Moa Group announces annual results
MOA GROUP LIMITED
NZX Release
Moa Group Announces Annual Results
26 June 2020
Moa Group Limited (NZX: MOA) (“Moa”, “the Group”), New Zealand’s own brewing and hospitality company,
today reports its results for the year ended 31 March 2020.
The Group reported total revenue of $38 million compared to $16 million in the prior year, the significant
increase reflected the addition of the Hospitality business during the year. The Group broke even at an
underlying EBITDA level compared to a loss of $2.0 million in the prior year.
Including the one-off acquisition and restructuring costs incurred during the year and the significant non-cash
charges of depreciation, amortisation and interest, net earnings after tax were a loss of $4.0 million compared
to a loss of $3.0 million in the prior year. Adjusting for the impact of these non-cash items resulted in positive
cash from operations of $2.2 million compared to cash outflows of $3.5m in the prior year.
FY20 was a year of transformation for the Group. The acquisition of Savor Group on 1 April 2019 and the
subsequent addition of Non Solo Pizza on 30 September 2019 formed Moa Hospitality and saw the Group’s
vertical integration strategy come to life. The Auckland Fish Market venues became more established having
completed its first full year of operation, and the opening of the Group’s latest venue Lobster & Tap in
December 2019 was also a highlight.
After a strong early summer and Christmas trading period, the Group was impacted significantly late in the
financial year due to the impact of COVID-19. Hospitality trading decreased sharply from late January as the
first news of the pandemic reached New Zealand shores. The reduction in visitation led to a decrease of 22% in
revenue for the last three months of the year compared to the prior year, which was exacerbated at an
underlying EBITDA level due to the high level of operating and fixed costs. This resulted in a decrease in
underlying EBITDA over the last three months of 29% compared to the prior year, to $2.5 million. The Group
reacted quickly to put contingency plans in place ahead of the mandated Government lockdown at Alert Level
4, but the impact prior to this was unavoidable.
The turnaround of Moa Beverages accelerated during the year with the introduction of new products,
elimination of unprofitable SKU’s, reformulating and pivoting the ‘Classics’ range from bottled to canned
product. The Beverages business has removed approximately $1.0 million from its operating cost base, on an
annualised basis, and by 31 March 2020 had reduced its working capital by $4.6 million compared to the prior
year resulting in strong positive cash inflows for the year. Moa Beverages underlying EBITDA loss for the full
year was $1.4 million compared to a loss of $1.6 million in the prior year.
Subsequent to year end the Group welcomed a new cornerstone investor, restructured its obligations to the
Savor vendors and undertook a rights issue, raising a total of $8.3 million of new capital with $6.1 million
received in cash. Market conditions deteriorated significantly during the COVID-19 Alert Level 4 lockdown,
however, the Beverages business was able to continue trading as an essential service as part of the grocery
supply chain, and the Hospitality business moved quickly to pivot into online takeaway and delivery offerings as
Savor Goods.
On the balance sheet, the new funds raised provide greater flexibility for the security of the Group over this
time. They also ensure that the Group is able to continue its strategy of growth and to target potential
acquisitions as the market allows.
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2
First quarter trading has been stronger than expected, with both businesses demonstrating a significant uplift
through Alert Levels 2 & 1. This trading has been positive, however, the Group expects the Hospitality market
to continue to be muted as the industry faces significant uncertainty over the near to medium term. The Group
will continue to focus on controlling costs and operating a lean business model as it adjusts to a new normal.
Due to the uncertain trading environment the Group is unable to provide guidance on earnings for FY21 at this
time.
Moa Group Executive Chair Geoff Ross said “The recent months have been full of challenges for Moa as we
grappled with many changes across our business. We are particularly pleased that Savor Group has been
integrated seamlessly into Moa Group to form a strong Moa Hospitality business and the momentum that has
built across the year has been encouraging. It has been great to see the cash turnaround in Moa Beverages as
we proactively sought ways to reduce costs and innovate with new and exciting products.
“We have not been immune to the outbreak of COVID-19 with many of our venues shutting as the New
Zealand government entered Alert Levels 3 and 4. While we acted quickly to maximise revenues through a new
online home delivery business, Savor Goods, COVID-19 has had a significant negative impact on our business in
the second half of the year.
“However, our new cornerstone shareholder and an oversubscribed capital raising of $8.3 million brings new
potential for the year ahead and we are excited to continue our vertical strategy with an aim to be a ‘gate to
plate’ and ‘vat to tap’ full-service hospitality group.”
For more information contact
Geoff Ross (Executive Chair): 021 424 219
About Moa Group Limited
Moa Group Limited (NZX: MOA) is a brewing and hospitality company owned by and based in New Zealand.
The Group is made of two segments: Moa Beverages, which brews and distributes Moa branded craft beers
and ciders, and Moa Hospitality, which owns and operates restaurants and bars across New Zealand following
the acquisition of the Savor Group and Non Solo Pizza businesses in April and September 2019 respectively.
---
Results Announcement
(for Equity Security issuer)
Results for announcement to the market
Name of issuer Moa Group Limited
Reporting Period 12 months to 31 March 2020
Previous Reporting Period 12 months to 31 March 2019
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
38,273 N/A
Total Revenue 38,273 N/A
Net profit/(loss) from continuing
operations
(4,041) -35%
Total net profit/(loss) (4,041) -35%
Amount per Quoted Equity Security Not Applicable
Imputed amount per Quoted Equity
Security
Not Applicable
Record Date Not Applicable
Dividend Payment Date Not Applicable
Current period Prior comparable period
Net tangible assets per Quoted
Equity Security
$(0.08) $0.11
A brief explanation of any of the
figures above necessary to enable
the figures to be understood
The Group acquired the Hospitality segment during the year which led to a
significant increase in total revenue. Therefore the percentage change is not
meaningful. The net loss after tax includes the operations of the new segment.
Authority for this announcement
Name of person authorised to make
this announcement
Geoff Ross
Contact person for this
announcement
Geoff Ross
Contact phone number +64 21 424 219
Contact email address
geoff@moabeer.com
Date of release through MAP 26/06/2020
Audited financial statements accompany this announcement.
---
Moa Group Limited
Financial statements for the year ended
31 March 2020
1
Moa Group Limited
Index to the Financial Statements
31 March 2020
Page
Directors’ Report 2
Auditors’ Report 3-5
Consolidated Statement of Comprehensive Income 6
Consolidated Statement of Movements in Equity 7
Consolidated Balance Sheet 8
Consolidated Statement of Cash Flows 9
Notes to the Financial Statements 10-22
2
Moa Group Limited
Directors' Report
31 March 2020
The Board of Directors has pleasure in presenting the financial statements and audit
report for Moa Group Limited for the year ended 31 March 2020.
The financial statements presented are signed for and on behalf of the Board of
Directors and were authorised for issue on 26 June 2020.
Geoff Ross
Executive Chairman
Sheena Henderson
Chair of the Audit and Risk Committee
Grant Thornton New Zealand
Audit Partnership
L4, Grant Thornton House
152 Fanshawe Street
PO Box 1961
Auckland 1140
T +64 (0)9 308 2570
F +64 (0)9 309 4892
www.grantthornton.co.nz
Chartered Accountants and Business Advisers
Member of Grant Thornton International Ltd
To the Shareholders of Moa Group Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Moa Group Limited (the “Company”) and its subsidiaries (“the
Group”) on pages 6 to 22 which comprise the consolidated balance sheet as at 31 March 2020, and the consolidated
statement of comprehensive income, consolidated statement of movements in equity and consolidated statement of
cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting
policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial
position of the Group as at 31 March 2020 and its financial performance and cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) issued by the New
Zealand Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)) issued by
the New Zealand Auditing and Assurance Standards Board. 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 are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for
Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Other than in our capacity as auditor we have no other relationship with, or interests in, the Group.
Material Uncertainty Related to Going Concern
We draw attention to the consolidated statement of comprehensive income which indicate the Group incurred a net loss
before income tax of $4.0 million during the year ended 31 March 2020 and Note 2 which describes the Group’s reliance
upon sufficient cash flow generation from operations and dependency on future fundraising to enable the Group to
continue its business operations. As stated in Note 2, these events and conditions, along with other matters indicate
that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern
section we have determined the matters described below to be the key audit matters to be communicated in our report.
Independent Auditor’s Report
Chartered Accountants and Business Advisers
Member of Grant Thornton International Ltd
Why the audit matter is significant How our audit addressed the key audit matter
Business Combinations - valuation of investments
in new businesses
During the reporting year 31 March 2020 the Group
acquired two new hospitality businesses, Savor Group
and Non Solo Pizza. Net consideration paid of $24.1m
comprising net assets of $4.9m and goodwill recognised
of $19.1m and other disclosures that can be seen in
Note 2a and Note 9. Given the significance of the
purchase, the degree of estimation and judgement
involved by Directors and level of audit effort incurred,
we considered the recognition, measurement, and
disclosure of these business acquisitions to be a key
audit matter.
The procedures we performed to conclude on the
business combinations included:
• Understanding the sale and purchase
agreements for each acquisition, critically
assessing the approach and assumptions
used to identify and fair value all the assets as
well as any liabilities.
• We challenged the Directors estimates and
judgements surrounding contingent
consideration elements arising from future
expected ‘earn-out’ payments to vendors
based upon achieving specific hospitality
venue sales targets over 24-month period
from the acquisition date.
• We reviewed the adequacy of the disclosures
made in notes 2a and 9 of the financial
statements relating to the acquisitions
completed during the year.
Carrying Value of Intangible Assets
Intangible assets (Note 9) primarily consists of goodwill
of $19.1m arising from business acquisitions during the
year as described in note 2a. Goodwill has been
allocated to five cash generating units based on the
respective hospitality site.
The Group is required to test goodwill for impairment on
an annual basis. The Group uses a value in use model
to determine the recoverable amount of the individual
cash generating units. The COVID19 global pandemic
has impacted the New Zealand economy and hospitality
sector in particular. COVID19 as described in note 2
creates significant uncertainty of trading at least in the
short term which impacts cash flows generated by the
cash generating units. The inherent uncertainty
involved in forecasting and discounting future cash
flows is one of the key judgement areas the Directors
have concentrated on. The uncertainty is affected by a
number of factors including economic factors in the New
Zealand economy, which form the basis for the
assessment of recoverability.
Given the significance of intangible assets, the degree
of estimation and judgement involved by Directors and
level of audit effort incurred, we considered the carrying
value of goodwill within intangible assets to be a key
audit matter.
Our audit procedures included a detailed evaluation of
the Group’s cash flows forecast and value in use model
for the cash generating units. Our procedures
included:
• Assessed the key inputs used in the value in
use model being revenue growth rate,
discount rate, terminal growth rate and
utilisation of income tax losses available to the
Group, and
• Assessed the reliability and sensitivity of the
Group’s forecasting by comparing the current
year results with the budgeted forecast, and
• Inquiries and discussions with management
and Directors in relation to future business
plans ensuring consistency with forecasts
used in the value in use model.
In addition, we used our own valuation specialist to
evaluate the assumptions and methodologies used by
the Group in the value in use model. We also assessed
whether the Group’s disclosures about the sensitivity in
key assumptions fairly reflected the risks inherent in the
valuation of goodwill.
Chartered Accountants and Business Advisers
Member of Grant Thornton International Ltd
Other Information
The Directors are responsible for the other information. The other information comprises the Annual Report, but does
not include the financial statements and our auditor’s report thereon. The Annual Report is expected to be made
available after the date of this auditor’s report.
Our opinion on the financial statements does not cover the other information and we will not express any form of audit
opinion or assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified
above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
Directors’ responsibilities for the Consolidated Financial Statements
The Directors are responsible on behalf of the Group for the preparation and fair presentation of the consolidated
financial statements in accordance with NZ IFRS issued by the New Zealand Accounting Standards Board, 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 on behalf of the Group for assessing
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
Auditor’s responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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) 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 the auditor’s responsibilities for the audit of the financial statements is located on the External
Reporting Board’s website at: https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-1/
Restriction on use of our report
This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we
might state to the Company’s shareholders, as a body 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 its shareholders, as a body, for our audit work, for this report or for
the opinion we have formed.
Grant Thornton New Zealand Audit Partnership
Kerry Price
Partner
Auckland
26 June 2020
Moa Group Limited
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2020
2020
2019
(restated)
Note
$000's
$000's
Revenue
38,273
15,902
Expenses:
Direct costs
16
(14,940)
(7,567)
Excise taxes
(4,246)
(4,301)
Employee costs
16
(12,464)
(1,880)
Marketing costs
(1,710)
(1,726)
Utilities and operational expenses
(1,735)
(170)
Other expenses
(1,686)
(709)
Warehousing and freight costs
(1,485)
(1,527)
Other income
3
16
Earnings before depreciation, amortisation, interest, tax and business
acquisition and restructuring expenses
10
(1,962)
Depreciation and amortisation
(2,666)
(433)
Business acquisition and restructuring costs
2b
(99)
(569)
Net interest expense
(1,286)
(23)
Loss before income tax(4,041)
(2,987)
Taxation expense14
- -
Loss attributable to the shareholders(4,041)
(2,987)
Other comprehensive income and expenses
-
-
Total comprehensive loss(4,041)
(2,987)
Basic and diluted losses per share (cents) 13
(4.8)
(4.3)
Weighted average number of shares outstanding (thousands of shares)
Basic and diluted
85,035
68,953
The accompanying notes form part of and are to be read in conjunction with these financial statements.
6
Moa Group Limited
Consolidated Statement of Movements in Equity
For the year ended 31 March 2020
Note
Share capitalUnissued capital
Accumulated
losses
Share-based
payments
reserve
Total equity
$000's$000's$000's
$000's$000's
Total equity at 1 April 201826,528 - (21,071)
116 5,573
Total comprehensive loss for the year
- -
(2,987)-
(2,987)
Share based payments143
- - (52)91
Issue of new shares5,434
- - - 5,434
Total equity at 31 March 201932,105 - (24,058)64 8,111
Total equity at 1 April 2019
32,105 - (24,058) 64 8,111
Total comprehensive loss for the year- - (4,041) - (4,041)
Arising from business combination2a, 111,999 1,999
Issue of new shares116,787 - - - 6,787
Total equity at 31 March 202038,892 1,999 (28,099)64 12,856
The accompanying notes form part of and are to be read in conjunction with these financial statements.
...
7
Moa Group Limited
Consolidated Balance Sheet
As at 31 March 2020
2020
2019
Note
$000's
$000's
Assets
Current assets:
Cash and cash equivalents- 2,585
Derivatives- 4
Trade and other financial receivables
4 2,021
2,982
Inventories
5 2,293
2,838
Total current assets
4,314
8,409
Non-current assets:
Trade and other financial receivables
4 423
758
Property, plant and equipment
8 7,651
2,159
Intangible assets
9 19,673
403
Right of use asset
19 8,819
-
Total non-current assets
36,566
3,320
Total assets40,880
11,729
Liabilities
Current liabilities:
Bank overdraft
597
-
Trade and other payables
6 4,569
3,089
Contract liabilities
7 610
528
Lease liability
19 1,038
-
Borrowings
10 1,643
-
Related party payables
2a3,183
-
Total current liabilities
11,640
3,617
Non-current liabilities:
Contract liabilities
7 1,294
-
Contingent consideration
2a1,234
-
Lease liability
19 8,067
-
Borrowings
10 5,789
-
Total non-current liabilities
16,384
-
Total liabilities28,024
3,617
Equity
Share capital
11 38,892
32,105
Reserves
(26,036)
(23,993)
Total equity 12,856
8,112
Total liabilities and equity40,880
11,729
The accompanying notes form part of and are to be read in conjunction with these financial statements.
8
Moa Group Limited
Consolidated Statement of Cash Flows
For the year ended 31 March 2020
Note
2020
2019
$000's
$000's
Cash flow from operating activities
Receipts from customers
39,944
14,508
Payments to suppliers, employees and other
(37,761)
(18,108)
Income tax paid
-
31
Net cash from/(used) in operating activities2,183
(3,569)
Cash flow from investing activities
Purchase of property, plant and equipment and intangible assets
(845)
(330)
Purchase of businesses
(10,962)
-
Purchase of investments(36)
Net cash used in investing activities(11,807)
(366)
Cash flow from financing activities
Interest paid
(392)
-
Borrowings drawn down
7,432
-
Lease liability principal repayment
19
(1,012)
-
Lease liability interest repayment19
(534)
-
Issue of shares
947
5,534
Net cash from financing activities6,441
5,534
Net movement in cash held
(3,183)
1,599
Add: opening cash and cash equivalents
2,586
987
Closing cash and cash equivalents(597)
2,586
The accompanying notes form part of and are to be read in conjunction with these financial statements.
9
Notes to the Financial Statements
1Significant accounting policies
Basis of preparation
Principles of consolidation
Foreign currency translation
Revenue recognition
Hospitality
Venue revenue
Supplier loan revenue
Brewing
Sale of goods
Contract Assets and Contract Liabilities
Income tax
The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the Balance
Sheet (see note 7). Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in
the Balance Sheet (see note 4), depending on whether something other than the passage of time is required before the consideration is due.
The financial statements have been prepared under the historical cost basis, as modified by the revaluation of certain assets and liabilities as identified in specific accounting
policies below.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred. Accounting policies have been applied consistently across the Group.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only to the extent that it is probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Moa Group Limited (‘the Parent’ or ‘Company’) and its subsidiaries (together ‘the Group’) operate in the beverage sector, brewing and distributing super premium craft beer and
cider, and the hospitality sector, operating a number of premium restaurants and bars. The Company has operations in New Zealand and sells predominantly to the New Zealand
market. The address of its registered office is 6/46 Maki Street, Westgate, Auckland 0814.
The Group is a public company incorporated in New Zealand and is listed with the New Zealand Stock Exchange on the NZX. The consolidated financial statements presented are
those of Moa Group Limited and its subsidiaries (the "Group"). Moa Group Limited is a company domiciled in New Zealand, registered under the Companies Act 1993 and is a
Financial Markets Conduct Act 2013 reporting entity in terms of the Financial Reporting Act 2013 under which the financial statements are prepared. The Company is a for-profit
entity. The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand, which is the New Zealand equivalent to
International Financial Reporting Standards (NZ IFRS). They also comply with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards
Board. The financial statements are presented in New Zealand dollars, which is the functional currency of both Moa Group Limited and its subsidiaries.
The financial statements incorporate the assets and liabilities of Moa Group Limited and its 100% owned subsidiaries Moa Brewing Company Limited, Savor Group Limited, and
Red Claw Trading Company, as well as interests in joint operations (together the ‘Group’) as at 31 March 2020 and the trading results for the year then ended.
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. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the
date control ceases. From that date they are deconsolidated.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of the subsidiary is the fair values of the assets
transferred, the liabilities incurred to 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. Acquisition costs are expensed as incurred.
Foreign currency transactions on any date are translated into the functional currency using the exchange rates approximating the rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the profit or loss component of the statement of comprehensive income.
The income tax expense or revenue for the year is the total of the current year’s taxable income based on the national income tax rate for each jurisdiction adjusted for any prior
years' under or over provisions, plus or minus movements in the deferred tax balance except where the movement in deferred tax is attributable to a movement in reserves. The
current income tax charge is calculated on the basis of tax laws enacted or substantially enacted at balance date.
Movements in deferred tax are attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements and any
unused tax losses or credits. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or
liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. An exception is made for certain temporary differences arising from
the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to temporary differences if they arose in a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or loss or taxable profit or loss.
The Group recognises revenue when it is highly probable that a significant reversal of revenue will not occur. The following accounting policies apply to the Group's businesses
from 1 April 2019.
The Group enters into contracts with a number of suppliers and receives upfront cash payments in return. Typically these contracts relate to the supply of beverages and include
an initial signing fee plus a prepaid rebate. The Group has determined that the initial fee and prepaid rebate constitute separate performance obligations and recognise the
revenue accordingly. The initial fee is deferred onto the balance sheet as a contract liability and is recognised as revenue over time, evenly across the term of the contract. The
prepaid rebate is also held as a contract liability and is recognised as revenue over time in line with the quantity of product consumed, based on the contracted rebate rate.
The Group derives venue revenue through the sale of food and beverages and by hosting events. This revenue is recognised at a point in time, being the point of sale. For
significant events, the Group receives deposits in advance to secure the booking. These deposits are deferred on the balance sheet as a contract liability and are recognised as
revenue at a point in time, being the date of the event. The Group has determined that there is a single performance obligation for these transactions even though part-payment
may be received in advance.
10
Brewing revenue consists of the sales of beer and cider products to distributors and end customers. Revenue is recognised at a point in time as the customer obtains control of
individual sales orders, which occurs when the goods are accepted by the customer at the point of delivery. The Group has pricing agreements with individual customers that
determine the terms of sale and revenue is measured net of returns, trade discounts and volume rebates. The Group has one customer who has prepaid for future orders and this
balance is deferred on the balance sheet as revenue received in advance, to be recognised as orders are fulfilled.
Goods and services tax (GST)
Excise tax
Cash and cash equivalents
Impairment of non-financial assets
Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
Financial instruments
Recognition and derecognition
Classification and initial measurement of financial assets
• Amortised cost
• Fair value through profit or loss (FVTPL)
• Fair value through other comprehensive income (FVOCI)
In the periods presented the Group does not have any financial assets categorised as FVTPL or FVOCI.
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Impairment of financial assets
In applying this forward looking approach, a distinction is made between:
• financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’) and
• financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’)
Measurement of the expected credit losses is determined by probability weighted estimate of credit losses over the expected life of the financial instrument.
Trade and other receivables and contract assets
Classification and measurement of financial liabilities
The Group’s financial liabilities include trade and other payables, contingent consideration, employee benefits, borrowings and related party payables.
Where excise tax is a production tax it is included in the statement of comprehensive income in both revenue and cost of sales. The excise tax component of sales is included in
receipts from customers in the statement of cash flows, and the excise tax payments are included in payments to suppliers and employees.
Financial assets and liabilities are recognised when the Group becomes a party to contractual provisions of the instrument. Financial assets are derecognised when the
contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risk and rewards are transferred. A financial liability is
derecognised when it is extinguished, discharged, cancelled or expires.
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15 (Revenue from
Contracts with Customers), all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Financial assets, other than those designated
and effective as hedging instruments, are classified into the following categories:
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s
cash and cash equivalents and trade and other receivables fall into this category of financial instruments.
Recognition of credit losses uses the ‘expected credit loss (ECL) model’. The Group considers a broad range of information when assessing credit risk and measuring expected
credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of future cash flows of the instrument.
The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit
losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial
instrument.
Current and deferred tax assets and liabilities of individual entities are reported separately in the consolidated financial statements unless the entities have a legally enforceable
right to make or receive a single net payment of tax and the entities intend to make or receive such a net payment or to recover the current tax asset or settle the current tax
liability simultaneously.
Cash and cash equivalents include cash on hand, deposits held on call with financial institutions and other short term highly liquid investments with original maturities of three
months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent
entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. The income tax
expense or credit attributable to amounts recognised in other comprehensive income is also recognised in other comprehensive income.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 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).
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through
profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method.
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12 month expected credit losses’ are recognised in Stage 1, while 'lifetime
expected credit losses' are recognised for Stage 2.
11
The statement of comprehensive income has been prepared so that all components are stated exclusive of GST. All items in the statement of financial position are stated net of
GST, with the exception of receivables and payables, which include GST invoiced. All items in the statement of cash flows are also stated net of GST.
Changes in accounting policy
New standards and interpretations adopted in the current period
NZ IFRS 16
Accounting standard that are issued but not yet effective
2Key estimates and judgements
Going concern
Annual goodwill impairment testing
NZ IFRS 16: Leases - lease liabilities, right-of-use assets
Management has assessed the likelihood of exercising renewal options for each of the properties and has applied the minimum contractual lease term.
COVID-19 impact
The financial statements have been prepared on a going concern basis, the validity of which depends on the Group generating sufficient cash flows in future periods and if
necessary, its ability to raise new equity. The uncertainty of meeting forecast financial performance and dependency on future fundraising creates a material uncertainty that may
cast doubt on the Group's ability to continue as a going concern.
If the Group was unable to continue in operational existence for the foreseeable future, adjustments may have to be made to reflect the fact that assets and liabilities may need to
be realised at amounts other than those at which they are currently recorded in the statement of financial position and the Group may have to provide for further liabilities that may
arise.
Subsequent to year end (as outlined in note 22) the Group raised $8.3m of new equity, resulting in total cash receipts of $6.1m. While the trading environment continues to be
uncertain due to COVID-19 (refer below and note 22), the three months of trading subsequent to year end have been solid for both the hospitality and brewing businesses which
are positive cash contributors to the Group.
Given the above, the Directors are confident that there is no need to raise additional capital, as the Group is able to meet its forecast financial performance and remains a going
concern for the foreseeable future, which is not less than 12 months from the date these financial statements are approved for issue.
The outbreak of the Coronavirus (COVID-19) was declared by the World Health Organisation as a 'Global Pandemic' on 11 March 2020. Since that time there has been an
increased adverse impact on global financial markets. There have been travel restrictions implemented by many countries and economic stimulus packages announced by most
governments. Market activity is being impacted in almost every sector and there has been a major reduction in hospitality activity. It is difficult at the current time to determine if
this is a short term reduction or is indicative of a longer term change in consumer behaviour.
The Group's brewing operations primarily service the grocery market, supplying supermarkets on a distribution centre basis. While there has been a reduction in demand for on-
premise customers, grocery demand has remained strong. For Hospitality, as the Government restrictions have been lifted progressively the uptake in trading has been strong,
however, it remains uncertain as to whether this indicates a return to pre-COVID-19 levels or is only temporary.
The impact of COVID-19 has been estimated by management and incorporated into the forecast revenues which form part of the value in use models used for goodwill
impairment testing. These models did not result in an impairment at 31 March 2020.
In determining the discount rate to measure the present value of the lease payments remaining, the Group has used the incremental borrowing rate of the Group. When estimating
this rate, the Group took into consideration the market interest rates on commercial property lending, and applied a risk factor to this for the current stage of the Group's growth.
The incremental borrowing rate applied to the lease liabilities on 1 April 2019 was estimated at 5.54% by management.
Several other amendments and interpretations apply for the first time from 1 April 2019, but do not have an impact on the consolidated financial statements of the Group.
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units in the acquired businesses. The value in use calculation requires
the Directors to estimate the future cash flows expected to arise from the cash generating units and a suitable discount rate in order to calculate present value.
The revenue assumption and other key inputs are based on management expectations of the budget period and balance of the forecast period. These assumptions and key
estimates and judgements are disclosed in note 2c.
For FY20, the Group had positive cash inflows from operations of $2.3m (2019: cash outflows of $3.6m), however, due to the impact of non-cash items such as depreciation,
amortisation, and lease liability interest, made a net loss before tax of $4.0m (2019: $3.0m).
The Group had net current assets/(liabilities) of ($7.3M) at balance date (2019: $4.8m). Subsequent to year end (refer to note 22), the Group reached an agreement to extend the
payment date of the related party payable and obtained a debt principal repayment holiday. Adjusting for these transactions, net current liabilities were $3.3m.
12
These financial statements are prepared using the same accounting policies as the prior year with the exception of NZ IFRS 16, the impact of which is outlined below.
The Group has adopted NZ IFRS 16, which replaces NZ IAS 17 Leases and removes the distinction between operating and finance leases for lessees, in the current financial
year. NZ IFRS 16 requires the Group to recognise most leases, where it is a lessee, in the consolidated balance sheet, similar to the previous finance lease model. This has
resulted in the recognition of ‘right-of-use’ assets and related lease liability balances.
Rental payments for leases previously classified as operating leases for property have moved from being included in operating expenses, to depreciation and finance expenses.
The impact on net earnings before income tax of an individual lease over its term remains the same, however, the new standard results in a higher interest expense in the early
years of a lease and lower in the later years, compared with the previous straight-line expense profile of an operating lease. A summary of the impact of the new standard on the
Group's financial statements is provided in note 19.
The Group has undertaken a number of key estimates and judgements when preparing these financial statements, the details of which are outlined in this note. These judgements
have been formed using historical information and comparatives where available, and management's best judgement where there is no appropriate comparison. The Group
continues to review all significant estimates along with the assumptions used and recognises any adjustments to these in the period in which a change occurs.
2aBusiness combinations
Savor Group
The deferred consideration to be settled in shares has been recognised within an unissued capital reserve within equity.
Non Solo Pizza (NSP)
Savor GroupNon Solo PizzaTotal
$000's$000's$000's
Purchase price20,506 3,811 24,317
Less: settlement adjustments(202) (57)
(259)
Net consideration20,304 3,754
24,058
Net consideration made up of the following:
Cash paid7,758 3,204 10,962
Value of shares issued5,040
550 5,590
Deferred consideration4,905 - 4,905
Contingent consideration1,919 -
1,919
Settement of pre-existing receivable682 - 682
Total net consideration20,304 3,754
24,058
Recognised assets acquired and liabilities assumed:
Property, plant and equipment5,535 617 6,152
Intangible assets52 52
Cash1 1
Inventories329 60 389
Right of use assets8,162 1,432 9,594
Employee entitlements(196)(56)(252)
Lease liabilities(8,162)(1,432)(9,594)
Other liabilities(1,295)(137) (1,432)
Identifiable net assets4,425 485 4,910
Goodwill recognised15,879 3,269 19,148
Consideration settled in cash7,758 3,204 10,962
Cash and cash equivalents acquired
(1)
(1)
Net cash outflow on acquisition7,758 3,203 10,961
Contribution to earnings
Earnings per share
The issue of additional shares during the period through an entitlement offer had the following impact on net earnings per share for the comparative periods:
2019
Reported net earnings per share(5.1)
Net earnings (NZ$000's)(2,987)
Adjusted denominator (thousands of shares)68,953
Restated net earnings per share (cents)(4.3)
The net earnings of the Group include the full year of trading for Savor Group Limited totalling revenue of $21.9 million and earnings before interest, tax, depreciation and
amortisation of $2.2 million. Non Solo Pizza's contribution for the six months from acquisition date totalled revenue of $2.4 million and earnings before interest, tax, depreciation
and amortisation of $0.5 million. Had Non Solo Pizza been consolidated for the full financial year, this contribution would have been $4.8 million and $1 million respectively.
In order to fund the acquisition, the Group took on long term borrowings of $5.5 million during FY20 and received $3 million from a share placement during FY19. In April 2019, the
Group also raised a further $1.07 million through a rights issue.
The variable component of contingent consideration is dependent on the achievement of certain agreed commercial milestones within the first 24 months of settlement. Depending
on the outcome of these milestones the sale and purchase agreements allow for an adjustment to the purchase price to be both positive and negative. Management have
considered a range of possible outcomes including the complete achievement of the milestones, which would result in an additional $3 million to be payable. Management have
assessed these possible outcomes based on their probabilities and applied a weighted average cost of capital of 10.1% to conclude the most likely outcome at the time of the
acquisition to be the payment of $1.9 million. Management reassessed the most likely outcome at 31 March 2020 to be $1.2 million and has adjusted the provision accordingly.
Subsequent to year end, the contingent consideration obligation was settled, refer to note 22 for further details.
During the year the Group acquired two new businesses as outlined in note 2a below. The Group obtained control of these business by acquiring the assets, including property
leases and employees. The acquisition of the businesses involved assessments and judgements by the Directors surroudning the fair value of assets acquired in the business
combination, including identification of intangible assets and the determination of the value of contingent consideration, outlined further below.
These transactions met the criteria of a business combination under NZ IFRS 3 Business Combinations, and the balances recognised on acquisition of each are outlined below.
On 1 April 2019, the Group acquired the Savor Group business, consisting of nine hospitality venues in downtown Auckland. The total purchase price of $20.3 million consisted of
a $13 million upfront payment to the vendors, a further $4.9 million to be paid in April 2020 and a variable contingent consideration component. The upfront and deferred payments
are split 60:40 between cash and the issue of shares in the Company and the contingent consideration is to be paid via the issue of shares.
NSP was purchased on 30 September 2019 for total consideration of $3.8 million, consisting of $3.1 million cash and $550,000 in Moa Group Limited shares. This transaction
resulted in the drawdown of a further $3.2 million of long term borrowings.
13
2b
Restructuring and acquisition costs
20202019
$000's$000's
Acquisition costs237
435
Restructuring and other costs546 134
Reassessment of contingent consideration(684)
99
569
2c
Intangible asset impairment
The key inputs and assumptions for each impairment assessment are outlined below:
Seafarers
Ebisu &
Fukuko
Azabu
Auckland Fish
Market
Non Solo Pizza
Revenue decline in year 1 (compared to FY20 performance)
-42.0%-41.0%-42.0%-22.0%-38.0%
Revenue growth in year 2 (compared to FY20 performance)
7.2%4.4%6.0%18.3%2.3%
Revenue growth (Year 3-5)
nilnilnilnilnil
Earnings growth in year 2 (compared to FY20 performance)
39.4%2.2%11.7%39.4%-0.6%
Earnings growth (Years 3-5)
nil
nilnilnilnil
Terminal growth rate
2.5%2.5%2.5%2.5%2.5%
Pre-tax discount rate
13.2%12.5%11.9%12.4%12.1%
3Segmental information
$000's
HospitalityBrewing
Group
Total
2020
Revenue24,090 14,183 38,273
Earnings before depreciation, amortisation, interest, tax and business acquisition
and restructuring expenses
2,487 (1,440) (1,037) 10
Depreciation and amortisation
(2,112) (554) (2,666)
Non-current assets33,752 2,602 36,354
Capital expenditure(637) (208) (845)
2019
Revenue15,902
15,902
Earnings before depreciation, amortisation, interest, tax and business acquisition
and restructuring expenses
(1,598) (364) (1,962)
Depreciation and amortisation(433)
(433)
Non-current assets3,320
3,320
Capital expenditure(325)
(325)
14
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is
responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. Segmental information is presented in
respect of the Group’s industry segments, and includes the businesses acquired during the period. Accordingly, there is no comparative information for the hospitality segment.
The Group's primary place of business is New Zealand with some Moa Brewing sales to export markets. Export sales are individually and wholly immaterial and therefore do not
require separate disclosure.
Trading was strong throughout the year, however, all hospitality venues saw a downturn later in the year as a result of the COVID-19 pandemic. Group management have
performed a comprehensive review of the business in light of COVID-19 and have put a number of measures in place to mitigate the risk of a sustained downturn in trading and
prepare each venue for long term margin growth. A number of these initiatives have been put in place subsequent to year end, however, the benefits of these will be achieved over
the longer term and are, in part, dependent on the recovery of the New Zealand economy.
Acquisition costs incurred during the year relate to Savor Group, Non Solo Pizza, and other potential acquisitions. Restructuring and other costs relate to right-sizing the Group
subsequent to the acquisitions (including the restructure of the Group Executive), and disposal of surplus fixed assets.
Goodwill across the Group was tested for impairment in March 2020. Each cash generating unit (CGU) that carries goodwill is valued on a value-in-use basis using a discounted
cash flow model. Management has used its past experience of sales growth, operating costs and margin, and external sources of information where appropriate, to determine
their expectations for the future. These cash flow projections are principally based on the Group's budget, which is risk adjusted where appropriate. Cash flows beyond five years
have been extrapolated using estimated terminal growth rates, which do not exceed the long-term average growth rate. The terminal growth rate used was 2.5%.
In preparing the goodwill impairment assessment the Group has been conservative in it's assumptions around the recovery of trading. While the early signs of economic recovery
are positive, it is expected that trading will remain muted in the near to medium term. Accordingly, the Group has significantly risk-adjusted the expectations of earnings
performance for the initial year of the 5 year forecast, assuming that the original budgeted performance will be achieved for years 2-5 of the assessment.
The resulting assessment has shown no impairment is required across any of the CGU's. Given the significant adjustment to forecast performance and the nil growth assumed in
the later years of the value in use models, a reasonably possible change (i.e. +/- 1%) in any of the assumptions above would not result in an impairment across any of the CGU's.
4Trade and other financial receivables
2020
2019
$000's$000's
Trade receivables1,588 2,693
Less provision for doubtful debts(63)
(45)
Trade receivables1,525 2,648
Contract assets207 682
Convertible loans216
216
Other receivables
496 194
2,444 3,740
Current
2,021 2,982
Non-current423 758
2,444 3,740
2020
2019
$000's$000's
Current1,668
2,720
0 - 30 days over standard terms149 175
31 - 60 days over standard terms48 40
61+ days over standard terms219 92
Provision(63)
(45)
Trade and other receivables
2,021
2,982
5Inventories
20202019
$000's$000's
Raw materials 1,040 1,227
Work in progress168 205
Finished goods1,085 1,406
2,293 2,838
6Trade and other payables
20202019
$000's$000's
Trade payables4,047 3,006
Employee entitlements522 83
4,569 3,089
Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials and where appropriate, either a
contract manufacturing charge, or direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal
operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. These amounts represent
liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 and 60
days of recognition. Liabilities for wages and salaries, including non
‑
monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the
reporting date are recognised in other payables in respect of employees' services up to the reporting date.
The Group applies the simplified approach to providing for expected credit losses prescribed by NZ IFRS 9, which permits the use of lifetime expected loss provisions for all trade
receivables. Collectability of trade receivables is reviewed on an ongoing basis and a provision for doubtful debts is made when there is evidence that the Group will not be able to
collect the receivable. Additionally, the Group has established an allowance for Expected Credit Loss (ECL) based on its historical credit loss experience, adjusted for forward-
looking factors specific to the receivables and the economic environment. Receivables are written off when recovery is no longer anticipated. There are no overdue receivables
considered impaired that have not been provided for.
15
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less an allowance for impairment.
Trade receivables are due for settlement between 30-90 days from invoice date.
7Contract liabilities
20202019
$000's
$000's
Revenue in advance436 528
Supplier loans1,468
1,904 528
Current610 528
Non-current1,294
1,904
528
The Group recognised $92,000 of revenue during the year that was recognised as revenue in advance at 31 March 2019.
8
Property, Plant & Equipment
Depreciation is calculated using the straight-line method to expense the cost of the assets over their useful lives. The rates are as follows:
Plant and equipment5% - 25%
Leasehold improvements7% - 10%
Fixtures & fittings15 - 25%
Motor vehicles20%
Plant &Fixtures & Leasehold
EquipmentFittingsImprovementsVehiclesTotal
2020
Carrying value at 1 April 20191,82060251282,159
Additions295129258682
Acquisitions1,1167184,3186,152
Disposals(65)(2)(67)
Depreciation(583)(160)(523)(9)(1,275)
Carrying value at 31 March 20202,5837454,304197,651
Represented by:
Cost4,2421,0984,8914710,278
Accumulated depreciation(1,659)(353)(587)(28)(2,627)
2,5837454,304197,651
2019
Carrying value at 1 April 20182,01566219382,338
Additions2471364
324
Impairments(134)(134)
Depreciation(308)(19)
(32)(10)(369)
Carrying value at 31 March 20191,82060251282,159
Represented by:
Cost3,658251315474,271
Accumulated depreciation and impairment(1,838)(191)(64)(19)
(2,112)
1,8206025128
2,159
The Group had no material capital commitments at 31 March 2020 (2019: nil).
All plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. 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 statement of comprehensive income during the financial year in which they are incurred.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Any related gain
or loss on disposal is recognised in the statement of comprehensive income as part of business acquisition and restructuring costs.
The Group has a long term contract brewing agreement with McCashin’s Brewery in Nelson where the Group has invested in plant and equipment at McCashin’s Brewery and
where at the end of the contract brewing agreement McCashin’s may purchase the plant and equipment at fair value.
Contract liabilities arise from transactions with customers where funds have been received but control of the goods or services has not passed to the customer. Revenue in
advance relates to Brewing sales to customers where the Group is party to a supply agreement and is recognised as orders are fulfilled. Supplier loans relate to inducements
received for the long term supply to Hospitality venues. These loans are amortised over the life of the individual contract as the benefits are consumed.
16
9
Intangible assets
GoodwillResourceTrademarks
Consentand SoftwareTotal
2020
Carrying value at 1 April 2019385
18403
Additions161161
Disposals(2)(2)
Acquisitions19,14852
19,200
Amortisation expense(63)(26)(89)
Carrying value at 31 March 2020
19,14832220319,673
Represented by:
Cost19,14863023220,010
Accumulated amortisation(308)(29)(337)
19,14832220319,673
2019
Carrying value at 1 April 2018448
13461
Additions55
Adjustments/impairment(4)4
Amortisation expense(59)(4)(63)
Carrying value at 31 March 201938518403
Represented by:
Cost63023653
Accumulated amortisation(245)
(5)(250)
38518403
Significant cash generating units
20202019
$000's$000's
Seafarers4,320
Ebisu & Fukuko
3,027
Azabu
4,369
Auckland Fish Market
4,163
Non Solo Pizza
3,269
19,148
10
Borrowings
The bank borrowings are subject to the performance of the Group against three covenants:
- The sum of the Group inventory and trade receivables balances must be three times greater than the Group's bank overdraft.
- EBITDA less capital expenditure and tax payments must be greater than 1.5 times the total debt principal and interest payments on a rolling 12 month basis.
- The Group's revenue and EBITDA must be 90% of the budgeted amount on a rolling 12 month basis.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangibles are carried at cost less any accumulated amortisation and
accumulated impairment losses. Intangible assets with indefinite useful lives are not amortised but are tested for impairment annually, either individually or at the cash-generating
unit level. Intangible assets with a definite life are amortised on a straight-line basis.
Resource consent assets relate to the Moa Brewery in Blenheim, New Zealand and is amortised over the life of the resource consent of 10 years. Trademarks and software,
including the cost of development of venue concepts, are amortised over a period of 3-5 years.
Goodwill is stated at cost, less any impairment losses. Goodwill is allocated to cash-generating units (CGUs) and is not amortised but is tested annually for impairment, and when
an indication of impairment exists.
For the purposes of considering whether there has been an impairment, assets are grouped at the lowest level for which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets. When the book value of a group of assets exceeds the recoverable amount, an impairment loss arises and is recognised
in earnings immediately. Refer to note 2c for impairment considerations.
The Group was in compliance with the above covenants for the first two quarters of the year and received waivers from it's banking partner for the remaining quarters. The
Group's banking partner continues to provide support as required, however, given the success of the rights issue subsequent to year end (refer note 22) the Board deemed it
unnecessary to draw down further borrowings.
The Group has bank borrowings of $7.5 million at 31 March 2020 (2019: nil) that were drawn down in two tranches to fund the acquisitions during the year. The average interest
rate on these borrowings during the year was 5.10% (2019: nil). The Group also has access to total overdraft facilities of $2 million (2019: $0.5 million).
The Group recognised a total of $19 million of goodwill as a result of the acquisition of Savor Group and Non Solo Pizza during the year. These have been allocated to the
following significant cash generating units.
The Group took on bank borrowings of $5.5 million to fund the Savor acquisition that expires on 6 March 2024. The Group borrowed a further $3.2 million from the bank to fund the
NSP acquisition that expires on 30 September 2024. Subsequent to year end, the Group's facility was amended to permit a six month principal repayment holiday.
17
11
Capital
20202019
$000's$000's
Reported capital at the beginning of the year32,105
26,528
Issue of shares (net of issue costs)6,787
5,577
38,892 32,105
Number of ordinary shares:
Number of shares on issue at the beginning of the year68,226,886 54,655,131
Issue of shares18,066,656 13,318,097
Share options exercised70,496
253,658
Total number of shares on issue86,364,038
68,226,886
Unissued capital
Share option plan
Number of options
Weighted
average exercise
price (cents)
Outstanding 1 April 2018 894,664
28.2
Granted 693,366
42.9
Forfeited (189,882)
28.2
Exercised (240,501)
28.2
Outstanding 31 March 2019 1,157,647
Granted
Forfeited (156,170)
28.2
Exercised (70,496)
28.2
Outstanding 31 March 2020 930,981
The outstanding options have been valued at 31 March 2020 using the Black-Scholes pricing method at $63,862.
Subsequent to year end, the Group issued a further 1,642,857 options to employees at an exercise price of $0.21.
12
Related party disclosures
20202019
Key management personnel compensation
Directors' fees224 211
Senior management remuneration paid, payable or provided for:
Short-term employee benefits1,069 400
Share based payments10
13
Earnings per share
20202019
Basic and diluted net earnings per share (cents)
(4.8) (4.3)
Net loss after tax (NZ$000's)
(4,041)
(2,987)
Weighted average number of shares outstanding (thousands of shares)85,035 68,953
Comparative balances have been restated for the impact of the rights issue during the year, as outlined in note 2a.
During the year the Group provided cleaning services to other hospitality venues owned by Executive Directors Paul Robinson and Lucien Law totalling $55,000. At 31 March
2020, there was $53,000 of directors fees payable to the Non-Executive Directors.
The Group is party to a sales venture agreement with Constellation Brands New Zealand Limited ('MoBev') to provide sales and distribution services to the brand owners. The
agreement is accounted for as a joint operation where each party accounts for its own sales and recognises its share of costs.
In July 2015 the Board approved the Company Employee Share Option Plan. Options allow eligible staff to subscribe for ordinary shares in the Company at an exercise price.
Options are vested in equal tranches on the first to third anniversaries of the date of issuance while the eligible employees remain in full time employment with the Group. Once
vested the options can be exercised at any time up to the second April following vesting. Employees can pay the exercise price in shares using the 20-day Volume Weighted
Average Price of the Company shares up to the date of issuance. The Employee Share Option Plan allows employees to exercise all their vested options into ordinary shares for
cash or a lower number of ordinary shares for no cash. The employee scheme was extended to certain customers of the Group on the achievement of certain performance goals.
The consideration for the purchase of the Savor Group businesses during the year contained a deferred portion that will be settled through the issue of shares at a future date.
This has been recognised as unissued capital in the statement of movements in equity for the year ended 31 March 2020. Subsequent to year end, these shares were issued and
will be reclassified to share capital in the financial year ending 31 March 2021.
All issued shares are fully paid. In addition, there are 53,475 unpaid shares held as treasury stock, which were cancelled subsequent to year end. Of the total shares issued during
the year, approximately 14 million were to the vendors of Savor Group and Non Solo Pizza, with the balance of 4 million issued as part of equity raising activities.
18
14
Income tax expense
20202019
$000's$000's
Below is the reconciliation of earnings before taxation to taxation expense:
Loss before taxation(4,041)
(2,987)
Taxation at 28 cents per dollar(1,131)(836)
Adjusted for:
Non-deductible expenses26 (1)
Temporary differences not recognised177 170
Non-assessable income(192)
Tax losses for which no deferred tax asset was recognised
1,120 667
15
Tax losses brought forward
20202019
$000's
$000's
The Group has unrecognised deferred tax assets arising from tax losses as follows:
Opening balance6,203
5,536
Tax losses for the year1,120 667
7,323 6,203
The Group has no imputation credits available at 31 March 2020 (2019: nil).
16Additional expense disclosures
20202019
$000's$000's
Direct costs includes the following:
Cost of goods sold (including the purchase of raw materials)14,597 8,088
Inventory written off137 38
Venue consumables and operational costs699
Employee costs includes the following:
Salaries and wage costs11,643 1,838
Kiwisaver contributions70 28
Bad debts written off30 45
Lease payments124
Foreign exchange (losses)/gains(7)10
Auditor's remuneration
Audit of the financial statements
Grant Thornton New Zealand81
KPMG New Zealand78
Advisory services
KPMG New Zealand125
Total auditor remuneration81 203
17Reconciliation of net earnings to net cash from operating activities
20202019
$000's$000's
Net profit(loss) after tax
(4,041)(2,987)
Add back:
Interest paid
392
Supplier loans received
500
Add/(Less) non-cash items:
Depreciation and amortisation 2,666433
Non-cash interest on lease liability and deferred consideration894
Amortisation of contract liabilities215
(Gain)/loss on disposal property, plant and equipment69 134
Foreign exchange (gains)/losses10
Movements in working capital:
Trade and other receivables1,123 (900)
Inventories(659)
(1,367)
Trade and other payables1,024 1,108
Net cash from operating activities2,183 (3,569)
19
18Financial instruments
a) Categories of financial assets & liabilities
The varying amounts presented in the balance sheet relate to the following categories of assets and liabilities:
Financial assets
Financial assets at amortised cost:
Cash and cash equivalents
2,585
Trade and other receivables
2,444
3,740
Total financial assets
2,444 6,325
Financial liabilities
Financial liabilities at amortised cost:
Bank overdraft
597
Trade and other payables
4,047 3,006
Employee benefits
52283
Borrowings
7,432
Total financial liabilities
12,598
3,089
b) Market risk
i) Interest rate risk
2020
2019
$000's$000's
Effect on net loss before tax
1% increase in interest rate(190)
1% decrease in interest rate190
The above information is calculated by applying the effective movement to the average balance of borrowings on hand at 31 March 2020 of $7.3 million (2019: nil).
ii) Currency risk
c) Credit risk
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised in Note 4.
d) Liquidity risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The following maturity analysis table sets out the remaining contractual undiscounted cash flows for financial liabilities.
Total0-6 months7-12 months1-2 years2-5 years
$000's$000's$000's$000's$000's
2020
Trade and other payables
4,047 4,047
Employee benefits
522 522
Related party payables
3,183 3,183
Contingent consideration
1,234 1,234
Borrowings
7,432 822 1,719 4,891
Total principal cash flows
16,418 7,752 2,056 1,719 4,891
Contractual interest cash flows
970 190 177 290 313
Total contractual cash flows
17,388 7,942 2,233 2,009 5,204
2019
Trade and other payables
3,006 3,006
Employee benefits
83 83
Total principal cash flows
3,089
3,089
Contractual interest cash flows
Total contractual cash flows
3,089 3,089
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk arises from cash and
cash equivalents and deposits with banks and financial institutions, as well as from the Group’s receivables due from customers. Cash and deposit balances are held with financial
institutions rated at least an A+ Credit Rating by Standard and Poors.
For Hospitality, sales are settled in cash at the point of sale, leaving minimal debtors. For Brewing, the four largest customers represent approximately 77% of sales, with no one
customer more than 33% of sales. Credit risk is concentrated within New Zealand and in the fast-moving consumer goods market. The Group has established credit policies under
which each new customer is assessed for creditworthiness before payment and delivery terms and conditions are agreed.
The Group purchases raw materials that are denominated in foreign currencies (primarily USD) from time to time. These purchases were immaterial during the financial year, and
the Group's exposure to movements in foreign exchange is immaterial.
The Group has adopted the simplified approach to ECL (expected credit loss) in NZ IFRS 9: Financial Instruments which apply to trade receivables that are in the scope of IFRS
15. The impact is limited as trade receivables are predominantly less than 90 days.
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Group’s reputation. Refer also to note 2.
The Group’s fair value interest rate risk as at 31 March 2020 arises from its borrowings. An analysis on the sensitivity of the Group's earnings due to movements in interest rates
is shown below.
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s income or the value of its holdings of derivative
financial instruments. The objective of market risk management is to manage and control risk exposures within acceptable parameters while optimising the return on risk.
20
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk
management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The
Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and foreign exchange
risks and aging analysis for credit risk.
19Leases
- fixed payments (including in-substance fixed payments), less any lease incentives receivable;
- variable lease payments that are based on an index or a rate;
- amounts expected to be payable by the lessee under residual value guarantees;
- the payment of penalties for terminating the elase, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group's incremental borrowing rate.
Right-of-use assets are measured at cost, comprising the following:
- the amount of the initial measurement of lease liability;
- any elase payments made at or before the commencement date less any lease incentives received;
- any initial direct costs, and;
- restoration costs.
NZ IFRS 16 - Leases
A reconciliation of operating lease commitments at 31 March 2019 to lease liability recognised at 1 April 2019 is shown below:
Total
$000's
Operating lease commitments disclosed at 31 March 2019 228
Discounted using the lessee's incremental borrowing rate at the date of initial application
(62)
Different treatment of extensions and incentives 642
Lease liabilities recognised as at 1 April 2019 808
Right of use assets
PropertyTotal
Opening net book value 808 808
Acquisition of Savor Group 8,162 8,162
Acquisition of Non Solo Pizza 1,432 1,432
Disposal of Moa Brewing head office lease (284) (284)
Depreciation charge (1,299) (1,299)
Closing net book value 8,819 8,819
Cost 10,118 10,118
Accumulated depreciation (1,299) (1,299)
Closing net book value 8,819 8,819
Lease liability
PropertyTotal
Opening lease liability balance 808 808
Acquisition of Savor Group 8,162 8,162
Acquisition of Non Solo Pizza 1,432 1,432
Disposal of Moa Brewing head office lease (290) (290)
Interest expense 534 534
Principal repayments (1,541) (1,541)
Closing lease liability balance 9,105 9,105
Current 1,038 1,038
Non-current 8,067 8,067
Total lease liabilities 9,105 9,105
The Group’s lease arrangements consist of property leases for offices and Moa Hospitality venues. The Group has applied judgement in determining the impact of adoption on the
Group. These were primarily regarding the lease term (which can be complex where leases include rights of renewal or cancellation), and the discount rate applicable to each
lease and the lease payments.
The Group holds no short-term or low value leases, however, should these arise in future, the Group intends to apply the exemptions allowed under NZ IFRS 16 which recognises
payments for leases of 12 months or less or leases of a low value on a straight-line basis as an expense in the income statement.
The Group has adopted transition relief where available including: the determination of a lease contract, to exclude initial direct costs in the measurement of the right-of-use asset
as at 1 April 2019, and application of a single discount rate to a similar lease portfolio.
The Group has adopted the modified retrospective approach on transition and used the practical expedient of relying on hindsight for determining the term of the property leases.
Under this approach, NZ IFRS 16 has been applied to leases from transition date as the majority of Group leases were acquired with the acquisition of Savor Group on 1 April
2019 (transition date). Accordingly, there is no cumulative catch-up adjustment to retained earnings. Prior year comparatives have not been restated.
The Group leases premises for office space, hospitality venues, and the Moa Brewery in Blenheim, New Zealand. Lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions. These lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is avaialble for use by the Group. Each lease payment is allocated
between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
21
20Financial statements presentation
21Contingent liabilities
There were no contingent liabilities at 31 March 2020 (2019: nil).
22Subsequent events
Capital raise
Bank facility
Subsequent to year end the Group was granted a six month principal repayment holiday by its banking partner, representing a total of $0.8 million of payments.
Related party payables
COVID-19
The Group's Hospitality business continues to be significantly impacted by the COVID-19 impact at the date of these financial statements. The Group is operating at reduced
levels as the hospitality industry recovers and is focussed on controlling costs and right-sizing the business. The Group expects the reduction in trading levels to continue
throughout FY21, which has been incorporated into both the goodwill impairment and going concern assessments contained in these financial statements (refer to note 2).
On 7 April 2020, the Group announced the placement of $2.5 million of shares to a new cornerstone shareholder and a renounceable rights issue to existing shareholders to raise
a further $3 million of capital. The rights issue closed on Monday 11 May 2020 oversubscribed, and the new shares were issued on 14 May 2020. The total proceeds from all
equity raising activities were $6.1 million.
In addition to this, the Group came to an agreement with the vendors of Savor Group to defer the $3.2 million cash portion of the related party payable for an additional 12 months,
to 1 April 2021. The unissued capital of $2.0 million was issued to the vendors in shares as part of the rights issue. The exercise price of these shares was amended to be $0.14,
in exchange for the cancellation of the contingent consideration from the Savor transaction ($1.23 million at 31 March 2020).
The acquisition of the Hospitality venues significantly altered the composition of the Group and led management to review the disclosures within these financial statements to
ensure they remained appropriate. That review led to a change in the presentation of the consolidated Statement of Comprehensive Income to classify expenses by nature from
the previous presentation of by function. Given the differences in each of the Group's segments this change provides better visibility of the underlying operations of the Group.
Comparative information has been restated in order to be consistent with the current year reporting in these financial statements.
22
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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