NZKS FY22 results and NZ$60.1 million equity raising
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 New Zealand King Salmon Investments Limited
Reporting Period 12 months to 31 January 2022
Previous Reporting Period 7 months to 31 January 2021
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$174,530 83%
Total Revenue $174,530 83%
Net (loss) from continuing
operations
($73,202) (934%)
Total net (loss) ($73,202) (934%)
Interim/Final Dividend
Amount per Quoted Equity
Security
$ nil
Imputed amount per Quoted
Equity Security
$ nil
Record Date N/A
Dividend Payment Date N/A
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.76 $1.04
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
The prior comparable period relates to 7 months due to a
change in balance date (June to January)
No final dividend was declared in respect of the 12 months
ended 31 January 2022.
Authority for this announcement
Name of person authorised
to make this announcement
Ben Rodgers
Contact person for this
announcement
Ben Rodgers
Contact phone number +64 027 527 5636
Contact email address Ben.rodgers@kingsalmon.co.nz
Date of release through MAP 13 April 2022
Audited financial statements accompany this announcement. Pursuant to ASX Listing Rule
1.15.3, New Zealand King Salmon Investments Limited confirms that it continues to comply with
the rules of its home exchange (the NZX Main Board).
---
New Zealand King Salmon
Investments Limited
Offer Document
2.85 for 1 Renounceable Rights Offer
13 April 2022
This is an important document. You should read the whole document
before deciding what action to take with your Rights. If you have any
doubts as to what you should do, please consult your broker, financial,
investment or other professional advisor.
2
CONTENTS
IMPORTANT INFORMATION 3
PART 1: LETTER FROM THE CHAIR 5
PART 2: OFFER AT A GLANCE 7
PART 3: IMPORTANT DATES 8
PART 4: DETAILS OF THE OFFER 9
GLOSSARY 15
DIRECTORY 18
3
IMPORTANT INFORMATION
General Information
The Offer is made under the exclusion in
clause 19 of Schedule 1 of the Financial
Markets Conduct Act 2013 and pursuant to the
provisions of section 708AA of the
Corporations Act 2001 (Cth) (as modified by
ASIC Instrument 22-0265).
This document is not a product disclosure
statement or other disclosure document for
the purposes of the FMCA, the Corporations
Act or any other law, has not been lodged with
the Financial Markets Authority or ASIC, and
does not contain all of the information that an
investor would find in a product disclosure
statement or other disclosure document, or
which may be required in order to make an
informed investment decision about the Offer
or NZKS.
Additional information available under
continuous disclosure obligations
NZKS is subject to continuous disclosure
obligations under the NZX Listing Rules. You
can find market releases by NZKS at nzx.com
and at asx.com.au under the code “NZK”.
NZKS may, during the period of the Offer,
make additional releases to the NZX and the
ASX. To the maximum extent permitted by
law, no release by NZKS to the NZX or the ASX
will permit an applicant to withdraw any
previously submitted application without
NZKS’ prior consent.
Offering Restrictions
This Offer Document does not constitute an
offer, advertisement or invitation in any place
in which, or to any person to whom, it would
not be lawful to make such an offer,
advertisement or invitation.
This Offer Document may not be sent or given
to any person who is not an Eligible
Shareholder in circumstances in which the
Offer or distribution of this Offer Document
would be unlawful. The distribution of this
Offer Document (including an electronic copy)
outside New Zealand or Australia may be
restricted by law. In particular, this Offer
Document may not be distributed to any
person, and the New Shares may not be
offered or sold, in any country outside
New Zealand or Australia except to
Institutional Investors or as NZKS may
otherwise determine in compliance with
applicable laws. Further details on the
offering restrictions that apply are set out in
the section of this Offer Document headed
“Details of the Offer”.
This Offer Document is not for distribution or
release in the United States. This Offer
Document does not constitute an offer to sell,
or the solicitation of an offer to buy, any
securities in the United States. The Rights and
the New Shares have not been, and will not
be, registered under the US Securities Act of
1933, as amended, or the securities laws of
any state or other jurisdiction of the United
States, and may not be offered or sold in the
United States except in transactions exempt
from, or not subject to, registration under the
US Securities Act and applicable US state
securities laws.
If you come into possession of this Offer
Document, you should observe any such
restrictions. Any failure to comply with such
restrictions may contravene applicable
securities law. NZKS disclaims all liability to
such persons.
Changes to the Offer
Subject to the NZX Listing Rules, NZKS
reserves the right to alter the dates set out in
this Offer Document. Additionally, NZKS
reserves the right to withdraw the Offer and
the issue of New Shares at any time before the
Allotment Date at its absolute discretion.
No Guarantee
No guarantee is provided by any person in
relation to the New Shares to be issued under
the Offer. Likewise, no warranty is provided
with regard to the future performance of NZKS
or any return on any investments made
pursuant to this Offer Document.
Decision to participate in the Offer
The information in this Offer Document does
not constitute a recommendation to acquire
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New Shares nor does it amount to financial
product advice. This Offer Document has
been prepared without taking into account the
particular needs or circumstances of any
investor, including their investment
objectives, financial and/or tax position.
Privacy
Any personal information you provide online
will be held by NZKS and/or the Share
Registrar at the addresses set out in the
Directory. This information will be used for
the purposes of administering your
investment in NZKS. This information will only
be disclosed to third parties with your consent
or if otherwise required by law. Under the
Privacy Act 2020 and the Australian Privacy
Act 1988 (Cth), you have the right to access
and correct any personal information held
about you.
Enquiries
Enquiries about the Offer can be directed to an
NZX Primary Market Participant, or your
solicitor, accountant or other professional
adviser. If you have any questions about how
to apply online, please contact the Share
Registrar.
Defined terms
Capitalised terms used in this Offer Document
have the specific meaning given to them in the
Glossary at the back of this Offer Document.
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PART 1: LETTER FROM THE CHAIR
13 April 2022
Dear Shareholder,
On behalf of the directors of New Zealand King Salmon Investments Limited (NZKS), I am
pleased to present you with the opportunity to participate in this Offer of New Shares to
repay all outstanding debt and strengthen NZKS’ balance sheet, providing the business with
significant liquidity as it resets its farming model whilst navigating heightened mortality and
the ongoing impacts of the Covid-19 pandemic.
Update on FY22 summer mortality and aquaculture farming model
Fish performance continues to be a key focus for the business and the mortality events
during FY22 dictate major change is required to ensure our farming strategy is more
sustainable over the long term. Warm summer temperatures have been the main factor of
multifactorial mortality events with approximately 2/3 of mortality biomass from warmer sites
occurring between January and April when the fish are generally smaller. In light of FY22
mortality, NZKS has reviewed the underlying risk factors and has revised our farming
strategy. We will avoid the higher water temperatures associated with the Pelorus and Queen
Charlotte Sounds over the summer months. The company will focus on the cooler Tory
Channel farms and utilise the nearby Queen Charlotte farms to tow stock to, after summer,
for harvest before the following summer.
Equity raise
Today, NZKS has announced a fully underwritten NZ$60.1 million pro rata Rights Offer. The
proceeds of the equity raise will be used to deleverage NZKS’ balance sheet and provide
liquidity and funding for medium term operating requirements.
Post the equity raise, NZKS will have total liquidity of NZ$13.2 million, providing the company
with significant flexibility as it transitions its farming model and navigates the ongoing
impacts of the Covid-19 pandemic.
NZKS is undertaking an approximately NZ$60.1 million offer of New Shares via an
underwritten pro rata Rights Offer to existing shareholders. Under the Rights Offer, Eligible
Shareholders may subscribe for 2.85 New Shares for every 1 existing share held as at
7.00pm (NZST) on 26 April 2022, at a price of NZ$0.15 per share.
Eligible Shareholders have until 5.00pm (NZST) on 6 May 2022 to apply at the
following link: www.shareoffer.co.nz/nzks.
Oregon Group has pre-committed to take up NZ$23.8m of its rights (representing 100% of
its entitlement). The board of NZ King Salmon unanimously supports the Rights Offer and
the directors of NZ King Salmon have pre-committed to subscribe for a further NZ$2.51m of
shares.
Shareholders who choose not to take up their rights, or who renounce their rights, will have
their percentage shareholding diluted.
We are also pleased to offer Eligible Retail Shareholders who take up their rights in full the
opportunity to apply for additional New Shares attributable to any unexercised rights up to
100% of their entitlements.
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This document sets out important information about the Offer. Before making your
investment decision, I encourage you to read this document in full and also to consider the
information disclosed by NZKS to NZX / ASX (in particular the Investor Presentation) and
other information available at www.nzx.com or https://www2.asx.com.au/ under the ticker
code “NZK”. If you are in doubt as to what you should do, you should consult your financial
or professional adviser or an NZX Primary Market Participant.
Thank you for your continued support.
Yours sincerely
John Ryder
Chair,
New Zealand King Salmon Investments Limited
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PART 2: OFFER AT A GLANCE
Issuer New Zealand King Salmon Investments Limited
The Offer A pro rata rights issue of 2.85 New Shares for every 1 Existing
Share held at 7.00pm (NZST) on the Record Date. The Rights
will not be quoted on the NZX Main Board or ASX.
Eligible Retail Shareholders who take up their Rights in full
have the opportunity to apply for additional New Shares which
are attributable to any Unexercised Rights, allowing them to
subscribe for additional New Shares up to a maximum of 100%
of their Rights.
Eligible Shareholder
A person who, at 7.00pm (NZST) on the Record Date, was
recorded in NZKS’ share register as being a Shareholder and:
(a) whose address is shown in NZKS’ share register as being
in New Zealand or Australia; or
(b) whose address is shown in NZKS’ share register as being
in Hong Kong or Singapore and who is an Institutional
Investor,
and who is not in the United States and who is not acting for
the account or benefit of a person in the United States.
Issue Price NZ$0.15 (or the A$ Price) per New Share.
Existing Shares
currently on issue
140,637,703 Existing Shares.
Maximum number of
New Shares being
offered
400,817,453 New Shares (subject to rounding).
Offer size The approximate amount to be raised under the Offer is
NZ$60.1 million.
How to apply Applications must be made online at
www.shareoffer.co.nz/nzks or as otherwise directed by NZKS.
Underwriting Oregon Group Limited, NZKS’ largest shareholder, has pre-
committed to subscribe for NZ$23.8m of New Shares
(representing 100% of its entitlement), and the directors of
NZKS have pre-committed to subscribe for a further NZ$2.51m
of New Shares, with the balance of the Offer fully underwritten
by the Underwriter.
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PART 3: IMPORTANT DATES
Event Date
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Announcement of the Offer 13 April 2022
Record Date for determining entitlements to Rights 7.00pm, 26 April 2022
Offer Opens 27 April 2022
Closing Date (last day for online applications) 5.00pm, 6 May 2022
Announce results of the Offer 11 May 2022
Allotment & Settlement of New Shares under the Offer on
the NZX Main Board & ASX and commencement of trading
of allotted New Shares on the NZX Main Board
12 May 2022
Commencement of trading of allotted New Shares on ASX 13 May 2022
Mailing of holding statements 16 May 2022
1
The dates set out in the table above (and any references to them in this Offer Document) are subject to change and are indicative only. All
times and dates refer to NZ standard time (unless otherwise specified). NZKS reserves the right to amend the timetables (including by
extending the closing dates for the Offer or accepting late Applications, either generally or in particular cases) subject to the NZX Listing
Rules. Any extension of the closing dates for the Offer will have a consequential effect on the issue date of New Shares.
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PART 4: DETAILS OF THE OFFER
The Offer
The Offer is an offer of New Shares in NZKS to Eligible Shareholders under a pro rata renounceable Rights
Offer. Under the Rights Offer, Eligible Shareholders are entitled to subscribe for 2.85 New Shares for every
1 Existing Share held at 7.00pm (NZST) on the Record Date. Any fractional Rights will be rounded down to
the nearest whole number. The Rights will not be quoted on the NZX Main Board.
If you are an Eligible Shareholder you may take up all or some of your Rights, transfer all or some of your
Rights or do nothing with all or some of your Rights. If you are an Eligible Shareholder and you do not
take up all of your Rights, or you transfer some or all of your Rights, your current shareholding will be
diluted as a result of the issue of New Shares.
If you are an Eligible Retail Shareholder and take up your Rights in full, you may also apply for additional
New Shares which are attributable to any Unexercised Rights, up to a maximum amount of New Shares
equal to 100% of your Rights.
You may transfer your Rights should you be able to find a buyer for those Rights. The Rights will not be
quoted on the NZX or the ASX. Any transfer of Rights should be notified to the Share Registrar.
The maximum number of New Shares that may be issued under the Offer is 400,817,453 (subject to
rounding). NZKS will raise a total of approximately NZ$60.1 million through the Offer. The Offer is fully
underwritten by the Underwriter (except in respect of the NZ$23.8 million of New Shares for which Oregon
Group Limited, NZKS’ largest shareholder, and the NZ$2.51 million of New Shares for which the directors
of NZKS have committed to subscribe).
Issue Price
The Issue Price is NZ$0.15 (or the A$ Price) per New Share.
The A$ Price will be the Australian dollar equivalent of NZ$0.15 determined using the RBNZ AUD/NZD
exchange rate on Tuesday, 26 April 2022 at 3.00pm (NZST). The A$ Price will be announced by NZKS on
Wednesday, 27 April 2022.
Payment for the New Shares must be paid in full in accordance with the instructions set out in the online
application process or as otherwise directed by NZKS.
NZKS may choose to accept late applications, but has no obligation to do so. NZKS may accept or reject
any online applications which it considers is not completed correctly, and may correct any errors or
omissions on any online application.
Any New Shares (including additional New Shares) issued to you will be issued on the branch register on
which you currently hold the Existing Shares to which your Rights relate.
As required by the Listing Rules, if NZKS receives, before the Closing Date, a renunciation and an
acceptance in respect of the same Right(s), the renunciation shall be given priority to the acceptance.
Application monies received will be held in a trust account with the Share Registrar until the corresponding
New Shares are allotted or the application monies are refunded. Interest earned on the application monies
will be for the benefit, and remain the property, of NZKS and will be retained by NZKS whether or not the
issue of New Shares takes place. Any refunds of application monies (without interest) will be made within
five business days (as defined in the Listing Rules) of allotment, or any decision not to proceed with the
Offer.
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Withdrawal
Subject to NZKS’ compliance with all applicable laws, NZKS reserves the right to withdraw the Offer at any
time at its absolute discretion. If any Application is not accepted, all applicable application monies will be
refunded, without interest, to the relevant Shareholder.
Purpose of the Offer
NZKS intends that the proceeds raised from the Offer will be applied to repay debt, strengthen NZKS’
balance sheet and reposition the company for its refreshed aquaculture strategy.
Eligibility
The Offer is only open to Eligible Shareholders and persons that NZKS is satisfied can otherwise participate
in the Offer in compliance with all applicable laws.
NZKS considers that the legal requirements of jurisdictions other than New Zealand, Australia, Hong Kong
and Singapore are such that it would be unduly onerous for NZKS to make the Rights Offer in those
jurisdictions (or to make the Rights Offer to Shareholders who are not Institutional Investors in Hong Kong
and Singapore). This decision was made having regard to the small number of Shareholders in such
overseas jurisdictions and the costs of complying with overseas legal requirements.
This Offer Document is only being sent by NZKS to Eligible Shareholders. The distribution of this Offer
Document (including an electronic copy) outside New Zealand or Australia may be restricted by law. Any
failure to comply with such restrictions may contravene applicable securities law. NZKS disclaims all
liability to such persons.
Hong Kong
WARNING: This document has not been, and will not be, registered as a prospectus under the Companies
(Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has it been authorised
by the Securities and Futures Commission in Hong Kong pursuant to the Securities and Futures Ordinance
(Cap. 571) of the Laws of Hong Kong (the "SFO"). No action has been taken in Hong Kong to authorise or
register this document or to permit the distribution of this document or any documents issued in
connection with it. Accordingly, the Rights and the New Shares have not been and will not be offered or
sold in Hong Kong other than to "professional investors" (as defined in the SFO and any rules made under
that ordinance).
No advertisement, invitation or document relating to the Rights and the New Shares has been or will be
issued, or has been or will be in the possession of any person for the purpose of issue, in Hong Kong or
elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of
Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to
the Rights and the New Shares that are or are intended to be disposed of only to persons outside Hong
Kong or only to professional investors (as defined in the SFO and any rules made under that ordinance). No
person allotted Rights or New Shares may sell, or offer to sell, such securities in circumstances that
amount to an offer to the public in Hong Kong within six months following the date of issue of such
securities.
The contents of this document have not been reviewed by any Hong Kong regulatory authority. You are
advised to exercise caution in relation to the offer. If you are in doubt about any of the contents of this
document, you should obtain independent professional advice.
Singapore
This document and any other materials relating to the Rights and the New Shares have not been, and will
not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore.
Accordingly, this document and any other document or materials in connection with the offer or sale, or
invitation for subscription or purchase, of Rights and New Shares, may not be issued, circulated or
distributed, nor may the Rights and New Shares be offered or sold, or be made the subject of an invitation
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for subscription or purchase, whether directly or indirectly, to persons in Singapore except pursuant to and
in accordance with exemptions in Subdivision (4) of Division 1, Part XIII of the Securities and Futures Act,
Chapter 289 of Singapore (the "SFA"), or as otherwise pursuant to, and in accordance with the conditions
of any other applicable provisions of the SFA.
This document has been given to you on the basis that you are (i) an existing holder of the Company’s
shares, (ii) an "institutional investor" (as defined in the SFA) or (iii) an "accredited investor" (as defined in
the SFA). In the event that you are not an investor falling within any of the categories set out above,
please return this document immediately. You may not forward or circulate this document to any other
person in Singapore.
Any offer is not made to you with a view to the Rights or the New Shares being subsequently offered for
sale to any other party. There are on-sale restrictions in Singapore that may be applicable to investors who
acquire Rights or New Shares. As such, investors are advised to acquaint themselves with the SFA
provisions relating to resale restrictions in Singapore and comply accordingly.
Underwriting Agreement
NZKS has requested the Underwriter underwrite the Offer and the Underwriter has agreed to do so (except
in respect of the $23.8 million of New Shares for which Oregon Group Limited, NZKS’ largest shareholder,
and the $2.51 million of New Shares for which the directors of NZKS have committed to subscribe). This
means that the Underwriter will subscribe at the Issue Price for any New Shares that are not subscribed for
by Eligible Shareholders under the Offer in accordance with the terms of the Underwriting Agreement. A
summary of the principal terms of the Underwriting Agreement is set out immediately below:
The Underwriter has the power to appoint sub-underwriters.
The Underwriter will be paid an agreed fee for its services in connection with the Offer.
The Underwriting Agreement contains termination events, representations, warranties and
indemnities that are customary for an offer of this nature.
The Underwriter may terminate its obligations under the Underwriting Agreement, including by
reason of events which have, or are likely to have, a material adverse effect on NZKS, the Shares
or the Offer. These may be as a result of events related to NZKS or as a result of external events,
such as material or fundamental changes in financial, economic and political conditions in certain
countries or financial markets.
If the Underwriting Agreement is terminated, a termination fee may be payable to the Underwriter.
NZKS has indemnified the Underwriter and its directors, officers, partners, employees and advisers
against certain losses sustained, suffered or incurred, arising out of or in connection with the Offer,
the allotment of the New Shares or the Underwriting Agreement.
For a period commencing on the date of the Underwriting Agreement and ending 180 days after the
Allotment Date for the Offer, NZKS and its subsidiaries will not, without the prior written consent of
the Underwriter:
o offer for sale or accept offers for any Shares or other equity securities issued by NZKS;
o allot or issue any Shares or other equity securities of NZKS (whether preferential, redeemable,
convertible or otherwise);
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o issue or grant any right or option that entitles the holder to call for the issue of Shares or other
equity securities by NZKS or that is otherwise convertible into, exchangeable for or redeemable
by the issue of, Shares or other equity securities by NZKS;
o create any debt instrument or other obligation which may be convertible into, exchangeable for
or redeemable by, the issue of Shares or other equity securities by NZKS;
o otherwise enter into any agreement whereby any person may be entitled to the allotment and
issue of any Shares or other equity securities by NZKS; or
o make any announcement of an intention to do any of the above,
other than pursuant to existing employee incentive plans (including as may be amended or updated
from time to time) or the Offer; or
o dispose of or charge, or agree to dispose of or charge, the whole or any substantial part of the
business; or
o enter into any commitment that is or may be material in the context of the Offer, the
underwriting or the quotation of Shares on the NZX,
other than as publicly disclosed or disclosed to the Underwriter prior to the date of the Underwriting
Agreement.
Application to take up additional New Shares
New Shares that are attributable to Unexercised Rights will be offered to Eligible Retail Shareholders who
take up their Rights in full.
Eligible Retail Shareholders who have taken up all of their Rights in full may apply for additional New
Shares, up to a maximum amount of New Shares equal to 100% of their Rights. Eligible Retail
Shareholders may apply for additional New Shares as directed via the online application, and will do so at
the Issue Price. Payment must be made for both your Rights and any additional New Shares for which you
wish to apply.
If you elect to apply for your Rights using the A$ Price, then any additional New Shares that you are
applying for must also be paid for in Australian dollars at the A$ price.
Allocations and any necessary scaling of additional New Shares applied for by Eligible Retail Shareholders
who take up their Rights in full will be determined by NZKS and the Lead Manager. NZKS and the Lead
Manager will determine the Shareholders who will be treated as Eligible Retail Shareholders in their sole
discretion. In exercising their discretion, NZKS and the Lead Manager may have regard to a number of
matters, including legal and regulatory requirements and logistical and registry constraints. NZKS reserves
the right to reject any application for additional New Shares that it or the Lead Manager considers is made
by or on behalf of a person who is not an Eligible Retail Shareholder.
Nominees
If you hold Existing Shares as nominee for more than one person, then you may (depending on the nature
of each such person) be an Eligible Shareholder or an Ineligible Shareholder with regard to the Rights of
each such person. Nominees who hold Shares on behalf of persons in the United States, or who are acting
for the account or benefit of persons in the United States, are not eligible to participate on behalf of those
persons.
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The Offer is being made to all Eligible Shareholders. Nominees and custodians with registered addresses in
eligible jurisdictions may be able to participate in the Offer in respect of some or all of the beneficiaries on
whose behalf they hold existing Shares, provided that the applicable beneficiary would satisfy the criteria
for an Eligible Shareholder.
Nominees and custodians who hold Shares as nominees or custodians will receive a letter from NZKS.
Nominees and custodians should consider carefully the contents of that letter and note in particular that
the Offer is not available to, and they must not purport to accept the Offer in respect of:
(a) beneficiaries on whose behalf they hold Existing Shares who would not satisfy the criteria for an
Eligible Shareholder; or
(b) Shareholders who are not eligible under applicable securities laws to receive an offer under the
Offer.
In particular nominees and custodians who hold Shares on behalf of persons in the United States, or who
are acting for the account or benefit of persons in the United States, are not eligible to participate on behalf
of those persons, and may not take up Rights on behalf of, or send any documents relating to the Offer to,
any person in the United States.
NZKS is not required to determine whether or not any registered holder is acting as a nominee or the
identity or residence of any beneficial owners of Shares or Rights. Where any holder is acting as a nominee
for a foreign person, that holder, in dealing with its beneficiary will need to assess whether indirect
participation by the beneficiary in the Offer is compatible with applicable foreign laws. NZKS is not able to
advise on foreign laws.
Terms and Ranking of New Shares
New Shares will rank equally with, and have the same voting rights, dividend rights and other entitlements
as, Existing Shares in NZKS quoted on the NZX Main Board and ASX.
NZKS’ formal dividend policy can be found at https://www.kingsalmon.co.nz/dividends/. However, NZKS’
Board has taken the prudent decision to suspend dividend payments until after such time as more normal
trading conditions resume.
NZX Main Board Quotation
The Rights will not be quoted on the NZX Main Board.
It is a term of the Offer that NZKS will take any necessary steps to ensure that the New Shares are,
immediately after the issue, quoted on the NZX Main Board. The New Shares have been accepted for
quotation by NZX and will be quoted upon completion of allotment procedures. NZX Main Board is a
licensed market operated by NZX, a licensed market operator, regulated under the FMCA.
ASX
The Rights will not be quoted on the ASX.
An application has or will be made to ASX for quotation of the New Shares issued under the Offer and
NZKS expects that the New Shares will be quoted upon completion of allotment procedures.
ASX accepts no responsibility for any statement in this Offer Document. The fact that ASX may approve
the New Shares for quotation is not to be taken in any way as an indication of the merits of NZKS. Holding
statements for New Shares allotted under the Offer will be issued and mailed as soon as practicable after
allotment. Applicants under the Offer should ascertain their allocation before trading in the New Shares.
Applicants can do so by contacting the Share Registrar, whose contact details are set out in the Directory.
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Applicants selling New Shares prior to receiving a holding statement do so at their own risk. No person
accepts any liability or responsibility should any person attempt to sell or otherwise deal with New Shares
before the holding statement showing the number of New Shares allotted to an applicant is received by the
applicant for those New Shares.
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PART 5: GLOSSARY
A$ Price The Australian dollar equivalent of the Issue
Price (as expressed in New Zealand Dollars),
calculated in accordance with the terms of this
Offer Document.
Allotment Date 12 May 2022.
ASX ASX Limited or the market it operates (as the
context requires).
ASX Listing Rules The official listing rules of ASX.
Closing Date 5.00pm (NZST) on 6 May 2022.
Eligible Retail Shareholder A person who is an Eligible Shareholder and is
not an Institutional Investor.
Eligible Shareholder A person who, at 7.00pm (NZST) on the Record
Date, was recorded in NZKS’ share register as
being a Shareholder and:
(a) whose address is shown in NZKS’ share
register as being in New Zealand or
Australia; or
(b) whose address is shown in NZKS’ share
register as being in Hong Kong or
Singapore and who is an Institutional
Investor,
and who is not in the United States and who is
not acting for the account or benefit of a
person in the United States.
Existing Share A Share on issue on the Record Date.
FMCA The Financial Markets Conduct Act 2013.
Ineligible Shareholder A Shareholder of NZKS who is not an Eligible
Shareholder.
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Institutional Investor A person:
in New Zealand, who NZKS or the Lead
Manager considers is an institutional,
habitual or sophisticated investor;
in Australia, who NZKS considers is a
“sophisticated investor” or “professional
investor” within the meaning of sections
708(8) and 708(11) of the Corporations
Act 2001 (Cth);
in Hong Kong, who NZKS considers is a
professional investor as defined in the
Securities and Futures Ordinance (Cap.
571) of the Laws of Hong Kong; or
in Singapore, who NZKS considers is an
“institutional investor” or a “relevant
person” as defined in Subdivision (4)
Division 1, Part XIII of the Securities
and Futures Act, Chapter 289 of
Singapore,
and who is not in the United States and who is
not acting for the account or benefit of a
person in the United States.
Issue Price NZ$0.15 per New Share.
Lead Manager Jarden Securities Limited.
New Share A Share in NZKS offered under the Offer of the
same class as, and ranking equally in all
respects with, NZKS’ quoted Existing Shares at
the Allotment Date.
NZKS New Zealand King Salmon Investments
Limited.
NZX NZX Limited.
NZX Listing Rules The listing rules of NZX in relation to the NZX
Main Board (or any market in substitution for
that market) in force from time to time, read
subject to any applicable rulings or waivers.
NZX Main Board The main board equity security market
operated by NZX.
NZX Primary Market Participant Any company, firm, organisation, or
corporation designated or approved as a
primary market participant from time to time
by NZX.
Offer The Rights Offer.
Offer Document This document.
Record Date 26 April 2022.
17
Right A renounceable right to subscribe for 2.85 New
Shares for every 1 Existing Share held at
7.00pm on the Record Date at the Issue Price,
issued pursuant to the Offer.
Rights Offer The pro rata renounceable rights offer of New
Shares detailed in this Offer Document.
Share A fully paid ordinary share in NZKS.
Shareholder A registered holder of Shares.
Share Registrar Computershare Investor Services Limited.
Underwriter Jarden Partners Limited
Unexercised Rights Those Rights not taken up by the Closing Date,
including the Rights attributable to Ineligible
Shareholders.
NOTE:
• All references to time are to New Zealand time unless stated or defined otherwise.
• All references to currency are to New Zealand dollars unless stated or defined otherwise.
• All references to legislation are references to New Zealand legislation unless stated or defined
otherwise.
• This Offer Document, the Offer and any contract resulting from it are governed by the laws of New
Zealand, and each applicant submits to the exclusive jurisdiction of the courts of New Zealand.
18
PART 6: DIRECTORY
ISSUER
New Zealand King Salmon Investments
Limited
93 Beatty Street
Annesbrook
Nelson 7011
New Zealand
Phone +64 3 5485714
www.kingsalmon.co.nz
LEGAL ADVISORS
Chapman Tripp
Level 34, PwC Tower
15 Customs Street West
Auckland 1010
LEAD MANAGER & UNDERWRITER
Jarden Securities Limited (as Lead
Manager) and Jarden Partners Limited (as
Underwriter)
Level 32, PwC Tower
15 Customs Street West
Auckland 1010
If you have any queries about how to apply online, please contact the Registrar at:
SHARE REGISTRAR
Computershare Investor Services Limited
New Zealand
Private Bag 92119
Victoria Street West
Auckland, 1142
New Zealand
159 Hurstmere Road
Takapuna
Auckland 0622
Telephone: 0800 650 034
Application Website: www.shareoffer.co.nz/nzks
Company Website: www.computershare.com/nz
Email: nzks@computershare.co.nz
Australia
GPO Box 2975
Melbourne VIC 3000
Australia
Yarra Falls
452 Johnston Street
Abbotsford, VIC 3067
Telephone: +61 03 9415 5000
1800 501 366 (freephone within
Australia only)
www.computershare.com/au
Offer Document
---
FY22 Results and Equity Raising Presentation
FY22 INVESTOR PRESENTATION
PRESENTERS
2
Grant Lovell
General Manager
Aquaculture
John Ryder
Chair
Grant Rosewarne
Chief Executive Officer /
Managing Director
Ben Rodgers
Chief Financial Officer
FY22 INVESTOR PRESENTATION
Disclaimer
This presentation has been prepared by New Zealand King Salmon Investments Limited (“NZ King Salmon”, “NZKS” or the “Company”) and is dated 13 April 2022. This presentation has been prepared to provide:
(i) additional comment on the financial statements of the Company for the 12 months ended 31 January 2022, and accompanying information, released to the market on the same date (and should be read in
conjunction with the explanations and views in those documents); and (ii) information in relation to the rights offer of new shares in the Company (the “New Shares”) under clause 19 of Schedule 1 of the Financial
Markets Conduct Act 2013 (“FMCA”) and section 708AA of the Corporations Act 2001 (Cth) as modified by ASIC Instrument 22-0265).
Information
This presentation contains summary information about the Company and its activities which is current as at the date of this presentation. The information in this presentation is of a general nature and does not purport
to be complete nor does it contain all the information which a prospective investor may require in evaluating a possible investment in the Company or that would be required in a product disclosure statement under the
FMCA or a prospectus under the Corporations Act 2001 (Cth). The historical information in this presentation is, or is based upon, information that has been released to NZX Limited (“NZX”) and/or ASX Limited
(“ASX”). This presentation should be read in conjunction with the Company’s financial statements, market releases and other periodic and continuous disclosure announcements, which are available at www.nzx.com
and www.asx.com.au or https://www.kingsalmon.co.nz/investors/.
Any decision to acquire New Shares should be made on the basis of the separate offer document to be lodged with NZX (the “Offer Document”). Any person and prospective investor who wishes to participate in the
offer should review the Offer Document and apply in accordance with the instructions set out in the Offer Document or as otherwise communicated to the shareholder. This presentation and the Offer Document do not
constitute an offer, advertisement or invitation in any place in which, or to any person to whom, it would not be lawful to makesuch an offer, advertisement or invitation.
Not financial product advice
This presentation is for information purposes only and is not financial or investment advice or a recommendation to acquire the Company’s securities, and has been prepared without taking into account the objectives,
financial situation or needs of prospective investors. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial
situation and needs and consult a financial adviser, solicitor, accountant or other professional adviser if necessary.
Past performance
Any past performance information given in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance. No representations or warranties are
made as to the accuracy or completeness of such information.
Future performance
This presentation includes certain “forward looking statements” about the Company and the environment in which the Company operates, such as indications of, and guidance on, future earnings and financial position
and performance. Forward looking information is inherently uncertain and subject to contingencies, known and unknown risks and uncertainties and other factors, many of which are outside of the Company’s control,
and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. A number of important factors could cause actual results or performance to differ
materially from the forward looking statements. No assurance can be given that actual outcomes or performance will not materiall y differ from the forward looking statements. The forward looking statements are
based on information available to the Company as at the date of this presentation. Except as required by law or regulation (including the Listing Rules), the Company undertakes no obligation to provide any additional
or updated information whether as a result of new information, future events or results or otherwise.
DISCLAIMER
3
FY22 INVESTOR PRESENTATION
DISCLAIMER
Non-GAAP financial information
Certain financial information included in this presentation is non-GAAP financial information, including:
•EBITDA. We calculate EBITDA by adding back (or deducting) depreciation, amortisation, finance expense / (income), and taxation expense to net earnings / (loss) from continuing operations.
•EBIT. We calculate EBIT by adding back (or deducting) finance expense / (income), and taxation expense to net earnings / (loss) from continuing operations.
•Pro Forma Operating EBITDA refers to earnings before interest, tax, depreciation and amortisation after allowing for pro forma adjustments as described in the Appendix to this document.
We believe that these non-GAAP financial measures provide useful information to readers to assist in the understanding of our financial performance, financial position or returns, but that they should not be viewed in
isolation, nor considered as a substitute for measures reported in accordance with NZ IFRS. This non-GAAP financial information is not audited, and caution should be exercised as other companies may calculate
these measures differently. The non-GAAP financial information includes pro forma financial information to which certain adjustments have been made. The Company’s financial information has been prepared in
accordance with Generally Accepted Accounting Practice. It complies with the New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards,
as appropriate for profit oriented entities. The Company’s financial statements also comply with International Financial Reporting Standards (IFRS).
Distribution of presentation
This presentation must not be distributed in any jurisdiction to the extent that its distribution in that jurisdiction is restri cted or prohibited by law or would constitute a breach by the Company of any law. The distribution
of this presentation in other jurisdictions outside New Zealand or Australia may be restricted by law, and persons into whosepossession this presentation comes should observe any such restrictions. Any failure to
comply with such restrictions may violate applicable securities laws. See the “Foreign Selling Restrictions” section of this presentation. None of the Company, any person named in this presentation or any of their
affiliates accept or shall have any liability to any person in relation to the distribution or possession of this presentation from or in any jurisdiction.
Not for distribution or release in the United States
This presentation is not for distribution or release in the United States. This presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. The rights and the
New Shares have not been, and will not be, registered under the US Securities Act of 1933, as amended, or the securities lawsofany state or other jurisdiction of the United States, and may not be offered or sold in
the United States except in transactions exempt from, or not subject to, registration under the US Securities Act and applicableUS state securities laws.
Currency
All currency amounts in this presentation are in NZ dollars unless stated otherwise.
Disclaimer: To the maximum extent permitted by law, each of the Company, the Underwriter, the Lead Manager and their respective affiliates, related bodies corporate, directors, officers, partners, employees, agents
and advisers disclaim all liability and responsibility (whether in tort (including negligence) or otherwise ) for any direct or indirect loss or damage which may be suffered by any person through use of or reliance on
anything contained in, or omitted from, this presentation.
Capitalised terms used in this presentation and not otherwise defined have the specific meaning given to them in the AppendixofDefined Terms in this document or in the glossary at the back of the Offer Document.
This presentation has been authorised for release to NZX and ASX by the Company’s Board of Directors.
4
FY22 INVESTOR PRESENTATION
EXECUTIVE SUMMARY
5
FY22 results
•FY22 performance impacted by hangover of the Single Year Class model 1HFY22, mortality event 2HFY22 and write-off of goodwill and impairment of assets
•Pro forma EBITDA of $6.7m impacted by the transition from the Single Year class model and mortality event
•Covid remained a significant headwind due to increased cost of freight and supply disruptions
•Sales demand returned in FY22 with sales exceeding harvest volumes.Supply constraints, a consequence of the single-year-class model, spanned Mar to Jul
2021
•Elevated mortality commenced in Jan 2022 – unusually early and severe
Update on 21/22
summer mortality
•NZ King Salmon has historically suffered from variable fish production –from a cost, size and volume perspective
•Sustained summer temperatures above 18°C have been the dominant stressor in a multifactorial event, suppressing fish immunity and resulting in elevated
mortality. Approximately half of the mortality biomass from warmer sites occurred between January and March when fish sizes are generally smaller
•The warm water sites over the summer months (January to March) account for $9.6 million of our total $20.8 million mortality value (46%)
Reset of aquaculture
farming model
•In light of FY21/FY22 mortality events, we have reviewed our operations and revised our farming strategy to avoid the summer months in our warmer water
spaces.Instead of making improvements to farm through the Pelorus summer we will be avoiding the Pelorus summer (except for a trial). Focus will insteadbe
onutilising the cooler water in the Tory Channel farms, and the nearby Queen Charlotte farms as a location to tow stock post summer
•Furthermore, we will produce seasonal volume using large smolt and we will repeat a vaccination trial in the Pelorus
FY23 guidance
•Impact of FY22 mortalities will carry through to FY23 resulting in reduced harvest figures
•Benefits from the change in aquaculture farming model is not expected to start materialising until December 2022 and January 2023, which means that FY23
will be a transition year before a full year of benefit is realised in FY24
•Noting FY23 as a transition year, proforma EBITDA guidanceis at a loss range of$8m – $12m, with sustainable earnings on a go forward basisexpected to be
in a guidance range of$15m - $19m
Equity raise
•NZ King Salmon is raising equity to repay debt and strengthen its balance sheet, providing the business with liquidity as it resets its farming model whilst
navigating the remaining impacts of the Covid-19 pandemic
•The equity raise will comprise a $60.1 million pro rata rights offer
•BNZ has provided covenant waivers until and excluding 30 April 2023. NZ King Salmon has restructured its banking facilities withBNZ, subject to successful
completion of an equity raising, providing it with a new facility up to $6.5 million in addition to retaining the Business Finance Guarantee Scheme loan ($4.25m).
This liquidity will be used to fund working capital and capex as earnings begin to return
FY22 INVESTOR PRESENTATION
FY22 OPERATIONAL HIGHLIGHTS
$174.5
FY22 REVENUE OF
MILLION
7,382
METRIC TONNES
HARVESTED
DURING FY22
40%
GEOGRAPHIC SPREAD
OF REVENUE
6%
39%
7%
EUROPE
5%
3%
NORTH
AMERICA
ASIA EX JAPAN
JAPAN
NEW
ZEALAND
AUSTRALIA
6
26.2
25.2
25.1
10.0
6.7
0.0
5.0
10.0
15.0
20.0
25.0
30.0
F18F19F20F21F22
(Jun)(Jun)(Jun)(7 mths to Jan)(Jan)
FY PRO-FORMA OPERATING EBITDA
14.5
12.9
11.2
2.3
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
F18F19F20F21F22
(Jun)(Jun)(Jun)(7 mths to Jan)(Jan)
FY PRO-FORMA NPAT
(60.0)
(55.7)
FY22 INVESTOR PRESENTATION
FY22PERFORMANCE
01
7
FY22 INVESTOR PRESENTATION
SALES PERFORMANCE AND BRAND ACHIEVEMENTS
Continuing to target branded premium markets
First half salesSecond half sales
Sales performance
•North American market continues to be a standout performer, with Ōra King foodservice and
Regal branded retail both continuing to grow
•New Zealand Foodservice market recovery is taking longer than anticipated, however retail
growth remains strong for the second year running resulting in a consistent domestic market
performance
•Japan market sales experienced strong growth as a result of frozen whole fish contracts and
Sushi chain store promotions in 1H22. Excluding the promotional sales to the Sushi chain,
fresh whole sales continued to increase throughout the financial year
•Asian markets, excluding Japan, remains in a recovery phase following Covid impacts. 2H22
saw a stronger recovery as retail sales increased and foodservice markets began its rebound
•The Australian market experienced a strong post Covid recovery
•European market volume growth of ~70% over FY21 was a result of investment in retail
specialists, new listings and expansion of existing business
Brand achievements
•Ōra Kingdocumentarylaunched globally
•Positive market test launch ofŌraKing Keiji, our interpretationof the famed Japanese Keiji, a
premium plate-size salmon enjoyed for itsunique flavour and delicate texture
•Regal DoubleManuka WoodRoasted KingSalmon awardedthe Top Honour in Specialty Food
category with twowins at Sofi awardsin North America
Domestic Market (MT)North America (MT)
Australia (MT)Europe (MT)
Japan (MT)Asia (MT)Excludes Japan
8
1,055
1,033
1,177
1,047
1,414
1,187
1,179
1,279
1,301
1,719
FY2018FY2019FY2020FY2021FY2022
1,970
1,597
1,686
1,205
1,333
2,365
1,987
1,550
1,550
1,417
FY2018FY2019FY2020FY2021FY2022
325
230
238
169
203
345
296
218
240
290
FY2018FY2019FY2020FY2021FY2022
47
64
52
54
100
62
75
71
82
132
FY2018FY2019FY2020FY2021FY2022
179
127
139
93
449
302
117
136
313
266
FY2018FY2019FY2020FY2021FY2022
182
252
309
177
129
196
253
269
149
219
FY2018FY2019FY2020FY2021FY2022
FY22 INVESTOR PRESENTATION
AQUACULTURE SUMMARY
SIGNIFICANT MORTALITY TO END FY22
9
Several significant challenges for Aquaculture in FY22 bookended by
issues in the Pelorus
•NZ KingSalmontransitioned out of theSingle Year Classfarming model. The
Single Year Class farming model adversely impacted our fish costs through
mortality and lack of growth in size for the first four months of 1H22, and an
adaptation to the farming model was required to mitigate the impact of warmer
summer waters
•1H22 saw significantly reduced harvest size due to low summer growth and
increased mortality in the Pelorus (Waitata / Kopaua) which involved
stocksdestined for harvest over this period.This also led to an increased FCR
and overall cost of fish from this region
•The Queen Charlotte Sound also experienced an increase in mortality through
1Q22 withthis slightly impacting 2Q22
•Farms performed well across 2H22 with good growth, low mortality rates and
strong harvest results
•A significant mortality event took place at the end of FY22 impacting stocks
primarily in the Pelorus, with this event continuing into FY23 andimpacting FY23
harvest volumes
•Te Pangu saw elevated mortality linked to a feed quality related issue in late
FY22, which will roll into 1Q23 butis not expected to continue indefinitely and
was exacerbatedby COVID supply challenges over the last few months. This
issue also compounded the Pelorus mortalities
1
Temperature data obtained from on farm loggers at 5m water depth
2
Mortality Biomass calculated asmortality biomass /gross growth
3
Financial years have been restated to 1 February – 31 January
10.0
11.0
12.0
13.0
14.0
15.0
16.0
17.0
18.0
19.0
20.0
Dec-21Jan-22Feb-22Mar-22
Temperature
FY22 Summer Temperatures
1
Waihinau Bay (Pelorus)Te Pangu (Tory Channel)18°
Historical Mortality Biomass Percentage
2
Year
3
Tory Channel
Queen
Charlotte
Pelorus SoundTotal
FY18
8.4%19.9%14.0%12.0%
FY19
12.9%20.2%20.3%16.5%
FY20
8.6%34.0%50.2%22.5%
FY21
11.9%16.9%28.5%20.4%
FY22
19.3%57.0%35.5%28.3%
FY22FY23
FY22 INVESTOR PRESENTATION
FISH PERFORMANCE
HEALTH INITIATIVES AND SUMMER MORTALITY
Fish performance continues to be a key focus for the business and changes to the farming model are required to ensure sustainability over the long term
1
•Warm waters during the summer period continue to heavily impact mortality
•Performance outside of the key summer period continues to be strong across all farms
•Significant investments in fish health have not materially helped to prevent summer mortality issues to date. However, FY22 saw significant learnings in this area and further
developmentswith the first rollout of a new autogenous vaccine as part of our ongoing immunisation programme
Biological Performance
2
FY18FY19FY20FY21FY22
Harvest Volume (t)8,3747,5827,5997,8057,382
Average G&G Harvest Weight (kg)4.224.403.774.553.50
Feed Conversion Ratio (FCR)1.821.801.721.811.87
Closing Livestock Biomass6,3877,0267,0146,8646,015
Feed Cost ($ / Kg of feed)2.242.382.522.492.39
1
Further detail on fish health and changes to farming model provided in Strategy Update & Outlook section
2
Financial years have been restated to 1 February – 31 January
10
SoundFarmVolume Harvested
2
FY18FY19FY20FY21FY22
Queen
Charlotte
Ruakaka1,143559630-1,000
Otanerau893817-911903
Tory
Channel
Clay Point1,9818721,9881,3951,428
Te Pangu1,9192,8491,7052,873325
Ngamahau4056911,272131,889
Pelorus
Sound
Waitata1,9361,2651,520321,391
Kōpaua95521478503433
Waihinau---1,058-
Forsyth---1,009-
Freshwater
2851214
Total8,3747,5827,5997,8057,382
FY22 INVESTOR PRESENTATION
FY22 RESULTS
02
11
FY22 INVESTOR PRESENTATION
FY22 HEADLINE FINANCIAL PERFORMANCE
•Gross Margin %in FY22 impacted by movement away from Single Year Class farming model, higher sea farm mortalities and the exit of the majority of excess frozen whole
fish inventory (built up during FY21 Covid disruptions) at discounted prices and continually elevated freight costs
•Pro forma EBITDAsupported by the early close out of in the money FX contracts in 1H22
•GAAP NPATsimilarly impacted by changes to the farming model, higher sea farm mortalities
3
and the impairment of goodwill of $39.26m and impairment of P&E and
intangibles of $20m
12
1
A full reconciliation between GAAP and Pro Forma results is shown on pages 36 and 37 of this presentation
2
The FY21 result is for a 7 month period following the Groups change in balance date from June to January
3
Further detail on fish health and changes to farming model provided in Strategy Update & Outlook section
Group Financial Performance
Pro forma
1
GAAP
FY22FY21
2
% chgFY22FY21
2
% chg
Volume Sold (t)
7,672 4,109
87%
7,672 4,109
87%
Revenue
174,530 95,239
83%
174,530 95,239
83%
Gross Margin
21,563 20,381
6%
12,743 14,153
(10%)
Gross Margin %
12%21%7%15%
EBITDA (Including the early close out of in the money FX contracts)
6,698 9,963
(33%)
(15,593)(2,009)
676%
EBITDA %
4%10%(9%)(2%)
EBIT
(60,935)4,975
(1,325%)
(84,973)(7,978)
965%
NPAT
(55,715)2,347
(2,474%)
(73,202)(7,079)
934%
FY22 INVESTOR PRESENTATION
PROFORMA
1
EBITDA COMPARISON (FY21 RESTATED TO 12 MONTHS
2
)
13
•Revenueincreased due to sales volume of 7,672MT, a 20% increase on sales volumes compared to prior 12 month period
2
•Stock movementwas negative due to the disposal of excess frozen whole fish built up in FY21 due to Covid disruptions across food services markets. This build up did not
repeat in FY22 and the majority of frozen whole fish stock was cleared in FY22 at discounted prices
•Freightcosts reflect increased sales volumes and increased freight cost per kg due to ongoing disruptions to the global logistics environment from Covid
•Mortality
3
impact reflects significant mortality increase in FY22
•Processingcosts reflect cost increases across the major cost groups including salaries & wages, and raw materials
•Early close out of in the money FX contractsin 1H22 helped mitigate the impact of cost increases listed above
1
Refer to pages 36 & 37 for full reconciliation between GAAP and Pro Forma results
2
FY21 was a 7 month reporting period, as such comparable information has been restated to provide a comparable 12 months to beona like for like basis
3
Further detail on fish health and changes to farming model provided in Strategy Update & Outlook section
$6.6
6.7
FY22 INVESTOR PRESENTATION
In light of recent trading impacts, NZ King Salmon is raising equity to repay all
outstanding debt to recapitalise and strengthen its balance sheet
•NZ King Salmon’s net bank debt increased to $44.2m in FY22 (out of total debt facilities of
$64.25m)
•Post the $60.1m equity raise, NZ King Salmon will have a pro forma net cash position of
$13.2m
2
as at 31 January 2022
•Inventory on Hand decreased due to the sale of excess whole frozen fish –inventory on hand
•Biological assets have decreased due to an increase in sea farm mortalities currently unfolding
•$13.3m of capex was spent in FY22. Large categories of capex spend include:
−Blue Endeavor resource consent – $3.2m spent YTD (project to date spend: $5.5m)
−Farm equipment upgrade (Pens & Barge, net cleaner and vessel) – $5.0m
−Purchase of additional premises adjacent to our main processing facility – $1.6m
•Goodwill of $39.26m and P&E and intangibles of $20m have been written off/impaired as a
result of the group’s annual impairment test
•As noted in our half year results ‘Other’ current and non-current assets decreased due to the
early exit of in the money foreign exchange contracts in H1 FY22 ($13.5m)
14
1
In addition to net bank debt, net cash and debt includes financing of insurance premiums
2
$44.2m net bank debt less expected equity proceeds of $57.4m (net of transaction fees)
BALANCE SHEET- RECAPITALISATION REQUIRED
Group Financial Position
Jan-22Jan-21
NZ$000sAuditedAudited
Current Assets
Cash and equivalents2,913 3,479
Receivables19,817 16,186
Taxation receivable294-
Inventories34,636 42,489
Biological Assets65,529 69,588
Derivative financial assets1,338 5,413
124,527 137,155
Non-current Assets
Property, plant & equipment50,620 60,716
Biological assets9,432 18,600
Other12,749 71,545
72,801 150,861
Total Assets197,328288,016
Current Liabilities
Loans (external)(49,659)(3,024)
Lease Liabilities(1,531)(1,580)
Payables(16,434)(18,597)
Other(6,993)(9,810)
(74,617)(33,011)
Non-Current Liabilities
Loans (external)-(39,250)
Lease Liabilities(4,402)(5,389)
Other(7,080)(17,823)
(11,482)(62,462)
Total Liabilities(86,099)(95,473)
Net Assets111,229 192,543
Net Cash / (Debt)
1
(46,746)(38,795)
FY22 INVESTOR PRESENTATION
STRATEGY UPDATE &
OUTLOOK
15
FY22 INVESTOR PRESENTATION
03
FY22 INVESTOR PRESENTATION
FISH HEALTH
Effective managementof fish health remains an ongoing challenge, and we continue to build our understanding in this area
Adverse health outcomes are rarely straightforward. They generally involve a number of factors such as stress, disease, environmental conditions and husbandry
acting in combination. In recent years we have undertaken research and trials, and made management changes, to address a number of complex fish health
issues. Whilst we have been able to exclude several potential risk factors, significant issues remain to be resolved
•Water temperatureshave the strongest correlation with mortality, with significant adverse effects for fish when temperatures consistently exceed 18°C. This is
a key focus for NZKS
•Single Year Class (SYC) productionhas been shown to be a very effective biosecurity measure elsewhere, especially in relation to viral diseases. However, it
is difficult to implement at NZKS farms. When applied in the Pelorus, SYC resulted in adverse environmental and fish health outcomes, with larger fish (which
are more susceptible to thermal stress) being exposed to warmer water and therefore increased health risk, requiring physicalremediation measures to be
employed (managed upwelling). Consequently, SYC did not reduce mortality
•Stinging organismsassociated with net fouling have been shown elsewhere to induce lesions and increase fish stress and susceptibility to disease. However,
replicated trials have eliminated this as a primary cause of mortality for NZKS. We are aware that these organisms may still increase fish stress when present
at elevated levels and therefore net hygiene remains a clear objective for NZKS. However, perversely, these trials also identifi ed that frequent net cleaning in
and of itself may contribute to stress and overall mortality, and so can be a confounding factor in other health issues
•Pathogenic microorganisms clearly play a part in our multifactorial mortality events. We have improved our sampling and diagnostic techniques over the last
year which, in conjunction with recent clinical trials, has dramatically increased our knowledge of both potentialthreats and treatment options. Our
ongoingimmunisationprogrammeis a key focus in this areato assist in mitigation
•Nutrition and the physical properties of fishfeedplay a major role in fish health, supporting optimal performance but also with thepotential for adverse
impacts. Consequently, we need to have a clear understanding ofboth feed quality and how feed performs in our production environment
16
FY22 INVESTOR PRESENTATION
MORTALITY RISK MITIGATION
Mortality remains the key risk to any farming model and managing this
risk is key
Although almost always multifactorialin nature,mortalityat NZKSis heavily
linked to warmer watertemperatures duringthe summer period. Whilst it
is impossible to remove all risk,mitigations can be incorporated into
currentproduction planning, with a clear focus on:
•Changing our aquaculture model to avoid farming over summer at
warmer water sites and instead target production in the cooler waters of
the Tory Channel (see page 18 for more detail on these changes)
•Vaccinedeployment for known diseases and vaccine development for
evolvingdisease risks
•Optimising feed quality, including testing pre-feeding and
collaboratingwith feed companies to support dietimprovement and
development
•Our ongoing breeding programme with a focus on survival
andthermaltolerance
•Ensuring appropriate resources, facilities and access to scientific
expertise are provided to the fish health team. NZKS employs a fully
qualified and specialist fishvet with specialist experience in the King
Salmonspecies
17
-
10.0%
20.0%
30.0%
40.0%
50.0%
5.0
8.0
11.0
14.0
17.0
20.0
Mortality (%)
Temperature
Temperature and mortality at warm water
1
and cool
water
2
farms
Temperature - CoolTemperature - Warm
Mortality - CoolMortality - Warm
1
Queen Charlotte and Pelorus Sound
2
Tory Channel
FY22 INVESTOR PRESENTATION
CHANGE TO AQUACULTURE MODEL TO REDUCE MORTALITY RISK
18
NZ King Salmon continuously seeks improvement in its production model
to minimise summer mortality
•In response to the FY22 and early FY23 mortality event, NZKS will transition its
core strategy from improving our practices and farming through the summer to
avoiding the summer in problem areas such as the Pelorus and Queen
Charlotte Sound.This will involve:
–Increasing our production focus in the cooler Tory Channel during the
summer period
–Towing fish to Ruakaka and Otanerau in March / April for grow-out and
harvest pre summer
–Fallowing some sites in the Pelorus until Blue Endeavour is active, when
and they will be utilised as nursery or harvest sites for the BE project
•We estimate the changes to our aquaculture model will reduce mortalityby
~50% (volume) and believe that we can limit the reduction in harvest volume to
only ~15%, maintaining production volume at an expected ~6,500MT
•Our revised production volume includes 500MT of seasonal harvest volume
associated with the transfer ofvery large smolt in March for harvest pre-
Christmas at between 2 – 2.5kg. It also includes harvest gains from the
immunisation programme over summer in the Pelorus (Waitata), which we
anticipate will provide a harvest opportunity for 3 – 3.5kg fish pre-Christmas
1
Mortality Biomass calculated asmortality biomass /gross growth
2
No towing operations undertaken in Queen Charlotte in FY21 due to SYC
Historical Mortality Biomass Percentage
1
YearTory Channel
Warm water
(Towed)
Warm water
(No Tow)
Total
FY18
8.4%10.1%17.1%12.0%
FY19
12.9%6.8%22.2%16.5%
FY20
8.6%N/A45.7%22.5%
FY21
11.9%N/A25.5%20.4%
FY22
19.3%37.2%43.1%28.3%
Average
12.2%18.6%29.4%19.8%
FY22 INVESTOR PRESENTATION
19
FARMING MODEL INFOGRAPHIC
FY22 INVESTOR PRESENTATION
$6.7
($15)
($10)
($5)
-
$5
$10
$15
FY22 EBITDARevenueFeedOther AquaProcessingOtherFY22 Early FX Close outFY23 EBITDA Guidance
$m
FY23 Guidance
FY23 OUTLOOK (EBITDA GUIDANCE)
A TRANSITORY YEAR TO THE REVISED FARMING MODEL
20
•Revenue
1
impacted bythe reduced harvestfrom the recent mortality event
•Feed is a variable expense and reduces in line with reduced harvest for FY23
•Otheraquacosts have increased due to the livestock movement (differencebetweenour fish production costs and the costs of harvest) recognised within COGS.Due to the mortality event we
have a decrease in harvest volume and the proportion of costsbeing capitalised to the balancesheet
•Processing costs decrease due to a reduction in raw materials, labour and overheads as a result of the reduced harvest
•The gain recognised from the early close out of in the money FX contracts in FY22 is not expected to repeat. NZ King Salmon will look to adjust its FX cover to align with the reduced harvest
•Given the current mortality event, there is no year-on-year benefit from reduced mortality associated with a change to the aquaculture model (avoiding farming the warmer sites over summer)
untilFY24.Therefore, FY23 represents a transitionary year to the new farming model
•Earnings guidance in the form of pro forma EBITDA for FY23 is given in a range of a loss of $8m to $12m
•NZKS board is considering the pause of non-essential capital expenditure until further review is performed
1
Revenue presented net of Omega and Atlantic COGS
($8) – ($12)
FY22 INVESTOR PRESENTATION
$6.7
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
FY22 EBITDARevenueMortalitiesFeedFreightProcessingCorporateOtherFY22 Early FX
Close out
Sustainable
earnings
$m
Sustainable Earnings
TRANSITIONING TO A MORE PREDICTABLE BUSINESS
SUSTAINABLE PRO FORMA EBITDA RANGE $15M –$19M
21
FY23 will be a transitional year to a new aquaculture farming model.The analysis above provides an understanding of how this new model supports NZ King Salmon’s view of sustainable
earnings. The key movements between the FY22 and a view of sustainable earnings are highlighted below:
•Revenue (margin) offsets the decline in harvest as NZ King Salmon optimises both product and customer mix
•An expected reduction in mortalities from not farming our warmer sites over summer
•Feed will decrease due to a reduction in harvest
•Freight remains challenging due to a number of external factors. The reduction in harvest (sales) will result in a slightly reduced total freight cost. Cost per kg is conservatively assumed to
reduce slightly (but remain elevated compared to historical levels) in the medium term as more capacity is introduced post Coviddisruptions. NZ King Salmon also notes the Government has
extended critical support to the aviation sector through the Maintaining International Air Connectivity (MIAC) Scheme throughto March 2023
•Outside of the variable costs associated with freight and feed, NZ King Salmon has identified a number of cost saving initiatives across overheads and people to align with a reduction in harvest
volumes
•NZKS notes the sustainable earnings assume the reconsenting of existing farms – refer to slide 35 for a list of existing sea farm resource consents and expiry
$15 – $19
FY22 INVESTOR PRESENTATION
BLUE ENDEAVOUR UPDATE
22
•Blue Endeavour hearings recommence for 2 days
on 26 and 27 of April 2022
•Consent outcome is due mid-year
•Blue Endeavour remains an important medium-
term project to deliver growth to NZ King Salmon
•Blue Endeavour will allow the utilisation of Pelorus
licenses as nursery sites and harvest locations
•Work continues on refining the production plan
•Blue Endeavour has the potential to add 10,000MT
of harvest volume in conjunction with our nursery
sites
•FY27 is the earliest possible Blue Endeavour
harvest
•Full capacity of existing sites plus Blue Endeavour
is ~16,500MT
FY22 INVESTOR PRESENTATION
EQUITY RAISING
23
04
FY22 INVESTOR PRESENTATION
STRENGTHENING BALANCE SHEET AND MITIGATING ONGOING
CHALLENGES
24
Overview of actions
being taken
•NZ King Salmon is taking pre-emptive action to ensure it remains well capitalised during the current period of uncertainty with sufficient
liquidity to maintain flexibility as earnings return:
−NZ King Salmon is today announcing an underwritten NZ$60.1 million equity raise
−Banking facility provider, BNZ, has provided covenant waivers until and excluding 30 April 2023, subject to successful
completion of the equity raise
Strengthening
balance sheet and
mitigating ongoing
challenges
•NZ King Salmon is today launching an equity raising comprising an underwritten NZ$60.1 million pro-rata rights offer
•The proceeds of the equity raising will be used to deleverage the balance sheet and provide liquidity and funding for medium term
operating requirements. Refer to the following page for details on planned uses of funding and the NZ King Salmon’s pro forma
capitalisation
•Post the equity raising, NZ King Salmon will be in a net cash position and have total liquidity of NZ$13.2 million, providingNZKing
Salmon with significant flexibility as it transitions its farming model to provide for a more predictable earnings profile
FY22 INVESTOR PRESENTATION
SOURCES & USES AND PRO FORMA GEARING
25
Sources of funds(NZ$m)
Rights offer$60.1m
Total$60.1m
Uses of funds(NZ$m)
Repayment of debt (31 January 2022)$42.8m
Transaction costs$2.7m
Excess cash / liquidity$14.6m
Total$60.1m
Sources and uses of funds
Pro forma gearing
Current as at 31 January 2022Pro forma as at 31 January 2022
Pro forma capitalisation (NZ$m)LimitDrawnCovenant
1
LimitDrawn
Covenant
(x EBITDA)
BNZ Facility A$20m$20m4.0xNilNiln/a
BNZ Facility B$20m$20m4.0xNilNiln/a
BNZ Facility C$20m$2.8m4.0xNilNiln/a
BNZ – Business Finance Guarantee Scheme$4.3m$4.3m4.0x$4.3m$4.3m2.5x
BNZ New Facility--$6.5m$0.0m2.5x
Less: Cash on balance sheet-($2.9m)
-
($17.5m)
Net debt / (cash)
$64.3m$44.2m$10.75m($13.2m)
Following the paydown of existing debt tranches, BNZ have agreed to provide NZKS with a 2-year $6.5m revolving facility for the purposes of funding general corporate
expenditures. All financial covenants (leverage ratio and interest cover ratio) are waived for one year, and thereafter a NetDebt / EBITDA covenant of 2.5x(previously 3.0x), and an
EBITDA / Net Interest Expense covenant of 3.0x (previously EBIT interest cover ratio of 2.5x), will apply from and including 30 April 2023
FY22 INVESTOR PRESENTATION
EQUITY RAISE DETAILS
26
Offer size and structure
•NZ$60.1 million equity raising (Equity Raising) in the form of a 2.85 for 1 rights offer (Rights Offer)
•Approximately 401 million new ordinary shares (New Shares) will be issued under the Equity Raising
•Under the Offer, Eligible Shareholders may apply for 2.85 New Shares for every 1 share held on the record date at the NZ$ price or A$ price (the Rights)
Offer Price
•New Shares will be issued at the fixed price of NZ$0.15 per new share representing:
–55.1% discount to TERP of NZ$0.33
–82.6% discount to last closing price of NZ$0.86 as at 12 April 2022
•The Australian dollar offer for eligible Australian shareholders will be set using the prevailing AUD/NZD exchange rate on 26April 2022
Rights Offer
•Eligible Shareholders in Australia, New Zealand and institutional investors in select other jurisdictions will be invited to take up their rights in a Rights Offer and
can access the offer materials at www.shareoffer.co.nz/nzks
•Eligible Retail Shareholders who take up their rights in full have the opportunity to apply for additional New Shares which are attributable to any Unexercised
Rights, allowing them to subscribe for additional New Shares up to a maximum of 100% of their Rights
•The rights will not be quoted on NZX or ASX and there will be no shortfall bookbuild for those rights not taken up by eligible shareholders or the rights of
ineligible shareholders – eligible shareholders may be able to renounce their rights by transferring them off-market
Ranking•All New Shares issued under the Equity Raising will rank equally with existing ordinary shares on issue
Underwriting
•Oregon Group has pre-committed to take up $23.8m of its rights (representing 100% of its entitlement), and the directors of NZ King Salmon have pre-
committed to subscribe for a further $2.5m of shares, with the balance of the Rights Offer fully underwritten by Jarden PartnersLimited on customary terms for
an offer of this nature
Board and shareholder
support
•As noted above, Oregon Group and the directors of NZ King Salmon have pre-committed to subscribe for $26.3m shares in aggregate and the board of NZ King
Salmon unanimously supports the Equity Raising
FY22 INVESTOR PRESENTATION
TIMETABLE
27
Offer timetable
Announcement of Equity RaisingWednesday, 13 April 2022
Record date for the Rights Offer7.00pm NZST Tuesday, 26 April 2022
Rights Offer opensWednesday, 27 April 2022
Offer Document despatched to Eligible ShareholdersWednesday, 27 April 2022
Rights Offer closes5.00pm NZST Friday, 6 May 2022
Announce results of Rights OfferWednesday, 11 May 2022
Settlement, allotment and commencement of trading of new shares on NZXThursday, 12 May 2022
Commencement of trading of new shares on ASXFriday, 13 May 2022
FY22 INVESTOR PRESENTATION
05
28
1H22 HALF YEAR RESULTS
KEY RISKS
FY22 INVESTOR PRESENTATION
KEY RISKS
29
This section outlines the key risks that NZKS has identified which are relevant to investors in the equity raise. These risksmay affect the future operating and
financial performance of NZKS and the NZKS share price. Like any investment, there are risks associated with an investment inNZKS's shares. Please note that
this section does not (and does not purport to) set out all of the risks related to an investment in NZKS shares, the future operating or financial performance of
NZKS, the equity raise or general market or industry risks. Some risks may be unknown and other risks, currently believed to be immaterial, could turn out to be
material.
In light of the Covid pandemic and heightened geopolitical tensions, extra caution should also be taken when assessing the risksassociated with investment.
These ever-evolving situations continue to pose challenges for global financial markets and the economy as a whole. Capital markets continue to see equity
securities suffer from spikes in volatility and significant price decline.
Before deciding whether to invest in NZKS shares, you must make your own assessment of the risks associated with an investment in NZKS and consider
whether such an investment is suitable for you, having regard to publicly available information (including this presentation), your personal circumstances and
following consultation with a financial advisor or other professional advisor.
FY22 INVESTOR PRESENTATION
Fish mortality
•Fish mortality, as evidenced historically and forecast into FY23, has a significant impact on the profitability and financialstability of NZKS as only the fish that survive
to the point of harvest are able to be sold. Every year, a number of fish will die prior to harvest due to a range of factors. NZKS is forecasting a Mortality Biomass
Percentageof approximately 38.8%
1
in FY23. If mortality is worse than forecast in FY23, it could have a material adverse impact on NZKS’s profitability and financial
position. The cause of fish mortality is multi-factorial with the dominant correlation currently being with prolonged elevated water temperature. Other factors include
opportunistic microorganism/diseases, feed related issues, predators, reduced oxygen levels, biofouling and other stressors, individually or in combination. Whilst the
interconnectivity of these factors are difficult to predict with any certainty, rising water temperatures are increasingly becoming a major concern given the impact of
climate change.
•While the impact of climate change is near impossible to control, NZKS currently manages the risk of fish mortality by stocking warmer sites at low density, actively
monitoring fish health and maintaining appropriate net cleaning regimes.Immunisation of young salmon against specific pathogensat the freshwater stage has also
been in place for 3 years to build resilience prior to seawater entry.In order to further mitigate the ongoing temperature risk, NZKS is planning to fallow some of its
warmer, low flow farms (Forsyth Bay and Waihinau Bay), and only use Ruakaka and Otanerau outside of the summer months. Whilstthis will reduce the volume of
fish that NZKS is able to harvest and sell, it is expected that it will also reduce fish mortality and volatility in harvest volumes.
•NZKS's ability to manage salmon mortality risk is impeded because, unlike Atlantic salmon, King salmon are not extensively farmed globally - NZKS is the world’s
largest producer and therefore the basic health management knowledge base is less than it is for other species. As a result, NZKS is often required to develop and
implement its own solutions and strategies without the benefit of leveraging existing experiences, as may be the case with Atlantic salmon.
Access to
waterspace
•Changes to local and central government policy surrounding aquaculture present a material concern for NZKS, with the possibilitythat policy changes, however well
intentioned, may present an additional compliance burden and increase NZKS’s costs. Any substantial changes could also have asignificant impact on NZKS’s future
growth initiatives, including Blue Endeavour. This is currently considered a low risk by NZKS given the New Zealand Government’srecent issue of positive statements
around the growth of the aquaculture industry in New Zealand.
•The resource consents for four of NZKS’s operational farms (Ruakaka, Otanerau, Waihinau Bay and Forsyth Bay) will expire and require renewal in FY24. While
NZKS is planning to fallow its farms at Waihinau Bay and Forsyth Bay (temporarily – these would be utilised under the Blue Endeavour project), if the consents are
not renewed for Ruakaka and Otanerau, NZKS’s annual harvest volume will reduce by approximately 750 -1000 tonnes, which would have an adverse impact on
NZKS’s profitability. Refer to the appendix for a list of existing sea farm resource consents and expiry dates.
•The Marlborough District Council re-interpreted a consent relevant to a number of NZKS’s farms in 2019 and this has resulted in a series of non-compliance notices,
small fines and warnings in respect of those farms. NZKS is currently seeking a determination by the Environment Court relating to these non-compliances, but if the
outcome is not in NZKS’s favour this could result in the Ngamahau, Kopaua, and Waitata farms being intermittently non-compliant.Should this occur the maximum
feed discharge at Waitata will likely need to be reduced, however, NZKS does not expect this to have a material impact on forecast harvests.
RISKS
30
1 Mortality Biomass calculated asmortality biomass /gross growth
FY22 INVESTOR PRESENTATION
Market access
•NZKS products are sold to a number of export markets and there is a risk that regulatory change in specific markets will impair NZKS’s access to these markets,
significantly impacting sales levels and profitability. This may be a closure of the market, or introduction of new rules that impact NZKS products, and may affect the
time spent at entry ports for clearance. NZKS's international customers expect continuity of supply, which requires consistent access to key markets in a timely
manner without extensive compliance obligations. Additionally, as NZKS products are highly perishable, they also require swift clearance at the port, and extensive or
changing compliance requirements may hinder clearance timeframes.
•NZKS’s food safety team works closely with relevant government departments to ensure compliance prior to its products leavingNew Zealand, which is expected to
limit the likelihood of access to relevant markets being restricted. The food safety team alsoworks with industry bodies and government departments to forward plan
for any longer-term compliance issues that may arise in advance ofactivity in-market.
•In the past, NZKS has moved products between markets in response to changes in pricing demand. Similarly, given the global demand for King salmon, NZKS
expects that if one market is closed or subject to more onerous restrictions, NZKS will be able to find alternative channels to sell its products, however the margins
may be lower in the short term.
Feed costs and
quality
•Feed is one of NZKS’s biggest costs, equivalent to approximately one quarter of its revenue. Sourcing good quality feed is crucial for NZKS as it is one of the key
factors in fish performance and fish health.Therefore, an increase in the cost of feed or a decrease in the quality of feed will have a significant impact on NZKS’s
operations and profitability. Further, given the rarity of King salmon globally, research and development to design feed specifically for King salmon is not extensively
undertaken by global feed companies and this can create risks when changing dietary components, including the risk of increased fish mortality.In addition, the mix of
feed inputs and the annual feed conversion ratio are the two main components that impact NZKS's carbon footprint, and ingredientchoices also affect consumer and
retailer perceptions.
•Whilst NZKS considers it unlikely that feed costs will increase beyond a level it can pass on to customers, NZKS endeavours to reduce this risk by sourcing feed from
multiple suppliers, reducing its dependence on any one supplier. To further understand what feed generates the best results, NZKS benchmarks to measure fish
performance and the cost of various diets to allow it to better respond to feed cost and quality opportunities and issues. The supply of feed has been disrupted by
Covid as the feed cannot be sourced from New Zealand. This current situation heightens the risk that NZKS incurs additional costs to secure the necessary feed.
Currently NZKS has a commercial supply agreement with Skretting Australia, this is not for a minimum volume rather a minimum percentage of NZKS supply and
therefore ensures that NZKS is not at risk ofbreaching this contract with a reduced feed volume.
RISKS
31
FY22 INVESTOR PRESENTATION
Food safety
•NZKS produces ready-to-eat products which are consumed in a raw state, such as cold smoked salmon, sushi and sashimi. There is arisk NZKS products could
contain harmful bacteria or other organisms, such as listeria, which is unique in that it is a food borne pathogen which can grow below 4°C. If NZKS’s products contain
harmful bacteria or other organisms, consumption could result inillness, or, if detected, could result in a product recall. Newlaws could also be passed which impose
further food safety requirements on NZKS, which may require significant capital expenditure to comply with, reducing NZKS’s operational performance.
•NZKS considers the likelihood ofa food safety issue to be low, given the rigorous steps NZKS takes to minimise the risk of contamination and the regular testing of its
fish for any food safety issues. Food safety incidents could result in reputational damage or regulatory consequences (includingfines, penalties, loss of licences or
temporary shutdowns of facilities). The potential magnitude of any food safety incident could be severe, which is why NZKS takesfood hygiene very seriously.
New initiatives
•NZKS is currently undertaking a number of transformational cost reduction initiatives as outlined on slide 20. To the extent that these cost savings are not fully
achieved, there may be a material adverse effect on the FY23 guidance and FY24 scenario presented.
•NZKS is proposing to undertake a number of new aquaculture initiatives to return to profitability and position it for operational longevity in light of rising water
temperatures. While NZKS believes it has appropriate expertise and resources in place to enable it to successfully complete these initiatives, there remain unforeseen
risks and other market risks, common to any shift in strategic direction. This could mean that the anticipated benefits of the new business plan are delayed or not
realised. If NZKS is less successful in achieving these initiatives than anticipated, it may have a material adverse effect on its financial performance and position.
Capital sufficiency
and banking
support
•NZKS has undertaken a capital sufficiency modelling exercise to assist in determining the optimal equity raise size. Based onits modelling, NZKS expects to have
sufficient liquidity to meet capital requirements under what NZKS considers to be realistic scenarios. The model is based on what NZKS considers to be a
conservative set of assumptions. However, there remains a risk that fish mortality is difficult to forecast and if it is worse than anticipated, negative impacts of the
Covid pandemic far exceed NZKS’s downside scenarios, or cost out assumptions cannot be met. In the event of this scenario materi alising, NZKS may have
insufficient liquidity to meet capital and operational requirements. NZKS would reassess balance sheet strength and may seek to access additional equity or debt
funding which could have adverse effects on NZKS's operating performance and earnings.
•NZKS is working with its existing bank, BNZ, and has agreed relaxation of certain covenants until, and excluding, 30 April 2023.If the equity raise is not successfully
completed by 31 May 2022, for example because the underwriting agreement is terminated prior to the allotment under the offer, an event of default would occur. If
there is an event of default, NZKS would be unlikely to retain the support of its bank unless it was able to repay or refinance its debt through implementing an
alternative option, such as the sale of assets, or securing alternative equity or debt funding, each of which would be expected to be materially less favourable to
NZKS, if available at all. Any such alternative options would therefore likely have a material adverse effect on NZKS’s financial position and performance.
RISKS
32
FY22 INVESTOR PRESENTATION
Social license
•In addition to its shareholders, NZKS has a number of external stakeholders, including iwi, as its business operates in public water space. It is crucial that NZKS
maintains positive relationships with its external stakeholders to supportpositive outcomes for future consent applications to continue to operate its farms. Failure to
renew some or all of these consents will have a material impact on NZKS’s operations, resulting in a decline in harvest and therefore cash flow.
•To minimise this risk, NZKS engages in a range of stakeholder engagement initiatives. These include, but are not limited to, environmental management and active
stakeholder management (i.e. with Aquaculture New Zealand, the local council, Iwi),a social and digital communicationsstrategy across all stakeholder groups,
government relations,community sponsorship and eventprogrammes, sustainabilityprogrammeswith team members and community.
•The Best Aquaculture Practices (BAP) certification is the main third-party accreditation selected to demonstrate independent assessment of the business’s operational
practices based on third party standards.NZKS ensures its compliance with BAPby engaging in regular external audits across operations, people & culture and key
suppliers to achieve four stars, the highest rating. NZKS is also a member of the Global Salmon Initiative (GSI), contributing to the members' annual Sustainability
Report.
•NZKS has recently published an Environmental Product Declaration (EPD) to externally verify the carbon footprint measurement andother environmental criteria
related to the company's egg to plate production of King salmon.
Inflationary
pressures
•NZKS expects risks associated with the macro-inflationary impacts in New Zealand will result in increasing costs for raw materials and labour costs, amongst other
things. Inflationary pressures will also result in the price of NZKS products increasing, however, it is unclear the overall impact this will have on NZKS’s profit margins
and whether NZKS will be able to fully pass on the increased raw material and labour costs to consumers.
RISKS
33
FY22 INVESTOR PRESENTATION
34
APPENDICES
06
FY22 INVESTOR PRESENTATION
EXISTING SEA FARM RESOURCE CONSENTS AND EXPIRY
FarmsRegionExpiry date
RuakakaQueen Charlotte2024
OtanerauQueen Charlotte2024
Forsyth BayPelorus2024
WaihinauPelorus2024
Crail Bay x 2Pelorus2024
Clay PointTory Channel2036
Te PanguTory Channel2036
WaitataPelorus2049
NgamahauTory Channel2049
KopauaPelorus2049
35
•Five licenses are due for expiry or renewal at the end of 2024, all of which represent
warmer, low flow licenses at lower producing sites
•Crail Bay has not been farmed for around 10 years and is currently being transitioned for
a seaweed trial
•Forsyth and Waihinauare scheduled to be fallowed for the next few years but would form
part of the Blue Endeavour model as nursery or harvestlocations
•Ruakaka and Otanerau form part of the updated production plan, receiving fish post
summer viatow operations from the Tory Channel farms
•By 2024 there will be new planning provisions inplace (at least in draft form)
–Thepanel hearing submissions on current proposals has signalled that it is open to
inviting iwi, the Governmentand the wider community to work on new provisions to
enable alignment with the NZ Aquaculture Strategy.NZ King Salmon is involved in
these discussions
•Renewingthe 2024 farms will require applications to be lodged, however it is logical to
make progress on the planning provisions before lodging these applications
•Applications would therefore be lodged in 2024 with preparatory work, including
consultation with iwi, being undertaken beforehand
•Opportunities may arise for consenting via alternative processesin meantime
•Farms will be able to operate on their current consents until all applications and appeals
have been resolved
FY22 INVESTOR PRESENTATION
APPENDIX – FY22 RECONCILIATION BETWEEN GAAP RESULTS AND
PRO FORMA FINANCIALS
36
FY22
NZD 000s
Statutory
Financial
Statements
Fair Value
Adjustments
IFRS 16 Lease
Adjustments
FX Close-outs
Pro Forma
Operating
Financial
Information
Revenue
174,530 174,530
Cost of goods
sold
(177,774)52,050 (1,968)(127,692)
Fair value gain / (loss) on biological transformation
41,261 (41,261)-
Freight costs to market
(25,275)(25,275)
Gross Profit
12,743 10,788 (1,968)21,563
Other operating income
402 13,471 13,873
Overheads
Sales, marketing and advertising
(13,471)(13,471)
Distribution overheads
(5,204)(5,204)
Corporate expenses
(8,649)(8,649)
Other expenses
(1,414)(1,414)
EBITDA
(15,593)10,788 (221)13,471 6,698
Depreciation and amortisation
(10,125)1,747 (8,378)
Impairment(59,255)(59,255)
EBIT
(84,973)(5)(221)13,471 (60,935)
Finance income
17 17
Finance costs
(2,636)249 (2,387)
Net finance costs
(2,619)-249 (2,370)
Profit / (loss) before Tax
(87,593)10,78829 13,471 (63,305)
Income tax (expense) / credit
14,390 (3,021)(8)(3,772)7,590
Net Profit / (loss) for the Year
(73,202)7,76821 9,699 (55,715)
FY22 INVESTOR PRESENTATION
APPENDIX – FY21 RECONCILIATION BETWEEN GAAP RESULTS AND
PRO FORMA FINANCIALS
37
FY21 (7 months)
NZD 000s
Statutory
Financial
Statements
Fair Value
Adjustments
IFRS 16 Lease
Adjustments
FX Close-outs
Pro Forma
Operating
Financial
Information
Revenue
95,239 95,239
Cost of goods
sold
(98,820)36,562 (984)(63,243)
Fair value gain / (loss) on biological transformation
29,350 (29,350)-
Freight costs to market
(11,616)(11,616)
Gross Profit
14,153 7,212 (984)20,381
Other operating income
541 5,744 6,285
Overheads
Sales, marketing and advertising
(7,702)(7,702)
Distribution overheads
(3,132)(3,132)
Corporate expenses
(4,979)(4,979)
Other expenses
(889)(889)
EBITDA
(2,009)7,212 (984)5,744 9,963
Depreciation and amortisation
(5,969)981 (4,988)
EBIT
(7,978)7,212 (3)5,744 4,975
Finance income
5 5
Finance costs
(1,353)140 (1,213)
Net finance costs
(1,349)-140 (1,208)
Profit / (loss) before Tax
(9,326)7,212 137 5,744 3,766
Income tax (expense) / credit
2,247 (2,019)(38)(1,608)(1,419)
Net Profit / (loss) for the Year
(7,079)5,193 98 4,136 2,347
FY22 INVESTOR PRESENTATION
UNDERSTANDING OUR GAAP RESULTS
The impact of NZ IAS-41 Agriculture, NZ IAS-2 Inventory and NZ IFRS-16 Leases
Our GAAP results are impacted by Fair Value gains or losses arising from the application of NZ IAS-41 Agriculture,
NZ IAS-2 Inventory and the classification of leases under NZ IFRS-16. The impact of these standards are explained below:
Fair Value under NZ IAS-41 Agriculture andNZ IAS-2 Inventory
When we record a change in biomass at sea, or where the expected future profit we realise on fish that we sell changes, thesestandards require us to quantify and recognise the
gain or loss in the current period. This applies to both biomass at sea and inventories of finished products.
Our Statement of Financial Position shows biological assets at their fair value, with FY22 seeing a reduction in fair value due to reduction in margin from cost increases and mortality. Pro Forma
Operating Financial Performance removes gains / losses associated with the application of these standards. The company will present Pro Forma results for future reporting periods on this basis.
NZ IFRS-16Leases
Under NZ IFRS-16 a lessee will no longer make a distinction between finance leases and operating leases; all (material) leases will be treatedasfinance leases.
In the statement of financial position we are therefore required to recognize the asset (or right to use the asset) and the liability for the lease, while in the statement of profit and loss we recognize
the interest cost and the depreciation of the leased asset instead of the operating lease expenses. The application of this standard increases EBITDA, assets and liabilities, however this impact is
reversed in our Pro Forma results.
38
FY22 INVESTOR PRESENTATION
APPENDIX – GLOSSARY OF TERMS
1H22Financial results for the 6 months from 1 February 2021 to 31 July 2021
2H22Financial results for the 6 months from 1 August 2021 to 31 January 2022
FY22Financial results for the 12 months from 1 February 2021 to 31 January 2022
FY21Financial results for the 7 months from 1 July 2020 to 31 January 2021
EBITDAEarnings before interest, tax, depreciation and amortisation
FCRFeed Conversion Ratio – the amount of feed (in kilograms) required to grow 1 kilogram of fish weight
G&GGilled and gutted. Note that all volumetric information presented is on a gilled and gutted basis unless otherwise stated
GAAPGenerally Accepted Accounting Practice
Mortality / Mortality RateThe percentage mortality of salmon in seawater, calculatedas the biomass of salmon mortalities in kg divided by the growth of salmon in kg
MTMetric tonnes
NPATNet profit after tax, also reported as net profit for the period in our published financial results
NZKSNew Zealand King Salmon
Pro Forma Operating EBITDA
Pro Forma Operating EBITDA refers to earnings before interest, tax, depreciation, amortisation after allowing for pro forma adjustments as described in the
Appendix to thisdocument. Pro Forma Operating EBITDA is a non-GAAP profit measure
Upwelling SystemA system that allows dense cooler water to be moved towards the ocean surface, displacing the warmer water and increasing water flow.
39
FY22 INVESTOR PRESENTATION
FOREIGN SELLING RESTRICTIONS
This document does not constitute an offer of rights ("Rights") or new ordinary shares ("NewShares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document
may not be distributed to any person, and the Rights andNew Shares may not be offered or sold, in any country outside New Zealand and Australiaexcept to the extent permitted below.
Hong Kong
WARNING: This document has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has
it been authorised by the Securities and Futures Commission in Hong Kong pursuant to the Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong (the "SFO").No action has
been taken in Hong Kong to authorise or register this document or to permit the distribution of this document or any documents issued in connection with it. Accordingly, the Rights andthe New
Shares have not been and will not be offered or sold in Hong Kong other than to "professional investors" (as defined in the SFO and any rules made under that ordinance).
No advertisement, invitation or document relating to the Rightsand the New Shares has been or will be issued, or has been or will be in the possession of any person for the purpose of issue,in
Hong Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of HongKong (except if permitted to do so under the securities laws of Hong
Kong) other than with respect to the Rightsand the New Shares that are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors (as defined in the
SFO and any rules made under that ordinance). No person allotted Rightsor New Shares may sell, or offer to sell, such securities in circumstances that amount to an offer to the public in Hong
Kong within six months following the date of issue of such securities.
The contents of this document have not been reviewed by any Hong Kong regulatory authority. You are advised to exercise caution in relation to the offer. If you are in doubt about any of the
contents of this document, you should obtain independent professional advice.
Singapore
This document and any other materials relating to the Rights and the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authorityof
Singapore.Accordingly, this document and any other document or materials in connection with the offer or sale, or invitation for subscript ion or purchase, of Rightsand New Shares, may not be
issued, circulated or distributed, nor may theRights and New Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to
persons in Singapore except pursuant to and in accordance with exemptions in Subdivision (4) of Division 1, Part XIII of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), or
as otherwise pursuant to, and in accordance with the conditions of any other applicable provisions of the SFA.
This document has been given to you on the basis that you are (i) an existing holder of the Company’s shares, (ii) an "instituti onal investor" (as defined in the SFA) or (iii) an "accredited investor"
(as defined in the SFA). In the event that you are not an investor falling within any of the categories set out above, pleasereturn this document immediately. You may not forward or circulate this
document to any other person in Singapore.
Any offer is not made to you with a view to the Rights or the New Shares being subsequently offered for sale to any other party. There are on-sale restrictions in Singapore that may be applicable
to investors who acquire Rightsor New Shares. As such, investors are advised to acquaint themselves with the SFA provisions relating to resale restrictions in Singapore and comply accordingly.
40
---
1
13 April 2022
NZX Limited
Level 1, NZX Centre
11 Cable Street
Wellington 6011
New Zealand
ASX Limited
20 Bridge Street
Sydney NSW 2000
Australia
NEW ZEALAND KING SALMON INVESTMENTS LIMITED (NZX: NZK, ASX: NZK): NOTICE PURSUANT
TO CLAUSE 20(1)(a) OF SCHEDULE 8 TO THE FINANCIAL MARKETS CONDUCT REGULATIONS 2014
New Zealand King Salmon Investments Limited (NZKS) has today announced that it will undertake a
rights offer of new fully paid ordinary shares of the same class as already quoted on the NZX Main
Board of NZX Limited and the Australian Securities Exchange operated by ASX Limited (the Offer).
Pursuant to clause 19 of Schedule 1 of the Financial Markets Conduct Act 2013 (FMCA), clause 20 of
Schedule 8 of the Financial Markets Conduct Regulations 2014 (FMC Regulations) and the Australian
Corporations Act 2001 (Cth) (Corporations Act), NZKS states that:
1 NZKS is making the Offer in reliance upon the exclusion in clause 19 of Schedule 1 of the FMCA
and is giving this notice under clause 20(1)(a) of Schedule 8 of the FMC Regulations.
2 NZKS will offer the ordinary shares for issue and issue the ordinary shares without disclosure under
Part 6D.2 of the Corporations Act.
3 NZKS is giving this notice under paragraphs 708A(12J) (as notionally inserted by ASIC Instrument
22-0265) and 708AA(2)(f) of the Corporations Act.
4 As at the date of this notice, NZKS is in compliance:
4.1 with the continuous disclosure obligations that apply to it in relation to NZKS’s quoted
ordinary shares and its obligations under rule 1.15.2 of the ASX Listing Rules; and
4.2 with its "financial reporting obligations" within the meaning set out in clause 20(5) of
Schedule 8 of the FMC Regulations.
5 As at the date of this notice, there is no information that is "excluded information" as defined in
clause 20(5) of Schedule 8 to the FMC Regulations in respect of NZKS.
The Offer is not expected to have any effect on the control of NZKS within the meaning set out in
clause 48 of Schedule 1 of the FMCA.
ENDS
Authorised by the Board of New Zealand King Salmon Investments Limited
Contacts
Ben Rodgers, CFO, New Zealand King Salmon Investments Limited
Grant Rosewarne, Managing Director and CEO
---
Corporate Action Notice
Page 1 of 2
Section 1: issuer information (mandatory)
Name of issuer New Zealand King Salmon Investments Limited
Class of Financial Product Ordinary shares
NZX ticker code NZK
ISIN (If unknown, check on NZX
website)
NZNZKE0003S0
Name of Registry Computershare Investor Services Limited
Type of corporate action
(Please mark with an X in the relevant
box/es)
Share purchase
plan
Renounceable
Rights issue
X
Capital
reconstruction
Non
Renounceable
Rights issue
Call Bonus issue
Record date 26/04/2022 (7.00pm NZST)
Ex-Date (one business day before the
Record Date)
22/04/2022
Currency NZD
Section 2: Rights issue (delete if not applicable)
Number of Rights to be issued 400,817,453 rights (subject to rounding)
Number of Financial Products to be
issued under the Rights issue
Up to 400,817,453 ordinary shares (subject to
rounding)
ISIN of Rights Security (if applicable) N/A
Minimum entitlement N/A
Oversubscription facility Y – Eligible Retail Shareholders who take up their
Rights in full have the opportunity to apply for
additional New Shares which are attributable to any
Unexercised Rights, allowing them to subscribe for
additional New Shares up to a maximum of 100% of
their Rights.
Entitlement ratio (for example 1 for 2) New 2.85 Existing 1
Treatment of fractions Rounded down to the nearest number
Subscription price $0.15
Letters of entitlement mailed 27/04/2022
Offer open 27/04/2022
Offer close 06/05/2022
Quotation Date (if applicable) N/A
2 of 2
Allotment Date Market open on:
12/05/2022
Section 7: Authority for this announcement (mandatory)
Name of person authorised to make this
announcement
Ben Rodgers, Chief Financial Officer
Contact person for this announcement Ben Rodgers
Contact phone number +64 27 527 5636
Contact email address Ben.Rodgers@kingsalmon.co.nz
Date of release through MAP 13/04/2022
---
NZK - NEW ZEALAND KING SALMON ANNOUNCES FY22 RESULT AND $60.1M RIGHTS OFFER
New Zealand King Salmon Investments Limited (NZX & ASX: NZK) reports its financial performance
for the 12 months ended 31 January 2022 (FY22). The past financial year has been challenging for
the company, due to issues with the wider environment, including increased mortalities and the
ongoing Covid-19 pandemic.
Key points include:
Net loss after tax of $73m, following a difficult year including an increase in sea farm
mortalities, continued freight headwinds and impairments to plant, equipment and
intangibles.
Sales volumes increased from 6,380mt FY21 (12 months) to 7,672mt FY22 (an increase of
20.3%).
Revenues increased from $156.1m FY21 (12 months) to $174.5m FY22 (an increase of
11.8%).
Mortality event in January 2022 increased mortality cost by $4.7m (29%) from $16.1m in
FY21 (12 months) to $20.8m.
Pro-forma EBITDA for FY22 was $6.7m, a decrease of $8.7m (or 56.6%) on FY21 (12 months)
of $15.4m. This result includes $13.5m of forex close-outs included in other income.
Finished goods inventories continue to be managed down following a build-up in inventory
principally due to Covid disruptions across foodservice markets. The majority of frozen
whole fish stock was cleared in FY22 at discounted prices.
Freight costs on a per kg basis increased during FY22 due to ongoing disruptions to the
global logistics environment.
Following an annual impairment test $59m of impairments have been recognised across
Goodwill ($39m) and plant, equipment, and intangibles ($20m)
NZ King Salmon has today announced an underwritten NZ$60.1 million 2.85 for 1 pro rata
renounceable rights offer at an issue price of NZ$0.15 per share. The proceeds of the rights
offer will be used to deleverage the balance sheet and provide liquidity for medium term
operating requirements.
Chairman John Ryder said: “The issues facing the company over the last year have caused us to
reassess our strategies to create a more secure platform for future expansion. The company is
undergoing a capital raise to strengthen its balance sheet and we are initiating structural changes to
our farming model to combat rising fish mortalities. These initiatives should put us on a better
footing and we remain positive about the future.”
New Zealand King Salmon CEO Grant Rosewarne acknowledged it had been a tough period.
“Unusually early elevated seawater temperatures were a major factor behind high mortality rates,
with the marine heatwave during summer associated with a La Niña event. It resulted in a $20.8m
negative impact on profitability, from high fish mortalities.
“Ongoing supply chain disruptions, soaring freight charges and mortalities continue to impact our
business. Our hospitality customers also continue to be affected by lockdowns and social
disruptions,” he said.
The Board and Management are deeply disappointed with the results for the year and the significant
mortalities experienced. We are very aware of the effect on the company and all stakeholders
whose support is valued in achieving our growth and success. We remain convinced that we have
the product, the distribution, the brands and demand to be very successful and to reward that
support. Our efforts to identify and counter the factors that aggravate the climate effect on our King
salmon have been intensified. Concurrently we have reorganised our grow-out in the Sounds as we
seek to regain a reliable base.
The company has traditionally farmed salmon all year round in the Pelorus and Queen Charlotte
Sounds, as well as Tory Channel, in the Marlborough Sounds. The bulk of mortalities have occurred
when it has farmed through the summer in the Pelorus or Queen Charlotte Sounds.
“To combat the continuing effects of climate change we plan to fallow three farms in the Pelorus
Sound. This will result in reduced harvest volumes but lower mortality costs, thereby giving us a
more stable, predictable operation” Mr Rosewarne said.
“These measures will result in a forecast decline in production in FY23 and FY24 to 5,700 and 6,500
tonnes respectively, with a 200-tonne predicted increase in 2025. This reduction in output will be
partially offset by a rigorous review of overheads and a downsizing of the company.”
“The hearing for our open ocean Blue Endeavour application, 7kms north of Cape Lambert in the
Cook Strait, is due to be completed at the end of April and we are hopeful for a decision mid-year.
This project is expected to have multiple benefits including increase in scale of operations, reduction
in operating costs and improvements in fish health.”
If Blue Endeavour is approved, the three fallowed farms in the Pelorus Sound will be used as nursery
sites for 9 months of the year, avoiding the summer months with fish being transferred to Blue
Endeavour at ~1.5kgs for full grow out to ~4.2kgs average weight. This represents an efficient use of
assets, capital, and resources.
The application is aligned with the Government’s Aquaculture Strategy which was launched in late
2019 and now has an accelerated objective of the industry achieving $3 billion revenue by 2030.
“It was heartening to see the Government acknowledge some of the reasons for our current
difficulties when Minister David Parker said our situation was a ‘sharp reminder that resource
management system reforms are needed to deliver better management for aquaculture’,” Mr
Rosewarne said.
“Our company remains the world’s largest producer of the premier King salmon species with brands
that attract premium prices across the globe, and the Blue Endeavour opportunity exists for us to
sustainably increase our scale and value proposition.”
Pro Rata Renounceable Rights Offer
Alongside our FY22 results, NZ King Salmon is also launching an underwritten NZ$60.1m, 2.85 for 1
pro rata renounceable rights offer at an issue price of NZ$0.15 per share (Rights Offer). The
proceeds of the Rights Offer will be used to deleverage NZ King Salmon’s balance sheet and provide
liquidity for medium term operating requirements.
Post the Rights Offer, the company will have total liquidity of NZ$13.2m, with no debt on the
balance sheet, providing NZ King Salmon with significant flexibility as it transitions its farming model
and navigates the ongoing impacts of the Covid-19 pandemic.
The Rights Offer price represents a:
82.6% discount to last close on Tuesday, 12 April 2022 of NZ$0.86; and
55.1% discount to TERP (the theoretical ex-rights price) of NZ$0.33
Individual entitlement letters will be sent to eligible shareholders on the opening of the Rights Offer
on 27 April 2022. Applications will only be accepted online at www.shareoffer.co.nz/nzks. The Rights
Offer will close at 5:00pm (NZST) on 6 May 2022, unless extended. NZ King Salmon is also pleased to
offer Eligible Retail Shareholders who take up their rights in full the opportunity to apply for
additional New Shares attributable to any unexercised rights up to 100% of their entitlements.
Oregon Group has pre-committed to take up NZ$23.8m of its rights (representing 100% of its
entitlement), and the directors of NZ King Salmon have pre-committed to subscribe for a further
NZ$2.5m of shares, with the balance of the Rights Offer fully underwritten by Jarden Partners
Limited on customary terms for an offer of this nature.
Rights Offer Timetable
Event Date
Announcement of FY22 results and the equity raise Wednesday, 13 April 2022
Record date for the Rights Offer 7.00pm NZST on Tuesday, 26 April 2022
Rights Offer opens Wednesday, 27 April 2022
Offer Document despatched to Eligible Shareholders Wednesday, 27 April 2022
Rights Offer closes 5.00pm NZST on Friday, 6 May 2022
Announce results of the Rights Offer Wednesday, 11 May 2022
Settlement and allotment of new shares on NZX Thursday, 12 May 2022
Settlement and allotment of new shares on ASX Friday, 13 May 2022
For further information in respect of the Rights Offer, please refer to the investor presentation and
offer document that accompanies this NZX announcement.
NZK FY22 Full Year Results Conference Call
NZ King Salmon will host a conference call at 3.00pm NZT on 13 April 2022. Participants are
encouraged to pre-register for the call to avoid delays dialling in on the day.
PARTICIPANT DETAILS
Participants can register for the conference by navigating to https://s1.c-
conf.com/diamondpass/10020776-jdcaP2.html
After registering, participants will receive their dial in number, passcode and a unique access PIN.
This information will also be emailed as a calendar invitation.
ALTERNATIVE DIAL IN DETAILS:
If you are unable to register prior to the call, then at the time of the conference you can dial in via
the number below and provide the conference ID 10020776 to an operator. If you require a number
for a location not listed below, please get in touch.
New Zealand 0800 453 055
Auckland 09 929 1687
Christchurch 03 974 2632
Wellington 04 974 7738
Australia 1800 809 971
Sydney 02 9007 3187
Hong Kong 800 966 806
Singapore 800 101 2785
Ends
Contact
Grant Rosewarne, Managing Director and CEO, New Zealand King Salmon Investments Ltd,
grant.rosewarne@kingsalmon.co.nz
Ben Rodgers, CFO and Company Secretary, New Zealand King Salmon Investments Ltd,
ben.rodgers@kingsalmon.co.nz
About New Zealand King Salmon
New Zealand King Salmon is the world’s largest aquaculture producer of the premium King salmon
species. We operate under our four key brands: Ōra King, Regal, Southern Ocean, and Omega Plus, as
well as our New Zealand King Salmon label. We have been growing and selling King salmon to
consumers for more than 30 years.
More information can be found at www.kingsalmon.co.nz
This announcement has been prepared for publication in New Zealand and may not be released to
US wire services or distributed in the United States. This announcement does not constitute an offer
to sell, or a solicitation of an offer to buy, securities in the United States or any other jurisdiction.
Any securities described in this announcement have not been, and will not be, registered under the
US Securities Act of 1933 and may not be offered or sold in the United States except in transactions
exempt from, or not subject to, the registration of the US Securities Act and applicable US state
securities laws. Shares and rights under the Rights Offer will not be offered or sold to persons
resident in the United States.
---
NEW ZEALAND KING SALMON INVESTMENTS LIMITED AND
SUBSIDIARIES
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
CONTENTS
FOR THE YEAR ENDED 31 JANUARY 2022
Corporate Information
1
Consolidated statement of comprehensive income
2
Consolidated statement of financial position
3
Consolidated statement of changes in equity
4
Consolidated statement of cash flows
5
Notes to the consolidated financial statements
6
1Corporate information6
2Basis of preparation6
3Significant accounting policies8
4New standards adopted and standards issued not yet adopted13
5Impairment14
6Other income14
7Expenses14
8Finance income and costs14
9Income tax15
10Components of other comprehensive income16
11Earnings per share16
12Cash and cash equivalents16
13Trade and other receivables16
14Inventories16
15Biological assets17
16Property, plant and equipment18
17Intangibles18
18Right of use assets19
19Lease liabilities20
20Interest bearing loans and borrowings20
21Trade and other payables20
22Employee benefits21
23Commitments and contingencies21
24Risk management21
25Fair value of financial instruments23
26Capital management24
27Capital and reserves24
28Events after balance date25
29Related party disclosure25
30Auditor's remuneration25
31Reconciliation of net operating cash flow to profit/(loss)25
32Revenue from contracts with customers26
33Segment information26
Auditor's Report
NEW ZEALAND KING SALMON INVESTMENTS LIMITED AND SUBSIDIARIES
CORPORATE INFORMATION
BOARD OF DIRECTORSSOLICITORSNEW ZEALAND KING SALMON
INVESTMENTS LIMITED
John William Dudley RyderChapman TrippTicker: NZK
Independent Non-Executive ChairmanLevel 34, 15 Customs Street WestListed on the NZX Main Board and
Grantley Bruce RosewarneAucklandas a foreign Exempt Listing on the
Chief Executive Officer and Managing DirectorNew ZealandASX
Jack Lee PorusNZ Company number: 2161790
Non-Executive DirectorGascoigne Wicks
Paul James Steere79 High StreetRegistered Office
Independent Non-Executive DirectorBlenheim93 Beatty Street
Chiong Yong TiongNew ZealandAnnesbrook
Non-Executive DirectorNelson
Catriona MacleodDuncan CotterillNew Zealand
Independent Non-Executive Director197 Bridge Street
Carol ChenNelsonPostal Address
Non-Executive DirectorNew ZealandPO Box 1180 Nelson 7040
New Zealand
Audit and Finance Committee
Paul Steere (Chair)AUDITORSTelephone
John Ryder+64 3 548 5714
Jack Porus Ernst & Young (EY)
Level 4, 93 Cambridge TerraceWebsite
Nominations and Remuneration CommitteeChristchurch www.kingsalmon.co.nz
Paul Steere (Chair)New Zealand
Jack PorusInvestor Relations
investor@kingsalmon.co.nz
Health, Safety and Risk CommitteeSHARE REGISTRY
Catriona Macleod (Chair)Computershare Investor
Chiong Yong TiongServices LimitedFINANCIAL CALENDAR
Level 2, 152 Hurstmere Road31 July 2022:
Takapuna2023 half year end
BANKERSAuckland 0622September 2022:
New Zealand2023 half year results announcement
The Bank of New Zealand
Deloitte Centre+64 9 488 8777
Level 6, 80 Queen Street
Aucklandenquiry@computershare.co.nz
New Zealand
Computershare Investor
Services Pty Limited
Yarra Fall
452 Johnston Street
Abbotsford VIC 3001
Australia
+61 3 9415 4083
enquiry@computershare.co.nz
1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JANUARY 2022
20222021
12 Months7 Months
to 31 Januaryto 31 January
Note$000$000
Revenue from contracts with customers32174,53095,239
Cost of goods sold including fair value uplift at point of harvest14(177,774) (98,820)
Fair value gain on biological transformation1541,26129,350
Freight costs to market(25,275) (11,616)
Gross profit
12,74314,153
Other income6402541
Sales, marketing and advertising expenses(13,471) (7,702)
Distribution overheads(5,204) (3,132)
Corporate expenses7(8,649) (4,979)
Other expenses7(1,414) (889)
Loss before interest, tax, depreciation, amortisation and impairment
(15,593) (2,009)
Depreciation and amortisation expense16,17,18(10,125) (5,969)
Impairment5(59,255) -
Finance income8175
Finance expenses8(2,636) (1,353)
Loss before tax
(87,593) (9,326)
Income tax credit / (expense)914,3902,247
Net loss after tax(73,202) (7,079)
Other comprehensive income
Exchange differences on translation of foreign operations10214(677)
Movement on cash flow hedges10(11,765) 22,065
Income tax effect of movement on cash flow hedges103,294(6,178)
Net other comprehensive income / (loss)
(8,257) 15,210
Total comprehensive income / (loss)(81,459) 8,131
20222021
Earnings per share
12 Months7 Months
Basic earnings per share11(0.53)$ (0.05)$
Diluted earnings per share11(0.53)$ (0.05)$
Other comprehensive income that may be reclassified to profit or loss in subsequent periods:
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
2
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JANUARY 2022
20222021
31 January31 January
ASSETSNote$000$000
Current assets
Cash and cash equivalents122,9133,479
Trade and other receivables1319,81716,186
Taxation receivable294-
Inventories1434,63642,489
Biological assets1565,52969,588
Derivative financial assets251,3385,413
Total current assets
124,527137,155
Non-current assets
Property, plant and equipment1650,62060,716
Biological assets159,43218,600
Derivative financial assets253,11216,354
Intangible assets173,8939,126
Right-of use assets185,7446,810
Goodwill17- 39,255
Total non-current assets
72,801150,861
TOTAL ASSETS
197,328288,016
LIABILITIES
Current liabilities
Trade and other payables2116,43418,597
Employee benefits222,8312,857
Borrowings2049,6593,024
Lease liabilities191,5311,580
Other financial liabilities29233233
Derivative financial liabilities253,6281,646
Taxation payable3015,074
Total current liabilities
74,61733,011
Non-current liabilities
Employee benefits22430696
Borrowings20- 39,250
Lease liabilities194,4025,389
Deferred tax liabilities9- 16,923
Derivative financial liabilities256,650204
Total non-current liabilities
11,48262,462
TOTAL LIABILITIES
86,09995,473
NET ASSETS
111,229192,543
EQUITY
Share capital27122,606122,606
Reserves10,17518,286
Retained earnings /(deficit)(21,552) 51,651
TOTAL EQUITY
111,229192,543
Net tangible assets per share
Net tangible assets per share0.76$ 1.04$
For and on behalf of the Board, who authorised the issue of these financial statements on 13 April 2022
DirectorDirector
13 April 202213 April 2022
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
3
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JANUARY 2022
Share
Capital
Foreign
Currency
Translation
Reserve
Hedge
Reserve
Share
Based
Payment
Reserve
Retained
Earnings/
(Deficit)
Total
Equity
Note$000$000$000$000$000$000
Balance as at 01 February 2021
122,606(1,162) 18,47497451,651192,543
Loss for the year- - - - (73,202) (73,202)
Other comprehensive income/(loss)10- 214(8,471) - - (8,257)
Total comprehensive income/(loss) for the year
- 214(8,471) - (73,202) (81,459)
Share based payment expense- - - 146- 146
Balance as at 31 January 2022122,606(948) 10,0031,120(21,551) 111,230
Balance as at 1 July 2020
122,606(485) 2,58787658,730184,314
Loss for the period- -
-
- (7,079) (7,079)
Other comprehensive income/(loss)10- (677) 15,887- - 15,210
Total comprehensive income/(loss) for the period
- (677) 15,887- (7,079) 8,131
Share based payment expense- -
-
98- 98
Balance as at 31 January 2021
122,606(1,162) 18,47497451,651192,543
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
4
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JANUARY 2022
20222021
12 Months7 Months
Note$000$000
Operating activities
Receipts from customers171,64492,449
Payments to suppliers(129,077) (73,283)
Payments to employees(43,556) (24,512)
Interest received175
Interest paid(1,685) (836)
Insurance and settlement income1-
Government grants received340490
Proceeds from foreign currency forward contracts closed early13,4955,744
Income tax paid(4,171) (938)
Net cash flows from / (used in) operating activities
317,008(881)
Investing activities
Proceeds from sale of property, plant and equipment17-
Purchase of property, plant and equipment(10,295) (4,837)
Purchase of intangible assets(2,907) (859)
Net cash flow (used in) / from investing activities
(13,185) (5,696)
Financing activities
Proceeds from borrowings174,79662,983
Repayment of borrowings
(167,411) (58,841)
Payment of lease liabilities(1,719) (845)
Net cash flows (used in) / from financing activities
5,6663,297
Net increase/(decrease) in cash and cash equivalents
(511) (3,280)
Net foreign exchange difference
(55) (356)
Cash and cash equivalents at beginning of the year
123,4797,115
Cash and cash equivalents at year end
122,9133,479
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
1.CORPORATE INFORMATION
2.BASIS OF PREPARATION
a.Statement of compliance
b.Basis of measurement
c.Significant accounting judgements, estimates and assumptions
Going concern
The Group is principally engaged in the farming, processing and sale of premium salmon products.
The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the reported outcomes of revenues, expenses, assets, liabilities and the accompanying disclosures. The Group
based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Uncertainties
about these assumptions and estimates could result in an outcome that requires a material adjustment to the carrying amount of assets
or liabilities in future periods.
Specific areas requiring significant estimates and judgements include:
The Group has reviewed the impact on the business from the evolving mortality event occurring at our sea farms. The Directors are of
the view that there will be a material adverse impact to financial results, in comparison to previous expectations, in the 12 months from
approving the financial statements. The impacts of fish mortality will result in an increase in mortality expenses for the year ended 31
January 2023 and a reduction in the forecast harvest volume. The Group is in breach of its banking related covenants at 31 January
2022 and without taking action the Group forecasts that breaches of a number of its banking related covenants over the next 12
months will continue. As a result, there are material uncertainties related to events or conditions that may cast significant doubt on the
Group's ability to continue as a going concern. In response to this the Group is taking the following actions.
In February 2022 the Group commenced discussions with the Group’s bank (Bank of New Zealand) while a review of the financial
structure of the business was undertaken. The Directors approved a rights issue, which will commence post the approval of the
financial statements of $60.1m to fully repay (or cash cover) all bank debt of the Group and provide sufficient funds to support
operations for the 12 months from the date of approving these financial statements. On the basis the Group completes the equity raise
of a minimum $50m (net of transaction costs), the Bank of New Zealand has agreed in principle a combination of temporary covenant
waivers, renegotiation of facilities and adjustments to covenant definitions. On the assumption the full equity raise is completed, and
financial forecasts are met, the Group does not forecast a default event in respect of its financial covenants for 12 months from the
date of approving these financial statements.
The consolidated financial statements of New Zealand King Salmon Investments Limited (the Company) and its subsidiaries (together
the Group) for the year ended 31 January 2022 were authorised by the directors on 13 April 2022.
New Zealand King Salmon Investments Limited is a profit-orientated company incorporated and domiciled in New Zealand. The
Company is registered under the Companies Act 1993 and listed on the NZX Main Board ("NZX") and the Australian Securities
Exchange ("ASX"). The Company is an FMC reporting entity under the Financial Markets Conduct Act 2013.
The consolidated financial statements comply with New Zealand Equivalents to International Financial Reporting Standards (IFRS) and
also with International Financial Reporting Standards (IFRS). The financial statements are prepared under NZ GAAP and FMC Act 2013.
The financial statements have been prepared on a historical cost basis except for biological assets and certain financial instruments
which have been measured at fair value. The carrying values of recognised assets and liabilities that are designated as hedged items in
hedging instruments, otherwise carried at amortised cost, are adjusted to recognise changes in the fair values attributable to the risks
that are being hedged in effective hedge relationships. The consolidated financial statements are presented in New Zealand dollars and
all values are rounded to the nearest thousand ($000), except when otherwise indicated.
The Group has changed its balance date to 31 January following a Board resolution on 2 November 2020.The comparative information is
for the seven month period to 31 January 2021 as such, amounts presented in the financial statements are not entirely comparable.
6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
Valuation of biological assets
Impairment testing of intangibles, plant and equipment
Inventory (Finished goods and work in progress) obsolescence
Valuation of financial derivatives
Should the proposed equity raise not be completed, an event of default will occur, and the willingness of the Bank of New Zealand to
continue to support the business is uncertain. In addition, if financial forecasts are not met, the amount of equity raised may not be
sufficient to allow the Group to pay its debts as they fall due. As a result of these material uncertainties, the Group may be unable to
realise its assets and discharge its liabilities in the normal course of business. As the Directors consider the equity raise and the
achievement of financial results is probable, the financial statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or adjustments to liabilities that might be necessary should the entity not continue as a going
concern.
The Directors consider that the completion of the equity raise is probable as they have taken all reasonable steps to ensure the
successful completion of the capital raise, including obtaining contractual pre-commitments from Oregon Group Limited and certain
Directors to subscribe for $26.3m of shares in the equity raise and entering into an underwriting agreement with Jarden Partners
Limited and Jarden Securities Limited as underwriter and lead manager of the equity raise, pursuant to which the balance of the equity
raise will be underwritten. However, these steps do not eliminate the inherent risk in equity markets. In addition, the Directors consider
that the Group's forecast net cashflows for the coming 12 months are achievable and so that the amount expected to be raised in the
capital raise will be sufficient to ensure that the Group can continue to pay its debts as they fall due. Having taken these actions the
Directors have concluded that it is appropriate that these financial statements are prepared on a going concern basis.
The Group recognises stocks of live fish at fair value according to the principles of NZ IAS 41 Agriculture. The fair value is measured
using a valuation model that relies on various assumptions and information available at balance date. Inputs include anticipated market
prices, quality mix, current weights of livestock relative to expected harvest weight, mortality rates, growth rates and production costs.
The income or loss that is ultimately recognised at time of sale may be significantly different from that implied by the fair value
adjustment at the end of a reporting period. The fair value uplift from accumulated costs to date has no cash impact in the reporting
period. Further details of the valuation and sensitivity to change in key inputs are given in note 15.
Inventories are stated at the lower of cost or net realisable value, and the Group uses judgment and estimates to determine the net
realisable value of inventory at the end of each reporting period.
The Group estimates the net realisable value of inventory for obsolescence and unmarketable items at the end of reporting period and
then writes down the cost of inventories to net realisable value. The net realisable value of the inventory is determined based on
assumptions of future demand and pricing and estimates over the remaining shelf life of the inventory.
The estimation of cash flows is sensitive to the periods for which detailed forecasts are available and to assumptions regarding long-
term sustainable cash flows, the assessment of impairment requires judgement to be applied and consideration of a number of factors
including but not limited to: changes in business strategy, regulatory environment, and customer preferences or requirements.As a
result of the mortality event, the Directors have approved a strategy change to reduce farming at the Group’s warmer sites over
summer (outside of some trials). This will reduce the Group’s annual harvest volume from ~8,000 tonnes to 6,500 tonnes (~5,750
tonnes FY23 and 6,500 tonnes FY24 onwards), however, it is also expected to reduce the risk of sea farm mortality with the intention
of being a more predictable and profitable business. As part of this the Group is reviewing its operating expenses to align with a
reduction in harvest volume. (Refer to note 16 and 17)
The Group’s non-financial assets are assessed for indicators of impairment on at least an annual basis and whenever events or
changes in circumstances indicate that the carrying amount of the assets may exceed their recoverable amount. In addition the
carrying value of goodwill, plant, equipment and intangible assets that are not yet available for use are tested annually for impairment
irrespective of whether there is any indication of impairment according to the principles of NZ IAS 36 Impairment of Assets.
Where the asset’s carrying amount is determined to be greater than the recoverable amount, the carrying amount is written down and
an impairment loss is recognised in the income statement. Impairment testing involves a significant amount of estimation. Impairment
testing involves assessing the recoverable amount of the Group’s Cash Generating Unit (“CGU”) by calculating the higher of the
CGU’s value in use or fair value less costs of disposal. The recoverable amount calculated under the value-in-use method includes
cash flow projections that necessarily take into account changes in the market in which a business operates. Determining both the
cash flows and the risk-adjusted discount rate appropriate to the operating unit requires the exercise of judgement.
The Group recognises financial derivatives at fair value according to the principles of NZ IFRS 13 Fair Value Measurement. The value is
calculated by a third party expert using an industry standard model. Inputs to the model are obtained externally by the service provider.
Further details of the valuation are included in note 24.
7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
d.Foreign currency translation
Functional and presentation currency
Transactions and balances
3.SIGNIFICANT ACCOUNTING POLICIES
a.
Basis of consolidation
b.
Financial instruments
Cash and cash equivalents
Trade and other receivables
Loans with related parties
Trade and other payables
For trade receivables and contract assets, the Group applies a simplified approach in calculating an allowance for expected credit loss
(ECL). Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECL's at
each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and the economic environment.
Loans and amounts owing from related companies are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial recognition such assets are carried at amortised cost using the effective interest method. Gains
and losses are recognised in profit or loss when the loans are derecognised or impaired.
Trade and other payables are carried at cost due to their short term nature and are not discounted. They represent liabilities for goods
and services provided to the Group prior to the end of the financial year that are unpaid, and arise when the Group becomes obliged to
make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within
30-90 days of recognition.
The financial statements of the subsidiaries are prepared for the same reporting period as the Parent company using consistent
accounting policies.
Transactions in foreign currencies are initially recorded in the functional currency and then translated by applying the exchange rates
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of
exchange at balance date.
The Group's consolidated financial statements are presented in New Zealand dollars, which is also the parent company's functional
currency. The Australian subsidiary's functional currency is Australian dollars which is translated into the presentation currency in these
financial statements. The USA subsidiary's functional currency is United States dollars which is translated into the presentation currency
in these financial statements.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the
date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value was determined.
The financial statements comprise the financial statements of New Zealand King Salmon Investments Limited and its subsidiaries (per
note 29). Subsidiaries are all those entities over which the Company has control.
In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and
losses resulting from intra-group transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date
on which control is transferred out of the Group.
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), and fair value through profit or loss. In order for a financial asset to be classified and measured at
amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on
the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial
assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business
model. Subsequently the Group applies the following accounting policies for financial instruments:
Cash and cash equivalents in the balance sheet comprise cash at bank and call deposits. For the purpose of the statement of cash
flows, cash and cash equivalents consist of cash and short-term deposits net of outstanding bank overdrafts.
Short term trade and other receivables are not discounted and are initially stated at cost. Gains and losses are recognised in the profit or
loss when the receivables are written off or impaired.
8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
Interest bearing borrowings
Financial guarantees
Derivative financial instruments and hedging
c.Inventories
d.Biological assets
Net realisable value - the estimated selling price in the ordinary course of business less estimated costs of completion and the
estimated costs necessary to make the sale.
Biological assets include fish livestock measured at fair value less estimated costs to sell. The net gain or loss resulting from the fair
value measurement is recognised in profit or loss.
Amounts accumulated in equity are transferred to profit or loss when the hedged item affects profit or loss.
Inventories including raw materials, work in progress and finished goods are valued at the lower of cost or net realisable value. Costs
incurred in bringing each product to its present location and condition are accounted for as follows:
Manufactured finished goods and work in progress - cost of direct materials, labour and a proportion of manufacturing overheads
appropriate to the stage of manufacture. Costs are assigned on the basis of weighted average costs. The cost of items transferred from
biological assets is their fair value less costs to sell at the date of harvest.
After initial recognition interest bearing borrowings are subsequently measured at amortised cost using the effective interest method.
Fees paid on establishment of loan facilities that are yield related are included as part of the carrying amount. Borrowings are classified
as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance
date. Borrowing costs are generally recognised as an expense when incurred, with the exception of borrowing costs associated with a
qualifying asset which are capitalised as part of the cost of that asset.
Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a
loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument.
Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributed
to the issuance of the guarantee. Subsequently the liability is measured at the higher of the best estimate of the expenditure required to
settle the present obligation at balance date and the amount recognised less cumulative amortisation.
The Group uses derivative financial instruments including forward currency contracts, options and interest rate swaps to hedge risks
associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are initially recognised at fair value
on the date on which a derivative contract is entered into and are subsequently re-measured to fair value at balance date. Derivatives
are carried as assets when their fair value is positive and as liabilities when their fair value is negative.
The fair values of forward currency contracts are calculated by reference to current forward exchange rates for contracts with similar
maturity profiles. The fair values of interest rate swaps are determined by reference to market values for similar instruments.
The Group designates its derivative financial instruments as hedges of a particular risk associated with a recognised asset or liability or
a highly probable commitment that could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is
recognised directly in other comprehensive income in the cash flow hedge reserve, while the ineffective portion is recognised
immediately in the statement of profit or loss.
Raw materials – the cost of fish is measured at fair value at harvest date. The cost of feed and packing materials is based on the
purchase price including import duties and other taxes, transport, handling and other costs directly attributable to the acquisition of the
goods and materials. Costs are determined on a weighted average basis.
The fair value of fish livestock is derived from the amount expected to be received from the sale of the asset in an active market. The
target live weight of the harvestable fish is defined as a fish with a live weight of 4kg or greater. Many fish are harvested with a live
weight above or below this weight.
For brood stock and fish where little biological transformation has taken place since initial cost was incurred, cost less impairment is
used as an approximation of fair value. This value is used up to the point at which fish are transferred to sea water. Fish stock is
transferred to inventory at the time of harvest. The transfer is recorded at its fair value which is deemed to be cost for the purposes of
inventory valuation.
9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
e.Property, plant and equipment
Freehold landnot depreciated
Freehold buildingstwenty to fifty years
Building fit outthree to twenty five years
Leasehold improvementsfive to ten years
Plant, furniture and fittingsthree to twenty years
Motor vehiclesfive to ten years
Sea vesselsten to twenty years
f.Leases
Right of use assets
The Group's lease portfolio
Property leases
Vehicle leases
Plant and Equipment Leases
Contracts not recognised as leases
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end
and adjusted prospectively if appropriate. An asset's carrying value is written down immediately to its recoverable amount if its carrying
value is greater than its estimated recoverable amount.
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment. Depreciation is provided on a
straight line basis over the estimated useful lives of the assets as follows:
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from
its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.
The Group recognises right of use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use).
Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities.
The cost of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made
at or before the commencement date less any lease incentives received. Right of use assets are depreciated on a straight-line basis
over the shorter of the lease term and the estimated useful lives of the assets.
At the inception of a contract, the Group is required to assess whether a contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration.
The Group’s real estate includes office buildings and storage facilities. The Group has recognised some storage contracts that meet the
identifiable criteria as a right of use asset and corresponding liability portfolio under NZIFRS 16.
The Group lease vehicles are predominantly used by sales staff and the transportation of personnel between operating locations. These
vehicles are generally held for a term of three years.
The Group sometimes leases machinery used for the production or processing of salmon. The current leases relate to equipment being
utilised for the upwelling on sea farms and various forklifts operated throughout the company. The Group has elected to apply the
recognition exemption for short-term leases for all other machinery employed for less than 12 months duration and for leases where the
underlying asset is of low value.
The Group has transport contracts that have not been recognised as leases on balance sheet but can be identified as an asset to which
the contract relates. These leases have been assessed as variable lease payments linked to future harvest volumes and activity levels.
These contracts have an operating expense value of $3.6m in the year to 31 January 2022 (7 months to 31 January 2021: $2.2m).
The Group applies short term lease recognition exemption to its short term leases of equipment. It also applies the lease of low-value
assets recognition exemption to leases of equipment that are considered to be low value. Lease payments on short term leases and
leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
g.Impairment of non financial assets
h.Intangibles
Useful lives: Indefinite
Internally generated or acquired:Acquired
Intellectual property, marine farm and hatchery licences and marina berth
Useful lives: Finite
Amortisation method used:Straight line, five to thirty five years
Internally generated or acquired:Acquired
Computer Software
Useful lives: Finite
Amortisation method used:Straight line, four to seven years
Internally generated or acquired:Acquired
i.Research and development costs
- Costs can be reliably measured.
- Completion of the project is technically feasible.
- Resources are available to complete the project.
- There is an intention to use the resulting asset and it will generate future economic benefits.
During the period of development the asset is tested for impairment annually.
j.Employee benefits
Wages, salaries, annual leave and sick leave
Long service leave
Defined contribution plans
k.Contributed equity
Ordinary shares
Contributions made to a defined contribution plan are expensed as incurred.
A summary of the policies applied to the Group’s intangible assets is as follows:
Goodwill and trade marks
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction net of tax from the proceeds. Other capital raising costs are expensed as incurred.
The liability for long service leave is recognised and measured at the present value of expected future payments to be made in respect of
services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service.
Liabilities for wages and salaries including non-monetary benefits, annual leave and accumulating sick leave expected to be settled
within 12 months of the reporting date are recognised in respect of employees' services up to the reporting date. They are measured at
the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the
leave is taken and are measured at the rates paid or payable.
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset
acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over
the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year-end.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are
accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate.
The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the
function of the intangible asset.
Intangible assets with indefinite useful lives or not yet available for use are not amortised but are tested for impairment annually, either
individually or at the cash-generating unit level. The assessment of useful life is reviewed annually to determine whether the indefinite life
continues to be supportable. If not, the change in useful life from indefinite to definite is made on a prospective basis.
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable
amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. The recoverable amount is
determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other
assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
Research costs are generally expensed as incurred. Development expenditures are capitalised as intangible assets when the Group can
demonstrate:
11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
l.Revenue and Income Recognition
Revenue from contracts with customers
Interest income
Insurance proceeds
m.Taxes
Income taxes
Other taxes
- Receivables and payables, which are stated with the amount of GST included.
NZ IFRS 15 established a five-step model to account for revenue arising from contracts with customers and requires that revenue be
recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or
services to a customer.
The Group is in the business of growing, processing and selling King Salmon to customers in New Zealand and overseas. Revenue from
contracts with customers is recognised when control of the goods is transferred to the customer at the amount that reflects the
consideration to which the Group expects to be entitled in exchange for those goods. The Group has generally concluded that it is the
principal in its revenue arrangements because it typically controls the goods before transferring them to the customer.
Revenues, expenses and assets are recognised net of the amount of GST, except when:
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised
deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable
that future taxable profit will allow the deferred tax asset to be recovered.
- The GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable.
Revenue is recognised as interest accrues using the effective interest method.
Insurance proceeds are recognised in the financial statements when receipt is virtually certain and can be measured reliably.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to
the taxation authorities based on the current period's taxable income. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised
or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.
- The net amount of GST recoverable from or payable to the taxation authority is included as part of receivables or payables in the
balance sheet.
- Commitments and contingencies are disclosed net of the amount of GST recoverable from or payable to the taxation authority.
- The Group recognises uncertain tax positions as a liability where it is probable that an outflow of resources will be required.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
n.Share-based payments
o.Comparatives
4.NEW STANDARDS ADOPTED AND STANDARDS ISSUED NOT YET ADOPTED
a.New standards adopted and interpretations
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the
likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will
ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award,
but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the
fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not
been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the
market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified
award, provided the original terms of the award are met. An additional expense, measured as at the date of modification, is recognised
for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee.
Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed
immediately through profit or loss.
Certain employees of the Group receive remuneration in the form of share-based payments, whereby employees render services as
consideration for equity instruments (equity-settled transactions). The cost of equity-settled transactions is determined by the fair value
at the date when the grant is made using an appropriate valuation model, further details of which are given in Note 27.
That cost is recognised in employee benefits expense, together with a corresponding increase in equity (other capital reserves), over the
period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense
recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has
expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the
statement of comprehensive income for the period represents the movement in cumulative expense recognised as at the beginning and
end of that period.
No other new standards, amendments or interpretations that are not yet effective have been early adopted by the Group in these
financial statements.
In the current year, the Group applied amendments to accounting standard and interpretations that are effective for an annual period
that began on or after 1 February 2021 in respect of cloud computing costs and selling costs in inventory net realisable value
assessment. Their adoption has not had any material impact on the disclosures or on the amounts reported in the financial statements.
Certain prior year comparatives have been reclassified to align with the current period’s presentation.The reclassification is in respect of
currency sensitivity impacts upon equity disclosures.
13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
5.IMPAIRMENT
20222021
12 Months7 Months
Plant, equipment and fittings
12,116 -
Vehicles and sea vessels
511 -
Development in progress
5,587 -
Trademarks
13 -
Farm and hatchery licenses
1,009
-
Software
763
-
Goodwill
39,255
-
Total impairment59,255-
20222021
Impairment Sensitivity$000$000
Mortality+ 500 tonnes(11,000) -
- 500 tonnes11,000 -
Price increases+1%21,000 -
-1%(22,000) -
Cost increases+1%(20,000) -
-1%20,000 -
Discount rate WACC+1%(19,000) -
-1%24,000 -
Growth rate+1%19,000 -
-1%(15,000) -
6.OTHER INCOME
20222021
12 Months7 Months
Other income$000$000
Grants received 340490
Profit on sale of property, plant and equipment17-
Other income4551
Total other income402541
7.EXPENSES
20222021
12 Months7 Months
Corporate and other expenses include:$000$000
Trade receivables written off- -
Impairment of trade receivables448
Research cost768599
Loss on sale of assets 1532
Low value leases3-
Directors' fees429271
Other directors' expenses101
Donations108
Employee benefits expense$000$000
Wages and salaries36,42720,236
Defined contribution plan expenses914514
Restructuring costs1210
Other employee benefits expenses5,3013,495
Outsourced labour890440
Total employee benefits expense43,54424,695
Compensation of key management personnel of the Group$000$000
Short-term employee benefits2,0271,224
Share based payment expense2129
Post employment pension and medical benefits11253
Total compensation of key management personnel of the Group2,1601,306
8.FINANCE INCOME AND COSTS
20222021
12 Months7 Months
Finance income$000$000
Interest income175
Total finance income175
Finance costs$000$000
Bank facility fees920418
Interest on bank loans and overdrafts1,467795
Interest on leases249140
Total finance costs2,6361,353
As noted in note 17 Intangible assets. Following on from an unexpected increase in sea farm mortality predominantly seen at our warmer sites towards the end of FY22, the Group has
approved a strategy change to reduce farming at our warmer sites over summer. This strategy has a significant impact on future harvest volumes and therefore a reduction in future cash
flows. A value in use calculation using a discounted cash flow approach (DCF) was prepared to estimate the recoverable amount of the CGU, with a resulting valuation single point of
$183m. The DCF resulted in $39.255m impairment to goodwill and additional impairment of $14.4m which has been allocated on a pro rata basis to intangible assets and plant and
equipment. Consideration has been given as to the status of development projects in light of the current financial environment and the impact this has on the capacity to complete significant
capital projects. As a result, the capitalised development costs have been impaired at balance date.
14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
9.INCOME TAX
20222021
12 Months7 Months
Recognised in the consolidated statement of comprehensive income$000$000
Current income tax expense(794) 427
Deferred tax relating to origination and reversal of temporary differences(13,596) (2,674)
Total income tax expense / (credit) in the statement of comprehensive income(14,390) (2,247)
Tax amounts posted directly to other comprehensive income(3,294) 6,178
Tax amounts posted directly to equity(32) -
Reconciliation of tax expense to statutory income tax rate
Profit / (loss) before tax(87,593) (9,326)
Income tax using the company tax rate 28%(24,526) (2,611)
Non deductible/non assessable items223
Impairment of goodwill10,991-
Unrecognised tax losses105-
Prior period adjustment(991) 306
Adjustment for varying tax rates1035
Other differences19-
Total tax expense / (credit)(14,390) (2,247)
Statement of financial position deferred tax assets and liabilities
20222021
Deferred tax liabilities
$000$000
Accelerated depreciation for tax purposes - (3,109)
Fair value adjustment to biological assets(6,829) (9,286)
Unrealised gains on foreign currency hedges
(1,246) (6,095)
Increase accounting cost for finished goods(304) (564)
Total deferred tax liabilities(8,379) (19,054)
Deferred tax assets
Deferred tax on impairment2,605-
Provision for doubtful trade debtors4129
Provision for employee benefits897765
Share based payments295263
Tax losses1,326-
Unrealised losses on foreign currency hedges2,725518
Other provisions490556
Total deferred tax assets8,3792,131
Net deferred tax liabilities-
(16,923)
Unused tax losses
Unused tax losses for which no deferred tax asset has been recognised
378-
Potential tax benefit @ 28%
106 -
Statement of comprehensive income impact of deferred tax assets and liabilities
20222021
12 months7 months
Deferred tax liabilities
$000$000
Accelerated depreciation for tax purposes
- (5)
Fair value adjustment to biological assets(2,457) (1,543)
Increase accounting cost for finished goods(260) (1,043)
Other provisions- (79)
(2,718) (2,670)
Deferred tax assets
Accelerated depreciation for tax purposes (5,714) -
Provision for doubtful trade debtors(13) 17
Provision for employee benefits(132) 22
Tax losses(5,104) -
Unrealised gains on foreign currency hedges18-
Other provisions66(43)
(10,879) (4)
Deferred tax expense / (credit)
(13,597) (2,674)
Imputation credit account
The imputation credit account balance in the Group as at 31 January 2022 is $9,517k (31 January 2021: $5,450k).
The unused tax losses relate to the New Zealand operations and can be carried forward indefinetely subject to the shareholder continuity test.
15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
10.COMPONENTS OF OTHER COMPREHENSIVE INCOME
20222021
12 months7 months
Movement in reserves$000$000
Forward currency contracts
Reclassification during the period to profit or loss(64) 38
Income tax effect18(11)
Realised/unrealised net gain/(loss) during the period (13,193) 21,769
Income tax effect3,694(6,095)
Interest rate swaps
Realised/unrealised net gain/(loss) during the period 944258
Income tax effect(265) (72)
Reclassification during the period to profit or loss547-
Income tax effect(153) -
Currency translation differences
Translation of foreign operations214(677)
Net movement in other comprehensive income(8,257) 15,210
11.EARNINGS PER SHARE
20222021
12 months7 months
Earnings per share$000$000
Profit / (Loss) attributable to ordinary equity holders (73,202) (7,079)
# of Shares# of Shares
000000
Weighted average number of ordinary shares for basic and diluted earnings per share139,004138,986
Basic earnings per share(0.53)$ (0.05)$
Diluted earnings per share(0.53)$ (0.05)$
12.CASH AND CASH EQUIVALENTS
20222021
Cash and cash equivalents$000$000
Cash at bank and on hand2,4522,571
Short-term deposits461908
Total cash and cash equivalents2,9133,479
13.TRADE AND OTHER RECEIVABLES
20222021
Trade and other receivables$000$000
Trade receivables16,61512,968
Allowance for expected credit losses(141) (97)
Prepayments2,8512,696
Other receivables492619
Total trade and other receivables19,81716,186
Ageing analysis of trade receivables$000$000
> 90 days overdue54
61 - 90 days overdue27
31 - 60 days overdue103114
< 30 days overdue3,7472,629
Not yet due12,75810,214
Total receivables16,61512,968
Receivables impairment $000$000
As at beginning of the year9790
Additional provisions for impairment4497
Receivables written off during the period- -
Reversal of unused amounts- (90)
As at year end14197
14.INVENTORIES
20222021
Inventories
$000$002
Raw materials10,50911,853
Work in progress1,7052,748
Finished goods22,42227,888
Total inventories34,63642,489
Amount of inventories recognised as an expense in the statement of comprehensive income
$000$000
Cost of inventories recognised as an expense180,98790,092
Movement in net realisable value provision (3,213) 8,728
Total cost of goods sold including fair value uplift at point of harvest177,77498,820
The cost of inventory includes fish harvested at the fair value less cost to sell at harvest date, based on management’s expected future sales pricing and mix of product (“deemed cost”). As
at 31 January 2022 no volumes were forecasted to be sold at returns materially below deemed cost plus further manufacturing costs. As a result, the overall deemed cost of inventory on
hand takes this into account and therefore increase the carrying value by the impact of the higher expected sales prices.
Basic earnings per share amounts are calculated by dividing the profit for the period attributable to shareholders of the Company by the weighted average number of ordinary shares on issue
during the period. Diluted earnings per share are calculated by dividing the profit attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding
during the year plus the weighted average number of shares that would be issued on conversion of all dilutive potential ordinary shares into ordinary shares.
Trade receivables generally have 20-30 day terms and are recognised at their realisable value.
The carrying value of finished goods as at 31 January 2022 includes a fair value uplift at point of harvest of $8,665k (2021: $12.939k) and net realisable value provision of $7,708k ( 2021:
$10,931k).
The cost of inventories recognised as an expense for the year ended 31 January 2022 includes a fair value uplift at point of harvest of $54,313k (2021: $29,857k).This cost is included in cost
of goods sold in the Statement of Comprehensive Income.
16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
15.BIOLOGICAL ASSETS
Cost Total
Biological assets
$000$000$000
As at 1 February 2021
55,02533,16388,188
Increase due to biological transformation
1
83,31133,876117,188
Decrease due to harvest
2
(66,920) (50,038) (116,958)
Decrease due to mortality
3
(20,841) - (20,841)
Changes in fair value
4
- 7,3857,385
As at 31 January 2022
50,57524,38674,961
Cost Total
Biological assets
$000$000$000
As at 1 July 2020
53,70438,67492,378
Increase due to biological transformation51,80733,72685,533
Decrease due to harvest(42,233) (34,860) (77,093)
Decrease due to mortality(8,253) - (8,253)
Changes in fair value- (4,377) (4,377)
As at 31 January 2021
55,02533,16388,188
20222021
12 months7 months
Fair value gain/(loss) recognised in profit and loss
$000$000
Gain arising from growth of biological assets33,87633,726
Movement in fair value of biological assets7,385(4,377)
Total fair value gain on biological transformation41,26129,349
20222021
Estimated closing biomasstonnestonnes
Closing fresh water stocks199173
Closing sea water stocks5,8166,691
Total estimated closing biomass live weight as at year end6,0156,864
20222021
12 months7 months
tonnestonnes
Total live weight harvested for the year8,3895,545
Fair value measurement
Fair value risk and sensitivity
2
Harvested fair value is included in cost of goods sold in the statement of comprehensive income and is calculated by multiplying the current period's harvest (biomass) by the prior period's
estimated gross margin per kg (recognised at 100%).
3
Mortality cost is expensed directly to the statement of comprehensive income within the cost of goods sold in the period which it occurs and is not subject to a fair value
4
Changes in fair value are impacted by movements in margin primarily being changes in sales price and costs to sell (fish cost, harvest, processing and freight to market).
Fair Value
Gain
Leaving all other variables constant a 15% increase/decrease in average future sales prices would increase/decrease the fair value of biological assets on hand and profit before tax by
$13.2m (2021: $18.3m) (excludes the impact of finished goods), while a 15% increase/decrease in future harvest volume would increase/decrease the fair value of biological assets on hand
and profit before tax by $ 3.3m (2021: $2.1m).
The Group is exposed to financial risks relating to the production of salmon stock including increasing climate change volatility, climatic events, disease and contamination of water space.
The Group seeks to produce and market the highest quality salmon products. Extensive monitoring and benchmarking is carried out to provide optimum conditions and diets to maximise fish
performance during the grow out cycle. Sales are maintained in a range of brands, products and markets to maximise returns from the quality mix of fish harvested. The Group has insurance
to cover some of the risks relating to the livestock.
Measurement of fair value is performed using a fair value model. The method of valuation therefore falls into level three of the fair value hierarchy as the inputs are unobservable inputs.
The Group has three hatcheries in the South Island and nine operational marine salmon farms in the Marlborough Sounds. The fish livestock typically grow for up to 31 months before
harvest.
Fair Value
Gain
The estimated unrealised fair value gain from cost at 31 January 2022 has decreased due to an increase in forecasted mortalities and a consequential decrease in the forecasted harvest.
Mortality assumptions made in the fair value model are in line with the FY23 forecast which sees FY22 high mortalities continued into the beginning of FY23. Average price increases are
forecast due to reduced lower value sales. Additional to this there are forecasted general price increases due to higher costs of inputs. Changes in these assumptions will impact the fair
value calculation. The realised profit which is achieved on the sale of inventory will differ from the calculations of fair value of biological assets because of changes in key factors such as the
final market destinations and product mix of inventory sold, changes in price, foreign exchange rates, harvest weight, growth rates, mortality, cost levels and differences in harvested fish
quality.
A 15% increase/decrease in costs to sell would decrease/increase the fair value of biological assets on hand and profit before tax by $ 9.7m (2021: $15m). Changes in fish health and
environmental factors may affect the quality of harvested fish, which may be reflected in realised profit via both achieved sales price and production costs.
1
Biological transformation fair value is impacted by volume increases and fish weight at reporting date relative to the target fish harvest weight of 4 kgs (proportional recognition).
The valuation of biological assets is carried out separately for each site at a brood and strategy level. Estimated actual cost up to the date of harvest per site is used to measure the expected
margin at the time the fish is defined as ready for harvest, being 4.0kg live weight. Selling price is estimated at balance date based on the most relevant future market price at expected
harvest date. The expected gross margin is recognised proportionately based on average biomass at reporting date. Fair value measurement commences at the date of transfer to sea water
as this is considered the point at which the fish commence their grow out cycle.
17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
16.PROPERTY, PLANT AND EQUIPMENT
Cost$000$000$000$000$000
As at 1 July 202011,37186,8533,5624,783106,569
Additions- - - 4,8374,837
Disposals- (210) - - (210)
Transfers from WIP3992,961166(3,526) -
As at 31 January 202111,77089,6043,7286,094111,196
Additions- - - 10,38410,384
Disposals- (1,604) (43) - (1,647)
Transfers from WIP2,4881,52443(4,054) -
As at 31 January 202214,25889,5233,72812,424119,933
Depreciation and impairment
As at 1 July 20202,70841,6321,748- 46,088
Depreciation2574,207137- 4,601
Impairment- - - - -
Disposals- (209) - - (209)
As at 31 January 20212,96545,6301,885- 50,480
Depreciation5486,889263- 7,700
Impairment5- 12,116511- 12,627
Disposals- (1,450) (45) - (1,494)
As at 31 January 20223,51363,1862,614- 69,313
Net Book Value
As at 31 January 20218,80543,9741,8436,09460,716
As at 31 January 202210,74426,3381,11412,42450,620
Borrowing costs
There were no borrowing costs capitalised in year ending 31 January 2022 (7 months to January 2021: $nil).
17.INTANGIBLES
Cost$000$000$000$000$000$000
As at 1 July 20202,7422424,2954,83739,25551,371
Additions859- - - - 859
Disposals- - - - - -
Transfers from WIP(741) - - 741- -
As at 31 January 20212,8602424,2955,57839,25552,230
Additions2,817- 6426- 2,907
Disposals (90) - - - - (90)
Transfers from WIP- - - - - -
As at 31 January 20225,5872424,3595,60439,25555,047
Amortisation and impairment
As at 1 July 2020- 2008792,383- 3,462
Amortisation- - 97290- 387
Impairment- - - - - -
Disposals- - - - - -
As at 31 January 2021- 2009762,673- 3,849
Amortisation- - 167510- 677
Impairment55,587131,00976339,25546,628
Disposals- - - - - -
As at 31 January 20225,5872132,1533,94639,25551,154
Net Book Value
As at 31 January 20212,860423,3192,90539,25548,381
As at 31 January 2022- 292,2061,658- 3,893
Note
NoteTrademarks
Farm and
hatchery
licensesSoftwareGoodwill
Property, Plant and Equipment is stated at historical cost less depreciation and any impairment adjustments. Historical cost includes expenditure that is directly attributable to the acquisition
of Property, Plant and Equipment. Asset residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date or whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. The Group has considered the continuing effects Covid-19 may have on the carrying value of its specialised assets, and has
concluded there is no evidence of technical or functional obsolescence which would impact the carrying value of its assets in use.
Total
Freehold
land and
buildings
Plant,
equipment
and fittings
Vehicles
and sea
vessels
Construction
in progress
Development in
progress
Total
18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
Goodwill
The following key assumptions were applied in the value in use calculation:
Key judgements
20222021
8.6%5.14%
2.5%0.21%
Harvest volumes in terminal year
6,700 tonnes8,000 tonnes
Sales Growth 2.5%
Cost inflation3.0%
$8m$8.7m
Trademarks
18.
RIGHT-OF-USE ASSETS
Land &
Buildings
Motor
Vehicles
Plant &
EquipmentTotal
Cost$000$000$000$000
As at 01 July 20203,8855791,5546,018
Additions2,231139432,413
Remeasurement7906- 796
As at 31 January 20216,9067241,5979,227
Additions- 545- 545
Disposals- (48) (48)
Remeasurement1317- 138
As at 31 January 20227,0371,2281,5979,862
Depreciation
As at 01 July 20207522254601,437
Depreciation565145270980
As at 31 January 20211,3173707302,417
Depreciation1,0192604701,749
Disposals- (48) - (48)
As at 31 January 20222,3365821,2004,119
Net Book Value
As at 31 January 20215,5893548676,810
As at 31 January 20224,7016463975,744
Goodwill resulted from the acquisition of The New Zealand King Salmon Co Limited and is subject to annual impairment testing. The Group considers the relationship between its market
capitalisation and its book value, among other indicators, when reviewing for indicators of impairment.
Trademarks are externally acquired and are carried at cost less impairment. They have indefinite useful lives and are assessed annually for impairment. An impairment of $13k has been
recognised during the year (7 months period to 31 January 2021: Nil).
The goodwill is allocated to the New Zealand King Salmon Company's one cash generating unit. The recoverable amount of the cash generating unit has been determined based on a value
in use calculation using future estimated cash flows, capital expenditure and changes in working capital over a five-year period, plus an estimated terminal value.
The terminal value calculation assumes sea farm consents expiring in 2024 will be renewed on reasonable commercial terms to enable water space to continue to be utilised. The forecasts
were based on actual results and expected future use of water space licences currently held, before fair value adjustments to biological assets. Following on from an unexpected increase in
sea farm mortality predominantly seen at our warmer sites towards the end of FY22, the Group has decided on a strategy change to reduce farming at our warmer sites over the summer.
This strategy has a significant impact on future harvest volumes and therefore a reduction in future cash flows. A value in use calculation using a discounted cash flow (DCF) approach was
prepared to estimate the recoverable amount of the CGU, with a resulting valuation single point of $183m. The DCF supported a $39.255m goodwill impairment to goodwill and additional
impairment of $14.4m which has been allocated on a pro rata basis to intangible assets and plant and equipment on the basis of the carrying amount of each asset, but not below its fair value
or value in use
Budget used for FY23 followed by a 3% growth rate in outer years
Budget used for FY23 followed by a 2.1% - 2.5% growth rate in outer years
Post tax discount rate
Terminal growth rate
Capex in terminal value
19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
19.
LEASE LIABILITIES
Total
$000$000$000$000
Liability liabilities at 01 July 2020
3,1873661,0524,605
Additions2,231139432,413
Remeasurement7906- 796
Interest for the period119714140
Lease payments made(631) (153) (201) (985)
Lease liabilities as at 31 January 20215,6963659086,969
Additions- 544- 544
Remeasurement1317- 138
Interest for the period2111919249
Lease payments made(1,179) (297) (491) (1,967)
As at 31 January 20224,8596384365,933
Short term leases
Total lease payments
The Group had total cash outflows for leases of $3,148k in 2022 (2021: $1,342k)
20222021
$000$000
Current1,5311,580
Non-current4,4025,389
Total lease liabilities5,933 6,969
20.INTEREST BEARING LOANS AND BORROWINGS
20222021
Current interest bearing loans and borrowings$000$000
Secured bank loans47,000750
Other borrowings2,6592,274
Total current interest bearing loans and borrowings49,6593,024
Non-current interest bearing loans and borrowings
Secured bank loans- 39,250
Total non-current interest bearing loans and borrowings- 39,250
- Interest Cover Ratio (EBIT/Interest expense)
- Leverage Ratio (Gross debt/EBITDA)
- Guarantee Group cover ratio - EBITDA of the Guaranteeing Group (A)
21.TRADE AND OTHER PAYABLES
20222021
$000$000
Trade payables14,22315,282
Other payables2,2113,315
Total trade and other payables16,43418,597
Land &
Buildings
The impacts of the unforeseen mortalities resulted in the Group breaching a number of its bank related covenants as at 31 January 2022 and forecasting to be in breach of the following
covenants in the next 12 months being:
Plant &
Equipment
As a result of breach of covenants default interest has been charged on the borrowings since the events of default. The Bank of New Zealand has agreed in principle to a combination of
temporary covenant waivers, renegotiation of facilities and adjustments to covenant definitions on the basis the Group completes the equity raise of a minimum $50m (net of transaction
costs).See also note 2 Significant accounting judgements, estimates and assumptions, Going Concern.
The Group recognised $1,178k of payments for short term lease equipment in the year (2021: $357k).
Motor
Vehicles
The Company has facilities with BNZ for $60m.Land and buildings, plant and equipment, motor vehicles and vessels with a total carrying value of $38.196m are subject to a first charge under
a General Security Deed granted to BNZ. The expiry date of facility A of $20m is 18 October 2022, facility B of $20m expires on 18 October 2023, and facility C of $20m expires on 18
October 2024. At balance date $20m of facility A was drawn, $20m of facility B was drawn and $2.75m facility C was drawn (as at 31 January 2021 total: $40m). During the period, the
financial covenants relating to interest coverage and leverage ratios have been amended. In prior year,the Group also secured a Business Finance Scheme Loan via BNZ for $5m (expiry
October 2025) that arose from the Government providing financial assistance following the pandemic virus Covid-19. At balance date the Business Finance Scheme loan was fully drawn at
$4.25m (as at 31 January 2021: $5m).
20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
22.EMPLOYEE BENEFITS
20222021
Current employee benefits$000$000
Bonuses65257
Employee annual and sick leave benefits 2,5922,350
Long service leave174250
Total current employee benefits2,8312,857
Non-current employee benefits
Long service leave430696
Total non-current employee benefits430696
Long service leave
Long service leave provisions are calculated based on the expected future payments to employees, discounted to their net present value.
23.COMMITMENTS AND CONTINGENCIES
Capital commitments
Contingencies
Guarantees
24.RISK MANAGEMENT
Market risk
Currency risk
- Differences in the timing of the cash flows of the hedged items and the hedging instruments
The Group's activities expose it to a variety of risks: market risk, credit risk, liquidity risk and climate change risk. The Health, Safety and Risk Committee has responsibility for the oversight of
all risk domains, which includes managing climate risk, as delegated by the Board. The Group uses derivative financial instruments to hedge certain risk exposures. Financial risk
management is the responsibility of the Chief Financial Officer in accordance with the Treasury Policy approved by the Board of Directors. In addition, the Group has a Treasury Committee, a
sub-committee of the Board's Audit and Finance Committee that oversees financial risk management.
The Group has entered into agreements to purchase plant and equipment. As at 31 January 2022 the total commitment is $1,929k (2021: $1,629k).
The Group has a contingent liability of $1,152k in respect of a fish transport contract requiring the Group to purchase four bulk tankers (including a new tank aquired in 2021), should the fish
transport contract be terminated early (2021: $826k).
- Changes to the forecasted amount of cash flows of hedged items and hedging instruments
- The counterparties' credit risk differently impacting the fair value movements of the hedging instruments and hedged items
The Group has exposure to foreign exchange risk as a result of transactions denominated in foreign currency, arising primarily from normal trading activities, but also from the net investment
in the foreign subsidiary.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. This comprises of two key types of risks; currency and
interest rate risk.
The Group imports nearly all of its feed from Australia, purchases of which are in Australian dollars. In order to protect against exchange rate movements and to manage the inventory costing
process, the Group has entered into forward exchange contracts to purchase Australian Dollars. The Group exports salmon to many countries, the major ones being Australia, Japan and the
United States. Sales are denominated in Australian dollars (AUD), Japanese yen (JPY) and United States dollars (USD) respectively. In order to protect against exchange rate movements
and to manage the inventory costing process, the Group has entered into forward exchange contracts and options to hedge the net exposure to AUD, JPY and USD respectively.
Foreign exchange forward contracts are designated as hedging instruments in cash flow hedges of highly probable forecast sales in USD, AUD and JPY and forecast purchases in USD, and
AUD. The Group has typically hedged 50-55% of the net exposure of these forecast transactions. The foreign exchange forward contract balances vary with the level of expected foreign
currency sales and purchases and changes in foreign exchange forward rates.
The cash flows are expected to occur up to 60 months from 1 February 2022. Realised gains/losses on exercise of foreign exchange contracts and options is recognised within revenue
when the hedged transactions occur.
The hedge ineffectiveness can arise from:
The Group manages its foreign currency risk by hedging its future exposure in respect of its import purchases and its export sales, over a maximum of five years, when exposures are
considered highly probable. The Group hedges this exposure with the use of forward foreign exchange contracts and options. The Group has a policy of hedging foreign exchange exposures
within a range of hedging limits broadly summarised as follows: Up to two years – 15% to 100%, two to five years – 0% to 50%. The notional contract amounts of forward foreign exchange
contracts and options outstanding at balance date were $ 82.9m on the import side ( 2021: $95.7m) and $ 273m on the export side (2021: $ 213.4m), for delivery over the next five financial
years, in line with anticipated payment dates.
The NZ dollar equivalent of unhedged currency risk on assets at balance date,31 January 2022 is $897k (2021: $491k) whilst the NZ dollar equivalent of unhedged currency risk on liabilities
at balance date, 31 January 2022 is $1,459k (2021: $316k).
There is an economic relationship between the hedged items and the hedging instruments as the terms of the foreign exchange and commodity forward contracts match the terms of the
expected highly probable forecast transactions (i.e., notional amount and expected payment date). The Group has established a hedge ratio of 1:1 for the hedging relationships as the
underlying risk of the foreign exchange and commodity forward contracts are identical to the hedged risk components. To test the hedge effectiveness, the Group uses the hypothetical
derivative method and compares the changes in the fair value of the hedging instruments against the changes in fair value of the hedged items attributable to the hedged risks.
- Different indexes (and accordingly different curves) linked to the hedged risk of the hedged items and hedging instruments
The Group has three guarantee facilities totalling $132k (2021: $115k).
21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
Currency sensitivity
EquityProfit
$000$000
2022+10%(6,686) (232)
-10%8,171284
2021+10%(7,865) (625)
-10%9,612764
EquityProfit
$000$000
2022+10%15,710760
-10%(19,420) (928)
2021+10%12,607556
-10%(15,134) (679)
EquityProfit
$000$000
2022+10%1,882152
-10%(2,262) (186)
2021+10%2,256152
-10%(2,649) (185)
Interest rate risk
Interest rate sensitivity
The following table demonstrates the sensitivity of the fair value of the interest rate swaps to a reasonably possible change in interest rates:
20222021
$000$000
Impact of an increase of 50 basis points126193
Impact of a decrease of 50 basis points(131) (198)
Credit risk
Maximum exposures to credit risk as at balance date are:
20222021
$000$000
Cash and short term deposits2,9133,479
Trade and other receivables19,81716,186
Derivative financial assets- 19,874
The above maximum exposures are net of any recognised provision for losses. No collateral is held on the above amounts.
Concentrations of credit risk
Financial instruments are only entered into with banks that have in place an executed International Swaps and Derivatives Association (ISDA) Master Agreement with the Group.
Bank balances are maintained with National Australia Bank in Australia, PNC Bank in USA, and with Bank of New Zealand. There is a wide spread of debtors, in terms of size and
geographical location within New Zealand and overseas. Concentration of credit risk in trade receivables is not considered significant as the Group's customers operate in different market
channels and geographic areas.
Customer credit risk is managed centrally subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is
assessed based on an extensive external credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables and contract
assets are regularly monitored and any shipments to major customers are generally covered by trade credit insurance.
An impairment analysis is performed at each reporting date using the accounts receivable aging report to measure expected credit losses. The impairment analysis is based on days past due
for all customers with coverage by trade credit insurance. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that
is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if past due for more than one
year and are not subject to enforcement activity.
Change in
USD rate
Change in
JPY rate
The following table demonstrates the sensitivity to a reasonably possible change in AUD, USD and JPY exchange rates. The impact on the Group's pre-tax profit is the result of a change in
fair value of monetary assets and liabilities. The impact on the Group's equity is due to changes in the fair value of forward exchange contracts and options designated as cash flow hedges.
As the Group’s Directors approved a fully underwritten or pre-committed rights offer of $60.1m to fully repay (or cash cover) all bank debt of the Group and provide sufficient liquidity going
forward (See also note 2 Significant accounting judgements, estimates and assumptions, Going Concern) those future cashflows are no longer considered highly probable for hedge
accounting purposes and its loss has been recognised in profit or loss in the income statement.
Change in
AUD rate
Credit risk is the risk of financial loss that arises if a counterparty to a financial instrument does not meet its contractual obligations. Financial instruments which potentially subject the Group
to credit risk principally consist of bank balances, trade receivables, derivative financial instruments and financial guarantees.
The Group has exposure to interest rate risk that arises mainly due to the Group's debt obligations with floating interest rates. Interest earned on call deposits are based on the
current interest rate. Interest rate swaps are used to manage interest rate risk. The Group has a policy of fixing interest rates within a range of 50% to 100% of the exposure. The fixed
interest rates for the existing swaps range between 4.3% and 5.01% (2021: 4.3% and 5.01%) and the floating rate of 0.96% is aligned to the floating quarterly bank bill rate, The amount of
borrowing covered using swaps at balance date 31 January 2022 was $10m (2021: $10m). The loss on interest rate swaps at balance date was $547k (2021: $1,491k).
22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
Liquidity risk
The following table analyses the contractual cash flows for all financial liabilities including proposed repayment of term debt with BNZ FY23 H1:
As at 31 January 2022$000$000$000
Bank loans47,000- -
Credit card facilities350- -
Lease liabilities1,5311,0023,400
Trade and other payables16,434- -
Financial guarantee contracts132- -
Total non-derivative liabilities65,4471,0023,400
Forward foreign currency exchange contracts95,864 81,805 29,141
Forward foreign currency options20,791 43,288 75,042
Interest swaps126 - -
Total derivative liabilities116,781125,093104,183
As at 31 January 2021
Bank loans75075038,500
Credit card facilities350- -
Lease liabilities- 1,3022
Trade and other payables19,263- -
Financial guarantee contracts115- -
Total non-derivative liabilities20,4782,05240,811
Forward foreign currency exchange contracts91,90384,82575,467
Forward foreign currency options27,99813,5395,402
Interest swaps429428756
Total derivative liabilities120,33098,79281,625
Climate Risk
25.FAIR VALUE OF FINANCIAL INSTRUMENTS
The following financial instruments of the Group are carried at fair value:
20222021
Current derivative financial assets$000$000
Forward exchange contracts1,0284,509
Foreign exchange options310904
Total current derivative financial assets
1,3385,413
Non-current derivative financial assets
Forward exchange contracts1,04315,454
Foreign exchange options2,068900
Total non-current derivative financial assets
3,11216,354
Current derivative financial liabilities
Forward exchange contracts2,77294
Foreign exchange options30861
Interest rate swaps5481,491
Total current derivative financial liabilities
3,6281,646
Non-current derivative financial liabilities
Forward exchange contracts2,61818
Foreign exchange options4,032186
Interest rate swaps- -
Total non-current derivative financial liabilities
6,650204
Valuation methods
Level 1: Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date
Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs)
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices)
The Group performs cash flow forecasting activities on a daily basis to ensure it has sufficient cash to meet operational needs and monitors performance against bank covenants on a
monthly basis. Surplus cash is invested in short-term or money market deposits.
Less than
one year
Undrawn committed facilities and/or liquid assets are maintained at all times at an amount sufficient to cover the forecast cash payments to employees, suppliers, tax authorities and banking
institutions as they fall due.
The carrying value of the BNZ loans and BFS loan is $47m and is considered a reasonable approximation of its fair value due to the short term maturities of the drawings.
The carrying value of cash and short term deposits, trade receivables, trade payables and other current liabilities is considered a reasonable approximation to their fair value due to the short
term maturities of these instruments.
Between one
and two
years
Between
two and five
years
The Group recognises climate change will have a significant impact on our operations. The key risks are both physical risks (climate and water temperature impacting fish health) and
transition risks resulting from the process of consumers adjusting their taste and preferences towards a low carbon economy. During the transition period, regulatory risk has also been
identified, as the cost of compliance is increasing and not showing any signs of stabilising. The Health, Safety and Risk Committee has responsibility for the oversight of all risk domains,
which includes managing climate risk, as delegated by the Board. An internal sustainability working group is being established to develop the Groups strategic response to climate risk in line
with the recommendations of the Task force on climate-related disclosures.
Financial instruments have been categorised into the following hierarchy and valued according to the following definitions, based on the lowest level input that is significant to the fair value
measurement as a whole:
All derivative financial instruments for which a fair value is recognised have been categorised within level 2 of the fair value hierarchy. Industry experts have provided the fair values for all
derivatives based on an industry standard model. There were no transfers between Level 1 and Level 2 during the period ended 31 January 2022 (31 January 2021 - nil).
23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
26.CAPITAL MANAGEMENT
Group capital
See also note 2 Significant accounting judgements, estimates and assumptions, Going Concern.
27.CAPITAL AND RESERVES
Share capital
20222021
Issued shares000000
Ordinary shares140,638138,986
Total issued shares
140,638138,986
2022202120222021
Movement in ordinary share capital000000$000$000
The beginning of the period138,986138,986122,606122,606
Share issue for employee LTI share scheme1,652- - -
Share issue recognised on repayment of employee loans- - - -
Total share capital as at period end
140,638138,986122,606122,606
Reserves
Foreign currency translation reserve
Hedge reserve
20222021
12 months7 months
$000$000
(18,187)
11,751
9,716
4,136
Total gain / (loss) on hedge reserves(8,471) 15,887
Retained earnings
Share based payment reserve
Retained earnings represents the profits retained in the business.
Share Capital
The capital of the Group consists of share capital, reserves and retained earnings/(deficit). The Group's objectives when managing capital are to safeguard the Group's ability to continue as a
going concern in order to provide returns for shareholders, benefits for shareholders and to maintain an optimal capital structure to reduce the cost of capital.
Ordinary shares are fully paid with no par value. Each ordinary share has an equal right to vote, to participate in dividends and to share in any surplus on winding up of the Company. No
dividend was declared nor paid during the year 2022 (7 months to 31 January 2021: No divided was declared nor paid).
The share based payment reserve relates to one long term incentive (LTI) scheme and two employee share ownership schemes. All of these schemes involve the Company making interest-
free limited recourse loans to selected personnel to acquire shares in the Company. The employees must remain in employment for the duration of the vesting or escrow periods before the
employees receive the full benefit of share ownership subsequent to repayment of the loan balance remaining at time of vesting.
# of Shares
Realised gain / (loss)
In addition to this the Group aims to ensure that it meets financial covenants attached to the interest bearing loans and borrowings that define capital structure requirements. Refer to note 20
Borrowings - the Group commenced negotiations with the Group’s Bank in February 2022 after the unforeseen increase in mortality commenced.The Group has worked with the Group’s
bank to agree a combination of temporary waivers and adjustments to existing facilities and associated covenants, and as such no event of default has occurred as at 31 January 2022.
Unrealised gain / (loss)
In order to maintain or adjust the capital structure the Group may adjust dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of the foreign subsidiary.
The hedge reserve represents the unrealised gains and losses on interest rate swaps and foreign currency forward contracts that the Group has taken out in order to mitigate interest rate
and foreign currency risks, net of deferred tax. Also included are the realised gains on early closed foreign currency forward contracts where the hedged future cash flows are still expected to
occur (net of tax).
24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
28.EVENTS AFTER BALANCE DATE
- The Group will look to offset the loss in harvest with market and product optimisation in addition to traditional tools
29.RELATED PARTY DISCLOSURES
Subsidiaries
New Zealand King Salmon Investments Limited has the following trading subsidiaries.
SubsidiaryCountry of IncorporationEquity Interest
The New Zealand King Salmon Co LimitedNew Zealand100%
New Zealand King Salmon Exports LimitedNew Zealand100%
The New Zealand King Salmon Pty LimitedAustralia100%
New Zealand King Salmon USA IncorporatedUnited States of America100%
Transactions with related parties
20222021
12 months7 months
Related party payments$000$000
Good and services purchased from other related parties402300
Total related party payments402300
Related party sales$000$000
Goods and services sold to related parties- 28
Total related party sales- 28
Amounts owing to related parties20222021
Current amounts owing to related parties$000$000
Other amounts owing to related parties233233
Total current amounts owing to related parties233233
Amounts owing by related parties$000$000
Amounts owing by related parties23
Total amounts owing by related parties23
30.AUDITOR'S REMUNERATION
20222021
12 months7 months
$000$000
Audit fees309189
Other assurance1010
Tax advisory and compliance - -
Total auditor's remuneration319199
31.RECONCILIATION OF NET OPERATING CASH FLOW TO PROFIT/(LOSS)
20222021
12 months7 months
Reconciliation of the profit / (loss) for the period with the net cash from operating activities$000$000
Profit / (loss) before tax(87,593) (9,326)
Adjusted for
Depreciation and amortisation10,1255,969
Impairment59,255-
(Gain)/loss on sale of assets1351
Share-based payments14698
Net foreign exchange differences13,6335,428
Net loss/(profit) on derivative instruments at fair value through profit or loss48338
(Increase)/decrease in trade and other receivables and prepayments(3,631) (3,409)
(Increase)/decrease in inventories and biological assets21,080(2,687)
Increase/(decrease) in trade and other payables(2,455) 3,945
Income tax paid(4,171) (938)
Net cash flow (to) / from operating activities7,008(881)
- Undertaking a change to its farming strategy to reduce the mortality risk by not farming the warmer farms during the summer months.
On 1 February 2022 the Group disclosed a mortality event was occurring at its sea farms. This event has continued into February, March and April of FY23, which will impact the FY23
harvest and financial results. As a result of this mortality event the Group is:
Other assurance services include performance of agreed upon procedures on sustainability information of the Group.
The principal activity of The New Zealand King Salmon Co Limited is the farming and processing of salmon. The activity of New Zealand King Salmon Exports Limited, The New Zealand
King Salmon Pty Limited, and New Zealand King Salmon USA Incorporated is the distribution of salmon.
In February 2022 the Group also commenced discussions with the BNZ resulting in an extension to the delivery date for the 31 January 2022 covenants to 13 April 2022 and in any event on
or before 30 April 2022 on the understanding that an equity raise will be launched on or about that date. The Group has modelled that breaches will occur without corrective action being
undertaken. On 12 April 2022, the Group's Board approved to proceed with a fully underwritten or pre-committed equity raise of $60.1m. In addition, the Group has agreed a combination of
temporary covenant waivers and temporary adjustments to covenant definitions with its debt providers. As a result of these corrective actions the Group has greater confidence that there will
be no default event in respect of its financial covenants for 12 months from the date of approving these financial statements.
In addition to the mortality event which has occurred at our warmer sea farms over summer, the Group has also seen elevated mortality at one of its other sites, Te Pangu, which has been
linked to a feed related issue. This issue will also result in a lower FY23 harvest and the expected financial impact of this post year end mortality event is an EBITDA loss of $3.8m
No final dividend was declared in respect of the year ended 31 January 2022 ( 7 months to 31 January 2021: Nil).
The following provides the total amount of transactions that were entered into with related parties for the relevant financial year:
At balance date Oregon Group Limited owned 39.55% (2021: 40.02%) and China Resources Ng Fung Limited owned 9.81% (2021: 9.96%) of the shares in New Zealand King Salmon
Investments Limited.
25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JANUARY 2022
32.REVENUE FROM CONTRACTS WITH CUSTOMERS
(a) Sale of goods with variable consideration
- Volume rebates
(b) Contract balances: contract liabilities
- Ōra King
- Regal
- Southern Ocean
- Omega Plus
- New Zealand King Salmon
(c) Performance obligations
Delivery to customer
On collection
Receipt into store
CIF, into hold
20222021
12 months7 months
Revenue by Product group
$000$000
Whole fish
88,519 46,057
Fillets, Steaks & Portions
35,418 18,606
Wood Roasted
14,099 8,555
Cold Smoked
26,522 16,504
Other 9,972 5,517
Total revenue by product group174,53095,239
20222021
Revenue by Brand
$000$000
Ōra King
61,477 34,326
Regal 33,922 19,502
Southern Ocean
9,928 6,203
Omega Plus
2,859 1,408
New Zealand King Salmon
66,344 33,800
Total revenue by brand174,530 95,239
20222021
Revenue by geographical location of customers$000$000
New Zealand69,08541,786
North America67,62634,671
Australia11,8166,385
Japan7,8075,023
China1,7371,021
Europe10,7092,793
Other5,7503,560
Total revenue by geographical location of customers174,53095,239
33.SEGMENT INFORMATION
Segment results
Segment performance - Refer also Note 32 for detail of disaggregation of revenue by product, brand and geographical area.
The Group's strategy is to maximise longer term sales and overall margins by focusing on branded, premium priced and differentiated sales across its range of markets, channels and
customers. The operating results of the whole business are monitored for the purpose of making decisions about resource allocating and performance. Accordingly, the Group is considered
to consist of one operating segment.
The performance obligation is satisfied upon delivery of salmon products when receipted into the customer's store and payment terms are generally on the 20th of the month following invoice
date.
The performance obligation is satisfied upon collection of salmon products by the customer and payment terms are generally on collection.
A contract liability is the obligation to transfer goods to a customer for which the Group has received consideration from the customer. If a customer pays consideration before the Group
transfers goods to the customer, a contract liability is recognised when the payment is made or when the payment is due (whichever is earlier). Contract liabilities are revenue when the Group
performs under the contract.
The performance obligation is satisfied upon delivery of salmon products to the customer, and payment terms generally range between cash on delivery and 20th of the month following
invoice date.
The Group recognises revenue from the following major brand sources:
Sales net of settlement discounts to one major customer for the period 1 February 2021 to 31 January 2022 totalled $19.08m or 10.93% of total gross revenue (7 months to
31 January 2021 one major customer totalled $10.7m or 11.24% of total gross revenue).
The performance obligation is satisfied upon delivery of shipping documents including either the bill of lading or way bill dependent on transportation mode. Payment terms generally range
between 7 days from invoice date and 20th of the month following invoice date.
Information about the Group's performance obligations is summarised below:
The Group provides retrospective volume rebates to certain customers on the quantity of product purchased during the period. The rebate is charged at time of settlement. Therefore the
Group does not see the need to recognise a refund liability due to timeliness of the transaction.
Some contracts for the sale of goods provide customers with volume rebates. Under NZ IFRS 15, volume rebates give rise to variable consideration.
26
A member firm of Ernst & Young Global Limited
Independent auditor’s report to the Shareholders of New Zealand King Salmon
Investments Limited
Opinion
We have audited the financial statements of New Zealand King Salmon Investments Limited (“the
company”) and its subsidiaries (together “the group”) on pages 2 to 26, which comprise the
consolidated statement of financial position of the group as at 31 January 2022, and the consolidated
statement of comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended of the group, and the notes to the consolidated
financial statements including a summary of significant accounting policies.
In our opinion, the consolidated financial statements on pages 2 to 26 present fairly, in all material
respects, the consolidated financial position of the group as at 31 January 2022 and its consolidated
financial performance and cash flows for the year then ended in accordance with New Zealand
equivalents to International Financial Reporting Standards and International Financial Reporting
Standards.
This report is made solely to the company's shareholders, as a body. Our audit has been undertaken so
that we might state to the company's shareholders those matters 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report.
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) issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Ernst & Young performs agreed upon procedures in relation to sustainability information of the group.
Partners and employees of our firm may deal with the group on normal terms within the ordinary
course of trading activities of the business of the group. We have no other relationship with, or interest
in, the group.
Material Uncertainty Related to Going Concern
We draw attention to Note 2c in the financial statements, which indicates that the group was in breach
of its bank covenants at balance date and is dependent on the success of a proposed equity raise, or
obtaining funding by alternative means, to enable it to repay its bank loans. In addition, it may need to
obtain additional funding to finance its operations. As stated in Note 2c, these events or conditions,
along with other matters explained in Note 2c, indicate that material uncertainties exist that may cast
A member firm of Ernst & Young Global Limited
significant doubt on the group’s ability to continue as a going concern. Our opinion is not modified in
respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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, but we do not provide a separate opinion on these matters. In addition to the matter described
in the Material Uncertainty Related to Going Concern section, we have determined the matters
described below to be the key audit matters to be communicated in our report. For each matter below,
our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial statements section of the audit report, including in relation to these matters. Accordingly, our
audit included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying consolidated financial statements.
Impairment assessment
Why significant How our audit addressed the key audit matter
Prior to its impairment, the consolidated
statement of financial position included
goodwill arising from business combinations of
$39.3 million (2021: $39.3 million). An
impairment test of the carrying value of
goodwill is required annually and as a result of
this, along with other indicators, an
impairment assessment was conducted at year
end. The group has recorded an impairment
of the full amount of goodwill of $39.3 million
and an additional impairment of other assets
of $14.4 million.
The recoverable amount of a cash generating
unit (“CGU”) is the higher of fair value less
costs to sell (FVLCS) and value in use (VIU).
The group has determined that it has a single
CGU.
Impairment is a key audit matter because the
group’s year end assessment of recoverable
amount involves significant judgements
related to future cash flow forecasts, discount
rate and terminal growth rate assumptions.
These are key inputs into the group’s
discounted cashflow (DCF) model used to
assess the VIU of the CGU and so its
recoverable amount.
In obtaining sufficient, appropriate audit evidence
we:
► evaluated the appropriateness of the group’s
single CGU determination;
► considered the group’s value in use
assessment. This included the following:
• agreed relevant DCF inputs to board
approved budget and forecasts and
compared these with historical actual
results taking into account proposed
changes in the group’s strategy. We
also considered the accuracy of the
group’s previous forecasts;
• tested the mathematical accuracy of
future cash flow forecasts and
discounting applied;
• involved our valuation specialists in
assessing the discount rate and
terminal growth rate applied, as well
as benchmarking components of the
group’s forecasts against other
market information;
A member firm of Ernst & Young Global Limited
Disclosures in relation to impairment of
goodwill and other assets are included in Note
5 to the group financial statements.
► considered the appropriateness of the
adoption of the calculated VIU as the CGU’s
recoverable amount;
► involved our valuation specialists in
performing an assessment of FVLCS based on
market capitalisation;
► evaluated the assessment of the carrying
value of the CGU prior to impairment, the
resulting impairment charge and its allocation
to goodwill and other assets; and
We also considered the appropriateness and
sufficiency of impairment related disclosures
included in the group financial statements.
Biological assets
Why significant How our audit addressed the key audit matter
At 31 January 2022, the consolidated
statement of financial position includes
biological assets (live salmon) of $75.0 million
with an estimated biomass of 6,015 metric
tonnes measured at fair value less costs to
sell. This includes a fair value increase above
cost of $24.4 million.
This is a key audit matter because the group’s
estimation of the fair value of biological assets
involves estimation of year-end biomass and a
valuation model that relies on significant
estimation including:
► year end biomass and future growth to
harvest;
► future fish mortalities;
► forecast sales prices;
► forecast costs to harvest date and of sale;
► forecast sales product mix; and
► use of a weight-based method, to
recognise the estimated fair value gain at
balance date
Disclosures in relation to biological assets are
included in Note 15 to the group financial
statements.
In considering the valuation of live salmon we:
► evaluated the appropriateness of key
estimations and assumptions and their impact
on the valuation assessment;
► agreed key estimation inputs used by the
group in their valuation model to source data
and to board approved forecasts;
► involved our valuation specialists in the
evaluation and testing of the mathematical
integrity of the calculations in the valuation
model;
► challenged the accuracy of model inputs
compared to historical actual values and
considered the accuracy of previous
forecasts; and
► considered post year end harvest mortality
data to assess the impact, if any, on the
forecasts used in the valuation model.
In considering live salmon biomass at year end we:
► tested controls over fish count recording at
the point of transfer from the freshwater
hatcheries to sea pens;
► considered the key inputs used by the group
in estimating growth and biomass;
► tested controls over fish quantity and biomass
adjustments to the livestock recording
system;
A member firm of Ernst & Young Global Limited
► agreed significant quantity and biomass
adjustments made by the group in the
livestock recording system to source data;
► performed analytical procedures over feed
conversion to biomass; and
► considered the accuracy of historical
forecasts of average fish weight and quantity
recorded in the livestock recording system to
actual fish harvest data.
We also considered the appropriateness and
sufficiency of biological assets disclosures included
in the group financial statements.
Information other than the financial statements and auditor’s report
The directors of the company are responsible for the Annual Report, which includes information other
than the consolidated financial statements and auditor’s report which is expected to be made available
to us after the date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained during the audit, or otherwise
appears to be materially misstated.
When we read the Annual Report, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to those charged with governance and, if uncorrected, to take
appropriate action to bring the matter to the attention of users for whom our auditor’s report was
prepared.
Directors’ responsibilities for the financial statements
The directors are responsible, on behalf of the entity, for the preparation and fair presentation of the
consolidated financial statements in accordance with New Zealand equivalents to International Financial
Reporting Standards and International Financial Reporting Standards, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing on behalf
of the entity 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 cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about 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
A member firm of Ernst & Young Global Limited
guarantee that an audit conducted in accordance with International Standards on Auditing (New
Zealand) will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
A further description of the auditor’s responsibilities for the audit of the financial statements is located
at the External Reporting Board’s website: https://www.xrb.govt.nz/standards-for-assurance-
practitioners/auditors-responsibilities/audit-report-1/. This description forms part of our auditor’s
report.
The engagement partner on the audit resulting in this independent auditor’s report is Brendan
Summerfield.
Chartered Accountants
Christchurch
13 April 2022
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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