Skellerup FY19 Result
Skellerup Holdings Limited
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 8 May 2019
Results for announcement to the market
Name of issuer Skellerup Holdings Limited
Reporting Period 12 months to 30 June 2019
Previous Reporting Period 12 months to 30 June 2018
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$245,792 2.2%
Total Revenue $245,792 2.2%
Net profit/(loss) from
continuing operations
$29,063 6.5%
Total net profit/(loss) $29,063 6.5%
Interim/Final Dividend
Amount per Quoted Equity
Security
$ 0.07500
Imputed amount per Quoted
Equity Security
$0.014586
Record Date 04/10/2019
Dividend Payment Date 17/10/2019
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$65.11 $64.67
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Authority for this announcement
Name of person
authorised
to make this announcement
Graham Leaming
Contact person for this
announcement
Graham Leaming
Contact phone number 021 271 9206
Contact email address graham.leaming@skellerupgroup.com
Date of release through MAP
23/08/2019
Audited financial statements accompany this announcement.
---
23 August 2019
Skellerup reports record profit again
Highlights for the year ending 30 June 2019
• Revenue of $245.8 million, up 2% on pcp.
• Record earnings before interest and tax (EBIT) of $41.8 million, up 5% on pcp.
o Industrial Division EBIT of $22.9 million, up 10% on pcp.
o Agri Division EBIT of $22.8 million, in line with pcp.
• Record net profit after tax (NPAT) of $29.1 million, up 7% on pcp.
• Final dividend increased from 7.0 cents per share (cps) to 7.5 cps (50% imputed) bringing the
total dividend to 13.0 cps (50% imputed) for the full year, up 2.0 cps on pcp.
Industrial Division revenue growth and margin improvement has delivered another record result for
Skellerup in FY19.
Industrial Division EBIT lifted by 10 percent to $22.9 million, repeating a trend in earnings growth
established over the past 5 years. CEO David Mair said the result was an outcome of concentrating
resources and executing on the best opportunities.
“We are focused on providing innovative and cost-effective solutions for original equipment
manufacturing customers. We have improved the speed at which we innovate. By being close to
customers and using our capability and expertise in compound and tool design we are capitalising on
our competitive advantage and we will continue to invest in people and capability to achieve further
growth.”
Agri Division EBIT was flat at $22.8 million. Mair said this repeated the record result achieved in the
prior year, noting operational gains offset the impact of softer markets.
“Our team achieved a very good result in a year where market conditions were more challenging
particularly in North America and Australasia. By implementing operational improvements and
continuing to deliver innovative and high performing products we were able to offset the market
challenges. This dual focus is the key to ensuring we maintain our reputation for developing and
manufacturing innovative and high-quality dairy consumables, animal hygiene products and rubber
footwear.”
Chair Liz Coutts noted that the Board was pleased with the FY19 result.
“We are very pleased to report another record result, particularly in a year where the geo-political
environment presented challenges and tariffs that directly impacted our bottom line.”
Coutts advised that a final dividend of 7.5 cents per share (imputed 50%) would be paid to
shareholders on 17 October 2019. This payment will bring the total dividend pay-out for the financial
year ended 30 June 2019 to 13.0 cents per share (also imputed 50%). This represents an increase of
2 cents per share or 18% over the prior year. Allowing for imputation differences (FY18 was imputed
~70%) provides shareholders with a minimum 10% net increase above the prior year.
“This dividend increase is consistent with our pattern of increases over the past 8 years during
which time the pay-out has more than doubled. This demonstrates Skellerup’s consistently strong
earnings and cash flow and the Board’s practice of increasing dividends as profit growth allows,”
Coutts said.
For further information please contact:
David Mair Graham Leaming
Chief Executive Officer Chief Financial Officer
021 708 021 021 271 9206
---
Skellerup Holdings Limited
Distribution Notice
Updated as at 8 May 2019
Please note: all cash amounts in this form should be provided to 8 decimal places
Section 1: Issuer information
Name of issuer Skellerup Holdings Limited
Financial product name/description Ordinary Shares
NZX ticker code SKL
ISIN (If unknown, check on NZX
website)
NZSKXE0001S8
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies
Record date Close of trading on: 04/10/2019
Ex-Date (one business day before the
Record Date)
03/10/2019
Payment date (and allotment date for
DRP)
17/10/2019
Total monies associated with the
distribution
1
NZ$14,606,501
Source of distribution (for example,
retained earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.089583
Total cash distribution
3
$0.075000
Excluded amount (applicable to listed
PIEs)
$0.000000
Supplementary distribution amount $0.006618
Section 3: Imputation credits and Resident Withholding Tax
4
Is the distribution imputed Fully imputed
Partial imputation X
No imputation
If fully or partially imputed, please
state imputation rate as % applied
50%
1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of
Resident Withholding Tax (RWT).
3
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT.
This should include any excluded amounts, where applicable to listed PIEs.
4
The imputation credits plus the RWT amount is 33% of the gross distribution for the purposes of this form. If the distribution is fully
imputed the imputation credits will be 28% of the gross distribution with remaining 5% being RWT. This does not constitute advice
as to whether or not RWT needs to be withheld.
Imputation tax credits per financial
product
$0.014583
Resident Withholding Tax per
financial product
$0.014979
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
N/A
Start date and end date for
determining market price for DRP
Date strike price to be announced (if
not available at this time)
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
DRP strike price per financial product
$
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
Section 5: Authority for this announcement
Name of person
authorised to make
this announcement
Graham Leaming
Contact person for this
announcement
Graham Leaming
Contact phone number 021 271 9206
Contact email address graham.leaming@skellerupgroup.com
Date of release through MAP
23/08/2019
---
2019
ANNUAL
REPORT
FY17FY19
NPAT
$29.1m
Increased by $1.8m
FY18
7%
Highlights 2019
FY19
Revenue
$245.8m
Increased by $5.4m
FY17FY18
2%
Contents
Business Review
Highlights 2019 2
Chair’s Review 4
Our Business Model 6
What we do – Industrial 8
What we do – Agri 10
CEO’s Review 12
Case Study No. 1 14
Case Study No. 2 16
Case Study No. 3 18
Case Study No. 4 20
Environment 22
Our People 24
Board of Directors 26
Corporate Governance 28
Independent Auditor’s Report 34
Directors’ Responsibility Statement 37
Income Statement 38
Statement of
Comprehensive Income 39
Balance Sheet 40
Statement of Changes in Equity 41
Cash Flow Statement 42
Notes to the Financial Statements 43
Financial Statements
Directors’ Disclosures,
Remuneration and Shareholding 73
Five-Year Financial History 77
Corporate Directory 78
Shareholder Information
FY17
Dividend
13.0cps
Increased by 2.0cps
FY18FY19
18%
Earnings per share
15.0c
Increased by 0.8c
FY17FY18FY19
6%
Increased by 16
2%
Increased by $0.6m
2%
Global Team
796
Operating Cash Flow
$28.9m
3
FY19 has been another record year for Skellerup, which reflects
our continued commitment to staying close to our customers.
At the heart of our business is a focus on developing strong and enduring
relationships with customers. Many of these customers are Original Equipment
Manufacturers (OEM), where we design and develop components and products
that are not only part of the customer’s final product but are also critical to
its overall function and performance. Often these products have to meet high
food or water safety standards. Our customers rely on us for high-quality
components that do not fail.
Designing and manufacturing critical components is a consistent link across
both divisions of our business. Whether the final product is a tap, automobile
or milking platform, we focus on working with the final manufacturer to deliver
a key component that meets their exacting standards of reliability
and performance.
Skellerup continues to have a strong balance sheet, providing opportunities
for ongoing growth. We remain open to prudent acquisitions that offer
additional potential for the business and deliver profitable growth for our
shareholders. Recently, we acquired the business and assets of Nexus Foams.
Using foam and other soft materials, Nexus designs and manufactures key
products for OEM customers, particularly in healthcare and electronic
applications. This is a great fit for Skellerup. This follows last year’s acquisition
of a 35 per cent share of Sim Lim Technic (Sim Lim). Sim Lim has provided
Skellerup with expertise in a new material and market segment that opens
up new markets to Skellerup and also generates new opportunities with our
existing customers for products using this material.
Skellerup serves customers across the globe. While much of our product
development and design is carried out in New Zealand, more than three
quarters of our products are manufactured overseas and over three quarters of
our revenue is also generated from international markets.
Our Board and management team continue to work hard to nurture strong
relationships with customers and business partners in all countries that we
operate in. Last year the Board visited our operations in China, enabling us to
meet the local team and our key business partners. In April this year, we visited
Vietnam where we have significant and long-standing business relationships
and manufacturing capability. This trip provided the opportunity to strengthen
our relationships and to better understand the local context and potential for
future growth.
We value their manufacturing capability; in turn, they value our product
development expertise and links to global markets. We are committed to this
mutually beneficial relationship.
Chair’s
Review
Skellerup
Annual Report 2019
4
Skellerup is committed to good governance. The Board is focused on providing
strategic input to support management in delivering on our growth plans.
We have a strong, diverse and well-balanced Board with strategic, commercial
and operational experience across local and international markets. In the
coming months, we will look to strengthening our Board further by appointing
a new independent director with operational expertise that aligns with
Skellerup’s global OEM business model.
As a result of the Company’s strong performance in FY19, the Directors are
pleased to announce a final dividend of 7.5 cents per share (cps), bringing
the total FY19 dividend to 13.0cps. This will be paid on 17 October 2019.
Skellerup is in an excellent position. We have a very strong team and are
trusted by our customers. I would like to thank my fellow Directors, our
Chief Executive and our whole team for their contribution to another positive
year. We look forward to continuing this success into the future, delivering
high-quality products to our customers, providing opportunities for our people
to develop and excel, and being able to generate strong, sustainable returns
to our shareholders.
Elizabeth (Liz) Coutts
Chair and Director
“ While much of our
product development
and design is carried
out in New Zealand,
more than three quarters
of our products are
manufactured overseas...”
5
Our Business Model
Our Business Enablers
Our economic performance
A strong balance sheet, low debt,
a very good dividend yield and
relatively low levels of capital
expenditure required to maintain
and grow the business.
Our people
A diverse, experienced, vibrant,
international team delivering solutions
for customers in over 80 countries.
Our operational capability
and capacity
World-class manufacturing and
distribution facilities and partners
in New Zealand, Australia, China,
Vietnam, UK, Italy and the US.
Our customer commitment
Customer-centric development,
partnering to deliver both
OEM and branded product
innovations.
Our environment
Reducing our impact on the
environment through decreasing
usage of important resources
and waste.
Our intellectual property
and innovation
Vast expertise and capability
in polymers and elastomers,
coupled with world-leading
tooling design to deliver
innovative, dependable
solutions for our customers.
Quality industrial co-
moulded rubber products
for a broad range of
markets from major
automotive to end-user
industrial customers
Engineered plastics and
rubber rings, joiners
and mouldings for the
automotive, industrial,
water pipe, valve and
medical industries
Sealing and waterproofing
products for roofing,
plumbing and civil/
underground applications
Cross-linked foam for
a range of applications
including marine, footwear
and leisure products
Manufacture of on-farm,
in-line milk filters
Distributor of premium
milk liners, tubing and
accessories
Food-grade dairy
liners and tubing
Design and manufacture
of food-grade dairy
rubberware including
liners and tubing
Agri Division
Industrial Division
Skellerup
Annual Report 2019
6
7
Our Approach
Strong Global Delivery
New Zealand
Australia
US
Other
Asia
France
UK & Ireland
Developing strong and deep customer
relationships
We work closely with customers, particularly
with OEMs as part of their product innovation
teams.
Manufacturing critical components that are
often only a small part of a more complex system
Our products are usually only a small part of
the total solution, but they are critical. The risk
of failure means OEM customers prefer the
trusted Skellerup brand.
Applying our intellectual know-how to
new applications
We are applying our expertise across new
industrial and agricultural markets. From
design to manufacture, our expertise in
polymer and elastomer technologies covers
the materials, the tooling and development,
and the process for manufacture.
Geographical
Revenue FY19
High-precision rubber
and plastic components
for the automotive, flow
control, appliance and
industrial markets
Vacuum pump systems and
components used in truck
systems to extract liquid
waste and to transport
water for the oil and gas
extraction industry
Live Wall System for
installation in new and
existing chutes to enhance
mine productivity
High-performance foam
and soft materials for
healthcare, electronics,
construction and
comfort applications
A true New Zealand
icon tried and tested
for over 60 years
Specialist in the
development, production
and distribution of dairy
hygiene and livestock health
management products
Premium food-grade
square liners for
maximum milking
efficiency
Specialist footwear for the
farming, fire, forestry and
electricity markets
RED BAND
World-leading in essential dairy consumables,
safeguarding milk quality, animal health and welfare.
Delivering specialist footwear for the farming, fire,
forestry and electricity markets
Keeping potable water separate from grey water for
industrial applications. Leveraging our innovative
intellectual property across adjacent sectors
7
Ice-maker seat
U-Dek foam
matting
Orthotic
ski-boot liner
Irrigation
isolation valve
Enzide plug
Automotive
coupling
Skellerup
Annual Report 2019
8
What we do
Industrial
We deliver critical, precise components, seals and
systems used in a broad range of applications
Gas-valve diaphragm
Tap (faucet)
mounting
bracket
Water-level sensor
Rain panel
Shower
valve seal
Deks flashing
Pan cones
& adaptors
Air admittance valves
Valve covers
& lift keys
Pipe repair
couplings
Mixer-tap
internal seal
Copper pipe
repair coupling
9
What we do
Agri
We produce essential dairy
consumables and rubber footwear
Milking
platform
wheel
Tubing
Milking liners
Teat sprayer
Skellerup
Annual Report 2019
10
Plate heat exchangers
Nozzle & hose
Safety
gumboots
Milk filters
11
Skellerup has continued to deliver strong performance
in FY19, as a result of focusing on our customers and
delivering productivity and efficiency gains across
our operations. We are a customer-led business,
responding quickly to deliver high-end products that
meet our customers’ expectations. This is the key part
of our strategy.
Our FY19 Net Profit after Tax (NPAT) of $29.1 million is a
record result, and an increase of $1.8 million (7%) from
the previous year.
Rapid innovation
We have built a reputation for rapid innovation. We are
close to our customers, ensuring we understand their
businesses – both their challenges and opportunities.
Our expertise and focus enable us to respond quickly
with new components, which in turn makes our customers
more successful. This focus on speed and precision covers
all aspects of the process, from prototype design to final
manufacture. We are renowned for helping our customers
launch new products to the market faster and more
accurately and they value this. Our customers reward us
by continued business and new opportunities.
Driving efficiency
Our success can also be attributed to our ongoing focus on
improving productivity and efficiency across all operations.
We have key measures that help us to identify issues
speedily. These measures include resolving lead-time issues
with customers all the way through the production process to
dealing with key suppliers. This enables us to act promptly
and reduce costly mistakes. This approach has also helped
us to identify ways to be more efficient and to eliminate waste
within our operations. This is a key part of our environmental
programme. Producing goods using fewer resources and
creating less waste makes good business sense, for our
bottom line and for the environment.
A strong, diversified business
Today Skellerup is a diversified, global business. We have
a strong focus on OEM business across a wide range of
sectors with an emphasis on high-end markets. A large
proportion of our products must meet food and water safety
standards. These are constantly changing and require
ongoing innovation not only for new products but also for
new materials, to ensure our products meet the specific
performance and safety standards every time. These
products are delivered across international markets, allowing
us to withstand political and market shocks and pressures.
Investing in our highly skilled workforce
The quality and expertise of our people is a key
differentiator. We employ nearly 800 people across a range of
roles. We foster a high-performance, entrepreneurial culture
that attracts the best people and empowers them to succeed
and build the capabilities necessary to deliver our strategy.
Skellerup values collaboration across our teams, with
our product development work often spanning multiple
geographies. Our technical salespeople are located close
to their customers, while product design is carried out in
New Zealand, Australia, the US and Europe. Manufacturing
and assembly are also global; we have operations in New
Zealand, Asia, Europe and North America.
Our people in the market have the technical skills and
understanding to communicate requirements to our
engineers and chemists, ensuring they develop outstanding
and reliable products which meet our customers’ needs.
Our operational leaders and teams consistently demonstrate
the skills and commitment to manufacture and deliver.
Our global but integrated model allows us to deliver for
our customers, leveraging our expertise and learnings
and capitalising on the benefits of time differences; this
enables the development timeline to continue across what is
effectively a 24-hour operation. The case studies on pages
14 – 21 in this report provide some examples of our
approach in action.
Health and safety will always be a key focus. Statistics show
an improvement in FY19, but our target remains zero harm.
This improvement has come from a strong contribution
across the business. The health and safety of our people is
the responsibility of everyone but in particular our leaders
have embraced the need to lead through their behaviour
and communication. Health and safety of our people is
embedded in the Skellerup culture. We are determined to
maintain the pattern of improvement and continue to commit
time and expertise to achieve this.
We are also pleased with the steady progress we have made
on improving environmental outcomes. We are focused on
minimising waste, making our operations as efficient as
possible and reducing the incidence of rejects. We discuss
more of our initiatives, large and small, later in this report
(page 22). These measures are not only good for the
environment but they also make good business sense, and
have a positive impact on team morale.
CEO’s Review
Skellerup
Annual Report 2019
12
Industrial Division
The Industrial Division has continued its trend of improved
financial results for the fourth year in succession,
delivering a record Earnings Before Interest and Tax
(EBIT) of $22.9 million.
These are strong results and we are looking forward to
further growth across the Industrial Division in the coming
year. Potable water continues to provide opportunities
across the division – working with organisations charged
with both the supply of drinking water and removing and
treating wastewater. As the world’s growing population
continues to rely on ageing infrastructure, this will be a key
driver for our expansion plans. We are pleased to work
with the leading providers of infrastructural pipe used to
transport water, along with the leading tap and shower
manufacturers in the US. At the other end of the scale, we
design and manufacture world-leading vacuum pump
systems used in the collection of liquid waste. We have
a reputation for delivering high-performance products
which meet the rapidly changing standards required.
During this year, we have also begun to realise the
benefits of our investment in Sim Lim and, as mentioned
above, we recently acquired the business and assets
of Nexus Foams. Sim Lim brings expertise in liquid
silicone rubber (LSR) into the Skellerup Group. This is a
valuable product capability which we are now offering to
existing and new customers. The Sim Lim operation has
recently been relocated to provide additional capacity
to meet the growth we expect to achieve. Nexus designs
and manufactures foam products for OEM customers,
particularly in healthcare and electronic applications.
The nature of this business and customer base is a great
fit for Skellerup.
Agri Division
The Agri Division delivered a robust performance,
delivering EBIT of $22.8 million, in line with the record
result achieved in the prior year.
Skellerup continues to be a global leader in the
development of innovative solutions for the dairy
industry and is the second largest manufacturer of
dairy rubberware in the world.
Our products play an essential role in protecting milk
quality and animal health. International markets for
our dairy rubberware continue to provide growth
opportunities. We are proud to also be a market
leader in New Zealand, which remains an important
market for us. An example of growth and innovation is
demonstrated in the feature on our integrated milking
and teat dipping liner later in this report, on page 16.
Our footwear products have again performed strongly
in FY19. While our Red Band gumboots are a household
name in New Zealand’s rural sector, so too are our
specialist boots around the world. We deliver specialty
footwear for the fire, forestry, electricity and mining
markets. Like all Skellerup products, these are high-
performance items which must meet rigorous standards.
Demand for these products continues to grow. We feature
the development of our di-electric footwear later in this
report, on page 18.
Concluding comments
I would like to thank the whole Skellerup team for their
contribution to another record result. Without their
expertise and commitment, we would not be the innovative
and successful company we are today.
Our focus going forward is to build on the momentum
achieved, staying close to our customers to deliver
innovative products and services. We believe that this
approach – the ongoing investment in our people and
focus on driving efficiency across all that we do – will
continue to deliver strong returns for our shareholders.
David Mair
Chief Executive Officer
and Director
“Our success can also be
attributed to our ongoing focus
on improving productivity and
efficiency across all operations.”
13
Installation times
drastically reduced
thanks to cutting-
edge technology
We worked with McWane to complete
the first prototype gaskets in just 10
weeks. The products underwent rigorous
testing, beginning with lab tests to prove
the rubber formulation met specification.
This was followed by pressure and life-
cycle testing to ensure the gasket could
withstand the rigours of ongoing use.
Case Study No. 1
Gulf Rubber is seen as a leader in
the development of products for
the potable water industry. This is
a growing sector, with customers
around the world struggling to meet
increasingly stringent standards, while
the ageing infrastucture is breaking
down. We worked closely with our
long-standing customer McWane
Global to develop a new restraining
pipe gasket for PVC piping.
A new product for a
growing market
1
McWane had a clear understanding
of the pipe joint design but
required Gulf Rubber’s compound
and manufacturing expertise for
the gasket design. The gasket
formulation is critical as it must not
only meet US potable water safety
and physical property specifications,
but also perform for a long period.
Developing
a world-first
product
2
Quality
control
3
Gulf Rubber & McWane Global
Skellerup
Annual Report 2019
14
“ McWane Global has undertaken many developmental products with Gulf
Rubber over the years. Gulf Rubber has, in fact, become our preferred
source for developing and producing elastomeric products and these are
becoming an increasingly important product group for McWane.
One of our latest team efforts with Gulf has been the development of
the RieberLok gasket. This is the world’s first commercially available
self-restraining gasket for PVC pipe applications in the municipal water
transportation market. The significance has resulted in greatly reduced
pipeline installation time, more reliable joint (pipe) connections and
substantially reduced installation costs for municipalities across the US.
Gulf Rubber’s contribution to the development of the RieberLok gasket
was significant and without that help we would not have been in the
market nearly as soon as we were.”
Dan Copeland
McWane Global, Vice-President of Product Development
The development team was based
across the US, New Zealand and
Asia. The sales team was based
close to the customer in the US,
with the prototypes and tooling
developed in New Zealand.
Product manufacturing is carried
out in Vietnam. This approach kept
the project moving forward over
24-hour periods taking advantage
of the difference in time zones.
A global
team
4
The new product has been
well received, achieving high-
quality standards while also
reducing installation time and labour
costs for our customer. McWane is
delighted with the end result.
The speed of execution has resulted
in Gulf Rubber being given the lead
opportunity to develop a broader
range of products suited to PVC
pipes as the supplier of choice.
Contributing to
the bottom line
5
15
Winning market share
by improving efficiency
and animal health
Case Study No. 2
Mastitis is estimated to cost the global dairy industry US$19.7
to US$32.0 billion annually, according to recent studies. Given
Skellerup’s proven track record in dairy solutions design and
development, we knew we could be of help.
Solving a global
market problem
1
ADF Milking has a presence in over 30 markets with key
focuses in: the UK and Europe, New Zealand and Australia,
and progressively into North America. This makes it an ideal
partner for any new product.
We believed we could develop a vastly improved range of
liners to help prevent the issues causing mastitis. The new
models would combine proven liner design features, such as
square barrel geometry, with automatic dipping and flushing
to optimise the milk production process, reduce costs and
improve the welfare of cows.
Our engineering expertise was called upon to design a
solution that would guarantee proper application of the teat
dip after milking. European-based milking machine provider
ADF Milking offered us an opportunity to design a range of
milking liners that would integrate effective massage with
automated teat-dipping and flushing technology.
In partnership with ADF Milking, we quickly moved into
the prototype stage, and over a six-month period, we
developed four design iterations in our research and
development facility in Christchurch.
Skellerup & ADF Milking
Collaboration with
a market leader
2
Skellerup
Annual Report 2019
16
17
The new liner design was trialled
on working farms in both Australia
and New Zealand over a six-month
period. This timeline allowed us to
assess the quality, functionality and
longevity of the product. This was
vital for ADF Milking to ensure it
was offering a trusted, reliable and
high-quality solution. The trial was
successful, enabling us to move
into full production.
We redesigned particular
equipment to meet the demands
of the product manufacturing
specifications. Our engineering
team ensured that we had the
right mechanism to replicate each
milk liner to meet the same high
standards ADF Milking had seen in
the prototype.
“ Skellerup has been a responsive
partner. In combination with
our engineering ability, we have
successfully created the next
generation of our award-
winning milking system.”
Angus Buchanan
Chief Executive Officer, ADF Milking Limited
Testing the
product
down under
3
Moving to
production
4
From our initial meeting, it took
three years for the product range to
be in market. It is providing dairy
farmers with what will become
an increasingly highly sought-
after solution. ADF Milking has
experienced significant growth in
market share year-on-year and this
has been a successful new product
for both Skellerup and ADF Milking.
Servicing
international
markets
5
17
Getting a foothold
into the US
utilities market
Case Study No. 3
In 2016, Skellerup Footwear successfully introduced a
di-electric over-the-sock boot to the US market. Designed
to insulate the foot and lower leg against the risk of
electrical shock, the over-the-sock boot was designed in
conjunction with Southern Company Ltd. The success and
popularity of the boot has enabled Skellerup Footwear a
broader market opportunity to create an over-shoe option to
enable workers to avoid changing from boot to boot. Like its
predecessor, the new boot appeals to Southern Company
as well as to other customers.
We extensively researched the need for a safety boot that
could not only be fitted over other shoes but also featured
improved traction in all terrains. This allows users to
be better protected with a non-slip grip in wet, stormy
conditions, without being restricted by a below-the-knee
boot. We worked quickly to produce a prototype in only
four months from the initial discussion.
Safety and
convenience
in one boot
1
Concept to prototype
in only four months
2
Skellerup & Southern Company Ltd
Skellerup
Annual Report 2019
18
Two over-shoe styles were produced – a buckle boot and
a slip-on. The development, testing and refinement of the
final over-shoes took more than a year, as Skellerup worked
to improve key elements including the fit, fastening, outsole
design and performance. Like all of Skellerup’s di-electric
footwear, each boot undergoes three minutes of testing in
water at 20kV to ensure safety, with engineers and technical
specialists providing oversight. All our boots are also given
a unique traceable serial number.
The di-electric shoes were all handmade to exact
specifications, incorporating multiple components. Various
unique rubber formulations were used, before the finished
product was vulcanised through heat and pressure.
The boots gained quick recognition, fast becoming the
footwear of choice for the utility industry.
Southern Company was particularly impressed with our
innovative and responsive approach and in December 2018
we began to successfully sell the over-the-shoe boot into the
US market. With both the over-the-sock and over-the-shoe
products in the market, Skellerup now has the full range to
meet the demand. Customers are asking for the boot by name
and it is now outperforming the incumbent di-electric boot
in the US.
“ We initially began working with Skellerup
Footwear in 2014 as its exclusive
distribution partner for the US market.
Skellerup’s on-the-ground support in the
US meant we had consistent service,
which gave us great confidence to supply
the utilities industry at scale. Skellerup’s
footwear performs exceptionally well and
we’re proud to continue to work with
Skellerup given the respect and standing
they have within the utilities sector.”
Peter Gobbi
Account Manager for a large utility distributor
Rigorous
testing and
improvements
3
Market-leading
performance
4
19
Thinking small
in a market
focused on big
Conventionally, components for
the vacuum truck market have
been circular in shape. The round
shape makes them more robust in
withstanding the high operating levels
of vacuum and pressure. However, as
trucks continue to advance, the space
available is becoming more limited. In
order to maximise the available space,
an alternative approach was taken by
redesigning the components into a
rectangular shape. This allowed the
same volume to be achieved as those
of the round components but within a
more compact working envelope.
Case Study No. 4
Skellerup’s Vacuum Systems Group
focuses on producing vacuum
solutions for the vacuum truck
market for both the growing portable
toilet and septic tank sector and the
oil and gas industry. While this is
a growing market, there is strong
competition in our main US market
with a number of companies offering
similar products. We needed to find
a new way to compete that would
allow us to move beyond a focus on
price, to one on value.
The need to
better integrate
1
We worked closely with our customers
to intimately understand how our
products were being used on their
vacuum trucks. We identified that
the installation process was the
biggest area for improvement, as the
installation of the individual pump and
components was inefficient and time
consuming. This discovery and our
subsequent shift to a total integrated
system solution allows us to establish
niches in the market that enable
customers to be more competitive
through reduced lead times and cost.
Researching
the problem
2
Thinking
small
3
Vacuum Systems Group
Skellerup
Annual Report 2019
20
21
These systems were developed
by experts across the Skellerup
Vacuum System Group. The pumps
were designed in New Zealand,
while the systems components were
developed in the US. The pumps are
manufactured in China, and then
integrated into systems within the US.
The physical proximity of being able
to assemble in our largest market has
helped shape strong relationships with
our customers as we are able to tailor
each system to meet each of their
unique requirements.
Since the launch of the range of
vacuum systems in 2016, sales
have grown every year and, most
importantly, the value we have
added has been recognised and
realised by our customers. We now
have a strong foundation to enable
us to become the supplier of choice
for vacuum systems in the US.
“ In the waste business, downtime of
any of our vacuum trucks is simply
a lost opportunity. Having converted
our fleet across to Masport, we have
significantly improved the overall
output and efficiency of our operation.
The performance, durability and
overall service Masport offers are
second to none.”
Jason Brott
Owner, SHVT Box
The end-to-end process of product
development was completed within
12 months. This included an
exhaustive period of internal testing,
one of which was solely focused on
assessing the lifespan of the products.
Each system was taken through 10,000
cycles to measure the level of wear
and impact it could sustain in shifting
between vacuum and pressure.
Performance of
10,000 cycles
in only 12 months’
development
4
On-the-ground
presence key to
customer focus
5
Becoming
the supplier
of choice
6
21
Environment
Managing resources to drive efficiency and eliminate waste
Skellerup is committed to operating as efficiently as possible
across all of our facilities and operations. This makes good
business sense, ensuring we use our resources wisely, while
also managing our impact on the environment.
Over the past 12 months, we have focused primarily on
our manufacturing and distribution facilities as these
provide the biggest opportunities for improvement.
We have achieved reductions in waste through recycling
and minimisation, and decreased our consumption of water
and electricity. We continue to focus on reducing product
rejects at our manufacturing facility in Wigram. Investment
in process improvement and mechanisation of key product
manufacturing processes have more than halved the
incidence of rejects at Wigram. This is the equivalent of
saving 260,000 saleable products per annum.
We have also achieved a substantial reduction in
plastic waste from our engineered plastics design and
manufacturing facility in Auckland. Investment in new tooling
for our highest-volume plastic product resulted in a 90 per
cent (4.6 tonnes p.a.) reduction in plastic waste. As a result of
this project and other initiatives, this facility has also recently
been certified under the global plastics industry Operation
Clean Sweep Programme.
Driving efficiencies & eliminating waste
50%+
reduction
in rejects
1
Process improvements at our
Wigram facility has more than
halved the incidence of rejects –
saving the equivalent of 260,000
saleable products per year.
2
90% reduction
in plastic waste
New tooling for our highest
volume plastic product in
our Auckland design and
manufacturing facility has resulted
in a 90 per cent (4.6 tonnes p.a.)
reduction in plastic waste.
Skellerup
Annual Report 2019
22
Environment
This programme recognises best-practice plastics facilities,
where raw materials and other by-products are being
proactively managed to ensure they stay out of New Zealand
waterways and oceans. We are proud to be a part of this
global initiative, which has had a positive impact on our
facility as a whole, making it cleaner, safer and more efficient.
In addition, we have looked for ways to reduce the use
of plastics across our operations. For example, we have
changed how we pack our Conewango dairy liners,
eliminating the need for plastic bags – this represents an
annual saving of 300,000 bags.
We are pleased with the progress we have made to date,
and are committed to continuing to invest in developing
new approaches and technologies to reduce the waste we
generate and drive efficiencies. Our people are focused
on initiatives which deliver strong environmental and
commercial outcomes.
3
Eliminating
300,000
plastic bags
Repackaging our Conewango
dairy liners has removed the
need for plastic bags – saving
300,000 bags a year.
“Over the past 12 months
we have focused primarily
on our manufacturing
and distribution facilities
as these provide the
biggest opportunities for
improvement.”
23
Our People
Skellerup is an international business with almost 800
employees, yet our team members all feel connected with
a common purpose of satisfying customers by providing
innovative solutions. Skellerup has proud traditions dating
back to the pioneering spirit of George Skellerup. We
support an entrepreneurial, can-do attitude that seeks to
overcome obstacles. Our focus is on how how we achieve
something, not the reasons why not.
A culture of innovation
In a period of rapid global disruptive change, we need to
keep the best part of our traditions while adapting to the
modern environment. We believe that the organisation of
the future will need fewer, more highly paid employees who
understand and embrace flexibility and we are committed
to continuously improving the business to benefit customers,
investors, themselves and the communities in which we
operate. As an international company, we must meet
customers’ demands for faster delivery of products and
services in differing time zones. Our global spread helps
us meet this need, as do investments in capability to speed
up processes. We are also meeting this need by adapting
to changes within our work environments including the
successfull implementation of flexible working hours in
some parts of our Company.
Understanding our OEM customers
A large part of Skellerup’s business, in both Industrial and
Agri divisions is related to original equipment manufacture
(OEM) customers. We work hard to find and subsequently
educate our people with a wide skill set and experience to
be successful in OEM business. Success in this area is not
about trying to sell existing products – rather, it requires
engagement with customers at multiple levels in order to
develop an understanding of their needs. This almost always
relies on our ability to identify a clear problem to solve and
then have the confidence and self-belief that we can solve it.
At that stage, customers rely on us to create new products.
Teamwork is essential in working with both customers and
suppliers in developing the solution. We spend considerable
time on training and testing our people to ensure they have
the necessary skills to win OEM business opportunities.
At Skellerup, we have world-class technical sales teams,
combined with clever and creative product development
teams, to deliver solutions that customers value.
Supporting continuous development
We have a social contract with our employees. We work
hard to provide opportunities to enable each individual to
reach their potential. We pay our employees well and seek
their commitment to self-learning and providing ideas for
continuous improvement in all our processes. It is pleasing
that the growth in Skellerup’s profile and reputation means
we are attracting high-calibre people to our teams as new
opportunities arise.
A commitment to health and safety
We are committed to providing a healthy and safe
environment for our people. Our leaders embrace the
requirement to lead by design and example. We have
well-developed health and safety (H&S) plans that are
implemented and measured across the Company. There is
regular involvement of senior managers in H&S audits as well
as in monthly meetings. Skellerup’s Directors all attend Board
H&S Committee meetings and join H&S meetings when
visiting our facilities across the world.
Skellerup
Annual Report 2019
24
We commit time and resources to training our staff not
only on safe practices but to also ensure we have a large
resource of our teams trained in first aid and able to respond
if needed. Ultimately, our goal is zero harm. We measure
incidents including near hits monthly across the Group. In
FY19, we again achieved a significant drop in our total injury
rate to 1.33, down from 2.34 recorded in the prior year. Lost-
time injuries were more than halved and no members of our
team suffered any serious harm injuries.
The key feedback from employees about their relationship
with Skellerup is that we are part of the same family;
we care and look after each other. Skellerup has provided
many long-serving employees with that sense of purpose
and security and they have rewarded us with their hard
work and loyalty.
New Zealand - 46%
Europe - 8%
Asia - 26%
North America - 6%
Australia - 8%
UK & ROI - 6%
“The growth in
Skellerup’s profile
and reputation means
we are attracting
high calibre people
to our teams as new
opportunities arise”
25
Geographical reach
of our employees
Totaling 796 employees
across the Company
Board of Directors
Elizabeth (Liz) Coutts
Liz has been Skellerup’s Chair since January 2017 and a member of the Board since 2002.
She has over 20 years’ governance experience as Board Chair and Audit Committee Chair
in both the private and public sectors across a broad range of industries. Her contribution to
governance was recognised with her appointment to the New Zealand Order of Merit (ONZM)
in 2016. Liz is also Chair of Ports of Auckland Limited, Chair of Oceania Healthcare Limited, a
director of EBOS Group Limited and up until June 2019 was President of the Institute of Directors.
Alan Isaac
Alan was appointed Chair of the Audit and Risk Management Committee in January 2017
and has been a member of the Board since August 2016. He has international experience in
leading teams to improve performance in business and sport. Alan enjoyed a distinguished
35-year career at KPMG including 10 years as Chair and has chaired and directed a range
of national and international companies and sporting bodies. He was recently appointed
President of the Institute of Directors, and is a director of Scales Corporation, Oceania
Healthcare and the NZ Community Trust.
John Strowger
John has been Chair of the Health and Safety Committee since August 2016 and a member of
the Board since March 2015. He is recognised as one of New Zealand’s leading commercial
lawyers, specialising in corporate, contract and securities law and mergers & acquisitions.
John was named NZ Deal Maker of the Year at the 2019, 2017 and 2015 Australasian Law
Awards. A partner at Chapman Tripp, he co-heads that firm’s China desk, which coordinates
the work on investment and trade between China and New Zealand.
David Cushing
David was appointed to the Skellerup Holdings Board in August 2017. He is a former
investment banker with over 20 years’ experience as a director of listed companies.
David has expertise across a broad range of industries having previously been a director
of horticultural business Fruitfed Supplies Limited, Williams & Kettle Limited, Tourism
Holdings Limited, Acurity Health Group Limited and property company NPT Limited.
He is a director of PGG Wrightson, Executive Chair of Rural Equities Limited and Managing
Director of private investment company H&G Limited. David is also a director of ASX-listed
agribusiness Webster Limited and a director of Red Steel Limited.
David Mair
David has been a member of the Board since 2006 and was appointed Chief Executive in
August 2011. He has wide-ranging international experience at director and executive level
and is an expert in managing global manufacturing businesses with a particular knowledge
of Asia, where he lived and worked for a number of years. David is also a director of Forté
Funds Management.
Skellerup
Annual Report 2019
26
Skellerup’s Skills Matrix
27
Manufacturing &
Supply Chain
i. Experience as a leader
or advisor for a business
with substantial
manufacturing capability
ii. Experience as a leader
or advisor dealing with
international contract
manufacturers and
contracts
iii. Experience as a leader
in international logistics
and supply chain
iv. Understanding of
contractual arrangements
with large OEM
customers (protection of
IP, counterparty style and
approach, risk)
Technology
i. Understanding of
the opportunity
and risks provided
by technological
development and
disruption, and
development and
protection of IP
International
i. Experience as a leader
or advisor for a business
with a substantial
presence in global
markets including
understanding commodity
and financial markets
ii. Experience as a leader
or advisor for a business
with a substantial OEM
customer base
iii. Experience as a leader
or advisor for a business
with a strong range of
branded products
Growth
i. A track record of
developing and
implementing a
successful and
sustainable strategy
of growth in business
Agriculture
i. Experience and
understanding of
the dynamics of the
international and
domestic agriculture
(in particular dairy)
market
Infrastructure
i. Experience and
understanding of
customers, products
and risks associated
with infrastructure
for potable water,
construction, automotive
and general applications
Governance
i. Commitment to the
highest standard of
governance
ii. Prior Board experience
(ideally NZX50
or equivalent) or
experience as Executive
or advisor to Board for
at least 5 years
iii. Ability to assess
effectiveness of senior
management
Finance & Accounting
i. Senior Executive or
Board experience in
international finance,
accounting, reporting,
controls and taxation
Risk Management
i. Experience in
developing or
overseeing an
appropriate risk
framework and culture
ii. Experience in
evaluating and
managing financial and
non-financial risks
Capital Markets
i. Experience with equity
and debt markets and
capital structuring
ii. Experience with
mergers, acquisitions
and dispositions and
investment analysis
iii. Experience and
understanding of
dealing with investors
and the investment
community
Regulatory
i. Understanding of the
regulatory environment
of Skellerup’s business
Human Resources
i. Experience in leading
teams and with best-
practice development,
performance and
remuneration structures
for international
business
Health & Safety
i. Understanding of health
and safety requirements
and management for a
global business
1. Core
2. Markets & Customers
Finance & Accounting
Regulatory
Agriculture
Infrastructure
Manufacturing & Supply Chain
Governance
5/5
Risk Management
5/5
Capital Markets
5/55/5
Health & Safety
5/5
Growth
5/5
3/5
Human Resources
3/5
International
3/5
4/5
Technology
4/5
4/5
4/5
1. Core
2. Markets & Customers
3. Manufacturing,
Supply Chain
& Technology
3. Manufacturing, Supply Chain & Technology
Corporate Governance
This section of the Annual Report outlines our corporate
governance structures and processes, and how they have
been applied during the year.
Skellerup’s Board and management are committed to
achieving high standards of corporate governance. We
believe this is central to the effective management of
the business and to maintaining the confidence of our
shareholders. The Board and management are focused on
ensuring the long-term success of the Company and are
committed to building long-term shareholder value.
The Board regularly reviews and assesses Skellerup’s
governance policies, procedures and practices to ensure
they are appropriate and effective. Skellerup reports
against the recommendations of the NZX Corporate
Governance Code (NZX Code) as required by the NZX
Listing Rules.
Our approach for the financial year ended 30 June 2019
is detailed below.
Principle 1 – Code of Ethical Behaviour
Skellerup’s complies with the recommendations
of Principle 1.
Skellerup’s Directors set high standards of ethical
behaviour and require members of the management team
to conduct themselves similarly; they hold management
accountable for delivering these standards throughout the
organisation.
Skellerup’s Code of Ethics provides a framework of
minimum standards of ethical behaviour according to
which Directors, management and all employees of
the Company are expected to conduct themselves.
The Code of Ethics outlines the Company’s expectations
for all personnel and includes consideration of
conflicts of interest, conduct, legislative compliance,
confidentiality and the use of the Company’s assets
and information.
Skellerup communicates its Code of Ethics to Directors
and employees, explaining the Code’s purpose and
the mechanism for reporting any unethical behaviour.
The Chief Executive Officer (CEO) reviews this Code
with all Group and Business Managers annually. The
Managers in turn are required to review with staff and
confirm that they have done so to the CEO. Skellerup has
not received any reports of serious instances of unethical
behaviour during the year.
Skellerup is committed to ensuring its Directors and
employees understand its policy on and rules for dealing
in Skellerup ordinary shares or any other derivatives
thereof. Skellerup’s Financial Products Trading Policy notes
that insider trading is prohibited at all times and provides
examples of material information to assist Directors and
employees with compliance. It imposes further restrictions
on Directors and senior management and permits trading
only in prescribed trading windows or with consent.
Principle 2 – Board Composition and Performance
Skellerup complies with the recommendations
of Principle 2.
The members of Skellerup’s Board collectively provide
the broad range of strategic, business, commercial and
financial skills and knowledge, and the independence
and experience required to lead and govern the
Company effectively.
The Board regularly reviews its performance and
composition to ensure it has the range of capabilities
required.
Currently, the Board comprises three non-executive,
independent Directors, one non-executive Director and
one executive Director. The independence of Directors
is reconsidered annually. See pages 26 and 27 for more
information on the tenure, skills and experience of
Skellerup’s current Board. The independent status of each
Director is noted also on page 26.
Board procedures ensure that all Directors have the
information needed to contribute to informed discussion
and decisions on a consistent basis and to carry out
their duties effectively. Senior managers make direct
presentations to the Board as required to give the Directors
an understanding of management strategies, priorities,
style and capabilities. Directors also visit Skellerup’s
facilities throughout the world as part of their ongoing
engagement to ensure they are familiar with all aspects of
the Company. Training is made available to Directors and
in the last financial year, they participated in training on a
wide range of topics.
Skellerup has a written Diversity Policy in place. Diversity
in Skellerup includes (but is not limited to) gender, race,
ethnicity and cultural background, disability and physical
capability, age, sexual orientation, and religious or
political belief.
Skellerup
Annual Report 2019
28
A gender composition table of the Skellerup Directors,
officers and management is included on page 75.
Skellerup maintains a merit-based environment which
provides equal opportunity for development and
recognition based on performance and a flexible and
inclusive work environment that values difference that
creates value. Skellerup remunerates equivalent roles
in an equitable manner.
Principle 3 – Board Committees
Skellerup complies with the recommendations
of Principle 3.
The Board has appointed four Board Committees to
assist in carrying out its responsibilities effectively,
each of which operates under a written charter.
The Board regularly reviews the performance of
each standing Committee against its specific written
charter. The delegated responsibilities, powers and
authorities of these Committees are described below.
1. Audit and Risk Management Committee
This Committee currently comprises four non-executive
Directors, one of whom is appointed as Chair. The CEO
and the Chief Financial Officer (CFO) attend as ex-officio
members at the invitation of the Committee; the external
auditors attend by invitation of the Chair.
This Committee meets a minimum of four times each year.
Its responsibilities are to:
• Ensure that the Company has adequate risk
management controls in place
• Advise the Board on accounting policies, practices
and disclosure
• Review the scope and outcome of the external audit
• Review the annual and half-yearly statements prior to
approval by the Board.
The Audit and Risk Management Committee reports the
proceedings of each of its meetings to the full Board.
The current composition of the Committee is Alan Isaac
(Chair), Elizabeth Coutts, John Strowger and David Cushing.
2. Health and Safety Committee
This Committee comprises four non-executive
Directors, one of whom is appointed as Chair, plus
the Executive Director.
The CFO also attends meetings as an ex-officio member.
This Committee meets a minimum of three times each
year. Its responsibilities are to:
• Provide leadership and policy for Health and Safety
(H&S) management within the Skellerup Group
• Advise the Board on H&S strategy and policy and
specify targets to track performance
• Review management systems to ensure that they are
appropriate to manage hazards and risks
of the business
• Monitor and review performance by specifying and
receiving timely reports on incidents, investigations and
resultant actions and with the assistance of internal and
external audits.
The H&S Committee reports proceedings of each of its
meetings to the full Board. The current composition of the
Committee is John Strowger (Chair), Elizabeth Coutts,
Alan Isaac, David Cushing and David Mair.
3. Remuneration Committee
This Committee comprises three non-executive Directors.
It meets as required to:
• Review the remuneration packages of the CEO and
senior managers
• Make recommendations to shareholders in relation
to non-executive Directors’ remuneration packages.
Remuneration packages are reviewed annually.
Independent external surveys are used as a basis
for establishing competitive packages. Management
only attends Remuneration Committee meetings at the
invitation of the Committee.
The current composition of the Remuneration Committee
is Elizabeth Coutts (Chair), Alan Isaac and David Cushing.
4. Board Nomination Committee
This Committee comprises two non-executive Directors.
It meets as required to recommend new appointments
to the Board.
The current composition of the Board Nomination
Committee is Elizabeth Coutts (Chair) and David Cushing.
29
Board and Committee Attendance 1 July 2018 to 30 June 2019
DirectorBoardAudit & RiskHealth & SafetyRemunerationNomination
Liz Coutts8 of 85 of 53 of 34 of 42 of 2
Alan Isaac8 of 85 of 53 of 34 of 4N/A
John Strowger8 of 85 of 53 of 3N/AN/A
David Cushing8 of 85 of 53 of 34 of 42 of 2
David Mair8 of 85 of 5*3 of 3N/AN/A
* David Mair attends Audit and Risk Management Committee meetings ex-officio at the invitation of the Committee.
The Company has a written Continuous Disclosure Policy
(CDP) and there are clear processes in place to ensure
compliance with the continuous disclosure requirements
that come with being a listed company.
Skellerup’s Code of Ethics, Board and Committee
Charters, CDP and other key governance documents are
published on its website at www.skellerupholdings.com
Principle 5 – Remuneration
Skellerup complies with the recommendations
of Principle 5.
The remuneration of Directors and executives is
transparent, fair and reasonable.
The Board’s Remuneration Committee is responsible for
reviewing remuneration packages of the CEO and senior
managers and making recommendations to shareholders
in relation to non-executive Directors’ remuneration.
The current approved pool of remuneration available for
the payment of non-executive Directors is $550,000. This
was approved by shareholders at the Annual Meeting on
26 October 2016. Non-executive Directors are paid a fixed
cash fee. Non-executive Directors are not part of any share
scheme. In the year ended 30 June 2019, total fees paid to
non-executive Directors amounted to $452,500. Details of
Director remuneration are shown on page 73.
Senior executives’ remuneration comprises a combination
of fixed and at-risk components. Payment of the at-risk
component is linked to exceeding previous best annual
financial performance in the areas of the business
for which each executive is responsible or, in some
circumstances, the achievement of specific projects.
Skellerup has a formal Takeover Response Policy in place.
The purpose of the Policy is to ensure that Skellerup is
well prepared for an approach and, therefore, it will be
better able to control the takeover response process and
respond to any approach in a professional, timely and
coordinated manner and in the best interests of Skellerup
and its shareholders.
Principle 4 – Reporting and Disclosure
Skellerup complies with the recommendations
of Principle 4.
The Board demands integrity in financial reporting and
in the timeliness and balance of information disclosed.
The financial progress of Skellerup’s two divisions is
reported separately to the Board each month to enable
divisional financial performance to be reviewed in the
context of the Company’s strategies and objectives.
Monthly reporting also provides information on H&S key
opportunities, personnel, customers and risks facing the
business, and the steps being taken to optimise outcomes.
The Audit and Risk Management Committee oversees
the quality and integrity of external financial reporting
including the accuracy, completeness and timeliness
of financial statements. The Company seeks to provide
clear, concise financial statements and recognises the
value of providing shareholders with financial and non-
financial information including environmental, economic
and social sustainability risk management as reported in
this Annual Report. Management’s accountability for the
integrity of the Company’s financial reporting is reinforced
by certification of the CEO and CFO in writing that the
financial statements fairly present the financial results and
position of the Company.
Skellerup
Annual Report 2019
30
Total remuneration paid to the CEO in the year ended
30 June 2019 and in the prior years, together with a
description of the long-term share-based incentive
scheme in place for the CEO, is detailed on page 61.
Skellerup has a written Remuneration Policy in
place for the remuneration of Directors and officers.
This Policy outlines the remuneration principles that
apply to Directors and senior managers of Skellerup
to ensure that remuneration practices are fair and
appropriate for the organisation, and there is a clear link
between remuneration and performance. The guiding
principles of this Policy are that the remuneration of
Directors and executives will be transparent, fair and
reasonable to meet the needs of the Company and
shareholders.
Principle 6 – Risk Management
Skellerup complies with the recommendations
of Principle 6.
Each Director has a sound understanding of the key risks
faced by Skellerup.
The Board, advised by the Audit and Risk Management
Committee, reviews the Company’s Risk Management
Report prepared by the CEO and management team on
a semi-annual basis and specific items are monitored on
a monthly basis. The Risk Management Report identifies
key risks and strategies to manage these risks. The Board
ensures that adequate external insurance cover is in place
appropriate to the Company’s size and risk profile.
The Audit and Risk Management Committee monitors the
Company’s system of internal financial control with the aid
of reviews and reports prepared by external providers and
periodic certification by the CEO and CFO. This system
includes clearly defined policies controlling treasury
operations and capital expenditure authorisation. The
CFO is responsible for ensuring that all operations within
the Company adhere to the Board-approved financial
control policies.
The H&S Committee leads and monitors H&S management
within the Skellerup Group. The Company operates a
comprehensive H&S framework across all of its businesses
to identify and address workplace hazards and to monitor
and review compliance with H&S policies and procedures.
Board review of H&S is a priority and is facilitated by both
the activities of the H&S Committee and the receipt and
review of H&S reports at each Board meeting. Details of
Skellerup’s key H&S risks and its performance for the year
ended 30 June 2019 are included on page 24.
Principle 7 – Auditors
Skellerup complies with the recommendations
of Principle 7.
The Board ensures the quality and independence of the
external audit process, which culminates in the Audit
Report issued in relation to the annual financial statements.
The Board has an established framework for
Skellerup’s relationship with its auditors and to ensure
independence of the Company’s external auditor
is maintained, a written Audit Independence Policy
was implemented during the past financial year. The
Policy sets out guidelines to be followed to ensure that
related assurance and other services provided by
Skellerup’s auditors are not perceived as conflicting
with the independent role of the auditor. The Audit and
Risk Management Committee approves any non-audit
services that are provided by the external auditor.
The Audit and Risk Management Committee meets
regularly with the external auditors and management.
Skellerup’s external auditor is Ernst & Young (EY) who
were reappointed by shareholders at the 2018 Annual
Meeting in accordance with the Companies Act 1993.
The audit partner responsible for the Skellerup audit was
appointed during the year ended 30 June 2018. During the
year ended 30 June 2019, EY provided non-audit services
to one Group subsidiary company.
Skellerup maintains an internal audit function with
the assistance of PwC. Skellerup reviews the residual
risks from its semi-annual Risk Management Report to
determine priorities for consideration for internal audit
review with the assistance of PwC.
The significant issues and judgements considered by the
Audit and Risk Management Committee are disclosed in
Note (f) on page 44 of the financial statements.
31
Principle 8 – Shareholder Rights and Relations
Skellerup complies with the recommendations
of Principle 8.
The Board aims to ensure that shareholders are kept
informed of developments affecting the Company and
encourages shareholders to engage with the Company.
Information is communicated to shareholders through the
annual and interim reports, and periodic and continuous
disclosure to the NZX, and at Annual Meetings.
The Board encourages shareholders to attend and
participate fully at Annual Meetings to ensure they
exercise the opportunity to ask questions about the
Company and its performance.
The Company also maintains information for shareholders
on its website (www.skellerupholdings.com). This includes
a description of Skellerup’s business and structure,
copies of key corporate governance documents and all
information released to the NZX.
The Board respects the interests of all stakeholders in
the Company. Skellerup strives to manage its business
in a manner that ensures long-term shareholder value
by delivering consistent quality solutions for customers,
a work environment that is healthy and safe and delivers
development opportunities for its employees, and meets
or exceeds the compliance requirements within the
environments in which the Company operates.
Skellerup
Annual Report 2019
32
Financial Statements
for the year ended 30 June 2019
33
Skellerup
Annual Report 2019
34
A member firm of Ernst & Young Global Limited
Independent auditor’s report to the Shareholders of Skellerup Holdings Limited
Opinion
We have audited the financial statements of Skellerup Holdings Limited (“the company”) and its
subsidiaries (together “the group”) on pages 38 to 72, which comprise the balance sheet of the group
as at 30 June 2019, and the income statement, statement of comprehensive income, statement of
changes in equity and cash flow statement for the year then ended of the group, and the notes to the
financial statements including a summary of significant accounting policies.
In our opinion, the financial statements on pages 38 to 72 present fairly, in all material respects, the
financial position of the group as at 30 June 2019 and its financial performance and cash flows for the
year then ended in accordance with New Zealand equivalents to International Financial Reporting
Standards and International Financial Reporting Standards.
This report is made solely to the company's shareholders, as a body. Our audit has been undertaken so
that we might state to the company's shareholders those matters we are required to state to them in an
auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company's shareholders, as a body,
for our audit work, for this report, or for the opinions we have formed.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report.
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 we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Ernst & Young provided services in respect of research and development tax incentives to the group
during the year. Partners and employees of our firm may deal with the group on normal terms within
the ordinary course of trading activities of the business of the group. We have no other relationship
with, or interest in, the group.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current year. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, but we do not
provide a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial statements section of the audit report, including in relation to these matters. Accordingly, our
audit included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial statements.
A member firm of Ernst & Young Global Limited
Independent auditor’s report to the Shareholders of Skellerup Holdings Limited
Opinion
We have audited the financial statements of Skellerup Holdings Limited (“the company”) and its
subsidiaries (together “the group”) on pages 38 to 72, which comprise the balance sheet of the group
as at 30 June 2019, and the income statement, statement of comprehensive income, statement of
changes in equity and cash flow statement for the year then ended of the group, and the notes to the
financial statements including a summary of significant accounting policies.
In our opinion, the financial statements on pages 38 to 72 present fairly, in all material respects, the
financial position of the group as at 30 June 2019 and its financial performance and cash flows for the
year then ended in accordance with New Zealand equivalents to International Financial Reporting
Standards and International Financial Reporting Standards.
This report is made solely to the company's shareholders, as a body. Our audit has been undertaken so
that we might state to the company's shareholders those matters we are required to state to them in an
auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company's shareholders, as a body,
for our audit work, for this report, or for the opinions we have formed.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report.
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 we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Ernst & Young provided services in respect of research and development tax incentives to the group
during the year. Partners and employees of our firm may deal with the group on normal terms within
the ordinary course of trading activities of the business of the group. We have no other relationship
with, or interest in, the group.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current year. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, but we do not
provide a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial statements section of the audit report, including in relation to these matters. Accordingly, our
audit included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial statements.
34
35
A member firm of Ernst & Young Global Limited
Scoping of the audit
Why significant How our audit addressed the key audit matter
Skellerup is a global business with over 75% of
the group’s revenue being generated in
countries other than New Zealand.
A significant area of focus when conducting
the audit was ensuring sufficient audit
evidence was obtained in differing geographic
locations and businesses to enable us to reach
appropriate conclusions on the consolidated
financial statements. This was both with
respect to the determination and allocation of
materiality as well as the determination of the
nature and extent of audit procedures to be
performed in each location.
The EY Auckland audit team is the co-ordinating
primary team (“the primary team”) and
determined the extent and nature of audit
procedures required by local audit teams in all
significant locations (“component teams”).
The primary team assessed the nature, scale and
risks associated with each of the group’s
significant businesses. As a result of this
assessment each business was allocated a scope
reflecting the audit procedures to be performed.
The primary team either performed, or instructed
component teams to perform, the audit
procedures required for group reporting purposes
in relation to significant businesses in New
Zealand, Australia, USA, UK, Italy and China. For
the remaining businesses analytical procedures
were performed by the primary team.
The primary team instructed component teams as
to the significant risk areas to be addressed by
their audit procedures and the information to be
reported back. The primary team determined the
materiality to be applied by each component team
having regard to the size and risk profile of the
various businesses across the group.
All component teams were required to provide
written confirmation to the primary team
confirming the procedures performed, the results
of the procedures and any significant findings or
observations.
Discussions were held with each of the component
teams. During these discussions, the procedures
performed by each component team were
discussed as were their findings relevant to the
group audit.
We reported to the Audit Committee the results of
audit procedures and testing performed by both
the primary and component teams and any
misstatements identified that warranted reporting
based on quantitative or qualitative grounds.
Information other than the financial statements and auditor’s report
The directors of the company are responsible for the Annual Report, which includes information other
than the financial statements and auditor’s report.
A member firm of Ernst & Young Global Limited
Independent auditor’s report to the Shareholders of Skellerup Holdings Limited
Opinion
We have audited the financial statements of Skellerup Holdings Limited (“the company”) and its
subsidiaries (together “the group”) on pages 38 to 72, which comprise the balance sheet of the group
as at 30 June 2019, and the income statement, statement of comprehensive income, statement of
changes in equity and cash flow statement for the year then ended of the group, and the notes to the
financial statements including a summary of significant accounting policies.
In our opinion, the financial statements on pages 38 to 72 present fairly, in all material respects, the
financial position of the group as at 30 June 2019 and its financial performance and cash flows for the
year then ended in accordance with New Zealand equivalents to International Financial Reporting
Standards and International Financial Reporting Standards.
This report is made solely to the company's shareholders, as a body. Our audit has been undertaken so
that we might state to the company's shareholders those matters we are required to state to them in an
auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company's shareholders, as a body,
for our audit work, for this report, or for the opinions we have formed.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report.
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 we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Ernst & Young provided services in respect of research and development tax incentives to the group
during the year. Partners and employees of our firm may deal with the group on normal terms within
the ordinary course of trading activities of the business of the group. We have no other relationship
with, or interest in, the group.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current year. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, but we do not
provide a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial statements section of the audit report, including in relation to these matters. Accordingly, our
audit included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial statements.
35
Skellerup
Annual Report 2019
36
A member firm of Ernst & Young Global Limited
Our opinion on the financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
fi nancial statements or our knowledge obtained during the audit, or otherwise appears to be materially
misstated.
If, based upon the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Directors’ responsibilities for the financial statements
The directors are responsible, on behalf of the entity, for the preparation and fair presentation of the
financial statements in accordance with New Zealand equivalents to International Financial Reporting
Standards and International Financial Reporting Standards, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing on behalf of the entity
the group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate
the group or cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with International Standards on Auditing (New Zealand) will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these financial statements.
A further description of the auditor’s responsibilities for the audit of the financial statements is located
at the External Reporting Board’s website: https://www.xrb.govt.nz/standards-for-assurance-
practitioners/auditors-responsibilities/audit-report-1/. This description forms part of our auditor’s
report.
The engagement partner on the audit resulting in this independent auditor’s report is Simon O’Connor.
Chartered Accountants
Auckland
23 August 2019
A member firm of Ernst & Young Global Limited
Independent auditor’s report to the Shareholders of Skellerup Holdings Limited
Opinion
We have audited the financial statements of Skellerup Holdings Limited (“the company”) and its
subsidiaries (together “the group”) on pages 38 to 72, which comprise the balance sheet of the group
as at 30 June 2019, and the income statement, statement of comprehensive income, statement of
changes in equity and cash flow statement for the year then ended of the group, and the notes to the
financial statements including a summary of significant accounting policies.
In our opinion, the financial statements on pages 38 to 72 present fairly, in all material respects, the
financial position of the group as at 30 June 2019 and its financial performance and cash flows for the
year then ended in accordance with New Zealand equivalents to International Financial Reporting
Standards and International Financial Reporting Standards.
This report is made solely to the company's shareholders, as a body. Our audit has been undertaken so
that we might state to the company's shareholders those matters we are required to state to them in an
auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company's shareholders, as a body,
for our audit work, for this report, or for the opinions we have formed.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report.
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 we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Ernst & Young provided services in respect of research and development tax incentives to the group
during the year. Partners and employees of our firm may deal with the group on normal terms within
the ordinary course of trading activities of the business of the group. We have no other relationship
with, or interest in, the group.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current year. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, but we do not
provide a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial statements section of the audit report, including in relation to these matters. Accordingly, our
audit included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial statements.
36
Directors’
Responsibility
Statement
for the year ended 30 June 2019
The Directors are pleased to present the Group
financial statements of Skellerup Holdings Limited for
the year ended 30 June 2019.
The Group financial statements are dated 23 August
2019 and are signed in accordance with a resolution
of the Directors made pursuant to section 211 of the
Companies Act 1993.
For and on behalf of the Directors
The Directors are responsible for the preparation,
in accordance with New Zealand law and generally
accepted accounting practice, of financial statements,
which give a true and fair view of the financial position
of the Skellerup Holdings Limited Group as at 30 June
2019, and the results of their operations and cash flows
for the year ended 30 June 2019.
The Directors consider that the financial statements of
the Group have been prepared using accounting policies
appropriate to the Group’s circumstances, consistently
applied and supported by reasonable and prudent
judgements and estimates, and that all applicable New
Zealand Equivalents to International Financial Reporting
Standards have been followed.
The Directors have responsibility for ensuring that proper
accounting records have been kept which enable, with
reasonable accuracy, the determination of the financial
position of the Group and enable them to ensure that the
financial statements comply with the Financial Reporting
Act 1993.
The Directors have responsibility for the maintenance of a
system of internal control designed to provide reasonable
assurance as to the integrity and reliability of financial
reporting. The Directors consider that adequate steps have
been taken to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
EM Coutts
Chair of the Board of Directors
AR Isaac
Director
37
Income Statement
for the year ended 30 June 2019
Note
2019
$000
2018
$000
Revenue2245,792 240,408
Cost of sales(152,917)(151,345)
Gross profit92,875 89,063
Other income4381 1,706
Distribution expenses(12,862)(13,587)
Marketing expenses(21,073)(18,730)
Administration expenses(17,523)(18,671)
Profit for the year before tax, finance costs and share of
profit of associate
41,798 39,781
Finance costs15(1,785)(1,863)
Share of profit of associate23 -
Profit for the year before tax40,036 37,918
Income tax expense5(10,973)(10,641)
Net after-tax profit for the year, attributable to owners of the Parent29,063 27,277
Earnings per share
Basic earnings per share (cents)1814.96 14.15
Diluted earnings per share (cents)1814.80 14.01
The above Income Statement should be read in conjunction with the accompanying notes.
Skellerup
Annual Report 2019
38
Statement of Comprehensive Income
for the year ended 30 June 2019
Note
2019
$000
2018
$000
Net profit after tax for the year attributable to equity holders of the Parent29,06327,277
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net gains/(losses) on cash flow hedges16735(1,061)
Income tax related to gains/(losses) on cash flow hedges5(206)297
Foreign exchange movements on translation of overseas subsidiaries16(1,749)5,987
Income tax related to gains/(losses) on foreign exchange movements of loans
with overseas subsidiaries
537(180)
Other comprehensive income net of tax(1,183)5,043
Total comprehensive income for the year attributable to equity holders
of the Parent
27,880 32,320
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
39
Balance Sheet
as at 30 June 2019
Note
2019
$000
2018
$000
Current assets
Cash and cash equivalents69,6399,681
Trade and other receivables and prepayments750,75949,486
Inventories848,33947,127
Income tax receivable51,4652,305
Derivative financial assets2131075
Total current assets110,512 108,674
Non-current assets
Property, plant and equipment991,29693,366
Deferred tax assets52,8223,542
Goodwill1049,47645,966
Intangible assets101,057456
Investment in associate231,723-
Derivative financial assets2117321
Total non-current assets146,547 143,351
Total assets257,059 252,025
Current liabilities
Trade and other payables1122,99528,709
Provisions124,8405,301
Income tax payable59601,194
Derivative financial liabilities21118465
Total current liabilities28,913 35,669
Non-current liabilities
Provisions121,4061,672
Interest-bearing loans and borrowings1346,21540,400
Deferred tax liabilities51,9501,815
Derivative financial liabilities21183183
Total non-current liabilities49,754 44,070
Total liabilities78,667 79,739
Net assets178,392 172,286
Equity
Equity attributable to equity holders of the Parent
Share capital1472,17369,732
Reserves16(9,490)(7,985)
Retained earnings19115,709110,539
Total equity178,392 172,286
The above Balance Sheet should be read in conjunction with the accompanying notes.
Skellerup
Annual Report 2019
40
Statement of Changes in Equity
for the year ended 30 June 2019
Fully Paid
Ordinary
Shares
Cash Flow
Hedge
Reserve
Foreign
Currency
Translation
Reserve
Employee
Share Plan
Reserve
Retained
Earnings
Total
Note$000$000$000$000$000$000
Balance 1 July 201769,732367(13,866)471102,543159,247
Net profit after tax for the year ending
30 June 2018
----27,27727,277
Other comprehensive income-(764)5,807--5,043
Total comprehensive income for the year-(764)5,807-27,27732,320
Share incentive scheme------
Dividends(19,281)(19,281)
Balance 30 June 201869,732(397)(8,059)471110,539172,286
Net profit after tax for the year ending
30 June 2019
----29,06329,063
Other comprehensive income16-529(1,712)--(1,183)
Total comprehensive income for the year-529(1,712)-29,06327,880
Share incentive scheme172,441--(322)4512,570
Dividends19----(24,344)(24,344)
Balance 30 June 201972,173132(9,771)149115,709178,392
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
41
Cash Flow Statement
for the year ended 30 June 2019
Note
2019
$000
2018
$000
Cash flows from operating activities
Receipts from customers244,265241,347
Interest received1453
Dividends received11
Payments to suppliers and employees(203,880)(197,965)
Income tax paid(9,695)(13,228)
Interest and bank fees paid(1,785)(1,863)
Net cash flows from/(used in) operating activities28,920 28,345
Cash flows from investing activities
Proceeds from sale of property, plant and equipment184908
Payments for property, plant and equipment(4,450)(5,333)
Payments for intangible assets (143)(95)
Acquisition of a business combination, net of cash acquired(6,663)-
Payment for investment in associate (1,674)-
Net cash flows from/(used in) investing activities(12,746)(4,520)
Cash flows from financing activities
Proceeds/(repayments) from loans and advances5,823(1,415)
Proceeds from issue of shares2,422-
Dividends paid to equity holders of Parent(24,344)(19,281)
Net cash flows from/(used in) financing activities(16,099)(20,696)
Net increase/(decrease) in cash and cash equivalents753,129
Cash and cash equivalents at the beginning of the year9,6816,022
Effect of exchange rate fluctuations(117)530
Cash and cash equivalents at the end of the year69,639 9,681
The above Cash Flow Statement should be read in conjunction with the accompanying notes.
Reconciliation of net profit after tax to net cash flow from operations
2019
$000
2018
$000
Net profit after tax29,06327,277
Adjustments for:
Depreciation6,9617,265
Amortisation171191
(Gain)/loss on sale of assets16(385)
Foreign currency movements on translating foreign assets and liabilities546(1,170)
Bad debts written off5143
Share of profit of associate23-
Net movement in working capital(7,967)(4,876)
Net cash inflow from operating activities28,864 28,345
Skellerup
Annual Report 2019
42
Notes to the Financial Statements
Reporting Entity
Skellerup Holdings Limited (‘the Company’) is a limited liability company incorporated and domiciled in New Zealand. It is
registered under the Companies Act 1993 with its registered office at Level 3, 205 Great South Road, Greenlane, Auckland. The
Company is a Reporting Entity in terms of the Financial Markets Conduct Act 2013 and is listed on the New Zealand Exchange
(NZX Main Board) with the ticker SKL. These financial statements were authorised for issue in accordance with a resolution of
the directors on 23 August 2019.
(a) Nature of operations
The Skellerup Group of companies is a global solutions provider of technical polymer and elastomer products for a variety
of specialist industrial and agricultural applications. Skellerup’s operations are split into two units: the Agri Division, a world
leading provider of food grade dairy rubberware, filters, and animal health products to the global dairy industry; and the
Industrial Division, a global specialist for technically demanding products used in water, roofing, automotive, extraction,
appliance and health applications.
(b) Basis of preparation
These financial statements of the Group, a profit-oriented business, are for the year ended 30 June 2019.
(c) Statement of compliance
The consolidated financial statements for the year ended 30 June 2019 have been prepared in accordance with New Zealand
Generally Accepted Accounting Practices (NZ GAAP) and the requirements of the Financial Markets Conduct Act 2013. For
the purpose of complying with NZ GAAP, the Group is a for-profit entity. The financial statements comply with New Zealand
equivalents to International Financial Reporting Standards (NZ IFRS). The financial statements also comply with International
Financial Reporting Standards (‘IFRS’). The financial statements are presented in New Zealand dollars (NZD) and all values are
rounded to the nearest thousand dollars ($000).
The accounting principles recognised as appropriate for the measuring and reporting of profit and loss and financial position on
a historical-cost basis have been applied, except for derivative financial instruments, which have been measured at fair value.
The preparation of financial statements in accordance with NZ IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual
results may differ from these estimates. Critical accounting judgements, estimates and assumptions are detailed in Note (f).
(d) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June 2019.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the
Group has:
• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
• Exposure, or rights, to variable returns from its involvement with the investee; and
• The ability to use its power over the investee to affect its returns.
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination
is measured at fair value. Fair value is calculated as the sum of: the acquisition-date fair values of the assets transferred by
the Group; the liabilities incurred by the Group to former owners; the equity issued by the Group; and the amount of any
non-controlling interest in the acquiree. For each business combination, the Group measures the non-controlling interest in
the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related
costs are expensed as incurred.
In preparing the consolidated financial statements, all inter-company balances, income and expense transactions, and profit
and losses resulting from intra-Group activities, have been eliminated.
(e) Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the currency that best reflects
the economic substance of the underlying events and circumstances relevant to that entity (the ‘functional currency’). The
consolidated financial statements are presented in New Zealand dollars (the ‘presentation currency’), which is the functional
currency of the Parent.
43
Transactions and balances
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the balance sheet date are translated to New Zealand dollars at the
foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income
statement, except when deferred in OCI as qualifying cash flow hedges.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated
at fair value are translated to New Zealand dollars at foreign exchange rates ruling at the dates the fair value was determined.
Group companies
The assets and liabilities of all Group companies that have a functional currency that differs from the presentation currency,
including goodwill and fair value adjustments arising on consolidation, are translated to New Zealand dollars at foreign
exchange rates ruling at the balance sheet date. The revenues and expenses of these foreign operations are translated to
New Zealand dollars at rates approximating the foreign exchange rates ruling at the dates of the transactions. Exchange
differences arising from the translation of foreign operations are recognised in the foreign currency translation reserve. On any
disposal of a foreign operation, the component of OCI relating to that particular foreign operation is reclassified to profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and are translated at the foreign exchange rates ruling at the balance sheet date.
(f) Significant accounting judgements and assumptions
In the process of applying the Group’s accounting policies, a number of judgements have been made and estimates of future
events applied. Judgements and estimates which are material to the financial statements are found in the following notes.
• Note 10 Impairment of goodwill page 54
• Note 8 Inventory obsolescence page 52
• Note 9 Estimation of useful lives of assets page 53
• Note 5 Recovery of deferred tax asset page 49
Skellerup
Annual Report 2019
44
1. Segment Information
An operating segment is a distinguishable component of the entity which is reported as an organisational unit, engages in
business activities, earns revenue and incurs expenses, and whose operating results are reviewed regularly by the chief
operating decision-maker to allocate resources and assess performance.
The Group’s operating segments are Agri, Industrial and Corporate, being the divisions reported to the executive management
and Board of Directors to assess performance of the Group and allocate resources. The principal measure of performance for each
segment is EBIT (earnings before interest and tax). As a result, finance costs and taxation have not been allocated to each segment.
Agri Division
The Agri Division manufactures and distributes dairy rubberware which includes milking liners, tubing, filters and feeding teats,
together with other related agricultural products and dairy vacuum pumps to global agricultural markets.
Industrial Division
The Industrial Division manufactures and distributes technical polymer products across a number of industrial markets,
including construction, infrastructure, automotive, mining and general industrial, together with industrial vacuum pump systems
for a variety of industrial applications worldwide.
Corporate Division
The Corporate Division includes the Parent company and other central administration expenses that have not been allocated
to the Agri and Industrial Divisions.
(a) Business segment analysis
For the year ended 30 June 2019
Agri
$000
Industrial
$000
Corporate
$000
Eliminations
$000
Total
$000
Revenue88,750157,188-(146)245,792
Segment EBIT22,79222,876(3,870)-41,798
Profit before tax, finance costs and share
of profit of associate
41,798
Finance costs(1,785)
Share of profit of associate23
Profit for the year before tax40,036
Income tax expense(10,973)
Net after-tax profit29,063
Assets and liabilities
Segment assets112,784122,93021,345-257,059
Segment liabilities9,63118,69450,342-78,667
Net assets103,153104,236(28,997)-178,392
Other segment information
Capital expenditure1,9268,33664-10,326
Cash flow
Segment EBIT22,79222,876(3,870)-41,798
Adjustments for:
- Depreciation and amortisation4,1192,94766-7,132
- Non-cash items--636-636
Movement in working capital104(8,015)(56)-(7,967)
Segment cash flow27,01517,808(3,224)-41,599
Finance and tax cash expense(11,480)
Movement in finance and tax accrual(1,255)
Net cash flow from operating activities28,864
Notes to the Financial Statements
For the year ended 30 June 2018
45
1. Segment Information (continued)
For the year ended 30 June 2018
Agri
$000
Industrial
$000
Corporate
$000
Eliminations
$000
Total
$000
Revenue89,033151,507-(132)240,408
Segment EBIT22,82720,816(3,862)-39,781
Profit before tax and finance costs39,781
Finance costs(1,863)
Profit for the year before tax37,918
Income tax expense(10,641)
Net after-tax profit27,277
Assets and liabilities
Segment assets121,287115,02815,710-252,025
Segment liabilities11,49822,96045,281-79,739
Net assets109,78992,068(29,571)-172,286
Other segment information
Capital expenditure2,4403,0026-5,448
Cash flow
Segment EBIT22,82720,816(3,862)-39,781
Adjustments for:
- Depreciation and amortisation4,2803,11264-7,456
- Non-cash items--(1,512)-(1,512)
Movement in working capital(705)(16)(4,155)-(4,876)
Segment cash flow26,40223,912(9,465)-40,849
Finance and tax cash expense(15,091)
Movement in finance and tax accrual2,587
Net cash flow from operating activities28,345
Major customers
The Agri and Industrial Divisions generate revenue from a large number of customers.
For the Agri Division, the three largest customers account for 36.0% (2018: 34.7%) of the Agri Division revenue.
For the Industrial Division, the three largest customers account for 9.3% (2018: 9.5%) of the Industrial Division revenue.
Skellerup
Annual Report 2019
46
2. Operating Revenue
The Group is in the business of providing technical polymer and elastomer products. Revenue from contracts with
customers is recognised when control of the goods or services are transferred to the customer at an amount that ref lects
the consideration to which the Group expects to be entitled in exchange for those goods and services. The Group has
concluded that it is the principal in its revenue arrangements, because it typically controls the goods and services before
transferring them to the customer.
NZ IFRS 15 – Revenue from contracts with customers
Skellerup implemented NZ IFRS 15 for the first time in 2018 using the full retrospective method of adoption. The implementation
of NZ IFRS 15 has not had any material impact on the financial results and disclosures for Skellerup.
The Agri and Industrial segments have similar performance obligations. The performance obligation is satisfied upon delivery
of product and payment is generally due within 30 to 120 days of delivery. Some contracts provide customers with volume
rebates which give rise to variable consideration and are accounted for accordingly. There are no maintenance or service
contracts with customers.
1. Segment Information (continued)
(b) Geographical revenue
Revenue from external customers by geographical locations is detailed below. Revenue is attributed to each geographical
location based on the location of the customers. Differences in foreign currency translation rates can impact comparisons
between years.
2019
$000
2018
$000
New Zealand50,77651,735
Australia49,15153,615
North America78,27868,364
Europe33,99433,603
United Kingdom and Ireland13,91712,431
Asia16,61416,448
Other3,0624,212
Total revenue245,792240,408
(c) Assets by geographical location
The non-current segment assets are scheduled by the geographical location in which the asset is held. The non-current assets,
which include property, plant and equipment, goodwill and intangible assets for each geographical location, are as follows:
2019
$000
2018
$000
New Zealand105,535101,837
Australia8,5049,140
Europe10,12310,969
United Kingdom and Ireland8,4898,846
Asia7,6357,891
North America1,5431,105
Non-current assets by geographical location141,829139,788
47
4. Other income
2019
$000
2018
$000
Interest income1453
Government grants received3213
Realised and unrealised foreign currency gains/(losses)(170)1,123
Other sundry income505517
Total other income/(expenses)3811,706
3. Expenditure included in Net Profit for the Year
Net profit for the year has been arrived at after charging the items noted below. Where the GST/VAT incurred on a purchase
of goods and services is not recoverable from the taxation authority, the GST/VAT is recognised as part of the expense item
as applicable.
Note
2019
$000
2018
$000
Employee benefits expense
Wages and salaries (including annual leave, long-service leave,
CEO share scheme and sick leave)
47,74349,577
Termination benefits96198
Defined contribution expense2,7252,723
Total employee benefit expense50,56452,498
Depreciation and amortisation expense
Depreciation of property, plant and equipment96,9617,265
Amortisation of intangible assets10171191
Total depreciation and amortisation expense7,1327,456
Total (gain)/loss on disposal of property, plant and equipment16(385)
Total product development costs3,9864,577
Total rentals and operating lease costs254,8844,368
Remuneration of auditors
Audit of the financial statements by Parent company auditors461467
Other auditors’ fees for the audit of the financial statements in foreign jurisdictions8372
Taxation services provided by Parent company auditors1311
Total remuneration of auditors557550
Skellerup
Annual Report 2019
48
5. Taxation
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from,
or paid to, the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• For a deferred income tax liability arising from the initial recognition of goodwill; or
• Where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, and the carry-forward of unused tax assets and unused tax losses can be utilised. The carrying amount of deferred
income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
(a) Income statement
2019
$000
2018
$000
Current income tax
Current income tax charge10,450 10,350
Prior-year adjustments(74)(3)
Deferred income tax
Temporary difference reversal468 174
Prior-year adjustments127 265
Effect of movements in tax rates2 (145)
Income tax expense as per income statement10,97310,641
(b) Amounts charged/(credited) to other comprehensive income
Note
2019
$000
2018
$000
Current income tax
Fair value of derivative financial instruments16206(297)
Translation of foreign operations16(37)180
Total income tax expense/(credit) relating to other comprehensive income169(117)
49
5. Taxation (continued)
(c) Reconciliation
2019
$000
2018
$000
Total profit before tax as reported40,036 37,918
Tax percentage at Parent company rate28%28%
Tax at Parent company rate11,210 10,617
Non-deductible expenses/(non-assessable income)77(116)
Tax effects of non-New Zealand profits(369)23
Adjustments for prior years53262
Effect of movements in tax rates2(145)
Income tax as per income statement10,97310,641
(d) Deferred tax assets and liabilities
2019
$000
2018
$000
Deferred tax asset2,822 3,542
Deferred tax liability(1,950)(1,815)
Net tax asset8721,727
The movement in the net deferred tax assets and liabilities is provided below:
2019
Opening
Balance
$000
Charged to
Income
$000
Charged to Other
Comprehensive
Income
$000
Foreign
Currency
Movements
$000
Closing
Balance
$000
Property, plant and equipment(1,588)(441)-(15)(2,044)
Provisions and accruals3,161(198)-(37)2,926
Financial derivatives154-(206)-(52)
Other-42--42
Net tax asset1,727(597)(206)(52)872
2018
Opening
Balance
$000
Charged to
Income
$000
Charged to Other
Comprehensive
Income
$000
Foreign
Currency
Movements
$000
Closing
Balance
$000
Property, plant and equipment(1,310)(200)-(78)(1,588)
Provisions and accruals3,06919-733,161
Financial derivatives(143)-297-154
Other109(113)-4-
Net tax asset1,725(294)297(1)1,727
(e) Imputation credit account
Note
2019
$000
2018
$000
Balance at the beginning of the year12 1,043
Attached to dividends paid19(4,773)(7,000)
Income tax paid in New Zealand4,802 6,823
Reversal of previous years' estimate-(854)
Total imputation credits4112
Skellerup
Annual Report 2019
50
7. Trade and Other Receivables and Prepayments
Trade receivables represent the Group’s right to an amount of consideration that is unconditional. Trade receivables are
recognised and measured at the transaction price determined under NZ IFRS 15. The Group recognises an allowance for
expected credit losses where there is an increase in credit risk subsequent to initial recognition.
2019
$000
2018
$000
Trade receivables46,87246,312
Less allowance for expected credit losses (548)(347)
46,32445,965
GST/VAT receivable285278
Other4,1503,243
Total trade and other receivables and prepayments50,75949,486
Trade recievables are non-interest bearing and are generally on terms ranging from 30 to 120 days to those customers
for whom the Group has been able to validate acceptable credit quality. The credit terms and limits are reviewed monthly.
The average credit period for the sale of goods is 63 days (2018: 64 days).
Of the trade receivables balance at the end of the year, $7.99 million (2018: $8.81 million) representing 17.2% (2018: 19.2%) of
the trade receivables is due from the Group’s three largest customers. The balances due from these customers are current and
are considered to be a low credit risk to the Group.
The Group recognised a provision for expected credit losses. This provision is based on days past due for customers,
considering historical credit loss experience.
Ageing of past due but not impaired trade receivables
2019
$000
2018
$000
One to 30 days11,44711,752
31 to 60 days7821,075
61 days plus1,828557
Total past due trade receivables14,05713,384
Movement in the allowance for expected credit losses:
Balance at the beginning of the year347180
Impaired losses recognised229 197
Amounts written off as uncollectable(5)(29)
Impairment losses reversed(15)(13)
Net foreign currency exchange differences(8)12
Balance at the end of the year548347
6. Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original
maturity of three months or less.
For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above,
net of outstanding bank overdrafts. Cash flows are included in the cash flow statement on a gross basis and the GST/VAT
component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation
authority, is classified as operating cash flows.
In New Zealand, some Group companies operate bank accounts in overdraft. Under the Group, bank facility overdrafts have a
legal right of set-off against bank accounts in funds. Therefore, only the net in funds position has been disclosed.
Cash and cash equivalents at the end of the year as shown in the cash flow statement can be reconciled to the related items
in the balance sheet as follows: all cash is available and under the control of the Group and, other than in China, there are no
restrictions relating to the use of the cash balances disclosed.
51
8. Inventories
The Group applies an inventory valuation policy of valuing at the lower of original cost or net realisable value. Where inventory
is written down below cost, estimates are made of the realisable value less cost to sell to determine the net realisable value.
Costs incurred in bringing each product to its present location and conditions are accounted for as follows:
• Raw materials as the purchase cost on a first-in, first-out basis;
• Finished goods and work-in-progress as the cost of direct materials and labour and a proportion of manufacturing overheads
based on normal operating capacity but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and the estimated costs necessary to make the sale.
2019
$000
2018
$000
Raw materials8,9099,229
Work-in-progress2,6422,534
Finished goods36,78835,364
Total inventories48,33947,127
The value of inventories is net of $2,540,737 (2018: $2,220,557) in respect of write-downs across all categories of inventory
to net realisable value. All inventory write-down movements are included in the cost of sales.
Skellerup
Annual Report 2019
52
9. Property, Plant and Equipment
All classes of property, plant and equipment are recorded initially at cost, including costs directly attributable to bringing the
asset to working condition and ready for its intended use. Subsequently, property, plant and equipment is measured at cost less
accumulated depreciation and accumulated impairment. Depreciation of property, plant and equipment, other than freehold
land, which is carried at cost, is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Buildings:
Plant and equipment:
Furniture, fittings and other:
The estimation of the useful lives of assets has been based on historical experience, manufacturers’ warranties and
management’s judgement on the performance of the asset. Adjustments to useful lives are made when considered necessary.
The depreciation charges are disclosed below. At each reporting date, the Group assesses whether or not there is any
indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of the
recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired
and is written down to its recoverable amount.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year in
which the item is derecognised.
Note
Freehold
Land
$000
Freehold
Buildings
$000
Plant and
Equipment
$000
Furniture,
Fittings
and Other
$000
Total
$000
Cost
Balance 1 July 20177,25834,500100,9887,200149,946
Additions-234,8664445,333
Disposals(174)-(959)(283)(1,416)
Net foreign currency exchange differences--3,296 275 3,571
Balance 30 June 20187,08434,523108,1917,636157,434
Additions-(40)4,6187465,324
Disposals--(950)(290)(1,240)
Net foreign currency exchange differences--(1,128)(77)(1,205)
Balance 30 June 20197,08434,483110,7318,015160,313
Accumulated depreciation and impairment
Balance 1 July 2017-60649,3015,09755,004
Depreciation expense3-9115,7286267,265
Disposals--(632)(262)(894)
Net foreign currency exchange differences--2,495 198 2,693
Balance 30 June 2018-1,51756,8925,65964,068
Depreciation expense3-9115,4525986,961
Disposals--(757)(283)(1,040)
Net foreign currency exchange differences--(899)(73)(972)
Balance 30 June 2019-2,42860,6885,90169,017
Carrying value
As at 30 June 20187,08433,00651,2991,97793,366
As at 30 June 20197,08432,05550,0432,11491,296
Plant and equipment and freehold buildings include work in progress of $1,389,000 (2018: $970,000).
Capital expenditure commitments are $830,000 (2018: $511,000).
40 years
Two to 30 years
Five to 10 years
53
10. Intangible Assets
The Group’s intangible assets consist mainly of goodwill, software costs and customer relationships.
Note
Goodwill
$000
Software
$000
Customer
Relationships
$000
Total
$000
Cost
Balance 1 July 201744,1749,067-53,241
Additions-98-98
Disposals-(76)-(76)
Net foreign currency exchange differences1,792136 -1,928
Balance 30 June 201845,9669,225-55,191
Additions4,1941436324,969
Disposals-(20)-(20)
Net foreign currency exchange differences(684)(29)-(713)
Balance 30 June 201949,4769,31963259,427
Accumulated amortisation
Balance 1 July 2017-8,528-8,528
Disposals-(73)-(73)
Amortisation expense3-191 -191
Net foreign currency exchange differences123 -123
Balance 30 June 2018-8,769-8,769
Disposals-(20)-(20)
Amortisation expense3-171-171
Net foreign currency exchange differences(26)-(26)
Balance 30 June 2019-8,894-8,894
Carrying value
As at 30 June 201845,966456-46,422
As at 30 June 201949,47642563250,533
Goodwill
Goodwill acquired in a business combination is measured initially at cost, being the excess of the consideration transferred over
the fair value of the Group’s net identifiable assets acquired and liabilities assumed. If this consideration transferred is lower
than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised in the income statement.
Separately recognised goodwill is tested annually for impairment and carried at cost less any accumulated impairment losses.
Impairment losses on goodwill are not reversed.
The Group determines whether or not goodwill associated with items with indefinite useful lives is impaired at least on an
annual basis. This requires certain assumptions being made in determining the recoverable amount of the cash-generating
units, using a value-in-use discounted cash flow methodology, to which the goodwill has been allocated. The assumptions
used in determining the recoverable amount and the carrying amount of goodwill are detailed below.
Skellerup
Annual Report 2019
54
10. Intangible Assets (continued)
Software
Identifiable intangible assets, which are acquired separately or in a business combination, are capitalised at cost at the date of
acquisition and stated at cost less any accumulated amortisation and impairment losses. Subsequent expenditure on intangible
assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other
expenditure is expensed as incurred. Software costs are recorded as intangible assets and amortised over a period of 10 years.
Research and development costs
Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when
its future recoverability can be regarded reasonably as assured. Following the initial recognition of the development expenditure,
the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated
impairment losses.
Any expenditure carried forward is amortised over the period of expected future sales from the related project.
The amortisation period and amortisation method for development costs are reviewed at each financial year-end. If the
useful life or method of consumption is different from that of the previous assessment, changes are made accordingly.
Impairment tests for goodwill
(i) Description of cash-generating units
Goodwill acquired through business combinations has been allocated to the business units acquired. Subsequent business
reorganisations within the Group have resulted in some original cash-generating units (CGU) being combined with other
Group businesses, with the exception of the purchase of Nexus Performance Foams Limited (NPFL) which has its own CGU.
In such circumstances, the original goodwill has been allocated across the combined cash-generating unit to determine fairly
the recoverable amount against the value in use.
The goodwill allocated to each cash-generating unit is shown in the table below. The changes in goodwill recorded are
attributable to exchange rate movements on the translation of the goodwill balances denominated in foreign currencies and the
acquisition of NPFL. The net present value of future estimated cash flows exceeds the recoverable amount of goodwill allocated
to each cash-generating unit based on a value-in-use calculation. A pre-tax discount rate of 11.12% (2018: 12.31%) has been
applied to discount future estimated cash flows to their present value.
Cash-generating unit
2019
$000
2018
$000
Gulf33,60033,907
Ambic7,5307,747
Deks3,7213,881
Stevens Filterite431431
Nexus4,194-
Total goodwill49,47645,966
(ii) Assumptions used to determine the recoverable amount
The estimated future cash flows generated have been determined from the business plans and detailed budgets prepared by
management as part of the annual business planning that is reviewed and approved by the Board of Directors. Such forecasts
analyse and quantify a range of growth objectives which form the basis for determining the business growth and direction over
the next three years.
For periods beyond 2019, the Group anticipates that business results will continue to improve due to new product developments,
the benefits of established customer relationships and expansion into new and existing niche markets. The estimated cash flow
in perpetuity is based upon the forecast year five cash flows and then an estimate of sustainable growth beyond this time period
of 1.5% per annum.
55
10. Intangible Assets (continued)
Key assumptions used in the value-in-use calculations are as follows:
Revenue assumptions
Revenue has been forecast to increase in a range of 2% to 18% per annum on a weighted average basis over the following five-
year period in line with the Group’s strategic business plans to develop and introduce new products, in addition to continuing to
support and grow the Group’s existing global customer relationships.
Discount rate assumptions
The discount rate is intended to reflect the time value of money and the risks specific to each cash-generating unit achieving its
forecast cash flows. In determining the appropriate discount rate, regard has been given to the weighted average cost of capital
of the Group, which has been updated as at 30 June 2019, to reflect the current market interest rates and the additional cost of
capital applicable in the current risk environment.
Commodity cost pricing assumptions
With the base raw material component being synthetic and natural rubbers sourced from Asia, the pricing of these raw
materials can fluctuate: many of the synthetics are by-products of the petrochemical industry, and natural rubbers are influenced
by global supply and demand influences. Pricing assumptions have been made in the Group forecasts that any cost increases
driven by commodity price changes will be passed through to customers.
Market share assumptions
In preparing forecasts, the Group’s business plans show no loss of market share. The Group’s strategy is to continue to expand
in global markets, especially in North America and Europe. This is the case particularly for the Gulf cash-generating unit, which
has dedicated manufacturing and distribution capabilities established in these markets.
Growth rate assumptions
The growth rates have been based on business plan assumptions applied in the preparation of the annual budgets for the new
financial year and the following two years, with assumed lower growth rates in years four and five and in perpetuity. This process
is based on key strategies that have been quantified at a product and customer level, reviewed by senior management and
signed off by the Board of Directors.
(iii) Sensitivity to assumption changes
Estimates made of future cash flows are based on current market conditions. With trading across a number of different products
covering a wide industry base, and through a number of international markets, the risk of significant change to cash flow
projections is mitigated. Any change in future cash flow projections, which is influenced by price changes, foreign currency
movements and competitor activities, is expected to have only minimal impact and is unlikely to cause an impairment risk to
the goodwill allocated to the various cash-generating units, particularly with the estimated net present value of each cash-
generating unit tested well above the carrying value of assets, including goodwill.
11. Trade and Other Payables
Trade and other payables are carried at amortised cost and, due to their short-term nature, are not discounted. They represent
liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid, and arise when
the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are
unsecured and paid usually within 30 to 60 days of recognition.
2019
$000
2018
$000
Trade payables13,25616,843
Employee entitlements2,1243,052
Sundry payables and accruals6,6517,728
GST payable9641,086
Total trade and other payables22,99528,709
The average credit period on purchases of all goods and services represents an average of 34 days credit
(2018: 45 days credit). The Group has financial risk management policies in place to ensure that all payables are met within
acceptable terms and conditions of purchase.
Skellerup
Annual Report 2019
56
12. Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event. It is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to
any provision is presented in the income statement net of any reimbursement. Provisions are measured at the present value of
management’s best estimates of the expenditure required to settle the present obligation at the balance date.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
2019
$000
2018
$000
Provisions
Employee entitlements5,5385,627
Warranties7081,346
Total provisions6,2466,973
Current4,8405,301
Non-current1,4061,672
Total provisions6,2466,973
Make-good
$000
Warranties
$000
Balance 1 July 20171,5281,224
Additional provisions recognised-545
Reductions arising from payments/sacrifices of economic benefits(1,528)(495)
Reductions arising from remeasurement or settlement without cost-50
Net foreign currency exchange differences-22
Balance 30 June 2018-1,346
Additional provisions recognised-298
Reductions arising from payments/sacrifices of economic benefits-(656)
Reductions arising from remeasurement or settlement without cost-(259)
Net foreign currency exchange differences-(21)
Balance 30 June 2019-708
Employee entitlements
(i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be
settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They
are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are
recognised when the leave is taken and are measured at the rates paid or payable.
(ii) Long-service leave
The liability for long-service leave is recognised and measured at the present value of expected future payments to be made
in respect of services provided by employees up to the reporting date using a probability calculation of the employee reaching
the future service milestones. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the reporting date with
terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.
57
12. Provisions (continued)
(iii) Defined contribution scheme
The Group contributes to post-employment schemes for its employees. Under these schemes, the benefits received by the
employee are determined by the amount of the contribution paid by the Group, together with any investment returns and, hence, the
actuarial and investment risk is borne entirely by the employee. Therefore, because the Group’s obligations are determined by the
amount paid during each period, no actuarial assumptions are required to measure the obligation or the expense.
Make-good costs
The provision for make-good costs includes the estimated future costs to the Group of decommissioning and relocating plant and
equipment for its Dairy Rubber Development and Manufacturing activity to the new site at Wigram, and costs to complete the exit
from the former operating site at Woolston.
Warranties
In determining the level of provision required for warranties, the Group has made judgements in respect of the expected
performance of products and the costs of rectifying any products that do not meet the customers’ quality standards. The provision for
warranty claims represents the present value of the Directors’ best judgement or estimate of the future outflow of economic benefits
that will be required under the Group’s various product warranty programmes.
The estimate has been made on the basis of the expected performance of products, historical warranty trends, the costs of rectifying
any products that do not meet the customers’ quality standards and insurance arrangements the Group has in place. The actual cost
may vary as a result of new materials, altered manufacturing processes or other events affecting product quality.
13. Interest-bearing Loans and Borrowings
All loans and borrowings are recognised initially at the fair value of the consideration received less directly attributable
transaction costs. After initial recognition, interest-bearing loans and borrowings are measured subsequently at amortised cost
using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right
to defer settlement of the liability for at least 12 months after the reporting date.
2019
$000
2018
$000
Non-current liabilities
Secured at amortised cost
Balance at the beginning of the year40,40041,777
Drawdowns32,45025,900
Repayments(26,627)(27,315)
Net foreign currency exchange differences(8)38
Balance at the end of the year46,21540,400
Effective interest rate
The carrying amounts disclosed above approximate fair value. The bank loans are provided under a $60 million multi-currency
facility agreement with ANZ Bank New Zealand Limited (ANZ Bank) which has an expiry date of 30 November 2021.
Derivative financial instruments are used by the Group in the normal course of business in order to hedge exposure to
fluctuations in interest and foreign exchange rates. The carrying amount of tangible assets of the Charging Group (which
excludes Skellerup Rubber Products Jiangsu Limited and other smaller entities in the Group) totalling $193 million is pledged
as security to ANZ Bank to secure the above term loans.
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset which
necessarily takes a substantial period of time to prepare for its intended use or sale) are capitalised as part of the cost of that
asset. All other borrowing costs are expensed in the period in which they occur.
3.43%3.71%
Skellerup
Annual Report 2019
58
15. Finance Costs
2019
$000
2018
$000
Interest on bank overdrafts and borrowings1,3521,455
Bank facility fees433408
Total finance costs in Income Statement1,7851,863
14. Contributed Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction, net of tax, from the proceeds.
Number
of shares
Value
$000
Balance 1 July 2017192,805,807 69,732
Balance 30 June 2018192,805,807 69,732
Balance 30 June 2019 194,753,340 72,173
All shares are fully paid and have no par value. Each ordinary share confers on the holder one vote at any shareholder meeting
of the Company and carries the right to dividends.
As at 30 June 2019, there are no redeemable ordinary shares on issue (2018: 1,947,533). The redeemable ordinary shares
on issue in 2018 were issued by the Company on 26 October 2011, in support of the Chief Executive Officer’s share-based
incentive scheme, and were redeemed on 25 September 2018 as described in Note 17.
The Directors’ objective is to ensure the entity continues as a going concern, as well as to maintain optimal returns to
shareholders and benefits for other stakeholders. The Directors aim to provide a capital structure which:
• Provides an efficient and cost-effective source of funds;
• Is balanced with external debt to provide a secure structure to support the short and long-term funding of the Group; and
• Ensures that the ratio of funds sourced from shareholders and external debt is maintained proportionately at a level which
does not create a credit and liquidity risk to the Group.
The Company is listed on the New Zealand Exchange and is, therefore, subject to continuous disclosure obligations to inform
shareholders and the market of any matters which affect the capital of the Company. This includes changes to the capital
structure, new share issues, dividend payments and any other significant matter which affects the creditworthiness or liquidity
of the Group.
The Group is not subject to any externally imposed capital requirements.
59
16. Reserves
2019
$000
2018
$000
Reserve balances
Cash flow hedge reserve132(397)
Foreign currency translation reserve(9,771)(8,059)
Employee share plan reserve149471
Total reserves(9,490)(7,985)
The cash flow hedge reserve is intended to recognise the fair value movements of the effective derivatives held to hedge
interest rate and foreign currency risk. A summary of movements is shown in the table below.
Note
2019
$000
2018
$000
Cash flow hedge reserve
Balance at the beginning of the year(397)367
Gain/(loss) recognised on cash flow hedges:
- Foreign exchange contracts813(1,057)
- Interest rate swaps(78)(4)
- Income tax related to gains / (losses) recognised in other comprehensive income5(206)297
Movement for the year529(764)
Balance at the end of the year132(397)
Exchange differences relating to the translation of values from the functional currencies of the Group’s foreign subsidiaries
into New Zealand dollars are brought to account by entries made directly to the foreign currency translation reserve.
A summary of movements is shown in the table below.
Note
2019
$000
2018
$000
Foreign currency translation reserve
Balance at the beginning of the year(8,059)(13,866)
Gain/(loss) recognition:
- Foreign exchange movements on translation of foreign operations(1,749)5,987
- Income tax related to gains/(losses) recognised in other comprehensive income537(180)
Movement for the year(1,712)5,807
Balance at the end of the year(9,771)(8,059)
The employee share plan reserve is used to record the value of share-based payments provided to employees, including key
management personnel, as part of their remuneration. A summary of movements is shown in the table below.
Note
2019
$000
2018
$000
Employee share plan reserve
Balance at the beginning of the year471471
Shares redeemed during the year(471)-
Expense recognised during the year17149-
Balance at the end of the year149471
Skellerup
Annual Report 2019
60
18. Earnings per Share
Earnings per share is calculated as net profit attributable to members of the Parent, adjusted to exclude any costs of servicing
equity (other than dividends), divided by the weighted average number of ordinary shares.
2019
Cents
per share
2018
Cents
per share
Basic earnings per share14.9614.15
Diluted earnings per share14.8014.01
Net tangible asset per share65.1164.67
The earnings and weighted average number of ordinary shares used in the calculation of earnings per share are as follows:
2019
$000
2018
$000
Earnings used in the calculation of earnings per share29,06327,277
Weighted average number of ordinary shares for
- Basic earnings per share194,289,134 192,805,807
- Diluted earnings per share196,353,340 194,753,340
17. Share-based Incentive Scheme
Skellerup Group operates a long-term incentive scheme for the benefit of senior executives. The scheme permits the Board to
grant options to acquire fully paid shares in the Company. The options are able to be exercised by the recipients subject to their
continued employment in a future period as determined by the Board of Skellerup.
On 25 September 2018 the CEO converted 1,947,533 redeemable preference shares to ordinary shares upon payment of the
balance of the 1.2534 per share issue price. The shares were issued under a Share-based Incentive Scheme which expired
on 26 October 2018. The fair value of this scheme was NZ$471,000 and was also determined using the Black-Scholes formula.
Upon conversion of the shares the NZ$471,000 recorded in prior periods was transferred from the Employee Share Plan Reserve
to Retained Earnings.
On 26 October 2018 the Board awarded 1,600,000 options, issued at an exercise price of NZ$2.12, being the weighted average
price of Skellerup’s shares in the prior twenty-day trading period. Option holders will be able to exercise the options in the
period beginning on 1 September 2020 and ending on 1 November 2020. Upon exercise, option holders will be issued one
ordinary share in Skellerup per option exercised or alternatively the option holder may elect to be issued the number of shares
as is equal to the difference between the market value of Skellerup’s ordinary shares and the exercise price. The options have
been fair valued using the Black-Scholes formula. The fair value has been determined as NZ$411,000. The expense recognised
in the current period for the CEO and Chief Financial Officer’s Incentive Scheme is NZ$149,000
61
20. Financial Risk Management Objectives and Policies
The Group’s principal financial instruments comprise receivables, payables, bank loans and overdrafts, cash and derivatives.
Because of these financial instruments, the principal financial risks to the Group are movements in foreign currency and interest
rates. Credit risk and liquidity risk are considered also to be risk areas and are, therefore, closely managed.
The Board reviews and agrees upon policies for managing financial risk. The Group enters into derivative transactions,
principally forward foreign currency contracts and interest rate swaps. The purpose is to manage the currency and interest rate
risks arising from the Group’s operations and its sources of finance.
Credit risk is managed through regular review of aged analysis of receivable ledgers. The credit risk exposures are the
receivables recorded in Note 7. Liquidity risk is monitored through the review of future rolling cash flow forecasts. These cash
flow forecasts are updated on a weekly basis with particular emphasis placed on the prospective four-week period. These
forecasts are monitored constantly against limitations of the entire debt facility.
Risk exposures and responses
(i) Interest rate risk
The Group’s exposure to market interest rates relates primarily to the Group’s long-term debt obligations.
The Group’s policy is to monitor its interest rate exposure and to hedge the volatility arising from interest rate changes by
entering into interest rate swap contracts that cover a minimum of 25% and a maximum of 75% of the core debt. Core debt
is defined as debt in excess of $15 million that is not expected to be repaid from available cash flows within an 18-month
time horizon.
The level of debt is disclosed in Note 13. A reasonably expected movement in the interest rate would not have a material impact
on profit or equity. At balance date, the Group had the following mix of financial assets and liabilities exposed to interest rate
risk. Details of financial instruments in place to manage this risk are disclosed in Note 21.
2019
$000
2018
$000
Financial assets
Cash and cash equivalents9,6399,681
Financial liabilities
Bank loans46,21540,400
Net exposure(36,576)(30,719)
19. Retained Earnings
2019
$000
2018
$000
Balance at the beginning of the year110,539102,543
Net profit for the year29,06327,277
Share incentive scheme451-
Payment of dividends(24,344)(19,281)
Balance at the end of the year115,709110,539
During the reporting period a dividend of 7.0 cents per share (imputed 55%) was paid on 11 October 2018 and 5.5 cents per
share (imputed 50%) on 21 March 2019.The imputation tax credits totalling $4,772,620 (2018: $6,999,439).
Skellerup
Annual Report 2019
62
20. Financial Risk Management Objectives and Policies (continued)
(ii) Foreign currency risk
The Group imports raw materials and finished goods and exports finished goods to a number of foreign customers. The main
foreign currencies traded are US dollars (USD), Australian dollars (AUD), British pounds (GBP) and Euro (EUR).
The Group seeks to cover up to 100% of the net foreign currency cash flow forecast, for the next 12-month period, with foreign
currency contracts. Where the foreign currency cash flows can be forecasted reliably beyond the future 12-month period, such
cash flows may also be covered by foreign currency contracts of up to 50% of the forecast cash flows.
The Group also has translational currency exposures. Such exposures arise from subsidiary operating entities that transact in
currencies other than the Group’s functional currency. Currently, the Group does not hedge these exposures.
Foreign currency net monetary assets
The Group has the following net monetary assets in foreign currency values which are in different currencies from the
subsidiary’s base currency and will revalue either through the income statement or the statement
of comprehensive income:
Cash and Cash
Equivalents
$000
Receivables
$000
Payables
$000
Net Monetary
Assets
$000
30 June 2019
USD1,2894,4551,8523,892
AUD1132,143632,193
GBP150512-662
EUR3631,3632531,473
30 June 2018
USD1,4245,4893,3693,544
AUD141,136221,128
GBP146331-477
EUR2081,168804572
The foreign currency denominated values as shown in the table above converted to New Zealand dollars as follows:
2019
$000
2018
$000
Financial assets
Cash and cash equivalents3,4052,760
Trade and other receivables12,64511,997
16,05014,757
Financial liabilities
Trade and other payables3,3826,381
Net exposure12,6688,376
63
20. Financial Risk Management Objectives and Policies (continued)
Foreign currency sensitivity
Net Profit after TaxNet Equity
Higher/(Lower)
2019
$000
2018
$000
2019
$000
2018
$000
Foreign currency rates
Increase +10%(836)(548)(8,994)(8,166)
Decrease -5%484317 5,2074,728
Significant assumptions used in the foreign currency exposure sensitivity analysis are as follows:
(a) The range of possible foreign exchange rate movements was determined by a review of the last two years’ historical
movements and economists’ views of future movements.
(b) The Group’s trend of trading in foreign currency values is not expected to change materially over future periods.
(c) The Group’s net exposure to foreign currency at balance date is representative of past periods and is expected
to remain relatively consistent for the future 12-month period.
(d) The price sensitivity of derivatives has been based on a reasonably possible movement of the spot rate applied
at balance date.
(e) The effect on other comprehensive income results from foreign currency revaluations through the cash flow hedge
reserve and the foreign currency translation reserve.
(f) The sensitivity analysis does not include financial instruments that are non-monetary items as these are
not considered to give rise to a currency risk.
(iii) Credit risk
All customers who trade with any Group subsidiary on credit terms are subject to credit verification procedures including an
assessment of their independent credit rating and financial position. Risk limits are set for individual customers according to the
risk profile of each and, where it is considered appropriate, registrations are made to record a secured interest in the products
supplied. Receivable balances are monitored on an ongoing basis with appropriate provisions held for doubtful debts.
(iv) Liquidity risk
The Group monitors its future cash inflows and outflows through rolling cash flow forecasts. At balance date, the liquidity risk is
considered to be low with the bank facility not fully drawn, compliance with bank covenants, and forecast cash flows reporting
positive operating cash generation for the Group over the next financial year. The following maturity analysis shows the profile
of future payment commitments of the Group. With the available bank facility and the ability for the business to generate future
positive operating cash inflows, the obligation to meet the forward commitments is considered to be a low risk.
Skellerup
Annual Report 2019
64
20. Financial Risk Management Objectives and Policies (continued)
Maturity analysis of financial assets and liabilities
The following table represents both the expected and contractual maturity and cash flows of receipts and payments.
There is a further analysis of future operating lease commitments in Note 25; these are not included in this analysis.
Balance 30 June 2019
Zero to Six
Months
$000
Seven to 12
Months
$000
One to Five
Years
$000
More than
Five Years
$000
Total
$000
Financial assets
Cash and cash equivalents9,639---9,639
Trade and other receivables and prepayments50,0815041641050,759
Derivatives310-173-483
60,0305043371060,881
Financial liabilities
Trade and other payables22,8289671-22,995
Interest-bearing loans--46,215-46,215
Derivatives118-183-301
22,9469646,469-69,511
Net total37,084408(46,132)10(8,630)
Balance 30 June 2018
Zero to Six
Months
$000
Seven to 12
Months
$000
One to Five
Years
$000
More than
Five Years
$000
Total
$000
Financial assets
Cash and cash equivalents9,681---9,681
Trade and other receivables and prepayments49,1151711901049,486
Derivatives75-21-96
58,8711712111059,263
Financial liabilities
Trade and other payables28,475115119-28,709
Interest-bearing loans--40,400-40,400
Derivatives465-183-648
28,94011540,702-
69,757
Net total29,93156(40,491)10(10,494)
Fair value
The derivatives that have been fair valued by the Group are detailed in Note 21 and have a fair value of $182,000
(2018: $552,000).
Under NZ IFRS, there are three methods available for estimating the fair value of financial instruments. These are:
Level 1 – the fair value is calculated using quoted prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the
assets or liabilities, either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
In determining the fair value of all derivatives, the Group has applied the Level 2 method of calculating fair value by using
estimated inputs, other than quoted prices, that are observable for assets and liabilities, either directly (as prices) or indirectly
(derived from prices).
65
21. Financial Instruments
Financial assets in the scope of NZ IAS 39 Financial Instruments: Recognition and Measurement are classified as either financial
assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial
assets. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair
value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets
after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end.
Recognition and derecognition
All regular purchases and sales of financial assets are recognised on the trade date: i.e. the date that the Group commits to
purchase the asset. Regular purchases or sales are purchases or sales of financial assets under contracts that require delivery
of the assets within the period established generally by regulation or convention in the market place. Financial assets are
derecognised when the Group no longer controls the contractual rights that comprise the financial instrument, which is normally
the case when the instrument is sold, or all the cash flows attributable to the instrument are passed through to an independent
third party. Gains and losses on financial assets are exclusive of interest and dividends, which are recognised separately.
(i) Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit and
loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the
intention of making a profit. Derivatives are classified also as held for trading unless they are designated as effective hedging
instruments. Gains or losses on investments held for trading are recognised in the income statement.
Detail of the Group’s financial assets and liabilities are shown below. Significant accounting policies and methods adopted,
including the criteria for recognition, the basis of measurement and the basis in which income and expenses are recognised,
in respect of each class of financial asset, financial liability and equity instrument, are disclosed in the preceding notes.
Financial Assets
Cash and Bank
Balances
$000
Trade and Other
Receivables
$000
Derivatives
$000
Total Financial
Assets
$000
Balance 30 June 2019
Fair value through profit and loss9,639--9,639
Loans and receivables-50,759-50,759
Hedge instruments--483483
Total financial assets9,63950,75948360,881
Balance 30 June 2018
Fair value through profit and loss9,681--9,681
Loans and receivables-49,486-49,486
Hedge instruments--9696
Total financial assets9,68149,4869659,263
Financial Liabilities
Trade and
Other Payables
$000
Derivatives
$000
Borrowings
$000
Total Financial
Liabilities
$000
Balance 30 June 2019
Hedge instruments-301-301
Other financial liabilities22,995-46,21569,210
Total financial liabilities22,99530146,21569,511
Balance 30 June 2018
Hedge instruments-648-648
Other financial liabilities28,709-40,40069,109
Total financial liabilities28,70964840,40069,757
Skellerup
Annual Report 2019
66
21. Financial Instruments (continued)
Where the financial assets and financial liabilities are shown at amortised cost, their cost approximates fair value. The Group
uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its risks associated
with foreign currency and interest rate fluctuations. Such derivative financial instruments are recognised initially at fair value on
the date on which a derivative contract is entered into and are remeasured subsequently to fair value. Derivatives are carried as
assets when their fair value is positive and as liabilities when their fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are
taken directly to profit or loss for the year. The fair values of forward currency contracts are calculated by reference to current
forward exchange rates for contracts with similar maturity profiles. The fair values of interest rate swap contracts are determined
by reference to market values for similar instruments.
For the purposes of hedge accounting, hedges are classified as:
• Fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability; or
• Cash flow hedges when they hedge the exposure to variability in cash flows that is attributable either to a particular risk
associated with a recognised asset or liability or to a forecast transaction.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the
Group wishes to apply hedge accounting, and the risk management objectives and strategies for undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk
being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in
the hedged item’s fair values or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in
achieving offsetting changes in fair values or cash flows and are assessed on an ongoing basis to determine that they actually
have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for as follows:
(ii) Cash flow hedges
Cash flow hedges are hedges of the Group’s exposure to variability in cash flows, which is attributable to a particular risk associated
with a recognised asset or liability or a highly probable forecast transaction and that could affect profit or loss. The effective portion
of the gain or loss on the hedging instrument is recognised directly in the statement of comprehensive income, while the ineffective
portion is recognised in the income statement.
Amounts taken to the statement of comprehensive income are transferred out of the statement of comprehensive income and
included in the measurement of the hedged transaction (sales or inventory purchases) when the forecast transaction occurs. If the
forecast transaction is no longer expected to occur, amounts previously recognised in the statement of comprehensive income are
transferred to the income statement.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or, if its designation as a hedge
is revoked, amounts previously recognised in the statement of comprehensive income remain in the statement of comprehensive
income until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is recognised in the
income statement.
67
21. Financial Instruments (continued)
Derivative financial instruments
Details of the derivatives held and their fair values at balance date were as follows:
2019
$000
2018
$000
Current assets
Forward currency contracts - cash flow hedge31075
Current assets31075
Non-current assets
Forward currency contracts - cash flow hedge17321
Non-current assets
17321
Total assets48396
Current liabilities
Forward currency contracts - cash flow hedge67404
Interest rate swaps - cash flow hedge5161
Current liabilities118465
Non-current liabilities
Forward currency contracts - cash flow hedge13100
Interest rate swaps - cash flow hedge17083
Non-current liabilities183183
Total liabilities301648
Net assets/(liabilities)182(552)
Foreign exchange contracts
The Group imports a large proportion of its raw materials and finished goods, and has export sales to a number of customers.
As a result, the Group has both inward and outward foreign currency cash flows. Both the inward cash flows and the outward
cash flows are tested and hedged against highly probable forecasted sales and purchases. The main currency exposures are in
US dollars, Euro dollars, Australian dollars and British pounds. At balance date, details of outstanding foreign currency contracts
are as follows:
Notional Amount Average Exchange Rates
2019
$000
2018
$000
20192018
Buy NZD/Sell EUR
Maturing 2019: two to 22 months (2018: one to 24 months)6,8267,2940.56030.5827
Buy NZD/Sell GBP
Maturing 2019: one to 22 months (2018: one to 24 months)4,9284,0510.50730.5183
Buy NZD/Sell USD
Maturing 2019: one to 19 months (2018: one to 24 months)5,3106,5690.67800.6927
Buy NZD/Sell AUD
Maturing 2019: three to seven months (2018: one to 15 months)97812,1910.92000.9105
Buy CNY/Sell AUD
Maturing 2019: three to seven months (2018: nil)3,523-0.2072-
Skellerup
Annual Report 2019
68
21. Financial Instruments (continued)
The forward currency contracts are considered to be highly effective hedges as they are matched against forecast inventory
purchases and export sales, and any gain or loss on the contracts attributable to the hedge risk is taken directly to other
comprehensive income.
Amounts are transferred out of other comprehensive income and included in the measurement of the hedged transaction (sales
or purchases) when the forecast transaction occurs. Movements in the cash flow hedge reserve are recorded in the Statement of
Comprehensive Income.
Interest rate swap agreements
The Group seeks to fix a minimum of 25% and a maximum of 75% of its interest rate risk where debt exceeds $15 million.
At 30 June 2019 the Group had $5 million fixed at a rate of 2.55% plus bank margin expiring 20 April 2020, $5 million fixed at
a rate of 2.68% plus bank margin expiring 22 February 2021, $5 million fixed at a rate of 1.99% plus bank margin expiring 23
April 2021 and $5 million fixed at a rate of 1.34% plus bank margin expiring 27 June 2022.
The interest swap agreements are considered to be highly effective hedges as they are matched against forecast interest
payments and any gain or loss on the contracts attributable to the hedge risk is taken directly to other comprehensive income.
Amounts are transferred out of other comprehensive income and included in the measurement of the hedged transaction
when the forecast interest payment is made. Movements in the cash flow hedge reserve are recorded in the Statement of
Comprehensive Income.
Credit risk
Credit risk arises from potential failure of counterparties to meet their obligations at the maturity dates of contracts. Because the
counterparty of the above financial derivatives is the ANZ Bank New Zealand Ltd, there is minimal credit risk.
NZ IFRS 9
NZ IFRS 9 Financial Instruments replaces NZ IAS 39 Financial Instruments: Recognition and Measurement for annual periods
beginning on or after 1 January 2019. Skellerup has implemented NZ IFRS 9 prospectively, with the initial application date of 1
July 2018. There were no material changes to the financial results, position or disclosures as a result.
69
22. Business Acquisition
On 18 April 2019, Skellerup established Nexus Performance Foams Limited (“Nexus”), a 100% owned subsidiary of Skellerup
Industrial Holdings Limited. On 30 April 2019, Nexus acquired the assets less the employee entitlements of Nexus Foams
Limited. The fair values of the identifiable assets and liabilities as at the date of acquisition were:
2019
$000
Assets
Inventory907
Intangible asset632
Prepayments 164
Fixed assets874
Total assets2,577
Liabilities
Employee entitlements (108)
Total identifiable net assets at value2,469
Goodwill arising on acquisition (note 10)4,194
Purchase consideration transferred 6,663
From the date of acquisition, Nexus has contributed $1,780,000 of revenue and $175,000 of profit before tax to the Group.
23. Investment in an Associate
On 11 July 2018, Skellerup acquired a 35% interest in Sim Lim Technic LLC (Sim Lim) for $1,683,400. Sim Lim designs and
manufactures liquid silicone rubber products at its base in Wisconsin, USA. Sim Lim is a private entity that is not listed on
any public exchange. The Group’s interest in Sim Lim is accounted for using the equity method in the consolidated financial
statements as shown below.
2019
$000
2018
$000
Balance at the beginning of the year--
Acquisition of associate 1,683-
Share of earnings23-
Net foreign currency exchange rate differences (8)-
Balance at the end of the year1,723-
Skellerup
Annual Report 2019
70
24. Related Parties
The consolidated financial statements incorporate the following significant companies:
(a) Subsidiary companies
Name of EntityPrincipal Activities
Country of
Incorporation
Holding
Balance Date
20192018
Skellerup Industries LimitedManufacturing and SalesNew Zealand100%100%30 June
Skellerup Growth LimitedPropertyNew Zealand100%100%30 June
Ambic Equipment LimitedManufacturing and SalesUK100%100%30 June
Conewango Products CorporationDistributionUSA100%100%30 June
Deks Industries Pty LimitedManufacturing and SalesAustralia100%100%30 June
Deks North America LimitedDistributionUSA100%100%30 June
Gulf Rubber Australia Pty LimitedManufacturing and SalesAustralia100%100%30 June
Gulf US IncorporatedDistributionUSA100%100%30 June
Masport IncorporatedManufacturing and SalesUSA100%100%30 June
Nexus Performance Foams LimitedManufacturing and SalesNew Zealand100%-30 June
Skellerup Rubber Products
Jiangsu Limited
Manufacturing and SalesChina100%100%31 December
Skellerup Rubber Services LimitedManufacturing and SalesNew Zealand100%100%30 June
Tumedei SpAManufacturing and SalesItaly100%100%30 June
Ultralon Foam International LimitedManufacturing and SalesNew Zealand100%100%30 June
(b) Associate Investment
As these are consolidated financial statements, transactions between related parties within the Group have been
eliminated. Consequently, only those transactions between entities which have some owners external to the Group have
been disclosed below:
Sales to
related party
$000
Purchases from
related Party
$000
Amounts owed by
related party
$000
Amounts owed to
related party
$000
Sim Lim Technic 201925649325617
(c) Compensation of Directors and key management
The remuneration of Directors and senior management personnel during the year was as follows:
2019
$000
2018
$000
Short-term benefits
Directors' fees453477
Senior management's salaries and incentives2,3621,896
Contribution to defined contribution scheme for senior management personnel5660
Long-term benefits
Share-based incentive scheme expensed/(redeemable shares paid) during the year149-
John Strowger is a Director of Skellerup and a partner of Chapman Tripp, the Group’s legal advisors. Chapman Tripp
has charged fees during the year amounting to $207,100 (2018: $296,597). The fees were charged on normal terms and
conditions and exclude GST. There was a total of $8,955 (2018: $21,047) outstanding (excluding GST) at balance date relating
to the above transactions.
71
28. New Accounting Standards, Amendments, Interpretations and IFRIC Interpretations
Other than as disclosed in notes 2 and 21, there is no new Accounting standard, amendment or interpretation, which
has been issued and is effective, that has a significant impact on the Group. Other than as disclosed in note 25, we have
not yet completed a formal assessment of new standards, amendments and interpretations that have been issued and are
not yet effective.
25. Lease Commitments
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires
an assessment of whether or not the fulfilment of the arrangement is dependent on the use of a specific asset or assets and
whether or not the arrangement conveys a right to use the asset.
Operating leases
The Group has entered into commercial leases on properties, motor vehicles, and plant.
2019
$000
2018
$000
Payments recognised as an expense
- Minimum lease payments4,8844,368
Non-cancellable operating lease commitments
- Within one year4,6993,659
- After one year but not more than five years12,0285,371
- After more than five years4,201111
Total minimum lease payments20,9289,141
NZ IFRS 16 – Leases
Skellerup will be required to account and report in accordance with NZ IFRS 16 for the year ending 30 June 2020. Skellerup
has considered the requirements of NZ IFRS 16 and expects its adoption will result in the recognition of a right to use asset of
$18,457,000 and a lease liability of $18,457,000 on 01 July 2019. Skellerup does not expect any material impact on earnings.
26. Contingent Liabilities
2019
$000
2018
$000
Bank guarantee provided to the New Zealand Exchange7575
The Group receives claims from time to time in relation to products supplied. Where the Group expects to incur a cost to
replace or repair the product supplied and can reliably measure that cost, that cost is recognised. The Group has general
liability and professional indemnity insurance in the event that there are warranty claims.
27. Significant Events after Balance Date
The Directors agreed to pay a final dividend, imputed to 50%, of 7.5 cents per share on 17 October 2019, to shareholders on the
register at 5.00pm on 04 October 2019. This dividend is not recorded in the financial statements.
There are no other events subsequent to balance date that require additional disclosure.
Skellerup
Annual Report 2019
72
Directors holding office during the year and their shareholdings
Directors held interests in the following shares in the Company as at 30 June 2019.
Held with Non-beneficial InterestHeld by Associated Persons
Liz Coutts(Independent)-920,000
David Cushing
(Non-Executive)
-9,866,169
Alan Isaac(Independent)-40,000
David Mair(Chief Executive)-5,475,039
John Strowger(Independent)-118,320
Directors’ Interests
Pursuant to section 140(2) of the Companies Act 1993 and section 299 of the Financial Markets Conduct Act 2013, the Directors
named below have made a general disclosure of interest during the period 01 July 2018 to 09 August 2019 by a general notice
disclosed to the Board and entered in the Company’s Interest Register.
Liz Coutts
• Retired as President of Institute of Directors on 19 June 2019.
David Cushing
• Interest in 9,866,169 shares held by H & G Ltd following the sale of 4,250,000 shares on 22 August 2018.
• Appointed Director of PGG Wrightson Limited on 30 April 2019.
Alan Isaac
• Retired as Vice-President of Institute of Directors on 19 June 2019.
• Appointed President of Institute of Directors on 19 June 2019.
David Mair
• Interest in 5,475,039 shares held by DM2 Investment Trust following purchase of 1,947,353 shares under Skellerup Holdings
CEO LTI 2011 scheme.
• Disposal of interest as Trustee for Monica Mair holding 5,000 shares due to Monica reaching 18 years of age.
Director, CEO and Employee Remuneration
Director Remuneration
The total remuneration to non-executive directors is $550,000 as approved by the shareholders at the Annual Meeting on
25 October 2017. Director remuneration for FY19 is shown in the table below.
NoteBoard ChairBoard DirectorAudit & Risk ChairTotal
Liz Coutts85,50085,500171,000
David Cushing 85,50085,500
Alan Isaac85,50025,000110,500
John Strowger85,50085,500
David Mair1----
Total85,500342,00025,000452,500
Note:
1. David Mair is an Executive Director. He is remunerated for his role as CEO and does not receive any director remuneration.
Directors’ Disclosures, Remuneration and Shareholding
73
CEO Remuneration
CEO remuneration is made of three components: Fixed remuneration, short-term performance incentive (STI) and long-term
performance incentive (LTI). The STI and LTI at risk because the outcome is determined by performance against financial
objectives. The table below shows CEO remuneration in FY19 and FY18.
$000SalaryKiwisaverKiwisaverSTILTISubtotalTotal
David Mair FY196502067010193194864
David Mair FY1860018618347-347965
The STI is an at-risk payment designed to motivate and reward for financial performance that exceeds the previous best
achieved by Skellerup under the incumbent CEO management. The financial measure used for determining this performance
is earnings before interest and tax (EBIT). The STI is set so that the CEO receives 5% of EBIT in excess of the previous best EBIT
achieved by Skellerup under his management. The FY19 STI payment was accrued at 30 June 2019 and will be paid in FY20.
The LTI is a share option scheme. Under the scheme David Mair was granted 1,000,000 options on 26 October 2018, at an
exercise price of $2.12 per share. The exercise price was the weighted average share price on the 20 day trading period
preceding issuance. The options are able to be exercised in the period 1 September 2020 to 1 November 2020. The options
have been valued using the Black Scholes formula.
CEO Remuneration: Five Year Summary
$000SalaryKiwisaverSTITotalLTI VestingLTI Span
David Mair FY19 65020101801-2018-2020
David Mair FY18 60018347965-2011-2018
David Mair FY176001831649-2011-2018
David Mair FY1660018-61850%2011-2016
David Mair FY1554216-55850%2011-2015
Fixed RemunerationPerformance Based Remuneration
Skellerup
Annual Report 2019
74
Employee Remuneration
The Group paid remuneration in excess of $100,000 including benefits to 112 employees (not including non-executive directors)
during the FY19 year in the following bands.
Remuneration
range $000
Number of
employees
Remuneration
range $000
Number of
employees
Remuneration
range $000
Number of
employees
100-11014190-2006310-3201
110-12012200-2102330-3401
120-1309210-2203380-3901
130-14011220-2304460-4701
140-1508230-2405500-5101
150-1606250-2602570-5801
160-1704260-2704880-8901
170-1803280-29031020-10301
180-1907300-3101
Gender and Diversity as at 30 June 2019
DirectorsOfficersManagement
201920182019201820192018
Male44222419
Female110098
Total55223327
Distribution of Ordinary Shares and Shareholders as at 09 August 2019
Size of shareholdingNumber of
shareholders
% of
shareholders
Number
of shares
%
of shares
1 - 4,9991,89634.454,773,2142.45
5,000 - 9,9991,28323.318,591,6054.41
10,000 - 49,9991,94035.2537, 909, 12619.47
50,000 - 99,9992204.0014,520,2677.46
100,000 - 499,9991372.4922,410,52811.51
500,000 - 999,999110.207,940,6524.08
1,000,000 and over160.2998,607,94850.63
Totals5,503194,753,340
100.00%100.00%
75
Substantial Product Holders
Pursuant to the Financial Markets Conduct Act 2013, the following parties had given notice as at 09 August 2019 that they were
substantial product holders in the Company and held a relevant interest in the number of ordinary shares shown below:
Number of shares %
Accident Compensation Corporation12,717,6366.53
Sir Selwyn Cushing12,523,8266.50
H&G Limited10,866,1695.64
Twenty Largest Shareholders as at 09 August 2019
Number of shares%
1Forsyth Barr Custodians Limited14,071,9087.23
2Accident Compensation Corporation12,167,5656.25
3H & G Limited9,866,1695.07
4FNZ Custodians Limited6,559,4633.37
5Citibank Nominees (New Zealand) Limited5,820,5772.99
6David William Mair + John Gordon Phipps5,475,0392.81
7Public Trust Forté Nominees Limited4,845,4942.49
8Custodial Services Limited 4,106,7052.11
9HSBC Nominees A/C NZ Superannuation Fund Nominees Limited3,007,5891.54
10Custodial Services Limited 2,826,4891.45
11BNP Paribas Nominees (NZ) Limited2,715,9811.39
12HSBC Nominees (New Zealand) Limited2,376,0411.22
13Leveraged Equities Finance Limited2,330,0001.20
14Maxima Investments Limited2,050,0001.05
15New Zealand Depository Nominee Limited1,986,6021.02
16New Zealand Permanent Trustees Limited1,856,5800.95
17PT (Booster Investments) Nominees Limited1,849,4830.95
18Tea Custodians Limited Client Property Trust Account1,693,4180.87
19Mint Nominees Limited1,614,4470.83
20Custodial Services Limited 1,541,0300.79
Skellerup
Annual Report 2019
76
Period Ending30/06/201930/06/201829/06/201729/06/201630/06/2015
Total Revenue245,792240,408210,322211,415203,011
EBIT (before Canterbury EQs)41,79839,78132,84929,51031,119
Finance Costs
1,7851,8631,414411163
Share of net profit of associates23----
Profit before Tax and Canterbury EQs40,03637,91831,43529,09930,956
Canterbury EQs Pre-Tax Income/(Expense)
--
(25)(145)
-
Ta x10,97310,6419,3008,4299,023
Net Profit After Tax29,06327,27722,11020,52521,933
EPS (c)*15.014.111.510.711.4
Dividend (c)13.011.09.59.09.0
Operating Cash Flow28,86428,34521,22930,93917,802
Cash Reserves (Net Debt)(36,576)(30,719)(35,755)(26,903)
830
Total Assets
257,059252,025237,932228,004211,631
Total Liabilities78,66779,73978,68572,14951,971
Net Assets178,392172,286159,247155,855159,660
*excluding Canterbury EQs Income (Expense).
Five Year Financial History (NZ $000)
77
Directors
EM Coutts, ONZM, BMS, FCA, CFloD
Chair
BD Cushing, BCom, ACA
AR Isaac, CNZM, BCA, FCA
DW Mair, BE, MBA
WJ Strowger, LLB (Hons)
Officers
DW Mair, BE, MBA
Chief Executive Officer
GR Leaming, BCom, CA
Chief Financial Officer
Registered Office
L3, 205 Great South Road
Greenlane
Auckland 1051
New Zealand
PO Box 74526
Greenlane
Auckland 1546
New Zealand
Email: ea@skellerupgroup.com
Telephone: +64 9 523 8240
Website: www.skellerupholdings.com
Corporate
Directory
Legal Advisors
Chapman Tripp
23 – 29 Albert Street
Auckland 1010
New Zealand
Bankers
ANZ Bank New Zealand Limited
23 – 29 Albert Street
Auckland 1010
New Zealand
Auditors
Ernst & Young
2 Takutai Square
Britomart
Auckland 1010
New Zealand
Share Registrar
Computershare Investor Services Limited
Private Bag 92119
Auckland 1142
New Zealand
159 Hurstmere Road
Takapuna
Auckland 0622
New Zealand
Managing your shareholding
Online
To change your address, update your payment instructions and
to view your investment portfolio including transactions, please visit:
www.computershare.co.nz/investorcentre
General enquiries
Email: enquiry@computershare.co.nz
Telephone: +64 9 488 8777
Facsimile: +64 9 488 8787
Please assist our registrar by quoting your Common Shareholder Number (CSN).
Skellerup
Annual Report 2019
78
79
Skellerup Holdings Limited
L3, 205 Great South Road
Greenlane, Auckland 1051, New Zealand
PO Box 74526, Greenlane
Auckland 1546, New Zealand
E ea@skellerupgroup.com
T +64 9 523 8240
W www.skellerupholdings.com
---
1
FY19 Results
23 August 2019
David Mair CEO & Executive Director
Graham Leaming CFO
2
FY19 Results23 August 2019
Record NPAT of $29.1 Million
•due to a strong performance across the Group
Record EBIT for the Industrial Division of $22.9 Million
•Continued growth in OEM business particularly into potable water applications
•Strong growth with vacuum systems in US Oil & Gas sector despite impact of US tariffs
Agri Division EBIT OF $22.8 million inline with record achieved in pcp
•Growth in Footwear offsetting tougher Dairy markets
Final dividend pay-out of 7.5 cents per share
•Brings full year pay out to 13.0 cents per share up 18% on pcp
Nexus acquisition in April 2019
•Results in line with expectations
Skellerup Key Points FY19
0
5
10
15
20
25
30
35
FY15FY16FY17FY18FY19
NPAT (million)
Net Profit after Tax
0
10
20
30
40
50
FY15FY16FY17FY18FY19
EBIT (millions)
EBIT by Segment
*
IndustrialAgri
3
FY19 Results23 August 2019
Skellerup Financial Highlights FY19
NZ$ MillionFY16FY17FY18FY19
Revenue211.4210.3240.4245.8
EBITDA36.840.447.248.9
Depreciation & amortisation(7.5)(7.8)(7.4)(7.1)
EBIT29.332.839.841.8
Finance costs(0.4)(1.4)(1.9)(1.8)
Tax expense(8.4)(9.3)(10.6)(11.0)
NPAT20.522.127.329.1
Earnings cents per share10.6511.4714.1514.96
Dividend cents per share9.09.511.013.0
Operating cash flow30.921.228.328.9
Cash net of debt(26.9)(35.8)(30.7)(36.6)
Capital &intangible expenditure38.912.65.44.6
Acquisition & Investment---7.4
•Revenue up $5.4 million and
2% on pcp.
•EBIT up $2.0 million and 5%
on pcp.
•NPAT up $1.8 million and 7%
on pcp.
•Dividend increased to 13.0
cents per share, 18%
increase on pcp.
•Operating cashflow up $0.6
million and 2% on pcp.
•Robust balance sheet –
increase in net debt of $5.9
million following acquisition
of Nexus in April 2019.
•Acquisition of Nexus
($5.7 million excluding
inventory) and investment in
Sim Lim ($1.7 million)
4
FY19 Results23 August 2019
Skellerup FY19 Industrial Division
NZ$ MillionFY16FY17FY18FY19
Revenue132.0131.2151.5157.1
EBIT15.317.120.822.9
EBIT %11.613.113.714.6
Revenue up 4% and EBIT up 10% against pcp
Growth into water and flow control applications
•Existing and new customers in US and Australia
Growth of vacuum systems in oil & gas applications
•Innovation and customer focus in the US
•US/China tariffs impact
Growth into high performance foam applications
•Global, particularly US : Ultralon U-Dek
Sales into roofing applications down
•Slowdown in Australian market
-
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
FY17FY18FY19
Industrial Revenue (millions)
Industrial Revenue Categorisation
Health
Electrical
Sports/Marine
Appliance
General
Extraction/Processing
Automotive/Machinery
Roofing
Water/Waste
5
6
FY19 Results23 August 2019
Skellerup FY19 Agri Division
Revenue and EBIT flat against pcp
Mixed dairy market
▪US and Europe up, NZ and Australia down
▪Operational process and efficiency improvements
Footwear strong
•Growth in NZ with traditional rural retailers and hardware/safety channels
•Growth internationally with specialist boots including new developments for
electrical and firefighting applications
•Operational performance good
NZ$ MillionFY16FY17FY18FY19
Revenue79.679.289.088.8
EBIT18.819.822.822.8
EBIT %23.624.925.625.7
AGRI REVENUE BY REGION
7
8
FY19 Results23 August 2019
Skellerup Approach & Markets
9
FY19 Results23 August 2019
Skellerup FY19
NZ$ MillionFY16FY17FY18FY19
AgriEBIT18.819.822.822.8
Industrial EBIT15.317.120.822.9
Corporate EBIT(4.8)(4.1)(3.9)(3.9)
EBIT29.332.839.841.8
Finance costs(0.4)(1.4)(1.9)(1.8)
Tax expense(8.4)(9.3)(10.6)(11.0)
NPAT20.522.127.329.1
Reconciliation of Segment EBIT to Group NPAT
10
FY19 Results23 August 2019
This presentation contains not only a review of operations, but also some forward looking
statements about Skellerup Holdings Limited and the environment in which the company
operates. Because these statements are forward looking, Skellerup Holdings Limited's
actual results could differ materially.
Although management and directors may indicate and believe that the assumptions
underlying the forward looking statements are reasonable, any of the assumptions could
prove inaccurate or incorrect and, therefore, there can be no assurance that the results
contemplated in the forward looking statements will be realised.
Please read this presentation in the wider context of material previously published by
Skellerup Holdings Limited.
Skellerup Disclaimer
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.
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