expenses
321 158
Over provision of income tax in previous year - current tax (6) (130)
Under provision of income tax in previous year - deferred tax 12 141
14,678 13,155
The tax rate used in the above reconciliation is the corporate tax rate of 28% payable by New Zealand companies under
New Zealand tax law.
Current Tax Liability
Balance at beginning of the year
4,427 1,921
Arising on acquisition of businesses 567 -
Current taxation expense 14,642 13,122
Taxation paid
(14,627) (10,616)
Balance at end of the year
5,009 4,427
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
14
Annual Financial Statements - Year Ended 31 December 2016
14
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
Opening
balance
Charged to
profit or loss
Charged to other
comprehensive
income
Acquisition
of Businesses
Closing
balance
$'000$'000$'000$'000$'000
Deferred Tax Liability
Taxable and deductible temporary differences
arise from the following:
31 December 2016
Deferred tax liabilities (assets):
Trade and other receivables (81) 76 - - (5)
Unharvested agricultural produce 4,338 440 - 105 4,883
Computer software 11 - - - 11
Property, plant and equipment 13,334 (509) 6,356 1,142 20,323
Trade and other payables (529) 29 - (12) (512)
Other financial assets and liabilities 860 - 2,627 - 3,487
Net deferred tax liability17,933368,9831,23528,187
31 December 2015
Deferred tax liabilities (assets):
Trade and other receivables 2 (83) - - (81)
Unharvested agricultural produce (Restated) 3,772 566 - - 4,338
Computer software 11 - - - 11
Property, plant and equipment (Restated) 13,842 (508) - - 13,334
Trade and other payables (587) 58 - - (529)
Other financial assets and liabilities 833 - 27 - 860
Net deferred tax liability17,8733327 - 17,933
Current tax is the taxation expected to be paid to Taxation Authorities in respect of the current year.
Deferred taxation is recognised in respect of temporary differences between the tax bases of assets and liabilities and their carrying
amounts in the Financial Statements.
Current and deferred tax is calculated on the basis of the laws enacted or substantively enacted at balance date.
Income Tax
Current and deferred tax are recognised in profit or loss, except when the tax relates to items charged or credited to other
comprehensive income, in which case the tax is also recognised in other comprehensive income.
B6. FOREIGN CURRENCY TRANSACTIONS
In preparing the financial statements of the individual entities, the transactions in currencies other than New Zealand dollars are
recorded at the rates of exchange prevailing at the dates of the transaction. At the end of each reporting period financial assets
and liabilities denominated in foreign currencies are retranslated into New Zealand dollars at the rates prevailing at the end of the
reporting period.
Exchange differences are recognised in profit or loss in the period in which they arise.
B5. TAXATION (continued)
15
Annual Financial Statements - Year Ended 31 December 2016
15
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
C. KEY ASSETS
IN THIS SECTION
This section shows the key assets Scales uses to generate operating revenues. There is information about:
• property, plant and equipment;
• unharvested agricultural produce;
• investments accounted for using the equity method;
• goodwill; and
• inventories
C1. PROPERTY, PLANT AND EQUIPMENT
Land and
Buildings at
fair value
Apple Trees
at fair value
Plant and
Equipment
at cost
Office
Equipment &
Motor Vehicles
at cost
Capital
Work in
Progress
at costTotal
$’000$’000$’000$’000$’000$’000
(Restated)(Restated)
Gross carrying amount
Balance 1 January 2015 103,833 17,897 88,359 15,912 6,606 232,607
Additions 992 613 14,478 1,519 (2,414) 15,188
Disposals (293) - (2,082) (542) (40) (2,957)
Balance 31 December 2015 104,532 18,510 100,755 16,889 4,152 244,838
Additions 6,904 2,909 6,086 3,056 761 19,716
Acquisition of businesses 8,866 200 2,563 93 - 11,722
Disposals - - (543) (756) - (1,299)
Revaluation 20,368 9,520 - - - 29,888
Balance 31 December 2016 140,670 31,139 108,861 19,282 4,913 304,865
Accumulated depreciation and
impairment
Balance 1 January 2015 2,217 - 55,368 11,142 - 68,727
Depreciation expense 2,204 1,193 5,293 1,553 - 10,243
Disposals (19) - (1,787) (393) - (2,199)
Balance 31 December 2015 4,402 1,193 58,874 12,302 - 76,771
Depreciation expense 2,175 1,311 6,128 1,824 - 11,438
Disposals - - (432) (668) - (1,100)
Revaluation (6,577) (2,319) - - - (8,896)
Balance 31 December 2016 - 185 64,570 13,458 - 78,213
Net book value
As at 31 December 2015 100,130 17,317 41,881 4,587 4,152 168,067
As at 31 December 2016 140,670 30,954 44,291 5,824 4,913 226,652
16
Annual Financial Statements - Year Ended 31 December 2016
16
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
Accounting Policy
Land, buildings and apple trees on owned orchards are included in the statement of financial position at their revalued amounts,
being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated
impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from
those that would be determined using fair values at the end of the reporting period.
Any revaluation increase arising on the revaluation of such land, buildings and apple trees on owned orchards is recognised in other
comprehensive income and accumulated as a separate component of equity in the revaluation reserve, except to the extent that it
reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to
profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such
land, buildings and apple trees is charged to profit or loss to the extent that it exceeds the balance, if any, held in the revaluation
reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings and apple trees is charged to profit or loss. On the subsequent sale or retirement of revalued
property or apple trees, the attributable revaluation surplus remaining in the revaluation reserve is transferred directly to retained
earnings. No transfer is made from the revaluation reserve to retained earnings except when an asset is derecognised.
Office equipment, motor vehicles, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the item.
Depreciation is provided on property, plant and equipment, including buildings and apple trees but excluding land and capital work
in progress. Depreciation is charged so as to write off the cost or valuation of assets, other than land and capital work in progress,
over their estimated useful lives, using either the straight-line or the diminishing value method. The estimated useful lives, residual
values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a
prospective basis. The following estimated useful lives are used in the calculation of depreciation:
Apple trees 30 years
Buildings 10 to 50 years
Office Equipment and Motor Vehicles 2 to 20 years
Plant and Equipment 2 to 25 years
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference
between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss.
Land and Buildings carried at Fair Value
Land and buildings shown at valuation were valued at fair value as at 31 December 2016 by independent registered valuers Added
Valuation Limited ($77,730,000), Logan Stone Limited ($58,314,000) and Telfer Young Limited ($3,865,000). The valuations, which
conform to the New Zealand Property Institute Practice Standard 3 - Valuations for Financial Reporting Purposes, were arrived at by
reference to market evidence of transaction prices for similar properties.
The fair value of land and buildings is calculated on the basis of market value. Market value is determined applying income
capitalisation and comparative sales calculations which are benchmarked against depreciated replacement cost calculations. The
valuations include adjustments to observable data for similar properties to take into account property-specific attributes.
The significant unobservable inputs, based on regional averages, for the land and buildings (mainly coldstores and packhouses) are
potential market comparative rentals $10 - $220 per square metre and capitalisation rates of 8% - 18%. The higher the rental rates
the higher the fair value. The higher the capitalisation rates the lower the fair value. Significant changes in either of these inputs
would result in significant changes to the fair value measurement.
The Group’s land and buildings are classified as Level 3 in the fair value hierarchy.
The carrying amount of land and buildings had it been recognised under the cost model is $83,869,000 (31 December 2015
$70,274,000).
Apple Trees carried at Fair Value
The Group’s apple orchards, being the apple trees other than the existing crop on the trees, were valued at fair value by Boyd Gross
B.Agr (Rural Val), Dip Bus Std, FNZIV, FPINZ of Logan Stone Limited as at 31 December 2016. The market valuations completed by
Boyd Gross were based on a DCF analysis of forecast income streams and costs. This was benchmarked against a comparison of sales
of other orchards adjusted to reflect the location, plantings, age and varieties of trees and productive capabilities of the orchards.
The significant unobservable inputs, based on district averages, for the apple trees valuations included in the valuer’s report are the:
20162015
Production levels (gross tray carton equivalent (tce)) per hectare3,624 - 5,7092,500 - 5,265
Orchard gate returns per tce$25.31 - $38.90$21.00 - $42.20
Orchard costs per tce$17.00 - $28.60$15.50 - $21.00
Discount rate 18.0% - 21.40%19.8% - 23.8%
C1. PROPERTY, PLANT AND EQUIPMENT (continued)
17
Annual Financial Statements - Year Ended 31 December 2016
17
The higher the production levels and orchard gate return the higher the fair value. The higher the orchard costs and discount rate
the lower the fair value. Significant changes in any of these inputs would result in significant changes to the fair value measurement.
The Group’s apple trees are classified as level 3 in the fair value hierarchy.
The apple trees, on owned and leased orchards, have the following planting profile:
Total Hectares Planted
20162015
Premium varieties:
NZ Queen213194
Pink Lady121107
Red sports (Fuji and Royal Gala)234204
Other premium5943
Traditional varieties:
Braeburn171172
Royal Gala186173
Other traditional160149
1,1441,042
The exported volume from Mr Apple’s planted apple orchard was 3,545,000 TCE’s (2015: 3,147,000 TCE’s).
Risk Management Strategy:
The Group is exposed to financial risks arising from changes in climatic conditions, market prices and the value of the New Zealand
dollar. The Group mitigates these risks by installing hail and frost protection on orchards which have shown to be more susceptible to
these risks, obtaining hail insurance cover, utilising foreign currency derivative instruments and building close working relationships
with key customers.
C2. UNHARVESTED AGRICULTURAL PRODUCE
20162015
$'000$'000
Balance at beginning of the year 15,493 13,471
Decrease due to Harvest (15,493) (13,471)
Acquisition of businesses 375 -
Development expenditure 17,065 15,493
Fair value adjustment 993 -
Balance at end of the year18,43315,493
The assessment of the value of unharvested agricultural produce was undertaken by management, using a discounted cash flow
model, and is calculated as the fair value less estimated harvest and post-harvest costs of the unharvested crop on the trees at the
reporting date. The risk adjusting discount rate represents an allowance for adverse events that may affect crop, harvest and/or
market conditions. This calculation is also benchmarked against orchard costs incurred during the current growing cycle.
The significant unobservable inputs included in the model are the:
Production levels (tonnes per hectare per annum)50 - 10050 - 100
Orchard gate returns per tce$20 to $40 $20 to $42
Risk adjusting discount rates 55% to 73%53% to 72%
The higher the yield per hectare and the higher the orchard gate returns per tce, the higher the fair value.
The higher the risk adjusting discount rate, the lower the fair value.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
C1. PROPERTY, PLANT AND EQUIPMENT (continued)
18
Annual Financial Statements - Year Ended 31 December 2016
18
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
20162015
Associate
Company
Joint
VentureTotal
Associate
Company
Joint
VentureTotal
$'000$'000$'000$'000$'000$'000
Share of profit before taxation - 2,2412,2411,1332,0353,168
Share of income tax - (629) (629) (319) (581) (900)
Share of Net Profit for the Year and
Total Comprehensive Income - 1,6121,6128141,4542,268
Carrying value at beginning of the year1,9443,0194,9632,0001,5643,564
Disposal of equity interest in Fern Ridge
Produce Limited (1,944) - (1,944) - - -
Dividend paid - (500) (500) (870) - (870)
INVESTMENT IN EQUITY
ACCOUNTED ENTITIES - 4,1314,1311,9443,0184,962
On 11 January 2016 the Group acquired a further 22.88% of the share capital of Fern Ridge Produce Limited and it is now a
subsidiary company. Details of this acquisition are included in Note F2.
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets
of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using
the equity method of accounting. Under the equity method, an investment in an associate or joint venture is initially recognised in
the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss
and other comprehensive income of the associate or joint venture. Dividends or distributions received from an associate or joint
venture reduce the carrying amount of the investment in that associate or joint venture in the Group financial statements. When
the Group’s share of losses of an associate or joint venture exceeds the Group’s interest in that associate or joint venture, the Group
discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf of the associate or joint venture.
An investment in an associate or joint venture is accounted for using the equity method from the date on which the investee
becomes an associate or a joint venture until the date it ceases to be an associate or joint venture. On acquisition of the investment
in an associate or joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the
identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying value of the
investment. The requirements of NZ IAS 36 are applied to determine whether it is necessary to recognise any impairment loss.
C4. GOODWILL
20162015
$'000$'000
Gross Carrying Amount
Balance at beginning of the year5,3195,319
Arising on acquisition of:
Fern Ridge Produce Limited5,702 -
Longview Group Holdings Limited5,201 -
Balance at end of the year16,2225,319
Goodwill arising on the acquisition of a business is carried at cost as established at the date of acquisition of the business less
accumulated impairment losses, if any.
C3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
19
Annual Financial Statements - Year Ended 31 December 2016
19
C4. GOODWILL (continued)
For the purpose of impairment testing, goodwill has been allocated to the cash-generating units listed below which represent the
lowest level at which goodwill is monitored.
20162015
$'000$'000
Storage & Logistics1,9891,989
Horticulture14,2333,330
16,2225,319
As at 31 December 2016, the Directors have determined, based on discounted cash flow and value in use calculations, that there
is no impairment of goodwill associated with Storage & Logistics and Horticulture. The Directors consider that any reasonably
possible changes in the key assumptions would not cause the carrying amount of any of the cash-generating units to exceed their
recoverable amount.
C5 . INVENTORIES
Finished goods
12,489 11,512
Other
3,876 2,802
16,365 14,314
Inventories are stated at the lower of cost and net realisable value. Cost means the actual cost of the inventory and in determining
cost the first in first out basis of stock movement is followed, with due allowance having been made for obsolescence. Net realisable
value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make
the sale.
C6. IMPAIRMENT OF ASSETS
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate
the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of
the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in
profit or loss and is not reversed in subsequent periods.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future pre-
tax cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount
of the asset (or cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or
loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
20
Annual Financial Statements - Year Ended 31 December 2016
20
D. CAPITAL FUNDING
IN THIS SECTION
This section explains how Scales manages its capital structure and how dividends are returned to shareholders. In this
section there is information about:
• equity:
• dividends paid; and
• earnings per share.
Capital Management
The Group’s capital includes share capital, reserves and retained earnings. The Group’s policy is to maintain a strong capital base so
as to maintain investor, creditor and customer confidence and to sustain the future development of the business. The impact of the
level of capital on shareholders’ return is also recognised and the Group recognises the need to maintain a balance between the
higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position.
D1. SHARE CAPITAL
Issued and paid up capital consists of 139,779,006 fully paid ordinary shares (2015: 139,779,006) less treasury stock of 1,846,927
shares (2015: 1,532,863 shares) (refer to note D2). All shares rank equally in all respects.
Basic and diluted earnings per share has been calculated on the basis of 139,779,006 (2015: 139,779,006 shares).
Shares purchased on market under the senior executive share scheme (note D2) are treated as treasury stock until vesting to
the employee.
The Available Subscribed Capital of $34,870,000 (2015: $35,877,000) represents the amount of the shareholders’ equity that is
available to be returned to shareholders on a tax-free basis.
In accordance with the Companies Act 1993 the Company does not have a limited amount of authorised capital and issued shares
do not have a par value.
D2. RESERVES
Revaluation Reserve
The revaluation reserve arises on the revaluation of land, buildings and apple trees, net of the related deferred tax.
Hedging Reserve
The hedging reserve represents the unrealised gains and losses on interest rate and foreign currency contracts taken out to manage
the Group interest rate and foreign currency risks, net of the related deferred tax.
Equity-settled Employee Benefits Reserve
The Senior Executive Share Scheme involves the Company making available interest-free loans to selected senior executives to
acquire shares in the Company. The senior executive will not gain any benefit with respect to the shares purchased under the
Scheme unless they remain in employment with the Group for a period of three years from the date of acquisition of those shares.
The shares are held by a custodian during the restrictive period and are then transferred to the senior executive. All net dividends or
distributions received in respect of the shares must be applied to repayment of the interest-free loan.
The 1,436,700 shares acquired during 2014 have an exercise price of $1.60 and vest on 24 July 2017; the 96,163 shares acquired
during 2015 have an exercise price of $1.66 and vest on 24 July 2017; and the 314,064 shares acquired during 2016 have an
exercise price of $1.67 and vest on 20 April or 24 May 2019. The price that the executives pay for each share is the issue price at
grant date, reduced by any dividends that are applied to the loans. No shares vested or were forfeited or expired during the year.
The shares issued vest over three years. Each instrument issued in the current year was estimated to have a fair value of $1.65 (2015:
32.7 cents) at the grant date. The estimated value of the share options was determined using the Black-Scholes pricing calculator
and is being amortised over the restrictive period. This cost is expensed with the corresponding credit included in the equity-settled
employee benefits reserve. The inputs into the option pricing calculator are the acquisition date share price $3.20 (2015: $1.66),
expected share price volatility 24% (2015: 22%), option life 3 years and risk-free interest rate 2.12% (2015: 3.89%).
Retained Earnings
Retained earnings represents the profits retained in the business.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
21
Annual Financial Statements - Year Ended 31 December 2016
21
D3. DIVIDENDS
20162015
$'000$'000
Final dividend - 6.50 (2015: 7.00) cents per share 8,974 9,685
Interim dividend - 8.00 (2015: 6.50) cents per share 11,045 8,993
Special dividend 4.00 cents per share - 5,534
20,019 24,212
The 2016 interim dividend was declared on 12 December 2016 and paid on 18 January 2017.
D4. IMPUTATION CREDIT ACCOUNT
Balance at end of the year 17,408 10,898
The imputation credit account balance represents the net amount available at the reporting date that can be attached to future
dividends declared.
The Scales Corporation Limited consolidated tax group for income tax includes Scales Corporation Limited and all New Zealand
registered subsidiary companies other than Scales Employees Limited.
D5. EARNINGS PER SHARE
Profit attributable to equity holders of the Company - used in the calculation of earnings
per share 37,772 35,894
Basic and diluted earnings per share
Weighted average number of ordinary shares outstanding 139,779,006139,779,006
Basic and diluted earnings per share (cents)27.0 25.7
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
22
Annual Financial Statements - Year Ended 31 December 2016
22
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
E. FINANCIAL ASSETS AND LIABILITIES
IN THIS SECTION
This section explains the financial assets and liabilities of Scales, the related risks and how Scales manages these risks. In
this section of the notes there is information on:
• the accounting policies, judgements and estimates relating to financial assets and liabilities; and
• the financial instruments used to manage risk.
ACCOUNTING POLICIES
Financial Assets
Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL) and
‘measured at amortised cost’.
The classification depends on the business model for managing the financial asset and the cash flow characteristics of the financial
asset and is determined at the time of initial recognition or when a change in the business model occurs.
Financial assets at fair value through profit or loss
Financial assets are classified at fair value through profit or loss if they are not measured at cost or amortised cost. Gains and losses
on a financial asset designated in this category and not part of a hedging relationship are recognised in profit or loss.
Financial assets measured at amortised cost
The Group’s financial assets held in order to collect contractual cash flows that are solely payments of principal and interest on the
principal outstanding are measured at amortised cost. Cash and cash equivalents and trade receivables are classified in this category.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial
assets are considered to be impaired when there is objective evidence that, as a result of events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the asset have been affected.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective
interest rate.
Financial Liabilities Measured at Amortised Cost
The Group’s financial liabilities include trade and other payables and borrowings. These financial liabilities are initially recognised
at fair value plus any directly attributable costs. Subsequent to initial recognition, they are measured at amortised cost using the
effective interest method.
Derivative Financial Instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to
their fair value with reference to observable market data at the end of each reporting period. The resulting gain or loss is recognised
in profit or loss immediately unless the derivative is designated as an effective hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as cash
flow hedges.
A derivative is presented as a non-current asset or a non-current liability where the cash flow will occur after 12 months and it is not
expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.
Hedge Accounting
At the inception of a hedge relationship, the Group documents the relationship between the hedging instrument and the hedged
item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging
relationship is highly effective in offsetting changes in cash flows of the hedged item, attributable to the hedged risk.
Cash Flow Hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
other comprehensive income and accumulated as a separate component of equity in the hedging reserve. The gain or loss relating
to the ineffective portion is recognised immediately in profit or loss, and is included in ‘other income’ or ‘other losses’.
Amounts recognised in the hedging reserve are reclassified from equity to profit or loss in the periods when the hedged item is
recognised in profit or loss, in the same line as the recognised hedged item. Hedge accounting is discontinued when the Group
revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. Any cumulative gain or loss deferred in the hedging reserve at that time remains in equity and is recognised when
the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was deferred in the hedging reserve is recognised immediately in profit or loss.
23
Annual Financial Statements - Year Ended 31 December 2016
23
E1. TRADE AND OTHER RECEIVABLES
20162015
$'000$'000
Trade receivables 14,574 11,822
Other receivables 593 603
Owing by entities accounted for using the equity method 349 531
Goods and services tax 2,013 1,725
17,529 14,681
Credit Risk Management
The Group activities expose it to credit risk which refers to the risk that a counterparty will default on its contractual obligations
resulting in financial loss to the Group. Financial instruments which potentially subject the Group to credit risk principally consist of
cash and cash equivalents, trade and other receivables and advances as disclosed in note E2. The Group performs credit evaluations
on trade customers, obtains trade credit insurance as appropriate but generally does not require collateral. The Group continuously
monitors the credit quality of its major receivables and does not anticipate non-performance of those customers. Cash and cash
equivalents are placed with high credit quality financial institutions.
There is a significant concentration of credit risk with five customers who represent 35.63% (2015 five customers who represent
22.01%) of trade and other receivables.
The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to credit risk.
Included in Trade Receivables are debtors which are past due at balance date, as payment was not received within one month,
and for which no provision has been made as there has not been a significant change in credit quality and the amounts are still
considered recoverable. No collateral is held over these balances although trade credit insurance cover is obtained in respect of some
specific receivables. Interest is not charged on overdue debtors. The ageing of these past due trade receivables is:
One month 2,363 2,191
Two months 639 654
More than two months 2,139 636
5,141 3,481
E2. OTHER FINANCIAL ASSETS
Current:
At fair value:
Foreign currency derivative instruments 8,409 4,540
At amortised cost:
Advances to entities accounted for using the equity method - 530
Advances to other entities 55 406
8,464 5,476
Non-current:
At fair value:
Foreign currency derivative instruments 11,231 5,705
Shares in unlisted companies 206 144
At amortised cost:
Employee loans 124 343
11,561 6,192
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
24
Annual Financial Statements - Year Ended 31 December 2016
24
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
E3. TRADE AND OTHER PAYABLES
20162015
$'000$'000
Trade payables 12,737 12,981
Accruals 4,882 5,665
Employee entitlements 4,428 3,630
22,047 22,276
E4. BORROWINGS
Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are measured
at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit or
loss over the period of the borrowing using the effective interest method.
The Group signed Multi-Option Facility Agreements with Rabobank and Westpac New Zealand Limited on 22 March 2013. The total
facility is $102,000,000. At 31 December 2016 the undrawn amount under these facilities, after allowing $2,000,000 to cover the
bank overdraft facilities, was $59,000,000 (2015: $70,000,000). The floating interest rates are 2.91% to 3.25% (2015: 4.07%) and
the term borrowing facility roll-over date is 30 June 2019. The bank facilities are secured by a registered first and exclusive general
security over the company and all subsidiaries (other than Selacs Insurance Limited, Scales Employees Limited and Meateor Foods
Australia Pty Limited) and mortgages over all Group land and buildings.
The Multi-Option Facility Agreements with the Group’s banks includes the requirement that at all times the Tangible Net Worth of
the Group, being Tangible Assets less Total Liabilities (excluding deferred tax liabilities), be not less than $100,000,000. The Group
has complied with this requirement since the facility was established. The Group policies in respect of capital management and
allocation are reviewed regularly by the Board of Directors. There have been no material changes to the Group’s management of
capital during the year.
E5. OTHER FINANCIAL LIABILITIES
Current financial liabilities at fair value:
Foreign currency derivative instruments 2,047 2,145
Interest rate swap contracts and forward rate agreements 371 84
Fern Ridge Produce Limited put option (Note F2) 939 -
3,357 2,229
Non-current financial liabilities at fair value:
Foreign currency derivative instruments 3,111 1,799
Interest rate swap contracts and forward rate agreements 826 1,055
Fern Ridge Produce Limited put option (Note F2) 940 -
4,877 2,854
E6. INTEREST RATE RISK
Interest Rate Risk Management
The Group is exposed to interest rate risk as it borrows funds at floating interest rates. Management monitors the level of interest
rates on an ongoing basis and may use interest rate swaps and forward rate agreements to manage interest rate risk.
Interest Rate Swap Contracts and Forward Rate Agreements
Under interest rate swap contracts and forward rate agreements, the Group agrees to exchange the difference between fixed and
floating rate interest amounts calculated on agreed notional principal amounts. Such contracts, some of which commence in future
reporting years, enable the Group to mitigate the risk of changing interest rates on the cash flow exposures on the issued floating
rate debt. The fair value of these contracts at the reporting date is determined by discounting the future cash flows using the
forward interest rate curves at reporting date and the credit risk inherent in the contracts. The average contracted fixed interest rate
25
Annual Financial Statements - Year Ended 31 December 2016
25
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
is based on the notional principal amount at balance date.
Details of interest rate swap contracts and forward rate agreements for the Group are:
Maturity Date
Fixed Interest
Rate
Notional Principal
AmountFair Value
201620152016201520162015
%%$’000$’000$’000$’000
Interest rate swap contracts:
Within one year 4.97 - 10,000 - (280) -
Two to five years 4.02 4.14 30,000 30,000 (826) (856)
After five years - 4.62 - 10,000 - (159)
Forward rate agreements:
Within one year 3.55 3.65 25,000 25,000 (91) (84)
Two to five years - 3.55 - 25,000 - (40)
(1,197) (1,139)
These interest rate swap contracts and forward rate agreements, exchanging floating rate interest amounts for fixed rate interest
amounts, are designated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting from floating interest
rates on borrowings. The interest rate swap and forward rate agreement payments, and the interest payments on the loans occur
simultaneously, and the amount deferred in equity is recognised in profit or loss over the period that the floating rate interest
payments on debt impact profit or loss.
The Group’s interest rate swap contracts and forward rate agreements are classified as Level 2 in the fair value hierarchy.
At 31 December 2016 it is estimated that a general increase of one percent in interest rates would decrease the Group’s profit after
income tax and equity by approximately $451,000 (2015: $417,000).
E7. FOREIGN CURRENCY RISK
Foreign Currency Risk Management
Foreign currency risk is the risk that the value of the Group’s assets and liabilities or revenues and expenses will fluctuate due to
changes in foreign exchange rates. The Group is exposed to currency risk as a result of normal trading transactions denominated in
foreign currencies. The currencies in which the Group primarily trades are the Australian dollar, Euro, Canadian dollar, Great Britain
pound and United States dollar, with the largest exposure being to the United States dollar.
Currency risk is managed by the natural hedge of foreign currency receivables and payables and the use of foreign currency
derivative financial instruments. The fair value of foreign currency derivative financial instruments at the reporting date is determined
on a discounted cash flow basis whereby future cash flows are estimated based on forward exchange rates and contract forward
rates, discounted at a rate that reflects the credit risk of various counterparties.
The Group’s forward foreign exchange contracts and foreign exchange options are classified as Level 2 in the fair value hierarchy.
Details of foreign currency instruments at balance date for the Group are:
20162015
Contract ValueFair ValueContract ValueFair Value
$’000$’000$’000$’000
Sale commitments forward foreign exchange contracts 165,524 7,250 152,613 1,955
Sale commitments foreign exchange options 128,150 7,232 146,158 4,346
These foreign currency instruments are designated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting
from movements in foreign currency exchange rates on anticipated future transactions. It is anticipated that the sales will take place
during the 2017 to 2020 financial years at which stage the amount deferred in equity will be released into profit or loss.
It is estimated that a general increase of five cents in the value of the New Zealand dollar against other foreign currencies would
have decreased the Group’s profit after income tax by $9,939,000 (2015: $10,159,000). A decrease in exchange rates would have
the opposite impact on profit.
E6. INTEREST RATE RISK (continued)
26
Annual Financial Statements - Year Ended 31 December 2016
26
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
E8. CATEGORIES OF FINANCIAL INSTRUMENTS
20162015
$'000$'000
Financial Assets:
Fair value through profit or loss 206 144
Derivative instruments in designated hedge accounting relationships 19,640 10,245
Amortised cost 22,050 28,068
41,896 38,457
Financial Liabilities:
Amortised cost 74,092 66,802
Fair value through profit or loss 1,879 -
Derivative instruments in designated hedge accounting relationships 6,355 5,084
82,326 71,886
E9. MATURITY PROFILE OF FINANCIAL LIABILITIES
Liquidity Risk Management
The Group manages liquidity risk by maintaining adequate reserves and banking facilities,by continuously monitoring forecast and
actual cash flows and matching the maturity profiles of financial assets and liabilities.
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up
based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.
The table includes both interest and principal cash flows.
Within Three
Months
Four Months
to One Year
One to Five
YearsTotal
$'000$'000$'000$'000
2016
Trade and other payables 22,047 - - 22,047
Dividend declared 11,045 - - 11,045
Fern Ridge Produce Limited put options 939 - 940 1,879
Borrowings 324 11,812 31,462 43,598
Interest rate swaps and forward rate agreements 113 315 684 1,112
34,468 12,127 33,086 79,681
2015
Trade and other payables 22,276 - - 22,276
Dividend declared 14,527 - - 14,527
Borrowings 305 916 30,611 31,832
Interest rate swaps and forward rate agreements 92 276 1,035 1,403
37,200 1,192 31,646 70,038
27
Annual Financial Statements - Year Ended 31 December 2016
27
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
F. GROUP STRUCTURE
IN THIS SECTION
This section provides information to help readers understand the Scales Group structure and how it affects the financial
position and performance of the Group. In this section there is information about:
• subsidiary companies;
• the acquisition of further shares in Fern Ridge Produce Limited;
• the acquisition of shares in Longview Group Holdings Limited; and
• investments in associate company and joint venture.
F1. SUBSIDIARY COMPANIES
Subsidiary Companies:Principal Activity
Country of
Incorporation
Holding
2016 2015Balance Date
Meateor Foods LimitedTrading company
New Zealand100%100%
31 December
Meateor Foods Australia Pty LimitedTrading company
Australia100%100%
31 December
Mr Apple New Zealand LimitedTrading company
New Zealand100%100%
31 December
New Zealand Apple LimitedTrading company
New Zealand100%100%
31 December
Fern Ridge Produce Limited (Note F2)Trading companyNew Zealand72.88%0%31 December
Longview Group Holdings Limited
(Note F2)
Trading companyNew Zealand100%0%31 December
Longview New Zealand Limited
(Note F2)
Trading companyNew Zealand100%0%31 December
Longview Packhouse Limited (Note F2)Trading companyNew Zealand100%0%31 December
Liqueo Bulk Storage LimitedTrading company
New Zealand100%100%
31 December
Polarcold Stores LimitedColdstore operator
New Zealand100%100%
31 December
Scales Logistics LimitedFreight consolidator
New Zealand100%100%
31 December
Whakatu Coldstores LimitedColdstore operator
New Zealand100%100%
31 December
Geo. H. Scales LimitedNon trading company
New Zealand100%100%
31 December
Scales Employees LimitedCustodial company
New Zealand100%100%
31 December
Scales Holdings LimitedHolding company
New Zealand100%100%
31 December
Selacs Insurance LimitedInsurance company
New Zealand100%100%
31 December
Subsidiary companies are controlled by the Company. Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the company loses
control of the subsidiary.
28
Annual Financial Statements - Year Ended 31 December 2016
28
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
F2. ACQUISITION OF SUBSIDIARIES
Fern Ridge Produce Limited:
On 11 January 2016 the Group acquired a further 25% of the share capital of associate entity, Fern Ridge Produce Limited (Fern
Ridge), increasing its shareholding to 75%. As part of the transaction, 2.12% of the shares were then sold to an employee of Fern
Ridge and Scales entered into agreements with the remaining shareholders of Fern Ridge whereby those shareholders have an option
to ‘Put’ their shares to Scales at a value based on a multiple of the Fern Ridge profits but with a minimum value equivalent to that
paid to the selling shareholders. The obligations to acquire the shares under the Put options are included in other financial liabilities.
Details of the acquisition are as follows:
Fair Value on
Acquisition
Assets and liabilities acquired:$'000
Assets
Cash and bank balances1,466
Trade and other receivables1,126
Plant and equipment20
Other intangible assets32
Liabilities
Trade and other payables (2,463)
Current taxation (180)
Net assets acquired1
Less fair value of non-controlling interest (1,880)
Goodwill on acquisition5,702
Less fair value of existing interest in Fern Ridge (1,943)
Consideration paid in cash1,880
Less: Cash and bank balances acquired (1,466)
Net cash outflow on acquisition414
Goodwill arising on acquisition
Goodwill arose on the acquisition of Fern Ridge because the cost of acquisition included a control premium paid. In addition, the
goodwill reflects the expected synergies and future market benefits expected to be obtained. These benefits are not recognised
separately from goodwill as the expected future economic benefits arising cannot be reliably measured and they do not meet the
definition of identifiable intangible assets.
The additional interest in Fern Ridge was acquired as it is a profitable horticultural trading business which the Group believes fits
strategically with its Horticulture operations.
Impact of the acquisition on the results of the Group
Fern Ridge contributed $1,498,000 to the Group profit after taxation for the year. Group revenue for the year includes $35,291,000
in respect of Fern Ridge.
29
Annual Financial Statements - Year Ended 31 December 2016
29
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
F2. ACQUISITION OF SUBSIDIARIES (continued)
Longview Group Holdings Limited Group:
On 2 November 2016 the Group acquired 100% of the shares in Longview Group Holdings Limited (Longview). Longview and its
wholly owned subsidiaries is a Hawke’s Bay grower, packer and marketer of apples. Longview leases 76 hectares of orchard and bare
land under long term leases.
Details of the acquisition are as follows:
Carrying Value
Fair Value
Adjustment
Fair Value on
Acquisition
$’000$’000$’000
Assets and liabilities acquired:
Assets
Trade and other receivables 818 - 818
Unharvested agricultural produce 375 - 375
Inventories 259 - 259
Prepayments 263 - 263
Property, plant and equipment 6,922 4,748 11,670
Other financial assets 9 - 9
Liabilities
Trade and other payables (729) - (729)
Current taxation (388) - (388)
Deferred taxation (126) (1,108) (1,234)
Net assets acquired11,043
Goodwill on acquisition 5,201
Consideration16,244
Less: Deferred purchase consideration (244)
Net cash outflow on acquisition16,000
Goodwill arising on acquisition
Goodwill arose on the acquisition of Longview because the cost of acquisition included immediate access to modern post-harvest
(packhouse) capacity; extends Scales’ total managed orchards by approximately 115 ha, of which 85 ha is planted; allows compelling
cost synergies as the additional owned and leased orchard operations are integrated with the Mr Apple orchard operations; and
gives Scales access to further grower suppliers, markets and customers. These benefits are not recognised separately from goodwill
as the expected future economic benefits arising cannot be reliably measured and they do not meet the definition of identifiable
intangible assets.
Impact of the acquisition on the results of the Group
Due to the seasonal nature of the business, Longview recorded a loss of $583,000 for the two months since acquisition. Group
revenue for the year includes $23,000 in respect of Longview.
Had the Longview acquisition been effective at 1 January 2016, the revenue of the Group would have been $396,459,000 and the
profit for the year would have been $39,751,000.
F3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Joint Venture:Principal Activity
Country of
Incorporation
Holding
2016 2015Balance Date
Profruit (2006) Limited
Juice Production &
SalesNew Zealand50%50%31 December
The Scales Corporation Limited Group share of the guarantee of Profruit (2006) Limited bank loan facilities is $240,000
(2015: $348,000).
Associate Company:
Fern Ridge Produce Limited
Fruit & Produce
ExportingNew Zealand0%50%31 October
Effective 11 January 2016, Fern Ridge Produce Limited is a subsidiary company.
30
Annual Financial Statements - Year Ended 31 December 2016
30
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
G. OTHER
IN THIS SECTION
This section includes the remaining information relating to Scales’ financial statements which is required to comply with
NZ IFRS.
G1. CAPITAL COMMITMENTS
20162015
$'000$'000
Commitments entered into in respect of apple trees as at balance date were 1,577 1,420
Commitments entered into in respect of other property, plant and equipment
as at balance date were 150 233
G2. OPERATING LEASE COMMITMENTS
The Group as Lessee
Operating leases relate to coldstores, orchards, offices, vehicles and office equipment with lease terms of between 3 to 9 years,
generally with options to extend for further periods. All operating lease contracts contain rental reviews that provide for reviews at
regular intervals and in the event that the Group exercises its options to renew.
Non-cancellable operating lease commitments:
Not later than one year 13,966 12,811
Later than one year and not later than five years 41,894 40,020
Later than five years 53,762 57,456
The Group as Lessor
Operating leases relate to coldstores owned by the Group with lease terms of between 3 to 9 years, generally with options to extend
for further periods. All operating lease contracts contain review clauses that provide for reviews at regular intervals and in the event that
the lessee exercises its option to renew. The lessee does not have an option to purchase the property at the expiry of the lease period.
Non-cancellable operating lease receivables:
Not later than one year 1,520 1,101
Later than one year and not later than five years 3,668 3,640
Later than five years 2,796 3,223
G3. RELATED PARTY DISCLOSURES
Transactions with Related Parties
Certain Directors or senior management have relevant interests in companies with which Scales has transactions in the normal
course of business. A number of Scales directors are also non-executive directors of other companies. Any transactions undertaken
with these entities have been entered in the ordinary course of business on a third party arm’s-length basis.
Key Management Personnel Remuneration
The compensation of the directors and executives, being the key management personnel of the Group, is as follows:
Short-term employee benefits2,742 2,557
Post-employment benefits 85 99
2,827 2,656
During 2016 146,028 (2015: nil) shares were issued to key management personnel in accordance with the senior executive share
scheme described in note D2.
31
Annual Financial Statements - Year Ended 31 December 2016
31
G3. RELATED PARTY DISCLOSURES (continued)
20162015
$'000
$'000
Transactions with Equity Accounted Entities
Revenue from sale of goods 1,128 4,683
Revenue from services 1,222 2,277
Dividends received 500 871
Materials and consumables purchases - 153
Trade receivables at balance date 349 531
Advance at balance date - 530
The advance is unsecured and repayable on demand.
G4. EVENTS OCCURRING AFTER BALANCE DATE
There were no events occurring subsequent to balance date which require adjustment to or disclosure in the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
32
Annual Financial Statements - Year Ended 31 December 2016
32
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
H. ADOPTION OF AMENDED ACCOUNTING
STANDARDS AND RESULTING RESTATEMENT
IN THIS SECTION
This section summaries the effect of the change in accounting policy on the prior period disclosures resulting from the
adoption of the amendments to NZ IAS 16 and NZ IAS 41.
H1. ADOPTION OF AMENDED ACCOUNTING STANDARDS AND RESULTING RESTATEMENT
The Group has applied the change in accounting policy retrospectively and restated the comparative periods to reverse the fair value
measurement recognised during 2015 relating to apple trees, which are now accounted for in accordance with NZ IAS 16.
In accordance with the transitional provisions in the amendments to NZ IAS 16 and NZ IAS 41 the Group elected to use the fair value
of the apple trees on 1 January 2015 as the deemed cost at that date. Depreciation on bearer plants was recognised for the 2015
year using depreciation rates based on an economic life of 30 years.
The following tables summarise the effect of the change in accounting policy on the prior period presented in the Group’s
consolidated financial statements. The transitional provisions in the amendments to NZ IAS 16 and NZ IAS 41 do not require separate
disclosure showing the effect on the 2016 year.
(a) Consolidated Statement of Financial Position
Previously reportedAdjustmentsRestated
At 1 January 2015$’000$’000$’000
Equity
Share capital 90,915 - 90,915
Other reserves27,599 - 27,599
Retained earnings27,816 - 27,816
146,330 - 146,330
Current assets
Unharvested agricultural produce - 13,47113,471
Other35,763 - 35,763
35,76313,47149,234
Non-current assets
Apple trees31,368 (31,368)0
Property, plant and equipment145,982 17,897 163,879
Other13,297 - 13,297
190,647 (13,471)177,176
Total Assets226,410 - 226,410
Current liabilities31,734-31,734
Non-current liabilities
Deferred tax liabilities17,873 - 17,873
Other30,473 - 30,473
48,346 - 48,346
Total liabilities80,080 - 80,080
Net assets146,330 - 146,330
33
Annual Financial Statements - Year Ended 31 December 2016
33
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
H1. ADOPTION OF AMENDED ACCOUNTING STANDARDS (continued)
Previously reportedAdjustmentsRestated
At 31 December 2015$’000$’000$’000
Equity
Share capital 90,755 - 90,755
Other reserves27,732 - 27,732
Retained earnings42,539 (3,041)39,498
161,026 (3,041)157,985
Current assets
Unharvested agricultural produce - 15,493 15,493
Other51,269 - 51,269
51,269 15,493 66,762
Non-current assets
Apple trees37,034 (37,034) -
Property, plant and equipment150,750 17,317 168,067
Other17,402 - 17,402
205,186 (19,717)185,469
Total Assets256,455 (4,224)252,231
Current liabilities43,459 - 43,459
Non-current liabilities
Deferred tax liabilities19,116 (1,183)17,933
Other32,854 - 32,854
51,970 (1,183)50,787
Total liabilities95,429 (1,183)94,246
Net assets161,026 (3,041)157,985
(b) Consolidated Statement of Comprehensive Income
Previously reportedAdjustmentsRestated
For the year ended 31 December 2015$’000$’000$’000
Other income 4,977 (3,031) 1,946
Depreciation and amortisation (10,138) (1,193) (11,331)
Income tax expense 14,338 (1,183) 13,155
Profit for the year 38,935 (3,041) 35,894
Total comprehensive income 38,900 (3,041) 35,859
The Group’s basic and diluted earnings per share have changed from 27.9 cents to 25.7 cents for the year ended 31 December 2015.
34
Annual Financial Statements - Year Ended 31 December 2016
34
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF SCALES CORPORATION LIMITED
OpinionWe have audited the consolidated financial statements of Scales Corporation Limited (the
‘Company’) and its subsidiaries (the ‘Group’), which comprise the consolidated statement of
financial position as at 31 December 2016, and the consolidated statement of comprehensive
income, statement of changes in equity and statement of cash flows for the year then ended,
and notes to the consolidated financial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying consolidated financial statements, on pages 2 to 33, present
fairly, in all material respects, the consolidated financial position of the Group as at 31 December
2016, and its consolidated financial performance and its consolidated cash flows for the year
then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (‘NZ IFRS’) and International Financial Reporting Standards (‘IFRS’).
Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and
International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and
Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code
of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Other than in our capacity as auditor and the provision of taxation advice, risk management
advice, due diligence and other assurance services, we have no relationship with or interests in
the Company or any of its subsidiaries. These services have not impaired our independence as
auditor of the Company and Group.
Audit materialityWe consider materiality primarily in terms of the magnitude of misstatement in the financial
statements of the Group that in our judgement would make it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced (the
‘quantitative’ materiality). In addition, we also assess whether other matters that come to our
attention during the audit would in our judgement change or influence the decisions of such a
person (the ‘qualitative’ materiality). We use materiality both in planning the scope of our audit
work and in evaluating the results of our work.
We determined materiality for the Group financial statements as a whole to be $2.5m.
Key audit mattersKey audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the consolidated financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matterHow our audit addressed the key audit matter
Valuation of Apple Trees
Bearer plants (the apple trees) are measured at fair value.
Apple trees were revalued at 31 December 2016 to
$31.0 million as described in note C1. A revaluation gain of
$11.8 million is recorded in other comprehensive income.
Apple trees are valued on the basis of a discounted cash
flow analysis of forecast income streams and costs from each
orchard. The model uses a number of significant unobservable
inputs, in particular: production levels per hectare, orchard gate
returns (market prices), orchard costs, and discount rates.
Our procedures focused on the appropriateness of the valuation
methodology and the key assumptions applied in the models.
Our procedures included, amongst others:
• Evaluating the Group’s processes in respect of the
independent valuation of the apple trees including its review
of the valuation methodology and determination of the key
valuation assumptions.
• Engaging a Deloitte valuation specialist to consider whether
the valuation method applied was reasonable.
35
Annual Financial Statements - Year Ended 31 December 2016
35
On 1 January 2016, the Group adopted the amendments to NZ
IAS 16 Property, Plant and Equipment and NZ IAS 41 Agriculture
which bring bearer plants (apple trees) into the scope of NZ IAS
16 so they are accounted for as property, plant and equipment.
Disclosures about the impact of adopting these amendments
are provided in note H1 and the ‘About This Report’ section of
the financial statements.
We included the valuation of apple trees as a key audit
matter due to the level of judgement involved in valuing the
apple trees.
• Assessing the competence, objectivity and integrity of
the Group’s independent registered valuer. This included
assessing the valuer’s professional qualifications, experience
and independence. It also included meeting with the valuer
to understand the valuation process adopted and to identify
and challenge the critical judgement areas in the valuations.
• Assessing the valuation methodology for consistency with
the prior year and determining whether any significant
changes to the methodology were appropriate.
• Challenging the reasonableness of the key assumptions by
comparing them to the prior year’s valuation, the Group’s
internal data and current market evidence. We focused on
the assumptions relating to production levels per hectare,
orchard gate returns (market prices), orchard costs, and
discount rates.
–We tested estimated production levels per hectare by
comparing orchard hectares in production with prior year,
adjusted for any changes in land area during the current
year. We compared the production levels per hectare to
external production data published by the Ministry for
Primary Industries as well as internal production data for
the previous season on a sample basis.
–We tested the orchard gate returns on a sample basis
by obtaining actual sales returns received during the
previous year.
–We challenged orchard costs by comparing orchard costs
to the prior year valuation and to data published by the
Ministry for Primary Industries.
–We challenged the discount rates by comparing them
with prior period discount rates and considering current
market interest rates and the risks associated with the
orchards.
• Checking the mechanical accuracy of the discounted cash
flow models on a sample basis.
• Confirming that the Group has appropriately applied the
amendments to NZ IAS 16 Property, Plant and Equipment
and NZ IAS 41 Agriculture in accordance with the
transitional provisions.
• Assessing the adequacy of the Group’s disclosures in respect
of the valuations.
Valuation of Unharvested Agricultural Produce
Unharvested agricultural produce growing on bearer plants
(i.e. fruit), is measured at fair value less costs to sell.
The Group’s unharvested agricultural produce was valued
at $18.4 million at balance date as described in note C2.
A revaluation gain of $1.0 million is recorded in profit or loss.
Fair value less costs to sell is calculated by the Group using a
discounted cash flow model. The model includes significant
unobservable inputs and assumptions including, for each
variety, the forecast production per hectare per annum by
weight, sales prices, costs to harvest and sell, and risk-adjusting
discount rates.
The risk-adjusting discount rates take into account the risk of
unknown adverse events that may affect crop, harvest and/or
market conditions.
The valuation of unharvested agricultural produce is a key audit
matter due to the level of judgement required to determine the
fair value less costs to sell.
Our procedures focused on the appropriateness of the valuation
methodology and the key assumptions applied in the internal
valuation model.
Our procedures included, amongst others:
• Holding discussions with management and considering
market information to identify factors, including
environmental or market risks, that would impact the
current crop valuation.
• Engaging a Deloitte valuation specialist to consider whether
the valuation method applied was appropriate and whether
the risk-adjusting discount rates were reasonable based on
market information and risks relating to the unharvested
agricultural produce.
• Challenging the reasonableness of the key assumptions
by comparing the forecast production, prices, and costs
to harvest and sell for the current growing season to the
approved budgets for each orchard.
• Assessing the historical accuracy of the Group’s
budget forecasts.
36
Annual Financial Statements - Year Ended 31 December 2016
36
• Checking the mechanical accuracy of the discounted cash
flow model.
• Assessing the adequacy of the Group’s disclosures in respect
of the valuation.
Valuation of Land and Buildings
Our procedures focused on the appropriateness of the valuation
methodologies and the reasonableness of the underlying inputs
and assumptions.
Our procedures included, amongst others:
• Evaluating the Group’s processes in respect of the
independent valuations, including its review of the
valuation methodologies and assumptions and confirming,
on a sample basis, the accuracy of the data provided to
the valuers.
• Assessing the competence, objectivity and integrity of the
independent registered valuers. This included assessing their
professional qualifications and experience and obtaining
representation from them regarding their independence and
the scope of their work. It also included meeting with the
valuers to understand the valuation processes adopted, and
to identify and challenge the critical judgements applied in
the valuations.
• Engaging a Deloitte valuation specialist to consider whether
the valuation methods applied were appropriate.
• Obtaining the key inputs and assumptions for each property,
comparing these to previous valuations, and considering
whether movements represented possible outliers. Where
significant or unusual movements were identified, we
discussed these with the valuer to identify the reason for the
change and challenged whether the assumptions used were
appropriate.
• Considering whether the valuations and underlying
assumptions were consistent with our knowledge of
economic and other factors affecting the properties and
determining whether adjustments to observable data were
consistent with property-specific attributes such as condition
and location.
• Checking the mathematical accuracy of the valuations on a
sample basis.
• Assessing the adequacy of the Group’s disclosures in respect
of the valuations.
Land and buildings are carried at fair value at the date of
revaluation, less any subsequent accumulated depreciation and
impairment losses. Revaluations are performed at least every
3 years.
Land and buildings were revalued at 31 December 2016 to
$140.7 million as described in note C1. A revaluation gain of
$26.9 million is recorded in other comprehensive income.
Revaluations are carried out by independent valuers. Estimating
the fair values of land and buildings requires judgement and the
calculations include both observable and non-observable inputs.
Land and buildings were valued using a combination of
comparative sales and income capitalisation methodologies,
benchmarked against depreciated replacement cost. The
significant inputs and assumptions adopted in the valuations
are sale prices for similar properties, market rental rates, and
capitalisation rates. The valuations include adjustments to
observable data for similar properties to take into account
property-specific attributes.
We consider the valuation of Land and Buildings to be a key
audit matter due to the judgment involved in determining their
fair values.
Other informationThe directors are responsible for the other information. The other information comprises the
information in the Annual Report that accompanies the consolidated financial statements and
the audit report. The Annual Report is expected to be made available to us after the date of this
auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and
we will not express any form of assurance conclusion thereon.
Our responsibility is to read the other information identified above when it becomes available
and consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
When we read the other information in the Annual Report, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to the directors and
consider further appropriate actions.
Directors’ responsibilities for
the consolidated financial
statements
The directors are responsible on behalf of the Group for the preparation and fair presentation
of the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such
internal control as the directors determine is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
37
Annual Financial Statements - Year Ended 31 December 2016
37
In preparing the consolidated financial statements, the directors are responsible on behalf of the
Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities
for the audit of the
consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs and ISAs (NZ)
will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements
is located on the External Reporting Board’s website at:
https://www.xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Page1.aspx
This description forms part of our auditor’s report.
Restriction on useThis report is made solely to the Company’s shareholders, as a body. Our audit has been
undertaken so that we might state to the Company’s shareholders those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company’s shareholders as a body, for our audit work, for this report, or for the opinions we
have formed.
Michael Wilkes, Partner
for Deloitte Limited
Christchurch, New Zealand
27 February, 2017
38
Annual Financial Statements - Year Ended 31 December 2016
38
Board of Directors
Jon Mayson (Chairman)
Tim Goodacre (Deputy Chairman)
Andy Borland (Managing Director)
Nick Harris
Mark Hutton
Alan Isaac
Weiyong Wang (appointed 23 June 2016)
Audit and Risk Management Committee
Alan Isaac (Chairman)
Nick Harris
Mark Hutton
Nominations and Remuneration Committee
Mark Hutton (Chairman)
Tim Goodacre
Jon Mayson
Registered Office
52 Cashel Street
Christchurch 8013
New Zealand
Postal Address
PO Box 1590
Christchurch 8140
New Zealand
Telephone
64-3-379-7720
Website
www.scalescorporation.co.nz
Auditor
Deloitte Limited
Level 4
151 Cambridge Terrace
Christchurch 8013
Bankers
ANZ Bank New Zealand Limited
665 Colombo Street
Christchurch 8011
Rabobank New Zealand Limited
Level 23
157 Lambton Quay
Wellington 6011
Westpac New Zealand Limited
Level 2
2 Show Place
Christchurch 8024
Solicitors
Anthony Harper
Level 9
HSBC Tower
62 Worcester Boulevard
Christchurch 8011
Chapman Tripp
23 Albert Street
Auckland 1140
Corporate Adviser
Maher & Associates
17 Albert Street
Auckland 1010
Share Registry
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna
North Shore City
Auckland 0622
DIRECTORY
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.