FWL Full Year 2019 Results and Annual Report Published
Results announcement
Results for announcement to the market
Name of issuer Foley Wines 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
$47,709 +13.4%
Total Revenue $47,943 +13.9%
Net profit/(loss) from continuing
operations
$3,839 +76.1%
Total net profit/(loss) $3,518 +94.9%
Interim/Final Dividend
Amount per Quoted Equity
Security
$ 0.03000000
Imputed amount per Quoted
Equity Security
$ 0.01166667
Record Date 4 October 2019
Dividend Payment Date 18 October 2019
Current period Prior comparable period
Net tangible assets per Quoted
Equity Security
$1.33 $1.56
A brief explanation of any of the
figures above necessary to
enable the figures to be
understood
Other Key Metrics:
Operating Profit before revaluations and income tax
(“Operating Earnings”) $5,509 +83.8%
Operating Profit before interest, impairment, revaluations,
income tax and depreciation (“Operating EBITDA”)
$9,898 +51.7%
This announcement should be read in conjunction with the
attached audited Annual Report 2019. A copy of the Annual
Report 2019 can also be found on the FWL web site
www.foleywines.co.nz.
Authority for this announcement
Name of person
authorised to
make this announcement
Jane Trought - CFO
Contact person for this
announcement
Mark Turnbull - CEO
Contact phone number +64 21 714 885
Contact email address mark@foleywines.co.nz
Date of release through MAP
27 August 2019
Audited financial statements accompany this announcement.
---
Distribution Notice
Section 1: Issuer information
Name of issuer Foley Wines Limited
Financial product name/description Ordinary Shares
NZX ticker code FWL
ISIN NZGRME0001S1
Type of distribution
Full Year X Quarterly
Half
Year
Special
DRP
applies
Record date 4 October 2019
Ex-Date 3 October 2019
Payment date 18 October 2019
Total monies associated with the
distribution
$1,972,084.44
Source of distribution Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution $0.04166667
Total cash distribution $0.03000000
Excluded amount $N/A
Supplementary distribution amount $0.00529412
Section 3: Imputation credits and Resident Withholding Tax
Is the distribution imputed Fully imputed
If fully or partially imputed, please state
imputation rate as % applied
28%
Imputation tax credits per financial
product
$0.01166667
Resident Withholding Tax per financial
product
$0.00208333
Section 4: Distribution re-investment plan (not applicable)
Section 5: Authority for this announcement
Name of person
authorised to make this
announcement
Jane Trought - CFO
Contact person for this announcement Mark Turnbull - CEO
Contact phone number +64 21 714 885
Contact email address mark@foleywines.co.nz
Date of release through MAP
27 August 2019
---
A PIVOTAL YEAR FOR FOLEY WINES
TUESDAY, AUGUST 27 2019 – Foley Wines announces a record operating profit and focus on key strategic
initiatives in the Company’s Annual Report to June 2019, published to the New Zealand Stock Exchange today.
HIGHLIGHTS
Case sales 522,000 (up 11%)
Export cases 404,000 (up 23.5%)
Bottled sales revenue $44,046,000 (up 15.7%)
Operating earnings $5,059,000 (up 83.8%)
Reported profit after tax $3,518,000 (up 94.9%)
Long term distribution agreement with Lion NZ Ltd entered into
Completion of Mt Difficulty purchase
Step change in Lighthouse distribution in Australia/New Zealand
Foley Wines CEO Mark Turnbull said, “We’ve continued to build on the gains we made in 2018, again delivering
growth, and remaining focused on the key strategic initiatives that will set us up for future success.”
The Company acquired Mt Difficulty on January 3 2019 after a lengthy OIO approval process. “Notwithstanding
the length of time, the Company remained focused on its key strategic initiatives; growing higher price point sales,
cementing the new Lion strategic partnership in New Zealand, seeking out new distribution in markets where the
Company’s brands were not represented, nurturing key stakeholder relationships in strategically important
markets and continuing to focus on process improvement and delivering cost of goods savings,” said Turnbull.
The Company’s portfolio and centralised business model continued to create opportunities with retailers and
importers seeking premium brands and streamlined procurement.
“The ability to supply five winery brands from three acclaimed regions and a craft gin, with one point of contact,
has gained the attention of several significant customers in 2019. We are now supplying three brands to a large
Asian retailer directly, with an additional brand set to join the range,” said Turnbull. The Company’s brands
continue to gain the attention of international airlines with Cathay Pacific recently selecting Mt Difficulty for its
First Class service, and Te Kairanga Runholder for its Business Class service.
In New Zealand, the Company continues to build a premium distribution platform alongside Lion NZ, who took
over the distribution of many of the Company’s brands during the year.
“In 2019 we embarked on the repositioning of brand price points which were not delivering value. We were fully
mindful that the price increase and change in distribution would result in a decrease in case sales. Its pleasing to
see that decrease is in line with our expectations and the change resulted in an increased net case realisation. At
the same time our bulk wine sales have reduced as demand for our branded products increases,” said Turnbull.
Lighthouse Gin sales grew significantly on the back of major distribution wins in New Zealand and Australia.
“Lighthouse continues to be a shining light in the craft gin category. We are very optimistic about building on this
momentum in the year ahead,” said Turnbull.
The Company continues to focus on a strategy of premiumisation with a significant increase in consumer
marketing investment in 2019 to grow awareness and rate of sale in tandem with increased availability.
“Consumers around the world continue to drink less but spend more. The next 12 months will see further activity
to build powerful brands underpinned by excellent wine quality,” said Turnbull.
Bill Foley, Chairman, said “I’m delighted with the progress that has been made over the last 12 months. To me
one of the key highlights has been the focus by the team on premiumisation of the portfolio. What is also very
pleasing is the continued focus on building markets; not being reliant on one or two markets is important in
managing the risk of any business.”
– END –
Authorised for public release.
For further information please contact:
Mark Turnbull
CEO, Foley Wines Limited
PO Box 67, Renwick, 7243, Marlborough
Tel: +64 21 714 885
Email: mark@foleywines.co.nz
Notes to Editors:
Foley Wines is a collection of iconic wineries and brands from New Zealand’s most acclaimed wine regions.
Each with a unique story of New Zealand to tell, our wineries are linked by a common unrelenting purpose; to
make great wine that people love to drink around the world– made by land & hand.
Our ambition is to be New Zealand’s most revered wine group through the ownership of iconic wineries in New
Zealand’s most acclaimed regions, inspiring the most discerning retailers and restaurants around the world.
Established in 1988 as Grove Mill Wine Company Ltd, the company merged with Foley Family Wines NZ
Limited in September 2012. The Company listed on the NZAX Board of the NZ Stock Exchange when this was
first established in November 2003 and migrated to the NZX Main Board and changed its name to Foley Wines
Limited (ticker code FWL) on 3 December 2018.
Foley Wines’ major shareholder is Bill Foley who is a major investor in the US wine industry. His company Foley
Family Inc. is a Top 20 wine company in the US, owning 17 wineries with over 150 dedicated sales personnel in
the US market.
Foley Wines wholly owns Martinborough Vineyard and Te Kairanga and the Lighthouse Gin brand in
Martinborough, Grove Mill and Vavasour in Marlborough, and Mt Difficulty in Central Otago.
---
ANNUAL REPORT 2019
Contents
FOLEYWINESLIMITED
| ANNUAL REPORT 2019
Performance Highlights 4
Chief Executive Officer (CEO) and Directors Report 5 – 16
Director’s Responsibility Statement 17
Financial Statements
Income Statement 21
Statement of Comprehensive Income 22
Statement of Changes In Equity 23
Statement of Financial Position 24 – 25
Statements of Cash Flows 26
Notes to the Financial Statements 27 – 69
Independent Auditor’s Report 70 – 77
Corporate Governance Statement 78 – 83
Statutory Information 84 – 89
Company Directory 90
1
FoleyWinesisacollectionoficonic
wineriesandbrandsfromNewZealand’s
mostacclaimedwineregions
made by
land &
hand
Each with a unique story of New Zealand to tell, our
wineries and distillery are linked by a common
unrelenting purpose; to make great wine that people
love to drink around the world – made by land & hand.
FOLEYWINESLIMITED
| ANNUAL REPORT 2019
2
Martinborough Vineyard
Martinborough
Te Kairanga
Martinborough
Vavasour
Awatere Valley, Marlborough
Grove Mill
Wairau Valley, Marlborough
Our wineries
& distillery
Lighthouse Gin
Martinborough
Mt Difficulty
Central Otago
s
FOLEY WINES LIMITED
| ANNUAL REPORT 2019
3
Performance
Highlights
FROM A PIVOTAL YEAR.
CASE SALES522,000 (up 11%)
EXPORT CASES404,000 (up 23.5%)
BOTTLED SALES REVENUE$44,046,000 (up 15.7%)
OPERATING EARNINGS$5,059,000 (up 83.8%)
REPORTED PROFIT AFTER TAX$3,518,000 (up 94.9%)
Long term distribution agreement with Lion NZ Ltd entered into.
Completion of Mt Difficulty purchase.
Step change in Lighthouse distribution in Australia/New Zealand.
FOLEYWINESLIMITED
| ANNUAL REPORT 2019
4
FOLEYWINESLIMITED
| CEO AND DIRECTORS’ REPORT
CEO & DIRECTORS’ REPORT
Apivotalyear.
“The company remained
focused on its key strategic
initiatives.”
The Directors of Foley WinesLimited(FWL)are pleasedto present the 2019 operating
results and annual report for the 12 months ended 30 June 2019.
2019was a pivotal year for the company. The completion of theMt Difficulty purchase
wasextremely satisfying against a background of significant uncertaintywiththe
gaining ofOIOapproval.
Notwithstanding this uncertainty, the Company remained focused onits key strategic
initiatives; growing higher price pointsales,cementing the new Lion strategic
partnershipin NewZealand, seeking out new distributionin markets where the
Company’s brandswerenot represented, nurturing key stakeholder relationshipsin
strategically important markets and continuingto focus on process improvement and
delivering cost of goods savings.
RECORDOPERATINGPERFORMANCE
A record operating profit before revaluations and incometax (“operating earnings”) of
$5.059m comparedwith$2.752m for the previous financial year.As outlinedin the
Company’s half year report,we are of thefirmbelief that operating performance
(underlying profit)is the keymetricto demonstrate the progress the companyis
making dueto the complexity around accounting, the accounting standards andfair
value adjustments.
Profit for the period net oftax attributable for the shareholderswas $3.518m,up 94.8%
comparedwith$1.805m the previous year.
Mark Turnbull, CEO and Director
5
JUNE ‘19JUNE ‘18% CHANGEJUNE ‘17% CHANGE
New Zealand118144(18)%92+28%
Australia138113+22%68+103%
USA/Canada145122+19%147(1)%
UK/Europe9773+33%64+52%
Rest of World2419+26%18+33%
TOTAL
522471+11%389+34%
Bottled case sales
BOTTLED CASE SALES (000’S) 12 MONTHS TO JUNE
FOLEY WINES LIMITED
| CEO AND DIRECTORS’ REPORT
6
EXPORT SALES GROWTH
Overall exportcases(packaged) shipped grew 23.5% for the 12 months. Once again this
compares favorablyto the broader industry which grew by 3% accordingto NewZealand
Wine GrowersKey Performance IndicatorsMay2019.
The USA/Canada market delivered strong growth on the previous year,withexportcases
up 19% for the 12 months. Further,in the first quarter FoleyFamilyWines Inc(FFW
USA)took over the importing ofMt Difficulty, which had previously very low exportsto
the USA . Whileit will take sometime tobuildMt Difficultysalesin the USAdue to the
high price point, the brandis already gaining interest. Finally,FFWUSAtook over the
Dashwood brand from another importerin the firstquarter of this calendar year.We
believe this decisionwill resultin the focus this brand needsin the USA .
The value of the Company’s portfolio and centralised business modelis creating
significant opportunitieswithretailersand importers seeking premium brands and
streamlined procurement. The abilityto supply five winery brands from threeacclaimed
regions and acraftgin, withone point of contact, has gained the attention of several
significant customersin 2019.We are now supplying threebrandsto a largeAsianretailer
directly,withan additional brandset to join the range.
The Company has made significant progresswitha large Australianretailgroup whose
focus on premium brandsis wellsatisfiedby our portfolio of high quality wineries and
brands commanding premium price points.
FOLEYWINESLIMITED
| CEO AND DIRECTORS’ REPORT
7
BUILDING A PREMIUM DISTRIBUTION PLATFORM IN
NEW ZEALAND
In 2019we embarked on the repositioning of brand price points whichwerenot
delivering value.As part of this strategy, LionNZ took over the distribution of many of
the Company’s brands during the year.We werefully mindful that the price increase and
changein distribution would resultin a decreasein casesales . As a result,casesales
excludingMt Difficultyweredown 50,000 for the year (35%),in line withexpectations.
However, netcaserealisationto December (the period priorto the Mt Difficulty
acquisition)was increased by $10 percase.
The Companyis optimistic thatit will see a strong performancein NewZealand over the
next 12 monthsas LionNZ executesits salesstrategy.
This year bulksalesreduced by approximately 46%to 54,680 9L equivalents compared
to 101,607 9L equivalentslast year. This decreaseis a clearindication that the Company
is growing the demand forits branded products. Moving forward bulk winesaleswill
primarily be usedto ensure our vintages (effectively inventories)are in balance.
FOLEYWINESLIMITED
| CEO AND DIRECTORS’ REPORT
8
CASHFLOW
Operatingcashflowwas $6.413m for the year, down from $7.715m the previous year.
This year’s cashflowwassignificantly influenced byMt Difficulty which required
increased investmentin inventory over the second half of the year. Notwithstanding this
investment, the Company’s cashflowwassignificantly strong enoughto finance this
additional working capital.
Total inventory increased by $14m whichwasreflective of both theMt Difficulty
acquisition andan increased volume from the 2019 vintage. This level of inventory
means the Companyis well placedto growsalesin the 2020 year.
Capital expenditurewas $2.948m for the year, comparedwith$2.121m the previous year.
The increaseis largely attributableto barrel expenditureat Mt Difficulty. However the
Company hasstill investedless than the annual depreciationin the year of $3.353m. The
intentionis toensure that the Company’s capital expenditureis lessthan annual
depreciation other than significant one-off investments for growth.
The total dividend paid for the yearwas $1.59m.
FOLEYWINESLIMITED
| CEO AND DIRECTORS’ REPORT
9
MTDIFFICULTYACQUISITION
“LighthouseGin continues to
be a shining light in the craft
gincategory.”
Mt Difficultywas finally acquired 3 January 2019aftera long delay of gettingOIO
approval. Note 30 gives the details of the transaction.In the first six monthssalesrevenue
was $6.262mat anaverage selling price of $196 percase.
The directorsare of thefirmview thatMt Difficultywasa strategically important
acquisition andwill deliver significant valueto the Company.
LIGHTHOUSEGIN
LighthouseGin continuesto be a shining lightin the craftgin category.Salesof
24,309Litres(equivalentto approximately 34,727 700mlbottles) comparedwith9,531
Litres(equivalentto approximately 13,615 700mlbottles)in the prior 12 months.
In the final quarter a major Australian liquorretailgroup ranged Lighthouse acrossall
of its three banners comprising of over 900 stores.
Furthermore, sinceNewZealand
distribution of Lighthouse
returnedto Foley Winesin
January, Lighthouse has been core
rangedin twoof NewZealand’s
largest specialist liquor groups.
Lighthousewas recently awarded the covetedtitle of ‘Master’at the Spirits Business
Gin Masterscompetitionin the UK.
The Companyis very optimistic that this growthwill continuein the year ahead.
FOLEYWINESLIMITED
| CEO AND DIRECTORS’ REPORT
10
BUILDING POWERFUL BRANDS
In 2019 the Companywas delightedto receive outside recognition of quality from
some of the world’s most respected and influential industry competitions and
commentators:
•Te Kairanga John Martin Pinot Noir 2017was awardedBestin Showwith97 Pointsat
theDecanter World Wine Awards 2019, the world’s largest and most prestigious wine
competition.Te Kairanga Runholder Pinot Noirwas awarded Goldwith95 Pointsat the
samecompetition.
•LighthouseGinwasjudged against 300 gins from around the worldto be awarded
‘Master’; the top accolade ofThe Spirits Business GlobalGin Masters 2019.
•GroveMillSauvignon Blanc 2018wasawardedtwomajor trophies by the
NewZealand International Wine Show 2018and theRoyal Easter Show Wine Awards 2019.
•Dashwood Sauvignon Blanc 2018wasawardedBestOpen White Wineat the
NewZealand Wine of the Year 2018.
•Chief Winemaker Marlborough,Stu Marfell,was named Winemaker of the Show by the
NewZealand International Wine Show 2018, while GroveMill Winemaker,GregLane,was
crownedTonnellerie de MercureyNewZealand Young Winemaker of the Year 2018.
•Martinborough Vineyard Home Block Pinot NoirandVavasour Sauvignon Blancwere
both again recognised on theFine Wines ofNewZealandlist 2019, andwerejoined this year
byTe Kairanga John Martin Pinot Noir.
These resultsare testamentto the team’sskillin the vineyards, wineries and distillery,
and serveas a hugely valuable decision-making tool for consumers navigating wine
and gin shelves.
FOLEYWINESLIMITED
| CEO AND DIRECTORS’ REPORT
The Company continues to focus
on a strategy of premiumisation
as consumers around the world
drink less but spend more.
2019saw a significant increasein consumer marketing investmentto grow awareness
and rate of sale in tandemwithincreased availability. Targeted consumer advertising
campaignsin NewZealandattractedpremium shoppersin nationaltitlessuchas
Kia Oraand Metro.
The next 12 monthswillsee
further activityin NewZealand
and Australiato build powerful
brands underpinned by excellent
wine quality.
12
The harvest totalled 6,812 tonnes across the Marlborough and Martinborough wineries,
an overall increase of 16% on the previous year’s harvest of 5,868 tonnes.
The Mt Difficulty winery totalled 1,492 tonnes,an overall increase of 21% for the 2019
vintage comparedwiththe previous year’s 1,236 tonnes.
Spring frostsin Martinborough caused significant issues for many growers. While there
wassome impact on the Company,it wasresolved that the use of helicopterswas
problematic both from cost and practical perspectives. Frost events whichare not forecast
pose a majorrisk . To manage this risk, the Company has purchased sufficient frost fans
to protect the majority of the vineyardsin this region for spring this year. While this
investmentis significant,it provides ongoing protection for yearsto come.
2019 HARVEST
FOLEYWINESLIMITED
| CEO AND DIRECTORS’ REPORT
14
Foley Wines celebrates the places and people that produce our acclaimed wines and gin.
The Company considers itself custodian of the regions we work in and actively pursues
business practices in line with our commitment to preserving our land for future
generations.
All of the Company’s wineries are Sustainable Winegrowing New Zealand accredited,
meeting international best practice guidelines for sustainability, biodiversity, soil, water
and air, energy, chemicals, by-products, people and business practices.
Solar power at the Grove Mill, Vavasour, Te Kairanga and Martinborough Vineyard
wineries significantly reduces the use of electricity from the main grid. Mt Difficulty
continues to use vermicast composting and biochar to redistribute waste materials while
improving soil quality. Its green roof aids insulation and wastewater management.
Over 90% of our wine is bottled in New Zealand-sourced, recycled glass, reducing our
carbon footprint and supporting our local industry.
FOLEYWINESLIMITED
| CEO AND DIRECTORS’ REPORT
MADE BY LAND & HAND
15
Over the course of the last two years the Company has demonstrated that it is gaining
momentum. The Company is targeting a lift in case sales numbers across the key markets
it operates and is forecasting 600,000 cases for the next financial year. However, the
Company is mindful of global economic head winds and the major influence of currency
movements. Notwithstanding these the Company is focused on improving its
performance over all key metrics.
FOLEYWINESLIMITED
| CEO AND DIRECTORS’ REPORT
OUTLOOK
DIVIDEND
The Directors consider that the underlying operational performance and cashflows justify
retaining a fully imputed dividend of 3 cents per share. As outlined in previous years,
FWL has a strong balance sheet and is focused on increasing the dividend yield to
Shareholders as the Company grows.
The policy of the Board is to evaluate present and projected cash flows, sustainable
operating earnings and, if prudent, declare a dividend subject to current and future capital
and acquisition expenditure requirements.
For and on behalf of the Board of Directors
Mark TurnbullMark Turnbull
CEO and Director
16
17
FOLEY WINES LIMITED| ANNUAL REPORT 2019
For the year ended 30 June 2019
DIRECTORS’ RESPONSIBILITY
STATEMENT
The Directors are responsible for the preparation, in accordance with New Zealand law
and generally accepted accounting practice, of financial statements which fairly present the
financial position of Foley Wines Limited and 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 Company and the Group have been
prepared using accounting policies appropriate to the Company and Group 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
Company and Group and enable them to ensure that the financial statements comply with the
Financial Markets Conduct Act 2013 and Financial Reporting Act 2013.
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 Company
and Group and to prevent and detect fraud and other irregularities.
The Directors are pleased to present the financial statements of Foley Wines Limited and
Group for the year ended 30 June 2019.
This annual report is dated 27 August 2019 and is signed in accordance with a resolution of
the Directors made that day pursuant to section 211(1)(k) of the Companies Act 1993.
For and on behalf of the Directors
WP Foley II
Chairman
A M Turnbull
CEO and Director
FOLEY WINES LIMITED| ANNUAL REPORT 2019
F OL E Y WI N E S L I M I T E D
| ANNUAL REPORT 2019
Financial Statements
19
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Income
Statement
For the year ended 30 June 2019
Group Group
2019 2018
Notes $’000 $’000
Total Revenue 3 47,94 3 42 , 07847,94 3 42 , 078
Expenses
Cost of sales (32,364) (30,622)Cost of sales (32,364) (30,622)
Selling, marketing and promotion expenses (5,303) (4,721)Selling, marketing and promotion expenses (5,303) (4,721)
Administration and corporate governance expenses (3,051) (2,491)Administration and corporate governance expenses (3,051) (2,491)
Non-recurring expenses 4 (680) (375)Non-recurring expenses 4 (680) (375)
Expenses excluding interest (41,398) (38,209)(41,398) (38,209)
Operating Profit before interest, impairment,
revaluations & income tax 6,545 3,869revaluations & income tax 6,545 3,869
Interest revenue 31 1Interest revenue 31 1
Interest expense 5 (1,562) (1,081)Interest expense 5 (1,562) (1,081)
Net finance costs (1,531) (1,080)Net finance costs (1,531) (1,080)
Operating Profit before impairment,
revaluations & income tax 5,014 2,789revaluations & income tax 5,014 2,789
Impairment
Impairment of trade and other receivables 2.2 (d) – –Impairment of trade and other receivables 2.2 (d) – –
Impairment of inventory 2.2 (d) 45 (37)Impairment of inventory 2.2 (d) 45 (37)
Operating Profit before revaluations & income tax 5,059 2,752Operating Profit before revaluations & income tax 5,059 2,752
Revaluation gains and losses
Unrealised gain in fair value of financial asset/liabilities 24(k) 187 (229)Unrealised gain in fair value of financial asset/liabilities 24(k) 187 (229)
Unrealised gain on harvested grapes 20 415 1,084Unrealised gain on harvested grapes 20 415 1,084
Realised reversal of gain on harvested grapes (513) (812)Realised reversal of gain on harvested grapes (513) (812)
Revaluation of property, plant & equipment 2.3.9 (93) (153)Revaluation of property, plant & equipment 2.3.9 (93) (153)
Profit before income tax 5,055 2,642Profit before income tax 5,055 2,642
Income tax expense 6.1 (1,537) (837)Income tax expense 6.1 (1,537) (837)
Profit for the year net of tax, attributable to
Shareholders of the Parent Company 3,518 1,805Shareholders of the Parent Company 3,518 1,805
Basic/Diluted Earnings per share cps (after tax) 7 5.89 3.46Basic/Diluted Earnings per share cps (after tax) 7 5.89 3.46
These financial statements should be read in conjunction with the Notes to the Financial Statements on pages 27 to 69.
21
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Statement of
Comprehensive Income
For the year ended 30 June 2019
Group Group
2019 2018
Notes $’000 $’000
Profit for the year 3,518 1,805Profit for the year 3,518 1,805
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Revaluation of property, plant and equipment 2.3.9 3,347 3,701Revaluation of property, plant and equipment 2.3.9 3,347 3,701
Income tax on items taken directly to or transferred from equity 6.2 (450) (601)Income tax on items taken directly to or transferred from equity 6.2 (450) (601)
Other comprehensive income for the year, net of tax 2,897 3,100Other comprehensive income for the year, net of tax 2,897 3,100
Total comprehensive income for the year, net of tax 6,415 4,905Total comprehensive income for the year, net of tax 6,415 4,905
These financial statements should be read in conjunction with the Notes to the Financial Statements on pages 27 to 69.
22
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Statement of
Changes in Equity
For the year ended 30 June 2019
GroupNotes
Fully Paid
Ordinary
Shares
$‘000
Asset
Revaluation
Reserve
$’000
Retained
Earnings
$’000
Total
$’000
Equity at 1 July 2018 66,518 13,337 14,627 94,482 66,518 13,337 14,627 94,482 66,518 13,337 14,627 94,482
Profit for the year – – 3,518 3,518Profit for the year – – 3,518 3,518Profit for the year – – 3,518 3,518
Other comprehensive income for the year – 2,672 225 2,897Other comprehensive income for the year – 2,672 225 2,897Other comprehensive income for the year – 2,672 225 2,897
Total comprehensive income for the year – 2,672 3,743 6,415 – 2,672 3,743 6,415 – 2,672 3,743 6,415
Contributions by owners 9 20,000 – – 20,000Contributions by owners 9 20,000 – – 20,000Contributions by owners 9 20,000 – – 20,000
Distributions to owners 8 – – (1,590) (1,590)Distributions to owners 8 – – (1,590) (1,590)Distributions to owners 8 – – (1,590) (1,590)
Transactions with owners during the year 20,000 – (1,590) 18,410 20,000 – (1,590) 18,410 20,000 – (1,590) 18,410
Added to equity during the year 20,000 2,672 2,153 24,825 20,000 2,672 2,153 24,825 20,000 2,672 2,153 24,825
Equity at 30 June 2019 86,518 16,009 16,780 119,307 86,518 16,009 16,780 119,307 86,518 16,009 16,780 119,307
Dividends paid per share cps 8 3.0Dividends paid per share cps 8 3.0Dividends paid per share cps 8 3.0
Equity at 1 July 2017 66,518 10,202 14,424 91,144 66,518 10,202 14,424 91,144 66,518 10,202 14,424 91,144
Profit for the year – – 1,805 1,805Profit for the year – – 1,805 1,805Profit for the year – – 1,805 1,805
Other comprehensive income for the year – 3,135 (35) 3,100Other comprehensive income for the year – 3,135 (35) 3,100Other comprehensive income for the year – 3,135 (35) 3,100
Total comprehensive income for the year – 3,135 1,770 4,905 – 3,135 1,770 4,905 – 3,135 1,770 4,905
Distributions to owners 8 – – (1,567) (1,567)Distributions to owners 8 – – (1,567) (1,567)Distributions to owners 8 – – (1,567) (1,567)
Transactions with owners during the year – – (1,567) (1,567) – – (1,567) (1,567) – – (1,567) (1,567)
Added to equity during the year – 3,135 203 3,338 – 3,135 203 3,338 – 3,135 203 3,338
Equity at 30 June 2018 66,518 13,337 14,627 94,482 66,518 13,337 14,627 94,482 66,518 13,337 14,627 94,482
Dividends paid per share cps 8 3.0Dividends paid per share cps 8 3.0Dividends paid per share cps 8 3.0
These financial statements should be read in conjunction with the Notes to the Financial Statements on pages 27 to 69.
23
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Statement of
Financial Position
As at 30 June 2019
Group Group
2019 2018
Notes $’000 $’000
CURRENT ASSETS CURRENT ASSETS
Cash and cash equivalents 3,445 2,768Cash and cash equivalents 3,445 2,768
Trade and other receivables 16 9,279 9,043Trade and other receivables 16 9,279 9,043
Other financial assets 15 93 –Other financial assets 15 93 –
Inventories 17 44,080 30,207Inventories 17 44,080 30,207
Biological work in progress 18 & 20 1,302 873Biological work in progress 18 & 20 1,302 873
Prepaid expenses 1,033 468Prepaid expenses 1,033 468
Current tax assets 6.3 – 67Current tax assets 6.3 – 67
59,232 43,426 59,232 43,426
NON-CURRENT ASSETS NON-CURRENT ASSETS
Property, plant and equipment 19 101,245 74,634Property, plant and equipment 19 101,245 74,634
Intangible assets 21 32,184 13,053Intangible assets 21 32,184 13,053
Deferred tax assets 6.4 232 128Deferred tax assets 6.4 232 128
13 3 , 6 61 8 7, 815 13 3 , 6 61 8 7, 815
TOTAL ASSETS 192,893 131,241TOTAL ASSETS 192,893 131,241
These financial statements should be read in conjunction with the Notes to the Financial Statements on pages 27 to 69.
24
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Statement of
Financial Position (continued)
As at 30 June 2019
Group Group
2019 2018
Notes $’000 $’000
CURRENT LIABILITIES
Trade and other payables 12 7,235 4,90312 7,235 4,903
Loans and borrowings 13 2,261 1,00213 2,261 1,002
Convertible notes 14 10,900 10,90014 10,900 10,900
Other financial liabilities 15 3 8415 3 84
Current tax liabilities 6.3 1,087 -6.3 1,087 -
21,486 16, 8 89 21,486 16, 8 89
NON-CURRENT LIABILITIES
Loans and borrowings 13 37,601 8,00013 37,601 8,000
Other financial liabilities 15 - 1415 - 14
Deferred tax liabilities 6.4 14,499 11,8566.4 14,499 11,856
52,100 19,870 52,100 19,870
TOTAL LIABILITIES 73,586 36,759 73,586 36,759
EQUITY
Share capital 9 86,518 66,5189 86,518 66,518
Reserves 10 16,009 13,33710 16,009 13,337
Retained earnings 11 16,780 14,62711 16,780 14,627
TOTAL EQUITY 119, 3 07 94 , 4 8 2 119, 3 07 94 , 4 8 2
TOTAL LIABILITIES AND EQUITY 192,893 131,241 192,893 131,241
These financial statements should be read in conjunction with the Notes to the Financial Statements on pages 27 to 69.
25
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Statement of
Cash Flows
For the year ended 30 June 2019
Group Group
2019 2018
Notes $’000 $’000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from (applied to) Cash was provided from (applied to)
Receipts from customers 50,229 44,599Receipts from customers 50,229 44,599
Insurance proceeds 605 994Insurance proceeds 605 994
Interest received 31 1Interest received 31 1
Payments to suppliers and employees (42,303) (35,670)Payments to suppliers and employees (42,303) (35,670)
Interest and other costs of finance paid (1,512) (1,081)Interest and other costs of finance paid (1,512) (1,081)
Income tax paid (637) (1,668)Income tax paid (637) (1,668)
Net cash flow from operating activities 22 6,413 7,175Net cash flow from operating activities 22 6,413 7,175
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was obtained from (applied to) Cash was obtained from (applied to)
Sale of property, plant and equipment 74 17Sale of property, plant and equipment 74 17
Purchase of property, plant and equipment and
biological assets – excluding Mt Difficulty acquisition (2,948) (2,121)biological assets – excluding Mt Difficulty acquisition (2,948) (2,121)
Acquisition of Mt Difficulty business and assets,
net of cash received 30 (47,081) –net of cash received 30 (47,081) –
Net cash flow from investing activities (49,955) (2,104)Net cash flow from investing activities (49,955) (2,104)
CASH FLOW FROM FINANCING ACTIVITIES
Cash was provided for (applied to) Cash was provided for (applied to)
Issue of equity share capital 9 20,000 –Issue of equity share capital 9 20,000 –
Dividends paid 8 (1,590) (1,567)Dividends paid 8 (1,590) (1,567)
Loans advanced 13 30,000 –Loans advanced 13 30,000 –
Loans repaid (4,191) (999)Loans repaid (4,191) (999)
Net cash flow from financing activities 44,219 (2,566)Net cash flow from financing activities 44,219 (2,566)
Net increase in cash held 677 2,505Net increase in cash held 677 2,505
Cash and cash equivalents at beginning of year 2,768 263Cash and cash equivalents at beginning of year 2,768 263
Cash and cash equivalents at end of year 3,445 2,768Cash and cash equivalents at end of year 3,445 2,768
Comprising: Cash and cash equivalents 3,445 2,768Comprising: Cash and cash equivalents 3,445 2,768
These financial statements should be read in conjunction with the Notes to the Financial Statements on pages 27 to 69.
26
FOLEY WINES LIMITED| ANNUAL REPORT 2019
F OL E Y WI N E S L I M I T E D
| ANNUAL REPORT 2019
Notes to Financial Statements
27
FOLEY WINES LIMITED| ANNUAL REPORT 2019
1. REPORTING ENTITY
Foley Wines Limited (“the Company”, “the Parent”) is a company domiciled in New Zealand, registered under
the Companies Act 1993 and listed on the NZX Main Board (NZSX) of the New Zealand Stock Exchange
(“NZX”). The Company is an issuer in terms of the Financial Markets Conduct Act 2013. Foley Wines Limited
changed its company name from Foley Family Wines Limited on 1 December 2018.
The Company is an integrated wine company producing table wines with the marketing and sales of premium
wines in New Zealand and various export markets.
The Company is 52.80% (2018: 66.46%) owned by Foley Family Wines Holdings, New Zealand Limited, which
in turn is owned 80.47% by Foley Family Wines Holdings, Inc., a company domiciled in the United States of
America.
2. SUMMARY OF ACCOUNTING POLICIES
The financial statements of Foley Wines Limited (“the Company”, “the Parent”) and its subsidiaries and controlled
entities (together referred to as “the Group”) have been prepared in accordance with generally accepted
accounting practice in New Zealand (“NZ GAAP”). The Company is a profit-oriented company incorporated in
New Zealand with its registered office at 13 Waihopai Valley Road, RD6, Blenheim 7276, New Zealand.
2.1 STATEMENT OF COMPLIANCE
The Company is a reporting entity for the purpose of the Financial Markets Conduct Act 2013 and its financial
statements comply with that Act.
The financial statements comply with New Zealand equivalents to International Financial Reporting Standards
(‘NZ IFRS’) and other applicable Financial Reporting Standards as appropriate for profit-oriented entities. The
financial statements also comply with International Financial Reporting Standards (“IFRSs”).
The financial statements were authorised for issue by the Directors on 27 August 2019.
2.2 BASIS FOR PREPARATION
The financial statements have been prepared on the historical cost basis except for land and buildings, land
improvements including biological bearer plants (refer note 2.2(a)) and derivative financial instruments each
of which have been measured at fair value. The reporting currency is New Zealand dollars and all values are
rounded to the nearest thousand dollars ($’000).
Judgements, Estimates and Assumptions and Accounting Policies
In the application of NZ IFRS the Directors are required to make judgements, estimates and assumptions about
carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstance, the results of which form the basis of making the judgements. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both current and future periods.
Notes to the
Financial Statements
For the year ended 30 June 2019
29
30
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.2 BASIS FOR PREPARATION (CONTINUED)
Judgements, Estimates and Assumptions and Accounting Policies (Continued)
The significant areas of estimation, assumptions and critical judgements made in the preparation of these
financial statements are as follows:
(a) Fair Value of Land, Land Improvements and Buildings
The fair value of land, land improvements (vineyards) and buildings is determined by an independent valuer.
The fair value of land, vineyards, including bearer plants (grape vines) and other vineyard infrastructure, and
buildings were determined under the principle of highest and best use at balance date. Fair value is the amount
for which the assets could have been exchanged between a knowledgeable willing buyer and a knowledgeable
willing seller in an arm’s length transaction as at the valuation date. Fair value is determined by direct reference
to recent market transactions on arm’s length terms for vineyards comparable in size, location and varietal mix
to those held by the Group. To determine the fair value the independent valuer uses valuation techniques which
are inherently subjective and involve estimation. The Directors consider that market data exists to support this
basis of valuation. Refer to note 19.
(b) Fair Value of Grapes at the Point of Harvest
The fair value of grapes at the point of harvest is determined by reference to market prices for each variety of
grape grown in the local area at the time of harvest. The Directors’ assessment of the fair value at the point of
harvest is determined after reviewing the market price paid to independent grape growers including reference
to New Zealand Winegrowers annual Grape Price Data.
(c) Determination of Lease Accounting
The Group has entered into long-term vineyard leases which allow the Group to control the growing and
harvesting of the grapes used in the production of finished product. After taking into consideration the terms and
conditions within the leases, it is believed that the lessor retains the significant risks and rewards of ownership
and the leases are accordingly classified as operating leases.
(d) Impairment of Assets other than Goodwill and Indefinite Life Intangibles
The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the
Group and to the particular asset that may lead to impairment. If an impairment trigger exists the recoverable
amount of the asset is determined. At balance date management considered that the indications of impairment
were significant enough to test the Group’s inventories for impairment in this (and the prior) reporting period.
In relation to inventories the recoverable amount, or net realisable value, represents the estimated selling price
in the ordinary course of business, less estimated costs of completion and estimated costs to be incurred in the
marketing, selling and distribution. Following this review of net realisable value of inventories there has been a
reversal of the previously recorded impairment of inventory of $45,000 for the Group has been recorded in the
current year (2018: $37,000).
(e) Impairment of Goodwill and Indefinite Life Intangibles
The Group determines at least annually whether goodwill and indefinite life intangible assets are impaired.
This requires an estimation of the recoverable amount of the cash generating units to which the goodwill and
intangible asset was allocated or market based evidence to support the carrying value.
31
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.2 BASIS FOR PREPARATION (CONTINUED)
Judgements, Estimates and Assumptions and Accounting Policies (Continued)
(e) Impairment of Goodwill and Indefinite Life Intangibles (Continued)
The calculation of the recoverable amount of the cash generating unit involves assumptions to be made in terms
of the timing and extent of net cash flows expected to arise from the cash generating unit and the selection of
an appropriate discount rate in order to determine the present value. The Group has determined that in the
current year there is only one cash generating unit for the whole business and the value of the goodwill and
intangible assets was supported by value-in-use calculations. These calculations required the use of estimates.
These estimates are set out in note 21.
(f) Derivative financial instruments
The Group has derivative financial instruments which are classified as level 2, as they have inputs other than
observable quoted prices. In calculating the mark to market values, management has considered the market rates.
The Directors continually review all accounting policies and areas of judgement in presenting the financial
statements.
Accounting policies are selected and applied in a manner which ensures that the resulting financial information
satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying
transactions or other events is reported. A summary of significant accounting policies is disclosed in section 2.3.
(g) Business Combination
The Significant estimates, assumptions and judgements in relation to the Mt Difficulty Acquisition are outlined
in note 30.
2.3 SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies have been adopted in the preparation and presentation of the
financial statements:
2.3.1 REVENUE RECOGNITION
Revenue is recognised to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services.
The following specific recognition criteria must also be met before revenue is recognised:
(a) Sale of goods
Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with
a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when
it transfers control of a product or service to a customer. Control is considered transferred to the buyer at the
time of delivery of the goods to the customer or at the free on board (FOB) port/delivery point or as otherwise
contractually determined. Delivery occurs when the goods have been shipped to the customer’s specific location.
For sales of goods to retail customers, transfer is at the point the customer purchases the goods at the retail
outlet. Payment of the transaction price is due immediately at the point the customer purchases the goods.
(b) Interest revenue
Revenue is recognised as the interest accrues (using the effective interest method which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying
amount of the financial asset).
32
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.2 BORROWING COSTS
Borrowing costs are recognised as an expense when incurred except to the extent that they are directly attributable
to the acquisition, construction or production of a qualifying asset.
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset will be
capitalised as part of the cost of that asset.
2.3.3 IMPAIRMENT OF ASSETS OTHER THAN GOODWILL AND INDEFINITE LIFE
INTANGIBLES
At each reporting date, the Group reviews the carrying value of its tangible and intangible assets and assesses
whether there is any indication that an asset may be impaired. Where an indicator of impairment exists or
when annual impairment testing for an asset is required, the Group makes a formal assessment of recoverable
amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered to be
impaired and is written down to its recoverable amount.
Impairment losses relating to property, plant and equipment are recognised in the current period profit or loss,
unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation
decrease only to the extent that there are sufficient previous reserves.
Financial assets, other than those “at fair value through profit or loss” (FVTPL), are assessed for indicators of
impairment at the end of each reporting period. For these assets the Group recognises lifetime expected credit
losses (ECL) when there has been a significant increase in credit risk since initial recognition. In determining the
expected credit losses for these assets, the Company has taken into account the historical default experience, the
financial position of the counterparties and considered various external sources of actual and forecast economic
information, as appropriate, in estimating the probability of default of each of these financial assets occurring
within their respective loss assessment time horizon, as well as the loss upon default in each case.
2.3.4 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand, cash at bank and investments on call or in short-term
deposits with an initial maturity of three months or less. Bank overdrafts are shown within loans and borrowings
in current liabilities in the Statement of Financial Position.
For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand, demand deposits
and short-term, highly liquid investments that are readily convertible into known amounts of cash and includes
at call borrowings such as bank overdrafts, used by the Group as part of its day-to-day cash management.
2.3.5 TRADE AND OTHER RECEIVABLES
Trade receivables are recognised at fair value and subsequent to initial recognition are carried at amortised cost.
Bad debts are written off during the year in which they are identified.
Other receivables are initially recognised at fair value of the consideration received or receivable. Other
receivables are classified as current assets unless the balances are expected to settle at least 12 months after
balance date, in which case they are classified as non-current other receivables. Subsequent measurement of
other non-current receivables occurs at amortised cost, where the nominal value is discounted to present value,
using the effective interest rate of the asset over the expected period of settlement.
33
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.6 INVENTORIES
All inventories are valued at the lower of cost or deemed cost and net realisable value. Cost is calculated on an
average cost basis. Inventory costs include a systematic allocation of appropriate production overheads that
relate to putting inventories in their present location and condition but exclude borrowing costs. The allocation
of production overheads is based on the normal capacity of the production facilities.
The deemed cost for the Group’s agricultural produce (grapes) is fair value at harvest date less estimated point-
of-sale costs in accordance with NZ IAS 41 ‘Agriculture’.
Net realisable value represents the estimated selling price in the ordinary course of business, less estimated costs
of completion and estimated costs to be incurred in the marketing, selling and distribution.
2.3.7 LEASES
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and
the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges,
are included in the Statement of Financial Position. Each lease payment is allocated between the liability and
finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the
finance cost is charged to the Income Statement over the lease period so as to produce a constant periodic rate
of interest on the remaining balance of the liability for each period. The property, plant & equipment acquired
under finance leases depreciated over the shorter of the asset’s useful life and the lease term.
Operating lease payments are recognised as an expense in profit or loss on a systematic basis that is
representative of the time pattern of the benefit to the Group.
2.3.8 AGRICULTURE (BIOLOGICAL ASSET PRODUCE AND BIOLOGICAL WORK IN
PROGRESS)
Agriculture comprises agricultural produce (harvested grapes) from bearer plants (grape vines).
All costs incurred in deriving produce from the current year’s harvest or maintaining agricultural assets (bearer
plants) are recognised as expenses in profit or loss. Costs incurred in deriving produce from a future harvest are
capitalised and treated as Biological work in progress in the Statement of Financial Position.
The fair value of harvested grapes (agricultural produce or “consumable biological asset”) less estimated point-
of-sale costs is recognised in profit or loss as gain/loss on harvested grapes in the period of harvest. The fair
value of grapes is determined by reference to market prices for grapes in the local area, at the time of harvest.
This becomes the deemed “cost” for inventory valuation purposes.
34
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.9 PROPERTY, PLANT AND EQUIPMENT
Land, land improvements (vineyards), including bearer plants (grapes vines) and other vineyard infrastructure,
and buildings are valued at fair value less accumulated depreciation. Land and grape vines are not depreciated.
Fair value is determined on the basis of an independent valuation prepared by external valuation experts
annually. The fair values are recognised in the financial statements and are reviewed at the end of each reporting
period to ensure that the carrying value is not materially different from their fair value. Fair value is determined
by reference to market-based evidence, which is the amount for which the assets could be exchanged between
a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction as at the
valuation date. Any subsequent acquisitions since the last revaluation are recorded at cost less accumulated
depreciation and impairment losses.
Land improvements include all costs incurred in developing vineyards including direct material (including grapes
vines), direct labour and an allocation of overhead and financing cost. These are not depreciated until the
integrated vineyard asset reaches full commercial production which is typically two to three years after planting.
Grape vines are not depreciated.
Revaluation increases are taken directly to the revaluation reserve except to the extent that they reverse a previous
revaluation decrease of the same asset that was recognised as an expense in profit or loss, in which case the
increase is credited to profit or loss to the extent of the decrease previously charged.
Decreases in value are debited directly to the revaluation reserve to the extent that they reverse previous surpluses
of the same asset and are otherwise recognised as expenses in profit or loss.
All other items of property, plant and equipment are recorded on the cost basis less accumulated depreciation
and impairment losses.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes
in circumstances indicate that the carrying value may not be recoverable. Resulting impairment losses are
recognised as an expense in profit or loss.
All items of property, plant and equipment other than land and grape vines, are depreciated on a straight line
basis at rates which will write off their cost or revalued amount less estimated residual value over their expected
useful lives. The estimated useful lives, residual values and depreciation methods are reviewed at the end of
each annual reporting period. The estimated useful lives of major classes of assets are as follows:
Buildings 10 – 50 years
Land improvements 5 – 50 years
Plant, equipment and vehicles 2 – 40 years
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected from its use. Any gain or loss arising on de-recognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period
the asset is derecognised.
35
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.10 INTANGIBLE ASSETS OTHER THAN GOODWILL
Purchased identifiable intangible assets, comprising trademarks, are shown at cost less any accumulated
impairment losses. Trademarks have been assessed as having an indefinite life, since the Company has the
rights to the brand while it is registered and has no intention of relinquishing those rights. Trademarks are not
amortised but are subject to annual impairment testing whereby the recoverable amount is estimated and an
impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount.
Intangible assets acquired in a business combination and recognised separately from goodwill, such as brands
acquired, are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less
accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are
acquired separately.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use
or disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the difference
between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when
the asset is derecognised.
2.3.11 PAYABLES
Trade payables and other accounts payable are recognised when the Group becomes obliged to make future
payments resulting from the purchase of goods and services.
2.3.12 LOANS AND BORROWINGS
Borrowings are initially recorded at fair value of the consideration received, net of issue costs directly associated
with the borrowing. Deferred consideration payable as part of a business combination are treated as borrowings
and recorded at fair value at the date of completion of the transaction.
After initial recognition, borrowings are subsequently measured at amortised cost, which present values the
borrowing using the effective interest rate method. Amortised cost is calculated by taking into account any issue
costs, and any discount or premium on issuance.
2.3.13 EMPLOYEE BENEFITS
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and sick
leave when it is probable that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within 12 months are measured at
their nominal values using the remuneration rate expected to apply at the time of settlement. Provisions made
in respect of employee benefits which are not expected to be settled within 12 months are measured as the
present value of the estimated future cash outflows to be made by the Group in respect of services provided by
employees up to reporting date.
Liabilities for short term bonus plans are recognised where there is a contractual or constructive obligation and
accrued on an undiscounted basis.
36
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.14 FOREIGN CURRENCIES
In preparing the financial statements of each individual group entity, all transactions denominated in a currency
other than the entity’s functional currency (foreign currencies) occurring during the financial year are translated
into the functional currency using the exchange rate in effect at the date of the transaction. Monetary items
receivable or payable in a foreign currency are translated at the exchange rate existing at balance date. Foreign
exchange gains or losses resulting from the settlement of transactions and from the translation at balance date
are recognised in profit or loss in the period in which they arise.
For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are translated into New Zealand dollars using exchange rates prevailing at balance date. Income and
expense items are translated at the average exchange rates for each month during the period, unless exchange
rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions
are used. Exchange differences relating to the translation of the results and net assets of the Group’s foreign
operations from their functional currencies to the Group’s presentation currency (i.e. New Zealand dollars) are
recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve.
Exchange differences previously accumulated in the foreign currency translation reserve are reclassified to profit
or loss on the disposal of the foreign operation.
Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition
of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate
of exchange prevailing at balance date. Exchange differences arising are recognised in the foreign currency
translation reserve which forms part of total equity.
2.3.15 INCOME TAX
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the
taxable profit or loss for the year. It is calculated using the tax rates and tax laws that have been enacted or
substantively enacted by the reporting date. Current tax for current and prior periods is recognised as a liability
(or asset) to the extent that it is unpaid (or refundable) at the reporting date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences
between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base
of those items. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred
tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against
which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred
tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial
recognition of assets or liabilities which affects neither taxable income nor accounting profit. Furthermore, a
deferred liability is not recognised in relation to taxable temporary differences arising from goodwill.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when
the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from the manner in which the consolidated entity expects, at
the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and
liabilities are offset when they relate to income taxes levied by the same taxation authority and the company
intends to settle its current tax assets and liabilities on a net basis.
37
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.15 INCOME TAX (CONTINUED)
Current and deferred tax is recognised as an expense or income in profit or loss, except when it relates to items
credited or debited directly to equity or in other comprehensive income, in which case the deferred tax or current
tax is also recognised directly in equity or in other comprehensive income.
2.3.16 GOODS AND SERVICES TAX
Revenues, expenses, assets and liabilities are recognised net of the amount of goods and services tax (GST),
except for receivables and payables which are recognised inclusive of GST, where invoiced.
Cash flows are included in the statement of cash flows on a gross basis.
2.3.17 DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments including forward exchange contracts, option contracts and
interest rate swaps for the primary purpose of reducing its exposure to fluctuations in foreign currency exchange
rates and interest rates.
Derivatives are initially recognised at fair value on the date the derivative contract is entered into (the trade
date) and are subsequently re-measured to their fair value at each reporting date. The resulting gain or loss is
recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument,
in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
The Group has not adopted hedge accounting during the year. All derivative financial instruments are treated
as held for trading and changes in their fair value are recognised immediately in profit or loss.
The fair value of forward exchange contracts, foreign exchange option contracts and interest rate swaps are
based on discounted cash flows using market inputs.
2.3.18 FINANCIAL INSTRUMENTS ISSUED BY THE GROUP
Debt and equity instruments
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of
the contractual agreement.
Transaction costs on the issue of equity instruments
Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of
the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred
directly in connection with the issue of those equity instruments and which would not have been incurred had
those instruments not been issued.
Interest and dividends
Interest and dividends are classified as expenses or as distributions of profit consistent with the Statement of
Financial Position classification of the related debt or equity instruments or component parts of compound
instruments.
38
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.19 STATEMENT OF CASH FLOWS
The cash flow statement is prepared inclusive of GST.
Definitions of the terms used in the statement of cash flows are:
“Cash and cash equivalents” includes cash on hand, demand deposits and short-term, highly liquid investments
that are readily convertible into known amounts of cash and includes at call borrowings such as bank overdrafts,
used by the Group as part of its day-to-day cash management.
“Investing activities” are those activities relating to the acquisition and disposal of current and non-current
investments, and any other non-current assets, and includes dividends received.
“Financing activities” are those activities relating to changes in equity and debt capital structure of the Group
and dividends paid on the Company’s equity capital.
“Operating activities” include all transactions and other events that are not investing or financing
activities.
2.3.20 SEGMENT REPORTING
The Group adopted NZ IFRS 8 Operating Segments, with effect from 1 July 2009. NZ IFRS 8 requires operating
segments to be identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker (CODM) in order to allocate resources to the segment and to
assess its performance. The CODM is considered to be the Board of Directors and has established that the
Group operates in one segment (refer note 27).
2.3.21 BUSINESS COMBINATIONS
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values
of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and
the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are
generally recognised in profit or loss as incurred.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the
acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities
assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and
liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is
recognised immediately in profit or loss as a bargain purchase gain.
2.3.22 GOODWILL
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business (see 2.3.21 above) less accumulated impairment losses, if any.
39
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.22 GOODWILL (CONTINUED)
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or
groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently
when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit
is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of
each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated
income statement. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
2.3.23 CHANGES IN ACCOUNTING POLICIES
There have been no changes in accounting policies during the year except as noted in 2.3.24.1 below.
2.3.24 ADOPTION STATUS ON RELEVANT FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
2.3.24.1 Standards and interpretations effective in the current year
The following Standards and Amendments to NZ IFRS, which are relevant to the Group’s financial statements,
and became effective mandatorily for the annual periods beginning on or after 1 January 2018, were adopted
by the Group from 1 July 2018. The adoption of these have not and will not lead to any change in the Group’s
accounting policies with measurement or recognition impact on the period presented in these financial
statements:
• NZ IFRS 15 Revenue from Contracts with Customers – NZ IFRS 15 introduces a single revenue recognition
model based on the transfer of goods and services and the consideration expected to be received for that
transfer. NZ IFRS 15 supersedes NZ IAS 18: Revenue. The changes in NZ IFRS 15 do not have an impact on
the timing of revenue recognition or net profit after tax for the Group.
• IFRS 9 (2014) Financial Instruments - replaced NZ IAS 39 Financial Instruments and all previous versions
of NZ IFRS 9. Financial assets of the Group (including foreign currency forward exchange contracts and
options or interest rate swaps) are measured at fair value. The classification and measurement of these has
remained the same under NZ IFRS 9. The changes do not have an impact on the net profit after tax for the
Group or the net financial position.
• NZ IFRIC 22 Foreign Currency Transactions and Advance Consideration - Clarifies which exchange rate to
use in reporting foreign currency transactions when a payment is made or received in advance. The changes
in NZ IFRIC 22 do not have an impact on the net profit after tax for the Group or the net financial position.
40
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3.24 ADOPTION STATUS ON RELEVANT FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS (CONTINUED)
2.3.24.2 Standards and interpretations effective in future periods
Certain new Standards, Interpretations and Amendments to existing standards have been published that are
mandatory for later periods and which the Group has not early adopted. The key items include:
• NZ IFRS 16 Leases – mandatory for annual periods beginning on or after 1 January 2019. NZ IFRS 16 is
the new standard on the recognition, measurement, presentation and disclosure of leases. The standard
will replace NZ IAS 17: Leases. The scope of the new standard includes leases of all assets, with certain
exceptions. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the
underlying asset) for a period of time in exchange for consideration. NZ IFRS 16 requires lessees to account
for all leases under a single on-balance sheet model (subject to certain exemptions) in a similar way to
finance leases under NZ IAS 17: Leases. Lessees will be required to recognise a liability to pay rentals with a
corresponding asset, and recognise interest expense and depreciation separately. Reassessment of certain
key considerations (e.g. lease term, variable rents based on an index or rate, discount rate) by the lessee
is required upon certain events. Lessor accounting is substantially the same as lessor accounting under NZ
IAS 17’s dual classification approach.
• NZ IFRIC 23 Uncertainty over Income Tax Treatments - Addresses how to reflect uncertainty in accounting
for income taxes under NZ IAS 12 – mandatory for annual periods beginning on or after 1 January 2019.
• Definition of a Business (Amendments to NZ IFRS 3) - To clarify whether a transaction should be accounted
for as a business combination or as an asset acquisition – mandatory for annual periods beginning on or
after 1 January 2020.
The Group’s management have completed an initial assessment of the new standards and except for the NZ
IFRS 16 Leases do not expect the adoption of these standards to have a material financial impact on the financial
statements of the Group but may affect disclosure.
In relation to NZ IFRS 16 Leases the Group has a number of operating leases including those for vineyard
land and producing vineyard leases that the Group will be required to recognise a ‘Right of-use Asset’ and a
corresponding ‘Lease Liability’ in the statement of financial position for all of these leases. This change will also
affect the profile of expenses (interest and depreciation) and the timing of these expenses relative to the lease
payments which are currently recognised. Management will work through a full analysis of each standard and
will provide further information on the expected impact of adoption of these standards in future reports ahead
of their effective dates. The Group does not expect to adopt these standards before their effective date.
2.4 BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and entities controlled
by the Company (its subsidiaries) made up to 30 June each year. Control is achieved when the Company – has
the power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee;
and has the ability to use its power to affects its returns.
41
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
2.4 BASIS OF CONSOLIDATION (CONTINUED)
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated
Income Statement and Statement of Comprehensive Income from the effective date of acquisition and up to the
effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners
of the Company and to the non-controlling interests even if this results in the non-controlling interests having a
deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Group Group
2019 2018
$’000 $’000
3. PROFIT FOR THE YEAR
Included in profit before income tax for the year are the following:
REVENUE:
Sales revenue – sale of goods – bottled wine 44,046 38,084Sales revenue – sale of goods – bottled wine 44,046 38,084
Sales revenue – other 3,663 3,994Sales revenue – other 3,663 3,994
Total sales revenue 47,709 42,078Total sales revenue 47,709 42,078
Other revenue – insurance proceeds 234 –Other revenue – insurance proceeds 234 –
Total revenue 47,943 42,078Total revenue 47,943 42,078
Sales revenue – other includes the sale of other products such as
bulk wine and spirits and restaurant meals.
EXPENSES:
Bad debts (net of bad debts recovered) – –Bad debts (net of bad debts recovered) – –
Depreciation 3,353 2,654Depreciation 3,353 2,654
Directors’ fees 193 147Directors’ fees 193 147
Employee benefits expense:
– Short-term employee benefits 8,202 6,553– Short-term employee benefits 8,202 6,553
Excise duty and HPA levy 3,220 3,839Excise duty and HPA levy 3,220 3,839
Fees paid to auditors (PwC):
– Audit of the financial statements (including fees and disbursements) 91 71– Audit of the financial statements (including fees and disbursements) 91 71
Operating lease rentals 1,184 826Operating lease rentals 1,184 826
42
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
Group Group
2019 2018
$’000 $’000
4. NON-RECURRING EXPENSES
Included in non-recurring expenses for the year are the following:
Acquisition expenses 216 375 Acquisition expenses 216 375
Capital raising costs 38 – Capital raising costs 38 –
Insurance claim related expenses 426 –Insurance claim related expenses 426 –
680 375 680 375
The acquisition expenses in the current and prior year relate to the Mt Difficulty Wines purchase which was
completed on 3 January 2019 following the receipt of Overseas Investment Office approval.
The capital raising costs related to the $20 million equity share issue approved by the shareholders to partly fund
the Mt Difficulty Wines acquisition.
During the year the Group received insurance proceeds for two main insurance claims. The first related to
damage to a wine tank (which was included in property, plant and equipment) and the second to the glycol
contamination of bulk wine due to a tank failure. The material damage insurance policy covered the cost to
replace the tank subject to the first claim and the contaminated products insurance policy covered the cost of the
inventory (bulk wine lost) and business interruption loss of profits on the lost wine.
Group Group
2019 2018
$’000 $’000
5. INTEREST EXPENSE 5. INTEREST EXPENSE
Loan interest and other costs of finance paid 1,562 1,081Loan interest and other costs of finance paid 1,562 1,081
43
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
Group Group
2019 2018
$’000 $’000
6. INCOME TAX
6.1 INCOME TAX RECOGNISED IN PROFIT
Tax expense comprises:
Current tax expense – current year 1,791 992Current tax expense – current year 1,791 992
Current tax expense/(benefit) – adjustment to prior year – –Current tax expense/(benefit) – adjustment to prior year – –
Current tax expense 1,791 992Current tax expense 1,791 992
Deferred tax expense/(benefit)
– origination & reversal of temporary differences (254) (155)– origination & reversal of temporary differences (254) (155)
Deferred tax expense – adjustment to prior year – –Deferred tax expense – adjustment to prior year – –
Deferred tax expense/(benefit) (254) (155)Deferred tax expense/(benefit) (254) (155)
Total income tax expense 1,537 837Total income tax expense 1,537 837
Reconciliation of income tax expense:
Profit before income tax 5,055 2,642Profit before income tax 5,055 2,642
Income taxation expense calculated at current rate of 28% 1,415 740Income taxation expense calculated at current rate of 28% 1,415 740
Non-deductible expenses 87 159Non-deductible expenses 87 159
Other deferred movements 35 (62)Other deferred movements 35 (62)
Income tax expense as reported 1,537 837Income tax expense as reported 1,537 837
6.2 INCOME TAX RECOGNISED DIRECTLY IN OTHER
COMPREHENSIVE INCOME
The following current and deferred amounts were charged/(credited)
directly to other comprehensive income during the year:
Deferred tax: Revaluation of property, plant and equipment 450 601Deferred tax: Revaluation of property, plant and equipment 450 601
6.3 CURRENT TAX ASSETS AND LIABILITIES
Current tax assets: Tax refund receivable – 67Current tax assets: Tax refund receivable – 67
Current tax liabilities: Tax payable 1,087 –Current tax liabilities: Tax payable 1,087 –
44
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
6. INCOME TAX (CONTINUED)
6.4 DEFERRED TAX BALANCES
Taxable and deductible temporary differences arise from the following:
Balance SheetIncome Statement
Group
2019
$’000
Group
2018
$’000
Group
2019
$’000
Group
2018
$’000
(i) Deferred tax liabilities
Tax and accounting book differences –
property, plant and equipment 12,015 9,282 (60) (127)property, plant and equipment 12,015 9,282 (60) (127)property, plant and equipment 12,015 9,282 (60) (127)
Brand intangible assets (value-in-use deferred tax) 2,212 2,212 – –Brand intangible assets (value-in-use deferred tax) 2,212 2,212 – –Brand intangible assets (value-in-use deferred tax) 2,212 2,212 – –
Inventories and biological work in progress 144 210 (66) 19Inventories and biological work in progress 144 210 (66) 19Inventories and biological work in progress 144 210 (66) 19
Fair value through profit or loss financial assets/liabilities 26 – 26 (36)Fair value through profit or loss financial assets/liabilities 26 – 26 (36)Fair value through profit or loss financial assets/liabilities 26 – 26 (36)
Other including WET rebate receivable 102 152 (50) 5Other including WET rebate receivable 102 152 (50) 5Other including WET rebate receivable 102 152 (50) 5
Gross deferred tax liabilities 14,499 11,856 (150) (139)Gross deferred tax liabilities 14,499 11,856 (150) (139)Gross deferred tax liabilities 14,499 11,856 (150) (139)
(ii) Deferred tax assets (ii) Deferred tax assets
Annual, sick leave and employee entitlements,
accruals and provisions (231) (100) (131) 12accruals and provisions (231) (100) (131) 12accruals and provisions (231) (100) (131) 12
Fair value through profit or loss financial assets/liabilities (1) (28) 27 (28)Fair value through profit or loss financial assets/liabilities (1) (28) 27 (28)Fair value through profit or loss financial assets/liabilities (1) (28) 27 (28)
Gross deferred tax assets (232) (128) (104) (16)Gross deferred tax assets (232) (128) (104) (16)Gross deferred tax assets (232) (128) (104) (16)
Net deferred tax liabilities 14,267 11,728 Net deferred tax liabilities 14,267 11,728 Net deferred tax liabilities 14,267 11,728
Deferred tax expense/(income) (254) (155)Deferred tax expense/(income) (254) (155)
All deferred tax assets and liabilities are disclosed as non-current.
Group Group
2019 2018
$’000 $’000
6.5 IMPUTATION CREDITS
Imputation credits available for subsequent reporting
periods based on a tax rate of 28% 4,011 2,838periods based on a tax rate of 28% 4,011 2,838
The above amounts represent the balance of the imputation account as at the end of the reporting period,
adjusted for:
a. Imputation credits that will arise from the payment of the amount of the provision for income tax
b. Imputation debits that will arise from the payment of dividends recognised as a liability at the reporting
date; and
c. Imputation credits that will arise from the receipt of dividends recognised as receivables at the reporting
date.
45
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
7. EARNINGS PER SHARE
Group Group
2019 2018
cents per cents per
shares shares
Basic/Diluted Earnings per share 5.89 3.46Basic/Diluted Earnings per share 5.89 3.46
The calculation of basic earnings per share in respect of 2019 is based on profit of $3,518,000 (2018: $1,805,000)
and the weighted average of 59,759,612 ordinary shares on issue during the year (2018: 52,222,534).
The calculation of diluted earnings per share in respect of 2019 based on profit of $4,028,000 (2018:
$2,315,000), being profit for the year adjusted for the interest on the convertible notes after income tax, and the
weighted average of 67,622,637 ordinary shares on issue during the year (2018: 60,085,559) becomes anti-
dilutive and therefore the diluted earnings per share is the same as basic earnings per share.
The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to
the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows:
Group Group
2019 2018
Number of Number of Number ofNumber of
shares shares
Weighted average number of ordinary shares (Basic) 59,759,612 52,222,534Weighted average number of ordinary shares (Basic) 59,759,612 52,222,534
Convertible notes outstanding at year end 7,863,025 7,863,025Convertible notes outstanding at year end 7,863,025 7,863,025
Weighted average number of ordinary shares (Diluted) 67,622,637 60,085,559Weighted average number of ordinary shares (Diluted) 67,622,637 60,085,559
8. DISTRIBUTION TO OWNERS
The Company paid a final dividend for 2018 of 3 cents per share fully imputed on 18 September 2018 totalling
$1,590,000 (2018: $1,567,000: 3 cents per share paid 3 October 2017). No final dividend for the financial
year has been declared and included in these financial statements. A final dividend of 3 cents per share fully
imputed, was approved by the Board on 27 August 2019 for payment on 18 October 2019 (refer note 31).
46
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
Parent 2019
Number of
shares issued
Parent 2018
Number of
shares issued
Group
2019
$’000
Group
2018
$’000
9. SHARE CAPITAL
FULLY PAID UP ORDINARY SHARES
Balance at beginning of financial year 52,222,534 52,222,534 66,518 66,518Balance at beginning of financial year 52,222,534 52,222,534 66,518 66,518Balance at beginning of financial year 52,222,534 52,222,534 66,518 66,518
Movements in share capital 13,513,614 – 20,000 –Movements in share capital 13,513,614 – 20,000 –Movements in share capital 13,513,614 – 20,000 –
Balance at end of financial year 65,736,148 52,222,534 86,518 66,518Balance at end of financial year 65,736,148 52,222,534 86,518 66,518Balance at end of financial year 65,736,148 52,222,534 86,518 66,518
The Company has only one class of shares and all shares have the same voting rights and share equally in
dividends and any surpluses on winding up. The shares have no par value.
Share issues during the year:
There were 13,513,614 ordinary shares issued during the year (2018: Nil) as follows:
3 July 2018 – Share Purchase Plan Share Issue – 765,634 shares at $1.48 – a total $1,133,000;
19 December 2018 – Share Placement Share Issues – 12,747,980 shares at $1.48 – a total of $18,867,000.
Shares reserved for issuance:
Convertible notes on issue at year end – convertible to 7,863,025 ordinary shares – refer note 14 (2018:
7, 8 6 3 , 0 2 5 ) .
Group Group
2019 2018
$’000 $’000
10. RESERVES
ASSET REVALUATION RESERVE
Balance at beginning of financial year 13,337 10,202Balance at beginning of financial year 13,337 10,202
Revaluation increments/(decrements) 3,347 3,701Revaluation increments/(decrements) 3,347 3,701
Reversal of previous revaluation decrements taken through profit & loss (225) (9)Reversal of previous revaluation decrements taken through profit & loss (225) (9)
Transferred to retained earnings – 44Transferred to retained earnings – 44
Deferred tax liability arising on revaluation (note 6.2) (450) (601)Deferred tax liability arising on revaluation (note 6.2) (450) (601)
Balance at end of financial year 16,009 13,337Balance at end of financial year 16,009 13,337
The asset revaluation reserve arises on the revaluation of land, buildings and land improvements. Where a
revalued asset is sold that proportion of the asset revaluation reserve which relates to that asset, and is effectively
realised, is transferred directly to retained earnings.
47
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
Group Group
2019 2018
$’000 $’000
11. RETAINED EARNINGS
Balance at beginning of financial year 14,627 14,424Balance at beginning of financial year 14,627 14,424
Profit for the year net of tax, attributable to Shareholders of the Parent Co. 3,518 1,805Profit for the year net of tax, attributable to Shareholders of the Parent Co. 3,518 1,805
Dividends paid relating to 2018 (2018: 2017) (1,590) (1,567)Dividends paid relating to 2018 (2018: 2017) (1,590) (1,567)
16,555 14,662 16,555 14,662
Reversal of previous revaluation reserve taken through profit & loss 225 9Reversal of previous revaluation reserve taken through profit & loss 225 9
Transferred from asset revaluation reserve – (44)Transferred from asset revaluation reserve – (44)
Balance at end of financial year 16,780 14,627Balance at end of financial year 16,780 14,627
12. TRADE AND OTHER PAYABLES
Trade creditors 4,674 3,584Trade creditors 4,674 3,584
Employee entitlements 997 432Employee entitlements 997 432
Other accruals 1,564 887Other accruals 1,564 887
7, 2 3 5 4 , 9 0 3 7, 2 3 5 4 , 9 0 3
13. LOANS AND BORROWINGS
At amortised cost:
Interest
Rate %
Interest
Rate Review
Date
Expiry
Date
Group
2019
$’000
Group
2018
$’000
Bank of New Zealand Term Loan #03 3.26% pa 31/7/19 31/8/20 5,001 9,002Bank of New Zealand Term Loan #03 3.26% pa 31/7/19 31/8/20 5,001 9,002Bank of New Zealand Term Loan #03 3.26% pa 31/7/19 31/8/20 5,001 9,002
Bank of New Zealand Term Loan #05 3.61% pa 3/10/19 5/1/22 29,760 –Bank of New Zealand Term Loan #05 3.61% pa 3/10/19 5/1/22 29,760 –Bank of New Zealand Term Loan #05 3.61% pa 3/10/19 5/1/22 29,760 –
Endovanerra Ltd (formerly Mt Difficulty
Wines Ltd) – Deferred Consideration Payment 0% pa 3/7/20 5,101 –Wines Ltd) – Deferred Consideration Payment 0% pa 3/7/20 5,101 –Wines Ltd) – Deferred Consideration Payment 0% pa 3/7/20 5,101 –
TOTAL LOANS AND BORROWINGS 39,862 9,002TOTAL LOANS AND BORROWINGS 39,862 9,002
Weighted average effective interest rate on
BNZ Term Loans 3.56% 3.49%BNZ Term Loans 3.56% 3.49%
Loans due within 1 year 2,261 1,002Loans due within 1 year 2,261 1,002
Total current loans and borrowings 2,261 1,002Total current loans and borrowings 2,261 1,002
Loans due 1 to 2 years 12,101 8,000Loans due 1 to 2 years 12,101 8,000
Loans due 2 to 5 years 25,500 –Loans due 2 to 5 years 25,500 –
Loans due after 5 years – –Loans due after 5 years – –
Total non-current loans and borrowings 37,601 8,000Total non-current loans and borrowings 37,601 8,000
Total loans and borrowings 39,862 9,002Total loans and borrowings 39,862 9,002
For loans covered by interest rate swap contracts (swaps) interest is charged on the underlying loan based on
the 1 month floating rate. Interest rate swaps have been taken out by the Group to convert this floating interest
rate obligation to a fixed interest rate obligation. Refer note 24 for further details of interest rate swap contracts.
48
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
13. LOANS AND BORROWINGS (CONTINUED)
BANK OF NEW ZEALAND FACILITIES
On 7 September 2012 the Company entered into a banking facility arrangement with Bank of New Zealand
(BNZ). The arrangement provided for a $20 million term loan facility and $5 million multi-option overdraft/cash
advance/letter of credit working capital facility. The facility also provides the option of uncommitted interest
rate swap and uncommitted forward foreign exchange facilities. An event of review occurs under the facilities if
entities owned or controlled by Mr William Foley no longer own at least 50.10% of the Group.
The terms of the BNZ facilities are as follows:
• The $20 million term loan facility is available to the Group. Interest is payable at 1.55% per annum above
the base rate. The base rate is the ‘BKBM’ rate as quoted on the Reuters Monitor Money Rates Services page.
• The $5 million multi-option facility is provided to be utilised for working capital, general corporate purposes
and letters of credit. The facility provides three facilities: market connect overdraft facility, committed cash
advance facility and letter of credit facility. Interest is payable at: the BNZ Market Connect Overdraft
Base Rate; the BNZ Committed Cash Advance Prime Rate plus 1.00% per annum margin respectively. A
commitment fee is payable on the facility which is charged quarterly in advance.
• The $5 million multi-option facility was converted to a Market Connect Overdraft Facility in January 2019
to fund ongoing working capital requirements. The interest rate payable on the facility is the BNZ Market
Connect Overdraft Prime Rate (with 0% margin).
The facilities are due to expire on 31 August 2020. All outstanding debt under any of the facilities was repayable
on the maturity date.
On 21 January 2019 the facility agreement for the $20 million term loan facility (loan #03) was amended to
include a non-utilisation fee of 0.4% pa. This loan facility is as an interest only facility until maturity on 31 August
2020. The full facility limit of $20 million is available for redraw throughout the term.
On 20 December 2018 the Company entered into a banking facility agreement with Bank of New Zealand
(BNZ) for a new $30 million term loan (loan # 05). The loan was drawn down in full on 3 January 2019. The
terms of the agreement are as follows: Principal repayments of $500,000 are payable quarterly and the facility
limit reduces by this amount each quarter. Interest is payable at 1.75% per annum above the base rate. The base
rate is the three month ‘BKBM’ rate as quoted on the Reuters Monitor Money Rates Services page.
SECURITY
The Bank has registered a first ranking general security agreement over all the present and after acquired
property of the Company and of its wholly owned subsidiaries, a specific security agreement over any separately
identifiable intellectual property of the Company or its wholly owned subsidiaries and a first ranking mortgage
over all of the land and improvements owned by the Company.
BANK COVENANTS
The Company complied with all of the financial covenants imposed by the Bank of NZ during the year.
MT DIFFICULTY ACQUISITION DEFERRED CONSIDERATION PAYMENT
In accordance with the Sale and Purchase Agreement the Deferred Consideration Payment of $5,200,000 is
due for payment on 3 July 2020. The fair value of this payment at balance date is $5,101,000 (refer Note 30).
49
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
Group Group
2019 2018
$’000 $’000
14. CONVERTIBLE NOTES
Foley Family Wines Holdings, New Zealand Limited 10,900 10,900Foley Family Wines Holdings, New Zealand Limited 10,900 10,900
Disclosed as:
Current convertible notes 10,900 10,900Current convertible notes 10,900 10,900
As part of the merger transaction with The New Zealand Wine Company Limited (renamed Foley Family Wines
Limited and later Foley Wines Limited (“FWL”)) on 4 September 2012, the Company issued an 18 month
convertible note to Foley Family Wines Holdings, New Zealand Limited (“Foley Holdings”) for the principal
amount of $10,900,000 thereby assuming Foley Family Wines NZ Limited’s current loan liability to Foley Family
Wines Holdings, New Zealand Limited of the same amount under a promissory note.
The principal terms of the Convertible Note are:
• the term of the Convertible Note is a minimum term of 18 months. After that period or earlier if FWL is in
breach of its obligations under the Convertible Note, the Convertible Note converts at the option of Foley
Holdings or alternatively Foley Holdings may demand repayment in lieu of conversion;
• the issue price on the conversion of any shares under the Convertible Note is $1.386 per share which is
the same price at which the shares have been issued to Foley Holdings pursuant to the Merger of The New
Zealand Wine Company Limited and Foley Family Wines New Zealand Limited. On conversion of the
Convertible Note issued by FWL, 7,863,025 shares in FWL could be issued to Foley Holdings at a price of
$1.386 per share by way of off-set against the amount owing to Foley Holdings under the Convertible Note.
Assuming no change in the shares on issue in FWL between the date of the issue of the Convertible Note
and its conversion to new shares, this would when aggregated with the shares issued under the Merger
increase the holdings of Foley Holdings in FWL to 83%.
• the Convertible Note does not give Foley Holdings any right to vote. Foley Holdings will acquire voting rights
with the ordinary shares it receives on any exercise of the right to convert under the Convertible Note;
• interest is payable, quarterly in arrears (not compounding), on the Convertible Note pending conversion
at the rate of 6.5% pa. The interest rate has been agreed between FWL and Foley Holdings as being
representative of market rates for an unsecured loan of its type; and
• all shares issued pursuant to the exercise of the Convertible Note will rank equally in all respects with all
other FWL shares on issue.
The Convertible Note can be converted at the option of Foley Holdings after 18 months from the date of issue,
that is, from 4 March 2014, and there are no performance hurdles required to be met before conversion can
occur. The Convertible Note has been classified as current. At balance date, and up to the date of these financial
statements, no notification had been received to convert the note.
50
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
Group Group
2019 2018
$’000 $’000
15. OTHER FINANCIAL ASSETS/(LIABILITIES)
At fair value:
Foreign currency forward contracts 89 –Foreign currency forward contracts 89 –
Foreign currency option contracts 4 –Foreign currency option contracts 4 –
Other financial assets – held for trading – Current 93 –Other financial assets – held for trading – Current 93 –
Other financial assets – held for trading – Non Current – –Other financial assets – held for trading – Non Current – –
Other financial assets – held for trading – Total 93 –Other financial assets – held for trading – Total 93 –
Foreign currency forward contracts – (80)Foreign currency forward contracts – (80)
Interest rate swap contracts (3) (4)Interest rate swap contracts (3) (4)
Other financial liabilities – held for trading – Current (3) (84)Other financial liabilities – held for trading – Current (3) (84)
Interest rate swap contracts – (14)Interest rate swap contracts – (14)
Other financial liabilities – held for trading – Non Current – (14)Other financial liabilities – held for trading – Non Current – (14)
Other financial liabilities – held for trading – Total (3) (98)Other financial liabilities – held for trading – Total (3) (98)
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. Refer note 24 for details of financial instruments
used by the Group.
Group Group
2019 2018
$’000 $’000
16. TRADE AND OTHER RECEIVABLES
Trade receivables 8,756 8,284Trade receivables 8,756 8,284
Impairment of trade receivables – –Impairment of trade receivables – –
Other receivables 523 759Other receivables 523 759
Other receivables – insurance proceeds receivable – –Other receivables – insurance proceeds receivable – –
9, 279 9, 0 4 3 9, 279 9, 0 4 3
The carrying amount disclosed above is a reasonable approximation of fair value. Trade receivables are non-
interest bearing and are generally due the last working day of the month following invoice for domestic customers
and 30-120 day terms for export customers.
Not Past Due 8,756 8,284Not Past Due 8,756 8,284
Past Due 1–30 days – –Past Due 1–30 days – –
Past Due 31–60 days – –Past Due 31–60 days – –
Past Due 61–90 days – –Past Due 61–90 days – –
Past Due > 91 days – –Past Due > 91 days – –
8,756 8,284 8,756 8,284
51
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
16. TRADE AND OTHER RECEIVABLES (CONTINUED)
Trade receivables that are less than 90 days past due are generally not considered impaired. As of 30 June 2019
trade receivables there were no debts (2018: $Nil) that were past due but not impaired.
The Group recognises a loss allowance for lifetime expected credit losses (ECL) for trade receivables. The
expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s
historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions
and an assessment of both the current as well as the forecast direction of conditions at the reporting date. Based
on the assessment undertaken at balance date the Group has not recorded an Impairment of Trade Receivables
in the current year (2018: $Nil). No bad debts were written off during the year (2018: $Nil) and nothing was
recovered from a bad debt written off in the previous financial years (2018: $Nil). The gross debt relating to the
trade receivables which were considered to be impaired at balance date was $Nil (2018: $Nil).
Group Group
2019 2018
$’000 $’000
17. INVENTORIES
Raw materials 746 572Raw materials 746 572
Consumable stores 104 105Consumable stores 104 105
Work in progress 30,403 21,484Work in progress 30,403 21,484
Finished goods 12,827 8,091Finished goods 12,827 8,091
Impairment of inventory – (45)Impairment of inventory – (45)
Total inventories at lower of cost and net realisable value 44,080 30,207Total inventories at lower of cost and net realisable value 44,080 30,207
Impairment of Inventory:
Opening balance 45 8Opening balance 45 8
Impairment charge reversal during the year (45) –Impairment charge reversal during the year (45) –
Impairment charge during the year – 37Impairment charge during the year – 37
Closing balance – 45Closing balance – 45
18. BIOLOGICAL WORK IN PROGRESS
Growing costs related to next harvest 1,302 873Growing costs related to next harvest 1,302 873
The growth on the vines in the period from harvest to 30 June 2019 cannot be reliably measured due to the lack
of market information and the variables in completing the biological transformation process between balance
date and the time of harvest. As allowed under NZ IAS 41 the cost of agricultural activity in the period to 30
June has been recognised as work in progress for the next harvest. This assumes the cost of the agricultural
activity approximates fair value in determining the value of the biological transformation that has occurred in
that period. The value of work in progress at balance date was $1,302,000 (2018: $873,000).
52
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
19. PROPERTY, PLANT AND EQUIPMENT
Group
Freehold
Land at
Fair Value
$’000
Freehold
Buildings
at Fair
Value
$’000
Land
Improve-
ments at
Fair Value
$’000
Plant,
Equip. &
Vehicles
at Cost
$’000
Total
$’000
Year ended 30 June 2019
At 1 July 2018, net of accumulated
depreciation and impairment 19,473 13,647 26,435 15,079 74,634depreciation and impairment 19,473 13,647 26,435 15,079 74,634depreciation and impairment 19,473 13,647 26,435 15,079 74,634
Additions excluding Mt Difficulty acquisition 19 141 467 2,577 3,204Additions excluding Mt Difficulty acquisition 19 141 467 2,577 3,204Additions excluding Mt Difficulty acquisition 19 141 467 2,577 3,204
Additions – Mt Difficulty acquisition 7,700 4,500 5,856 5,852 23,908Additions – Mt Difficulty acquisition 7,700 4,500 5,856 5,852 23,908Additions – Mt Difficulty acquisition 7,700 4,500 5,856 5,852 23,908
Disposals – (4) (70) (148) (222)Disposals – (4) (70) (148) (222)Disposals – (4) (70) (148) (222)
Revaluations 1,512 326 1,236 – 3,074Revaluations 1,512 326 1,236 – 3,074Revaluations 1,512 326 1,236 – 3,074
Depreciation charge for the year – (323) (383) (2,647) (3,353)Depreciation charge for the year – (323) (383) (2,647) (3,353)Depreciation charge for the year – (323) (383) (2,647) (3,353)
At 30 June 2019, net of accumulated
depreciation and impairment 28,704 18,287 33,541 20,713 101,245depreciation and impairment 28,704 18,287 33,541 20,713 101,245depreciation and impairment 28,704 18,287 33,541 20,713 101,245
At 30 June 2019 At 30 June 2019 At 30 June 2019
Cost or fair value 28,704 18,287 33,541 36,224 116,756Cost or fair value 28,704 18,287 33,541 36,224 116,756Cost or fair value 28,704 18,287 33,541 36,224 116,756
Accumulated depreciation
(accum impairment nil) – – – (15,511) (15,511)(accum impairment nil) – – – (15,511) (15,511)(accum impairment nil) – – – (15,511) (15,511)
Net carrying amount 28,704 18,287 33,541 20,713 101,245Net carrying amount 28,704 18,287 33,541 20,713 101,245Net carrying amount 28,704 18,287 33,541 20,713 101,245
Year ended 30 June 2018
At 1 July 2017, net of accumulated
depreciation and impairment 17,883 13,286 25,189 15,293 71,651depreciation and impairment 17,883 13,286 25,189 15,293 71,651depreciation and impairment 17,883 13,286 25,189 15,293 71,651
Additions – 141 290 1,859 2,290Additions – 141 290 1,859 2,290Additions – 141 290 1,859 2,290
Disposals – – (1) (30) (31)Disposals – – (1) (30) (31)Disposals – – (1) (30) (31)
Revaluations 1,590 490 1,298 – 3,378Revaluations 1,590 490 1,298 – 3,378Revaluations 1,590 490 1,298 – 3,378
Depreciation charge for the year – (270) (341) (2,043) (2,654)Depreciation charge for the year – (270) (341) (2,043) (2,654)Depreciation charge for the year – (270) (341) (2,043) (2,654)
At 30 June 2018, net of accumulated
depreciation and impairment 19,473 13,647 26,435 15,079 74,634depreciation and impairment 19,473 13,647 26,435 15,079 74,634depreciation and impairment 19,473 13,647 26,435 15,079 74,634
At 30 June 2018: At 30 June 2018: At 30 June 2018:
Cost or fair value 19,473 13,647 26,435 28,300 87,855Cost or fair value 19,473 13,647 26,435 28,300 87,855Cost or fair value 19,473 13,647 26,435 28,300 87,855
Accumulated depreciation
(accum impairment nil) – – – (13,221) (13,221)(accum impairment nil) – – – (13,221) (13,221)(accum impairment nil) – – – (13,221) (13,221)
Net carrying amount 19,473 13,647 26,435 15,079 74,634Net carrying amount 19,473 13,647 26,435 15,079 74,634Net carrying amount 19,473 13,647 26,435 15,079 74,634
COMMITMENTS
At balance date the Group had capital commitments of $500,000 for an Amenities Building at the Grove Mill/
Waihopai Valley site (2018: $39,000 replacement wine tank Vavasour).
53
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
19. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
REVALUATION OF LAND, BUILDINGS AND LAND IMPROVEMENTS
Land, buildings and land improvements (which includes biological bearer assets) shown at valuation were valued
at fair value under the principle of highest and best use by Alexander Hayward Limited, registered independent
valuers, for the Marlborough properties, Telfer Young (Hawkes Bay) Limited, registered independent valuers,
for the Martinborough properties, and Logan Stone Ltd, registered independent valuers, for the Central Otago
properties, on 30 June 2019 (2018: 30 June 2018). Fair value is the amount for which the assets could have
been exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length
transaction as at the valuation date. Fair value is determined by direct reference to recent market transactions
on arm’s length terms for land, buildings and vineyards comparable in size, location and varietal mix to those
held by the Group. Based on these valuation techniques these fair values are included in Level 2 in the fair value
hierarchy (refer note 24(j)).
The carrying amount of land, buildings and land improvements had they been recognised under the historic
cost model would have been $16,016,000, $16,710,000 and $18,351,000 respectively (2018: $8,297,000,
$12,099,000, $16,656,000).
Land Improvements comprise of vineyards including biological bearer plants (grape vines). The valuation of
bearer plants at 30 June 2019 was $24,631,000 (2018: $19,311,000).
20. BIOLOGICAL ASSET PRODUCE
Biological assets consist of grape vines (bearer plants). Bearer plants are classified as Property, Plant and
Equipment and are included as part of land improvements (vineyard) in note 19. The Company grows grapes
to use in the production of wine, as part of normal operations. Vineyards are located in Marlborough,
Martinborough and Central Otago, New Zealand. Grapes are harvested between March and May each year.
At 30 June 2019 the Group held approximately 250 hectares of land owned or leased by the Company in
Marlborough (2018: 255), 190 hectares of land owned or leased by the Group in Martinborough (2018: 190)
and 180 hectares of land owned or leased by the Group in Central Otago (2018: Nil). 200 hectares are
currently in commercial production in Marlborough (2018: 206), 137 hectares in Martinborough (2018: 146)
and 161 hectares in Central Otago (2018: Nil).
During the year ended 30 June 2019 the Company harvested 4,301 tonnes of grapes (2018: 3,196). The
grapes harvested are recognised at fair value at the point of harvest after taking into consideration various
market factors, as well as reviewing the district average pricing report for grapes of similar quality and variety.
Any adjustment to bring the cost of sale to fair value is recognised in inventory and the revaluation gains and
losses section of the Income Statement. The fair value adjustment for the 2019 harvest was $415,000 (2018:
$1,084,000). Refer to note 18 for recognition of the biological transformation between the time of harvest and
balance date.
The Group is exposed to financial risks in respect of agricultural activity. The agricultural activity of the Company
consists of the management of vineyards to produce grapes for use in the production of wine. The primary
financial risk associated with this activity occurs due to the length of time between expending cash on the
purchase or planting and maintenance of grape vines and on harvesting grapes, and ultimately receiving cash
from the sale of wine to third parties. The Company’s strategy to manage this financial risk is to actively review
and manage its working capital requirements. The quality and quantity of the grape harvest is dependent on
seasonal climatic factors such as rainfall, sunshine and temperature, including frosts. The Group manages
this risk by diversifying its vineyards across the Marlborough, Martinborough and Central Otago regions and
through the use of windmills and helicopters for normal frost protection purposes.
54
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
Group Group
2019 2018
$’000 $’000
21. INTANGIBLE ASSETS
TRADEMARKS
At start of period, net of impairment 151 151At start of period, net of impairment 151 151
Additions during the year – –Additions during the year – –
At 30 June, net of impairment 151 151At 30 June, net of impairment 151 151
Cost (gross carrying value) 151 151Cost (gross carrying value) 151 151
Accumulated impairment losses – –Accumulated impairment losses – –
Net carrying amount 151 151Net carrying amount 151 151
Trademarks pertain to the registration of trademarks in local and overseas jurisdictions for the Company’s
brands. Trademarks are carried at cost, less any accumulated impairment losses. Trademarks have been
assessed as having an indefinite life since the Company has the rights to the brand while it is registered and has
no intention of relinquishing those rights. The recoverable amount is estimated annually and an impairment loss
recognised to the extent that the recoverable amount is lower than the carrying amount.
GOODWILL
At start of period, net of impairment 4,727 4,727At start of period, net of impairment 4,727 4,727
Additions during the year 19,131 –Additions during the year 19,131 –
At 30 June, net of impairment 23,858 4,727At 30 June, net of impairment 23,858 4,727
Cost (gross carrying value) 23,858 4,727Cost (gross carrying value) 23,858 4,727
Accumulated impairment losses – –Accumulated impairment losses – –
Net carrying amount 23,858 4,727Net carrying amount 23,858 4,727
After initial recognition, goodwill acquired is measured at cost less any accumulated impairment losses. Goodwill
is not amortised but is subject to impairment testing on an annual basis or whenever there is an indication of
impairment. Goodwill relates to the acquisition of the Vavasour Wines’ business assets on 1 September 2003,
Goldwater Wines’ business assets on 1 April 2006, Clifford Bay’s business assets on 1 March 2007, the reverse
acquisition of The New Zealand Wine Company Ltd (Grove Mill) on 4 September 2012, the acquisition of
Martinborough Vineyards on 30 June 2014 and the acquisition of Mt Difficulty Wines’ business and assets on 3
January 2019. The value of Goodwill at balance date includes a deferred tax liability on acquired indefinite life
intangibles (brands) of $2,212,000 (2018: $2,212,000) and acquired non-depreciable buildings of $1,196,000
(2018: Nil).
55
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
Group Group
2019 2018
$’000 $’000
21. INTANGIBLE ASSETS (CONTINUED)
BRANDS AND INTELLECTUAL PROPERTY
At start of period, net of impairment 8,175 8,175At start of period, net of impairment 8,175 8,175
Additions – current year additions – –Additions – current year additions – –
Impairment – –Impairment – –
At 30 June, net of impairment 8,175 8,175At 30 June, net of impairment 8,175 8,175
Cost (gross carrying value) 8,175 8,175Cost (gross carrying value) 8,175 8,175
Accumulated impairment losses – –Accumulated impairment losses – –
Net carrying amount 8,175 8,175Net carrying amount 8,175 8,175
Brands are regarded as having indefinite useful lives as there are no legal restrictions on the use of the brands
or technological barriers to their ongoing usefulness. Brands are not amortised but are subject to impairment
testing on an annual basis or whenever there is an indication of impairment. The Brands included are Vavasour,
Goldwater, Dashwood, Clifford Bay, Martinborough Vineyard and Lighthouse Gin.
TOTAL INTANGIBLE ASSETS 32,18 4 13,053 32,18 4 13,053
(A) IMPAIRMENT TESTS FOR GOODWILL AND INTANGIBLES WITH INDEFINITE
USEFUL LIVES
The Group has determined that in the current year the value of the goodwill and intangible assets was supported
by value-in use calculations performed for the cash generating unit, being the whole business. The recoverable
amount of the cash generating unit was determined based on pre-tax cash flow projections based on the current
results of the Group and the following key assumptions: Earnings Before Interest and Tax estimated growth rate:
3% pa; Terminal value of 3%; a period of projection of five years and a pre-tax discount rate 6.3% pa (2018:
6.4% pa). The discount rate used is consistent with companies operating in the same industry. No reasonable
possible change in assumptions would lead to an impairment. The recoverable amount determined did not
indicate any impairment and no adjustment was deemed to be required.
56
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
Group Group
2019 2018
$’000 $’000
22. CASH FLOW INFORMATION
(A) RECONCILIATION OF PROFIT FOR THE YEAR
TO NET CASH FLOW FROM OPERATING ACTIVITIES
PROFIT AFTER INCOME TAX FOR THE YEAR 3, 518 1, 8 053, 518 1, 8 05
NON-CASH ITEMS:
Depreciation 3,353 2,6543,353 2,654
Increase/(decrease) in deferred tax (254) (155)(254) (155)
Impairment loss/(gain) recognised on trade and other receivables - -- -
Impairment loss/(gain) recognised on inventories (45) 37(45) 37
Adjustments resulting from revaluation of grapes 98 (272)98 (272)
Loss/(gain) on disposal of property, plant and equipment 156 14156 14
Loss/(gain) on asset revaluations 93 15393 153
3,401 2,4313,401 2,431
MOVEMENTS IN WORKING CAPITAL BALANCES:
Trade and other receivables 145 521145 521
Inventories (2,825) 2,615(2,825) 2,615
Biological work in progress (429) (167)(429) (167)
Prepaid expenses (448) (165)(448) (165)
Trade and other payables 2,085 5822,085 582
Other financial assets/liabilities (188) 229(188) 229
Current tax assets/liabilities 1,154 (676)1,154 (676)
(506) 2,939(506) 2,939
NET CASH FLOW FROM OPERATING ACTIVITIES 6 , 413 7,1756 , 413 7,175
(B) NET DEBT RECONCILIATION
Loans and borrowings – repayable within one year 2,261 1,0 0 22,261 1,0 0 2
Loans and borrowings – repayable after one year 37,601 8,00037,601 8,000
Net debt 3 9, 8 62 9, 0 0 23 9, 8 62 9, 0 0 2
Loans advanced during the year 30,000 -30,000 -
Loans repaid during the year (4,191) (999)(4,191) (999)
Net movement in net debt – all cash flows 25,809 (999)25,809 (999)
57
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
Group Group
2019 2018
$’000 $’000
23. OPERATING LEASE COMMITMENTS
Not later than 1 year 1, 397 7711, 397 771
Later than 1 year and not later than 5 years 4,677 2,7854,677 2,785
Later than 5 years 9, 627 6, 0 8 49, 627 6, 0 8 4
15, 701 9, 6 4 015, 701 9, 6 4 0
Operating leases relate substantially to vineyard land where the Group is the lessee with lease terms between
19 years and 364 days and 30 years. The vineyard land lease agreements have normal provisions for periodic
rent reviews to market rates.
24. FINANCIAL INSTRUMENTS
(A) CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital
structure of the Group consists of debt, which includes loans and borrowings disclosed in note 13, cash and cash
equivalents and equity, comprising issued capital, reserves and retained earnings as disclosed in notes 8, 10
and 11 respectively. The Group’s Board of Directors reviews the capital structure on a semi-annual basis. As part
of the review the Board considers the cost of capital and the risks associated with each class of capital as well as
the requirement by the Group’s bank, Bank of New Zealand, to maintain adjusted tangible equity percentage
at a level of at least 50% of adjusted total tangible assets. The Board will balance the Group’s overall capital
structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption
of existing debt. The Group’s overall strategy remains unchanged from 2018.
(B) SIGNIFICANT ACCOUNTING POLICIES
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which income and expenses are recognised, in respect of each class of
financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements.
(C) FINANCIAL RISK MANAGEMENT OBJECTIVES
The Group is exposed to financial risks relating to the operations of the Group. These risks include agricultural
risk, market risk (including currency risk and interest rate risk), credit risk and liquidity risk.
The agricultural activity of the Group consists of the management of vineyards to produce grapes for use in
the production of wine. The primary financial risk associated with this activity occurs due to the length of time
between expending cash on the purchase or planting and maintenance of grape vines and on harvesting
grapes, and ultimately receiving cash from the sale of wine to third parties. The Group’s strategy to manage
this financial risk is to actively review and manage its working capital requirements. In addition, the Group
maintains credit facilities at a level sufficient to fund the Group’s working capital during the period between cash
expenditure and cash inflow. At balance date, the Group had unused credit facilities in the form of undrawn
bank overdrafts and loan facilities of $20 million (2018: $16 million).
58
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
24. FINANCIAL INSTRUMENTS (CONTINUED)
(C) FINANCIAL RISK MANAGEMENT OBJECTIVES (CONTINUED)
The Group seeks to minimise the effects of these risks, by obtaining independent advice and using derivative
financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s
policies approved by the Board of Directors, which provide written principles on the use of financial derivatives.
Compliance with policies and exposure limits is reviewed by the Board of Directors on a periodic basis. The Group
does not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes.
(D) MARKET RISK
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates
(refer note 24(e)) and interest rates (refer note 24(f)). The Group enters into a variety of derivative financial
instruments to manage its exposure to interest rate and foreign currency risk, including:
(i) forward foreign exchange contracts and foreign currency option contracts to hedge the exchange rate risk
arising on the export of wine principally to the United States, United Kingdom, Europe and Australia; and
(ii) interest rate swaps to mitigate the risk of rising interest rates.
There has been no change to the Group’s exposure to market risks or the manner in which it manages and
measures the risk.
(E) FOREIGN CURRENCY RISK MANAGEMENT
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange
rate fluctuations arise. Exchange rate exposures are managed within approved parameters utilising forward
foreign exchange contracts and foreign exchange option contracts.
Foreign currency denominated assets and liabilities at balance date are:
Group Group
2019 2018
$’000 $’000
Cash and cash equivalents 1,655 441,655 44
Trade and other receivables 6,027 6,4176,027 6,417
Trade and other payables (373) (418)(373) (418)
Net exposure at balance date 7, 3 0 9 6 , 0 4 37, 3 0 9 6 , 0 4 3
SENSITIVITY ANALYSIS
The Group is mainly exposed to US dollars (USD), Great British pounds (GBP), Australian dollars (AUD) and
Euro (EUR). If there was a 10% upward movement in the New Zealand dollar against the relevant currencies
the profit before tax and equity would decrease by $259,000, $114,000, $256,000 and $35,000 respectively
for the Group (2018: $262,000, $45,000, $207,000 and $35,000). If there was a 10% downward movement
in the New Zealand dollar against the relevant currencies the profit before tax and equity would increase
by $317,000, $140,000, $313,000 and $42,000 respectively for the Group (2018: $320,000, $55,000,
$253,000 and $43,000). The 10% sensitivity rate used represents management’s assessment of the reasonably
possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their translation at the year end for the listed percentage change in
foreign currency rates.
59
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
24. FINANCIAL INSTRUMENTS (CONTINUED)
(E) FOREIGN CURRENCY RISK MANAGEMENT (CONTINUED)
FORWARD FOREIGN EXCHANGE CONTRACTS AND OPTION CONTRACTS
It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency
payments and receipts up to 100% of the exposure generated. The Group also enters into forward foreign
exchange contracts and option contracts including collars to manage the risk associated with anticipated sales
and purchase transactions out to 60 months within 25-100% of the exposure generated, subject to certain
criteria being met. Forward foreign exchange contracts and option contracts are measured at fair value through
profit or loss. The fair value of forward foreign exchange contracts and option contracts is based on market
values of equivalent instruments at the reporting date.
The aggregate notional principal of forward foreign exchange contracts outstanding for the Group as at
balance date was $6,291,000 (2018: $5,286,000). The aggregate notional principal of foreign exchange
option contracts outstanding at balance date was a net of $214,000 (2018: $Nil).
(F) INTEREST RATE RISK MANAGEMENT
The Company and the Group is exposed to interest rate risk as it borrows funds at both fixed and floating interest
rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate
borrowings, by use of interest rate swap contracts. Hedging activities are evaluated regularly with the assistance
of independent advice to align with interest rate views and defined risk appetite; ensuring optimal hedging
strategies are applied or protecting interest expense through different interest rate cycles. The Company and
the Group’s exposure to interest rates on financial assets and financial liabilities are detailed in the liquidity risk
management section of this note or in note 13.
SENSITIVITY ANALYSIS
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative
and non-derivative instruments at the reporting date and the stipulated change taking place at the beginning
of the financial year and held constant throughout the reporting period. A 100 basis point (1%) increase or
decrease is used and represents management’s assessment of the reasonably possible change in interest rates.
At balance date, if interest rates had been 1% lower or higher and all other variables were held constant, the
Company and Group’s net profit and equity would increase/decrease by approximately $214,000 (2018: $74,000)
respectively. This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings.
The Company and Group’s sensitivity to interest rates has increased during the current year mainly due to the
increase in floating interest rate exposure.
INTEREST RATE SWAP CONTRACTS
Under interest rate swap contracts, the Group agrees to exchange the difference between the fixed and floating
rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to
mitigate the risk of changing interest rates on debt held. The fair value of interest rate swaps are based on
market values of equivalent instruments at the reporting date as disclosed below.
The aggregate notional principal amount of the outstanding interest rate swap contracts at balance date was
$233,000 (2018: $1,029,000). The interest rates applicable to the interest rate swap contracts during the year
were 5.30% pa – 6.01% pa (2018: 5.30% pa – 6.01% pa).
60
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
24. FINANCIAL INSTRUMENTS (CONTINUED)
(F) INTEREST RATE RISK MANAGEMENT (CONTINUED)
INTEREST RATE SWAP CONTRACTS (CONTINUED)
Interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are used
to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. These are
measured at fair value through profit or loss. The interest rate swaps and the interest payments on the loan
occur simultaneously on a monthly basis. The floating rate on the interest rate swaps is the 1 month BKBM rate.
The Group will settle the difference between the fixed and floating interest rate on a net basis.
(G) CREDIT RISK MANAGEMENT
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group has adopted a policy of only dealing with credit worthy counterparties as a
means of mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of
its counterparties are continuously monitored and the aggregate value of transactions concluded is spread
amongst approved counterparties. Credit exposure is controlled by counterparty limits that are approved by the
Board of Directors and are monitored on a regular basis. The Group does not require collateral in respect of
trade and other receivables.
A default on a financial asset is when the counterparty fails to make contractual payments within 60 days
of when they fall due. Probability of default constitutes a key input in measuring expected credit loss (ECL).
Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which
includes historical data, assumptions and expectations of future conditions.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical
areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where
appropriate, trade credit insurance is purchased.
The Group does not have any significant concentrations of net credit risk. The Company does not expect the
non-performance of any obligations at balance date. The credit risk on liquid funds and derivative financial
instruments is limited because the counterparties are banks with high credit-ratings assigned by international
agencies.
The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses,
represent the Group’s maximum exposure to credit risk.
(H) LIQUIDITY RISK MANAGEMENT
Liquidity risk represents the Group’s ability to meet its contractual obligations. Ultimate responsibility for liquidity
risk management rests with the Board of Directors, who has built an appropriate liquidity risk management
framework for the management of the Group’s short, medium and long-term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and
reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities. At balance date, the Group had unused credit facilities in the form of
undrawn bank overdrafts and loan facilities of $20 million (2018: $16 million) to further reduce liquidity risk.
61
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
24. FINANCIAL INSTRUMENTS (CONTINUED)
(H) LIQUIDITY RISK MANAGEMENT (CONTINUED)
LIQUIDITY TABLES
The following tables detail the Company and Group’s remaining contractual maturity for its non-derivative
financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group can be required to pay. Refer to note 13 for the weighted average
effective interest rate.
Less than
1 year
$’000
1-2
years
$’000
2-5
years
$’000
Over
5 years
$’000
Group 2019
Trade and other payables 7,235 – – –Trade and other payables 7,235 – – –Trade and other payables 7,235 – – –
Loans and borrowings 3,157 14,154 26,142 –Loans and borrowings 3,157 14,154 26,142 –Loans and borrowings 3,157 14,154 26,142 –
Convertible notes 11,609 – – –Convertible notes 11,609 – – –Convertible notes 11,609 – – –
22,001 14,154 26,142 – 22,001 14,154 26,142 – 22,001 14,154 26,142 –
Group 2018
Trade and other payables 4,903 – – –Trade and other payables 4,903 – – –Trade and other payables 4,903 – – –
Loans and borrowings 1,290 1,259 7,040 –Loans and borrowings 1,290 1,259 7,040 –Loans and borrowings 1,290 1,259 7,040 –
Convertible notes 11,609 – – –Convertible notes 11,609 – – –Convertible notes 11,609 – – –
17,802 1,259 7,040 – 17,802 1,259 7,040 – 17,802 1,259 7,040 –
62
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
24. FINANCIAL INSTRUMENTS (CONTINUED)
(H) LIQUIDITY RISK MANAGEMENT (CONTINUED)
LIQUIDITY TABLES (CONTINUED)
The following table details the Group’s liquidity analysis for its derivative financial instruments. The table has
been drawn up based on the undiscounted net cash inflows/(outflows) on the derivative instrument that settle on
a net basis and the undiscounted gross inflows and (outflows) on those derivatives that require gross settlement.
When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to
the projected interest rates as illustrated by the yield curves existing at the reporting date.
Less than
6 mths
$’000
6 -12
mths
$’000
1-2
years
$’000
Over
2 years
$’000
Group 2019
Interest rate swaps – net settled cash flows (2) – – –Interest rate swaps – net settled cash flows (2) – – –Interest rate swaps – net settled cash flows (2) – – –
Forward exchange contracts – cash inflows 4,598 2,046 – –Forward exchange contracts – cash inflows 4,598 2,046 – –Forward exchange contracts – cash inflows 4,598 2,046 – –
Forward exchange contracts – cash outflows (4,722) (2,015) – –Forward exchange contracts – cash outflows (4,722) (2,015) – –Forward exchange contracts – cash outflows (4,722) (2,015) – –
Foreign currency option contracts – cash inflows 214 – – –Foreign currency option contracts – cash inflows 214 – – –Foreign currency option contracts – cash inflows 214 – – –
Foreign currency option contracts – cash outflows (209) – – –Foreign currency option contracts – cash outflows (209) – – –Foreign currency option contracts – cash outflows (209) – – –
(121) 31 – – (121) 31 – – (121) 31 – –
Group 2018
Interest rate swaps – net settled cash flows (8) (13) (2) –Interest rate swaps – net settled cash flows (8) (13) (2) –Interest rate swaps – net settled cash flows (8) (13) (2) –
Forward exchange contracts – cash inflows 4,416 870 – –Forward exchange contracts – cash inflows 4,416 870 – –Forward exchange contracts – cash inflows 4,416 870 – –
Forward exchange contracts – cash outflows (4,482) (885) – –Forward exchange contracts – cash outflows (4,482) (885) – –Forward exchange contracts – cash outflows (4,482) (885) – –
(74) (28) (2) – (74) (28) (2) – (74) (28) (2) –
(I) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of financial assets and liabilities are determined as follows:
• the fair value of financial assets and liabilities with standard terms and conditions and traded on active
markets are determined with reference to the quoted market prices; and
• the fair value of derivative instruments are calculated based on discounted cash flows using market inputs.
The Directors consider that the carrying value of all financial instrument assets and liabilities in the financial
statements approximate their fair value.
63
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
24. FINANCIAL INSTRUMENTS (CONTINUED)
(J) FAIR VALUE MEASUREMENTS RECOGNISED IN THE STATEMENT OF FINANCIAL
POSITION
The following table provides an analysis of financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the
assets or liability that are not based on observable market data (unobservable inputs).
Group Group
2019 2018
$’000 $’000
Financial assets held for trading
Other financial assets (derivative financial assets) – Current 93 –93 –
Other financial assets (derivative financial assets) – Non–Current – –– –
Total financial assets 93 –93 –
Financial liabilities held for trading
Other financial liabilities (derivative financial liabilities) – Current 3 843 84
Other financial liabilities (derivative financial liabilities) – Non–Current – 14– 14
Total financial liabilities 3 983 98
All financial assets and liabilities of the Group that are measured at fair value subsequent to initial recognition are
included in Level 2 as the fair value of these instruments are not quoted on an active market and is determined
by using valuation techniques. These valuation techniques rely on observable market data. There were no
transfers between Level 1 and 2 during the year.
(K) CHANGE IN FAIR VALUE OF FINANCIAL ASSETS/LIABILITIES
Foreign currency forward contracts 169 154169 154
Foreign currency option contracts 4 64 6
Interest rate swaps 14 3614 36
187 196187 196
25. DIRECTORS AND KEY MANAGEMENT PERSONNEL COMPENSATION
Key management personnel are the Directors of the Company and the executives with the greatest authority for
the strategic direction of the Company. The compensation of the Directors and the key management personnel
is set out below:
Short-term employee benefits 1,651 1,520Short-term employee benefits 1,651 1,520
64
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
26. RELATED PARTY DISCLOSURES
(A) INVESTMENT IN SUBSIDIARIES
The Parent entity in the consolidated entity is Foley Wines Limited. The Parent entity of Foley Wines Limited is
Foley Family Wines Holdings, New Zealand Limited who own 52.80% (2018: 66.46%) of the shares in Foley
Wines Limited. The ultimate parent is Foley Family Wines Holdings, Inc., who own 80.47% of Foley Family Wines
Holdings, New Zealand Limited and as such owns 42.49% (2018: 53.48%) of the Company.
The consolidated financial statements include the financial statements of Foley Wines Limited (FWL) and the
following subsidiaries:
Name of EntityPrincipal ActivityParent Company
Country of
Incorpo-
ration
Ownership
Interest %
2019
Ownership
Interest %
2018
Vavasour Wines LtdNon-operatingFoley Wines LtdNZ100%100%
Goldwater Wines LtdNon-operatingFoley Wines LtdNZ100%100%
Clifford Bay Wines LtdNon-operatingFoley Wines LtdNZ100%100%
Te Kairanga Wines LtdNon-operatingFoley Wines LtdNZ100%100%
Grove Mill Wine Company LtdNon-operatingFoley Wines LtdNZ100%100%
Sanctuary Wine Company LtdNon-operatingFoley Wines LtdNZ100%100%
The New Zealand Wine
Company LtdNon-operatingFoley Wines LtdNZ100%100%
Martinborough Vineyard Wines
LtdNon-operatingFoley Wines LtdNZ100%100%
The New Zealand Wine
Company (Europe) LtdNon-operatingFoley Wines Ltd
England and
Wales0%100%
Mt Difficulty Wines Ltd
(formerly Martinborough
Terraces Ltd)Non-operatingFoley Wines LtdNZ100%100%
Burnt Spur LtdNon-operatingFoley Wines LtdNZ100%100%
The New Zealand Wine Company (Europe) Ltd was dissolved on 12 February 2019.
Martinborough Terraces Ltd changed its company name to Mt Difficulty Wines Ltd on 3 January 2019.
(B) TRANSACTIONS WITH RELATED PARTIES – DIRECTORS AND KEY MANAGEMENT
PERSONNEL
Details of the compensation paid to Directors and key management personnel are set out in note 25.
Group Group
2019 2018
$’000 $’000
Certain Directors and key management personnel have interests in contracts
with the Group as follows. All transactions were at normal commercial rates.
AM Turnbull (Lighthouse Distillery Ltd – purchase of Spirits for resale) 579 362AM Turnbull (Lighthouse Distillery Ltd – purchase of Spirits for resale) 579 362
AM Turnbull (Lighthouse Distillery Ltd – charges from FWL for
labour, rent, electricity and administration) 78 41labour, rent, electricity and administration) 78 41
65
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
26. RELATED PARTY DISCLOSURES (CONTINUED)
(C) TRANSACTIONS WITH OTHER RELATED PARTIES
Material transactions with related parties during the period are set out below:
(i) Sales were made to Foley Family Wines, Inc., a 100% owned subsidiary of Foley Family Wines Holdings,
Inc., the ultimate parent of Foley Wines Limited. Sales for the year were $9,184,000 (2018: $5,227,000).
(ii) Marketing support services were provided by Foley Family Wines Inc., a 100% owned subsidiary of Foley
Family Wines Holdings, Inc., the ultimate parent of Foley Wines Limited. Marketing support charges for
the year were $108,000 (2018: $101,000).
(iii) Interest was paid/payable to Foley Family Wines Holdings, New Zealand Limited the parent of the Foley
Wines Limited under the convertible note (note 14). Interest paid/payable for the year was $709,000
(2018: $709,000).
(iv) Sales were made to EuroVintage Limited, a 50% associate of the parent company of Foley Wines Limited
(until 30 November 2018). Sales for the year were $1,769,000 (2018: $12,980,000). Management fees
and the funding of promotional activity such as bonus stock relating to these sales were paid during
the year of $55,000 (2018: $1,628,000). Sales from EuroVintage to the Group totalled $9,000 (2018:
$41,000).
(v) Sales were made to, and administration services provided to, Wharekauhau Country Estate Limited, a
luxury lodge 74.6% owned by Bill Foley, the majority shareholder of the ultimate parent. Sales for the year
totalled $30,000 (2018: $33,000). Administration Charges for the year totalled $2,000 (2018: $6,000).
Accommodation, meals and events provided by Wharekauhau to the Company during the year totalled
$22,000 (2018: $35,000).
(vi) Lighthouse Gin product was purchased for global distribution from Lighthouse Distillery Limited, a
company owned by Mark Turnbull, CEO and Director of Foley Wines Limited. Purchases during the period
totalled $579,000 (2018: $362,000). Administration services, rental, electricity and contract distilling
services were provided to Lighthouse Distillery Limited during the period of $78,000 (2018: $41,000).
Group Group
2019 2018
$’000 $’000
Amounts owing to related parties as at balance date:
Foley Family Wines Inc. – 27– 27
Foley Family Wines Holdings, New Zealand Limited – convertible note 10,900 10,90010,900 10,900
EuroVintage Limited * – 97– 97
Wharekauhau Country Estate Limited 1 11 1
Lighthouse Distillery Limited 27 3727 37
Amounts owing from related parties as at balance date:
Foley Family Wines, Inc. 2,010 1,7072,010 1,707
EuroVintage Limited * – 1,096– 1,096
Wharekauhau Country Estate Limited 5 65 6
Lighthouse Distillery Limited 20 3120 31
* EuroVintage Limited ceased to be a related party on 30 November 2018 when Foley Family Wines Holdings,
New Zealand Limited, parent of Foley Wines Limited, sold its shareholding in that company.
66
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
27. SEGMENT INFORMATION
The Group operates in the wine industry and is considered to operate in one segment. Financial information
available to management including the chief operating decision maker is principally based on the information
provided in these financial statements. There are therefore no additional disclosures included in these financial
statements.
Included in sales revenue are revenues of approximately $11,256,000 (2018: $2,315,000), $9,184,000 (2018:
$5,227,000), $4,844,000 (2018: $3,930,000) and $1,769,000 (2018: $12,980,000) which arose from sales to
the Group’s largest customers. No other single customers contributed 10% or more to the Group’s revenue in
either 2019 or 2018. The second largest customer is a related party – refer note 26.
The Group derived sales revenue from New Zealand customers of $17,612,000 and overseas customers of
$29,726,000 (2018: NZ $16,257,000; Overseas $25,821,000).
28. COMMITMENTS
In the ordinary course of business the Group has Grower Agreements which would require it to purchase grapes
during harvest which occurs between March and May each year throughout the period of the Agreement.
At balance date the Group had capital commitments of $500,000 for an Amenities Building at the Grove Mill/
Waihopai Valley site (2018: $39,000 replacement wine tank Vavasour). The Group has also committed to a
capital expenditure project not exceeding $3 million for the Mt Difficulty Restaurant redevelopment.
29. CONTINGENT LIABILITIES
There were no contingent liabilities at balance date (2018: Nil).
67
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
30. MT DIFFICULTY WINES ACQUISITION
On 3 January 2019 the Company completed its purchase of the assets and business of Mt Difficulty Wines, a
wine business with a winery, vineyards and cellar door/restaurant located in Central Otago.
The impact of this acquisition on the balance sheet was as follows:
Group
2019
$’000
Cash 1
Trade and other receivables 381
Inventories 8, 612
Biological work in progress 2,489
Prepayments 201
Property, plant and equipment 23,908
Total assets acquired 35,592
Trade and other payables (247)
Deferred tax (2,343)
Total liabilities acquired (2,590)
Net assets acquired 33,002
Goodwill on acquisition 19,131
Total net assets acquired 52,133
Funded as follows:
Liabilities – Loans and borrowings 2 7, 0 8 2
Equity – Share capital 20,000
Total paid in the current financial year 47, 0 8 2
Liabilities – Loans and borrowings – Deferred consideration (refer below) 5,051
Total amount paid/payable 52,133
68
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
30. MT DIFFICULTY WINES ACQUISITION (CONTINUED)
The Deferred Consideration Payment of $5,200,000 is due to be paid on 3 July 2020 in accordance with the
Sale and Purchase Agreement. The fair value (net present value) of the deferred consideration at acquisition
date was $5,051,000. At year end the fair value of this payment was $5,101,000 and is included in Non-current
Loans and borrowings.
The acquisition aligns with and supports the Company’s strategic direction to become NZ’s most revered wine
group by becoming a super-premium wine producer and a leader in the super-premium category. The addition
of a third iconic wine region, providing geographical diversification, complement the Foley Wines branded wine
portfolio and provide further opportunity to strengthen distribution in New Zealand and internationally. The
goodwill is attributable to the brands, key customer contracts, high profitability of the acquired business and
synergies from combining the businesses. It will not be deductible for tax purposes.
The initial accounting for the acquisition goodwill has only been provisionally determined at the end of the
reporting period. Further analysis is to be undertaken to determine if there are any identifiable intangible assets,
such as brands, that are able to be fair valued at the acquisition date and separately recognised in the financial
statements.
SIGNIFICANT ESTIMATE: CONTINGENT CONSIDERATION: Mt Difficulty Cellar Door and
Restaurant Development (Redevelopment) - If the total aggregate cost to the Company of the Redevelopment
(exclusive of GST) (Redevelopment Final Cost) is less than $3,000,000 then upon final completion and operation
of the Redevelopment, the Company will be required to pay to the previous Mt Difficulty Wines (shareholders), as
an adjustment to the purchase price, the difference (if any) between $3,000,000 and the Redevelopment Final
Cost. Based on the information available at balance date the Company does not expect that there will be any
further amount payable for the purchase under this provision.
ACQUIRED RECEIVABLES: The fair value and gross contractual value of acquired trade receivables
is $381,000. This has all subsequently been collected therefore there is no portion of this estimated to be
uncollectible.
TRANSACTION COSTS: The acquisition-related costs (included in Non-recurring expenses – refer Note 4 in
the current and prior year) were $591,000. In addition, the costs associated with the equity share capital issues
to partly fund the acquisition were $38,000 (Note 4).
REVENUE AND PROFIT CONTRIBUTION: The acquired Mt Difficulty business contributed revenue of
$6,264,000 to the Group for the period from 3 January 2019 to 30 June 2019.
There were no acquisitions in the year ended 30 June 2018.
69
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Notes to the
Financial Statements (continued)
For the year ended 30 June 2019
31. SUBSEQUENT EVENTS
On 3 July 2019 the interest rate on the BNZ Term Loan #05 facility was reviewed. The new interest rate on this
loan facility for the period from 3 July 2019 to 3 October 2019 was 3.42% pa.
On 31 July 2019 the interest rate on the BNZ Term Loan #03 facility was reviewed. The new interest rate on this
facility for the period from 31 July 2019 to 30 August 2019 was 3.11% pa.
On 2 August 2019 $1,000,000 was redrawn on the BNZ term loan facility #03.
On 27 August 2019 the Board approved a final dividend of 3 cents per share, fully imputed, for payment on 18
October 2019.
No other material events have occurred since balance date.
Group Group
2019 2018
$ $
32. NET TANGIBLE ASSETS PER SHARE
Net tangible assets per share 1.33 1.56
The calculation of net tangible per share in respect of 2019 is based on net tangible assets of $87,123,000,
being Net assets $119,307,000 less intangible assets $32,184,000 (2018: $81,447,000 being $94,500,000 less
$13,053,000) and the 65,736,148 ordinary shares on issue at balance date (2018: 52,222,534).
33. FOREIGN CURRENCY EXCHANGE RATES
The following spot foreign exchange rates
have been applied at balance date:
NZ $1.00 =
30 June 201930 June 2018
FWL BuyFWL SellFWL BuyFWL Sell
Australian dollar 0.9528 0.9596 0.9160 0.9212Australian dollar 0.9528 0.9596 0.9160 0.9212Australian dollar 0.9528 0.9596 0.9160 0.9212
United States dollar 0.6671 0.6726 0.6724 0.6775United States dollar 0.6671 0.6726 0.6724 0.6775United States dollar 0.6671 0.6726 0.6724 0.6775
Great British pound 0.5265 0.5289 0.5143 0.5184Great British pound 0.5265 0.5289 0.5143 0.5184Great British pound 0.5265 0.5289 0.5143 0.5184
Euro 0.5868 0.5919 0.5817 0.5864Euro 0.5868 0.5919 0.5817 0.5864Euro 0.5868 0.5919 0.5817 0.5864
FOLEY WINES LIMITED| ANNUAL REPORT 2019
F OL E Y WI N E S L I M I T E D
| ANNUAL REPORT 2019
Independent
Auditor’s Report
70
PricewaterhouseCoopers, Level 3, 6 Albion St, PO Box 645, Napier,4110, New Zealand
T: +64 6 835 6144, F: +64 6 835 0360, pwc.co.nz
Independent auditor’s report
To the shareholders of Foley Wines Limited
We have audited the financial statements, which comprise:
the statement of financial position as at 30 June 2019;
the income statement for the year then ended;
the statement of comprehensive income for the year then ended;
the statement of changes in equity for the year then ended;
the statement of cash flows for the year then ended; and
the notes to the financial statements, which include a summary of accounting policies.
Our opinion
In our opinion, the accompanying financial statements of Foley WinesLimited (the Company),
including its subsidiaries and controlled entities (the Group), present fairly, in all material respects,
the financial position of the Group as at 30 June 2019, its financial performance and its cash flows for
the year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in theAuditor’s responsibilities for the audit of the financial statementssection of
our report.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners(PES 1) issued by the New Zealand Auditing and
Assurance Standards Board and the International Ethics Standards Board for Accountants’Code of
Ethics for Professional Accountants(IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Other than in our capacity as auditor we have no relationship with, or interests in, the Group.
PwC
73
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall Group materiality: $479,428, which represents 1% of total sales
revenue.
We chose total sales revenue as our benchmark because, in our view,it is
the most stable benchmark against which the performance of the Group
can be measured.
We have determined that there are three key audit matters:
Acquisition of Mt Difficulty Wines
Valuation of land, land improvements and buildings
Impairment testing of intangibles
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the financial statementsas a whole as set out above. These,
together with qualitative considerations, helped us to determinethe scope of our audit, the nature,
timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the financial statements and
our application of materiality. As in all of our audits, we also addressed the risk of management
override of internal controls including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatementdue to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industry in which the Group operates.
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 ouropinion thereon, and we do not
provide a separate opinion on these matters.
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74
Key audit matter
How our audit addressed the key audit
matter
Acquisition of Mt Difficulty Wines
On 3 January 2019, Mt Difficulty Wines was acquired by
Foley Wines Limited for a purchase price of $52 million as
disclosed in note 30 of the financial statements. The
acquisition accounting has been determined provisionally as
management has not yet completed an analysis to determine
whether there are other identifiable intangibles assets, such
as brands, which should be separately recognised. The
acquisition has therefore resulted in a provisional goodwill of
$19 million.
The purchase price includes deferred consideration of $5.2
million (included at a present value of $5.1 million under
loans and borrowings) which will become payable on 3 July
2020.
If the total aggregate cost to the Group of the Mt Difficulty
Cellar Door and Restaurant Development (Redevelopment),
exclusive of GST, (Redevelopment Final Cost) is less than $3
million then upon final completion and operation of the
Redevelopment, the Group will be required to pay to the
previous Mt Difficulty Wines shareholders, as an adjustment
to the purchase price, the difference between $3 million and
the Redevelopment Final Cost. Management does not expect
any further amount will be payable.
An independent valuer was engaged to value the biological
assets, land, land improvements and buildings.
Because of the significant estimates and judgments involved
in determining the fair values of net assets acquired and the
Redevelopment Final Cost, this was considered to be a key
audit matter.
Our audit of the acquisition of Mt Difficulty Wines focused
on verifying the purchase price and assessing the significant
estimates and judgments made by management based on
the provisional accounting for the acquisition. Our audit
procedures included:
Confirming the acquisition price paid to the Sale and
Purchase Agreement and the cash payment made;
Assessing management’s treatment of the deferred
consideration and contingent consideration by
reviewing the relevant sections of the Sale and
Purchase Agreement and confirming our
understanding is consistent with the provisional
approach taken and supporting documentation
available;
Gaining an understanding of the approach
management has undertaken to identify and value the
tangible assets and liabilities acquired;
Consistent with our approach to auditing external
valuations of land, property, plant and equipment and
biological assets at 30 June 2019, we have held
discussions with the valuer to understand the
procedures and processes they performed in
undertaking the valuation and the methodology
used. This was performed alongside the audit work as
outlined in our Valuation of land, land improvements
and buildings key audit matter;
Utilising our internal PwC valuation expert, we have
assessed the methodology adopted by the valuer to
confirm that the basis of valuation was appropriate for
assets of this nature;
To confirm the existence of tangible assets at
acquisition date we attended inventory counts and
performed test counts on a sample basis, and
performed existence testing for biological assets and
items of property plant and equipment on a sample
basis, by sighting the physical assets;
We agreed the deferred consideration to the Sale and
Purchase agreement clauses and to the overall
calculation of the purchase price;
We have agreed the deferred consideration to
supporting documentation confirming the expected
payment date;
In respect of the redevelopment final costs we have
obtained evidence from management in respect of the
redevelopment to confirm that no further amounts are
expected to be paid as part of the sale and purchase
agreement as a result of this clause.
As a result of the audit procedures performed, there were no
matters to report.
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75
Key audit matter
How our audit addressed the key audit
matter
Valuation of land, land improvements and buildings
As disclosed in note 19 of the financial statements, the
company has recorded the following assets at fair value:
Freehold land$28.7 million
Freehold buildings$18.4 million
Land improvements$33.5 million
Total held at fair value:$80.6 million
Land improvements comprise vineyards including $24.6
million of grape vine biological assets.
Management have used independent valuers to determine
the fair values at balance date. The valuations are prepared
using a "comparative sales" basis and include an assumption
over the comparability of certain key inputs, such as location,
soil quality, type and number of buildings, variety of vines
and growing conditions at each of the wineries and
vineyards. The assumption is that these key elements of the
properties held by the company are comparable to those
selected for the purpose of performing the valuation.
The valuers have determined a value for each property as a
whole taking into account current market conditions and
recent sales within each area, based on available market
transaction data, to arrive at a range of valuation outcomes,
from which they derive a fair value estimate for the
property's components of land, buildings and land
improvements.
The valuation of these assets is a key audit matter due to the
subjectivity of certain assumptions in these judgements.
Our audit of the land, buildings and land improvements of
the group focused on the judgements inherent in the
valuation of those assets.
Our audit procedures included:
Assessing the independence, objectivity and
competence of each valuer;
Discussions with the valuers to understand the
procedures and processes they performed in
undertaking the valuations and the methodology they
used. We discussed the following with each valuer:
Valuation methodology used include their
peer review process;
How they selected comparative sales
transactions; and
How they obtained knowledge of the
characteristics of each vineyard, for example
by site inspection to confirm soil type,
location and grape varietal.
Using our PwC valuation expert, we have assessed the
appropriateness of the methodology adopted by the
valuers for assets of this nature;
We sighted supporting documentation including
comparative sales data from Real Estate Institution of
New Zealand (REINZ) and titles (total hectares and
ownership) obtained by the valuer, obtained
spreadsheets used by the valuer in performing their
calculations and yield data and planting details
provided by management;
On a sample basis, we have confirmed components of
the valuation, including type and number of buildings,
yield data and varietals to source data such as title
deeds, vineyard production reports, photographs of the
sites and our own observations of the assets during site
visits;
Due to the acquisition of Mt Difficulty Wines during
the year there were two valuations performed over this
during the year, one for the acquisition (where the site
was visited twice by the independent valuer), and one
for 30 June 2019 where no visit was performed by the
independent valuer. We performed additional
procedures at 30 June 2019 to physically visit all sites
that were included in the valuations to ensure there
was no visible evidence that the valuation may be
impaired at this date and confirm the existence of
planted vineyards.
As a result of the audit procedures performed, there were no
matters to report.
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76
Key audit matter
How our audit addressed the key audit
matter
Impairment testing of intangibles
The Group has $32.1m of intangibles at 30 June 2019 which
has increased from $13m in the prior year. The increase has
arisen as a result of the acquisition of Mt Difficulty as noted
in the preceding Key Audit Matter.
Following the acquisition management have fully integrated
the sales of the Mt Difficulty into the existing Foley business
and increased the range of brands in their portfolio sales
approach to the market.
This approach is consistent with the historical company
strategy and with the way the goodwill is monitored by the
Chief Operating Decision Maker (CODM). This results in the
assessment that all the Group’s operations are generated
from one cash generating unit (CGU).
Management have completed the impairment assessment
based on this CGU using a discounted cashflow approach.
The details of this assessment are shown in note 21 to the
financial statements.
The discounted cashflow analysis has considered the forecast
earnings before interest and tax over a five year period
(based on the budget for the next financial year and with an
estimated growth percentage applied thereafter), capital
expenditure during this period and a terminal value growth
rate.
The discount rate has been assessed by management based
on a calculated Weighted Average Cost of Capital (WACC).
Impairment testing is a key audit matter due to the estimates
inherent in management’s value in use calculation and
judgment exercised in determining the relevant CGU level at
which the goodwill should be tested for impairment.
Our audit procedures have focused on the key judgements
included in the impairment assessment.
Assessment of cash generating unit
We assessed the appropriateness of the identified CGU
by considering the extent to which cash flows are
separately identifiable to assets based on the Group’s
portfolio sales approach, and by reviewing management
reporting to validate the level of aggregation at which
financial information and goodwill is monitored by the
CODM.
Audit of management’s value in use calculation
We have agreed cashflows included in the calculation to
the Group’s budget and assessed the achievability of the
budget and future earnings growth taking account of
current performance of the underlying business,
including the impact of the inclusion of Mt Difficulty’s
results for a full year;
We have assessed the reliability of management’s
budgeting process by comparing previous budgets to
actual results achieved;
We have engaged our internal expert to consider the
appropriateness of the discount rate used;
We have performed sensitivity analysis to consider the
impact of reasonably possible changes in assumptions
including earnings growth rate, terminal growth rate,
discount rate and capital expenditure;
We checked the calculation of the value of net assets of
the CGU.
As a result of the audit procedures performed, there were no
matters to report.
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the financial statements does not
cover the other information included in the annual report and we do notexpress any form of
assurance conclusion on the other information.
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 financial statements or our knowledge obtained in the audit, orotherwise appears to be materially
misstated. If, based on the work we have performed on the other information that we obtained prior to
the date of this auditor’s report, 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.
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77
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible forassessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whetherthe financial statements, as a whole,
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (NZ) and ISAs 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 our responsibilities for the audit of thefinancial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders as a body.Our audit work has been
undertaken so that we might state those matters which 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.
The engagement partner on the audit resulting in this independent auditor’s report is Victoria
Lawson.
For and on behalf of:
Chartered AccountantsNapier
27 August 2019
FOLEY WINES LIMITED| ANNUAL REPORT 2019
F OL E Y WI N E S L I M I T E D
| ANNUAL REPORT 2019
Corporate Governance
Information
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FOLEY WINES LIMITED| ANNUAL REPORT 2019
For the year ended 30 June 2019
Corporate Governance
Statement
This statement is designed to provide an overview for Shareholders to reflect the main governance policies and practices
adopted or followed during the financial year ended 30 June 2019 and has been approved by the Board. For further
information refer to the Company’s website (www.foleywines.co.nz).
The Board is committed to high standards of best practice corporate governance and ethical conduct as being integral to
overall business integrity and to delivery of long term shareholder value.
The Board believes that the Company’s policies and practices have complied in all substantial respects with corporate
governance best practice in New Zealand including the NZX Corporate Governance Code 2017 (NZX Code) attached
as Appendix 16 to the NZX Main Board Listing Rules in force until 30 June 2019. Foley Wines Limited (FWL) will be
required to adhere to the updated 2019 version of the NZX Code contained in Appendix 1 of the NZX Main Board Listing
Rules issued on 1 January 2019 from 1 July 2019.
THE ROLE OF SHAREHOLDERS
Under the Companies Act, and the NZX Listing Rules, all Shareholders have the right to receive Annual and Interim
Financial Statements and all Notices of Meetings and to attend all such Meetings in person or by proxy. Resolutions for
which requisite Notice are given may be voted upon by show of hands or, if a poll is called, on a one share one vote basis.
There are no priority or special voting shares.
FWL is required to maintain the full list of shareholders - with the Register held by Computershare Investor Services - and
certain other statutory information available to shareholders at the Company’s registered office.
The Company is committed to communicating regularly with Shareholders. However, under the Listing Rules, FWL
is obliged to meet the NZX continuous disclosure requirements of all market price sensitive or other material company
information to be supplied first to the NZX as soon as practicable (and subject only to specified departures for incomplete
information) prior to communicating that information to shareholders, the general investment or local community, or to
the media.
To facilitate this general information flow, the Comp any maintains a comprehensive website including an investor section
(www.foleywines.co.nz). This contains the constitution, annual and half-yearly reports and financial statements, corporate
governance policies and documents, releases to the NZX or media and any presentations to third parties.
The Directors have the power to declare dividends from time to time to shareholders subject to complying with the
solvency and liquidity test criteria contained in the Companies Act.
BOARD CHARTER
ROLE OF THE BOARD OF DIRECTORS
The Directors are responsible, collectively as the Board under its Chairman, for the success of FWL and are accountable
to shareholders for the Company’s overall ethical conduct, strategic development, annual performance and long-term
sustainable increase in shareholder value.
The Board exercises its powers on behalf of all Shareholders, except for those powers specifically required to be exercised
by Shareholders by law, the NZX Listing Rules or the FWL Constitution. Except for powers specifically reserved to the
Directors under the Companies Act or the Delegated Authorities Policy, the Board in turn delegates authorities to the
Chief Executive Officer (CEO), with sub-delegations to members of the Management Team, with the CEO (Executive
Director) responsible for the day-to-day management of the FWL business and delivering against the agreed strategic
plans, operating budgets and performance targets.
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FOLEY WINES LIMITED| ANNUAL REPORT 2019
Corporate Governance
Statement (continued)
For the year ended 30 June 2019
ROLE OF THE BOARD OF DIRECTORS (CONTINUED)
The Role of the Board is to provide the overall framework for governance, accountability, risk control and deliverability
of the strategic and operating plans. To do so the Board meets with management normally at approximately quarterly
intervals, and more frequently if warranted, otherwise contact shall occur via email or teleconference to ensure Directors
are fully apprised about key Company activities and issues.
The Chairman, on behalf of the Board, is the formal channel of communication to external stakeholders and to the CEO
who in turn has delegated responsibility for management and staff and for achieving agreed policies, business strategies,
operating plans and budgets. The CEO reports regularly to the Chairman on critical issues being faced by the Company,
as well as progress being made against strategic plans.
The Board shall maintain a Code of Ethics Policy Statement, reviewed at least bi-annually, to underpin FWL’s vision
and values and expected standards of conduct for Directors, Managers, employees and contractors. The Board shall also
maintain a Financial Product Dealing Policy that explains what processes are in place to manage the legal and reputational
risks associated with director and staff share trading to provide transparency about expectations and requirements to
protect them from the risk of breaching insider trading laws.
In addition to the foregoing, the Directors are responsible for preparing and providing to Shareholders the financial
statements, as prescribed in the Financial Reporting Act. These shall give a true and fair view of the financial (and
operational) state of affairs of FWL for the period, as portrayed in the Income Statement, Statement of Comprehensive
Income, Statement of Changes in Equity, Statement of Financial Position and Statement of Cash Flows. These financial
statements are unaudited for the half-year report but must be audited by the External Auditor for the full financial year
report ended 30th June.
COMPOSITION OF THE BOARD
Under the Constitution there shall be a minimum of 3 Directors and the maximum number of Directors may be determined
from time to time by the Board, and unless so determined, is 8. The Board is therefore authorised to appoint one or
more additional Directors to fill a casual vacancy or to expand the Board for increased effectiveness or to help meet the
Company’s objectives.
Under the NZX Main Board Listing Rules a minimum of two Directors must be ordinarily resident in New Zealand
and one third of the Directors, and a minimum of two, must be independent, as defined in the NZX Listing Rules.
Due to the resignation of an Independent Director in November 2017 the Company did not have the required minimum
number of independent directors to meet the NZX Main Board requirements for a period from November 2017 until the
appointment of a new Independent Director from 1 November 2018. During this time, when the Board reviewed the mix
of qualifications, skills and experience the Company needed going forward, the Company was listed on the NZX NZAX
Board and not required to meet these NZX Main Board Listing requirements. A further Independent Director was
appointed to the Board from 1 February 2019 which resulted in the Board then consisting of a majority of Independent
Directors from that date, which is consistent with the recommendation in the NZX Code.
Directors are elected by shareholders at the first annual meeting after appointment. After that, at each annual meeting,
the NZX Listing Rules and the Company’s Constitution require one-third of Directors to retire by rotation, determined by
length of service since their last election. Directors who have served for more than nine years on the Board shall retire
annually. Retiring Directors are eligible for re-election.
As at the end of the current financial year there were four Non-Executive Directors, three of which were independent, and
one Executive Director. Details of all Directors as at the date of this report, including their qualifications, length of service
and experience, are shown in Section 1 of the Statutory Information section of this Annual Report.
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FOLEY WINES LIMITED| ANNUAL REPORT 2019
Corporate Governance
Statement (continued)
For the year ended 30 June 2019
ROLE OF THE BOARD OF DIRECTORS (CONTINUED)
DIRECTOR NOMINATION
The responsibility for identifying suitable candidates for recruitment to the Board, is undertaken by the Board, drawing on
advice from independent consultants as appropriate. Nominated candidates are assessed against a number of criteria which
include character, background, professional skills and experience, and their availability to commit to the role.
WRITTEN AGREEMENT
The Company provides a letter of appointment to each newly appointed Director setting out the terms of their appointment.
The letter includes information regarding expected time commitments, the board’s responsibilities, remuneration,
independence requirements, disclosure requirements, confidentiality obligations, indemnity and insurance provisions,
intellectual property rights and cessation of appointment.
BOARD PERFORMANCE EVALUATION
All Non-Executive Directors are expected to participate in performance reviews, particularly prior to the re-election of
a Non-Executive Director to the Board. The findings of the performance review process are used to identify, assess and
enhance Director competencies and to define characteristics or skills which should be sought in future Board candidates.
The Board undertakes a performance evaluation of the Board and its members bi-annually.
CONFLICT OF INTEREST
In order to ensure that any “interest” of a Director in a particular matter to be considered by the Board are known by
each Director, the Company has developed protocols, consistent with obligations imposed by the Companies Act 1993, to
require each Director to disclose any relationships, duties or interests held that may give rise to a potential conflict.
REMUNERATION – NON-EXECUTIVE DIRECTORS
Remuneration levels are set at competitive levels to attract and retain appropriately qualified and experienced Directors
taking in to account the responsibilities and time commitments provided by those Directors to the Company in discharging
their duties.
Directors’ fees are recommended to and confirmed by Shareholders’ resolution at an Annual Meeting. In accordance
with the Listing Rules the Shareholders approve the total aggregate amount of fees payable to all Directors as Directors’
fees, with the fee allocation to be determined by Directors. Currently the maximum aggregate amount of fees payable to
Directors is $240,000 per annum.
The Company’s policy is to pay all of its Directors in cash. The Directors fees paid during the year are shown in Section
3 of the Statutory Information section of this Annual Report.
The Board reviews annually and recommends to Shareholders any increase in Directors’ fees when profit performance
warrants. The criteria for reviewing Non-Executive Director remuneration includes obtaining advice from external
consultants, where appropriate, information on Board arrangements for other corporations of similar size and complexity,
and the review of current and expected workloads of non-executive Directors. The Board will continue to review its
remuneration strategies in relation to non-executive Directors from time to time, in line with general industry practice.
Directors may claim reimbursement against GST receipts for travelling and other associated reasonable expenses in the
course of business as a Board member.
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FOLEY WINES LIMITED| ANNUAL REPORT 2019
Corporate Governance
Statement (continued)
For the year ended 30 June 2019
ROLE OF THE BOARD OF DIRECTORS (CONTINUED)
REMUNERATION – CEO (EXECUTIVE DIRECTOR) AND SENIOR EXECUTIVES
The criteria for reviewing the remuneration for senior executives includes, as appropriate, advice obtained from external
consultants, participation in independent surveys, specific market comparison of individual roles, and level of achievement
against business and personal objectives.
DIVERSITY
At 30 June 2019 the Directors were all Male (5) and the Key Management Personnel were 75% Male (3) and 25% Female
(1). These percentages were the same as at the prior balance date, 30 June 2018.
INDEPENDENT PROFESSIONAL ADVICE
The Board, and individual Directors with the authority of the Chairman and/or the Board, has the ability to retain, at
the Company’s expense, special independent legal, accounting and other consultants or experts deemed necessary in the
proper discharge of its or his duties and responsibilities, provided the costs are reasonable and the advice is specific.
BOARD COMMITTEES
To enhance the effectiveness of the Board there is an Audit and Risk Committee. Due to the size of the Board all other
matters including Remuneration matters are considered by the full Board. The Board may establish an ad hoc Committee
at any appropriate time to consider a special issue.
The committees have their own charters setting out the objectives, composition, and responsibilities of the committee.
The Board will periodically review the charters. The Board Chairman may not be the Chairman of the Audit and Risk
Committee. A quorum shall be two Committee members, including the Committee Chairman. Any Director may attend
any Committee meeting as an observer if he/she so wishes. The Committee may request the CEO, Chief Financial Officer
and/or any Management Team member to attend.
AUDI T AND RISK COMMITTEE
The Audit and Risk Committee comprises of three Directors: Grant Graham (Chairman), Anthony Anselmi and Paul
Brock, and meets formally a minimum of two times during the financial year. The Board is of the opinion that sufficient
financial expertise and knowledge of the industry in which the Company operates is possessed by the members of the
Audit and Risk Committee. Details of the qualifications of the Audit and Risk Committee members are set out in Section
1 of the Statutory section of this Annual Report.
The Board aspires to achieve best practice standards in corporate governance and in the preparation and presentation of
its published financial statements, as required by the Financial Reporting Act, and that they present a true and fair view of
the current state of FWL’s financial (and operational) affairs. The primary objective of the Audit and Risk Committee is
to assist the Board of Directors in fulfilling its responsibilities relating to annual reporting, tax planning and compliance,
and risk management practices.
Management’s monthly financial (and operational) reports are the most significant tools the Board has to monitor the
Company’s performance.
The underlying internal control and accounting and operational systems determine the accuracy of the financial
statements and results presented to the Board. The Company does not have an internal audit function. Procedures have
been established at the Board and executive management levels that are designed to safeguard the assets and interests of
the Company and ensure the integrity of reporting. The Board acknowledges that it is responsible for the overall internal
control framework but recognises that no cost-effective internal control system will preclude all errors and irregularities.
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FOLEY WINES LIMITED| ANNUAL REPORT 2019
Corporate Governance
Statement (continued)
For the year ended 30 June 2019
ROLE OF THE BOARD OF DIRECTORS (CONTINUED)
AUDIT AND RISK COMMITTEE (CONTINUED)
The External Auditor is responsible for reviewing and making recommendations on these underlying control systems
to ensure they produce accurate and consistent reports on which Shareholders may rely and, to assist meeting this
responsibility, the External Auditor shall have full access to all board papers and minutes and all financial and related
records.
It is paramount the independence of The External Auditor is maintained for Shareholders’ benefit.
The Audit and Risk Committee is responsible to ensure the External Auditor’s independence is maintained. In the event
there is actual or perceived conflict this should be brought to the Board’s attention for resolution. If the risk is accepted
(e.g. for statutory share register audit), because it will be outweighed by the value to be achieved by the External Auditor
undertaking such activity, and is compatible with maintaining the external audit independence, such decision must be
transparent and is to be recorded in the Minutes of the Board.
The Company invites the External Auditor to attend the Annual Meeting of Shareholders and they are available to answer
shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.
MANAGING RISKS
The Board has identified a number of risks in the Company’s operations that are commonly faced by other entities in the
wine industry. The Board and management of the Company believe they have taken all necessary steps to manage and
mitigate those risks.
HEALTH AND SAFETY
The Board has responsibility for ensuring the Company maintains a health and safety management system that meets
best practice standards to protect the health and safety of its employees and contractors engaged by the Company. The
Board maintains a Health and Safety Policy, reviewed annually, to underpin the Company’s commitment to providing a
safe working environment for its employees and contractors. The Board receives a monthly Workplace Health and Safety
Report from the Company’s Health and Safety Manager.
INSURANCE
The Company carries insurance which the Board considers sufficient for the size and nature of the Company’s business
and risk profile.
CONTINUOUS DISCLOSURE
The Company is committed to providing relevant and timely information to its shareholders and to the broader market, in
accordance with its obligations under the NZX Listing Rules.
The Company’s website contains copies of the annual reports and financial statements, annual meeting documents,
corporate governance policies and documents, NZX announcements and any presentations to third parties.
FOLEY WINES LIMITED| ANNUAL REPORT 2019
F OL E Y WI N E S L I M I T E D
| ANNUAL REPORT 2019
Statutory Information
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FOLEY WINES LIMITED| ANNUAL REPORT 2019
For the year ended 30 June 2019
Statutory
Information
1. DIRECTOR PROFILES
WILLIAM P FOLEY II – CHAIRMAN
William P Foley II (Bill) was appointed to the Board in September 2012. Mr. Foley has served as the Executive Chairman
of Fidelity National Financial, Inc. (FNF) since October 2006 and, prior to that, as Chairman of the Board of FNF since
1984. Mr. Foley also served as Chief Executive Officer of FNF from 1984 until May 2007 and as President of FNF from
1984 until December 1994. Effective March 2012, Mr. Foley became the Vice Chairman of the Board of Fidelity National
Information Services, Inc.; prior to that he served as Executive Chairman from February 2006 through February 2011
and as non-executive Chairman from February 2011 to March 30, 2012. Mr. Foley served as the Chairman of the Board of
Lender Processing Services, Inc. from July 2008 until March 2009, and, within the past five years, has served as a director
of Florida Rock Industries, Inc. Mr. Foley also serves on the board of directors of the Foley Family Charitable Foundation.
Mr. Foley also is Chairman, CEO and President of Foley Family Wines Holdings, Inc., which is the holding company of
numerous vineyards and wineries located in the U.S. and in New Zealand.
Mr. Foley’s qualifications to serve on the Board include his 30 plus years as a director and executive officer of FNF, his
experience as a board member and executive officer of public and private companies in a wide variety of industries, and
his strong track record of building and maintaining shareholder value and successfully negotiating and implementing
mergers and acquisitions.
PAUL BROCK – DEPUTY CHAIRMAN – NON-EXECUTIVE INDEPENDENT DIRECTOR
Paul Brock was appointed to the Board with effect from 1 November 2018 and was appointed Deputy Chairman. Paul
Brock was the Kiwibank Group Chief Executive from 2010-2017. He was Co-Founder of the bank which was launched in
2002. As Group Chief Executive Paul led the Kiwibank Group through a period of rapid growth and diversification into
business banking, wealth management, insurance and asset finance. The bank is now a major player in the New Zealand
market with one in four New Zealanders holding an account with Kiwibank.
Paul has a strong background in governance, management, growth business development, brand development and
marketing. An extensive background in the financial services industry has also included senior management positions
with Westpac and Trust Bank. Paul has been Chairman of Gareth Morgan Investments Ltd and Kiwibank Investment
Management Ltd and a Director of Kiwi Insurance Ltd, New Zealand Home Loans Ltd, Kiwibank Custodial Services Ltd,
AMP Home Loans Ltd, Kiwi Capital Securities Ltd, Kiwi Capital Funding Ltd and Kiwi Wealth Management Ltd. Paul
is currently Chair of the board of the New Zealand Story Group, a country reputation programme to enhance the New
Zealand brand and increase the benefits to New Zealand from export trade, and is also a member of the Massey University
Business School Advisory Board.
Paul holds a Bachelors degree in Business Studies from Massey University.
ANTH ONY ANSELMI O.B.E. – NON-EXECUTIVE INDEPENDENT DIRECTOR
Anthony Anselmi (Tony) was appointed to the Board in September 2012 and is a member of the Audit and Risk Committee.
Tony’s business career began in footwear retail, and today the family owned business, Overland Footwear Company Ltd.
of which Tony is the Chairman, owns and operates retail stores throughout New Zealand and in the State of Victoria,
Australia. The Company has been a finalist for the last eleven years in the I.B.M. Kenexa Employment Consultants, Best
Places to Work annual awards and a category and overall winner several times. Tony opened a manufacturing plant in 1966
and Fabia Products Ltd. became one of the larger footwear manufacturers in New Zealand. He has considerable experience
in farming and developed a large area of neglected land into an extensive dairy farming enterprise.
86
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Statutory
Information (continued)
For the year ended 30 June 2019
1. DIRECTOR PROFILES (CONTINUED)
ANTHONY ANSELMI O.B.E. – NON-EXECUTIVE INDEPENDENT DIRECTOR (CONTINUED)
Tony was appointed a Director of the State Owned Enterprise, Forestry Corporation and served on the Board until it was
sold by the Government. He was appointed an inaugural director of Inframax Ltd. a road construction and maintenance
L.A.T.E. owned by the Waitomo District Council.
Tony was an investor in the New Zealand Wine Fund Ltd (Vavasour Wines) and when this was purchased by Foley Family
Wines, New Zealand Ltd. at the invitation of Mr Foley be transferred his investment to the new Company.
GRANT GRAHAM – NON-EXECUTIVE INDEPENDENT DIRECTOR
Grant Graham was appointed to the Board with effect from 1 February 2019 and as Chair of the Board Audit and Risk
Committee. Grant is a Partner at advisory and investment firm KordaMentha with a strong background in corporate
finance and advisory in valuation, restructuring and as an expert witness.
Over 20 years, Grant has written numerous Independent Advisors’ reports for listed company activity subject to NZX
listing rules and the New Zealand Takeovers’ Code. In the process, he has gained an enviable reputation for the quality of
these reports, his clear and concise communication style, and pragmatic advice.
Grant has a Bachelor of Commerce and is a Chartered Accountant with Chartered Accountants Australia New Zealand
(CAANZ) holding a Certificate of Public Practice and CAANZ Accredited Insolvency Practitioner status. Grant is a
member of the Institute of Directors in New Zealand.
ANTONY MARK TURNBULL – CEO (EXECUTIVE DIRECTOR)
Antony Mark Turnbull (Mark) was appointed Chief Executive Officer and Director of the Company in September 2012.
Mark’s career started as an accountant with Ernst and Young, then for the next 18 years was Managing Partner of the brand
consultancy Designworks. Mark was Chairman of the New Zealand Wine Fund when it was acquired by Foley Family
Wines in 2009. In 2011 Mark had a sabbatical year and attended London Business School where he completed a Masters
of Science in Leadership and Strategy with Distinction. Mark is a Chartered Accountant with Chartered Accountants
Australia and New Zealand.
2. INTEREST REGISTERS
The following entries were recorded in the Directors’ interest register of the Company during the year:
SHARE DEALINGS IN THE SHARES OF FOLEY WINES LIMITED
Share transactions undertaken during the year were as follows (2018: Nil):
WP Foley II – purchased 8,981,487 jointly with CJ Foley at $1.48 per share on 18 December 2018;
AM Turnbull – purchased 10,136 shares as part of the Share Purchase Plan at $1.48 per share on 3 July 2018 and 40,211
shares on market for $55,127 (an average price per share of $1.37) on 28 November 2018. The balance held at year end
was 60,347 shares.
SHARE DEALINGS IN THE SHARES OF FOLEY WINES LIMITED SUBSIDIARY COMPANIES
There were no transactions during the year (2018: Nil).
87
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Statutory
Information (continued)
For the year ended 30 June 2019
2. INTEREST REGISTERS (CONTINUED)
2019 2018
$’000 $’000
TRANSACTIONS
Certain Directors have interests in contracts with Foley Wines Limited.
All transactions were at normal commercial rates.
AM Turnbull (Lighthouse Distillery Ltd – purchase of Spirits for resale) 579 362AM Turnbull (Lighthouse Distillery Ltd – purchase of Spirits for resale) 579 362
AM Turnbull (Lighthouse Distillery Ltd – charges from FWL for labour,
rent, electricity and administration) 78 41rent, electricity and administration) 78 41
LOANS TO DIRECTORS
No loans to directors were authorised during the year.
IMDEMNITY AND INSURANCE
The Directors’ and Officers’ liability insurance is held to cover risks normally covered by such policies arising out of acts
or omissions of directors and employees in their capacity as such except for specific matters which are expressly excluded.
3. DIRECTORS REMUNERATION
Directors of the Company during the year and remuneration and other benefits paid to directors by the Company were as
follows:
2019 2018
$’000 $’000
DIRECTORS’ FEES
WP Foley II 100 100WP Foley II 100 100
AJ Anselmi 39 35AJ Anselmi 39 35
PR Brock 33 –PR Brock 33 –
GR Graham 21 –GR Graham 21 –
JA Jamieson – 12JA Jamieson – 12
REMUNERATION AND OTHER BENEFITS
AM Turnbull was a Director and the Chief Executive Officer during the year and as such did not receive Director’s Fees.
Remuneration and other benefits paid to Executive Directors during the year was $548,000 (2018: $543,000). There were
no short term or long term incentive schemes in place during the year.
88
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Statutory
Information (continued)
For the year ended 30 June 2019
4. EMPLOYEES’ REMUNERATION
Section 211(1)(g) of the Companies Act 1993 required disclosure of remuneration and other benefits, including redundancy
and other payments made on termination of employment, in excess of $100,000 per year, paid by the Company or any of
its subsidiaries worldwide to any employees who are not Directors of the Company:
Number of Employees
$100,000 – $109,999 3
$110,000 – $119,999 1
$120,000 – $129,999 2
$130,000 – $139,999 2
$150,000 – $159,999 1
$240,000 – $249,999 2
$370,000 – $379,999 1
5. DONATIONS
Foley Wines Limited made no cash donations during the year (2018: $Nil).
6. SHAREHOLDER BREAKDOWN
Shareholding as at 30 June 2019
Number of
shareholders
Total shares
held
% of share
capital
1-999 508 124,710 0.19%1-999 508 124,710 0.19%
1,0 0 0 -9,999 324 1,110, 838 1.69 %1,0 0 0 -9,999 324 1,110, 838 1.69 %
10,000-49,999 144 2,676,652 4.07%10,000-49,999 144 2,676,652 4.07%
50,000-99,999 23 1,633,448 2.49%50,000-99,999 23 1,633,448 2.49%
100,000-499,999 20 3,879,209 5.90%100,000-499,999 20 3,879,209 5.90%
500,000+ 10 56,311,291 85.66%500,000+ 10 56,311,291 85.66%
1,029 65,736,148 100.00% 1,029 65,736,148 100.00%
7. DIRECTORS’ SHAREHOLDING
As at 30 June 2019 Directors held the following direct interests in the Company.
WP Foley II – Individually and with CJ Foley held a direct interest in Foley Wines Limited (FWL) of 61% through
his shareholding in Foley Family Wines Holdings, Inc. (FWLH), the ultimate parent of Foley Family Wines Holdings,
New Zealand Limited (FWLH-NZ) which is the New Zealand based parent company and majority shareholder of FWL,
through his shareholding in FWLH-NZ and through the ownership of 8,981,487 ordinary FWL shares (2018: 60%). This
interest was 64% including the shares to be issued under the Convertible Note (note 14) (2018: 64%).
AJ Anselmi – held a direct interest in FWL of 1.7% through his shareholding in FWLH-NZ (2018: 2.1%). This interest was
1.8% including the shares to be issued under the Convertible Note (note 14) (2018: 2.3%).
AM Turnbull – held a direct interest in FWL of 1.1% (2018: 1.5%) through his shareholding in FWLH-NZ (1.15%; 2018
1.5%) and through the ownership of 60,347 ordinary FWL shares (0.09% 2018: 0.02%). This interest was 1.3% including
the shares to be issued under the Convertible Note (note 14) (2018: 1.6%).
89
FOLEY WINES LIMITED| ANNUAL REPORT 2019
Statutory
Information (continued)
For the year ended 30 June 2019
8. 20 LARGEST REGISTERED HOLDERS
Ordinary shares held at 30 June 2019:
Ordinary
shares held
% of share
capital
Foley Family Wines Holdings, New Zealand Limited *34,708,796 52.80%34,708,796 52.80%
WP Foley II & CJ Foley 8,981,487 13.66%8,981,487 13.66%
National Nominees New Zealand Limited on behalf of
Milford Asset Management Limited * 3,942,553 6.00%3,942,553 6.00%
Accident Compensation Corporation 2,821,875 4.29%2,821,875 4.29%
Lion NZ Limited 2,027,027 3.08%2,027,027 3.08%
Alfa Lea Horticulture Limited 903,330 1.37%903,330 1.37%
JP Morgan Chase Bank NA NZ Branch - Segregated Clients Acct - NZCSD 878,410 1.34%878,410 1.34%
New Zealand Permanent Trustees Limited - NZCSD 875,000 1.33%875,000 1.33%
Sky Hill Limited 600,000 0.91%600,000 0.91%
BNP Paribas Nominees (NZ) Limited - NZCSD 572,813 0.87%572,813 0.87%
Public Trust RIF Nominees Limited - NZCSD 413,099 0.63%413,099 0.63%
FNZ Custodians Limited 3 8 9, 741 0 . 59 %3 8 9, 741 0 . 59 %
JD Croft 322,388 0.49%322,388 0.49%
Phaben Holdings Limited 300,001 0.46%300,001 0.46%
Kynance Holdings Limited 300,000 0.46%300,000 0.46%
TJ Fairhall 295,116 0.45%295,116 0.45%
Custodial Services Limited 2 0 7, 5 2 2 0 . 3 2 %2 0 7, 5 2 2 0 . 3 2 %
CM & BW Doig 198,794 0.30%198,794 0.30%
JD Orchard, CS Orchard & JG Orchard 160,000 0.24%160,000 0.24%
MJ McQuillan 135,107 0.21%135,107 0.21%
Sub-total 59,033,059 89.80%59,033,059 89.80%
Others (1,009 Shareholders) 6,703,089 10.20%6,703,089 10.20%
TOTAL 65,736,148 100.00%65,736,148 100.00%
* These shareholders are substantial product holders as defined in Section 274 of Sub-part 5 of Part 5 of the Financial
Markets Conduct Act 2013 as they have a substantial holding in the Company.
9. NZX WAIVERS
The Company traded its ordinary shares on the NZX Alternative Market (NZAX) until 30 November 2018 under the ticker
code “FFW”. On 3 December 2018 the Company migrated to the NZ Main Board (NZSX) and commenced trading Foley
Wines Limited ordinary shares under the ticker code “FWL” (following a company name change on 1 December 2018).
As part of the migration process the Company applied to, and the NZX granted, a number of waivers from certain NZX
Main Board Listing Rules. The details of these waivers can be viewed on the NZX website www.nzx.com (http://nzx-
prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/FFW/327240/291048.pdf).
90
FOLEY WINES LIMITED| ANNUAL REPORT 2019
For the year ended 30 June 2019
Company
Directory
DIRECTORS:
WP Foley, II (Chairman)
PR Brock (Deputy Chairman)
AJ Anselmi
GR Graham
AM Turnbull (CEO)
HEAD OFFICE ADDRESS:
13 Waihopai Valley Road
RD6, Blenheim, 7276, Marlborough, New Zealand
Telephone +64 3 572 8200
Facsimile +64 3 572 8211
POSTAL ADDRESS:
PO Box 67, Renwick 7243, Marlborough, New Zealand
EMAIL:
info@foleywines.co.nz
WEBSITES:
www.foleywines.co.nz
www.grovemill.co.nz
www.vavasour.com
www.tekairanga.com
www.martinborough-vineyard.co.nz
www.mtdifficulty.nz
www.lighthousegin.co.nz
NATURE OF BUSINESS:
Production and distribution of wine
AUDITORS:
PricewaterhouseCoopers, Napier
SOLICITORS:
Bell Gully, Auckland
Jennifer Mills & Associates, Auckland
BANKERS:
Bank of New Zealand, Auckland
REGISTRATION NO.
307139
REGISTERED OFFICE:
13 Waihopai Valley Road, RD6 Blenheim 7276, Marlborough, New Zealand
SHARE REGISTRAR:
Computershare Investor Services Limited
159 Hurstmere Road, Takapuna, North Shore City 0622
Private Bag 92119, Auckland 1142
Telephone +64 9 488 8777
Facsimile +64 9 488 8787
Email: enquiry@computershare.co.nz (please quote CSN or shareholder number)
Website for shareholders to change address or payment instructions or view
investment portfolio: www.computershare.co.nz/investorcentre
SHARE TRADING:
NZX – NZSX Market
Security Code “FWL”
Investors who wish to join the Foley Investors Wine Club,
please email info@foleywines.co.nz
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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