PGG Wrightson repeats record operating performance
14 August 2018
PGG Wrightson repeats record operating performance
PGG Wrightson Ltd* (PGW) announced for the year ended 30 June 2018 a full year operating earnings before
interest, tax, depreciation and amortisation (Operating EBITDA)** of $70.2 million (FY2017 $64.5 million) and net
profit after tax (NPAT) of $18.9 million (FY2017 $46.3 million).
The company declared a fully imputed dividend of 1.25 cents per share, which will be paid on 3 October 2018.
This will bring the total fully-imputed dividends paid for the year to 3.00 cents per share.
PGW Deputy Chairman Trevor Burt said, “It is very pleasing to have seen a significant increase in PGW’s
Operating EBITDA throughout the year and especially gratifying to have matched 2016’s record result. In October
2017 we targeted a range of $65 to $70 million and we exceeded the top end of that.”
“We have consistently advised throughout the year that NPAT would be down on FY2017. This year’s NPAT
result was affected by a number of one-off non-trading items including a one-off provision for the remediation
costs of historical liabilities under the Holidays Act 2003. Last year also benefited from significant capital gains
on the sale of property. With our property divestment programme largely complete these one-off gains were much
lower in 2018. In declaring today’s dividend, the Board balanced the one-off nature of these items affecting NPAT
and the strong underlying trading performance against the reinvestment opportunities available to the business.
We felt it prudent to reduce the final dividend this year.” said Mr Burt.
PGW Chief Executive Ian Glasson added, “This is an excellent trading result for PGW, one that we can be proud
of. In particular it shows the strength of PGW’s rural services businesses. Almost all of our New Zealand
businesses were up on last year, with most achieving double-digit earnings growth. These results were achieved
despite our Seed and Grain Australian and South American businesses facing challenging climatic conditions.
However, the New Zealand agriculture sector was very strong over the course of FY2018, and our trading result
reflects our broad-based exposure to New Zealand agriculture and our passion and commitment to the sector.”
Mr Glasson noted with respect to the recent Mycoplasma bovis outbreak that “Despite not affecting PGW’s
financial performance to date, we are working closely with our customers and industry bodies to help manage and
monitor the impact on the broader sector.”
“The Agency group delivered a record result, with Operating EBITDA up 12 percent on their outstanding result in
FY2017. The Livestock business repeated 2017’s performance with the effects of higher sheep prices offsetting
a lower number of dairy transactions. The Wool team achieved excellent results with volumes returning to more
normal levels on a lift in underlying wool prices.
“The Retail and Water group also achieved a record result with another spectacular year. Operating EBITDA
increased $5.5 million, which is a very impressive 30 percent increase on the previous year. The improvement
was evenly split between Retail, which continues to benefit from its position of technical excellence in the
marketplace, and Water, which improved its contribution despite the ongoing challenges facing the irrigation
sector.”
“The Seed and Grain group had a small reduction in Operating EBITDA, down 4 percent to $35.6 million. Our
New Zealand business was the standout performer for Seed and Grain during FY2018, with strong sales volumes
not quite enough to offset the impact of extremely dry conditions in South America and in our Australian markets.”
noted Mr Glasson.
Net cash flow from operating activities reduced $14.7 to $5.8 million, mostly due to an increase in investment in
working capital, including the successful growth of Livestock ‘Go’ products. After spending a net $20.9 million on
$
18.9m
1.25
Per share, fully imputed
$
70.2m
capital expenditure and investments, and paying $29.3 million in dividends, net interest-bearing debt increased
$40.8 million to $169.1 million.
Mr Glasson added, “Our people are key to our continued robust performance - their commitment and passion for
agriculture ensures that we continue to perform strongly in all market conditions. I am proud to say that the levels
of morale and staff engagement at PGW remain high.”
Mr Glasson also referred to the announcement of Monday 6 August that PGW had entered into a conditional
agreement with DLF Seeds to sell the PGW Seed and Grain business for NZ$421 million. Upon completion of
the transaction, PGW would also recognise a gain on sale of more than $120 million.
Mr Glasson emphasised “A key aspect of the agreement is that the way our rural service and Seeds businesses
work together would not change. The Seeds team would continue to work closely with the rural services team,
alongside their clients. To formalise those arrangements, PGW Seeds (under DLF Seeds ownership) would enter
into a long-term distribution agreement with PGW and would also continue to trade under the PGG Wrightson
Seeds brand.
It is important to remember that PGW has the strongest nationwide rural services offering in New Zealand,
covering the length of the country. A sale of the PGW Seed business would not change that – in fact, it remains
business as usual for PGW and its customers. Indeed, upon completion of the DLF Seeds transaction, PGW will
have a strong rural services business with revenue of over $800 million and good profitability (FY2018 Operating
EBITDA of approximately $35 million).
Mr Glasson concluded, “It is our intention to provide more information on our progress, including an earnings
forecast, at the time of the Annual Shareholder Meeting in October.”
Ian Glasson
Chief Executive Officer
For all media enquiries please contact:
Linda Chalmers, PGG Wrightson Group Communication and Brand Manager - phone: +64(0)27 405
3241
*All references to PGG Wrightson Limited or the Group refer to the Company, its subsidiaries and interests in associates and jointly
controlled entities.
**Operating EBITDA: Earnings before net interest and finance costs, income tax, depreciation, amortisation, the results from discontinued
operations, fair value adjustments and non-operating items.
PGW has used non-GAAP profit measures when discussing financial performance in this document. Please refer to our full accounts for
details of how Operating EBITDA relates to GAAP. For a comprehensive discussion on the use of non-GAAP profit measures, please refer
to the policy “Non-GAAP Accounting Information” available on our website www.pggwrightson.co.nz.
---
PGG Wrightson Limited
Key financial disclosures
For the year ended 30 June 2018
PGG Wrightson Limited
Statement of Profit or Loss
For the year ended 30 June 2018
Note
2018
$000
2017
$000
Continuing operations
Operating revenue
2
1,193,462 1,132,963
Cost of sales3(847,328) (804,317)
Gross profit346,134 328,646
Other income221 388
Employee benefits expense(165,809) (160,851)
Research and development(4,778) (4,542)
Other operating expenses4(103,709) (99,268)
Equity accounted earnings of investees5(1,885) 126
70,174 64,499
Non-operating items(80) 7,148
Holidays Act 2003 remediation costs20(8,226) -
Fair value adjustments6(3,877) 1,953
Depreciation and amortisation expense(12,974) (10,733)
45,017 62,867
Net interest and finance costs7(14,162) (6,158)
Profit from continuing operations before income taxes30,855 56,709
Income tax expense8(12,460) (10,428)
Profit from continuing operations18,395 46,281
Discontinued operations
Profit from discontinued operations (net of income taxes)9492 30
Net profit after tax18,887 46,311
Profit attributable to:
Shareholders of the Company17,964 45,607
Non-controlling interest923 704
Net profit after tax18,887 46,311
Earnings per share
Basic earnings per share (New Zealand Dollars)100.025 0.061
Continuing operations
Basic earnings per share (New Zealand Dollars)0.024 0.061
The accompanying notes form an integral part of these financial statements.
Operating EBITDA
EBIT
1
PGG Wrightson Limited
Statement of Other Comprehensive Income
For the year ended 30 June 2018
Note
2018
$000
2017
$000
Net profit after tax18,887 46,311
Other comprehensive income/(loss) for the period
Items that will never be reclassified to profit or loss
Changes in fair value of equity instruments- 240
Remeasurements of defined benefit liability212,746 3,121
Deferred tax on remeasurements of defined benefit liability8(961) (2,389)
1,785 972
Items that are or may be reclassified to profit or loss
Foreign currency translation differences for foreign operations6,408 (1,169)
Effective portion of changes in fair value of cash flow hedges- (2,039)
Income/deferred tax on changes in fair value of cash flow hedges8- 571
6,408 (2,637)
Other comprehensive income/(loss) for the period, net of income tax8,193 (1,665)
Total comprehensive income for the period27,080 44,646
Total comprehensive income/(loss) attributable to:
Shareholders of the Company26,307 43,579
Non-controlling interest773 1,067
Total comprehensive income for the period27,080 44,646
Printed:
Monday, 13 August 2018
4:05:12 p.m.
The accompanying notes form an integral part of these financial statements.
2
PGG Wrightson Limited
3
3
Interim Segment ReportFor the year ended / as at 30 June 2018
(a) Operating Segments
- - - -
"Other" cost allocation
- - -
(b) Geographical Segment Information The Australian and South American business units fa
cilitate the export sales and services of New Zeala
nd operations in addition to their own seed trading
operations. Inter-segment pricing is
determined on an arm's length basis.In presenting information on the basis of geographi
cal segments, segment revenue is based on the geogr
aphical location of operations and segment assets a
re based on the geographical location of
the assets.The Group applies an allocation methodology which a
llocates certain corporate costs where they can be
directly attributed to an operating segment or attr
ibuted based on the use of the following
methods:
IT hardware, support, licence and other costs attri
buted based on a per user basis.
Property costs allocated, where not directly attrib
utable, on a property space utilisation basis.
Business operations costs (Accounts Payable, Accoun
ts Receivable, Credit Services, Call Centre) alloca
ted based on FTE usage by each operating segment, t
ransactional volumes or for Credit
allocated based on the operating segment to which o
verdue accounts relate to.
The Group Finance, Risk and Assurance, Treasury, HR
, Credit and the Executive Team functions continue
to be reported outside of the operating segments.
Other costs including non-operating items, fair val
ue adjustments, net interest and finance costs, inc
ome tax expense as well as the reporting of discont
inued operations are not fully allocated by the
Group. Accordingly, these items have not been full
y allocated across the operating segments.
The Group operates predominantly in New Zealand wit
h some operations in Australia and South America.
The Group has three primary operating segments: Age
ncy, Retail and Water and Seed and Grain which are
the Group's strategic divisions. Agency and Retail
and Water operate within New Zealand.
Seed and Grain primarily operates within New Zealan
d with additional operations in Australia and South
America.
The three operating segments offer different produc
ts and services, and are managed separately because
they require different skills, technology and mark
eting strategies. There is also a Group
General Manager for each segment. Within each segm
ent, further business unit analysis may be provided
to management where there are significant differen
ces in the nature of activities. The Chief
Executive Officer or Chairman of the Board reviews
internal management reports on each strategic busin
ess unit on at least a monthly basis.
Agency.
Includes rural Livestock trading activities, Expo
rt Livestock, Wool, Insurance, Real Estate and Fina
nce Commission.
Retail and Water .
Includes the Rural Supplies and Fruitfed retail o
perations, PGG Wrightson Water, AgNZ (Consulting),
Agritrade and ancillary sales support, supply chain
and marketing
functions.Seed and Grain.
Includes Australasia Seed (New Zealand and Austra
lian manufacturing and distribution of forage seed
and turf), Grain (sale of cereal seed and grain tra
ding), South America
(various related activities in the developing seeds
markets including the sale of pasture and crop see
d and farm inputs, together with operations in the
areas of livestock, real estate and
irrigation), and other Seed and Grain (research and
development, international, production and corpora
te seeds).
Other.
Other non-segmented amounts relate to certain Grou
p Corporate activities including Finance, Treasury,
HR and other support services including corporate
property services and include
adjustments for discontinued operations (PGW Rural
Capital Limited) and consolidation/elimination adju
stments.
Assets allocated to each business unit combine to f
orm total assets for the Agency, Retail and Water a
nd Seed and Grain business segments. Certain other
assets are held at a Corporate level
including those for the Corporate functions noted a
bove.
3
PGG Wrightson Limited
3
3
Segment ReportFor the year ended / as at 30 June 2018
Revenue derived from outside the Group
2018$000
2017$000
New Zealand
1,005,402
954,330
Australia
76,024
79,161
South America
112,036
99,472
Total revenue derived from outside the Group
1,193,462
1,132,963
Non current assets excluding financial instruments
and deferred tax
New Zealand
90,512
85,756
Australia
15,317
14,638
South America
45,731
47,131
Total non current assets excluding financial instru
ments and deferred tax
151,560
147,525
(c) Operating Segment Information
Jun 2018
$000
Jun 2017
$000
Jun 2018
$000
Jun 2017
$000
Jun 2018
$000
Jun 2017
$000
Jun 2018
$000
Jun 2017
$000
Jun 2018
$000
Jun 2017
$000
Total segment revenue
200,574
197,098
606,176
562,162
449,495
428,711
749
1,040
1,256,994
1,189,012
Intrasegment revenue
-
-
-
-
(63,532)
(56,049)
-
-
(63,532)
(56,049)
Total external operating revenues
200,574
197,098
606,176
562,162
385,963
372,662
749
1,040
1,193,462
1,132,963
20,112
17,996
23,810
18,295
35,607
37,045
(9,355)
(8,836)
70,174
64,499
Non-operating items
688
3,275
590
(12)
(217)
5,231
(1,141)
(1,347)
(80)
7,148
Holidays Act 2003 remediation costs
(2,441)
-
(3,422)
-
(1,066)
-
(1,297)
-
(8,226)
-
Fair value adjustments
(1,087)
26
-
-
(2,790)
2,049
-
(121)
(3,877)
1,953
Depreciation and amortisation expense
(1,086)
(1,130)
(3,097)
(1,737)
(6,056)
(5,517)
(2,735)
(2,349)
(12,974)
(10,733)
16,186
20,167
17,881
16,546
25,478
38,807
(14,528)
(12,654)
45,017
62,866
Net interest and finance costs
(1,388)
472
385
272
(7,261)
(4,127)
(5,898)
(2,774)
(14,162)
(6,158)
14,798
20,639
18,266
16,819
18,217
34,680
(20,426)
(15,428)
30,855
56,709
Income tax (expense) / income
(4,366)
(4,171)
(4,680)
(5,253)
(8,878)
(7,513)
5,464
6,509
(12,460)
(10,428)
10,432
16,468
13,586
11,566
9,339
27,166
(14,962)
(8,918)
18,395
46,281
Discontinued operations
-
-
-
-
-
-
492
30
492
30
Net profit after tax
10,432
16,468
13,586
11,566
9,339
27,166
(14,470)
(8,888)
18,887
46,311
Segment assets
161,378
145,410
149,107
137,081
412,673
367,754
18,529
27,704
741,687
677,949
Investment in equity accounted investees
-
-
-
-
14,264
20,892
59
81
14,323
20,973
Assets held for sale
-
37
218
500
-
-
2,398
2,690
2,616
3,227
Total segment assets
161,378
145,447
149,325
137,581
426,937
388,646
20,986
30,475
758,626
702,149
Total segment liabilities
(87,182)
(71,296)
(82,109)
(72,117)
(164,144)
(187,209)
(137,729)
(81,816)
(471,164)
(412,437)
Capital expenditure
3,212
1,743
9,689
5,238
13,204
11,901
3,326
1,901
29,431
20,783
The accompanying notes form an integral part of the
se financial statements.
Operating EBITDAEBITProfit/(loss) from continuing operations before income taxesProfit/(loss) from continuing operations
Agency
Retail and Water
Seed and Grain
Other
To
tal
4
PGG Wrightson Limited
Statement of Cash Flows
For the year ended 30 June 2018
Note
2018
$000
2017
$000
Cash flows from operating activities
Cash was provided from:
Receipts from customers1,214,939 1,201,273
Dividends received3 10
Interest received5,225 3,318
1,220,167
1,204,601
Cash was applied to:
Payments to suppliers and employees(1,190,563) (1,159,853)
Lump sum contributions to defined benefit plans (ESCT inclusive)(2,842) (7,551)
Interest paid(8,550) (6,321)
Income tax paid(12,446) (10,408)
(1,214,401) (1,184,133)
Net cash flow from operating activities5,766 20,468
Cash flows from investing activities
Cash was provided from:
Proceeds from sale of property, plant and equipment and assets held for sale3,407 22,352
Net proceeds from sale of investments111 4,424
3,518
26,776
Cash was applied to:
Purchase of property, plant and equipment
(15,183) (12,803)
Purchase of intangibles
(7,974) (4,307)
Net cash paid for purchase of investments(1,215) (2,773)
(24,372) (19,883)
Net cash flow from investing activities(20,854) 6,893
Cash flows from financing activities
Cash was provided from:
Increase in external borrowings and bank overdraft
42,499 3,715
Repayment of loans by related parties3,441 -
45,940
3,715
Cash was applied to:
Dividends paid to shareholders
(28,570) (28,588)
Dividends paid to minority interests
(759) (646)
(29,329) (29,234)
Net cash flow from financing activities16,611 (25,519)
Net increase/(decrease) in cash held1,523 1,842
Opening cash9,403 7,561
Cash and cash equivalents1110,926 9,403
2018
$000
2017
$000
Net profit after tax18,887 46,311
Add/(deduct) non-cash/non operating items:
Depreciation, amortisation and impairment12,974 10,733
Fair value adjustments3,877 (1,953)
Net (profit)/loss on sale of assets/investments(1,746) (9,630)
Bad debts written off (net)429 1,244
Change in deferred taxation(1,114) (811)
Earnings from equity accounted investees1,885 (126)
Discontinued operations(492) (30)
Defined benefit expense142 649
Effect of foreign exchange movements3,618 (197)
Pension contributions (operating cash) not expensed through profit and loss(2,842) (7,551)
Other non-cash/non-operating items(1,999) 1,339
33,619 39,978
Add/(deduct) movement in working capital items:
Change in working capital due to sale/purchase of businesses(2,683) (3,378)
Change in inventories and biological assets(7,374) (11,208)
Change in accounts receivable and prepayments(45,081) (12,364)
Change in trade creditors, provisions and accruals19,360 5,856
Change in income tax payable/receivable3,326 2,156
Change in other current assets/liabilities4,599 (572)
(27,853) (19,510)
Net cash flow from operating activities5,766 20,468
The accompanying notes form an integral part of these financial statements.
Reconciliation of Profit After Tax With Net Cash Flow from Operating Activities
5
PGG Wrightson Limited
Statement of Financial Position
As at 30 June 2018
Note
2018
$000
2017
$000
ASSETS
Current
Cash and cash equivalents1110,926 9,403
Short-term derivative assets12827 3,528
Trade and other receivables14267,627 230,022
Finance receivables733 -
Go livestock receivables
1339,419 32,371
Assets classified as held for sale2,615 3,227
Biological assets911 1,553
Inventories15262,538 253,600
Other investments1730 3,441
Intangible assets182,641 -
Total current assets588,267 537,145
Non-current
Long-term derivative assets1220 427
Biological assets- 58
Deferred tax asset816,259 15,145
Investments in equity accounted investees514,323 20,973
Other investments172,520 1,906
Intangible assets1813,017 9,129
Property, plant and equipment19124,220 117,365
Total non-current assets170,359 165,003
Total assets758,626 702,148
LIABILITIES
Current
Debt due within one year1130,806 26,719
Short-term derivative liabilities123,645 991
Accounts payable and accruals20267,096 248,290
Income tax payable6,751 4,115
Defined benefit liability21905 942
Total current liabilities309,203 281,057
Non-current
Long-term debt11149,205 110,925
Long-term derivative liabilities12966 661
Other long-term provisions202,121 4,909
Defined benefit liability219,669 14,885
Total non-current liabilities161,961 131,380
Total liabilities471,164 412,437
EQUITY
Share capital31606,324 606,324
Reserves318,647 (2,956)
Retained earnings31(329,987) (316,121)
Total equity attributable to shareholders of the Company284,984 287,247
Non-controlling interest2,478 2,464
Total equity287,462 289,711
Total liabilities and equity758,626 702,148
These financial statements have been authorised for issue on 13 August 2018.
Alan LaiBruce Irvine
ChairmanDirector and Audit Committee Chairman
The accompanying notes form an integral part of these financial statements.
6
PGG Wrightson Limited
Additional financial disclosures including notes to the financial statements
For the year ended 30 June 2018
1
Event Subsequent to Balance Date
Agreement for sale of PGG Wrightson Seeds Holdings Limited
Dividend
2
Operating Revenue
2018
$000
2017
$000
1,048,007 994,024
110,852 108,205
29,627 27,627
Interest revenue on Go livestock product receivables
3,397 1,674
Debtor interest charges1,579 1,433
Total operating revenue1,193,4621,132,963
-1
Recognition of Revenue
Sales Revenue
Commission Revenue
Interest and Similar Income and Expense
Fee Income from Providing Transaction Services
3Cost of Sales
Cost of Sales includes the following items by nature:Note
2018
$000
2017
$000
Depreciation and amortisation1,0681,068
Employee benefits including commissions33,62037,097
Inventories, finished goods, work in progress, raw materials and consumables15783,988755,142
28,65211,010
847,328804,317
Other
For all financial instruments measured at amortised cost, interest income or expense is recorded at the effective interest rate, which is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account
all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the
effective interest rate, but not future credit losses.
Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the original effective
interest rate applied to the new carrying amount.
The Group recognises interest revenue, management fees, and establishment fees on an accruals basis when the services are rendered using the effective interest rate method.
Fees arising from negotiating or participating in the negotiation of a transaction for a third party are recognised on completion of the underlying transactions. Fees or components of the fees that are
linked to certain performance are recognised after fulfilling the corresponding criteria.
Income Recognition Accounting Policies
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be
met before revenue is recognised.
Sales revenue comprises the sale value of transactions where the Group acts as a principal.
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised
when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated
reliably, and there is no continuing management involvement with the goods.
Commission revenue comprises commission for transactions where the Group acts as an agent.
For agency commissions the Group does not take inventory risk or title for inventories, or for the Group's Livestock and Real Estate businesses biological assets and properties respectively. The Group
also generates commissions from the successful referral of clients to unrelated lending and insurance partners.
On 13 August 2018 the Directors of PGG Wrightson Limited resolved to pay a final dividend of 1.25 cents per share on 3 October 2018 to shareholders on the Company's share register as at 5.00pm on
4 September 2018. This dividend will be fully imputed.
Continuing operations
Sales
Commissions
Construction contract revenue
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts
For the year ended 30 June 2018
The Group announced in October 2017 that it had appointed Credit Suisse (Australia) Ltd and First NZ Capital Ltd as financial advisors to assist with a strategic review of PGW’s business, its growth
opportunities, capital and balance sheet requirements, and potentially shareholding structure.
Further to this review, on 6 August 2018 the Group announced that it had signed a sale and purchase agreement for the sale of its subsidiary PGG Wrightson Seeds Holdings Limited (PGW Seeds).
The agreement represents the sale of the Group's Seed and Grain operating segment. The sale price is approximately $421 million subject to various adjustments until settlement. The sale is
conditional on various approvals including:
- PGW shareholder approval of a major transaction at a shareholders meeting.
- New Zealand Overseas Investment Act approval.
- New Zealand Commerce Commission clearance, Australian Competition and Consumer Commission approval and receipt of applicable regulatory approvals in South America.
- Change of control consents from several of PGW Seeds’ joint venture partners.
- PGW banking syndicate consent.
Based on the initial sale price an estimated capital gain is expected to be recognised by the Group of approximately $136 million. This estimated capital gain is subject to any further adjustments to the
sale price until settlement, less transaction/disposal costs, and is subject to any reversal of the Foreign Currency Translation Reserve.
As the transaction was not agreed until post balance date and is still subject to the required approvals noted above the Group has not recognised the subsidiary or the Seed and Grain segment as
"Assets Held For Sale" or a "Discontinued Operation" as at 30 June 2018.
7
4Other Operating Expenses
Other operating expenses includes the following items:
2018
$000
2017
$000
Audit of annual financial statements of the Company - KPMG277 267
Audit of annual financial statements of the subsidiaries and associates - KPMG131 118
Other non-audit services provided by KPMG
- Tax consulting- 4
- Trust account audit of PGG Wrightson Real Estate Limited12 11
- Review of charging group consolidation for bank syndicate2 2
- Quality assurance - IT project- 44
Directors' fees767 770
Donations6 3
Doubtful debts - (decrease)/increase in provision for doubtful debts529 286
Net doubtful debts - bad debts written off/recovered(100) 958
Marketing8,792 8,261
Motor vehicle costs8,047 7,306
Rental and operating lease costs 29,692 28,951
Other expenses55,554 52,287
103,70999,268
5
Earnings from equity accounted investees
Current assets
$000
Non-current
assets
$000
Total assets
$000
Current
liabilities
$000
Non-current
liabilities
$000
Total liabilities
$000
Revenues
$000
Expenses
$000
Profit / (loss) after
tax
$000
PGW Share
$000
30 June 2018
51% Forage Innovations Limited
1,232 - 1,232 (822) - (822) 1,704 (1,622) 82 41
50% Agimol Corporation S.A.
59,974 15,178 75,152 (63,441) - (63,441) 72,621 (76,899) (4,278) (2,139)
33% Agri Optics New Zealand Limited
339 103 442 (60) (450) (510) 1,028 (1,067) (39) (51)
50% Canterbury Sale Yards (1996) Limited
153 42 195 (61) - (61) 550 (592) (42) (21)
50% Fertimas S.A.
18,175 - 18,175 (15,146) - (15,146) 27,085 (26,515) 570 285
79,873 15,323 95,196 (79,530) (450) (79,980) 102,988 (106,695) (3,707) (1,885)
30 June 2017
51% Forage Innovations Limited
1,166 - 1,166 (837) - (837) 1,504 (1,585) (81) (42)
50% Agimol Corporation S.A.
51,277 10,991 62,268 (53,519) - (53,519) 85,575 (85,193) 382 190
51% Agri Optics New Zealand Limited
8 139 147 (93) (191) (284) 177 (277) (100) (51)
50% Canterbury Sale Yards (1996) Limited
193 6 199 (37) - (37) 530 (588) (58) (29)
50% Fertimas S.A.
8,886 - 8,886 (6,649) - (6,649) 20,722 (20,606) 116 58
61,530 11,136 72,666 (61,135) (191) (61,326) 108,508 (108,249) 259 126
Movement in carrying value of equity accounted investees
2018
$000
2017
$000
Opening balance20,973 18,000
Investment in Agri Optics New Zealand Limited- 834
Additional investment in Agimol Corporation (AgroCentro Uruguay)3,078 2,063
Currency translation72 (50)
Share of profit/(loss)(1,885) 126
Dividends received- -
Impairment(7,804) -
Investment disposal(111) -
Closing balance14,323 20,973
Agimol Corporation S.A. earn-out provision
Agri Optics New Zealand Limited
Associates and Jointly Controlled Entities
The Group has conducted an impairment assessment based on forecasted future cash flows of Agimol Corporation S.A. which resulted in an impairment of $7.80 million (USD 5.28 million) recorded
through the profit and loss in fair value adjustments. This impairment assessment has been calibrated by and is consistent with, a valuation of Agimol Corporation S.A. included as part of the proposed
sale of PGG Wrightson Seeds Holdings Limited (see Note 1). Following the impairment, goodwill of $5.44 million is included in the carrying value of Agimol Corporation S.A. (30 June 2017: goodwill of
$13.24 million included in the carrying value of Agimol Corporation S.A.). The carrying value of the Group's investment in Agimol Corporation S.A. as at 30 June 2018 was $11.83 million (USD 7.59
million).
The initial investment recorded for this equity accounted investee company in 2016 included a provision for expected future earn-out payments of $7.03 million (USD 4.51 million). This provision was
previously included within accruals and other liabilities (see Note 20). Based on the above future cash flow forecasts, we have re-assessed the provision which has resulted in a reduction of the
provision. The reduction of $5.13 million (USD 3.66 million) has been recorded through the profit and loss in fair value adjustments. This provision release offsets against the impairment of Agimol
Corporation S.A. noted above.
During the period the Group reduced its investment in Agri Optics New Zealand Ltd from 51% to 33.33% following the inclusion of a third JV partner. Proceeds of $0.11 million were received for the
investment reduction.
Basis of Consolidation Accounting Policies
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Joint ventures are those entities over whose activities the Group has
joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Associates and jointly controlled entities are accounted for using the
equity method. The consolidated financial statements include the Group's share of the income and expenses of equity accounted investees, after adjustments to align the accounting policies with those
of the Group, from the date that significant influence starts. Where the Group's share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any
long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. The
carrying value of equity accounted investees is reviewed where any indicators of impairment are present.
Equity Accounted Investees
Impairment of Agimol Corporation S.A.
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts
For the year ended 30 June 2018
8
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
6Fair value adjustments
2018
$000
2017
$000
Property, plant and equipment impairment(1,070) -
Assets held for sale- (121)
Biological assets39 28
Investments(2,846) 2,046
(3,877) 1,953
7Interest - Finance Income and Expense
2018
$000
2017
$000
Finance income contains the following items:
Other interest income249
211
Finance income249 211
Interest funding contains the following items:
Interest on loans and overdrafts(6,652)
(5,747)
Net interest on interest rate derivatives(533)
(367)
Fair value change on interest rate derivatives(42)
392
Effective interest on expected earn out payments(87)
(27)
Effective interest on defined pension ESCT payments(401)
(122)
Other interest expense(1,281)
(108)
Bank facility fees(1,239)
(772)
Interest funding expense(10,235) (6,751)
Foreign exchange contains the following items:
Net gain/(loss) on foreign denominated items1,849 (924)
Fair value change on foreign exchange derivatives (6,025) 1,306
Foreign exchange income/(expense)(4,176) 382
Net interest and finance costs(14,162) (6,158)
The Group undertakes transactions denominated in foreign currencies and exposure to movements in foreign currency arises from these activities. The Group uses forward, spot foreign exchange
contracts and foreign exchange options to manage these exposures. These derivatives are recorded at their fair value with mark-to-market fair value movements flowing through fair value change on
foreign exchange derivatives in the profit and loss. A portion of the underlying hedged future sale or purchase transactions have not yet been recognised by the Group. For this portion no corresponding
offsetting net gain/(loss) on foreign denominated items has been recognised.
Fair Value Change on Foreign Exchange Derivatives Accounting Policies
9
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
8Income Taxes
2018
$000
2017
$000
Current tax expense
Current year(14,843) (11,331)
Adjustments for prior years308 (1,725)
(14,535) (13,056)
Deferred tax expense
Origination and reversal of temporary differences1,390 915
Recognition of previously unrecognised tax losses460 -
Adjustments for prior years225 1,714
2,075 2,629
Income tax (expense)/income(12,460) (10,428)
Profit/(loss) for the year18,887 46,311
Income tax (expense)/income(12,460) (10,428)
Tax on discontinued operations(199) (4)
Profit/(loss) excluding income tax31,546 56,743
2018
$000
2018
$000
2017
$000
2017
$000
28.0%(8,833) 28.0%(15,888)
2.3%(714) -0.3%194
Non-deductible expenses7.7%(2,441) 0.2%(91)
Tax effect of discontinued operations 0.6%(199) 0.0%(4)
Tax exempt income-2.3%726 -9.8%5,583
Under/(over) provided in prior years-1.7%533 0.0%(11)
Recognition of previously unrecognised tax losses1.5%(460) 0.0%-
3.4%(1,072) 0.4%(210)
39.5%(12,460) 18.4%(10,428)
-
Income tax recognised directly in equity
2018
$000
2017
$000
Income/deferred tax on changes in fair value of cash flow hedges- 571
(961) (2,389)
Total income tax recognised directly in equity(961) (1,818)
Recognised deferred tax assets and liabilities
Assets
2018
$000
Assets
2017
$000
Liabilities
2018
$000
Liabilities
2017
$000
Net
2018
$000
Net
2017
$000
Deferred tax assets and liabilities are attributable to the following:
Group
Property, plant and equipment- - (162) (518) (162) (518)
Intangible assets- - (97) (455) (97) (455)
Employee benefits10,689 9,635 - - 10,689 9,635
Provisions5,596 4,676 (718) (97) 4,878 4,579
Other items951 1,904 - - 951 1,904
Tax asset/(liability)17,236 16,215 (977) (1,070) 16,259 15,145
Balance
1 Jul 2016
$000
Recognised in
profit or loss
$000
Recognised in
other
comprehensive
income
$000
Balance
30 Jun 2017
$000
Recognised in
profit or loss
$000
Recognised in other
comprehensive
income
$000
Balance
30 Jun 2018
$000
Group
Property, plant and equipment(2,335) 1,817 - (518) 356 - (162)
Intangible assets(435) (20) - (455) 358 - (97)
Employee benefits12,356 (332) (2,389) 9,635 2,015 (961) 10,689
Provisions4,115 981 - 5,096 (218) - 4,878
Other items633 183 571 1,387 (436) - 951
14,334 2,629 (1,818) 15,145 2,075 (961) 16,259
Unrecognised tax losses / Unrecognised temporary differences
-
the initial recognition of goodwill
-
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantially enacted at the
reporting date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be recognised.
Movement in deferred tax on temporary differences during the year
At 30 June 2018 the Group has $7.44 million of unrecognised deferred tax assets relating to unrecognised losses (2017: $6.37 million) and $2.64 million of unrecognised deferred tax assets relating to
unrecognised temporary differences (2017: $2.39 million). These unrecognised deferred tax assets relate to the Australian and South American subsidiaries of the Group.
Income Tax Accounting Policies
Income tax expense comprises current and deferred taxation and is recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income or equity, in
which case it is recognised directly in other comprehensive income or equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the reporting date, and any adjustment to tax payable with respect to previous periods.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is not recognised for:
differences relating to subsidiaries, associates and jointly controlled entities to the extent that they will probably not reverse in the foreseeable future.
Income tax using the Company's domestic tax rate
Effect of tax rates in foreign jurisdictions
Current year tax losses not recognised
Deferred tax on movement of actuarial gains/losses on employee benefit plans
The Group has $3.58 million imputation credits as at 30 June 2018 (2017: $0.32 million). This balance includes the third provisional tax instalment made on 27 July 2018 in respect of the year ended 30
June 2018.
10
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
9Discontinued Operations
10Earnings Per Share and Net Tangible Assets
Basic earnings per share
Number of shares
2018
000
2017
000
Weighted average number of ordinary shares 754,849 754,849
Number of ordinary shares754,849 754,849
2018
$000
2017
$000
Net Tangible Assets
Total assets758,626 702,148
Total liabilities(471,164) (412,437)
less intangible assets
(13,017) (9,129)
less deferred tax
(16,259) (15,145)
258,186 265,437
2018
$
2017
$
Net tangible assets per share0.342 0.352
Earnings per share0.025 0.061
11Cash and Financing Facilities
2018
$000
2017
$000
Cash and cash equivalents10,926 9,403
Current financing facilities(30,806) (26,719)
Term financing facilities(149,205) (110,925)
Net interest bearing debt(169,085) (128,241)
Go range of livestock product receivables
39,419 32,371
Net interest-bearing debt less Go livestock receivables
(129,666) (95,870)
Australia and New Zealand Facilities
-
-
-
-
-
South American Facilities
-
-
-
A committed facility of $17.73 million (USD 12.00 million) maturing on 29 June 2021.
Finance lease facilities of $0.23 million.
Separate to the club facility, the Group’s South American operations have various unsecured financing facilities that amounted to $19.99 million (USD 13.53 million) as at 30 June 2018.
Overdraft facilities of $9.59 million.
Guarantee and trade finance facilities of $10.40 million.
Finance lease facilities of $2.83 million.
The syndicated facilities fund the general corporate activities of the Group, the seasonal fluctuations in working capital, and the Go range of livestock product receivables.
Two of the Group’s wholly-owned Uruguayan subsidiaries (Wrightson Pas S.A. and Agrosan S.A.) are jointly and severally financed by a club structure. The club facilities contain various financial
covenants and restrictions that are standard for facilities of this nature. The club facilities are denominated in USD, secured by a mortgage over the logistics centre in Uruguay and provide:
An amortising logistics centre facility of $12.00 million (USD 8.13 million) maturing on 17 September 2022.
The Company amended and extended its syndicated facility agreement on 15 December 2017. The facility agreement provides bank facilities of $210.00 million. The agreement contains various
financial covenants and restrictions that are standard for facilities of this nature, including maximum permissible ratios for debt leverage and operating leverage. The Company has granted a general
security deed and mortgage over all its wholly-owned New Zealand and Australian assets to a security trust. These assets include the shares held in South American subsidiaries and equity accounted
investees. ANZ Bank New Zealand Limited acts as security trustee for the banking syndicate (ANZ Bank New Zealand Limited, Bank of China (New Zealand) Limited, Bank of New Zealand, Bank of
Tokyo-Mitsubishi UFJ, Ltd and Westpac New Zealand Limited).
The Company's bank syndicate facilities include:
A term debt facility of $150.00 million maturing on 31 July 2020.
A working capital facility of up to $60.00 million maturing on 31 July 2020.
The syndicated facility agreement also allows the Group, subject to certain conditions, to enter into additional facilities outside of the Company syndicated facility. The additional facilities are guaranteed
by the security trust. These facilities amounted to $22.82 million as at 30 June 2018 including:
The discontinued operations pertain to the Group's wholly owned subsidiary PGW Rural Capital Limited (PGWRC) which was established during 2012 to hold and recover certain excluded loans related
to the sale of the Group's finance subsidiary PGG Wrightson Finance Limited. As at 30 June 2018 one loan remained in PGWRC. During the period an unconditional sale and purchase agreement was
signed in respect of a property used as security for the loan with proceeds subsequently being received by the Group on 13 July 2018. The provision for finance doubtful debts was reassessed at 30
June 2018 in respect of the amount recoverable.
The calculation of basic earnings per share at 30 June 2018 was based on the profit/(loss) attributable to ordinary shareholders of $18,887,000 (2017:$46,311,000) by the weighted average number of
shares, 754,848,774 (2017: 754,848,774) on issue. There are no dilutive shares or options (2017: Nil).
Earnings per Share Accounting Policies
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to shareholders by the weighted average
number of shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to shareholders and the number of shares outstanding to include the effects of all
potential dilutive shares.
11
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
12Derivative Financial Instruments
2018
$000
2017
$000
Derivative assets held for risk management
Current827 3,528
Non-current20 427
847 3,955
Derivative liabilities held for risk management
Current(3,645) (991)
Non-current(966) (661)
(4,611) (1,652)
Net derivatives held for risk management(3,764) 2,303
Derivatives held for risk management
Derivative Financial Instruments Accounting Policies
13Go livestock product receivables
2018
$000
2017
$000
Go livestock receivables -less than one year
39,419 32,371
Go livestock receivables -greater than one year
- -
Less provision for doubtful debts - Go range of livestock receivables- -
39,419 32,371
The status of the Go range of livestock receivables at the reporting date is as follows:
Not impaired
2018
$000
Impaired
2018
$000
Not impaired
2017
$000
Impaired
2017
$000
Not past due - Go range of livestock receivables
39,419 - 32,371 -
Past due 0 - 90 days- - - -
Past due 91 - 365 days- - - -
Impairment- - - -
39,419 - 32,371 -
Derivative financial instruments are recognised initially at fair value and transaction costs are expensed immediately. Subsequent to initial recognition, derivative financial instruments are stated at fair
value. The gain or loss on re-measurement to fair value is recognised immediately in profit or loss.
The Group holds receivables in respect of its Go range of livestock products. Launched in November 2015, the Go range allow farmers to defer payment for the purchase of livestock. The
counterparty to the Go product is fully exposed to the risks and rewards of ownership. To mitigate credit risk the Group retains title to the livestock until sale. Fee income received in respect of the Go
range of livestock receivables are recognised by the Group as interest income over the respective contract period. Interest income on the Go range of livestock receivables is included within operating
revenue (see Note 2 Operating Revenue) of the Agency operating segment.
The Group uses interest rate swaps and options to hedge its exposure to changes in the market rates of variable and fixed interest rates.
The Group also uses forward foreign exchange contracts, spot foreign exchange contracts and foreign exchange options to manage its exposure to foreign currency fluctuations.
The Group uses derivative financial instruments to manage its exposure to interest rate and foreign currency risks arising from operational, financing and investment activities. In accordance with
Treasury policy, the Group does not hold or issue derivative instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
12
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
14Trade and Other Receivables
2018
$000
2017
$000
Accounts receivable213,262 193,233
Trade receivables due from related parties25,827 18,877
239,089 212,110
Less provision for doubtful debts(6,887) (6,358)
Net accounts receivable232,202 205,752
Other receivables and prepayments35,425 24,270
267,627 230,022
Analysis of movements in provision for doubtful debts
Balance at beginning of year(6,358) (6,072)
Movement in provision(529) (286)
Balance at end of year(6,887) (6,358)
The aging status of the accounts receivable at the reporting date is as follows:
Total debtors
2018
$000
Provision
2018
$000
Total debtors
2017
$000
Provision
2017
$000
Not past due192,533 (20) 163,641 -
Past due 1 - 30 days18,702 (95) 24,855 (18)
Past due 31 - 60 days12,391 (81) 8,332 (17)
Past due 61 - 90 days1,070 (32) 964 (28)
Past due 90 plus days14,393 (6,659) 14,318 (6,295)
239,089 (6,887) 212,110 (6,358)
Trade and Other Receivables Accounting Policies
Determination of Fair Values
Impairment of Trade Receivables
15 Inventory
2018
$000
2017
$000
Merchandise/finished goods266,471 258,536
Work in progress842 761
Less provision for inventory write down(4,775) (5,697)
262,538 253,600
Finished Goods
Wholesale Seeds
Accounts receivables include accrued interest. Specific provisions are maintained to cover identified doubtful debts.
During the year ended 30 June 2018, finished goods, work in progress, raw materials and consumables included in cost of sales in the Statement of Profit or Loss amounted to $783.99 million (2017:
$755.14 million) (see Note 3).
During the year ended 30 June 2018 inventories written down to net realisable value amounted to $2.34 million (2017: $1.94 million). The write-downs are included in cost of sales in the Statement of
Profit or Loss. Consideration is given to factors such as age, germination levels and quality when assessing the net realisable value of seeds inventory.
Inventories Accounting Policies
Raw materials and finished goods are stated at the lower of cost or net realisable value. Cost is determined on a weighted average cost basis, and, in the case of manufactured goods, includes direct
materials, labour and production overheads.
Wholesale seeds inventory is stated at the lower of cost or net realisable value and comprises costs of purchase and other direct costs incurred to bring the inventory to its present location and condition.
The Group has transacted with its related party Agimol Corporation S.A and its subsidiaries during the period ended 30 June 2018. The aggregate value of transactions during the period between the
Group and Agimol Corporation S.A. and its subsidiaries amounted to $23.16 million (2017: $28.03 million). The outstanding balance as at 30 June 2018 was $25.83 million (2017: $18.88 million). No
provision is held in respect of the outstanding balance (2017: Nil).
The Group has also transacted with its related party Fertimas S.A. during the period ended 30 June 2018. The aggregate value of transactions during the period between the Group and Fertimas S.A.
amounted to $16.52 million (2017: $12.78 million). The outstanding balance as at 30 June 2018 was Nil (2017: Nil).
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.
Trade receivables are considered past due when they have been operated outside of the normal key trade terms. When forming a view management considers the counterparty’s ability to pay, the level
of security and the risk of loss.
13
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
16
Group entities
Significant SubsidiariesDirect Parent
2018
%
2017
%
PGG Wrightson Seeds Holdings LimitedNew ZealandPGG Wrightson Limited100%100%
PGW Rural Capital LimitedNew ZealandPGG Wrightson Limited100%100%
PGG Wrightson Employee Benefits Plan Trustee LimitedNew ZealandPGG Wrightson Limited100%100%
PGG Wrightson Real Estate LimitedNew ZealandPGG Wrightson Limited100%100%
Agriculture New Zealand LimitedNew ZealandPGG Wrightson Limited100%100%
PGG Wrightson Trustee LimitedNew ZealandPGG Wrightson Limited100%100%
New ZealandPGG Wrightson Limited100%100%
AustraliaPGG Wrightson Limited100%100%
New ZealandPGG Wrightson Limited100%100%
Bloch & Behrens Wool (NZ) LimitedNew ZealandPGG Wrightson Limited100%100%
New ZealandPGG Wrightson Limited100%100%
New ZealandPGG Wrightson Investments Limited100%100%
PGG Wrightson Seeds New Zealand LimitedNew ZealandPGG Wrightson Seeds Holdings Limited100%100%
New ZealandPGG Wrightson Seeds Holdings Limited100%100%
PGG Wrightson Seeds Australia Holdings Pty LimitedAustraliaPGG Wrightson Seeds Holdings Limited100%100%
Grasslands Innovation LimitedNew ZealandPGG Wrightson Seeds Holdings Limited70%70%
PGG Wrightson Seeds LimitedNew ZealandPGG Wrightson Seeds New Zealand Limited100%100%
PGG Wrightson Consortia Research LimitedNew ZealandPGG Wrightson Seeds Limited100%100%
Agricom LimitedNew ZealandPGG Wrightson Seeds Limited100%100%
Wrightson Seeds LimitedNew ZealandPGG Wrightson Seeds Limited100%100%
PGG Wrightson Employee Benefits Plan LimitedNew ZealandPGG Wrightson Employee Benefits Plan Trustee Limited100%100%
PGG Wrightson Seeds (Australia) Pty LimitedAustraliaPGG Wrightson Seeds Australia Holdings Pty Limited100%100%
PGW AgriTech South America S.A.UruguayPGG Wrightson Seeds South America Holdings Limited 100%100%
Wrightson Pas S.A. UruguayPGG Wrightson Seeds South America Holdings Limited 100%100%
Juzay S.A.UruguayPGW AgriTech South America S.A.100%100%
Agrosan S.A.UruguayPGW AgriTech South America S.A.100%100%
PGG Wrightson Seeds Argentina S.A.ArgentinaPGW AgriTech South America S.A.100%100%
PGW Sementes LtdaBrazilPGW AgriTech South America S.A.100%100%
Hunker S.A. UruguayJuzay S.A.100%100%
Lanelle S.A. UruguayJuzay S.A.100%100%
Afinlux S.A. UruguayJuzay S.A.51%51%
Kroslyn S.A. LimitedUruguayAgrosan S.A. 100%100%
Escritorio Romualdo Rodriguez LtdaUruguayAfinlux S.A.51%51%
Ag Property Holdings Limited
PGG Wrightson Seeds South America Holdings Limited
Ownership interest
Country of Incorporation
AgriServices South America Limited
PGW AgriServices Australia Pty Limited
PGG Wrightson Investments Limited
NZ Agritrade Limited
14
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
16Group entities (continued)
Acquisition of Business
17Other Investments
2018
$000
2017
$000
Current investments
BioPacificVentures 30 30
Advances to equity accounted investees- 3,411
30 3,441
Non-current investments
Advances to equity accounted investees150 -
Sundry other investments2,370 1,906
2,520 1,906
Investment in BioPacificVentures
Advances to equity accounted investees
Sundry other investments including saleyards
Determination of Fair Values
18Intangible Assets
Software
$000
Trademarks,
Patents & Rights
$000
Total
$000
Cost
Balance at 1 July 201622,151 2,088 24,239
Additions4,154 160 4,314
Added as part of a business combination/amalgamation - 682 682
Disposals and reclassifications(7,720) - (7,720)
Effect of movement in exchange rates(5) - (5)
Balance at 30 June 201718,580 2,930 21,510
Balance at 1 July 201718,580 2,930 21,510
Additions10,412 221 10,633
- - -
Disposals and reclassifications- - -
Effect of movement in exchange rates23 43 66
Balance at 30 June 201829,015 3,194 32,209
Amortisation and impairment losses
Balance at 1 July 201616,416 744 17,160
Amortisation for the year2,451 490 2,941
Disposals and reclassifications(7,720) - (7,720)
Effect of movement in exchange rates(1) 1 -
Balance at 30 June 201711,146 1,235 12,381
Balance at 1 July 201711,146 1,235 12,381
Amortisation for the year3,600 527 4,127
Disposals and reclassifications- - -
Effect of movement in exchange rates22 21 43
Balance at 30 June 201814,768 1,783 16,551
Carrying amounts
At 1 July 20165,735 1,344 7,079
At 30 June 20177,434 1,695 9,129
At 1 July 20177,434 1,695 9,129
At 30 June 201814,247 1,411 15,658
The carrying amount includes software cost of $2.64 million included as a current asset (2017: Nil).
Sundry other investments including saleyards, which do not have a market price in an active market and whose fair value can not be reliably determined, are carried at cost.
Other Investments Accounting Policies
The fair value of financial assets at fair value through profit or loss and available-for-sale financial assets is determined by reference to the market price, unless other objective reliable evidence suggests
a different value. Other investments where no active market exists are held at historical cost.
Added as part of a business combination/amalgamation
On 31 August 2017 the Group acquired the assets and business of the Superior Seed Company (Superior) at Deniliquin in the Riverina Region of New South Wales. The purchase price was $1.06
million. The net assets acquired included plant and equipment, inventory and employee provisions. Superior is a seed production, cleaning and wholesale marketing business.
In 2005 the Group committed $14.00 million to an international fund established for investment in food and agriculture life sciences. The investment in BioPacificVentures had a total lifespan of 12 years
and matured in March 2017. The investors have agreed to continue with the fund manager in facilitating the wind down of the remaining investments held.
At 30 June 2018 $13.95 million has been drawn on the committed level of investment (30 June 2017: $13.95 million).
The non current advance is a loan to the jointly controlled entity Agri Optics New Zealand Limited. No interest is payable on the balance and no provision for doubtful debts was recorded against the
loan as at 30 June 2018.
During the period, the advance previously provided to the South American investee entity Fertimas S. A., was repaid and replaced with external bank funding. The Group supports this external bank
funding by way of guarantee. See Note 26.
15
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
18Intangible Assets continued
Software
Rights
Determination of Fair Values
Impairment
Manufacturing and production rights are finite life intangibles and are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over an estimated
useful life between 2 and 10 years. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period.
The fair value of intangible assets acquired in a business combination is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.
The carrying amounts of the Group's intangible assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the recoverable
amount of the asset is estimated. For intangible assets that have indefinite lives, the recoverable amount is estimated at each reporting date. An impairment loss is recognised in the profit or loss if the
carrying amount of an asset exceeds the recoverable amount.
Intangible Assets Accounting Policies
Software is a finite life intangible and is recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over an estimated useful life between 1 and 10
years. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period.
16
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
19
Property, Plant and Equipment
Land
$000
Buildings
$000
Plant and
equipment
$000
Capital works
project*
$000
Total
$000
Cost
Balance at 1 July 201621,835 52,686 109,412 4,345 188,278
Additions125 2,100 10,966 (336) 12,855
Added as part of a business combination/amalgamation - - - - -
Disposals and transfers to other asset classes(1,504) (11,589) (3,261) (5) (16,359)
(84) (637) (416) (1) (1,138)
Balance at 30 June 201720,372 42,560 116,701 4,003 183,636
Balance at 1 July 201720,372 42,560 116,701 4,003 183,636
Additions551 3,162 11,652 (181) 15,184
- 12 801 - 813
Disposals and transfers to other asset classes(169) (122) (2,399) - (2,690)
- (1,070) - - (1,070)
233 1,829 1,753 - 3,815
Balance at 30 June 201820,987 46,371 128,508 3,822 199,688
Depreciation and impairment losses
Balance at 1 July 2016- 5,710 57,565 - 63,275
Depreciation for the year- 1,132 6,660 - 7,792
Depreciation recovered to COGS- - 1,068 - 1,068
Disposals and transfers to other asset classes- (1,188) (4,373) - (5,561)
Effect of movements in exchange rates- (112) (191) - (303)
Balance at 30 June 2017- 5,542 60,729 - 66,271
Balance at 1 July 2017- 5,542 60,729 - 66,271
Depreciation for the year- 1,296 7,551 - 8,847
- - 1,068 - 1,068
Disposals and transfers to other asset classes- (82) (1,713) - (1,795)
- 171 906 - 1,077
Balance at 30 June 2018- 6,927 68,541 - 75,468
Carrying amounts
At 1 July 201621,835 46,976 51,847 4,345 125,003
At 30 June 201720,372 37,018 55,972 4,003 117,365
At 1 July 201720,372 37,018 55,972 4,003 117,365
At 30 June 201820,987 39,444 59,967 3,822 124,220
*Capital works projects are recorded net of transfers to other asset classes.
Capital gains on the sale of property, plant and equipment of $1.69 million were recognised in non-operating items in the current period (2017: $8.74 million).
Subsequent Costs
Borrowing Costs
Depreciation
Determination of Fair Values
Impairment
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to
the Group and its cost can be measured reliably. The costs of day-to-day servicing of property, plant and equipment is recognised in profit or loss as incurred.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. All other borrowing costs are expensed as
they are incurred.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each item of property, buildings, plant and equipment. Leased assets are depreciated over the shorter
of the lease term and their useful lives. Land is not depreciated. The estimated useful lives for the current and comparative periods are between 2 and 40 years for plant and equipment and 50 years for
buildings. Depreciation methods, useful lives and residual values are reassessed at reporting date.
The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which the property
could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion. The market value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items.
The carrying amounts of the Group's property, plant & equipment assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then
the recoverable amount of the asset is estimated. An impairment loss is recognised in the profit or loss if the carrying amount of an asset exceeds the recoverable amount.
Effect of movements in exchange rates
Depreciation recovered to COGS
Effect of movements in exchange rates
Property, Plant & Equipment Accounting Policies
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly
attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. Purchased software that
is integral to the functionality of the related equipment is capitalised as part of that equipment.
Effect of movements in exchange rates
Added as part of a business combination/amalgamation
Impairment
17
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
20Trade and Other Payables
2018
$000
2017
$000
Trade creditors147,134 132,668
Trade payables due to related parties4,822 5,002
Loyalty reward programme1,177 1,318
Deposits received in advance3,196 3,589
Accruals and other liabilities81,725 87,676
Employee entitlements 31,163 22,946
269,217 253,199
Payable within 12 months267,096 248,290
Payable beyond 12 months2,121 4,909
269,217 253,199
Holidays Act 2003 - Remediation Costs
21Defined Benefit Asset / Liability
2018
$000
2017
$000
Present value of funded obligations(66,814) (71,106)
Fair value of plan assets59,092 58,835
Net defined benefit asset / (liability)(7,722) (12,271)
ESCT on committed contributions - short-term(905) (942)
ESCT on committed contributions - long-term(1,947) (2,614)
Total defined benefit asset / (liability)(10,574) (15,827)
Group / Company
Plan assets consist of:
20182017
Equities59%64%
Fixed interest31%28%
Cash10%8%
100%100%
Actuarial Assumptions:
Principal actuarial assumptions at the reporting date (expressed as weighted averages):
20182017
Discount rate used (10 year New Zealand Government Bond rate)2.85%2.97%
Inflation2.00%2.00%
Future salary increases3.00%3.00%
Future pension increases2.00%2.00%
Longevity at age 65 for current pensioners
20182017
Males21 21
Females24 24
Longevity at age 65 for current members aged 45
Males24 24
Females28 28
Sensitivity analysis
Change in assumption
Impact on DBO
with increase in
assumption
$000
Impact on DBO
with decrease in
assumption
$000
Impact on DBO
with increase in
assumption
$000
Impact on DBO
with decrease
in assumption
$000
Discount rate (0.50% movement)1,403 (1,537) 1,635 (1,778)
Salary growth rate (0.50% movement)(200) 200 (284) 284
Pension growth rate (0.25% movement)(601) 601 (711) 640
Life expectancy (1 year movement)(1,470) 1,470 (1,493) 1,493
Historical information
2018
$000
2017
$000
2016
$000
2015
$000
2014
$000
Present value of the defined benefit obligation(66,814) (71,106) (73,417) (72,153) (68,330)
Fair value of plan assets59,092 58,835 52,702 57,498 54,802
(Deficit) / surplus in the plan(7,722) (12,271) (20,715) (14,655) (13,528)
The Group expects to pay $2.94 million in contributions to defined benefit plans in 2019 (2018: $3.02 million). Member contributions are expected to be $0.86 million (2018: $0.92 million).
The sensitivity of the defined benefit obligation (DBO) to changes in the weighted principal assumption is:
20182017
As at 30 June 2018 the weighted average duration of the defined benefit obligation was 8.7 years for the PGG Wrightson Employment Benefits Plan (2017: 8.5 years).
Plan assets included exposure to the Company's ordinary shares of Nil (2017: Nil).
Assumptions regarding future mortality are based on published statistics and mortality tables. The current longevities underlying the values of the defined benefit obligation at the reporting date were as
follows:
During the period the Group recognised an $8.06 million provision for remediation costs of historical liabilities under the Holidays Act 2003. The Group has engaged the services of an external advisor
and a law firm to assist in determining the level of provision. Work on determining the final liability is not yet complete. The provision is included within Employee entitlements above and represents
Management’s best estimate of the remediation costs.
The Group makes contributions to the PGG Wrightson Employee Benefits Plan, a defined benefit plan that provides a range of superannuation and insurance benefits for employees and former
employees. The defined benefit plan is not open to new members. The plan's retired employees are entitled to receive an annual pension payment payable on their life and in some cases on the life of
a surviving spouse.
18
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
21Defined Benefit Asset / Liability (continued)
Movement in the liability for defined benefit obligations:
2018
$000
2017
$000
Liability for defined benefit obligations at 1 July71,106 73,417
Benefits paid by the plan(8,914) (6,010)
Current service costs858 989
Interest costs 2,010 1,579
Member contributions1,170 1,199
Actuarial (gains)/losses recognised in other comprehensive income arising from:
(Gains)/losses from change in financial assumptions510 (2,197)
Experience (gains)/losses74 2,129
Liability for defined benefit obligations at 30 June66,814 71,106
Movement in plan assets:
Fair value of plan assets at 1 July58,835 52,702
Contributions paid into the plan3,011 5,920
Member contributions1,170 1,199
Benefits paid by the plan(8,914) (6,010)
Current service costs- -
Interest costs1,677 1,199
Other Actuarial items recognised in other comprehensive income:
Expected return on plan assets 3,313 3,825
Fair value of plan assets at 30 June59,092 58,835
Expense recognised in profit or loss:
Current service costs858 989
Interest333 380
1,191 1,369
Recognised in non operating items142 649
Recognised in Employee Benefit Expense1,049 720
1,191 1,369
Movements recognised in equity:
Cumulative gains/(losses) at 1 July(34,645) (36,397)
Net profit and loss impact from current period costs(1,191) (1,369)
Gains /(losses) recognised during the year2,729 3,893
ESCT provision17 (772)
Cumulative gains/(losses) at 30 June(33,090) (34,645)
Provisions made with respect to employee benefits which are not expected to be settled within twelve months are measured as the present value of the estimated future cash outflows to be made by the
Group with respect to services provided by employees up to reporting date.
Employee Benefits Accounting Policies
The Group's net obligation with respect to defined benefit pension plans is calculated by estimating the future benefit that employees have earned in return for their service in the current and prior
periods. That benefit is discounted to determine its present value, and any unrecognised past service costs and the fair value of any plan assets is deducted. The discount rate is the yield at the reporting
date on bonds that have maturity dates approximating the terms of the Group's obligations. The calculation is performed by a qualified actuary using the projected unit credit method. When the
calculation results in a benefit to the Group, the recognised asset is limited to the lower of the net assets of the plan or the current value of the contributions holiday that is expected to be generated.
Actuarial gains and losses and the expected return on plan assets are recognised directly in other comprehensive income and the defined benefit plan reserve in equity.
Short-term employee benefit obligations are measured on an undiscounted basis and expensed as the related service is provided. A provision is recognised for the amount of outstanding short-term
benefits at each reporting date.
19
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
22
Financial Instruments
Liquidity Risk
-
-
-
The objectives of the Group's funding and liquidity policy is to:
Ensure all financial obligations are met when due;
Provide adequate protection, even under crisis scenarios; and
Achieve competitive funding within the limitations of liquidity requirements.
The Group manages this risk by forecasting daily cash requirements, forecasting future funding requirements and maintaining an adequate liquidity buffer.
The Group is committed to the management of risk to achieve sustainability of service, employment and profits, and therefore, takes on controlled amounts of risk when considered appropriate.
The primary risks are those of liquidity, market (foreign currency, price and interest rate), funding and credit risk.
The Board of Directors are responsible for the review and ratification of the Group's systems of risk management, internal compliance and control, code of conduct and legal compliance.
The Board maintains a formal set of delegated authorities (including policies for credit and treasury), that clearly define the responsibilities delegated to Management and those retained by the Board.
The Board approves these delegated authorities and reviews them annually.
Liquidity risk is the risk that the Group will encounter difficulties in raising funds at short notice to meet commitments associated with financial instruments. The Group monitors its liquidity daily, weekly
and monthly and maintains appropriate liquid assets and committed bank funding facilities to meet all obligations in a timely and cost efficient manner. Management of liquidity risk is designed to ensure
that the Group has the ability to meet financial obligations as they fall due.
20
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
22
Financial Instruments (continued)
Market Risk
Foreign Currency Risk
Interest Rate Risk
Funding Risk
Credit Risk
-
-
Capital Management
Sensitivity Analysis
2018
$000
2017
$000
2018
$000
2017
$000
Impact on net profit after tax(1,614)
(1,418)
1,610
1,421
Members’ equity(1,614)
(1,418)
1,610
1,421
Quantitative disclosures
(a) Liquidity Risk - Contractual Maturity Analysis
2018
Within 12
months 1 to 5 years Beyond 5 years
Contractual cash
flowBalance Sheet
Liabilities
Debt41,041 163,231 - 204,272 180,011
Derivative financial instruments3,645 966 - 4,611 4,611
Trade and other payables151,956 - - 151,956 151,956
196,642 164,197 - 360,839 336,578
2017
Liabilities
Debt33,375 123,195 3,487 160,057 137,644
Derivative financial instruments991 661 - 1,652 1,652
Trade and other payables137,670 - - 137,670 137,670
172,036 123,856 3,487 299,379 276,966
(b) Liquidity Risk - Expected Maturity Analysis
The sensitivity of net profit after tax for the period to 30 June 2018, and shareholders equity at that date, to reasonably possible changes in conditions is as follows:
Interest rates increase by 1%Interest rates decrease by 1%
The stress test uses the existing balance sheet interest rate mismatch against the cumulative mismatch between repricing assets and liabilities out from one to five years. Other market risks such as
pricing and foreign exchange are not considered likely to lead to material change over the next reporting period. For this reason sensitivity analysis of these market risks is not included.
The following tables analyse the Group's financial assets and financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date
(reported on an undiscounted basis). History demonstrates that such accounts provide a stable source of long term funding for the Group.
The expected cash flows of the Group's finance receivables equal their contractual cash flows.
Credit risk is the potential for loss that could occur as a result of a counterparty failing to discharge its obligations. This may be due to drought, bio-security issues or volatility in commodity prices.
Management formally reports on all aspects of key risks to the Audit Committee at least two times each year. In addition, the following management committees review and manage key risks:
The Senior Management Team meets regularly to consider new and emerging risks, reviews actions required to manage and mitigate key risks, and monitors progress.
The Group has a Credit Committee, comprising of management appointees, which meets regularly as required to review credit risk, new loans and provisioning.
The capital of the Group consists of share capital, reserves, and retained earnings.
The policy of the Group is to maintain a strong capital base so as to maintain investor, creditor and market confidence while providing the ability to develop future business initiatives. In addition, external
funding arrangements currently limit the Group's ability to pay dividends due to debt ratio requirements. This policy is reviewed regularly by the Board and has not been changed during the period.
The Treasury policy of the Group effectively insulates earnings from the effect of short-term fluctuations in either foreign exchange or interest rates. Over the longer term however, permanent changes in
foreign exchange or interest rates will have an impact on profit.
The Group undertakes transactions denominated in foreign currencies and exposure to movements in foreign currency arises from these activities. It is the Group's policy to hedge foreign currency risks
as they arise. In some circumstances foreign exchange options are used to hedge potential foreign exchange risk. The Group uses forward, spot foreign exchange contracts and foreign exchange
options to manage these exposures.
The translation of independent foreign operations into the Group financial statements is not hedged, apart from the seasonal working capital exposure to PGG Wrightson Seeds (Australia) Pty Limited
which is hedged with foreign exchange contracts.
Interest rate risk is the risk that the value of financial instruments and the interest margin will fluctuate as a result of changes in market interest rates. The risk is that financial assets may be repriced at a
different time and / or by a different amount than financial liabilities.
This risk is managed by operating within approved policy limits using an interest rate duration approach.
Floating rate borrowings are used for general funding activities. Interest rate swaps, interest rate options and forward rate agreements are used to hedge the floating rate exposure as deemed
appropriate. The Group had $78.0 million of interest rate derivatives at balance date (2017: $93.0 million).
Funding risk is the risk of over-reliance on a funding source to the extent that a change in that funding source could increase overall funding costs or cause difficulty in raising funds. The Group has a
policy of funding diversification. The funding policy augments the Group's liquidity policy with it's aim to ensure the Group has a stable diversified funding base without over-reliance on any one market
sector.
Market risk is the potential for change in the value of balance sheet positions caused by a change in the value, volatility or relationship between market risks and prices. Market risk arises from the
mismatch between assets and liabilities, both on and off balance sheet. Market risk includes price, foreign currency and interest rate risk which are explained as follows:
21
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
22
Financial Instruments (continued)
(c) Foreign Currency Exposure Risk
The Group's exposure to foreign currency risk can be summarised as:
2018
GBP
NZ$000
USD
NZ$000
AUD
NZ$000
Euro
NZ$000
Cash and cash equivalents5 19 9 19
Trade and other receivables6,830 50,406 10,702 55,627
Debt- (5,908) - -
Trade and other payables(119) (5,363) (2,704) (1,565)
Net balance sheet position6,716 39,154 8,007 54,081
Forward exchange contracts
Notional forward exchange cover6,711 45,043 7,998 54,062
Net unhedged position5 (5,889) 9 19
2017
Cash and cash equivalents2 4,819 1,378 17
Trade and other receivables7,683 39,114 23,040 44,837
Debt- (41,871) - -
Trade and other payables(141) (9,582) (2,823) (7,285)
Net balance sheet position7,544 (7,520) 21,595 37,569
Forward exchange contracts
Notional forward exchange cover7,542 29,562 20,243 37,556
Net unhedged position2 (37,082) 1,352 13
(d) Interest Rate Repricing Schedule
2018
Within
12 months
$000
1 to 2 years
$000
Over 2 years
$000
Non interest
bearing
$000
Total
$000
Liabilities
Debt
180,011 -
-
-
180,011
Derivative financial instruments
(63,000) 15,000 48,000
4,611 4,611
Trade and other payables
- - -
151,956 151,956
117,011 15,000 48,000 156,567 336,578
2017
Liabilities
Debt137,644 - - - 137,644
Derivative financial instruments(78,000) 15,000
63,000
1,652 1,652
Trade and other payables- - - 137,670 137,670
59,644 15,000 63,000 139,322 276,966
The net balance sheet positions for the Group in AUD and USD include cash, trade and other receivables, and trade and other payables for the Australian and South American domiciled subsidiary
companies and are therefore not hedged.
The following tables include the Group's liabilities at their carrying amounts, categorised by the earlier of contractual repricing or maturity dates.
22
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
22
Financial Instruments (continued)
(e) Accounting classifications and fair values
The tables below set out the Group's classification of each class of financial assets and liabilities, and their fair values.
2018
Designated at
fair value
through other
comprehensive
income
$000
Designated at fair
value through
profit and loss
$000
Other amortised
cost
$000
Total carrying
amount
$000
Fair value
$000
Assets
Cash and cash equivalents
- - 10,926
10,926
10,926
Derivative financial instruments
- 847 -
847
847
Trade and other receivables
- -
232,202 232,202 232,202
Other investments30
-
2,370 2,400 2,400
Go livestock receivables
-
-
39,419 39,419 39,419
Finance receivables-
-
733 733 733
30 847 285,650 286,527 286,527
Liabilities
Derivative financial instruments4,611
-
4,611 4,611
Trade and other payables
- -
151,956 151,956 151,956
Debt
- -
180,011 180,011 180,011
- 4,611 331,967 336,578 336,578
2017
Assets
Cash and cash equivalents- - 9,403 9,403 9,403
Derivative financial instruments- 3,955 - 3,955 3,955
Trade and other receivables- - 205,752 205,752 205,752
Other investments30 - 5,317 5,347 5,347
Go livestock receivables
- - 32,371 32,371 32,371
Finance receivables- - - - -
30 3,955 252,843 256,828 256,828
Liabilities
Derivative financial instruments1,652 - 1,652 1,652
Trade and other payables- - 137,670 137,670 137,670
Debt- - 137,644 137,644 137,644
- 1,652 275,314 276,966 276,966
Fair value hierarchy
-
-
-
2018
Note
Level 1
$000
Level 2
$000
Level 3
$000
Total
$000
Assets
Derivative financial instruments- 847 - 847
Other investments17 - - 30 30
- 847 30 877
Liabilities
Derivative financial instruments- 4,611 - 4,611
- 4,611 - 4,611
2017
Assets
Derivative financial instruments- 3,955 - 3,955
Other investments17 - - 30 30
- 3,955 30 3,985
Liabilities
Derivative financial instruments- 1,652 - 1,652
- 1,652 - 1,652
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
There have been no material movements between the fair value hierarchy during the year ended 30 June 2018.
The Group's banking facilities are based on floating interest rates. Therefore the fair value of the banking facilities equals the carrying value.
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie. as prices) or indirectly (ie. derived from prices)
23
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
22
Financial Instruments (continued)
(f) Credit Risk
Total trade and Go livestock receivables
2018
$000
2017
$000
New Zealand179,598 158,936
Australia10,848 13,314
South America80,410 65,873
270,856 238,123
Concentrations of Credit Risk
(i) Non-derivative Financial Assets
-the asset is held within a business model with an objective to hold assets in order to collect contractual cash flows; and
-the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest.
Financial assets measured at fair value
Trade and Other Receivables
(ii) Non-derivative Financial Liabilities
Interest-bearing Borrowings
Trade and Other Payables
Determination of Fair Values for Derivatives
Determination of Fair Values for Non-derivative Financial Instruments
23Operating Leases
2018
$000
2017
$000
Non-cancellable operating lease rentals are payable as follows:
Within one year26,869 25,376
Between one and five years68,281 56,981
Beyond five years42,976 33,332
138,126 115,689
The Group also leases and subleases land and buildings from which it conducts operations. These leases range in length from one to fifteen years with various rights of renewal. Where surplus
properties are unable to be exited, sublease revenue is obtained where possible on a short-term temporary basis. During the year ended 30 June 2018 sublease revenue totalling $1.18 million (2017:
$1.20 million) was received.
Determination of Fair Values
The fair value of forward exchange contracts is based on broker quotes, if available. If broker quotes are not available, then fair value is estimated by discounting the difference between the contractual
forward price and the current forward price at the reporting date for the residual maturity of the contract using a risk-free interest rate based on government bonds.
The fair value of interest rate swaps is based on broker quotes. These quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract
using market interest rates for a similar instrument at the reporting date.
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
For finance leases, the market rate of interest is determined by reference to similar lease agreements.
The Group leases a fleet of vehicles for use by employees, agents and representatives. Leases are typically for a period of between four and six years.
The Group leases office and computer equipment. Leases are typically for a period of four years.
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly liquid investments with maturities of three months or less. Bank overdrafts that are repayable on
demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents.
Trade and other receivables are stated at their amortised cost less impairment losses.
Interest-bearing borrowings are classified as other financial liabilities and are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these
liabilities are measured at amortised cost using the effective interest rate method.
Trade and other payables are stated at cost.
A financial asset is subsequently measured at amortised cost using the effective interest method and net of any impairment loss, if:
Financial assets other than those classified as financial assets measured at amortised cost are subsequently measured at fair value with all changes recognised in profit or loss.
However, for investments in equity instruments that are not held for trading, the Group may elect at initial recognition to present gains and losses through other comprehensive income. For instruments
measured at fair value through other comprehensive income gains and losses are never reclassified to profit and loss and no impairments are recognised in profit and loss. Dividends earned from such
investments are recognised in profit and loss unless the dividends clearly represent a repayment of part of the cost of investment.
Cash and cash equivalents
The Group initially recognises financial assets on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
Financial assets are initially measured at fair value. If the financial asset is not subsequently measured at fair value through profit and loss, the initial investment includes transaction costs that are
directly attributable to the asset's acquisition or origination. The Group subsequently measures financial assets at either fair value or amortised cost.
Financial assets measured at amortised cost
The carrying amount of financial assets represents the Group's maximum credit exposure. The Group's maximum credit exposure to credit risk for receivables by geographic regions is as follows:
Financial instruments which potentially subject the Group to concentrations of credit risk principally consist of bank balances, advances, trade debtors, and forward foreign exchange contracts. The
Group places its cash and short term investments with three major trading banks. Concentrations of credit risk with respect to advances are limited due to the large number of customers included in the
Group's farming customer base in New Zealand.
Financial Instruments Accounting Policies
Non-derivative financial assets comprise investments in equity and debt securities, finance receivables, trade and other receivables, cash and cash equivalents and intercompany advances. The Group
early adopted NZ IFRS 9 (2009) Financial Instruments from 1 January 2012. NZ IFRS 9 (2009) requires that an entity classifies its financial assets at either amortised cost or fair value depending on the
entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The Group early adopted IFRS 9 (2013) Financial Instruments from 1
January 2015. IFRS 9 (2013) provides amended general hedge accounting requirements.
24
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
24
Seasonality of Operations
25 Commitments
Note
2018
$000
2017
$000
There are commitments with respect to:
Capital expenditure not provided for 2,463 1,432
Investment in BioPacificVentures1751 51
Contributions to Primary Growth Partnership277 867
2,791 2,350
Primary Growth Partnership - Seed and Nutritional Technology Development
Forward purchase commitments
26 Contingent Liabilities
There are contingent liabilities with respect to:
2018
$000
2017
$000
Guarantee3,693 -
PGG Wrightson Loyalty Reward Programme102 140
3,795 140
Guarantees
PGG Wrightson Loyalty Reward Programme
27Related Parties
Parent and ultimate controlling party
Transactions with key management personnel
Key management personnel compensation comprised:
2018
$000
2017
$000
Short-term employee benefits6,
079 7,924
Post-employment benefits151 121
Termination benefits- -
6,230 8,045
Other Transactions with Key Management Personnel
Key Management Personnel/Director
Transaction
Value
2018
$000
Balance
Outstanding
2018
$000
Transaction
Value
2017
$000
Balance
Outstanding
2017
$000
John Nichol
2 - 4 -
Trevor Burt
184 - 106 -
Mark Dewdney (resigned 31 October 2017)
416 - 543 20
David Green
87 - 104 -
Stephen Guerin
9 - 16 -
John McKenzie
3,345 (593) 5,351 (382)
Peter Newbold
Purchase of retail goods35 3 25 -
Cedric Bayly (retired 31 October 2017)
Purchase of retail goods1 - 9 -
Transaction
Purchase of retail goods
Purchase of retail goods and livestock transactions
Purchase of retail goods and livestock transactions
Purchase of retail goods and rental receipts
Purchase of retail goods and livestock transactions
Purchase of retail goods, sale of seed under production contracts, sale of
wool, water services and livestock transactions
Losses are not expected to arise from these contingent liabilities.
The immediate parent of the Group is Agria (Singapore) Pte Ltd and the ultimate controlling party of the Group is Agria Corporation.
Directors fees incurred during the year are disclosed in Note 4 Other Operating Expenses.
Several Directors, Senior Executives or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these
entities. A number of these entities transacted with the Group during the reporting period. The terms and conditions of these transactions with Key Management Personnel and their related parties were
no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-Key Management Personnel related entities on an arm's length basis.
The aggregate value of transactions and outstanding balances relating to Directors, Senior Executives and entities over which they have control or significant influence were as follows:
The Group is subject to significant seasonal fluctuations. The Retail business is weighted towards the first half of the financial year as demand for New Zealand farming inputs are generally weighted
towards the Spring season. Livestock and Seed and Grain activities are significantly weighted to the second half of the financial year. Seed and Grain revenues reflect the fact the Group operates in
geographical zones that suit Autumn harvesting and sowing. New Zealand generally has Spring calving and lambing and so Livestock trading is weighted towards the second half of the financial year in
order for farmers to maximize their incomes. Other business units have similar but less material cycles. The Group recognises that this seasonality is the nature of the industry and plans and manages
its business accordingly.
The Group announced on 18 February 2013 that it had completed the contracting process for the Primary Growth Partnership (PGP) programme with the Ministry of Primary Industries. The PGP
programme is a Seed and Nutritional Technology Development Programme that aims to deliver innovative forages for New Zealand farms. As a result of entering into the partnership the Group is
committed to contributions to the partnership over the six year life of the programme which ends on 31 December 2018. The total commitment in respect of the programme is $3.61 million (2017: total
commitment of $3.61 million). As at 30 June 2018 total contributions of $3.33 million (2017: $2.74 million) have been made to the programme.
The Group as part of its ordinary course of business enters into forward purchase agreements with seed and wool growers. These commitments extend for periods of up to 3 years. These
commitments are at varying stage of execution, therefore there remains uncertainty associated with yield, quality and market price. The Group is unable to sufficiently quantify the value of these
commitments.
The guarantee is a standby letter of credit supporting external bank funding of the jointly controlled entity Fertimas S.A. Funding was previously provided by the respective joint venture partners. See
Note 17.
A provision is retained for the expected level of points redemption from the PGG Wrightson Loyalty Reward Programme. A contingent liability of $0.10 million represents the balance of live points that do
not form part of the provision (2017: $0.14 million).
25
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
28Reporting Entity
29Basis of Preparation
Statement of Compliance
Basis of Measurement
-
-
-
-
-
Functional and Presentation Currency
Use of Estimates and Judgements
NoteJudgement
5Carrying value of equity accounted investees
5Reassessment of earn-out provision
14Carrying value of trade and other receivables
15Valuation of seeds inventory
20Assessment of Holidays Act 2003 remediation costs
Certain comparative amounts have been reclassified to conform with the current period's presentation.
biological assets are measured at fair value less point-of-sale costs
assets classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell.
These financial statements are presented in New Zealand dollars ($), which is the Group's functional currency. All financial information presented in New Zealand dollars has been rounded to the nearest
thousand.
The preparation of the consolidated financial statements in conformity with NZ IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates and assumptions.
Estimates and assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following
notes:
The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice ("NZ GAAP"). They comply with the New Zealand equivalents to International
Financial Reporting Standards ("NZ IFRS") and other applicable Financial Reporting Standards as applicable for profit oriented entities. The financial statements comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board, as applicable for profit oriented entities.
These statements were approved by the Board of Directors on 13 August 2018.
The financial statements have been prepared on the historical cost basis except for the following:
derivative financial instruments are measured at fair value
financial instruments at fair value through profit or loss are measured at fair value
investments are measured at fair value
PGG Wrightson Limited (the "Company") is a company domiciled in New Zealand, registered under the Companies Act 1993 and listed on the New Zealand Stock Exchange. The Company is an FMC
Entity in terms of the Financial Markets Conduct Act 2013.
Financial statements of PGG Wrightson Limited for the year ended 30 June 2018 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in associates
and jointly controlled entities. Financial statements have been prepared in accordance with the requirements of the Financial Markets Conduct Act 2013 and the Financial Reporting Act 2013.
The Group is primarily involved in the provision of goods and services within the agricultural sector.
26
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
30Other Significant Accounting Policies
(a)
Subsidiaries
Transactions Eliminated on Consolidation
(b)
Foreign Currency Transactions
Foreign Operations
(c)
Impairment of Equity Instruments
Non-financial Assets
An impairment loss is recognised if the carrying amount of an asset or the cash-generating unit to which it relates, exceeds the recoverable amount. A cash-generating unit is the smallest identifiable
asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in profit or loss.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future 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 or unit.
In determining the fair value using value in use, regard is given to external market evidence.
The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of assets is impaired. In the case of equity instruments that are not held for trading, the
Group may elect to present gains and losses through other comprehensive income. If no election is made fair value gains and losses are recognised in profit or loss.
The recoverable amount of the Group's investments in held-to-maturity debt instruments and receivables carried at amortised cost is calculated as the present value of estimated future cash flows,
discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with short duration are not discounted.
Impairment losses on an individual basis are determined by an evaluation of the exposures on an instrument by instrument basis. All individual instruments that are considered significant are subject to
this approach.
All known losses are expensed in the period in which it becomes apparent that the receivables are not collectable.
The carrying amounts of the Group's non-financial assets, other than biological assets, inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists then the recoverable amount of the asset is estimated.
Transactions in foreign currencies are translated to the respective functional currencies of the group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are retranslated to the functional currency at that date. The foreign currency gain or loss on monetary items is the difference between amortised
cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at
the end of the period.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that fair value was
determined. Foreign currency differences arising on retranslation are recognised in profit or loss.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to New Zealand dollars at the exchange rates at the reporting date. The
income and expenses of foreign operations are translated to New Zealand dollars at exchange rates at the date of the transactions.
Foreign currency differences are recognised in other comprehensive income and the Foreign Currency Translation Reserve ("FCTR"). When a foreign operation is disposed of, in part or in full, the
relevant amount in the FCTR is transferred to profit or loss.
Impairment
The carrying value of the Group's assets are reviewed at each reporting date to determine whether there is any objective evidence of impairment. An impairment loss is recognised whenever the
carrying amount exceeds its recoverable amount. Impairment losses directly reduce the carrying value of assets and are recognised in profit or loss unless the asset is carried at a revalued amount in
accordance with another standard.
The accounting policies set out in these financial statements have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by
Group entities.
Basis of Consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases.
Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from
transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of impairment.
Foreign Currencies
27
PGG Wrightson Limited
Additional financial disclosures including notes to the accounts continued
For the year ended 30 June 2018
30Other Significant Accounting Policies (continued)
(d)
(e )
Research and Development
(f)
(g)
-
-
(h)
-
-
-
-
Standards and Interpretations That Have Been Issued or Amended But Are Not Yet Effective
A number of new standards and interpretations are not yet effective for the year ended 30 June 2018 and have not been applied in preparing these consolidated financial statements. These standards
are:
IFRS 9 (2014) Financial Instruments has been issued. The final component of IFRS 9 (2014) introduces a new expected credit loss model for calculating impairment. IFRS 9 (2014) is effective
for annual periods beginning on or after 1 January 2018. The Group does not plan to adopt IFRS 9 (2014) early. Initial review has determined that this new standard will not have a significant
financial impact on the Group's financial statements.
IFRS 15 Revenue from Contracts with Customers has been issued. This standard introduced a new revenue recognition model for contracts with customers. The standard is effective for
annual periods beginning on or after 1 January 2018. Initial review has determined that this new standard will not have a significant financial impact on the Group's financial statements.
IFRS 16 Leases has been issued. This standard eliminates the classification of leases as either operating leases or finance leases. The standard uses a single lessee model which requires a
lessee to recognise on the Statement of Financial Position assets and liabilities for all leases with a term of more than 12 months. The standard is effective for annual periods beginning on or
after 1 January 2019. The Group does not plan to adopt IFRS 16 early. Initial review has determined that this new standard will likely have a significant financial impact on both the balance
sheet and profit and loss given the extent of operating leases the Group is exposed to.
A variety of minor improvements to standards have been made in order to clarify various treatments of specific transactions. These are not expected to have an impact on the Group's financial
results.
Deposits received less withdrawals are netted as the cash flows are received and disbursed on behalf of customers and reflect the activities of the customers rather than those of the Group.
Disclosure of non-GAAP financial information
Non-GAAP reporting measures have been presented in the Statement of Profit or Loss or referenced to in the notes to the financial statements. The following non-GAAP measures are relevant to the
understanding of the Group financial performance:
EBITDA (a non-GAAP measure) represents earnings before net interest and finance costs, income tax, depreciation, amortisation and the results from discontinued operations.
Operating EBITDA (a non-GAAP measure) represents earnings before net interest and finance costs, income tax, depreciation, amortisation, results from discontinued operations, fair value
adjustments and non-operating items.
The PGW Board and management consider the Operating EBITDA measure to promote a more meaningful communication of financial information. This measure is also the required information for
certain stakeholders and for internal management reporting and review.
The principal research and development activities are in the development of systems, processes and new seed cultivars.
Research expenditure on the development of new systems and processes is recognised in profit or loss as incurred. Development activities involve a plan or design for the production of new or
substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the
cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss when incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.
Research and development expenditure on the development of new seed cultivars is recognised in profit or loss as incurred. Development costs of seed cultivars are substantially indistinguishable from
the cultivar research costs.
Statement of Cash Flows
The statement of cash flows has been prepared using the direct approach modified by the netting of certain items as disclosed below.
Determination of Fair Values
A number of the Group's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for
measurement and/or disclosure purposes based on the methods outlined in the respective notes for the assets and liabilities. Where applicable, further information about the assumptions made is
disclosed in the notes specific to that asset or liability.
Intangible Assets
28
PGG Wrightson Limited
Statement of Changes in Equity
For the year ended 30 June 2018
Share capital
Foreign
currency
translation
reserve
Realised
capital and
other reserves
Revaluation
reserve
Hedging
reserve
Defined benefit
plan reserve Fair value reserve
Retained
earnings
Non-controlling
interest Total equity
$000$000$000$000$000$000$000$000$000$000
Balance at 1 July 2016606,324 (8,749) 23,443 556 1,468 (17,170) 2,412 (336,028) 2,043 274,299
Profit or loss- - - - - - - 45,607 704 46,311
Other comprehensive income
Foreign currency translation differences- (1,532) -
- - -
- - 363 (1,169)
- - -
-
-
-
240 - - 240
- - -
- (1,468) -
- - - (1,468)
- - -
- - 732
- - - 732
Total other comprehensive income- (1,532) - - (1,468) 732 240 - 363 (1,665)
- (1,532) - - (1,468) 732 240 45,607 1,067 44,646
Dividends to shareholders
-
- -
- - -
-
(28,588) (646) (29,234)
- - - - - - - (28,588) (646) (29,234)
- - - - - 2,351 (5,239) 2,888 -
-
Balance at 30 June 2017606,324 (10,281) 23,443 556 - (14,087) (2,587) (316,121) 2,464 289,711
Balance at 1 July 2017606,324 (10,281) 23,443 556 - (14,087) (2,587) (316,121) 2,464 289,711
Profit or loss- - - - - - - 17,964 923 18,887
Other comprehensive income
Foreign currency translation differences- 6,558
- - - -
- - (150) 6,408
- -
- -
-
-
- - - -
- -
- - - -
- - - -
- -
- - -
1,785 - - - 1,785
Total other comprehensive income- 6,558 - - - 1,785 - - (150) 8,193
- 6,558 - - - 1,785 - 17,964 773 27,080
Dividends to shareholders
- - - - -
-
(28,570) (759)
(29,329)
- - - - - - - (28,570) (759) (29,329)
- - - - - 3,260 (3,260) -
-
Balance at 30 June 2018606,324 (3,723) 23,443 556 - (9,042) (2,587) (329,987) 2,478 287,462
Contributions by and distributions to
shareholders
Total contributions by and distributions to
shareholders
Transfer to retained earnings
Total comprehensive income for the period
Changes in fair value of equity instruments, net
of tax
Effective portion of changes in fair value of cash
flow hedges, net of tax
Defined benefit plan actuarial gains and losses,
net of tax
Total comprehensive income for the period
Transactions with shareholders, recorded
directly in equity
Transactions with shareholders, recorded
directly in equity
Contributions by and distributions to
shareholders
Total contributions by and distributions to
shareholders
Transfer to retained earnings
Total comprehensive income for the period
Changes in fair value of equity instruments, net
of tax
Effective portion of changes in fair value of cash
flow hedges, net of tax
Defined benefit plan actuarial gains and losses,
net of tax
Total comprehensive income for the period
29
31Capital and Reserves
No. of shares
2018
000
No. of shares
2017
000
2018
$000
2017
$000
On issue at 1 July 754,849 754,849 606,324 606,324
Share capital on issue at 30 June754,849 754,849 606,324 606,324
All shares are ordinary fully paid shares with no par value, carry equal voting rights and share equally in any profit on the winding up of the Group.
Foreign currency translation reserve
Realised capital reserve
The realised capital reserve comprises the cumulative net capital gains that have been realised.
Revaluation reserve
Hedging reserve
Defined benefit plan reserve
Fair value reserve
Retained earnings
Dividends
The following dividends were paid by the Company for the year ended 30 June:
Ordinary Share Capital
Repurchase of Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares are
cancelled. Treasury stock for which unrestricted ownership has not yet been transferred are not cancelled.
The defined benefit plan reserve contains actuarial gains and losses on plan assets and defined benefit obligations. During the year ended 30 June 2018 the amount of $3.26 million was transferred
from the defined benefit reserve to retained earnings (30 June 2017: $2.35 million) . This amount represents the tax impact of lump sum cash contributions made.
The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets and equity investments elected at fair value through other comprehensive income until
the investments are derecognised or impaired.
Retained earnings equals accumulated undistributed profit.
A fully imputed 2018 interim dividend of 1.75 cents per share was paid on 5 April 2018 and a fully imputed 2017 final dividend of 2.0 cents per share was paid on 4 October 2017 (2017: Fully imputed
2017 interim dividend of 1.75 cents per share was paid on 4 April 2017 and a fully imputed 2016 final dividend of 2.0 cents per share was paid on 4 October 2016).
Share Capital Accounting Policies
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations as well as from the translation of liabilities that hedge the
Group's net investment in a foreign subsidiary.
The revaluation reserve relates to historic revaluations of property, plant and equipment.
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet settled.
30
© 2018 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Independent Auditor’s Report
To the shareholders of PGG Wrightson Limited
Report on the consolidated financial statements
Opinion
In our opinion, the accompanying consolidated
financial statements of PGG Wrightson Limited (the
company) and its subsidiaries (the Group) on pages
1 to 30:
i. present fairly in all material respects the Group’s
financial position as at 30 June 2018 and its
financial performance and cash flows for the
year ended on that date; and
ii. comply with New Zealand Equivalents to
International Financial Reporting Standards and
International Financial Reporting Standards.
We have audited the accompanying consolidated
financial statements which comprise:
— the consolidated statement of financial position
as at 30 June 2018;
— the consolidated profit and loss, statements of
other comprehensive income, changes in
equity and cash flows for the year then ended;
— the segment report as at and for the year
ended 30 June 2018; and
— additional financial disclosures including notes
to the financial statements.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). 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 (IESBA
Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the Group in relation to regulatory audit and agreed upon
procedures. Subject to certain restrictions, partners and employees of our firm may also deal with the Group on
normal terms within the ordinary course of trading activities of the business of the Group. These matters have
not impaired our independence as auditor of the Group. The firm has no other relationship with, or interest in,
the Group.
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and on the consolidated financial statements as a whole. The materiality for the consolidated financial
statements as a whole was set at $2,400,000 determined with reference to a benchmark of adjusted Group net
profit before tax. We chose the benchmark because, in our view, this is a key measure of the Group’s
performance.
2
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the consolidated financial statements in the current period. We summarise below those matters and our key
audit procedures to address those matters in order that the shareholders as a body may better understand the
process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely
for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not
express discrete opinions on separate elements of the consolidated financial statements
The key audit matter How the matter was addressed in our audit
Climatic Environment – Impact on the carrying value of inventory ($262.5 million – refer note 15)
The Group is exposed to risks associated
with climatic events, particularly in New
Zealand, Australia and South America.
Weather events have an impact on harvest
yields, specific ally within the Seed and
Grain business, and also on autumn
demand for replanting. This combined with
the quality of Seed and Grain inventory, in
particular germination levels of seeds,
impacts on the carrying value of inventory at
year end.
Weather events can also impact on the
quantity and mix of products sold across
other operating segments due to the
variation in customer demands.
Our audit procedures included:
— Challenging the methodology applied by management to calculate
the inventory provision. In addition, we checked a sample of inputs
in the inventory provision calculation for consistency with the last
purchase date, sales volume in the last 12 months, aging of
inventory items and months of inventory cover.
— Comparing products sold with negative margin during the financial
year to the level of product on hand at year end and assessing
whether the inventory is held at the lower of cost and net realisable
value.
— Assessing a sample of externally completed germination testing of
seed inventory to identify any low quality inventory requiring
additional provisioning.
— Assessing the level of inventory provisions at year end and found
them to be comparable to actual losses recognised during the
current and historical years.
Our procedures did not identify any variations that would materially
impact the carrying value of inventory.
Economic Risk Factors – Impacts on the recoverability of trade receivables ($267.6 million – refer note 14)
The Group is exposed to both domestic and
international economies. Economic risk is
considered a key audit matter given the
impact this has on the ability of the Group
to collect outstanding accounts receivable.
The credit quality of farmer customers is
often dependent on domestic and
international economic performance,
including the impact of commodity prices,
foreign exchange rates and the liquidity
within the banking environment, specifically
within Uruguay.
Refer Note 14 for further details on
outstanding trade receivables and credit
quality at year end and to Note 22 for details
on how the Group manages credit risk.
Our audit procedures included:
— Evaluating whether the aged accounts receivable listing (used as the
initial basis by management to determine whether a provision is
required) was complete and accurately reflected the aging of
outstanding amounts. We agreed a sample of individual outstanding
trade receivables to original sales documentation.
— Challenging the methodology applied by management to calculate
the provision for doubtful debts by considering the policy applied
and whether the underlying assumptions were appropriate.
— Assessing the level of provision for doubtful debts at year end by
comparing to actual losses recognised during the current and
historical years. We also considered whether the aging of historical
balances had deteriorated.
Our audit procedures did not identify variations that would materiality
impact on the carrying value of trade receivables.
3
The key audit matter How the matter was addressed in our audit
Investment Risk – Carrying value of the equity accounted investment in Agimol Corporation S.A. (‘Agimol’)
($11.8 million - refer note 5)
The Group has a 50 percent investment in
Agimol which is accounted for as an equity
accounted investee.
Included within the original purchase price
of this investment was an estimate for the
amount payable under an earn out provision
as detailed in Note 5.
During the year, the Group has made an
additional investment in Agimol.
The operations of Agimol have been
impacted by historical flooding events
within Uruguay and the flow on effects
through on-farm spending in subsequent
seasons.
The Group has conducted an impairment
assessment based on the forecast future
performance of Agimol and recognised an
impairment expense of $7.8 million.
This is considered to be a key audit matter
due to the judgement in forecasting future
performance which is inherently uncertain.
Our audit procedures included:
— Considering the terms of additional investments during the year,
specifically if there continues to be joint control and it remains
appropriate to continue equity accounting for the investment.
— Challenging the assumptions adopted in managements forecast
future cashflow analysis, including forecast cashflow performance,
long term growth rates and discount rates.
— Engaging our internal valuation specialists to assist in assessing key
assumptions in management’s discounted cashflow and challenging
the assessed carrying value based on other references for valuation,
including implied earnings multiples.
— Comparing the assessed carrying value based on future forecast
performance to the value included within the agreed purchase price
as part of the conditional sale of PGG Wrightson Seeds Holdings
Limited, announced subsequent to year end (refer note 1 of the
financial statements).
— Comparing the consistency of the assumptions made by
management to assess the carrying value of the investment with
those used to assess the carrying value of the earn out provision.
Our audit procedures concluded that the carrying value of the
investment within Agimol Corporation is materially correct and is
consistent with the value included within the conditional sale of PGG
Wrightson Seeds Holdings Limited.
Other information
The Directors, on behalf of the Group, are responsible for the other information included in the Group’s Annual
Report. Other information may include the Chairman and Chief Executive Officer’s report, disclosures relating to
corporate governance, statutory disclosures and shareholder information. Our opinion on the consolidated
financial statements does not cover any other information and we do not express any form of assurance
conclusion thereon.
The Annual Report is expected to be made available to us after the date of this Independent Auditor's Report. Our
responsibility is to read the Annual Report when it becomes available and consider whether the other information
it contains is materially inconsistent with the consolidated financial statements, or our knowledge obtained in the
audit, or otherwise appear misstated. If so, we are required to report such matters to the Directors.
Use of this independent auditor’s report
This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been
undertaken so that we might state to the shareholders those matters we are required to state to them in the
independent 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 shareholders as a body for our audit work, this independent
auditor’s report, or any of the opinions we have formed.
4
Responsibilities of the Directors for the consolidated financial
statements
The Directors, on behalf of the company, are responsible for:
— the preparation and fair presentation of the consolidated financial statements in accordance with generally
accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial
Reporting Standards) and International Financial Reporting Standards;
— implementing necessary internal control to enable the preparation of a consolidated set of financial
statements that is fairly presented and free from material misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate 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 objective is:
— 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 independent 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 NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They 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 these consolidated financial statements is located at
the External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is Peter Taylor
For and on behalf of
KPMG
Christchurch
13 August 2018
---
PGG Wrightson Limited
Results for announcement to the market
Reporting PeriodYear ended 30 June 2018
Previous Reporting PeriodYear ended 30 June 2017
Amount (000s)Percentage change
Revenue from ordinary activities
$NZ 1,193,462+ 5.3%
Profit (loss) from ordinary activities after
tax attributable to security holder.
$NZ 17,964- 60.6%
Net profit (loss) attributable to security
holders.
$NZ 17,964
- 60.6%
Interim/Final DividendAmount per securityImputed amount per security
Final0.0125$ 0.004861$
Record Date
4 September 2018
Dividend Payment Date
3 October 2018
CommentsRefer to results release and financial statements.
Net Tangible Assets per security: 30 June 2018 $0.342, 30 June
2017 $0.352
Profit (loss) from ordinary activities after tax attributable to
security holders calculated as Profit attributable to Shareholders of
the Company as disclosed in the Statement of Profit or Loss.
Net profit (loss) attributable to security holders calculated as Profit
attributable to Shareholders of the Company as disclosed in the
Statement of Profit or Loss.
---
APPENDIX 7 – NZSX Listing Rules
Number of pages including this one
(Please provide any other relevant
NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10. details on additional pages)
For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required.
Full name
of Issuer
Name of officer authorised to
Authority for event,
make this notice
e.g. Directors' resolution
Contact phone
Contact fax
numbernumberDate
Nature of event
BonusIf ticked,Rights Issue
Tick as appropriateIssuestate whether:Taxable/ Non TaxableConversionInterestRenouncable
Rights IssueCapitalCallDividend
If ticked, stateFull
non-renouncable
change
x
whether:
InterimYear
X
SpecialDRP Applies
EXISTING securities affected by this
If more than one security is affected by the event, use a separate form.
Description of theISIN
class of securities
If unknown, contact NZX
Details of securities issued pursuant to this eventIf more than one class of security is to be issued, use a separate form for each class.
Description of theISIN
class of securities
If unknown, contact NZX
Number of Securities toMinimum
Ratio, e.g
be issued following eventEntitlement
1 for 2 for
Conversion, Maturity, Call
Treatment of Fractions
Payable or Exercise Date
Tick if
provide an
pari passu
ORexplanation
Strike price per security for any issue in lieu or date
of the
Strike Price available.
ranking
Monies Associated with Event
Dividend payable, Call payable, Exercise price, Conversion price, Redemption price, Application money.
Source of
Amount per securityPayment
(does not include any excluded income)
Excluded income per security
(only applicable to listed PIEs)
SupplementaryAmount per security
Currencydividendin dollars and cents
details -
NZSX Listing Rule 7.12.7
Total monies (estimated)
TaxationAmount per Security in Dollars and cents to six decimal places
In the case of a taxable bonusResident
Imputation Credits
issue state strike priceWithholding Tax(Give details)
Foreign
FDP Credits
Withholding Tax(Give details)
Timing
(Refer Appendix 8 in the NZSX Listing Rules)
Record Date 5pmApplication Date
For calculation of entitlements -Also, Call Payable, Dividend /
Interest Payable, Exercise Date,
Conversion Date. In the case
of applications this must be the
last business day of the week.
Notice DateAllotment Date
Entitlement letters, call notices,For the issue of new securities.
conversion notices mailedMust be within 5 business days
of application closing date.
OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:Security Code:
Cease Quoting Rights 5pm:
Commence Quoting New Securities:Security Code:
Cease Quoting Old Security 5pm:
4 September, 20183/10/2018
$$0.000868$0.004861
$
NZD$0.002206
$9,435,610
Date Payable
3 October, 2018
Enter N/A if not
applicable
NZREIE0001S4
In dollars and cents
Retained earnings
$0.0125
027 5533373 03 349 617613082018
Ordinary shares
EMAIL: announce@nzx.com
Notice of event affecting securities
1
PGG W rightson Limited
Julian DalyDirectors Resolution
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.