Release of FY22 Annual Report
ANNUAL REPORT 2022
SUSTAINED
PROGRESS
JOURNEY
OUR
TRANSFORMATION
TO A SUSTAINABLE
BUSINESS
CONTINUES
WE'VE STRENGTHENED THE BREMWORTH BRAND,
SHIFTED OUR FOCUS TO PREMIUM RESIDENTIAL
CONSUMERS AND SIGNIFICANTLY IMPROVED
MARGINS. THE GOOD NEWS IS,
WE'RE JUST GETTING STARTED.
1
CONTENTS
CEO Review 2
FY22 Progress 4
Sustainability 6
Highlights 10
Board of Directors 26
Chairman’s Review 28
FY22 Financial Highlights 34
FY22 Financial Review 36
FY22 Timeline 40
FY23 Priorities 42
Trend Statement 44
Consolidated Financial Statements 48
Governance and Other Disclosures 110
On behalf of the Board and
management of Bremworth Ltd,
we are pleased to present the
Annual Report for the year
ended 30 June 2022.
George Adams
Chairman
Greg Smith
Chief Executive Officer
29 September 2022
2
"GUIDED BY OUR PURPOSE TO FIND A
MORE SUSTAINABLE WAY, WE'RE MAKING
POSITIVE CHANGES AND DOING MORE
OF WHAT REALLY MATTERS."
GREG SMITH CEO
3
CEO REVIEW
"WE'VE BUILT A STRONG
FINANCIAL PLATFORM BY
RESTORING OUR MARGINS,
SIMPLIFYING OUR OPERATIONS
AND FOCUSING ON
CONSUMER INSIGHTS."
GREG SMITH CEO
Despite a challenging operating environment,
we’re ahead of our transformation plan with a
44% increase in normalised EBITDA. Our shift
in focus to premium residential consumers has
driven significant improvement in gross margin.
Our all-natural strategy delivered strong 15%
revenue growth in woollen carpet and rugs in
NZ and 25% growth in our rest of world business.
We intentionally moved away from the low margin
high volume commercial business in Australia
meaning revenue contracted 12%.
Elco Direct, our wool buying business grew revenue
by 20%. This is a pleasing result which reflects our
deep relationships with our New Zealand growers.
Our fledgling digital direct-to-consumer rug
business is growing rapidly with increased
revenue and gross profit.
FY22 presented a unique set of challenges for our
entire organisation. Our sales, administration and
leadership teams spent up to 8 months working
from home. We took the decision to protect our
manufacturing teams and ensure continuity of
supply for our customers. Throughout this period
our manufacturing team did not skip a beat.
I’m incredibly proud of the courage, teamwork
and resilience that was shown to ensure we
delivered against our ambitious strategic plans.
These qualities give me great confidence in
FY23 and beyond.
Greg Smith
Chief Executive Officer
4
PRIORITY ONE
CREATING DEMAND FOR
BREMWORTH BRANDED PRODUCT
Bremworth has the highest unprompted brand awareness in NZ when
compared to all competitor carpet manufacturers*
Bremworth is the most preferred brand in NZ when compared to key competitors*
Preference for Bremworth carpet in NZ has increased from 27% in 2020 to 35% in 2022*
We’ve been awarded the Most Trusted Carpet Brand for the 9th year in a row**
We’re seeing others pay for “Bremworth” as a keyword in their Google AdWords spend
PRIORITY TWO
OPTIMISING OPERATIONAL EFFICIENCY
AND COMMERCIAL EXCELLENCE
Improved gross profit margin from 28.1% to 31.1%
Capex investment to increase manufacturing capacity
Reduced SKU’s by 30% to simplify product offer
Improved delivery times and inventory quality and profile to support sales growth in FY23
Exited high volume, low margin commercial business in Australia
Introduced Te Ara Rangatira, Bremworth’s leadership development programme
Implementing Industry 4.0 principles and technology to improve capability, efficiency and capacity
Introduced flexible hybrid working
LAST YEAR WE SET
FOUR KEY PRIORITIES
THIS IS HOW WE HAVE PERFORMED
5
FY22 PROGRESS
PRIORITY THREE
SUPERCHARGING THE
DIGITAL BUSINESS
Growing demand online for our rugs
60% growth in website traffic vs FY21
Double digit growth in social media followers vs FY21
Consumer insights informing product development
PRIORITY FOUR
PRIORITISING INNOVATION,
SUSTAINABILITY AND PARTNERSHIPS
Won the Primary Industries Innovation and Collaboration Project Award in recognition
of our science-based and research-led sustainability programme and the partnerships we have
formed with organisations like the University of Auckland, NZ Product Accelerator,
AgResearch and the Ministry for Primary Industries’ Sustainable Food and Fibre Futures fund
Embarked on $2.9m decarbonisation initiatives to reduce manufacturing carbon
emissions in partnership with the Energy Efficiency Conservation Authority,
while continuing with $4.9m research-based sustainability programme
Reduced total manufacturing carbon emissions by 5% vs FY21
Developed prototype fully compostable rugs that can be safely returned to the earth
Developed virtual manufacturing model as a “digital twin” of our
operations to map sustainability indicators such as carbon and energy
use and aid in the development of future product
* TRA Consumer Insights Research
** Reader’s Digest Most Trusted Brand
6
SUSTAINABILITY
IS A TEAM
EFFORT
Sustainability is not just a division at Bremworth,
it’s a way of making products, treating people and
doing business.
To support our evolution, we’re working with
Government agencies, research partners, and
industry thought leaders to improve our products’
circularity and reduce our environmental impact
at all stages of production. With each new initiative
we’re getting one step closer to achieving our
sustainability aspirations.
SUSTAINABILITY
Proudly partnering with ....
7
OUR THREE PRIORITIES ARE:
1. TO MAKE MORE COMPOSTABLE SOLUTIONS
2. REDUCE CARBON
3. MINIMISE WASTE
8
9
SUSTAINABILITY FRAMEWORK
Bremworth’s Integrated Sustainability Framework
embracing People, Planet and Prosperity considers
the United Nations Sustainable Development
Goal 3 (Good Health and Well-being), Goal 8
(Decent Work and Economic Growth), Goal 10
(Reduced Inequalities), Goal 12 (Responsible
Consumption and Production) and Goal 13
(Climate Action) as it seeks to make a positive
difference in the journey towards a more
sustainable future for all.
BREMWORTH'S INTEGRATED SUSTAINABILITY
FRAMEWORK EMBRACING PEOPLE, PLANET
AND PROSPERITY
PEOPLE
Safety &
Wellbeing
•
We support our team to be their best selves and take a proactive approach
to risk management.
•
Our critical risk framework and controls are key enablers and challenge us to design
out risk where possible.
•
To enable our people to thrive, we design a holistic approach to the safety and
wellbeing of our people.
Diversity,
Inclusion
& Capability
•
Diversity in our workforce is what makes Bremworth special.
•
We are committed to diverse perspectives as well as collaborative and transformational
leadership in line with a high-performance culture.
•
We foster an environment of exploration, adaptation and growth.
PLANET
Circularity
•
We are committed to a circular economy and to product longevity by design,
with materials kept in use and waste and pollution minimised.
•
Designing for the future requires us to consider the whole of product life cycle
including use and end of life. We will innovate to reduce environmental impacts.
Climate
Change
•
We commit to reducing our greenhouse gas emissions in line with scientific
consensus to restrict global warming.
•
We will communicate the impact of our products on the climate to consumers
so that they can make informed choices.
PROSPERITY
Consumer
Wellbeing
•
We make beautifully designed, high performing interior products which aspire to add
to consumer health and wellbeing. Wool and other natural fibres have multiple inherent
benefits including indoor air quality, sound, moisture control and fire safety.
•
We work closely with our customers and suppliers to ensure our products and services
incorporate beautiful design, meet performance requirements and provide sustainable
and safe options for our consumers.
Communities
•
We support the New Zealand wool industry and wool-growing community to positively
steward the land. At the sites of our operations, we aspire to be an active member
of a thriving local community by creating meaningful employment opportunities.
•
We increase shareholder value by building our reputation as a leading employer,
while continuing to reinvest in the future growth of Bremworth and our people.
•
We will introduce long-term contracts to enable our wool growers and Bremworth
to improve supply, quality and margins – in the process creating a sustainable future.
10
COMPOSTABLE
RUG PROTOTYPES
At Bremworth we’ve developed two fully
compostable rug prototypes to help us rapid test
ideas that will deliver consumers more compostable
carpet and rugs over time. This project was part of
our $4.9m research-led sustainability programme
supported by the Ministry for Primary Industries’
Sustainable Food and Fibre Futures fund.
Most wool carpets use a synthetic backing
and latex which contain materials that hinder
composting. Our goal is to address these barriers
and move towards circular product ranges with
genuine end of life options like upcycling, recycling
or even returning to the earth, ultimately being
better for people and the planet.
Dr Kirstine Hulse, GM of Sustainability at
Bremworth, challenged our designers to make
a highly desirable, functional rug using only
biodegradable natural fibres and almost
nothing else.
The prototype rugs are hand woven and knotted
from natural materials including New Zealand wool
and alpaca fibres.
These experimental rugs allow us to push towards
product circularity, bringing us one step closer to
deliver fully compostable products in the future.
SUSTAINABILITY HIGHLIGHT
11
Photo Abodo Wanaka
12
DECARBONISATION
FY22 marked the beginning of our journey
to reduce carbon impacts from our
manufacturing plants.
Our first project is a $2.5 million initiative to
transition our Napier wool yarn spinning plant
from natural gas to electricity for specified process
heat streams and incorporating high temperature
heat pump technology.
This project is 38% co-funded under various funding
programmes, including $798,000 from the GIDI
(Government Investment in Decarbonising Industry)
Fund administered by the Energy Efficiency
and Conservation Authority (EECA), with the
project expected to save up to 1,500 tonnes
of CO₂e per annum.
A second EECA co-funded initiative will
see a gas fired dryer at our Whanganui plant
replaced with an alternative that uses radio
waves to dry felted yarn during our production
process. The reduction in greenhouse gases
from this initiative is estimated to be almost
200 tonnes of CO₂e annually.
SUSTAINABILITY HIGHLIGHT
13
14
INNOVATION &
COLLABORATION
As we make progress on our journey to go good
together we were proud to receive the Innovation
and Collaboration Project Award at the Primary
Industries New Zealand (PINZ) Awards 2022.
This award recognises our science-based
and research-led sustainability programme in
partnership with AgResearch, the University
of Auckland and NZ Product Accelerator and
with the underlying projects co-funded by the
Ministry for Primary Industries’ Sustainable Food
and Fibre Futures fund.
SUSTAINABILITY HIGHLIGHT
15
"THE BREMWORTH STORY BLEW ME AWAY
AND IT IS TO THE COMPANY'S CREDIT IT IS
MAINTAINING PRODUCTION IN NEW ZEALAND
DESPITE IT BEING CHEAPER TO DO SO
OFFSHORE. WATCH THIS SPACE."
ALAN EMMERSON PINZ JUDGE
16
17
BRAND HIGHLIGHT
BREMWORTH HAS THE HIGHEST
UNPROMPTED BRAND AWARENESS IN
NZ COMPARED TO ALL COMPETITOR
CARPET MANUFACTURERS*.
OUR BRAND IS
STRATEGICALLY
POSITIONED
TO APPEAL TO
PREMIUM
RESIDENTIAL
CONSUMERS
* TRA Consumer Insights Research
** Reader’s Digest Most Trusted Brand
Bremworth’s investment in the greater New Zealand
wool story is elevating our brand preference
and awareness.
Being awarded the Most Trusted Carpet Brand for
the 9th year in a row also underscores our strong
position in the market**.
18
DESIGN HIGHLIGHT
INTERIOR
INFLUENCER
Melbourne based art director and style influencer,
Natalie Turnbull helped us demonstrate how
Bremworth customised rugs define spaces and
bring natural beauty to any interior.
“I was looking for a soft, neutral tone and wanted
to bring multiple textures into the space without
affecting the overall calm palette. As this is a
smaller open plan home, I used rugs in different
shapes and sizes to create different zones.”
NATALIE TURNBULL
19
20
ONE OF NEW YORK'S TALLEST SKYSCRAPERS WILL
SOON BE HOME TO BREMWORTH WOOL FLOORING.
THE $1.1 BILLION BROOKLYN TOWER WILL
STAND AT 327 METRES TALL AND REQUIRE
OVER 3,000SQM OF CARPET.
21
PROJECT HIGHLIGHT
BROOKLYN
TOWER
Opening later this year, Brooklyn Tower will be one
of the world’s tallest residential buildings and home
to hundreds of the city’s elite.
The Brooklyn Tower project is our highest profile
commercial contract in North America since
Bremworth wool carpets were used to refurbish
dozens of showrooms owned by luxury French
jewellery maker, Cartier.
As a natural fibre manufacturer from a country
renowned for its environmental positioning and
high standard of farming practices, this high
profile project will help to raise the profile of
both the Bremworth brand and New Zealand
wool in the US market.
22
PEOPLE HIGHLIGHT
INVESTING IN
OUR PEOPLE'S
FUTURE
Te Ara Rangatira –
Leadership Development Programme
Te Ara Rangatira means to rise up and awaken to
a high standing. The main purpose of this two year-
long programme is to support leaders and teams
with the tools and knowledge they need to create
and nurture high performance culture.
Poutama –
Technical Development Programme
Poutama symbolises the various levels of learning
and intellectual achievement. This programme
supports the ongoing development of key technical
and operational functions to heighten industry
expertise within Bremworth and facilitate cross-
functional knowledge and experiences. We also
leverage technology and systems training to
embed knowledge transfer.
DEVELOPING OUR PEOPLE'S CAPABILITY HELPS
WITH ENGAGEMENT AND RETENTION, AND BUILDS
THE SKILLS NEEDED FOR A SUSTAINABLE FUTURE.
THAT'S WHY WE'RE INVESTING IN OUR EMPLOYEES
VIA TWO CAPABILITY-BASED PROGRAMMES.
23
"WE ARE PROUDLY ENCOURAGING SUSTAINABLE
STRATEGIES THROUGHOUT OUR BUSINESS AND
STAFF HAVE ADOPTED THE SUSTAINABLE WAY IN
THEIR EVERYDAY LIFE AS WELL. FROM TAKING
THEIR OWN CONTAINER FOR TAKEAWAYS TO
STARTING VEGETABLE PATCHES, OUR PEOPLE
ARE LOOKING FOR BETTER WAYS."
Fogalele Pritchard-Apulu, Manufacturing Training Manager
24
PEOPLE HIGHLIGHT
25
In 1964, a young man by the name of Grant Biel
was hired by a local carpet company, Bremworth,
to make sense of newly imported broadloom carpet
tufting and finishing plant from the US. Grant,
who was finishing his final year at the School of
Engineering, was a mechanical whizz and soon
things were humming.
After a few years, Grant left Bremworth to pursue
his aeronautical passions overseas, but returned
not long after, convincing the company to sponsor
him as a New Zealand entrant in the 1969 London
to Sydney Commemorative Air Race.
Grant and Tony Timpson met when they were both
working for Bremworth, and in 1972, they decided
to open their own carpet business. And so Cavalier
Carpets was conceived. Grant was the mechanical
and engineering brains while Tony was marketing,
sales and accounting. Import licenses for equipment
were extremely difficult to obtain in those days,
so incredibly all Cavalier’s carpet making machinery
was designed and built in-house.
The first Cavalier workshop was established in the
basement of Leon O’Shea’s home in Howick and
it was there that the prototype carpet tufter was
built. The story goes that Grant was so excited
at assembling the first tufting machine that he
unravelled yarn from the sleeve of his red jersey
to thread the machine and tuft a very small piece
of carpet, and in doing so, created a piece of our
history! With the knowledge that the equipment
worked, a new factory (or ‘tin shed’ as they called it)
was built in the middle of a big green paddock
at Orb Avenue, Wiri in South Auckland... very close
to where our offices are today.
The first ‘Cavalier’ carpet came through the
purpose-built finishing line a few months later
in May 1973, a 52oz shaggy cut pile that came in
9 colours ... eight more colours than Henry Ford
offered when he started! Cavalier went from
strength to strength, as it learned, refined and
focused on crafting and delivering high quality
New Zealand wool carpets.
The next fifty years would see Grant and Tony
setting up new plants, establishing offices overseas,
listing on the stock exchange and acquiring and
investing in related businesses. One of their biggest
moments was in 1988, when the pair acquired the
original Bremworth business and brought it into the
Cavalier fold. Grant and Tony were a dream team,
leading the way in the carpet sector, continually
innovating and creating an iconic New Zealand
business where the core values were founded on
culture, ethics and people being just as important
as profit and sales.
Now, five decades after that friendship formed,
we have relaunched the Bremworth name and
brand and are building our future around the deep
expertise and heritage created by Grant and Tony.
To acknowledge Grant’s contribution to the creation
and ongoing support of our business Grant is
Bremworth’s first ever Director Emeritus, a position
he will hold for life. This honorary appointment is in
recognition of the pivotal role Grant has played in
our history.
FIFTY YEARS AT
THE FOREFRONT
DIRECTOR EMERITUS - GRANT BIEL
BOARD OF DIRECTORS
26
George Adams
Independent Chairman
George Adams is an
independent Director and was
appointed to the Board on 1
June 2018. He was appointed
Chair of the Board in July
2020, having served as Deputy
Chair of the Board since
April 2019. George was also
appointed Chair of the Board’s
Nomination Committee in
July 2020 and is a member
of the Board’s Audit and
Remuneration Committees.
George brings outstanding
commercial and governance
experience from more than
30 years of international
business experience in the
fast-moving consumer goods
and telecommunications
industries, as well as a strong
background in occupational
health and safety.
LEADING THE
CHARGE
A STRONG AND STABLE BOARD PROVIDES ROBUST
STRATEGIC AND GOVERNANCE OVERSIGHT.
WE'VE SET A CLEAR GROWTH STRATEGY AND
HAVE FUNDING OPTIONS TO EXECUTE THE PLAN,
WITH AMPLE CAPACITY TO RAMP UP MANUFACTURING.
27
Dianne Williams
Independent Director
Dianne Williams is an
independent Director
and joined the Bremworth
Board in July 2015. She
was appointed Chair of
the Board’s Remuneration
Committee in July 2020
and is a member of the
Board’s Audit and Nomination
Committees. Dianne’s early
career was in marketing in
the FMCG sector, driving
market dominance for some
of New Zealand’s favourite
brands including Cadbury
and Sealord before taking
up senior executive roles
with companies demanding
strong sales and
marketing programmes.
Paul Izzard
Independent Director
Paul Izzard is an independent
Director and joined the
Bremworth Board in
November 2020. Paul is
founder and director of
Izzard Design, a leading
interior design business in
New Zealand. Over almost
20 years, he has completed
more than 300 projects in
residential and commercial
design. Paul’s industry
knowledge and networks,
as well as his business
leadership experience,
are considered valuable
attributes as Bremworth
transforms to being a
global leader in designing
and creating desirable,
sustainable, safe and
high performing natural
interior solutions.
Katherine Turner
Independent Director
Katherine Turner is an
independent director and
is the newest member of
the Board joining in
February 2022. She was
appointed Chair of the
Board’s Audit Committee
at the same time and is
a member of the Board’s
Remuneration and
Nomination Committee.
Katherine is a highly
regarded and respected
leader and qualified
Chartered Accountant.
She has a depth of
financial, commercial
and sustainability expertise
across manufacturing and
primary sectors and a
wealth of experience taking
New Zealand products to
the world.
John Rae
Independent Director
John is an independent
director and joined the
board in July 2015. Since
then, he has at various
times been Deputy Chair
of the Company and also
Chair of both the Audit
and Risk and Remuneration
committees. John has
degrees in both law and
commerce and had a
successful international
career as a CEO in the
finance sector, which has
evolved into becoming
an experienced chair and
director across a range of
industries in over the past
30 years. His specialization
is in governance of entities
facing challenging situations
and transformations, and
shareholder transition
and succession.
28
CHAIRMAN'S REVIEW
FY22
PERFORMANCE
REVIEW
GEORGE ADAMS
FY22 was a transformative year for our company.
We completed the first 12 months as a natural
fibre and wool only business. The move away from
synthetic carpet in July 2020 was a bold one, given
synthetic carpet revenue for FY20 was $36 million.
Now, our five-year journey to profitable growth has
truly started.
Bremworth’s financial and strategic progress is
tracking ahead of plan. While FY22 carpet revenue
was down $19 million, it was as we expected,
with that reduction coming from our exit from the
synthetic carpet market. Despite that, we delivered
a 44% uplift in normalised earnings (EBITDA) and
a 29% increase in net profit after tax to $2.2m for
FY22. This is a strong result in light of COVID-19
and economic headwinds.
The Board is committed to delivering shareholder
value long term. In line with this, and after much
deliberation, the Board declared no dividend
for FY22 as we continue to invest for the future.
Profitable growth and a return to dividends are
expected from FY24 onwards.
A STRONG RESULT IN FY22
29
"A TRANSFORMATIONAL YEAR.
GROWING DEMAND, A STRONGER
OPERATING PLATFORM, AND
IMPROVING PROFITABILITY."
30
A POSITIVE OUTLOOK
FOR CONTINUED GROWTH
The structural transformation undertaken in
the last year has set the platform to grow our
business with a stronger operating platform,
enhanced consumer demand, and a focus on
a high value audience.
The Board remains committed to Bremworth’s
growth aspirations and generating value for
our shareholders. Thank you to our team, our
suppliers and all our customers for their support.
George Adams, Chairman
SUSTAINABILITY
FOUNDATIONS
We have committed over $7 million to our
sustainability initiatives and received Government
co-funding to support these projects. We’re
decarbonising manufacturing plants and investing
in research-led programmes to identify innovative,
sustainable opportunities. Because meaningful
change doesn’t happen without commitment
and investment.
BOARD UPDATE
Bremworth has a board of directors that provide
diversity of thought and varied commercial skills.
We were pleased to welcome Katherine Turner
as a director in February 2022. Katherine is a
qualified Chartered Accountant, a respected
leader, and a highly experienced finance executive.
On appointment, Katherine also took up the role
of Chair of the Audit Committee.
OUR TRANSFORMATION
PLAN ANNOUNCED IN 2020
FY20 - FY21
TRANSFORMATION
INVESTMENT
Strong capital base
to fund transformation
Relaunch of Bremworth
brand and marketing
Right-sized organisation
Set forth on our
sustainability journey
Exited synthetics
Redefined as a premium
design and natural
fibre company
FY22 - FY23
RE-BUILD
INVESTMENT
Appointment
of new CEO
Clear, purpose
led strategy
Capitalise on consumer
and macro trends
Build the brand
Optimise the retailer
network
Measure and drive
sustainability goals
Return to profitable
growth in FY23
FY24
FUTURE FOCUSED
PROFITABLE
GROWTH
Partnerships and
product adjacencies
Return to dividends
FY25 ONWARDS
FULL BENEFITS OF
TRANSFORMATION
STRATEGY
31
32
33
WE REMAIN
COMMITTED
TO OUR
GROWTH
STRATEGY
1. GROW THE NEW ZEALAND WOOL FLOORING MARKET
2. GROW OUR SHARE OF THE MARKET
3. EXPAND OUR PRESENCE
4. DESIGN-LED INNOVATION
34
FY22 FINANCIAL HIGHLIGHTS
CONTINUING PROFIT
IMPROVEMENT
UPLIFT IN
EARNINGS
EBITDA $4.9M, UP 4%
NORMALISED EBITDA, UP 44%
1
PROFIT
IMPROVEMENT
NET PROFIT AFTER TAX (NPAT) $2.2M, UP 29%
NORMALISED NPAT $1.7M, UP 325%
1
REDUCTION
IN COST
FOCUS ON STRUCTURAL IMPROVEMENTS DRIVING
OPERATIONAL EFFICIENCIES AND BENEFITS
35
GROSS MARGIN
IMPROVEMENT
UPLIFT IN GROSS MARGIN TO 31.1%,
UP FROM 28.1%
ROBUST
BALANCE SHEET
PROVIDING A STRONG PLATFORM
TO CONTINUE EXECUTING THE STRATEGY
1
EBITDA is earning before interest, tax, depreciation and amortisation. Normalised results exclude the impact of non-trading
adjustments and are non-GAAP measures. FY21 normalised EBITDA and normalised NPAT excluded net gain on sale and leaseback
of property of $2.6m and restructuring costs of $(1.3)m, whereas FY22 normalised NPAT includes a normalised tax charge of $0.5m.
36
FY22
FINANCIAL
REVIEW
37
REVENUE - GROUP
We had always expected that FY22 revenue
would drop, with revenue of $95.5 million down
14% on $111.6 million in FY21 as follows:
REVENUE - WOOLLEN
CARPET AND RUGS
Our all-natural strategy delivered a strong
$4.4 million/15% revenue growth in New Zealand
and $0.5 million/25% growth in our rest of
world business.
While revenue was down $5.0 million/12% in
Australia, that was the result of the intentional
move away from low-margin high-volume
commercial business in that market to focus
on premium residential consumers.
• non-wool carpet revenue down $19.0 million
as a result of the decision made at the start
of FY21 to exit the non-wool segment of the
carpet market;
• woollen carpet and rugs revenue in line with
FY21 despite COVID-19 impact, economic
headwinds and disruptions to the residential
building pipeline;
• Elco Direct wool procurement revenue
up $3.1 million/20% on FY21.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
EBITDA
4.7
4.9
3.4
4.9
Normalised EBITDA
(1)
FY21Non-wool
carpet
Woollen
carpet
and rugs
Wool
bre
OthersFY22
111.6
3.1
95.5
$ millions
0.0
0.5
1.0
1.5
2.0
2.5
NPAT
2.2
1.71.7
0.4
Normalised NPAT
(1)
$ millions
$ millions
(0.1)
(0.1)
(19.0)
FY21New Zealand
Australia
Rest
of world
FY22
73.1
73.0
$ millions
(5.0)
0.5
4.4
FY21FY22FY21FY22
WE ARE MAKING STRONG PROGRESS,
WITH FY22 FINANCIAL AND STRATEGIC OUTCOMES
AHEAD OF EXPECTATIONS.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
EBITDA
4.7
4.9
3.4
4.9
Normalised EBITDA
(1)
FY21Non-wool
carpet
Woollen
carpet
and rugs
Wool
bre
OthersFY22
111.6
3.1
95.5
$ millions
0.0
0.5
1.0
1.5
2.0
2.5
NPAT
2.2
1.71.7
0.4
Normalised NPAT
(1)
$ millions
$ millions
(0.1)
(0.1)
(19.0)
FY21New Zealand
Australia
Rest
of world
FY22
73.1
73.0
$ millions
(5.0)
0.5
4.4
FY21FY22FY21FY22
FY22 FINANCIAL REVIEW
38
FY22 FINANCIAL REVIEW
EARNINGS AND PROFIT
On a normalised basis (that is, after adjusting
for the impact of non-trading adjustments), EBITDA
was up 44% from $3.4 million to $4.9 million and
NPAT was up 325% from $0.4 million to $1.7 million,
with the Group benefitting from:
• the structural improvements during the year,
driving improved sales mix, uplift in gross profit
from 28.1% to 31.1% and operational efficiencies
and benefits and a reduction in operating costs;
• ongoing investment in the Bremworth brand and
our focus on the premium residential consumers;
• good demand for our rugs; and
• another solid performance by Elco Direct.
CASH FLOWS
Cash position remains strong, with $14.9 million
at balance date.
Operating cashflow of $(2.9) million reflects
a significant investment in woollen carpet
inventory to support FY23 sales growth.
Capital expenditure totalled $2.9 million
in FY22, with almost 55% of that invested
in plant improvements to enable higher
output and drive manufacturing efficiencies.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
EBITDA
4.7
4.9
3.4
4.9
Normalised EBITDA
(1)
FY21Non-wool
carpet
Woollen
carpet
and rugs
Wool
bre
OthersFY22
111.6
3.1
95.5
$ millions
0.0
0.5
1.0
1.5
2.0
2.5
NPAT
2.2
1.71.7
0.4
Normalised NPAT
(1)
$ millions
$ millions
(0.1)
(0.1)
(19.0)
FY21New Zealand
Australia
Rest
of world
FY22
73.1
73.0
$ millions
(5.0)
0.5
4.4
FY21FY22FY21FY22
0.0
1.0
2.0
3.0
4.0
5.0
6.0
EBITDA
4.7
4.9
3.4
4.9
Normalised EBITDA
(1)
FY21Non-wool
carpet
Woollen
carpet
and rugs
Wool
bre
OthersFY22
111.6
3.1
95.5
$ millions
0.0
0.5
1.0
1.5
2.0
2.5
NPAT
2.2
1.71.7
0.4
Normalised NPAT
(1)
$ millions
$ millions
(0.1)
(0.1)
(19.0)
FY21New Zealand
Australia
Rest
of world
FY22
73.1
73.0
$ millions
(5.0)
0.5
4.4
FY21FY22FY21FY22
(1)
EBITDA is earnings before interest, tax, depreciation and amortisation and NPAT is net profit after tax. Normalised results exclude
the impact of non-trading adjustments and are non-GAAP measures. FY21 normalised EBITDA and normalised NPAT excluded net
gain on sale and leaseback of property of $2.6m and restructuring costs of $(1.3)m, whereas FY22 normalised NPAT includes a
normalised tax charge of $0.5m.
39
STRONG BALANCE SHEET
Our balance sheet remains strong providing us
with a solid platform to continue to execute on
our transformation strategy.
OUTLOOK
We remain optimistic about the future - having
reset the business, validated our progress against
the original transformation plans and successfully
navigated the challenges of COVID-19.
In particularly, we:
• see enormous opportunity to continue
to rebuild wool’s 15% share of the Australasian
carpet market;
• expect ongoing strong residential renovation
activity to continue to support the demand
for carpet;
• have significantly improved our inventory
position while also increasing our manufacturing
capability to support growth;
• are forecasting woollen carpet revenues
to increase as our transformation gathers
momentum and sales of higher-value higher-
margin woollen carpet increase.
40
FY22 TIMELINE
January 2022
Whanganui
decarbonisation project
Commenced our first
decarbonisation initiative
at the Whanganui yarn
spinning plant to replace
gas fired dryer with a
radio frequency dryer.
The reduction in
greenhouse gases from
this project is estimated
to be almost 200 tonnes
per annum.
September 2021
Premium product
focus shift
Rationalised our product
offer and shifted focus
to Bremworth branded
collections for premium
residential consumers,
to optimise margin
potential and improve
service level.
July 2021
New CEO welcomed
We were pleased to
welcome Greg Smith as
the new Chief Executive
Officer for Bremworth.
41
April 2022
Named Most
Trusted Brand
Bremworth was named
New Zealand’s Most
Trusted Carpet Brand
for the 9th consecutive
year at the Reader’s
Digest’s Annual Trusted
Brands Awards.
March 2022
Napier decarbonisation
project
Announced our second
decarbonisation initiative,
transitioning our Napier
yarn spinning plant from
natural gas to electricity
for specified process heat
streams and incorporating
high temperature heat
pump technology. This
project is expected to
eliminate up to 1,500
tonnes per annum of the
greenhouse gas emissions
from this plant.
May 2022
Compostable rug
development
We showcased our
prototype compostable
rug which was
developed under our
$4.9m research-based
sustainability programme.
This development brings
us one step closer to
being able to create fully
compostable products.
42
FY23 PRIORITIES
FY23
LET'S KEEP
GOING GOOD
FUTURE FOCUS FROM
GREG SMITH CEO
• Improve efficiency safely
Embed high performance culture
Invest in technology to reduce waste
Use data to drive decisions
Continue training and risk
minimisation programmes
To continue our transformation journey we
have set three key priorities for the year ahead.
• Grow revenue
Create demand
Increase branded presence
Increase product penetration
Improve our supply consistency
• Make winning products
Supercharge product development
Use consumer insights
Leverage our sustainability aspirations
43
"WE'VE LAID THE FOUNDATIONS
FOR SUSTAINABLE GROWTH IN THE
YEAR AHEAD AND BEYOND."
GREG SMITH CEO
44
TREND
STATEMENT
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
Normalised is a non-GAAP measure of financial performance and therefore falls within the Financial Markets Authority’s guidance
note on “Disclosing non-GAAP financial information”. Normalised results are not audited and exclude items that are not expected to
occur on a regular basis either by virtue of quantum or nature. Full commentary on the disclosure of non-GAAP financial information
and a reconciliation from the non-GAAP financial information to the most directly comparable GAAP financial information, including
that for the previous period, can be found on pages 143 and 144.
46
0
10
20
30
40
50
60
70
FY17FY18FY19FY20FY21
59
41
32
43
NIL
FY22
NIL
0
5
10
15
20
25
30
35
FY17FY18FY19FY20FY21
19
19
2424
28
0
5
10
15
20
25
30
35
40
45
FY17FY18FY19FY20FY21
39
32
39
38
0
20
40
60
80
100
120
140
160
180
FY17FY18FY19FY20FY21
146
170
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21FY22
(1.3)
3.0
1.9
PercentagePercentagePercentage
Days
Days
37
154
91
123
(4.9)
0.5
2.11
2.87
1.41
FY22
31
2.2
FY22
43
FY22
151
FY22
2.50
0
10
20
30
40
50
60
70
FY17FY18FY19FY20FY21
59
41
32
43
NIL
FY22
NIL
0
5
10
15
20
25
30
35
FY17FY18FY19FY20FY21
19
19
2424
28
0
5
10
15
20
25
30
35
40
45
FY17FY18FY19FY20FY21
39
32
39
38
0
20
40
60
80
100
120
140
160
180
FY17FY18FY19FY20FY21
146
170
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21FY22
(1.3)
3.0
1.9
PercentagePercentagePercentage
Days
Days
37
154
91
123
(4.9)
0.5
2.11
2.87
1.41
FY22
31
2.2
FY22
43
FY22
151
FY22
2.50
0
10
20
30
40
50
60
70
FY17FY18FY19FY20FY21
59
41
32
43
NIL
FY22
NIL
0
5
10
15
20
25
30
35
FY17FY18FY19FY20FY21
19
19
2424
28
0
5
10
15
20
25
30
35
40
45
FY17FY18FY19FY20FY21
39
32
39
38
0
20
40
60
80
100
120
140
160
180
FY17FY18FY19FY20FY21
146
170
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21FY22
(1.3)
3.0
1.9
PercentagePercentagePercentage
Days
Days
37
154
91
123
(4.9)
0.5
2.11
2.87
1.41
FY22
31
2.2
FY22
43
FY22
151
FY22
2.50
0
10
20
30
40
50
60
70
FY17FY18FY19FY20FY21
59
41
32
43
NIL
FY22
NIL
0
5
10
15
20
25
30
35
FY17FY18FY19FY20FY21
19
19
2424
28
0
5
10
15
20
25
30
35
40
45
FY17FY18FY19FY20FY21
39
32
39
38
0
20
40
60
80
100
120
140
160
180
FY17FY18FY19FY20FY21
146
170
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21FY22
(1.3)
3.0
1.9
PercentagePercentagePercentage
Days
Days
37
154
91
123
(4.9)
0.5
2.11
2.87
1.41
FY22
31
2.2
FY22
43
FY22
151
FY22
2.50
0
10
20
30
40
50
60
70
FY17FY18FY19FY20FY21
59
41
32
43
NIL
FY22
NIL
0
5
10
15
20
25
30
35
FY17FY18FY19FY20FY21
19
19
2424
28
0
5
10
15
20
25
30
35
40
45
FY17FY18FY19FY20FY21
39
32
39
38
0
20
40
60
80
100
120
140
160
180
FY17FY18FY19FY20FY21
146
170
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21FY22
(1.3)
3.0
1.9
PercentagePercentagePercentage
Days
Days
37
154
91
123
(4.9)
0.5
2.11
2.87
1.41
FY22
31
2.2
FY22
43
FY22
151
FY22
2.50
0
10
20
30
40
50
60
70
FY17FY18FY19FY20FY21
59
41
32
43
NIL
FY22
NIL
0
5
10
15
20
25
30
35
FY17FY18FY19FY20FY21
19
19
2424
28
0
5
10
15
20
25
30
35
40
45
FY17FY18FY19FY20FY21
39
32
39
38
0
20
40
60
80
100
120
140
160
180
FY17FY18FY19FY20FY21
146
170
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY17FY18FY19FY20FY21
2.18
2.57
-6
-4
-2
1
3
5
FY17FY18FY19FY20FY21FY22
(1.3)
3.0
1.9
PercentagePercentagePercentage
Days
Days
37
154
91
123
(4.9)
0.5
2.11
2.87
1.41
FY22
31
2.2
FY22
43
FY22
151
FY22
2.50
TREND STATEMENT
SIX YEAR PERFORMANCE GRAPHS
Unaudited
TREND STATEMENT
Unaudited
2022
$000
2021
$000
2020
$000
2019
$000
2018
$000
2017
$000
Operating revenue$95,485$111,577$117,981$135,234$148,120$156,120
EBITDA (normalised)4,9183,3852,3007,0 769,9982,572
EBIT (normalised)3,4751,708(2,162)3,5976,437(679)
Profit/(Loss) before income tax
(normalised)
2,605652(4,697)2,4515,058(2,818)
Profit/(Loss) after income tax
(normalised)
1,735376(3,457)1,8793,974(1,856)
Abnormal costs (after tax)5051,353(17,994)(18,659)107(268)
Profit/(Loss) after tax
attributable to shareholders
of the Company (GAAP)2,2401,729(21,451)(16,780)4,081(2,124)
Financial Position
Shareholders’ equity3 7,7 7 135,59233,63754,98972,2226 7, 8 9 0
Loans and borrowings––15,80020,50031,50041,500
Fixed assets14,30612,09422,72530,16435,1423 7,1 2 3
Right-of-use assets9,2809,968430–––
Goodwill and other intangibles––––2,3622,362
Cash and bank14,87422,5081,2762,7242,1111,255
Return on average shareholders'
equity (normalised)4.7%1.1%( 7. 8 %)3.0%5.7%(2.7%)
Basic earnings per ordinary share
(normalised) – cents2.510.55(5.03)2.745.79(2.70)
Diluted earnings per ordinary share
(normalised) – cents2.460.54(5.03)2.745.79(2.70)
Net tangible asset backing
per ordinary share
$0.40$0.36$0.47$0.72$0.94$0.87
47
48
49
CONSOLIDATED
FINANCIAL
STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
51 Directors’ Responsibility Statement
52 Independent Auditor’s Report
57 Consolidated Statement of Profit or Loss
58 Consolidated Statement of Comprehensive Income
59 Consolidated Statement of Changes in Equity
61 Consolidated Statement of Financial Position
62 Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
64 1. Company information
64 2. General information relating to preparation of consolidated financial statements
3. Financial performance
67 3a. Segment performance
69 3b. Earnings per share
69 3c. Revenue from contracts with customers
70 3d. Other income and gains
70 3e. Administration expenses
71 3f. Personnel expenses
71 3g. Government grants
72 3h. Finance costs
73 3i. Income tax
4. Capital and funding
76 4a. Capital management
76 4b. Share capital, dividends and reserves
78 4c. Banking facilities and loans and borrowings
5. Assets employed
79 5a. Property, plant and equipment
82 5b. Capital commitments
6. Working capital
82 6a. Cash and bank
83 6b. Trade receivables, other receivables and prepayments
83 6c. Inventories
84 6d. Trade payables and accruals
85 6e. Employee entitlements
86 7. Risks and financial instruments
8. Others
97 8a. Leases
99 8b. Share-based payment
102 8c. Provisions
104 8d. Employee benefits
104 8e. Contingencies
105 8f. Related parties
107 8g. Group entities
107 8h. Events after balance date
108 8i. COVID-19
109 8j. Climate-related disclosures
109 8k. Standards, interpretations and amendments to standards
50
51
CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS' RESPONSIBILITY STATEMENT
DIRECTORS' RESPONSIBILITIES
The Directors are responsible for the preparation of the
consolidated financial statements of Bremworth Limited
(formerly known as Cavalier Corporation Limited) and
subsidiaries ("the Group"). The Directors discharge this
responsibility by ensuring that the consolidated financial
statements comply with Generally Accepted Accounting
Practice and fairly present the financial position of the
Group as at balance date and of its operations and
cash flows for the year ended on that date.
ACCOUNTING POLICIES
The Directors consider that the accounting policies used
in the preparation of the consolidated financial statements
are appropriate, consistently applied, and supported by
reasonable judgements and estimates. All relevant financial
reporting and accounting standards have also been followed.
ACCOUNTING RECORDS
The Directors believe that proper accounting records,
which enable, with reasonable accuracy, the determination
of the financial position of the Group and facilitate the
compliance of the consolidated financial statements with
the Financial Markets Conduct Act 2013, have been kept.
SAFEGUARDING OF ASSETS AND INTERNAL CONTROLS
The Directors consider that they have taken adequate
steps to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities. Internal control
procedures are also considered to be sufficient to provide
a reasonable assurance as to the integrity and reliability of
the consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS
The Directors present, on pages 57 to 109, the consolidated
financial statements for the year ended 30 June 2022.
These audited consolidated financial statements were
authorised for issue by the Directors on 29 August 2022
and, as required by section 461(1)(b) of the Financial Markets
Conduct Act 2013, are dated and signed as at that date.
For and on behalf of Bremworth Limited
T H G Adams
Chairman of the Board of Directors
K M Turner
Chairman of the Audit Committee
52
To the shareholders of Bremworth Limited
OUR OPINION
In our opinion, the accompanying consolidated financial statements of Bremworth Limited (the Company), including
its subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as at 30 June 2022,
its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
What we have audited
The Group's consolidated financial statements comprise:
—the consolidated statement of financial position as at 30 June 2022;
—the consolidated statement of profit or loss for the year then ended;
—the consolidated statement of comprehensive income for the year then ended;
—the consolidated statement of changes in equity for the year then ended;
—the consolidated statement of cash flows for the year then ended; and
—the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)) and International
Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities
for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for
Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand
Auditing and Assurance Standards Board and the International Code of Ethics for Professional Accountants (including
International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code),
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Other than in our capacity as auditor we have no relationship with, or interests in, the Group.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current year. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand
T: +64 9 355 8000, www.pwc.co.nz
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
Independent auditor’s report
To the shareholders of Fidelity Life Assurance Company Limited
We have audited the consolidated financial statements which comprise:
● the consolidated statement of financial position as at 30 June 2020;
● the consolidated income statement for the year then ended;
● the consolidated statement of comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Fidelity Life Assurance Company
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2020, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance over custodial controls and
solvency and tax compliance. In addition, our Firm has insurance arrangements with the Group covering
partners and employees within the Firm. Those arrangements were contracted on normal terms within
the ordinary course of trading activities of the Group. Certain partners and employees of our firm may
also individually deal with the Group on normal terms within the ordinary course of trading activities of
the Group. These matters have not impaired our independence as auditor of the Group.
53
DESCRIPTION OF THE KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Forecast liquidity and cash flows
The Group prepares its consolidated financial statements
on a going concern basis and expects to be able to realise
its assets and meet its financial obligations in the normal
course of business for the foreseeable future.
During the year the Group has continued to progress its
previously announced strategic transformation, having
ceased production and sales of synthetic carpets to focus
solely on its all-wool carpet business. Consistent with
management's forecasts, cash has reduced from
$22.5 million in 2021 to $14.9 million at year end.
As this represents a material change in direction of the
business there is inherently a level of estimation uncertainty
and execution risk associated with the Group's ability to
maintain sufficient liquidity to meet its financial commitments
as they fall due in the normal course of business, until the full
benefits of the strategy eventuate, which management expect
to occur from FY25 onwards. Consequently it is an area of
focus for the audit and a key audit matter.
To assess the ongoing liquidity of the Group and its ability
to meet its other financial commitments as they fall due
in the normal course of business, management has forecast
the Group's financial performance, cash flows and financial
position as part of its management and monitoring of the
Group's operations through to 30 June 2024.
In preparing these forecasts, assumptions included the
Group's strategic transformation plans, future economic and
market conditions, such as forecast sales volumes, expected
NZD/AUD exchange rate movements (after considering the
Group's hedged positions) and forecast wool prices.
In forming its going concern conclusion, the Board has also
taken into consideration a number of factors including the
cash surplus, the improvement in manufacturing efficiencies,
margins and profile of its inventory during the year, the
Group's potential ability to obtain other sources of funding
(including the sale of other properties) and the option to
reduce discretionary spending, if required.
Refer to Note 2c to the consolidated financial statements
describing the cash flow forecasts and basis for conclusion
on the use of the going concern assumption for the
preparation of the consolidated financial statements.
To audit the Group’s cash flow forecasts for the period to
30 June 2024, which are used to support the going concern
assumption for the preparation of the consolidated financial
statements, our audit procedures included the following:
—gaining an understanding of management's process
and controls to prepare cash flow forecasts;
—gaining an understanding of key assumptions
used in the cash flow forecasts through discussions
with management;
—evaluating the accuracy of the Group's previous
forecasts by comparing the actual performance
against forecasts in prior periods;
—checking these key assumptions are consistent
with the Board approved forecasts;
—assessing and challenging key assumptions such as
sales volumes, wool price and exchange rates with
reference to independent data sources and contracts,
where possible, and to recent actual sales and
performance;
—performing sensitivity testing on the key sales
assumptions used in the forecast cash flows to
assess the level of forecasting risk;
—assessing the Group's ongoing ability to obtain funding
from other sources such as the sale of other properties
and to reduce discretionary spending, if required; and
—performing subsequent events procedures to identify
events that may affect the Group's cash flow forecasts.
We also considered the adequacy of the related disclosures
in the consolidated financial statements against the
requirements of NZ IFRS.
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
Independent auditor’s report
To the shareholders of Fidelity Life Assurance Company Limited
We have audited the consolidated financial statements which comprise:
● the consolidated statement of financial position as at 30 June 2020;
● the consolidated income statement for the year then ended;
● the consolidated statement of comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Fidelity Life Assurance Company
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2020, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance over custodial controls and
solvency and tax compliance. In addition, our Firm has insurance arrangements with the Group covering
partners and employees within the Firm. Those arrangements were contracted on normal terms within
the ordinary course of trading activities of the Group. Certain partners and employees of our firm may
also individually deal with the Group on normal terms within the ordinary course of trading activities of
the Group. These matters have not impaired our independence as auditor of the Group.
54
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)
DESCRIPTION OF THE KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Valuation of inventory
The carrying value of the Group’s inventory at 30 June 2022 was
$27.26 million (30 June 2021 $20.03 million) net of inventory
provisions of $1.35 million (30 June 2021 $1.98 million).
The cost of inventory reflects raw materials and manufacturing
costs, including an allocation of production overheads based
on normal operating capacity.
The Group has recorded inventory provisions, which represent
a deduction from the cost of inventory, for obsolete, aged and
discontinued inventory and carpet oddments to reflect
management's best estimate of their net realisable value.
Determining these provisions involves significant judgement
considering a range of factors such as inventory rationalisation
plans, consumer demand and trends, available distribution
channels and historical sales and margins data.
Valuation of inventory is an area of focus and key audit matter
for the audit due to the significance of the inventory balance,
the complexity of inventory costing, and the judgements
involved in estimating the inventory provisions.
Note 6c of the consolidated financial statements describes
the accounting policy on inventories and the judgements
and estimates applied by management to determine the
inventory provision.
To audit the cost of inventory, our procedures included:
—gaining an understanding of the inventory costing
process and controls;
—testing the accuracy of the application of inventory
costing by reperforming the calculation;
—verifying inputs, on a sample basis, of the finished
goods, work in progress and yarn inventory cost by
agreeing them to supporting documents;
—testing the cost of raw material inventory, on a sample
basis, to supplier invoices; and
—evaluating the nature and appropriateness of factory
overheads capitalised into inventory based on normal
operating capacity, and testing the mathematical
accuracy of the overhead allocation calculation.
To audit the inventory provisions, our procedures included:
—gaining an understanding of and assessing the Group's
methodology for inventory provision process and
controls, taking into consideration key attributes used
such as piece sizes, low grade quality, discontinued
products and recent sale prices;
—observing management's stocktake process by attending
selected locations to confirm the existence and condition
of the inventory;
—assessing the accuracy of management's estimate of
provisioning by comparing actual utilisation of provision
with the corresponding prior year provisions; and
—testing the net realisable value of finished goods, on a
sample basis, by comparing the cost with recent sales
prices and margins.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
Independent auditor’s report
To the shareholders of Fidelity Life Assurance Company Limited
We have audited the consolidated financial statements which comprise:
● the consolidated statement of financial position as at 30 June 2020;
● the consolidated income statement for the year then ended;
● the consolidated statement of comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Fidelity Life Assurance Company
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2020, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance over custodial controls and
solvency and tax compliance. In addition, our Firm has insurance arrangements with the Group covering
partners and employees within the Firm. Those arrangements were contracted on normal terms within
the ordinary course of trading activities of the Group. Certain partners and employees of our firm may
also individually deal with the Group on normal terms within the ordinary course of trading activities of
the Group. These matters have not impaired our independence as auditor of the Group.
55
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)
OUR AUDIT APPROACH
Overview
Overall group materiality: $478,000, which represents approximately 0.5% of revenue.
We chose revenue as the benchmark because, in our view, it is the stable benchmark
against which the performance of the Group is most commonly measured by users
and is an accepted benchmark.
We selected transactions and balances to audit based on the Group's materiality.
By using this approach, we audited all the material classes of transactions and balances
in the consolidated financial statements of the Group.
As reported above, we have two key audit matters, being:
—Liquidity and cash flow forecasts
—Valuation of inventory
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated
financial statements. In particular, we considered where management made subjective judgements; for example, in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters,
consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to
fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group
materiality for the consolidated financial statements as a whole as set out above. These, together with qualitative considerations,
helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures and to evaluate the effect
of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole.
How we tailored our group audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated
financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls,
and the industry in which the Group operates.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
Independent auditor’s report
To the shareholders of Fidelity Life Assurance Company Limited
We have audited the consolidated financial statements which comprise:
● the consolidated statement of financial position as at 30 June 2020;
● the consolidated income statement for the year then ended;
● the consolidated statement of comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Fidelity Life Assurance Company
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2020, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance over custodial controls and
solvency and tax compliance. In addition, our Firm has insurance arrangements with the Group covering
partners and employees within the Firm. Those arrangements were contracted on normal terms within
the ordinary course of trading activities of the Group. Certain partners and employees of our firm may
also individually deal with the Group on normal terms within the ordinary course of trading activities of
the Group. These matters have not impaired our independence as auditor of the Group.
56
OTHER INFORMATION
The Directors are responsible for the other information. The other information comprises the information included in the
Annual Report but does not include the consolidated financial statements and our auditor's report thereon. The other
information we obtained prior to the date of this auditor's report comprised the Directors' Responsibility Statement, Trend
Statement and Disclosure of Non-GAAP Financial Information. The remaining other information is expected to be made available
to us after that date. Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of audit opinion or assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing
to report in this regard.
When we read the other information not yet received, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to the Directors and use our professional judgement to determine the appropriate
action to take.
RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the consolidated financial
statements in accordance with NZ IFRS and IFRS, and for such internal control as the Directors determine is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
AUDITOR�S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is located at the External
Reporting Board’s website at:
https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
WHO WE REPORT TO
This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might
state those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s
shareholders, as a body, for our audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Philippa (Pip) Cameron.
For and on behalf of
Chartered Accountants
29 August 2022 Auckland
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
(
CONT'D
)
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
Independent auditor’s report
To the shareholders of Fidelity Life Assurance Company Limited
We have audited the consolidated financial statements which comprise:
● the consolidated statement of financial position as at 30 June 2020;
● the consolidated income statement for the year then ended;
● the consolidated statement of comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Fidelity Life Assurance Company
Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2020, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance over custodial controls and
solvency and tax compliance. In addition, our Firm has insurance arrangements with the Group covering
partners and employees within the Firm. Those arrangements were contracted on normal terms within
the ordinary course of trading activities of the Group. Certain partners and employees of our firm may
also individually deal with the Group on normal terms within the ordinary course of trading activities of
the Group. These matters have not impaired our independence as auditor of the Group.
57
Audited
Note
2022
$000
2021
$000
Revenue from contracts with customers3c 95,485 111,577
Cost of sales (65,785) (80,145)
Gross profit
29,700 31,432
Other income and gains
3d 688 2,823
Distribution expenses (16,286) (19,914)
Administration expenses
3e (10,627) (10,009)
Restructuring costs– (1,271)
3,475 3,061
Finance costs
3h (1,029) (1,124)
Finance income 159 68
Profit before income tax 2,605 2,005
Income tax expense
3i
(365) (276)
Profit after tax for the year
$2,240 $1,729
Basic earnings per share (cents)
3b
3.24 2.52
Diluted earnings per share (cents)
3b
3.17 2.50
This Consolidated Statement of Profit or Loss is to be read in conjunction with the notes on pages 64 to 109.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 30 JUNE 2022
58
Audited
Note
2022
$000
2021
$000
Profit after tax for the year
2,240 1,729
Other comprehensive income that may be reclassified subsequently
to profit or loss
Effective portion of changes in fair value of cash flow hedges (576) 299
Net change in fair value of cash flow hedges transferred to profit or loss (55) (77)
Income tax on changes in fair value of cash flow hedges
3i– (47)
Total other comprehensive income (631) 175
Total comprehensive income for the year
$1,609 $1,904
This Consolidated Statement of Comprehensive Income is to be read in conjunction with the notes on pages 64 to 109.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022
59
Audited
Note
Share
Capital
$000
Cash Flow
Hedging
Reserve
$000
Foreign
Currency
Translation
Reserve
$000
Share-based
Payment
Reserve
$000
Retained
Earnings
$000
To tal
Equity
$000
Total equity at 1 July 2021 21,846 55 (1,420) 51 15,060 35,592
Total comprehensive income for the year
Profit after tax– – – – 2,240 2,240
Other comprehensive income that may be
reclassified subsequently to profit or loss
Changes in fair value of cash flow hedges
(net of income tax)– (631) – – – (631)
Total comprehensive income for the year– (631)– – 2,240 1,609
Transaction with owners in their capacity
as owners
Share-based payments –
value of employee services
8b– – – 362 – 362
Issue of shares pursuant to the
Bremworth Equity Plan
4b, 8b208– – – – 208
Total transaction with owners for the year208– – 362 – 570
Total equity at 30 June 2022 $22,054 ($576)($1,420)$413 $17,300 $ 3 7,7 7 1
This Consolidated Statement of Changes in Equity is to be read in conjunction with the notes on pages 64 to 109.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
60
Note
Share
Capital
$000
Cash Flow
Hedging
Reserve
$000
Foreign
Currency
Translation
Reserve
$000
Share-based
Payment
Reserve
$000
Retained
Earnings
$000
To tal
Equity
$000
Audited
Total equity at 1 July 2020 21,846 (120) (1,420)– 13,331 33,637
Total comprehensive income for the year
Profit after tax– – – – 1,729 1,729
Other comprehensive income that may be
reclassified subsequently to profit or loss
Changes in fair value of cash flow hedges
(net of income tax)– 175 – – – 175
Total comprehensive income for the year – 175 –– 1,729 1,904
Transaction with owners in their capacity
as owners
Share-based payments –
value of employee services
8b–– – 51 – 51
Total transaction with owners for the year–– – 51 – 51
Total equity at 30 June 2021 $21,846 $55 ($1,420)$51 $15,060 $35,592
This Consolidated Statement of Changes in Equity is to be read in conjunction with the notes on pages 64 to 109.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
61
Audited
Note
2022
$000
2021
$000
ASSETS
Property, plant and equipment - owned
5a 14,306 12,094
Property, plant and equipment - right-of-use
8a 9,280 9,968
Deferred tax asset
3i 532 732
Total non-current assets
24,118 22,794
Cash and bank
6a 14,874 22,508
Trade receivables, other receivables and prepayments
6b 12,201 12,520
Inventories
6c 2 7, 2 6 3 20,035
Advances to employees
8b 160 –
Derivative financial instruments
7 8 109
Income tax receivable 278 57
Total current assets
54,784 55,229
Total assets
$78,902 $78,023
EQUITY
Share capital
4b 22,054 21,846
Cash flow hedging reserve
4b (576) 55
Foreign currency translation reserve
4b (1,420) (1,420)
Share-based payment reserve
4b, 8b 413 51
Retained earnings 17,300 15,060
Total equity
3 7,7 7 1 35,592
LIABILITIES
Lease liabilities
8a 17,820 19,530
Employee benefits
8d 720 776
Provisions
8c 711 672
Total non-current liabilities
19,251 20,978
Trade payables and accruals
6d 12,210 13,064
Customer deposits
3c 203 –
Employee benefits
8d 53 136
Employee entitlements
6e 5,376 5,203
Lease liabilities
8a 1,938 2,003
Provisions
8c 988 662
Derivative financial instruments
7 694 34
Deferred income
3g
418 351
Total current liabilities
21,880 21,453
Total liabilities
41,131 42,431
Total equity and liabilities
$78,902 $78,023
This Consolidated Statement of Financial Position is to be read in conjunction with the notes on pages 64 to 109.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
62
Audited
Note
2022
$000
2021
$000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 96,808 111,527
Cash paid to suppliers and employees (101,010) (94,083)
(4,202) 17,444
Government grants received 640 495
COVID-19-related subsidies received
3g
1,776 –
Other receipts 5 6
GST paid 107 (229)
Interest paid – loans and borrowings (39) (515)
Interest component of lease payments
8a
(990) (675)
Interest received 172 53
Income tax paid (386) (363)
Net cash flow from operating activities
(2,917) 16,216
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of plant and equipment– 29
Proceeds from sale of property 105 25,022
Acquisition of plant and equipment
5a (2,898) (2,481)
Short term deposits 8,000 (12,000)
Advances to employees pursuant to the Bremworth Equity Plan
8b (160)–
Net cash flow from investing activities
5,047 10,570
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of shares pursuant to the Bremworth Equity Plan
8b208–
Repayment of loans and borrowings
4c– (15,800)
Principal component of lease payments
8a (2,041) (1,74 4)
Net cash flow from financing activities
(1,833) (1 7, 5 4 4)
Net increase in cash and cash equivalents
297 9,242
Cash and cash equivalents at beginning of the year 10,508 1,276
Effect of exchange rate changes on cash 69 (10)
Cash and cash equivalents at end of the year
$10,874 $10,508
This Consolidated Statement of Cash Flows is to be read in conjunction with the notes on pages 64 to 109.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2022
63
RECONCILIATION OF PROFIT WITH NET CASH FLOW FROM OPERATING ACTIVITIES
Audited
Note
2022
$000
2021
$000
Profit after tax for the year
2,240 1,729
Add/(Deduct) non-cash items:
Depreciation – owned assets
5a
683 379
Depreciation – right-of-use assets
8a
954 534
Share-based payments – value of employee services
8b
362 51
Deferred tax 200 (132)
Net gain on sale of property, plant and equipment (102) (2,651)
Net (gain)/loss on foreign currency balance (69) 10
Changes in working capital items:
Trade receivables, other receivables and prepayments 321 87
Inventories ( 7, 2 2 8) 12,046
Income tax receivable (221) 45
Trade payables and accruals (856) 2,446
Customer deposits 203 –
Employee benefits and entitlements 34 1,783
Provisions 365 10
Deferred income 67 351
Derivative financial instruments 130 (472)
Net cash flow from operating activities($2,917)$16,216
This Consolidated Statement of Cash Flows is to be read in conjunction with the notes on pages 64 to 109.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
1. COMPANY INFORMATION
On 30 August 2021, Cavalier Corporation Limited changed its name to Bremworth Limited.
Bremworth Limited ("Bremworth" or "the Company") is a limited liability company that is domiciled and incorporated
in New Zealand.
The consolidated financial statements presented are for Bremworth and its subsidiaries ("the Group”) as at, and for the
year ended, 30 June 2022.
The Company is registered under the Companies Act 1993 and is an FMC reporting entity for the purposes of the
Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013. The consolidated financial statements
have been prepared in accordance with these Acts.
The principal activities of the Group comprise wool acquisition, and carpet and rug manufacturing and sales.
All Group subsidiaries are wholly-owned.
2. GENERAL INFORMATION RELATING TO PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
2a. STATEMENT OF COMPLIANCE
The consolidated financial statements comply with New Zealand equivalents to International Financial Reporting Standards
(NZ IFRS), other applicable New Zealand accounting standards and authoritative notices as appropriate for Tier 1 For-Profit
entities. The consolidated financial statements also comply with International Financial Reporting Standards (IFRS).
2b. BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting
Practice (NZ GAAP) as appropriate for Tier 1 For-Profit entities.
They have been prepared on the historical cost basis, except for derivative financial instruments which are measured
at fair value as disclosed at note 7 (Risks and financial instruments) to the consolidated financial statements.
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in New Zealand dollars, which is Bremworth Limited's functional and presentation currency. Unless otherwise
indicated, all financial information presented in New Zealand dollars has been rounded to the nearest thousand.
The Consolidated Statements of Profit or Loss, Comprehensive Income, Changes in Equity and Cash Flows are stated
exclusive of GST. All items in the Consolidated Statement of Financial Position are stated exclusive of GST, except for
trade receivables and trade payables, which include GST invoiced.
2c. GOING CONCERN
Assessment of going concern
The Group prepares its consolidated financial statements on a going concern basis and expects to be able to realise its
assets and meet its financial obligations in the normal course of business.
In May 2020, the Group embarked on a strategy to transform the business to an all-wool and natural materials organisation.
This led to the exit of the business from the synthetic carpet market, with steps taken to convert and sell down all of its
remaining synthetic yarn and carpet inventory. In December 2020, the Group settled the sale and leaseback of its Auckland
property, with the net proceeds of sale of $25.0 million used to fully repay bank debt outstanding at that date with the
balance of the net proceeds of sale applied towards providing the Group with the financial resources to undertake its
strategic transformation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
65
2. GENERAL INFORMATION RELATING TO PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
2c. GOING CONCERN (CONT'D)
Assessment of going concern (cont'd)
The Board notes that, despite the ongoing disruptions from COVID-19 (with further discussion of the impact of COVID-19
set out at note 8i (COVID-19) to the consolidated financial statements) and inflationary impacts on costs experienced during
FY22, the Group continues to make positive progress with its transformation plans. These included the successful re-set of
the business model during FY22 to focus on higher-margin residential cut-length business - in the process allowing it to not
only increase margins, but also rationalise non-performing stock-keeping units (SKUs), improve manufacturing efficiencies
and reduce lead times to market through improved profile of inventories and service levels.
The full benefits of the transformation are expected from FY25 onwards.
However, the Group’s transformation represents a material change in direction of the business and therefore there is
inherently a level of uncertainty and execution risk.
For FY22, net cash flow from operations was a negative $2.9 million, largely reflecting the investment in inventories.
Cash and bank at balance date of $14.9 million was consistent with management's forecasts prepared at the start of FY22.
To assess the ongoing liquidity of the Group and its ability to meet its other financial commitments as they fall due in the
normal course of business, management has forecast the Group’s financial performance, cash flows and financial position
as part of its management and monitoring of the Group’s operations through to 30 June 2024.
In preparing these forecasts, management considered and, where required made assumptions, in relation to:
—the capital investments and marketing spends that would be required to execute the Group’s transformation strategy;
—projected growth in woollen carpet sales volumes from the implementation of initiatives underpinning the strategy;
—future economic and market conditions, including consideration of the impact of COVID-19;
—NZD/AUD exchange rate changes, after considering hedged positions;
—wool price movements, after recognising wool purchase contracts;
—manufacturing discipline and cost control.
The Board notes that while the financial forecasts and the success of the transformation are highly dependent on the
projected increase in woollen carpet sales, even if the projected increase in woollen carpet sales were to fall somewhat
short of forecast, going concern is still supported with the Group having sufficient liquidity to meet its financial commitments
for a period of at least 12 months following the issuance of the consolidated financial statements.
The Board also notes that even though there are some uncertainties relating to the transformation plan, these uncertainties
are not significant and would not lead to a material uncertainty relating to going concern.
In forming these views, the Board has taken into account the following:
—the cash surplus of approximately $14.9 million as at balance date along with positive equity and positive working
capital, with the negative cash flows from operations the result of the Group’s investment in inventory to support
sales growth and service levels;
—the successful re-set of the business model during FY22 which has increased margins, rationalised non-performing
stock-keeping units (SKUs), improved manufacturing efficiencies, reduced lead times to market and improved the
profile of its inventory and service levels;
—the Group's ongoing ability to resort to other sources of funding (including the sale of properties) and to reduce
discretionary spending if required.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
66
2. GENERAL INFORMATION RELATING TO PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
2d. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS AND SIGNIFICANT ACCOUNTING POLICIES
The preparation of the consolidated financial statements in conformity with NZ IFRS requires the directors to make
judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets,
liabilities, income and expenses. Judgements and estimates are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future
periods affected.
Information about estimates and judgements that have a significant effect on the amounts recognised in the
consolidated financial statements are disclosed in the following notes:
Note 2c – going concern
Note 3i – measurement and recoverability of tax losses
Note 5a – recoverability of property, plant and equipment
Note 6c – inventory provisioning
Note 8a – determination of lease term
Note 8c – measurement of provisions
Note 8d – measurement of employee benefits
Significant accounting policies and critical estimates, judgements and assumptions are also disclosed in the relevant
notes to the consolidated financial statements and identified using the following coloured boxes:
Accounting policies Estimates, judgements and assumptions
2e. BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Group as at 30 June 2022
and the results of all subsidiaries for the year then ended. Subsidiaries are all entities over which the Company has control.
The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity.
Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements. Unrealised losses are also eliminated unless the underlying intra-group
transaction provides evidence that the asset transferred is impaired.
2f. CHANGES IN ACCOUNTING POLICIES
There were no changes in accounting policies during the year ended 30 June 2022.
2g. RESTATEMENT OF PRIOR YEAR BALANCES
Wages, salaries, bonuses and holiday pay for the previous year ended 30 June 2021 as disclosed in note 3f (Personnel
expenses) to the consolidated financial statements have been restated from $28,390,000 to $32,347,000 to correct for
a mapping error of the amount disclosed in note 3f to the underlying financial records. This error had no other impact
on the financial statements for the year ended 30 June 2021.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
67
3. FINANCIAL PERFORMANCE
This section deals with the financial performance of the Group and addresses, among other things, the financial performance
of the Group’s reportable segments and the key areas that impact on the Group’s profitability, including operating revenue,
other income, gains/losses on sale of property, plant and equipment, expenses and taxation.
3a. SEGMENT PERFORMANCE
Reportable segments
The Group’s reportable and operating segments are:
— Carpet, with this segment involved in the manufacturing and sales of carpet in New Zealand, Australia and rest
of the world; and
— Wool, with this segment involved in the acquisition of wool for the carpet segment and for sales to external
customers in New Zealand.
An operating segment is a component of the Group:
—that engages in business activities from which it may earn revenues and incur expenses, including revenues
and expenses that relate to transactions with any of the Group’s other components;
—whose operating results are regularly reviewed by the Group’s chief operating decision maker - in this case,
the Chief Executive Officer - to make decisions about the resources to be allocated to the segment and to
assess its performance; and
—for which discrete financial information is available.
The Chief Executive Officer uses total revenue, segment result before depreciation, restructuring and impairment and
segment result after depreciation but before restructuring and impairment to assess the performance of the operating
segments. Total assets and total liabilities are also reviewed for the operating segments.
Inter-segment transactions
All inter-segmental transactions included in revenue and operating expenses for each segment are on an arm’s-length basis.
Inter-segmental sales during the year and intercompany profits on stocks at balance date are eliminated on consolidation.
Geographical areas
In presenting information on the basis of geographical areas, revenue is based on the geographical location of customers
and non-current assets are based on the geographical location of those assets.
Revenue
2022
$000
2021
$000
New Zealand 54,595 63,901
Australia 3 7,7 9 7 45,067
Canada 1,460 1,070
USA 1,331 1,139
Rest of the world 302 400
$95,485 $111,577
Non-current assets
As at
30 June 2022
$000
As at
30 June 2021
$000
New Zealand 23,084 22,154
Australia 1,034 640
$24,118 $22,794
Major customers
None of the Group’s external customers contributed revenues in excess of 10% of the Group’s total revenues.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
68
3. FINANCIAL PERFORMANCE (CONT'D)
3a. SEGMENT PERFORMANCE (CONT'D)
Carpet and rugs sales and
manufacturing
Wool acquisition To tal
2022
$000
2021
$000
2022
$000
2021
$000
2022
$000
2021
$000
External revenue 76,307 95,548 19,178 16,029 95,485 111,577
Inter-segment revenue– – 2,401 2,313 2,401 2,313
To t al r eve nu e 76,307 95,548 21,579 18,342 97,886 113,890
Elimination of inter-segment revenue (2,401) (2,313)
Consolidated revenue $95,485 $111,577
Segment result before depreciation,
restructuring related expenses and impairment
4,880 6,784 949 784 5,829 7, 5 6 8
Depreciation – owned assets (515) (236) (168) (143) (683) (379)
Depreciation – right-of-use assets (822) (411) (132) (123) (954) (534)
Depreciation – recycled through inventory 194 (764)– – 194 (764)
Segment result before restructuring
and impairment
3,737 5,373 649 518 4,386 5,891
Restructuring costs– (1,271)– –– (1,271)
Segment result after restructuring
and impairment
3,737 4,102 649 518 4,386 4,620
Elimination of inter-segment profits 52 (49)
Unallocated corporate costs (963) (1,510)
Results from operating activities 3,475 3,061
Finance costs (1,029) (1,124)
Finance income 159 68
Profit before income tax 2,605 2,005
Income tax expense (365) (276)
Profit after tax for the year$2,240 $1,729
Carpet and rugs sales and
manufacturing
Wool acquisition To tal
2022
$000
2021
$000
2022
$000
2021
$000
2022
$000
2021
$000
Reportable segment assets 59,122 50,987 4,906 4,528 64,028 55,515
Unallocated assets - Cash and bank 14,874 22,508
Total assets$78,902 $78,023
Capital expenditure 2,621 2,481 277 – $2,898 $2,481
Reportable segment liabilities 20,229 18,920 1,144 1,978 21,373 20,898
Unallocated liabilities - Lease liabilities 19,758 21,533
Total liabilities$41,131 $42,431
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
69
3. FINANCIAL PERFORMANCE (CONT'D)
3b. EARNINGS PER SHARE
Basic earnings per share (Basic EPS)
20222021
Profit after tax attributable to shareholders of the Company ($000) 2,240 1,729
Weighted average number of ordinary shares outstanding 69,081,838 68,679,098
Basic EPS (cents) 3.24 2.52
Diluted earnings per share (Diluted EPS)
20222021
Profit after tax attributable to shareholders of the Company ($000) 2,240 1,729
Weighted average number of ordinary shares outstanding 70,659,533 69,242,681
Diluted EPS (cents) 3.17 2.50
In calculating the diluted earnings per share, the Company has taken into account the maximum number of shares that could
be issued under the Company's LTI Scheme and the Bremworth Option Scheme as further discussed at note 8b (Share-based
payment) to the consolidated financial statements.
3c. REVENUE FROM CONTRACTS WITH CUSTOMERS
2022
$000
2021
$000
Sales of goods
Carpet 72,296 91,533
Rugs 773 660
Wool 19,178 16,029
Carpet yarn 598 605
Others 2,130 2,507
94,975 111,334
Provision of installation services 510 243
To t al r eve nu e$95,485 $111,577
There were no installation contracts outstanding at balance date (2021: $355,000). All of the contracts outstanding at
30 June 2021 were fulfilled in the current year ended 30 June 2022.
Credit terms for carpet and rug sales within New Zealand and Australia are generally no later than 30 days after the month
in which invoices are raised and, in the case of wool sold in New Zealand, within 14 days of invoice date or on despatch
whichever is the earlier. Credit terms for sales of carpet overseas are generally 60 to 90 days from date of invoice and for
sales of carpet yarn overseas 120 days from date of invoice.
Rugs sold direct are for cash, with payment at the time orders are placed. All amounts received are accounted for as
customer deposits in the first instance, with $203,000 of customers deposits booked as at balance date (2021: Nil).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
70
3. FINANCIAL PERFORMANCE (CONT'D)
3c. REVENUE FROM CONTRACTS WITH CUSTOMERS (CONT'D)
Accounting policies
Sale of goods
Revenue is recognised when or as performance obligations are satisfied by transferring control of the products sold
to the customer at the transaction price specified in the contract. Control transfers to the customers for carpet, rug and
carpet yarn sales on delivery of the goods to the customer. For wool sales, control passes on payment, prior to delivery.
The transaction price includes all amounts which the Group expects to be entitled to, net of goods and services tax and
other indirect taxes, expected rebates and discounts.
Apart from warranties, there are no contractual rights of return and there are therefore no provisions for returns.
In specific circumstances, the Group may choose to accept returns, in which case the returns are recognised at
that time.
Provision of installation services
Revenue from installation services rendered is recognised in profit or loss in proportion to the stage of completion
of the transaction at the reporting date as the customer receives and uses the benefit simultaneous to installation.
The stage of completion of installation services rendered is determined by having regard to the quantity in lineal metres
of carpet installed at balance date relative to the total quantity in lineal metres of carpet required for each contract.
3d. OTHER INCOME AND GAINS
Note
2022
$000
2021
$000
Rentals received 4 5
Dividends received 1 1
Government grants recognised
3g
581 166
Net gain on sale and leaseback of property– 2,624
Net gain on sale of plant and equipment 102 27
Total other income and gains$688 $2,823
3e. ADMINISTRATION EXPENSES
The following items of expenditure are included in administration expenses:
2022
$000
2021
$000
Donations$2 $2
Audit fees
Fees paid and payable to PwC for:
Audit of consolidated financial statements 515 567
Treasury advisory services– 20
Total fees paid and payable to PwC$515 $587
KPMG were auditors of the Company up until the financial year ended 30 June 2020, with PwC appointed auditors with
effect from the financial year ended 30 June 2021.
PwC ceased providing the Group with all advisory services prior to their appointment as auditors.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
71
3. FINANCIAL PERFORMANCE (CONT'D)
3f. PERSONNEL EXPENSES
Note
2022
$000
2021
$000
Directors’ fees
8f
372 386
Wages, salaries, bonuses and holiday pay 33,218 32,347
Other employee related costs 1,494 1,234
Restructuring costs 121 1,271
Employee termination benefits– 494
Employee benefits 1,130 1,354
Increase in liability for retiring allowances and long service leave 392 23
Total personnel expenses$36,727 $ 3 7,1 0 9
Personnel costs are included in cost of sales, distribution expenses and administration expenses in the Consolidated
Statement of Profit or Loss (except where these costs relate to the restructuring of the Group’s operations in which case
they are classified as restructuring costs).
Employee benefits include those benefits provided to employees as part of their employee arrangements with the Group
and cover the provision of motor vehicles, income protection insurances, life insurances and medical insurances and
associated fringe benefits taxes. Employee benefits also include the costs of providing on-site staff amenities.
3g. GOVERNMENT GRANTS
COVID-19 subsidies
2022
$000
2021
$000
Balance at 1 July brought forward in inventory– 1,500
Subsidies received during the year 1,776 –
Amount recognised in the Consolidated Statement of Profit or Loss (1,667) (1,500)
Balance at 30 June carried forward in inventory$109 –
The Group applied for and received $1,676,000 pursuant to various COVID-19 subsidy schemes from the New Zealand
Government and $100,000 from the New South Wales Government during the year (2021: Nil).
$1,308,000 of those subsidies were recognised in cost of sales in the Consolidated Statement of Profit or Loss during the
financial year, with $257,000 and $102,000 recognised in distribution expenses and administration expenses respectively
(2021: $1,500,000 was recognised in cost of sales in the Consolidated Statement of Profit or Loss).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
72
3. FINANCIAL PERFORMANCE (CONT'D)
3g. GOVERNMENT GRANTS (CONT'D)
International Growth Fund and Sustainable Food and Fibre Futures Fund
Grants totalling $242,000 (2021: $88,000) from the Government’s International Growth Fund (IG Fund) and $339,000 (2021:
$78,000) from the Sustainable Food and Fibre Futures Fund (SFFF Fund) are included in other income in the Consolidated
Statement of Profit or Loss, with the IG Fund covering pre-approved activities over the period from May 2019 to January
2023 and the SFFF Fund over the period from December 2020 through to December 2023.
There are no unfulfilled conditions or other contingencies attaching to the grants recognised in other income during the year.
Government grants that have been deferred, either because they relate to future costs to be incurred or assets, totalled
$418,000 at balance date (2021: $351,000).
Others
The Group did not benefit directly from any other forms of government assistance.
Notes 3d (Other income and gains) and 3g (Government grants) to the consolidated financial statements provide further
information on how the Group accounts for government grants.
Accounting policies
Grants from the government are recognised at their fair value where there is a reasonable assurance that the Group
will comply with all attached conditions and the grants will be received.
Government grants relating to costs that have been incurred are credited to profit or loss while grants relating to
future costs are included in current liabilities as deferred income and recognised in profit or loss over the period
necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as
deferred income and they are credited to profit or loss on a straight-line basis over the expected lives of the related assets.
3h. FINANCE COSTS
2022
$000
2021
$000
Interest expense - loans and borrowings (39) (449)
Interest component of lease payments (990) (675)
Finance costs($1,029)($1,124)
Accounting policies
Finance costs include interest expense on loans and borrowings and interest component of lease payments.
All interest expense are recognised in profit or loss using the effective interest method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
73
3. FINANCIAL PERFORMANCE (CONT'D)
3i. INCOME TAX
2022
$000
2021
$000
INCOME TAX EXPENSE IN THE CONSOLIDATED STATEMENT
OF PROFIT OR LOSS
Current tax expense
Current year 66 408
Adjustment for prior years 99 –
165 408
Deferred tax expense/(benefit)
Origination and reversal of temporary differences 695 196
Adjustment for prior years 10 (230)
Unrecognised deferred tax liabilities
(505) (98)
200 (132)
Income tax expense$365 $276
2022
$000
2021
$000
RECONCILIATION OF EFFECTIVE TAX RATE
Profit after tax for the year
2,240 1,729
Income tax expense
365 276
Profit excluding income tax$2,605 $2,005
Income tax using the Company’s domestic tax rate of 28% (2021: 28%)
729 561
Non-deductible expenses
15 11
Effect of tax rate difference in foreign jurisdiction
17 34
Adjustment for prior years
109 (232)
Unrecognised deferred tax liabilities
(505) (98)
Income tax expense$365 $276
2022
$000
2021
$000
INCOME TAX RECOGNISED DIRECTLY IN EQUITY
Derivative financial instruments– 47
Income tax on income and expense recognised directly in equity–$47
IMPUTATION CREDITS
Imputation credits available to shareholders of the Company$9,233 $9,233
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
74
3. FINANCIAL PERFORMANCE (CONT'D)
3i. INCOME TAX (CONT'D)
Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities Net
2022
$000
2021
$000
2022
$000
2021
$000
2022
$000
2021
$000
Property, plant and equipment 302 378 – – 302 378
Employee benefits 101 156 – – 101 156
Lease liabilities 21 80 – – 21 80
Provisions 108 118 – – 108 118
Net tax assets/(liabilities)$532 $732 ––$532 $732
Deferred tax assets at balance date relate to the Group's Australian carpet sales operations where it is expected that
there will be taxable profits in future periods to allow for the utilisation of the deferred tax assets.
Deferred tax assets relating to the Group's New Zealand operations were written off in FY20. Deferred tax assets not
recognised in respect of temporary differences and tax loss carry-forwards totalled $16,601,000 at balance date
(2021: $16,389,000).
While the Board has confidence in the prospects of the business as discussed at note 2c (Going concern) to the consolidated
financial statements, it has taken the same approach with respect to the recognition of deferred tax assets as it has with the
reversal of the FY20 impairment of assets as discussed at note 5a (Property, plant and equipment) to the consolidated
financial statements and has concluded that the execution of the Group’s strategy to focus on wool carpets, while
progressing to plan, is still in its early stages and therefore does not warrant the re-recognition of deferred tax assets.
Deferred tax assets have also not been recognised in respect of temporary differences and tax loss carry-forwards totalling
$24,150,000 (2021: $24,150,000) relating to an Australian subsidiary that currently does not have trading activity on the basis
that it is also not probable that future taxable profit will be available against which the Group can use the benefits therefrom,
taking the total deferred tax assets unrecognised to $40,751,000 (2021: $40,539,000).
Notwithstanding the derecognition of deferred tax assets for accounting purposes, these deferred tax assets remain
available to the Group for income tax purposes.
Movement in temporary differences during the year:
Balance
30 June 2021
$000
Recognised in
consolidated
statement of
profit or loss
$000
Balance
30 June 2022
$000
Property, plant and equipment 378 (76) 302
Employee benefits 156 (55) 101
Lease liabilities 80 (59) 21
Provisions 118 (10) 108
To t al$732 ($200)$532
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
75
3. FINANCIAL PERFORMANCE (CONT'D)
3i. INCOME TAX (CONT'D)
Deferred tax assets and liabilities (cont'd)
Balance
30 June 2020
$000
Recognised in
consolidated
statement of
profit or loss
$000
Balance
30 June 2021
$000
Property, plant and equipment 181 197 378
Inventories 100 (100)–
Employee benefits 130 26 156
Lease liabilities 145 (65) 80
Provisions 44 74 118
To t al$600 $132 $732
Accounting policies
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except
to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised
in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting
date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes and is measured at the tax rates that are
expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date.
Estimates, judgements and assumptions
Deferred tax assets are recognised for unused tax losses and deductible temporary differences to the extent that
it is probable that future taxable profits will be available against which they can be used. Future taxable profits are
determined based on business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each
balance date and adjusted to the extent that it is no longer probable that sufficient taxable profits will be available in
the future to utilise the deferred tax asset.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
76
4. CAPITAL AND FUNDING
This section looks at the Group’s two key sources of funding, how it manages its funding and other related matters.
4a. CAPITAL MANAGEMENT
The Group’s capital includes share capital, reserves and retained earnings.
The Group’s capital management policy is aimed at maintaining a strong capital base so as to maintain investor, creditor
and market confidence in the Group and to enable it to continue to fund the ongoing needs of the business and to sustain
its future development.
The impact of the level of capital on shareholders’ return is also recognised, as is the return to shareholders in the form of
dividends paid and growth in share price, and the Group works to maintain a balance between the higher returns that might
be possible with greater gearing and the advantages and security afforded by a sound capital base.
The Group is not subject to any externally imposed capital requirements.
The allocation of capital between the Group’s specific business segment operations and activities is, to a large extent,
driven by the opportunities that exist within each of these segments and the optimisation of the return achieved on the
capital allocated. The process of allocating capital to specific business segment operations and activities is determined
by the Chief Executive Officer in consultation with the Board and is therefore undertaken independently of those
responsible for the operation.
The Group’s policies in respect of capital management and allocation are reviewed regularly by the Board.
There have been no material changes in the Group’s management of capital during the year.
Consistent with best practice, the Group monitors capital on the basis of the leverage ratio. Leverage ratio is calculated as
net debt divided by total capital employed. Net debt is determined as total loans and borrowings (including both non-current
and current as shown in the Consolidated Statement of Financial Position) plus bank overdraft less cash and bank. Total
capital employed is calculated as equity as shown in the Consolidated Statement of Financial Position plus net debt financing
assets in operation.
4b. SHARE CAPITAL, DIVIDENDS AND RESERVES
Share capital
20222021
Shares on issue
Balance at 1 July 68,679,098 68,679,098
Issued during the year 500,000 –
Balance as at 30 June 69,179,098 68,679,098
The Company does not have a limited amount of authorised capital.
The Company issued 500,000 fully paid up ordinary shares on 10 September 2021 to the Chief Executive Officer pursuant
to the Bremworth Equity Plan, with more information to be found in note 8b (Share-based payment) to the consolidated
financial statements.
All issued shares are fully paid up and have no par value.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and one vote per share
at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
77
4. CAPITAL AND FUNDING (CONT'D)
4b. SHARE CAPITAL, DIVIDENDS AND RESERVES (CONT'D)
Dividends
No dividends were paid during the year (2021: Nil).
The Board has not declared a final dividend in respect of the current year ended 30 June 2022 (2021: Nil).
Cash flow hedging reserve
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising
from operational, financing and investing activities. In accordance with its treasury policy, the Group does not hold or issue
derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are
accounted for as trading instruments.
Derivative financial instruments are recognised initially at fair value and transaction costs are expensed immediately.
Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on re-measurement
to fair value is recognised immediately in profit or loss.
Where derivatives qualify for hedge accounting, changes in the fair value of the derivative hedging instrument designated
as a cash flow hedge are recognised in other comprehensive income to the extent that the hedge is effective. To the extent
that the hedge is ineffective, changes in fair value are recognised in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then
hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive
income remains there until the forecast transaction occurs at which time the gain or loss is transferred to profit or loss. When
the hedge item is a non-financial asset, the amount recognised in the cash flow hedging reserve is transferred to the carrying
amount of the asset when it is recognised. In other cases, the amount recognised in the cash flow hedging reserve is
transferred to profit or loss in the same year that the hedged item affects profit or loss.
The cash flow hedging reserve represents the effective portion of the cumulative net change in the fair value of cash flow
hedging instruments related to hedged transactions that have not yet occurred.
Foreign currency translation reserve
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated to New Zealand dollars at exchange rates at the reporting date. The income and expenses of foreign operations
are translated to New Zealand dollars at exchange rates at the dates of the transactions.
The foreign currency translation reserve comprises all exchange rate differences arising from the translation of the financial
statements of foreign operations and the translation of liabilities designated as hedges against the Company’s net investment
in a foreign operation.
There is no movement in the foreign currency translation reserve balance for the year ended 30 June 2022 (2021: Nil)
as the reserve relates to dormant foreign entities of the Group.
Share-based payment reserve
The share-based payment reserve is used to recognise the grant date assessed fair value of the performance rights issued
to executive employees under the Company's long-term incentive scheme as further discussed at note 8b (Share-based
payment) to the consolidated financial statements.
The assessed fair value of the performance rights at grant date are recognised as an expense in profit or loss over the
period from grant date to condition date, adjusted to reflect only those rights where the service condition will be met,
with corresponding entries to the share-based payment reserve.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
78
4. CAPITAL AND FUNDING (CONT'D)
4c. BANKING FACILITIES AND LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group’s banking facilities. For more information about the
Group’s exposure to interest rate risks, see note 7 (Risks and financial instruments) to the consolidated financial statements.
The Group’s banking facilities are provided by Bank of New Zealand and National Australia Bank Limited (together,
“the Bank”).
The Group has no funding facilities at balance date (2021: Nil).
The Group fully repaid its Bank loans and borrowings, while also putting itself in a surplus cash position, during FY21
with the cash coming from the Group's sell-down of non-wool inventory as it exited the non-wool carpet market and
from the sale and leaseback of the Auckland property.
Following the full repayment of the Group's Bank loans and borrowings in December 2020, the Bank and the Company
agreed to the withdrawal of all committed credit lines while continuing to retain transactional banking facilities, foreign
exchange transaction facilities and a guarantee facility.
The Group continues to maintain ongoing relationships with the Bank, with the view that committed credit lines could be
reinstated in the future to fund working capital requirements as the Group progresses through its transformation journey.
As a consequence, the Group has retained the security arrangements that were previously put in place to secure obligations
for the payment and repayment of moneys due, owing or payable by the Group to the Bank.
These security arrangements include the granting in favour of Bank of New Zealand, as security agent for the Bank,
a first-ranking composite general security deed and cross guarantee securing all obligations of the Group to the Bank
by certain companies in the Group. The property-owning companies in the Group have also continued to grant in favour
of Bank of New Zealand first-ranking mortgages in respect of land and buildings as security for all obligations of the Group
to the Bank, including obligations for the payment and repayment of moneys due, owing or payable by the Group to the
Bank (see note 5a (Property, plant and equipment) to the consolidated financial statements).
The Group had no other borrowings at balance date (2021: Nil).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
79
5. ASSETS EMPLOYED
This section covers non-current assets, being property, plant and equipment and other assets that the Group employs
in the production and sale of carpet, and the acquisition and sale of wool fibre, to generate revenues and profits.
5a. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
$000
Plant and
equipment
$000
Other
assets
$000
Under
construction
$000
To tal
$000
COST
Balance at 1 July 2021 10,427 64,793 11,448 1,322 87,990
Additions
543 83 379 1,893 2,898
Disposals
– (528) (274)– (802)
Tr a n s f e r s
– 1,315 1,231 (2,546)–
Balance at 30 June 2022$10,970 $65,663 $12,784 $669 $90,086
Balance at 1 July 2020
24,828 68,098 14,505 655 108,086
Additions
– 38 204 2,239 2,481
Disposals
(14,401) (4,427) (3,541) (208) (22,577)
Tr a n s f e r s
– 1,084 280 (1,364)–
Balance at 30 June 2021$10,427 $64,793 $11,448 $1,322 $87,990
DEPRECIATION AND IMPAIRMENT LOSSES
Balance at 1 July 2021
1,544 63,848 10,459 45 75,896
Depreciation for the year
128 232 323 – 683
Disposals
– (562) (237)– (799)
Balance at 30 June 2022$1,672 $63,518 $10,545 $45 $75,780
Balance at 1 July 2020
2,989 68,065 13,652 655 85,361
Depreciation for the year
224 17 138 – 379
Disposals
(1,669) (4,423) (3,544) (208) (9,844)
Tr a n s f e r s
– 189 213 (402)–
Balance at 30 June 2021$1,544 $63,848 $10,459 $45 $75,896
CARRYING AMOUNTS
At 30 June 2022$9,298 $2,145 $2,239 $624 $14,306
At 30 June 2021$8,883 $945 $989 $1,277 $12,094
At 1 July 2020$21,839 $33 $853 –$22,725
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
80
5. ASSETS EMPLOYED (CONT'D)
5a. PROPERTY, PLANT AND EQUIPMENT (CONT'D)
Other assets
Other assets comprise fixtures and fittings (including leasehold improvements and display stands), computer equipment,
motor vehicles and office equipment.
Impairment
NZ IAS 36 Impairment of Assets requires the Group to assess, at the end of each reporting period, whether there is any
indication that an asset may be impaired. If any such indication exists, the Group shall estimate the recoverable amount
of the asset. The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use.
The Group is required to recognise an impairment loss to the extent to which the carrying amount of an asset exceeds its
recoverable amount.
As at 30 June 2022, the Group has not identified any indicators of impairment over the assets held.
The Group’s market capitalisation at balance date was approximately $5.3 million below the carrying value of net assets.
However, this market capitalisation value excluded any control premium and may not reflect the value of 100% of the Group’s
net assets. Furthermore, the Group has seen improved trading performance by the woollen carpet business in the current
financial year when compared with the previous financial year.
The Directors also note that improvements in the share price subsequent to balance date have resulted in the Group's market
capitalisation exceeding the carrying value of its net assets.
The Group has therefore concluded that no impairment is required as at 30 June 2022 (2021: Nil).
The Group has also concluded that no reversal of the previous impairment of assets should be made following an assessment
that the execution of the Group’s strategy to focus on wool carpets which, while progressing to plan, is in its early stages.
Security
At balance date, the Group’s property, plant and equipment were subject to various registered charges in favour of the
Group’s bankers as security for the Group’s banking facilities and arrangements (see note 4c (Banking facilities and loans
and borrowings) to the consolidated financial statements).
Accounting policies
Recognition and measurement
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to
a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on
which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised
as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Under construction
Items being constructed for future use are held as part of property, plant and equipment under construction.
The carrying amounts of these represent the costs incurred at balance date and will be transferred to the appropriate
classification of property, plant and equipment on completion. Initial cost includes the purchase consideration and
those costs directly attributable in bringing the asset to the location and condition necessary for its intended use.
These costs include site preparation costs, installation costs, borrowing costs, unrecovered operating costs incurred
during planned commissioning and the costs of obtaining consents.
Costs cease to be capitalised when all the activities necessary to bring the asset to its location and condition for its
intended use are complete.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
81
5. ASSETS EMPLOYED (CONT'D)
5a. PROPERTY, PLANT AND EQUIPMENT (CONT'D)
Accounting policies (cont'd)
Depreciation
Depreciation is recognised in the Consolidated Statement of Profit or Loss over the estimated useful lives of each part
of an item of property, plant and equipment. Land is not depreciated.
The principal rates used for the current and comparative periods are as follows:
— buildings 1.0 – 2.5% straight line
— building fitouts 5.0 – 20.0% straight line
— plant and equipment 6.7 – 10.0% straight line
— other assets
– display stands 10.0% straight line
– computer equipment 20.0 – 25.0% straight line
– office equipment 10.0 – 20.0% straight line
– cars 20.0% diminishing value
– trucks and utilities 10.0% straight line
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
Impairment
The carrying amount of property, plant and equipment and other assets is tested for impairment whenever there are
indicators of impairment.
An impairment loss is recognised if the carrying amount of the cash-generating unit (being the smallest identifiable
asset group that generates cash flows that are largely independent from other assets and groups) to which the
property, plant and equipment and other assets is allocated exceeds its recoverable amount.
The recoverable amount of a cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
cash-generating unit.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount
of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group
of units) on a pro rata basis.
Estimates, judgements and assumptions
NZ IAS 36 Impairment of Assets requires the Group to assess, at the end of each reporting period, whether there is
any indication that an asset may be impaired. If any such indication exists, the Group shall estimate the recoverable
amount of the asset. The recoverable amount of an asset is the higher of its fair value less costs of disposal and its
value in use. The Group is required to recognise an impairment loss to the extent to which the carrying amount of
an asset exceeds its recoverable amount.
For the purpose of assessing impairment, assets are grouped in the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash generating
unit or CGU), which as at 30 June 2022 were identified as being the Carpets and Wool Acquisition CGUs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
82
5. ASSETS EMPLOYED (CONT'D)
5b. CAPITAL COMMITMENTS
The Group had outstanding commitments for the purchase of plant and equipment of $208,000 at balance date
(2021: $1,016,000).
In addition, the Group committed to two decarbonisation projects during the year ended 30 June 2022.
The first initiative is a $2,500,000 project at the Group's Napier carpet yarn spinning plant to reduce its reliance on natural
gas process heat through process heat optimisation and transitioning to electric heat pump technology. This project is being
38% co-funded ($958,000) under various funding programmes, including the GIDI (Government Investment in Decarbonising
Industry) Fund administered by the Energy Efficiency and Conservation Authority (EECA). This initiative is expected to
continue into FY23 and FY24.
The second decarbonisation initiative at the Group’s Whanganui carpet yarn spinning plant, which is also being co-funded
by EECA, will see a gas-fired dryer replaced with an alternative radio frequency dryer for use in felted yarn production.
This project is expected to cost $440,000, with the EECA co-funding agreed at 40% ($176,000), and will run over FY23
and FY24.
6. WORKING CAPITAL
This section reviews the level of working capital the Group generates and utilises in its normal day-to-day operating activities.
The Group’s working capital includes current assets (cash and bank, trade receivables, other receivables and prepayments
and inventories) and current liabilities (trade payables and accruals and employee entitlements).
6a. CASH AND BANK
Cash and bank at balance date comprise the following:
2022
$000
2021
$000
Cash and cash equivalents 10,874 10,508
Short term deposits 4,000 12,000
$14,874 $22,508
Accounting policies
Cash is cash on hand and demand deposits and includes bank overdrafts used for cash management purposes where
formal arrangements for set off has been agreed with the Bank. Under these set off arrangements, the Group is able
to set off overdrawn balances up to a maximum of $1,000,000 against credit balances in selected accounts as long
as the net balance of all these accounts (including overdrawn accounts) as a whole remain in credit. At balance date,
there were no overdrawn amounts subject to set off (2021: $130,000). Cash equivalents are highly liquid investments
that are readily convertible to known amounts of cash (that is, there is insignificant risk of changes in value) with
maturity no more than three months from balance date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
83
6. WORKING CAPITAL (CONT'D)
6b. TRADE RECEIVABLES, OTHER RECEIVABLES AND PREPAYMENTS
2022
$000
2021
$000
Trade receivables due from external customers 11,145 11,793
Other receivables 39 88
Prepayments 1,017 639
$12,201 $12,520
The Group's approach and policy with respect to, and quantitative disclosure of, credit risk are discussed at note 7
(Risks and financial instruments) to the consolidated financial statements.
Impairment losses on trade receivables and other receivables are assessed collectively and on a portfolio basis based
on the number of days overdue using the expected loss model, taking into account the historical loss experienced in
portfolios with a similar number of days overdue as well as current conditions and forecast of future economic conditions.
Accounting policies
Trade receivables and other receivables are recognised initially at transaction price and subsequently at amortised
cost less impairment losses.
6c. INVENTORIES
Inventories, net of provision, are summarised in the table below:
2022
$000
2021
$000
Raw materials 6,984 5,922
Work in progress 1,024 1,200
Finished goods 19,255 12,913
$ 2 7, 2 6 3 $20,035
Carrying amount of inventories subject to retention of title clauses$3,378 $3,152
Inventory provision at 1 July 1,976 4,741
Change in provision during the year (623) (2,765)
Inventory provision at 30 June$1,353 $1,976
The approach to inventory provisioning in 2022 is substantially consistent with 2021, with improved selling prices, quality
and profile of inventory (from the transformation to all-wool and the re-set of the business to focus on margins) contributing
to the reduction in provisioning at balance date. $699,000 of the inventory provision as at 30 June 2021 was able to be
released during the year ended 30 June 2022 as a consequence of the improvement in selling prices and margins.
Write downs of inventory during the year totalled $935,000 (2021: $1,299,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
84
6. WORKING CAPITAL (CONT'D)
6c. INVENTORIES (CONT'D)
Accounting policies
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in
first-out principle, and includes expenditure incurred in acquiring the inventories and bringing them to their existing
location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate
share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price
in the ordinary course of business, less the estimated costs of completion and selling expenses.
Estimates, judgements and assumptions
Inventory provisions are recognised for oddments and obsolete, aged and discontinued inventories to arrive at their
likely net realisable value.
Judgement and estimates are applied in identifying and categorising - to the extent applicable - obsolete, aged and
discontinued inventory and determining the level of provisioning that is required – with a range of factors including
inventory rationalisation plans, consumer demand and trends, available distribution channels and historical sales and
margin data considered.
6d. TRADE PAYABLES AND ACCRUALS
2022
$000
2021
$000
Trade payables 10,766 11,658
Accruals 1,444 1,406
$12,210 $13,064
Accounting policies
Trade payables are unsecured - except to the extent to which they have retention of titles clauses within their supply
arrangements with the Group - and are usually paid within the agreed payment terms.
The carrying amounts of trade payables are considered to be the same as their fair values, due to their short-term nature.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
85
6. WORKING CAPITAL (CONT'D)
6e. EMPLOYEE ENTITLEMENTS
2022
$000
2021
$000
Leave obligations 4,351 3,760
Bonus entitlement 732 587
Termination entitlement– 509
Wages accruals 293 347
$5,376 $5,203
Leave obligations cover the Group's liabilities in relation to employees' accrued and entitled annual leave as well as their
unconditional entitlement to long service leave where they have completed the required period of service.
Accounting policies
Employee entitlements relating to wages and salaries as well as annual leave and other employment-related payments
that are expected to be settled wholly within 12 months after the end of the annual reporting period in which the
employees render the related service are recognised in respect of employees’ services up to the end of the reporting
period as liabilities and are measured at the amounts expected to be paid when the liabilities are settled.
The entire amount of employee entitlements is presented as current as the Group does not have an unconditional
right to defer settlement for any of these obligations.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
86
7. RISKS AND FINANCIAL INSTRUMENTS
This section identifies the risks faced by the Group, explains the impact of these risks on its financial position, performance
and cash flows, outlines the Group’s approach to financial risk management and highlights the financial instruments used
to manage risks.
MANAGEMENT COMMENTARY
Exposure to credit, liquidity, foreign currency and interest rate risks arises in the normal course of the Group’s businesses.
The Group enters into derivative financial instruments in the ordinary course of business to manage foreign currency and
interest rate risks in accordance with the treasury policy approved by the Board. A financial risk management committee,
composed of senior management and operating under the Board-approved treasury policy, ensures that procedures for
derivative instrument utilisation, control and valuation, risk analysis, counterparty credit approval, and ongoing monitoring
and reporting are adhered to.
The Group manages commodity price risks through negotiated supply contracts and forward physical contracts. However,
because these contracts are, generally, in respect of raw material and utility purchases for own use, they are not accounted
for as financial instruments.
Credit risk
Management has a credit policy in place under which each new customer is individually analysed for credit worthiness and
assigned a purchase limit before the standard payment and delivery terms and conditions are offered. Because of the Group’s
customer base, there is no need for the Group to rely on external ratings. In most cases, bankers’ references, trade credit
insurance approvals and/or credit references from other suppliers are considered adequate. Purchase limits are reviewed
on a regular basis.
In order to determine which customers are classified as having payment difficulties, the Group applies a mix of duration
and frequency of default. The Group does not generally require collateral in respect of trade and other receivables.
The Group’s exposure to credit risk is mainly influenced by its customer base. As such, it is concentrated to the default risk
of its industry. However, geographically, there is no credit risk concentration, with the Group’s customers spread throughout
New Zealand, Australia and other overseas markets. Credit risk exposure with respect to trade receivables is limited by
stringent credit controls, by the utilisation of irrevocable letters of credit and trade credit insurances wherever required,
and by the large number of customers within the Group's customer base.
The amount and timing of collection of trade receivables and estimate of expected credit losses under NZ IFRS 9 Financial
Instruments have been considered and included in the consolidated financial statements. There has been no indication of a
significant change in amounts or timing of receipts from trade receivables as at 30 June 2022 due to the impact of COVID-19
(2021: Nil).
The Group does not invest in securities, but accepts that surplus cash and cash equivalents may arise from time to time
during the course of its management of cash. In these instances, it requires these surplus cash and cash equivalents to be
deposited on call and only with counterparties approved by the Board as having the required credit ratings.
Foreign currency forward exchange contracts and interest rate swaps have been entered into with counterparties approved
by the Board as having the required credit ratings. The Group's exposure to credit risk from these financial instruments
is limited because it does not expect the non-performances of the obligations contained therein due to the high credit
ratings of the financial institutions concerned. The Group does not require any collateral or security to support these
financial instruments.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
87
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
MANAGEMENT COMMENTARY (CONT'D)
Liquidity risk
Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity requirements
on an ongoing basis. In general, the Group generates sufficient cash flows from its operating activities to meet its obligations
arising from its financial liabilities and has credit lines in place to cover potential shortfalls.
As part of the Group's transformation to its new business model, it completed the sale and leaseback of its Auckland
property on 23 December 2020.
The funds generated enabled the Group to not only repay all of the Group's bank debt outstanding as at that date but also
put it into a significant cash surplus position at balance date to enable it to fund its transformation and provide it with
sufficient liquidity to settle its ongoing financial obligations for at least 12 months after the date of issuing these consolidated
financial statements.
As discussed at note 4c (Banking facilities and loans and borrowings) to the consolidated financial statements, the Group
continues to maintain, among other things, transactional banking facilities with its Bank and will look to raise for discussions
with the Bank the reinstatement of committed credit lines to cover working capital requirements as the Group progresses
through its transformation journey.
The Group’s contractual cash flows and liquidity risk profile are set out in detail on page 90.
Foreign currency risk
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies
in which sales, purchases, receivables and payables are denominated. All entities in the Group have New Zealand dollars ($)
as their functional currency.
The Group enters into foreign currency contracts within policy parameters to manage the risk associated with forecast
sales and purchases. The Group’s policy allows management to hedge up to 12 months forecast sales and purchases
without prior approval of the Board having first been obtained.
The Group does not engage in speculative transactions or hold derivative financial instruments for trading purposes and
requires that exposures to foreign currency risks, and details of all outstanding derivative instruments, are reported to
and reviewed by the Board on a monthly basis.
The Group applies a hedge ratio of 1:1. The method used to assess hedge effectiveness is Critical Match Terms whereby
the hedging instrument and the hedged item are matched to the key terms. In the hedge relationship, the main cause of
ineffectiveness includes a change in the critical terms, for example, the timing of the transaction.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based
on the currency, amount and timing of the respective cash flows. The Group assesses whether the derivative designated in
each hedging relationship is expected to be, and has been, effective in offsetting changes in cash flows of the hedged item
using the critical matched terms method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
88
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
MANAGEMENT COMMENTARY (CONT'D)
Interest rate risk
Prior to the repayment of bank debt in December 2020, interest rate swaps were entered into to hedge a proportion of the
Group’s exposure to interest rate fluctuations by ensuring that there was an appropriate mix, after having regard to the
circumstances prevailing at the time, of fixed and floating rate exposure within the Group’s total loans and borrowings.
Interest rate risks are continually monitored having regard to the circumstances at any given time.
The Group’s policy allows management to hedge up to between 25% and 75% of the Group’s core loans and borrowings
without the prior approval of the Board having first been obtained.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based
on the reference interest rates, tenors, repricing dates and maturities and the notional or par amounts. The Group assesses
whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in cash
flows of the hedged item using the critical matched terms method.
QUANTITATIVE DISCLOSURES
Credit risk
The carrying amount of financial assets represents the Group’s maximum credit exposure.
The Group has not renegotiated the terms of any financial assets which would result in the carrying amount no longer being
past due or avoid a possible past due status.
The Group’s maximum exposure to credit risk for trade and other receivables by geographic regions is as follows:
2022
$000
2021
$000
New Zealand 5,797 5,207
Australia 4,677 6,046
Other regions 710 628
Trade and other receivables$11,184 $11,881
The status of trade and other receivables at the reporting date is as follows:
Current
0 – 30 days
past due
31 – 120 days
past due
More than 120
days past due
To tal
2022
Expected loss rate0%0%0%7%
Gross carrying amount – trade and other receivables
9,885 930 291 84 11,190
Loss allowance
– – – (6) (6)
2021
Expected loss rate0%0%0%18%
Gross carrying amount – trade and other receivables 10,379 1,149 293 73 11,894
Loss allowance– –– (13) (13)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
89
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
QUANTITATIVE DISCLOSURES (CONT'D)
In summary, trade and other receivables are determined to be impaired as follows:
2022
$000
2021
$000
Trade and other receivables - gross 11,190 11,894
Individual impairment provisions (6) (13)
Trade and other receivables - net$11,184 $11,881
Individually impaired trade receivables relate to a small number of customers where the amounts involved are immaterial.
In the case of insolvency, the Group generally writes off the receivable in full unless there is clear evidence that a receipt,
whether directly or by way of a claim under the Group’s trade credit insurance policy, is highly probable.
The Group adopts the expected loss model in assessing its trade and other receivables for impairment. In doing so, it
determines impairment on a forward-looking basis, taking into account not only past events and current conditions, but also
forecast of future economic conditions. Bad debts are written off when they are considered to have become uncollectable.
The details of movements in the impairment provision are as follows:
2022
$000
2021
$000
Balance at 1 July (13) (42)
Impaired trade receivables written off 7 11
Changes in impairment provision– 18
Balance at 30 June($6)($13)
Changes in the impairment provision are included in distribution expenses in the Consolidated Statement of Profit or Loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
90
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
QUANTITATIVE DISCLOSURES (CONT'D)
Liquidity risk
The following table sets out the contractual undiscounted cash flows for all material financial liabilities (including projected
interest costs).
Timing of contractual cash flows
Statement of
consolidated
financial
position
$000
To tal
contractual
cash flows
$000
6 months
or less
$000
6-12
months
$000
1-2 years
$000
2-5 years
$000
Greater
than 5
years
$000
2022
Trade payables 10,766 10,766 10,766 – – – –
Lease liabilities 19,758 26,537 1,427 1,408 2,735 5,726 15,241
Total non-derivative liabilities$30,524 $37,303 $12,193 $1,408 $2,735 $5,726 $15,241
Forward exchange contracts
Inflow (41,693) (13,534) (12,147) (16,012)– –
Outflow 42,240 13,914 12,251 16,075 ––
686 547 380 104 63 – –
Net derivative liabilities/(assets)$686
Disclosed in consolidated statement
of financial position
Current assets (8)
Current liabilities 694
Net derivative liabilities/(assets)$686
2021
Trade payables 11,658 11,658 11,658 – – – –
Lease liabilities 21,533 28,429 1,522 1,458 2,766 5,607 1 7,0 76
Total non-derivative liabilities$33,191 $40,087 $13,180 $1,458 $2,766 $5,607 $ 1 7,0 76
Forward exchange contracts
Inflow (22,762) (14,113) (8,649)– – –
Outflow 22,666 14,062 8,604 – ––
(75) (96) (51) (45)– ––
Net derivative (assets)/liabilities($75)
Disclosed in consolidated statement
of financial position
Current assets (109)
Current liabilities 34
Net derivative (assets)/liabilities($75)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
91
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
QUANTITATIVE DISCLOSURES (CONT'D)
Foreign currency risk
The Group’s exposure to foreign currency risk can be summarised as follows:
NZD equivalent of these currencies
AUD
$000
USD
$000
EUR
$000
Others
$000
2022
Trade receivables 4,715 300 – –
Trade payables (1,596) (1,001) (94) (13)
Net consolidated statement of financial position exposure before hedging activity 3,119 (701) (94) (13)
Estimated forecast sales for which hedging is in place 38,574 – – –
Net cash flow exposure before hedging activity 41,693 (701) (94) (13)
Forward exchange contracts
Notional amounts (41,693)– – –
Net unhedged exposure– ($701)($94)($13)
2021
Trade receivables 5,997 431 6 –
Trade payables (2,146) (274)– (9)
Net consolidated statement of financial position exposure before hedging activity 3,851 157 6 (9)
Estimated forecast sales for which hedging is in place 18,911 – – –
Net cash flow exposure before hedging activity 22,762 157 6 (9)
Forward exchange contracts
Notional amounts (22,762)– – –
Net unhedged exposure– $157 $6 ($9)
Interest rate risk – re-pricing analysis
At balance date, the interest rate profile of the Group’s interest-bearing financial instruments was as follows:
To tal
$000
6 months or less
$000
6-12 months
$000
1-2 years
$000
2-5 years
$000
Greater than 5 years
$000
2022
Financial assets and liabilities
Cash and bank 14,874 14,874 – –– –
2021
Financial assets and liabilities
Cash and bank 22,508 19,508 3,000 –––
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
92
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
SENSITIVITY ANALYSIS
In managing interest rate and currency risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s
earnings. Over the longer-term, however, changes in foreign exchange and interest rates will have an impact on profit.
For foreign exchange contracts that continue to meet the hedge accounting criteria at the balance sheet date to hedge
foreign exchange exposures, it is estimated that a general change in the value of the New Zealand dollar against other
foreign currencies as set out below would have no impact on the Group’s profit or loss before income tax for the years
ended 30 June 2022 and 2021. The impact on equity, net of tax, for these foreign exchange contracts, is disclosed in
the table below:
StrengthenWeakenStrengthenWeaken
P&L Equity, net of tax
$000$000$000$000
30 June 2022
NZD/AUD (+/- 5%)– – 1,318 (1,457)
30 June 2021
NZD/AUD (+/- 5%)– – 609 (673)
There were no foreign exchange contracts that do not meet the hedge accounting criteria at the balance sheet date.
The impact of a change in interest rates by one percentage point on the Group’s profit or loss and OCI is set out as follows:
Increase
1% point
Decrease
(1% point)
Increase
1% point
Decrease
(1% point)
P&L Equity, net of tax
$000$000$000$000
Interest rate impact - Net FY22$40 ($40)– –
Interest rate impact - Net FY21$150 ($150)– –
HEDGING
Interest rate hedges
The Group has a policy of ensuring that between 25% and 75% of its exposure to changes in interest rates on borrowings
is on a fixed rate basis.
This policy has no application at the present time, with the Group having completed the sale and leaseback of its Auckland
property and fully repaid all of its borrowings during the year.
Forecast transactions
The Group classifies the forward exchange contracts taken out to hedge forecast transactions as cash flow hedges.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
93
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
HEDGING (CONT'D)
The following relates to items designated as hedging instruments:
Notional
amount
Carrying amount
Line item in
consolidated
statement of
financial position
Changes in
the value of the
hedging instrument
recognised in OCI
during the year
Hedge
ineffectiveness
recognised
in profit or loss
Balance
in CFHR
Average
rate of
hedgingAssetsLiabilities
2022
$000 $000 $000 $000 $000 $000
Foreign
currency risk
Forward
exchange
contracts
– sales and
receivables ¹
,
²
AUD38,100 8 (694)Derivative
financial
instruments
– assets and
liabilities
52 – (576)0.9138
1
62% of notional amount expiring within 12 months of balance date and 38% expiring between 12 and 24 months of balance date
2
Hedge ratio 1:1
Notional
amount
Carrying amount
Line item in
consolidated
statement of
financial position
Changes in
the value of the
hedging instrument
recognised in OCI
during the year
Hedge
ineffectiveness
recognised
in profit or loss
Balance
in CFHR
Average
rate of
hedgingAssetsLiabilities
2021
$000 $000 $000 $000 $000 $000
Foreign
currency risk
Forward
exchange
contracts
– sales and
receivables ¹
,
²
AUD21,075 109 (34)Derivative
financial
instruments
– assets and
liabilities
109 – 550.9259
Interest rate risk
Interest rate swaps
–– – Derivative
financial
instruments
– liabilities
66 – – –
1
100% of notional amount expiring within 12 months of balance date
2
Hedge ratio 1:1.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
94
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
CLASSIFICATION AND FAIR VALUES
The following tables show the carrying amounts and fair values of financial assets and financial liabilities, including their
levels in the fair value hierarchy.
Hedging
instruments
$000
Amortised
cost
$000
Total carrying
amount
$000
Fair value hierarchy
Level 2
$000
2022
Assets
Derivative financial instruments 8 – 8 8
Cash and bank– 14,874 14,874
Trade and other receivables– 11,184 11,184
Advances to employees– 160 160
Total assets$8 $26,218 $26,226
Liabilities
Lease liabilities– 17,820 17,820
Employee benefits– 720 720
Total non-current liabilities– 18,540 18,540
Derivative financial instruments 694 – 694 694
Trade payables and accruals– 12,210 12,210
Employee benefits and entitlements– 5,429 5,429
Lease liabilities– 1,938 1,938
Total current liabilities 694 19,577 20,271
Total liabilities$694 $38,117 $38,811
Hedging
instruments
$000
Amortised
cost
$000
Total carrying
amount
$000
Fair value hierarchy
Level 2
$000
2021
Assets
Derivative financial instruments 109 – 109 109
Trade and other receivables– 11,881 11,881
Cash and bank– 22,508 22,508
Total assets$109 $34,389 $34,498
Liabilities
Lease liabilities– 19,530 19,530
Employee benefits– 776 776
Total non-current liabilities– 20,306 20,306
Derivative financial instruments 34 – 34 34
Trade payables and accruals– 13,064 13,064
Employee benefits and entitlements– 5,339 5,339
Lease liabilities– 2,003 2,003
Total current liabilities 34 20,406 20,440
Total liabilities$34 $40,712 $40,746
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
95
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
CLASSIFICATION AND FAIR VALUES (CONT'D)
There were no financial assets or liabilities with fair values classified as Level 1 or Level 3 in the fair value hierarchy.
A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire
or if the Group transfers the rights to receive the contractual cash flows in a transaction in which substantially all the
risks and rewards of ownership of the financial assets are transferred. Financial liabilities are derecognised if the Group’s
obligations specified in the contract expire or are discharged or cancelled.
Derivatives, being forward exchange contracts, have been measured at fair value using relevant valuation techniques which
include net present value and discounted cash flow models and comparison with similar instruments for which observable
market prices exist. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates,
credit spreads and other information used in estimating discount rates and foreign currency exchange rates.
Non-derivative financial instruments comprise trade and other receivables, cash and bank and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value, inclusive of transaction costs, and are subsequently
measured at amortised cost using the effective interest rate method less any impairment losses.
DETERMINATION OF FAIR VALUES
The fair value of an asset or a liability is measured on a recurring basis. When measuring the fair value of an asset or a liability,
the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value
hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
If the inputs used to measure the fair value of an asset or liability might be categorised in different levels of the fair value
hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which
the change occurred.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
96
7. RISKS AND FINANCIAL INSTRUMENTS (CONT'D)
MASTER NETTING OR SIMILAR AGREEMENTS
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting
agreements. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all
transactions outstanding are aggregated into a single net amount that is payable by one party to the other. In certain
circumstances – for example, when a credit event such as a default occurs, all outstanding transactions under the agreement
are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.
The ISDA agreements do not meet the criteria for offsetting in the Consolidated Statement of Financial Position. This is
because the Group does not have any currently legally enforceable right to offset recognised amounts, because the right
to offset is enforceable only on the occurrences of future events such as a default on the bank loans or other credit events.
The following table sets out the carrying amounts of recognised derivatives that are subject to master netting agreements:
2022 2021
Derivative assets
$000
Derivative liabilities
$000
Derivative assets
$000
Derivative liabilities
$000
Gross amounts in the consolidated
statement of financial position
8 (694) 109 (34)
Amounts offset– – – –
Net amounts in the consolidated
statement of financial position
8 (694) 109 (34)
Related amounts that are
not offset based on ISDA
(8) 8 (34) 34
Net amounts– ($686)$75 –
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
97
8. OTHERS
This section includes the remaining information relating to the consolidated financial statements which is required to be
disclosed to comply with financial reporting standards.
8a. LEASES
This note provides information for leases where the Group is a lessee.
AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Right-of-use assets
2022
$000
2021
$000
Buildings 8,839 9,662
Plant and equipment 361 281
Motor vehicles 80 25
$9,280 $9,968
Lease liabilities
2022
$000
2021
$000
Non-current 17,820 19,530
Current 1,938 2,003
$19,758 $21,533
Additions to right-of-use assets during the year were $266,000 (2021: $10,071,000).
There was no impairment of right-of-use assets during the year (2021: Nil).
There was also no reversal of prior year impairment of right-of-use assets during the year (2021: Nil).
AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Depreciation charge in respect of right-of-use assets
2022
$000
2021
$000
Buildings 823 483
Plant and equipment 131 51
$954 $534
Interest expense (included in finance costs)$990$675
Expense relating to short-term leases (included in cost of goods sold
and administration expenses)$594$459
Expense relating to leases of low-value assets that are not disclosed
above as short-term leases (included in administrative expenses)$71$28
AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF CASH FLOWS
Total cash outflow for leases$3,031$2,419
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
98
8. OTHERS (CONT'D)
8a. LEASES (CONT'D)
AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
Accounting policies
The Group leases buildings, forklifts and motor vehicles, with contracts typically entered into for fixed periods ranging
from between three to four years for motor vehicles, five to six years for fork hoists and up to sixteen years for
buildings, but may have extension options as further discussed below.
Contracts may contain both lease and non-lease components. The Group has elected, for leases of motor vehicles,
to not separate lease and non-lease components and instead account for these as a single lease component.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants other than the security interests in the leased assets that
are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
— fixed payments; and
— variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date.
Lease payments to be made under reasonably certain extension options are also included in the measurement
of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
— where possible, uses recent third-party financing secured by the individual lessee as a starting point, adjusted to
reflect changes in financing conditions since third party financing was secured;
— uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by lessees
within the Group which does not have recent third-party financing;
— makes adjustments, where necessary, specific to the lease taking into account country, currency and security.
If a readily observable amortising loan rate is available to the individual lessee (through recent financing or market
data) which has a similar payment profile to the lease, then the group entities use that rate as a starting point to
determine the incremental borrowing rate.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period.
Right-of-use assets are measured at cost comprising the following:
— the amount of the initial measurement of lease liability; and
— make good costs.
Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Payments associated with short-term leases of plant and equipment and motor vehicles and all leases of low-value
assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease
term of 12 months or less without a purchase option. Low-value assets comprise IT equipment and small items of
office furniture.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
99
8. OTHERS (CONT'D)
8a. LEASES (CONT'D)
EXTENSION OPTIONS
Extension options are generally incorporated into contracts for leases of buildings, with these options used to maximise
operational flexibility with respect to the management of the buildings used in the Group’s operations. Where extension
options are held, they are exercisable only by the Group and not by the respective lessor. Extension options are generally
not included in contracts for leases of plant and equipment and motor vehicles because of the Group's ability to replace
these assets without significant cost, delay or disruption to the business.
Estimates, judgements and assumptions
In determining the lease term, management considers all facts and circumstances that create an economic incentive to
exercise an extension option. Extension options are only included in the lease term if the lease is reasonably certain to be
extended, with the Group reasonably certain to extend:
— if there are significant costs to not extend; and
— if leasehold improvements are expected to have a significant remaining value.
Otherwise, the Group considers other factors including the lease durations already provided for in the contract,
the Group's future strategic or business direction and the costs and disruptions to the business as a consequence
of any decision to not exercise an extension option.
As at balance date, potential future cash outflows of $19,803,000 (undiscounted) in respect of leases of buildings
have not been included in the determination of lease liability because it is not reasonably certain that these leases
will be extended (2021: $19,803,000).
The lease term is reassessed if an extension option is actually exercised. The assessment of reasonable certainty
is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment,
and that is within the control of the lessee. The Group did not revise its assessment of reasonable certainty with
respect to extension options during the year (2021: Nil).
8b. SHARE-BASED PAYMENT
DESCRIPTION OF SHARE-BASED PAYMENT ARRANGEMENT
The Board approved the establishment of the Bremworth Equity Ownership Plan (Bremworth Equity Plan) and the Bremworth
Share Option Scheme (Bremworth Option Scheme) on 27 August 2021.
The Bremworth Equity Plan and the Bremworth Option Scheme are designed to incentivise certain employees and align
their interests with the Company's shareholders by providing them with equity interests in the Company.
The Bremworth Equity Plan provides for eligible employees to be issued shares in the Company on terms determined by
the Board and as set out in the rules of the Bremworth Equity Plan and includes the provision of a full recourse loan by the
Company to those eligible employees to fund the amount payable for the shares issued to them.
The Bremworth Option Scheme provides for selected employees to be awarded options to acquire ordinary shares at a
fixed price, with the options becoming exercisable over time in accordance with a vesting schedule or on certain liquidity
events as defined in the rules of the Bremworth Option Scheme.
The Company issued two tranches of options under the Bremworth Option Scheme to the Chief Executive Officer during
the year ended 30 June 2022, with 480,000 options on 10 September 2021 and a further 520,000 options on 8 April 2022.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
100
8. OTHERS (CONT'D)
8b. SHARE-BASED PAYMENT (CONT'D)
DESCRIPTION OF SHARE-BASED PAYMENT ARRANGEMENT (CONT'D)
The Company also issued 500,000 fully paid up ordinary shares pursuant to the terms of the Bremworth Equity Plan to
the Chief Executive Officer on 10 September 2021, with the consideration for the shares of $208,050 funded by way of
an interest-free, full-recourse, loan provided by the Company to the Chief Executive Officer.
The Board also approved on 18 December 2020 the establishment of a long-term incentive scheme (LTI Scheme) for
executive employees pursuant to which the Company will issue performance rights (“Rights”) to the participants which
would entitle the participants to be issued shares in the Company, subject to service and performance conditions being
met, at the end of the stipulated performance period.
No Rights were issued pursuant to the LTI Scheme during the year ended 30 June 2022.
The Company has determined that the shares issued under the Bremworth Equity Plan, the options issued under the
Bremworth Option Scheme and the Rights issued under the LTI Scheme to be equity-settled share-based payment
arrangements pursuant to NZ IFRS 2 Share-based Payment, with the participants not able to request payment in cash.
MEASUREMENT OF FAIR VALUE OF OPTIONS GRANTED UNDER THE BREMWORTH OPTION SCHEME
The fair value of the options at the grant date has been determined using a Monte Carlo simulation.
Specifically, the Monte Carlo simulation is used as follows:
—to predict the Company’s future share prices (a “market condition” under NZ IFRS 2), gross of dividends, using a
random-walk process which is driven by assumptions regarding volatility and the underlying drift rate from grant
date through to vesting date;
—to calculate the annualised total shareholder return (TSR) at the vesting date implied by the simulated share price;
—to determine the extent to which the calculated TSR exceeds the TSR set out in the vesting schedule;
—to calculate the number of shares to be issued and the implied payoff to the Chief Executive Officer based on the
number of shares issued and the simulated share price at vesting date.
The inputs used in the measurement of the fair value at Grant Date of the Rights are as follows.
—Share price at grant date - $0.78 per share, being the Company's closing share price on NZX on 7 September 2021,
in respect of the first tranche of 480,000 options;
—Share price at grant date - $0.42 per share, being the Company's closing share price on NZX on 7 April 2022,
in respect of the second tranche of 520,000 options;
—Exercise price - $0.4161 per share, being the 20-day volume weighted average sale price of a Bremworth share on
NZX up to 23 June 2021 when the Chief Executive Officer was appointed.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
101
8. OTHERS (CONT'D)
8b. SHARE-BASED PAYMENT (CONT'D)
OUTSTANDING OPTIONS UNDER THE BREMWORTH OPTION SCHEME
The only options outstanding at balance date are the 1,000,000 options granted and issued to the Chief Executive Officer
under the Bremworth Option Scheme during the year ended 30 June 2022.
The maximum number of shares that will be issued in respect of these 1,000,000 options is 1,000,000 shares, with the
options becoming exercisable over time in accordance with a vesting schedule or on certain liquidity events as defined
in the rules of the Bremworth Option Scheme.
OUTSTANDING RIGHTS UNDER THE LTI SCHEME
There are no changes to the outstanding Rights on issue during the year ended 30 June 2022.
The number of shares that will be issued on condition date (being 1 May 2023) of the outstanding Rights under the
LTI Scheme is unknown at balance date.
The number of shares to be issued is dependent on the extent to which TSR exceeds 14% per annum compounding over
the performance period and the share price at condition date, except that the number of shares issued to all participants
will not, together with shares issued under NZX Listing Rule 4.6.1 over the previous 12 months, exceed 3% of the total number
of shares on issue at condition date.
The maximum number of shares that could be issued in respect of all outstanding Rights under the LTI Scheme at condition
date is 1,071,394 (or 1.54% of the total number of shares on issue at balance date of 69,179,098).
For the number of shares issued at Condition Date to all current Participants to equal 1.56% of the total number of shares
currently on issue, the share price would have to exceed $0.5128 per share at Condition Date - based on the share price at
the start of the Performance Period of $0.3141 per share, TSR of 14% per annum compounding over the Performance Period
and no dividends payable during the Performance Period.
MAXIMUM NUMBER OF SHARES THAT COULD BE ISSUED UNDER THE BREMWORTH OPTION SCHEME AND
THE LTI SCHEME
The following table summarises the maximum number of shares that could be issued under the Bremworth Option Scheme
and the LTI Scheme as at balance date:
2022
$000
2021
$000
Balance at 1 July 1,071,394 –
Issued during the year 1,000,000 1,854,336
Lapsed during the year– (782,942)
Balance as at 30 June 2,071,394 1,071,394
% of total number of shares on issue 2.99 1.56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
102
8. OTHERS (CONT'D)
8b. SHARE-BASED PAYMENT (CONT'D)
IMPACT OF SHARE-BASED PAYMENT ARRANGEMENTS ON THE FINANCIAL STATEMENTS
The assessed fair value of the options and Rights at grant date are recognised as an expense in profit or loss over the period
from date on which the participant started rendering service or the grant date (whichever is the earlier), adjusted to reflect
only those options and Rights where the service condition will be met, with corresponding entries to the share-based-
payment reserve within equity.
The following were recognised in administration expenses in the Consolidated Statement of Profit or Loss for the year
ended 30 June 2022:
—$46,000, being the proportion of fair value of the options granted to the Chief Executive Officer in September 2021,
for the period from commencement of employment through to balance date;
—$27,000, being the proportion of the fair value of the options granted to the Chief Executive Officer in April 2022,
for the period from commencement of employment through to balance date;
—$192,000, being the difference between the $0.4161 issue price per share and the $0.8000 market price per share at
issue date in respect of the 500,000 fully paid up ordinary shares issued to the Chief Executive Officer in September
2021 under the Bremworth Equity Plan;
—$97,000, being the proportion of fair value of the Rights relating to the year ended 30 June 2022;
with a corresponding credit totalling $362,000 to the share-based payment reserve within equity (30 June 2021: $51,000).
INTEREST-FREE FULL-RECOURSE LOAN
The Company has accounted for the interest-free, full-recourse, loan made by the Company to the Chief Executive Officer
to fund the $208,050 payable for the shares issued under the Bremworth Equity Plan at fair value of $152,000, with the
difference between fair value and face value of the loan to be recognised as an employee benefit in administration expenses
in the Consolidated Statement of Profit or Loss over the period of service.
8c. PROVISIONS
Workplace accidents
$000
Make good
$000
Warranties
$000
Claims
$000
To tal
$000
Balance at 1 July 2021 150 89 1,095 – 1,334
Provided during the year– – 15 350 365
Utilised during the year– – – – –
Released to profit or loss during the year– – – – –
Balance at 30 June 2022$150 $89 $1,110 $350 $1,699
Non-current– 89 622 – 711
Current 150 – 488 350 988
Balance at 30 June 2022$150 $89 $1,110 $350 $1,699
Balance at 1 July 2020 210 59 1,025 – 1,294
Provided during the year– 30 70 – 100
Utilised during the year (60)– – – (60)
Released to profit or loss during the year––– – –
Balance at 30 June 2021$150 $89 $1,095 –$1,334
Non-current– 89 583 – 672
Current 150 – 512 – 662
Balance at 30 June 2021$150 $89 $1,095 – $1,334
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
103
8. OTHERS (CONT'D)
8c. PROVISIONS (CONT'D)
WORKPLACE ACCIDENTS
Certain companies within the Group are parties to the ACC Partnership Programme during the year. Under this programme,
these companies assume the costs normally assumed by ACC (Accident Compensation Corporation of New Zealand) for
accidents in the workplace, with the provision for claims incurred but yet to be settled. It is expected that the outflow of
economic benefit will occur within 12 months of balance date.
MAKE GOOD
Provision for make good relates to the costs expected to be incurred in relation to make good obligations under leases
entered into, with the provision utilised as the costs relating thereto are incurred or adjusted to reflect current estimates
of costs to be incurred. The amount utilised during the year relates to the amount paid.
WARRANTIES
The provision for warranties relates mainly to carpet sold during the years ended 30 June 2022 and 2021. The provision is
based on estimates made from historical warranty data associated with similar products sold by the Group.
The Group has no history of material warranty claims in respect of non-carpet products sold. As a consequence, no provision
for warranties is required in respect of these other products.
The amount of warranty costs recognised as an expense directly to the Consolidated Statement of Profit or Loss during
the year totalled $1,024,000 (2021: $852,000).
Warranties relating to the sale of carpet are standard warranties. The Group does not offer extended warranties that would
be subject to a separate performance obligation.
CLAIMS
The provision for claims relates to the estimated cost to settle claims received during the year ended 30 June 2022 for
products supplied by a previously-owned business unit, with these claims yet to be resolved at balance date (2021: Nil).
Accounting policies
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability.
Estimates, judgements and assumptions
Provision for warranties requires judgement to be applied by considering a range of factors including the nature and
extent of historical claims data associated with similar products sold by the Group, the terms of the warranties built
into supply contracts, consumer protection laws in key markets and the corrective actions being taken to address
quality issues at production.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
104
8. OTHERS (CONT'D)
8d. EMPLOYEE BENEFITS
2022
$000
2021
$000
Liability for retiring allowances– 96
Liability for long service leave 773 816
Total employee benefits$773 $912
Non-current 720 776
Current 53 136
Balance at 30 June$773 $912
Accounting policies
Short-term employee benefits are expensed as the related services are provided.
Long-term employee benefits relate to long service leave that is not expected to be settled within 12 months after
the end of the annual reporting period in which the employees render the service that gives rise to the benefit.
The Group's net obligation is the amount of future benefit employees have earned in return for their service in
the current and prior years. The complexity and length of the long service leave arrangement requires the use of
actuarial assumptions, such as salary increases and inflation, in order to calculate the present value of the obligation.
The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees
have earned in return for their service in the current and prior periods adjusted for the probability of the benefits
vesting and discounted at the appropriate rate to determine its present value.
Estimates, judgements and assumptions
The Group appointed Deloitte to assist with the Group's assessment of its liability for long service leave as at 30 June
2022, with Deloitte using a Projected Unit Credit (PUC) method to value employees' entitlements to long service leave.
This method involves a monthly projection of the long service leave entitlement for each employee to retirement age.
The expected entitlement payment at each point over the projection period is calculated using assumptions about
likely resignation, retirement, mortality and disability for each employee. Using employee data provided by the
Company, Deloitte were able to estimate the value of the long service leave liability as at balance date.
8e. CONTINGENCIES
The Group has granted indemnities in favour of Bank of New Zealand and National Australia Bank Limited (together,
“the Bank”) at balance date in respect of Bank guarantees relating to operating leases and other commitments totalling
$2,248,000 (2021: $2,418,000).
Some subsidiaries in the Group are parties to a cross guarantee in favour of the Bank securing each other’s obligations,
with the property-owning companies in the Group also granting in favour of the Bank first-ranking mortgages in respect
of land and buildings as security for all obligations of the Group to the Bank.
The Group’s indebtedness under the cross guarantee at balance date amounted to nil (2021: Nil).
The Group received claims during the year ended 30 June 2022 for products supplied by a previously-owned business unit,
with the estimated cost to settle these claims provided for at balance date. It is not possible to estimate the financial impact
of any further claims given there is insufficient history to inform the extent or the timing of any future claims.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
105
8. OTHERS (CONT'D)
8f. RELATED PARTIES
TRANSACTIONS WITH DIRECTORS AND KEY MANAGEMENT PERSONNEL
For the purposes of this note, key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or
otherwise) of that entity.
As shareholders
One of the Directors is a shareholder in the Company. The Chief Executive Officer is also a shareholder in the Company
by virtue of the fully paid up ordinary shares issued to, and held by, him pursuant to the Bremworth Equity Plan with more
information found in note 8b (Share-based payment) to the consolidated financial statements.
Their shares rank pari passu with all the other ordinary shares in the capital of the Company and do not therefore confer
additional rights to dividends paid or to attend or vote at any meetings of the shareholders of the Company.
As lenders or borrowers
There were no loans to, or from, the Directors and key management personnel during the year ended 30 June 2022
(2021: Nil), except as further disclosed below.
An interest-free, full-recourse, loan of $208,050 was provided to the Chief Executive Officer during the year pursuant
to the terms of the Bremworth Equity Plan, with the proceeds of that loan applied towards the amount payable for
the 500,000 fully paid up ordinary shares issued to the Chief Executive Officer under the Bremworth Equity Plan.
More information can be found in note 8b (Share-based payment) to the consolidated financial statements.
Directors’ remuneration and benefits
The fees paid to the Directors for services in their capacity as directors totalled $372,000 during the year ended
30 June 2022 (2021: $392,000).
No other services were provided by the Directors during the year (2021: Nil).
The scale of fees payable to the Directors was last reviewed and approved by the Board in January 2019, with the current
scale of fees applying with effect from 1 January 2019 set out below:
Directors’ feesPer annumExplanatory notes
Non-executive Chairman of the Board$128,100 Inclusive of time spent on Board committees and
as Chairman of Nomination Committee
Non-executive directors $61,000 Inclusive of time spent on Board committees
Chairman of the Audit Committee$10,000 In recognition of additional time and responsibilities
as Chairman of Audit Committee
Chairman of the Remuneration Committee$5,000 In recognition of additional time and responsibilities
as Chairman of Remuneration Committee
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
106
8. OTHERS (CONT'D)
8f. RELATED PARTIES (CONT'D)
TRANSACTIONS WITH DIRECTORS AND KEY MANAGEMENT PERSONNEL (CONT'D)
Directors’ remuneration and benefits (cont'd)
The Directors agreed to a 20% reduction in fees from 1 April 2020 to 31 July 2020 in response to the uncertain COVID-19
operating environment.
G C W Biel, a long-serving Director, was paid a lump sum retiring allowance pursuant to an arrangement that was contained
in the Company’s constitution on his retirement from the Board on 25 November 2021. The amount of this retiring allowance,
which was set in November 2007, is $96,000. The Company decided at that time that retiring allowances would no longer be
offered in respect of new Directors appointed to the Board.
The Group notes that the Directors are precluded by the NZX Listing Rules from voting at general meetings of shareholders
on certain matters prescribed by the New Zealand Exchange. These matters include, in the case of the Directors who are also
shareholders, shareholders’ approval of directors’ fees.
Key management personnel’s (including the Chief Executive Officer’s) remuneration and benefits
In addition to salaries and performance-based payments, the Group also provides non-cash benefits to the Chief Executive
Officer of the Company and key management personnel of the Group.
These non-cash benefits may include the provision of motor vehicles, income protection insurances, life insurances and
medical insurances. In assessing the value of the non-cash benefit provided to the Chief Executive Officer and key
management personnel, the Group has used the value of the benefit that is used for calculating fringe benefit tax plus the
fringe benefit tax that is paid or payable.
The remuneration paid and payable, and the benefits provided, to the Chief Executive Officer and key management
personnel (but excluding the Directors’ remuneration and benefits) comprised:
2022
$000
2021
$000
Salaries, bonuses and leave entitlements 3,582 3,653
Share-based payments 362 51
Employee benefits 254 278
Termination payments 10 509
$4,208 $4,491
The Group has not provided the Chief Executive Officer and key management personnel with any post-employment benefits.
Pursuant to the terms of employment of the Chief Executive Officer, the Company agreed to issue the Chief Executive
Officer with 500,000 ordinary shares under the terms of the Bremworth Equity Plan (as discussed in detail at note 8b
(Share-based payment) to the consolidated financial statements), with the issue of these shares to take place at the time of
the appointment of the Chief Executive Officer.
However, because of a delay in the issue of those shares to the Chief Executive Officer and the increase in the Bremworth
share price between the time of his appointment on 23 June 2021 and the time the shares were issued to him on 10
September 2021, the Chief Executive Officer was liable for the tax on the difference between the market price of Bremworth
shares on issue date and the price those shares were issued to him at.
In keeping with the agreement that was reached with the Chief Executive Officer, the Board approved a one-off payment to
the Chief Executive Officer in September 2021 of $127,317 to keep the Chief Executive Officer neutral in respect of the tax
that he had to pay as a consequence of the delay.
That amount of $127,317 is recognised in administration expenses in the Consolidated Statement of Profit or Loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
107
8. OTHERS (CONT'D)
8f. RELATED PARTIES (CONT'D)
TRANSACTIONS WITH DIRECTORS AND KEY MANAGEMENT PERSONNEL (CONT'D)
Other transactions
The Group deals with many entities and organisations in the normal course of business. The Group is not aware of any of
the Directors, the Chief Executive Officer or key management personnel, or their related parties, holding positions in any
of these entities or organisations that result in them having control or significant influence over the financial or operating
policies of these entities or organisations.
The Group does not transact with the Directors, the Chief Executive Officer or key management personnel, and their related
parties, other than in their capacity as directors and employees, except that they may purchase goods from the Group for
their own domestic use. These purchases are on the same terms and conditions as those applying to all employees of the
Group and are immaterial and personal in nature.
8g. GROUP ENTITIES
OPERATING SUBSIDIARIES OF THE GROUP
Principal
activity
Country of
incorporation
Interest
(%)
2022
Interest
(%)
2021
Bremworth Carpets and Rugs Limited
(previously Bremworth Limited)
Carpet sales and manufacturingNew Zealand100100
Bremworth Pty Limited
(previously Cavalier Bremworth Pty Limited)
Carpet salesAustralia100100
Cavalier Bremworth (Australia) LimitedCarpet distributionNew Zealand100100
Bremworth Spinners Limited
(previously Cavalier Spinners Limited)
Carpet yarn salesNew Zealand100100
Elco Direct LimitedWool acquisitionNew Zealand100100
8h. EVENTS AFTER BALANCE DATE
There have been no events subsequent to 30 June 2022 which would materially affect the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
108
8. OTHERS (CONT'D)
8i. COVID-19
On 17 August 2021, in response to a potential outbreak of the COVID-19 Delta variant of the virus, the New Zealand
Government imposed Level 4 lockdown throughout the country effective from 11.59 pm that same day. Under Level 4
lockdown, all workplaces in New Zealand were required to close unless the workplace was deemed to be essential.
As a consequence, all of the Group's carpet yarn making facilities in Napier and Whanganui had to cease operations
during the duration of the Level 4 lockdown from 18 August 2021 through to 31 August 2021, while its carpet manufacturing
operation in Auckland was not able to recommence operation until 22 September 2021.
Notwithstanding the ability to return to work, protocols that were in place to keep our people safe - such as separations
of our shifts to keep our people apart and bubbles in the workplace - affected plant efficiency and operating levels and
impacted manufacturing capacity.
As a consequence of the Level 4 lockdown and the loss in revenue, the Group was eligible to apply for the New Zealand
Government's COVID-19 wage subsidy. The Group received, for the duration of the lockdown, $1,488,000 under the wage
subsidy scheme.
The Group was also eligible for the New Zealand Government's COVID-19 Resurgence Support Payment and the COVID-19
Leave Support Payment, with the Group applying for, and receiving, a further $76,000 and $112,000 respectively under
those schemes.
In addition, the Group’s Australian operation also applied for and received $100,000 under the New South Wales
Government’s COVID-19 JobSaver scheme.
More information on the accounting of the various COVID-19 subsidies can be found in note 3g (Government grants)
to the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
FOR THE YEAR ENDED 30 JUNE 2022
109
8. OTHERS (CONT'D)
8j. CLIMATE-RELATED DISCLOSURES
The Group has considered the impact of climate-related risks on the business and on its future financial performance,
financial position and cash flows as part of the sustainability framework that has been adopted under the Group's
transformation strategy to becoming an all-wool and natural materials organisation.
These risks are broadly as follows:
—the exposure to carbon pricing and its impact on the cost of natural gas, with the Group's reliance on natural gas
at its carpet manufacturing plant in Auckland and its carpet yarn manufacturing plants in Napier and Whanganui;
—the exposure to the effects of climate change through adverse climatic conditions (for example, flooding) and,
in time, rising sea levels, with both the Napier and Whanganui sites within close proximity of the coast.
In relation to the exposure to carbon pricing, the Group has in place decarbonisation projects that are aimed at directly
reducing our reliance on natural gas in our manufacturing processes while also ensuring that its electricity provider is,
by design, a fully renewable generator of electricity.
More information on these decarbonisation projects can be found in note 5b (Capital commitments) to the consolidated
financial statements.
In relation to the exposure to adverse climatic conditions, the Group has in place insurances to protect the Group against
losses arising from such events while also having established appropriate stormwater infrastructure and processes to
mitigate the current levels of risk posed by these events.
Based on the Group's assessment, there is nothing to indicate that climate-related risks has had any impact on the
carrying value of its non-financial assets as at 30 June 2022, with the Board closely monitoring developments in this area.
8k. STANDARDS, INTERPRETATIONS AND AMENDMENTS TO STANDARDS
There are no new, or pending, standards or amendments to existing standards which have, or are expected to have,
a material impact on the Group.
110
GOVERNANCE
& OTHER
DISCLOSURES
FOR THE YEAR ENDED 30 JUNE 2022
111
CONTENTS
113 Corporate Governance Statement
131 Disclosures under the Companies Act 1993
135 Disclosures under the NZX Listing Rules
137 Disclosures under the Financial Markets Conduct Act 2013
138 Shareholder Information
139 Trend Statement
143 Disclosure of Non-GAAP Financial Information
IBC Corporate Directory
112
112
GOVERNANCE AND OTHER DISCLOSURES
113
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
Bremworth’s Board of Directors (“the Board”) is responsible for and committed
to maintaining the highest standards of corporate behaviour and responsibility
and has adopted governance principles reflecting this.
The Board seeks to follow best practice recommendations for listed companies to the extent that is appropriate for
the nature and complexity of Bremworth’s operations.
The Board considers that the Company’s corporate governance framework materially complies with the NZX Corporate
Governance Code.
Bremworth’s Code of Ethics and other key policies and charters relating to corporate governance can be found on the
Company’s website www.bremworth.co.nz/corporate-governance
A summary of Bremworth’s governance actions and performance against each of the principles in the NZX Corporate
Governance Code and its compliance with the recommendations relating to each of these principles are set out on
pages 113 to 130.
PRINCIPLE 1 — CODE OF ETHICAL BEHAVIOUR
Bremworth expects its Directors, officers, employees and contractors to act legally, ethically and with integrity in a manner
consistent with the Company’s Code of Ethics.
The Code of Ethics sets out the standard of conduct expected of Directors and employees and the Company’s approach
to stakeholders. It is supported by other policies and procedures including those that address continuous disclosures,
confidentiality of information, conflicts of interest, reporting of concerns and share trading.
Whistleblowing
Bremworth has established internal procedures to monitor compliance with, and measures for dealing with breaches of,
the Code of Ethics. Bremworth encourages employees to speak out if they have concerns. The avenues for doing so are
detailed in the Company’s Code of Ethics which supports the reporting and investigation of breaches of the Code of Ethics
and serious wrongdoing in or by Bremworth.
Conflicts of interest
The Board is conscious of its obligation to ensure that Directors and employees avoid conflicts of interest between their
duty to Bremworth and their own interests. Guidance is provided in the Company’s Constitution, Board charter and the
Code of Ethics.
The Board reviews at every meeting the interests register in which relevant transactions and matters involving the Directors
are recorded. It is expected that Directors are sensitive to actual and perceived conflicts of interest that may occur and have
constant consideration of this issue.
Bremworth does not donate to political parties.
The Directors’ interest disclosures can be found on pages 131 and 132.
Share trading policy
Bremworth has a Share Trading Policy which, along with the Financial Markets Conduct Act 2013, imposes limitations and
requirements on Directors and employees in dealing in the Company’s shares. Directors and employees who are likely to
have knowledge of, or access to, material information can only buy or sell Bremworth shares during permitted periods and
with the written consent of the Board. They must not use their position of confidential knowledge of the Company or its
business to engage in share trading for personal benefit or to provide benefit to any third party.
Trading in Bremworth shares while in possession of material information is strictly prohibited.
A regular review of the share register is conducted to ensure compliance with the Share Trading Policy.
114
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
PRINCIPLE 2 — BOARD COMPOSITION AND PERFORMANCE
The Board’s role is to add long-term shareholder value, while acting in a manner that the Directors believe is in the best interests
of the Company and having regard to the interests of its employees and other stakeholders. The role and responsibilities of the
Board are detailed in the Board charter, which is reviewed at least every two years and is available on the Company’s website.
Delegation
The Board delegates the day-to-day management of the Company to the Chief Executive Officer (“the CEO”). The CEO in turn
delegates authority to senior management. These authorisation levels are set out in the Delegated Authority Policy.
Board composition
The Board comprises Directors who, collectively, have the balance of independence, skills, knowledge, experience and
perspectives to meet and discharge the Board’s responsibilities. Core competences and skills include health and safety,
sustainability and environment, operations and asset optimisation, financial acumen, sales, marketing and distribution,
legal, regulatory and risk, listed company governance, operating model transformation and well-developed ability for critical
and strategic analysis.
A balance of longer-serving Directors with experience in the Company and newer Directors who bring fresh perspective and
insight is desirable. The Board encourages strong individual thinking and rigorous discussion and analysis when making decisions.
Grant Biel, a long-standing Director and co-founder of the carpet business, retired from the Board at the conclusion of the 2021
Annual Meeting held on 25 November 2021. Grant was appointed the Company’s first-ever Director Emeritus by the Board on his
retirement and continues to make himself available to the Board and to the Company.
Katherine Turner was appointed as an independent Director on 24 February 2022 and will be putting herself forward for election
as a Director at the November 2022 Annual Meeting. Katherine is a highly experienced finance executive and respected leader
and a qualified Chartered Accountant. She is a member of the NZ Institute of Directors and is a Trustee for Lite-foot,
a non-profit organisation combining sport and sustainability.
Katherine has held a variety of senior finance and commercial roles in medium and large multinational companies, including
Fonterra and Danone. She is currently Vice President Finance for TOMRA Fresh Food and prior to this was Chief Financial
Officer at Sanford Limited for three years.
As at 30 June 2022, the Board comprised five Directors – George Adams (Chairman), Paul Izzard, John Rae, Katherine Turner
and Dianne Williams.
The profile of the Directors can be found on pages 26 and 27.
115
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
PRINCIPLE 2 — BOARD COMPOSITION AND PERFORMANCE
(
CONT'D
)
Directors’ skills matrix as at 30 June 2022
Director independence
The Board charter provides that the Chairman shall be an independent Director and that the majority of the Board shall
be independent Directors.
Director independence is determined in accordance with the NZX Listing Rules and with regard to the factors described
in the NZX Corporate Governance Code.
George Adams, Paul Izzard, John Rae, Katherine Turner and Dianne Williams have been determined to be independent
Directors of the Company as at 30 June 2022.
Director appointment
Membership of the Board, and appointment and retirement of Directors by rotation, are determined in accordance with the
Company’s Constitution and the NZX Listing Rules.
While the appointment process is the responsibility of the whole Board, the Nomination Committee is tasked with identifying
and recommending candidates to fill director vacancies for the approval of the Board. The Committee considers such factors
as it deems appropriate, including capability, skill sets, experience, qualifications, judgement and the ability to work with other
Directors. Reference checks are carried out on all candidates and key information about candidates is provided to shareholders
to assist their decision as to whether to elect or re-elect a candidate.
0%10%20%30%40%50%60%70%80%90%100%
Corporate governance
Environmental
International business
Interior design
Stakeholder engagement
People, and health and safety
Industry, operations, asset optimisation and IT
Sales and marketing
Financial acumen
Strategy development and execution
Extensive experience and strong working knowledge
Limited knowledge or experience and not considered an area of expertise
Solid relevant experience and working knowledge
116
PRINCIPLE 2 — BOARD COMPOSITION AND PERFORMANCE
(
CONT'D
)
Director appointment (cont'd)
Shareholders may also nominate candidates for election to the Board, with the Board asking for Director nominations prior to
the Annual Meeting of shareholders each year, in accordance with the Constitution of the Company and the NZX Listing Rules.
New Directors are provided with an induction pack containing governance information, key policies and all relevant information
necessary to prepare them for their role. New Directors also receive presentations by the CEO and senior management on the
key issues facing Bremworth, its operations and the environment and markets in which it operates.
The Company has written agreements with all Directors establishing the terms of their appointment.
The Board is satisfied that each Director has the necessary time available to devote to the position, broadens the Board’s
expertise and has a personality that is compatible with the other Directors.
Director training, access to information and advice
Directors are encouraged to undertake appropriate training and education to ensure they remain current on how to best perform
their duties. In addition, the CEO and senior management provide regular updates on relevant industry and company issues.
Directors have unrestricted access to Company information and briefings from the CEO and senior management. Site visits
provide the Directors with a better understanding of the business, including its critical health and safety risks and how these
are managed.
Directors and Board committees have the right, in connection with their duties and responsibilities, to seek independent
professional advice at the Company’s expense, with the approval of the Chairman.
Evaluation of Director, Board and committee performance
The Board, and the Board’s committees, critically evaluate annually their own performance and the performance of the individual
Directors. The Board, and its committees, also review annually their own processes and procedures to ensure that they are not
unduly complex and are designed to assist the Board and its committees in effectively fulfilling their roles.
Attendance at meetings
Board meetings are usually held monthly (except for January), with other meetings held as and when required to deal with
any specific matters that may arise between scheduled meetings.
The table below sets out Director attendances at Board, Board committee and shareholder meetings for the year ended
30 June 2022.
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Shareholder
To t al h e l d126151
Attendances:
George Adams
Grant Biel
1
Paul Izzard
John Rae
Katherine Turner
2
Dianne Williams
12/12
6/6
12/12
11/12
5/5
12/12
6/6
3/3
5/6
5/6
3/3
6/6
1/1
Not applicable
Not applicable
1/1
Not applicable
1/1
5/5
Not applicable
4/5
5/5
4/4
5/5
1/1
1/1
1/1
1/1
Not applicable
1/1
1
Grant Biel retired as a Director on 25 November 2021
2
Katherine Turner was appointed a Director on 24 February 2022
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
117
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
PRINCIPLE 2 — BOARD COMPOSITION AND PERFORMANCE
(
CONT'D
)
Diversity and Inclusion Policy
Bremworth is committed to creating an inclusive and high performing culture to drive business engagement and success.
Bremworth aims to reflect the communities we operate in. We embrace and capitalise on innovation which starts with listening
and learning. Fundamental elements of our philosophy include:
—seeing the diversity of its work force as a key asset and contributor to improved business performance and decision making;
—not discriminating based on age, race, gender, sexual orientation, ethnicity or any other non-performance related
differentiating factor;
—treating its people fairly and respectfully; and
—promoting diversity of thought and action, and unbiasedly rewarding capability and achievement.
The Company has a Diversity and Inclusion Policy, a copy of which is published on the Company’s website.
The key areas of focus are:
—sharing and promotion of this Policy with employees;
—a capability-based approach to recruitment of people from a diverse as possible range of candidates;
—facilitation of opportunities for diversity of thought and action from all levels of the organisation; and
—promotion of diversity and inclusion through company culture programmes and celebrations that bring employees
with differing perspectives together.
Through our transformation initiatives, Bremworth has been growing its internal pipeline of talent and focusing on bringing women
into supervisory and technical roles. This includes a number of women in engineering and science and/or research-based roles.
A number of initiatives are in place to support diversity and the Board believes the principles in the Policy were adhered
to in the 2022 financial year.
Bremworth has a diverse workforce, representing more than 15 different ethnicities. English is a second language for a number
of these staff, so Bremworth has initiatives in place to support them in the workplace, including the opportunity to participate
in numeracy and literacy programmes.
The gender composition of the Company’s Directors, officers and employees is summarised below.
30 June 202230 June 2021
MaleFemaleTo talMaleFemaleTotal
Directors
3/60%2 /4 0%5/100%4/80%1/20%5/100%
Officers
1
8/80%2/20%10/100%7/ 70%3/30%10/100%
Direct reports of officers
39/59%2 7/41%66/100%39/57%29/4 3%68/100%
Rest of organisation
211/60%143/40%354/100%22 7/62%138/38%365/100%
To t al
261/60%174/4 0%435/100%2 7 7/62%171/38%448/100%
1
An officer is a person, however designated, who is concerned or takes part in the management of the Company’s business but excludes
a person who does not report directly to the Board or report directly to a person who reports directly to the Board.
118
PRINCIPLE 2 — BOARD COMPOSITION AND PERFORMANCE
(
CONT'D
)
Diversity and inclusion policy (cont'd)
30 June 2022 30 June 2021
Age compositionNumber%Number%
Under 30 years of age
77187417
30 to 50 years of age
1653818140
Over 50 years of age
1934419343
To t al
435100448100
In 2022, two targeted development programmes were launched as part of implementing our people capability and development
pillar. These are an anthropology-based culture and leadership development programme Te Ara Rangatira, and the technical
development programme Poutama. A further cornerstone of our capability development focusses on providing opportunities
to be part of cross-functional project teams.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
119
PRINCIPLE 3 — BOARD COMMITTEES
The Board utilises committees to enhance Board effectiveness in key areas, while retaining Board responsibility.
Committees established by the Board make recommendations to the Board on those matters falling within the scope
of the relevant committee charter. They do not act or make decisions unless specifically mandated by their charter
or by prior Board authority to do so.
The Board has three standing committees – the Audit Committee, Remuneration Committee and Nomination Committee.
Each of these has a Board approved charter (which can be found on the Company’s website), setting out the role,
responsibilities, delegations and membership requirements. The Board regularly reviews the charters of each Board
committee, their performance against those charters and membership of each committee.
The Board believes that committee charters comply with the recommendations in the NZX Corporate Governance Code.
The Board appoints the Chairman of each committee. Members are chosen for the skills, experience and other qualities
that they bring to the relevant committees.
Bremworth’s Board committees as at 30 June 2022 were:
Committee
Role
Members
Audit CommitteeAssists the Board in ensuring adequacy of financial management,
internal reporting and monitoring processes, integrity of financial
reporting, statutory audit quality and independence, internal audit
and internal controls.
Katherine Turner (Chairman)
George Adams
Paul Izzard
John Rae
Dianne Williams
Remuneration CommitteeAssists the Board in establishing and maintaining a strong
governance framework in respect of remuneration packages
for Directors and for the CEO and senior management.
Dianne Williams (Chairman)
George Adams
Paul Izzard
John Rae
Katherine Turner
Nomination CommitteeAssists the Board in ensuring appropriate Board performance
and composition and in appointing directors.
George Adams (Chairman)
John Rae
Dianne Williams
Independent Takeover Committee
As the Company has a small Board, it is not envisaged that the Board would appoint an Independent Takeover Committee,
upon a takeover offer being received, unless there are Directors who are interested in the takeover offer or certain Directors
are unavailable to assist on the matter.
The Board has a Takeover Response Policy setting out the objectives of the Company’s takeover response strategy and
establishing the appropriate protocols to be followed in the event of a takeover offer for the Company, covering, among
other things:
—structure of the takeover response team and roles of key groups in the team;
—the Takeovers Code process and timetable;
—steps to be taken on receipt of a takeover notice;
—communication between the Company and the bidder; and
—potential takeover response strategies.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
120
PRINCIPLE 4 — REPORTING AND DISCLOSURE
Continuous disclosure
The Board is responsible for the timeliness, accuracy and completeness of all Company disclosures, including its results,
financial reporting and all matters relating to its business activities that could have a material effect on the price of Bremworth
shares if they were generally available to the market.
Bremworth is committed to promoting investor confidence by providing timely, accurate, complete and equal access to
material information, both positive and negative, in accordance with the NZX Listing Rules. To achieve and maintain high
standards of disclosures, Bremworth has adopted a Continuous Disclosure Policy, which is designed to ensure compliance
with NZX continuous disclosure guidance note.
This Policy, a copy of which is published on the Company’s website, sets guidelines and outlines responsibilities to safeguard
the Company against inadvertent breaches of continuous disclosure obligations.
Financial reporting
The Directors are committed not only to preparing consolidated financial statements that comply with New Zealand Generally
Accepted Accounting Practice and fairly present the Group’s financial position as at balance date and its financial performance
and cash flows for the year ended on that date, but also to balanced, clear and objective financial reporting.
The Audit Committee assists the Board in providing oversight of the quality and integrity of external financial reporting including
the accuracy and completeness of the financial statements. In preparing the consolidated financial statements, the Company
also ensures that its financial reporting is accompanied by sufficient explanation and is expressed in a clear and objective
manner to assist investors make informed investment decisions.
All matters required to be addressed, and for which the Committee has responsibility, were addressed during the
reporting period.
The Directors believe that proper accounting records which enable, with reasonable accuracy, the determination of the financial
position of the Group and facilitate the compliance of the consolidated financial statements with the Financial Markets Conduct
Act 2013 have been kept.
The Chief Financial Officer holds the role of Company Secretary. In all secretarial matters, the Board ensures that the
Company Secretary’s reports are objective and that the Company Secretary has unfettered access to the Chairman and the
Audit Committee, without reference to the CEO.
Non-financial reporting
In addition to shareholders, Bremworth has a wide range of stakeholders and maintains open channels of communication for all
audiences, including brokers, the investing community and the New Zealand Shareholders’ Association, as well as its employees,
suppliers and customers.
Bremworth’s vision is to become a global leader in designing and creating desirable, sustainable, safe and high performing
natural interiors with its purpose to find a more sustainable way. This includes enhancing consumer wellbeing by producing
innovative products in an economically inclusive, socially just and environmentally restorative way, while also being conscious to
how its activities affect employees, contractors, communities and the environment in which it operates.
Insight into Bremworth’s assessment of its business, strategy and performance as well as the progress of its transformational
shift towards becoming a design-led wool-focused company can be found on pages 2 to 43.
A detailed framework addressing the Company’s environmental and social responsibilities was developed over the 2020 financial
year, with a new Sustainability division established. The development of this division and addition of key technical specialists has
continued over the 2022 financial year. The business follows the integrated People, Planet and Prosperity framework with key
pillars detailed below.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
121
PRINCIPLE 4 — REPORTING AND DISCLOSURE
(
CONT'D
)
Non-financial reporting (cont'd)
The Board is pleased to be able to share with shareholders the progress for the 2022 financial year as the Company continues
to build its programme of formal measuring and monitoring of these key areas within the context of our business.
In April 2021, the Company embarked on the $4.9 million research-based sustainability programme in partnership with the
Ministry for Primary Industries (“MPI”) via the Sustainable Food, Fibre and Futures fund - with MPI contributing $1.9 million
to the programme.
This three-year programme is grounded on the sustainability principles of People, Planet and Prosperity and focuses on three
main work streams:
—developing a more sustainable and compostable carpet;
—increasing process efficiency through Industry 4.0 principles and technology; and
—leveraging technology to further develop technical capability and future pipeline of talent.
Part of this work has included a detailed analysis of the supply chain with particular regard to the risk of modern slavery as well
as minimising environmental impact through selection of raw materials. In accordance with the Australian Modern Slavery Act
2018, Bremworth voluntarily developed its first Modern Slavery Statement during the 2022 financial year.
Implementation of technology-based initiatives including the development of a manufacturing based digital twin model have
enabled detailed mapping of key environmental measures such as carbon, waste and energy. A virtual tour of each of the yarn
plants has also been developed to support our capability-based programmes.
Proof of progress in this programme is further illustrated through the innovative rug project where sustainability and design
concepts are prototyped to explore opportunities to incorporate these concepts into commercial application. Our first rugs
were produced and are showcased on pages 11 and 15 with further rugs currently under development.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
PLANET
PEOPLE
PROSPERITY
C
O
N
S
U
M
E
R
W
E
L
L
B
E
I
N
G
122
PRINCIPLE 4 — REPORTING AND DISCLOSURE
(
CONT'D
)
Non-financial reporting (cont'd)
After completing a decarbonisation opportunities assessment and pathway in 2021, the Company has committed to two
decarbonisation projects during the year.
The first, a $2.5 million project at the Napier carpet yarn spinning plant, seeks to reduce its reliance on natural gas process
heat through process heat optimisation and transitioning to electric high temperature heat pump technology. This project is
being 38% co-funded under various funding programmes, including $798,000 from the GIDI (Government Investment in
Decarbonising Industry) Fund administered by the Energy Efficiency and Conservation Authority (EECA). This initiative is
expected to continue into the year ending 30 June 2024.
The second decarbonisation initiative at the Whanganui carpet yarn spinning plant, which is also being co-funded by EECA,
will see a gas-fired dryer replaced with an alternative radio frequency dryer for use in felted yarn production. This project is
expected to cost $0.4 million, with the EECA co-funding agreed at 40%, and will run over the years ending 30 June 2023
and 30 June 2024.
The business will continue to advance its climate change response by assessing adaptation opportunities and requirements
over the next financial year, as well as developing further projects on its decarbonisation pathway.
Bremworth recognises the role of farm standards, animal welfare, regenerative agriculture, and the value that long-term
contracts provide to farming communities. All Bremworth wool is sourced from New Zealand farms. Bremworth continues
to pursue appropriate certification of its wool supply to ensure traceability and transparency in the supply chain.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
123
PRINCIPLE 5 — REMUNERATION
The Board has a clear policy for setting remuneration of Directors and senior management at levels that are fair and reasonable
to attract, reward and retain the skills, knowledge and experience required to enhance the Company’s performance.
The Remuneration Committee assists the Board in discharging its responsibilities in relation to setting and reviewing
of Directors’ remuneration and senior management objective setting, performance review and remuneration.
External advice is sought as required to ensure remuneration is benchmarked to the market for Directors and senior
management positions.
Directors’ remuneration
Shareholders resolved at the October 2018 Annual Meeting that the total remuneration to be paid to the non-executive Directors
be fixed at a sum not exceeding $450,000 per annum, such sum to be divided amongst them in such proportions and in such
manner as they may determine.
The remuneration payable to the Directors was last reviewed and approved by the Board on 18 January 2019, with the current
scale of Directors’ remuneration applying from 1 January 2019 set out on page 105 (note 8f (Related parties) to the consolidated
financial statements).
The total remuneration paid to the Directors for the year ended 30 June 2022 was $371,940, with the details paid to each
Director set out on page 133.
Remuneration Strategy
Bremworth’s remuneration strategy is:
—aligned with its recruitment and leadership development philosophies and its approaches to performance management
to ensure the attraction, development and retention of talented individuals; and
—underpinned by a pay-for-performance philosophy and utilises annual performance incentives to provide opportunities for
individuals to achieve market competitive remuneration levels and in the case of superior performance, total remuneration
above market.
CEO and executive remuneration
The CEO and executive remuneration packages are made up of three key components – being fixed remuneration (in the form
of fixed base salary plus fringe benefits), variable short-term performance incentives and long-term performance incentives.
Fixed remuneration
Bremworth’s philosophy with respect to fixed remuneration is to ensure that all employees are fairly and equitably remunerated
relative to similar businesses and positions within the New Zealand market.
Fixed remuneration levels are reviewed annually for market competitiveness and alignment with strategic priorities and
performance outcomes and to ensure:
—our employees are strongly motivated to deliver shareholder value;
—the Company is able to attract and retain high-performing employees who will ensure the achievement of business
objectives; and
—the provision of benefits and allowances that contribute to the health and well-being of our employees.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
124
PRINCIPLE 5 — REMUNERATION
(
CONT'D
)
Short-term performance incentives
Short-term performance incentives are at-risk payments that are designed to motivate and reward performance during
a financial year, with targets set by the Board having regard to strategic priorities and desired performance outcomes
from time to time.
Short-term performance incentives include both Company targets and individual targets, with minimum thresholds in place
for both of these. Eligibility to short-term performance incentives is conditional on these thresholds being achieved in the first
instance, with pay outs dependent on the extent to which actual performance exceeds the targets determined by the Board.
The Company targets for the 2022 financial year and the 2023 financial year include both revenue and profitability, with each
of these given equal weightings.
Individual targets (and the clear measures underlying these targets to determine achievement or non-achievement in any one
year) are set having regard to the roles and responsibilities held by the CEO and each member of the senior leadership team
and as agreed with the Board (in the case of the CEO) and with the CEO (in the case of the senior leadership team) at the start
of the relevant financial year.
Short-term incentives entitlements for on-target performance and over-performance are set out in the table below:
Entitlement
for on-target
performance
Maximum
entitlement for
over-performance
CEO
40% of base salary60% of base salary
Member of the senior leadership team
20% of base salary30% of base salary
Long-term performance incentives
Bremworth’s long-term performance incentives are designed to align the interests of the CEO and members of the Bremworth
senior leadership team with those of shareholders, and to incentivise them to enhance long-term shareholder value, through
share-based payment arrangements.
These long-term incentives include:
—the issue of performance rights in December 2020 to selected senior executive employees (including the CEO at the time)
under a long-term incentive scheme; and
—the issue of shares and options in September 2021 and April 2022 respectively to the incoming CEO pursuant to the
Bremworth Equity Ownership Plan and the Bremworth Share Option Scheme respectively.
More information on these long-term incentives can be found on pages 99 to 102 (note 8b (Share-based payment) to the
consolidated financial statements).
Plans to introduce the Bremworth 2022 Long Term incentive Scheme (“2022 LTI Scheme”) are well advanced.
The 2022 LTI Scheme will provide for the allocation of shares, annually, to such selected members of the senior leadership team
(“the Participants”) as the Board shall determine as part of the Participants’ total remuneration package, with:
—the market value of the shares to be allocated to the Participants equal to 20% of base salary of the Participants; and
—these shares to vest at the end of the three-year performance period subject to the fulfilment of the performance conditions
set down by the Board.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
125
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
PRINCIPLE 5 — REMUNERATION
(
CONT'D
)
CEO’s remuneration
The remuneration of the CEO is set independently, and without any involvement of the CEO, on an arm’s length commercial
basis as recommended by the Remuneration Committee and approved by the Board.
The CEO’s remuneration comprises a fixed base salary, a variable short-term incentive that is payable annually subject to
attainment of targets, awards under the Bremworth Equity Ownership Plan (Bremworth Equity Plan) and the Bremworth
Share Option Scheme (Bremworth Option Scheme) and other benefits (including fringe benefits and holiday pay entitlements).
The targets under the short-term incentive plan include growth in revenue and/or profitability as well as the delivery of strategy,
health and safety, leadership and culture outcomes as agreed with the CEO at the commencement of the period, with 40% of
fixed base salary payable for on-target performance under the plan.
The Company issued two tranches of options under the Bremworth Option Scheme to the CEO during the year ended
30 June 2022, with 480,000 options on 10 September 2021 and a further 520,000 options on 8 April 2022.
The Company also issued 500,000 fully paid up ordinary shares pursuant to the terms of the Bremworth Equity Plan to the
CEO on 10 September 2021, with the consideration for the shares of $208,050 funded by way of an interest-free, full-recourse,
loan provided by the Company to the CEO.
The remuneration of the CEO can be analysed as follows:
Greg Smith
1
Fixed base
salary received
2
Short term
incentive
receivable
2, 3
Share-based
payments
4
Other benefits
received or
receivable
5
To tal
remuneration
Year ended 30 June 2022
$530,020$130,332$265,232$201,748$ 1 ,1 2 7, 3 3 2
1
Commencement date of employment 26 July 2021
2
Inclusive of 3.0% Employer KiwiSaver
3
40% of fixed base salary payable for on-target performance, with CEO eligible for 24.59%
4
Inclusive of fair value of options issued under the Bremworth Option Scheme of $73,282 and difference between
issue price and market price of shares issued under the Bremworth Equity Plan of $191,950
5
Inclusive of fringe benefits, holiday pay entitlement and a one-off payment of $127,317 as further discussed below
Pursuant to the terms of employment of the CEO, the Company agreed to issue the CEO with 500,000 ordinary shares under the
terms of the Bremworth Equity Plan (as discussed in detail at note 8b (Share-based payment) to the consolidated financial
statements), with the issue of these shares to take place at the time of the appointment of the CEO.
However, because of a delay in the issue of those shares to the CEO and the increase in the Bremworth share price between the
time of his appointment on 23 June 2021 and the time the shares were issued to him on 10 September 2021, the CEO was liable
for the tax on the difference between the market price of Bremworth shares on issue date and the price those shares were issued
to him at.
126
PRINCIPLE 5 — REMUNERATION
(
CONT'D
)
CEO’s remuneration (cont'd)
In keeping with the agreement that was reached with the CEO, the Board approved a one-off payment to the CEO in
September 2021 of $127,317 to keep the CEO neutral in respect of the tax that he had to pay as a consequence of the delay.
Paul Alston
6
Fixed base
salary received
7
Short term
incentive
receivable
7, 8
Termination
payment
receivable
7, 9
Share-based
payments
10
Other benefits
received or
receivable
11
To tal
remuneration
Year ended 30 June 2022
$61,643Not applicableNot applicableNot applicable$15,858$77,501
Year ended 30 June 2021
$508,559$ 1 0 7, 2 7 8$508,560–$104,467$1,228,864
Year ended 30 June 2020
$508,559–Not applicableNot applicable$18,110$526,669
Year ended 30 June 2019
$508,559–Not applicableNot applicable$ 1 7,7 0 8$526,267
6
Cessation date of employment 13 August 2021
7
Inclusive of 3.0% Employer KiwiSaver
8
Maximum of 24% of fixed base salary subject to attainment of revenue growth target and delivery of other quantitative
and qualitative measures covering the wider business, with CEO eligible for 21.09%
9
In lieu of notice and inclusive of an ex-gratia payment
10
Nil, with fair value of performance rights recognised to 22 April 2021 of $23,438 reversed as a consequence of the forfeiture of the CEO’s
performance rights upon his resignation from the Company
11
Inclusive of fringe benefits and holiday pay entitlement
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
127
PRINCIPLE 6 — RISK MANAGEMENT
Bremworth is committed to the effective management of risk, which is fundamental to the Company’s growth and profitability
targets and outcomes.
The Company maintains a risk management framework for the identification, assessment, monitoring and management of
risk and has in place, among other policies, a Health and Safety Policy, a Treasury Management Policy and a Delegated
Authority Policy to manage specific risks.
The Board is responsible for overseeing and approving the Company’s risk management framework and risk tolerance levels
as well as ensuring that an effective assurance system is in place.
The material financial risks facing the business and the management of these risks are discussed at pages 86 to 96 (note 7
(Risks and financial instruments) to the consolidated financial statements) with management reporting on these financial risks
to the Board at every scheduled Board meeting.
Health and safety
The Board has a Health and Safety Policy, a copy of which is published on the Company’s website.
The Policy provides the context, direction and framework within which all other health and safety materials are developed. It is
the foundation for managing health and safety risks whilst applying a learning and people-centric lens to our operations and risk
management. We take a proactive approach to risk management. Our critical risk framework and controls are key enablers and
challenge us to design out risk where possible. To enable our people to thrive, we designed a holistic approach to their safety
and wellbeing so that we support our team to be their best selves. Our critical risks are shown below.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
CONFINED SPACES
Areas with limited access and
potential to contain a toxic or
oxygen-deficient atmosphere.
OPERATING PLANT/ EQUIPMENT
Fixed plant used in making carpet
and yarn.
FALLING OBJECTS
To ols or equipment falling
from height.
MOBILE PLANT
Powered mobile equipment
including moving vehicles, forklifts
and elevated work platforms.
WORKING AT HEIGHT
Person falling from one level
to another.
SUSPENDED LOADS
Loads suspended above ground
such as hoists and slings.
HAZARDOUS ENERGY
SOURCES
Electricity, fuel, pressure and
hydraulics.
SUBSTANCES HAZARDOUS
TO HEALTH
Substances known or suspected to
cause harm to health.
ENVIRONMENT
Environmental conditions
and natural disasters.
128
PRINCIPLE 6 — RISK MANAGEMENT
(
CONT'D
)
Health and safety (cont'd)
The Board adopts a risk-based approach to health and safety risk management, focusing on strengthening critical risk
management, while continuing to develop organisational capability and accountability for making health and safety an
integrated part of our business. Health and safety is a standing agenda item at Board meetings and Directors complete
site visits which include a health and safety focus.
While the Board does not have a Health and Safety Committee, there is a Health and Safety forum which the Board Chairman,
as the Board’s representative, and the CEO are part of, along with employees from across the whole business. The quarterly
Health and Safety forum involves employees from different backgrounds, experience, roles and levels of the organisation.
The diversity of thought, demographics and perspectives brought by this group is an important contribution and helps shape
the overall Health and Safety programme while also demonstrating our Diversity and Inclusion Policy in action. During lockdown
and COVID-19 restrictions, this forum continued online as a valuable engagement and communication vehicle and had a
particular emphasis on wellbeing and mental health by design.
This past year has seen several more COVID-19 management initiatives including the implementation of a digital contact-tracing
system using individually issued proximity activated cards. This enabled accurate and timely mitigation to minimise exposure to
our people.
There is an ongoing emphasis to learn from high-risk potential events and to proactively manage risks to prevent reoccurrence.
A key initiative to support this is the implementation of a “Learning Teams” approach to investigations with a focus on
meaningful conversations.
The Health and Safety programme concentrates on clearly identifying critical risks and strengthening control effectiveness for
these key critical risks. Key areas of the programme include improving machinery safety, implementation of electric forklifts and
reducing hazardous substance risk. Initiatives are executed within a cycle of continuous improvement and with the input and
support of our site Health and Safety committees and the Health and Safety forum. Underpinning this is a focus to protect and
grow our talent, maintain strong safety leadership and create psychologically safe workplaces for our people to thrive.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
129
PRINCIPLE 7 — AUDITORS
External audit
The Board is responsible for ensuring the quality and independence of the statutory audit process and has adopted an
External Audit Independence Policy, a copy of which is published on the Company’s website.
The Audit Committee is charged with considering, and making recommendations to the Board regarding, any issues relating
to the independence, performance, appointment or termination of the external auditor.
The Committee reviews the quality and cost of the statutory audit undertaken by the Company’s external auditor and provides
a formal channel of communication between the Board, senior management and external auditor. The Committee also assesses
the external auditor’s independence on an annual basis.
The external auditor is prohibited from undertaking any work that impairs, or is seen to impair, independence and objectivity
with respect to the statutory audit.
No non-audit services have been provided by the external auditor since their appointment in May 2021.
Bremworth’s external auditor attends the Annual Meeting and is available to answer questions relating to the conduct of the
statutory audit and the preparation and content of the auditor’s report.
The fees paid to the external auditor for audit work for the years ended 30 June 2021 and 2022 are set out on page 70 (note 3e
(Administration expenses) to the consolidated financial statements).
All non-audit work carried out by the external auditor are required to be approved by the Board pursuant to the External Audit
Independence Policy as having no effect on the independence or objectivity of the external auditor in relation to its statutory
audit work.
In determining whether a non-audit related service impinges on the independence or objectivity of the external auditor,
consideration is given to, among other things, the people doing the work, the nature of the work done and whether it involves
any calculations of balances in the financial statements or for financial reporting.
Internal audit
Bremworth operates an independent internal audit programme that provides objective assurance of the effectiveness of the
internal control framework.
Internal audit assists the Board and the Audit Committee to accomplish their objectives by bringing a disciplined approach
to evaluating and improving the effectiveness of risk management, internal controls and governance processes.
Internal audit adopts a risk-based assurance approach that is approved by the Board and has the autonomy to report significant
issues directly to the Audit Committee or, if considered necessary, the Chairman of the Board.
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
130
PRINCIPLE 8 — SHAREHOLDER RIGHTS AND RELATIONS
Bremworth respects the rights of shareholders, is focused on fostering constructive relationships with shareholders that
encourage them to engage with the Company and values dialogue with institutional and private investors.
Bremworth is also committed to giving all shareholders comprehensive, timely and equal access to information about its
activities and keeps shareholders informed through:
—continuous disclosures to NZX;
—half year and annual reports, including accompanying shareholder presentations;
—the Annual Meeting and any other meetings of shareholders called to obtain approval for Board actions as appropriate; and
—the Company’s website www.bremworth.co.nz/investor-centre where investors and interested stakeholders can access
financial and operational information and key corporate governance information about the Company.
The Board encourages shareholders to opt to receive communications from the Company electronically, thereby ensuring
that they get access to communications efficiently and in a timely manner.
Shareholder meetings
The Board encourages full participation of shareholders at shareholder meetings to ensure a high level of Director and
management accountability and shareholder identification with Bremworth’s strategies and goals.
Shareholders are able to ask questions of and express their views to the Board, management and the external auditor at
Annual Meetings of shareholders. The Board adopts the one share, one vote principle, conducting voting at shareholder
meetings by poll. Shareholders are also able to cast postal votes or vote by proxy ahead of meetings without having to
physically attend those meetings.
Bremworth aims to make its notice of Annual Meeting and any other meetings of shareholders available on its website at
least 20 working days prior to the meeting.
VARIANCES TO NZX CORPORATE GOVERNANCE CODE
NZX Corporate Governance
Code Principle
NZX Corporate Governance Code
Recommendation
Key difference
Board’s position
2. Board Composition
and Performance
2.5: The Board should set
measurable objectives for
achieving diversity
The Board has not set measurable
objectives under the Diversity
and Inclusion Policy for
achieving diversity
The Board considers diversity outcomes
can be achieved without measurable objectives,
with the increase in the number of women in
middle management over the 2022 financial
year demonstrating this approach
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE GOVERNANCE STATEMENT
(
CONT'D
)
131
DIRECTORS
The Directors of the Company as at 30 June 2022 were:
George Adams
Paul Izzard
John Rae
Katherine Turner
Dianne Williams
Katherine Turner was appointed a Director on 24 February 2022 and Grant Biel retired as a Director on 25 November 2021.
INTERESTS REGISTER
The Companies Act 1993 requires the Company to maintain an interests register in which are recorded the particulars of
certain transactions and matters (e.g. use of company information, remuneration, indemnity and insurance and share dealing)
involving the Directors. It further requires particulars of the entries in the interests register for the year to be disclosed in the
annual report.
Use of company information
No notices were received from the Directors regarding the use of company information that would not otherwise have been
available to them, except in their capacity as directors, during the year.
Remuneration
The scale of remuneration payable to the Directors with effect from 1 January 2019 was approved by the Board of Directors
on 18 January 2019 and is set out on page 105 (note 8f (Related parties) to the consolidated financial statements).
Indemnity and insurance
The Board of Directors authorised, during the year, the renewal of the Company’s directors’ and officers’ liability insurance
policies covering the risks arising out of the acts or omissions of the Directors and employees of the Company and its
subsidiaries to the extent normally covered by such policies.
The total cost of these policies for the year ended 30 August 2022 was $125,387 which was considered fair to the Company.
Share dealing
No notices were received from the Directors in relation to share dealing during the year.
Directors’ relevant interests in shares in the Company as at 30 June 2022 were:
Dianne Williams
Beneficial
Other
5,000
–
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE COMPANIES ACT 1993
FOR THE YEAR ENDED 30 JUNE 2022
132
INTERESTS REGISTER (CONT'D)
Specific disclosures of interest
No specific disclosures of interest were received during the year.
General disclosures of interest
General disclosures of interest that were current as at 30 June 2022 were:
George AdamsApollo Foods Limited
Mars Manufacturing Limited
The Apple Press Limited
Apollo Brands Limited
Arborgen Holdings Limited
Hellers Group Holdings Limited
Insightful Mobility Limited
Mix Global Holdings Limited
Essano Limited
Mix IP Limited
Netlogix Group Holdings Limited
New Zealand Frost Fans Limited
Business Leaders Health and Safety Forum
Worksafe Partners Advisory Group
Executive Chairman and shareholder
Director
Director
Director
Director
Director
Chairman and shareholder
Chairman
Director
Director
Chairman
Chairman
Chairman
Member
Paul IzzardPaul Izzard Design Limited
Windswept Trust
Director and shareholder
Tr u s te e
John RaeAbodo Limited
Corson Grain Limited
F J Hawkes & Co. Limited
Gobble Limited
Jaffa Holdings Limited
Kingyo Foods Limited
Ngapuhi Asset Holding Company Limited
Thos Corson Holdings Limited
Wet Gisborne Limited
Te Rahui Herenga Waka Whakatane GP
JR Family Trust
Chairman of Advisory Board
Director
Director and shareholder
Director and shareholder as nominee
Director and shareholder
Director and shareholder as nominee
Chairman
Chairman
Chairman
Chairman
Tr u s te e
Katherine TurnerCompac International Limited
Compac Sorting Equipment Limited
Compac Technologies Limited
LENZ Equipment Limited
Taste Technologies Limited
Taste Technologies Installations Limited
Tastemark Limited
Cresta Properties Limited
Project Litefoot Trust
Director
Director
Director
Director
Director
Director
Director
Director and shareholder
Tr u s te e
Dianne WilliamsCoromandel Pure Honey 2020 Limited
Darden Limited
Darden Holdings Limited
Stepchange Consulting Limited
West Auckland Trust Services Limited
Director and shareholder
Director and shareholder
Director and shareholder
Director and shareholder
Director
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE COMPANIES ACT 1993
(
CONT'D
)
FOR THE YEAR ENDED 30 JUNE 2022
133
DIRECTORS� REMUNERATION
The total remuneration and value of other benefits earned by each of the Directors of the Company for the year ended
30 June 2022 were:
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Other
benefits
To tal
George Adams$128,100––––$128,100
Grant Biel
1
$24,569––––$24,569
Paul Izzard$61,000––––$61,000
John Rae$61,000$6,548–––$67,548
Katherine Turner
2
$21,241$3,482–––$24,723
Dianne Williams$61,000–$5,000$66,000
To t al$356,910$10,030$5,000––$371,940
1
Grant Biel retired as a Director on 25 November 2021
2
Katherine Turner was appointed a Director on 24 February 2022
EMPLOYEES� REMUNERATION
The number of employees of the Company and its subsidiaries whose remuneration and value of other benefits for the year
ended 30 June 2022 fall into the various brackets specified by the Companies Act 1993 is as follows:
Remuneration and value of other benefits ($)Number of employees – 2022Number of employees – 2021
100,000 – 109,999199
110,000 – 119,999910
120,000 – 129,999713
130,000 – 139,99984
140,000 – 149,99955
150,000 – 159,99932
160,000 – 169,99933
170,000 – 179,99922
180,000 – 189,999–1
190,000 – 199,99932
200,000 – 209,999–1
230,000 – 239,99932
240,000 – 249,9992–
250,000 – 259,999–2
260,000 – 269,99921
290,000 – 299,9991–
300,000 – 309,9991–
310,000 – 319,999–1
320,000 – 329,9991–
470,000 – 479,999–1
490,000 – 499,99911
500,000 – 509,9991–
1,120,000 – 1,129,9991–
1,220,000 – 1,229,999–1
Total number of employees
7261
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE COMPANIES ACT 1993
(
CONT'D
)
FOR THE YEAR ENDED 30 JUNE 2022
134
DONATIONS
Refer to page 70 (note 3e (Administration expenses) to the consolidated financial statements).
AUDIT FEES
Refer to page 70 (note 3e (Administration expenses) to the consolidated financial statements).
SUBSIDIARY COMPANY DIRECTORS
The following persons respectively held office as directors of subsidiary companies as at the end of the year:
SubsidiariesDirectors
Bremworth Carpets and Rugs Limited (formerly Bremworth Limited)
Bremworth Spinners Limited (formerly Cavalier Spinners Limited)
Elco Direct Limited
Cavalier Bremworth Limited (formerly Elcotex Limited)
Cavalier Bremworth (North America) Limited
Cavalier Spinners Limited (formerly Heron Distributors Limited)
Knightsbridge Carpets Limited
EnCasa Carpets Limited
Norman Ellison Carpets Limited
Carpet Distributors Limited
Horizon Yarns Limited
NEC Limited
Cavalier Commercial Limited
Radford Yarn Technologies Limited
E Lichtenstein and Company Limited
Elcopac Limited
Elcowool Limited
e-Wool Limited
Microbial Technologies Limited
Northern Prospecting Limited
Greg Smith
Cavalier Bremworth (Australia) LimitedGreg Smith
Scott Bain
Bremworth Pty. Limited (formerly Cavalier Bremworth Pty. Limited)
Cavalier Holdings (Australia) Pty. Limited
Cavalier Bremworth Pty. Limited (formerly Kimberley Carpets Pty. Limited)
Norman Ellison Carpets Pty. Limited
Cavalier Commercial Pty. Limited
Scott Bain
No subsidiary company directors received, in their capacity as such, directors’ fees or other benefits from the subsidiaries.
There were no entries in the interests register in respect of any of the subsidiary company directors. The remuneration
and value of other benefits of these directors is disclosed under employees’ remuneration on page 133.
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE COMPANIES ACT 1993
(
CONT'D
)
FOR THE YEAR ENDED 30 JUNE 2022
135
ANALYSIS OF SHAREHOLDINGS
Number of shareholders
%
Shares held
%
Size of shareholdings
Up to 1991013.358,4680.01
200 – 4991214.0140,9660.06
500 – 9992257. 4 5156,3140.23
1,000 – 1,99951116.93700,3541.01
2,000 – 4,99976925.472,362,3203.41
5,000 – 9,99950016.563 , 2 9 7, 8 3 84.77
10,000 – 49,99965021.5312,786,50818.48
50,000 – 99,999782.585,037,3787. 2 8
Over 99,999642.1244,788,95264.74
3,019100.0069,179,098100.00
Location of shareholders
New Zealand2,90396.1668,206,11598.59
Overseas
Australia712.35491,4500.71
Others451.49481,5330.70
3,019100.0069,179,098100.00
Shares held
%
Top 20 shareholders
Rural Aviation (1963) Limited8 , 5 6 7,6 4 212.38
Brian Edward Woolf3,600,0005.20
FNZ Custodians Limited2,932,4174.24
Brigit Kirsten Timpson and Fairlie Ann Milne (Brigit Timpson Family Account)2,402,6803.47
Matthew Charles Timpson and Rennie Cox Trustees No 8 Limited (Matthew Timpson Family Account)2,402,6803.47
Anthony Talbot Timpson and David John Graeme Cox (Anthony Timpson Family Account)2,402,6793.47
Suzanne Rachel Timpson and Fairlie Ann Milne (Suzanne Timpson No 1 Family Account)2,402,6793.47
New Zealand Depository Nominee Limited (Account 1 Cash Account)1,792,3882.59
Custodial Services Limited (Account 4)1,280,7071.85
Gregory John Muir1,225,0001.77
Fergus David Elliott Brown1,000,0001.45
F B Trustee Limited (Fergus Brown Family Account)1,000,0001.45
Ian David McIlraith940,0001.36
Masfen Securities Limited787,5001.14
Maarten Arnold Janssen74 7, 5 1 61.08
Percy Keith McFadzean715,0001.03
BNP Paribas Nominees (NZ) Limited692,6521.00
Forsyth Barr Custodians Limited (1-Custody)590,6480.85
Graham James Munro and Zita Lillian Munro588,0000.85
Graeme Paul Spry519,2160.75
36,589,40452.89
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE NZX LISTING RULES
AS AT 31 AUGUST 2022
136
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE NZX LISTING RULES (CONT'D)
AS AT 31 AUGUST 2022
NZX WAIVER LISTING RULE 4.6.1(c)
On 5 August 2021, NZ RegCo granted Bremworth a waiver from NZX Listing Rule 4.6.1(c), to the extent that this Rule would
have prohibited Bremworth from issuing Equity Securities to CEO, Greg Smith, as a consequence of the threshold in the Rule
having already been met as result of Performance Rights having been previously issued to the previous CEO, Paul Alston
(which subsequently lapsed upon his resignation).
The waiver had the effect that the Equity Securities issued to Greg Smith “replaced” the Performance Rights issued to
Paul Alston for the purposes of calculating the 3% threshold in accordance with Rule 4.6.1(c). That is, the Performance Rights
issued to Paul Alston would not have to be counted when calculating the Equity Securities that Bremworth would be able to
issue pursuant to Rule 4.6.1 to Greg Smith.
This waiver was released by NZ RegCo to the market on the NZX Market Announcement Platform on 8 September 2021
and is also available on the Company’s website www.bremworth.co.nz.
137
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURES UNDER THE FINANCIAL MARKETS CONDUCT ACT 2013
AS AT 30 JUNE 2022
SUBSTANTIAL HOLDINGS
The substantial product holders in the Company in respect of whom notices have been received were:
Number of ordinary shares
(being the only class of listed
voting securities) where
relevant interest exists
A C Timpson Trust9,610,718
Marama Trading Limited9,610,718
G C W Biel8 , 4 6 7,6 4 2
Rural Aviation (1963) Limited8 , 4 6 7,6 4 2
The total number of ordinary shares, being the only class of listed voting securities in the Company, as at 30 June 2022
was 69,179,098.
The definition of the term “relevant interest” in the Financial Markets Conduct Act 2013 is extremely wide, and more than
one relevant interest can exist in the same voting securities.
138
GOVERNANCE AND OTHER DISCLOSURES
SHAREHOLDER INFORMATION
ANNUAL MEETING OF SHAREHOLDERS
Time and date2 p.m., Monday, 28 November 2022
VenueAuditorium
Auckland War Memorial Museum
Auckland Domain
Parnell
Auckland 1010
CORPORATE CALENDAR
28 November 20222022 Annual Meeting of shareholders
31 December 2022End of 2023 half year
Mid-February 2023Announcement of 2023 half year result and release of 2023 half year report
30 June 2023End of 2023 financial year
Late August 2023 Announcement of 2023 annual result
September 2023Period for director nominations
End of September 2023 Release of 2023 Annual Report
139
GOVERNANCE AND OTHER DISCLOSURES
TREND STATEMENT
2022
$000
2021
$000
2020
$000
2019
$000
2018
$000
2017
$000
2016
$000
Financial Performance
Operating revenue$95,485 $111,577 $117,981 $135,234 $148,120 $156,120 $190,371
EBITDA (normalised) 4,918 3,385 2,300 7,0 76 9,998 2,572 12,275
Depreciation – owned assets (683) (379) (2,418) (3,479) (3,561) (3,251) (3,352)
Depreciation – right-of-use assets (954) (534) (1,779)– – – –
Depreciation – recycled through inventory 194 (764) (265)– – – –
EBIT (normalised) 3,475 1,708 (2,162) 3,597 6,437 (679) 8,923
Finance costs (1,029) (1,124) (2,535) (1,790) (2,798) (2,936) (3,374)
Finance income 159 68 – – – – –
Share of profit after tax of equity-accounted
investees (normalised)– – – 644 1,419 797 2,670
Profit/(Loss) before income tax (normalised) 2,605 652 (4,697) 2,451 5,058 (2,818) 8,219
Income tax (expense)/benefit (870) (276) 1,240 (572) (1,084) 962 (1,906)
Profit/(Loss) after tax (normalised) 1,735 376 (3,457) 1,879 3,974 (1,856) 6,313
Abnormal gains/(losses) (after tax) 505 1,353 (17,994) (18,659) 107 (268) (3,198)
Profit/(Loss) after tax attributable to
shareholders of the Company (GAAP)
2,240 1,729 (21,451) (16,780) 4,081 (2,124) 3,115
Ordinary dividends paid– – – – –– –
Profit/(Loss) after dividends$2,240 $1,729 ($21,451)($16,780)$4,081 ($2,124)$3,115
Financial Position
Shareholders’ equity 3 7,7 7 1 35,592 33,637 54,989 72,222 6 7, 8 9 0 69,361
Loans and borrowings - term portion– – – 20,500 27,500 35,000 3 7,7 0 0
Term liabilities 19,251 20,978 3,511 1,618 2,029 3,728 4,461
Loans and borrowings – current portion– – 15,800 – 4,000 6,500 –
Current liabilities 21,880 21,453 1 7,0 3 3 22,227 2 7, 2 5 3 25,739 35,854
Shareholders’ equity and total liabilities$78,902 $78,023 $69,981 $99,334 $133,004 $138,857 $ 1 4 7, 3 76
Property, plant and equipment 14,306 12,094 22,725 30,164 35,142 3 7,1 2 3 36,820
Right-of-use assets 9,280 9,968 430 –– ––
Investment in equity-accounted investees–– – – 24,544 23,490 23,175
Goodwill and other intangibles– – – – 2,362 2,362 2,362
Deferred tax asset 532 732 600 5,456 4,971 5,532 3,496
Non-current assets 24,118 22,794 23,755 35,620 6 7,0 1 9 68,507 65,853
Cash and bank 14,874 22,508 1,276 2,724 2,111 1,255 1,200
Current assets 39,910 32,721 44,950 60,990 63,874 69,095 80,323
Total assets$78,902 $78,023 $69,981 $99,334 $133,004 $138,857 $ 1 4 7, 3 76
140
GOVERNANCE AND OTHER DISCLOSURES
TREND STATEMENT (CONT'D)
2022
$000
2021
$000
2020
$000
2019
$000
2018
$000
2017
$000
2016
$000
Abnormal items (after tax)
Impairment of plant and equipment– – (5,095) (4,413)– – (1,573)
Impairment of right-of-use assets – – (2,094)– – – –
Impairment of intangible assets– – – (2,362)– – –
Impending change in legislation relating
to tax depreciation on buildings
– – 2,940 – – – –
Derecognition of deferred tax assets– – (12,891)– – – –
Restructuring costs
1, 2
– (1,271) (854)– 136 (4,542) (3,222)
Reversal of impairment of fixed assets– – – – 99 1,083 –
Gain on sale of property– 2,624 – – – – 2,035
Scour merger costs– – – – (128) (738) (438)
Gain on merger and dilution of
equity-accounted investee
– – – – – 3,929 –
Loss on sale of interest in, and property
held by, equity-accounted investees
– – – (11,884)– – –
Reversal of normalised tax expense 505 – – – – – –
To t al$505 $1,353 ($17,994)($18,659)$107 ($268)($3,198)
1
Incurred as part of the Group’s strategic transformation into the all-wool and natural materials business model
2
Incurred as part of the Group’s strategic plan to address its cost base, with the consolidation of its yarn spinning operations in Napier,
Whanganui and Christchurch. The costs included employee termination benefits, employee support costs, costs to relocate plant and
equipment and abnormal manufacturing costs and inefficiencies during the consolidation process, which included:
—consolidation of woollen yarn spinning operations (previously in Napier and Whanganui) to a single hub at the Napier plant;
—down-scaling of the semi-worsted yarn spinning operation in Whanganui;
—relocation of the felted yarn operation from Christchurch to Whanganui; and
—closure of the Christchurch plant.
141
GOVERNANCE AND OTHER DISCLOSURES
TREND STATEMENT (CONT'D)
2022202120202019201820172016
Financial Ratios and Summary
Use of Funds and Return on Investment
Return on average shareholders’ equity
(normalised) - %
4.7% 1.1% ( 7. 8 %)3.0% 5.7% (2.7%)9.3%
Basic earnings per ordinary share
(normalised) - cents
2.51 0.55 (5.03) 2.74 5.79 (2.70) 9.19
Diluted earnings per ordinary share
(normalised) - cents
2.46 0.54 (5.03) 2.74 5.79 (2.70) 9.19
Financial Structure
Net tangible asset backing per ordinary share - $$0.40 $0.36 $0.47 $0.72 $0.94 $0.87 $0.92
Equity ratio - %47. 9%45.6%48.1%55.4%54.3%48.9%4 7.1%
Return to Shareholders
Dividends paid per ordinary share – – – – – – –
Share Price
30 June$0.465 $0.490 $0.220 $0.320 $0.620 $0.350 $0.760
52 week high$0.850 $0.490 $0.380 $0.680 $0.630 $0.950 $0.770
52 week low$0.445 $0.205 $0.160 $0.310 $0.270 $0.330 $0.350
Market Capitalisation ($000)
30 June$32,168 $33,653 $15,109 $21,977 $42,581 $24,038 $52,196
Capital Expenditure and Depreciation ($000)
Capital expenditure$2,898 $2,481 $2,119 $4,705 $1,622 $2,123 $2,076
Depreciation - owned assets$683 $379 $2,418 $3,479 $3,561 $3,251 $3,352
Depreciation - right-of-use assets$954 $534 $1,779 – – – –
142
GOVERNANCE AND OTHER DISCLOSURES
TREND STATEMENT (CONT'D)
GLOSSARY OF FINANCIAL TERMS
EBITDA Earnings before interest, tax, depreciation and amortisation
EBIT Earnings before interest and tax
EBITDA (normalised) Earnings before abnormal costs, interest, tax, depreciation and amortisation
EBIT (normalised) Earnings before abnormal costs, interest and tax
Net assets Total assets less total liabilities
USE OF FUNDS AND RETURN ON INVESTMENT
Return on average shareholders’ equity Profit/(Loss) after tax (normalised)
(normalised) Average shareholders’ equity
Basic earnings per ordinary share Profit/(Loss) after tax (normalised)
(normalised) Weighted average number of ordinary shares on issue during the year
Diluted earnings per ordinary share Profit/(Loss) after tax (normalised)
(normalised) Weighted average number of ordinary shares on issue during the year
(including the maximum number of shares that could be issued under
the Company's LTI Scheme and the Bremworth Option Scheme)
FINANCIAL STRUCTURE
Net tangible asset backing Net assets less goodwill and other intangible assets
per ordinary share Number of ordinary shares on issue at balance date
Equity ratio Shareholders’ equity
Shareholders’ equity and total liabilities
143
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION
The Directors acknowledge that the Annual Report, including the Trend Statement from pages 139 to 142, contains financial
information that is non-GAAP (Generally Accepted Accounting Practice) and therefore falls within the Financial Markets
Authority’s guidance note on “Disclosing non-GAAP financial information” issued in July 2017.
The Trend Statement has been prepared using the audited GAAP-compliant financial statements of the Group.
The Directors believe that the non-GAAP financial information contained within the Trend Statement (more particularly,
the non-GAAP measures of financial performance such as “EBITDA (normalised)”, “EBIT (normalised)”, “Profit before income
tax (normalised)” and “Profit after tax (normalised)” as well as the various other financial ratios that are based on normalised
results – for example, earnings per share) provide useful information to investors regarding the performance of the Group
because the calculations exclude restructuring costs and other gains/losses (for example, gain/loss on sale of property and
investments) that are not expected to occur on a regular basis either by virtue of quantum or nature.
In arriving at this view, the Directors have also taken cognisance of the regular requests by users of the consolidated
financial statements, including analysts and shareholders, regarding the nature and quantum of abnormal items within
the GAAP-compliant results and the way analysts distinguish between GAAP and non-GAAP measures of profit.
The disclosure of the non-GAAP financial information is also consistent with how the financial information for the Group
is reported internally, and reviewed by the Chief Executive Officer as its chief operating decision maker, and provides what
the Directors and management believe gives a more meaningful insight into the underlying financial performance of the
Group and a better understanding of how the Group is tracking after taking into account items of an abnormal nature,
including items that are unlikely to recur or otherwise unusual in nature.
Non-GAAP financial information does not have standardised meaning prescribed by GAAP and therefore may not be
comparable to similar financial information prescribed by other entities.
In collating the Trend Statement, the Directors have taken into account all of the requirements within the guidance note.
More specifically, these include:
—outlining why non-GAAP financial information is useful to investors and how it is used internally by management;
—identifying the source of non-GAAP financial information;
—ensuring that:
–non-GAAP financial information is not presented with undue and greater prominence, emphasis or authority
than the most directly comparable GAAP financial information;
–presentation of non-GAAP financial information does not in any way confuse or obscure presentation of GAAP
financial information;
–a reconciliation from the non-GAAP financial information to the most directly comparable GAAP financial
information, including that for the previous period, can be easily accessed (see below);
–a consistent approach is adopted from period to period with respect to the presentation of non-GAAP financial
information, including that for comparative periods;
–where there is any change in approach from the previous period, the nature of the change is explained and the
reasons and financial impact provided;
–non-GAAP financial information is unbiased; and
—taking care when describing, or referring to, items as ‘one-off’ or ‘non-recurring’.
144
GOVERNANCE AND OTHER DISCLOSURES
DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION (CONT'D)
RECONCILIATION OF GAAP-COMPLIANT TO NON-GAAP-COMPLIANT MEASURES OF PROFIT AFTER TAX
YEAR ENDED 30 JUNE 2022 YEAR ENDED 30 JUNE 2021
GAAP
$000
Adjustments
$000
Normalised
$000
GAAP
$000
Adjustments
$000
Normalised
$000
Revenue$95,485– $95,485$111,577– $111,577
EBITDA 4,918 4,918 4,738 (1,353) 3,385
Depreciation – owned assets (683)– (683) (379)– (379)
Depreciation – right-of-use assets (954)– (954) (534)– (534)
Depreciation – recycled through inventory 194 – 194 (764)– (764)
EBIT 3,475 – 3,475 3,061 (1,353) 1,708
Finance costs (1,029)– (1,029) (1,124)– (1,124)
Finance income 159 – 159 68 – 68
Profit before tax 2,605 – 2,605 2,005 (1,353) 652
Tax expense (365) (505) (870) (276)– (276)
Profit after tax$2,240 (505) 1,735$1,729 (1,353) 376
Abnormal gains after tax 505 505 1,353 1,353
Profit after tax (GAAP)– $2,240– $1,729
Analysis of abnormal items
Profit
before tax
$000
Ta x
effect
$000
Profit
after tax
$000
Profit
before tax
$000
Tax effect
$000
Profit
after tax
$000
Reversal of normalised tax expense– 505 505 – ––
Restructuring costs– – – (1,271)– (1,271)
Gain on sale and leaseback of property– – – 2,624 – 2,624
–$505 $505 $1,353 –$1,353
Calculation of basic and diluted earnings per share
under GAAP and non-GAAP measures of profit after tax
Year ended 30 June 2022
GAAP-compliant reported
profit after tax
Reverse abnormal
items (net of tax)
where applicable
Non-GAAP-compliant
normalised profit after tax
Profit attributable to shareholders ($000)$2,240 ($505)$1,735
Weighted average number of ordinary shares (basic) 69,081,838 69,081,838
Earnings per share (basic) (cents) 3.24 2.51
Weighted average number of ordinary shares (diluted) 70,659,533 70,659,533
Earnings per share (diluted) (cents) 3.17 2.46
Year ended 30 June 2021
Profit attributable to shareholders ($000)$1,729 ($1,353)$376
Weighted average number of ordinary shares (basic) 68,679,098 68,679,098
Earnings per share (basic) (cents) 2.52 0.55
Weighted average number of ordinary shares (diluted) 69,242,681 69,242,681
Earnings per share (diluted) (cents) 2.50 0.54
GOVERNANCE AND OTHER DISCLOSURES
CORPORATE DIRECTORY
BOARD OF DIRECTORS
George Adams DipFSA(Hons), FCA, CFInstD
Independent
Chairman of the Board of Directors
Chairman of Nomination Committee
Member of Audit and Remuneration Committees
Paul Izzard
BA (Hons) Interior Design
Independent
Member of Audit and Remuneration Committees
John Rae
B.Com., LLB, CMInstD
Independent
Member of Audit, Remuneration and Nomination Committees
Katherine Turner
B.Com., CA, CMInstD
Independent
Chairman of Audit Committee
Member of Remuneration Committee
Dianne Williams
B.Com., MBA, CMInstD
Independent
Chairman of Remuneration Committee
Member of Audit and Nomination Committees
DIRECTOR EMERITUS
Grant Biel B.E. (Mech.)
CHIEF EXECUTIVE OFFICER
Greg Smith
CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY
Victor Tan CA, FCIS
FOUNDING SHAREHOLDER
The late Anthony Charles Timpson ONZM
REGISTERED OFFICE
7 Grayson Avenue, Auckland 2104
P O Box 97040, Auckland 2241
Telephone: 0800 808 303
Facsimile: 64-9-279 4756
Website: bremworth.co.nz
SHARE REGISTRAR
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road, Auckland 0622,
Private Bag 92119, Auckland 1142
Telephone: 64-9-488 8700
Facsimile: 64-9-488 8787
Investor Enquiries: 64-9-488 8777
AUDITORS
PwC
LEGAL ADVISORS
Russell McVeagh
BANKERS
Bank of New Zealand
National Australia Bank Limited
CORPORATE
General Manager Health and Safety,
People and Sustainability
Kirstine Hulse
Group Information Technology Manager
Trevor Jones
CARPET OPERATION
General Manager Sales New Zealand and Australia
Dean Chandler
General Manager Logistics,
Procurement and International Operations
Garth Clarke
General Manager Global Marketing,
Product and Digital Business
Rochelle Flint
General Manager Tufting Plant
Jason Howearth
General Manager Yarn Plants
Andrew Karl
WOOL OPERATION
General Manager Wool Procurement
Shane Eades
WEBSITES
Corporate
bremworth.co.nz/investor-centre
Carpet Operation
bremworth.co.nz
bremworth.com.au
Wool Operation
elcodirect.co.nz
Share Registrar
computershare.com/nz
This document is printed on Eco100 environmentally responsible paper which has been produced
using FSC
®
certified, 100% Post-Consumer Recycled, PCF (Process Chlorine Free) pulp.
Bremworth Ltd
7 Grayson Avenue, Auckland 2104, PO Box 97040, Auckland 2241
Telephone: 64-9-277-6000 www.bremworth.co.nz
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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