Allied Farmers Reports Solid Result
announce@nzx.com
27 August 2019
ALLIED FARMERS REPORTS SOLID RESULT
The Directors of Allied Farmers Ltd (“Allied”) (ALF:NZX) are pleased to report an
audited net profit before tax for the year to 30 June 2019 of $2.22m (FY18 $2.44m). This
is slightly below FY18’s profit which included a significant one-off recovery from the
Asset Management Services Division. Excluding the one-off items from the results, the
FY19 trading profit was slightly ahead of FY18.
The Board would like to acknowledge the contribution of our staff in achieving this
outcome.
The company ended the financial year in a strong position, and it is pleasing to note the
improving financial performance of the company over the last five years. The company
has experienced steady revenue growth, and significantly strengthened its balance sheet.
While EBIT has fallen slightly in FY19, it has shown an upward trend over the five year
period.
During the year, the Board was pleased to support management proposals to implement a
range of staff benefits, including health and life/terminal illness insurances, driver alert
technology and various health checks. Our staff are our most important resource, and
make the Allied Farmers Group the stable and successful business that it is today. The
Board is pleased to support our staff by facilitating their ongoing personal and professional
development, knowing that this will enhance the development and growth of our people-
based business.
A number of other important corporate initiatives have been implemented which have
materially strengthened our business:
• An oversubscribed capital raising in February/March 2019 which has increased our
cash reserves;
• A restructuring of the share register, which will reduce administrative costs, and
has re-positioned the share price into a more normal range;
• Improved the Board with the appointment of new Directors who bring a range of
relevant skills and experience to the company;
• Added management resource to support the growth expected in the business; and
• A review of strategy and vision (see below for further comment).
More specifically the company has confirmed its vision:
To be the major solution provider to agricultural producers, growing value for them and
our investors.
MJR-370048-16-76-V1:wu
The Board and management are currently refining a number of strategic priorities that fit
within this vision. Our goal is to assist our farmer clients to meet the emerging challenges
and leverage the opportunities that face New Zealand farmers daily. This includes
changing market conditions, climate change, bio-security challenges, changing consumer
tastes and preferences, changing animal welfare expectations, and expanding regulation.
We see significant opportunities around effective deployment and use of new technologies
and information resources.
The challenges that have been evident in the livestock business over the last 12 months are
likely to remain in the near term. However, we expect continued growth in our livestock
financing business, and initiatives in the digital area will provide further support to the
core agency activity. The start of the financial year has been steady, and we are confident
that the strength of our business model, our learnings and adjustments from recent years
and the dedication of our staff position the business well.
Consistent with previous years, the Board will consider the payment of a dividend in
respect of FY19 at the time of the 26 November 2019 Annual Meeting. It is proposed that
any dividend declaration will be announced at that time, and is likely to be paid in late
January, after the company passes its peak working capital requirements.
Mark Benseman
Chairperson
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Results announcement
Results for announcement to the market
Name of issuer Allied Farmers Limited
Reporting Period 12 months to 30 June 2019
Previous Reporting Period 12 months to 30 June 2018
Currency
Amount (000s) Percentage change
Revenue from continuing
operations
$21,366 14.4 %
Total Revenue $21,366 14.4 %
Net profit/(loss) from
continuing operations
$2,001 (10%)
Total net profit/(loss) $2,001 (10%)
Interim/Final Dividend
Amount per Quoted Equity
Security
N/A
Imputed amount per Quoted
Equity Security
N/A
Record Date N/A
Dividend Payment Date N/A
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.278 $0.169
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Refer to results release and audited financial statements.
The net tangible assets per share above is calculated on a post
share consolidation basis.
The final dividend per share amount noted above is calculated
on a post share consolidation basis. The final dividend is to be
paid post share consolidation.
Authority for this announcement
Name of person
authorised
to make this announcement
Brian Lee
Contact person for this
announcement
Brian Lee
Contact phone number 06 765 6077
Contact email address brian.lee@alliedfarmers.co.nz
Date of release through MAP
27/08/2019
Audited financial statements accompany this announcement.
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Annual Report
2019
Working with Farmers for Farmers
Annual Report
2019
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Working with Farmers for Farmers
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2019
Working with Farmers for Farmers
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Annual Report
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Working with Farmers for Farmers
CO
NTENTS
SECTION PAGE
Overview from the Chairman 2
Five Year Financial Summary 5
Directors 6
Shareholder Information 7
Corporate Governance Report 13
Consolidated Financial Statements 23
Statement of Accounting Policies 27
Notes to the Consolidated Financial Statements 36
Independent Auditor’s Report 52
Company Directory 56
T
his report is dated 27 August 2019 and is signed on behalf of the Board of Allied Farmers
Limited:
M
ark Benseman Marise James
Chairman Director
1
OVERVIEW FROM THE CHAIRMAN
The Directors of Allied Farmers Ltd (“Allied”) (ALF:NZX) are pleased to report an audited net profit
before tax for the year to 30 June 2019 of $2.22m (2018 $2.44m). This is slightly below last year’s profit
which included a significant one-off recovery from the Asset Management Services Division. Excluding
the one-off items from the results the trading profit was slightly ahead of last years. However we also
acknowledge that trading conditions in the Livestock Business were more challenging. Despite the
slightly lower result, the company ended the financial year in a strong position, and the Board would like
to acknowledge the contribution of the staff in achieving this outcome.
The initiative that the Board is most proud of is a heightened focus on staff welfare. The Board was
pleased to support management proposals to implement a range of staff benefits, including health and
life/terminal illness insurances, driver alert technology and various health checks. Our staff are our most
important resource, and make the Allied Farmers Group the stable and successful business that it is
today. The Board is pleased to support our staff by facilitating their ongoing personal and professional
development, knowing that this will enhance the development and growth of our people-based business.
A number of other important corporate initiatives have been implemented which have materially
strengthened our business:
• An oversubscribed capital raising in February/March 2019 which has increased our cash
reserves;
• A restructuring of the share register, which will reduce administrative costs, and has re-
positioned the share price into a more normal range;
• Improving the Board with the appointment of new Directors who bring a range of relevant skills
and experience to the company;
• Added management resource to support the growth expected in the business; and
• A review of strategy and vision (see below for further comment).
It is also pleasing to note the improving trend in our financial results over the last five years (see
accompanying charts). Our revenue has grown steadily, and while EBIT has fallen slightly in the last
year, it too has shown an upward trend over the five year period.
Our balance sheet is also substantially stronger than it was five years ago, with very comfortable debt
levels, and is now well-placed to support our continuing growth and farming-focused diversification. We
enjoy a good relationship with our main funders and have well established banking relationships.
Earnings per Share (“EPS”) has declined in the last year, due to an increase in the number of shares on
issue (adjusted for the share consolidation which occurred in July of 2019) as a result of the capital
raising completed in March 2019.
Directors are confident that retained capital will drive further earnings growth.
2
Operational Review
Our sole current operating business is a 66% shareholding in New Zealand Farmers Livestock (“NZFL”).
Livestock Trading
NZFL’s Livestock agency business faced a challenging year, with drought conditions affecting the
second half year, and the Mycoplasma bovis situation also having a major negative impact in some
regions and for some clients. While there has been a significant reduction in dairy conversion activity,
and indeed some conversion of properties back from dairy to other uses, sheep and beef has remained
relatively buoyant, with strong sheep prices and good red meat pricing.
We continue to grow the livestock agency business and are actively looking for and implementing
opportunities and innovations to reinforce our national presence in livestock trading.
Meat Processing
Our meat business performed ahead of expectations, with good volume growth, and much effort to bed
in aspects of that growth. Product pricing was generally solid, with skin prices markedly improved, and
the overall result benefiting from a moderately weaker NZD.
Finance
New Zealand Farmers Livestock Finance continued its impressive growth, and has benefited from the
experience and strong relationships we have within the livestock industry. Our finance offering is an
important part of our effort to provide enhanced services to our farmer clients, complements our livestock
agency business, and we believe has good potential for further growth as the sector undergoes a
quantum shift in the sources and availability of finance.
Digital
Our digital platform, MyLivestock, continues to grow its market penetration. This is an important part of
our business and will be developed over time to be more integrated into our business, supporting our
staff and assisting our farmer clients with their day-to-day needs.
Strategy and Vision
The Board and Management have spent
considerable time reviewing the
company’s vision and strategy.
The foundation for this comes from Allied
Farmers’ heritage as a long established
New Zealand owned company servicing
the rural sector, working with farmers for
farmers. This dates from 1889 when The
Egmont Farmers’ Union Limited was
established. This long history gives the
company a significant depth of experience and knowledge operating in the New Zealand rural sector,
and our focus will remain on this sector for the foreseeable future.
3
More specifically the company has confirmed its vision:
To be the major solution provider to agricultural producers, growing value for them and our
investors.
The Board and Management are currently refining a number of strategic priorities that fit within this
Vision. Our goal is to assist our farmer clients to meet the emerging challenges and leverage the
opportunities that face New Zealand farmers daily. This includes changing market conditions, climate
change, bio-security challenges, changing consumer tastes and preferences, changing animal welfare
expectations, and expanding regulation. We see significant opportunities around effective deployment
and use of new technologies and information resources.
In keeping with this vision and the priorities, and recognising its sound financial position, the company is
actively investigating and seeking business opportunities that will enhance our service offering to the
New Zealand rural sector.
Allied Farmers has a positive outlook for the New Zealand rural sector. The UN forecasts that the
world’s population will grow to 9.7bn by 2050, approximately 26% above the current level. These people
will require feeding, and with growing income levels families will also desire more and higher quality
protein. New Zealand is well positioned to provide these products, with a reputation for providing high
quality, natural and wholesome food products.
There are challenges facing the New Zealand agricultural sector, including mitigating the effects of
greenhouse gas emissions and reducing the sector’s impost on the environment, but these challenges
can be successfully over-come with sensible policy development and appropriate changes to farming
and wider community practices. Agricultural products, and particularly dairy, meat and wool, still support
New Zealander’s expected living standards, and these products are a material, resource-efficient and
valued contribution to the global community facing the challenge of feeding the world’s growing
population.
Outlook for 2020
The challenges that have been evident in the livestock business over the last 12 months are likely to
remain in the near term. Global uncertainties are material. We continue to work at enhancing our
response, and to grow and develop our service to farmers, with a view to succeeding together. We
expect continued growth in our livestock financing business, and initiatives in the digital area will provide
further support to the core agency activity. We seek to challenge paradigms and add value within and
outside of Allied Farmers.
The start of the financial year has been steady, and we are confident that the strength of our business
model, our learnings and adjustments from recent years and the dedication of our staff position the
business well.
Mark Benseman
Chairperson
4
The amounts shown in this Five Year Financial Summary have been extracted from the audited financial
statements of Allied Farmers Limited and subsidiaries for the respective years.
5
DIRECTORS
Mark Benseman - Chairman
Mr Benseman was appointed a Director of Allied Farmers Limited in October 2015. He is an
experienced manager and financial analyst, with over 25 years’ experience in the investment industry.
Mark is currently the Principal of Fraters Group in New Zealand and in the past had a role as a senior
analyst with ABN AMRO New Zealand, was Director and Head of Research with Citigroup Smith Barney
in New Zealand, and similarly with Merrill Lynch (NZ). Mr Benseman is not an independent director due
to the fact that an Associated Person is an Allied Farmers Substantial Product Holder. He has the
following qualifications: BA (Hons in Economics).
Philip Luscombe
Mr Luscombe was appointed a Director of Allied Farmers Limited in December 2005. He is an
experienced farmer with interests in dairy farms in Taranaki and Otago, and in farm forestry. He is a
Director of PKW Farms GP Limited, as well as a number of private companies. He is a trustee of The
Massey-Lincoln and Agricultural Industry Trust and a former trustee of the Massey University Agricultural
Research Foundation. He is a former director of Kiwi Cooperative Dairies Limited, Kiwi Milk Products
Limited, Dairy InSight and industry research company Dexcel. Mr Luscombe is an independent director.
He has the following qualification: BAgSci(Hons).
Andrew McDouall
Mr McDouall was appointed a Director of Allied Farmers Limited in October 1999. He is Managing
Director of investment banking group MSL Capital Markets, and a director of a number of private
companies. Mr McDouall is an independent director. He has the following qualifications: BCA, DipNZSE.
Marise James
Ms James was appointed a Director of Allied Farmers Limited in October 2018. She is a chartered
accountant and partner at Baker Tilly Staples Rodway in Taranaki, where she services agri sector and
professional services clients. She was a founding director of Fonterra Co-operative Group, and
directorships of FMG Insurance Limited, Landcorp Farming Limited and the TSB Bank. She has chaired
the Audit Committees of FMG and Landcorp. Her current governance roles include Chair of Firstlight
Wagyu NZ Limited, and directorships of EIDNZ Limited and the Taranaki Rugby Football Union. Ms
James is an independent director. She has the following qualifications:
Member of Chartered
Accountants Australia and New Zealand; Fellow, Institute of Directors New Zealand (Accredited); and
F.C.A (Fellow of
Chartered Accountants Australia and New Zealand)
Richard Perry
Mr Perry was appointed a Director of Allied Farmers Limited in June 2019. He has a strong knowledge
and experience of the agribusiness, finance and technology sectors. He has previously held senior
finance and executive roles at the Reserve Bank of New Zealand, Landcorp Farming Ltd and Callaghan
Innovation and has been a Technical Advisor to the International Monetary Fund. He is currently a
member of the External Reporting Advisory Board and Director of Business Applications for Rocket Lab.
As an experienced company director he has acted for several company boards across the agri-tech,
property and food and beverage sectors including start-ups, mergers and established companies. Mr
Perry is an independent director. He has the following qualifications: B Com (Hons), F.C.A (Fellow of
Chartered Accountants Australia and New Zealand) and CTP (Certified Treasury Professional).
Note: Former Chairman and Director Garry Bluett resigned from the Board with effect from 27
November 2018.
6
SHAREHOLDER INFORMATION
DISCLOSURES OF INTEREST
Pursuant to section 140 of the Companies Act 1993, the following changes in interests were disclosed
during FY19 (excluding directorships of wholly owned subsidiaries) in the Interests Register:
Name Entity Relationship/Disclosure
Marise
James
Baker Tilly Staples Rodway
Firstlight Wagyu NZ Limited,
EIDNZ Limited
Taranaki Rugby Football Union.
Partner
Chairperson
Director
Director
Richard
Perry
Rocket Lab Limited
External Reporting Advisory Panel
Rural Advisory Group – Chartered
Accountants Australia New Zealand
Director of Business Applications
Member
Member
Andrew
McDouall
McDouall Stuart Group Limited (in
liquidation)
Director of company placed in
liquidation 19.2.19
Except as disclosed above, and the removal of former director Garry Bluett’s interests after his
resignation in November 2018, there were no director details included in the Interests Register as at 30
June 2018, or entered during the year ended 30 June 2019, that have been removed during the year
ended 30 June 2019.
DIRECTORS’ SHARE TRADING AND HOLDINGS
Directors disclosed the following acquisitions and disposals of relevant interests in Allied Farmers
Limited shares during FY19 pursuant to section 148 of the Companies Act 1993.
Director Date(s) Details
Mark Benseman
9 March - 13 September 2018 Sold 586,789 shares in 8 transactions
for total consideration of $47,684.98
24 September – 1 November
2018
Sold 549,645 shares in 4 transactions
for total consideration of $40,392.26
26 March 2019 Allotted 187,367 shares for $13,677.79
pursuant to Share Purchase Plan
As at 30 June 2019 directors, or entities related to them, held relevant interests (as defined in the
Financial Markets Conduct Act 2013) in Allied Farmers Limited Securities as follows:
* On 16 July 2019 Allied Farmers completed a one for ten share consolidation, and therefore the number
of shares actually held by these shareholders at the date of this Annual Report are not the same as
disclosed above.
Name Number of Shares and percentage of shares on issue*
Mark Benseman 19,257,489 (10.79%)
Philip Luscombe 1,295,566 (0.73%)
Andrew McDouall 111,290 (0.062%)
7
. DIRECTORS’ REMUNERATION
The above table reflects what has been paid out by the Company. The $204,093 of directors fees
actually paid in FY17 included the cash payment of $55,292 accrued but unpaid from the previous year.
Shareholders approved a cap on directors’ fees of $332,000 p.a. at the AGM in 2007. This cap includes
all directors fees paid in relation to Group subsidiary companies as well as for the Parent. In addition to
the above payments, Oliver Carruthers, a director of NZ Farmers Livestock Limited received total
remuneration and benefits from NZ Farmers Livestock Limited of $212,531.91, and Simon Williams, a
director of NZ Farmers Livestock Limited and NZ Farmers Livestock Finance Limited, received total
remuneration and benefits from NZ Farmers Livestock Limited of $120,274.69. In neither case did this
remuneration and benefits include any director’s fees.
PARTICULAR DISCLOSURES
Bonds
020 Bond
Albany Braithwaite Holdings Limited, an Associated Person of Director Mark Benseman, is currently the
holder of 600,000 first ranking bonds issued in a $1 million bond issue on 9 October 2014 (“020 Bond”).
The 020 Bond maturity date is 30 September 2021.
030 Bond
Albany Braithwaite Holdings Limited was the holder of 150,000 second ranking bonds issued in a
$550,000 bond issued on 31 August 2016 (“030 Bond”). The 030 Bonds matured on 30 September
2018. Two bondholders, one of whom is Albany Braithwaite Holdings Limited, were repaid in full on
maturity date. The remaining two 030 Bondholders, holding 300,000 bonds agreed to extend the
maturity date for their 030 Bonds to 31 March 2019, at which time they were fully repaid.
Director
2019 2018 2017
Garry Bluett $20,834 $50,000 $81,458
Philip Luscombe $36,250 $28,000 $44,667
Andrew McDouall $29,250 $28,000 $46,760
Mark Benseman $42,000 $28,000 $31,208
Marise James $27,500 - -
Richard Perry $2,917 - -
Total $158,751 $134,000 $204,093
8
General
Except to the extent described above, no Director has entered into any transactions with the Company
or its subsidiaries other than in the normal course of business, on the Company’s normal terms of trade,
and on an arms-length basis.
No Director issued a notice requesting to use Group information received in their capacity as a Director
which would not otherwise have been available to them.
During the year the Company paid premiums on contracts insuring directors and officers in respect of
liability and costs permitted to be insured against in accordance with Section 162 of the Companies Act
1993 and the Company’s constitution.
20,547,829 new shares were issued on 26 March 2019 pursuant to a share purchase plan. No other
new shares were issued during the financial year.
EMPLOYEE REMUNERATION
The number of employees whose remuneration and benefits were over $100,000 is within the specified
bands as follows:
Remuneration range 2019 2018
100,000 110,000 4 8
110,001 120,000 5 1
120,001 130,000 1 3
130,001 140,000 1 1
140,001 150,000 1 3
150,001 160,000 1 3
160,001 170,000 3 -
170,001 180,000 2 1
180,001 190,000 1 -
190,001 200,000 2 -
200,001 210,000 1 1
210,001 220,000 - 3
220,001 230,000 - 1
230,001 240,000 1 -
240,001 250,000 - 2
250,001 260,000 - -
260,001 270,000 - -
270,001 280,000 - -
280,001 290,000 - -
290,001 300,000 - -
300,001 310,000 1 1
310.001 320,000 - -
320,001 330,000 - -
Total 24 28
T
he remuneration figures shown in the above table include all monetary remuneration actually paid, plus
the cost of all benefits provided, during the year. The table does not include independent contractors.
9
SUBSTANTIAL PRODUCT HOLDERS
The following notices were given under the Financial Markets Conduct Act 2013 up to the date of this
Annual Report*:
Holder Relevant Interest Date
Albany Braithwaite Holdings Limited 20,206,556 (12.48%) 5 April 2017
Deborah Lee Seerup as beneficial owner
via ASB Nominees as registered holder
11,850,005 (7.34%) 22 February 2018
Stockmans Holdings Limited 19,267,822 (12.104%) 4 December 2015
*The total number of issued voting securities of Allied Farmers Limited as at 7 August 2019, being after
the completion of a 1 for 10 share consolidation, was 17,854,729 ordinary shares. The ownership
percentages referred to above are as disclosed in the relevant notice as at the historic date of
disclosure, and may have changed as a result of the issue of further shares, or share transfers below the
threshold for filing a notice, subsequent to the date of the relevant disclosure. The holdings of significant
shareholders is disclosed below under the heading Twenty Largest Registered Shareholders.
SUBSIDIARY COMPANIES
Directors of subsidiary companies as at 30 June 2019 were as follows:
Subsidiaries of the Parent Principal Activity Directors
Allied Farmers Rural Limited Rural Services M Benseman, P Luscombe, A
McDouall, R Perry, M James
ALF Nominees Limited Nominee company M Benseman
Allied Farmers Investments Limited Asset Management
Services
M Benseman, P Luscombe, A
McDouall, R Perry, M James
Allied Farmers (New Zealand) Limited Non-trading M Benseman
Subsidiaries of Allied Farmers Investments Limited
Allied Farmers Property Holdings Limited Non-trading M Benseman
QWF Holdings Limited Non-trading M Benseman
Lifestyles of NZ Queenstown Limited Non-trading M Benseman
LONZ 2008 Limited Non-trading M Benseman
LONZ 2008 Holdings Limited Non-trading M Benseman
Clearwater Hotel 2004 Limited Non-trading M Benseman
Subsidiaries of Allied Farmers Property Holdings Limited
UFL Lakeview Limited Non-trading M Benseman
5M No 2 Limited Non-trading M Benseman
Subsidiaries of Allied Farmers Rural Limited
NZ Farmers Livestock Limited Livestock Trading P Luscombe, M James, S Williams, M
Benseman, O Carruthers
Subsidiaries of NZ Farmers Livestock Limited
Farmers Meat Export Limited Meat Processing and
Trading
S Morrison, W Sweeney, P Luscombe
NZ Farmers Livestock Finance Limited Rural Finance P Luscombe, M James, S Williams
Redshaw Livestock Limited Livestock Trading D Freeman, A Hiscox, M MacDonald,
W Sweeney
10
DONATIONS
The Company made no donations to any political party during the year.
SHAREHOLDER INFORMATION
The ordinary shares of Allied Farmers Limited are listed on the NZX Main Board. The NZX share code is
‘ALF’.
The shareholder information in the following disclosures has been taken from the Company’s share
register at 7 August 2019.
TWENTY LARGEST REGISTERED SHAREHOLDERS as at 7 August 2019
Rank Investor Name
Total
Units % Issued Capital
1 Stockmans Holdings Limited 1,945,519 10.90
2 Albany Braithwaite Holdings Limited 1,925,749 10.79
3 Deborah Lee Seerup 1,370,001 7.67
4 Donald Clifton Jacobs 695,082 3.89
5 John Drakley Moore 328,244 1.84
6 Garry Charles Bluett 312,718 1.75
7 Ronald Alfred Brierley 303,159 1.70
8 Stuart David Hynes 273,897 1.53
9 Ross Phillip Drew 268,737 1.51
10 Fortune Capital Group Limited 228,125 1.28
11 Maurice Duncan Priest 200,237 1.12
12 Jade NZ Limited 150,000 0.84
13 James Field Seerup & Jeanette Elizabeth Seerup 142,312 0.80
14 Lee Athol Wilson & Shirley Ann Wilson 129,690 0.73
15 Philip Charles Luscombe & Ainsley Jocelyn Luscombe 129,557 0.73
16 New Zealand Central Securities Depository Limited 127,029 0.71
17 Omaio Investments Limited 119,655 0.67
18 Arcos Investments Limited 116,000 0.65
19 Custodial Services Limited 112,957 0.63
20 Colin Stuart Loveday 110,000 0.62
ANALYSIS OF SHAREHOLDING as at 7 August 2019
Range Holders Holders % Issued Capital Issued Capital %
1-1,000 1,715 64.14 646,389 3.62
1,001-5,000 546 20.42 1,361,125 7.62
5,001-10,000 172 6.43 1,304,675 7.31
10,001-50,000 197 7.37 3,806,531 21.32
50,001-100,000 22 0.82 1,538,689 8.62
Greater than
100,000 22 0.82 9,197,449 51.51
11
SHAREHOLDER ENQUIRIES
Shareholders should send changes of address, dividend queries, and instructions and shareholding
information requests to Link Market Services Limited, which acts as the Company’s share registrar.
ANNUAL MEETING OF SHAREHOLDERS
Allied Farmers Limited’s Annual Meeting of shareholders is proposed to be held at the TET MultiSports
Centre, Stadium 62 Portia St, Stratford 4332, on Tuesday 26 November 2019 from 11am. A Notice of
Annual Meeting and Proxy Form will be circulated to shareholders prior to the meeting.
REGISTERED OFFICE
The registered office of Allied Farmers Limited is:
201 Broadway
Stratford 4332
PO Box 304
Stratford 4352
DIVIDENDS PAID
A fully imputed dividend of $0.002 per share (2018: $0.002) was paid to eligible shareholders on 18
January 2019.
NZX REGULATION WAIVERS
The Company has not sought or been granted any waivers in the 12 months preceding 30 June 2019.
12
CORPORATE GOVERNANCE REPORT
The objective of the Board is to enhance shareholder value, ensure that Allied Farmers’ businesses are
operated in a sustainable and ethical manner, and protect the health and safety of its staff. The Board
considers there is a strong link between good corporate governance and the achievement of this
objective.
The Board considers that its corporate governance framework complies with the 2019 NZX Corporate
Governance Code (NZSX Code), except as stated within this report. The exceptions arise because
aspects of the Code are either not relevant or appropriate for Allied Farmers given its size and that it is
primarily a holding company of shares in a majority owned subsidiary, NZ Farmers Livestock Limited.
The information in this report is current as at the date of release of this Annual Report and has been
approved by the Board of Allied Farmers.
The key corporate governance documents referred to in this report are available on Allied Farmers’
website at www.alliedfarmers.co.nz.
Allied Farmers is listed on the NZX’s Main Board and is subject to regulatory control and monitoring by
both the NZX and the Financial Markets Authority.
Principle 1 – Code of Ethical Behaviour
Directors should set high standards of ethical behaviour, model this behaviour and hold
management accountable for these standards being followed throughout the organisation.
Allied Farmers is committed to maintaining the highest ethical standards by Directors, staff, suppliers
and customers/clients. Allied Farmers has a Code of Ethics to guide executives, management and
employees in carrying out their duties and responsibilities. A copy of this is available on Allied Farmers’
website. The Code covers such matters as:
• Expected conduct;
• Confidentiality;
• Use of assets;
• Corporate social responsibility; and
• Acceptance of gifts
The Code of Ethics requires Directors and employees to promptly report material breaches of the Code.
In addition, Allied Farmers has adopted a Whistle Blowing Policy that sets out the processes by which
suspected serious wrongdoing can be reported, and the whistle blower is protected.
Allied Farmers has in place processes to enable all new and existing employees to be aware of and
understand the Code.
Allied Farmers has a Securities Trading Policy to explain expectations and requirements for dealing in
Allied Farmers securities, and to protect from the risk of breaching insider trading laws. A copy of this is
available on Allied Farmers’ website.
Details of Directors’ share dealings are in the Shareholder Information section of the 2019 Annual
Report
.
13
Principle 2 – Board Composition and Performance
To ensure an effective Board, there should be a balance of independence, skills, knowledge,
experience and perspectives.
The business and affairs of Allied Farmers are managed directly by the Board of Directors. The Board:
• establishes long-term goals and strategic plans to achieve those goals;
• reviews and adopts the annual budgets for financial performance and monitors results monthly;
• ensures preparation of the annual and half-yearly financial statements;
• manages risk by ensuring that Allied Farmers has implemented adequate systems of internal
controls together with appropriate monitoring of compliance activities; and
• works with management to create shareholder value.
Allied Farmers’ Board operates under a written Board Charter which sets out the structure of the Board;
the procedures for the nomination, resignation and removal of Directors; outlines the responsibilities and
roles of the Chairman and Directors; and identifies procedures to ensure that the Board meets regularly,
conducts its meetings in an efficient and effective manner and that each Director is fully empowered to
perform his or her duties as a Director of the Company and to fully participate in meetings of the Board.
A copy of the Charter is available on Allied Farmers’ website.
Management of Allied Farmers is undertaken by the executive team under the leadership of the Chief
Executive, through a set of delegated authorities.
Directors have direct access to and may rely upon Allied Farmers’ senior management and external
advisers. Directors have the right, with the approval of the Chairman to seek independent legal or
financial advice at the expense of Allied Farmers for the proper performance of their duties.
Board Composition and Appointment
The number of elected Directors and the procedure for their retirement and re-election at Annual
Shareholders’ Meetings are set out in the Constitution of the Company.
The Board reviews the criteria for selection of Directors to ensure the most appropriate balance of skills,
qualifications, experience and background to effectively govern Allied Farmers.
All directors are required to retire (though may be re-elected) not later than the third annual meeting
following appointment, or after three years, whichever is longer. Any Directors appointed since the
previous annual meeting must also retire and are eligible for election.
The Board currently comprises of five Directors: a non-executive Chairman and four independent non-
executive Directors. The Chief Executive is not a member of the Board.
The Board supports the separation of the roles of Chairman and CEO and the appointment of a non-
executive chairman. The Allied Chairman, Mark Benseman, is not independent because an Associated
Person is a Substantial Product Holder. The Board has determined that this relationship does not
compromise the ability for Mr Benseman to act as Chairman in an independent manner, and the fact that
all other directors are independent ensures appropriate independent oversight is exercised.
In order for a director to be independent, the Board has determined that he or she must not be an
executive of Allied Farmers and must have no disqualifying relationships as defined by the NZX Listing
Rules.
Information on each Director is available on the Allied Farmers website. Changes to Director’s interests
during FY19 are disclosed in the Shareholder Information section of the 2019 Annual Report.
Allied Farmers provides written agreements to new Directors in relation to their appointment.
14
The Company encourages all Directors to undertake appropriate training and education so that they may
best perform their duties. This includes attending presentations on changes in governance, legal and
regulatory frameworks; attending technical and professional development courses; and attending
presentations from industry experts and key advisers. In addition, updates are provided to the Board on
relevant industry and Company issues.
At appropriate times the Board considers individual and collective performance, together with the skill
sets, training and development and succession planning required to govern the business. An evaluation
of Board skills, capability and experience was undertaken in March 2019.
Diversity
Allied Farmers recognises the value of diversity of thinking and skills t hat can be delivered by persons of
different backgrounds, sector experience, communication styles, life-skills and interpersonal skills. This
can arise through several different characteristics, including but not limited to the following; gender,
ethnic background, religion, age, marital status, culture, disability, economic background, education,
language, physical appearance and sexual orientation.
Given that Allied Farmers does not directly employee any staff, the Board has determined that the
compliance costs of adopting and reporting the outcomes of a formal Diversity and Inclusion Policy do
not outweigh any potential benefits of such a Policy, and therefore have decided to not adopt a formal
Diversity and Inclusion Policy. This will be reviewed if circumstances change.
As at 30 June 2019, females represented 20% (FY18: 0%) of Directors and 0% (FY18: 0%) of Officers of
Allied Farmers. Officers are defined as being the Chief Executive Officer and specific direct reports of
the CEO having key functional responsibility.
Current Year Previous Year
Male Female Male Female
Number of Directors 4 1 4 0
Percentage of Directors 80% 20% 100% 0%
Percentage of Officers 100% 0% 100% 0%
15
Board Meetings and Attendance
The Board meets as often as it deems appropriate, including sessions to review the performance of the
business versus plans, and to consider the strategic direction of Allied Farmers and its forward-looking
business plans. Phone conferences are also used as required.
The table below sets out Director attendance at Board and committee meetings during FY19. In total,
there were 12 Board meetings and two Audit and Risk Management Committee meetings.
Board Audit and Risk
Total number of meetings 12 2
Garry Bluett (resigned 27/11/18) 5 1
Andrew McDouall 11 1
Philip Luscombe 12 1
Mark Benseman 11 2
Marise James (appointed 1/10/18) 7 1
Richard Perry (appointed 1/5/19) 1 0
Principle 3 – Committees
The Board should use committees where this will enhance its effectiveness in key areas, while
still retaining Board responsibility.
Audit and Risk Management Committee
The Board has delegated a number of its responsibilities to the Audit and Risk Committee to assist in the
execution of the Board’s responsibilities.
The Audit and Risk Committee reviews and analyses policies and strategies that are within its terms of
reference. It examines proposals and, where appropriate, makes recommendations to the full Board.
The Audit and Risk Committee does not take action or make decisions on behalf of the Board unless
specifically mandated by prior Board authority to do so.
The Audit and Risk Committee meets as required and has a Charter which is approved and reviewed by
the Board. A copy of the Audit and Risk Committee Charter is on the Allied Farmers website.
Minutes of each committee meeting are forwarded to all members of the Board, who are all entitled to
attend any committee meeting.
The Audit and Risk Committee is empowered to seek any information it requires from employees in
pursuing its duties and to obtain independent legal or other professional advice.
The Audit and Risk Committee provides a forum for the effective communication between the Board and
external auditors. The Committee reviews the annual and half-yearly financial statements prior to their
approval by the Board, the effectiveness of internal control and management information systems and
the efficiency and effectiveness of the audit function.
The Committee must be comprised solely of Directors of Allied Farmers, have a minimum of three
members, have a majority of independent Directors and have at least one Director with an accounting or
financial background. The makeup of the current members of this committee complies with this
recommendation.
Members as at 30 June 2019 were Marise James (Chair), Andrew McDouall and Mark Benseman. The
Audit and Risk Committee Chair, Ms James is both an independent and non-executive director.
Management may attend meetings only at the invitation of the Committee and the Committee has
committee-only time with the external auditors without management present.
16
The membership and performance of the Audit and Risk Committee was evaluated as part of the Board
performance evaluation.
Other Committees as Required
Due to the modest size of Allied Farmers, the desire to contain compliance costs, and the fact that Allied
Farmers Group has only two senior executives (being the NZFL Chief Executive and Chief Financial
Officer - neither of whom are members of the Board of Allied Farmers), the Board has determined that a
separate Remuneration and/or Nominations Committee is not required. The Board considers that the
purpose and roles performed by a separate Remuneration and/or Nomination Committee can be
appropriately performed by the full Board without compromising the probity of its decision making. The
Board has determined to review this decision from time to time, and in particular has agreed to form a
Remuneration Committee and/or Nomination Committee if the Board considers that, for reasons such as
ensuring independent and non-conflicted decision making, such a committee is necessary.
From time to time, other special purpose committees may be formed to review and monitor specific
projects with senior management.
In the case of a takeover offer, Allied Farmers will form an Independent Takeover Committee to oversee
disclosure and response and engage expert legal and financial advisors to provide advice on procedure.
A Takeover Response Protocol has recently been adopted.
Principle 4 – Reporting and Disclosure
The Board should demand integrity in financial and non-financial reporting, and in the timeliness
and balance of corporate disclosures.
Allied Farmers’ Directors are committed to keeping investors and the market informed of all material
information about the Company and its performance, in a timely manner. Allied Farmers has adopted a
Continuous Disclosure Policy to ensure that material information is identified, reported, assessed and,
where required, disclosed to the market in a timely manner. A copy of the Continuous Disclosure Policy
is available on Allied Farmers’ website.
In addition to all information required by law, Allied Farmers also seeks to provide sufficient meaningful
information to ensure stakeholders and investors are well informed, including financial and non-financial
information.
Financial Information
Senior Management are responsible for implementing and maintaining appropriate accounting and
financial reporting principles, policies, and internal controls designed to ensure compliance with
accounting standards and applicable laws and regulations, including relevant tax legislation.
The Board’s Audit and Risk Management Committee oversees the quality and integrity of external
financial reporting, including the accuracy, completeness, balance and timeliness of financial
statements. It reviews Allied Farmers’ full and half year financial statements and makes
recommendations to the Board concerning accounting policies, areas of judgement, compliance with
accounting standards, stock exchange, legal and tax requirements, and the results of the external audit
.
For the financial year ended 30 June 2019, the Directors believe that proper accounting records have
been kept that enable the determination of the Company’s financial position with reasonable accuracy,
and facilitate compliance of the financial statements with the Financial Markets Conduct Act 2013. The
Chief Executive Officer and Chief Financial Officer have confirmed in writing to the Board that Allied
Farmers’ external financial reports present a true and fair view in all material aspects.
Allied Farmers’ full and half year financial statements are available on the Company’s website.
17
Non-financial information
The Board recognises the importance of non-financial disclosure. The Company monitors progress in
business sustainability as it seeks to actively improve the social and environmental characteristics of the
business. This is a goal to which the Company is strategically committed and which it incorporates in its
day to day operations. In addition, NZ Farmers Livestock invests in a range of social responsibility
initiatives that support staff, customers and the communities in which it operates
The Company considers that shareholders, and the investment market generally, should be promptly
informed of all major business events that influence the company, and to ensure compliance with NZX
Continuous Disclosure requirements.
The Company aims to manage its businesses in a way that will produce positive outcomes for all
stakeholders including the public, customers, team members, suppliers and shareholders.
Allied Farmers discusses its strategic objectives, and its progress against these, in the Chair and Chief
Executive’s commentary in shareholder reports, and at the Annual Shareholders Meeting. Allied
Farmers supports NZ Farmers Livestock’s commitment to using its resources responsibly, and
identification of opportunities to reduce any negative environmental risk or impact from business
operations, products and services.
NZ Farmers Livestock is also committed to providing fair and responsible products and services that
includes adherence to the Responsible Lending Code, the Responsible Credit-Related Insurance Code,
Insurance (Prudential Supervision) Act 2010 and various other Acts. Compliance is monitored through
periodic auditing and legal review, and senior management oversight of practices.
Principle 5 – Remuneration
The remuneration of Directors and executives should be transparent, fair and reasonable.
Remuneration of Directors and senior executives is the Board’s responsibility. In recent years, Allied
Farmers has only appointed one new senior executive – the Chief Financial Officer in March 2018. The
Board takes account of external market factors and internal factors in determining the remuneration of
senior executives. Allied Farmers has recently adopted a Remuneration Policy.
Director Remuneration
The total remuneration pool available for Directors has been fixed by shareholders at a maximum of
$332,000 per annum for all non-executive Directors. The Board determines the level of remuneration
paid to Directors from that pool. Directors also receive reimbursement for reasonable travelling,
accommodation and other expenses incurred in the course of performing their duties.
Allied Farmers may appoint additional non-executive directors in due course. The Directors’ potential fee
pool includes future directors’ fees and has been fixed.
Any proposed increases in non-executive Director fees and remuneration will be put to shareholders for
approval. If independent advice is sought by the Board, it will be disclosed to shareholders as part of the
approval process.
18
Board Role Approved Remuneration
Directors’ fees are currently allocated by the Directors per annum as follows:
• Allied Farmers Ltd Chair - $50,000;
• NZ Farmers Livestock Ltd Chair - $45,000
• Audit and Risk Committee Chair - $40,000
• Other Directors appointed prior to 1 October 2015 - $33,000 plus retirement allowance after
seven years of service; and
• Other Directors appointed after 1 October 2015 - $35,000 with no retirement allowance.
Details of individual Directors’ remuneration are detailed in the Shareholder Information section of the
2019 Annual Report.
Executive Remuneration
In general, executive remuneration comprises a fixed base salary and an at-risk short-term incentive
payable annually. At-risk incentives are paid against targets agreed with executives and are based on
financial measures including earnings targets and progress against objectives related to the strategic
plan and other personal objectives.
CEO Remuneration
The review and approval of the CEO’s remuneration is the responsibility of the Board.
The CEO’s remuneration comprises a fixed base salary, fringe benefits and an at-risk short-term
incentive payable annually. At-risk incentives are paid against targets agreed with the CEO, and are
based on financial measures including earnings targets and progress against objectives related to the
strategic plan and other personal objectives.
Salary Benefits Performance
- Short term
Incentive
Staff
Profit
Share
Total
Remuneration
FY19 $253,000 $9,539 $45,433.00
being 76% of
maximum
achievable for
FY18
$248.78 $308,220.78
FY18 $250,000 $15,000 $43,332.00
being 72% of
maximum
achievable for
FY17
$451.02 $308,788.02
19
Principle 6 – Risk Management
Directors should have a sound understanding of the material risks faced by the issuer and how
to manage them. The Board should regularly verify that the issuer has appropriate processes
that identify and manage potential and material risks.
The Board has overall responsibility for the Company’s system of risk management and internal control.
The Board delegates day to date management of the risk to the Chief Executive Officer. The Audit and
Risk Management Committee provides an additional and more specialised oversight of Company risks in
addition to the oversight provided by the Board. The Audit and Risk Management Committee’s Charter
details the specific responsibilities of the Committee in regard to risk assurance.
The Board is satisfied that major risks are reviewed and has recently adopted a Risk Management
Framework to identify areas of significant business risk, and implement procedures to effectively
manage those risks. The Risk Management Framework covers the following aspects relating to risk
management:
• Creating an operating risk compliance culture and accountability;
• Monitoring of operating risk and compliance policies;
• Training and support; and
• Reporting and review of a Top 10 risk matrix.
Where appropriate, the Board obtains advice directly from external advisers. Once a significant business
risk is identified, the Board is advised and action is taken promptly to mitigate and monitor or, if there are
benefits to be obtained, take advantage of these in addressing the risks.
Allied Farmers maintains insurance policies that it considers adequate to meet its insurable risks.
More details of Allied Farmers’ financial risk management are available in the FY19 Financial
Statements.
Health and Safety
Allied Farmers is a holding company and does not undertake any operations in the context of a health
and safety environment. Allied Farmers’ majority owned subsidiary, NZ Farmers Livestock Limited, and
its wholly owned subsidiaries are operational businesses, and the Board of Directors of NZ Farmers
Livestock is responsible for ensuring that the systems used to identify and manage health and safety
risks are fit for purpose, effectively implemented, regularly reviewed and continuously improved. The NZ
Farmers Livestock Board recognises that effective management of health and safety is essential for the
operation of a successful business, and its intent is to prevent harm and promote wellbeing for
employees, contractors and customers.
NZ Farmers Livestock has adopted a Health and Safety Policy and a Health and Safety Handbook and
Policy Manual, continues to drive increasing focus on health and safety objectives, and holds regular
health and safety meetings for each saleyard at which it operates. Minutes of these meetings, health and
safety audits and all significant injuries are reported to the NZ Farmers Livestock and Allied Farmers’
Boards.
20
Principle 7 – Auditors
The Board should ensure the quality and independence of the external audit process.
The Allied Farmers Board is committed to ensuring audit independence, both in fact and appearance, so
that Allied Farmers’ external financial reporting is viewed as being highly objective and without bias.
The Audit and Risk Management Committee (ARMC) reviews the quality and cost of the audit
undertaken by the Company’s external auditors and provides a formal channel of communication
between the Board, senior management and external auditors.
The ARMC approves the auditor’s terms of engagement, audit partner rotation (at least every five years)
and audit fee, and reviews and provides feedback in respect of the annual audit plan. The Committee
periodically has time with the external auditor without management present. The ARMC also assesses
the auditor’s independence on an annual basis.
An External Auditor Independence Policy has been adopted and sets out the services that may or may
not be performed by the external auditor.
For the financial year ended 30 June 2019, PricewaterhouseCoopers (PWC) was the external auditor for
Allied Farmers Limited. The last audit partner rotation was in 2015.
All audit work at Allied Farmers is fully separated from non-audit services, to ensure that appropriate
independence is maintained. The only non-audit services provided by PWC subsequent to FY19 was for
tax advice totalling $2,000. The amount of fees paid to PWC for audit work in FY19 are identified in note
3 of the consolidated financial statements. At the 2018 Annual Meeting shareholders authorised the
Directors to fix the auditor’s fees and expenses for the ensuing year.
PWC has provided the ARMC with written confirmation that, in its view, it was able to operate
independently during the year.
Given the cost, PWC has not attended recent Annual Shareholders’ Meeting, but are available to do so if
requested. PWC are available by telephone during the meeting to answer any questions if required. In
recent years, there have not been any questions asked at the Annual Shareholders’ Meeting that have
not satisfactorily been answered or addressed by management or the Chairman. If circumstances
changed (for example, a complex or controversial matter was to be considered or presented to the
meeting) the PWC lead partner would be required to attend the meeting.
Allied Farmers has a number of internal controls overseen by the ARMC and/or the Board of either Allied
Farmers or NZ Farmers Livestock (as appropriate). These include controls for computerised information
systems, cyber risk and information security, business continuity management, insurance, health and
safety, conflicts of interest, and prevention and identification of fraud. The Company does not have an
internal audit function.
21
Principle 8 – Shareholder Rights and Relations
The Board should respect the rights of shareholders and foster constructive relationships with
shareholders that encourage them to engage with the issuer.
The Board is committed to open and regular dialogue and engagement with shareholders. Allied
Farmers seeks to ensure that investors understand its activities by communicating effectively with them
and giving them access to clear and balanced information.
Allied Farmers has a calendar of communications and events for shareholders, including but not limited
to:
• Annual and Interim Reports
• Market announcements
• Annual Shareholders’ Meeting
• Easy access to information through the Allied Farmers website www.alliedfarmers.co.nz
• Access to management and the Board via the “Contact Us” facility on the Allied Farmers
website
Shareholders are actively encouraged to attend the Annual Shareholders’ Meeting and may raise
matters for discussion at this event, and may vote on major decisions that affect Allied Farmers. Voting
is by poll.
In accordance with the Companies Act 1993, Allied Farmers’ Constitution and the NZX Main Board
Listing Rules, Allied Farmers refers major decisions that may change the nature of the Company to
shareholders for approval.
All shareholders are given the option to elect to receive electronic communications from the Company.
Exercise of disciplinary powers
No disciplinary action has been taken by either the NZX or the FMA against the Company during the
financial year ended 30 June 2019.
22
Allied Farmers Limited and Subsidiaries
For the
year ended 30 June 2019
Note
Note
June
June
2019
2018
$000
$000
Revenue
Sale of
goods
8,188
4,685
Interest income
925
676
Commission Income
12,142
12,852
Total Revenue
21,255
18,213
Other income
111
470
Total income
21,366
18,683
Ex
penses
Cost of inventor
y sold
6,719
4,165
Interest and fundin
g expense2
599
594
Rental and operatin
g leases
119
141
Emplo
yee benefit expense
7,757
7,667
Depreciation and amortisation11,12
635
546
Other operatin
g expenses3
3,316
3,135
Total expenses
19,145
16,248
Profit before income tax2,221
2,435
Income tax expense5
(220)
(210)
2,001
2,225
2,001
2,225
1,258
1,535
8
743
690
Basic (cents per share)4
7.58
9.51
4
7.589.51
The notes are an integral part of these consolidated financial statements.
Total earnings per share attributable to the equity holders of the Parent Company:
Diluted (cents per share)
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
Total comprehensive income
Profit Attributable to:
Owners of the Parent
Non-Controlling Interests
23
Consolidated Statement of Changes in Equity
Allied Farmers Limited and Subsidiaries
For the year ended 30 June 2019
NoteParent
Equity
Subtotal
$000$000$000$000$000
O
pening balance as at 1 July 2017151,779 (150,756) 1,023 797 1,820
Com
prehensive income
Net Profit for the
year ended 30 June 2018- 1,535 1,535 690 2,225
Total com
prehensive income- 1,535 1,535 690 2,225
Transactions with owner
s
Dividends paid- (323) (323) (273) (596)
Ac
quisition of Redshaw Livestock Limited- - - 17 17
Total transactions with owner
s- (323) (323) (256) (579)
Closin
g balance as at 30 June 2018151,779 (149,544) 2,235 1,231 3,466
Com
prehensive income
Net Profit for the
year ended 30 June 2019- 1,258 1,258 743 2,001
Total com
prehensive income- 1,258 1,258 743 2,001
Transactions with owner
s
Dividends paid7- (323) (323) (593) (916)
Sale of Shares in NZ Farmers Livestock Limited8- - -
(22) (22)
AFL Purchase of Small Parcels of Shares6
(261) - (261) - (261)
AFL Shares Issued61,500 - 1,500 - 1,500
Total transactions with owner
s1,239 (323) 916 (615) 301
Closin
g balance as at 30 June 2019153,018 (148,609) 4,409 1,359 5,768
Refer Note 7
Accumulated
losses
Non
Controlling
Interests
Share
Capital
Total
Equity
The notes are an integral part of these consolidated financial statements.
24
Consolidated Balance Sheet
Allied Farmers Limited and Subsidiaries
As at 30 June 2019
Note June
June
2019
2018
$000
$000
E
quity
Share capital6
153
,018
151,779
Reserves7
(148,609)
(149,544)
Equit
y attributable to owners of the Parent
4,409
2,235
Non Controllin
g Interests8
1,359
1,231
Total e
quity5,768
3,466
Liabilities
Current liabilities
Trade and other
payables10
12
,923
10,232
Finance receivables borrowin
gs9
1
,500
1,500
Borrowin
gs9
909
1,439
Taxation
55
133
Total current liabilities15,387
13,304
Non-current liabilities
Borrowin
gs9
2,884
3,551
Total non-current liabilities2,884
3,551
Total liabilities18,271
16,855
Total liabilities and shareholders e
quity24,039
20,321
Assets
Current assets
Cash and cash e
quivalents21.1
2
,301
569
Trade and other receivables16
11
,449
9,367
Finance receivables16
4
,710
4,619
Inventor
y17
197
122
Pre
payments16
2
13
Total current assets18
,659
14,690
Non-current assets
Investments
5
-
Pro
perty, plant and equipment11
3
,839
4,190
Intan
gible assets and Goodwill12
764
751
Deferred tax asset5
772
690
Total non-current assets5
,380
5,631
Total assets24,039
20,321
DirectorDirector
The Board of Directors of Allied Farmers Limited authorised these financial statements for issue on 27 August 2019.
The notes are an integral part of these consolidated financial statements.
25
Consolidated Statement of Cash Flows
Allied Farmers Limited and Subsidiaries
For the year ended 30 June 2019
Note
June
June
2019
2018
$000$000
Cash Flows from Operating Activities
Cash was provided from:
Receipts from customers18,362 17,806
Interest received925 553
19,287
18,810
Cash was applied to:
Payments to suppliers and employees(15,238) (16,108)
Interest paid(599) (594)
Taxation paid(379) (323)
(16,215)
(17,025)
Net cash flows from operating activities19
3,072
1,785
Cash Flows from Investing Activities
Cash was provided from:
Sale of property, plant and equipment- 73
- 73
Cash was applied to:
Increase in finance receivables NZ Farmers Livestock Finance Ltd(93) (2,545)
Acquisition of subsidiary/investment net of cash acquired(5) (145)
Purchase of shares in NZ Farmers Livestock Ltd(22) -
Purchase of intangibles, property, plant and equipment(346) (248)
(466)
(2,938)
Net cash flows (used in) investing activities(466) (2,865)
Cash Flows from Financing Activities
Cash was provided from:
Share Purchase Plan1,500 -
Drawdown of finance receivables borrowings1,500 1,500
3,000 1,500
Cash was applied to:
Repay livestock trading borrowings(382) (360)
Repayment of vehicle finance borrowings(265) (472)
Repayment of finance receivables borrowings(1,500) -
Repayment of bond(550) -
Dividends paid(916) (596)
Share Repurchase of Small Parcels(261) -
(3,874)
(1,428)
Net cash flows from / (used in) from financing activities(874) 72
Net increase in cash and cash equivalents
1,732
(1,008)
Cash and cash equivalents at beginning of year569 1,577
Cash and cash equivalents at end of year2,301 569
The notes are an integral part of these consolidated financial statements.
26
To assess the impact of NZ IFRS 15 on the group, contracts within each segment were aggregated to create portfolios of
contracts. An individual contract from each portfolio was selected as being representative of each unique contract type. For
each contract type, the five step method was applied to assess the impact on revenue recognition.
The five step method for recognising revenue from contracts with customers involves consideration of the following:
1. Identifying the contract with the customer:
2. Identifying performance obligations;
3. Determining the transaction price;
4. Allocating the transaction price to distinct performance obligations; and
5. Recognising revenue.
The adoption of NZ IFRS 15 did not have any material effect for the Group, and no restatement to the prior year was made. The
Group’s major revenue streams under NZ IFRS 15 are the sale of livestock agency services and the procurement and
processing of calves.
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July
2018. Those which may be relevant to the Group are set out below with updated accounting policies as necessary.
These financial statements are prepared on a going concern basis. The cashflow statement is presented on a net basis. This
basis has been preferred to gross basis to remain consistent with the revenue basis of presentation.
New Standards and Interpretations
NZ IFRS 15 applies to all revenue arising from contracts with customers, unless the contracts are in the scope of other
standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under
NZ IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in the
exchange for acting as agent in a livestock transaction or transferring goods or services to a customer.
Statement of Accounting Policies
GENERAL INFORMATION
These Consolidated Financial Statements ("Financial Statements") have been approved for issue by the Board of Directors on
27th August 2019.
The Board of Directors does not have the power to amend the financial statements after they have been issued.
Allied Farmers Limited and Subsidiaries (together "the Group") are a "for profit" rural services group, with its predominant
activities comprising the sale of livestock agency services, the procurement and processing of calves and the provision of
livestock financing.
Allied Farmers Limited ("the Parent Company") is a limited liability company, incorporated and domiciled in New Zealand. The
Parent Company's registered address is:
201 Broadway
Allied Farmers Limited is a public company listed on the New Zealand Stock Exchange Main Board (NZX code: ALF).
BASIS OF PREPARATION
Stratford
New Zealand
Allied Farmers Limited and Subsidiaries
For the year ended 30 June 2019
The financial statements are presented in New Zealand Dollars which is the Parent Company's and Subsidiaries' functional
currency and the Group's presentation currency.
NZ IFRS 15 Revenue from Contracts with Customers
Allied Farmers Limited is a company registered under the Companies Act 1993 and is an FMC reporting entity under Part 7 of the
Financial Markets Conduct Act 2013. The financial statements of the Group have been prepared in accordance with the
requirements of Part 7 of the Financial Markets Conduct Act 2013 and the NZX Main Board Listing Rules.
The financial statements have been
presented on the basis of historical cost.
The preparation of financial statements in conformity with NZ IFRS requires the use of certain accounting estimates. It also
requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving
judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed
below.
The Group's financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice
(NZ GAAP). They comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS), and other
applicable Financial Reporting Standards, as appropriate for profit-oriented entities. These financial statements also comply with
International Financial Reportin
g Standards (IFRS).
27
Description
Commissions made
on facilitating a
livestock sale
agreement and on
grazing agreements
Commissions made
on facilitating a
forward livestock sale
agreement
Description
RFID fees earned on
scanning of RFID
chips
Fees earned on
organisation of
auctions
Fees earned on
weighing of stock
Description
Sale of bobby calf
meat
Sale of bobby calf
skins
SALES OF GOODS
Revenue typeKey judgement
Performance
obligation
Timing of revenue recognition
The table below provides further information on the application of NZ IFRS 15 across the major segments in the Group.
For forward delivery
contracts,
determining the
commission to be
recognised due to
the extended period
of time with these
contracts
Revenue type
Livestock
commissions earned
on sales
Livestock
commissions earned
on forward delivery
contracts
COMMISSION EARNED
Key judgementTiming of revenue recognition
Performance
obligation
Determining the
distinct performance
obligation and
whether the Group is
acting as an agent.
Point in time
Recognised at the point in time when
the sale is agreed by a vendor and a
purchaser
Point in time
Recognised at the point in time when
the sale is agreed by a vendor and a
purchaser. Due to the timing of these
contracts there is some uncertainty
relating to the final commission.
The performance
obligation is fulfilled
when the goods are
available to the
customer at the meat
work plant. The Group
is acting as a principal
as it holds inventory
risk.
Point in time
Recognised at the point in time when
the goods are available to the
customer
Point in time
Recognised at the point in time when
the goods are available to the
customer
Sales of meat
Sales of skins
No major judgement
required
The performance
obligation is fulfilled
when the sale is
agreed. The Group is
acting as an agent as it
doesn't have inventory
risk and isn't able to
set a price
FEES EARNED
RFID scanning fees
Point in time
Recognised at the point in time when
the RFID chip is scanned
Yard fees on
auctions
Point in time
Recognised at the point in time when
a sale is agreed during auction
Revenue typeKey judgement
Performance
obligation
Timing of revenue recognition
Valuation fees
Point in time
Recognised at the point in time when
the animals are weighed
Determining the
distinct performance
obligation
The performance
obligation is fulfilled
when the stock are
scanned, a sale is
agreed within the
auction or when the
stock are weighed.
The Group is acting as
a principal as it is
primarily responsible
for the service
rendered and is able to
set a price
28
Original Carrying
amount - IAS 39
New Carrying
Amount - IFRS 9
$000$000
569 569
9,367 9,367
4,619 4,619
The Group considers a broad range of information when assessing credit risk and measuring external credit losses, including
past events, current conditions and reasonable and supportable forecasts that affect the expected collectability of the future cash
flows of the instrument.
The term of the Group's financial assets is typically less than 12 months. Accordingly provisioning is based on borrower specific
factors in conjunction with any macro economic factors contributing to the definition of "significant increase in credit risk", whilst
also factoring in any cash flows from collateral held as security for the financial assets.
From 1 July 2018 the Group assessed on a forward-looking basis the expected credit losses associated with its financial assets
carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in
credit risk.
For financial assets (excluding trade and other receivables), a distinction is made between:
GroupOriginal Classification -
IAS 39
New Classification Category - IFRS 9
NZ IFRS 9 applies to the accounting for financial instruments, in particular classification and measurement of impairment and
hedge accounting. The adoption of NZIFRS 9 did not have any material effect for the Group and no restatement for the prior year
has been made.
Variable consideration
Non derivative financial assets are classified and measured at amortised cost when the asset is held within a business model
whose objective is to collect the contractual cash flows and those contractual cash flows consist solely of payments of principal
and interest on specified dates. Financial assets are initially measured at fair value and subsequently at amortised cost using the
effective interest rate method, less any impairment losses.
Cash
Trade Receivables
Finance lease
receivables
30 June 2019
NZ IFRS 9 Financial Instruments
Impairment of Financial Assets
From 1 July 2018 the Group classifies its financial assets as being measured at amortised cost. Until June 2018 the Group
classified its financial assets as loans and receivables. There was no change in the measurement of these assets and
investments as a result of reclassification.
Loans and receivables
Amortised Cost
Amortised Cost
Amortised Cost
The table below illustrates the classification and carrying amount of the Group's financial assets under IAS 39 and IFRS 9 on the
date of initial application.
Due to the extended time period between when the forward delivery contracts are agreed and when the forward contract settle,
there is an element of variability in the value of the contract and the commission earned to be recognised.
Financial assets that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk
(“Stage 1”);
Financial assets that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low
(“Stage 2”); and
A significant increase in credit risk is defined as a significant increase in the probability of a default occurring since initial
recognition.
At each reporting period, an assessment is performed based on probability-weighted outcomes from a range of potential
outcomes to determine the appropriate level of revenue to be recognised. On settlement of the contract, the revenue is adjusted
to account for any difference between what has been recognised and the final settlement. At 30 June 2019, all forward delivery
contracts have settled and therefore the variable consideration has no impact on the revenue recognised.
Financial Assets at Amortised Cost
Loans and receivables
Loans and receivables
For trade and other receivables the Group makes use of a simplified approach, as permitted by NZ IFRS 9, and records the loss
allowances as lifetime expected credit losses from recognition. This is expected credit losses that result from all possible default
events over the life of the financial instrument.
12 month expected credit losses are recognised for Stage 1 while ‘lifetime expected credit losses’ are recognised for the second
category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the
ex
pected life of the financial instrument.
Financial assets that have objective evidence of impairment at the reporting date (“Stage 3”).
For trade and finance receivables, impairment losses arise from expected credit losses. Trade and finance receivables are
recorded initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less any
expected credit losses due to bad and doubtful accounts. The expected credit losses are based on management's assessment
of amounts considered uncollectible for specific customers or groups of customers based on age of debt, history of payments,
account activity, economic factors and other relevant information.
29
Recognition of right of use assets of $0.5m and
Recognition of lease liability of $0.5m
NZ IFRS 16 Leases will result in almost all leases being recognised in the statement of financial position, as the distinction
between operating leases and finance leases is removed. The standard is mandatory for the Group from 1 July 2019.
Under NZ IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for
a period of time in exchange for consideration. Under NZ IAS 17, a lessee was required to make a distinction between an
operating lease (off balance sheet) and a finance lease (on balance sheet). NZ IFRS 16 now requires a lessee to recognise a
lease liability reflecting the future lease payments and a ‘right-of-use’ asset for almost all lease contracts. The statement of
comprehensive income will be impacted by the recognition of an interest expense and a depreciation expense with premise rental
and vehicle lease e
quipment expenses removed altogether.
Increase in finance costs (recognised as interest expense) of $0.04m
the property lease term including potential renewals for which the group may have the right to exercise
the incremental borrowing rate that is used to discount lease assets and liabilities
NZ IFRS 16 Leases
New Standards and Interpretations Not Yet Adopted
As a result of the calculations and the application of judgement, management is able to quantify the potential impact of NZ IFRS
16 based on the current property lease arrangements across the Group. Management expects that there will be an impact across
the following line items in the statement of financial position:
The expected impact across the following line items in the statement of comprehensive income for the year ended 30 June 2020
is estimated as follows:
The financial statements incorporate the assets and liabilities of all subsidiaries of the Group as at balance date and the results
of all subsidiaries for the year then ended.
Subsidiaries
The impact for the Group will be primarily focused on the accounting for operating leases on properties rented. As at the reporting
date, the Group has operating lease commitments on rented property of $0.5m. Upon adoption, NZ IFRS 16 is consequently
unlikely to have a significant impact upon the Group’s statement of financial position and statement of financial performance.
To calculate the impact of NZ IFRS 16 as at 1 July 2019, being the date of adoption, management has assessed all property
lease contracts applying judgement as follows:
Increase in depreciation and amortisation expense of $0.08m
Decrease in premises expenses of $0.1m
Finance assets are written off when there is no reasonable expectation of recovery. Indication that there is no reasonable
expectation of recovery includes, among others, collection procedures have proved unsuccessful, the occurrence of significant
changes in borrower’s position such that the borrower can no longer pay back the obligation, or that the proceeds from
collections and/ or insurance claims will not be sufficient to pay back the entire obligation.
Outcome of renewals under property lease agreements for the year ended 30 June 2020
Changes to the existing lease arrangements
Changes to borrowing rates
New lease contracts entered into
Finalisation of management's judgements
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control ceases.
Estimates are subject to change at the time of adoption due to:
The implementation of NZ IFRS 16 has no cash impact to the Group as changes are limited to financial reporting requirements
only. The Group intends to implement the simplified transition approach as defined in the standard for the year ended 30 June
2020 and will not restate comparative amounts for the period prior to adoption.
BASIS OF CONSOLIDATION
30
Business combinations
Commission income includes commission and other fees charged on livestock sales transactions. Commission income is
recognised on a net basis as the Group acts as an agent to the customer in facilitating the livestock sales. Fees income is
recognised on a gross basis as the Group acts as a principal to the customer in providing primarily the service. Judgement has
been exercised in determinin
g that the Group are an agent as opposed to a principal in these transactions.
Commission income
Business combination are accounted for using the purchase method. The cost of a business combination is an aggregate of the
fair value of assets purchased, liabilities assumed or incurred and any equity issued in exchange for consideration received.
OPERATING REVENUE AND EXPENSES
Deferred tax assets or liabilities are determined using tax rates that have been enacted or substantially enacted by the balance
date and are expected to apply when the related deferred tax asset is realised or deferred tax liability is settled.
Associates are entities over which the Group has significant influence but not control. Investments in associates are accounted
for using the equity method of accounting. Under the equity method the investment is initially recognised at cost, and the carrying
amount is increased or decreased to recognise the investors share of the profit or loss of the investee after the date of
acquisition. The Group's investment in associates includes goodwill identified on acquisition.
Finance income comprises interest income on Finance Business receivables and interest income on bank deposits. These are
included as part of revenue.
The income tax expense or benefit for the period is the tax payable on the current period's taxable income based on the tax rate
adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets
and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
The calculation of the effective interest rate includes all fees that are integral to the effective interest rate. All fees except those
charged to customer accounts in arrears are considered to be integral to the effective interest rate. Fees charged to customer
accounts in arrears are recognised as income at the time the fees are charged.
In some circumstances the Group acts as an agent in conjunction with another agent company. In these circumstances the
commission earned is shared. The cost paid to the sharing agent company has been netted off the commission received.
Commission income which is non-yield related is recognised on an accrual basis once the underlying service has been provided.
All fees and commission income are recognised within "Commission Income".
Associates
Joint arrangements
The Group applies NZ IFRS 11 to all joint arrangements. Under NZ IFRS 11 investments in joint arrangements are classified as
either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has
assessed the nature of its joint arrangements and determined them to be joint operations. As joint operations, the Group
accounts for its share of the revenue, expenses, assets and liabilities.
TAXATION
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Any current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Sales of goods
Revenue from the sale of goods (primarily the sale of calf meat and skins) is measured at the fair value of the consideration
received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the
significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the
associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement
with the goods.
Interest income and expense for all interest bearing financial instruments are recognised within "Interest income" and "Interest
and funding expense" in the consolidated statement of profit or loss and other comprehensive income using the effective interest
method.
Interest income and interest funding expense
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition
of a subsidiary is the fair values of the assets transferred, the liabilities incurred to or assumed from the former owners of the
acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any
non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling
interest's proportionate share of the recognised amounts of acquiree's identifiable net assets. The excess of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity
interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.
31
Impairment losses recognised in prior periods, other than those related to goodwill, are assessed at each reporting date for any
indications that the loss has decreased or no longer exists, and where the impairment loss may be reversed.
LEASES
FINANCIAL ASSETS
Purchases and sales of financial assets are recognised on the trade date, the date on which the Group commits to purchase or
sell the asset.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a
repayment plan with the Group.
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on a Standard cost
basis, and includes expenditure incurred in acquiring the inventories and bringing them to their existing locations and condition
being the acquisition cost, freight, duty, and other inward charges. Net realisable value is the estimated selling price in the
ordinary course of business, less applicable variable selling expenses.
The Group categorises a loan or receivable for write off when a debtor fails to make contractual payments more than 180 days
past due. Where loans or receivables have been written off, the Group continues to engage in enforcement activity to attempt to
recover the receivable due. Where recoveries are made, these are recognised in profit or loss.
CASH AND CASH EQUIVALENTS
A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership to
the lessee.
The Group leases certain assets where the Group has substantially all the risks and rewards of ownership. These are classified
as finance leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value of the leased
property and the present value of the minimum lease payments.
TRADE AND OTHER RECEIVABLES
At initial recognition, the Group measures its financial assets at their fair value. The Group subsequently measures these at
amortised cost using the effective interest method less provision for expected credit losses.
INVENTORY
Operating lease assets
Finance leases
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance
charges, are included in Borrowings. The interest element of the finance cost is charged to the consolidated profit or loss
statement over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each
period. The assets acquired under finance leases are depreciated over the shorter of the useful life of the leased asset and the
lease term.
IMPAIRMENT OF FINANCIAL ASSETS
The impairment assessment of the Group's finance and trade receivables is based on management's assessment of any
objective evidence of impairment on an individual basis which takes into account historical loss experience.
TESTING FOR IMPAIRMENT OF NON FINANCIAL ASSETS
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. In the case of goodwill, this is also impairment tested at least annually. An impairment loss is recognised for the
amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an
asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash generating units).
The Group does not engage in any speculative transactions or hold derivative financial instruments for trading purposes.
Derecognition
Financial assets are derecognised when the rights to the cash flows of the assets have expired or the rights to receive the cash
flows of the assets and substantially all the risks and rewards of the assets have been transferred.
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with
original maturities of three months or less, and bank overdrafts. Cash equivalents are short-term highly liquid investments that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
The Group classifies their financial assets as loans and receivables.
32
3 - 15 years
Buildings
A summary of the assumptions underpinning the Group's expected credit loss model is as follows:
CategoryCompany definition of category
Loans whose credit risk in in line with original
expectations
12 month expected losses. Where
the expected lifetime of an asset is
less than 12 months, expected losses
are measured at its expected lifetime.
Basis for recognition of expected
credit loss provision
Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These gains and losses are
included in the consolidated statement of profit or loss and other comprehensive income.
Lifetime expected losses.
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific
software. These costs are amortised on a straight line basis over their estimated useful lives, which is estimated to be between
one and six years.
INTANGIBLE ASSETS
Goodwill
Goodwill on acquisitions of subsidiaries is included in "Intangible Assets" and "Goodwill". Goodwill on acquisitions of associates
is included in "Investments in associates" and is tested for impairment as part of the overall balance. Separately recognised
goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill
are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those generating
units or groups of cash-generating units that are expected to benefit from the business combination on which the goodwill arose.
Software
All other property, plant and equipment are depreciated on a straight line basis at rates over their estimated useful lives, as
follows:
Asset class Estimated Useful Life
Loans to customers
Stage 2 - Underperforming
Stage 3 - Non-performing
(credit impaired)
Write-off
Loans for which a significant increase in
credit risk has occurred compared to original
expectations; a significant increase in credit
risk is presumed if interest and/or principal
repayments are 30 days past due (see
above in more detail)
Interest and/or principal repayments are 60
days past due or it becomes probable a
customer will enter bankruptcy
Interest and/or principal repayments are 120
days past due and there is no reasonable
ex
pectation of recovery.
8 - 30 years
Motor Vehicles
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the consolidated profit or loss statement during the financial period in
which the
y are incurred.
Land is not depreciated.
Items of property, plant and equipment are stated at historical or deemed cost less accumulated depreciation and impairment.
Cost includes expenditure that is directly attributable to the acquisition of the items.
PROPERTY, PLANT AND EQUIPMENT
Stage 1 - Performing
Plant and Equipment 1 - 30 years
Asset is written off.
The Group uses three categories for loans which reflect their credit risk and how the loan loss provision is determined for each of
those categories. These internal credit risk ratings are aligned to external credit rating companies, such as Standard and Poor,
Moody's and Fitch.
Lifetime expected losses.
33
Liabilities for wages and salaries, annual leave, long service leave and accumulating sick leave expected to be settled within 12
months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and are
measured at the amounts expected to be paid when the liabilities are settled.
BORROWINGS AND BORROWING COSTS
Borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at
amortised cost. Any difference between proceeds net of transaction costs and the redemption value is recognised in the
consolidated statement of profit or loss and other comprehensive income over the period of the borrowings using the effective
interest rate method. As borrowing costs for Allied Farmers Limited are not for qualifying assets, Allied Farmers Limited
expenses all borrowin
g costs.
Borrowing costs are recognised in the consolidated statement of profit or loss and other comprehensive income in the period in
which they were incurred.
Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred.
Costs that are directly associated with the development of identifiable and unique software products and websites controlled by
the Group, and that will generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.
Costs include the software development employee costs and an appropriate portion of relevant overheads. Computer software
development costs recognised as assets are amortised on a straight line basis over their estimated useful lives (not exceeding
three years).
TRADE AND OTHER PAYABLES
Trade and other payables relate primarily to the liability that exists to the vendor of livestock as a result of livestock sales on the
vendors behalf. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest rate method.
EMPLOYEE BENEFITS
Dividends are recognised as a liability in the period in which they are approved by the Board. Dividends that are approved after
balance date but prior to the financial statements being authorised for issue are disclosed as a subsequent event.
EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average
number of ordinary shares on issue during the year.
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The Group has no category of dilutive potential ordinary shares.
Borrowings are classified as current financial liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
GOODS AND SERVICES TAX (GST)
The operations of the Group comprise taxable and exempt supplies. All balances in the consolidated balance sheet are stated
net of GST with the exception of trade receivables and payables which are shown inclusive of GST, and fixed assets which may
be shown inclusive or exclusive of GST depending on whether or not the GST was recoverable at time of purchase.
The areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect
on the amount recognised in the consolidated financial statements are:
Where goods and services are purchased that relate to exempt supplies, the amounts recognised are inclusive of non-
recoverable GST.
DIVIDENDS
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and assumptions about the future in preparing their financial statements that affect the reported
amounts of assets and liabilities. The actual results will often differ from the estimates made. Estimates and judgements are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The assessment that there was no impairment of the goodwill in the Redshaw CGU ('cash generating unit') at 30 June
2019. The valuation of the CGU is based on a discounted cashflow of management forecasts of future financial
performance and therefore there is inherent estimation uncertainty. Assumptions made in the valuation and the underlying
financial forecasts are detailed in Note 12 - Intangible assets and Goodwill.
34
The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The
Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the
Group's past history and existing market conditions, as well as forward-looking estimates at the end of each reporting
period. Details of the key assumptions and inputs used are disclosed in Note 16.
Other Judgements include:
35
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
1.Financial information on segments of the business
Asset
Management
Services
Livestock
ServicesCorporate
Total
Continuing
$000$000$000$000
- 8,189 - 8,189
Commission Income- 12,141 - 12,141
Other Income- 111 - 111
- 925 - 925
- 21,366 - 21,366
- (6,719) - (6,719)
- (635) - (635)
- (504) (95) (599)
Rental and operating Leases (external)- (117) (2) (119)
Employee benefit expense- (7,671) (86) (7,757)
- (2,923) (393) (3,316)
- 2,797 (576) 2,221
- (220) - (220)
- 2,577 (576) 2,001
Asset
Management
Services
Livestock
ServicesCorporate
Total
Continuing
$000$000$000$000
- 16,181 2,478 18,659
- 5,380 - 5,380
-
21,561 2,478 24,039
- (15,107) (280) (15,387)
- (1,884) (1,000) (2,884)
- (16,991) (1,280) (18,271)
The Asset Management Services segment managed the assets previously acquired from Hanover Finance Limited, United Finance
Limited and their subsidiary companies. The Asset Management Services activities are carried out by Allied Farmers Investments
Limited and subsidiary companies. The Asset Management Services activities were completed during FY17 with the realisation of the
remainin
g assets.
The segment assets and liabilities as at 30 June 2019 are as follows:
Allied Farmers Limited and Subsidiaries
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The
chief operating decision maker has been identified as the Board of Directors (The Board). The Board receives financial information for
the three operating segments, being Asset Management, Livestock Services and Corporate.
The Livestock Services segment relates to livestock sale activities, the financing of livestock sales, and calf procurement, processing
and sales. These activities service a single customer base. The Livestock activities are influenced by seasonality. Livestock sales are
normally stronger in the autumn season and calf sales traditionally occur mainly in the first half of the financial year.
Corporate activities comprise the livestock services and corporate activities of the Group including the remaining activities of the
holding company Allied Farmers Rural Limited.
The segment results for the year ended 30 June 2019 are as follows:
Sales of goods
Interest Income
Total Income
Depreciation and amortisation
Interest and funding expense (external)
Net Other expenses (external)
Profit/Loss before income tax
Income Tax
Profit/Loss after Income Tax
Cost of Inventory sold
Current Assets
Non Current Assets
Assets
Current Liabilities
Non Current Liabilities
Liabilities
36
Asset
Management
Services
Livestock
ServicesCorporate
Total
Continuing
$000$000$000$000
- 4,685 - 4,685
- 12,852 - 12,852
- 676 - 676
451 19 - 470
451 18,232 - 18,683
- (4,165) - (4,165)
- (546) - (546)
- (501) (93) (594)
Rental and operating expense- (139) (2) (141)
Employee benefit expense- (7,614) (53) (7,667)
(2) (2,634) (499) (3,135)
449 2,633 (647) 2,435
- (1,519) 1,519 -
- (210) - (210)
449 904 872 2,225
Asset
Management
Services
Livestock
ServicesCorporate
Total
Continuing
$000$000$000$000
- 14,513 177 14,690
- 5,631 - 5,631
-
20,144 177 20,321
- (12,344) (960) (13,304)
-
(2,551)
(1,000)(3,551)
- (14,895) (1,960) (16,855)
NoteGroupGroup
JuneJune
20192018
$000$000
2Interest and funding expense
Borrowings - Other bank borrowings167 197
Borrowings - Finance Receivables181 142
Borrowings - Finance lease156 137
Borrowings - Bonds 95 118
599 594
3Other operating expenses
Included in other operating expenses are:
PricewaterhouseCoopers - audit fees140 104
PricewaterhouseCoopers - direct expenses associated with the audit7 6
Directors' fees20 159 141
Contractors and consultants190 282
Information systems expenses68 61
Compliance costs122 103
Loss on sale of fixed assets24 59
Insurance141 140
Software and hardware maintenance65 76
Storage217 138
Marketing and advertising381 408
Telecommunications218 227
Vehicle expenses774 676
Other expenses810 714
3,316 3,135
The segment results for the year ended 30 June 2018 are as follows:
Other Income
Total Income
Interest Income
Sale of goods
Commission Income
Net Other expenses (external)
Profit/Loss before income tax
Inter-segmental income
Non Current Assets
Assets
Current Liabilities
Non Current Liabilities
Liabilities
Cost of Inventory Sold
Current Assets
Income Tax
Profit/Loss after Income Tax
The segment assets and liabilities as at 30 June 2018 are as follows:
Depreciation and amortisation
Interest and funding expense (external)
37
4Earnings per shareJuneJune
20192018
(a) Basic earnings per share
Profit attributable to owners of the parent from continuing operations ($000)1,2581,535
Weighted average number of ordinary shares on issue (thousands)165,987161,505
Weighted average number of ordinary shares on issue (thousands) after share consolidation adjustment16,59916,151
Basic earnings per share (cents)7.589.51
(b) Diluted Earnings per share
25
1,2581,535
Weighted average number of ordinary shares on issue (thousands)165,987161,505
Weighted average number of ordinary shares on issue (thousands) after share consolidation adjustment16,59916,151
Diluted earnings per share (cents)7.589.51
5
Taxation
GroupGroup
JuneJune
20192018
$000$000
Current tax:
Current tax on
profits for the year301369
Deferred tax:
Reco
gnition of deferred tax asset (81)(159)
Income tax expense220210
Profit from continuing operations before income tax
2,221
2,435
Prima facie income tax expense at 28%
622
682
Plus/(less) tax effect of permanent and temporary differences:
Non-deductible expenditure
14
9
Timing differences
(32)
13
Recognition of deferred tax asset
(81)
(159)
Use of Group tax losses
(303)
(335)
Income tax expense220
210
Deferred tax balances:
Opening balance
690
531
Deferred tax impact of temporary provisions
5
28
Recognition of tax losses
77
131
Closing balance772
690
Deferred tax is made u
p of the following temporary differences:
Deferred tax assets:
Financial assets at amortised cost - Expected credit losses
13
6
Employee benefit provisions
154
156
Tax losses expected to be recovered in future periods
605
528
772
690
There are no dilutive instruments in 2019.
Profit attributable to the owners of the parent from continuing operations ($000)
Deferred income tax assets are recognised for tax losses to the extent that the realisation of the related tax benefit through future taxable
profits is probable. The tax losses are available to be offset against the future taxable profits of the Group, subject to the shareholder
continuity requirements of the tax legislation being met.
As at 30 June 2019 the balance of imputation credits available to the shareholders of the Parent Company only were $112,341 (June 2018:
$237,799).
The calculation of basic earnings per share at 30 June 2019 was based on the following profit attributable to
ordinary shareholders and a weighted average number of ordinary shares outstanding, calculated as follows:
Group unrecognised deferred tax assets comprised of unused tax losses as at 30 June 2019 total $43,530,255 gross (June 2018:
$45,751,628).
Recognition of tax losses not previously recognised
Refer note 25 for details of share consolidation subsequent to balance date
38
6Share capitalGroup
Group
20192018
$000
$000
Ordinary shares (fully paid)
Balance at be
ginning of year
151
,779
151,779
Cancellation of shares
(261)
-
Issue of shares
1
,500
-
Balance at end of
year
153
,018
151,779
Total
153,018
151,779
000's
000's
Number of shares issued and fully paid
Balance at beginning of year
161,505
161,505
Cancellation of shares
(3,506)
-
Issue of ordinar
y shares
20
,548
-
Balance at end of year
178,547
161,505
20192018
7Accumulated LossesGroup
Group
20192018
$000
$000
Balance at beginning of year
(149,544)
(150,756)
Net profit for the year
1,258
1,535
Dividends Paid (a fully imputed 0.2 cents per share was paid in January 2019)
(323)
(323)
Balance at end of
year
(148,609)
(149,544)
8Non Controlling Interest2019
2018
$000
$000
Balance at the beginning of the year
1,231
797
Current year profit
743
690
Acquisition of shares in Redshaw Livestock Limited
-
17
Allied Farmers Rural Limited purchase of shares in subsidiary NZ Farmers Livestock Ltd
(22)
-
Dividend paid to Non Controlling Interests
(593)
(273)
Balance at end of year
1,359
1,231
2019
2018
$000
$000
Cash flows generated from operating activities
Cash generated from operations3,679
3,714
Interest paid(504)
(500)
Income tax paid(378)
(323)
Net cash generated from operating activities2,797
2,891
Net cash (used in) investing activities(466)
(2,865)
Net cash generated from/(used in) financing activities(1,240)
(1,345)
Net (decrease)/increase in cash and cash equivalents1,091
(704)
Cash and cash equivalents at beginning of year383
1,087
Cash and cash equivalents at end of yea
r
1,474
383
Livestock Services
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as
transactions with owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share
acquired of the carrying value of the net assets of the subsidiary acquired is recorded in equity. Gains or losses on disposals to non-
controlling interests are also recorded in equity.
The subsidiaries that have Non Controlling Interests that are material to the Group are found in Note 13 of these consolidated financial
statements. The summarised cash flows for the subsidiaries that have Non Controlling Interests are shown below.
Ordinary shares in the Parent do not have a par value. All ordinary shares rank equally as to voting, dividends and distribution of capital on
liquidation.
The total number of shares on issue as at 30 June 2019 is 178,547,294 (June 2018: 161,505,350). Refer note 25 for details of share
consolidation subsequent to balance date.
39
9BorrowingsGroup
Group
2019
2018
$000
$000
Bank borrowings - Finance Receivables (secured)
1,500
1,500
415
417
-
550
Finance leases
494
472
2,409
2,939
1,560
1,940
1,000
1,000
324
611
2,884
3,551
Borrowin
g Covenants
Current
Bonds (secured)
Non Current
Bank borrowings - Trading (secured)
Bonds (secured)
Bank borrowings - Trading (secured)
The creation of the Farmers Meat Export Limited facility has created the following additional securities granted in favour of the ANZ Bank
New Zealand Limited - A cross guarantee between NZ Farmers Livestock Limited and Farmers Meat Export Limited, a first ranking
General Security Agreement over the assets of Farmers Meat Export Limited, and a first ranking General Security Agreement over all the
assets of NZ Farmers Livestock Limited.
A subsidiary NZ Farmers Livestock Finance Limited has two on demand facilities of $3,000,000 (Bull Financing Facility) and $2,000,000
(General Livestock Financing Facility). The Bull Financing Facility was not drawn down as at 30 June 2019. The on demand overdraft
facility for NZ Farmers Livestock Finance Limited balance owing at 30 June 2019 is $2,000,000 (30 June 2018 Nil). This overdraft facility
has been offset against cash balances in accordance with the facility agreement. The facilities have an interest rate of the commercial
overdraft base rate minus a margin of 2.6%.
A subsidiary NZ Farmers Livestock Finance Limited has entered into a new general financing livestock loan commercial loan facility of
$1,500,000 on 20 June 2019. This is due for repayment on 30 June 2020 and has an interest rate of 3.45% p.a. as at 30 June 2019, plus
an additional margin of 2.15% p.a. Principal reductions are being made at at $25,000 per month. The balance owing at 30 June 2019 is
$1,500,000 (30 June 2018: $1,500,000).
Bonds
Allied Farmers Rural Limited issued $550,000 of Bonds on 29 August 2016. The Bonds were secured by way of a second charge General
Security Agreement over all of the assets and undertakings of Allied Farmers Limited and subsidiaries excluding NZ Farmers Livestock
Limited and subsidiaries and a specific security over the shares held by Allied Farmers Rural Limited in NZ Farmers Livestock Limited
plus a guarantee from Allied Farmers Limited and subsidiaries. The bonds had an interest rate of 7.75%. There were no specific financial
covenants. The bonds were repaid on 31 March 2019.
Allied Farmers Rural Limited also issued $1,000,000 of Bonds on 30 September 2014. The Bonds are secured by way of a first charge
General Security Agreement over all of the assets and undertakings of Allied Farmers Limited and subsidiaries excluding NZ Farmers
Livestock Limited and subsidiaries and a specific security over the shares held by Allied Farmers Rural Limited in NZ Farmers Livestock
Limited plus a guarantee from Allied Farmers Limited and subsidiaries. The Bonds repayment date is 30 September 2021 and have an
interest rate of a 450 basis point margin over the 4 year swap rate as at 30 September 2017 as advised in writing to the Allied Farmers
Rural Limited by ANZ Bank NZ Limited, but not less than 6.50% per anum and not more than 7.50% per anum. At 30 June 2018 the
interest rate on the Bonds was 7.3% p.a. There are no specific financial covenants.
Finance Leases
Bank borrowings - Trading
NZ Farmers Livestock Limited borrowed $3,050,000 on 3 September 2013 from the ANZ Bank NZ Limited to part finance the acquisition
of the sale yards purchased from Allied Farmers Limited. There were 3 loans secured by way of a first mortgage charge over the sale
yards concerned. On 29 May 2018 the ANZ Bank NZ Limited reset the loan terms in the amount of $2,388,400 with the current interest
rate on two of the the loans as at 30 June 2019 being the one month commercial loan fixed rate plus a margin of 2.15% p.a with the third
incurring interest at 6.25% p.a. The loans are due for repayment on 6 September 2021. Principal reductions are being made at at
$33,120
per month. The balance owing at 30 June 2019 is $1,974,930 (30 June 2018: $2,357,757).
Overdraft Facilities
NZ Farmers Livestock Limited has an overdraft facility of $1,000,000 which has not been drawn down as at 30 June 2019 (June 2018:
Overdrawn $Nil). This facility has an interest rate being the commercial overdraft base rate minus a margin of 2.6% p.a. and is secured
over the assets of NZ Farmers Livestock Limited and subsidiaries Farmers Meat Export Limited and NZ Farmers Livestock Finance
A subsidiary, Farmers Meat Export Limited has, from 1 July 2019, an undrawn seasonal overdraft facility of $3,000,000 (2018
$2,700,000) which is on demand. This facility has an interest rate of the commercial overdraft base rate minus a margin of 2.6% p.a.
Bank Borrowings - Finance Receivables
ANZ Bank New Zealand Limited
The bank applies a financial covenant annually that the NZ Farmers Livestock Limited EBIT (earnings before interest and taxation) must
be at least 3 times the interest cost expense. The Company has complied with this covenant throughout the year. In addition the Group
must provide annual financial statements within 5 months after balance date and NZ Farmers Livestock Finance Limited has receivables
concentration and arrears covenants commencing from 31 December 2019.
Both facilities are secured by way of a fixed and floating charge over the finance receivables and secondly, all other assets of NZ
Farmers Livestock Limited and Farmers Meat Export Limited.
40
Finance LeasesGroup
Group
2019
2018
$000
$000
551
539
325
648
876
1,187
(58)
(105)
818
1,082
494
472
324
611
818
1,083
10Trade and other
payablesGroup
Group
2019
2018
$000
$000
Trade creditors
11,643
8,525
Employee benefits, profit share and commissions
1,133
1,180
Other creditors and payables
147
527
12,923
10,232
Em
ployee benefits
11Pro
perty, plant and equipmentGroup
Group
2019
2018
$000
$000
Freehold lan
d
Cost at beginning of year
2,019
2,019
Additions
-
-
Disposals
-
-
Cost at end of year
2,019
2,019
Buildin
gs
Cost at beginning of year
1,041
1,030
Purchases
-
11
Disposals
(8)
-
Cost at end of year
1,033
1,041
Accumulated depreciation at beginning of year
(299)
(237)
Depreciation charged to consolidated profit or loss statement
(62)
(62)
Disposals- -
Accumulated depreciation at end of year
(361)
(299)
Buildings net book value
672
742
Motor vehicles
Cost at beginning of year
1,729
1,412
Additions
340
1,139
Disposals
(283)
(822)
Cost at end of year
1,786
1,729
Accumulated depreciation at beginning of year
(532)
(835)
Depreciation charged to consolidated profit or loss statement
(520)
(387)
Disposals
180
690
Accumulated depreciation at end of year
(872)
(532)
Motor vehicles net book value
914
1,197
Later than 1 year and no later than 5 years
Future Finance Charges of Finance Lease Liabilities
Present Value of Finance Lease Liabilities
The present value of finance lease liabilities is as follows:
No later than 1 year
Later than 1 year and no later than 5 years
Finance Lease Liabilities
Lease liabilities are effectively secured as the right to the
leased asset revert to the lessor in the event of default
Gross Finance Lease Liabilities - minimum lease payments
No later than 1 year
Finance Lease liabilities have arisen on the financing of the acquisition of motor vehicles. The Finance Leases provide for the ownership
of the vehicle to remain with the Lessor and NZ Farmers Livestock Limited (the Lessee) has a commitment to pay monthly instalments.
The security for the Finance Leases is the motor vehicle. The Lessee has also committed to meet further obligations relating to distance
covered and condition of the vehicle on the expiry of the Finance Lease. Under the terms of the finance lease NZ Farmers Livestock
Limited has the option to purchase in respect of motor vehicles held under finance leases.
In the event of liquidation of the Parent, unless statutorily required otherwise, all creditors within this class will rank in priority ahead of
shareholders.
Employee benefit entitlements consist of holiday pay provisions and provisions for staff bonus payments. Holiday pay is provided for at
contractual pay rates and is paid to staff in accordance with statutory terms as and when annual leave is taken during the financial period.
Bonus payments are based on staff performance against key indicators and are paid within three months following the end of the Group's
financial year.
41
Plant and equipment
Cost at beginning of year
426
305
Additions
46
131
Disposals
-
(10)
Cost at end of year
472
426
Accumulated depreciation at beginning of year
(194)
(155)
Depreciation charged to consolidated profit or loss statement
(44)
(46)
Disposals- 7
Accumulated depreciation at end of year
(238)
(194)
Plant and equipment net book value
235
232
5,310
5,215
(1,471)
(1,025)
Total property, plant and equipment net book value
3,839
4,190
Cost Capitalised Finance Lease
1,787
1,730
(872)
(532)
Net Book Amount
915
1,198
12Intan
gible assets and GoodwillGroup
Group
2019
2018
$000
$000
Com
puter software
Cost at beginning of year
234
225
Additions
22
9
Cost at end of year
256
234
Accumulated amortisation at beginning of year
(225)
(174)
Amortisation charged to profit or loss statement
(9)
(51)
Disposals
-
-
Accumulated amortisation at end of year
(234)
(225)
Computer software net book value
22
9
742
100
Additions
-
642
742
742
764
751
A Cash Generating Unit ("CGU") level summary of the goodwill allocation is presented below.
NZF
LRedshawTotal
$000$000$000
Redshaw
-
642642
NZFL100
-
100
Total100642742
NZFLRedshawTotal
$000$000$000
Redshaw
-
642 642
NZFL100
-
100
Total100 642 742
Revenue Growth Rate 5.0%
Long Term Growth Rate2.5%
Pre Tax Discount Rate15.0%
Property, plant and equipment cost at end of year
Property, plant and equipment accumulated depreciation at
end of year
Vehicles include the following amounts where the Group is a leasee under a Capitalised Finance Lease:
Accumulated Depreciation
Goodwill
Cost at beginning of year
Cost at end of year
Total Intangible Assets and Goodwill
Impairment Tests For Goodwill - Redshaw
Goodwill arose on the acquisition of a controlling interest in Redshaw Livestock Limited. On an annual basis, the recoverable amount of
Goodwill is determined based on value in use calculations specific to the Redshaw CGU. These calculations use pre-tax cash flow
projections based on financial budgets prepared by management covering a five year period. Cash flows beyond the five year period are
extrapolated by way of a terminal value calculation using the estimated growth rates stated below.
The growth rates adopted are consistent with internal forecasts and budgets. The discount rate reflects the specific risks relating to the
cash flow being discounted. As a result no impairment charge was recognised in the financial statements.
2019
2018
42
The recoverable amount of this CGU would equal its carrying amount if any of the key assumptions were to change as follows:
From
To
Revenue Growth Rate (%)5.0%4.0%
Long Term Growth Rate (%)2.5%1.5%
Pre-tax discount rate (%)15.0%15.5%
Im
pairment Test for Goodwill - NZFL
13Investment in subsidiaries
20192018
Subsidiaries of the Parent
Allied Farmers Investments LimitedInvestment
100%100%
Allied Farmers Rural LimitedInvestment
100%100%
ALF Nominees Limited
100%100%
Allied Farmers (New Zealand) Ltd
100%100%
Subsidiaries of Allied Farmers Rural Limited
NZ Farmers Livestock LimitedLivestock Agency and Finance
67%66%
Subsidiar
y of NZ Farmers Livestock Limited
Meat Processing and Trading
100%100%
Livestock Finance
100%100%
Redshaw Livestock Limited **Livestock Agency
52%52%
Subsidiaries of Allied Farmers Investments Limited
Allied Farmers Property Holdings Limited
100%100%
QWF Holdin
gs Limited
100%
100%
100%
100%
Lifestyles of New Zealand Queenstown Limited
100%
100%
LONZ 2008 Limited
100%
100%
LONZ 2008 Holdings Limited
100%
100%
Subsidiaries of Allied Farmers Pro
perty Holdings Limited
UFL Lakeview Limited
100%
100%
5M No. 2 Limited
100%
100%
14Joint Arran
gements
Non-Trading
Non-Trading
Farmers Meat Exports Limited
NZ Farmers Livestock Finance Ltd
Clearwater Hotel 2004 LimitedNon trading
Impact of possible changes in key assumptions
Non tradin
g
Non trading
The Directors and management have considered and assessed reasonably possible changes for other key assumptions and have not
identified any instances that could cause the carrying amount of the Redshaw CGU to exceed its recoverable amount.
Goodwill of $100,000 arose on the acquisition of a finance book from Stock Plan Limited previously supplying finance to a number of NZ
Farmers Livestock Limited customers. On an annual basis the recoverable amount of this goodwill is tested by undertaking an
assessment of its fair value less costs of disposal specific to the NZFL CGU ( comprising the Livestock Services business excluding
Redshaw and the meat processing and trading business). This assessment uses the fair value multiple calculated upon acquisition of
0.49. This multiple has been computed via dividing the total purchase price by total bull revenue, and is applied against the current
year's earnings. No impairment charge was required to be recognised in the financial statements. There are no forseeable changes in
assumptions which could result in a material impairment.
Below is a sensitivity analysis showing the impact on value of changes to the key variables:
The recoverable amount of the Redshaw CGU is estimated to have exceeded the carrying amount of the CGU at 30 June 2019 by
$35,000.
2019
The Group's subsidiary NZ Farmers Livestock Limited owns a proportion of various sale yard tangible assets and has joint arrangements
in relation to the operation of these sale yards (referred to as 'Associated Auctioneers').
These joint operations are in place over four different locations. These joint operations are charged with the operating activities of the
sale yards including conducting sales of livestock via the auction process, maintaining the sale yards, collecting levies on livestock sales
and meeting operating costs of the yards. If there is a shortfall in the income to meet the operating costs in any one year then the joint
operation's parties are required to contribute to the shortfall in the proportion of their ownership of the sale yards.
Non trading
Non trading
Non trading
Non trading
Non trading
** NZ Farmers Livestock Limited guarantees the BNZ bank overdraft of Redshaw Livestock up to $338,000, plus interest and costs.
All companies within the Group are incorporated in and have their principal place of business in New Zealand, and have a balance date of
30 June.
43
Share of
Joint
Operation
Location
2019
2018
- Associated Auctioneers
33%Te Kuiti
$000
$000
53
81
53
53
-
28
263
280
291
304
(28)
(24)
- Associated Auctioneers
50%Stratford
184
147
28
12
43
23
199
158
295
297
254
219
41
78
- Associated Auctioneers
50%Frankton
212
111
48
17
104
112
268
206
574
618
412
363
162
255
- Associated Auctioneers
25%Morrinsville
172
174
34
20
206
217
Net assets344
371
248
334
275
275
(27)
59
15
2019
2018
$000
$000
Redshaw Livestock Ltd original cost including legal expenses of 17% shareholding
- -
Additional cost of further 17% shareholding
- -
- -
- -
- -
- -
- -
Investments accounted for using the equity method
The various joint operations are:
Summarised Balance Sheet
Current Assets
Net assets
Current Liabilities
Net Assets
Loss before taxation
Summarised Balance Sheet
Current Assets
Current Liabilities
Non current assets
Summarised statement of profit or loss
Income
Expenses
Summarised Balance Sheet
Current Assets
Current Liabilities
Non current assets
Net assets
Summarised statement of profit or loss
Summarised statement of profit or loss
Income
Expenses
Profit
Summarised Balance Sheet
Income
Expenses
Profit
Expenses
Loss
There are various contractual restrictions in relation to the assets and liabilities of these joint operations, such as requiring unanimous
agreement in relation to accessing the bank accounts.
The joint operation of the sale yards is strategically vital to the interests of NZ Farmers Livestock Limited as the sale yards activity
provide significant income to NZ Farmers Livestock Limited via commission on the sale of livestock handled through the sale yards.
The amounts recognised in the consolidated balance sheet are as follows:
Current Assets
Current Liabilities
Non current assets
Summarised statement of profit or loss
Income
Fair value adjustment recognised in other operating expense in
Share of profit for year (net of dividend)
Total
Working capital loan
The amounts recognised in the consolidated profit or loss are as follows;
Redshaw Livestock Ltd
44
Name of entityPlace of Nature of Measurement
Redshaw Livestock NZLivestock Equity
2019
2018
$000
$000
- -
- -
- -
- -
- -
- -
- -
-
1,281
Profit for period after tax
-
-
Tax on previous year
-
-
-
-
-
1,281
-
436
-
(436)
- -
16Trade and other receivables2019
2018
$000
$000
Trade receivables livestock (gross)
11,482
9,390
4,725
4,619
Expected credit losses
(48)
(23)
Trade receivables (net of provision)
16,159
13,986
Prepayments
2
13
16,161
13,999
Aging of Past Due Receivables that are not impaired
433
852
261
123
305
246
999
1,221
17Inventories 2019
2018
$000
$000
197
122
18Net Debt Reconciliation
This section sets out an analysis of net debt and movements in net debt for the year ended 30 June 2019.2019
2018
$000
$000
Borrowings - repayable within 1 year(2,409) (2,939)
Borrowings - repayable after 1 year(2,884) (3,551)
Less: Cash and cash equivalents2,301569
Net debt(2,992)(5,922)
Cash and Bank Balances2,301 569
Gross debt - fixed interest rates(2,716) (3,441)
Gross debt - variable interest rates(2,577) (3,050)
Net debt(2,992)(5,922)
Summarised Balance Sheet
Current Assets
Current Liabilities
Non current assets
Net assets
The associate listed below has share capital consisting solely of ordinary shares, which are held directly by the Group:
Interest in associate at 34%
Amount brought to account on acquisition majority shareholding 1 July 2017 including a fair
value adjustment totalling ($38,000)
The entity has adopted the general expected credit loss model for material financial assets, e.g. in relation to customer loans. Refer Note
21.1.
Summarised statement of profit or loss
Income
Expenses
Profit before Tax
Reconciliation of summarised financial information
Opening net assets at 1 July 2017
Trade receivables finance (gross) - refer below
These comprise finished goods (after allowing for obsolete stock as at 30 June 2019 of $18,000) related to
the meat trading and processing business
61-90 days
Total Past Due Receivables
Dividend
Net assets at Date of acquisition of controlling interest
1-30 days
31-60 days
There are also Finance Receivables totaling $635,993 which are past their due date at 30 June 2019 (2018 $379,444). All have been
subject to specific assessment and there are no expected credit losses. Note that apart from one account of $30,134 (2018 $14,575) all
are less than 4 months past due.
It is expected that all trade receivables will be collected within 12 months of the balance date. All accounts past their due date have been
subject to individual assessment. No credit losses are expected.
45
Cash/Bank Finance Secured BondsTotal
Net debt as at 1 July 2018569 (1,083) (3,857) (1,550) (5,921)
Cash Flows1,732 265 382 550 2,929
Cash Flows from Finance Receivables - inflows- - 1,500 - 1,500
Cash Flows from Finance Receivables - outflows- - (1,500) - (1,500)
Net debt as at 30 June 20192,301 (818) (3,475) (1,000) (2,992)
19Reconciliation of net profit after tax for the year with cash flow from operating activities
JuneJune
2019
2018
$000$000
Note
Net profit after tax for the period2,0012,225
Adjustments for:
Impairment of debtors
25 (21)
(Profit)/Loss on sale of assets46 59
Depreciation11, 12635546
Movement in deferred tax assets5(81) (159)
625425
Movement in working capital:
(Increase)/Decrease in trade and other receivables16(2,092)(3,242)
Increase/(Decrease) in payables and provisions102,6912,488
(Increase) in inventory17(75)(104)
Decrease in tax payable(78)(7)
446(865)
Net cash (outflows)/inflows from operating activities3,0721,785
20Related party transactions
Overview of related party transactions
Categories of related party relationships
(a) Key management personnel
2019
2018
$000
$000
Salaries and other short term benefits
300
354
Directors fees
159
141
Total key management personnel compensation
459
495
Directors long service leave entitlement
56
218
All transactions with related parties are entered into in the ordinary course of business.
Related party transactions are detailed by reference to the following categories:
(a) Key management personnel: those persons having authority and responsibility for planning, directing and controlling the activities of
the Group, directly or indirectly, including all directors.
(b) Other related parties: Other related parties including entities that may have directors who are also directors of the Company.
There are no directors fees unpaid as at 30 June 2019 (2018: nil).
Certain directors and key management of the Group of companies have completed livestock trading transactions with the Group's
subsidiary, NZ Farmers Livestock Limited, which over the year totalled $707,648 in sales (2018 $534,163), $491,425 in purchases
(2018 $424,553), and $35,769 in commission (2018 $20,650).
As at 30 June 2019 those directors and key management owed the Group $9,200 (2018: $226,781) which has since been settled and
the Group owed those parties $131,316 (2018: $34,044) for livestock transactions at arms length on normal commercial terms. There
have been no bad debts written off any of these amounts.
(b) Other related parties
Allied Farmers Rural Limited during the year has lent surplus funds to its subsidiary NZ Farmers Livestock Limited on commercial
terms set at arms length, these funds being on call and interest bearing at a rate comparable to the bank facilities. As at 30 June 2019
the total of these funds lent to NZ Farmers Livestock Limited was $1,296,000 (2018 $878,000).
Albany Braithwaite Holdings an associated person of Director Mark Benseman is the holder of $600,000 in bonds.
46
21
Financial risk management
21.1
Credit risk
Risk exposures by class of financial instrument
Cash and cash equivalents
Trade and other receivables
2019
2018
$000$000
1,971
264
245
240
85
65
2,301
569
All banks have a minimum rating of A- or higher.
2019
2018
$000$000
1,318
2,697
14,841
11,289
16,159
13,986
24
31
Group 1
Group 2
Trade and Finance Receivables written off at year end
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about
counterparty default rates.
Credit quality of financial assets
Cash at bank
Bank of New Zealand
TSB Bank Limited
Trade and Finance Receivables
Counterparties without external credit rating
ANZ Bank New Zealand Limited
The Group manages its exposure using a credit policy that includes limits on exposures with significant counterparties that have been set
and approved by the Board and are monitored on a regular basis and does not have any significant concentration of risk with any single
party.
The Group's largest percentage of trade and finance receivables is made up of transactions with small scale rural consumers. An internal
review is completed over the credit worthiness based upon financing information of these consumers before financing is made available.
No credit risk rating grades are completed for the trade and finance receivables.
The Group’s activities expose it to a variety of financial risks, market risk (including currency and interest rate risk), credit risk and liquidity
risk. The Group’s overall risk management program seeks to minimise potential adverse effects on the Group’s financial performance.
The Group's financial assets are categorised into cash and cash equivalents, trade and other receivables, and advances.
For all trade and other receivables, there is the risk that the counterparty to the receivables may not settle its obligations when they fall
due. The maximum credit risk is the face value of the trade and other receivables. The exposures are largely unsecured except for
receivables for livestock finance which are secured over the livestock. Risk exposures in trade and other receivables are managed on a
case-by-case basis depending on the materiality of the exposure.
Credit risk is the risk that a counterparty to a transaction with the Group will fail to discharge its obligations, causing the Group to incur a
financial loss. Financial instruments that potentially subject the Group to concentrations of credit risk consist principally of cash and cash
equivalents, and trade and other receivables.
The Group's assets subject to credit risk as at 30 June 2019 are $16.159 million (2018 $13.986 million).
The Group is exposed to the risk of default by placing cash deposits with banks.The maximum credit risk is the face value of its cash
deposits. The Group's exposure to banks is unsecured. To manage this risk, the Group only deposits cash with New Zealand registered
banks. While cash and cash equivalents are also subject to the expected credit loss requirements of NZ IFRS 9 the identified expected
credit losses was immaterial.
Profit or loss is sensitive to higher/lower interest income from cash and cash equivalents as a result of changes in interest rates. An
increase of 100 basis points in interest rates would increase post tax profits by $8,970 and would decrease post tax profit if a 100 point
decrease in interest rates occurred.
47
21
Financial risk management (continued)
Group 2 - existing customers more than six months with no defaults in the past
Credit Risk Disclosures - customer loans, general expected credit loss model applied
Financial Risk Management
Category
Stage 1 - Performing
Stage 2 - Underperforming
Stage 3 - Non-Performing (credit
impaired)
Stage 4 - Write-off
21.2 Liquidity risk
Basis for recognition of
expected credit loss
12 month expected lossesLoans whose credit risk is in line with original
expectations.
The Group considers the probability of default upon initial recognition of an asset and whether there has been a significant
increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase
in credit risk, the company compares the risk of default occurring on the asset as at the reporting date with the risk as at the
date of initial recognition. It considers available and reasonable supportive forward looking information. Especially the following
indicators are incorporated:
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 60 days past due in
making a contractual payment.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a
repayment plan with the Group. The Group categorises a loan or receivable for write off when a debtor fails to make
contractual payments more than 180 days past due. Where loans or receivables have been written off, the company continues
to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made these are recognised
in profit or loss.
- actual or expected significant adverse changes in business, financial or economic conditions that are expected
to cause a significant change in the borrowers ability to meet its obligations.
- significant changes in the expected performance and behaviour of the borrower, including changes in the
borrowers operating results
Interest and/or principal repayments are 90
days past due or it becomes probable a
customer will enter into bankruptcy.
Interest and/or principal repayments are 180
days past due and there is no reasonable
expectation of recovery.
Lifetime expected losses
Lifetime expected losses
Asset is written off
Loans for which a significant increase in
credit risk has occurred compared to original
expectations. A significant increase in credit
risk is presumed if interest and/or principal
repayments are 60 days past due.
A default on a financial asset is when the counterparty fails to make contractual payments within 90 days of when they fall due.
Group 1 - new customers less than six months
The Group has no credit rating for Trade and Finance Receivables. The Group continually assesses the Trade and Finance
Receivables credit risk and measures the risk against receipts that may not have been paid on time. The Group's experience is
that the rates of default by Trade and Finance Receivables is minimal.
Liquidity risk is reviewed on an ongoing basis and managed to meet requirements. Cash flow forecasting is performed in the
operating entities of the Group and aggregated at Group level. The Group monitors rolling forecasts of the Group's liquidity
requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn
committed borrowing facilities (note 9) at all times so that the Group does not breach borrowing limits or covenants (where
applicable) on any of its borrowing facilities.
The amounts disclosed in the tables below show the contractual undiscounted cash flows due on financial liabilities. The
amounts below also reflect the contractual repricing timing on financial liabilities, if applicable.
The Group uses 3 categories of loans which reflect their credit risk and how the loan loss provision is determined for each of
those categories
Definition of
Cate
gory
48
30 June 2019Under 66-121-22-5Over 5
TotalMonthsMonthsYearsYearsYears
$000
Financial liabilities
Trade and other payables12,92312,923----
Borrowings - ANZ Bank New Zealand Ltd3,7053391,6755141,177-
Borrowings - Finance Leases92131023532551-
Borrowings - Bonds1,1653737731,018-
Gross payable on financial liabilities
18,71413,6091,9479122,246-
30 June 2018Under 66-121-22-5Over 5
TotalMonthsMonthsYearsYearsYears
$000
Financial liabilities
Trade and other payables10,23210,232----
Borrowings - ANZ Bank New Zealand Ltd4,2993001,7935141,692-
Borrowings - Finance Leases1,187270263461193-
Borrowings - Bonds1,815319326731,097-
Gross payable on financial liabilities
17,53311,1212,3821,0482,982-
21.3
20192018
$000$000
Borrowings - ANZ Bank Limited and bonds (secured)
+/-
24
31
21.4
21.5
22
23
20192018
$000$000
Operating lease commitments
123119
87137
--
210256
Later than one year and not later than five years
Later than five years
The Group's capital is its equity on the consolidated balance sheet, including its share capital and accumulated losses.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
prices. Market risk comprises three types of risk: currency risk, interest rate risk, and other price risk. The Group is not exposed to
other price risk or currency risk.
Market risk sensitivity analysis
If market interest rates for borrowings - other assets (secured) were to increase or decrease by 50 basis points (bps) the affect on
net profit after tax, and equity, for the year as applied to year end balances would be as follows:
If interest rates for the year were 50 bps higher or lower
Effect on net profit for the year / equity
Capital management
The Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may issue new shares, sell
assets, seek new debt funding, or adjust the amount of dividends paid to shareholders.
Offsetting financial assets and liabilities
The ANZ Bank New Zealand Limited in accordance with the mortgage over the NZ Farmers Livestock Limited sale yards assets may
(but is not obliged to) debit any of the Borrower’s other bank accounts with the ANZ Bank New Zealand Limited with any amount
payable by the Borrower under that mortgage agreement.
The result of this arrangement is that the ANZ saleyards borrowings of $1,974,930 (2018 $2,357,757) and ANZ finance receivables
of $1,500,000 (2018 $1,500,000) could be settled by realising the assets over which they are secured. Refer also Note 9.
Contingent assets and liabilities
There were no material contingent assets or liabilities outstanding as at 30 June 2019 for the Group (2018: nil).
Commitments
The following amounts have been committed by the Group but not recognised in the
financial statements:
Not later than one year
24
Financial assets and liabilities
Cash and short term deposits
These are short term in nature and their carrying value is equivalent to their fair value.
Trade, related party and other receivables
Trade, related party and other payables
These liabilities are mainly short term in nature with their carrying value approximating their fair value.
Borrowings
The Group’s classification of each class of financial assets and their fair values is set out below:
Financial
Assets at
Amortised
Cost
Financial
Liabilities
at
Amortised
Cost
Total
30 June 2019$000$000$000
Assets per balance sheet
Cash and cash equivalents2,301- 2,301
Finance Receivables4,710- 4,710
Trade and other receivables11,449- 11,449
18,460- 18,460
Liabilities per balance sheet
Trade and other payables- 12,92312,923
Borrowings - Bank- 3,4753,475
Borrowings - Bonds- 1,0001,000
Borrowings - Finance Leases- 818818
- 18,21618,216
30 June 2018$000$000$000
Assets per balance sheet
Cash and cash equivalents569- 569
Trade and other receivables13,986- 13,986
14,555- 14,555
Liabilities per balance sheet
Trade and other payables- 10,2323,857
Borrowings - Bank- 3,8571,550
Borrowings - Bonds- 1,5501,083
Borrowings - Finance Leases- 1,08316,722
- 16,72223,212
Financial Assets pledged as collateral for bank facilities
2019
2018
$000
$000
Cash and cash equivalents
1,971
397
Trade and other receivables
16,159
13,986
18,130
14,383
The Group leases premises, plant and equipment and motor vehicles. Operating leases held over properties give the Group
the right to renew the lease subject to a redetermination of the lease rental by the lessor. There are no renewal options or
options to purchase in respect of plant and equipment held under operating leases. There are options to purchase in respect of
motor vehicles held under finance leases (refer note 9). There are also options to purchase Land and Buildings currently
leased if certain criteria are met.
Borrowings have fixed and floating interest rates. Fair value is estimated using the discounted cash flow model based on a
current market interest rate for similar products; their carrying value approximates their fair value.
These assets are short term in nature and are reviewed for impairment; their carrying value approximates their fair value.
50
25 Subsequent Events
On 30 July 2019, Redshaw Livestock Limited declared a dividend of which the Group's share is $104,000.
(d) Registered first ranking general security agreement over the present and after acquired property of NZ Farmers Livestock
Finance Limited.
(a) Cross guarantee and indemnity between NZ Farmers Livestock Limited, Farmers Meat Export Limited, and NZ Farmers
Livestock Finance Limited.
(b) Registered first ranking general security agreement over the present and after acquired property of Farmers Meat Export
Limited.
(c) Registered first ranking general security agreement over the present and after acquired property of NZ Farmers Livestock
Limited.
The pledged assets are secured to ANZ Bank New Zealand Ltd under the following securities:
On 1 July 2019, Allied Farmers Limited announced that they will undergo a capital decrease of shares ("share
consolidation"). Shareholders received one ordinary share for every ten ordinary shares held at 5pm on the
record date of 16 July 2019. Implementation date was Wednesday 17 July 2019. As a result of the consolidation
the number of shares will be reduced from 178,547,294 to approximately 17,854,729 Shares.
51
52
PricewaterhouseCoopers, PwC Centre, 10 Waterloo Quay, PO Box 243, Wellington 6140, New Zealand
T: +64 4 462 7000, pwc.co.nz
Independent auditor’s report
To the shareholders of Allied Farmers Limited
We have audited the consolidated financial statements which comprise:
the consolidated balance sheet as at 30 June 2019;
the consolidated statement of profit or loss and other comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended;
the statement of accounting policies; and
the notes to the consolidated financial statements.
Our opinion
In our opinion, the accompanying consolidated financial statements of Allied Farmers Limited (the
Company), including its subsidiaries (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 the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code
of Ethics for Assurance Practitioners (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.
Our firm carried out other services for the Group in the area of tax consulting services subsequent to 30
June 2019. The provision of these other services has not impaired our independence as auditor of the
Group.
53
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the consolidated
financial statements are free from material misstatement.
Overall Group materiality: $108,600, which represents approximately 5% of
profit before tax.
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark.
We have determined that there is one key audit matter:
Assessment of goodwill for impairment
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 consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the 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 consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated 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 misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion
on the consolidated financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industries 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 consolidated financial statements of the current year. We have one key audit matter: the
assessment of goodwill for impairment. This matter was addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on this matter.
54
Key audit matter How our audit addressed the key audit matter
Assessment of goodwill for impairment
As disclosed in Note 12 to the consolidated
financial statements, the Group has
$742,000 of goodwill, comprising
$100,000 relating to NZ Farmers Livestock
Limited (NZFL) and $642,000 relating to
Redshaw Livestock Limited (Redshaw).
Management is required to undertake an
impairment assessment of goodwill at least
annually. No impairment charge has been
recorded against goodwill in the current
financial year.
The impairment assessment of goodwill
involves valuing the cash generating unit(s)
(CGUs), including goodwill. Management
has identified two CGUs: NZFL and
Redshaw. While judgement underpins any
impairment assessment, the Redshaw CGU
is the only CGU requiring significant
judgement due to the nature of the
assessment and the significant value
attributed to goodwill. Therefore, the
goodwill impairment assessment for
Redshaw was considered a key audit
matter.
Management has prepared a goodwill
impairment assessment using a discounted
cash flow model to determine a value in use
for the Redshaw CGU. The valuation
requires the use of judgements and
estimates in forecasting future cash flows
including revenue growth rates, the
discount rate and the terminal growth rate.
Management has assessed that the goodwill
is able to be supported by the discounted
cash flows over a five year forecast period,
including a terminal value.
Our audit procedures included the following
We understood and evaluated the Group’s
processes and controls relating to the goodwill
impairment assessment.
We obtained management’s valuation of the
relevant CGU’s and undertook the following:
o Compared forecast results to the Board-
approved budget;
o Challenged management on key
assumptions including forecast revenue
growth rates and the terminal value growth
rate;
o Assessed management’s forecasting
accuracy by comparing historical forecasts
to actual results; and
o Used an in-house valuation expert to test
the mathematical accuracy of the goodwill
impairment model and assess the
reasonableness of the discount rate and
terminal value growth rate.
We also assessed whether management’s
disclosures relating to the impairment
assessment, including disclosures of the
sensitivities of key assumptions, were consistent
with the requirements of accounting standards.
The audit procedures performed responded to the risk
surrounding the judgements and estimates made by
management in concluding there was no impairment of
the carrying value of goodwill.
Information other than the consolidated financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial statements
does not cover the other information included in the annual report and we do not express any form of
assurance conclusion on the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with
the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. 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.
55
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as
the Directors determine is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as
a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (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 consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial 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 Christopher Ussher.
For and on behalf of:
Chartered Accountants
27 August 2019
Wellington
COMPANY DIRECTORY
Directors of the Company
Mark Benseman (Chairperson) BA (Hons in Economics).
2b/3 Clyde Quay Wharf
Te Aro
Wellington 6011
Philip C Luscombe BAgSci (Hons)
199 Palmer Road
RD 28
Hawera 4678
G Andrew McDouall BCA, Dip NZSE
5 Fancourt Street
Karori
Wellington 6012
Marise James FCA, FInstD
3 Sunset Street
Bell Block,
New Plymouth 4312
R
ichard Perry B Com (Hons), FCA, CTP
116 Woburn Road
Woburn
Lower Hutt 5010
Registered Office of the Company
201 Broadway
Stratford 4332
Postal Address of the Company
PO Box 304
Stratford 4352
Ph: 06 765 6199
A
uditors
PricewaterhouseCoopers
10 Waterloo Quay
P.O. Box 243
Wellington 6011
Share Registrar
Link Market Services Limited
PO Box 91976
Auckland 1142
Shareholder Enquiries
Link Market Services Limited
Ph: 09 375 5998
Fax: 09 375 5990
Email: lmsenquiries@linkmarketservices.com
PO Box 91976
Auckland 1142
56
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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