2020 Annual Report
Results announcement
Results for announcement to the market
Name of issuer Allied Farmers Limited
Reporting Period 12 months to 30 June 2020
Previous Reporting Period 12 months to 30 June 2019
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$20,061 (2.5%)
Total Revenue $20,061 (2.5%)
Net profit/(loss) from
continuing operations
$1,218 (39.1%)
Total net profit/(loss) $1,218 (39.1%)
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
$0.304 $0.28 (after consolidation)
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.
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
28/08/2020
Audited financial statements accompany this announcement.
---
Allied Farmers Ltd
201 Broadway, Stratford, 4332
PO Box 304, Stratford 4352
Phone: 06 765 6199
Web: http://www.alliedfarmers.co.nz
Email: headoffice@alliedfarmers.co.nz
31 August 2020
announce@nzx.com
FY20 ANNUAL REPORT
The Directors of Allied Farmers Ltd (“Allied” or “Allied Group”) (ALF:NZX) are pleased to
report an audited net profit before tax for the year to 30 June 2020 of $1.099million
(FY19 $2.221million).
The first 6 months of the financial year saw strong performance despite the ongoing
mycoplasma bovis outbreak. However, since Christmas several factors which were outside
of the company’s control negatively impacted activity levels. The livestock business has had
to absorb the negative impact and disruption of severe drought conditions across many
parts of the country, and the COVID-19 pandemic. Taking these factors into the account, the
Directors consider that the result produced was satisfactory.
Shareholders should be proud of the way staff responded to the challenges that were
placed in front of them. While it would have been easy to point to the COVID-19
disruption as being a reason not to deliver our services to our food producing clients, our
staff instead took on the challenge and came up with innovative ways to tackle some of
the constraints our clients were facing. The Directors wish to acknowledge the dedicated
and hardworking team led by Chief Executive Steve Morrison that continues their focus
on Working with Farmers for Farmers.
The Directors believe that strong governance is the cornerstone on which success is built.
During the year, the Directors were pleased with the ongoing improvements to the
company’s policies and governance including:
• improving our approaches to identifying and managing risks, including health and
safety;
• extending the benefits provided to our staff around health and wellbeing;
• adoption of a Diversity Policy and a Sustainability Statement;
• the further strengthening of the Board with the appointment of Ross Verry
to Chair our Finance business and lead the development of that opportunity;
• the appointment of KPMG as the new external auditors including the refining and
improvement of our annual financial statements to “cut the clutter” and improve
transparency and understanding of our financial performance; and
• the clarity obtained in challenging and resolving an issue with the Commissioner of
Inland Revenue in respect of using the accumulated tax losses of the company.
As always our mission is to assist our clients, who are important links in the global food
chain, and important contributors to New Zealand’s economy through the export earnings
they generate, to meet the challenges that are placed in front of them.
Strategy and Vision
Over the past twelve months the Board and Management have continued to refine our strategy
and vision.
The company is more convinced than ever that its vision is correct:
To be the major solution provider to agricultural producers,
growing value for those producers and our investors.
Our focus continues to be on improving and growing our existing business while
simultaneously exploring and progressing new initiatives.
The company has recently announced several initiatives which it is pursuing to further this
vision. These include investment in the growth of our rural-focused finance business,
innovation initiatives, and investment in digital technologies.
Investment in growth of rural-focused finance business
The Allied Group has a well-established finance operation providing short term seasonal
livestock financing. The finance business has operated profitably and has given the Allied
Group significant experience in rural financing.
It has become apparent that New Zealand food producers are seeking sources of finance
from other than the traditional banks. As a result, the Allied Group has decided to invest
in the expansion of its financing operation.
The expansion will focus on unlocking potential for good food producing operators who
are constrained by traditional financing structures. Allied Group will continue to do this by
providing insight and advice, on time, on point and when it matters. Simple. Flexible. Easy.
Innovation and Digital
Allied recognises that food producers are facing constant challenges relating to
compliance, technology, environment and market expectations. Allied believes that there
are many potential innovative solutions which can assist farmers to meet these challenges.
One such challenge was presented by the COVID-19 lockdown which forced the cessation
of livestock sale yard operations. Allied Group subsidiary New Zealand Farmers Livestock
Ltd (“NZFL”) demonstrated its ability to respond quickly, and, through the introduction of
the leading innovative online/live sales process via its website MyLivestock, was able to
provide farmers with an effective means to buy and sell livestock in real time both on-site
and on- line – a ‘hybrid’ auction that supported our leadership of safe yard re-opening at
COVID-19 Level 3, met urgent farmer needs for livestock trade and price discovery, and
continues to enhance the operation of this important market channel.
The successful creation and deployment of this technology is an example of Allied’s
strategy to invest in innovation that will directly benefit food producers. Allied’s intention
is to continue to invest in these types of initiatives including:
• Further development of the MyLivestock website to enhance and improve this
service to farmers, leading to growth in its use;
• Investigate ways in which Allied can connect Agritech providers with farmers,
facilities and industry knowledge in order to trial, test and refine potential
solutions and products of real value to farmers; and
• Partnering with other companies and providers to develop a modest
programme of research and development aimed to identify and develop
potential solutions.
Allied is conscious of the growing desire of consumers for products that are sustainable
and high quality, and, in addition to the above, is currently in the early stages of an
investment proposal to support the development of an important technology which will
further enhance the innovation reputation of New Zealand dairy farmers. Allied’s
intention is to continue to evaluate and potentially invest in profitable and innovative
technologies either by strategic partnership or through direct investment within a
disciplined and ethical investment framework.
Capital Raising
To support these initiatives and to enable Allied to achieve its goals, we have announced
our intention to explore various capital raising options. These will include raising equity,
potentially through an entitlement issue to existing shareholders, and possibly a placement
to new shareholders. In addition, the company is exploring raising additional debt finance
through a wholesale bond issue in order to support the finance operations. Further details
will be provided as these options develop.
Outlook for 2021
Allied Farmers continues to have a positive yet cautious outlook for the New Zealand rural
sector. Notwithstanding the challenges of the 2019/2020 drought and advent of COVID-19,
the New Zealand rural sector continues to be a significant contributor to the nation’s
current and ongoing prosperity. As global population grows, and consumer expectations
and tastes change, food production must adapt and increase, and the global productive land
is limited. Moreover, with growing income levels families will also desire more and higher
quality protein that must be delivered from sustainable agricultural sources and have lower
environmental footprints. New Zealand is well positioned to provide these products, with a
reputation for providing high quality, natural and wholesome food products.
While we must acknowledge that the global economic outlook has rapidly deteriorated
and may take several years to recover, we believe the impact on the New Zealand
agricultural sector will be disproportionately less than experienced by some other sectors.
We remain optimistic that the challenges facing the New Zealand agricultural sector,
including COVID-19 fall out and reducing the sector’s impost on the environment, can be
successfully over-come with sensible policy development and appropriate changes to
farming and wider community practices. We are already seeing a greater focus and
support for our sector than arguably existed pre COVID-19 and we consider the
opportunities to work with our food producers and other stakeholders, and to continue to
innovate and invest, will be key to ensuring the ongoing strength of our sector and of our
Company.
We are proud to have a company history that dates back over a hundred years and has
seen and responded to many previous economic and global challenges. 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.
Now is not the time to sit still and hope – we must continue to work hard to keep rising to
the opportunities the environment has created and overcome the challenges faced. Allied
Farmers was well placed to withstand these last year, and we remain well placed to deliver
for the future for the benefit of all our stakeholders.
Consistent with previous years, the Board will consider the payment of a dividend in respect
of FY20 at the time of the November 2020 Annual Meeting. It is proposed that any dividend
declaration will be announced at that time, and is likely to be paid in late January 2021, after
the company passes its peak working capital requirements.
Richard Perry
Chairperson
---
Annual Report
2020
Contents
SECTION PAGE
Overview from the Chairperson 2
Executive Report 5
Directors 9
Disclosure 12
Consolidated Financial Statements 20
Notes to the Consolidated Financial Statements 23
Independent Auditor’s Report 36
Company Directory 40
This report is dated 31 August 2020 and is signed on behalf of the Board of Allied Farmers Limited:
Richard Perry
Chairman
Marise James
Director
1
Overview from the Chairperson
The Directors of Allied Farmers Ltd (“Allied” or “Allied Group”) (ALF:NZX) are pleased to report an
audited net profit before tax for the year to 30 June 2020 of $1.099million (FY19 $2.221million).
The first 6 months of the financial year saw strong performance despite the ongoing mycoplasma bovis
outbreak. However, since Christmas several factors which were outside of the company’s control
negatively impacted activity levels. The livestock business has had to absorb the negative impact and
disruption of severe drought conditions across many parts of the country, and the COVID-19 pandemic.
Taking these factors into the account, the Directors consider that the result produced was satisfactory.
Shareholders should be proud of the way staff responded to the challenges that were placed in front of
them. While it would have been easy to point to the COVID-19 disruption as being a reason not to
deliver our services to our food producing clients, our staff instead took on the challenge and came up
with innovative ways to tackle some of the constraints our clients were facing. The Directors wish to
acknowledge the dedicated and hardworking team led by Chief Executive Steve Morrison that
continues their focus on Working with Farmers for Farmers.
The Directors believe that strong governance is the cornerstone on which success is built. During the
year, the Directors were pleased with the ongoing improvements to the company’s policies and
governance including:
•improving our approaches to identifying and managing risks, including health and safety;
•extending the benefits provided to our staff around health and wellbeing;
•adoption of a Diversity Policy and a Sustainability Statement;
•the further strengthening of the Board with the appointment of Ross Verry to Chair our
Finance business and lead the development of that opportunity;
•the appointment of KPMG as the new external auditors including the refining and improvement
of our annual financial statements to “cut the clutter” and improve transparency and
understanding of our financial performance; and
•the clarity obtained in challenging and resolving an issue with the Commissioner of Inland
Revenue in respect of using the accumulated tax losses of the company.
As always our mission is to assist our clients, who are important links in the global food chain, and
important contributors to New Zealand’s economy through the export earnings they generate, to meet
the challenges that are placed in front of them.
Strategy and Vision
Over the past twelve months the Board and Management have continued to refine our strategy and vision.
The company is more convinced than ever that its vision is correct:
To be the major solution provider to agricultural producers, growing value for
those producers and our investors.
Our focus continues to be on improving and growing our existing business while simultaneously
exploring and progressing new initiatives.
The company has recently announced several initiatives which it is pursuing to further this vision. These
2
include investment in the growth of our rural-focused finance business, innovation initiatives, and
investment in digital technologies.
Investment in growth of rural-focused finance business
The Allied Group has a well-established finance operation providing short term seasonal livestock
financing. The finance business has operated profitably and has given the Allied Group significant
experience in rural financing.
It has become apparent that New Zealand food producers are seeking sources of finance from other
than the traditional banks. As a result, the Allied Group has decided to invest in the expansion of its
financing operation.
The expansion will focus on unlocking potential for good food producing operators who are constrained
by traditional financing structures. Allied Group will continue to do this by providing insight and advice,
on time, on point and when it matters. Simple. Flexible. Easy.
Innovation and Digital
Allied recognises that food producers are facing constant challenges relating to compliance, technology,
environment and market expectations. Allied believes that there are many potential innovative
solutions which can assist farmers to meet these challenges.
One such challenge was presented by the COVID-19 lockdown which forced the cessation of livestock sale
yard operations. Allied Group subsidiary New Zealand Farmers Livestock Ltd (“NZFL”) demonstrated its
ability to respond quickly, and, through the introduction of the leading innovative online/live sales process
via its website MyLivestock, was able to provide farmers with an effective means to buy and sell livestock
in real time both on-site and on-line – a ‘hybrid’ auction that supported our leadership of safe yard re-
opening at COVID-19 Level 3, met urgent farmer needs for livestock trade and price discovery, and
continues to enhance the operation of this important market channel.
The successful creation and deployment of this technology is an example of Allied’s strategy to invest in
innovation that will directly benefit food producers. Allied’s intention is to continue to invest in these
types of initiatives including:
• Further development of the MyLivestock website to enhance and improve this service to
farmers, leading to growth in its use;
• Investigate ways in which Allied can connect Agritech providers with farmers, facilities and
industry knowledge in order to trial, test and refine potential solutions and products of real
value to farmers; and
• Partnering with other companies and providers to develop a modest programme of research
and development aimed to identify and develop potential solutions.
Allied is conscious of the growing desire of consumers for products that are sustainable and high quality,
and, in addition to the above, is currently in the early stages of an investment proposal to support the
development of an important technology which will further enhance the innovation reputation of New
Zealand dairy farmers. Allied’s intention is to continue to evaluate and potentially invest in profitable
and innovative technologies either by strategic partnership or through direct investment within a
disciplined and ethical investment framework.
3
Capital Raising
To support these initiatives and to enable Allied to achieve its goals, we have announced our intention to
explore various capital raising options. These will include raising equity, potentially through an
entitlement issue to existing shareholders, and possibly a placement to new shareholders. In addition, the
company is exploring raising additional debt finance through a wholesale bond issue in order to support
the finance operations. Further details will be provided as these options develop.
Outlook for 2021
Allied Farmers continues to have a positive yet cautious outlook for the New Zealand rural sector.
Notwithstanding the challenges of the 2019/2020 drought and advent of COVID-19, the New Zealand rural
sector continues to be a significant contributor to the nation’s current and ongoing prosperity. As global
population grows, and consumer expectations and tastes change, food production must adapt and
increase, and the global productive land is limited. Moreover, with growing income levels families will also
desire more and higher quality protein that must be delivered from sustainable agricultural sources and
have lower environmental footprints. New Zealand is well positioned to provide these products, with a
reputation for providing high quality, natural and wholesome food products.
While we must acknowledge that the global economic outlook has rapidly deteriorated and may take
several years to recover, we believe the impact on the New Zealand agricultural sector will be
disproportionately less than experienced by some other sectors. We remain optimistic that the
challenges facing the New Zealand agricultural sector, including COVID-19 fall out and reducing the
sector’s impost on the environment, can be successfully over-come with sensible policy development and
appropriate changes to farming and wider community practices. We are already seeing a greater focus
and support for our sector than arguably existed pre COVID-19 and we consider the opportunities to
work with our food producers and other stakeholders, and to continue to innovate and invest, will be key
to ensuring the ongoing strength of our sector and of our Company.
We are proud to have a company history that dates back over a hundred years and has seen and
responded to many previous economic and global challenges. 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.
Now is not the time to sit still and hope – we must continue to work hard to keep rising to the
opportunities the environment has created and overcome the challenges faced. Allied Farmers was well
placed to withstand these last year, and we remain well placed to deliver for the future for the benefit of
all our stakeholders.
Consistent with previous years, the Board will consider the payment of a dividend in respect of FY20 at the
time of the November 2020 Annual Meeting. It is proposed that any dividend declaration will be
announced at that time, and is likely to be paid in late January 2021, after the company passes its peak
working capital requirements.
Richard Perry
Chairperson
4
Executive Report
First and foremost, we are proud of the manner in which the Allied Farmers team rose to the major
challenges presented this year by both serious and widespread drought and COVID-19. These challenges,
particularly arriving on top of mycoplasma bovis, and coupled with growing compliance and financial
pressures for many people, severely tested our clients and communities, and impacted our own
operating performance.
After a first half in line with expectations, full year net profit after tax was 39% below last year, at
$1.218m.
I
n particular, we would like to acknowledge the hard work to provide the support that has enabled staff
to develop and engage in their key role of Working with Farmers for Farmers.
5
The year saw a range of health, safety and staff support initiatives that acknowledge that engaged staff
are our future, and the critical need to keep people safe. A Driver Alert system roll-out, several staff
insurance offerings, enhanced Occupational Safety and Health -related processes, yard facilities and
resource, and several staff health contributions have moved our business forward, and will support our
ambitious growth strategy.
NZ Farmers Livestock Ltd, a 66.7% owned subsidiary of Allied Farmers Limited, has for some years
generated the vast majority of the Allied Farmers Group revenue. There is excellent shareholder
alignment, with the balance of the NZ Farmers Livestock ownership held by staff. NZ Farmers Livestock
comprises livestock agency with a closely aligned meat processing business, and livestock financing
activities.
Livestock Agency
Staff Levels
20
18
16
14
12
10
8
6
4
2
0
Waikato Northland Manawatu Taranaki South King Head Office
Island Country
Agents Administration Permanent Part Time
NZ Farmers Livestock continues to focus on growing its livestock agency business and market share.
Agents, with their COVID-19-related essential service designation, facilitated stock movements
throughout lockdown. We were particularly proud to launch, in the face of considerable competitor
resistance and appreciable technical and operational challenges, a ‘Hybrid’ (on-line and live) auction
facility that enabled the early and safe re-opening of saleyards at COVID-19 level 3. This agility and focus
supported farmers and animal welfare as NZ progressed from severe drought into winter, and moderated
COVID-19 economic impacts in this critical NZ sector. The performance of our Hawkes Bay subsidiary,
Redshaw Livestock, in the face of very severe drought pressure, was particularly creditable. Government
acknowledgement of the value of the livestock agency role through this difficult period reinforces the
value of livestock agency within the wider industry value chain and NZ economy.
Today we continue to offer the NZ-leading hybrid auction facility across most sales, both yard and on-
farm, and to refine and enhance our broader MyLiveStock digital offering. Client uptake continues to
grow, and increasing numbers of vendors have enjoyed the benefit of that bigger, and growing, buying
bench. A growing range of clients engage with our saleyards remotely, either to watch their stock sell, to
monitor the market, or to bid, encouraged by the commitment vendors have made in sending stock to
sale, and the supporting services and arrangements at yards and on-farm sales. This will be a growing part
of our industry, and we intend to continue our leading role.
6
T
he year saw a strong performance in our related meat processing activity, with improving performance
and relatively strong pricing on major products. Supplier relationships, several value-adding partnering
arrangements, good supporting systems, working capital provision and tight cost management have
made this a good contributor over the years.
L
ivestock Financing
We also achieved a solid livestock financing performance, built upon an excellent understanding of the
clients and activity involved, very good staffing, good processes and systems, and the developing
opportunity in this area as the engagement of other lenders in the area reduces. Livestock financing is
offered to valued clients, informed by the close relationships in place, and supports client investment in the
face of reducing trading bank appetite in this area critical to many farmers.
Given this success, Allied Group recently announced that it has decided to invest in the major expansion
of its rural-focused financing operation, which will focus on unlocking potential for good food producing
operators who are constrained by traditional financing structures. This Allied Farmers commitment is
reflected across the introduction of targeted governance expertise, enhanced finance policy, systems
and controls, growing staff resource and multiple funding sources.
Outlook and Strategy
We continue to explore options to further enhance the value we add as we support farmers taking
livestock to market, and to grow the value realised through the various livestock value chains.
The 2020/21 year has started back on track post-COVID-19, with good agency performance, ongoing
financing progress, but in line with industry-wide indications, expectations of a contributing but more
challenging year for our meat processing business. The business will support and benefit from a return to
more normal farm sales volumes, when this eventually develops.
New Zealand agriculture is well placed to supply the world with high quality and safe food, and we are
focused on supporting and building this farmer success in increasingly uncertain times. Like many businesses
we work in an increasingly dynamic and disrupted environment. The team continues to rise to this
challenge. During the year, we joined the NZ Biosecurity initiative, continued inputs supporting OSPRI and
the NZ Stock and Station Agents Association self-regulation, and continued to build a range of business
partnering intended to add value to all involved. Allied also continues review of a range of other
agribusiness options, as we look to diversify the revenue base, and support progressive initiatives promising
material value add for shareholders.
NZ Farmers Livestock has agents operating nationally and well supported by a growing range of digital
and other tools. We are committed to succeeding within a changing sector, and will be both progressive
and responsive to create value, for both clients and Allied, in this environment.
As a major 100% NZ-owned business in this space, we are pleased to see strong and growing agency
market shares, to be growing and supporting our staff and communities, and to have developed a platform
for the growth and the broadening contribution that will benefit all stakeholders.
7
Highlighting our Livestock Business...
Our core agency business is focused on the marketing, purchase and sale of livestock on behalf of
clients. It relies on the trust and confidence of clients, the networks maintained, the (increasingly digital)
advertising tools presently employed, the saleyards, on-farm yarding and Hybrid auction infrastructure
available, and the raft of agreements, back office and related support necessary to bring confidence,
price discovery, structure and efficiency to this step in the agribusiness value chain.
Staff bring a depth of livestock and market expertise, broad contact networks, a range of tools and market
intelligence, and work throughout varied seasonal and market conditions to identify options in the
market, agree and realise fair pricing and timely transactions, and to action these deals. This role aligns
well with our meat and livestock lending activities, and represents a sound platform for the further
progression of wider agribusiness options.
Hybrid Auction Platform
When COVID-19 concerns limited livestock selling options, and remaining sales channels and activity
came under growing pressure from poor price discovery and low sale completion rates, NZ Farmers
Livestock developed and launched a Hybrid auction option – essentially adding on-line remote bidding
to the standard saleyard and on-farm in-person bidding.
This is accessed on-line via our long-established MyLiveStock website, and to commission this, the team
dealt with technical challenges that had impacted earlier efforts. Within a month, and through an agile
development process supported by several excellent partners, the team had an operating Hybrid auction
successfully transacting livestock. That was critical for several clients needing to progress clearance sales
under Level 3 lockdown, but also added options important to vendors and buyers across our saleyards.
Clients can today register once, to be able to participate remotely or in-person at any of our livestock
sales, and development continues at pace, as we look to add more supporting elements to this very
popular offering. The several hundred registrations during the COVID-19 period has continued to expand
strongly, and clients are increasingly happy bidding remotely, and at times simply to access this
information portal in support of their in-yard bidding.
Hybrid auctions today operate routinely at our Rongotea, Te Kuiti, Morrinsville, Frankton and Stratford
yards, and operate at a wide range of on-farm bull, clearance and other livestock sales. We continue to
work to take this excellent initiative and our broader agency offering to other sale yards.
NZFL Valued Client Maurice Butler....
“The clearing sale of my high producing dairy herd was
held in June 2020 using NZ Farmers Livestock’s hybrid
auction platform which combines ringside and online
selling.
“I was delighted with the result with record
attendance of farmers – both at the farm and online –
from across New Zealand.
“I cannot say enough about the company and don’t
think anyone could have done as good a job”.
8
Directors
R
ichard Perry - Chairperson
Richard was appointed a director of Allied Farmers Limited in June 2019
and Chairperson in July 2020. He has a strong knowledge and experience of
the agribusiness, finance and technology sectors. He previously held senior
finance and executive roles at the Reserve Bank of NZ, Landcorp Farming
Ltd and Callaghan Innovation and has been a Technical Advisor to the
International Monetary Fund. He currently provides strategic and financial
consulting advice to a number of start-up and established companies
including Rocket Lab and Biolumic Ltd and is a member of the External
Reporting Advisory Panel and the Rural Advisory Committee of Chartered
Accountants Australia and New Zealand. He has acted for several company
boards across the agri-tech, property and food and beverage sectors.
Richard is not an independent director as he is providing advisory services
to the Allied Group. He has the following qualifications: B Com (Hons), F.C.A
(Fellow of Chartered Accountants Australia and New Zealand) and CTP
(Certified Treasury Professional).
Marise James - Lead Independent Director
M
arise 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 has held
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
the Taranaki Rugby Football Union. Marise is an independent director. She
has the following qualifications; Fellow, Institute of Directors New Zealand
(Accredited); and F.C.A (Fellow of Chartered Accountants Australia and New
Zealand)
9
Mark Benseman
Mark 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). Mark 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
Philip 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 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.
Philip is an independent director. He has the following qualification:
BAgSci(Hons).
Ross Verry
Ross was appointed a Director of Allied Farmers Limited in October 2019.
He has extensive experience in the agri-finance sector. He is currently Chief
Executive of Syndex Limited, an early stage, innovative capital markets
business, and previously worked in ANZ Bank, including most recently 5
years as a General Manager, Commercial and Agri. Ross is a director of THE
Limited, a largescale dairy farming business, and Gold Creek Partnership, a
dairy farming syndicate. He was also previously a Trustee of Agri-Womens
Development Trust. In addition, Ross is currently Chairman of the New
Zealand Cricket Players Association Board. Ross is an independent director.
His qualifications include a BCA and Chartered Accountant – Chartered
Accountants of Australia and New Zealand.
Note: Former Director Andrew McDouall resigned from the Board with
effect from 26 November 2019.
10
Director Independence
As at 30 June 2020, Marise James, Philp Luscombe and Ross Verry are considered by the Board to
be “independent” directors. They are considered to be independent due to the following factors:
•They are non-executive directors who are not substantial shareholders and who are free of any
interest, business or other relationship that would materially interfere with, or could reasonably
be seen to materially interfere with, the independent exercise of their judgement.
•T
hey have not been employed or retained, within the last three years, to provide
material professional services to the Company.
•Wi
thin the last 12 months, they were not a partner, director, senior executive or material
shareholder of a firm that provided material professional services to the Company or any of
its subsidiaries.
•N
one of those directors:
ohave been, within the last three years, a material supplier to the Company or have any
other material contractual relationship with the Company or another group member
other than as a director of the Company;
oreceive performance-based remuneration from, or participates in, an employee
share scheme of the Company; and
ocontrol, or is an executive or other representative of an entity which controls, 5% or more
of the Company’s voting securities.
Mark Benseman is not considered to be independent because he is associated with a
significant shareholder of the Company (Albany Braithwaite Holding Limited).
Richard Perry is not considered to be independent because, through a company he owns, he
provides material advisory services to the Company.
11
More information on Allied Farmers governance is set out in the Corporate Governance Report, a copy of
which is available on the Allied Farmers’ website.
Disclosure of Interest
Pursuant to section 140 of the Companies Act 1993, the following changes in interests were
disclosed during FY20 (excluding directorships of wholly owned subsidiaries) in the Interests
Register:
Name Entity Relationship/Disclosure
Marise James EIDNZ Limited
OSPRI
Resigned as Chairperson
Appointed Director
Richard Perry Rocket Lab Limited
The Waimatai Group Ltd
Updated role to Financial Consultant
Director and Shareholder
Ross Verry Syndex Ltd
THE Limited
Gold Creek Partnership
Chief Executive
Director
Director
Philip Luscombe Koki South Farms Limited
PKWF 2013 Limited
and PKW Farms GP Limited
Resigned as Director
Resigned as Director
Directors’ Share Trading and Holdings
Directors disclosed the following acquisitions and disposals of relevant interests in Allied Farmers
Limited shares during FY20 pursuant to section 148 of the Companies Act 1993.
Director Date(s) Details
Mark Benseman 16 March 2020 On market sale of 1030 ordinary shares for a total
consideration of $590.20
5 April – 2 May 2020
On market sale of 128,323 ordinary shares for a total
consideration of $77,940.48
Philip Luscombe 29 November 2019
On market sale of 34,000 ordinary shares for a total
consideration of $24,140.00
6 March – 10 March 2020On market sale of 80,000 ordinary shares for a total
consideration of $52,536.78
12
As at 30 June 2020 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:
Name
Number of Shares and percentage of shares on issue*
Mark Benseman
1,796,395 (10.06%)
Philip Luscombe
15,557 (0.087%)
Directors’ Remuneration
Director 2020 2019 2018
Garry Bluett 0 $20,834 $50,000
Philip Luscombe $45,000 $36,250 $28,000
Andrew McDouall $72,667* $29,250 $28,000
Mark Benseman $49,500 $42,000 $28,000
Marise James $40,000 $27,500
-
Richard Perry $35,000 $2,917
-
Ross Verry $26,250
-
Total $268,417 $158,751 $134,000
*includes a retirement allowance of $58,917
Shareholders approved a cap on directors’ fees of $332,000 p.a. at the 2007 Annual Meeting. 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 $203,570, 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 $122,090. In neither case did this
remuneration and benefits include any director’s fees.
13
Particular Disclosures
Bonds
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.
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.
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
FY20 $255,266 $11,134 $47,949.00 being 77% of
maximum achievable from FY19
Nil $314,349
FY19 $253,000 $9,539 $45,433.00 being 76% of
maximum achievable from FY18
$249
$308,221
14
Employee Remuneration
The number of employees whose remuneration and benefits were over $100,000 for FY20 is within the
specified bands as follows:
Remuneration Range 2020 2019
100,000 110,000 4 4
110,001 120,000 4 5
120,001 130,000 5 1
130,001 140,000 1 1
140,001 150,000
1
150,001 160,000
1
160,001 170,000 1 3
170,001 180,000 1 2
180,001 190,000 2 1
190,001 200,000 3 2
200,001 210,000 4 1
210,001 220,000
-
220,001 230,000
-
230,001 240,000 1 1
240,001 250,000
-
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
310.001 320,000 1 -
320,001 330,000
-
Total
27 24
The 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.
15
Substantial Product Holders
Notices given under the Financial Markets Conduct Act 2013 up to the date of this Annual Report:
Holder Relevant Interest Date of Notice
Don Jacobs and Ngaruawahia.com 896,620 (5.022%) 16 June 2020
Albany Braithwaite Holdings Limited 1,796,395 (10.06%) 4 May 2020
Stockmans Holdings Limited 1,945,519 (10.9%) 4 December 2015
Subsidiary Companies
Directors of subsidiary companies as at 30 June 2020 were as follows:
Subsidiaries of the Parent Principal Activity Directors
Allied Farmers Rural Limited Rural Services M Benseman, P Luscombe, R Perry,
M James, R Verry
ALF Nominees Limited Nominee company M Benseman
Allied Farmers (New Zealand) Limited Non-trading R Perry, R Verry, M James, O Carruthers
Rural Funding SolutioNZ Limited Rural Financing M Benseman, R Perry, M James, R Verry,
O Carruthers
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, R Verry,
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 R Perry, M James, R Verry, O Carruthers
Redshaw Livestock Limited Livestock Trading D Freeman, A Hiscox, M MacDonald,
W Sweeney
Shareholder Information
The ordinary shares of Allied Farmers Limited are listed on the NZX Main Board. The NZX share code is
‘ALF’.
16
The shareholder information in the following disclosures has been taken from the Company’s share
register at 26 August 2020.
Twenty Largest Registered Shareholders
Rank Investor Name Total Units
%
Issued
Capital
1 Stockmans Holdings Limited 1,945,519 10.9
2 Albany Braithwaite Holdings Limited 1,796,395 10.06
3 Donald Clifton Jacobs 824,781 4.62
4 Deborah Lee Seerup 685,001 3.84
5 Geoffrey Richard Field Seerup 685,000 3.84
6 John Drakley Moore 503,244 2.82
7 Garry Charles Bluett 312,718 1.75
8 Ronald Alfred Brierley 303,159 1.7
9 Glenn Leslie Ballinger 300,000 1.68
10 Ross Phillip Drew 274,000 1.53
11 Stuart David Hynes 273,897 1.53
12 Caspar Petrus Alydis Van Den Broek 250,000 1.4
13 Fortune Capital Group Limited 228,125 1.28
14 Colin Stuart Loveday 150,000 0.84
14 Jade NZ Limited 150,000 0.84
15 Lee Athol Wilson & Shirley Ann Wilson 145,000 0.81
16 James Field Seerup & Jeanette Elizabeth Seerup 142,312 0.8
17 FNZ Custodians Limited 138,484 0.78
18 Custodial Services Limited 127,961 0.72
19 New Zealand Central Securities Depository Limited 124,679 0.7
20 Omaio Investments Limited 119,480 0.67
17
Analysis of Shareholding
Range Holders Holders % Issued Capital
Issued
Capital %
1-1000 1,659 64.48 624,600 3.5
1001-5000 536 20.83 134,3639 7.53
5001-10000 149 5.79 1,128,861 6.32
10001-50000 184 7.15 3,539,406 19.82
50001-100000 21 0.82 1,410,389 7.9
Greater than 100000 24 0.93 9,807,963 54.93
Diversity and Gender
In June 2020 Allied Farmers adopted a Diversity and Inclusion Policy. More information on the Policy is set
out in the Corporate Governance Report and a copy is available on the Allied Farmers’ website. Because
the Policy has only recently been adopted, there is insufficient information available at this time to provide
an evaluation on Allied Farmers’ performance with respect to the Policy. This will be provided in the 2021
Annual Report.
As at 30 June 2020, females represented 20% (FY19: 20%) of Directors and 25% (FY19: 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.
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.
Current Year Previous Year
Male Female Male Female
Number of Directors 4 1 4 1
Percentage of Directors 80% 20% 80% 20%
Percentage of Officers 75% 25% 75% 25%
18
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 24 November 2020 from 11am. A Notice of
Annual Meeting and Proxy Form will be circulated to shareholders prior to the meeting.
Dividends Paid
A fully imputed per share of $0.02 per share (2019: $0.002 (pre-share consolidation)) was paid to eligible
shareholders on 17 January 2020.
19
Allied Farmers Group
Profit and Loss Statement
For the year ended 30 June 2020
Note20202019
$000$000
Revenue and other incomeA120,061 20,583
Cost of sales and operating expensesA1(18,425)(17,939)
Depreciation and amortisationA1(784)(635)
Net interest incomeB7247 212
Profit before tax1,099 2,221
Income tax (expense) / benefitA2119 (220)
Profit after tax 1,218 2,001
Total comprehensive income
1,218 2,001
Profit attributable to:
Owners of the Parent
767 1,258
Non-controlling interests
451 743
Basic and Diluted earnings per share (cents)
4.30 7.58
Group
The notes to the Group financial statements from an integral part of these financial statements.
20
Allied Farmers Group
Statement of Cash Flows
For the year ended 30 June 2020
Note
2020
2019
Cash flows from/(to) operating activities$000$000
Cash receipts from customers
18,499
18,362
Interest received
700
925
Cash paid to suppliers and employees
(17,705)
(15,237)
Interest paid(453) (599)
Income tax paid
(274)
(379)
Net cash flow from operating activities767 3,072
Cash flows from/(to) investing activities
Decrease (Increase) in finance receivables NZ Farmers Livestock Finance Ltd1,127 (93)
Acquisition of subsidiary/investment net of cash acquired- (5)
Purchase of shares in NZ Farmers Livestock Ltd(11) (22)
Acquisition of intangibles, property, plant and equipment (794) (346)
Net cash flow from/(used in) investing activities322 (466)
Cash flows from/(to) financing activities
Share Purchase Plan- 1,500
Drawdown of finance receivables borrowings 1,500 1,500
Repayment livestock trading borrowings(412) (382)
Repayment of vehicle finance borrowings(32) (265)
Repayment of finance receivables borrowings(1,775) (1,500)
Repayment of bond- (550)
Dividends paid(585) (916)
Share Repurchase of Small Parcels- (261)
Net cash flow used in financing activities(1,304) (874)
Net movement in cash and cash equivalents(215) 1,732
Opening cash and cash equivalents2,301 569
Closing cash and cash equivalents
B3
2,086
2,301
Reconciliation of Profit to Cash Surplus from Operating Activities
Profit for the year 1,218 2,001
Adjustments for items not involving cash flows:
Impairment on receivables 67 25
(Profit)/loss on sale of assets (80) 46
Depreciation 784 635
(Increase) Decrease in Deferred Tax (18) (81)
Other non cash items (17) -
736 625
Movement in trade and other receivables
(653) (2,091)
Movement in inventories
(99) (75)
Movement in trade, other payables and employee benefits
(171) 2,690
Movement in taxation
(264) (78)
Cash flow from operating Activities 767 3,072
Group
The notes to the Group financial statements from an integral part of these financial statements.
21
Allied Farmers Group
Balance Sheet
As at 30 June 2020
Note20202019
$000$000
Equity
Share capitalB2153,018 153,018
Accumulated Losses (148,210) (148,609)
Equity attributable to owners of the Parent4,808 4,409
Non-controlling interests1,582 1,359
Total equityE36,390 5,768
Liabilities
Bank overdraftB3- -
Trade and other payablesB611,779 11,790
Employee benefits973 1,133
Income tax payable- 55
Finance receivables bank borrowingsB4300 1,500
Bank borrowingsB4441 415
Lease liabilitiesB5454 494
Total current liabilities13,947 15,387
Bank borrowings and bondsB42,122 2,560
Finance receivables bank borrowingsB4925 -
Lease LiabilitiesB5871 324
Total non-current liabilities3,918 2,884
Total liabilities17,865 18,271
Total liabilities and equity24,255 24,039
Assets
Cash and cash equivalentsB32,086 2,301
Trade ReceivablesC111,287 9,726
Inventories296 197
Income tax receivable319 -
Finance receivablesC13,583 4,710
Other receivables749 1,725
Total current assets18,320 18,659
Deferred tax assetsA2790 772
GoodwillD2742 742
Intangible asset - computer software216 22
Property - owned and leasedC24,187 3,844
Total non-current assets5,935 5,380
Total assets24,255 24,039
Group
The notes to the Group financial statements from an integral part of these financial statements.
22
Allied Farmers Group
A. Financial performance
In this section
-
-
A1: How we operate and generate return for shareholders
Livestock services: An agency business facilitating sales and purchases of livestock both in saleyards and on farms
Financial services: Providing livestock finance to farmer clients
Parent operations: The ultimate holding company for Allied Group Investments and governance activity for the Group
Segment information for 2020
Livestock
Services
Financial
Services
Parent
Operations
Total
$000$000$000$000
Commission and fee income11,267 - - 11,267
Sale of goods8,724 - - 8,724
Interest incomeB7215 485 -700
Other Income70 - - 70
Total Income20,276 485 -20,761
Cost of goods sold7,122 - - 7,122
Personnel expenses7,016 - 95 7,111
Depreciation and amortisation783 - - 783
Rental and operating leases(3)- - (3)
Other operating expenses3,572 - 624 4,196
Total Expenses18,490 - 719 19,209
Finance CostsB7(230)(150)(73)(453)
Profit/(loss) before tax1,556 335 (792)1,099
Income tax (expense) / benefit 119
Profit/(loss) after tax
1,218
Current Assets14,991 3,225 104 18,320
Non Current Assets5,835 100 -5,935
Assets20,826 3,325 104 24,255
Current Liabilities12,257 1,572 118 13,947
Non Current Liabilities1,993 925 1,000 3,918
Liabilities14,250 2,497 1,118 17,865
Segment information for 2019
Livestock
services
Financial
Services
Parent
Operations
Total
$000$000$000$000
Commission and fee income12,283 - - 12,283
Sale of goods8,189 - - 8,189
Interest incomeB7186 595 -781
Other Income111 - - 111
Total Income20,769 595 -21,364
Cost of goods sold6,719 - - 6,719
Personnel expenses7,671 - 86 7,757
Depreciation and amortisation635 - - 635
Rental and operating leases117 - 2 119
Other operating expenses2,951 - 393 3,344
Total Expenses18,093 - 481 18,574
Finance CostsB7(293)(181)(95)(569)
Profit/(loss) before tax2,383 414 (576)2,221
Income tax (expense) / benefit (220)
Profit/(loss) after tax
2,001
This section explains the financial performance of the Group providing additional information about individual items in the Profit and Loss Statement,
including:
accounting policies, judgements and estimates that are relevant for understanding items recognised in the Profit and Loss Statement.
the key operating segment information regularly reported to the Chief Executive and reviewed by the Directors.
Group
Group
23
Allied Farmers Group
Current Assets13,1604,710789 18,659
Non Current Assets5,280100-5,380
Assets18,440 4,810 789 24,039
Current Liabilities13,0172,13923115,387
Non Current Liabilities1,884-1,0002,884
Liabilities14,9012,1391,231 18,271
Revenue Measurement and Recognition
Commission income on facilitating a livestock sale agreement, grazing agreement or forward livestock sale agreement is recognised when
the sale is agreed by a vendor and purchaser. The Group is acting as an agent as it doesn't have inventory risk and isn't able to set a price.
Forward delivery contracts in relation to herd sales on which commission income is earned contain an element of variable consideration due
to the timfarme between when the sale is agreed and its completion. At 30 June 2020 (2019: all), all forward delivery contracts have settled
and therefore the variable consideration has no impact on the revenue recognised.
Sale of goods (veal meat and skins) revenue is recognised when delivered to the agent (ANZCO) or once goods are delivered to the
customer. The Group is deemed a principal, rather than an agent, as it holds inventory risk.
Fee income relates to RFID scanning fees, yard fees charged at saleyards and valuation fees. The income is recognised when livestock are
scanned, a sale is agreed within the auction or when the livestock 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.
Finance receivables interest income is recognised using the effective interest method. 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.
24
Allied Farmers Group
A2Taxation
2020
2019
Current tax expense
Current income tax expense (benefit)
(102)
301
Deferred tax expense (credit)
(17)
(81)
Total income tax expense in income statement(119) 220
Income tax expense calculation
Net profit before tax for the year
1,099
2,221
Income tax using the company's tax rate (28%)
308
622
Expenditure not deductible for tax
14
14
Timing differences
56
(32)
Recognition of deferred tax asset
(17)
(81)
Prior period adjustments
34
-
Use of Group tax losses
(514)
(303)
Income tax expense (benefit)(119) 220
Deferred Tax
Movement in temporary differences during the year
Opening
balance
Recognised in
income
Closing
Balance
$000$000$000
Financial receivable credit loss provision13 7 20
Employee benefits154 50204
Tax loss carry forward605 (39)566
772 18
790
Financial receivable credit loss provision6 7 13
Employee benefits156 (2)154
Tax loss carry forward528 77 605
690 82 772
Key Judgement:
A deferred tax asset is recognised to the extent it is probable that future taxable profits will be available to use the asset. This is reviewed at
each balance date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available in the future to utilise
the asset.
Measurement and Recognition:
Deferred tax is income tax that is expected to be payable or recoverable in the future as a result of the unwinding of temporary differences.
These arise from differences in the recognition of assets and liabilities for financial reporting and for the filing of income tax returns. Deferred
tax is recognised on all temporary differences, other than those arising from goodwill and the initial recognition of assets and liabilities in a
transaction (other than in a business combination) that affects neither the accounting nor taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the year when a liability is settled or an asset realised, based on tax
rates and tax laws that have been enacted or substantively enacted at balance date.
Group unrecognised deferred tax assets comprise unused tax losses as at 30 June 2020 total $41,737,685 gross (June 2019: $43,530,255)
As at balance date imputation credits available to the shareholders of only the Parent Company in subsequent periods totalled $79,040
(2019: $112,341)
Measurement & Recognition
Income tax expense is the income tax assessed on taxable profit for the year. Taxable profit differs from profit before tax reported in the
statement of comprehensive income as it excludes items of income and expense that are taxable or deductible in future years (i.e. deferred
tax) and also excludes items that will never be taxable or deductible.
Group
2019
2020
25
Allied Farmers Group
B. Funding and Related Financial Risks
In this section
B1Capital management
B2Share Capital
Profit after tax
20202019
Total comprehensive incomeShare capital ($000)153,018 153,018
Number of shares issued and fully paid (000's)
Balance at beginning of year
178,547 161,505
Consolidation/Cancellation of shares
(160,692)(3,506)
Issue of ordinary shares
- 20,548
Balance at end of year
17,855 178,547
B3Cash and cash equivalents
20202019
$000 $000
Cash and cash equivalents4,086 4,301
Finance Receivables overdraft facility offset per agreement(2,000)(2,000)
Net cash and cash equivalents2,086 2,301
Undrawn overdraft facilities
9,000 9,000
Cash is held at banks with a credit rating of A- or higher.
B4Debt funding
Payable within 1
year
Payable after 1
year
UndrawnInterest rate
$000$000$000
Finance receivables bank borrowings
300 925 - 4.35%
Bank borrowings
441 1,122 - 4.35%
Bonds
- 1,000 - 7.30%
Total debt funding
741 3,047 -
Finance receivables bank borrowings
1,500 - - 5.60%
Bank borrowings
415 1,560 - 5.60% -6.25%
Bonds
- 1,000 - 7.30%
Total debt funding
1,915 2,560 -
-
This section explains how the Allied Group manages its various funding sources including capital structure and debt. It also explains the financial risks
that the Group faces and how these risks are managed.
2019
On 17 July 2019 Allied Farmers Limited completed a share consolidation. Shareholders received one ordinary share for every ten ordinary
shares held at 5pm on the record date of 16 July 2019. As a result of the consolidation the number of shares was reduced from 178,547,294 to
approximately 17,854,729 Shares.
All ordinary shares rank equally as to voting, dividends and distribution of capital on liquidation.
2020
Group
Group
Measurement and recognition
Borrowings are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost (using the effective
interest method). Fees for establishing new borrowings are spread over the term of those borrowings.
The borrowing facilities are secured, by way of a first ranking General Security Agreement and gross guarantee and indemnity, against the
assets of NZ Farmers Livestock Limited, NZ Farmers Livestock Finance Limited and Farmers Meat Export Limited. The financial covenants
under these facilities have been fully complied with during the year.
NZ Farmers Livestock Limited guarantees the bank overdraft of its subsidiary Redshaw Livestock up to $338,000 (FY19: $338,000), plus
interest and costs.
Bonds of $1,000,000 were issued by Allied Farmers Rural Limited 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 annuum and not more than 7.50% per anum. There are no specific financial covenants.
The Allied Group's capital includes share capital, accumulated losses and non controlling interests.
The Board 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.
Group
26
Allied Farmers Group
B5
Lease liabilities
PropertyMotor VehiclesProperty
Motor Vehicles
$000$000$000$000
Opening620 818 - 1,083
Leases entered into during the period - 451 - 270
Interest expense15 - - -
Principal repayments(95)(484)- (535)
Remeasurements- - - -
Closing lease liabilities540 785 - 818
Short-term lease liabilities
83 371 - 494
Long-term lease liabilities
457 414 - 324
Group
Measurement and recognition
The above lease liabilities are in relation to leases of regional offices and the leases of Motor Vehicles.
The Group recognises a lease liability at the lease commencement date. The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, The Group’s incremental borrowing rate. Generally, The Group uses its incremental borrowing rate
(6.91%) as the discount rate, with adjustments for the type and term of the lease.
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have lease terms of 12 months or less
and leases of low-value assets. The Group recognises the lease payments associated with these leases within operating expenses on a
straight-line basis over their lease terms.
20202019
27
Allied Farmers Group
B6
Balance Sheet
Contractual
Cashflow
< 6 months6 - 12 mths1 - 5 yrs
$000$000$000$000$000
Trade and other payables11,779 11,779 11,779 - -
Finance receivables bank borrowings1,225 1,235 150 150 935
Bank borrowings1,563 1,678 256 255 1,167
Bonds1,000 1,090 36 1,054 -
Lease liabilities1,325 1,425 352 225 847
16,892 17,207 12,573 1,684 2,949
Trade and other payables11,790 11,790 11,790 - -
Finance receivables borrowings1,500 1,500 125 1,375 -
Bank borrowings1,975 2,205 214 300 1,691
Bonds1,000 1,165 37 37 1,091
Lease liabilities818 921 310 235 376
17,083 17,581 12,476 1,947 3,158
Interest Rate Risk
20202019
$000 $000
Effect on net profit for the year / equity
+/-
14 24
B7Net Interest income/(costs)
20202019
$000 $000
Interest received 700 781
Total interest income700 781
Interest paid on borrowings(200)(318)
Interest paid on bonds(73)(95)
Lease costs(180)(156)
Total interest expenses(453)(569)
Net Interest income/(costs)247 212
Group
The group is exposed to interest rate risk on movements in floating interest rates on bank borrowings.
In managing interest rate risk, the group aims to reduce the impact of short-term fluctuations on the group’s earnings. Over the longer term,
however, permanent changes in interest rates will have an impact on profit.
If market interest rates for bank borrowings 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:
Group
Liquidity risk
Liquidity risk represents the group’s ability to meet its contractual obligations as they fall due.
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 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 (including interest) due on financial liabilities, so will
not always reconcile to the amount disclosed on the statement of financial position. The amounts below also reflect the contractual repricing
timing on financial liabilities, if applicable.
2020
2019
28
Allied Farmers Group
C. Our receivables, other assets and other payables
In this section
C1Receivables
20202019
$000 $000
Receivables from livestock sales11,287 9,726
Finance receivables3,583 4,710
Total receivables14,870 14,436
Amounts are stated at carrying value, net of credit loss allowance
provisions
115 48
Receivables written off during the year52
24
The status of receivables at the reporting date is as follows:
Group receivables
Not yet due
1 - 30 days
overdue
31 - 60 days
overdue
61 - 90 days
overdue
Total
$000 $000 $000$000$000
Receivables from livestock sales
9,661 791 240 665 11,357
Credit loss allowance (livestock)
- - - (70)(70)
Finance receivables
3,393 165 19 51 3,628
Credit loss allowance (finance)
- - - (45)(45)
Net receivable
13,054 956 259 601 14,870
Receivables from livestock sales
8,601 645 186 327 9,759
Credit loss allowance (livestock)
- - - (33)(33)
Finance receivables
4,603 - 28 94 4,725
Credit loss allowance (finance)
- - - (15)(15)
Net receivable
13,204 645 214 373 14,436
Credit Risk Management
Key Judgement
The loss allowances for receivables 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.
This section explains:
- The assets the Group is due to receive from third parties and the credit risk associated with these assets.
- The property and motor vehicles the Group owns and has a right to use under lease arrangements.
- The obligations to third parties, other than banks and bond holders.
Group
2019
Credit risk is the risk that a counterparty to a transaction with the Group will fail to discharge its obligations and make payment, causing the Group to incur a
financial loss.
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.
Receivables 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.
2020
Measurement and recognition
Receivables from livestock sales and Finance Receivables are measured on initial recognition at fair value, and are subsequently carried at amortised cost,
less provision for expected credit losses.
For Receivables from livestock sales, the provision for expected credit losses is based on the simplified approach, as permitted by NZ IFRS 9, and records the
loss allowances as lifetime expected credit losses from recognition. These are the expected credit losses that result from all possible default events over the
life of the financial instrument.
Finance Receivables are reviewed on an individual basis to determine whether any amounts are unrecoverable and an expected credit loss provision is
recorded. The expected credit losses are based on management's assessment of amounts considered uncollectible for specific customers based on age of
debt, history of payments, account activity, current and future economic factors and other relevant information. Debts known to be uncollectable are written-off
as bad debts to the profit and loss when identified.
29
Allied Farmers Group
C2
Property owned and leased
2019
LandBuildings
Plant and
equipment
Motor VehiclesTotalTotal
$000 $000 $000 $000 $000 $000
Cost at beginning of year
2,019 1,038 472 1,786 5,315 5,215
Additions including Right of Use Assets treated as Buildings
- 620 88 485 1,193 386
Disposals
- - (10)(380)(390)(291)
Cost at end of year
2,019 1,658 550 1,891 6,118 5,310
Accumulated depreciation at beginning of the year
- (361)(238)(872)(1,471)(1,025)
Depreciation (including $93,000 on right of use assets)
- (157)(50)(593)(800)(626)
Disposals
- - - 340 340 180
Accumulated depreciation at end of year
- (518)(288)(1,125)(1,931)(1,471)
Net value 2020
2,019 1,140 262 766 4,187
Net Value 2019
2,019
677
234
914
3,844
Right Use Assets
The net value of right of use assets reflected in buildings at 30 June 2020 is $527,000 (2019 nil).
Motor Vehicle Leases
The majority of the Group's motor vehicles are leased, with the Group having substantially all the risks and rewards of ownership. The leased motor vehicles
are included along with those vehicles which are owned outright by the Group.
Measurement and recognition
Land is not depreciated. All other owned property, plant and equipment is depreciated on a straight line basis at rates over their estimated useful lives, as
follows:
- Buildings: 8 - 30 years.
- Plant and equipment: 1 - 30 years.
- Motor Vehicles: 1-3 years.
2020
Group
30
Allied Farmers Group
D. Group Structure
In this section
D1
Subsidiaries
2020
2019
Ownership
interest
Ownership
interest
Investments in operating subsidiaries
Operating Subsidiaries of the Parent
Allied Farmers Investments LimitedInvestment
100%
100%
Allied Farmers Rural LimitedInvestment
100%
100%
Rural Funding Solutionz LimitedFinance
100%
100%
Subsidiaries of Allied Farmers Rural Limited
NZ Farmers Livestock LimitedLivestock Agency and Finance
67%
67%
Subsidiaries of NZ Farmers Livestock Limited
Farmers Meat Exports LimitedMeat Processing and Trading
100%
100%
NZ Farmers Livestock Finance LtdLivestock Finance
100%
100%
Redshaw Livestock LimitedLivestock Agency
52%
52%
D2Goodwill
20202019
Cash generating units:
$000 $000
Redshaw642 642
NZFLFL100 100
742 742
Impairment assessment
Redshaw CGU
20202019
Revenue growth rate
2.0%
5.0%
Long term growth rate
2.0%
2.5%
Pre tax discount rate
12.7%
15.0%
The financial statements include the financial statements of Allied Farmers Limited and the operating subsidiaries listed below.
Subsidiaries are entities controlled by the group. Control exists when the Group has the power to govern the financial and operating policies of the entity
so as to obtain benefit from its activities. The financial records of operating subsidiaries are included in the consolidated financial statements from the
date on which control commences until the date on which control ceases.
There are a number of subsidiaries within the Group that are non-trading and therefore have no financial records during the year or balances as at year-
end, they are not included within these consolidated financial statements.
This section provides information to help readers understand the Group structure and how it affects the financial position and performance of the Group.
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.
Group
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.
Goodwill in Redshaw arose on the acquisition of a controlling interest in Redshaw Livestock Limited and the NZFL goodwill arose on the acquisition
of a finance book from Stock Plan Limited previously supplying finance to a number of NZ Farmers Livestock Limited customers.
Key Judgement
The assessment that there was no impairment of the goodwill in the Redshaw CGU ('cash generating unit') at 30 June 2020. 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.
31
Allied Farmers Group
20202019
Revenue growth rate
1.6%
1.0%
Pre tax discount rate
0.8%
0.5%
NZ Farmers Livestock Finance CGU
D3
Associated Auctioneers
Group's Share
of Income
Group's Share
of Assets
Group's Share
of Liabilities
Group's Share
of Revenues
Group's Share
of Expenses
$000$000$000$000$000
202054354 (39)510 (456)
201985384 (64)584 (499)
Measurement & Recognition
The Group's subsidiary NZ Farmers Livestock Limited owns a proportion (25-50%) of various sale yard tangible assets and has joint arrangements in
relation to the operation of these sale yards (referred to as 'Associated Auctioneers'). The Group has assessed the nature of its investment in Associated
Auctioneers as joint operations. As joint operations, the Group accounts for its share of the revenue, expenses, assets and liabilities.
These joint operations are in five 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.
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.
Management has identified that a reasonably possible change in key assumption could cause the carrying amount to exceed the recoverable
amount. The following table shows the amount by which these two assumptions would need to change individually for the estimated recoverable
amount to be equal to the carrying amount.
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 NZFLFL CGU (being the Livestock Financing 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 revenue from financing bull sales, and is applied against the current
year's earnings.
No impairment charge was required to be recognised in the financial statements. There are no foreseeable 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 estimated recoverable amount of the Redshaw CGU is estimated to have exceeded the carrying amount of the CGU at 30 June 2020 by
approximately $132,000 (2019: $35,000).
32
Allied Farmers Group
E. Other
In this section
E1Related parties
The Group has a related party relationship with its key management personnel.
Key management personnel ('KMP') compensation
2020
2019
$000
$000
Short term employee benefits
314
300
Directors fees
210
159
Directors long service leave entitlement
-
56
Key management personnel and their related parties
2020
2019
Transactions
$000
$000
Livestock sales
506
708
Livestock purchases
669
491
Commission revenue
36
36
Consultant Fees
13
-
Dividends received as minority shareholders of NZFL
73
517
Amount receivable from KMP
36
9
Amount payable to KMP
106
131
Bonds on issue
600
600
No debts with key management personnel were written off during the year (2019:nil)
Consulting fees paid to entities associated with directors on an arms length basis total $66,995 (2019 $2,598)
2020
2019
E2Auditors’ remuneration
$000
$000
Audit fees - KPMG
165
-
Audit fees - previous auditors
-
140
Fees for other services - KPMG
73
-
Direct expenses associated with the audit
15
7
Total
253
147
Other services provided by KPMG included Taxation services relating to loss offset elections for the 2016 to 2018 income years. $50,000 of these services
were undertaken prior to KPMG being appointed as auditors.
Identity of related parties
The Group has a related party relationship with each of its subsidiary companies outlined in Section D.
Transactions with related parties, including directors, are made on terms equivalent to those that prevail in arm's length transactions.
This section includes information required to comply with financial reporting standards that is not covered in other sections.
Group
Group
Group
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 2020 the total of these funds lent to NZ Farmers
Livestock Limited was $614,000 (2019 $1.3 million).
.
33
Allied Farmers Group
E3
Statement of Changes in Equity
For the year ended 30 June 2020
Components that make up the capital and reserves of the Group and the changes of each component during the year.
Group
Share
Capital
Accumulated
losses
Parent Equity
Subtotal
Non-
Controlling
Interests
Total
$000$000$000$000$000
Balance at 1 July 2018
151,779 (149,544)2,235 1,231 3,466
Profit after tax for the year- 1,258 1,258 743 2,001
Total comprehensive income for the year
- 1,258 1,258 743 2,001
Dividends paid- (323)(323)(593)(916)
Sale of Shares in NZ Farmers Livestock Limited- - - (22)(22)
AFL Purchase of Small Parcels of Shares(261)- (261)- (261)
AFL Shares issued1,500 - 1,500 - 1,500
Total transactions with owners
1,239 (323)916 (615)301
Balance at 30 June 2019153,018 (148,609)4,409 1,359 5,768
Balance at 1 July 2019153,018 (148,609)4,409 1,359 5,768
Profit after tax for the year
- 767 767 451 1,218
Total comprehensive income for the year- 767 767 451 1,218
Dividends paid
- (357)(357)(228)(585)
AFL Purchase Minority Shareholders Shares
- (11)(11)- (11)
AFL Shares issued
- - - - -
Total transactions with owners- (368)(368)(228)(596)
Balance at 30 June 2020153,018 (148,210)4,808 1,582 6,390
E4Events Subsequent to Balance Date
The financial statements at 30 June 2020 include estimates and judgements in respect of the potential impact of Covid-19 on the Group's financial position
and results. Whilst these reflect all available information at the date these financial statements are approved it is noted that there is significant uncertainty
with regards to medium and long term effect of Covid-19 on the New Zealand economy and livestock agency related industries.
.
34
Allied Farmers Group
About this report
In this section
-
-
-
-It relates to an aspect of Allied's operations that is important to future performance.
Statement of compliance and basis of preparation
The financial statements have been prepared:
-
-
-presented on the basis of historical cost
-
The fair value of Financial Assets and liabilities approximates their carrying value
Other accounting policies
-Note A2
-Note C1
-Note D2
Goodwill impairment assessment
New accounting standards adopted during the period
Operating lease commitments disclosed at 30 June 2019805
Discounted using the incremental borrowing rate at 1 July 2019
(185)
Lease liability at 1 July 2019
B5620
Right of use asset recognised
620
Other operating expenses
(62)
Depreciation
47
Interest
22
The notes to the financial statements within sections A to E include information that is considered relevant and material to assist a reader in understanding
changes in the Group's financial position or performance. Information is considered material if:
Allied Farmers Limited is a for-profit entity domiciled in New Zealand and registered under the Companies Act 1993. The company is an FMC Entity in terms
of the Financial Markets Conduct Act 2013 and prepares its financial statements in accordance with that Act, the Financial Reporting Act 2013, and NZX
Main Board Listing Rules.
The consolidated financial statements are for Allied Farmers Limited and its subsidiaries (together referred to as "Allied") and Allied's interests in associates
as at end for the year ended 30 June 2020.
in New Zealand dollars, with all values rounded to the nearest thousand dollars unless otherwise stated.
on the basis of going concern. The directors, having considered projected future performance and the availability of financing, consider the going
concern basis to be appropriate; and
These Consolidated Financial Statements ("Financial Statements") have been approved for issue by the Board of Directors on 31st August 2020.
in accordance with Generally Accepted Accounting Practice (GAAP) in New Zealand and comply with International Financial Reporting Standards
(IFRS) and the New Zealand equivalents to IFRS (NZ IFRS) and other applicable financial reporting standards, as appropriate for a Tier 1 for-profit
entity;
The amount is significant because of its size or nature;
It is important for understanding the results of Allied;
It helps explain changes in Allied's business; or
NZ IFRS 16 was effective for the annual period beginning 1 July 2019. The adoption of this new standard has resulted in the Group recognising a right-of-use
asset and related lease liability in connection with all operating leases (excluding short term leases). The Group has applied the simplified transition
approach (modified retrospective approach) which means that the FY19 comparatives have not been restated.
On adoption of NZ IFRS 16, the Group recognised lease liabilities as the present value of the remaining lease payments, discounted at the Group's
incremental borrowing rate as at 1 July 2019. The incremental borrowing rate applied to the lease liabilities as at 1 July 2019 was 6.91%. This rate has been
applied across all lease categories.
Deferred tax asset recognition
Receivables credit loss provision
In preparing the Group financial statements, all material intragroup transactions, balances, income and expenses have been eliminated. Subsidiaries are
consolidated on the date on which control is obtained to the date on which control is lost.
Other accounting policies that are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements
other. Other than NZIFRS 16, the accounting policies have been consistently applied to the periods in these financial statements. The presentation and
structure of the financial statements has changed, where applicable comparatives have been amended to align with current year’s presentation.
Critical Judgements and Estimates
The preparation of financial statements requires management to exercise its judgement in applying Allied's accounting policies. Estimates and judgements
are reviewed by management on an on-going basis, with revisions recognised in the period in which the estimate is revised and in any future periods
affected. Areas of estimate or judgement that have most significant impact on the amounts recognised in the financial statements are:
35
© 2020 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Independent Auditor’s Report
To the shareholders of Allied Farmers Limited
Report on the audit of the consolidated financial statements
Opinion
In our opinion, the accompanying consolidated
financial statements of Allied Farmers Limited
(the ’company’) and its subsidiaries (the 'group') o n
pages 20 to 35:
i.present fairly in all material respects the Group’s
financial position as at 30 June 2020 and its
financial performance and cash flows for the
year ended on that date; and
ii.comply with New Zealand Equivalents to
International Financial Reporting Standards and
International Financial Reporting Standards.
We have audited the accompanying consolidated
financial statements which comprise:
— the consolidated balance sheet as at 30 June
2020;
— the consolidated statements of profit and loss,
changes in equity and cash flows for the year
then ended; and
— notes, including a summary of significant
accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ ISAs (NZ)’) . We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the group in accordance with Professional and Ethical Standard 1 (Revised) Code of
Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the
International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (‘IESBA
Code’), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the group in relation to taxation services. Subject to certain
restrictions, partners and employees of our firm may also deal with the group on normal terms within the
ordinary course of trading activities of the business of the group. These matters have not impaired our
independence as auditor of the group. The firm has no other relationship with, or interest in, the group.
Scoping
The scope of our audit is designed to ensure that we perform adequate work to be able to give an opinion on the
consolidated financial statements as a whole, taking into account the structure of the group, the significance and
risk profile of each subsidiary it owns, the group’s accounting processes and controls, and the industry in which
the subsidiary operates.
In establishing the overall approach to the group audit, we determined the type of work that needed to be
performed at the component level by us, as the group engagement team. A full scope audit was performed on
the most significant subsidiaries for the group using specific component materiality’s which were lower than
group materiality. The component materiality took into account the size and the risk profile of each component.
36
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and on the consolidated financial statements as a whole. The materiality for the consolidated financial
statements as a whole was set at $220,000 determined with reference to a benchmark of group total revenue.
We chose the benchmark because, in our view, this is a key measure of the group’s performance.
Key audit matter
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the consolidated financial statements in the current period. We summarise below the matter and our key
audit procedures to address the matter in order that the shareholders as a body may better understand the
process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely
for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not
express discrete opinions on separate elements of the consolidated financial statements
The key audit matter How the matter was addressed in our audit
Assessment of goodwill for impairment – Redshaw Livestock Limited
The Group has goodwill of $642,000 as disclosed
in Note D2 of the consolidated financial
statements, relating to Redshaw Livestock
Limited (Redshaw). Goodwill is required to be
tested for impairment annually.
Valuation of Goodwill is considered to be a key
audit matter due to the significance of the asset
to the Group’s consolidated financial position and
the level of management judgement to forecast
cash flows and determine other key inputs. We
highlight that there is higher estimation
uncertainty in the current period due to the
business disruption impact of the COVID-19
global pandemic.
We focussed on the significant forward-looking
assumptions the Group applied in their value in
use model including:
•
forecast cash flows – the Group has
experienced business disruption in the
current year, as a result of COVID-19. This
impacted the Group through a shutdown for
1 month and a corresponding loss of
revenue. These conditions and the
uncertainty of their continuation increase the
possibility of goodwill being impaired, plus
the risk of inaccurate forecasts or a
significantly wider range of possible
outcomes, for us to consider.
•
forecast growth rates and terminal growth
rates – In addition to the uncertainties
described above, the Group’s value in use
Our procedures to assess the carrying value of Goodwill
included amongst others:
• Along with our valuation specialists, considering the
appropriateness of the value in use method applied by
the Group to perform the annual test of goodwill for
impairment against the requirements of the accounting
standards.
• Assessing the integrity of the value in use model used,
including the accuracy of the underlying calculation
formulas.
• Challenging the Group’s forecast cash flow and growth
assumptions in light of the market conditions. We
compared forecast growth rates and terminal growth
rates to the Group’s stated plan and strategy, past
performance of the Group, and our experience
regarding the feasibility of these in the industry in
which they operate.
• Along with our valuation specialists, analysing the
Group’s discount rate we independently developed a
discount rate range considered comparable using
publicly available market data for comparable entities,
adjusted by risk factors and the industry it operates in.
• Considering the sensitivity of the model by varying key
assumptions, such as forecast growth rates, terminal
growth rates and discount rates, within a reasonably
possible range. We did this to identify those
assumptions at higher risk of bias or inconsistency in
application and to focus our further procedures.
37
The key audit matter How the matter was addressed in our audit
model is sensitive to changes in these
assumptions, reducing available headroom.
This drives additional audit effort specific to
their feasibility and consistency of application
to the Group’s strategy.
•
discount rate - these are complicated in
nature and vary according to the conditions
and environment the specific Cash
Generating Unit (CGU) is subject to from
time to time, and the model approach to
incorporating risks into the cash flows or
discount rates. The Group’s modelling is
sensitive to changes in the discount rate.
•Assessing the disclosures in the financial report using
our understanding of the matters obtained from our
testing and against the requirements of the accounting
standards.
Based on the above procedures there were no matters to
report.
Other information
The Directors, on behalf of the group, are responsible for the other information included in the entity’s Annual
Report. Other information includes the Chairman’s report, Chief Executive’s report, and disclosures relating to
corporate governance. Our opinion on the consolidated financial statements does not cover any other
information and we do not express any form of assurance conclusion thereon.
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 materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Use of this independent auditor’s r eport
This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been
undertaken so that we might state to the shareholders those matters we are required to state to them in the
independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the shareholders as a body for our audit work, this independent
auditor’s report, or any of the opinions we have formed.
38
Responsibilities of the Directors for the consolidated financial
statements
The Directors, on behalf of the company, are responsible for:
— the preparation and fair presentation of the consolidated financial statements in accordance with generally
accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial
Reporting Standards) and International Financial Reporting Standards;
— implementing necessary internal control to enable the preparation of a consolidated set of financial
statements that is fairly presented and free from material misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial
statements
Our objective is:
— to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error; and
— to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at
the External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is Sonia Isaac.
For and on behalf of
KPMG
Wellington
31 August 2020
39
Company Directory
Directors
Richard Perry (Chairperson) B Com (Hons), FCA,
CTP
41 Dorset Street
Westmere
Auckland 1022
Ro
ss Verry BCA
809 Riddell Road
St Heliers
Auckland 1071
Mark Benseman BA (Hons in Economics)
2b/3 Clyde Quay Wharf
Te Aro
Wellington 6011
Marise James FCA, FInstD
3 Sunset Street
Bell Block,
New Plymouth 4312
Philip C Luscombe BAgSci (Hons)
8 Ronald Street, Strandon,
New Plymouth, 4312
Registered Office of the Company Postal Address of the Company
201 Broadway
Stratford 4332
P.O. Box 304
Stratford 4352
Ph: 06 765 6199
Auditors
KPMG
10 Customhouse Quay
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
40
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.
Other issuers discussed similar conditions around this time
Matched by meaning across NZX announcement text, not keywords — based on our semantic index of announcement bodies.
- AFC — AFC Group Holdings Limited: Preliminary Announcement of AFC Group Holdings Limited2020-06-29
“Results announcement (for Equity Security issuer/Equity and Debt Security issuer) Results for announcement to the market Name of issuer AFC Group Holdings Limited Reporting Period 12 months to 31 March 2020 Previous Reporting Period 12 months to 31 March 2019 Currency NZD…”
- FSF — Fonterra Shareholders' Fund: Fonterra Shareholders’ Fund Annual Results 20202020-09-17
“Page 1 Results for announcement to the market Name of issuer Fonterra Shareholders’ Fund Reporting Period 12 months to 31 July 2020 Previous Reporting Period 12 months to 31 July 2019 Currency New Zealand Dollars Amount (m’s) Percentage change Revenue from continuing…”
- FSF — Fonterra Shareholders' Fund: Fonterra announces its Annual Results and dividend2020-09-17
“Fonterra Co-operative Group Limited Fonterra Co-operative Group Page 1 Results for Announcement to the Market Results for announcement to the market Name of issuer Fonterra Co-operative Group Limited Reporting Period 12 months to 31 July 2020 Previous Reporting Perio…”