Release of FY21 Annual Report
Template
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 17 October 2019
Results for announcement to the market
Name of issuer Bremworth Limited
Reporting Period 12 months to 30 June 2021
Previous Reporting Period 12 months to 30 June 2020
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$111,577 (5%)
Total Revenue $111,577 (5%)
Net profit/(loss) from
continuing operations
$1,729 Prior year $(21,451)
Total net profit/(loss) $1,729 Prior year $(21,451)
Interim/Final Dividend
Amount per Quoted Equity
Security
It is not proposed to pay dividends
Imputed amount per Quoted
Equity Security
Not applicable
Record Date Not applicable
Dividend Payment Date Not applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.36 $0.47
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please refer to accompanying FY21 annual report which
includes the FY21 audited financial statements
Authority for this announcement
Name of person
authorised
to make this announcement
Victor Tan
Contact person for this
announcement
Victor Tan
Contact phone number 027 668 8963
Contact email address vtan@bremworth.co.nz
Date of release through MAP
30 September 2021
Announcement based on audited financial statements.
---
ANNUAL REPORT 2021
NATURAL
PROGRESSION
VISION
TAKING A GOOD
LOOK INTO THE
FUTURE
WE'RE ON A MISSION TO
BECOME A GLOBAL LEADER IN
DESIGNING & CREATING DESIRABLE,
SUSTAINABLE, SAFE & HIGH-
PERFORMING NATURAL INTERIORS.
THAT'S OUR VISION
1
CONTENTS
Purpose 2
People 6
Sustainability 8
Grown Good 10
Passion 12
Campaign 14
People 24
Chairman’s Review 28
FY21 32
FY22 38
On behalf of the Board and
management of Bremworth Ltd,
we are pleased to present the
Annual Report for the year
ended 30 June 2021.
George Adams
Chairman
Greg Smith
Chief Executive Officer
30 September 2021
PURPOSE
2
FINDING A MORE
SUSTAINABLE
WAY
A year of transformation has redefined
Bremworth as a premium design and
natural fibre company.
Guided by a new purpose-led strategy, we’ve said
goodbye to synthetic and hello to natural.
With consumers demanding more natural and
sustainable quality products, we’re making positive
changes and doing more of what really matters.
Progressive new initiatives are plotting a fresh
course for our future. Now we invite you to
unite with us.
3
PURPOSE
4
PURPOSE
NOT PLASTIC
In May 2021 we farewelled
synthetic fibre carpet
for good.
Some would say brave. Some might think silly.
But for us, moving on from synthetic carpets
was the right thing to do for people,
the planet and our business.
Not only have we reduced our contribution to
the worldwide plastic problem, this statement
move has already led to a lift in sales of our
higher margin, higher quality wool carpet.
We expect this momentum to continue as
consumer demand for natural and sustainable
products accelerates.
5
6
"WE ONLY HAVE A FINITE
TIME ON THIS PLANET,
I JOINED BREMWORTH TO BE
PART OF SOMETHING GOOD"
PEOPLE
7
NATURAL
BORN LEADER
GREG SMITH CEO
In July, we welcomed Greg Smith as CEO. Previously
CEO of Icebreaker and a senior executive with
Michael Hill Jeweller, Greg has extensive international
business experience, running iconic New Zealand
companies and helping them scale on the world stage.
Greg’s proven ability to build a highly successful
business and valuable brand based on a natural
ethos, makes him the ideal person to lead our
company forward.
“I could see a huge opportunity for the brand and
I’m stoked to be a part of this transformational
journey. Looking ahead, we’ll prioritise innovation,
sustainability and partnerships as we drive demand
for Bremworth branded product.
Naturally, we’ll continue to optimise operational
efficiency and commercial excellence. And it’s time
to supercharge the digital side of the business.”
8
SUSTAINABILITY
A SUSTAINABLE
FUTURE HAS
STARTED
Sustainability isn’t a choice, it’s essential to future-
proof any business. Consumers search for it.
Stakeholders demand it. And, because it’s the right
thing to do, a focus on sustainability feels good too.
Our goal is to operate at the highest environmental
standards based on science, with efficiency across
energy, resources, operations, and supply chain.
A $4.9 MILLION INVESTMENT
This year our $4.9m research based sustainability
programme began with support from the Ministry
for Primary Industries’ Sustainable Food and Fibre
Futures fund.
To assist with this work we are partnering with
the University of Auckland and AgResearch
and are in the process of appointing three PhD
students to add even more brain power to our
research team.
CARBON ASSESSMENT
Recently completed carbon assessments have
identified opportunities to reduce emissions
right across our operations. To this end, we
have signed up to EECA’s Energy Transition
Accelerator programme to develop a pathway
to decarbonisation.
9
OUR FOCUS
ENERGY EFFICIENCY AND CARBON REDUCTION.
NATURAL AND COMPOSTABLE SOLUTIONS.
DECREASING WASTE.
10
"WE ARE FULLY COMMITTED
TO SUPPORTING NEW ZEALAND
WOOL GROWERS AND THE
NEW ZEALAND WOOL INDUSTRY."
Greg Smith, CEO
11
GROWN GOOD
WOOL
GROWN
GOOD
Our fully owned subsidiary Elco Direct is one of
Aotearoa’s largest wool buyers.
By continually providing a competitive price and
unequalled service to farmers, Elco Direct has
established an extensive and loyal customer base.
To give our consumers certainty about the integrity,
traceability, biosecurity, sustainability, and animal
welfare of our wool products, Bremworth recently
signed up to the New Zealand Farm Assurance
Programme.
Before long 100% of our wool will be sourced from
NZFAP accredited sources.
12
PASSION
SPUN
WITH
LOVE
13
Every product we make is made with the
same care, belief and attention to detail
that has made us the trusted, respected
and iconic brand we are today.
The creation of each of our products
involves beautiful, honest materials,
careful craftsmanship and unique design.
But above all, we make a genuine,
wholehearted difference to the daily
lives of every one of our consumers.
MADE
WITH
CARE
14
CAMPAIGN
TAKING
OUR BRAND
TO A GOOD
PLACE
Conscious consumption has become mainstream. Plastic isn’t
so fantastic. And natural is more important than ever.
To reflect these changes and appeal to a burgeoning
mindful market, we’ve repositioned our business
and redefined the Bremworth brand.
We’re presenting wool where it’s always belonged:
at the heart of a healthy home.
&
YOU
15
16
CAMPAIGN
SURREAL
MADE REAL
&
TE PAPA
SURREALIST ART
EXHIBITION PARTNER
17
Bremworth were approached by
Te Papa to collaboratively create
a sensory art experience. Shared
values, inspired design and real
craftsmanship led to something
truly magical.
We designed a custom carpet
made from 100% NZ wool for
the exhibition space.
The beautiful black, dense and
lush carpet immersed visitors
into a surrealist world.
18
CAMPAIGN
NATURAL
INSPIRES OUR
EVERYDAY
&
CONTEMPORARY
DESIGN
19
Contemporary design embracing
nature’s beauty. Bremworth’s wool
carpets and rugs are right at home
in this modern interior, bringing a
richness of warmth and texture only
nature can bring.
20
CAMPAIGN
A NATURAL
STEP FORWARD
IN FLOORING
&
DESIGNER
SPACES
21
Bremworth blends innovation and
nature’s gift – wool. Each carpet
and rug is designed to bring long
lasting comfort, dependability and
elevated design into today’s homes.
22
CAMPAIGN
REFLECTING
NEW ZEALAND
&
BRAKE
HOUSE
23
“When it came to the carpet we wanted to
be natural, we wanted 100% wool fibre, we
wanted a New Zealand brand. That began
and ended at Bremworth.”
Eric Young
Brake House Custodian
Designed by architect Ron Sang in the 1970’s for
photographer Brian Brake, the Brake House is
admired for the way it blends into its surrounding
native bush, and has a connection to the natural
environment.
24
PEOPLE
EMPOWERING
GOOD PEOPLE
TO DO GREAT
THINGS
PEOPLE, TEAMS &
TOGETHERNESS ARE
OUR BACKBONE.
This year we’ve invested in new skills and
capability, particularly in new areas of focus
such as sustainability.
To better understand how we can connect people
and technology, we completed an Industry 4.0
SIRI assessment with the assistance of Callaghan
Innovation. With a focus on enabling our people
to be their best, the findings will be used to boost
productivity, and innovation.
WE CONTINUE TO FOCUS
ON HELPING OUR PEOPLE
THRIVE.
Making sure our people are fit and well, and
that they go home safely every day from work
is always a priority.
The wellbeing of our people away from work has
also been paramount, especially during COVID
lockdowns. All staff have 24/7 access to Benestar
which is an Employee Assistance Programme and
we’ve offered staff programmes on sleep, yoga,
mindfulness and resilience.
25
"WE'VE GOT A FAMILY DYNAMIC ON
OUR MANUFACTURING FLOOR, WHICH IS
GREAT BECAUSE EVERYONE IS WILLING
TO JUMP IN AND HELP"
Mele Leaaemanu - Day Shift Production Supervisor
PEOPLE
George Adams
Independent Chairman
George Adams is an
independent Director and
was appointed to the Board on
1 June 2018. He was appointed
Chair of the Board in July
2020, having served as Deputy
Chair of the Board since
April 2019. George was also
appointed Chair of the Board’s
Nomination Committee in
July 2020 and is a member
of the Board’s Audit and
Remuneration Committees.
George brings outstanding
commercial and governance
experience from more than
25 years of international
business experience in the
fast-moving consumer goods
and telecommunications
industries, as well as a strong
background in occupational
health and safety.
WE INVITE
YOU TO UNITE
WITH US
26
Dianne Williams
Independent Director
Dianne Williams is an
independent Director and
joined the Bremworth
Board in July 2015. She was
appointed Chair of the Board’s
Remuneration Committee in
July 2020 and is a member
of the Board’s Audit and
Nomination Committees.
Dianne’s early career was in
marketing in the FMCG sector,
driving market dominance
for some of New Zealand’s
favourite brands including
Cadbury and Sealord before
taking up senior executive
roles with companies
demanding strong sales and
marketing programmes.
Paul Izzard
Independent Director
Paul Izzard is an independent
Director and joined the
Bremworth Board in November
2020. Paul is founder and
director of Izzard Design,
a leading interior design
business in New Zealand.
Over almost 20 years, he
has completed more than
300 projects in residential
and commercial design.
Paul’s industry knowledge
and networks, as well as
his business leadership
experience, are considered
valuable attributes as
Bremworth transforms to
being a global leader in
designing and creating
desirable, sustainable, safe
and high performing natural
interior solutions.
John Rae
Independent Director
John Rae is an independent
Director and joined the
Bremworth Board in July 2015.
He was appointed Chair of
the Board’s Audit Committee
in July 2020 and is a member
of the Board’s Remuneration
and Nomination Committees.
John has degrees in Law and
Commerce and spent his
early career in banking in New
Zealand and London in various
treasury and capital market
roles for 10 years before
returning to New Zealand
and undertaking a number
of private equity, venture
capital and corporate finance
transactions in Australasia.
Grant Biel
Non- Independent Director
Grant Biel is a non-
independent Director by
virtue of his interests in Rural
Aviation (1963) Limited, a
substantial product holder in
Bremworth. He has been on
the Bremworth Board since
July 1984, held the position of
executive Director from July
1984 to September 1995 and is
a member of the Board’s Audit,
Remuneration and Nomination
Committees. Grant is the
surviving co-founder of the
Cavalier Carpets business
which he founded with Tony
Timpson in 1972.
27
28
FY21
CHAIRMAN'S
REVIEW
GEORGE ADAMS
FY21 marked the beginning of a new era for
Bremworth.
We took the first bold steps towards becoming
a global leader in desirable, sustainable, high
performing natural interior solutions, building
solid foundations for our future.
ALL WOOL,ALL GOOD
Our ‘all wool and natural fibres’ strategy saw
us exit the synthetic carpet market - which
previously accounted for around half our sales
- to fully pursue higher margin, higher quality
wool carpet sales.
Our growth strategy is built on four pillars –
to grow the wool flooring market, to grow our
share of this market, to expand our presence
and to continue with the design-led innovation
for which Bremworth is famous for.
To support the execution of our strategy
and investment in the new way forward, we
successfully concluded the sale and leaseback
of our Auckland property in December 2020 for
$25.0 million net. We have also right sized the
organisational structure in response to our exit from
synthetics – downsizing Auckland manufacturing
and increasing capacity at Napier and Whanganui.
Our priorities for FY21 to FY23 are to push forward
with our new strategy and navigate the economic
recovery post-COVID.
A number of initiatives in FY21 drove progress
towards our goals:
•
The launch of the re-energised Bremworth
brand for the core carpet business;
•
Rollout of new colour options, providing
greater choice for consumers;
•
Expansion of our retailer distribution networks,
predominantly in Australia;
29
"ALREADY WE ARE SEEING A
LIFT IN OUR WOOL CARPET SALES
& WE EXPECT DEMAND TO GROW"
30
•
Launch of a differentiated brand strategy
in 2H21, to build demand for Bremworth
branded product, grow the New Zealand
wool carpet category and support the
broader New Zealand wool industry.
SUSTAINABILITY
GOAL-SETTING
Hand-in-hand with our commercial strategy,
we have set forth on our sustainability journey.
Our goal is to reduce our environmental impact
through research, science and innovation. We
are systematically identifying opportunities to
be more sustainable and efficient throughout
our supply chain and production processes.
True, we’re not perfect but we are committed to
being better, underlined by the launch of a $4.9
million sustainability-based research programme.
This will focus on:
•
Reducing the company’s carbon footprint;
•
Using more natural solutions; and
•
Finding new, innovative ways to manufacture
our products so that they are better for
people and the planet.
CAVALIER BECOMES
BREMWORTH
We started FY22 with the announcement of
our company name change from Cavalier
to Bremworth. This is a natural progression
for our company and follows the 2020 move
to return the carpet business to the original
Bremworth brand. The renewed commitment to
the Bremworth name is another defining step in
our transformation. We look forward to a future
where we can deliver value to our shareholders
and make a genuine difference to the wellbeing
of people and the planet. All while providing the
design and performance attributes consumers
care about.
GOOD PEOPLE
Our people have always been the backbone
of our business, with a number of multi-
generational family members part of our 400
strong ‘work family’. Over what has been a very
challenging year, our people have continued to
work hard, add value and come to work every
day with a great attitude. On behalf of the Board
and management, our sincere thanks go to
everyone in the Bremworth team for their
efforts and contribution.
LEADING CHANGE
In April this year, we accepted the resignation
of Paul Alston as CEO. Paul joined Bremworth
as chief financial officer in 2012 and served as
chief executive officer from May 2015. He led
the business through an intensive period of
change, restructuring and positioning it for
the future as a more sustainable and focused
business. The Board wishes to acknowledge the
significant value that Paul brought to Bremworth
over his nine years with the business.
In July, we were delighted to welcome Greg
Smith as the incoming CEO. His proven business
acumen, natural leadership skills and visionary
thinking make him the ideal person to lead our
company forward.
GOVERNANCE
In another turning point for our company,
founder Grant Biel has announced his intention
to step down from the Board at this year’s Annual
Shareholders’ Meeting. Alongside co-founder,
Tony Timpson, Grant created Bremworth and
has helped guide its progression from a tin shed
operation to be New Zealand’s leading carpet
manufacturer today. Grant will continue his
association with Bremworth as the company’s
first ever Director Emeritus, a position he will
hold for life. The honorary appointment is in
recognition of the pivotal role Grant has played
in our history.
31
TOWARDS FY22
We will continue to invest in our transformation,
particularly around technology, sustainability
and marketing. Supply chain and COVID-related
disruptions including a tight labour market
are expected to continue over the short term.
However, consumer demand has strengthened
over the pandemic period as people spend
money on consumer goods and housing in
lieu of travel.
There is also growing awareness of, and
sentiment towards, natural products, with
Government policy increasingly addressing
sustainability and climate change.
We are in a strong financial position, confident in
our strategy and excited about the opportunities
ahead of us and the future of our company.
Our thanks go to our shareholders for your
support during this time.
George Adams, Chairman
30 September 2021
We also appointed Paul Izzard to the Board
during the year. He is one of the leading
commercial interior designers in the country,
as well as a strong business leader, and is
providing significant insight and advice as
we transform our business towards a
‘consumer and design-led’ future.
LOOKING FORWARD
Our decision to stop selling synthetic carpets
was brave and disruptive. But that’s just the start.
We are looking at every aspect of our business to
see what we can do better, backed by more than
50 years of experience in the market and current
consumer insights.
The opportunity for Bremworth is significant.
Wool carpets make up only a small portion of
carpet sales overall and there is an enormous
opportunity to rebuild wool’s share of market
as consumers seek more natural alternatives.
GROWTH STRATEGY
Our first strategic pathway is to grow demand
for wool carpet. Already our digital marketing
campaigns are promoting New Zealand wool
as a natural, high performing alternative to
synthetic carpet fibres. We firmly believe wool
carpet is the optimum offer for consumers.
Along with design and performance benefits,
wool is natural, fire retardant, warm in winter
and cool in summer, and stain resistant.
The trend for hard flooring looks set to stay.
Rugs are becoming an integral part of this
flooring style, adding softness, warmth,
texture and design flair to people’s homes.
As such, we are seeing strong and growing
demand for Bremworth rugs.
32
FY21
FINANCIAL
PERFORMANCE
REVENUE
$111.6M
DOWN 5% ON PCP
INCREASED
WOOL CARPET
SALES
17% GROWTH
YEAR ON YEAR
OPERATING
CASH FLOW
$16.2M
UP 138% ON
THE PRIOR YEAR
Normalised is a non-GAAP measure of financial performance and therefore falls within the Financial Markets Authority’s guidance
note on “Disclosing non-GAAP financial information”. Normalised results are not audited and exclude items that are not expected to
occur on a regular basis either by virtue of quantum or nature. Full commentary on the disclosure of non-GAAP financial information
and a reconciliation from the non-GAAP financial information to the most directly comparable GAAP financial information, including
that for the previous period, can be found on pages 131 and 132.
33
48% IMPROVEMENT
IN NORMALISED EBITDA
EBITDA $4.7M
NORMALISED $3.4M
RETURN
TO PROFIT
$1.7M NET PROFIT AFTER TAX
UP FROM LOSS OF $21.5M IN FY20
ROBUST
BALANCE
SHEET
NIL BANK DEBT.
$22.5M CASH & BANK
AS AT 30 JUNE 2021
34
FY21
FINANCIAL
REVIEW
35
INCREASING WOOL
CARPET SALES
Bremworth reported significantly improved wool
carpet sales, strong cash flows and a return to
profit as we continue our journey to execute our
all wool and natural fibres strategy.
We are still seeing the impact of the global
pandemic, with ongoing restrictions and
lockdowns in Australia and New Zealand, and
supply chain issues. However, consumer demand
has strengthened over this time as people spend
money on consumer goods and housing in
lieu of travel. There is also growing awareness
and sentiment towards natural products, and
increasing Government policy addressing
sustainability and climate change.
RETURN TO PROFIT
Revenue was $111.6m, with earnings before
interest, tax, depreciation and amortisation
(EBITDA) of $4.7m and normalised EBITDA up
48% to $3.4m. Net profit after tax improved to
$1.7m, up from a loss of $21.5m in the prior year.
Group revenue was down 5% on the prior year,
reflecting Bremworth’s exit from the synthetic
carpet market, with synthetic carpet stocks
selling down faster and at a higher margin than
anticipated. Pleasingly, sales of wool carpets
increased 17% year on year, with strong growth
in the second half. The improved sales mix was
underpinned by strong consumer demand in
both New Zealand and Australia, despite supply
chain issues and COVID-related disruption to the
export supply chain.
Revenue from the wool buying business, Elco
Direct, was down 5%, but it recorded strong
year on year margin growth as operating
conditions improved.
Operating expenses increased as expected,
with the right sizing of the business for the new
strategy and commencement of brand awareness
campaigns in the second half of the year.
EBITDA increased to $4.7m, up from $(8.9)m
in FY20, while normalised EBITDA was up 48%
to $3.4m. Net profit after tax of $1.7m included
the costs associated with the right-sizing of the
organisation and a $2.6m net gain on the sale
and leaseback of the Auckland property.
Excluding these one-off items, normalised profit
after tax was $0.4m (FY20: normalised loss after
tax of $3.5m).
STRONG PLATFORM
TO EXECUTE STRATEGY
Tight control over working capital continues.
Inventory levels reduced as planned due to
the sell down of synthetic carpets. These are
expected to increase again over time as wool
carpet sales grow.
All debt was repaid during the year, with cash
and bank of $22.5m at year end providing a strong
platform and the financial resources to execute
the new strategy. Operating cash flow improved
to $16.2m, up 138% on the prior year.
Prudent capital management remains a priority
as the Company continues to invest in resetting
the business and expanding capacity to support
growth. No dividend was declared.
Normalised is a non-GAAP measure of financial performance and therefore falls within the Financial Markets Authority’s guidance
note on “Disclosing non-GAAP financial information”. Normalised results are not audited and exclude items that are not expected to
occur on a regular basis either by virtue of quantum or nature. Full commentary on the disclosure of non-GAAP financial information
and a reconciliation from the non-GAAP financial information to the most directly comparable GAAP financial information, including
that for the previous period, can be found on pages 131 and 132.
36
FY21
SUMMARY
New purpose led strategic
direction was announced.
We started our journey to deliver
natural, sustainable and beautiful
interior products that help create
happy and healthy homes
July
2020
November
2020
December
2020
Secured funding
to execute the
strategic plan.
Funding for the execution of
our strategic transformation
was confirmed, with the
successful sale and leaseback
of our Auckland property
Re-launched
Bremworth brand.
We returned our carpet
business to the original
Bremworth brand and, more
recently, we also changed our
company name from Cavalier
to Bremworth
37
Secured funding
to execute the
strategic plan.
Funding for the execution of
our strategic transformation
was confirmed, with the
successful sale and leaseback
of our Auckland property
May
2021
June/
July
2021
April
2021
Bremworth’s last ever
synthetic carpet
production was
celebrated.
MPI helped us to celebrate
the end of synthetic carpet
production in our plants, which
reduces our use of imported
synthetic fibre annually by
2,500 tonnes
Secured SFFF grant from
MPI to support Bremworth’s
sustainability programme.
We took the first step in
our sustainability journey,
securing Government funding
to support our $4.9 million
sustainability-based research
programme which seeks to
create better and greener ways
to manufacture wool carpet
June
We signed up to the
New Zealand Farm Assurance
Programme. This provides
our consumers certainty about
the integrity, traceability,
biosecurity, sustainability, and
animal welfare of our wool.
July
We were pleased to welcome
Greg Smith as the new
Chief Executive Officer for
Bremworth, farewelling Paul
Alston after nine years with
the company.
EOYF
Results in line with
expectations as we continue
to execute our all wool and
natural fibres strategy
38
FY22
FY22
LET'S KEEP
GOING GOOD
FUTURE FOCUS FROM
GREG SMITH CEO
• Create demand for Bremworth
branded product
• Optimise operational efficiency
and commercial excellence
• Super charge the digital business
• Prioritise innovation, sustainability
and partnerships.
Consumers are increasingly looking to bring
more natural alternatives into their homes.
They’re making good choice and we want to
be one of them.
To continue the transformation journey we
have set four key priorities for the year ahead.
39
"AT BREMWORTH, WE HAVE AN
ENORMOUS OPPORTUNITY TO REBUILD
WOOL'S SHARE OF THE FLOORING
MARKET AND GROW OUR BUSINESS"
Greg Smith - CEO
40
TREND
STATEMENT
40
4141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
Normalised is a non-GAAP measure of financial performance and therefore falls within the Financial Markets Authority’s guidance
note on “Disclosing non-GAAP financial information”. Normalised results are not audited and exclude items that are not expected to
occur on a regular basis either by virtue of quantum or nature. Full commentary on the disclosure of non-GAAP financial information
and a reconciliation from the non-GAAP financial information to the most directly comparable GAAP financial information, including
that for the previous period, can be found on pages 131 and 132.
42
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37
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3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21
(1)
3
2
PercentagePercentagePercentage
Days
Days
37
154
91
123
(5)
–
2.11
2.87
1.42
0
10
20
30
40
50
60
70
FY17FY18FY19FY20FY21
59
41
32
43
–
0
5
10
15
20
25
30
FY17FY18FY19FY20FY21
1919
2424
28
0
5
10
15
20
25
30
35
40
45
FY17FY18FY19FY20FY21
39
32
39
38
0
20
40
60
80
100
120
140
160
175
FY17FY18FY19FY20FY21
146
170
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21
(1)
3
2
PercentagePercentagePercentage
Days
Days
37
154
91
123
(5)
–
2.11
2.87
1.42
0
10
20
30
40
50
60
70
FY17FY18FY19FY20FY21
59
41
32
43
–
0
5
10
15
20
25
30
FY17FY18FY19FY20FY21
1919
2424
28
0
5
10
15
20
25
30
35
40
45
FY17FY18FY19FY20FY21
39
32
39
38
0
20
40
60
80
100
120
140
160
175
FY17FY18FY19FY20FY21
146
170
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21
(1)
3
2
PercentagePercentagePercentage
Days
Days
37
154
91
123
(5)
–
2.11
2.87
1.42
0
10
20
30
40
50
60
70
FY17FY18FY19FY20FY21
59
41
32
43
–
0
5
10
15
20
25
30
FY17FY18FY19FY20FY21
1919
2424
28
0
5
10
15
20
25
30
35
40
45
FY17FY18FY19FY20FY21
39
32
39
38
0
20
40
60
80
100
120
140
160
175
FY17FY18FY19FY20FY21
146
170
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21
(1)
3
2
PercentagePercentagePercentage
Days
Days
37
154
91
123
(5)
–
2.11
2.87
1.42
0
10
20
30
40
50
60
70
FY17FY18FY19FY20FY21
59
41
32
43
–
0
5
10
15
20
25
30
FY17FY18FY19FY20FY21
1919
2424
28
0
5
10
15
20
25
30
35
40
45
FY17FY18FY19FY20FY21
39
32
39
38
0
20
40
60
80
100
120
140
160
175
FY17FY18FY19FY20FY21
146
170
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21
(1)
3
2
PercentagePercentagePercentage
Days
Days
37
154
91
123
(5)
–
2.11
2.87
1.42
TREND STATEMENT
FIVE YEAR PERFORMANCE GRAPHS
UNAUDITED
TREND STATEMENT
2021
$000
2020
$000
2019
$000
2018
$000
2017
$000
2016
$000
2015
$000
Operating revenue$111,577$117,981$135,234$148,120$156,120$190,371$215,728
EBITDA (normalised)3,3852,3007,0 769,9982,57212,2758,517
EBIT (normalised)1,708(2,162)3,5976,437(679)8,9232,655
Profit/(Loss) before income tax (normalised)652(4,697)2,4515,058(2,818)8,219741
Profit/(Loss) after income tax (normalised)376(3,457)1,8793,974(1,856)6,3131,195
Abnormal costs (after tax)1,353(17,994)(18,659)107(268)(3,198)(26,910)
Profit/(Loss) after tax attributable to
shareholders of the Company (GAAP)1,729(21,451)(16,780)4,081(2,124)3,115(25,715)
Financial Position
Shareholders’ equity35,59233,63754,98972,2226 7, 8 9 069,36166,184
Loans and borrowings–15,80020,50031,50041,5003 7,7 0 056,767
Fixed assets12,09422,72530,16435,1423 7,1 2 336,8204 7, 9 1 0
Right-of-use assets9,968430–––––
Goodwill and other intangibles–––2,3622,3622,3622,362
Cash and bank22,5081,2762,7242,1111,2551,2002,834
Return on average shareholders' equity
(normalised)1.1%( 7. 8)%3.0%5.7%(2.7)%9.3%1.5%
Basic earnings per ordinary share
(normalised) – cents0.55c(5.03)c2.74c5.79c(2.70)c9.19c1.74c
Diluted earnings per ordinary share
(normalised) – cents0.54c(5.03)c2.74c5.79c(2.70)c9.19c1.74c
Net tangible asset backing per ordinary share$0.36$0.47$0.72$0.94$0.87$0.92$0.91
43
UNAUDITED
4444
45
CONSOLIDATED
FINANCIAL
STATEMENTS
45
Contents
47 Directors’ Responsibility Statement
48 Independent Auditor’s Report
53 Consolidated Statement of Profit or Loss
54 Consolidated Statement of Comprehensive Income
55 Consolidated Statement of Changes in Equity
57 Consolidated Statement of Financial Position
58 Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
60 1. Company information
60 2. General information relating to preparation of consolidated financial statements
3. Financial performance
65 3a. Segment performance
67 3b. Earnings per share
67 3c Revenue from contracts with customers
68 3d. Other income and gains
68 3e. Administration expenses
69 3f. Personnel expenses
69 3g. Government grants
70 3h. Finance costs
71 3i. Income tax
4. Capital and funding
74 4a. Capital management
74 4b. Share capital, dividends and reserves
76 4c. Loans and borrowings
5. Assets employed
77 5a. Property, plant and equipment
79 5b. Capital commitments
6. Working capital
80 6a. Cash and bank
80 6b. Trade receivables, other receivables and prepayments
81 6c. Inventories
82 6d. Trade payables and accruals
82 6e. Employee entitlements
83 7. Risks and financial instruments
8. Others
93 8a. Leases
95 8b. Share-based payment
98 8c. Sale and leaseback of property
99 8d. Provisions
100 8e. Employee benefits
101 8f. Contingencies
101 8g. Related parties
103 8h. Group entities
103 8i. Events after balance date
103 8j. Standards, interpretations and amendments to standards
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
46
47
CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS' RESPONSIBILITY STATEMENT
DIRECTORS' RESPONSIBILITIES
The Directors are responsible for the preparation of the
consolidated financial statements of Bremworth Limited
(formerly known as Cavalier Corporation Limited) and
subsidiaries (“the Group”). The Directors discharge this
responsibility by ensuring that the consolidated financial
statements comply with Generally Accepted Accounting
Practice and fairly present the financial position of the
Group as at balance date and of its operations and cash
flows for the year ended on that date.
ACCOUNTING POLICIES
The Directors consider that the accounting policies used
in the preparation of the consolidated financial statements
are appropriate, consistently applied, and supported by
reasonable judgements and estimates. All relevant financial
reporting and accounting standards have also been followed.
ACCOUNTING RECORDS
The Directors believe that proper accounting records, which
enable, with reasonable accuracy, the determination of the
financial position of the Group and facilitate the compliance
of the consolidated financial statements with the Financial
Markets Conduct Act 2013, have been kept.
SAFEGUARDING OF ASSETS AND INTERNAL CONTROLS
The Directors consider that they have taken adequate steps
to safeguard the assets of the Group and to prevent and
detect fraud and other irregularities. Internal control
procedures are also considered to be sufficient to provide
a reasonable assurance as to the integrity and reliability
of the consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS
The Directors present, on pages 53 to 103, the consolidated
financial statements for the year ended 30 June 2021.
These audited consolidated financial statements were
authorised for issue by the Directors on 30 September 2021
and, as required by section 461(1)(b) of the Financial Markets
Conduct Act 2013, are dated and signed as at that date.
For and on behalf of Bremworth Limited
T H G Adams
Chairman of the Board of Directors
J M Rae
Chairman of the Audit Committee
48
To the shareholders of Bremworth Limited
OUR OPINION
In our opinion, the accompanying consolidated financial statements of Bremworth Limited (formerly known as "Cavalier
Corporation Limited") (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial
position of the Group as at 30 June 2021, its financial performance and its cash flows for the year then ended in accordance with
New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting
Standards (IFRS).
What we have audited
The Group's consolidated financial statements comprise:
—the consolidated statement of financial position as at 30 June 2021;
—the consolidated statement of profit or loss for the year then ended;
—the consolidated statement of comprehensive income for the year then ended;
—the consolidated statement of changes in equity for the year then ended;
—the consolidated statement of cash flows for the year then ended; and
—the notes to the consolidated financial statements, which include 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)) and International
Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for
Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand
Auditing and Assurance Standards Board and the International Code of Ethics for Professional Accountants (including
International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code),
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carried out other services for the Group in the areas of treasury advisory services prior to the acceptance of our
audit engagement services. The provision of these other services has not impaired our independence as auditor of the Group.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current year. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand
T: +64 9 355 8000, www.pwc.co.nz
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
Independent auditor’s report
To the shareholders of Fidelity Life Assurance Company Limited
We have audited the consolidated financial statements which comprise:
● the consolidated statement of financial position as at 30 June 2020;
● the consolidated income statement for the year then ended;
● the consolidated statement of comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Fidelity Life Assurance Company
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2020, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance over custodial controls and
solvency and tax compliance. In addition, our Firm has insurance arrangements with the Group covering
partners and employees within the Firm. Those arrangements were contracted on normal terms within
the ordinary course of trading activities of the Group. Certain partners and employees of our firm may
also individually deal with the Group on normal terms within the ordinary course of trading activities of
the Group. These matters have not impaired our independence as auditor of the Group.
49
DESCRIPTION OF THE KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Liquidity and cash flow forecasts
The consolidated financial statements have been prepared
on a going concern basis and the Group expects to be able
to realise its assets and meet its financial obligations in the
normal course of business for the foreseeable future. This is
primarily supported by the Group’s current liquidity and cash
flow forecasts.
Management has forecast the Group’s financial performance,
cash flows and financial position as part of its management
and monitoring of the Group’s operations and its ability to
meet its financial commitments as they fall due in the normal
course of business through to 30 June 2023.
In preparing these forecasts, assumptions included the
Group’s strategic transformation plans, future economic and
market conditions, such as forecast sales volumes, expected
NZD/AUD exchange rate movements (after considering the
Group’s hedged positions) and forecast wool prices.
In forming its going concern conclusion, the Board has also
taken into consideration a number of factors, including the
cash surplus resulting from the successful execution of the
sale and leaseback of the Auckland property and the sell
down of non-wool inventory, with no outstanding external
debt as at balance date, the potential impact of the recent
COVID-19 lockdowns in New Zealand and the Group’s ability
to resort to other sources of funding (including the sale of
other properties) and to reduce discretionary spending,
if required.
The Group's all-wool and natural materials strategy involves
some uncertainty around the successful execution of this
transformation and the cash flow forecasts of the business,
therefore it is an area of focus for the audit and a key audit
mat ter.
Refer to Note 2c to the consolidated financial statements
describing the Group’s cash flow forecasts and conclusion
on the use of going concern assumption for the preparation
of the consolidated financial statements.
To audit the Group’s cash flow forecasts for the period to
30 June 2023, which are used to support the going concern
assumption for the preparation of the consolidated financial
statements, our audit procedures included the following:
—gaining an understanding of key assumptions used
in the cash flow forecasts through discussions with
management;
—checking these key assumptions are consistent with
the Board approved forecasts;
—assessing and challenging key assumptions such as
sales volumes and margins, wool price and exchange
rates with reference to independent data sources and
contracts, where possible, and to recent actual sales
and margin performance;
—performing sensitivity testing on the key sales
assumptions used in the forecast cash flows to assess
the level of forecasting risk;
—evaluating the accuracy of the Group’s previous
forecasts by comparing the actual performance against
forecasts in prior periods;and
—performing subsequent events procedures to identify
events that may affect the Group’s cash flow forecasts,
including consideration of the expected impacts of the
most recent New Zealand COVID-19 lockdown.
We also considered the adequacy of the related disclosures
in the consolidated financial statements against the
requirements of NZ IFRS.
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
Independent auditor’s report
To the shareholders of Fidelity Life Assurance Company Limited
We have audited the consolidated financial statements which comprise:
● the consolidated statement of financial position as at 30 June 2020;
● the consolidated income statement for the year then ended;
● the consolidated statement of comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Fidelity Life Assurance Company
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2020, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance over custodial controls and
solvency and tax compliance. In addition, our Firm has insurance arrangements with the Group covering
partners and employees within the Firm. Those arrangements were contracted on normal terms within
the ordinary course of trading activities of the Group. Certain partners and employees of our firm may
also individually deal with the Group on normal terms within the ordinary course of trading activities of
the Group. These matters have not impaired our independence as auditor of the Group.
50
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)
DESCRIPTION OF THE KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Valuation of inventory
The carrying value of the Group’s inventory at 30 June 2021 was
$20.03 million (30 June 2020 $32.08 million) net of inventory
provisions of $1.98 million (30 June 2020 $4.74 million).
The cost of inventory reflects raw materials and manufacturing
costs, including an allocation of production overheads based
on normal operating capacity.
The Group has recorded inventory provisions, which
represent a deduction from the cost of inventory, for obsolete,
aged and discontinued inventory and carpet oddments to
reflect management’s best estimate of their net realisable
value. Determining these provisions involves significant
judgements considering a range of factors such as inventory
rationalisation plans, consumer demand and trends, available
distribution channels and historical sales and margins data.
Valuation of inventory is an area of focus and key audit matter
for the audit due to the significance of the inventory balance,
the complexity of inventory costing, and the judgements
involved in estimating the inventory provisions.
Note 6c of the consolidated financial statements describes
the accounting policy on inventories and the judgements and
estimates applied by management to determine the inventory
provision.
To audit the cost of inventory, our procedures included:
—gaining an understanding of the inventory costing
process;
—testing the accuracy of the application of inventory
costing by reperforming the calculation;
—verifying inputs, on a sample basis, of the finished
goods, work in progress and yarn inventory cost by
agreeing them to supporting documents;
—testing the cost of raw material inventory, on a sample
basis, to supplier invoices; and
—evaluating the nature and appropriateness of factory
overheads capitalised into inventory based on normal
operating capacity, and testing the mathematical
accuracy of the overhead allocation calculation.
To audit the inventory provisions, our procedures included:
—observing management’s stocktake process by attending
selected locations to confirm the existence and condition
of the inventory;
—gaining an understanding of and assessing the Group’s
methodology for identifying slow moving, oddments
and obsolete inventories, taking into consideration other
key attributes used such as piece sizes, low grade quality
and discontinued products;
—assessing the accuracy of management’s estimate
of provisioning by comparing actual inventory write
offs with the corresponding prior year provisions;
—testing the net realisable value of finished goods,
on a sample basis, by comparing the cost with recent
sales prices and margins; and
—reviewing the inventory aging schedules to verify,
on a sample basis, whether provisions were recorded
for aged stock in accordance with the Group’s policy
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
Independent auditor’s report
To the shareholders of Fidelity Life Assurance Company Limited
We have audited the consolidated financial statements which comprise:
● the consolidated statement of financial position as at 30 June 2020;
● the consolidated income statement for the year then ended;
● the consolidated statement of comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Fidelity Life Assurance Company
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2020, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance over custodial controls and
solvency and tax compliance. In addition, our Firm has insurance arrangements with the Group covering
partners and employees within the Firm. Those arrangements were contracted on normal terms within
the ordinary course of trading activities of the Group. Certain partners and employees of our firm may
also individually deal with the Group on normal terms within the ordinary course of trading activities of
the Group. These matters have not impaired our independence as auditor of the Group.
51
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)
OUR AUDIT APPROACH
Overview
Overall group materiality: $557,000, which represents approximately 0.5% of revenue.
We chose revenue as the benchmark because, in our view, it is the stable benchmark
against which the performance of the Group is most commonly measured by users,
and is an accepted benchmark.
Following our assessment of the risk of material misstatement, full scope audits were
performed for five of 28 entities in the Group based on their financial significance.
These five entities covered all of the Group’s trading entities, which accounted for all
of the Group’s revenue. Specified audit procedures and analytical review procedures
were performed on the remaining entities.
As reported above, we have two key audit matters, being:
—Liquidity and cash flow forecasts
—Valuation of inventory
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated
financial statements. In particular, we considered where management made subjective judgements; for example, in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters,
consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to
fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group
materiality for the consolidated financial statements as a whole as set out above. These, together with qualitative considerations,
helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures and to evaluate the effect
of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole.
How we tailored our group audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated
financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls,
and the industry in which the Group operates.
OTHER MATTER
The consolidated financial statements of Bremworth Limited for the year ended 30 June 2020 were audited by another auditor
who expressed an unmodified opinion on those consolidated financial statements on 20 November 2020.
PwC 4
Our audit approach
Overview
Overall group materiality: $557,000, which represents approximately
0.5% of revenue. We chose revenue as the benchmark because, in
our view, it is the stable benchmark against which the performance of
the Group is most commonly measured by users, and is an accepted
benchmark.
Following our assessment of the risk of material misstatement, full
scope audits were performed for five of 24 entities in the Group
based on their financial significance. These five entities covered all of
the Group’s trading entities, which accounted for all of the Group’s
revenue. Specified audit procedures and analytical review
procedures were performed on the remaining entities.
As reported above, we have two key audit matters, being:
● Liquidity and cash flow forecasts
● Valuation of inventory
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the consolidated financial statements. In particular, we considered where
management made subjective judgements; for example, in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain. As in all
of our audits, we also addressed the risk of management override of internal controls, including among
other matters, consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if,
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate, on the consolidated financial statements as a whole.
How we tailored our group audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates.
Other matter
The consolidated financial statements of Bremworth Limited for the year ended 30 June 2020 were
audited by another auditor who expressed an unmodified opinion on those consolidated financial
statements on 20 November 2020.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
Independent auditor’s report
To the shareholders of Fidelity Life Assurance Company Limited
We have audited the consolidated financial statements which comprise:
● the consolidated statement of financial position as at 30 June 2020;
● the consolidated income statement for the year then ended;
● the consolidated statement of comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Fidelity Life Assurance Company
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2020, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance over custodial controls and
solvency and tax compliance. In addition, our Firm has insurance arrangements with the Group covering
partners and employees within the Firm. Those arrangements were contracted on normal terms within
the ordinary course of trading activities of the Group. Certain partners and employees of our firm may
also individually deal with the Group on normal terms within the ordinary course of trading activities of
the Group. These matters have not impaired our independence as auditor of the Group.
52
OTHER INFORMATION
The Directors are responsible for the other information. The other information comprises the information included in the
Annual report but does not include the consolidated financial statements and our auditor's report thereon. Our opinion on the
consolidated financial statements does not cover the other information and we will not express any form of audit opinion or
assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the consolidated financial
statements in accordance with NZ IFRS and IFRS, and for such internal control as the Directors determine is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
AUDITOR�S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is located at the External
Reporting Board’s website at:
https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
WHO WE REPORT TO
This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might state
those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s
shareholders, as a body, for our audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Philippa (Pip) Cameron.
For and on behalf of
Chartered Accountants
30 September 2021 Auckland
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
Independent auditor’s report
To the shareholders of Fidelity Life Assurance Company Limited
We have audited the consolidated financial statements which comprise:
● the consolidated statement of financial position as at 30 June 2020;
● the consolidated income statement for the year then ended;
● the consolidated statement of comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Fidelity Life Assurance Company
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2020, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance over custodial controls and
solvency and tax compliance. In addition, our Firm has insurance arrangements with the Group covering
partners and employees within the Firm. Those arrangements were contracted on normal terms within
the ordinary course of trading activities of the Group. Certain partners and employees of our firm may
also individually deal with the Group on normal terms within the ordinary course of trading activities of
the Group. These matters have not impaired our independence as auditor of the Group.
PwC 5
Other information
The Directors are responsible for the other information. The other information comprises the
information included in the Annual report but does not include the consolidated financial statements
and our auditor's report thereon. Our opinion on the consolidated financial statements does not cover
the other information and we will not express any form of audit opinion or assurance conclusion
thereon. In connection with our audit of the consolidated financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If, based on the work we have performed on the other
information that we obtained prior to the date of this auditor’s report, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is
located at the External Reporting Board’s website at:
https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Philippa (Pip)
Cameron.
For and on behalf of:
Chartered Accountants
30 September 2021
Auckland
53
Audited
Note
2021
$000
2020
$000
Revenue from contracts with customers3c 111,577 1 1 7, 9 8 1
Cost of sales (80,145) (95,227)
Gross profit
31,432 22,754
Other income and gains
3d 2,823 35
Distribution expenses (19,914) (18,255)
Administration expenses
3e (10,009) (6,696)
Restructuring costs (1,271) (1,186)
Impairment of plant and equipment
5a– ( 7,0 7 7 )
Impairment of right-of-use assets
5a– (2,909)
3,061 (13,334)
Finance costs
3h (1,124) (2,535)
Finance income68–
Profit/(Loss) before income tax2,005(15,869)
Income tax (expense)/benefit
3i
(276) 7, 3 0 9
Derecognition of deferred tax assets
3i
– (12,891)
Profit/(Loss) after tax for the year
$1,729 ($21,451)
Basic earnings/(loss) per share (cents)
3b
2.52 (31.23)
Diluted earnings/(loss) per share (cents)
3b
2.50 (31.23)
This Consolidated Statement of Profit or Loss is to be read in conjunction with the notes on pages 60 to 103.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 30 JUNE 2021
54
54
Audited
Note
2021
$000
2020
$000
Profit/(Loss) after tax for the year
1,729 (21,451)
Other comprehensive income that may be reclassified subsequently
to profit or loss
Effective portion of changes in fair value of cash flow hedges 299 (178)
Net change in fair value of cash flow hedges transferred to profit or loss (77) 315
Income tax on changes in fair value of cash flow hedges
3i (47) (38)
Total other comprehensive income 175 99
Total comprehensive income for the year
$1,904 ($21,352)
This Consolidated Statement of Comprehensive Income is to be read in conjunction with the notes on pages 60 to 103.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2021
55
Audited
Note
Share
Capital
$000
Cash Flow
Hedging
Reserve
$000
Foreign
Currency
Translation
Reserve
$000
Share-based
Payment
Reserve
$000
Retained
Earnings
$000
To tal
Equity
$000
Total equity at 1 July 2020 21,846 (120) (1,420)– 13,331 33,637
Total comprehensive income for the year
Profit after tax– – – – 1,729 1,729
Other comprehensive income that may be
reclassified subsequently to profit or loss
Changes in fair value of cash flow hedges
(net of income tax)
– 175 – – – 175
Total comprehensive income for the year– 175– – 1,729 1,904
Transaction with owners in their capacity
as owners
Share-based payments - value of employee
services
8b– – – 51 – 51
Total equity at 30 June 2021 $21,846 $55 ($1,420)$51 $15,060 $35,592
This Consolidated Statement of Changes in Equity is to be read in conjunction with the notes on pages 60 to 103.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2021
56
Share
Capital
$000
Cash Flow
Hedging Reserve
$000
Foreign
Currency
Translation
Reserve
$000
Retained
Earnings
$000
To tal
Equity
$000
Audited
Total equity at 1 July 2019 21,846 (219) (1,420) 34,782 54,989
Total comprehensive income for the year
Loss after tax– –– (21,451) (21,451)
Other comprehensive income that may be
reclassified subsequently to profit or loss
Changes in fair value of cash flow hedges
(net of income tax)
– 99 – – 99
Total comprehensive income for the year – 99 – (21,451) (21,352)
Total equity at 30 June 2020 $21,846 ($120)($1,420)$13,331 $33,637
This Consolidated Statement of Changes in Equity is to be read in conjunction with the notes on pages 60 to 103.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2020
57
Audited
Note
2021
$000
2020
$000
ASSETS
Property, plant and equipment - owned
5a 12,094 22,725
Property, plant and equipment - right-of-use
8a 9,968 430
Deferred tax asset
3i 732 600
Total non-current assets
22,794 23,755
Cash and bank
6a 22,508 1,276
Trade receivables, other receivables and prepayments
6b 12,520 12,607
Inventories
6c 20,035 32,081
Derivative financial instruments
7 109 160
Income tax receivable 57 102
Total current assets
55,229 46,226
Total assets
$78,023 $69,981
EQUITY
Share capital
4b 21,846 21,846
Cash flow hedging reserve
4b 55 (120)
Foreign currency translation reserve
4b (1,420) (1,420)
Share-based payment reserve
4b, 8b 51 –
Retained earnings 15,060 13,331
Total equity
35,592 33,637
LIABILITIES
Lease liabilities
8a 19,530 2,224
Employee benefits
8e 776 703
Provisions
8d 672 584
Total non-current liabilities
20,978 3,511
Loans and borrowings
4c– 15,800
Trade payables and accruals
6d 13,064 10,617
Employee benefits
8e 136 128
Employee entitlements
6e 5,203 3,501
Lease liabilities
8a 2,003 1,345
Provisions
8d 662 710
Derivative financial instruments
7 34 732
Deferred income
3g
351 –
Total current liabilities
21,453 32,833
Total liabilities
42,431 36,344
Total equity and liabilities
$78,023 $69,981
This Consolidated Statement of Financial Position is to be read in conjunction with the notes on pages 60 to 103.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2021
58
Audited
Note
2021
$000
2020
$000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 111,527 117,836
Cash paid to suppliers and employees (94,083) (107,965)
17,444 9,871
Government grants received 495 –
Other receipts 6 5
GST paid (229) (10)
Interest paid – loans and borrowings (515) (2,006)
Interest component of lease payments (675) (536)
Interest received 53 –
Income tax paid (363) (551)
Net cash flow from operating activities
16,216 6,773
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of plant and equipment 29 28
Proceeds from sale of property
8c 25,022 –
Acquisition of plant and equipment
5a (2,481) (2,119)
Short term deposits(12,000)–
Net cash flow from investing activities
10,570 (2,091)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of loans and borrowings
4c (15,800) (4,700)
Principal component of lease payments
8a (1,744) (1,490)
Net cash flow from financing activities
(17,544) (6,190)
Net increase/(decrease) in cash and cash equivalents
9,242 (1,508)
Cash and cash equivalents at beginning of the year 1,276 2,724
Effect of exchange rate changes on cash (10) 60
Cash and cash equivalents at end of the year
$10,508 $1,276
This Consolidated Statement of Cash Flows is to be read in conjunction with the notes on pages 60 to 103.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2021
59
Audited
2021
$000
2020
$000
Profit/(Loss) after tax for the year 1,729 (21,451)
Add/(Deduct) non-cash items:
Depreciation – owned assets 379 2,683
Depreciation – right-of-use assets 534 1,779
Share-based payments – value of employee services 51 –
Impairment of plant and equipment– 7,0 7 7
Impairment of right-of-use assets– 2,909
Deferred tax (132) (8,073)
Derecognition of deferred tax assets– 12,891
Net (gain)/loss on sale of property, plant and equipment (2,651) 35
Net loss/(gain) on foreign currency balance 10 (60)
Changes in working capital items:
Trade receivables, other receivables and prepayments 87 (263)
Inventories 12,046 15,332
Income tax receivable 45 213
Trade payables and accruals 2,446 (6,400)
Employee benefits and entitlements 1,783 (427)
Provisions 10 (174)
Deferred income 351 (9)
Derivative financial instruments (472) 711
Net cash flow from operating activities$16,216 $6,773
This Consolidated Statement of Cash Flows is to be read in conjunction with the notes on pages 60 to 103.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
1. COMPANY INFORMATION
On 30 August 2021, Cavalier Corporation Limited changed its name to Bremworth Limited.
Bremworth Limited ("Bremworth" or "the Company") is a limited liability company that is domiciled and incorporated
in New Zealand.
The consolidated financial statements presented are for Bremworth and its subsidiaries ("the Group") as at, and for the
year ended, 30 June 2021.
The Company is registered under the Companies Act 1993 and is an FMC reporting entity for the purposes of the
Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013. The consolidated financial statements have
been prepared in accordance with these Acts.
The principal activities of the Group comprise wool acquisition, and carpet and rug manufacturing and sales.
All Group subsidiaries are wholly-owned.
2. GENERAL INFORMATION RELATING TO PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
2a. STATEMENT OF COMPLIANCE
The consolidated financial statements comply with New Zealand equivalents to International Financial Reporting Standards
(NZ IFRS), other applicable New Zealand accounting standards and authoritative notices as appropriate for Tier 1 For-Profit
entities. The consolidated financial statements also comply with International Financial Reporting Standards (IFRS).
2b. BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting
Practice (NZ GAAP) as appropriate for Tier 1 For-Profit entities.
They have been prepared on the historical cost basis, except for derivative financial instruments which are measured at fair
value as disclosed at note 7 (Risks and financial instruments) to the consolidated financial statements.
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in New Zealand dollars, which is Bremworth Limited's functional and presentation currency. Unless otherwise
indicated, all financial information presented in New Zealand dollars has been rounded to the nearest thousand.
The Consolidated Statements of Profit or Loss, Comprehensive Income, Changes in Equity and Cash Flows are stated
exclusive of GST. All items in the Consolidated Statement of Financial Position are stated exclusive of GST, except for
trade receivables and trade payables, which include GST invoiced.
2c. GOING CONCERN
Transformation to the all-wool and natural materials business model
On 22 May 2020, the Board of Directors approved the strategy to transform the business to an all-wool and natural materials
organisation, with the Board advising shareholders and the market that it would require significant additional investment and
funding to execute the transformation.
As part of this transformation, the Group commenced its exit from the non-wool carpet business during the financial year
so that it can focus on its woollen carpet operations – with the funds released from the sale of non-wool inventory being
used to significantly reduce the Group’s net bank debt position.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
61
2. GENERAL INFORMATION RELATING TO PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
2c. GOING CONCERN (CONT'D)
Transformation to the all-wool and natural materials business model (cont'd)
On 23 December 2020, the Group settled the sale and leaseback of its Auckland property, with the net proceeds of sale of
$25.0 million used to fully repay bank debt outstanding at that date and the balance of the net proceeds of sale to be applied
towards providing the Group with the financial resources to undertake its strategic transformation.
The Group’s transformation represents a material change in direction of the business and therefore the forecasts inherently
include a level of estimation uncertainty and execution risk. Five-year modelling of the Group’s future financial performance
and the investment needed to bring about the transformation were undertaken by management and external advisers.
In summary:
—The surplus cash at the end of FY21, arising primarily as a result of the sell down of non-wool inventory, the sale
and leaseback of the Auckland property and settlement of bank debt during FY21, will be required in FY22 and
beyond for the ongoing transformation;
—Total sales revenue for FY22 is expected to reduce, with the Group having exited its non-wool carpet business,
even though sales revenue is expected to grow again from FY23 onwards as the Group's transformation programme
gathers momentum;
—Investment costs, including the restructuring of the Group's operations, will be incurred as the business adjusts its
manufacturing and sales base to reflect the new sales focus, with these costs also inclusive of new display stands at
retail to expand its market presence;
—Marketing spend and people costs associated with the sustainability initiative will increase as the Group invests in a
number of initiatives to enhance its market presence and ensure its strategy is successfully communicated, understood
and implemented – in the process growing the wool flooring market while also growing its share of the wool market;
—As the Group’s strategy progresses and sales of higher margin, higher value woollen carpets replace and eclipse the
previous non-wool carpet sales, the Group’s financial performance is forecast to improve, with growing revenues
expected from FY23 and FY24 onwards as the business builds woollen carpet sales;
—The full benefits from the transformation are expected from FY25 onwards.
The Board is currently not considering any further sources of funding, with the sell down of non-wool inventory and the
sale and leaseback of the Auckland property leaving the Group with a significant cash and bank surplus of $22.5 million
at balance date.
The Board notes that to date, the transformation has gone better than originally planned and will continue to ensure that
management remains focused on key areas in the business, including the Group's funding requirements and structure,
the capital expenditures that will be needed to increase manufacturing capacity, the levels of working capital required to
support sales and the management of leasing arrangements.
COVID-19
On 17 August 2021, in response to a potential outbreak of the COVID-19 Delta variant of the virus, the New Zealand
Government imposed Level 4 lockdown throughout the country effective from 11.59 pm that same day. Under Level 4
lockdown, all workplaces in New Zealand are required to close unless the workplace is deemed to be essential. As a
consequence, all of the Group's carpet yarn making facilities in Napier and Whanganui had to cease operations during
the duration of the Level 4 lockdown from 18 August 2021 through to 31 August 2021, while its carpet manufacturing
operation in Auckland was not able to recommence operation until 22 September 2021.
The Group has considered the impact of COVID-19 in general, and the impact of this latest Level 4 lockdown, in forecasting
the Group's projected cashflows for the purposes of assessing its ongoing liquidity. The Group has concluded that COVID-19
generally (particularly in Australia) and the latest Level 4 lockdown (in New Zealand) are unlikely to materially impact the
Group's ongoing liquidity adversely.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
62
2. GENERAL INFORMATION RELATING TO PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
2c. GOING CONCERN (CONT'D)
Assessment of going concern
The Group prepares its consolidated financial statements on a going concern basis and expects to be able to realise its
assets and meet its financial obligations in the normal course of business.
Management forecasts the Group’s financial performance, cash flows and financial position as part of its management and
monitoring of the Group’s operations and its ability to meet its other financial commitments as they fall due in the normal
course of business through to 30 June 2023.
In preparing these forecasts, management considered and, where required, made assumptions in relation to:
—the Group’s strategic transformation to an all-wool and natural materials business model and, in particular, the capital
investments and marketing spends that would be required to execute the transformation and reposition the Group as
discussed above;
—projected growth in woollen sales volumes from the implementation of initiatives underpinning the transformation;
— future economic and market conditions, including consideration of the impact of COVID-19 and the implications of
the 17 August 2021 Level 4 lockdown in New Zealand as highlighted earlier;
—NZD/AUD exchange rate changes, after considering hedged positions;
—wool prices movements, after recognising wool purchase contracts;
—manufacturing discipline and cost control.
The Group decided to exit the non-wool carpet market and return to an all-wool and natural materials business model –
focusing on designing and creating desirable, sustainable, safe and high-performing natural interior solutions - during the
year ended 30 June 2020.
To facilitate that transformation to the new model, the Group needed to raise capital, with the Group taking extensive
external independent advice and investigating a range of opportunities to realise additional funds to allow the Group to
execute its transformation as well as support the business in light of the impact of, and the uncertainty caused by, COVID 19.
The sale and leaseback of the Auckland property represented the most effective way of accessing capital, even though the
Board is continuing to consider other capital raising options to further strengthen the Group’s balance sheet if required.
The net proceeds from the sale and leaseback will be used to provide the Group with:
—the financial resources to undertake its strategic transformation to the all-wool and natural materials business model;
—additional liquidity and funding during the current uncertain operating environment; and
—a sound financial footing to better capitalise on opportunities in the carpet market.
The Board notes that while these financial forecasts and the success of the transformation are highly dependent on the
projected increase in woollen carpet sales, even if the projected increase in woollen carpet sales were to fall somewhat short
of forecast, going concern is still supported with the Group having sufficient liquidity to meet its financial commitments for a
period of at least 12 months following the issuance of the consolidated financial statements.
The Board also notes that even though there are some uncertainties relating to the transformation plan, these uncertainties
are not significant and would not lead to material uncertainty relating to going concern.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
63
2. GENERAL INFORMATION RELATING TO PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
2c. GOING CONCERN (CONT'D)
Assessment of going concern (cont'd)
In forming these views, the Board has taken into account the following:
—how the sell-down of non-wool inventory has progressed during the year, with the funds released from the sale of that
inventory more than originally anticipated and able to be used to largely reduce the Group's net bank debt position;
—the successful sale and leaseback of the Auckland property on 23 December 2020, with the net proceeds of sale of
$25.0 million almost $1.0 million more than originally expected and used to fully repay bank debt outstanding at that
date and the balance to be applied towards providing the Group with the financial resources to undertake its strategic
transformation while also providing it with liquidity to meet ongoing commitments;
— in relation to the COVID-19 Level 4 lockdown in New Zealand in August 2021, the Group's eligibility to claim the
Government's COVID-19 wage subsidy for the period from 18 August 2021 through to 14 September 2021 to assist it
in meeting its obligations to continue to pay its employees during the lockdown;
— the cash and bank surplus of approximately $22.5 million as at balance date along with positive equity, positive
working capital and positive cash flows from operations;
—the Group's ongoing ability to resort to other sources of funding (including the sale of properties) and to reduce
discretionary spending if required.
2d. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS AND SIGNIFICANT ACCOUNTING POLICIES
The preparation of the consolidated financial statements in conformity with NZ IFRS requires the directors to make
judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets,
liabilities, income and expenses. Judgements and estimates are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods
affected.
Information about estimates and judgements that have a significant effect on the amounts recognised in the consolidated
financial statements are disclosed in the following notes:
Note 2c – going concern
Note 3i – measurement and recoverability of tax losses
Note 5a – recoverability of property, plant and equipment
Note 6c – inventory provisioning
Note 8a – determination of lease term
Note 8d – measurement of provisions
Note 8e – measurement of employee benefits
Significant accounting policies and critical estimates, judgements and assumptions are also disclosed in the relevant notes
to the consolidated financial statements and identified using the following coloured boxes:
Accounting policies Estimates, judgements and assumptions
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
64
2. GENERAL INFORMATION RELATING TO PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
2e. BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Group as at 30 June 2021
and the results of all subsidiaries for the year then ended. Subsidiaries are all entities over which the Company has control.
The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity.
Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements. Unrealised losses are also eliminated unless the underlying intra-group
transaction provides evidence that the asset transferred is impaired.
2f. CHANGES IN ACCOUNTING POLICIES
The Group previously capitalised costs incurred in configuring or customising certain suppliers’ application software in
certain cloud computing arrangements as fixed assets, as the Group considered that it would benefit from those costs to
implement the cloud-based software over the expected terms of the cloud computing arrangements. Following the IFRS
Interpretations Committee (IFRIC) agenda discussion on Configuration or Customisation Costs in a Cloud Computing
Arrangement in March 2021 (ratified by International Accounting Standards Board (IASB) in April 2021), the Group has
reconsidered its accounting treatment and adopted the guidance set out in the IFRIC agenda decision, which is to recognise
those costs as intangible assets only if the activities create an intangible asset that the Group controls and the intangible
asset meets the recognition criteria. Costs that do not result in an intangible asset are expensed as incurred, unless they are
paid to the suppliers of the cloud-based software to significantly customise the cloud-based software for the Group, in which
case the costs paid upfront are recorded as prepayments for services and amortised over the expected terms of the cloud
computing arrangements.
As a result of this change in accounting policy, the Group has determined that certain costs relating to the implementation
of cloud-based software would need to be expensed when they were incurred, as the amounts were paid to third parties who
were not subcontracted by the supplier of the cloud-based software and did not create separate intangible assets controlled
by the Group, or significantly customise the cloud-based software for the Group.
The change in policy has been applied retrospectively. The impact of this change is:
—an increase of $494,000 to administration expenses in the Consolidated Statement of Profit or Loss for the year ended
30 June 2021 with a corresponding decrease to property, plant and equipment (owned) in the Consolidated Statement
of Financial Position. The impact on the consolidated financial statements for the year ended 30 June 2020 is nil.
—a decrease in basic earnings per share of 0.72 cents (2020: Nil) and a decrease in diluted earnings per share of
0.71 cents (2020: Nil).
2g. RESTATEMENT OF PRIOR YEAR BALANCES
The Consolidated Statement of Profit or Loss for the year ended 30 June 2020 included $784,000 in distribution expenses
that should have been included in cost of sales as the expenses relate to inventory. This has been corrected by restating both
distribution expenses and cost of sales during the year ended 30 June 2020 by $784,000.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
65
3. FINANCIAL PERFORMANCE
This section deals with the financial performance of the Group and addresses, among other things, the financial performance
of the Group’s reportable segments and the key areas that impact on the Group’s profitability, including operating revenue,
other income, gains/losses on sale of property, plant and equipment, expenses and taxation.
3a. SEGMENT PERFORMANCE
Reportable segments
The Group’s reportable and operating segments are:
— Carpet, with this segment involved in the manufacturing and sales of carpet in New Zealand, Australia and rest
of the world; and
— Wool, with this segment involved in the acquisition of wool for the carpet segment and for sales to external
customers in New Zealand.
An operating segment is a component of the Group:
—that engages in business activities from which it may earn revenues and incur expenses, including revenues
and expenses that relate to transactions with any of the Group’s other components;
—whose operating results are regularly reviewed by the Group’s chief operating decision maker - in this case,
the Chief Executive Officer - to make decisions about the resources to be allocated to the segment and to
assess its performance; and
—for which discrete financial information is available.
The Chief Executive Officer uses total revenue, segment result before depreciation, restructuring and impairment and
segment result after depreciation but before restructuring and impairment to assess the performance of the operating
segments. Total assets and total liabilities are also reviewed for the operating segments.
Inter-segment transactions
All inter-segmental transactions included in revenue and operating expenses for each segment are on an arm’s-length basis.
Inter-segmental sales during the year and intercompany profits on stocks at balance date are eliminated on consolidation.
Geographical areas
In presenting information on the basis of geographical areas, revenue is based on the geographical location of customers
and non-current assets are based on the geographical location of those assets.
Revenue
2021
$000
2020
$000
New Zealand 63,901 65,012
Australia 45,067 50,071
USA 1,139 1,371
Canada 1,070 729
Rest of the world 400 798
$111,577 $117,981
Non-current assets
As at
30 June 2021
$000
As at
30 June 2020
$000
New Zealand 22,154 22,740
Australia 640 1,015
$22,794 $23,755
Major customers
None of the Group’s external customers contributed revenues in excess of 10% of the Group’s total revenues.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
66
3. FINANCIAL PERFORMANCE (CONT'D)
3a. SEGMENT PERFORMANCE (CONT'D)
Carpets sales and manufacturing Wool acquisition To tal
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
2020
$000
External revenue 95,548 101,135 16,029 16,846 111,577 1 1 7, 9 8 1
Inter-segment revenue– – 2,313 1,788 2,313 1,788
To t al r eve nu e 95,548 101,135 18,342 18,634 113,890 119,769
Elimination of inter-segment revenue (2,313) (1,788)
Consolidated revenue $111,577 $117,981
Segment result before depreciation,
restructuring related expenses and impairment
6,784 3,484 784 102 7, 5 6 8 3,586
Depreciation – owned assets(236) (2,267) (143) (151) (379) (2,418)
Depreciation – right-of-use assets(411)
(1,649)(123)(130)(534)(1,779)
Depreciation – recycled through inventory(764)(265)––(764)(265)
Segment result before restructuring
and impairment
5,373 (697) 518 (179) 5,891 (876)
Restructuring costs (1,271) (1,186)– – (1,271) (1,186)
Impairment of plant and equipment– ( 7,0 7 7 )– – – ( 7,0 7 7 )
Impairment of right-of-use assets– (2,909)– – – (2,909)
Segment result after restructuring
and impairment
4,102 (11,869)518 (179) 4,620 (12,048)
Elimination of inter-segment profits (49) 50
Unallocated corporate costs (1,510) (1,336)
Results from operating activities 3,061 (13,334)
Finance costs (1,124) (2,535)
Finance income68–
Profit/(Loss) before income tax 2,005 (15,869)
Income tax (expense)/benefit (276) 7, 3 0 9
Derecognition of deferred tax assets– (12,891)
Profit/(Loss) after tax for the year $1,729 ($21,451)
Carpets sales and manufacturing Wool acquisition To tal
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
2020
$000
Reportable segment assets 50,987 6 7, 4 74 4,528 2,507 55,515 69,981
Unallocated assets - Cash and bank 22,508 –
Total assets$78,023 $69,981
Capital expenditure 2,481 2,067 – 52 $2,481 $2,119
Reportable segment liabilities 18,920 19,363 1,978 1,181 20,898 20,544
Unallocated liabilities - Lease liabilities 21,533
–
Unallocated liabilities - Loans and borrowings– 15,800
Total liabilities$42,431 $36,344
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
67
3. FINANCIAL PERFORMANCE (CONT'D)
3b. EARNINGS PER SHARE
Basic earnings/(loss) per share (Basic EPS)
20212020
Profit/(Loss) after tax attributable to shareholders of the Company ($000) 1,729 (21,451)
Weighted average number of ordinary shares outstanding 68,679,098 68,679,098
Basic EPS (cents) 2.52 (31.23)
Diluted earnings/(loss) per share (Diluted EPS)
20212020
Profit/(Loss) after tax attributable to shareholders of the Company ($000) 1,729 (21,451)
Weighted average number of ordinary shares outstanding 69,242,681 68,679,098
Diluted EPS (cents) 2.50 (31.23)
In calculating the diluted earnings per share, the Company has taken into account the maximum number of shares that
could be issued under the Company's long term incentive scheme as further discussed at note 8b (Share-based payment)
to the consolidated financial statements over that period from grant date of the performance rights of 21 December 2020
to balance date.
3c. REVENUE FROM CONTRACTS WITH CUSTOMERS
2021
$000
2020
$000
Sales of goods
Carpet 94,700 98,985
Wool fibre 16,029 16,846
Carpet yarn 605 1,014
111,334 116,845
Provision of installation services 243 1,136
To t al r eve nu e$111,577 $117,981
Installation contracts outstanding at balance date totalled $355,000 (2020: $105,000). The contracts outstanding at balance
date are expected to be fulfilled during the year ending 30 June 2022. All of the contracts outstanding at 30 June 2020 were
fulfilled in the current year ended 30 June 2021.
Credit terms for carpet sales within New Zealand and Australia are generally no later than 30 days after the month in which
invoices are raised and, in the case of wool sold in New Zealand, within 14 days of invoice date or on despatch whichever is
the earlier. Credit terms for sales of carpet overseas are generally 60 to 90 days from date of invoice and for sales of carpet
yarn overseas 120 days from date of invoice.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
68
3. FINANCIAL PERFORMANCE (CONT'D)
3c. REVENUE FROM CONTRACTS WITH CUSTOMERS (CONT'D)
Accounting policies
Sale of goods
Revenue is recognised when or as performance obligations are satisfied by transferring control of the products sold
to the customer at the transaction price specified in the contract. Control transfers to the customers for carpet and
yarn sales on delivery of the goods to the customer. For wool sales, control passes on payment, prior to delivery.
The transaction price includes all amounts which the Group expects to be entitled to, net of goods and services tax
and other indirect taxes, expected rebates and discounts.
Apart from warranties, there are no contractual rights of return and there are therefore no provisions for returns.
In specific circumstances, the Group may choose to accept returns, in which case the returns are recognised at
that time.
Provision of installation services
Revenue from installation services rendered is recognised in profit or loss in proportion to the stage of completion of
the transaction at the reporting date as the customer receives and uses the benefit simultaneous to installation. The
stage of completion of installation services rendered is determined by having regard to the quantity in lineal metres
of carpet installed at balance date relative to the total quantity in lineal metres of carpet required for each contract.
3d. OTHER INCOME AND GAINS
Note
2021
$000
2020
$000
Rentals received 5 4
Dividends received 1 1
Government grants recognised
3g
166 –
Net gain on sale and leaseback of property 2,624 –
Net gain/(loss) on sale of plant and equipment 27 (35)
Other income– 65
Total other income and gains/losses$2,823 $35
3e. ADMINISTRATION EXPENSES
The following items of expenditure are included in administration expenses:
2021
$000
2020
$000
Donations$2 $3
Fees paid to KPMG for:
Audit of consolidated financial statements - current year– 371
Audit of consolidated financial statements - additional for prior year 259 61
Tax services 22 20
Other services 18 –
Total fees paid to KPMG$299 $452
Fees paid and payable to PwC for:
Audit of consolidated financial statements - current year 567 –
Treasury advisory services 20 34
Total fees paid and payable to PwC$587 $34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
69
3. FINANCIAL PERFORMANCE (CONT'D)
3e. ADMINISTRATION EXPENSES (CONT'D)
Fees paid to KPMG for tax services were in respect of transfer pricing review and review of income tax returns (2020:
transfer pricing review, R&D incentive tax advice, review of income tax returns and assistance with COVID-19 wage
subsidy applications).
PwC ceased providing the Group with all advisory services prior to their appointment as auditors.
3f. PERSONNEL EXPENSES
Note
2021
$000
2020
$000
Directors’ fees
8g
386 368
Wages, salaries, bonuses and holiday pay 28,390 27,898
Other employee related costs1,2341,260
Restructuring costs1,271–
Employee termination benefits494 364
Employee benefits 1,354 1,263
Increase/(Decrease) in liability for retiring allowances and long service leave23 (15)
Total personnel expenses$33,152 $31,138
Personnel costs are included in cost of sales, distribution expenses and administration expenses in the Consolidated
Statement of Profit or Loss (except where these costs relate to the restructuring of the Group’s operations in which
case they are classified as restructuring costs).
Employee benefits include those benefits provided to employees as part of their employee arrangements with the Group
and cover the provision of motor vehicles, income protection insurances, life insurances and medical insurances and
associated fringe benefits taxes. Employee benefits also include the costs of providing on-site staff amenities.
3g. GOVERNMENT GRANTS
COVID-19 wage subsidy
2021
$000
2020
$000
COVID-19 wage subsidy
Balance at 1 July 1,500 –
Wage subsidy received during the year– 2,819
Amount recognised in the Consolidated Statement of Profit or Loss (1,500) (1,319)
Balance at 30 June carried forward in inventory$0 $1,500
The Group did not apply for any COVID-19 wage subsidy from the New Zealand Government during the year (2020: Applied
for and received $2,819,000 of COVID-19 wage subsidy).
$1,500,000 of that wage subsidy was recognised in cost of sales in the Consolidated Statement of Profit or Loss during the
financial year (2020: $1,319,000 was recognised in cost of sales, distribution expenses and administration expenses in the
Consolidated Statement of Profit or Loss).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
70
3. FINANCIAL PERFORMANCE (CONT'D)
3g. GOVERNMENT GRANTS (CONT'D)
International Growth Fund and Sustainable Food and Fibre Futures Fund
Grants totalling $88,000 (2020: Nil) from the government’s International Growth Fund (IG Fund) and $78,000 (2020: Nil)
from the Sustainable Food and Fibre Futures Fund (SFFF Fund) are included in other income in the Consolidated Statement
of Profit or Loss, with the IG Fund covering pre-approved activities over the period from May 2019 to January 2023 and the
SFFF Fund over the period from December 2020 through to December 2023.
There are no unfulfilled conditions or other contingencies attaching to the grants recognised in other income during the year.
Government grants that have been deferred, either because they relate to future costs to be incurred or assets, totalled
$351,000 at balance date (2020: Nil).
Others
The Group also received a one-off grant from the Energy Efficiency and Conservation Authority (EECA) of $31,000 during
the year, being EECA's contribution towards the costs incurred by the Group in assessing opportunities under EECA's Energy
Transition Accelerator programme. The Group did not benefit directly from any other forms of government assistance.
Notes 3d (Other income and gains) and 3g (Government grants) to the consolidated financial statements provide further
information on how the Group accounts for government grants.
Accounting policies
Grants from the government are recognised at their fair value where there is a reasonable assurance that the Group
will comply with all attached conditions and the grants will be received.
Government grants relating to costs that have been incurred are credited to profit or loss while grants relating to
future costs are included in current liabilities as deferred income and recognised in profit or loss over the period
necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as
deferred income and they are credited to profit or loss on a straight-line basis over the expected lives of the related assets.
3h. FINANCE COSTS
2021
$000
2020
$000
Interest expense - loans and borrowings (449) (1,531)
Interest rate swap - hedge ineffectiveness– (468)
Interest component of lease payments (675) (536)
Finance costs($1,124)($2,535)
Accounting policies
Finance costs include interest expense on borrowings and interest income on funds invested. All interest expense and
income are recognised in profit or loss using the effective interest method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
71
3. FINANCIAL PERFORMANCE (CONT'D)
3i. INCOME TAX
2021
$000
2020
$000
INCOME TAX EXPENSE IN THE CONSOLIDATED STATEMENT
OF PROFIT OR LOSS
Current tax expense
Current year 408 773
Adjustment for prior years– (9)
408 764
Deferred tax expense/(benefit)
Origination and reversal of temporary differences 196 (8,082)
Adjustment for prior years (230) 9
Derecognition of deferred tax assets– 12,891
Unrecognised deferred tax assets
(98)–
(132) 4,818
Income tax expense$276 $5,582
2021
$000
2020
$000
RECONCILIATION OF EFFECTIVE TAX RATE
Profit/(Loss) after tax for the year
1,729 (21,451)
Income tax expense
276 5,582
Profit/(Loss) excluding income tax$2,005 ($15,869)
Income tax using the Company’s domestic tax rate of 28% (2020: 28%)
561 (4,443)
Unrecognised deferred tax assets
(98)–
Impending change in legislation relating to tax depreciation on buildings
– (2,940)
Derecognition of deferred tax assets
– 12,891
Non-deductible expenses
11 41
Effect of tax rate difference in foreign jurisdiction
34 33
Prior period adjustment
(232)–
Income tax expense$276 $5,582
2021
$000
2020
$000
INCOME TAX RECOGNISED DIRECTLY IN EQUITY
Derivative financial instruments47 38
Income tax on income and expense recognised directly in equity$47 $38
IMPUTATION CREDITS
Imputation credits available to shareholders of the Company$9,233 $9,233
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
72
3. FINANCIAL PERFORMANCE (CONT'D)
3i. INCOME TAX (CONT'D)
Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities Net
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
2020
$000
Property, plant and equipment 378 181 – – 378 181
Inventories– 100 – – – 100
Employee benefits 156 130 – – 156 130
Lease liabilities 80 146 – – 80 146
Provisions 118 43 – – 118 43
Net tax assets/(liabilities)$732 $600 $0 $0 $732 $600
No deferred tax assets in respect of temporary differences and tax loss carry-forwards were derecognised during the year
(2020: $12,891,000).
Deferred tax assets at the balance date relate to the Group's Australian carpet sales operations where it is expected that
there will be taxable profits in future periods to allow for the utilisation of the deferred tax assets.
Deferred tax assets have not been recognised in respect of temporary differences and tax loss carry-forwards totalling
$16,389,000 (2020: $12,891,000) relating to the Group's New Zealand operations on the basis that it is not probable that
future taxable profit will be available against which the Group can use the benefits therefrom.
Deferred tax assets have also not been recognised in respect of temporary differences and tax loss carry-forwards totalling
$24,150,000 (2020: $24,150,000) relating to an Australian subsidiary that currently does not have trading activity on the basis
that it is also not probable that future taxable profit will be available against which the Group can use the benefits therefrom,
taking the total deferred tax assets unrecognised to $40,539,000 (2020: $37,041,000).
Notwithstanding the derecognition of deferred tax assets for accounting purposes, these deferred tax assets remain
available to the Group for income tax purposes.
Movement in temporary differences during the year:
Balance
30 June 2020
$000
Recognised in
consolidated
statement of
profit or loss
$000
Recognised in
equity
$000
Derecognition
of deferred
tax assets in
profit or loss
$000
Balance
30 June 2021
$000
Property, plant and equipment 181 197– – 378
Inventories 100 (100) – – –
Employee benefits 130 26 – – 156
Lease liabilities 145 (65)–– 80
Provisions 44 74 – – 118
To t al$600 $132$0 $0 $732
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
73
3. FINANCIAL PERFORMANCE (CONT'D)
3i. INCOME TAX (CONT'D)
Deferred tax assets and liabilities (cont'd)
Balance
30 June 2019
$000
Recognised on
transition to
NZ IFRS 16
$000
Recognised in
consolidated
statement of
profit or loss
NZ IFRS 16
$000
Recognised in
equity
$000
Derecognition
of deferred
tax assets in
profit or loss
$000
Balance
30 June 2020
$000
Property, plant and equipment (1,130)– 4,476 – (3,165) 181
Right-of-use assets (2,194) 1,245 – 949 –
Derivative financial instruments– – 38 (38)– –
Inventories 644 – 612 – (1,156) 100
Employee benefits 1,124 – (5)– (989) 130
Lease liabilities 2,17 7 (349)– (1,683) 145
Provisions 1,193 17 (216)– (950) 44
Deferred income–– – – –
Tax loss carry-forwards 3,625 – 2,272 – (5,897)–
To t al$5,456 – $8,073 ($38)($12,891)$600
Accounting policies
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to
the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in
other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting
date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes and is measured at the tax rates that are
expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.
Estimates, judgements and assumptions
Deferred tax assets are recognised for unused tax losses and deductible temporary differences to the extent that it is
probable that future taxable profits will be available against which they can be used. Future taxable profits are
determined based on business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each
balance date and adjusted to the extent that it is no longer probable that sufficient taxable profits will be available in
the future to utilise the deferred tax asset. In arriving at the decision to derecognise deferred tax assets at 30 June
2020, regard was given to the history of tax losses generated by the Group, the further losses that are expected in
FY21 and FY22 as the Company executes its strategic decision to restructure the business to an all-wool and natural
materials business, the significant level of estimation uncertainty in management's forecasts and the execution risk
underlying the transformation and the material change in direction of the business.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
74
4. CAPITAL AND FUNDING
This section looks at the Group's two key sources of funding, how it manages its funding and other related matters.
4a. CAPITAL MANAGEMENT
The Group’s capital includes share capital, reserves and retained earnings.
The Group’s capital management policy is aimed at maintaining a strong capital base so as to maintain investor, creditor and
market confidence in the Group and to enable it to continue to fund the ongoing needs of the business and to sustain its
future development.
The impact of the level of capital on shareholders’ return is also recognised, as is the return to shareholders in the form of
dividends paid and growth in share price, and the Group works to maintain a balance between the higher returns that might
be possible with greater gearing and the advantages and security afforded by a sound capital base.
The Group is not subject to any externally imposed capital requirements.
The allocation of capital between the Group’s specific business segment operations and activities is, to a large extent,
driven by the opportunities that exist within each of these segments and the optimisation of the return achieved on the
capital allocated. The process of allocating capital to specific business segment operations and activities is determined
by the Chief Executive Officer in consultation with the Board and is therefore undertaken independently of those responsible
for the operation.
The Group’s policies in respect of capital management and allocation are reviewed regularly by the Board.
There have been no material changes in the Group’s management of capital during the year.
Consistent with best practice, the Group monitors capital on the basis of the leverage ratio. Leverage ratio is calculated
as net debt divided by total capital employed. Net debt is determined as total loans and borrowings (including both non-
current and current as shown in the Consolidated Statement of Financial Position) plus bank overdraft less cash and bank.
Total capital employed is calculated as equity as shown in the Consolidated Statement of Financial Position plus net debt
financing assets in operation.
4b. SHARE CAPITAL, DIVIDENDS AND RESERVES
Share capital
20212020
Number of ordinary shares issued 68,679,098 68,679,098
The Company does not have a limited amount of authorised capital.
All issued shares are fully paid up and have no par value.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and one vote per share at
meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
75
4. CAPITAL AND FUNDING (CONT'D)
4b. SHARE CAPITAL, DIVIDENDS AND RESERVES (CONT'D)
Dividends
No dividends were paid during the year (2020: Nil).
The Board has not declared a final dividend in respect of the current year ended 30 June 2021 (2020: Nil).
Cash flow hedging reserve
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising
from operational, financing and investing activities. In accordance with its treasury policy, the Group does not hold or
issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting
are accounted for as trading instruments.
Derivative financial instruments are recognised initially at fair value and transaction costs are expensed immediately.
Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on re-measurement
to fair value is recognised immediately in profit or loss.
Where derivatives qualify for hedge accounting, changes in the fair value of the derivative hedging instrument designated
as a cash flow hedge are recognised in other comprehensive income to the extent that the hedge is effective. To the extent
that the hedge is ineffective, changes in fair value are recognised in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised,
then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other
comprehensive income remains there until the forecast transaction occurs at which time the gain or loss is transferred to
profit or loss. When the hedge item is a non-financial asset, the amount recognised in the cash flow hedging reserve is
transferred to the carrying amount of the asset when it is recognised. In other cases, the amount recognised in the cash flow
hedging reserve is transferred to profit or loss in the same year that the hedged item affects profit or loss.
The cash flow hedging reserve represents the effective portion of the cumulative net change in the fair value of cash flow
hedging instruments related to hedged transactions that have not yet occurred.
Foreign currency translation reserve
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated to New Zealand dollars at exchange rates at the reporting date. The income and expenses of foreign operations
are translated to New Zealand dollars at exchange rates at the dates of the transactions.
The foreign currency translation reserve comprises all exchange rate differences arising from the translation of the financial
statements of foreign operations and the translation of liabilities designated as hedges against the Company’s net investment
in a foreign operation.
There is no movement in the foreign currency translation reserve balance for the year ended 30 June 2021 (2020: Nil) as the
reserve relates to dormant foreign entities of the Group.
Share-based payment reserve
The share-based payment reserve is used to recognise the grant date assessed fair value of the performance rights issued
to executive employees under the Company's long-term incentive scheme as further discussed at note 8b (Share-based
payment) to the consolidated financial statements.
The assessed fair value of the performance rights at grant date are recognised as an expense in profit or loss over the period
from grant date to condition date, adjusted to reflect only those rights where the service condition will be met, with
corresponding entries to the share-based payment reserve.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
76
4. CAPITAL AND FUNDING (CONT'D)
4c. LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more
information about the Group’s exposure to interest rate risks, see note 7 (Risks and financial instruments) to the consolidated
financial statements.
The Group’s banking facilities are provided by Bank of New Zealand and National Australia Bank Limited (together,
“the Bank”).
The Group has no funding facilities at balance date (2020: $20,000,000, with $15,800,000 drawn down at balance date).
The Group also has no overdraft facilities at balance date (2020: $1,598,000 at balance date).
The Group fully repaid its Bank loans and borrowings, while also putting itself in a surplus cash position, during the financial
year with the cash coming from the Group's sell-down of non-wool inventory as it exited the non-wool carpet market and
from the sale and leaseback of the Auckland property.
Details of the Group’s loans and borrowings at 30 June are as follows:
Nominal interest
rate 2021
%
Notional value
2021
$000
Fair value
2021
$000
Nominal interest
rate 2020
%
Notional value
2020
$000
Fair value 2020
$000
Non-current– – – –
Current– – 15,800 15,800
Total secured bank loans$0 $0 7. 3 $15,800 $15,800
The Group had no other borrowings at balance date (2020: Nil).
Following the full repayment of the Group's Bank loans and borrowings in December 2020, the parties agreed to the
withdrawal of all committed credit lines while continuing to retain transactional banking facilities, foreign exchange
transaction facilities and a guarantee facility.
The Group continues to maintain ongoing relationships with the Bank, with the view that committed credit lines could be
reinstated in the future to fund working capital requirements as the Group progresses through its transformation journey.
As a consequence, the Group has retained the security arrangements that were previously put in place to secure obligations
for the payment and repayment of moneys due, owing or payable by the Group to the Bank. These security arrangements
include the granting in favour of Bank of New Zealand, as security agent for the Bank, a first-ranking composite general
security deed and cross guarantee securing all obligations of the Group to the Bank by certain companies in the Group.
The property-owning companies in the Group have also continued to grant in favour of Bank of New Zealand first-ranking
mortgages in respect of land and buildings as security for all obligations of the Group to the Bank, including obligations for
the payment and repayment of moneys due, owing or payable by the Group to the Bank (see note 5a (Property, plant and
equipment) to the consolidated financial statements).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
77
5. ASSETS EMPLOYED
This section covers non-current assets, being property, plant and equipment and other assets that the Group employs in the
production and sale of carpet, and the acquisition and sale of wool fibre, to generate revenues and profits.
5a. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
$000
Plant and
equipment
$000
Other
assets
$000
Under
construction
$000
To tal
$000
COST
Balance at 1 July 2020 24,828 68,098 14,505 655 108,086
Additions
– 38 204 2,239 2,481
Disposals
(14,401) (4,427) (3,541) (208) (22,577)
Tr a n s f e r s
– 1,084 280 (1,364)–
Balance at 30 June 2021$10,427 $64,793 $11,448 $1,322 $87,990
Balance at 1 July 2019
24,159 68,848 16,169 957 110,133
Additions
387 221 892 619 2,119
Disposals
– (1,321) (2,845)– (4,166)
Tr a n s f e r s
282 350 289 (921)–
Balance at 30 June 2020$24,828 $68,098 $14,505 $655 $108,086
DEPRECIATION AND IMPAIRMENT LOSSES
Balance at 1 July 2020
2,989 68,065 13,652 655 85,361
Depreciation for the year
224 17 138 – 379
Disposals
(1,669) (4,423) (3,544) (208) (9,844)
Tr a n s f e r s
– 189 213 (402)–
Balance at 30 June 2021$1,544 $63,848 $10,459 $45 $75,896
Balance at 1 July 2019
2,651 63,938 13,380 – 79,969
Depreciation for the year
338 1,524 556 – 2,418
Impairment losses provided
– 3,874 2,548 655 7,0 7 7
Disposals
– (1,271) (2,832)– (4,103)
Balance at 30 June 2020$2,989 $68,065 $13,652 655 $85,361
CARRYING AMOUNTS
At 30 June 2021$8,883 $945 $989 1,277 $12,094
At 30 June 2020$21,839 $33 $853 $0 $22,725
At 1 July 2019$21,508 $4,910 $2,789 $957 $30,164
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
78
5. ASSETS EMPLOYED (CONT'D)
5a. PROPERTY, PLANT AND EQUIPMENT (CONT'D)
Land and buildings
The Group entered into a sale and leaseback of its Auckland property, which had a carrying value of $12,732,500, during
the year. The impact of, and further details relating to, the sale and leaseback transaction can be found at note 8c (Sale and
leaseback of property) to the consolidated financial statements.
Other assets
Other assets comprise fixtures and fittings (including leasehold improvements and display stands), computer equipment,
motor vehicles and office equipment.
Impairment
NZ IAS 36 Impairment of Assets requires the Group to assess, at the end of each reporting period, whether there is any
indication that an asset may be impaired. If any such indication exists, the Group shall estimate the recoverable amount
of the asset. The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use.
The Group is required to recognise an impairment loss to the extent to which the carrying amount of an asset exceeds its
recoverable amount.
As at 30 June 2021, the Group has not identified any indicators of impairment over the assets held.
The Group’s market capitalisation at balance date was approximately $2.0 million below the carrying value of net assets.
However, this market capitalisation value excluded any control premium and may not reflect the value of 100% of the Group’s
net assets. Furthermore, the Group has seen improved trading performance by the woollen carpet business in the current
financial year when compared with the previous financial year.
The Directors also note that improvements in the share price subsequent to balance date have resulted in the Group's market
capitalisation exceeding the carrying value of its net assets.
The Group has also concluded that no reversal of the previous impairment of assets should be made following an assessment
that the execution of the Group’s strategy to focus on wool carpets, while progressing to plan, is in its early stages.
Security
At balance date, the Group’s property, plant and equipment were subject to various registered charges in favour of the
Group’s bankers as security for the Group’s banking facilities and arrangements (see note 4c (Loans and borrowings)
to the consolidated financial statements).
Accounting policies
Recognition and measurement
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a
working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on
which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised
as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Under construction
Items being constructed for future use are held as part of property, plant and equipment under construction.
The carrying amounts of these represent the costs incurred at balance date and will be transferred to the appropriate
classification of property, plant and equipment on completion. Initial cost includes the purchase consideration and
those costs directly attributable in bringing the asset to the location and condition necessary for its intended use.
These costs include site preparation costs, installation costs, borrowing costs, unrecovered operating costs incurred
during planned commissioning and the costs of obtaining consents.
Costs cease to be capitalised when all the activities necessary to bring the asset to its location and condition for its
intended use are complete.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
79
5. ASSETS EMPLOYED (CONT'D)
5a. PROPERTY, PLANT AND EQUIPMENT (CONT'D)
Accounting policies (cont'd)
Depreciation
Depreciation is recognised in the Consolidated Statement of Profit or Loss over the estimated useful lives of each part
of an item of property, plant and equipment. Land is not depreciated.
The principal rates used for the current and comparative periods are as follows:
— buildings 1.0 – 2.5% straight line
— building fitouts 5.0 – 20.0% straight line
— plant and equipment 6.7 – 10.0% straight line
— other assets
– display stands 10.0% straight line
– computer equipment 20.0 – 25.0% straight line
– office equipment 10.0 – 20.0% straight line
– cars 20.0% diminishing value
– trucks and utilities 10.0% straight line
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
Impairment
The carrying amount of property, plant and equipment and other assets is tested for impairment whenever there are
indicators of impairment.
An impairment loss is recognised if the carrying amount of the cash-generating unit (being the smallest identifiable
asset group that generates cash flows that are largely independent from other assets and groups) to which the
property, plant and equipment and other assets is allocated exceeds its recoverable amount.
The recoverable amount of a cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
cash-generating unit.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount
of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of
units) on a pro rata basis.
Estimates, judgements and assumptions
NZ IAS 36 Impairment of Assets requires the Group to assess, at the end of each reporting period, whether there is
any indication that an asset may be impaired. If any such indication exists, the Group shall estimate the recoverable
amount of the asset. The recoverable amount of an asset is the higher of its fair value less costs of disposal and its
value in use. The Group is required to recognise an impairment loss to the extent to which the carrying amount of
an asset exceeds its recoverable amount.
For the purpose of assessing impairment, assets are grouped in the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash
generating unit or CGU), which as at 30 June 2021 were identified as being the Carpets and Wool Acquisition CGUs.
5b. CAPITAL COMMITMENTS
The Group had outstanding commitments for the purchase of plant and equipment of $1,016,000 at balance date
(2020: $469,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
80
6. WORKING CAPITAL
This section reviews the level of working capital the Group generates and utilises in its normal day-to-day operating activities.
The Group’s working capital includes current assets (cash and bank, trade receivables, other receivables and prepayments
and inventories) and current liabilities (trade payables and accruals and employee entitlements).
6a. CASH AND BANK
Cash and bank at balance date comprise the following:
2021
$000
2020
$000
Cash and cash equivalents 10,508 1,276
Short term deposits 12,000 –
$22,508 $1,276
Accounting policies
Cash is cash on hand and demand deposits and includes bank overdrafts used for cash management purposes where
formal arrangements for set off has been agreed with the Bank. Under these set off arrangements, the Group is able to
set off overdrawn balances up to a maximum of $1,000,000 against credit balances in selected accounts as long as
the net balance of all these accounts (including overdrawn accounts) as a whole remain in credit. At balance date, the
overdrawn amount subject to set off totalled $130,000 (2020: $4,000). Cash equivalents are highly liquid investments
that are readily convertible to known amounts of cash (that is, there is insignificant risk of changes in value) with
maturity no more than three months from balance date.
6b. TRADE RECEIVABLES, OTHER RECEIVABLES AND PREPAYMENTS
2021
$000
2020
$000
Trade receivables due from external customers 11,793 12,148
Other receivables 88 17
Prepayments 639 442
$12,520 $12,607
The Group's approach and policy with respect to, and quantitative disclosure of, credit risk are discussed at note 7 (Risks and
financial instruments) to the consolidated financial statements.
Impairment losses on trade receivables and other receivables are assessed collectively and on a portfolio basis based on the
number of days overdue using the expected loss model, taking into account the historical loss experienced in portfolios with
a similar number of days overdue as well as current conditions and forecast of future economic conditions.
Accounting policies
Trade receivables and other receivables are recognised initially at transaction price and subsequently at amortised
cost less impairment losses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
81
6. WORKING CAPITAL (CONT'D)
6c. INVENTORIES
Inventories, net of provision, are summarised in the table below:
2021
$000
2020
$000
Raw materials and consumables 5,922 12,547
Work in progress 1,200 1,439
Finished goods 12,913 18,095
$20,035 $32,081
Carrying amount of inventories subject to retention of title clauses$3,152 $1,851
Inventory provision at 1 July 4,741 2,576
Change in provision during the year (2,765) 2,165
Inventory provision at 30 June$1,976 $4,741
Additional inventory provisioning taken up during 2020 largely against non-wool carpet inventory as a consequence of the
Group’s transformation to the all-wool and natural materials business model was able to be released in 2021 as the Group
completed its sell down of non-wool inventory.
Write downs of inventory during the year totalled $1,299,000 (2020: $1,228,000).
Accounting policies
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in
first-out principle, and includes expenditure incurred in acquiring the inventories and bringing them to their existing
location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate
share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price
in the ordinary course of business, less the estimated costs of completion and selling expenses.
Estimates, judgements and assumptions
Inventory provisions are recognised for oddments and obsolete, aged and discontinued inventories to arrive at their
likely net realisable value.
Judgement and estimates are applied in identifying and categorising obsolete, aged and discontinued inventory and
determining the level of provisioning that is required – with a range of factors including inventory rationalisation plans,
consumer demand and trends, available distribution channels and historical sales and margin data considered.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
82
6. WORKING CAPITAL (CONT'D)
6d. TRADE PAYABLES AND ACCRUALS
2021
$000
2020
$000
Trade payables 11,658 8,705
Accruals 1,406 1,912
$13,064 $10,617
Accounting policies
Trade payables are unsecured - except to the extent to which they have retention of title clauses within their supply
arrangements with the Group - and are usually paid within the agreed payment terms.
The carrying amounts of trade payables are considered to be the same as their fair values, due to their short-term nature.
6e. EMPLOYEE ENTITLEMENTS
2021
$000
2020
$000
Leave obligations 3,760 3,356
Bonus entitlement 587 –
Termination entitlement 509 –
Wages accruals 347 145
$5,203 $3,501
Leave obligations cover the Group's liabilities in relation to employees' accrued and entitled annual leave as well as their
unconditional entitlement to long service leave where they have completed the required period of service.
Accounting policies
Employee entitlements relating to wages and salaries as well as annual leave and other employment-related payments
that are expected to be settled wholly within 12 months after the end of the annual reporting period in which the
employees render the related service are recognised in respect of employees’ services up to the end of the reporting
period as liabilities and are measured at the amounts expected to be paid when the liabilities are settled.
The entire amount of employee entitlements is presented as current as the Group does not have an unconditional right
to defer settlement for any of these obligations.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
83
7. RISKS AND FINANCIAL INSTRUMENTS
This section identifies the risks faced by the Group, explains the impact of these risks on its financial position, performance
and cash flows, outlines the Group’s approach to financial risk management and highlights the financial instruments used to
manage risks.
MANAGEMENT COMMENTARY
Exposure to credit, liquidity, foreign currency and interest rate risks arises in the normal course of the Group’s businesses.
The Group enters into derivative financial instruments in the ordinary course of business to manage foreign currency and
interest rate risks in accordance with the treasury policy approved by the Board. A financial risk management committee,
composed of senior management and operating under the Board-approved treasury policy, ensures that procedures for
derivative instrument utilisation, control and valuation, risk analysis, counterparty credit approval, and ongoing monitoring
and reporting are adhered to.
The Group manages commodity price risks through negotiated supply contracts and forward physical contracts. However,
because these contracts are, generally, in respect of raw material and utility purchases for own use, they are not accounted
for as financial instruments.
Credit risk
Management has a credit policy in place under which each new customer is individually analysed for credit worthiness and
assigned a purchase limit before the standard payment and delivery terms and conditions are offered. Because of the Group’s
customer base, there is no need for the Group to rely on external ratings. In most cases, bankers’ references, trade credit
insurance approvals and/or credit references from other suppliers are considered adequate. Purchase limits are reviewed on
a regular basis.
In order to determine which customers are classified as having payment difficulties, the Group applies a mix of duration and
frequency of default. The Group does not generally require collateral in respect of trade and other receivables.
The Group’s exposure to credit risk is mainly influenced by its customer base. As such, it is concentrated to the default risk of
its industry. However, geographically, there is no credit risk concentration, with the Group’s customers spread throughout
New Zealand, Australia and other overseas markets. Credit risk exposure with respect to trade receivables is limited by
stringent credit controls, by the utilisation of irrevocable letters of credit and trade credit insurances wherever required, and
by the large number of customers within the Group's customer base.
The amount and timing of collection of trade receivables and estimate of expected credit losses under NZ IFRS 9 Financial
Instruments have been considered and included in the consolidated financial statements. There has been no indication of a
significant change in amounts or timing of receipts from trade receivables as at 30 June 2021 due to the impact of COVID-19
(2020: Nil).
The Group does not invest in securities, but accepts that surplus cash and cash equivalents may arise from time to time
during the course of its management of cash. In these instances, it requires these surplus cash and cash equivalents to be
deposited on call and only with counterparties approved by the Board as having the required credit ratings.
Foreign currency forward exchange contracts and interest rate swaps have been entered into with counterparties approved by
the Board as having the required credit ratings. The Group's exposure to credit risk from these financial instruments is limited
because it does not expect the non-performances of the obligations contained therein due to the high credit ratings of the
financial institutions concerned. The Group does not require any collateral or security to support these financial instruments.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
84
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
MANAGEMENT COMMENTARY (CONT'D)
Liquidity risk
Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity requirements
on an ongoing basis. In general, the Group generates sufficient cash flows from its operating activities to meet its obligations
arising from its financial liabilities and has credit lines in place to cover potential shortfalls.
As part of the Group's transformation to its new business model, it completed the sale and leaseback of its Auckland
property on 23 December 2020 (refer to note 8c (Sale and leaseback of property) to the consolidated financial statements
for further information).
The funds generated enabled the Group to not only repay all of the Group's bank debt outstanding as at that date but also
put it into a significant cash surplus position at balance date to enable it to fund its transformation and provide it with
sufficient liquidity to settle its ongoing financial obligations for at least 12 months after the date of issuing these consolidated
financial statements.
As discussed at note 4c (Loans and borrowings) to the consolidated financial statements, the Group continues to maintain,
among other things, transactional banking facilities with its Bank and will look to raise for discussions with the Bank the
reinstatement of committed credit lines to cover working capital requirements as the Group progresses through its
transformation journey.
The Group’s contractual cash flows and liquidity risk profile are set out in detail on page 86.
Foreign currency risk
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies
in which sales, purchases, receivables and payables are denominated. All entities in the Group have New Zealand dollars ($)
as their functional currency.
The Group enters into foreign currency contracts within policy parameters to manage the risk associated with forecast sales
and purchases. The Group’s policy allows management to hedge up to 12 months forecast sales and purchases without prior
approval of the Board having first been obtained.
The Group does not engage in speculative transactions or hold derivative financial instruments for trading purposes and
requires that exposures to foreign currency risks, and details of all outstanding derivative instruments, are reported to and
reviewed by the Board on a monthly basis.
The Group applies a hedge ratio of 1:1. The method used to assess hedge effectiveness is Critical Match Terms whereby
the hedging instrument and the hedged item are matched to the key terms. In the hedge relationship, the main cause of
ineffectiveness includes a change in the critical terms, for example, the timing of the transaction.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on
the currency, amount and timing of the respective cash flows. The Group assesses whether the derivative designated in each
hedging relationship is expected to be, and has been, effective in offsetting changes in cash flows of the hedged item using
the Critical Matched Terms method.
Interest rate risk
Interest rate risks are continually monitored having regard to the circumstances at any given time.
Prior to the repayment of bank debt in December 2020, interest rate swaps were entered into to hedge a proportion of the
Group’s exposure to interest rate fluctuations by ensuring that there was an appropriate mix, after having regard to the
circumstances prevailing at the time, of fixed and floating rate exposure within the Group’s total loans and borrowings.
The Group’s policy allows management to hedge up to between 25% and 75% of the Group’s core loans and borrowings
without the prior approval of the Board having first been obtained.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based
on the reference interest rates, tenors, repricing dates and maturities and the notional or par amounts. The Group assesses
whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in cash flows
of the hedged item using the Critical Matched Terms method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
85
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
QUANTITATIVE DISCLOSURES
Credit risk
The carrying amount of financial assets represents the Group’s maximum credit exposure.
The Group has not renegotiated the terms of any financial assets which would result in the carrying amount no longer
being past due or avoid a possible past due status.
The Group’s maximum exposure to credit risk for trade and other receivables by geographic regions is as follows:
2021
$000
2020
$000
New Zealand 5,207 7, 3 2 3
Australia 6,046 4,431
Other regions 628 411
Trade and other receivables$11,881 $12,165
The status of trade and other receivables at the reporting date is as follows:
Current
0 – 30 days
past due
31 – 120 days
past due
More than 120
days past due
To tal
2021
Expected loss rate0%0%0%18%
Gross carrying amount – trade and other receivables
10,379 1,149 293 73 11,894
Loss allowance
– – – (13) (13)
2020
Expected loss rate0%0%0%56%
Gross carrying amount – trade and other receivables 11,275 754 103 75 12,207
Loss allowance– – – (42) (42)
In summary, trade and other receivables are determined to be impaired as follows:
2021
$000
2020
$000
Trade and other receivables - gross 11,894 12,207
Individual impairment provisions (13) (42)
Trade and other receivables - net$11,881 $12,165
Individually impaired trade receivables relate to a small number of customers where the amounts involved are immaterial.
In the case of insolvency, the Group generally writes off the receivable in full unless there is clear evidence that a receipt,
whether directly or by way of a claim under the Group’s trade credit insurance policy, is highly probable.
The Group adopts the expected loss model in assessing its trade and other receivables for impairment. In doing so, it
determines impairment on a forward-looking basis, taking into account not only past events and current conditions, but also
forecast of future economic conditions. Bad debts are written off when they are considered to have become uncollectable.
The details of movements in the impairment provision are as follows:
2021
$000
2020
$000
Balance at 1 July (42) (13)
Impaired trade receivables written off 11 –
Changes in impairment provision 18 (29)
Balance at 30 June($13)($42)
Changes in the impairment provision are included in distribution expenses in the Consolidated Statement of Profit or Loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
86
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
QUANTITATIVE DISCLOSURES (CONT'D)
Liquidity risk
The following table sets out the contractual undiscounted cash flows for all material financial liabilities (including projected
interest costs).
Timing of contractual cash flows
Statement of
consolidated
financial
position
$000
To tal
contractual
cash flows
$000
6 months
or less
$000
6-12
months
$000
1-2 years
$000
2-5 years
$000
Greater
than 5
years
$000
2021
Secured bank loans– – – – – ––
Trade payables 11,658 11,658 11,658 – – ––
Lease liabilities 21,533 28,429 1,522 1,458 2,766 5,607 17,076
Total non-derivative liabilities$33,191 $40,087 $13,180 $1,458 $2,766 $5,607 $17,076
Interest rate swaps– – – – –– –
Forward exchange contracts
Inflow (22,763) (14,113) (8,649)– – –
Outflow 22,666 14,062 8,604 – – –
75 (97) (51) (45)– – –
Total derivative liabilities$75
Disclosed in consolidated statement
of financial position
Current assets 109
Current liabilities (34)
Total derivative liabilities$75
2020
Secured bank loans 15,800 16,206 6,048 2,158 8,000 – –
Trade payables 8,705 8,705 8,705 – – – –
Lease liabilities 3,569 3,938 807 748 1,224 1,154 4
Total non-derivative liabilities$28,074 $28,849 $15,560 $2,906 $9,224 $1,154 $4
Interest rate swaps (560) (571) (166) (68) (137) (200)–
Forward exchange contracts
Inflow (20,478) (16,775) (3,703)– – –
Outflow 20,496 16,74 4 3,752 – – –
(12) 18 (31) 49 – – –
Total derivative assets($572)
Disclosed in consolidated statement
of financial position
Current assets 160
Current liabilities (732)
Total derivative liabilities($572)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
87
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
QUANTITATIVE DISCLOSURES (CONT'D)
Foreign currency risk
The Group’s exposure to foreign currency risk can be summarised as follows:
NZD equivalent of these currencies
AUD
$000
USD
$000
EUR
$000
Others
$000
2021
Trade receivables 5,997 432 6 –
Trade payables (2,146) (274) - (9)
Net consolidated statement of financial position exposure before hedging activity 3,851 158 6 (9)
Estimated forecast sales for which hedging is in place 18,911 – – –
Estimated forecast purchases for which hedging is in place– – – –
Net cash flow exposure before hedging activity 22,762 158 6 (9)
Forward exchange contracts
Notional amounts (22,762)– – –
Net unhedged exposure$0 $158 $6 ($9)
2020
Trade receivables 4,699 320 6 –
Trade payables (1,74 5) (1,130) (1)–
Net consolidated statement of financial position exposure before hedging activity 2,954 (810) 5 –
Estimated forecast sales for which hedging is in place 14,805 – – –
Estimated forecast purchases for which hedging is in place– (320)––
Net cash flow exposure before hedging activity 1 7,75 9 (1,130) 5 –
Forward exchange contracts
Notional amounts (1 7,75 9) 2,618 ––
Net unhedged exposure$0 $1,488 $5 $0
Interest rate risk – re-pricing analysis
At balance date, the interest rate profile of the Group’s interest-bearing financial instruments was as follows:
To tal
$000
6 months or less
$000
6-12 months
$000
1-2 years
$000
2-5 years
$000
Greater than 5 years
$000
2021
Financial assets and liabilities
Cash and bank 22,508 19,508 3,000–– –
Loans and borrowings– – – – ––
22,508 19,508 3,000– ––
Related derivatives
Effect of interest rate swaps–– – –– –
To t al$22,508 $19,508 $3,000 $0 $0 $0
2020
Financial assets and liabilities
Cash and bank 1,276 1,276 – –––
Loans and borrowings (15,800) (15,800)––––
(14,524) (14,524)––––
Related derivatives
Effect of interest rate swaps– 5,000 – – (5,000)–
To t al($14,524)($9,524)$0 $0 ($5,000)$0
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
88
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
SENSITIVITY ANALYSIS
In managing interest rate and currency risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s
earnings. Over the longer-term, however, changes in foreign exchange and interest rates will have an impact on profit.
For foreign exchange contracts that continue to meet the hedge accounting criteria at the balance sheet date to hedge
foreign exchange exposures, it is estimated that a general change in the value of the New Zealand dollar against other
foreign currencies as set out below would have no impact on the Group’s profit or loss before income tax for the years
ended 30 June 2021 and 2020. The impact on equity, net of tax, for these foreign exchange contracts, is disclosed in the
table below:
StrengthenWeakenStrengthenWeaken
P&L Equity, net of tax
$000$000$000$000
30 June 2021
NZD/AUD (+/- 5%)– – 609 (673)
30 June 2020
NZD/AUD (+/- 5%)– – 433 (480)
For foreign exchange contracts that do not meet the hedge accounting criteria at the balance sheet date, the estimated
impact on the Group’s profit or loss due to a general change in the value of the New Zealand dollar is disclosed in the
table below:
Strengthen
10.0%
Weaken
(10.0%)
Strengthen
10.0%
Weaken
(10.0%)
P&L Equity, net of tax
$000$000$000$000
Impact of the derecognition at balance date of US dollar
denominated forward exchange contracts as at 30 June 2021
– – – –
Impact of the derecognition at balance date of US dollar
denominated forward exchange contracts as at 30 June 2020
(181) 221 – –
The impact of a change in interest rates by one percentage point on the Group’s profit or loss and OCI is set out as follows:
Increase
1% point
Decrease
(1% point)
Increase
1% point
Decrease
(1% point)
P&L Equity, net of tax
$000$000$000$000
Interest rate impact - Net FY21$150 ($150) – –
Interest rate impact - Net FY20$152 ($152)$18 ($18)
HEDGING
Interest rate hedges
The Group has a policy of ensuring that between 25% and 75% of its exposure to changes in interest rates on borrowings is on
a fixed rate basis.
This policy has no application at the present time, with the Group having completed the sale and leaseback of its Auckland
property and fully repaid all of its borrowings during the year.
The Critical Matched Terms method was used to assess hedge effectiveness at inception and on an ongoing basis. At 30 June
2020, because the Group was expected to be repaying bank debt within 12 months of the balance date as a result of the sale
and leaseback of the Auckland property, it was determined that the interest rate hedges would be ineffective from the date
of the sale and leaseback.
Forecast transactions
The Group classifies the forward exchange contracts taken out to hedge forecast transactions as cash flow hedges.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
89
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
HEDGING (CONT'D)
The following relates to items designated as hedging instruments:
Notional
amount
Line item in
consolidated
statement
of financial
position
Changes in the
value of the
hedging
instrument
recognised
in OCI during
the year
Hedge
ineffectiveness
recognised in
profit or loss
Line item in
profit or loss that
includes hedge
ineffectiveness
Balance
in CFHR
Average
rate of
hedging
Carrying amount
AssetsLiabilities
2021 $000 $000 $000 $000 $000 $000
Foreign
currency risk
Forward
exchange
contracts
– sales and
receivables ¹
,
²
AUD21,075 109 (34)Derivative
financial
instruments
– assets and
liabilities
109 – – 550.9259
Interest rate
risk
Interest rate
swaps
–– –Derivative
financial
instruments
– liabilities
66––––
1
100% of notional amount expiring within 12 months of balance date
2
Hedge ratio 1:1
Notional
amount
Line item in
consolidated
statement
of financial
position
Changes in the
value of the
hedging
instrument
recognised
in OCI during
the year
Hedge
ineffectiveness
recognised in
profit or loss
Line item in
profit or loss that
includes hedge
ineffectiveness
Balance
in CFHR
Average
rate of
hedging
Carrying amount
AssetsLiabilities
2020 $000 $000 $000 $000 $000 $000
Foreign
currency risk
Forward
exchange
contracts
– sales and
receivables ¹
,
³
AUD16,675 62 (172)Derivative
financial
instruments
– assets and
liabilities
(348)–– (77)0.9390
Forward
exchange
contracts
– inventory
purchases ¹
,
³
USD1,746 ² 98 – Derivative
financial
instruments
– assets
(44) 60 Cost of sales– 0.6624
Interest rate
risk
Interest rate
swaps ³
,
⁴
NZD10,000– (560)Derivative
financial
instruments
– liabilities
(529) (468)Finance costs (92)2.88% -
4.88%
1
100% of notional amount expiring within 12 months of balance date.
2
Includes USD1,019k of foreign exchange contracts relating to inventory purchases which are deemed to be ineffective as at 30 June 2020.
3
Hedge ratio 1:1.
4
$5 million of notional amount of interest rate swaps expiring within 6 months of balance date. Balance of $5 million expiring over the next
four years. However, it was expected that the interest rate swaps would be settled within 12 months of balance date following the sale and
leaseback of the Auckland property.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
90
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
CLASSIFICATION AND FAIR VALUES
The following tables show the carrying amounts and fair values of financial assets and financial liabilities, including their
levels in the fair value hierarchy.
Hedging
instruments
$000
Amortised
cost
$000
Total carrying
amount
$000
Fair value hierarchy
Level 2
$000
2021
Assets
Derivative financial instruments 109 – 109 109
Trade and other receivables– 11,881 11,881
Cash and bank– 22,508 22,508
Total assets$109 $34,389 $34,498
Liabilities
Lease liabilities– 19,530 19,530
Employee benefits– 776 776
Total non-current liabilities– 20,306 20,306
Loans and borrowings– – –
Derivative financial instruments 34 – 34 34
Trade payables and accruals– 13,064 13,064
Employee benefits and entitlements– 5,203 5,203
Lease liabilities– 2,003 2,003
Total current liabilities 34 20,270 20,304
Total liabilities$34 $40,576 $40,610
Hedging
instruments
$000
Amortised
cost
$000
Total carrying
amount
$000
Fair value hierarchy
Level 2
$000
2020
Assets
Derivative financial instruments 160 – 160 160
Trade and other receivables– 12,165 12,165
Cash and bank– 1,276 1,276
Total assets$160 $13,441 $13,601
Liabilities
Lease liabilities– 2,224 2,224
Employee benefits– 703 703
Total non-current liabilities– 2,927 2,927
Loans and borrowings– 15,800 15,800
Derivative financial instruments 732 – 732 732
Trade payables and accruals– 10,617 10,617
Employee benefits and entitlements– 3,500 3,500
Lease liabilities– 1,345 1,345
Total current liabilities 732 31,262 31,994
Total liabilities$732 $34,189 $34,921
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
91
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
CLASSIFICATION AND FAIR VALUES (CONT'D)
There were no financial assets or liabilities with fair values classified as Level 1 or Level 3 in the fair value hierarchy.
A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial
assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group
transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of
ownership of the financial assets are transferred. Financial liabilities are derecognised if the Group’s obligations specified in
the contract expire or are discharged or cancelled.
Derivatives, being forward exchange contracts and interest rate swaps, have been measured at fair value using relevant
valuation techniques which include net present value and discounted cash flow models and comparison with similar
instruments for which observable market prices exist. Assumptions and inputs used in valuation techniques include risk-free
and benchmark interest rates, credit spreads and other information used in estimating discount rates and foreign currency
exchange rates.
Non-derivative financial instruments comprise trade and other receivables, cash and bank, loans and borrowings and trade
and other payables. Non-derivative financial instruments are recognised initially at fair value, inclusive of transaction costs,
and are subsequently measured at amortised cost using the effective interest rate method less any impairment losses.
The underlying interest rate margins of loans and borrowings, which were repaid in December 2020, approximate current
margins, and fair value approximates the present value of future principal and interest cash flows.
DETERMINATION OF FAIR VALUES
The fair value of an asset or a liability is measured on a recurring basis. When measuring the fair value of an asset or a liability,
the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value
hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
If the inputs used to measure the fair value of an asset or liability might be categorised in different levels of the fair value
hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which
the change occurred.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
92
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
MASTER NETTING OR SIMILAR AGREEMENTS
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting
agreements. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all
transactions outstanding are aggregated into a single net amount that is payable by one party to the other. In certain
circumstances – for example, when a credit event such as a default occurs, all outstanding transactions under the agreement
are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.
The ISDA agreements do not meet the criteria for offsetting in the Consolidated Statement of Financial Position. This is
because the Group does not have any currently legally enforceable right to offset recognised amounts, because the right to
offset is enforceable only on the occurrences of future events such as a default on the bank loans or other credit events.
The following table sets out the carrying amounts of recognised derivatives that are subject to master netting agreements:
2021 2020
Derivative assets
$000
Derivative liabilities
$000
Derivative assets
$000
Derivative liabilities
$000
Gross amounts in the consolidated
statement of financial position
109 (34) 160 (732)
Amounts offset– – – –
Net amounts in the consolidated
statement of financial position
109 (34) 160 (732)
Related amounts that are
not offset based on ISDA
(34) 34 (160) 160
Net amounts$75 $0 $0 (572)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
93
8. OTHERS
This section includes the remaining information relating to the consolidated financial statements which is required to be
disclosed to comply with financial reporting standards.
8a. LEASES
This note provides information for leases where the Group is a lessee.
AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Right-of-use assets
2021
$000
2020
$000
Buildings 9,662 430
Plant and equipment 281 –
Motor vehicles 25 –
$9,968 $430
Lease liabilities
2021
$000
2020
$000
Non-current 19,530 2,224
Current 2,003 1,345
$21,533 $3,569
Additions to right-of-use assets during the year were $10,071,000 (2020: $24,700,000).
There was no impairment of right-of-use assets during the year (2020: $2,909,000).
There was also no reversal of prior year impairment of right-of-use assets during the year (2020: Nil).
AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Depreciation charge in respect of right-of-use assets
2021
$000
2020
$000
Buildings 483 1,116
Plant and equipment 51 663
$534 $1,779
Interest expense (included in finance costs)
$675536
Expense relating to short-term leases (included in cost of goods sold
and administration expenses
$459$266
Expense relating to leases of low-value assets that are not disclosed
above as short-term leases (included in administrative expenses)
$28$45
AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF CASH FLOWS
Total cash outflow for leases$2,419$2,026
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
94
8. OTHERS (CONT'D)
8a. LEASES (CONT'D)
AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
Accounting policies
The Group leases buildings, forklifts and motor vehicles, with contracts typically entered into for fixed periods
ranging from between three to four years for motor vehicles, five to six years for fork hoists and up to sixteen years
for buildings, but may have extension options as further discussed below.
Contracts may contain both lease and non-lease components. The Group has elected, for leases of motor vehicles,
to not separate lease and non-lease components and instead account for these as a single lease component.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants other than the security interests in the leased assets that are
held by the lessor. Leased assets may not be used as security for borrowing purposes.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
— fixed payments; and
— variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date.
Lease payments to be made under reasonably certain extension options are also included in the measurement
of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar
value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
— where possible, uses recent third-party financing secured by the individual lessee as a starting point, adjusted to
reflect changes in financing conditions since third party financing was secured;
— uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by lessees
within the Group which does not have recent third-party financing;
— makes adjustments, where necessary, specific to the lease taking into account country, currency and security.
If a readily observable amortising loan rate is available to the individual lessee (through recent financing or market
data) which has a similar payment profile to the lease, then the group entities use that rate as a starting point to
determine the incremental borrowing rate.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period.
Right-of-use assets are measured at cost comprising the following:
— the amount of the initial measurement of lease liability; and
— make good costs.
Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Payments associated with short-term leases of plant and equipment and motor vehicles and all leases of low-value
assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less without a purchase option. Low-value assets comprise IT equipment and small
items of office furniture.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
95
8. OTHERS (CONT'D)
8a. LEASES (CONT'D)
EXTENSION OPTIONS
Extension options are generally incorporated into contracts for leases of buildings, with these options used to maximise
operational flexibility with respect to the management of the buildings used in the Group’s operations. Where extension
options are held, they are exercisable only by the Group and not by the respective lessor. Extension options are generally
not included in contracts for leases of plant and equipment and motor vehicles because of the Group's ability to replace
these assets without significant cost, delay or disruption to the business.
Estimates, judgements and assumptions
In determining the lease term, management considers all facts and circumstances that create an economic incentive
to exercise an extension option. Extension options are only included in the lease term if the lease is reasonably certain
to be extended, with the Group reasonably certain to extend:
— if there are significant costs to not extend; and
— if leasehold improvements are expected to have a significant remaining value.
Otherwise, the Group considers other factors including the lease durations already provided for in the contract,
the Group's future strategic or business direction and the costs and disruptions to the business as a consequence
of any decision to not exercise an extension option.
As at balance date, potential future cash outflows of $19,092,000 (undiscounted) in respect of leases of buildings have
not been included in the determination of lease liability because it is not reasonably certain that these leases
will be extended (2020: $5,361,000).
The lease term is reassessed if an extension option is actually exercised. The assessment of reasonable certainty is
only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and
that is within the control of the lessee. The Group did not revise its assessment of reasonable certainty with respect to
extension options during the year (2020: The Group revised its assessment of reasonable certainty with respect to
extension options, in the process decreasing recognised lease liabilities and right-of-use assets by $2,960,000).
8b. SHARE-BASED PAYMENT
DESCRIPTION OF SHARE-BASED PAYMENT ARRANGEMENT
On 18 December 2020, the Company established a long-term incentive scheme (“Scheme”) for executive employees pursuant
to which the Company will issue performance rights (“Rights”) to the participants which would entitle the participants to be
issued shares in the Company, subject to service and performance conditions being met, at the end of the stipulated
performance period.
On 21 December 2020, the Company offered Rights to selected key management personnel (“Participants”) that will entitle
the Participants to be issued shares in the Company for no cash consideration provided that total shareholder return (“TSR”)
over the period from 1 November 2020 to 1 May 2023 (“Performance Period”) exceeds 14% per annum compounding and they
remain employed by the Company as at 1 May 2023 (“Condition Date”).
TSR is defined as the increase in share price over the Performance Period adjusted upwards for distributions made by the
Company during that period.
The Company has determined the Rights issued under the Scheme to be an equity-settled share-based payment
arrangement pursuant to NZ IFRS 2 Share-based Payment, with the Participants not able to request payment in cash.
The Company has established grant date of the Rights to be 21 December 2020 (“Grant Date”), being the date at which the
parties had a shared understanding of the terms and conditions of the share-based arrangement.
Shares issued under the arrangement are subject to trading restrictions, with 40% of the shares able to be traded
immediately, 30% one year after issue date and the remaining 30% two years after issue date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
96
8. OTHERS (CONT'D)
8b. SHARE-BASED PAYMENT (CONT'D)
MEASUREMENT OF FAIR VALUE
The fair value of the Rights at the Grant Date of $395,000 has been determined using a Monte Carlo simulation.
Specifically, the Monte Carlo simulation is used as follows:
—to predict the Company’s future share prices (a “market condition” under NZ IFRS 2), gross of dividends, using a
random-walk process which is driven by assumptions regarding volatility and the underlying drift rate from Grant Date
through to Condition Date;
—to calculate the annualised TSR at the Condition Date implied by the simulated share price;
—to determine the extent to which the calculated TSR exceeds 14% per annum compounding;
—to calculate the number of shares to be issued, taking into account the share cap under the share-based arrangement,
and the implied payoff to the Participants based on the number of shares issued and the simulated share price at
Condition Date.
The inputs used in the measurement of the fair value at Grant Date of the Rights are as follows.
—Share price at Grant Date - $0.36 per share, being the Company's closing share price on NZX on 21 December 2020;
—Share price at start of the Performance Period - $0.31 per share, being the 20-day volume weighted average sale price
of one of the Company's share on NZX up to 1 November 2020;
—Expected volatility - 58%, based on the annualised volatility for the 2.5 years prior to Grant Date, being the historical
period commensurate with the expected term of the Rights;
—Expected term – 2.5 years;
—Expected dividends – Nil;
—Drift rate used to discount Participants’ payoff from the Condition Date to the Grant Date – 14% per annum.
Post-vesting trading restrictions relating to the shares that may be issued on Condition Date have been incorporated into
the Monte Carlo simulation modelling used to determine fair value at Grant Date of the Rights by discounting the simulated
value of the shares at the Condition Date, with the discount rate based on the price of a notional put option which could be
purchased to hedge share price exposure during the restriction period.
Service condition attached to the Rights has not been taken into account in determining fair value because it is classified
as a “non-market” condition (being a condition that is not dependent on share price) under NZ IFRS 2, with service condition
reflected in the number of shares expected to be issued as a result of the condition.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
97
8. OTHERS (CONT'D)
8b. SHARE-BASED PAYMENT (CONT'D)
OUTSTANDING RIGHTS
The number of shares that will be issued on Condition Date of the outstanding Rights is unknown at balance date.
The following table summarises, as at Grant Date and as at 30 June 2021, the maximum number of shares that could be
issued under the Scheme at Condition Date:
Maximum number of shares
that could be issued under the
Scheme at Condition Date
% of total number of
shares on issue
As at Grant Date 1,854,336 2.7%
Adjusted to reflect rights where service conditions were no longer
met following the resignation of the Chief Executive Officer
(782,942)(1.1%)
As at 30 June 2021 1,071,394 1.6%
The number of shares to be issued is dependent on the extent to which TSR exceeds 14% per annum compounding over the
Performance Period and the share price at Condition Date, except that the number of shares issued to all Participants will
not, together with shares issued under NZX Listing Rule 4.6.1 over the previous 12 months, exceed 3.0% of the total number
of shares on issue at Condition Date.
For the number of shares issued at Condition Date to all current Participants to equal 1.56% of the total number of shares
currently on issue, the share price would have to exceed $0.5128 per share at Condition Date - based on the share price at
the start of the Performance Period of $0.3141 per share, TSR of 14% per annum compounding over the Performance Period
and no dividends payable during the Performance Period.
EXPENSE RECOGNISED IN PROFIT OR LOSS
The assessed fair value of the Rights at Grant Date of $395,000 will be recognised as an expense in profit or loss over the
period from Grant Date to Condition Date, adjusted to reflect only those Rights where the service condition will be met,
with corresponding entries to the share-based payment reserve within equity.
$51,200 (being the proportion of fair value of the Rights relating to the period from Grant Date to balance date – after
adjusting to reflect only those Rights where the service condition will be met) has been recognised in administration
expenses in the Consolidated Statement of Profit or Loss for the year ended 30 June 2021 - with a corresponding credit
to the share-based payment reserve within equity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
98
8. OTHERS (CONT'D)
8c. SALE AND LEASEBACK OF PROPERTY
On 23 December 2020, the Group completed the sale and leaseback of its Auckland property for net proceeds of
$25,022,500 (being gross of $25,500,000 less transaction costs of $477,500).
The initial term of the leaseback is 14 years plus one right of renewal of six years, with net rent at commencement date of
$1,600,000 per annum and a 2.5% increase in rent per annum on each anniversary of the commencement date (except where
that anniversary coincides with a market rent review date). Market rent reviews will take place on the sixth anniversary of the
commencement date and on the renewal date, with market rent to be no less than 100% and no greater than 110% of the
annual rent immediately preceding the relevant rent review date.
The terms of the sale and leaseback are typical for those entered into for large industrial sites in the Auckland region and the
triple-net lease (where the lessee assumes direct responsibility for all costs payable in respect of the property (including
rates, insurance and maintenance of the premises (including structural repairs and capital works))) typical after having regard
to the age and condition of the Auckland property.
The Group has estimated the present value of the rental obligations in respect of the leaseback to be $19,306,000, based on
the initial term of the leaseback of 14 years and the net rent during that initial term (but ignoring the market rent review to
take place on the sixth anniversary of the commencement date), discounted at the Group’s incremental borrowing rate of
4.5% per annum.
The sale and leaseback has been accounted for in accordance with paragraphs 98 to 103 of NZ IFRS 16 Leases because the
Group had control of the underlying asset before that asset was transferred to the buyer-lessor, with the difference between
the $25,500,000 from the sale and leaseback of the property less transaction costs of $477,500 and the carrying value of the
property of $12,732,500 giving rise to the following:
—lease liability assumed of $19,306,000;
—right-of-use asset retained of $9,640,000;
—net gain on sale and leaseback of $2,624,000.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
99
8. OTHERS (CONT'D)
8d. PROVISIONS
Workplace
accidents
$000
Make
good
$000
Onerous
contracts
$000
Warranties
$000
To tal
$000
Balance at 1 July 2020 210 59 – 1,025 1,294
Provided during the year– 30 – 70 100
Utilised during the year (60)– – – (60)
Released to profit or loss during the year– – – – –
Balance at 30 June 2021$150 $89 – $1,095 $1,334
Non-current– 89 – 583 672
Current 150 – – 512 662
Balance at 30 June 2021$150 $89 – 1,095 $1,334
Balance at 1 July 2019 210 150 14 1,040 1,414
Provided during the year– 59 –– 59
Utilised during the year– (150) (14)– (164)
Released to profit or loss during the year– – – (15) (15)
Balance at 30 June 2020$210 $59 – $1,025 $1,294
Non-current– 54 – 530 584
Current 210 5 – 495 710
Balance at 30 June 2020$210 $59 –$1,025 $1,294
Workplace accidents
Certain companies within the Group are parties to the ACC Partnership Programme during the year. Under this programme,
these companies assume the costs normally assumed by ACC (Accident Compensation Corporation of New Zealand) for
accidents in the workplace, with the provision for claims incurred but yet to be settled. It is expected that the outflow of
economic benefit will occur within 12 months of balance date.
Make good
Provision for make good relates to the costs expected to be incurred in relation to make good obligations under leases
entered into, with the provision utilised as the costs relating thereto are incurred or adjusted to reflect current estimates
of costs to be incurred. The amount utilised during the year relates to the amount paid.
Warranties
The provision for warranties relates mainly to carpet sold during the years ended 30 June 2021 and 2020. The provision
is based on estimates made from historical warranty data associated with similar products sold by the Group.
The amount of warranty costs recognised as an expense directly to the Consolidated Statement of Profit or Loss during
the year totalled $852,000 (2020: $1,101,000).
Warranties relating to the sale of carpet are standard warranties. The Group does not offer extended warranties that
would be subject to a separate performance obligation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
100
8. OTHERS (CONT'D)
8d. PROVISIONS (CONT'D)
Accounting policies
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability.
Estimates, judgements and assumptions
Provision for warranties requires judgement to be applied by considering a range of factors including the nature and
extent of historical claims data associated with similar products sold by the Group, the terms of the warranties built
into supply contracts, consumer protection laws in key markets and the corrective actions being taken to address
quality issues at production.
8e. EMPLOYEE BENEFITS
2021
$000
2020
$000
Liability for retiring allowances 96 96
Liability for long service leave 816 735
Total employee benefits$912 $831
Non-current 776 703
Current 136 128
Balance at 30 June$912 $831
Accounting policies
Short-term employee benefits are expensed as the related services are provided.
Long-term employee benefits relate to long service leave that is not expected to be settled within 12 months after
the end of the annual reporting period in which the employees render the service that gives rise to the benefit.
The Group's net obligation is the amount of future benefit employees have earned in return for their service in the
current and prior years. The complexity and length of the long service leave arrangement requires the use of actuarial
assumptions, such as salary increases and inflation, in order to calculate the present value of the obligation. The
Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior periods adjusted for the probability of the benefits vesting
and discounted at the appropriate rate to determine its present value.
Estimates, judgements and assumptions
The Group appointed Deloitte to assist with the Group's assessment of its liability for long service leave as at 30 June
2021, with Deloitte using a Projected Unit Credit (PUC) method to value employees' entitlements to long service leave.
This method involves a monthly projection of the long service leave entitlement for each employee to retirement age.
The expected entitlement payment at each point over the projection period is calculated using assumptions about
likely resignation, retirement, mortality and disability for each employee. Using employee data provided by Cavalier,
Deloitte were able to estimate the value of the long service leave liability as at balance date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
101
8. OTHERS (CONT'D)
8f. CONTINGENCIES
The Group has granted indemnities in favour of Bank of New Zealand and National Australia Bank Limited (together,
“the Bank”) at balance date in respect of Bank guarantees relating to operating leases and other commitments totalling
$2,418,000 (2020: $899,000).
Some subsidiaries in the Group are parties to a cross guarantee in favour of the Bank securing each other’s obligations, with
the property-owning companies in the Group also granting in favour of the Bank first-ranking mortgages in respect of land
and buildings as security for all obligations if the Group to the Bank.
The Group’s indebtedness under the cross guarantee at balance date amounted to nil (2020: $15,800,000).
8g. RELATED PARTIES
TRANSACTIONS WITH DIRECTORS AND KEY MANAGEMENT PERSONNEL
For the purposes of this note, key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or
otherwise) of that entity.
As shareholders
Some of the Directors are shareholders in the Company.
Their shares rank pari passu with all the other ordinary shares in the capital of the Company and do not therefore confer
additional rights to dividends paid or to attend or vote at any meetings of the shareholders of the Company.
As lenders or borrowers
There were no loans to, or from, the Directors and key management personnel during the year ended 30 June 2021
(2020: Nil).
Directors’ remuneration and benefits
The fees paid to the Directors for services in their capacity as directors totalled $386,000 during the year ended
30 June 2021 (2020: $368,000).
No other services were provided by the Directors during the year (2020: Nil).
The scale of fees payable to the Directors was last reviewed and approved by the Board in January 2019, with the current
scale of fees applying with effect from 1 January 2019 set out below:
Directors’ feesPer annumExplanatory notes
Non-executive Chairman of the Board$128,100 Inclusive of time spent on Board committees and as
Chairman of Nomination Committee
Non-executive directors
(including Deputy Chairman of the Board)
$61,000 Inclusive of time spent on Board committees
Chairman of the Audit Committee$10,000 In recognition of additional time and responsibilities as
Chairman of Audit Committee
Chairman of the Remuneration Committee$5,000 In recognition of additional time and responsibilities as
Chairman of Remuneration Committee
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
102
8. OTHERS (CONT'D)
8g. RELATED PARTIES (CONT'D)
TRANSACTIONS WITH DIRECTORS AND KEY MANAGEMENT PERSONNEL (CONT'D)
Directors’ remuneration and benefits (cont'd)
The Directors agreed to a 20% reduction in fees from 1 April 2020 to 31 July 2020 in response to the uncertain
COVID-19 operating environment.
G C W Biel, a long-serving Director, is entitled to a lump sum retiring allowance. The amount of this retiring allowance, which
was set in November 2007, is $96,000. The Company decided at that time that retiring allowances would no longer be
offered in respect of new
Directors appointed to the Board.
The Group notes that the Directors are precluded by the NZX Listing Rules from voting at general meetings of shareholders
on certain matters prescribed by the NZX. These matters include, in the case of the Directors who are also shareholders,
shareholders’ approval of directors’ fees.
Key management personnel’s (including the Chief Executive Officer’s) remuneration and benefits
In addition to salaries and performance-based payments, the Group also provides non-cash benefits to the Chief Executive
Officer of the Company and key management personnel of the Group.
These non-cash benefits may include the provision of motor vehicles, income protection insurances, life insurances and
medical insurances. In assessing the value of the non-cash benefit provided to the Chief Executive Officer and key
management personnel, the Group has used the value of the benefit that is used for calculating fringe benefit tax plus
the fringe benefit tax that is paid or payable.
The remuneration paid and payable, and the benefits provided, to the Chief Executive Officer and key management
personnel (but excluding the Directors’ remuneration and benefits) comprised:
2021
$000
2020
$000
Salaries, bonuses and leave entitlements 3,653 2,770
Share-based payments 51 –
Employee benefits 278 116
Termination payments 509 107
$4,491 $2,993
The Group has not provided the Chief Executive Officer and key management personnel with any post-employment benefits.
Other transactions
The Group deals with many entities and organisations in the normal course of business. The Group is not aware of any of the
Directors, the Chief Executive Officer or key management personnel, or their related parties, holding positions in any of
these entities or organisations that result in them having control or significant influence over the financial or operating
policies of these entities or organisations.
The Group does not transact with the Directors, the Chief Executive Officer or key management personnel, and their related
parties, other than in their capacity as directors and employees, except that they may purchase goods from the Group for
their own domestic use. These purchases are on the same terms and conditions as those applying to all employees of the
Group and are immaterial and personal in nature.
The Board approved a one-off payment to the Chief Executive Office on his resignation from the Company in April 2021,
with that amount of $509,000 recognised in administration expenses in the Consolidated Statement of Profit or Loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2021
103
8. OTHERS (CONT'D)
8h. GROUP ENTITIES
OPERATING SUBSIDIARIES OF THE GROUP
Principal
activity
Country of
incorporation
Interest
(%)
2021
Interest
(%)
2020
Bremworth Carpets and Rugs Limited
(previously Bremworth Limited)
Carpet sales and manufacturingNew Zealand100100
Bremworth Pty Limited
(previously Cavalier Bremworth Pty Limited)
Carpet salesAustralia100100
Cavalier Bremworth (Australia) LimitedCarpet distributionNew Zealand100100
Bremworth Spinners Limited
(previously Cavalier Spinners Limited)
Carpet yarn salesNew Zealand100100
Elco Direct LimitedWool acquisitionNew Zealand100100
8i. EVENTS AFTER BALANCE DATE
COVID-19
On 17 August 2021, in response to a potential outbreak of the COVID-19 Delta variant of the virus, the New Zealand
Government imposed Level 4 lockdown throughout the country effective from 11.59 pm that same day. Under Level 4
lockdown, all workplaces in New Zealand are required to close unless the workplace is deemed to be essential. As a
consequence, all of the Group's carpet yarn making facilities in Napier and Whanganui had to cease operations during
the duration of the Level 4 lockdown from 18 August 2021 through to 31 August 2021, while its carpet manufacturing
operation in Auckland was not able to recommence operation until 22 September 2021.
A discussion of the impact of COVID-19 in general, and the impact of this latest Level 4 lockdown, on the Group can be
found at note 2c (Going concern) to the consolidated financial statements.
As a consequence of the Level 4 lockdown and the loss in revenue, the Group was eligible to apply for the New Zealand
Government's COVID-19 wage subsidy. The Group received, for the four weeks to 14 September 2021, $926,000 under
the wage subsidy scheme.
The Group was also eligible for the New Zealand Government's COVID-19 Resurgence Support Payment and applied for,
and received, a further $55,000 under that scheme.
CHANGE OF NAME
The Company changed its name from Cavalier Corporation Limited to Bremworth Limited on 30 August 2021.
ESTABLISHMENT OF BREMWORTH EQUITY OWNERSHIP PLAN AND BREMWORTH SHARE OPTION SCHEME
The Board approved the establishment of the Bremworth Equity Ownership Plan (Equity Plan) and the Bremworth Share
Option Scheme (Option Scheme) on 27 August 2021.
The Equity Plan and the Option Scheme are designed to incentivise certain employees and align their interests with the
Company's shareholders by providing them with equity interests in the Company. The Equity Plan provides for eligible
employees to be issued shares in the Company on terms determined by the Board and as set out in the rules of the Equity
Plan. The Option Scheme provides for elected employees to be awarded options to acquire ordinary shares at a fixed price,
with the options becoming exercisable over time in accordance with a vesting schedule.
The Company issued 500,000 ordinary shares pursuant to the terms of the Equity Plan and 480,000 options under the
Option Scheme to the CEO on 10 September 2021.
8j. STANDARDS, INTERPRETATIONS AND AMENDMENTS TO STANDARDS
There are no new, or pending, standards or amendments to existing standards which have, or are expected to have,
a material impact on the Group.
GOVERNANCE
& OTHER
DISCLOSURES
Contents
107 Corporate Governance Statement
119 Disclosures under the Companies Act 1993
123 Disclosures under the NZX Listing Rules
125 Disclosures under the Financial Markets Conduct Act 2013
126 Shareholder Information
127 Trend Statement
131 Disclosure of Non-GAAP Financial Information
133 Corporate Directory
GOVERNANCE AND OTHER DISCLOSURES
FOR THE YEAR ENDED 30 JUNE 2021
106
106
107
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
Bremworth’s Board of Directors (“the Board”) is responsible for and committed to
maintaining the highest standards of corporate behaviour and responsibility and
has adopted governance principles reflecting this.
The Board seeks to follow best practice recommendations for listed companies to the extent that is appropriate for the
nature and complexity of Bremworth’s operations.
The Board considers that the Company’s corporate governance framework materially complies with the NZX Corporate
Governance Code.
Bremworth’s Code of Ethics and other key policies and charters relating to corporate governance can be found on the
Company’s website www.bremworth.co.nz/corporate-governance
A summary of Bremworth’s governance actions and performance against each of the principles in the NZX Corporate
Governance Code and its compliance with the recommendations relating to each of these principles are set out on
pages 107 to 118.
PRINCIPLE 1 — CODE OF ETHICAL BEHAVIOUR
Bremworth expects its Directors, officers, employees and contractors to act legally, ethically and with integrity in a
manner consistent with the Company’s Code of Ethics.
The Code of Ethics sets out the standard of conduct expected of Directors and employees and the Company’s approach
to stakeholders. It is supported by other policies and procedures including those that address continuous disclosures,
confidentiality of information, conflicts of interest, reporting of concerns and share trading.
Whistleblowing
Bremworth has established internal procedures to monitor compliance with, and measures for dealing with breaches of,
the Code of Ethics. Bremworth encourages employees to speak out if they have concerns. The avenues for doing so are
detailed in the Company’s Code of Ethics which supports the reporting and investigation of breaches of the Code of Ethics
and serious wrongdoing in or by Bremworth.
Conflicts of interest
The Board is conscious of its obligation to ensure that Directors and employees avoid conflicts of interest between their duty to
Bremworth and their own interests. Guidance is provided in the Company’s Constitution, Board Charter and the Code of Ethics.
The Board reviews at every meeting the interests register in which relevant transactions and matters involving the Directors
are recorded. It is expected that Directors are sensitive to actual and perceived conflicts of interest that may occur and have
constant consideration of this issue.
Bremworth does not donate to political parties.
The Directors’ interest disclosures can be found on page 120.
Share trading policy
Bremworth has a Share Trading Policy which, along with the Financial Markets Conduct Act 2013, imposes limitations and
requirements on Directors and employees in dealing in the Company’s shares. Directors and employees who are likely to
have knowledge of, or access to, material information can only buy or sell Bremworth shares during permitted periods and
with the written consent of the Board. They must not use their position of confidential knowledge of the Company or its
business to engage in share trading for personal benefit or to provide benefit to any third party.
Trading in Bremworth shares while in possession of material information is strictly prohibited.
A regular review of the share register is conducted to ensure compliance with the Share Trading Policy.
108
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
PRINCIPLE 2 — BOARD COMPOSITION AND PERFORMANCE
The Board’s role is to add long-term shareholder value, while acting in a manner that the Directors believe is in the best interests
of the Company and having regard to the interests of its employees and other stakeholders. The role and responsibilities of the
Board are detailed in the Board Charter, which is reviewed at least every two years and is available on the Company’s website.
Delegation
The Board delegates the day-to-day management of the Company to the Chief Executive Officer (“the CEO”). The CEO in turn
delegates authority to senior management. These authorisation levels are set out in the Delegated Authority Policy.
Board composition
The Board comprises Directors who, collectively, have the balance of independence, skills, knowledge, experience and
perspectives to meet and discharge the Board’s responsibilities. Core competences and skills include health and safety,
sustainability and environment, manufacturing, financial acumen, sales, marketing and distribution, legal, regulatory and risk,
listed company governance, operating model transformation, design innovation and well-developed ability for critical and
strategic analysis.
A balance of longer-serving Directors with experience in the Company and newer Directors who bring fresh perspective and
insight is desirable. The Board encourages strong individual thinking and rigorous discussion and analysis when making decisions.
With Bremworth’s new strategy unveiled to shareholders and options to fund the transformation being finalised, Alan Clarke
stepped down as Chairman on 22 July 2020 and was succeeded by George Adams. Alan retired as a Director following the
2020 Annual Meeting of shareholders on 23 December 2020.
Paul Izzard was appointed as an independent Director on 20 November 2020 and elected to the Board by shareholders at the
2020 Annual Meeting. Paul is founder and director of Paul Izzard Design, a leading interior design business in New Zealand.
His industry knowledge and networks, as well as his business leadership experience, are considered valuable attributes as
Bremworth transforms to being a global leader in designing and creating desirable, sustainable, safe and high performing
natural interior solutions.
As at 30 June 2021, the Board comprised five Directors – George Adams (Chairman), Grant Biel, Paul Izzard, John Rae and
Dianne Williams.
The profile of the Directors can be found on pages 26 and 27.
Director independence
The Board charter provides that the Chairman shall be an independent Director and that the majority of the Board shall be
independent Directors.
Director independence is determined in accordance with the NZX Listing Rules and with regard to the factors described
in the NZX Corporate Governance Code.
George Adams, Paul Izzard, John Rae and Dianne Williams have been determined to be independent Directors of the
Company as at 30 June 2021. Grant Biel is not an independent Director as he is an associate of a substantial product holder
in the Company.
Director appointment
Membership of the Board, and appointment and retirement of Directors by rotation, are determined in accordance with the
Company’s Constitution and the NZX Listing Rules.
While the appointment process is the responsibility of the whole Board, the Nomination Committee is tasked with identifying
and recommending candidates to fill director vacancies for the approval of the Board. The Committee considers such factors
as it deems appropriate, including capability, skill sets, experience, qualifications, judgement and the ability to work with other
Directors. Reference checks are carried out on all candidates and key information about candidates is provided to shareholders
to assist their decision as to whether to elect or re-elect a candidate.
109
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
PRINCIPLE 2 — BOARD COMPOSITION AND PERFORMANCE
(
CONT'D
)
Director appointment (cont'd)
Shareholders may also nominate candidates for election to the Board, with the Board asking for Director nominations prior to
the Annual Meeting of shareholders each year, in accordance with the Constitution of the Company and the NZX Listing Rules.
New Directors are provided with an induction pack containing governance information, key policies and all relevant information
necessary to prepare them for their role. New Directors also receive presentations by the CEO and senior management on the
key issues facing Bremworth, its operations and the environment and markets in which it operates.
The Company has written agreements with all Directors appointed since 1 October 2017, establishing the terms of their appointment.
The Board is satisfied that each Director has the necessary time available to devote to the position, broadens the Board’s
expertise and has a personality that is compatible with the other Directors
Director training, access to information and advice
Directors are encouraged to undertake appropriate training and education to ensure they remain current on how to best perform
their duties. In addition, the CEO and senior management provide regular updates on relevant industry and company issues.
Directors have unrestricted access to Company information and briefings from the CEO and senior management. Site visits
provide the Directors with a better understanding of the business, including its major health and safety risks and how these
are managed.
Directors and Board committees have the right, in connection with their duties and responsibilities, to seek independent
professional advice at the Company’s expense, with the approval of the Chairman.
Evaluation of Director, Board and committee performance
The Board, and the Board’s committees, critically evaluate annually their own performance and the performance of the individual
Directors. The Board, and its committees, also review annually their own processes and procedures to ensure that they are not
unduly complex and are designed to assist the Board and its committees in effectively fulfilling their roles.
Attendance at meetings
Board meetings are usually held monthly (except for January), with other meetings held as and when required to deal with any
specific matters that may arise between scheduled meetings.
The table below sets out Director attendances at Board, Board committee and shareholder meetings for the year ended
30 June 2021.
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Shareholder
To t al h e l d185132
Attendances:
George Adams
Grant Biel
Alan Clarke
1
Paul Izzard
2
John Rae
Dianne Williams
18/18
17/18
12/13
6/6
18/18
18/18
5/5
5/5
3/3
2/2
5/5
5/5
1/1
1/1
Not applicable
Not applicable
1/1
1/1
3/3
3/3
1/1
2/2
3/3
3/3
2/2
2/2
2/2
1/1
2/2
2/2
1
Alan Clarke retired as a Director on 23 December 2020.
2
Paul Izzard was appointed a Director on 20 November 2020.
110
PRINCIPLE 2 — BOARD COMPOSITION AND PERFORMANCE
(
CONT'D
)
Diversity and inclusion policy
Bremworth is committed to creating a culture of ‘equality of opportunity’ to drive business engagement and success and:
—sees the diversity of its work force as a key asset and contributor to improved business performance and decision making;
—does not discriminate based on age, race, gender, sexual orientation, ethnicity or any other non-performance related
differentiating factor;
—treats its people fairly and respectfully; and
—promotes diversity of thought and action, and unbiasedly rewards capability and achievement.
The Company has a Diversity and Inclusion Policy, a copy of which is published on the Company’s website.
The key areas of focus are:
—sharing and promotion of this Policy with employees;
—a capability-based approach to recruitment of people from a diverse as possible range of candidates;
—facilitation of opportunities for diversity of thought and action from all levels of the organisation; and
—promotion of diversity and inclusion through company culture programmes and celebrations that bring employees
with differing perspectives together.
A number of initiatives are in place to support diversity and the Board believes the principles in the Policy were adhered
to in the 2021 financial year.
Bremworth has a diverse workforce, representing more than 15 different ethnicities. English is a second language for a number
of these staff, so Bremworth has initiatives in place to support them in the workplace, including the opportunity to participate
in numeracy and literacy programmes.
The gender composition of the Company’s Directors and officers is summarised below.
30 June
2021
30 June
2020
MaleFemaleTo talMaleFemaleTo tal
Directors4/80%1/20%5/100%4/80%1/20%5/100%
Officers
1
7/ 70%3/30%10/100%7/ 70%3/30%10/100%
Direct reports of officers39/57%2 9/4 3%68/100%38/63%22/37%60/100%
Rest of organisation2 2 7/6 2%138/38%365/100%212/59%14 6/41%358/100%
To t al2 7 7/6 2%171/38%448/100%261/60%17 2 /4 0%433/100%
1
An officer is a person, however designated, who is concerned or takes part in the management of the Company’s business but excludes a person
who does not report directly to the Board or report directly to a person who reports directly to the Board.
30 June
2021
30 June
2020
Age compositionNumber%Number%
Under 30 years of age74174711
30 to 50 years of age1814017941
Over 50 years of age1934320748
To t al448100433100
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
111
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
PRINCIPLE 3 — BOARD COMMITTEES
The Board utilises committees to enhance Board effectiveness in key areas, while retaining Board responsibility. Committees
established by the Board make recommendations to the Board on those matters falling within the scope of the relevant committee
charter. They do not act or make decisions unless specifically mandated by their charter or by prior Board authority to do so.
The Board has three standing committees – the Audit Committee, Remuneration Committee and Nomination Committee.
Each of these has a Board approved charter (which can be found on the Company’s website), setting out the role, responsibilities,
delegations and membership requirements. The Board regularly reviews the charters of each Board committee, their performance
against those charters and membership of each committee.
The Board believes that committee charters comply with the recommendations in the NZX Corporate Governance Code.
The Board appoints the Chairman of each committee. Members are chosen for the skills, experience and other qualities that
they bring to the relevant committees.
Bremworth’s Board committees as at 30 June 2021 were:
Committee
Role
Members
Audit CommitteeAssists the Board in ensuring adequacy of financial management,
internal reporting and monitoring processes, integrity of financial
reporting, statutory audit quality and independence, internal audit
and internal controls.
John Rae (Chairman)
George Adams
Grant Biel
Paul Izzard
Dianne Williams
Remuneration CommitteeAssists the Board in establishing and maintaining a strong
governance framework in respect of remuneration packages
for Directors and for the CEO and senior management.
Dianne Williams (Chairman)
George Adams
Grant Biel
Paul Izzard
John Rae
Nomination CommitteeAssists the Board in ensuring appropriate Board performance
and composition and in appointing directors.
George Adams (Chairman)
Grant Biel
John Rae
Dianne Williams
Independent Takeover Committee
As the Company has a small Board, it is not envisaged that the Board would appoint an Independent Takeover Committee,
upon a takeover offer being received, unless there are Directors who are interested in the takeover offer or certain Directors
are unavailable to assist on the matter.
The Board has a Takeover Response Policy setting out the objectives of the Company’s takeover response strategy and establishing
the appropriate protocols to be followed in the event of a takeover offer for the Company, covering, among other things:
—structure of the takeover response team and roles of key groups in the team;
—the Takeovers Code process and timetable;
—steps to be taken on receipt of a takeover notice;
—communication between the Company and the bidder; and
—potential takeover response strategies.
112
PRINCIPLE 4 — REPORTING AND DISCLOSURE
Continuous disclosure
The Board is responsible for the timeliness, accuracy and completeness of all Company disclosures, including its results,
financial reporting and all matters relating to its business activities that could have a material effect on the price of Bremworth
shares if they were generally available to the market.
Bremworth is committed to promoting investor confidence by providing timely, accurate, complete and equal access to
material information, both positive and negative, in accordance with the NZX Listing Rules. To achieve and maintain high
standards of disclosures, Bremworth has adopted a Continuous Disclosure Policy, which is designed to ensure compliance
with NZX continuous disclosure guidance note.
This Policy, a copy of which is published on the Company’s website, sets guidelines and outlines responsibilities to safeguard
the Company against inadvertent breaches of continuous disclosure obligations.
Financial reporting
The Directors are committed not only to preparing consolidated financial statements that comply with New Zealand Generally
Accepted Accounting Practice and fairly present the Group’s financial position as at balance date and of its operations and cash
flows for the year ended on that date, but also to balanced, clear and objective financial reporting.
The Audit Committee assists the Board in providing oversight of the quality and integrity of external financial reporting including
the accuracy and completeness of the consolidated financial statements. In preparing the consolidated financial statements,
the Company also ensures that its financial reporting is accompanied by sufficient explanation and is expressed in a clear and
objective manner to assist investors make informed investment decisions.
All matters required to be addressed, and for which the Committee has responsibility, were addressed during the reporting period.
The Directors believe that proper accounting records which enable, with reasonable accuracy, the determination of the financial
position of the Group and facilitate the compliance of the consolidated financial statements with the Financial Markets Conduct
Act 2013 have been kept.
The CFO holds the role of Company Secretary. In all secretarial matters, the Board ensures that the Company Secretary’s
reports are objective and that the Company Secretary has unfettered access to the Chairman and the Audit Committee,
without reference to the CEO.
Non-financial reporting
In addition to shareholders, Bremworth has a wide range of stakeholders and maintains open channels of communication for
all audiences, including brokers, the investing community and the New Zealand Shareholders’ Association, as well as its staff,
suppliers and customers.
Bremworth is committed to conducting the activities of the Company’s business responsibly and sustainably by balancing
its economic, environmental and social responsibilities and having regard to how its activities affect employees, contractors,
communities and the environment in which it operates.
Insight into Bremworth’s assessment of its business, strategy, performance and the transformational shift that is underway
to position Bremworth as a design-led wool-focused company can be found on pages 2 to 39.
A detailed framework addressing the Company’s environmental and social responsibilities was developed over the 2020
financial year, with a new Sustainability division established, the appointment of a Sustainability Manager made and the
first area of focus being the establishment of baseline sustainability data.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
113
PRINCIPLE 4 — REPORTING AND DISCLOSURE
(
CONT'D
)
Non-financial reporting (cont'd)
The Board is pleased to be able to share with shareholders the progress for the 2021 financial year as the Company continues
to forge ahead towards more formal measuring and monitoring of these key areas within the context of our business.
In April 2021, the Company announced the $4.9 million research-based sustainability programme in partnership with the
Ministry for Primary Industries (MPI) via the Sustainable Food, Fibre and Futures Fund - with MPI contributing $1.9 million
to the programme.
The programme will run for the next three years and is grounded on the sustainability principles of People, Planet and
Profitability. This focuses on three main work streams:
—developing a more sustainable and compostable carpet;
—increasing process efficiency through Industry 4.0 principles and technology; and
—leveraging technology to further develop technical capability and future pipeline of talent.
The Company also signed up to the Energy Efficiency and Conservation Authority Energy Transition Accelerator Programme
during the year. As part of this, an assessment of the decarbonisation options available to the Group has been completed
enabling the business to begin defining its carbon reduction priorities.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
114
PRINCIPLE 5 — REMUNERATION
The Board has a clear policy for setting remuneration of Directors and senior management at levels that are fair and reasonable
to attract, reward and retain the skills, knowledge and experience required to enhance the Company’s performance.
The Remuneration Committee assists the Board in discharging its responsibilities in relation to setting and reviewing Directors’
remuneration and senior management objective setting, performance review and remuneration.
External advice is sought as required to ensure remuneration is benchmarked to the market for Directors and senior
management positions.
Directors’ remuneration
Shareholders resolved at the October 2018 Annual Meeting that the total remuneration to be paid to the non-executive Directors
be fixed at a sum not exceeding $450,000 per annum, such sum to be divided amongst them in such proportions and in such
manner as they may determine.
The remuneration payable to the Directors was last reviewed and approved by the Board on 18 January 2019, with the current
scale of Directors’ remuneration applying from 1 January 2019 set out on page 101 (note 8g of the notes to the consolidated
financial statements).
The total remuneration paid to the Directors for the year ended 30 June 2021 was $386,427, with the details paid to each Director
set out on page 121.
CEO’s remuneration
The remuneration of the CEO is set independently, and without any involvement of the CEO, on an arm’s length commercial basis
as recommended by the Remuneration Committee and approved by the Board.
The CEO’s remuneration comprises a fixed base salary, fringe benefits and a variable short-term incentive that is payable annually
subject to attainment of targets. These targets may include growth in revenue and/or profitability as well as the delivery of strategy,
health and safety, leadership and culture outcomes as agreed with the CEO at the commencement of the period.
The remuneration of the CEO can be analysed as follows:
Year ended 30 June
Fixed base
salary received
1
Short term incentive
receivable
1, 2
Termination payment
receivable
1, 3
Fair value of
performance rights
pursuant to long-term
incentive scheme
4
Other benefits
received or
receivable
5
Total remuneration
2021$508,559$107,278$508,560–$104,467$1,228,864
2020$508,559–Not applicableNot applicable$18,110$526,669
2019$508,559–Not applicableNot applicable$ 1 7,7 0 8$526,267
1
Inclusive of 3.0% Employer KiwiSaver
2
Maximum of 24% of fixed base salary subject to attainment of revenue growth target and delivery of other quantitative and qualitative measures
covering the wider business, with CEO eligible for 21%
3
In lieu of notice and inclusive of an ex-gratia payment
4
Nil, with fair value of performance rights recognised to 22 April 2021 of $23,438 reversed as a consequence of the forfeiture of the CEO’s
performance rights upon his resignation from the Company
5
Include fringe benefits and holiday pay entitlement.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
115
PRINCIPLE 5 — REMUNERATION
(
CONT'D
)
CEO’s remuneration (cont'd)
The Board established a share-based long-term incentive scheme for the CEO and executive employees in December 2020,
pursuant to which the Company would issue performance rights to the participants which would entitle the participants to
be issued shares in the Company, subject to service and performance conditions being met, at the end of the stipulated
performance period – in the process aligning the participants’ interests with those of shareholders.
Entitlements under the scheme are based on the extent to which the CEO and the other participants are able to generate
total shareholder returns (being increase in share price adjusted upwards for dividends paid) in excess of 14% per annum
compounding over a two and a half-year performance period, with shares to be issued under the scheme subject to the
3% share cap provided for under the NZX Listing Rules (see note 8b of the notes to the consolidated financial statements
for further information).
In deciding on the two and a half-year performance period, the Board took into account the considerable efforts that had
already been expended on the Group’s transformation to the all-wool and natural materials by the participants by the time
of the establishment of the share-based long-term incentive scheme in December 2020.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
116
PRINCIPLE 6 — RISK MANAGEMENT
Bremworth is committed to the effective management of risk, which is fundamental to the Company’s growth and profitability
targets and outcomes.
The Company maintains a risk management framework for the identification, assessment, monitoring and management
of risk and has in place, among other policies, a Treasury Management Policy and a Delegated Authority Policy to manage
specific risks.
The Board is responsible for overseeing and approving the risk management framework and tolerance levels as well as
ensuring that an effective assurance system is in place.
The material financial risks facing the business and the management of these risks are discussed at pages 83 to 92
(note 7 of the notes to the consolidated financial statements) with management reporting on these financial risks to
the Board at every scheduled Board meeting.
Health and safety
The Board has a Health and Safety Policy, a copy of which is published on the Company’s website.
The Policy provides the context, direction and framework within which all other health and safety materials are developed.
It is the foundation for managing health and safety risks whilst applying a learning and people-centric lens to our operations
and risk management.
The Board adopts a risk-based approach to health and safety risk management, focusing on strengthening critical risk
management, while continuing to develop organisational capability and accountability for making health and safety an
integrated part of our business. Health and safety management is a regular agenda item at Board meetings and Directors
complete site visits which include a health and safety focus.
While the Board does not have a Health and Safety Committee, there is a Health and Safety forum which George Adams,
as the Board’s representative, and the CEO are part of, along with employees across the whole business. The quarterly Health
and Safety forum involves employees from different backgrounds, experience, roles and levels of the organisation. The diversity
of thought, demographics and perspectives brought by this group is a valuable contribution and helps shape the overall Health
and Safety programme while also demonstrating our Diversity and Inclusion Policy in action.
There is an ongoing emphasis to learn from high-risk potential events and to proactively manage risks to prevent reoccurrence.
A key initiative to support this is the adoption of a “Learning Teams” approach to investigations.
The Health and Safety programme concentrates on clearly identifying critical risks and strengthening control effectiveness for
these key critical risks. Initiatives are executed within a cycle of continuous improvement and with the input and support of our
site Health and Safety committees and the Health and Safety forum. Underpinning this is a focus to protect and grow our talent,
maintain strong safety leadership and create psychologically safe workplaces for our people to thrive.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
117
PRINCIPLE 7 — AUDITORS
External audit
The Board is responsible for ensuring the quality and independence of the statutory audit process and has adopted an
External Audit Independence Policy, a copy of which is published on the Company’s website.
The Audit Committee is charged with considering, and making recommendations to the Board regarding, any issues relating
to the independence, performance, appointment or termination of the external auditor.
The Committee reviews the quality and cost of the statutory audit undertaken by the Company’s external auditor and provides
a formal channel of communication between the Board, senior management and external auditor. The Committee also assesses
the external auditor’s independence on an annual basis.
The external auditor is prohibited from undertaking any work that impairs, or is seen to impair, independence and objectivity
with respect to the statutory audit.
The Board appointed PwC as the Group’s external auditor for the year ended 30 June 2021 on 25 May 2021.
PwC previously provided the Group with treasury advisory services, but ceased to provide these services prior to their
appointment as auditors. No non-audit services have been provided by PwC since their appointment as auditors.
Bremworth’s external auditor attends the Annual Meeting and is available to answer questions relating to the conduct of the
statutory audit and the preparation and content of the auditor’s report.
The fees paid to the previous external auditor, KPMG, for audit and non-audit work for the year ended 30 June 2020 and the
fees paid to PwC for audit and non-audit work for the year ended 30 June 2021 are set out on page 68 (note 3e of the notes
to the consolidated financial statements).
All non-audit work carried out by the external auditor were approved by the Board pursuant to the External Audit Independence
Policy as having no effect on the independence or objectivity of the external auditor in relation to its statutory audit work.
In determining whether a non-audit related service impinges on the independence or objectivity of the external auditor,
consideration is given to, among other things, the people doing the work, the nature of the work done and whether it involves
any calculations of balances in the consolidated financial statements or for financial reporting.
Internal audit
Bremworth operates an independent internal audit programme that provides objective assurance of the effectiveness of the
internal control framework.
Internal audit assists the Board and the Audit Committee to accomplish their objectives by bringing a disciplined approach
to evaluating and improving the effectiveness of risk management, internal controls and governance processes.
Internal audit adopts a risk-based assurance approach that is approved by the Board and has the autonomy to report significant
issues directly to the Audit Committee or, if considered necessary, the Chairman of the Board.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
118
PRINCIPLE 8 — SHAREHOLDER RIGHTS AND RELATIONS
Bremworth respects the rights of shareholders, is focused on fostering constructive relationships with shareholders
that encourage them to engage with the Company and values dialogue with institutional and private investors.
Bremworth is also committed to giving all shareholders comprehensive, timely and equal access to information about
its activities and keeps shareholders informed through:
—periodic and continuous disclosure, including shareholder presentations, to NZX;
—half year and annual reports;
—the Investor Newsletter;
—the Annual Meeting and any other meetings of shareholders called to obtain approval for Board actions as
appropriate; and
—the Company’s website www.bremworth.co.nz/investor-centre where investors and interested stakeholders can
access financial and operational information and key corporate governance information about the Company.
The Board encourages shareholders to opt to receive communications from the Company electronically, thereby
ensuring that they get access to communications efficiently and in a timely manner.
Shareholder meetings
The Board encourages full participation of shareholders at shareholder meetings to ensure a high level of Director and
management accountability and shareholder understanding of Bremworth’s strategies and goals.
Shareholders are able to ask questions of and express their views to the Board, management and the external auditors at
Annual Meetings of shareholders. The Board adopts the one share, one vote principle, conducting voting at shareholder
meetings by poll. Shareholders are also able to cast postal votes or vote by proxy ahead of meetings without having to
physically attend those meetings.
Bremworth aims to make its notice of Annual Meeting and any other meetings of shareholders available on its website at
least 20 working days prior to the meeting.
—Notice of special meeting: Bremworth held a special meeting of shareholders on 17 September 2020 to approve the sale
and leaseback of its Auckland property. While Bremworth had intended to give shareholders at least 20 working days’
notice for the special meeting and had made arrangements on this basis pursuant to recommendation 8.5 of the
NZX Corporate Governance Code, it was unable to meet that recommendation because of ongoing delays with the
negotiation of the sale and purchase agreement and requests by the purchaser for extension of time to complete due
diligence. The notice period provided complied with the minimum period under schedule 1 of the Companies Act 1993.
—Notice of Annual Meeting: Due to the termination of the original agreement for the sale and leaseback of Bremworth’s
Auckland property and the timing of the second offer which required further shareholder approval, 14 working days’
notice was provided for the 23 December 2020 Annual Meeting of shareholders.
VARIANCES TO NZX CORPORATE GOVERNANCE CODE
NZX Corporate Governance
Code Principle
NZX Corporate Governance Code
Recommendation
Key difference
Board’s position
2. Board Composition
and Performance
2.5: The Board should set
measurable objectives for
achieving diversity
The Board has not set measurable
objectives under the Diversity and
Inclusion Policy for achieving
diversity
The Board considers diversity outcomes can be
achieved without measurable objectives, with
the increase in the number of woman in middle
management over the 2021 financial year
demonstrating this approach
8. Shareholder Rights
and Relations
8.5: Notices of annual or
special meetings should be
posted on the Company’s
website at least 20 working
days prior to the meetings
in question
The notices for the special
meeting and Annual Meeting of
shareholders held in 2020 were not
made available on the Company’s
website at least 20 working days
prior to the meetings
It is the Board’s policy to make notices of
meetings available on the Company’s website at
least 20 working days prior to the meeting, while
noting that this was not possible in relation to
the two meetings held in 2020 because of the
circumstances explained above
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
119
DIRECTORS
The Directors of the Company as at 30 June 2021 were:
George Adams
Grant Biel
Paul Izzard
John Rae
Dianne Williams
Paul Izzard was appointed a Director on 20 November 2020 and Alan Clarke retired as a Director on 23 December 2020.
INTERESTS REGISTER
The Companies Act 1993 requires the Company to maintain an interests register in which are recorded the particulars of
certain transactions and matters (e.g. use of company information, remuneration, indemnity and insurance and share dealing)
involving the Directors. It further requires particulars of the entries in the interests register for the year to be disclosed in the
annual report.
Use of company information
No notices were received from the Directors regarding the use of company information that would not otherwise have been
available to them, except in their capacity as directors, during the year.
Remuneration
The scale of remuneration payable to the Directors with effect from 1 January 2019 was approved by the Board of Directors
on 18 January 2019 and is set out on page 101 (note 8g of the notes to the consolidated financial statements).
Indemnity and insurance
The Board of Directors authorised, during the year, the renewal of the Company’s directors’ and officers’ liability insurance
policies covering the risks arising out of the acts or omissions of the Directors and employees of the Company and its
subsidiaries to the extent normally covered by such policies.
The total cost of these policies for the year ended 30 August 2021 was $112,100 which was considered fair to the Company.
Share dealing
No notices were received from the Directors in relation to share dealing during the year.
Directors’ relevant interests in shares in the Company as at 30 June 2021 were:
Grant Biel
Beneficial
Other
–
8 , 5 6 7,6 4 2
Dianne Williams
Beneficial
Other
5,000
–
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE COMPANIES ACT 1993
FOR THE YEAR ENDED 30 JUNE 2021
120
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE COMPANIES ACT 1993
(
CONT'D
)
FOR THE YEAR ENDED 30 JUNE 2021
INTERESTS REGISTER (CONT'D)
Specific disclosures of interest
No specific disclosures of interest were received during the year.
General disclosures of interest
General disclosures of interest that were current as at 30 June 2021 were:
George AdamsApollo Foods Limited
Mars Manufacturing Limited
The Apple Press Limited
Apollo Brands Limited
Arborgen Holdings Limited
Insightful Mobility Limited
Mix Global Holdings Limited
Essano Limited
Mix IP Limited
Netlogix Group Holdings Limited
New Zealand Frost Fans Limited
Tegel Group Holdings Limited
Business Leaders Health and Safety Forum
Competenz
Worksafe Partners Advisory Group
Executive Chairman and shareholder
Director
Director
Director
Director
Chairman and shareholder
Chairman
Director
Director
Chairman
Chairman
Director
Chairman
Chairman
Member
Grant BielAuckland Air Charter Limited
Bay Cliffe Industries Limited
Baycliffe Enterprises Limited
Bondworth Carpets Limited
Heli Harvest Limited
Heli Harvest (2012) Limited
Rural Aviation (1963) Limited
Westburn Investments Limited
Director
Director and shareholder
Director and shareholder
Director and shareholder
Director
Director
Director and shareholder
Director
Paul IzzardPaul Izzard Design Limited
Windswept Trust
Director and shareholder
Tr u s te e
John RaeAbodo Limited
Corson Grain Limited
Eastland Group Limited
Eastland Network Limited
Eastland Port Limited
F J Hawkes & Co. Limited
Gisborne Airport Limited
Gobble Limited
Jaffa Holdings Limited
Kingyo Foods Limited
Ngapuhi Asset Holding Company Limited
Smart Environmental Limited
Thos Corson Holdings Limited
Wet Gisborne Limited
Te Rahui Herenga Waka Whakatane GP
JR Family Trust
Chairman of Advisory Board
Director
Director
Director
Director
Director and shareholder
Director
Director and shareholder as nominee
Director and shareholder
Director and shareholder as nominee
Chairman
Director
Chairman
Chairman
Chairman
Tr u s te e
Dianne WilliamsCoromandel Pure Honey 2020 Limited
Darden Limited
Darden Holdings Limited
Stepchange Consulting Limited
West Auckland Trust Services Limited
Chartered Accountants Australia New Zealand
Netball Northern Zone (Incorporated Society)
Director and shareholder
Director and shareholder
Director and shareholder
Director and shareholder
Director
Director
Director
121
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE COMPANIES ACT 1993
(
CONT'D
)
FOR THE YEAR ENDED 30 JUNE 2021
DIRECTORS� REMUNERATION
The total remuneration and value of other benefits earned by each of the Directors of the Company for the year ended
30 June 2021 were:
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Other
benefits
To tal
George Adams$122,935$451–––$123,386
Grant Biel$59,983––––$59,983
Alan Clarke$31,346––––$31,346
Paul Izzard$ 3 7, 4 4 7––––$ 3 7, 4 4 7
John Rae$59,983$9,382$226––$69,591
Dianne Williams$59,983–$4,691––$64,674
To t al$371,677$9,833$4,917––$386,427
The Directors’ fees earned reflect the 20% reduction in fees from 1 July to 31 July 2020 that the Directors agreed to in response
to the uncertain COVID-19 operating environment.
EMPLOYEES� REMUNERATION
The number of employees of the Company and its subsidiaries whose remuneration and value of other benefits for the year
ended 30 June 2021 fall into the various brackets specified by the Companies Act 1993 is as follows:
Remuneration and value of other benefits ($)Number of employees – 2021Number of employees – 2020
100,000 – 109,99998
110,000 – 119,9991013
120,000 – 129,999139
130,000 – 139,99945
140,000 – 149,99951
150,000 – 159,99924
160,000 – 169,99934
170,000 – 179,99922
180,000 – 189,99912
190,000 – 199,99922
200,000 – 209,99911
220,000 – 229,999–1
230,000 – 239,9992–
240,000 – 249,999–1
250,000 – 259,9992–
260,000 – 269,9991–
310,000 – 319,9991–
330,000 – 339,999–1
390,000 – 399,999–1
470,000 – 479,9991–
490,000 – 499,9991–
520,000 – 529,999–1
1,220,000 – 1,229,9991–
Total number of employees6156
122
DONATIONS
Refer to page 68 (note 3e of the notes to the consolidated financial statements).
AUDIT FEES
Refer to page 68 (note 3e of the notes to the consolidated financial statements).
SUBSIDIARY COMPANY DIRECTORS
The following persons respectively held office as directors of subsidiary companies as at the end of the year:
SubsidiariesDirectors
Bremworth Carpets and Rugs Limited (formerly Bremworth Limited)
Bremworth Spinners Limited (formerly Cavalier Spinners Limited)
Elco Direct Limited
Cavalier Bremworth Limited (formerly Elcotex Limited)
Cavalier Bremworth (North America) Limited
Cavalier Spinners Limited (formerly Heron Distributors Limited)
Knightsbridge Carpets Limited
EnCasa Carpets Limited
Norman Ellison Carpets Limited
Carpet Distributors Limited
Horizon Yarns Limited
NEC Limited
Cavalier Commercial Limited
Radford Yarn Technologies Limited
E Lichtenstein and Company Limited
Elcopac Limited
Elcowool Limited
e-Wool Limited
Microbial Technologies Limited
Northern Prospecting Limited
Paul Alston
Bremworth Pty. Limited (formerly Cavalier Bremworth Pty. Limited)
Cavalier Bremworth (Australia) Limited
Cavalier Holdings (Australia) Pty. Limited
Cavalier Bremworth Pty. Limited (formerly Kimberley Carpets Pty. Limited)
Norman Ellison Carpets Pty. Limited
Cavalier Commercial Pty. Limited
Paul Alston
Scott Bain
No subsidiary company directors received, in their capacity as such, directors’ fees or other benefits from the subsidiaries.
There were no entries in the interests register in respect of any of the subsidiary company directors. The remuneration and value
of other benefits of these directors is disclosed under employees’ remuneration on page 121.
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE COMPANIES ACT 1993
(
CONT'D
)
FOR THE YEAR ENDED 30 JUNE 2021
123
ANALYSIS OF SHAREHOLDINGS
Number of shareholders
%
Shares held
%
Size of shareholdings
Up to 199983.228,3280.01
200 – 4991234.0441,9850.06
500 – 9992257. 3 91 5 7, 2 3 00.23
1,000 – 1,99951116.79699,0271.02
2,000 – 4,99978125.672,408,8553.51
5,000 – 9,99951616.963,419,5194.98
10,000 – 49,99964521.2012,802,00718.64
50,000 – 99,999772.534,889,7657.1 2
Over 99,999672.2044,252,38264.43
3,043100.0068,679,098100.00
Location of shareholders
New Zealand2,92796.1967,734,48398.62
Overseas
Australia702.30493,0140.72
Others461.51451,6010.66
3,043100.0068,679,098100.00
Shares held
%
Top 20 shareholders
Marama Trading Limited9,610,71813.99
Rural Aviation (1963) Limited8 , 5 6 7,6 4 212.47
Brian Edward Woolf3,250,0004.73
FNZ Custodians Limited2,911,7844.24
New Zealand Depository Nominee Limited (Account 1 Cash Account)1,411,7152.06
Gregory John Muir1,225,0001.78
Custodial Services Limited (Account 4)1,170,0661.70
Ian David McIlraith1,100,0001.60
Fergus David Elliott Brown1,000,0001.46
F B Trustee Limited (Fergus Brown Family Account)1,000,0001.46
Masfen Securities Limited787,5001.15
Maarten Arnold Janssen74 7, 5 1 61.09
Percy Keith McFadzean715,0001.04
BNP Paribas Nominees (NZ) Limited709,7001.03
FNZ Custodians Limited (DTA Non Resident Account)6 4 7,7 7 80.94
Forsyth Barr Custodians Limited (1-Custody)584,4720.85
Graham James Munro and Zita Lillian Munro580,0000.84
Peter William Beasley and Anne Kathryn Beasley and Kevin Harborne (Waitemata Ventures Account)500,0000.73
Maosong Zhang398,3080.58
FNZ Custodians Limited (DRP NZ Account)324,5000.47
3 7, 2 41 ,6 9 954.23
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE NZX LISTING RULES
AS AT 31 AUGUST 2021
124
NZX WAIVER RELIED ON
Bremworth relied on the NZX Class Waiver from NZX Listing Rules 3.5.1 and 3.6.1, dated 3 April 2020, which provided
Bremworth with an additional 30 days to release its results announcement, and an additional two months for the preparation
and release of its annual report, for the year ended 30 June 2020.
NZX WAIVER LISTING RULE 2.11.4
On 10 June 2021, NZ RegCo granted Bremworth a waiver from NZX Listing Rule 2.11.4, to the extent that this Rule would
have otherwise required Bremworth to obtain authorisation by an Ordinary Resolution to pay a lump sum retiring allowance
to Bremworth Director, Grant Biel.
This waiver was released by NZ RegCo to the market on the NZX Market Announcement Platform on 10 June 2021 and is
also available on the Company’s website bremworth.co.nz.
NZX WAIVER LISTING RULE 4.6.1(C)
On 5 August 2021, NZ RegCo granted Bremworth a waiver from NZX Listing Rule 4.6.1(c), to the extent that this Rule would
have prohibited Bremworth from issuing Equity Securities to Chief Executive Officer, Greg Smith, as a consequence of the
threshold in the Rule having already been met as result of Performance Rights having been previously issued to the previous
Chief Executive Officer, Paul Alston (which subsequently lapsed upon his resignation).
The waiver had the effect that the Equity Securities issued to Greg Smith “replaced” the Performance Rights issued to
Paul Alston for the purposes of calculating the 3% threshold in accordance with Rule 4.6.1(c). That is, the Performance Rights
issued to Paul Alston would not have to be counted when calculating the Equity Securities that Bremworth would be able to
issue pursuant to Rule 4.6.1 to Greg Smith.
This waiver was released by NZ RegCo to the market on the NZX Market Announcement Platform on 8 September 2021
and is also available on the Company’s website bremworth.co.nz.
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE NZX LISTING RULES
(
CONT'D
)
AS AT 31 AUGUST 2021
125
SUBSTANTIAL HOLDINGS
The substantial product holders in the Company in respect of whom notices have been received were:
Number of ordinary shares
(being the only class of listed
voting securities) where
relevant interest exists
A C Timpson Trust9,610,718
Marama Trading Limited9,610,718
G C W Biel8 , 4 6 7,6 4 2
Rural Aviation (1963) Limited8 , 4 6 7,6 4 2
The total number of ordinary shares, being the only class of listed voting securities in the Company, as at 30 June 2021 was
68,679,098.
The definition of the term “relevant interest” in the Financial Markets Conduct Act 2013 is extremely wide, and more than one
relevant interest can exist in the same voting securities.
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE FINANCIAL MARKETS CONDUCT ACT 2013
AS AT 30 JUNE 2021
126
ANNUAL MEETING OF SHAREHOLDERS
Time and date2 p.m., Thursday, 25 November 2021
VenueThis will be advised in the Notice of Meeting
CORPORATE CALENDAR
25 November 20212021 Annual Meeting of shareholders
31 December 2021End of 2022 half year
Mid-February 2022Announcement of 2022 half year result and release of 2022 half year report
30 June 2022End of 2022 financial year
Late August 2022 Announcement of 2022 annual result
September 2022Period for director nominations
End of September 2022 Release of 2022 Annual Report
GOVERNANCE AND OTHER DISCLOSURES
SHAREHOLDER INFORMATION
127
GOVERNANCE AND OTHER DISCLOSURES
TREND STATEMENT
2021
$000
2020
$000
2019
$000
2018
$000
2017
$000
2016
$000
2015
$000
Financial Performance
Operating revenue$111,577 $117,981 $135,234 $148,120 $156,120 $190,371 $215,728
EBITDA (normalised) 3,385 2,300 7,0 76 9,998 2,572 12,275 8,517
Depreciation – owned assets (379) (2,418) (3,479) (3,561) (3,251) (3,352) (5,862)
Depreciation – right-of-use assets(534)(1,779)– – – – –
Depreciation – recycled through inventory (764) (265)– – – – –
EBIT (normalised) 1,708 (2,162) 3,597 6,437 (679) 8,923 2,655
Finance costs (net) (1,056) (2,535) (1,790) (2,798) (2,936) (3,374) (3,948)
Share of profit after tax of equity-accounted
investees (normalised)– – 644 1,419 797 2,670 2,034
Profit/(Loss) before income tax (normalised) 652 (4,697) 2,451 5,058 (2,818) 8,219 741
Income tax (expense)/benefit (276) 1,240 (572) (1,084) 962 (1,906) 454
Profit/(Loss) after tax (normalised) 376 (3,457) 1,879 3,974 (1,856) 6,313 1,195
Abnormal gains/(losses) (after tax) 1,353 (17,994) (18,659) 107 (268) (3,198) (26,910)
Profit/(Loss) after tax attributable to
shareholders of the Company (GAAP)
1,729 (21,451) (16,780) 4,081 (2,124) 3,115 (25,715)
Ordinary dividends paid– – – – – – –
Profit/(Loss) after dividends$1,729 ($21,451)($16,780)$4,081 ($2,124)$3,115 ($25,715)
Financial Position
Shareholders’ equity 35,592 33,637 54,989 72,222 6 7, 8 9 0 69,361 66,184
Loans and borrowings - term portion– – 20,500 27,500 35,000 3 7,7 0 0 45,000
Term liabilities 20,978 3,511 1,618 2,029 3,728 4,461 4,938
Loans and borrowings – current portion– 15,800 – 4,000 6,500 – 11,767
Current liabilities 21,453 1 7,0 3 3 22,227 2 7, 2 5 3 25,739 35,854 41,237
Shareholders’ equity and total liabilities$78,023 $69,981 $99,334 $133,004 $138,857 $ 1 4 7, 3 76 $169,126
Property, plant and equipment 12,094 22,725 30,164 35,142 3 7,1 2 3 36,820 4 7, 9 1 0
Right-of-use assets 9,968 430 –– –– –
Investment in equity-accounted investees– – – 24,544 23,490 23,175 24,937
Goodwill and other intangibles– – – 2,362 2,362 2,362 2,362
Deferred tax asset 732 600 5,456 4,971 5,532 3,496 1,388
Non-current assets 22,794 23,755 35,620 6 7,0 1 9 68,507 65,853 76,597
Cash and bank 22,508 1,276 2,724 2,111 1,255 1,200 2,834
Current assets 32,721 44,950 60,990 63,874 69,095 80,323 89,695
Total assets$78,023 $69,981 $99,334 $133,004 $138,857 $ 1 4 7, 3 76 $169,126
128
GOVERNANCE AND OTHER DISCLOSURES
TREND STATEMENT (CONT'D)
2021
$000
2020
$000
2019
$000
2018
$000
2017
$000
2016
$000
2015
$000
Abnormal items (after tax)
Impairment of carpet tile business assets– – –––– (9,132)
Impairment of plant and equipment– (5,095) (4,413)–– (1,573) (4,344)
Impairment of right-of-use assets– (2,094)–––––
Impairment of intangible assets–– (2,362)––– (5,432)
Impending change in legislation relating to tax
depreciation on buildings
– 2,940 –––––
Derecognition of deferred tax assets– (12,891)––– – (6,771)
Restructuring costs (1,271) (854) – 136 (4,542) (3,222) (711)
Reversal of impairment of fixed assets––– 99 1,083 ––
Gain on sale of property 2,624 –––– 2,035 –
Scour merger costs––– (128) (738) (438) (520)
Gain on merger and dilution of equity-ac-
counted investee
–––– 3,929 ––
Loss on sale of interest in, and property held
by, equity-accounted investees
–– (11,884)––––
To t al$1,353 ($17,994)($18,659)$107 ($268)($3,198) (26,910)
1
Incurred as part of the Group’s strategic transformation into the all-wool and natural materials business model
2
Incurred as part of the Group’s strategic plan to address its cost base, with the consolidation of its yarn spinning operations in Napier,
Whanganui and Christchurch. The costs included employee termination benefits, employee support costs, costs to relocate plant and
equipment and abnormal manufacturing costs and inefficiencies during the consolidation process, which included:
—consolidation of woollen yarn spinning operations (previously in Napier and Whanganui) to a single hub at the Napier plant;
—down-scaling of the semi-worsted yarn spinning operation in Whanganui;
—relocation of the felted yarn operation from Christchurch to Wanganui; and
—closure of the Christchurch plant.
1122
129
GOVERNANCE AND OTHER DISCLOSURES
TREND STATEMENT (CONT'D)
2021202020192018201720162015
Financial Ratios and Summary
Use of Funds and Return on Investment
Return on average shareholders’ equity
(normalised) - %
1.1% ( 7. 8 %)3.0% 5.7% (2.7%)9.3% 1.5%
Basic earnings per ordinary share
(normalised) - cents
0.55 (5.03) 2.74 5.79 (2.70) 9.19 1.74
Diluted earnings per ordinary share
(normalised) - cents
0.54 (5.03) 2.74 5.79 (2.70) 9.19 1.74
Financial Structure
Net tangible asset backing per ordinary share - $$0.36 $0.47 $0.72 $0.94 $0.87 $0.92 $0.91
Equity ratio - %45.6%48.1%55.4%54.3%48.9%4 7.1%39.1%
Return to Shareholders
Dividends paid per ordinary share – – –– – – –
Share Price
30 June$0.49 $0.22 $0.32 $0.62 $0.35 $0.76 $0.36
52 week high$0.49 $0.38 $0.68 $0.63 $0.95 $0.77 $1.36
52 week low$0.21 $0.16 $0.31 $0.27 $0.33 $0.35 $0.31
Market Capitalisation ($000)
30 June$33,653 $15,109 $21,977 $42,581 $24,038 $52,196 $24,724
Capital Expenditure and Depreciation ($000)
Capital expenditure$2,481 $2,119 $4,705 $1,622 $2,123 $2,076 $2,564
Depreciation - owned assets$379 $2,418 $3,479 $3,561 $3,251 $3,352 $5,862
Depreciation - right-of-use assets$534 $1,779 $0 $0 $0 $0 $0
130
GOVERNANCE AND OTHER DISCLOSURES
TREND STATEMENT (CONT'D)
GLOSSARY OF FINANCIAL TERMS
EBITDA Earnings before interest, tax, depreciation and amortisation
EBIT Earnings before interest and tax
EBITDA (normalised) Earnings before abnormal costs, interest, tax, depreciation and amortisation
EBIT (normalised) Earnings before abnormal costs, interest and tax
Net assets Total assets less total liabilities
USE OF FUNDS AND RETURN ON INVESTMENT
Return on average shareholders’ equity Profit/(Loss) after tax (normalised)
(normalised) Average shareholders’ equity
Basic earnings per ordinary share Profit/(Loss) after tax (normalised)
(normalised) Weighted average number of ordinary shares on issue during the year
FINANCIAL STRUCTURE
Net tangible asset backing Net assets less goodwill and other intangibles
per ordinary share Number of ordinary shares on issue at balance date
Equity ratio Shareholders’ equity
Shareholders’ equity and total liabilities
Net interest bearing debt : equity ratio Interest-bearing debt less cash and bank : Shareholders’ equity
Net interest cover EBIT (normalised) plus dividends received from equity-accounted
(normalised) investees grossed up for imputation
Net interest expense
RETURN TO SHAREHOLDERS
Ordinary dividend cover Profit/(Loss) after tax attributable to shareholders of the Company (normalised)
(normalised) Ordinary dividends paid
131
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION
The Directors acknowledge that the Annual Report, including the Trend Statement from pages 127 to 130, contains financial
information that is non-GAAP (Generally Accepted Accounting Practice) and therefore falls within the Financial Markets
Authority’s guidance note on “Disclosing non-GAAP financial information” issued in July 2017.
The Trend Statement has been prepared using the audited GAAP-compliant consolidated financial statements of the Group.
The Directors believe that the non-GAAP financial information contained within the Trend Statement (more particularly, the
non-GAAP measures of financial performance such as “EBITDA (normalised)”, “EBIT (normalised)”, “Profit before income tax
(normalised)” and “Profit after tax (normalised)” as well as the various other financial ratios that are based on normalised results
– for example, earnings per share) provide useful information to investors regarding the performance of the Group because the
calculations exclude restructuring costs and other gains/losses (for example, gain/loss on sale of property and investments) that
are not expected to occur on a regular basis either by virtue of quantum or nature.
In arriving at this view, the Directors have also taken cognisance of the regular requests by users of the consolidated financial
statements, including analysts and shareholders, regarding the nature and quantum of abnormal items within the GAAP-
compliant results and the way analysts distinguish between GAAP and non-GAAP measures of profit.
The disclosure of the non-GAAP financial information is also consistent with how the financial information for the Group is
reported internally, and reviewed by the Chief Executive Officer as its chief operating decision maker, and provides what the
Directors and management believe gives a more meaningful insight into the underlying financial performance of the Group
and a better understanding of how the Group is tracking after taking into account items of an abnormal nature, including
items that are unlikely to recur or otherwise unusual in nature.
Non-GAAP financial information does not have standardised meaning prescribed by GAAP and therefore may not be
comparable to similar financial information prescribed by other entities.
In collating the Trend Statement, the Directors have taken into account all of the requirements within the guidance note.
More specifically, these include:
—outlining why non-GAAP financial information is useful to investors and how it is used internally by management;
—identifying the source of non-GAAP financial information;
—ensuring that:
–non-GAAP financial information is not presented with undue and greater prominence, emphasis or authority
than the most directly comparable GAAP financial information;
–presentation of non-GAAP financial information does not in any way confuse or obscure presentation of GAAP
financial information;
–a reconciliation from the non-GAAP financial information to the most directly comparable GAAP financial
information, including that for the previous period, can be easily accessed (see below);
–a consistent approach is adopted from period to period with respect to the presentation of non-GAAP financial
information, including that for comparative periods;
–where there is any change in approach from the previous period, the nature of the change is explained and the
reasons and financial impact provided;
–non-GAAP financial information is unbiased; and
—taking care when describing, or referring to, items as ‘one-off’ or ‘non-recurring’.
132
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION (CONT'D)
RECONCILIATION OF GAAP-COMPLIANT TO NON-GAAP-COMPLIANT MEASURES OF PROFIT/LOSS AFTER TAX
YEAR ENDED 30 JUNE 2021 YEAR ENDED 30 JUNE 2020
GAAP
$000
Adjustments
$000
Normalised
$000
GAAP
$000
Adjustments
$000
Normalised
$000
Revenue$111,577 –$111,577 $117,981 – $117,981
EBITDA 4,738 (1,353) 3,385 (8,872) 11,172 2,300
Depreciation – owned assets (379) – (379) (2,418) – (2,418)
Depreciation – right-of-use assets(534
)–(534)(1,779)–(1,779)
Depreciation – recycled through inventory(764)– (764)(265)– (265)
EBIT 3,061 (1,353) 1,708 (13,334) 11,172 (2,162)
Finance costs (net) (1,056)– (1,056) (2,535)– (2,535)
Profit/(Loss) before tax 2,005 (1,353) 652 (15,869) 11,172 (4,697)
Tax (expense)/benefit (276)– (276) (5,582) 6,823 1,241
Profit/(Loss) after tax 1,729 (1,353) 376 (21,451) 17,995 (3,456)
Abnormal gains/(losses) after tax 1,353 1,353 (17,995) (17,995)
Profit/(Loss) after tax (GAAP)$0$1,729$0($21,451)
Analysis of abnormal items
Profit/(Loss)
before tax
$000
Tax effect
$000
Profit/(Loss)
after tax
$000
(Loss)/Profit
before tax
$000
Tax effect
$000
(Loss)/Profit
after tax
$000
Restructuring costs (1,271)– (1,271) (1,186) 332 (854)
Impairment of plant and equipment– –– ( 7,0 7 7 ) 1,982 (5,095)
Impairment of right-of-use assets– – – (2,909) 815 (2,094)
Impending change in legislation relating to tax
depreciation on buildings
– – – – 2,940 2,940
Derecognition of deferred tax assets– – – – (12,891) (12,891)
Gain on sale and leaseback of property 2,624 – 2,624 – – –
$1,353 $0 $1,353 ($11,172)($6,823)($17,995)
Calculation of basic and diluted earnings/(loss) per share
under GAAP and non-GAAP measures of profit/(loss) after tax
Year ended 30 June 2021
GAAP-compliant reported
profit/(loss) after tax
Reverse abnormal
items (net of tax)
where applicable
Non-GAAP-compliant
normalised profit/(loss) after tax
Profit attributable to shareholders ($000)$1,729 ($1,353)$376
Weighted average number of ordinary shares (basic) 68,679,098 68,679,098
Earnings per share (basic) (cents) 2.52 0.55
Weighted average number of ordinary shares (diluted) 69,242,681 69,242,681
Earnings per share (diluted) (cents) 2.50 0.54
Year ended 30 June 2020
Loss attributable to shareholders ($000)($21,451) 17,995 ($3,456)
Weighted average number of ordinary shares
(basic and diluted)
68,679,098 68,679,098
Loss per share (basic and diluted) (cents) (31.23) (5.03)
133
CORPORATE DIRECTORY
BOARD OF DIRECTORS
George Adams DipFSA(Hons), FCA, CFInstD
Independent
Chairman of the Board of Directors
Chairman of Nomination Committee
Member of Audit and Remuneration Committees
Grant Biel
B.E. (Mech.)
Non-independent
Member of Audit, Remuneration and Nomination Committees
Paul Izzard
BA (Hons) Interior Design
Independent
Member of Audit and Remuneration Committees
John Rae
B.Com., LLB, CMInstD
Independent
Chairman of Audit Committee
Member of Remuneration and Nomination Committees
Dianne Williams
B.Com., MBA, CMInstD
Independent
Chairman of Remuneration Committee
Member of Audit and Nomination Committees
CHIEF EXECUTIVE OFFICER
Greg Smith
CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY
Victor Tan CA, FCIS
FOUNDING SHAREHOLDER
The late Anthony Charles Timpson ONZM
REGISTERED OFFICE
7 Grayson Avenue, Auckland 2104
P O Box 97040, Auckland 2241
Telephone: 0800 808 303
Facsimile: 64-9-279 4756
Website: bremworth.co.nz
SHARE REGISTRAR
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road, Auckland 0622,
Private Bag 92119, Auckland 1142.
Telephone: 64-9-488 8700
Facsimile: 64-9-488 8787
Investor Enquiries: 64-9-488 8777
AUDITORS
PwC
LEGAL ADVISORS
Russell McVeagh
BANKERS
Bank of New Zealand
National Australia Bank Limited
CORPORATE
General Manager Health and Safety,
People and Sustainability
Kirstine Hulse
Group Financial Controller
Linda Arbuckle
Group Information Services Manager
Trevor Jones
CARPET OPERATION
General Manager New Zealand Sales
Dean Chandler
General Manager Marketing and
Australian Operations
Rochelle Flint
Logistics Manager
Garth Clarke
Auckland Carpet Tufting Plant Manager
Jason Howearth
Napier Yarn Spinning Plant Manager
Karl Thin
Whanganui Yarn Spinning Plant Manager
Andrew Karl
WOOL OPERATION
General Manager Wool Acquisition
Shane Eades
WEBSITES
Corporate
bremworth.co.nz/investor-centre
Carpet Operation
bremworth.co.nz
bremworth.com.au
Wool Operation
elcodirect.co.nz
Share Registrar
computershare.co.nz/investorcentre
Bremworth Ltd
7 Grayson Avenue, Auckland 2104, PO Box 97040, Auckland 2241
Telephone: 64-9-277-6000 www.bremworth.co.nz
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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