2022 Annual Report
Scales Corporation Limited
Annual Report 2022
local local
Thinking
acting
globalglobal
In a year where we made substantial strategic
progress with the growth of Global Proteins, we
also delivered a strong Group performance.
Our people are central to this success.
USAAustralia
Scales Corporation Limited
Introduction
Contents
Logistics
Air & sea freight
Global Proteins
Petfood ingredient
procurers, processors
and marketers
Edible protein exporter
Juice manufacturer
Vertically integrated apple
grower, packer & marketer
Apple marketer
Horticulture
Our 2022 results were extremely pleasing. They were
driven by record results from Global Proteins and Logistics,
with Horticulture dealing admirably with adverse market
conditions throughout the year. As ever, exceptional
leadership and extraordinary effort from the Scales team
were instrumental in the delivery of these results.
We made significant progress in the growth of Global
Proteins through the investment in Australian-based Fayman
International, ANZ Exports and Meateor Australia towards
the end of the year. We welcome our Australian partners to
the Group and are excited to work with them going forward.
Significant progress was also made on Sustainability, with
a number of environmental and marketplace initiatives
undertaken. Several key people programmes were
introduced, or re-established, to continue to provide support
for our teams. As ever, our people are our top priority.
Introduction02
Key 2022 Highlights04
Managing Director and Chair’s Report06
Sustainability Report16
Divisional Overview26
Leadership Profiles42
Financial Statements46
Independent Auditor’s Report88
Corporate Governance91
Director Disclosures106
Glossary110
Directory111
This was brought home to us by the cyclone event that
hit the North Island in February 2023. Within a few days
of the event, we were delighted to be able to report that
all our team members were safe and well. However, there
are many people who have experienced significant loss or
disruption as a result of this event and our teams in Hawke’s
Bay at Mr Apple, Meateor, Scales Logistics, Fern Ridge and
Profruit have encountered significant difficulties and stress.
The Hawke’s Bay community, its people and its culture,
are an integral part of Scales. Accordingly, Scales is
donating $250,000 to the recovery. We are also providing
tailored assistance to those staff members who have been
particularly affected.
Our heartfelt sympathy goes out to those that have lost
loved ones and we will support our teams, and the Hawke’s
Bay community, in every way that we can.
Welcome to our Annual Report for our 111th year of trading.
Annual Report - Year Ended 31 December 2022
Introduction
$46.4m
up 17% on 2021
Underlying NPAT
$38.2m
up 3% on 2021
N PAT
Our Numbers
(2021: 6.5 million litres)
5.7m
litres of
juice sold
$27.6m
down 7% on 2021
Underlying NPAT
attributable to
shareholders
$19.4m
down 28% on 2021
NPAT attributable
to shareholders
13.7c
Earnings per Share
(2021: 19.1 cents)
$7 7.9 m
Underlying EBITDA
up 6% on 2021
4.58m
TCEs of all apples
exported
(2021: 4.98 million)
3.32m
TCEs of own-grown
apples exported
(2021: 3.65 million)
Scales Corporation Limited
Key 2022 Highlights
1
Includes 100 per cent of volumes from Meateor NZ; i.e. total volumes controlled directly and indirectly by the Meateor Group. Excludes protein volumes sold by Fayman.
15.5c
per share
(2021: 19.0 cents)
Dividends
declared
$27.0m
Net Cash
(2021: $82.1 million)
First
Group-wide
carbon footprint
completed
2
leadership
programmes
custom built
(2021: 13.8%)
13.5%
Return on
Capital Employed
Record Revenue
$
619.2m
up 20% on 2021
TEUs of ocean
freight managed
27,580
(2021: 30,313 TEUs)
158,595
Metric tonnes of petfood
ingredients sold
1
up 6% on 2021
Annual Report - Year Ended 31 December 2022
Key 2022 Highlights
Focused
Managing Director and Chair’s Report
Scales Corporation Limited
Managing Director and Chair’s Report
2022
$000's
2021
$000'sVariance
Revenue619,173 514,551 20%
EBITDA68,516 71,619 -4%
Underlying EBITDA77,893 73,793 6%
NPAT38,231 36,950 3%
Underlying NPAT46,396 39,775 17%
NPAT Attributable
to Shareholders
19,412 26,925 -28%
Underlying NPAT
Attributable to
Shareholders
27,577 29,750 -7%
On behalf of the Board, we are delighted to
present Scales’ Annual Report for the year
ended 31 December 2022 with Net Profit
After Tax (NPAT) of $38.2 million.
This was a strong performance, driven by
record Global Proteins and Logistics results.
The Group also generated record Revenue
of $619.2 million and NPAT Attributable to
Shareholders of $19.4 million. Our Underlying
1
results were also strong, with Underlying
NPAT Attributable to Shareholders of $27.6
million, Underlying NPAT of $46.4 million and
Underlying EBITDA of $77.9 million.
Our diversified agribusiness strategy
continued to prove beneficial, with Global
Proteins outperforming expectations with
a record result, complemented by a record
result for Logistics.
The graphs below show the Underlying NPAT Attributable to Shareholders and Underlying EBITDA trend for a 5-year period.
Underlying NPAT Attributable to Shareholders
Tim Goodacre and Andy Borland
1
Directors and management use non-GAAP (Underlying) profit measures when discussing financial performance in this document. The Directors and
management believe that these profit measures provide meaningful information that is helpful to investors and give them a better understanding of a
company’s financial performance when presented in addition to GAAP (NZ IFRS) information. Underlying profit measures are used internally to evaluate
performance of our divisions, establish operational goals and to allocate resources. They also represent some of the profit measures required by Scales’
debt providers. Non-GAAP (Underlying) profit measures are not prepared in accordance with NZ IFRS and are not uniformly defined, therefore the non-GAAP
profit measures reported in this document may not be comparable with those that other entities report and should not be viewed in isolation or considered
as a substitute for GAAP (NZ IFRS) measures reported by Scales. Underlying profit measures were not subject to an audit or review. Underlying NPAT and
Underlying EBITDA are shown before the deduction of share of Non-Controlling Interests (Shelby).
A full reconciliation between Underlying and NZ IFRS measures is provided on pages 38 to 41.
Underlying EBITDA
2022
$27.6m
2018201920202021
$31.8m
$27.5m
$29.8m
$35.4m
20182019202020212022
$62.2m
$64.1m
$73.8m
$77.9m
$67.1m
Annual Report - Year Ended 31 December 2022
Managing Director and Chair’s Report
1
Calculated as the difference between the closing share price on 28 February 2023 plus all net dividends paid (a total of $1.45 per share) and the IPO listing price of $1.60.
Global Proteins
We are optimistic about the future of our Global Proteins
division. The industry is supported by many positive macro-
economic conditions, giving rise to strong global growth
in the demand for protein. Demand growth is expected to
outpace supply growth resulting in a protein supply ‘gap’.
This gap will make resilient supply chain models increasingly
more important. Scales’ Global Proteins division, with its
broad network of suppliers and customers across multiple
geographies, is well placed to be a long-term strategic
participant in the global supply chain for protein. Given its
nature, we believe that the sector is resilient to market cycles
as well as producing above-average returns on investment.
The worldwide nature of these protein opportunities allows us
to leverage our existing networks and supplier and customer
relationships, giving us global ambitions for the division. As we
already have significant operations in New Zealand, Australia
and North America, we are keen to extend our operations into
Europe. Europe is the second largest market for petfood and
many of our existing customers, with whom we have very long-
standing and enduring relationships, are operating in this market.
As a result, discussions regarding potential opportunities are
currently taking place and we look forward to updating you on
progress in due course.
Australian Investments
On 31 October 2022, Scales made 2 investments to expand the
Global Proteins division.
The first investment was the acquisition of a 33.33 per cent
interest in a newly established petfood ingredient processing
operation based close to many abattoirs in the food
processing district of Melbourne. The company has been
named Meateor Australia.
We have invested with 2 recognised industry participants
who bring extensive supply relationships to the operation and
this business is currently developing a greenfield site, which
will ultimately process and market petfood proteins. The facility
is expected to be commissioned in the second quarter of 2023,
with the intention being to scale up to full production over the
course of 2023.
Our second investment was the purchase of 50 per cent of
the Australian operations of Fayman International and 42.5
per cent of ANZ Exports (together, Fayman). Fayman is a
leading global exporter of edible proteins sourced principally
from Australia, with the business having been operating for
over 40 years.
Australia's product mix, growth and proximity to Asia make
it a strategically important supply base for both our petfood
customers and edible protein markets.
These investments are another step towards:
• improving our footprint in Australia
• moving up the supply chain
• establishing direct supply relationships
• improving the breadth of our networks and products
• providing further opportunities to expand and diversify
our business globally
• providing the foundation for Scales to explore
alternative markets for animal proteins
• expanding our relationships across a range of
customers and channels.
The transactions broaden our participation across the
various end channels for proteins (pharmaceutical, petfood
ingredients and edible proteins). By positioning ourselves
in this way, Scales directs proteins globally to their highest
and best use, optimising the lifecycle value of these
proteins, as well as the quality and service levels provided
to our customers. We believe that this is a globally unique
business model, which supports strong and enduring
relationships throughout the value chain.
Shareholder Returns
We continue to be conscious of the long-term return to our
shareholders. Shareholders who invested in our IPO in July
2014 will have achieved a 206 per cent return
1
on funds
invested to the end of February 2023. By comparison, an
investment in the S&P NZX50 would have delivered a 129
per cent return on funds invested over the same period.
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Scales Corporation Limited
Managing Director and Chair’s Report
Vertically
integrated
Global supply relationships
to aggregate product
Technology and network design to ensure
supply chain excellence
Value-add services, deep knowledge
& shipping relationships
Integrated
business
planning with
customers
Strong customer
relationships in Asia
Strong market relationships for
all animal by-products
Knowledge of processing
& investment in technology
Varieties & IP
Our
competitive
advantages:
Our value
chains:
Land
Primary
processing
Secondary
processing
Domestic
cold storage
In-market
cold storage
Freight
Retail
manufacturing
Wholesale
& retail
Consumer
Logistics
Global Proteins
Horticulture
Strategy
Scales’ Mission
To be the foremost investor in, and grower
of, Global agribusinesses by leveraging its
unique insights, experience and access to
collaborative synergies.
Corporate and Competitive Strategies
We are invested across 3 divisions. While all divisions have different business models,
we are able to leverage our knowledge, partnerships and Group synergies to create
competitive advantages and generate sustainable value for our stakeholders.
Scales’ Long-term Goal
To generate a long-run average 12.5 per
cent ROCE across the portfolio.
Strategic Update
Throughout 2022 we continued to proactively search for and
review potential investment opportunities, both internal and
external, and were delighted to successfully complete the
investments into Meateor Australia and Fayman towards
the end of the year. We have focused on opportunities that
complement our strengths, including:
• export-led businesses
• businesses to which we can add value from our long-
standing and strong relationships with both suppliers
and customers
• strong production knowledge and value-add skill
• highly-skilled supply chain and logistics expertise
Future investment is likely to be prioritised towards the
fast-growing proteins markets, whilst ensuring that the
opportunities align with our vision, play to our strengths and
are in line with our target returns.
Where we invest: our value chains
Annual Report - Year Ended 31 December 2022
Managing Director and Chair’s Report
Division
TargetStatus
Group
SustainabilityExcellent Progress
• Develop Group and divisional sustainability
strategies, including clear goals and targets
• Further develop and evolve our reporting of key
sustainability areas affecting Scales’ businesses
• Horizon scan workshop completed, including
climate scenarios, for Mr Apple
• Reviewed materiality to focus on key areas
of impact, reducing the number of materiality
domains from 24 to 12
• Custom built 2 leadership programmes that are
currently being rolled out
• Re-engaged the ‘Ethical Voice’ worker wellbeing
online survey platform targeted at our RSE
workers
• Completed Scales’ first water, carbon and soil
baselines for our regenerative trials
Financial and operationalExcellent Progress
• Maintain financial returns in line with, or above,
industry returns
• Continue to seek acquisitive and organic growth
to expand the business
• Investment made in 2 Australian operations
• Other acquisition and internal growth
opportunities regularly reviewed
Shareholder returnsOn Track
• Continue to provide shareholders with an
attractive yield on dividends
• Deliver capital gains and shareholder liquidity
through careful strategic execution
• Interim dividend maintained at 9.5 cents per share,
initial payment made in January 2023 with second
instalment payable in March 2023
• Maintained Group ROCE above adjusted long-run
target of 12.5 per cent
Global
Proteins
Increase scale and expand offeringExcellent Progress
• Review strategic initiatives and consider organic
and acquisition opportunities to increase
divisional scale
• Benefitted from diversified geographies and
proteins afforded by the Shelby and Meateor
businesses, together with investments in
processing capability
• 2 investments made in Australia, including 1 in the
edible proteins market
• Ongoing global growth opportunities being
actively investigated
Horticulture
Operational and brandingOngoing
• Reach 4 million TCEs of our own-grown apples
• Continue to increase market penetration into Asia
• Continue to develop the Mr Apple brand,
particularly within our key markets of Asia and
the Middle East
• Acquire new Plant Variety Rights (PVRs) to meet
emerging needs
• Redevelop lower-performing orchards and
varieties into higher value crops
• 3.32 million TCEs exported
• Increased proportion of sales made to the Asia
and Middle East markets
• Rollout of new brand identity, with a wide variety
of marketing and branding initiatives undertaken
• Continued growth in sales of PVRs including
Dazzle
TM
Logistics
Expand logistics offeringsOngoing
• Develop scale to utilise the expertise and capacity
within the team
• Strategic benefit of in-house logistics provider
experienced during period of strong global
shipping demand as well as port and logistics
constraints
Specific Strategic Targets
We are in the process of reviewing and resetting our strategic targets, including our sustainability targets as noted in our
Sustainability Report. An update on our strategy and strategic objectives will be communicated to shareholders in due course.
Scales Corporation Limited
Managing Director and Chair’s Report
Sustainability
Scales is focused on:
• Its broader obligations as a responsible corporate citizen
• The desire of our stakeholders to receive clear
reporting on our environmental footprint and
sustainability improvements
• Its ability to better identify and manage all risks (as well
as opportunities) facing the business
• Embedding sustainability into Scales’ broader strategic
planning
A key goal for 2022 was to work across our strategic planning
framework to deliver Group and divisional sustainability
strategies. The purpose for this review was to obtain clarity
on significant sustainability risks and opportunities, as
well as to improve our prioritisation and execution of the
sustainability initiatives we are hoping to employ.
We have focused on Mr Apple initially and have completed
a horizon scan, reviewed key risks and opportunities, and
developed a clear 6-point action plan. This process will
be rolled out to the other divisions in 2023. We also made
excellent progress at a Group level, undertaking our first
Group-wide water footprint and completing our first Group
carbon audit and decarbonisation road map.
Our full Sustainability Report is provided in the next section,
which we encourage you to read. We look forward to
building on our progress during 2023.
Scales’ Team
As ever, people are our key focus as, without them, we
would not be the business that we are. We recognise the
importance of employee engagement and continue to
enhance our employee engagement activities.
During the year, Mr Apple built an Employee Value
Proposition (EVP) programme as well as 2 leadership
programmes to help develop our employees and leaders.
We also re-engaged our Ethical Voice platform, an online
survey targeted at our RSE workers, so that we can
keep informed about their overall wellbeing and how
we can improve their working environment. We believe
it is important to both develop our team members and
to support their mental and physical wellbeing. Further
information about these programmes can be found in our
Sustainability Report.
2022 was not without its challenges so we would like
to recognise the responsiveness of our people through
the year. They found creative new ways to innovate and
collaborate, continue to support each other and the local
communities of which they are a part and produce excellent
results. We have a unique culture within Scales, which has
always been the key ingredient to our success, and we will
work hard to maintain and develop it for the years to come.
On behalf of the Board, we would like to say thank you to
the entire Scales team for their dedication and contribution
which makes Scales a unique place to work.
Appropriately Incentivising
our Team
Compensation of the Scales’ management team
continues to link remuneration with the delivery of the
strategies as directed by the Board, drive a performance-
led culture and connect the long-term sustainable
success of the business with our values. It also aligns to
retaining and developing high-performing team members
as well as promoting positive personal performance.
We have therefore maintained a strong incentive-based
remuneration scheme, with shorter term incentives being
balanced alongside long-term business and shareholder
interests. Our remuneration philosophy and analysis
of executive remuneration is detailed more fully in the
Corporate Governance Statement on pages 91 to 105.
Board Succession
– Retirement of Tim
Goodacre
Shareholders are aware of the
director succession process that
has been ongoing over the past 2
years. We are very pleased with
the progress of this process, which
is achieving its desired outcome
of effecting a planned and orderly
refresh of the Board. New Directors
announced over the past year
have been Miranda Burdon and
Mike Petersen. Both of these Directors will add valuable
experience, qualifications and a diversity of thought around
the Board table.
Also announced earlier this month, our Chair, Tim Goodacre,
will retire in April 2023, handing over the role of Chair to
Mike Petersen. At the 2022 ASM, Tim signalled his intention
to retire in 2023 as part of a planned succession process.
Tim was appointed as a Director of Mr Apple in 2012, before
joining the Board of Scales Corporation in 2014, just prior to
Scales’ listing on the NZX. In 2017, Tim was appointed as
just the 9th Chair of Scales in over 100 years of trading.
Tim has brought a wealth of knowledge and experience
to Scales, with over 40 years involvement in agribusiness,
including 5 years as CEO of Zespri International from 2003
to 2007.
Tim has been a great leader and supporter of Scales during
his tenure on the Board. He is well-respected by his fellow
Directors, management and all of the wider Scales’ teams
for his leadership ability, his passion for the businesses
and their people and his constant support for everyone
involved at Scales. Tim regularly commented on the unique
and positive culture evident in all Scales’ businesses and
he contributed in no small way to the development of that
culture right across the Group.
We would like to thank Tim for his outstanding
contribution to Scales over the past 11 years.
Tim Goodacre
Annual Report - Year Ended 31 December 2022
Managing Director and Chair’s Report
Income Statement
2022
$000's
2021
$000's
Revenue619,173 514,551
Underlying EBITDA77,893 73,793
Underlying EBIT58,207 54,247
Underlying NPAT46,396 39,775
After tax impact of:
Non-cash, NZ IFRS and other adjustments(8,165)(2,825)
N PAT38,231 36,950
NPAT Attributable to Shareholders19,412 26,925
Capital employed445,670 415,821
Return on capital employed13.5%13.8%
Group Financials
Summary
The Group delivered excellent results in 2022, with record earnings for Global Proteins and Logistics. Underlying NPAT
Attributable to Shareholders was $27.6 million and Reported NPAT Attributable to Shareholders was $19.4 million.
We were pleased to achieve record Revenue of $619.2 million and Underlying EBITDA of $77.9 million for the year ended
31 December 2022, increases on 2021 of 20 per cent and 6 per cent, respectively.
Additional detail of the performance of each division is provided in the Divisional Overview section.
Managing Director and Chair’s Report
Scales Logistics Christchurch
Scales Corporation Limited
12
Capital Management
ROCE is a measure of how efficiently we are generating a return on our assets. It continues to be an important performance metric
for each division and the Group and is at the heart of how we monitor the performance of the portfolio and make decisions around
capital expenditure. Prior to committing to an investment in assets, we need to be confident that we will generate a return that
meets or exceeds our targets.
The ROCE targets vary by division, given each division’s specific asset and risk profiles.
20222021
ROCE
Global Proteins67.4%48.0%
Horticulture-0.4%7.8%
Logistics61.1%37.3%
Group13.5%13.8%
Target12.5%12.5%
Group capital employed increased by $29.8 million in 2022, primarily as a result of our Australian investments together with an
increase in Mr Apple’s capital employed due to investment in its Whakatu packhouse automation project and revaluation of its land
and buildings.
Scales’ basic earnings per share for the year ended 31 December 2022 was 13.7 cents per share (19.1 cents per share in the year
ended 31 December 2021).
1
Financing
Average Net Cash for the year was $21.9 million (2021: $60.1 million), a reduction of $38.1 million, with the movement primarily
relating to our Australian investments and an increase in working capital.
Hedging Strategy
As an exporter, we continue to have significant exposure to foreign exchange movements. This is most prevalent in Mr Apple,
with our Global Proteins and Logistics divisions also affected. We also have exposure to movements in interest rates, both on
borrowings and deposits.
Scales has a Board approved Treasury Management Policy, which governs how all foreign exchange, interest rate and related
activities are conducted. This policy is reviewed biennially.
Under this policy we may take foreign exchange cover for Mr Apple for up to 48 months forward using a variety of foreign exchange
instruments (including options and forward contracts). Scales maintains a blend of instruments. In addition, Scales manages the
cover levels for seasonal and market variations for future years.
We continue to have a natural hedge covering some of our US dollar exposure as international shipping is payable in US dollars. We
take cover on the remaining expected net US dollar, Euro, British pound and Canadian dollar exposures.
In general, Global Proteins and Logistics take foreign currency cover once exposures have been confirmed.
The average conversion rate of Mr Apple’s main foreign
currency exposures since 2019 were as noted below.
2022202120202019
USD .6588.6697.6424.6664
EUR.5449.5455.5671.5663
GBP.4962.5027.5101.4658
CAD.8597.8651.8657.8650
Foreign currency
In 2022, Mr Apple’s net foreign currency exposures
were as shown below.
Euros 14%
Canadian dollars 1%
US dollars 77%
British pounds 8%
1
Based on the weighted average number of ordinary shares.
Annual Report - Year Ended 31 December 2022
Managing Director and Chair’s Report
The hedging position for Mr Apple’s main foreign currency exposures, as at 28 February 2023, was:
20232024202520262027
USD
% cover of expected exposure90%71%65%43%13%
Average rate of cover .6518.6413.6393.6262.5954
EUR
% cover of expected exposure72%91%74%50%25%
Average rate of cover.5459.5386.5427.5347.5460
Interest rates
In addition, we take out interest rate swaps and forward rate agreements, which provide some certainty on interest costs on Scales’
long-term and short-term borrowings. We funded the US dollar investment in Shelby via a US dollar term loan to provide a hedge on
the investment. Similarly, we funded the Fayman and Meateor Australia investments via an AUD term loan. As at 31 December 2022
our US dollar term debt was 47 per cent hedged by interest rate swaps.
Dividend
A final 2021 fully imputed cash dividend of 9.5 cents per share (a gross amount of 13.2 cents per share) was paid on 8 July 2022.
Together with a 2021 interim dividend of 9.5 cents per share (a gross amount of 13.2 cents per share) that was paid on 14 January
2022, this brought the annual dividends for 2021 to a total of 19.0 cents per share (a gross amount of 26.4 cents per share).
A fully imputed initial interim 2022 cash dividend of 6.0 cents per share (a gross amount of 8.3 cents per share) was declared on 9
December 2022 and paid on 16 January 2023. A second interim dividend in respect of 2022 of 3.5 cents per share (a gross amount
of 4.9 cents per share) was declared on 23 February 2023 and is payable on 31 March 2023. We will review, and advise on, a final
dividend for 2022 in early May 2023.
As always, any dividend is subject to Board approval. It is standard practice for the Directors to consider all aspects of the Group’s
performance and financial position prior to declaring any dividend. From 2023 onwards, our dividend policy will revert to 50 per cent
to 75 per cent of Underlying NPAT Attributable to Shareholders.
Capital Expenditure
Capital expenditure in 2022 was $15.6 million, a decrease of $0.9 million on the prior year (2021: $16.5 million).
Material expenditure included:
• Investment in plant and machinery to facilitate increased volumes in Global Proteins ($1.9 million)
• Whakatu packhouse automation ($6.6 million)
• Mr Apple redevelopment ($1.6 million)
2022
$000's
2021
$000's
Operational capital expenditure
Global Proteins1,631 542
Horticulture2,607 3,736
Logistics168 58
Other26 4
Total operational capital expenditure4,431 4,340
Margin sustainability capital expenditure
Horticulture6,564 6,050
Total margin sustainability capital expenditure6,564 6,050
Growth capital expenditure
Global Proteins1,860 -
Horticulture2,730 6,134
Total growth capital expenditure4,590 6,134
Total capital expenditure15,585 16,524
We are mindful of our responsibility to maintain appropriate cash levels and retain strength in our balance sheet. Consequently,
future investment will be prioritised towards Global Proteins given its strong growth prospects and return on investment.
Scales Corporation Limited
Managing Director and Chair’s Report
Tim Goodacre
Chair
17 March 2023
Andy Borland
Managing Director
Outlook
We entered 2023 in a strong position, following a year of successful strategic and financial progress. We continue to execute
against our strategy and are well-positioned to continue our global growth, particularly in the Global Proteins division.
Global Proteins has commenced the year well, taking advantage of the opportunities in the strong and growing global petfood
market as well as investigating opportunities to develop our investments, through Fayman, in the edible proteins market.
The Horticulture division has had a difficult start to the harvest season with the impact of Cyclone Gabrielle. However, the
resilience of the team meant that they re-commenced picking and packing operations as soon as it was safe to do so, and they
are keen to maximise the harvest as best as possible.
Whilst Scales, like all businesses, faces some headwinds, we anticipate a positive outlook for the Group based upon the
strength of our diversified portfolio and the abilities of our leadership and management team to execute the Group’s strategies.
On behalf of the Board, we would like to thank all our management and staff, fellow Directors, suppliers, customers and other
stakeholders for their hard work, support and commitment in our 111th year of trading.
Managing Director and Chair’s Report
Annual Report - Year Ended 31 December 2022
Delivering
long-term value
Sustainability Report
Sustainability Report
Scales Corporation Limited
SCALES GOVERNANCE, STRATEGY
AND RISK MANAGEMENT PROCESS
Governance oversight
OUR
MISSION
S
T
R
A
T
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G
I
C
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Board
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Actions
Strategic priorities
Key success factors:
• Capability assessment
• Competitive strategy
Review
corporate
strategy
Risks
identified
and
assessed
Review controls Prioritise
Actions
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We have integrated Climate-Related Disclosures (CRD) into this year’s Sustainability
Report. An index at the conclusion of this section provides page references to
Aotearoa New Zealand Climate Standard 1 Climate-related Disclosures.
Governance and Strategy
As part of our Sustainability review, we are conducting horizon scans across all our divisions. This process looks at the broad factors
influencing our future operating environment and assesses future risk and opportunities. Along with our Sustainability strategy, this
process also informs our corporate, competitive and risk management strategies. All risks and opportunities are considered under
the same assessment process during the horizon scan (see climate risk section) and are prioritised on this basis.
We will conduct horizon scans every 4 years and involve members from both the divisional sustainability committees and the
Scales Board Health & Safety and Sustainability Committee. The outputs are reviewed by the Board and are considered alongside
stakeholder input via our materiality process.
The Board Committee is also responsible for reviewing sustainability strategy, including associated targets, and is responsible for
making sure management have the appropriate capabilities and resource to execute.
Scales governance, strategy and risk management process
Annual Report - Year Ended 31 December 2022
Sustainability Report
Materiality
Following the materiality review in 2021, we have re-visited the materiality domains to achieve more focus on key areas of
impact and have also simplified our categorisation. We define materiality through the GRI framework of double materiality,
which considers both financial and non-financial impacts, to a wider stakeholder group.
Board Appointments
During the year, we were pleased to announce the appointment
of Miranda Burdon to the Board. Miranda was appointed as a
Non-Executive Independent Director, effective from 31 August
2022. Miranda is Chair of Meadow Mushrooms, Emerging
Proteins NZ, an organisation that seeks to accelerate the
development of a thriving emerging proteins sector in New
Zealand, and Live Ocean, a New Zealand based ocean
conservation charity. Miranda brings extensive commercial
experience, focused on marketing and brand management.
Labour affordability
Labour security
Health, safety & labour practices
Market access
Consumer preferences
Innovation
Regulation
Environment
Water management
Carbon emissions
Climate conditions & weather events
Biodiversity
Brand reputation
People
MarketplaceCorporate
Earlier this month, we were also pleased to announce
the appointment of Michael (Mike) Petersen to the
Board, effective on 28 April 2023. Mike will be a Non-
Executive Independent Director of Scales and will
also be appointed as 10th Chair of Scales. Mike is a
Director of ANZCO Foods and Kelso Genetics Limited
and is Chair of agri-food digital marketplace developer,
Nui Markets Limited. Mike also has advisory roles
with a number of other privately-owned companies.
Sustainability Report
Scales Corporation Limited
Health and Safety
Our health & safety culture is at the heart of our everyday
operations.
2022 presented some challenges with the outbreak of the
COVID-19 Omicron variant occurring during peak harvest for
Mr Apple, our largest employer. However, operations were
maintained throughout the season despite significant labour
shortages due to isolation requirements. There was a strong
focus on wellbeing, including preventative and recovery
measures, and mental fitness support through facilitated
workshops (via Groov) and one to one counselling (via Vitae).
Pleasingly, Mr Apple reduced its Lost Time Injury rate by 39
per cent from the prior year, and it was at its lowest since
2018, which is an amazing result. Notwithstanding this, Mr
Apple is continuing to strive for excellence and, at the end of
2022, it shifted to a Health, Safety & Wellbeing partnership
model. The aim is to achieve a more proactive field-based
approach with Health, Safety & Wellbeing partners dedicated
to both the orchards and to post-harvest operations.
People
600+
Permanent staff members
30+
Operational sites
~1,450
RSE workers
37%28%
Permanent female
staff Scales wide
Female senior leadership/
management staff
Longest serving
employee
46 years
Our Team
Scales continues to look at ways to innovate and improve
across all its businesses. As an example, during the year
Profruit participated in the Healthy Work Group project led by
Massey University. The aim is to explore how to reduce work
related ill health in small and medium sized organisations in
New Zealand, with a specific focus on mental wellbeing in the
initial assessments.
Employee Value Proposition
and Leadership
In 2022 Mr Apple built and communicated their EVP, which
was weaved into the 2023 seasonal recruitment campaign.
We are also partnering with Māori Wardens and Land Based
Training to provide pre-employment training and pastoral care
to improve the retention of full-time team members.
In addition, Mr Apple custom built 2 leadership programmes:
Leading through Others (Senior Managers) and Emerging
Leaders (Assistant Managers/Team Leaders/Site Managers).
This has been rolled out to our orchard and post-harvest teams
and will be extended to the remaining teams during 2023.
RSE Spotlight
Mr Apple re-engaged its 'Ethical Voice' worker wellbeing
platform in 2022. Targeted at our seasonal employees, Ethical
Voice is an independent online survey which is aimed at
assessing our employees’ wellbeing and working environment.
It is modelled on United Nations’ ‘Guiding Principles on
Business and Human Rights’, and GLOBALG.A.P’s ‘GRASP’.
It is translated into the local language of our employees.
With scores over 75 per cent across all themes, Mr Apple
has consistently scored in the ‘excellent’ range and improved
across all 2019 baselines.
Annual Report - Year Ended 31 December 2022
Sustainability Report
Increasingly, our customers and our markets require upstream sustainability reporting
as part of their own internal frameworks and regulations. A key component of our
horizon scan process for each division is to understand these changes and to align our
action plans with our customer and market requirements.
As part of Mr Apple’s assessment there was a continued focus on its pest and disease strategy, which includes exploring new
prevention, detection and control methods. Mr Apple has also developed a world-class traceability system and, in 2022, set
baselines for its regenerative soil trial, which aims to improve soil carbon, organic matter and water retention. The key goal is to
identify new orchard management practices that improve soil and tree health and ultimately reduce pest and disease responses
1
.
Additionally, Mr Apple is actively investigating further technology and controls in its post-harvest operations.
In parallel, through its leadership on the Research Consultative Group of New Zealand Apples and Pears, Mr Apple is supporting
the delivery of the $14.8 million ‘Smart and Sustainable’ programme. Over the next 7 years the programme will investigate the
minimisation of sprays while continuing to ensure world leading market access for our apples.
This research will support our own internal work on decision support tools, alternative non-chemical control options, pest and
disease detection technologies, new application methods and integrated online dashboards.
Marketplace
1
This trial was impacted by Cyclone Gabrielle, which will require new baseline assessments and a new site.
Orchard
Management
Technology
- detection,
removal,
traceability
Investigation of
new chemistry
and alternate
controls
Investigating regenerative treatments
to improve soil and tree health
Investigating spray application
methods to increase efficacy
Technology to track and trace back
to the individual bin level
Optical grading
Investigating packhouse technologies that
better align to our customers, or prospective
customers, access requirements
Investigation of non-chemical controls
including bio-pesticides
Scales Corporation Limited
Sustainability Report
Water
In 2022, we completed our first Group-wide water
footprint. As with carbon, this baseline measure allows
us to assess areas for improvement including reporting,
reduction and efficiency gains.
Mr Apple accounted for 96 per cent of water usage
across the Group and will have a dedicated water action
plan as part of its refreshed sustainability strategy.
Carbon
Energy Monitoring Trial
In 2022, we commenced a trial programme, installing
sensors in some of our post-harvest machinery to provide
real-time information on energy usage. The purpose
of the trial was to assess the benefits of identifying
abnormal consumption trends and to benchmark plant
performance to identify replacement options.
Decarbonisation Reports
Scales engaged DETA Consulting to prepare a
decarbonisation roadmap across all our businesses with
operational facilities. This roadmap provides guidance
on potential areas for carbon reduction and future capital
expenditure requirements.
While the final document is being finalised, the key areas
of focus identified across all businesses were:
• Alternative fuel usage
• Refrigerant replacement and plant upgrades
• Transport efficiencies
• Electricity decarbonisation
• Accommodation upgrades
This document will form the basis of our divisional
carbon action plans and a roadmap for our goal setting.
GHG Reporting and Performance.
This was the first year we have completed a Group-wide
carbon assessment. It was based on the equity share
approach, applying ISO 14064-1:2018 standard.
1
Given the nature of our portfolio, the equity share
approach gives us the most consistency across our
various business structures and meets all requirements
under the Aotearoa New Zealand Climate Standard.
Environment
Divisional results (absolute emissions) are below and include
Category 1-4 emissions:
Divisional tCO2e emissions 2022, Category 1-4
Global proteinsHorticultureLogistics Total
35,03526,60326461,902
Categories 1 and 2 make up 15 per cent of overall emissions
and these will be the initial focus for our decarbonisation
initiatives.
Indirect freight (Category 3) represents 74 per cent of overall
emissions. Whilst not the immediate focus, we will see
improvements over time due to changes in our market mix,
network design (centralisation of processing and storage
sites) and technology improvements in the freight industry.
Category 3 emissions are accounted for by the cargo owners,
hence Logistics, as a service provider, has a very small
footprint relative to our other divisions.
We will be reviewing our targets across the Group once our
strategic process is completed.
1
This standard classifies emissions into one of 6 Categories, of which Categories 1-4 are relevant to Scales. These categories are: Category 1 - Direct
GHG emissions and removals; Category 2 - Indirect GHG emissions from imported energy; Category 3 - Indirect GHG emissions from transportation; and
Category 4 - Indirect GHG emissions from products an organisation uses. Global Warming Potentials (GWP) from the Intergovernmental Panel on Climate
Change fifth assessment report are the preferred GWP conversion.
5,023
2,496
16,627
2,458
Category 1
Category 2
Category 3
Category 4
255
1,337
29,276
4,168
119
48
74
23
HorticultureGlobal ProteinsLogistics
Emissions Breakdown
Annual Report - Year Ended 31 December 2022
Sustainability Report
Mr Apple - 2022 Emissions
This was Mr Apple’s fifth season under the Toitū certification programme. As mentioned previously, the year was impacted by
certain disruptions that have in turn affected our GHG emissions performance. Factors such as irregular and / or inefficient sailings
and extended onshore storage requirements (increased electricity consumption) drove increases in Category 2 and 3 emissions.
Combined with reduced revenue, this led to an increase in carbon intensity. Overall emissions declined from last year, primarily due
to reduced volumes and trucking requirements.
Absolute 2022 emissions
= 21,581 tCO2e
4 per cent decrease
1
Carbon intensity goal of 1
per cent reduction in GHG
emissions per million dollars
gross revenue from 2018-2024
11 per cent increase
Reduce paper use by 10
per cent per annum
53 per cent total reduction
Reduce waste to landfill by 30
per cent by 2024 (post-harvest)
30 per cent reduction
Reduce electricity consumption
by 3 per cent by 2024
13 per cent increase
Reduce overall fuel use by
5 per cent by 2024
4 per cent reduction
Prior to 2022, initiatives such as centralising domestic freight, EROAD monitoring, market allocations reducing ocean freight
kilometres and waste minimisation programs were starting to have an impact on our 2018 baseline. We expect this trend to
continue when normal operating conditions resume.
Environment (continued)
Climate Risk Framework
Methodology
In 2022, we developed our 3 climate scenarios which are aligned to the Aotearoa Circle’s Agri-Adaptation Road Map:
1. Orderly – RCP 2.6: this is an orderly transition to a low-carbon future that avoids major physical changes
2. Disorderly – RCP 2.6: expected to result in a 1-2°C increase in global temperature. This scenario has a delayed, disorderly and
disruptive transition to a low-carbon future. It avoids major physical changes but has high transition impacts
3. Hothouse – RCP 8.5: this converts to a 2.4°C increase across our long-term horizon of 2050 (although it is on track to achieve
> 3°C by 2100). There is low transition risk as global carbon reduction initiatives do not come into legislation. As a result, there
are increased physical impacts
These scenarios were considered as part of the horizon scan to help identify key risks and opportunities (both climate and other)
across the business. Scales has developed an online tool, in conjunction with external consultants, to act as a sustainability
dashboard, displaying risks, opportunities, scenario analysis, action plans and KPIs. This tool considers both financial and non-
financial impacts on the business and ranks all risks based on a combination of impact, likelihood and confidence (spread of the
responses), as well as looking at the impacts over both a short-term (to 2030) and long-term (to 2050) basis.
1
Percentage changes are calculated over the period 2018-2022.
Scales Corporation Limited
Sustainability Report
RisksTime HorizonStrategies
Volume impacted by
extreme weather
Short-term• Geographical spread of orchards reduces catastrophic risk from
single event
• Invested in more support structures for the trees in our new
developments
• Future proof drainage when orchards are redeveloped to allow for
increased rainfall events
• Hail nets are not considered currently viable, however we will
continue to review this position
Labour security and affordability
impacted by external factors
Short-term• Continual industry and government engagement to highlight the
benefits of the RSE programme
• Diversify geographic sources of RSE labour pools
• Further investment in technology to improve labour efficiency
Water security impacted by rainfall
and drought changes
Long-term• Staggered renewal dates for water consents
• Implemented successful post-harvest reticulation and storage
systems at Whakatu, opportunities to roll out across other sites
• Investigate on-orchard water storage options
Supply chain reliability and
affordability impacted by regulatory
changes and extreme weather
Short-term• Regular review of concentration risk to key suppliers and business
continuity plans
• Internal trials and industry partnerships to reduce and develop more
sustainable inputs
Yield impacted by sea level rise
and changing seasonal conditions
Long-term• Spread of lease renewals, so we can continually assess
appropriateness of locations
• Option to use existing products and technology to offset the
increased risk of sunburn, manage harvest windows and chill
requirements
Yield impacted by pests and
diseases and biodiversity loss
Long-term• Formalising the pest and disease strategy, which includes
prevention, reduction and control options
• Continued support and partnership with industry initiatives
Opportunities
Changes to market access
requirements – opportunity
to improve access relative to
competitors
Short-term• See above for pest and disease strategy
• Regular review of market concentration risk
• Continual development of carbon and biodiversity programmes to
align with increased market requirements
• Additional investment in R&D for packaging and label options
• Ongoing focus on existing compliance requirements and assurance
programmes including GAP and GRASP
Market demand impacted by
customer perceptions and
preference
Short-term• Identified our target markets are aligning our pipeline of new
varieties with customer preferences
• Embedding sustainability into our strategy, brand and
communications - opportunity to improve premiumisation of the
Mr Apple brand
As well as resulting in new mitigation / adaptation actions, the opportunities identified above are being reflected in Mr Apple's
strategic plan, including target markets, variety selection, branding and supply chain efficiency initiatives. The capability and
resources (including capital deployment) required to unlock these initiatives are considered by the Board and made at a Group
level across our portfolio.
Outcomes
Key climate risks for Mr Apple are shown below. These risks and opportunities helped inform Mr Apple's 6-point action plan, and
this strategic planning process will be rolled out to the other divisions in 2023. The table below includes both transition and physical
risks and traverses the entire Mr Apple value chain from orchard to consumer impacts. The risks and opportunities have been
ranked on impact (noting that this ranking does not take into account likelihood).
Annual Report - Year Ended 31 December 2022
Sustainability Report
GovernancePage number
Identify the governance body responsible for oversight of climate-related risks and opportunities
17
Description of the governance body’s oversight of climate-related risks and opportunities
17
Description of management’s role in assessing and managing climate-related risks and opportunities
17
Strategy
Description of current climate-related impacts
23
Description of the scenario analysis undertaken
22
Description of the climate-related risks and opportunities identified over the short, medium and long-term
23
Description of the anticipated impacts of climate-related risks and opportunities
23
Description of how the business will position itself as the global and domestic economy transitions towards a
low-emissions, climate-resilient future state
9, 23
Risk Management
Description of the processes for identifying, assessing and managing climate-related risks 17, 22, 23
Description of how the processes for identifying, assessing and managing climate-related risks are integrated into
overall risk management processes
17
Metrics and Targets
The metrics that are relevant to all entities regardless of industry and business model 21, 22
Industry-based metrics relevant to its industry or business model used to measure and manage climate-related risks
and opportunities
21, 22
Any other key performance indicators used to measure and manage climate-related risks and opportunities21, 22
The targets used to manage climate-related risks and opportunities, and performance against those targets 21, 22
GHG Emissions
A statement describing the standard or standards that GHG emissions have been measured in accordance with21
The GHG emissions consolidation approach used: equity share, financial control or operational control21
The source of emission factors and the GWP rates used or a reference to the GWP source21
Summary of specific exclusions of sources, including facilities, operations or assets with a justification for their exclusionN/A
Scales Corporation Limited
Sustainability Report
Environment (continued)
CRD Index – Summary of Key Disclosures
Sustainability Report
25
Annual Report - Year Ended 31 December 2022
Structure builds
confidence
Divisional Overview
Scales Corporation Limited
Divisional Overview
This section provides a summary of each of our 3 operating divisions, including their
performance and key operating statistics. In line with our Group results, we focus on the
Underlying financial performance of our business divisions, excluding certain non-cash,
NZ IFRS and other adjustments.
Global Proteins
Overview
Our Global Proteins division converts agricultural by-products
into valuable food commodities. The division comprises 5
business operations:
• Meateor NZ – 50 per cent ownership of a processor and
marketer of petfood ingredients for the global petfood
industry with processing plants in Whakatu and Dunedin
• Meateor International – 100 per cent ownership of a
supplier and marketer of petfood ingredients from Australia
and other markets
• Shelby – 60 per cent ownership of a US procurer, processor
and marketer of ingredients for the petfood industry
• Fayman – 50 per cent ownership of the Australian
operations of Fayman International and 42.5 per cent
ownership of ANZ Exports, a global exporter of edible
proteins sourced principally from Australia
• Meateor Australia – 33.33 per cent ownership of a new
petfood protein manufacturing facility in Melbourne
Note that Profruit has been transferred into our
Horticulture division, where we believe that its operations
and strategy are better aligned. Current year and prior
year financial results have been updated accordingly.
Global Proteins Division
Meateor NZ
*
Meateor
International
**
Shelby Foods
**
Fayman
*
Meateor
Australia
*
Petfood ingredient
processor and marketer,
New Zealand
(50%)
Petfood ingredient
supplier, Australia &
other markets
(100%)
Petfood ingredient
procurer, processor
and marketer, USA
(60%)
Edible by-products
exporter
(50% - Fayman
International / 42.5%
ANZ Exports)
Petfood protein
manufacturer
(33.33%)
*
Equity accounted.
**
Fully consolidated into Scales’ financial results, with Shelby non-controlling interest of $18.8 million deducted from NPAT (2021: $9.8 million).
Annual Report - Year Ended 31 December 2022
Divisional Overview - Global Proteins
20222021
Key Operational Metrics
Petfood ingredients volume soldMT158,595 149,207
Financial Performance$000's$000's
Global Proteins revenue319,923 218,852
Underlying Global Proteins EBITDA 60,158 33,387
Depreciation and amortisation(747)(733)
Depreciation of right-of-use assets(64)(58)
Underlying Global Proteins EBIT59,347 32,596
Global Proteins EBITDA 58,913 32,933
Global Proteins EBIT58,102 32,142
Capital employed106,605 69,546
ROCE67.4%48.0%
NB: A reconciliation of Underlying to Reported profit measures follows this Divisional Overview section.
Operational Summary
Global Proteins produced another excellent performance for the
year. The division generated a 6 per cent increase in volumes of
petfood ingredients sold, from 149,207 MT to 158,595 MT.
Given the primarily edible nature of product sold, this figure
does not incorporate volumes sold by Fayman. However, over
9,000 MT of product was sold by Fayman during November and
December 2022.
Financial Summary
Financially, the Global Proteins division delivered an
exceptional result in 2022 with record results for both
revenue and profitability. Revenue was $319.9 million, a 46
per cent increase on prior year (2021: $218.9 million), whilst
Underlying EBITDA was $60.2 million, an 80 per cent increase
(2021: $33.4 million).
This result reflects factors including:
• Significant operational efficiencies following development
and investment at processing sites
• Impacts of new product development, which is returning
higher margins
• A leadership team with long-term customer relationships,
enabling expansion of geographic reach and product range
• Changes in mix, including product, customer and market
• Contribution from Fayman since completion, which is
equity-accounted
Operational and Financial Performance
The table below outlines key operational metrics and the summarised financial performance for Global Proteins.
20182019202020212022
29.0
111.0
115.7
149.2
158.6
Petfood Ingredients Sold (MT 000s)
Scales Corporation Limited
Divisional Overview - Global Proteins
Industry and Strategy Update
The petfood industry continues its expansion. In the second
half of 2022 alone, petfood manufacturers in the USA
announced over US$2.4 billion of facility expansions and
investments to meet future demand
1
, with this additional
capacity expected to progressively be available over the next
2 years. Coupled with this, supply chains and the sourcing
of raw materials are being identified as the biggest future
production challenges for petfood manufacturers
2
.
Meateor and Shelby have very experienced and well-connected
leadership teams and have developed deep relationships
with suppliers and customers over 25 years. This gives us
confidence that we will participate alongside our customers in
this growth. Consequently, we are investing in broadening and
expanding our own capacity within the USA to support current
customers and internationally to support many of those same
customers with their global businesses.
Our value chain ranges from sourcing raw material proteins,
to production and shipping of high-quality products, through
to sale of these products to the 3 main markets for animal
products of pharmaceuticals, petfood and edible proteins.
Whilst we have previously concentrated on the supply of
petfood ingredients, we also supply to the pharmaceutical
industry and, with the investment in Fayman, now supply to
the edible proteins market, particularly in Asia. It is our plan to
grow our presence within each of these end-markets.
2023 Outlook
The outlook for Global Proteins is extremely positive and
2023 has started well. Whilst some normalisation is expected
for 2023, early trading has continued at 2022’s levels.
There will be some disruption to earnings as the Meateor
Australia start-up becomes fully operational in 2023 and
integrates into the Group.
We are excited to see what 2023 brings for this division.
1
https://www.petfoodprocessing.net/articles/16526-pet-nutrition-demand-fuels-more-than-2-billion-in-facility-investments
2
https://digital.petfoodprocessing.net/sosland/pfp/pet-food-processing-december-2022/index.php#/p/12
We use partnership
models across a
variety of countries to
secure and aggregate
raw material supply
Our deep market knowledge
and key relationships with
shipping companies
ensures we secure the best
prices and capacity
We apply years of
knowledge to produce
consistent, high
quality ingredients
Our excellence in supply chain
management results in full,
on-time delivery even under
the most challenging
environments
We integrate our
business planning
processes with our customers,
to provide supply chain resilience
and new product developments.
We consistently invest in
innovation and technology to
improve our product pipeline
and operations.
We have strong market
relationships and sales
channels for all animal
by-products including petfood,
edible and pharmaceutical.
We have strong partnerships
with customers in high growth
Asia markets
Annual Report - Year Ended 31 December 2022
Divisional Overview - Global Proteins
Mr Apple - Sales by Region (TCEs)
Horticulture
Overview
Our Horticulture division comprises:
• Mr Apple – New Zealand’s largest fully vertically
integrated apple business, based in Hawke’s Bay
• Fern Ridge – a fresh produce exporter in Hawke’s Bay
• Profruit – 50 per cent ownership of a manufacturer
of high-quality apple, kiwifruit and pear juice
concentrates, located in Hawke’s Bay
During 2022, we operated 3 packhouses. Each of our
packhouses are equipped with high-speed optical
grading machines. Stage 1 of the Whakatu packhouse
automation project was successfully completed in 2022.
The remaining stages have been paused for 2023.
Mr Apple also operates 6 coolstores.
Markets
Our apples are sought after around the world and we sell
apples to approximately 125 customers in 30 countries.
Asia and the Middle East is our largest market,
accounting for approximately 75 per cent of export
sales volumes (2021: 71 per cent).
Asia & Middle East
Europe
North America
UK
2021
3%
9%
71%
17%
3%
7%
75%
15%
2022
Marketing and Branding
Over the past decade, Mr Apple has made significant
advances in the areas of marketing and branding. Focus
has been on development of both the Mr Apple brand as
well as the brands of high value varieties sold (such as
Dazzle
TM
, Posy
TM
and Diva
TM
). Our experience, together
with our international research, shows that premium apple
brands, well supported by consumer marketing, point of
sale displays and innovative packaging, achieve excellent
and consistent prices. The underlying consumer demand
that is generated can support large volume growth.
With New Zealand comprising a very small portion
of international production and sales of apples, we
increasingly direct our focus to premium-branded apples.
Dazzle
TM
, Posy
TM
and Diva
TM
achieve NZD FOB prices that
are approximately 2-times higher than traditional apples
and are excellent examples of how Mr Apple is developing
an economically sustainable and resilient business model.
2022 saw the implementation of strategy work
completed in 2021, with the brand identity refreshed
to be contemporised and simplified. The brand rollout
was across the corporate sites, packaging, point of sale
material and advertising. This change is the first step in a
longer-term brand development strategy. Some highlights
of the year are shown in the following pictures.
Scales Corporation Limited
Divisional Overview - Horticulture
Mr Apple is the official apple supplier of the NZ Team, supporting it at the Beijing Winter Olympics and at the Birmingham
Commonwealth Games.
Mid-Autumn festival offers the opportunity for apple gifting in many markets. Mr Apple developed special packaging and supported
this with in-store sampling and Key Opinion Leader / Key Opinion Consumer campaigns.
Dazzle
TM
and Posy
TM
have their
own marketing material to support
brand awareness and sales.
Annual Report - Year Ended 31 December 2022
Divisional Overview - Horticulture
Financial Performance and Key Operating Statistics
Summary Performance
The table below shows the financial performance of our Horticulture division for 2022 and 2021.
2022
$000's
2021
$000's
Horticulture revenue228,854 243,422
Underlying EBITDA
Mr Apple14,649 37,941
Fern Ridge1,263 1,131
Profruit1,069 1,715
Underlying Horticulture EBITDA16,980 40,787
Depreciation and amortisation(9,645)(9,820)
Depreciation of right-of-use assets(8,393)(8,047)
Underlying Horticulture EBIT(1,058)22,920
Horticulture EBITDA10,33241,239
Horticulture EBIT(7,707)23,372
Capital employed299,837 310,691
ROCE-0.4%7.8%
NB: A reconciliation of Underlying to Reported profit measures follows this Divisional Overview section.
Divisional Overview - Horticulture
Scales Corporation Limited
32
Divisional Overview - Horticulture
Horticulture generated a solid result in a year with significant disruption. Earnings were affected by a number of factors,
particularly the lockdowns in China, which resulted in material reductions in both sales volumes and prices during critical sales
windows particularly during the latter parts of the season. Lower volumes, higher shipping costs and labour availability also all
had an impact on earnings.
Profruit delivered a strong result given the market conditions, with our share of earnings being $1.1 million (2021: $1.7 million).
Annual Report - Year Ended 31 December 2022
33
Divisional Overview - Horticulture
20222021202020192018
Orchard
Total planted orchard (at time of harvest)
1
Ha.1,167 1,201 1,186 1,158 1,149
Fully mature equivalent planted orchardHa.1,024 1,050 1,028 1,023 1,057
Apples picked (Mr Apple orchards)TCE 000s4,281 4,757 5,119 4,841 5,090
Apples packed (Mr Apple + external
growers (Hawke's Bay))
TCE 000s3,960 4,430 4,858 4,747 4,739
Exported volume
Mr AppleTCE 000s3,324 3,651 3,915 3,822 3,867
External growersTCE 000s1,256 1,332 1,824 2,132 1,964
TotalTCE 000s4,580 4,983 5,739 5,953 5,831
Mr Apple packout %%78%77%76%79%76%
Total NZ productionTCE 000s18,777 19,666 22,199 21,755 20,687
Mr Apple own grown volume share of NZ production%17.7%18.6%17.6%17.6%18.7%
Profruit
Juice concentrate soldlitres 000s5,748 6,497 6,544 6,170 6,219
Weather and orchard redevelopment, which reduced planted hectares, impacted volumes this year:
• Gross production was down 10 per cent to 4.28 million TCEs (2021: 4.76 million TCEs)
• Own-grown export volumes were down 9 per cent to 3.32 million TCEs (2021: 3.65 million TCEs)
• Total exported volumes, were down 8 per cent to 4.58 million TCEs (2021: 4.98 million TCEs)
Despite the decrease in volumes, we continue to contribute significantly to the national apple crop, with production from our owned
and leased orchards accounting for 17.7 per cent of New Zealand’s apple exports (2021: 18.6 per cent).
Orchard Statistics
We continue to monitor and report against various operating statistics, a selection of which are noted below:
Scales Corporation Limited
Divisional Overview - Horticulture
34
Divisional Overview - Horticulture
1
Planted orchard at the end of the year was 1,149 hectares.
Volumes and Prices
Volumes and prices (on a NZD FOB basis) for 2022 and 2021 are noted below.
Volumes by Variety (TCE 000s)20222021
Premium Varieties
NZ QueenTCE 000s439 510
Pink LadyTCE 000s305 426
Red Sports (Fuji and Royal Gala)TCE 000s1,056 1,061
Dazzle™ & Posy™TCE 000s215 135
OtherTCE 000s181 235
TotalTCE 000s2,196 2,366
Growth%(7%)6%
% premium66%65%
Traditional varieties
BraeburnTCE 000s338 271
Royal GalaTCE 000s298 412
OtherTCE 000s492 602
TotalTCE 000s1,128 1,285
Growth%(12%)(23%)
Total Mr Apple owned and leased orchardsTCE 000s3,324 3,651
Growth%(9%)(7%)
Prices by Variety (NZD / TCE (FOB))
Weighted average price for premium varietiesNZD / TCE 40.6 39.8
Weighted average price for traditional varietiesNZD / TCE 27.3 33.3
Total weighted average priceNZD / TCE 36.1 37.5
Volumes of Traditional and Premium varieties were down 12% and 7% respectively in 2022. However, we experienced pleasing
growth in Dazzle™ volumes. Premium volumes accounted for around 66 per cent of all exports in 2022, a slight increase from 2021
(65 per cent).
Premium varieties achieved an overall slight increase in price, endorsing our strategy of investing in these varieties.
Annual Report - Year Ended 31 December 2022
35
Divisional Overview - Horticulture
2023 Outlook
Given the scale of Cyclone Gabrielle’s impact, we are continuing to assess and understand the full effect that the cyclone has had
on our operations. As we previously advised, 3 of our orchards (Brookfields, Kinross and Pakowhai) were extensively damaged,
with our Pilos orchard sustaining moderate damage. Other orchards did not sustain material damage.
Picking and packing re-commenced following the cyclone with early sales indications being positive.
Other PremiumDazzle & Posy
Red Sports
(Fuji and Royal Gala)
Pink Lady
NZ QueenOther TraditionalRoyal GalaBraeburn
Volumes by Variety (TCE 000s)
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2013201420152016201720182019
4,000
202020212022
2,833
2,752
3,155
3,5463,545
3,867
3,822
3,915
3,651
3,324
Divisional Overview - Horticulture
Scales Corporation Limited
Annual Report - Year Ended 31 December 2022
Divisional Overview - Logistics
Logistics
Operational and Financial Performance
The key operational metrics and the summarised financial performance for the Logistics division for 2022 and 2021 are shown below.
20222021
Key Operational Metrics
Ocean freight volumeTEUs27,580 30,313
Airfreight volumeMT5,553 3,645
Financial Performance$000's$000's
Revenue123,338 81,878
Underlying Logistics EBITDA 6,595 4,942
Depreciation and amortisation(194)(209)
Depreciation of right-of-use assets(572)(596)
Underlying Logistics EBIT5,829 4,137
Logistics EBITDA 6,595 4,942
Logistics EBIT5,829 4,137
Capital employed7,556 11,534
ROCE61.1%37.3%
Logistics produced an exceptional full year result despite continued global supply chain sector difficulties, with a 51 per cent
increase in revenue to $123.3 million (2021: $81.9 million) and a 33 per cent increase in Underlying EBITDA to $6.6 million
(2021: $4.9 million).
Whilst there was a 9 per cent decrease in ocean freight volumes managed, airfreight volumes increased by 52 per cent. Once
again, the skill and expertise of the Logistics team has been in evidence in 2022, ensuring that all product was shipped on time
and in full. We believe this is a key advantage for both Scales’ internal divisions as well as Logistics’ external freight customers.
2023 Outlook
Global supply chain conditions are expected to improve in 2023, with reduced port congestion. Some disruptions are likely
to continue, including geopolitical conflicts and inflationary pressures, so resilience and the ability to optimise supply chain
management will be required.
In the short-term within New Zealand, delays are expected in the aftermath of Cyclone Gabrielle as backlogs are cleared at
ports and damages to the road and rail network are repaired.
Scales Logistics will continue to support both its internal and external customers’ requirements, providing invaluable strategic
input and supply chain agility as and when required.
NB: A reconciliation of Underlying to Reported profit measures follows this Divisional Overview section.
Overview and Divisional Developments
The services of Scales Logistics include:
• Ocean freight services to exporters and importers of perishable products, with offices in Auckland, Christchurch, Tauranga,
Hawke’s Bay and Melbourne
• Air freight services, including chiller facilities in Christchurch and Auckland together with warehousing facilities in Christchurch
GroupGlobal Proteins
2022202120222021
$000's$000's$000's$000's
Underlying EBITDA (excluding NZ IFRS 16)66,550 62,989 60,083 33,319
NZ IFRS 16 Leases9,383 10,804 76 68
NZ IFRS 16 Leases - renewal reassessment1,960 - - -
Underlying EBITDA (including NZ IFRS 16)77,893 73,793 60,158 33,387
Other adjustments:
(Impairment)/reversal of impairment of non-
current assets
(3,729)1,650 - -
Gain on sale of property, plant and equipment -1,132 - -
Equity settled employee benefits(609)(726) - -
NZ IFRS 16 Leases - renewal reassessment(1,960) - - -
Fayman acquisition entries1,619 -1,619 -
Intercompany FX(568) -260 -
Change in fair value gain on apple inventory131 (932) - -
Change in gross liability for non-controlling
interests
(4,215)(1,852)(4,193)(2,169)
Transaction costs(47)(1,446) - -
Profruit - segment transfer--1,0691,715
Reported EBITDA68,515 71,619 58,913 32,933
Underlying EBIT (excluding NZ IFRS 16)55,951 52,203 59,335 32,586
NZ IFRS 16 Leases296 2,044 11 10
NZ IFRS 16 Leases - renewal reassessment1,960 - - -
Underlying EBIT (including NZ IFRS 16)58,207 54,247 59,347 32,596
Other adjustments:
(Impairment)/reversal of impairment of non-
current assets
(3,729)1,650 - -
Gain on sale of property, plant and equipment -1,132 - -
Equity settled employee benefits(609)(726) - -
NZ IFRS 16 Leases - renewal reassessment(1,960) - - -
Fayman acquisition entries1,619 -1,619 -
Intercompany FX(568) -260 -
Change in fair value gain on apple inventory131 (932) - -
Change in gross liability for non-controlling
interests
(4,215)(1,852)(4,193)(2,169)
Transaction costs(47)(1,446) - -
Profruit - segment transfer--1,0691,715
Reported EBIT48,829 52,073 58,10232,142
Reconciliation of Underlying to Reported Profit Measures
The following table provides a reconciliation of Underlying profitability to Reported profitability for the Group and each division.
Scales Corporation Limited
Divisional Overview
HorticultureLogisticsCorporate and eliminations
202220212022202120222021
$000's$000's$000's$000's$000's$000's
6,532 30,896 5,843 4,166 (5,907)(5,393)
8,488 9,891 752 776 67 70
1,960 - - - - -
16,980 40,787 6,595 4,942 (5,841)(5,323)
(3,729)1,650 - - - -
-1,132 - - - -
- - - -(609)(726)
(1,960) - - - - -
- - - - - -
- - - -(828) -
131 (932) - - - -
(22)318 - - - -
- - - -(47)(1,446)
(1,069)(1,715)----
10,33241,2396,595 4,942 (7,324)(7,495)
(3,114)21,076 5,649 3,957 (5,919)(5,417)
95 1,844 180 180 9 10
1,960 - - - - -
(1,058)22,920 5,829 4,137 (5,910)(5,406)
(3,729)1,650 - - - -
-1,132 - - - -
- - - -(609)(726)
(1,960) - - - - -
- - - - - -
- - - -(828) -
131 (932) - - - -
(22)318 - - - -
- - - -(47)(1,446)
(1,069)(1,715)----
(7,707)23,3725,829 4,137 (7,394)(7,578)
Annual Report - Year Ended 31 December 2022
Divisional Overview
GroupGlobal Proteins
2022202120222021
$000's$000's$000's$000's
Underlying NPAT (excluding NZ IFRS 16)46,897 40,438 49,145 26,527
NZ IFRS 16 Leases, net of tax(1,913)(663)(1)(3)
NZ IFRS 16 Leases - renewal reassessment, net
of tax
1,412 - - -
Underlying NPAT (including NZ IFRS 16)46,396 39,775 49,144 26,524
Other adjustments:
(Impairment)/reversal of impairment of non-
current assets
(3,729)1,650 - -
Gain on sale of property, plant and equipment -1,132 - -
Equity settled employee benefits(609)(726) - -
NZ IFRS 16 Leases - renewal reassessment(1,960) - - -
Fayman acquisition entries1,619 -1,619 -
Intercompany FX(568) -260 -
Change in fair value gain on apple inventory131 (932) - -
Change in gross liability for non-controlling
interests
(4,215)(1,852)(4,193)(2,169)
Transaction costs(47)(1,446) - -
Profruit - segment transfer--1,0691,715
Taxation effect 1,212 (653)(812)(452)
Reported NPAT38,231 36,950 47,08725,619
Underlying NPATAS (excluding NZ IFRS 16)28,078 30,413 30,327 16,703
NZ IFRS 16 Leases, net of tax(1,913)(663)(1)(3)
NZ IFRS 16 Leases - renewal reassessment, net
of tax
1,412 - - -
Underlying NPATAS (including NZ IFRS 16)27,577 29,750 30,326 16,700
Other adjustments:
(Impairment)/reversal of impairment of non-
current assets
(3,729)1,650 - -
Gain on sale of property, plant and equipment -1,132 - -
Equity settled employee benefits(609)(726) - -
NZ IFRS 16 Leases - renewal reassessment(1,960) - - -
Fayman acquisition entries1,619 -1,619 -
Intercompany FX(568) -260 -
Change in fair value gain on apple inventory131 (932) - -
Change in gross liability for non-controlling
interests
(4,215)(1,852)(4,193)(2,169)
Transaction costs(47)(1,446) - -
Profruit - segment transfer--1,0691,715
Tax effect of other NZ IFRS adjustments1,212 (653)(812)(452)
Reported NPAT Attributable to Shareholders19,412 26,925 28,26815,794
Reconciliation of Underlying profitability to Reported profitability for the Group and each division (continued)
Scales Corporation Limited
Divisional Overview
HorticultureLogisticsCorporate and eliminations
202220212022202120222021
$000's$000's$000's$000's$000's$000's
(2,010)15,560 4,015 2,802 (4,252)(4,450)
(1,849)(592)(61)(65)(2)(2)
1,412 - - - - -
(2,448)14,968 3,954 2,736 (4,253)(4,452)
(3,729)1,650 - - - -
-1,132 - - - -
- - - -(609)(726)
(1,960) - - - - -
- - - - - -
- - - -(828) -
131 (932) - - - -
(22)318 - - - -
- - - -(47)(1,446)
(1,069)(1,715)----
1,556 (201) - -469 -
(7,542)15,2183,954 2,736 (5,269)(6,624)
(2,012)15,359 4,015 2,802 (4,252)(4,452)
(1,849)(592)(61)(65)(2) -
1,412 - - - - -
(2,449)14,767 3,954 2,736 (4,253)(4,452)
(3,729)1,650 - - - -
-1,132 - - - -
- - - -(609)(726)
(1,960) - - - - -
- - - - - -
- - - -(828) -
131 (932) - - - -
(22)318 - - - -
- - - -(47)(1,446)
(1,069)(1,715)----
1,556 (201) - -469 -
(7,543)15,0193,954 2,736 (5,268)(6,624)
Annual Report - Year Ended 31 December 2022
Divisional Overview
Scales Corporation Limited
Leadership Profiles
Our leadership
team
Leadership Profiles
Tim was elected to the
Board in 2014, having been
appointed Chair of Scales’
Horticulture division in
2012. He has been involved
in agribusiness for over
40 years and was CEO
of Zespri International
from 2003 to 2007. Tim
is currently: Chair of
The Nutritious Kiwifruit
Company Limited, which
is a consortium of New
Zealand kiwifruit suppliers
selling under a new single
brand, based around
nutrition and health, on
the Australian market;
Director of Prevar Limited,
an Australian and New
Zealand joint venture apple
and pear industry company,
supporting the development
and commercialisation
of new apple and pear
varieties, and Director
of Koala Cherries Pty
Limited. Tim is a member
of Scales’ Nominations and
Remuneration Committee.
Miranda was appointed to
the Board in August 2022.
Miranda has over 20 years
executive and entrepreneurial
experience, centered on fast
moving consumer goods in
New Zealand and globally,
including as the Global
Marketing Manager for
Pernod Ricard. Miranda is
currently Chair of Meadow
Mushrooms and Live Ocean.
Miranda is also the former
CEO of Global Women. In
2019 Miranda co-founded
Food Nation, a New Zealand
based food manufacturer
that develops plant-powered
products. Miranda is a
member of Scales’ Health
& Safety and Sustainability
Committee.
Miranda Burdon,
Non-Executive
Independent Director
Tim Goodacre,
Non-Executive
Independent Chair
Andrew (Andy)
Borland,
Executive Director
Andy joined Scales in 2007
and became Managing
Director in 2011. Prior to
joining Scales he had a 20-
year career in banking, with
his final role being Head
of Corporate at Westpac
New Zealand. Andy has
overall responsibility for
the strategic direction and
day-to-day management of
Scales. In addition to his
directorships of the Group,
Andy is currently the Chair
of Primary Collaboration
New Zealand Limited and
Primary Collaboration New
Zealand (Shanghai) Co.
Limited. Andy is a member
of Scales’ Finance and
Treasury Committee and
Scales’ Health & Safety and
Sustainability Committee.
Nick was elected to the
Board in 2014, having been
appointed a Director of both
Scales’ Storage & Logistics
division and Meateor in
2012. Nick was previously
the Managing Director and
was one of the founding
shareholders of Hellers
Limited, New Zealand’s
largest bacon, ham and
small goods company. Nick
is currently the Managing
Director of Harris Meats
and Glenturret Farm in
Cheviot, North Canterbury,
and is also a Shareholder
and Director of several
private companies. Nick is
a member of Scales’ Audit
and Risk Management
Committee.
Nick Harris,
Non-Executive
Independent Director
Annual Report - Year Ended 31 December 2022
Leadership Profiles
Board of Directors (as at 17 March 2023)
Alan was elected to
the Board in 2014. Alan
was the President of
the International Cricket
Council between 2012
and 2014 and is currently:
Chair of the Basin Reserve
Trust, a Director of Oceania
Healthcare (NZ) Limited,
Skellerup Holdings Limited
and a number of private
companies. Alan has an
extensive background
in the accounting and
finance field and is a former
National Chair of KPMG.
He was made a Companion
of the New Zealand Order
of Merit (CNZM) in 2013
for services to cricket and
business. Alan is Chair
of Scales’ Audit and Risk
Management Committee.
Alan Isaac,
Non-Executive
Independent Director
Xin was appointed to
the Board in 2021. He
is a Senior Director of a
department within China
Resources Enterprise,
Limited, which holds
a 15.1% shareholding
in Scales. Xin has held
Director and CFO roles
within China Resources
(Holdings) Co, Limited.
Xin holds a Bachelor
of Engineering from
the Beijing Institute of
Technology and a MBA
from the University of North
Carolina at Chapel Hill.
Qi Xin,
Non-Executive Director
Mark was elected to
the Board in 2011. He
is a founding partner of
Direct Capital. Mark has
a background in private
equity, specialising in
portfolio management with
a focus on strategy, growth
and capital funding. Mark
is currently a Director of a
number of Direct Capital
entities. Mark is also a
Director of Evergreen
Partners Limited, and is
a Board Member of New
Zealand Rugby Union
Incorporated. Mark is Chair
of Scales’ Nominations and
Remuneration Committee
and of Scales’ Finance and
Treasury Committee and is
a member of Scales’ Audit
and Risk Management
Committee.
Mark Hutton,
Non-Executive
Independent Director
Scales Corporation Limited
Leadership Profiles
Board of Directors (continued)
Nadine Tunley,
Non-Executive
Independent Director
Nadine was appointed to
the Board in 2019. Nadine is
currently CEO of Horticulture
New Zealand and has
extensive horticulture and
wider primary industry
management experience
from previous roles,
including as the former CEO
of Oha Honey LP. Nadine
also brings experience from
a wide variety of governance
and advisory roles, including
as a Director of Plant &
Food Research, a member
of Ngā Pouwhiro Taimatua
and a former member of
the Primary Sector Council.
Nadine was also a former
Chair of New Zealand Apples
& Pears Incorporated.
Nadine is Chair of Scales’
Health & Safety and
Sustainability Committee.
Annual Report - Year Ended 31 December 2022
Leadership Profiles
Management Profiles
Andy Borland,
Managing Director
Andy joined Scales in 2007 and
became Managing Director in 2011.
Andy’s full biography is set out in
the previous section.
Kent Ritchie,
CEO Scales Logistics
Kent joined Scales in 1998, and has
spent over 30 years in the shipping
industry. He has been involved in
setting up shipping services from
New Zealand, has experience in all
aspects of the transport industry
and has led Scales’ expansion into
the logistics arena.
Brett Frankel,
President Shelby Foods
Brett established Shelby Foods in
2007 and has been its President
since inception. Brett has over
20 years’ experience in petfood,
having had a senior procurement
role prior to starting Shelby. He also
represents the third generation of
family involvement in the sector,
following in the footsteps of both
his father and grandfather.
John Sainsbury,
CEO Meateor Group
John has been with Meateor in
various management roles for over
20 years. Prior to that, John worked
in senior management, marketing
and operational roles in the United
States. John was appointed CEO of
Meateor Foods in 2015, and CEO of
Meateor Group in 2019.
Tim Harty,
General Manager
Meateor Pet Foods
Tim was appointed General
Manager at the inception of the JV
with Alliance in 2019. Tim has had
over 20 years’ experience in the
export meat industry, in marketing
and operational roles, both in New
Zealand and overseas.
Geoff Smith,
Chief Operations Officer
Geoff joined Scales in 2022 from
Zespri where he was Head of New
Zealand Supply. Geoff has extensive
experience across a variety of
agribusinesses, particularly in
operations, supply chain, strategy
and investment. Geoff has both an
Honours degree and Doctorate from
Lincoln University.
Steve Kennelly,
Chief Financial Officer
Steve has been with Scales since
1993 in a variety of accounting
and financial roles. As CFO, Steve
is responsible for finance, funding,
legal, company secretarial and
information technology. Steve is a
member of Chartered Accountants
Australia and New Zealand.
Andrew van Workum,
CEO Mr Apple
Andrew has worked in the apple
industry for over 30 years. He
joined Mr Apple at its inception in
2001 and prior to that was General
Manager of Mr Apple’s predecessor,
Grocorp Pacific Limited, where
he worked for 16 years. He has
extensive experience in the
production aspects of the apple
industry, and was previously a
Director of Pipfruit New Zealand.
Chantelle Ramage,
General Manager Profruit
Chantelle has been with Profruit for
16 years, including 14 as General
Manager. Prior to that Chantelle
held Production Manager and
Technical Manager roles with the
company. Chantelle graduated from
Lincoln University with a Bachelor
of Science, majoring in Food.
Hamish Davis,
Managing Director Fern Ridge Fresh
Hamish joined Fern Ridge in 2001,
becoming Managing Director
in 2008. He has over 30 years’
experience in the growing and
post-harvest sectors of the apple
industry, and remains very active in
export sales for the company
Financial Statements
Scales Corporation Limited
Financial
Statements
Contents
Comprehensive income
The income earned and operating expenditure
incurred by the Scales Group during the financial year
(profit or loss) followed by the other comprehensive
income that is taken to reserves in equity.
48
Changes in equity
The opening balance, details of movements during
the year and the balance of each component of
shareholders’ equity at the end of the financial year.
50
Financial position
The Scales Group assets, liabilities and equity
at the end of the financial year.
51
Cash flows
Cash generated and used in the operating, investing
and financing activities of the Scales Group.
52
Notes to the Financial Statements 54
A. Segment information 56
B. Financial performance
B1. Revenue
B2. Cost of sales, administration and
operating expenses
B3. Other income and losses
B4. Finance cost
B5. Taxation
B6. Foreign currency transactions
58
C. Key assets
C1. Property, plant and equipment
C2. Unharvested agricultural produce
C3. Investments accounted for using the
equity method
C4. Goodwill
C5. Inventories
C6. Impairment of assets
C7. Software
63
D. Capital funding
D1. Share capital
D2. Reserves
D3. Dividends attributable to equity
holders of the company
D4. Imputation credit account
D5. Earnings per share
72
E. Financial assets and liabilities
E1. Trade and other receivables
E2. Other financial assets
E3. Trade and other payables
E4. Borrowings
E5. Other financial liabilities
E6. Interest rate risk
E7. Foreign currency risk
E8. Categories of financial instruments
E9. Maturity profile of financial liabilities
75
F. Group structure
F1. Subsidiary companies
F2. Non-Controlling Interests
82
G. Other
G1. Capital commitments
G2. Leases
G3. Related party disclosures
G4. Contingent liability
G5. Events occurring after balance date
84
Financial Statements
Annual Report - Year Ended 31 December 2022
20222021
Note
$000's$000's
RevenueB1619,173 514,551
Cost of salesB2(492,547)(400,663)
126,626 113,888
Administration and operating expensesB2(53,003)(47,241)
Reversal of impairment (impairment) on revaluationC1(3,729)1,650
Share of profit of entities accounted for using the equity methodC34,624 3,162
Other incomeB367 6,022
Other lossesB3(6,069)(5,862)
EBITDA68,516 71,619
Amortisation(379)(342)
DepreciationC1(10,220)(10,443)
Depreciation of right-of-use assetG2(9,087)(8,760)
EBIT48,830 52,074
Finance revenue1,045 1,203
Finance costB4(1,284)(1,786)
Finance cost of lease liabilityG2(2,953)(2,964)
PROFIT BEFORE INCOME TAX EXPENSE45,638 48,527
Income tax expenseB5(7,407)(11,577)
PROFIT FOR THE YEAR38,231 36,950
Profit for the year is attributable to:
Equity holders of the company19,412 26,925
Non-controlling interests 18,819 10,025
38,231 36,950
EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:
Basic earnings per share (cents) D513.7 19.1
Diluted earnings per share (cents) D513.7 19.1
The notes to the financial statements on pages 54 to 86 form part of and should be read in conjunction with this statement.
Financial Statements
Scales Corporation Limited
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
20222021
Note$000's$000's
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Loss on cash flow hedges(10,704)(20,730)
Income tax relating to cash flow hedges 2,997 5,804
Share of other comprehensive income of joint ventures C3 817 (1,015)
Income tax relating to share of other comprehensive income of joint ventures(229)284
Foreign exchange gain on translating foreign operations 330 692
(6,789)(14,965)
Items that will not be reclassified to profit or loss:
Revaluation of land and buildings 10,355 22,362
Income tax relating to buildings(331)(1,647)
Revaluation of apple trees(3,873)3,048
Income tax relating to apple trees1,084 (854)
Remeasurement of net defined benefit liability372 318
Income tax relating to remeasurement of net defined benefit liability(44)-
7,563 23,227
OTHER COMPREHENSIVE INCOME FOR THE YEAR774 8,262
TOTAL COMPREHENSIVE INCOME FOR THE YEAR39,005 45,212
Total comprehensive income for the year attributable to:
Equity holders of the Company20,037 35,060
Non-controlling interests18,968 10,152
39,005 45,212
The notes to the financial statements on pages 54 to 86 form part of and should be read in conjunction with this statement.
Financial Statements
Annual Report - Year Ended 31 December 2022
Consolidated Statement of Comprehensive Income (continued)
for the year ended 31 December 2022
The notes to the financial statements on pages 54 to 86 form part of and should be read in conjunction with this statement.
Financial Statements
Scales Corporation Limited
Share
capitalReserves
Retained
earnings
Attributable
to owners
of the
Company
Non-
controlling
interestsTotal
Note$000's$000's$000's$000's$000's$000's
Balance at 1 January 202196,371 86,774 190,622 373,767 4,638 378,405
Profit for the year- - 26,925 26,925 10,025 36,950
Other comprehensive income for the year- 8,135 - 8,135 127 8,262
Total comprehensive income for the year- 8,135 26,925 35,060 10,152 45,212
Reclassification of revaluation reserveD2- (2,224)2,224 - - -
Recognition of share-based paymentsD2- 726 - 726 - 726
Shares soldD1347 - - 347 - 347
Shares fully vestedD1, D22,870 (1,251)(295)1,324 - 1,324
DividendsD3- - (26,832)(26,832)(8,868)(35,700)
Balance at 31 December 202199,588 92,160 192,644 384,392 5,922 390,314
Profit for the year- - 19,412 19,412 18,819 38,231
Other comprehensive income for the year- 625 - 625 149 774
Total comprehensive income for the year- 625 19,412 20,037 18,968 39,005
Recognition of share-based paymentsD2- 609 - 609 - 609
Shares soldD1116 - - 116 - 116
Shares fully vestedD1, D22,271 (804)(234)1,233 - 1,233
DividendsD3- - (21,947)(21,947)(17,516)(39,463)
Balance at 31 December 2022101,975 92,590 189,875 384,440 7,374 391,814
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
The notes to the financial statements on pages 54 to 86 form part of and should be read in conjunction with this statement.
Financial Statements
Annual Report - Year Ended 31 December 2022
20222021
Note$000's$000's
EQUITY
Share capitalD1101,975 99,588
ReservesD292,590 92,160
Retained earnings189,875 192,644
Equity attributable to Scales Corporation Limited shareholders384,440 384,392
Equity attributable to non-controlling interests7,374 5,922
TOTAL EQUITY391,814 390,314
CURRENT ASSETS
Cash and bank balances68,144 35,398
Term deposits- 85,000
Trade and other receivablesE142,102 28,658
Current tax assets5,334 -
Other financial assetsE24,938 5,923
Unharvested agricultural produceC225,149 24,561
InventoriesC542,647 29,641
Prepayments4,783 4,056
TOTAL CURRENT ASSETS193,097 213,237
NON-CURRENT ASSETS
Property, plant and equipmentC1221,204 213,869
Investments accounted for using the equity methodC354,743 26,051
GoodwillC445,527 43,392
Other financial assetsE215,511 11,074
Computer softwareC71,332 717
Right-of-use assetG249,044 76,431
TOTAL NON-CURRENT ASSETS387,361 371,534
TOTAL ASSETS580,458 584,771
CURRENT LIABILITIES
Bank overdrafts2,368 2,196
Trade and other payablesE337,226 23,466
Dividend declaredD38,503 13,419
Current tax liabilities- 479
Other financial liabilitiesE515,445 7,410
Lease liabilityG210,925 10,237
TOTAL CURRENT LIABILITIES74,467 57,207
NON-CURRENT LIABILITIES
BorrowingsE438,732 36,060
Deferred tax liabilitiesB517,821 22,944
Defined benefit plan net liability170 427
Other financial liabilitiesE513,388 8,338
Lease liabilityG244,066 69,481
TOTAL NON-CURRENT LIABILITIES114,177 137,250
TOTAL LIABILITIES188,644 194,457
NET ASSETS391,814 390,314
Consolidated Statement of Financial Position
as at 31 December 2022
Financial Statements
Scales Corporation Limited
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
20222021
Note$000's$000's
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from:
Receipts from customers606,293 505,854
Dividends and distributions received1,876 2,251
Interest received1,393 1,416
609,562 509,521
Cash was disbursed to:
Payments to suppliers and employees(545,477)(453,109)
Interest paid(4,237)(4,750)
Income tax paid(14,983)(11,823)
(564,697)(469,682)
NET CASH PROVIDED BY OPERATING ACTIVITIES44,865 39,839
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from:
Proceeds from maturing term deposits85,000 19,632
Advances repaid112 1,231
Sale of property, plant and equipment and computer software161 3,773
85,273 24,636
Cash was applied to:
Purchase of property, plant and equipment(14,592)(15,822)
Purchase of computer software(994)(705)
Purchase of financial instruments- (325)
Purchase of non-controlling shareholding(2,180)-
Acquisition of interest in joint ventures(25,968)-
Advances to joint ventures(2,818)-
(46,552)(16,852)
NET CASH PROVIDED BY INVESTING ACTIVITIES38,721 7,784
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was provided from:
Treasury stock sold116 347
116 347
Cash was applied to:
Dividends paid(26,863)(26,772)
Dividends paid to non-controlling interests(17,516)(8,868)
Repayments of lease liabilities(8,281)(7,839)
Repayments of term facility borrowingsE4- (18,000)
(52,660)(61,479)
NET CASH USED IN FINANCING ACTIVITIES(52,544)(61,132)
NET INCREASE (DECREASE) IN NET CASH31,042 (13,509)
Net foreign exchange difference1,532 677
Cash and cash equivalents at the beginning of the year33,202 46,034
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR65,776 33,202
Represented by:
Cash and bank balances 68,144 35,398
Bank overdrafts(2,368)(2,196)
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR65,776 33,202
The notes to the financial statements on pages 54 to 86 form part of and should be read in conjunction with this statement.
Financial Statements
Annual Report - Year Ended 31 December 2022
Andy Borland, Managing DirectorTim Goodacre, Chair
Consolidated Statement of Cash Flows (continued)
for the year ended 31 December 2022
20222021
$000's$000's
NET CASH GENERATED BY OPERATING ACTIVITIES
Reconciliation of profit for the year to net cash generated by operating activities:
Profit for the year 38,231 36,950
Non-cash items:
Depreciation (including on right-of-use asset)19,307 19,203
Loss on lease modification1,854 -
Impairment (reversal of impairment) on revaluation3,729 (1,650)
Amortisation 379 342
Share of equity accounted results(4,624)(3,162)
Hedging instruments192 358
Government grant- (879)
Gain on disposal of property, plant and equipment(66)(1,132)
Share-based payments609 726
Change in gross liability on put options4,215 1,852
Deferred tax(1,774)871
Interest capitalised into loans(24)-
Operating cash receipts not included in profit for the year:
Dividends received from equity accounted entities1,875 2,250
Changes in net assets and liabilities:
Trade and other receivables(12,812)(8,828)
Unharvested agricultural produce(588)(539)
Inventories (12,553)(3,498)
Prepayments(712)(148)
Trade and other payables13,429 (1,760)
Current tax assets and liabilities(5,802)(1,117)
NET CASH PROVIDED BY OPERATING ACTIVITIES44,865 39,839
Statement of Cash Flows
For the purpose of the statement of cash flows, cash and cash equivalents include cash and bank balances and bank overdrafts.
The following terms are used in the statement of cash flows:
Operating activities are the principal revenue producing activities of the Group and other activities that are not investing or
financing activities.
Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.
Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of
the Group.
For and on behalf of the Board of Directors who authorised the issue of the financial statements on 22 February 2023.
The notes to the financial statements on pages 54 to 86 form part of and should be read in conjunction with this statement.
The notes to the financial statements include information which is considered relevant and material to assist the reader in
understanding the financial performance and financial position of the Scales Corporation Limited Group (Scales or the Group).
Information is considered relevant and material if:
• the amount is significant because of its size and nature;
• it is important for understanding the results of Scales;
• it helps to explain changes in Scales’ business; or
• it relates to an aspect of Scales’ operations that is important to future performance.
Scales Corporation Limited (the Company) is a for-profit entity domiciled and registered under the Companies Act 1993 in New
Zealand. It is an FMC reporting entity for the purposes of the Financial Markets Conduct Act 2013. The Group consists of Scales
Corporation Limited, its subsidiaries and joint ventures. The principal activities of the Group are to grow apples, provide logistics
services, export products, manufacture and trade food ingredients, provide insurance services to companies within the Group and
operate processing facilities.
The financial statements have been prepared:
• in accordance with Generally Accepted Accounting Practice (GAAP), International Financial Reporting Standards (IFRS), the New
Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable financial reporting standards,
as appropriate for a Tier 1 for-profit entity;
• in accordance with the requirements of the Financial Markets Conduct Act 2013;
• in accordance with accounting policies that are consistent with those applied in the previous year;
• on the basis of historical cost, except for certain assets and financial instruments that are measured at fair values; and
• in New Zealand dollars with all values rounded to the nearest thousand dollars.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or liability, the Group takes into account the characteristics of the asset or liability
if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the
inputs to the fair value measurements are observable. The levels are described as:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
• Level 2 inputs are inputs, other than quoted prices within Level 1, that are observable for the asset or liability, either directly or
indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
Key judgements and estimates
In the process of applying the Group’s accounting policies and the application of financial reporting standards, Scales has made a
number of judgements and estimates. The estimates and underlying assumptions are based on historical experience and various
other factors that are considered to be appropriate under the circumstances.
Actual results may differ from these estimates.
Judgements and estimates which are considered material to understanding the performance of Scales are explained in the
following notes:
• Apple trees in note C1;
• Unharvested agricultural produce in note C2;
• Assessment of Group goodwill for impairment in note C4.
Notes to the Financial Statements
Scales Corporation Limited
Notes to the Financial Statements
for the year ended 31 December 2022
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
Basis of consolidation
The Group financial statements incorporate the financial statements of the Company and its subsidiaries (being entities controlled
by Scales Corporation Limited), and the equity accounted result, assets and liabilities of the joint ventures.
The financial statements of members of the Group, are prepared for the same reporting period as the parent company, using
consistent accounting policies.
In preparing the Group financial statements, all material intra-group transactions, balances, income, expenses and cash flows have
been eliminated. Subsidiaries are consolidated from the date on which control is obtained to the date on which control is lost.
Other accounting policies
Other accounting policies that are relevant to an understanding of the financial statements are provided throughout the notes to
the financial statements.
Adoption of new and revised standards and interpretations; standards and Interpretations issued but not yet effective
All mandatory amendments and interpretations have been adopted in the current year. None had a material impact on these
financial statements.
The Group has reviewed the standards, interpretations and amendments to existing standards issued but not yet effective and
does not expect these standards to have a material effect on the financial statements of the Group when adopted.
Notes to the Financial Statements
Scales Corporation Limited
A. Segment Information
This section explains the financial performance of the operating segments of Scales, providing additional information about
individual segments, including:
• total segment revenue and revenue from external customers;
• segment profit before income tax; and
• total segment assets and liabilities.
Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker,
being the Managing Director. The Managing Director monitors the operating performance of each segment for the purpose of
making decisions on resource allocation and strategic direction. Inter-segment pricing is determined on an arm’s length basis.
Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
No single external customer’s revenue accounts for 10% or more of the Group’s revenue.
Change in segments:
The Food Ingredients segment has been changed to Global Proteins, which includes the new entities acquired during the year
and shifting Profruit (2006) Limited to the Horticulture segment. This impacts the share of profit in entities accounted for using
the equity method and the carrying value of investments accounted for using the equity method. The prior year figures have been
restated to reflect this change in segments.
The Group comprises the following operating segments:
Global Proteins: processing and marketing of proteins such as pet food ingredients, edible meat and offal products. Meateor Foods
Limited, Meateor Foods Australia Pty Limited, Meateor Group Limited, Meateor US LLC, Shelby JV LLC Group (Shelby Cold Storage
LLC, Shelby Exports Inc, Shelby Foods LLC, Shelby JV LLC, Shelby Properties LLC, Shelby Trucking LLC), Meateor GP Limited,
Meateor Pet Foods Limited Partnership, Scales FI Group Holding Pty Limited, Meateor Australia Pty Limited, FI Group Holding Pty
Limited Group (FI Group Holding Pty Limited, Fayman International Group Pty Limited and Fayman New Zealand Limited) and ANZ
Exports Pty Limited.
Horticulture: orchards, fruit packing, juice concentrate processing and marketing. Mr Apple New Zealand Limited, New Zealand
Apple Limited, Fern Ridge Produce Limited, Longview Group Holdings Limited and Profruit (2006) Limited.
Logistics: logistics services. Scales Logistics Limited and Scales Logistics Australia Pty Ltd.
Other: Scales Corporation Limited, Geo. H. Scales Limited, Scales Employees Limited, Scales Holdings Limited and Selacs Insurance
Limited.
Global
ProteinsHorticultureLogisticsOtherEliminationsTotal
$000's$000's$000's$000's$000's$000's
2022
Total segment revenue319,923 228,854 123,338 2,893 (55,835)619,173
Inter-segment revenue- - (52,894)(2,941)55,835 -
Revenue from external customers319,923 228,854 70,444 (48)- 619,173
Gain on sale of non-current assets- 66 - - - 66
Share of profit of entities accounted for
using the equity method
3,556 1,068 - - - 4,624
Impairment on revaluation- (3,729)- - - (3,729)
Loss on lease modification- (1,854)- - - (1,854)
EBITDA58,913 10,332 6,595 (7,324)- 68,516
Amortisation expense- (361)(18)- - (379)
Depreciation expense(747)(9,285)(176)(12)- (10,220)
Depreciation of right-of-use asset(64)(8,393)(572)(58)- (9,087)
Finance revenue36 20 18 971 - 1,045
Finance costs(25)(62)(39)(1,158)- (1,284)
Finance cost of lease liability(14)(2,664)(264)(11)- (2,953)
Income tax expense(11,012)2,871 (1,615)2,323 26 (7,407)
Segment profit (loss) after income tax47,087 (7,542)3,929 (5,269)26 38,231
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
Segment Reporting (continued)
Global
ProteinsHorticultureLogisticsOtherEliminationsTotal
$000's$000's$000's$000's$000's$000's
Segment assets169,018 345,096 29,032 37,312 - 580,458
Segment liabilities46,398 107,850 15,967 18,429 - 188,644
Segment carrying value of investment
accounted for using the equity method
47,885 6,858 - - - 54,743
Segment acquisition of property, plant and
equipment and computer software
3,491 11,898 168 26 - 15,583
Segment acquisition of right-of-use assets42 6,614 33 - -6,689
2021
Total segment revenue218,852 243,422 81,878 3,453 (33,054)514,551
Inter-segment revenue- - (30,166)(2,888)33,054 -
Revenue from external customers218,852 243,422 51,712 565 - 514,551
Gain on sale of non-current assets- 1,132 - - - 1,132
Share of profit of entity accounted for
using the equity method
1,447 1,715 - - - 3,162
Reversal of impairment on revaluation- 1,650 - - 1,650
EBITDA32,933 41,239 4,942 (7,495)- 71,619
Amortisation expense- (298)(33)(11)- (342)
Depreciation expense(733)(9,522)(177)(11)- (10,443)
Depreciation of right-of-use asset(58)(8,047)(596)(59)- (8,760)
Finance revenue- - - 1,203 - 1,203
Finance costs(24)(18)(31)(1,713)- (1,786)
Finance cost of lease liability(14)(2,666)(271)(13)- (2,964)
Income tax expense(6,485)(5,470)(1,170)1,476 72 (11,577)
Segment profit (loss) after income tax25,619 15,218 2,664 (6,623)72 36,950
Segment assets105,866 354,040 22,382 102,483 - 584,771
Segment liabilities27,064 126,005 12,961 28,427 - 194,457
Segment carrying value of investment
accounted for using the equity method
19,387 6,664 - - - 26,051
Segment acquisition of property, plant and
equipment and computer software
542 15,921 58 4 - 16,525
Segment acquisition of right-of-use assets- 6,941 339 34 - 7,314
Non-current assets other than financial instruments by geographical location
New ZealandAustraliaUSATotal
20222021202220212022202120222021
$000's$000's$000's$000's$000's$000's$000's$000's
Property, plant and
equipment
213,614 210,074 31 34 7,559 3,761 221,204 213,869
Investments
accounted for using
the equity method
27,674 26,051 27,069 - - - 54,743 26,051
Goodwill16,189 16,188 - - 29,338 27,204 45,527 43,392
Computer software1,332 717 - - - - 1,332 717
Right-of-use asset48,578 75,897 149 180 317 354 49,044 76,431
Notes to the Financial Statements
Scales Corporation Limited
B1. Revenue
20222021
$000's$000's
By nature:
Revenue from the sale of goods525,298 428,738
Revenue from the rendering of services88,990 69,082
Fees and commission13 13
Net foreign exchange gain (loss)(544)12,268
Rental revenue5,416 4,450
619,173 514,551
By market:
New Zealand 95,627 96,972
Asia162,097 140,261
Europe32,262 45,668
North America325,855 224,301
Other3,332 7,349
619,173 514,551
By segment and type:
Horticulture - sale of agricultural produce214,084 226,606
Horticulture - agricultural produce related services9,363 12,375
Horticulture - other5,407 4,441
Global Proteins - sale of pet food ingredients310,517 213,416
Global Proteins - other9,406 5,436
Logistics services70,444 51,712
Other(48)565
619,173 514,551
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf
of third parties. The Group recognises revenue when it transfers control of a product or service to a customer.
B. Financial Performance
This section explains the financial performance of Scales, providing additional information about individual items in the statement
of comprehensive income, including:
• accounting policies, judgements and estimates that are relevant for understanding items recognised in the statement of
comprehensive income; and
• analysis of Scales’ performance for the year by reference to key areas including revenue, expenses and taxation.
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
B1. Revenue (continued)
Sale of agricultural produce
The Group sells apples to more than 160 customers in 40 countries. Sales-related quality claim provisions are recorded in
accordance with NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Revenue is recognised when control of
the goods has transferred, being when the goods have been shipped to the customer (outright sales) or when the goods have
been sold by the customer (consignment sales). In addition, the apple season finishes before the end of the calendar year,
with performance obligations under both sales types satisfied for all sales made during that season.
Outright sales
Following shipment, revenue is recognised when the customer obtains control as it has full discretion over the manner of
distribution and price to sell the goods, has the primary responsibility when onselling the goods and bears the risks of loss in
relation to the goods. A receivable is recognised by the Group when it loses control, which is when the goods are delivered on
the ship at the port of shipment as this represents the point in time at which the right to consideration becomes unconditional,
as only the passage of time is required before the payment is due. Terms of payment are up to 45 days on arrival.
Consignment sales
Revenue is recognised by the Group when it loses control, which is when the goods are confirmed to be on-sold to the ultimate
customer as this represents the point in time at which the right to consideration becomes unconditional, as only the passage
of time is required before the payment is due. Terms of payment are immediate upon on-sale.
Sale of petfood ingredients
The Group sells petfood ingredients to a number of international and domestic customers. Revenue is recognised when
control of the goods has transferred, being when the goods have been delivered to the customer (delivered to destination
sales) or when shipped to the customer (outright sales). Terms of payment are up to 120 days.
Delivered to destination sales
Following delivery, revenue is recognised when the customer obtains control as it has full discretion over the manner of
distribution and price to sell the goods, has the primary responsibility when onselling the goods and bears the risks of loss
in relation to the goods. A receivable is recognised by the Group when it loses control, which is when the goods are delivered
to the destination named by the customer as this represents the point in time at which the right to consideration becomes
unconditional, as only the passage of time is required before the payment is due.
Outright sales
Same as above under 'Sale of agricultural produce - outright sales'.
Agricultural produce related services
The Group provides a number of agricultural produce related services to external apple growers, including packaging, cartage,
export documentation and export services. Each of those services is considered to be a distinct service as it is both regularly
supplied by the Group to customers on a stand-alone basis and is available for customers from other providers in the market.
A receivable is recognised by the Group when the service performance has been completed, and the performance obligation
is satisfied as this represents the point in time at which the right to consideration becomes unconditional, as only the passage
of time is required before the payment is due. Terms of payment are up to 45 days.
Logistics services
The Group provides marine and air logistics services to domestic customers. Revenue is recognised by the Group at a point
in time, which is when the shipment is organised and the goods are on the ship or the aeroplane. The performance obligation
is satisfied at the point in time at which the right to consideration becomes unconditional, as only the passage of time is
required before the payment is due. Terms of payment are up to 60 days.
Notes to the Financial Statements
Scales Corporation Limited
B2. Cost of Sales, Administration and Operating Expenses
20222021
$000's$000's
Auditor's remuneration:
Deloitte Limited (New Zealand):
Audit of the financial statements:
Audit of the annual financial statements285 232
Review of interim financial statements - 48
Other assurance services:
Audit of solvency certificate for Selacs Insurance Limited7 7
Sheehan & Company CPA, PC (United States):
Group reporting audit115 88
Review of subsidiary financial statements35 28
Bad debts (recovered) incurred(112)14
Change in fair value adjustment to unharvested agricultural produce(131)932
Change in inventories(12,688)(3,743)
Direct expenses99,408 71,145
Directors' fees677 596
Donations10 2
Electricity3,583 2,899
Employee benefits expense:
Post employment benefits - defined contribution plans1,265 1,339
Post employment benefits - defined benefit plans689 438
Salaries, wages and related benefits94,037 83,363
Other employee benefits609 726
Grower payments31,568 47,803
Insurance4,190 3,946
Management fees44 48
Materials and consumables182,046 136,854
Ocean and air freight118,136 76,414
Operating lease expenses2,218 2,319
Packaging14,029 16,487
(Reversal of) provision for write-down of inventories(107)405
Repairs and maintenance5,637 5,514
545,550 447,904
Disclosed as:
Cost of sales492,547 400,663
Administration and operating expenses53,003 47,241
545,550 447,904
Employee benefits
An accrual is made for benefits due to employees in respect of wages and salaries, annual leave and long service leave when it is
probable that settlement will be required and they are capable of being measured reliably.
Accruals are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.
Contributions to defined contribution plans are recognised as an expense when employees have rendered service entitling them to
the contributions.
The costs relating to shares issued in accordance with the Senior Executive Share Scheme are explained in note D2.
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
B3. Other Income and Losses
20222021
$000's$000's
Dividends1 1
Gain on disposal of property, plant and equipment66 1,132
Loss on lease modification(1,854)-
Government grants- 879
Insurance claims expense paid- (4,010)
Reinsurance income- 4,010
Remeasurement of gross liability to non-controlling interest(4,215)(1,852)
(6,002)160
Disclosed as:
Other income67 6,022
Other losses(6,069)(5,862)
(6,002)160
B4. Finance Cost
Interest on loans1,140 1,281
Other interest73 443
Bank facility fees71 62
1,284 1,786
Finance costs consist of interest and other costs incurred in connection with the borrowing of funds. Interest expense is accrued on
a time basis using the effective interest method.
B5. Taxation
Income tax recognised in profit or loss
Income tax expense comprises:
Current tax expense9,32410,353
Adjustments recognised in the current year in relation to the current tax of prior years (143)369
Deferred tax expense (credit) relating to the origination and reversal of temporary differences(1,774)855
Total income tax expense recognised in profit or loss7,40711,577
The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense in the financial statements
as follows:
Profit before tax45,638 48,527
Income tax expense calculated at applicable corporate tax rates11,830 13,065
Non-assessable income(5,404)(3,092)
Non-deductible expenses1,124 1,235
(Over) under provision of income tax in previous year - current tax(143)369
7,407 11,577
The tax rates used in the above reconciliation are the corporate tax rate of 28% payable by New Zealand companies under New
Zealand tax law, 30% payable by Australian companies under Australian tax law and 25.5% payable by US entities under US tax law
(being federal tax 21% and weighted average state tax 4.5%).
Notes to the Financial Statements
Scales Corporation Limited
Opening
balance
Charged to
profit or loss
Charged
to other
comprehensive
income
Foreign
exchange
movements
Closing
Balance
$000's$000's$000's$000's$000's
Deferred tax liability
Taxable and deductible temporary differences
arise from the following:
31 December 2022
Deferred tax liabilities (assets):
Trade and other receivables11 71 - - 82
Unharvested agricultural produce6,877 165 - - 7,042
Property, plant and equipment and computer
software
15,985 (1,409)(753)137 13,960
Trade and other payables(850)142 - - (708)
Lease liability and right-of-use asset (NZ IFRS 16)(939)(743)- (4)(1,686)
Other financial assets and liabilities, joint ventures
and pension plan
1,860 - (2,724)(5)(869)
Net deferred tax liability22,944 (1,774)(3,477)128 17,821
31 December 2021
Deferred tax liabilities (assets):
Trade and other receivables(164)175 - - 11
Unharvested agricultural produce6,719 158 - - 6,877
Property, plant and equipment and computer
software
12,514 887 2,501 83 15,985
Trade and other payables(748)(102)- - (850)
Lease liability and right-of-use asset (NZ IFRS 16)(676)(263)- - (939)
Other financial assets and liabilities, joint ventures
and pension plan
7,951 - (6,088)(3)1,860
Net deferred tax liability25,596 855 (3,587)80 22,944
Current tax is the taxation expected to be paid to taxation authorities in respect of the current year. Deferred taxation is recognised
in respect of temporary differences between the tax bases of assets and liabilities and their carrying amounts in the Financial
Statements. Current and deferred tax is calculated on the basis of the laws enacted or substantively enacted at balance date.
Income tax
Current and deferred tax are recognised in profit or loss, except when the tax relates to items charged or credited to other
comprehensive income, in which case the tax is also recognised in other comprehensive income.
B6. Foreign Currency Transactions
In preparing the financial statements of the individual entities, the transactions in currencies other than New Zealand dollars are
recorded at the rates of exchange prevailing at the dates of the transaction. At the end of each reporting period financial assets
and liabilities denominated in foreign currencies are retranslated into New Zealand dollars at the rates prevailing at the end of the
reporting period.
Exchange differences from these transactions are recognised in profit or loss in the period in which they arise.
Income and expenses for each subsidiary whose functional currency is not New Zealand dollars are translated at exchange
rates that approximate the rates at the actual dates of the transactions. Assets and liabilities of each subsidiary are translated at
exchange rates at balance date.
All resulting exchange differences are recognised in the foreign exchange translation reserve, which is a separate component of
equity.
The effective portion of exchange differences on foreign currency borrowings designated as hedges of net investments in foreign
operations is also recognised in the foreign exchange translation reserve.
B5. Taxation (continued)
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
C. Key Assets
This section shows the key assets Scales uses to generate operating revenues. There is information about:
• property, plant and equipment;
• unharvested agricultural produce;
• investments accounted for using the equity method;
• goodwill; and
• inventories
C1. Property, Plant and Equipment
Land and
buildings at
fair value
Apple trees
at fair value
Plant and
equipment
at cost
Office
equipment
& motor
vehicles
at cost
Capital work
in progress
at costTotal
$000's$000's$000's$000's$000's$000's
Gross carrying amount
Balance at 1 January 2021107,899 32,804 63,982 13,009 17,738 235,432
Additions14,825 2,568 7,428 684 (9,683)15,822
Disposals- - (304)(1,293)- (1,597)
Revaluation20,618 22 - - - 20,640
Effect of foreign currency translation109 - 202 1 10 322
Balance at 31 December 2021143,451 35,394 71,308 12,401 8,065 270,619
Additions721 2,437 11,055 1,793 (1,414)14,592
Disposals- - (100)(534)(21)(655)
Revaluation8,257 (6,030)- - - 2,227
Effect of foreign currency translation158 - 301 2 29 490
Balance at 31 December 2022152,587 31,801 82,564 13,662 6,659 287,273
Accumulated depreciation and
impairment
Balance at 1 January 20211,873 1,840 40,621 9,787 - 54,121
Depreciation expense1,745 3,026 4,512 1,160 - 10,443
Disposals- - (259)(1,247)- (1,506)
Revaluation(1,744)(3,026)- - - (4,770)
Reversal of impairment on revaluation(610)(1,040)- - - (1,650)
Effect of foreign currency translation- - 112 - - 112
Balance at 31 December 20211,264 800 44,986 9,700 - 56,750
Depreciation expense2,098 2,157 4,909 1,056 - 10,220
Disposals- - (39)(519)- (558)
Revaluation(2,098)(2,157)- - - (4,255)
Impairment on revaluation67 3,661 - - - 3,728
Effect of foreign currency translation- - 183 1 - 184
Balance at 31 December 20221,331 4,461 50,039 10,238 - 66,069
Net book value
As at 31 December 2021142,187 34,594 26,322 2,701 8,065 213,869
As at 31 December 2022151,256 27,340 32,525 3,424 6,659 221,204
Notes to the Financial Statements
Scales Corporation Limited
C1. Property, Plant and Equipment (continued)
Accounting policy
Land, buildings and apple trees are included in the statement of financial position at their fair value at the date of revaluation,
less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
Valuations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would
be determined using fair values at the end of the reporting period.
Any valuation increase arising on the revaluation of such land, buildings and apple trees is recognised in other comprehensive
income and accumulated as a separate component of equity in the revaluation reserve, except to the extent that it reverses a
valuation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or
loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land,
buildings and apple trees is charged to profit or loss to the extent that it exceeds the balance, if any, held in the revaluation
reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings and apple trees is charged to profit or loss. On the subsequent sale or retirement of revalued
property or apple trees, the attributable revaluation surplus remaining in the revaluation reserve is transferred directly to retained
earnings. No transfer is made from the revaluation reserve to retained earnings except when an asset is derecognised.
Office equipment, motor vehicles, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the item.
Depreciation is provided on property, plant and equipment, including buildings and apple trees but excluding land and capital
work in progress. Depreciation is charged so as to write off the cost or valuation of assets, other than land and capital work
in progress, over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and
depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective
basis. The following estimated useful lives are used in the calculation of depreciation:
Apple trees 30 years
Buildings 10 to 50 years
Office Equipment and Motor Vehicles 2 to 20 years
Plant and Equipment 2 to 25 years
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the
difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss.
Land and buildings carried at fair value
Land and buildings shown at valuation were valued at fair value as at 31 December 2022 by independent registered valuers
Added Valuation Limited and Logan Stone Limited. The valuations were arrived at by reference to market evidence of
transaction prices for similar properties.
In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. Where
Level 1 inputs are not available, the Group engages third party qualified valuers to perform the valuation. The Group finance
team, led by the Chief Financial Officer, works closely with the qualified external valuers to establish the appropriate valuation
techniques and inputs to the model. The Chief Financial Officer reports the Group finance team’s findings to the Audit and Risk
Management Committee to explain the methods used and causes of fluctuations in the fair value of assets and liabilities.
The fair value of land and buildings is calculated on the basis of market value. Market value is determined by applying income
capitalisation and comparative sales calculations which are benchmarked against depreciated replacement cost calculations.
The valuations include adjustments to observable data for similar properties to take into account property-specific attributes.
The significant unobservable inputs, based on regional averages, for the land and buildings (mainly coolstores and packhouses)
are potential market comparative rentals $5 - $250 per square metre (2021: $5 - $250) and the capitalisation rates of 5.6% - 10%
(2021: 5.3% - 10%).
The higher the rental rates the higher the fair value. The higher the capitalisation rates the lower the fair value. Significant
changes in either of these inputs would result in significant changes to the fair value measurement. Orchard land is valued
within the range of $39,500 to $180,000 per hectare (2021: $31,600 to $176,800).
The Group’s land and buildings are classified as Level 3 in the fair value hierarchy.
The carrying amount of land and buildings had it been recognised under the cost model is $62,365,000 (31 December 2021:
$64,114,000).
Apple trees carried at fair value
The Group’s apple orchards, being the apple trees other than the existing crop on the trees, were valued at fair value by Boyd
Gross B.Agr (Rural Val), Dip Bus Std, FNZIV, FPINZ of Logan Stone Limited as at 31 December 2022.
The market valuations completed by Boyd Gross were based on a discounted cash flows analysis of forecast income streams
and costs. They were benchmarked against a comparison of sales of other orchards adjusted to reflect the location, plantings,
age and varieties of trees and productive capabilities of the orchards. The fair value of orchard land and buildings are deducted
from the overall orchard valuation to give rise to the apple trees valuation.
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
C1. Property, Plant and Equipment (continued)
The significant unobservable inputs, based on district averages, for the apple trees are:
20222021
Production levels (gross tray carton equivalent (tce)) per hectare2,485 - 5,2493,262 - 7,599
Orchard gate returns per tce$20.00 - $62.00$25.00 - $40.00
Orchard costs per tce$20.21 to $37.16$13.63 to $31.14
Discount rate15.6% - 17.1%15.5% - 16.5%
The higher the production levels and orchard gate return the higher the fair value. The higher the orchard costs and discount rate the
lower the fair value. Significant changes in any of these inputs would result in significant changes to the fair value measurement.
The Group’s apple trees are classified as Level 3 in the fair value hierarchy.
The carrying amount of apple trees had it been recognised under the cost model is $13,873,000 (31 December 2021: $15,421,216).
The apple trees, on owned and leased orchards, have the following planting profile:
Total Hectares Planted
20222021
Premium varieties:
NZ Queen205 207
Pink Lady117 118
Red sports (Fuji and Royal Gala)268 264
Other premium174 173
Traditional varieties:
Braeburn86 89
Royal Gala152 160
Other traditional147 150
1,149 1,161
Risk management strategy:
The Group is exposed to financial risks arising from changes in climatic conditions, market prices and the value of the New Zealand
dollar. The Group mitigates these risks by geographical spread of orchards, installing hail and frost protection on orchards which
have shown to be more susceptible to these risks, utilising foreign currency derivative instruments and building close working
relationships with key customers.
C2. Unharvested Agricultural Produce
20222021
$000's$000's
Balance at beginning of the year24,561 24,022
Decrease due to harvest(24,561)(24,022)
Development expenditure26,388 25,931
Fair value adjustment(1,239)(1,370)
Balance at end of the year25,149 24,561
The assessment of the value of unharvested agricultural produce was undertaken by management, using a discounted cash flow
model, and is calculated as the fair value less estimated harvest and post-harvest costs (including costs to sell) of the unharvested
crop on the trees at the reporting date. The risk adjusting discount rate represents an allowance for adverse events that may affect
crop, harvest and/or market conditions. This calculation is also benchmarked against orchard costs incurred during the current
growing cycle.
The Group’s unharvested agricultural produce is classified as Level 3 in the fair value hierarchy.
The significant unobservable inputs included in the model are the:
20222021
Production levels (tonnes per hectare per annum)60 - 11127 - 131
Orchard gate returns per tce$23 to $65$24 to $57
Risk adjusting discount rates 46% to 64%46% to 64%
The higher the yield per hectare and the higher the orchard gate returns per tce, the higher the fair value. The higher the risk
adjusting discount rate, the lower the fair value.
Notes to the Financial Statements
Scales Corporation Limited
C3. Investments Accounted for Using the Equity Method
Details of each of the Group’s material joint ventures at the end of the reporting period are as follows:
Joint venturesPrincipal activity
Country of
incorporation HoldingBalance date
20222021
ANZ Exports Pty LtdTrading companyAustralia42.50%0%30 June
FI Group Holding Pty LtdTrading companyAustralia50%0%30 June
Meateor Australia Pty LtdTrading companyAustralia33.33%0%30 June
Meateor Pet Foods Limited PartnershipTrading companyNew Zealand 50%50%31 December
Profruit (2006) LimitedTrading companyNew Zealand 50%50%31 December
Summarised financial information in respect of the Group’s joint ventures is set out below. The aggregate summarised financial
information below represents amounts in joint ventures' financial statements prepared in accordance with NZ IFRS Standards.
The Australian incorporated entities have a balance date of 30 June which aligns with the income tax year in Australia.
On 31 October 2022, Scales Group acquired the shareholdings of FI Group Holding Pty Limited, ANZ Exports Pty Limited and
Meateor Australia Pty Limited. On the same date, Scales Group provided a put option to the other shareholders of each entity for the
remaining shares and the shareholders provided Scales Group with a call option for the remaining shares. The exercise price is set
at a value based on a multiple of the respective entities' EBITDA. The options have a nil fair value at 31 December 2022.
Summarised financial information for Profruit (2006) Limited for the year ended 31 December
20222021
$000's$000's
Current assets14,558 11,832
Non-current assets6,015 6,058
Current liabilities(4,717)(2,098)
Non-current liabilities(2,142)(2,466)
Net assets13,714 13,326
Group's share in the net assets of the equity accounted entity6,857 6,663
Carrying amount of investment in equity accounted entity6,857 6,663
The above amounts of assets and liabilities include the following:
Cash and cash equivalents164 34
Current financial liabilities (excluding trade and other payables and provisions)(326)(325)
Non-current financial liabilities (excluding trade and other payables and provisions)(2,142)(2,466)
Revenue26,504 22,396
Profit for the year after tax2,128 3,430
Other comprehensive income attributable to the owners of the company- -
Total comprehensive income2,128 3,430
The above profit for the year includes the following:
Depreciation and amortisation646 604
Interest expense469 210
Income tax expense838 1,352
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in
the consolidated financial statements:
20222021
$000's$000's
Share of profit before taxation1,484 2,382
Share of income tax(415)(667)
Share of other comprehensive income (net of tax)- -
Share of net profit for the year and total comprehensive income1,069 1,715
Carrying value at beginning of the year6,663 6,198
Dividends and distributions paid(875)(1,250)
Investment in equity accounted entity6,857 6,663
Summarised financial information for Meateor Pet Foods Limited Partnership for the year ended 31 December
Current assets25,679 19,824
Non-current assets29,328 29,403
Current liabilities(10,526)(7,461)
Non-current liabilities(2,847)(2,991)
Net assets41,634 38,775
Group's share in the net assets of equity accounted entity20,817 19,388
Carrying amount of investment in equity accounted entity20,817 19,388
The above amounts of assets and liabilities include the following:
Cash and cash equivalents320 511
Current financial liabilities (excluding trade and other payables and provisions)(3,600)(1,100)
Non-current financial liabilities (excluding trade and other payables and provisions)- -
Capital commitments2,000 -
Revenue52,665 48,826
Profit for the year after tax3,224 2,894
Other comprehensive income attributable to the owners of the company1,634 (2,030)
Total comprehensive income4,858 864
The above profit for the year includes the following:
Depreciation and amortisation1,253 1,189
Interest expense245 190
Income tax expense- -
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in
the consolidated financial statements:
Share of profit before taxation1,612 1,447
Share of income tax- -
Share of other comprehensive income (net of tax)817 (1,015)
Share of net profit for the year and total comprehensive income2,429 432
Carrying value at beginning of the year19,388 19,956
Dividends and distributions paid by equity accounted entity(1,000)(1,000)
Investment in equity accounted entity20,817 19,388
C3. Investments Accounted for Using the Equity Method (continued)
Notes to the Financial Statements
Scales Corporation Limited
Summarised financial information for the Fayman equity accounted entities for the year ended 31 December
The initial accounting for the acquisitions of FI Group Holding Pty Limited, ANZ Exports Pty Limited and Meateor Australia Pty
Limited is provisional and will be finalised within 12 months of the acquisition.
2022
$000's
Current assets35,931
Non-current assets4,581
Current liabilities(21,613)
Non-current liabilities(13,678)
Net assets5,221
Group's share in the net assets of equity accounted entities2,611
Goodwill25,301
Effect of foreign exchange translation(841)
Carrying amount of investment in equity accounted entities27,071
The above amounts of assets and liabilities include the following:
Cash and cash equivalents1,533
Current financial liabilities (excluding trade and other payables and provisions)(14,742)
Non-current financial liabilities (excluding trade and other payables and provisions)(13,607)
Revenue48,546
Profit for the year after tax4,112
Other comprehensive income attributable to the owners of the company-
Total comprehensive income4,112
The above profit for the year includes the following:
Depreciation and amortisation7
Interest expense268
Income tax expense1,706
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in
the consolidated financial statements:
Share of profit before taxation2,783
Share of income tax(839)
Share of other comprehensive income (net of tax)-
Share of net profit for the year and total comprehensive income1,944
Investment acquired25,968
Dividends and distributions paid by equity accounted entities-
Effect of foreign exchange translation(841)
Investment in equity accounted entities27,071
C3. Investments Accounted for Using the Equity Method (continued)
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
The Group previously guaranteed a share of the Profruit (2006) Limited bank loan facilities, this was released in 2021.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets
of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of joint ventures are incorporated in these consolidated financial statements using the equity
method of accounting. Under the equity method, an investment in a joint venture is initially recognised in the consolidated statement
of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive
income of the joint venture. Dividends or distributions received from a joint venture reduce the carrying amount of the investment in
that joint venture in the Group financial statements. When the Group’s share of losses of a joint venture exceeds the Group’s interest
in that joint venture, the Group discontinues recognising its share of further losses. Additional losses are recognised only to the
extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture.
An investment in a joint venture is accounted for using the equity method from the date on which the investee becomes a joint
venture until the date it ceases to be a joint venture. On acquisition of the investment in a joint venture, any excess of the cost of
the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as
goodwill, which is included within the carrying value of the investment. The requirements of NZ IAS 36 Impairment of Assets are
applied to determine whether it is necessary to recognise any impairment loss.
C4. Goodwill
20222021
$000's$000's
Gross carrying amount
Balance at beginning of the year
43,392 41,905
Effect of foreign currency exchange differences2,135 1,487
Balance at end of the year45,527 43,392
Goodwill arising on the acquisition of a business is carried at cost as established at the date of acquisition of the business less
accumulated impairment losses, if any. Goodwill is tested for impairment annually, or more frequently if there are indications that
goodwill might be impaired. For the purpose of impairment testing, goodwill has been allocated to the cash-generating units (CGUs)
listed below which represent the lowest level at which the Directors monitor goodwill.
Horticulture - Fern Ridge
5,702 5,702
Horticulture - Mr Apple
8,531 8,531
Food Ingredients - Shelby
29,339 27,204
Logistics
1,955 1,955
45,527 43,392
As at 31 December 2022, the Directors have determined, based on discounted cash flow and value in use calculations, that there is
no impairment of goodwill associated with Fern Ridge, Shelby and Logistics.
The discounted cash flow and value in use calculation uses future cash flows covering a 5-year period based on a Board approved
budget. The model was based on the following key assumptions:
20222021
Pre-tax discount rates12-16%10-13%
Annual growth rates3%3%
The Directors consider that any reasonably possible changes in the key assumptions would not cause the carrying amount of any of
the CGUs to exceed their recoverable amount.
The Directors determined the recoverable amount of the Mr Apple CGU based on the value in use of the business which uses future
cash flows covering a 5-year period based on the Director approved forecast.
The Directors concluded that there is no impairment of the Mr Apple CGU as the recoverable amount exceeded the carrying value of
the Mr Apple CGU.
$000's
Recoverable amount of the Mr Apple CGU286,967
Carrying value244,014
Headroom 42,953
C3. Investments Accounted for Using the Equity Method (continued)
Notes to the Financial Statements
Scales Corporation Limited
Key assumptions:
Post-tax discount rate8.67%
Terminal growth rate beyond year 52.00%
The post-tax discount rate was determined based on the weighted average cost of capital which utilises past experience and
external sources.
The sensitivity of the recoverable amount of the Mr Apple CGU to the reasonably possible changes is set out below:
$000's$000's
+0.5%-0.5%
Post-tax discount rate(20,270)23,471
Terminal growth rate17,183 (14,785)
+5%-5%
Forecast earnings20,558 (20,558)
Changes in each key assumptions that would result in the recoverable amount equalling the carrying amount, assuming all other
inputs remain unchanged, are set out below:
Post-tax discount rateIncrease by 1.15%
Terminal growth rateReduction by 1.69%
Forecast earningsReduction by 10.45%
C5. Inventories
20222021
$000's$000's
Finished goods 37,810 25,041
Other 4,837 4,600
42,647 29,641
Inventories are stated at the lower of cost and net realisable value. Cost means the actual cost of the inventory and in determining
cost the first in first out basis of stock movement is followed, with due allowance having been made for obsolescence. Net
realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary
to make the sale.
C4. Goodwill (continued)
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
C6. Impairment of Assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate
the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs.
A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that
the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the
carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss and is not reversed
in subsequent periods.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
pre-tax cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or
CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset
is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
C7. Software
Software is stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is
directly attributable to the acquisition of the item. Amortisation is calculated on a straight line basis. The estimated useful life of
3 years is used in the calculation of amortisation.
20222021
$000's$000's
Gross carrying amount
Opening balance7,239 6,537
Additions994 702
Closing balance8,233 7,239
Accumulated amortisation
Opening balance(6,522)(6,180)
Amortisation expense(379)(342)
Closing balance(6,901)(6,522)
Net book value1,332 717
Notes to the Financial Statements
Scales Corporation Limited
D. Capital Funding
This section explains how Scales manages its capital structure and how dividends are returned to shareholders. In this section
there is information about:
• equity;
• dividends paid; and
• earnings per share.
Capital management
The Group’s capital includes share capital, reserves and retained earnings. The Group’s policy is to maintain a strong capital base
so as to maintain investor, creditor and customer confidence and to sustain the future development of the business. The impact of
the level of capital on shareholders’ return is also recognised and the Group recognises the need 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 position.
D1. Share Capital
Issued and paid up capital consists of 142,721,868 fully paid ordinary shares (2021: 142,394,837) less treasury stock of 1,088,295
shares (2021: 1,230,166 shares) (refer to note D2). All shares rank equally in all respects.
Shares issued or purchased on market under the Senior Executive Share Scheme (Share Scheme) (note D2) are treated as treasury
stock until vesting to the employee.
Number of shares
20222021
Fully paid ordinary shares:
Opening balance142,394,837 142,090,521
Share Scheme - shares issued327,031 304,316
Closing balance142,721,868 142,394,837
Treasury stock:
Opening balance1,230,166 1,580,229
Share Scheme - shares issued327,031 304,316
Share Scheme - shares forfeited and sold(27,657)(61,074)
Share Scheme - shares fully vested(441,245)(593,305)
Closing balance1,088,295 1,230,166
The available subscribed capital of $49,101,810 (2021: $47,456,844) represents the amount of the shareholders’ equity that is
available to be returned to shareholders on a tax-free basis.
In accordance with the Companies Act 1993 the Company does not have a limited amount of authorised capital and issued shares
do not have a par value.
20222021
$000's$000's
Movement in share capital related to share-based payments:
Equity-settled employee benefit share scheme vested
Interest-free loan became full recourse1,233 1,324
Accumulated share option value reclassified from reserve into share capital804 1,251
Accumulated dividends reclassified from retained earnings into share capital234 295
2,271 2,870
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
D2. Reserves
Revaluation
Cash flow
hedge
Share
of joint
ventures
Equity-
settled
employee
benefits
Foreign
exchange
translation
Pension
plan
reserve
Total
reserves
$000's$000's$000's$000's$000's$000's$000's
Balance at 1 January 202165,625 19,947 661 1,802 (860)(401)86,774
Other comprehensive income (loss)22,909 (14,926)(731)- 692 191 8,135
Transfer to retained earnings(2,224)- - - - - (2,224)
Recognition of share-based
payments
- - - 726 - - 726
Shares fully vested- - - (1,251)- - (1,251)
Balance at 31 December 202186,310 5,021 (70)1,277 (168)(210)92,160
Other comprehensive income (loss)7,235 (7,707)588 - 330 179 625
Recognition of share-based
payments
- - - 609 - - 609
Shares fully vested- - - (804)- - (804)
Balance at 31 December 202293,545 (2,686)518 1,082 162 (31)92,590
Revaluation reserve
The revaluation reserve arises on the revaluation of land, buildings and apple trees, net of the related deferred tax.
Cash flow hedge reserve
The cash flow hedge reserve represents the unrealised gains and losses on interest rate and foreign currency contracts taken out to
manage the Group interest rate and foreign currency risks, net of the related deferred tax.
Equity-settled employee benefits reserve
The Share Scheme involves the Company making available interest-free loans to selected senior executives to acquire shares in the
Company. The senior executives will not gain any benefit with respect to the shares purchased under the Share Scheme unless they
remain in employment with the Group for a period of 3 years from the date of acquisition of those shares.
The shares are held by a custodian during the restricted period and are then transferred to the senior executive. All net dividends or
distributions received in respect of the shares must be applied to repayment of the interest-free loan.
Grant dateVesting date
Exercise
price ($)
Number of shares
Opening
balanceGrantedForfeited
Vested and
exercised
Closing
balance
30 April 2019 - FY1830 April 20222.71249,179 - (8,672)(240,507)-
28 June 2019 - FY18R28 June 20224.06200,738 - - (200,738)-
30 April 2020 - FY1930 April 20233.20291,344 - (9,219)- 282,125
28 June 2020 - FY19R28 June 20234.19194,511 - - - 194,511
30 April 2021 - FY2030 April 20243.20294,394 - (9,766)- 284,628
30 April 2022 - FY2130 April 20254.06- 327,031 - - 327,031
Total1,230,166 327,031 (27,657)(441,245)1,088,295
The weighted average share price for shares that vested during 2022 was $4.69.
The shares issued vest over 3 years. The estimated value of the share options is determined using the Black-Scholes pricing calculator
and is amortised over the restricted period. This cost is expensed with the corresponding credit included in the equity-settled employee
benefits reserve. Expected share price volatility was based on historical volatility of the Company's ordinary shares.
Notes to the Financial Statements
Scales Corporation Limited
The inputs into the option pricing calculator are:
20222021
FY21FY20
Issue date share price, $5.03 4.55
Expected share price volatility, %25 23
Option life, years3 3
Risk-free interest rate, %3.27 0.41
Exercise price, $3.20 3.20
Fair value, at the grant date, $2.21 1.54
Foreign exchange translation reserve
Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net
investment, are accounted for in 2 ways. Gains or losses relating to the effective portion of the hedge are recognised in other
comprehensive income. Any gains or losses relating to the ineffective portion of the hedge are recognised in profit or loss.
Gains or losses arising on translation of foreign subsidiaries results (Note B6) are also recognised in this reserve.
D3. Dividends Attributable to Equity Holders of the Company
20222021
$000's$000's
Final dividend paid - 9.50 (2021: 9.50) cents per share13,444 13,413
Interim dividend declared - 6.00 (2021: 9.50) cents per share8,503 13,419
21,947 26,832
All above dividends were fully imputed.
The 2022 interim dividend was declared on 9 December 2022 and paid on 16 January 2023.
D4. Imputation Credit Account
20222021
$000's$000's
Balance at end of the year18,057 20,895
The imputation credit account balance represents the net amount available at the reporting date that can be attached to future
dividends declared.
The Scales Corporation Limited consolidated tax group for income tax includes Scales Corporation Limited and all New Zealand
registered subsidiary companies other than Scales Employees Limited.
D5. Earnings Per Share
Basic earnings per share is calculated by dividing the profit attributable to shareholders of the company by the weighted average
number of ordinary shares on issue during the year, excluding shares held as treasury stock. Diluted earnings per share assumes
conversion of all dilutive potential ordinary shares in determining the denominator.
20222021
Profit attributable to equity holders of the Company ($000's):19,412 26,925
Weighted average number of shares:
Ordinary shares141,413,787 140,900,047
Effect of dilutive ordinary shares (non-vested Senior Executive Share Scheme)302,534 351,554
Weighted average number of Ordinary Shares for diluted earnings per share 141,716,321 141,251,601
Earnings per share (cents):
Basic13.7 19.1
Diluted13.7 19.1
D2. Reserves (continued)
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
E. Financial Assets and Liabilities
This section explains the financial assets and liabilities of Scales, the related risks and how Scales manages these risks.
In this section of the notes there is information on:
• the accounting policies, judgements and estimates relating to financial assets and liabilities; and
• the financial instruments used to manage risk.
Accounting Policies
Financial assets
Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL)
and ‘measured at amortised cost’.
The classification depends on the business model for managing the financial asset and the cash flow characteristics of the financial
asset and is determined at the time of initial recognition or when a change in the business model occurs.
Financial assets at fair value through profit or loss
Financial assets are classified as financial assets at fair value through profit or loss if they are not measured at cost or amortised cost.
Gains and losses on a financial asset designated in this category and not part of a hedging relationship are recognised in profit or loss.
Financial assets measured at amortised cost
The Group’s financial assets held in order to collect contractual cash flows that are solely payments of principal and interest on the
principal outstanding are measured at amortised cost. Cash and cash equivalents, trade receivables and employee loans are classified
in this category.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses (ECL) on investments in debt instruments that are measured at
amortised cost, trade and other receivables. The amount of ECL is updated at each reporting date to reflect changes in credit risk
since initial recognition of the respective financial instrument.
The Group always recognises lifetime ECL for trade receivables. The ECL on these financial assets is estimated using a provision
matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time
value of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since
initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the
Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life of a financial instrument. In
contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument
that are possible within 12 months after the reporting date.
For financial assets, the ECL is estimated as the difference between all contractual cash flows that are due to the Group in accordance
with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate.
Financial liabilities measured at amortised cost
The Group’s financial liabilities include trade and other payables and borrowings. These financial liabilities are initially recognised
at fair value net of any directly attributable costs. Subsequent to initial recognition, they are measured at amortised cost using the
effective interest method.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to
their fair value with reference to observable market data at the end of each reporting period. The resulting gain or loss is recognised
in profit or loss immediately unless the derivative is designated as an effective hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as cash flow
hedges. A derivative is presented as a non-current asset or a non-current liability where the cash flow will occur after 12 months and it
is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.
Hedge accounting
At the inception of a hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item,
along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception
of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is
highly effective in offsetting changes in cash flows of the hedged item, attributable to the hedged risk.
Notes to the Financial Statements
Scales Corporation Limited
E1. Trade and Other Receivables
20222021
$000's$000's
Trade receivables36,170 23,945
Interest receivable-
372
Other receivables1,964 1,224
Owing by entity accounted for using the equity method924 -
Goods and services tax3,044 3,117
42,102 28,658
Credit risk management
The Group activities expose it to credit risk which refers to the risk that a counterparty will default on its contractual obligations
resulting in financial loss to the Group. Financial instruments which potentially subject the Group to credit risk principally consist of
cash and cash equivalents, trade and other receivables and advances. The Group performs credit evaluations on trade customers,
obtains trade credit insurance as appropriate but generally does not require collateral. The Group continuously monitors the credit
quality of its major receivables and does not anticipate non-performance of those customers. Cash and cash equivalents are placed
with high credit quality financial institutions.
There is a significant concentration of credit risk with 5 customers who represent 44.42% (2021: 5 customers who represented
36.87%) of trade and other receivables.
The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to credit risk.
Included in trade receivables are debtors which are past due at balance date, as payment was not received within 1 month, and
for which provision for expected credit losses was not material as there has not been a significant change in credit quality and the
amounts are still considered recoverable. No collateral is held over these balances although trade credit insurance cover is obtained in
respect of some specific receivables. Interest is not charged on overdue debtors. The ageing of these past due trade receivables is:
1 month4,998 5,740
2 months1,288 1,508
More than 2 months13,981 2,260
20,267 9,508
There was no material ECL based on Group assessment as at 31 December 2022 (2021: nil).
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
other comprehensive income and accumulated as a separate component of equity in the hedging reserve. The gain or loss relating
to the ineffective portion is recognised immediately in profit or loss, and is included in ‘other income’ or ‘other losses’.
Amounts recognised in the hedging reserve are reclassified from equity to profit or loss in the periods when the hedged item is
recognised in profit or loss, in the same line as the recognised hedged item. Hedge accounting is discontinued when the Group
revokes the hedging relationship, the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge
accounting. Any cumulative gain or loss deferred in the hedging reserve at that time remains in equity and is recognised when
the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was deferred in the hedging reserve is recognised immediately in profit or loss.
Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging
instrument relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated under the
heading of foreign exchange translation reserve. The gain or loss relating to the ineffective portion is recognised immediately in
profit or loss. Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the foreign
exchange translation reserve are reclassified to profit or loss on the disposal of the foreign operation.
E. Financial Assets and Liabilities (continued)
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
E2. Other Financial Assets
20222021
Current:
$000's$000's
At fair value:
Foreign currency derivative instruments4,435 5,923
Interest rate swap contracts and forward rate agreements503 -
4,938 5,923
Non-current:
At fair value:
Foreign currency derivative instruments9,853 10,185
Interest rate swap contracts and forward rate agreements1,004 198
Shares in unlisted companies184 184
At amortised cost:
Employee loans1,628 507
Related party loans2,842 -
15,511 11,074
E3. Trade and Other Payables
Trade payables16,127 11,551
Accruals15,565 6,858
Employee entitlements5,534 5,057
37,226 23,466
E4. Borrowings
Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are measured
at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit
or loss over the period of the borrowing using the effective interest method. The fair value of current and non-current borrowings is
approximately equal to their carrying amount.
The Group replaced existing Multi-Option Facility Agreements with Coöperatieve Rabobank U.A., New Zealand Branch (Rabobank)
and Westpac New Zealand Limited (Westpac) with new agreements on 11 November 2021. The existing facility agreement with
ANZ Bank New Zealand Limited (ANZ) was also replaced with a new agreement on 11 November 2021. The USD denominated loans
are designated as a hedge of net investment in foreign operations.
Facility limitUndrawn facility
2022202120222021
Facility
$000's$000's$000's$000's
Rabobank term facility, NZD1,000 1,000 - -
Rabobank term facility, USD11,635 11,635 - -
Rabobank seasonal facility, NZD1,000 1,000 1,000 1,000
Westpac term facility, NZD1,000 1,000 - -
Westpac term facility, USD11,635 11,635 - -
Westpac seasonal facility, NZD1,000 1,000 1,000 1,000
ANZ overdraft, NZD1,000 1,000 1,000 1,000
The floating interest rate is 1.91% to 5.85% (2021: 1.22% to 2.17%) and the term borrowing facility expiry date is 1 July 2024.
Notes to the Financial Statements
Scales Corporation Limited
E4. Borrowings (continued)
The seasonal facility, presented as current borrowings, is due for repayment within 1 year. The bank facilities are secured by a
first ranking security interest granted by each of the Charging Group Companies over all its present and after-acquired property
(including proceeds) and a first ranking security interest over any of the Charging Group Companies' present and future assets
and undertakings which are not personal property. The bank facilities are also secured by first and exclusive registered mortgages
over property comprising coolstores, orchards and industrial and commercial property owned by members of the Charging Group.
Charging Group Companies as at 31 December 2022 are Scales Corporation Limited, Scales Holdings Limited, Mr Apple New
Zealand Limited, New Zealand Apple Limited, Geo.H.Scales Limited, Meateor Foods Limited, Scales Logistics Limited and Meateor
Group Limited.
Other current borrowingsTerm borrowings
2022202120222021
$000's$000's$000's$000's
Seasonal (current) and term (non-current)
borrowings:
Opening balance- 860 36,060 52,199
Repayments- - - (18,000)
Loans forgiven- (860)- -
Effect of foreign currency translation- - 2,672 1,861
- - 38,732 36,060
E5. Other Financial Liabilities
Current financial liabilities at fair value:
20222021
$000's$000's
Foreign currency derivative instruments7,209 1,822
Interest rate swap contracts and forward rate agreements- 173
Put option8,236 5,415
15,445 7,410
Non-current financial liabilities at fair value:
Foreign currency derivative instruments11,802 6,387
Put option1,586 1,951
13,388 8,338
In 2016 the Group increased its shareholding in Fern Ridge Produce Limited (Fern Ridge) to 75%. As part of the transaction, 2.12%
of the shares were then sold to an employee of Fern Ridge, and Scales entered into agreements with the remaining shareholders
of Fern Ridge whereby those shareholders have an option to put their shares to Scales at a value based on a multiple of Fern Ridge
profits, but with a minimum value equivalent to that paid to the selling shareholders. The option was exercised by the remaining
shareholders in 2022 resulting in Scales acquiring the remaining shares in Fern Ridge.
In 2018 the Group acquired 60% of Shelby JV LLC and its subsidiaries Shelby Foods LLC, Shelby Exports Inc, Shelby Cold Storage
LLC, Shelby Trucking LLC and Shelby Properties LLC (collectively, Shelby Group).
As part of the transaction, the Company entered into an agreement with the vendor whereby the vendor has an option to put a
further 5% of total units in Shelby Group to Scales at a value based on a multiple of Shelby Group EBITDA. The obligation to acquire
the ownership interest under the put option is included in other financial liabilities.
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
E6. Interest Rate Risk
Interest rate risk management
The Group is exposed to interest rate risk as it borrows funds at floating interest rates. Management monitors the level of interest
rates on an ongoing basis and may use interest rate swaps and forward rate agreements to manage interest rate risk.
Interest rate swap contracts and forward rate agreements
Under interest rate swap contracts and forward rate agreements, the Group agrees to exchange the difference between fixed and
floating rate interest amounts calculated on agreed notional principal amounts. Such contracts, some of which can commence in
future reporting years, enable the Group to mitigate the risk of changing interest rates on the cash flow exposures on the issued
floating rate debt. The fair value of these contracts at the reporting date is determined by discounting the future cash flows using
the forward interest rate curves at reporting date and the credit risk inherent in the contracts. The average contracted fixed interest
rate is based on the notional principal amount at balance date.
The Group’s interest rate swap contracts and forward rate agreements are classified as Level 2 in the fair value hierarchy.
Details of interest rate swap contracts for the Group are:
Fixed Interest
Rate
Notional Principal
AmountFair Value
202220212022202120222021
%%$000's$000's$000's$000's
Maturity Date
Within 1 year- - - - - -
2-5 years1.20 1.20 17,364 16,101 1,507 25
After 5 years- - - - - -
17,364 16,101 1,507 25
These interest rate swap contracts and forward rate agreements, exchanging floating rate interest amounts for fixed rate interest
amounts, are designated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting from floating interest
rates on borrowings. The interest rate swap and forward rate agreement payments, and the interest payments on the loans occur
simultaneously, and the amount deferred in equity is recognised in profit or loss over the period that the floating rate interest
payments on debt impact profit or loss.
As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the Group performs
a qualitative assessment of effectiveness and it is expected that the value of the interest rate swap contracts and the value of the
corresponding hedged items will systematically change in opposite directions in response to movements in the underlying interest
rates. The main source of hedge ineffectiveness in these hedge relationships (which is not material) is the effect of the counterparty
and the Group's own credit risk on the fair value of the interest rate swap contract, which is not reflected in the fair value of
the hedged item attributable to the change in interest rates. No other sources of ineffectiveness emerged from these hedging
relationships.
The sensitivity analysis below has been determined based on the exposure to interest rates for both derivatives and non-derivative
instruments at the reporting date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at
reporting date was outstanding for the whole year. A 1% increase or decrease is used when reporting interest rate risk internally to
key management personnel and represents management’s assessment of the reasonably possible change in interest rates. Impact
on net profit after tax assumes that none of floating interest rate borrowings were hedged.
20222021
+1%-1%+1%-1%
$000's$000's$000's$000's
Impact on net profit after tax(131)131 (14)14
Impact on cash flow hedge reserve net of tax337 (352)460 (485)
Notes to the Financial Statements
Scales Corporation Limited
E7. Foreign Currency Risk
Foreign currency risk management
Foreign currency risk is the risk that the value of the Group’s assets and liabilities or revenues and expenses will fluctuate due to
changes in foreign exchange rates. The Group is exposed to currency risk as a result of normal trading transactions denominated in
foreign currencies. The currencies in which the Group primarily trades are the Australian dollar, Euro, Canadian dollar, Great Britain
pound and United States dollar, with the largest exposure being to the United States dollar.
Currency risk is managed by the natural hedge of foreign currency receivables and payables and the use of foreign currency
derivative financial instruments. The fair value of foreign currency derivative financial instruments at the reporting date is
determined on a discounted cash flow basis whereby future cash flows are estimated based on forward exchange rates and
contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.
The Group’s forward foreign exchange contracts and foreign exchange options are classified as Level 2 in the fair value hierarchy.
Details of foreign currency instruments at balance date for the Group are:
20222021
Contract ValueFair ValueContract ValueFair Value
$000's$000's$000's$000's
Sale commitments forward foreign exchange
contracts422,810 (3,795)315,284 1,754
Sale commitments foreign exchange options158,067 (928)171,680 6,145
These foreign currency instruments are designated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting
from movements in foreign currency exchange rates on anticipated future transactions. It is anticipated that the sales will take place
during the 2023 to 2027 financial years at which stage the amount deferred in equity will be released into profit or loss.
For hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount, life and underlying)
of the foreign exchange forward contracts and their corresponding hedged items are the same, the Group performs a qualitative
assessment of effectiveness and it is expected that the value of the forward contracts and the value of the corresponding hedged
items will systematically change in opposite directions in response to movements in the underlying exchange rates. The Group uses
the hypothetical derivative method for the hedge effectiveness assessment and measurement of hedge ineffectiveness. As for the
hedge of the net investment in Meateor US LLC sub-group, the Group assesses effectiveness by comparing the nominal amount
of the net assets designated in the hedge relationship with the nominal amount of the hedging instrument. This is a simplified
approach because the currency of the exposure and hedging instruments perfectly match and the Group excludes from the
designation the foreign currency basis spread.
The following table demonstrates the sensitivity to a reasonably possible change of 5% in the value of New Zealand dollar against
other foreign currencies, with all other variables held constant. The impact on the Group’s profit before tax is due to changes in the
fair value of monetary assets and liabilities. The impact on the Group’s equity is due to changes in the fair value of forward exchange
contracts designated as cash flow hedges.
20222021
+5%-5%+5%-5%
$000's$000's$000's$000's
USD
Impact on net profit after tax(783)865 (489)540
Impact on cash flow hedge reserve net of tax(15,976)14,479 (12,977)12,024
AUD
Impact on net profit after tax644 (1,082)(3)4
Impact on cash flow hedge reserve net of tax176 176 - -
EUR
Impact on net profit after tax(2)2 - -
Impact on cash flow hedge reserve net of tax(2,143)1,940 (2,376)2,197
GBP
Impact on net profit after tax(7)7 (1)2
Impact on cash flow hedge reserve net of tax(991)898 (1,150)1,052
CAD
Impact on net profit after tax- - - -
Impact on cash flow hedge reserve net of tax(383)347 (309)279
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
E8. Categories of Financial Instruments
20222021
$000's$000's
Financial assets:
Amortised cost111,672 61,446
Derivative instruments in designated hedge accounting relationships15,795 16,108
Fair value through profit or loss184 184
127,651 77,738
Financial liabilities:
Amortised cost86,829 75,141
Derivative instruments in designated hedge accounting relationships19,011 8,382
Fair value through profit or loss9,822 7,366
115,662 90,889
The carrying amount of financial instruments at amortised cost approximates their fair value.
E9. Maturity Profile of Financial Liabilities
Liquidity risk management
The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously monitoring forecast and
actual cash flows and matching the maturity profiles of financial assets and liabilities.
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up
based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.
The table includes both interest and principal cash flows.
Within 3 months
4 months to
1 year1-5 years Total
$000's$000's$000's$000's
2022
Trade and other payables37,226 - - 37,226
Dividend declared8,503 - - 8,503
Put options8,236 - 1,586 9,822
Borrowings570 2 39,885 40,457
Interest rate swaps and forward rate agreements- - - -
54,535 2 41,471 96,008
2021
Trade and other payables23,466 - - 23,466
Dividend declared13,419 - - 13,419
Put options5,415 - 1,951 7,366
Borrowings165 500 37,055 37,720
Interest rate swaps and forward rate agreements96 292 1,293 1,681
42,561 792 40,299 83,652
Notes to the Financial Statements
Scales Corporation Limited
F. Group Structure
This section provides information to help readers understand the Scales Group structure and how it affects the financial
position and performance of the Group. In this section there is information about subsidiaries and non-controlling interests.
F1. Subsidiary Companies
Holding
Subsidiary CompaniesPrincipal Activity
Country of
Incorporation20222021Balance Date
Fern Ridge Produce LimitedTrading companyNew Zealand 100%72.88%31 December
Geo. H. Scales Limited Non trading companyNew Zealand 100%100%31 December
Longview Group Holdings LimitedNon trading companyNew Zealand 100%100%31 December
Meateor Foods Australia Pty LimitedTrading companyAustralia100%100%31 December
Meateor Foods LimitedTrading companyNew Zealand 100%100%31 December
Meateor Group LimitedHolding companyNew Zealand 100%100%31 December
Meateor US LLCHolding companyUnited States100%100%31 December
Mr Apple New Zealand LimitedTrading companyNew Zealand 100%100%31 December
New Zealand Apple LimitedTrading companyNew Zealand 100%100%31 December
Scales Employees LimitedCustodial companyNew Zealand 100%100%31 December
Scales FI Group Holding Pty LtdHolding companyAustralia100%0%31 December
Scales Holdings LimitedHolding companyNew Zealand 100%100%31 December
Scales Logistics LimitedFreight consolidatorNew Zealand 100%100%31 December
Scales Logistics Australia Pty LtdFreight consolidatorAustralia100%100%31 December
Selacs Insurance LimitedInsurance companyNew Zealand 100%100%31 December
Shelby Cold Storage, LLC Coldstore operatorUnited States60%60%31 December
Shelby Exports, IncNon trading companyUnited States60%60%31 December
Shelby Foods, LLC Trading companyUnited States60%60%31 December
Shelby JV LLCHolding companyUnited States60%60%31 December
Shelby Properties LLCNon trading companyUnited States60%60%31 December
Shelby Trucking LLCTrading companyUnited States60%60%31 December
Subsidiary companies are controlled by the Company. Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company
loses control of the subsidiary.
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
F2. Non-Controlling Interests
The following non-wholly owned subsidiaries of the Group have material non-controlling interests.
Proportion of equity interest held by non-controlling interests:
Subsidiary companies:
Country of
incorporation
and operation
Non-controlling holding
20222021
Shelby JV LLC and its subsidiariesUnited States40%40%
The summarised financial information in respect of the Group’s subsidiary that have material non-controlling interests as at
31 December 2022, reflecting 100% of the underlying subsidiary’s relevant figures, is set out below:
20222021
$000's$000's
Statement of financial position
Current assets29,827 23,428
Non-current assets6,163 3,288
Current liabilities(11,697)(7,630)
Non-current liabilities(435)(730)
Net assets23,858 18,357
Attributable to:
Equity holders of the Company14,315 11,014
Non-controlling interests9,543 7,343
Note that a put option on 5% of the non-controlling interest shareholding is recognised as a financial liability, separate from non-
controlling interest. Refer to note E5 for disclosures regarding the put option.
Total dividends paid to non-controlling interests17,313 8,484
Statement of comprehensive income
Total revenue220,425 142,037
Net profit for the year47,155 24,448
Attributable to:
Equity holders of the Company28,293 14,669
Non-controlling interests18,862 9,779
Statement of cash flows
Net cash provided by operating activities48,064 25,352
Net cash used in investing activities(4,238)(530)
Net cash used in financing activities(43,344)(21,264)
Net increase in net cash482 3,558
Notes to the Financial Statements
Scales Corporation Limited
G. Other
This section includes the remaining information relating to Scales' financial statements which is required to comply
with NZ IFRS.
G1. Capital Commitments
20222021
$000's$000's
Commitments entered into in respect of apple trees purchases as at balance date2,530 1,264
Commitments entered into in respect of property, plant and equipment purchases as at
balance date
371 2,912
G2. Leases
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognised a right-of-use
asset and a corresponding liability with respect to all lease arrangements in which it is the lessee, except for short-term leases
(defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group applies the
practical expedient and recognises the lease payments as an operating expense on a straight-line basis over the term of the lease
unless another systematic basis is more representative of the time pattern in which economic benefits from the lease assets are
consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing
rate (IBR).
Lease payments included in the measurement of the lease liability comprise:
• fixed lease payments (including in-substance fixed payments), less any lease incentives;
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
• the amount expected to be payable by the lessee under residual value guarantees;
• the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease
liability is remeasured by discounting the revised lease payments using a revised discount rate;
• the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual
value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate;
• a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability
is remeasured by discounting the revised lease payments using a revised discount rate.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before
the commencement date and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and
impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located
or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and
measured under NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
Right-of-use assets are depreciated over the shorter period of either the lease term or the useful life of the underlying asset. If a
lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
The Group applies NZ IAS 36 Impairment of Assets to determine whether a right-of-use asset is impaired and accounts for any
identified impairment loss under this standard.
Notes to the Financial Statements
Annual Report - Year Ended 31 December 2022
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-
use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those
payments occurs and are included in the line 'Administration and operating expenses' in the statement of comprehensive income.
As a practical expedient, NZ IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and
associated non-lease components as a single arrangement.
The lease modification in the current year relates to the reassessment of renewal terms for leases extending longer than 10 years.
The impact reduced the lease liability and right of use asset proportionately based on the reduction in the overall lease term
assumed. The difference has been recorded as a loss on lease modification in the statement of comprehensive income.
Right-of-use assets
Land and
buildings
Plant and
equipment
Office equipment
motor and
vehiclesTotal
$000's$000's$000's$000's
Carrying Amount
Balance at 1 January 202172,827 29 5,021 77,877
Additions5,212 451 1,651 7,314
Depreciation expense(6,372)(180)(2,208)(8,760)
Balance at 31 December 202171,667 300 4,464 76,431
Additions2,326 796 3,567 6,689
Lease modification(24,989)- - (24,989)
Depreciation expense(6,332)(390)(2,365)(9,087)
Balance at 31 December 2022
42,673 706 5,666 49,044
20222021
$000's$000's
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets9,087 8,760
Loss on lease modification1,854 -
Interest expense on lease liabilities2,953 2,964
Expense relating to short-term leases and low-value assets2,218 2,319
Lease liabilities
Current10,925 10,237
Non-current44,066 69,481
Maturity analysis (undiscounted cash flows)
Year 110,932 10,244
Year 29,930 9,205
Year 39,065 8,613
Year 48,466 8,083
Year 57,578 7,451
Onwards26,483 59,860
72,454 103,456
Cash outflows for leases
Interest on lease liabilities2,953 2,964
Repayments of lease liabilities8,281 7,839
Short-term leases and low-value asset leases2,218 2,319
13,452 13,122
G2. Leases (continued)
Notes to the Financial Statements
Scales Corporation Limited
G3. Related Party Disclosures
Transactions with related parties
Certain Directors or senior management have relevant interests in companies with which Scales has transactions in the normal
course of business. A number of Scales Directors are also non-executive Directors of other companies. Any transactions undertaken
with these entities have been entered in the ordinary course of business.
Key management personnel remuneration
The compensation of the Directors and executives, being the key management personnel of the Group, is as follows:
20222021
$000's$000's
Short-term employee benefits3,445 2,986
Share-based payments574 416
Post-employment benefits113 99
4,132 3,501
During 2022, 975,164 (2021: 1,201,923) shares were on issue to key management personnel in accordance with the Share Scheme
described in note D2.
Transactions with equity accounted entities
Revenue from sale of goods2,428 1,623
Revenue from services6,179 4,547
Dividends and distributions received1,875 2,250
Interest received
24
-
Materials and services received
(998)(1,034)
Trade receivables at balance date924 479
Purchase of property, plant and equipment15 -
Related party loans2,842 -
On 31 October 2022, Meateor Group Limited along with the other joint venture partners, agreed a financing arrangement with
Meateor Australia Pty Limited for a term of 5 years. The total facility provided to Meateor Australia Pty Limited is AUD 4 million with
the interest rate on the drawdown balances charged at 5% per annum.
G4. Contingent Liability
There are no contingent liabilities as at 31 December 2022 (2021: Nil).
G5. Events Occurring After Balance Date
After balance date, Scales Corporation Limited signed an amendment to the lending facility agreements with Rabobank and
Westpac. The facility of AUD 25 million was drawn down on 7 February 2023.
Cyclone Gabrielle resulted in flooding of some the Group's Hawke’s Bay orchards. The initial assessment is that 4 of 15 orchards
were impacted. Of the 4 damaged orchards, 3 had extensive damage and 1 moderate. Further limited crop damage is also
anticipated to the remaining orchards from the effects of the cyclone. Crop/fruit damage from the event is not covered by insurance.
The 2023 harvest started prior to the cyclone and, with 3% picked, there is still a substantial proportion of the crop available and
remaining to be harvested for export. Picking has recommenced, with cool-storage and packing activities back underway. Group
packhouses and coolstores remain fully operational.
Other than disclosed above, the impact on unharvested agricultural produce, land and buildings, apple trees or goodwill carrying
values is not able to be quantified as at the financial statement authorisation date.
The Group does not expect material operating impact on its other business units, which accounted for the majority of the Group's
operating profits for previous years.
There were no other events occurring subsequent to balance date which require adjustment to or disclosure in the financial statements.
Annual Report - Year Ended 31 December 2022
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF SCALES CORPORATION LIMITED
OpinionWe have audited the consolidated financial statements of Scales Corporation Limited and its
subsidiaries (the ‘Group’), which comprise the consolidated statement of financial position as at 31
December 2022, and the consolidated statement of comprehensive income, statement of changes in
equity and statement of cash flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements, on pages 48 to 86, present
fairly, in all material respects, the consolidated financial position of the Group as at 31 December
2022, and its consolidated financial performance and cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’)
and International Financial Reporting Standards (‘IFRS’).
Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and
International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). 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 Company in accordance with Professional and Ethical Standard 1
International Code of Ethics for Assurance Practitioners (including International Independence
Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board
and the International Ethics Standards Board for Accountants’ International Code of Ethics for
Professional Accountants (including International Independence Standards), and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We note that during
the period our systems identified that a non-audit partner in the same office as the engagement
partner inadvertently held an interest in the entity for part of the period, which was rectified prior to
the issuance of this opinion. The matter does not impact on the financial statements and has not
compromised our objectivity as auditor.
Other than in our capacity as auditor and the provision of other assurance services, we have no
relationship with or interests in the Company or any of its subsidiaries. These services have not
impaired our independence as auditor of the Company and Group.
Audit materialityWe consider materiality primarily in terms of the magnitude of misstatement in the financial
statements of the Group that in our judgement would make it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced (the ‘quantitative’
materiality). In addition, we also assess whether other matters that come to our attention during the
audit would in our judgement change or influence the decisions of such a person (the ‘qualitative’
materiality). We use materiality both in planning the scope of our audit work and in evaluating the
results of our work.
We determined materiality for the Group financial statements as a whole to be $2.3 million.
Key audit mattersKey audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the consolidated financial statements of the current period. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Independent Auditor's Report
Scales Corporation Limited
Key audit matterHow our audit addressed the key audit matter
Valuation of Unharvested Agricultural Produce
Unharvested agricultural produce growing on bearer
plants (apples), is measured at fair value less costs
to sell in accordance with NZ IAS 41 Agriculture.
The Group’s unharvested agriculture produce was
valued at $25.1 million at balance date as described
in note C2. A revaluation loss of $1.2 million is
recorded in profit or loss.
Fair value less costs to sell is calculated by the
Group using a discounted cash flow model. The
model includes significant unobservable inputs
and assumptions including, for each variety, the
forecast production per hectare per annum by
weight, expected sales prices, and risk-adjusting
discount rates, as well as costs to harvest and sell.
The risk-adjusting discount rates take into account
the risk of unknown adverse events that may affect
crop, harvest and/or market conditions.
The valuation of unharvested agricultural produce is
considered to be a key audit matter due to the level
of judgement required to determine the fair value
less costs to sell.
Our procedures focused on the appropriateness of the valuation methodology
and the key assumptions applied in the internal valuation model.
Our procedures included, amongst others:
• Holding discussions with management and considering market information
to identify factors, including environmental/climate or market risks, that
would impact the current crop valuation;
• Assessing and challenging the reasonableness of the risk-adjusting
discount rates;
• Engaging a Deloitte valuation specialist to consider whether the valuation
method applied was appropriate and whether the risk-adjusting discount
rates were reasonable based on risks relating to the unharvested
agricultural produce;
• Challenging the reasonableness of the key assumptions by comparing the
forecast production, prices, and costs to harvest and sell for the current
growing season, to the approved budgets for each orchard;
• Assessing the historical accuracy of the Group’s budget forecasts by
comparing to the actual results for production per hectare and sales prices;
• Checking the mechanical accuracy of the discounted cash flow model.
Valuation of Apple Trees
As disclosed in note C1 the Group has apple trees
valued at $27.3 million. A revaluation loss of $3.8
million has been recorded in other comprehensive
income, with an impairment of $3.7 million recorded
in profit or loss.
The Group has a policy of recording apple trees at
fair value with valuations performed with sufficient
regularity that the carrying amount at the end of a
reporting period does not differ materially from their
fair value.
The fair value of the apple trees is determined by
an independent registered valuer on the basis of a
discounted cash flow analysis of forecast income
streams and costs from each orchard less the fair
value of orchard land and buildings. The model
uses a number of significant unobservable inputs,
in particular: production levels per hectare, orchard
gate returns (market prices), orchard costs, and
discount rates.
Valuation of apple trees is considered to be a key
audit matter due to the significance of the assets
to the Group’s consolidated statement of financial
position, and the level of judgement involved in
valuing the apple trees.
Our procedures focused on the appropriateness of the valuation
methodology and the key assumptions applied in the model.
Our procedures included, amongst others:
• Evaluating the Group’s processes in respect of the independent valuation
of the apple trees including its review of the valuation methodology and
determination of the key valuation assumptions;
• Engaging a Deloitte valuation specialist to consider whether the valuation
methods applied were reasonable;
• Assessing the competence, objectivity and integrity of the Group’s
independent registered valuer. This included assessing the valuer’s
professional qualifications, experience and independence. It also included
meeting with the valuer to understand the valuation process adopted and
to identify and challenge the critical judgement areas in the valuation;
• Assessing the valuation methodology for consistency with the prior year
valuation and determining whether any changes to the methodology were
appropriate;
• Checking the mechanical accuracy of the discounted cash flow models
on a sample basis;
• Challenging the reasonableness of the key assumptions by comparing
them to the prior year valuation, the Group’s internal data and current
market evidence. We focused on the assumptions relating to production
levels per hectare, orchard gate returns (market prices), orchard costs,
and discount rates:
-We tested estimated production levels per hectare by comparing
orchard hectares in production with the prior year valuation. We
compared the production levels per hectare to internal production
data for the season;
-We tested the orchard gate returns by comparing these to actual
sales returns received during the previous year;
-We challenged orchard costs by comparing orchard costs to the prior
year valuation and actual costs incurred;
-We challenged the discount rates by comparing them with prior
year valuation discount rates, market data and considering the risks
associated with the orchards.
Independent Auditor's Report
Annual Report - Year Ended 31 December 2022
Other informationThe directors are responsible on behalf of the Group for the other information. The other
information comprises the information in the Annual Report that accompanies the consolidated
financial statements and the audit report. The Annual Report is expected to be made available to us
after the date of this auditor's report.
Our opinion on the consolidated financial statements does not cover the other information and we
do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information identified above when it becomes available
and 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.
When we read the other information in the Annual Report, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and consider
further appropriate actions.
Directors’ responsibilities
for the consolidated
financial statements
The directors are responsible on behalf of the Group for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS 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 on behalf of the
Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities for
the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about whether the 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 and ISAs (NZ)
will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is
located on the External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1
This description forms part of our auditor’s report.
Restriction on useThis report is made solely to the Company’s shareholders, as a body. Our audit has been
undertaken so that we might state to the Company’s shareholders those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company’s shareholders as a
body, for our audit work, for this report, or for the opinions we have formed.
Nicole Dring, Partner
for Deloitte Limited
Christchurch, New Zealand
22 February 2023
Independent Auditor's Report
Scales Corporation Limited
Corporate Governance Statement
Annual Report - Year Ended 31 December 2022
Corporate Governance Statement
The Board of Scales Corporation Limited (Scales or the Company) is committed to ensuring that the Company meets best practice
governance principles and maintains the highest ethical standards. This Corporate Governance Statement provides an overview of the
Company’s governance framework. It is structured to follow the NZX Corporate Governance Code (NZX Code), dated 17 June 2022 and
discloses the practices relating to the NZX Code’s recommendations.
The Board’s view is that Scales complies with the corporate governance principles and recommendations set out in the NZX Code.
The Board believes our governance structures, in particular our approach to remuneration, meet our strategic objectives. In forming
our conclusions, we have sought external feedback from shareholders and advisors to challenge our thinking and validate our findings,
which we have appreciated.
The Company also complies with the corporate governance requirements of the NZX Main Board Listing Rules (NZX Listing Rules).
The Board regularly reviews and assesses Scales’ governance structures and processes to ensure that they are consistent with best practice.
Scales’ key corporate governance documents referred to in this statement, including charters and policies, can be found at
www.scalescorporation.co.nz/about-us/governance.
Scales’ Corporate Governance Code (the Scales Code) was reviewed and updated in December 2022 and is reviewed annually.
This Corporate Governance Statement was approved by the Board on 17 March 2023.
Principle 1 – Code of Ethical Behaviour
Directors should set high standards of ethical behaviour, model this behaviour and hold management accountable for these standards
being followed throughout the organisation.
RECOMMENDATION 1.1
The Board should document minimum standards of ethical behaviour to which the issuer’s Directors and employees are expected to
adhere (a Code of Ethics).
Code of Ethics
Scales’ Board sets a framework of ethical standards for the Company via its Code of Ethics. These standards are expected of all
Directors and employees of Scales and its subsidiaries.
The Code of Ethics covers a wide range of areas including:
• Standards of behaviour
• Conflicts of interest
• Proper use of Company information and assets
• Accepting gifts
• Delegated authorities
• Compliance with laws and policies
• Reporting concerns
• Corporate opportunities
The procedure for advising the Company of a suspected breach is set out in the Code of Ethics. No breaches were identified during the year.
Every new Director, employee and contractor is to be provided with a copy of the Code of Ethics and must confirm that they have read
and understand the Code of Ethics. The Code of Ethics is also available on the Company’s website.
Regular training on ethics is undertaken. Training is completed via a combination of facilitated sessions for Directors and senior
management, and by individual subsidiaries, in sessions tailored to their specific businesses.
The Code of Ethics is subject to annual review by the Board.
RECOMMENDATION 1.2
An issuer should have a financial product dealing policy which applies to employees and Directors.
Share trading by Company Directors and Employees
The Board has implemented formal procedures to handle trading in the Company’s securities by Directors, employees and advisors of
the Company, with approval being required before trading can occur. Approval is required to be obtained from the Chair, other Directors,
CEO or the Chief Financial Officer depending on who is trading. A blackout period is imposed for all Directors and employees between
the end of the half year and full year and the release to NZX of the results for that period.
The policy provides that shares may not be traded at any time by any individual holding material information. The full procedures are
outlined in the Securities Trading Policy and Guidelines.
The fundamental rule in the policy is that insider trading is prohibited at all times. The requirements of the policy are separate from, and
in addition to, the legal prohibitions on insider trading in New Zealand.
Corporate Governance Statement
Scales Corporation Limited
Principle 2 – Board Composition & Performance
To ensure an effective Board, there should be a balance of independence, skills, knowledge, experience and perspectives.
RECOMMENDATION 2.1
The Board of an issuer should operate under a written charter which sets out the roles and responsibilities of the Board.
Responsibilities of the Board
The Board has overall responsibility for all decision making within Scales. In this regard the Board is responsible for laying solid
foundations for the direction, management and oversight of the Company in support of its objectives. It has delegated day-to-
day management of the Company to the Managing Director and the senior management team.
The main functions of the Board include to:
• Review and approve the strategic, business, risk, financial and ESG (Environmental, Social and Governance) plans prepared
by Management
• Monitor performance against the strategic, business, risk, financial and ESG plans
• Appoint, provide counsel to and review the performance of the Managing Director
• Approve major investments and divestments
• Ensure ethical behaviour by the Company, Board, Management and employees
• Assess its own effectiveness in carrying out its functions
The Board monitors these matters by receiving reports and plans from Management, maintaining an active programme of
divisional visits and through its annual work programme.
The Board uses Committees to address certain issues that require detailed consideration by members of the Board who
have specialist knowledge and experience. The Board retains ultimate responsibility for the functions of its committees and
determines their responsibilities.
The Board has a statutory obligation to reserve responsibility for certain matters. It also deals directly with issues relating to the
Company’s mission, appointments to the Board, strategy, business risk, financial and ESG plans.
Details of the Board’s role, composition, responsibilities, operation, policies and committees are provided in the Scales Code.
RECOMMENDATION 2.2
Every issuer should have a procedure for the nomination and appointment of Directors to the Board.
Director nomination and appointment
The Board is responsible for appointing Directors. The Nominations and Remuneration Committee manages the appointment
process for new Directors and the re-election of existing Directors in order to make a recommendation to the Board. When
considering an appointment, the Committee will undertake a thorough check of the candidate and his or her background. Where
the Board determines a person is an appropriate candidate, shareholders are notified of that and are provided with all material
information that is relevant to the decision on whether to elect or re-elect a Director.
The Nominations and Remuneration Committee also has responsibility for reviewing the composition of the Board to ensure
that the Company has access to the most appropriate balance of skills, qualifications, experience, perspectives and diversity to
effectively govern the Company.
Using the Board skills matrix, the Board has determined that to operate effectively and to meet its responsibilities it requires
competencies in disciplines including executive leadership and strategy, governance, agriculture, logistics, finance and capital
markets, risk and compliance, legal and regulatory, people, digital and technology, export, retail and doing business in China. It is
proposed that the skills matrix be included in future reports.
The current mix of skills and experience is considered appropriate for the responsibilities and requirements of governing Scales.
The Board seeks external advice where required to strengthen its oversight of issues in all disciplines.
As at 31 December 2022 the Board had a majority of Independent Directors. Director independence is considered on a case-by-
case basis and is monitored on an ongoing basis.
RECOMMENDATION 2.3
An issuer should enter into written agreements with each newly appointed Director establishing the terms of their appointment.
Letter of appointment
All new Directors will enter into a written agreement with Scales setting out the terms of their appointment.
Corporate Governance Statement
Annual Report - Year Ended 31 December 2022
RECOMMENDATIONS 2.4, 2.8 AND 2.9
Every issuer should disclose information about each Director in its annual report or on its website, including a profile of experience,
length of service, independence and ownership interests. A majority of the Board should be independent Directors. The Chair
should be independent.
Board of Directors
A profile of each of the Directors is on pages 43 – 44 of this report. The profiles include information on the year of appointment,
skills, experience and background of each Director.
A majority of the Board are Independent Directors. Tim Goodacre is the Independent Chair of Scales. Miranda Burdon, Nick Harris,
Mark Hutton, Alan Isaac and Nadine Tunley are Independent Directors. Qi Xin is a senior Director of a department within China
Resources Enterprise, Limited, which holds a 15.1% shareholding in the Company. Mr Qi is a non-executive Director.
Andy Borland is the Managing Director and Chief Executive Officer (CEO) of Scales.
The roles of Board Chair, Audit and Risk Management Committee Chair and CEO are not held by the same person.
The Board determines annually on a case-by-case basis on the advice of the Nominations and Remuneration Committee who, in its
view, are Independent Directors. The guidelines set out in the NZX Code are used for this purpose, which for 2022 included specific
consideration of the tenure of any non-executive director serving longer than 9 years.
Ownership of Scales shares by Directors is encouraged rather than being a requirement. Directors’ ownership interests are disclosed
at page 108.
The Board does not have a tenure policy however it recognises that a regular refreshment programme leads to the introduction of
new perspectives, skills, attributes and experience. In 2021 the Board commenced a succession process. This was designed to
ensure a planned and orderly succession of the existing Board over time, with new Directors required to have appropriate experience
and qualifications, and an increase in Board diversity also a desired outcome of the process. The stated aims of the process were to:
• Identify future Board requirements, in terms of skills, Director numbers and diversity
• Conduct a broad search for candidates that match the determined requirements
• To ensure a smooth transition of new Directors
Progress on this succession process has been positive. In August 2022, Miranda Burdon was appointed to the Board, and in March
2023 it was announced that Chair, Tim Goodacre, would retire, with Mike Petersen to be appointed as his successor. In accordance
with NZX rules both new Directors will offer themselves for election at the next Annual Shareholders’ Meeting and shareholders will
have the opportunity to hear from them directly.
Director period of appointment
0-3 years3 – 9 years9 years +
Number of Directors224
Interests Register
The Board maintains an Interests Register. Any Director who is interested in a transaction with the Company must immediately
disclose to the Board the nature, monetary value and extent of the interest. A Director who is interested in a transaction may attend
and participate at a Board meeting at which the transaction is discussed but may not be counted in the quorum for that meeting or
vote in respect of the transaction, unless it is one in respect of which Directors are expressly required by the Companies Act 1993 to
sign a certificate.
Particulars of entries made in the Interests Register are included in the Director Disclosures section on pages 107 and 108.
RECOMMENDATION 2.5
An issuer should have a written diversity policy which includes requirements for the Board or a relevant Committee of the Board to
set measurable objectives for achieving diversity (which, at a minimum, should address gender diversity) and to assess annually
both the objectives and the entity’s progress in achieving them.
Diversity
Scales recognises the value in diversity of thinking and skills and seeks to ensure that the Board and workforce both comprise
members reflecting diversity. A formal Diversity Policy has been adopted by the Board.
The Board seeks diversity in the skills, attributes, perspectives and experience of its members across a broad range of criteria so as
to represent the diversity of shareholders, business types and regions in which Scales operates. Diversity, both at Board level and
throughout the Company, is actively considered and reviewed by the Board.
Scales participates in the Institute of Directors’ Future Directors programme as part of our commitment to further develop the
skillsets available within the agriculture sector. The programme is designed to give talented young aspiring Directors exposure to a
company Board, whilst also giving the host company a fresh perspective. Our fifth and latest Future Director, Kelly Brown, completed
a 12-month term on 8 June 2022.
Corporate Governance Statement
Scales Corporation Limited
Scales recruits, promotes and compensates on the basis of merit, regardless of gender, ethnicity, religion, age, nationality, sexual
orientation, union membership or political opinion. Scales requires that people in the workplace are treated with respect in
accordance with the Company’s philosophies of equal employment opportunities, and anti-harassment and discrimination policies.
Responsibility for workplace diversity and the setting of measurable objectives is held by the Nominations and Remuneration
Committee. The current objectives are:
• Continue to strive to ensure strong female candidates are identified in the recruitment process for all Board and senior executive roles
• Review and encourage participation of under-represented groups in our leadership training programmes
• Complete a review of our gender pay equality across roles, age and salary bands
• Make access to courses in Te Reo Mᾱori language available to all staff and also encourage the learning of other languages that
are relevant to employees’ roles
In accordance with the objectives, gender pay equality across the Company was reviewed in 2020. The overall finding of the review
was that the Company offers pay equity across genders. Work is continuing on the appropriate targets and measurements for the
remaining objectives.
The gender composition of Scales’ Directors, Senior Managers and Management Team (comprising the top 2 layers of management)
was as follows:
As at 31 December 2022As at 31 December 2021
PositionFemaleMaleFemaleMale
Director2 (25%)6 (75%)1 (14%)6 (86%)
Senior Managers0 (0%)5 (100%)0 (0%)4 (100%)
Management Team (excluding
Senior Managers)
7 (35%)13 (65%)6 (33%)12 (67%)
RECOMMENDATION 2.6
Directors should undertake appropriate training to remain current on how to best perform their duties as Directors of an issuer.
Director Training
The Board ensures that there is appropriate training available to all Directors to enable them to remain current on how best to
discharge their responsibilities and keep up to date on changes and trends in areas relevant to their work. Directors are provided with
industry information and receive copies of appropriate Company documents to enable them to perform their role. The Board has
allocated funding of $1,000 per annum for each Director to provide resources to help develop and maintain skills and knowledge.
The Board also ensures that new Directors are appropriately introduced to Management and the businesses.
RECOMMENDATION 2.7
The Board should have a procedure to regularly assess Director, Board and Committee performance.
Board Performance Evaluation
The Board annually assesses its effectiveness in carrying out its functions and responsibilities. The Chair of the Board leads the
review and evaluation of the Board as a whole, and of the Board Committees, against their charters. The Chair of the Board also
engages with individual Directors to evaluate and discuss performance and professional development.
Principle 3 – Board Committees
The Board should use Committees where this will enhance its effectiveness in key areas, while still retaining Board responsibility.
Board Committees
The Board has 4 formally constituted committees – the Audit and Risk Management Committee, the Nominations and Remuneration
Committee, the Health & Safety and Sustainability Committee and the Finance and Treasury Committee. Each Committee focuses
on specific areas of governance and together they strengthen the Board’s oversight of Scales. Committee membership is reviewed
annually.
Each Committee has a written charter that is approved by the Board, which sets out its mandate. The charters are reviewed annually
with any proposed changes recommended to the Board for approval.
Annually, each Committee agrees a programme of matters to be addressed over the following 12-month period. The Committees each
annually review their performance against the Committee charter and objectives for the year and report their findings to the Board.
Corporate Governance Statement
Annual Report - Year Ended 31 December 2022
Attendance at Meetings
The table below sets out Director attendance at Board and Committee meetings during the year ended 31 December 2022.
Board
Audit and
Risk Management
Committee
Nominations
and Remuneration
Committee
Finance and
Treasury
Committee
Health & Safety
and Sustainability
Committee
Eligible
to attendAttended
Eligible
to attendAttended
Eligible
to attendAttended
Eligible
to attendAttended
Eligible
to attendAttended
Andrew Borland1010----5555
Tim Goodacre1010--55----
Miranda Burdon44--------
Nick Harris101055----55
Mark Hutton1010555555--
Alan Isaac101055------
Nadine Tunley1010------55
Qi Xin1010--------
RECOMMENDATION 3.1
An issuer’s Audit Committee should operate under a written charter. Membership on the Audit Committee should be majority
independent and comprise solely of non-executive Directors of the issuer. The Chair of the Audit Committee should not also be the
Chair of the Board.
Audit and Risk Management Committee
The primary functions of the Audit and Risk Management Committee are:
• To oversee the financial reporting process to ensure that the interests of shareholders are properly protected in relation to
financial reporting and internal control
• To provide the Board with an independent assessment of the Company’s financial position and accounting affairs
• To keep under review the effectiveness of the Company’s procedures for the identification, assessment and reporting of material
risks
• To oversee the appointment and performance of the external auditor
Members of the Committee are appointed by the Board and must comprise solely non-executive Directors, a majority of which must
be Independent Directors. The current members of the Committee are Alan Isaac (Chair), Nick Harris and Mark Hutton. All members
of the Audit and Risk Management Committee are Independent Directors. Alan Isaac is a former national chair of KPMG. The Chair
of the Audit and Risk Management Committee and the Board Chair are different people.
The Committee met on 5 occasions during the year. The agenda items for each meeting generally relate to financial governance,
external financial reporting, external audit, internal audit, risk management, compliance and insurance.
RECOMMENDATION 3.2
Employees should only attend Audit Committee meetings at the invitation of the Audit Committee.
Meeting Attendance
The Managing Director and Chief Financial Officer are regularly invited to attend Audit and Risk Management Committee meetings.
RECOMMENDATION 3.3 AND 3.4
An issuer should have Nomination and Remuneration Committees which operate under written charters.
Nominations and Remuneration Committee
The primary functions of the Nominations and Remuneration Committee are:
• To establish a clear framework for oversight and management of the Company’s remuneration structure, policies, procedures and
practices to ensure Scales’ remuneration is fair and reasonable
• Defining the roles and responsibilities of the Board and senior management
• Reviewing and making recommendations on Board and Committee composition and succession
Members of the Committee are appointed by the Board and must comprise a majority of Independent Directors. The current
members of the Committee are Mark Hutton (Chair) and Tim Goodacre.
Management attends Nominations and Remuneration Committee meetings if invited by the Committee. The Committee met on 5
occasions during the year.
Corporate Governance Statement
Scales Corporation Limited
RECOMMENDATION 3.5
An issuer should consider whether it is appropriate to have any other Board Committees as standing Board Committees. All
Committees should operate under written charters.
Health & Safety and Sustainability Committee
The Board’s commitment to ensuring a safe and healthy workplace for staff, contractors and visitors led to it establishing a Health
and Safety Committee. The Committee is also responsible for sustainability issues.
The primary functions of the Committee are:
• To assist the Board to provide leadership and policy for health & safety and sustainability
• To assist the Board to fulfil its responsibilities and to ensure compliance with all legislative and regulatory requirements in
relation to the health and safety practices of the Company as those activities affect employees and contractors
• To support the ongoing improvement of health and safety in the workplace
• To support sustainability initiatives across the Company
Members of the Committee are appointed by the Board. The Committee must be chaired by an Independent Director. The current
members of the Committee are Nadine Tunley (Chair), Andy Borland and Miranda Burdon.
The Committee met on 5 occasions during the year.
Finance and Treasury Committee
Scales operates in a capital intensive sector and is one of New Zealand’s leading horticultural exporters with material foreign
currency receipts. The Board considers that with both the size of Scales’ existing activities and the strategic focus to seek organic
and acquisitive growth opportunities, it is appropriate to have a Board Committee to further focus on this part of the business.
The primary functions of the Committee are to:
• Review the allocation of capital
• Oversee the Company’s capital and treasury risk management
• Monitor continuous disclosure processes to ensure their integrity, transparency and adequacy, and that they are in accordance
with Company policies
• Oversee takeover protocols and, if required, establish a Takeovers Committee comprising of Independent Directors
Members of the Committee are appointed by the Board. The Committee must be chaired by an Independent Director. The current
members of the Committee are Mark Hutton (Chair) and Andy Borland. The Committee also obtains ongoing advice from external
advisors.
The Committee met on 5 occasions during the year.
RECOMMENDATION 3.6
The Board should establish appropriate protocols that set out the procedure to be followed if there is a takeover offer for the
issuer.
Takeover Protocols
The Board has documented and adopted a series of protocols to be followed in the event of a takeover offer being made, including
communication between insiders and any bidder. A committee of Independent Directors would be formed and would have
responsibility for managing the takeover in accordance with the Board protocols and the New Zealand Takeovers Code.
Corporate Governance Statement
Annual Report - Year Ended 31 December 2022
Principle 4 – Reporting and Disclosure
The Board should demand integrity in financial and non-financial reporting, and in the timeliness and balance of corporate
disclosures.
RECOMMENDATION 4.1
An issuer’s board should have a written continuous disclosure policy.
Shareholder Communications and Market Disclosure
Scales’ Board is committed to the principle that high standards of reporting and disclosure are essential for proper accountability
between the Company and its investors, employees and stakeholders.
It achieves these commitments, and the promotion of investor confidence, by ensuring that trading in its shares takes place in
an efficient, competitive and informed market. The Company has in place a written Shareholder Communications and Market
Disclosure Policy designed to ensure this occurs. The policy includes procedures intended to ensure that disclosure is made in a
timely and balanced manner and in compliance with the NZX Listing Rules, such that:
• All investors have equal and timely access to material information concerning the Company, including its financial situation,
performance, ownership and governance
• Company announcements are factual and presented in a clear and balanced way
Accountability for compliance with disclosure obligations is with the Managing Director and Chief Financial Officer. Managers
reporting to the Managing Director are required to provide the Chief Financial Officer with all relevant information that may be
material and to regularly confirm that they have done so.
Significant market announcements, including the preliminary announcement of the half year and full year results, the financial
statements for those periods, and any advice of a change in earnings forecast are approved by the Board.
Directors consider at each Board meeting whether there is any material information which should be disclosed to the market.
RECOMMENDATION 4.2
An issuer should make its Code of Ethics, Board and Committee charters and the policies recommended in the NZX Code, together
with any other key governance documents, available on its website.
Governance Policies and Charters
Scales’ key corporate governance documents can be found at www.scalescorporation.co.nz/about-us/governance.
RECOMMENDATION 4.3
Financial reporting should be balanced, clear and objective. An issuer should provide non-financial disclosure at least annually,
including considering material exposure to environmental, economic and social sustainability risks and other key risks.
Financial and Non-Financial Reporting
Scales’ Board is committed to ensuring integrity and timeliness in its financial reporting and in providing information to the market
and shareholders which reflects a considered view on the present and future prospects of the Company.
A programme of clear, meaningful, timely and effective communications with shareholders is centred around a comprehensive set
of information regarding Scales’ operations and results being available on the Company’s website and in shareholder reports.
The Audit and Risk Management Committee oversees the quality and integrity of external financial reporting including the accuracy,
completeness, balance and timeliness of financial statements. It reviews interim and annual financial statements and makes
recommendations to the Board concerning accounting policies, areas of judgement, compliance with financial reporting standards,
stock exchange and legal requirements, and the results of the external audit. All matters required to be addressed and for which the
Committee has responsibility were addressed during the period under review.
Half year and full year financial statements are prepared in accordance with relevant financial standards.
Both financial and non-financial disclosures are made at least annually, including reporting of material exposure to environmental,
economic and social sustainability risks and other key risks. Scales has a strategic target to develop best-in-class sustainability
reporting and to measure and report on key sustainability aspects affecting its businesses.
Scales’ Sustainability Report is included at pages 16 – 24 of this report and provides details of the continuing growth and
improvements in Scales’ initiatives in this area. The Group-wide report identifies material sustainability topics, grouped under the
headings Governance and Strategy, People, Marketplace, and Environment. Included in this report is work being undertaken on TCFD
(Taskforce on Climate-related Financial Disclosures) reporting.
Corporate Governance Statement
Scales Corporation Limited
Principle 5 - Remuneration
The remuneration of Directors and senior management should be transparent, fair and reasonable.
Remuneration Report
Introduction
This Remuneration Report outlines the Company’s overall reward strategy for the year ended 31 December 2022 and provides
detailed information on the remuneration arrangements in this period for the Directors of the Company, the CEO and other
nominated executives.
The Company’s Remuneration Policy may be amended from time to time and is reviewed at least once a year. The Company has
also established a number of additional policies to support a strong governance framework and uphold ethical behaviour and
responsible decision making.
Remuneration Philosophy
The Nominations and Remuneration Committee is responsible for making recommendations to the Board on remuneration
policies and packages for Directors, the CEO and nominated executives. The primary objectives of the Remuneration Policy are
to provide a competitive, flexible and benchmarked structure that reflects market best practice. The policy is to ensure that the
appropriate culture is maintained within the business, is tailored to the specific circumstances of the Company and reflects
each person’s duties and responsibilities so as to attract, motivate and retain high calibre people. This includes the Company
responsibility to monitor diversity and ensure pay equity.
The Nominations and Remuneration Committee reviews market data on remuneration structure and quantum. The remuneration
packages of the CEO and nominated executives are structured to include a Short-term Incentive Scheme (STI Scheme) that is
directly linked to the overall financial and operational performance of the Company. The CEO and nominated executives may also
be invited to participate in the Company’s Long-Term Incentive Scheme (LTI Scheme). The long-term benefits of the LTI Scheme
are solely conditional upon the Company’s share price meeting certain performance criteria, details of which are outlined below.
The Nominations and Remuneration Committee regularly assesses if the remuneration outcomes are both meeting these
objectives and ensuring the outcomes are reasonable, considering the Company’s actual performance.
Remuneration Structure
In accordance with best practice corporate governance, the structure of non-executive Director remuneration is separate and
distinct from the remuneration of the CEO and other executives.
Components of Compensation – Non-Executive Directors
The Board seeks to set aggregate remuneration for non-executive Directors at a level which provides the Company with the ability to
attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.
No remuneration is payable to Directors unless it is approved by the Company’s shareholders. The NZX Listing Rules specify that
shareholders can approve a per-Director remuneration amount or an aggregate Directors’ fee pool. Scales’ shareholders approve a
Directors’ fee pool and, at the 2022 Annual Shareholders’ Meeting, they approved an increase in the pool by $50,000, to $650,000 per
annum.
The Board reviews its fees annually to ensure the Company’s non-executive Directors are fairly remunerated for their services and
recognising the level of skill and experience required to fulfil the role. The process involves benchmarking against a group of peer
agribusiness companies. In addition, the Board reviews the Committee structure and appropriate level of resourcing required to
make an ongoing contribution to long-term value creation.
Non-executive Directors have no entitlement to:
• Any performance-based remuneration
• Participation in any share-based incentive schemes
• Any golden handshake or parachute payments on their resignation as a Director
This policy reflects the differences in the role of the non-executive Directors, which is to provide oversight and guide strategy,
and the role of management, which is to operate the business and execute the Company’s strategy. Non-executive Directors are
encouraged to be shareholders but are not required to hold shares in the Company.
Each non-executive Director receives a base fee for services as a Director of the Company or specific subsidiaries, plus an
additional fee is paid for being a member of the Board Committees. The payment of an additional fee recognises the additional
time commitment and specific skills required by each Director who serves on those Committees. All Directors are also entitled to be
reimbursed for costs associated with carrying out their duties, including a training allowance.
Corporate Governance Statement
Annual Report - Year Ended 31 December 2022
Fees payable to the non-executive Directors of the Company for the period 1 January 2022 to 31 December 2022 were as follows:
DirectorBase fee
Fees for
serving on
Nominations and
Remuneration
Committee
Fees for
serving on
Audit and Risk
Management
Committee
Fees for serving
on the Board
of Selacs
Insurance
Limited
Fees for serving
on Health &
Safety and
Sustainability
Committee
Fees for serving
on Finance
and Treasury
Committee
Tim Goodacre$166,000 (Chair)-----
Miranda Burdon*$26,795---$427-
Nick Harris**$80,000-$6,000-$11,178 -
Mark Hutton$80,000$15,000 (Chair)$6,000--$9,000 (Chair)
Alan Isaac$80,000-$18,000 (Chair)$12,000--
Nadine Tunley**$80,000---$6,427(Chair)-
Qi Xin$80,000-----
* Miranda Burdon joined the Board on 31 August 2022.
** Nadine Tunley became Chair of the Health & Safety and Sustainability Committee on 6 December 2022, replacing Nick Harris.
(a) Remuneration of the CEO and Employees
The number of employees of the Company (including former employees), not being a Director mentioned above, who received
remuneration and other benefits in excess of $100,000 in the period 1 January 2022 to 31 December 2022 is set out in the
remuneration bands detailed below:
Amount of RemunerationEmployees
$100,001-$110,00011
$110,001-$120,00016
$120,001-$130,0009
$130,001-$140,0007
$140,001-$150,00014
$150,001-$160,0003
$160,001-$170,0007
$170,001-$180,0003
$180,001-$190,0003
$190,001-$200,0006
$200,001-$210,0005
$210,001-$220,0002
$230,001-$240,0002
$250,001-$260,0001
Amount of RemunerationEmployees
$320,001-$330,0002
$340,001-$350,0001
$370,001-$380,0001
$420,001-$430,0001
$470,001-$480,0001
$520,001-$530,0001
$610,001-$620,0001
$640,001-$650,0001
$1,120,001-$1,130,0001
$2,420,001-$2,430,0001
As set out in further detail below, the total remuneration and
value of other benefits paid to the CEO (including under the STI
Scheme and LTI Scheme detailed below) for the year ended 31
December 2022 was $1,127,498 (2021: $908,161).
(b) Components of Compensation – CEO and Nominated Executives
(i) Structure
The Company aims to reward the CEO and nominated executives with a level and mix of remuneration commensurate with their
position and responsibilities within the Group, so as to:
• Reward them for Company and business unit performance against targets set by reference to appropriate benchmarks and key
performance indicators
• Align their interests with those of shareholders
• Ensure total remuneration is competitive by market standards
Remuneration consists of both fixed and variable remuneration components. The variable remuneration component comprises
the STI Scheme and the LTI Scheme with the proportion of fixed and variable components established for the CEO and for each
nominated executive.
Corporate Governance Statement
Scales Corporation Limited
FixedVariable
Nominated Executives
74%26%2022
202171%29%
CEO
202260%40%
202167%33%
(ii) Fixed annual remuneration
Remuneration levels are regularly reviewed to ensure that they are appropriate for the responsibility, qualifications and experience
of the CEO and each nominated executive and are competitive with the market.
The CEO and nominated executives receive their fixed annual remuneration in cash and a limited range of prescribed fringe benefits
such as superannuation, motor vehicle and health insurance. The total employment cost of any remuneration package, including
fringe benefit tax, is taken into account in determining an employee’s fixed annual remuneration.
For the financial year ended 31 December 2022, the CEO received $678,456 (2021: $612,338) in fixed annual remuneration.
(iii) Variable remuneration – STI Scheme
The current STI Scheme is directly linked to the achievement of the annual financial and operational targets. As such it can be
viewed as a ‘profit share’ arrangement. The objective of the STI Scheme is to provide an additional incentive to the executive to
achieve the targets and ensure that the cost to the Company is flexible and in line with the trading outcome for the current year.
Actual STI Scheme payments depend on achieving specific financial targets, determined by the Board, to be aligned with targets
communicated to shareholders. The targets are set at the beginning of the year and are also subject to a number of ‘qualifying
gates’ including liquidity and ESG measures. The financial targets may include a weighted combination of:
• At least 40% for meeting budget or target Underlying Net Profit after Tax Attributable to Shareholders for the Group, within
issued Guidance
• At least 40% for meeting budget or target Underlying Earnings before Interest and Tax for the Group, division or business unit
• Any balance for strategic objectives and other contributions
STI Scheme payments relating to the financial year ended 31 December 2022 are delivered as a taxable cash bonus and are
payable on completion of the annual audited financial statements. It should be noted that the level of remuneration detailed in
this report for the CEO includes the bonus paid in early 2022 relating to the 2021 financial year. The actual amount paid for all
nominated executives in the STI Scheme for the 2021 year was $883,105 and the total liability for 2022 is $936,898, being 83% of
the total pool for the year.
The STI Scheme payment for the CEO relating directly to the financial year ended 31 December 2022 has been approved for
payment, with the CEO receiving $229,438 (2021: $195,866) being 100% of his maximum available bonus. The CEO’s financial
targets were 60% for meeting the target Underlying Net Profit after Tax Attributable to Shareholders for the Group and 40% for
meeting the target Underlying Earnings before Interest and Tax for the Group.
STI Scheme payment values are set as a percentage of total fixed remuneration, being 30% for the CEO and between 10% and 30%
for other nominated executives for the financial year ended 31 December 2022. For the financial year ended 31 December 2022
there were 33 nominated executives in the STI Scheme.
In addition to the STI Scheme the Board reserves the ability to pay ad-hoc bonus payments to any employee where certain outcomes
are considered by the Board to positively impact on long-term success. There were no ad-hoc bonuses accrued for 2022 financial year.
(iv) Variable remuneration – LTI Scheme
The LTI Scheme has been designed to link reward with key performance indicators that drive sustainable growth in shareholder
value over the long-term. The objectives of the LTI Scheme are to:
• Align the CEO and nominated executives’ interests with those of shareholders
• Help provide a long-term focus
• Retain high calibre senior employees by providing an attractive equity-based incentive that builds an ownership of the
Company mindset
• Encourage executives to think and act like owners
The hurdle rate used for the LTI Scheme is an absolute share price growth hurdle, which is more challenging over time than a
relative Total Shareholder Return (TSR) approach. This approach only rewards executives if long-term shareholders also do well.
The remuneration packages for the CEO and nominated executives are all subject to Board approval, following recommendations
from the Nominations and Remuneration Committee.
The mix of fixed and variable ‘at risk’ remuneration payable in respect of 2022 and 2021 was as follows:
Corporate Governance Statement
Annual Report - Year Ended 31 December 2022
Under the LTI Scheme, the CEO and nominated executives are offered an interest free loan which is to be applied to acquire
shares in the Company. Shares acquired under the LTI Scheme are held by a custodian and will only vest in the employee if he
or she is still employed by the Company after 3 years from the date of issue. Once the shares vest, the employee still remains
obligated to repay the outstanding balance of the loan. Often, to fund the repayment of the outstanding loans, executives may,
subject to the approved procedures, sell on-market their LTI vested shares. Over the next 12 months a total of 476,636 shares
vest, on 30 April 2023 and 28 June 2023 (as detailed in the table below). Alternatively, if an employee leaves employment before
the expiry of the 3-year period, the Company is authorised to sell that employee’s shares with the proceeds applied to repay the
balance of the loan, with any deficit covered by the Company and any surplus retained by the Company.
Although performance rights are the most prevalent LTI instrument in Australasia, the Company believes the issue of shares and
loans is more relevant for Scales. The structure is well understood by executives and more closely aligns to the security held by
shareholders. In addition, the economic return achieved by executives is more challenging under the current terms. The Board
will continue to review the outcomes from the current LTI scheme structure and has the ability to adjust the scheme to achieve
the target objectives.
Each employee’s loan amount (which determines how many shares will be acquired) is set as a percentage of their total fixed
remuneration and selected employees will be offered a loan for this amount if the criteria set by the Board are met.
The criteria for share allocation under the Scheme for the 2022 year is the achievement of a gross TSR of 15.0% over the IPO
reference share price (equivalent to $3.33 for 2022).
The Board has retained the discretion to vary the applicable criteria for each offer under the LTI Scheme.
LTI Scheme loan amounts are set as a percentage of total fixed remuneration, being 30% for the CEO and between 10% and
20% for other nominated executives in respect of the financial year ended 31 December 2022. For the financial year ended 31
December 2022, there were 54 nominated executives in the LTI Scheme, an increase of 8 from the 2021 year.
In addition to the original LTI Scheme, selected executives were provided with a one-off refresh opportunity to increase their
participation in the share-based LTI Scheme with additional shares being allocated over a 3-year period, commencing in 2018.
The allocation price was referenced to the share price at the time of implementation. The total number of shares issued in
relation to this refresh was 630,934.This refresh allocation replaced the highly successful original IPO allocation and the Board
believes it was consistent with the objective to encourage executives to think and act like owners.
During the financial year ended 31 December 2022, 327,031 shares were allocated under the LTI Scheme relating to the 2021
financial year, with matching interest free loans of $1,046,499, an average of $3.20 per share. The CEO will receive 61,208 shares
in the Company under the LTI Scheme relating to the financial year ended 31 December 2021, compared to 46,875 shares relating
to the previous year. As at the end of the financial year ended 31 December 2022, the total balance owing under the loans
advanced to the CEO under the LTI Scheme was $1,134,439, with $1,974,434 to senior management and $1,789,527 to other
nominated executives. Note that under current accounting treatment, loans relating to unvested shares are not recorded on the
Company's balance sheet.
In total, the CEO at year end held 229,455 shares under the LTI Scheme which are subject to vesting constraints.
As at year end, total loans for vested shares, which are now full recourse, of $1,559,692 remain outstanding and are recorded on
the Company's balance sheet. The executives are obligated to repay the outstanding loan balance on the sale of the shares or on
termination of employment.
Total shares allocated under the scheme as at the end of the financial year ended 31 December 2022 are as follows:
Number of shares
Grant dateVesting date
Exercise
price ($)
Opening
balanceGrantedForfeited
Vested and
exercised
Closing
balance
30 April 2019 - FY1830 April 20222.71249,179-(8,672)(240,507)-
28 June 2019 - FY18R24 August 20224.06200,738--(200,738)-
30 April 2020 - FY1930 April 20233.20291,344-(9,219)-282,125
28 June 2020 - FY19R28 June 20234.19194,511---194,511
30 April 2021 - FY2030 April 20243.20294,394-(9,766)-284,628
30 April 2022 - FY2130 April 20253.20-327,031--327,031
Total 1,230,166327,031(27,657)(441,245)1,088,295
The total cost of the LTI Scheme relating to share allocations made during 2022 was $722,084. Under accounting standard IFRS 2
Share Based Payments, the total option value of each annual allocation is spread across the 3 years of the vesting period from the
date of issue. As a result, the total expense recorded in the Statement of Comprehensive Income for the financial year ended 31
December 2022 is $608,679. The total cost relating to each annual share allocation will be cumulative.
Corporate Governance Statement
Scales Corporation Limited
The total annual cost of the LTI Scheme relating to shares issued from 2014 to 2022 is detailed below. In addition, the annual
allocation spread across the 3 years of the vesting period is as follows:
Financial YearLTI Scheme YearAllocation Cost at Grant DateAmortisation Expense
2014IPO$469,985$65,000
20152014$31,465$167,850
20162015$517,879$269,719
20172016$572,866$388,732
20182017$1,251,325$846,796
20192018$869,951$865,695
20202019$785,682$697,679
20212020$467,125$726,769
20222021$722,084$608,679
2023*$471,978
2024*$279,190
2025*$63,907
*The forecast years assume no further allocations.
In March 2018 there was a change in tax legislation affecting Employee Share Schemes. This change applied to share allocations
made after September 2018 and consequently first affected shares vesting in 2022 under Scales’ LTI Scheme. The most significant
impacts of the legislative changes were to deem the gains made in share value, by participants, as taxable to them on vesting, and
to provide a tax deduction to the employer for these gains. The gains, per share, are calculated as the difference between the market
price on vesting and the allocation price.
Scales’ Board agreed, for the LTI share allocations vesting in 2022, to fully fund participants’ tax liability, effectively passing on the
actual economic benefit derived from the legislative changes. The net after-tax cost to Scales of funding this liability was $77,077.
(v) Non-Statutory remuneration
The statutory format in which companies are required to present remuneration data may make it difficult for shareholders to
understand the total remuneration actually earned by nominated executives in any year. In addition to the timing and recording of
STI Scheme payments, the requirement for share-based payments to be calculated at the time of grant (not vesting) and accrued
over the vesting period may not then reflect what nominated executives actually received or became entitled to during the financial
year under review.
The following table summarises the total value of vested shares actually received by nominated executives on the date of vesting
and can be compared to the Allocation Cost recorded above.
The value recorded in the following table for each allocation highlights the amount by which the share price on the vesting date
exceeded the performance targets.
Financial YearLTI Scheme YearValue at Vesting DateShare Price at Vesting Date
2017IPO$3,245,760$3.45
20182014$352,066$4.75
20192015$1,110,314$5.01
20202016$1,126,548$4.80
20212017$1,270,022$4.70
20212018 Refresh$253,603$4.88
20222018$651,774$4.85
20222019 Refresh$202,745$4.50
(vi) Employee share ownership scheme
At the time of the Company’s IPO, it established an employee share ownership scheme to facilitate an increase in the level of
participation by employees as shareholders, which improves the alignment of interests between employees and shareholders.
Under the scheme, each eligible employee was offered an interest free loan up to $5,000 to fund 50% of the subscription price for
the share which the employee wished to acquire in the Company. Employees are obliged to repay their loans when the shares are
sold or when they leave the Company.
Corporate Governance Statement
Annual Report - Year Ended 31 December 2022
Principle 6 – Risk Management
Directors should have a sound understanding of the material risks faced by the issuer and how to manage them. The Board should
regularly verify that the issuer has appropriate processes that identify and manage potential and material risks.
RECOMMENDATION 6.1
An issuer should have a risk management framework for its business and the issuer’s Board should receive and review regular reports.
Risk Management Framework
The Board is responsible for ensuring that key business and financial risks are identified, and that appropriate controls and
procedures are in place to effectively manage those risks.
The Audit and Risk Management Committee has overall responsibility for ensuring that the Company’s risk management framework
is appropriate and that it appropriately identifies, considers and manages risks.
Risk management is an integral part of Scales’ business. A risk management framework incorporating a risk register is used to
identify those situations and circumstances in which the Company may be materially at risk and for which risk mitigation activities
are appropriate. This approach is intended to embed a comprehensive, holistic, Group-wide culture of risk awareness in senior
management, supported by a consistent method of identifying, assessing, controlling, monitoring and reporting existing and
potential risks to Scales’ business.
The objectives of the framework are to:
• Provide a consistent and structured way to manage risk across the Company
• Ensure the Company manages effectively the risks it faces in achieving its objectives
• Ensure our people are aware of and meet their responsibilities to identify, evaluate and treat the risks that may prevent or restrict
the Company from achieving its objectives
The Board has delegated responsibility to the Audit and Risk Management Committee to establish and regularly review the
Company’s risk management framework. As part of this framework the Committee is tasked with identifying situations and
circumstances in which the Company may be materially at risk, and initiating appropriate action through the Board or Managing
Director. A risk management policy is overseen by the Managing Director and supports a comprehensive approach to the
management of those risks identified as material to the Company’s operations. Risk management is a standing item on the agenda
for Audit and Risk Management Committee meetings, with detailed reports provided by management.
The Managing Director and Chief Financial Officer have provided the Board, through the Audit and Risk Management Committee,
with assurances that, in their opinion, financial records have been properly maintained, that the financial statements comply with
those accounting standards under which Scales must report and that the statements present fairly Scales’ financial position and
performance. These representations are given on the basis that a sound system of internal controls and risk management is
operating effectively in all material respects in relation to financial reporting.
Insurance
In managing the Company’s business risks, the Board approves and monitors policy and procedures in areas such as treasury
management, financial performance, taxation and delegated authorities.
Scales has insurance policies in place covering most areas where risk to its assets and business can be insured at a reasonable
cost. It also operates a captive insurance subsidiary, Selacs Insurance Limited. Selacs Insurance accesses reinsurance, for the
benefit of the Company, in international insurance markets, including in London.
RECOMMENDATION 6.2
An issuer should disclose how it manages its health and safety risks and should report on their health and safety risks,
performance and management.
Health and Safety
The Health & Safety and Sustainability Committee was initially established to assist the Board to meet its responsibilities under
the Health & Safety at Work Act 2015. In particular, the Committee is responsible for ensuring that health and safety is given an
appropriate level of focus across the Scales Group by regularly reviewing the assurance processes around risk assessment and
mitigation, safety systems, staff capability, staff competency, safety leadership and safety culture. Detailed reporting is provided to
the Committee on lead and lag indicators including health and safety incidents, injury rates by severity, local site health and safety
committee meetings and sick leave. The findings of independent audit reports are provided to the Committee. Further information is
included in the Sustainability Report on pages 16 – 24 of this report.
Corporate Governance Statement
Scales Corporation Limited
Principle 7 – Auditors
The Board should ensure the quality and independence of the external audit process.
RECOMMENDATION 7.1 AND 7.2
The Board should establish a framework for the issuer’s relationship with its external auditors.
The external auditor should attend the issuer’s Annual Shareholders’ Meeting to answer questions from shareholders in relation to
the audit.
External Auditor
Oversight of the Company’s external audit arrangements to safeguard the integrity of financial reporting is the responsibility
of the Audit and Risk Management Committee. Scales maintains an External Auditor Independence Policy to ensure that audit
independence is maintained, both in fact and appearance.
The policy covers the following areas:
• Appointment of the external auditor
• Provision of other assurance services by the external auditor
• Pre-approval process for the provision of other assurance services
• External auditor lead and engagement partner rotation
• Hiring of staff from the external auditor
• Relationships between the external auditor and the Company
• Reporting on fees and non-audit work
The role of the external auditor is to audit the financial statements of the Company in accordance with applicable auditing standards
in New Zealand and to report on its findings to the Board and shareholders of the Company.
The External Auditor Independence Policy is available in the Governance section of the Company’s website. Deloitte Limited is the
Company’s external auditor. Nicole Dring is the current audit engagement partner, having been appointed for the 2021 audit.
All services provided by the Company’s external auditor are considered on a case-by-case basis by Management and the Audit and
Risk Management Committee to ensure there is no actual or perceived threat to independence in accordance with the policy. The
external auditor has provided the Audit and Risk Management Committee with written confirmation that, in its view, it was able to
operate independently during the year.
Fees paid to the external auditors are included in note B2 of the notes to the financial statements. A total of $442,267 was paid for
assurance-related services (including $149,522 paid to Sheehan & Company for the audit of Meateor US LLC and its subsidiaries).
There was no non-assurance work carried out by the external auditors during the year. All non-assurance services provided must
have the prior approval of the Audit and Risk Management Committee.
The effectiveness, performance and independence of the external auditors is reviewed by the Audit and Risk Management
Committee on an ongoing basis. During 2021, and coinciding with the retirement of the then current audit engagement partner,
a formal review of the external auditor was undertaken by the Audit and Risk Management Committee. This review included an
assessment of the auditors’ independence, expertise and partner rotation frequency.
The auditor is regularly invited to meet with the Committee including without Management present.
The auditor has been invited to attend the Annual Shareholders’ Meeting and will be available to answer questions about the audit
process and the independence of the auditor.
RECOMMENDATION 7.3
Internal audit functions should be disclosed.
Internal Audit
Scales' internal audit function is overseen by the Audit and Risk Management Committee. The objective of the internal audit function
is to enhance and protect the organisational value of Scales by providing risk-based and objective assurance, advice and insight.
Internal audit activities are governed by Scales’ Internal Audit Charter, which outlines, amongst other things, the principles, purpose,
authority and scope of the function.
An annual internal audit plan is prepared for approval by the Audit and Risk Management Committee. Where necessary, external
expertise is obtained for specific audit activities.
The internal auditor is regularly invited to meet with the Committee including without Management present.
The Company continues to co-source engagements in the internal audit programme with KPMG, as required. A number of such
engagements are planned for 2023.
Corporate Governance Statement
Annual Report - Year Ended 31 December 2022
Principle 8 – Shareholder Relations
The Board should respect the rights of shareholders and foster constructive relationships with shareholders that encourages
them to engage with the issuer.
RECOMMENDATION 8.1
An issuer should have a website where investors and interested stakeholders can access financial and operational information
and key corporate governance information about the issuer.
Shareholder Relations
Scales’ Board is committed to maintaining open and transparent communications with investors and other stakeholders.
The annual report, NZX releases, governance policies and charters and a variety of corporate information is posted onto the
Company’s website. Recordings of results briefings are available at Investor Presentations in the Investors section of the website.
Each shareholder is entitled to receive a hard copy of each annual report.
The Company has a Shareholder Meetings page in the Investors section on its website. Documents relating to meetings are
available.
Shareholder meetings will be held at a time and location to encourage participation in person by shareholders. Annual
Shareholders’ Meetings historically have been held in Christchurch, reflecting the head office location for the Company and the
historical shareholder base. Since 2021, meetings have been held as 'hybrid meetings', with shareholders having the ability to
either attend in person or to view the meeting, and to also vote and ask questions, virtually. It is the intention to continue this
practice, to enable the widest possible shareholder participation.
RECOMMENDATION 8.2
An issuer should allow investors the ability to easily communicate with the issuer, including providing the option to receive
communications from the issuer electronically.
Electronic Communications
Shareholders have the option of receiving their communications electronically. Contact details for Scales’ head office are
available on the website.
RECOMMENDATION 8.3
Shareholders should have the right to vote on major decisions which may change the nature of the company in which they are
invested in.
Major Decisions
Directors’ commitment to timely and balanced disclosure is set out in its Shareholder Communications and Market Disclosure
Policy and includes advising shareholders on any major decisions. Where voting on a matter is required, the Board encourages
investors to attend the meeting or to send in a proxy vote. Shareholders may raise matters for discussion at the Annual
Shareholders’ Meeting either in person, virtually or by emailing the Company with a question to be asked. Scales conducts voting
at its Annual Shareholders’ Meetings by way of poll and on the basis of 1 share, 1 vote.
RECOMMENDATION 8.4
When seeking additional equity, the Company should offer shares to existing shareholders on a pro-rata basis before offering
shares to other investors.
The Board will take this recommendation into account if considering any future capital raisings.
RECOMMENDATION 8.5
The Board should ensure that the notice of meeting for the Annual Shareholders’ Meeting and any special meeting is posted on
the issuer’s website as soon as possible and at least 20 working days prior to the meeting.
Notice of Meeting
Scales’ Notice of Meeting will be available at least 20 working days prior to the meeting on the Shareholder Meetings page in the
Investors section of the website.
Director Disclosures
Scales Corporation Limited
Director Disclosures
Directors
The following persons were Directors of Scales and its subsidiaries during the year ended 31 December 2022:
Scales Corporation Limited
Andrew BorlandExecutive Director
Tim GoodacreIndependent Chair
Miranda Burdon (appointed 31 August 2022)Independent Director
Nick HarrisIndependent Director
Mark HuttonIndependent Director
Alan IsaacIndependent Director
Nadine TunleyIndependent Director
Qi XinDirector
Fern Ridge Produce Limited
Russell Black (resigned 12 December 2022)
Andrew Borland
Hamish Davis
Andrew van Workum
Geo. H. Scales Limited
Andrew Borland
Steve Kennelly
Kent Ritchie
Longview Group Holdings Limited
Andrew Borland
Andrew van Workum
Meateor Foods Limited
Andrew Borland
Nick Harris
Meateor Foods Australia Pty Limited
Andrew Borland
Tim Goodacre
Meateor Group Limited
Andrew Borland
Nick Harris
Meateor US LLC
Andrew Borland
John Sainsbury
Mr Apple New Zealand Limited
Andrew Borland
Tim Goodacre
Mark Hutton
New Zealand Apple Limited
Andrew Borland
Tim Goodacre
Scales Logistics Australia Pty Limited
Andrew Borland
Tim Goodacre
Scales Employees Limited
Andrew Borland
Mark Hutton
Scales FI Group Holding Pty Limited
Tim Goodacre (appointed 27 September 2022)
Scales Holdings Limited
Andrew Borland
Steve Kennelly
Kent Ritchie
Scales Logistics Limited
Andrew Borland
Steve Kennelly
Kent Ritchie
Selacs Insurance Limited
Andrew Borland
Alan Isaac
Steve Kennelly
Shelby Exports, Inc.
Brett Frankel
Bruce Curtis (resigned 1 January 2022)
Shelby JV LLC
Andrew Borland
John Sainsbury
Brett Frankel
Bruce Curtis (resigned 1 January 2022)
Director Disclosures
Annual Report - Year Ended 31 December 2022
Interests Register
The following entries were made in the interests register of Scales and its subsidiaries during the period 1 January 2022 to
31 December 2022:
Indemnification and Insurance of Directors
As permitted by the Company’s Constitution and in accordance with Section 162 of the Companies Act 1993, the Group has
indemnified all Directors and arranged Directors’ and Officers’ liability insurance which ensures that, to the extent permitted by law,
Directors will incur no monetary loss as a result of actions undertaken as Directors. Certain actions are specifically excluded, for
example, the incurring of penalties and fines, which may be imposed in respect of breaches of the law.
Share Dealings by Directors
Dealings by Directors in relevant interests in Scales’ ordinary shares during the year ended 31 December 2022 as entered in the
Interests Register of Scales are as follows:
Name of DirectorNo. of Shares
Nature of Relevant
Interest
Acquisition/
DisposalConsiderationDate of Acquisition
Andrew Borland61,208Beneficial ownerAcquisition$3.20 per share7 April 2022
General Notice of Disclosure of Interest in the Interests Register
Details of Directors’ general disclosures entered in the relevant interests register for Scales or its subsidiaries during the period 1
January 2022 to 31 December 2022 are as follows:
Scales Corporation Limited
Andrew Borland
The Lincoln University FoundationTrustee
Lincoln University Centennial TrustAdvisor
Rabobank New Zealand Limited (until 23 November 2022)Chair
Miranda Burdon
Emerging Proteins New ZealandChair
Food Nation LimitedDirector
Meadow Mushrooms LimitedChair
Tim Goodacre
Heathcote and District Financial Services LimitedDirector
Koala Cherries Pty LimitedDirector
Prevar LimitedDirector
The Nutritious Kiwifruit Company LimitedChair
Nick Harris
Glenturret Farm LimitedDirector
Harris Farms LimitedDirector
Harris Meats (Cheviot) LimitedDirector
Mark Hutton
Evergreen Partners LimitedDirector
Direct Capital IV Management Limited
Director
Direct Capital V Management Limited
Director
Direct Capital VI Management Limited
Director
New Zealand Rugby Union Incorporated
Board Member
Alan Isaac
Basin Reserve Trust
Chair
NZ Community Trust
Chair
Oceania Healthcare (NZ) Limited
Director
Skellerup Holdings Limited
Director
Wellington Cricket Foundation
Trustee
Wellington Cricket Trust
Trustee
Wellington Free Ambulance
Director
Director Disclosures
Scales Corporation Limited
Nadine Tunley
Energie Fruit Charitable Trust
Trustee
Energie Fruit Company NZ Limited
Director/Shareholder
Horticulture New Zealand Incorporated
CEO
Ngā Pouwhiro Taimatua
Member
Origin NZ Limited
Director/Shareholder
The Manuka Holding Co Limited
Director/Shareholder
Qi Xin
China Resources Enterprise, Limited
Executive
Relevant Interests
The table below records the Scales ordinary shares in which each Director had a relevant interest as at 31 December 2022.
DirectorNumber of Ordinary Shares – BeneficialNumber of Ordinary Shares – Non-Beneficial
Andrew Borland361,410500,000
Tim Goodacre15,625Nil
Miranda BurdonNilNil
Nick Harris100,000Nil
Mark HuttonNil604,961
Alan Isaac25,0003,000
Nadine TunleyNilNil
Qi XinNilNil
Use of Company Information by Directors
No notices were received from Directors pursuant to section 145 of the Companies Act 1993 to use Company information received
in their capacity as Directors, which would otherwise not have been available to them.
Auditor’s Fees
Deloitte Limited has continued to act as the auditor of Scales and its subsidiaries. The amount payable by Scales and its
subsidiaries to Deloitte Limited as audit fees during the year ended 31 December 2022 was $292,745. There were no fees paid to
Deloitte Limited for non-assurance work during the year. In addition, audit fees of $149,522 were payable to Sheehan & Company
during the year ended 31 December 2022, for their audit of Meateor US LLC and its subsidiaries.
Shareholder Information
Spread of Shares
Set out below are details of the spread of shareholders of Scales as at 31 January 2023:
Number of ShareholdersNumber of Shares Held% of Shares Held
Under 2,000 1,357 1,325,408 0.93
2,000 to 4,999 1,536 4,635,560 3.25
5,000 to 9,999 911 5,999,258 4.20
10,000 to 49,999 815 14,745,646 10.33
50,000 to 99,999 77 5,141,913 3.60
100,000 and over 64 110,874,083 77.69
Scales Corporation Limited (continued)
Director Disclosures
Annual Report - Year Ended 31 December 2022
20 Largest Shareholders
Set out below are details of the 20 largest shareholders of Scales as at 31 January 2023:
ShareholderNumber of Shares% of Shares
New Zealand Central Securities Depository Limited31,518,46722.08
Custodial Services Limited24,986,84317.51
China Resources Enterprise, Limited21,500,00015.06
FNZ Custodians Limited9,116,9606.39
New Zealand Depository Nominee Limited2,733,2921.92
John Grant Sinclair & Camille Elizabeth Sinclair2,241,0001.57
JB Were (NZ) Nominees Limited2,190,7521.53
FNZ Custodians Limited1,802,7341.26
PT (Booster Investments) Nominees Limited1,657,6881.16
Scales Employees Limited1,088,2950.76
Forsyth Barr Custodians Limited961,6100.67
Sirius Capital Limited604,9610.42
John Grant Sinclair578,5180.41
Hobson Wealth Custodian Limited527,5630.37
Andrew James Borland & Gina Dellabarca500,0000.35
Investment Custodial Services Limited488,1540.34
Forsyth Barr Custodians Limited481,9980.34
FNZ Custodians Limited369,2200.26
JB Were (NZ) Nominees Limited349,7060.25
Woolf Fisher Trust Incorporated 340,0000.24
Substantial Product Holders
Set out below are details of the substantial product holders of Scales as advised by notice to Scales at 31 December 2022.
The number of shares shown below is as advised in the most recent substantial product holder notices given to Scales and may not
be their holding as at 31 December 2022.
NameNumber of SharesClass of Shares
China Resources Enterprise, Limited21,500,000Ordinary
Harbour Asset Management Limited and Jarden Securities Limited15,084,439Ordinary
The total number of Scales Corporation Limited ordinary shares on issue as at 31 December 2022 was 142,721,868.
Other Information
NZX Waivers
Scales did not rely upon any waivers granted by NZX Limited during the year ended 31 December 2022.
Exercise of NZX Disciplinary Powers
NZX Limited did not exercise any of its powers under Listing Rule 9.9.3 in relation to Scales during the year ended 31 December 2022.
Donations
Donations of $10,490 were made by Scales during the year ended 31 December 2022. No donations were made to political parties.
Glossary
Scales Corporation Limited
AUDAustralian dollars
Average Net Cash
Average net cash is calculated as the average of the cash / debt balances plus the net working capital facility
balance, as at 30 June and 31 December each year
Capital Employed
Capital Employed is calculated as non-current assets plus working capital (excluding cash, overdrafts and
borrowings, NZ IFRS 16 lease liability, dividends declared, derivative assets / liabilities and employee loans)
CRDClimate-Related Disclosures
EBITEarnings Before Interest and Tax
EBITDAEarnings Before Interest, Tax, Depreciation and Amortisation
EPSEarnings Per Share
ERMEnterprise Risk Management
EVPEmployee Value Proposition
Fayman
Australian operations of FI Group Holding Pty Limited (50 per cent held by Scales, equity accounted as a joint
venture) together with ANZ Exports Pty Limited (42.5 per cent held by Scales, equity accounted)
Fern RidgeFern Ridge Produce Limited (100 per cent held by Scales, consolidated)
FOB
Free On Board, a term which means that the price for goods includes delivery at the seller’s expense on to a
vessel at a named port and no further. The buyer bears all costs thereafter (including costs of sea freight)
FYFinancial Year
GAAPGenerally Accepted Accounting Practice
GAPGood Agricultural Practices
GHGGreenhouse Gas
GRASPGLOBAL GAP Risk Assessment on Social Practice
GroupScales Corporation Limited, its subsidiaries and joint ventures
GWPGlobal Warming Potentials
HaHectare, a metric unit of measurement equal to 10,000 square metres
IPOInitial Public Offering
ISOInternational Organization for Standardisation
KPIsKey Performance Indicators
Meateor Australia Meateor Australia Pty Limited (33.33 per cent held by Scales, equity accounted)
Meateor InternationalMeateor Foods Limited and Meateor Foods Australia Pty Limited (100 per cent held by Scales, consolidated)
Meateor NZMeateor Pet Foods Limited Partnership (50 per cent held by Scales, equity accounted as a joint venture)
MTMetric Tonnes
N PATNet Profit After Tax
NPATASNet Profit After Tax Attributable to Shareholders
NZ IFRSNew Zealand equivalents to International Financial Reporting Standards
ProfruitProfruit (2006) Limited (50 per cent held by Scales, equity accounted as a joint venture)
PVRPlant Variety Rights
ROCEReturn on Capital Employed, calculated as EBIT divided by average Capital Employed
ShelbyShelby JV LLC group of companies (60 per cent held by Scales, consolidated)
TCE
Tray Carton Equivalent, a measure of apple and pear weight, equal to 18.6kg packed weight which equates to
18.0kg sale weight
TCFDTask Force on Climate-related Financial Disclosures
tCO2eTonnes of CO2 equivalent
TEUTwenty-foot Equivalent Unit, a unit of cargo capacity to describe container volumes
Underlying profit
measures (EBIT,
EBITDA, NPAT,
NPATAS)
Non-GAAP profit measures which Directors and management use when discussing financial performance.
See page 7 for definition and pages 38-41 for reconciliation to GAAP (NZ IFRS) profit measures.
Glossary
Board of Directors
Tim Goodacre (Chair)
Andrew Borland (Managing Director)
Miranda Burdon (appointed 31 August 2022)
Nick Harris
Mark Hutton
Alan Isaac
Nadine Tunley
Qi Xin
Audit and Risk Management Committee
Alan Isaac (Chair)
Nick Harris
Mark Hutton
Nominations and Remuneration Committee
Mark Hutton (Chair)
Tim Goodacre
Finance and Treasury Committee
Mark Hutton (Chair)
Andrew Borland
Health & Safety and Sustainability
Committee
Nadine Tunley (Chair)
Andrew Borland
Miranda Burdon
Registered Office
52 Cashel Street
Christchurch 8013
New Zealand
Postal Address
PO Box 1590
Christchurch 8140
New Zealand
Telephone
+64 3 379 7720
Website
www.scalescorporation.co.nz
Auditor
Deloitte Limited
Level 4
151 Cambridge Terrace
Christchurch 8013
Bankers
ANZ Bank New Zealand Limited
Level 3
ANZ Centre
267 High Street
Christchurch 8011
Coöperatieve Rabobank U.A., New Zealand Branch
Level 4
32 Hood street
Hamilton 3204
Westpac New Zealand Limited
Level 4
The Terrace
83 Cashel Street
Christchurch 8011
Solicitors
Anthony Harper
Level 9
Anthony Harper Tower
62 Worcester Boulevard
Christchurch 8013
Chapman Tripp
Level 34
PwC Tower
15 Customs Street West
Auckland 1010
Corporate Advisor
Maher & Associates
17 Albert Street
Auckland 1010
Share Registry
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna
Auckland 0622
Directory
Annual Report - Year Ended 31 December 2022
Directory
52 Cashel Street, Christchurch 8013, New Zealand
www.scalescorporation.co.nz
Scales Corporation Limited
Printed on 100% recycled paper
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.