rt
l Repo
Annua /14
2013
Season Overview
2013/14 was the year Psa had the biggest impact on the New Zealand kiwifruit
industry. Fruit and service payments were down 17 percent to $800.8 million due
to a 55 percent fall in Gold volumes.
However, the reduced volumes, combined with strong market pricing, resulted
in grower returns at record or near-record levels across all categories.
More broadly, this past year looks likely to have been the bottom of the Psa cycle
with Gold3 looking positive on orchards – volumes are projected to reach over
50 million trays by 2018 – and orchard values recovering.
This favourable position is backed up by a positive market
outlook – strong growth in developing economies, a
growing global middle class and increasing demand
for healthy food – which presents significant long-term
growth opportunities.
New Zealand kiwifruit is the global category leader, thanks
to our integrated industry model, which enables us to
deliver a high-quality product reinforced by a leading
brand. As the kiwifruit category leader, Zespri earns a
significant premium over its competitors – a premium which
Zespri returns to its growers and shareholders each year.
However, we compete not just in the kiwifruit category but
across the global fruit industry and our challenge is to grow
kiwifruit’s share of the global fruit bowl.
Our future is not without risk. We face continued pressure
from the New Zealand dollar and volatility in the global
economy, the ever-present threat of pests and diseases,
and continued consolidation in global supply chains,
which create both competitive and regulatory pressures.
At orchard level, it is important that growers factor these
risks into their business planning. At industry level, the best
way for us to manage these risks is to retain and strengthen
our integrated structure, as well as continually innovating to
develop our branded, high-quality product offering.
Contents
Financial Highlights................................................1
Zespri Chairman & CEO’s Report ........................ 2
Industry Performance
Zespri Alternative Revenue Statement...................... 10
New Zealand Pool Costs as a
Percentage of Pool Revenue..................................... 11
Corporate Governance........................................12
Financial Statements and Statutory Information
Auditor’s Report........................................................17
Income Statements and
Statements of Comprehensive Income.................... 18
Balance Sheets........................................................ 19
Statements of Changes in Equity.............................. 20
Statements of Cash Flows........................................ 21
Notes to the Financial Statements..................... 22 - 61
Statutory Information
Shareholder Information................................... 62 - 63
Directors’ Disclosures....................................... 63 - 67
Employee Remuneration.......................................... 68
Financial Highlights
New Zealand-grown fruit and service payments (including loyalty premium)
2013/14
2012/13
$800.8 million
$959.1 million
Variance
(17%)
– Per tray supplied
$9.26
$9.32
(1%)
Net profit after tax
$17.2 million
$7.6 million
128%
New Zealand-grown Orchard Gate Return (OGR) per hectare
$49,385 (average)
$51,153 (average)
(3%)
– Green
$42,659
$37,959
12%
– Organic Green
$40,989
$34,846
18%
– Gold
$90,813
$101,973
(11%)
– Green14
$25,438
$18,916
34%
$89.4 million
$78.2 million
14%
– Interim
4.0
4.0
– Final
7.0
1.0
Equity
Dividend per share (cents)
– Total
11.0
5.0
Percentage of available profit
80%
84%
Zespri global kiwifruit sales
$1.349 billion
$1.561 billion
(23%)
Export earnings (New Zealand-grown)
$0.921 billion
$1.100 billion
(16%)
97.3 million
110.1 million
(12%)
86.1 million
101.3 million
(15%)
68.9 million
70.4 million
(2%)
3.1 million
3.2 million
(1%)
Zespri global volume (trays sold)
New Zealand-grown
– Green
– Organic Green
– Gold
11.1 million
24.6 million
(55%)
– Green14
0.4 million
0.4 million
(16%)
– Other
2.5 million
2.8 million
(12%)
Non-New Zealand-grown
11.2 million
8.8 million
27%
– Green
9.0 million
6.7 million
35%
– Gold
2.2 million
2.1 million
7%
Financial Calendar
Financial year-end: 31 March 2014
Annual Report circulated: 23 June 2014
Deadline for receipt of proxies for Annual Meeting:
1pm, 21 July 2014
Notice of
Annual Meeting
The Annual Meeting of Shareholders of Zespri Group
Limited will take place at 1pm on Wednesday 23 July 2014
at Baycourt Theatre, Durham Street, Tauranga.
Annual Meeting: 23 July 2014
Indicative dates for dividend payments:
December (interim) and August (final)
1
Zespri Chairman
& CEO’s Report
Peter McBride C H A I R M A N | Lain Jager C H I E F
EXECUTIVE OFFICER
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
This past year, the New Zealand kiwifruit industry has delivered extraordinarily
good results in the face of some very unfavourable factors. A 55 percent
reduction in Gold volumes due to Psa and ongoing foreign exchange volatility
cost the industry around $280 million.
This was partially offset by strong pricing and a favourable market mix, which
meant at an individual level growers received record or near-record returns.
Results and global economic environment
From last year, Green per-tray OGR is up 13 percent
from $4.62 to $5.23 and Organic Green is up
14 percent from $6.18 to $7.07. Gold per-tray
returns are at record levels – $12.91 a tray,
$90,813 a hectare – due to the short supply this
year with the changeover to Gold3.
Despite continued economic pressure on consumers
around the world, demand for our premium-branded
Zespri Kiwifruit remains strong. A dry summer in 2012/13
delivered smaller-profile, high-taste fruit, that was well
received around the world. Importantly, Gold3 was well
received by markets and our learning over the past year
positions us well to deliver great tasting fruit to markets in
2014 and beyond.
These strong returns are due to actions right across the
supply chain – growers delivering high-taste fruit that
our consumers value, the lowest onshore fruit loss ever
recorded for Green, solid post-harvest performance,
and strong pricing and tailored marketing strategies in
each of the 53 countries where we sell our fruit.
On the supply side, the impact of Psa on Gold volumes
was significant in 2013/14. Gold volumes were down
55 percent from 24.6 million trays in 2012/13 to
11 million trays.
With only around 500 hectares of Hort16A remaining at
March 2014, growers have grafted or planted more than
4,000 hectares of Gold3, showing their confidence in this
new Gold variety. More than 60 percent of growers now
grow a licensed variety.
With the majority of Hort16A growers grafted over to
Gold3 and a significant number of growers also choosing
to graft from Green to Gold3, we now have more than
4,000 hectares of this variety in the ground. This means that
total Gold volumes are forecast to increase dramatically over
coming seasons to build to 50 million trays by 2018.
It is heartening to see a sense of optimism return to the
industry after three tough years in the wake of Psa in
New Zealand. However, Psa is now with us for the long
term and there will be good and bad years with the disease.
As an industry, we should be proud of how we have worked
together to manage a dire threat to our shared future
collective livelihoods.
Green volumes were almost unchanged at 68.9 million trays
in 2013/14, slightly down from 70.4 million trays last year,
with Organic Green volumes unchanged at 3.1 million trays.
Orchard gate return per hectare
OGR per hectare NZD '000
83.8
83.1
102.0
90.9
90.8
60.9
24.1
34.7
46.1
30.1
2007/08
Green
39.4
29.6
2008/09
Organic Green
All figures are NZ IFRS figures
2 Zespri Annual Report 2013/14
39.4
32.2
2009/10
Gold
37.5
2010/11
33.1 35.5
2011/12
42.7 41.0
38.0 34.8
25.4
18.9
2012/13
2013/14
Green14
Note: 2012/13 and 2013/14 season results for Green14 and Gold reflect lower yields from new orchard production.
Zespri Chairman & CEO’s Report (continued)
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Collaborative marketing update
Strong collaboration supported significant gains in supply
chain efficiencies. Since 2009, the cost of quality has halved
in fx-adjusted total dollar terms; $60.9 million has been
saved over this period. On a per-tray basis, this is an average
saving of 48 cents or 46 percent across all varieties and a
standout 58 cents a tray for Green; this is significant and a
major contributor to the increasing OGR over this period.
Fruit loss was the lowest ever recorded in Europe and Japan.
Collaborative marketing continues to play an
important role in the ongoing structure of the industry.
In 2013/14, 16 companies operated 20 market sales
programmes, selling around 2 million trays of non-Zespri
New Zealand kiwifruit.
Thirteen companies operated as sales agents for the
Hayward and Hayward Organic grower pools for a mix
of Zespri and own-branded programmes. Another three
companies obtained export authorisation from Kiwifruit
New Zealand to export their Gold PVR varieties to
10 locations.
There are many contributors to this improvement, not the
least being the shorter crop which allowed for sales to finish
earlier than they did in previous years. However, there have
been many incremental and significant improvements made
across the supply chain, which have also contributed.
Zespri supports maximising the wealth of New Zealand
kiwifruit growers, as well as innovation in cultivar
development in New Zealand. Accordingly, we continue to
support the role collaborative marketing plays in providing a
channel to market third-party cultivars.
These include:
• optimising the length of the selling season
• industry focusing on picking quality
• harvesting fruit for optimal storage
•improving coolchain management, particularly in
New Zealand coolstores
•implementing more sophistication in New Zealand
and in-market inventory management
Green quality costs (10yr average FX)
Per submit tray
•significantly enhancing and extending suppliers’
accountability for the quality of fruit being sold in
Europe and Japan.
$1.40
$1.20
Total volume was down 15 percent from 101.3 million trays
to 86.1 million trays. Following on from this, fruit and service
payments were down 17 percent to $800.8 million from
$959.1 million in 2012/13, with a significant part of this due
to the reduction in Gold volume of 13.5 million trays and a
drop of $252 million in overall revenue.
$1.00
Discounts
$0.80
Quality claims
Condition checking
$0.60
Repacking
$0.40
Offshore fruit loss
$0.20
The 2013/14 corporate profit after tax is $17.2 millon,
which is more than double the $7.6 million profit recorded
in 2012/13. The previous year’s profit was affected by a
provision for a legal penalty in China and the effects of
Psa funding.
$0.00
Repacking and
condition checking
Onshore fruit loss
2008 2009 2010 2011 2012 2013
New Zealand-grown
Total volume sold
Tray equivalents (m)
72.7
67.9
58.8
2.3
2006/07
Green
2.8
2.4
2007/08
Organic Green
2.9
22.0
3.3
2.5
2008/09
Gold
73.3
69.9
21.9
19.3
16.7
2.3
71.9
29.1
21.1
1.4
2009/10
Other
70.4
3.3
3.9
2010/11
3.5
68.9
24.6
3.3
2011/12
3.2
2.8 0.4
2012/13
3.1
11.1
2.5 0.4
2013/14
Green14
3
Zespri Chairman & CEO’s Report (continued)
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Movements NZD per TE supplied
Green OGR: 2013 vs 2008
$0.10
$0.25
$1.23
$3.68
2008 Season
Price
Mix
Freight
—$0.08
—$0.12
Promotion
Other Costs
$0.37
$0.08
Onshore
Fruit Loss/
Other Income
Loyalty
Movements NZD per TE supplied
$6.27
2008 Season
FX
Post-harvest
costs
$0.32
$0.19
$0.08
$0.22
Other Costs
FX
Onshore
Fruit Loss/
Other Income
Post-harvest
costs
$1.79
$0.65
$0.36
FX
Onshore
Fruit Loss/
Other Income
Post-harvest
costs
2013 season
$7.07
—$0.25
Price
Gold OGR: 2013 vs 2008
Movements NZD per TE supplied
-$0.07
$5.23
—$0.45
Organic Green OGR: 2013 vs 2008
$0.31
$0.18
$5.27
Mix
Promotion
$0.74
—$0.42
2013 season
$12.91
—$0.87
$5.41
2008 Season
Price
Mix
Promotion
Other Costs
2013 season
Movements NZD per TE supplied
Green14 OGR: 2013 vs 2012
$3.03
$0.72
$0.64
$6.65
2012 Season
Price
4 Zespri Annual Report 2013/14
Mix
Promotion
—$1.11
—$0.12
—$0.12
Other Costs
FX
Onshore
Fruit Loss/
Other Income
$0.09
Post-harvest
costs
$9.77
2013 season
Zespri Chairman & CEO’s Report (continued)
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
2013/14 issues
Market access
In the past few seasons, several non-compliance issues
have arisen around the world in relation to the distribution
of New Zealand kiwifruit. While these issues have primarily
resulted from the improper actions of independent third
parties, the Board is committed to ensuring that the
Zespri reputation and business is not adversely affected
by such types of incidents, and that the company and
our business partners are legally compliant. This means
improving internal processes and transparency of the
legal obligations throughout the distribution chain to
ensure that opportunities for unlawful conduct by third
parties are mitigated as far as possible. This will also ensure
that Zespri’s business and culture are consistent with the
operations of multinational businesses and the laws of the
countries in which Zespri Kiwifruit is sold.
Compliance-related requirements have become
increasingly complicated as authorities, retailers and
consumers around the world focus on food safety
and sustainability.
In this regard, the company is working with external
professional advisors to develop an in-depth understanding
of the applicable customs and duty compliance regimes in
all markets where Zespri is not the importer of record.
We have conducted duty audits on a number of customers
in relation to the 2013 season ahead of appointing
customers for 2014. This type of compliance audit and
other control improvements through areas of risk in the
global supply chain are being, and will continue to be,
incorporated into standard business practices going
forward to mitigate against future non-compliance issues.
Specific issues in this past financial year include:
•
SFO investigation: The Serious Fraud Office (SFO)
launched an investigation into Zespri in October 2013.
The investigation is ongoing.
•
Taiwan: Zespri has appointed two new importers
in Taiwan, as well as selling directly to retail. We will
operate a direct sales model in Taiwan for the 2014
season as we have done in previous seasons.
Changing distribution arrangements in our seventh-largest
market so close to the season start was challenging and we
thank the Taiwan trade for working with us collaboratively
through the process. Changing partners after many years
may have some impact on Taiwan volumes but, in the
context of global supply and demand, we are confident this
will not adversely impact grower returns.
In a time of unrelenting scrutiny and social media pressure,
retailers have become extremely risk averse and require
more compliance assurance from suppliers, with a resulting
cost in time and money for the industry. However, the
scale of the New Zealand kiwifruit industry offers growers
a significant competitive advantage by providing major
retailers with systems of secure supply and safe, socially
responsible food production. This is why Zespri again ran a
comprehensive residue-testing programme in 2013/14 to
test every New Zealand-supplying orchard for residues of
over 300 agrichemicals and to detect any potential issues
before fruit entered the Zespri inventory.
Zespri Global Supply
Serving our customers and consumers with Zespri-branded
kiwifruit all year round continues to be a vital part of our
marketing strategy. Globally, non-New Zealand volumes
increased from 8.8 million trays in 2012/13 to 11.2 million
trays this year and Zespri Global Supply profit increased
from $5.3 million last year to $9.9 million in 2013/14.
This is a 87 percent increase in profit from a 27 percent
increase in volume.
Zespri Gold supply from Italy and France has been
impacted by Psa and the changeover to Zespri SunGold.
However, it is pleasing to report that this year saw the first
volumes of Italian-origin Zespri SunGold with 100,000 trays
of great-quality fruit. Volumes are set to increase strongly
over time.
Meanwhile, Green volumes from Italy increased strongly,
from 6.6 million trays last season to 8.9 million trays this
season – an increase of 36 percent. A particular highlight
was the massive increase in sales of Italian-sourced Zespri
Green Kiwifruit in China from 90,000 trays last year to
1.3 million trays this season.
Global kiwifruit sales marketed by Zespri
2004/05
2005/06
$997.3
$945.2
$24.9
$45.9
$1,045.0
2006/07
$1,082.2
2007/08
$80.4
$81.6
$151.6
$1,299.8
2008/09
$1,505.0
2010/11
$98.2
1522.2
2011/12
1455.7
2012/13
1,204.5
2013/14
New Zealand-grown kiwifruit
$141.8
$1,359.3
2009/10
Non-New Zealand-grown kiwifruit
$144.4
$119.9
$105.7
NZD (m)
NZ FRS figures to 2005/06 and NZ IFRS figures from 2006/07
5
Zespri Chairman & CEO’s Report (continued)
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Foreign exchange
Hedging Gain/Loss
Foreign exchange (FX) movements subtracted $21.3 million
from grower returns in 2013/14, compared to the previous
year. However, grower returns would have been a further
$88.5 million lower without the hedging policy for this
period, which shielded returns from FX movements
compared to the spot rate.
100
87.2
94.7
73.9
80
60
40
$ millions
Zespri operates a hedging policy, progressively taking cover
on behalf of New Zealand kiwifruit growers up to three
years into the future. While we sell in 53 markets around the
world, Zespri is exposed primarily to three currencies – the
Yen, Euro and US dollar. The New Zealand dollar is strong
relative to all these currencies at present.
42.7
27.2
10.5
20
19.6
88.5
5.2
0
-20
-40
Zespri has operated within its hedging policy for
the 2013/14 year.
-50.4
-60
2004 2005 2006 2007 2008 2009 2010 2011
2012
2013
Hedging Gain/Loss
While we cannot know the future, we anticipate that the
relatively strong performance of the New Zealand economy
this year will see the Kiwi dollar continue at high levels
through 2014. Ongoing global volatility makes future years
very hard to predict, other than noting that FX rates have
historically tended to cycle. We are nearing the high point
of historical rates for the Yen, US dollar and Euro so there is
reason to hope for some relief.
Zespri in the context of the global economy
Demand for Zespri products remained robust through the
downturn following the 2008 global financial crisis.
The world’s economy is slowly emerging from the global
financial crisis, although that recovery is characterised by
significant volatility and risks on a variety of fronts. While the
International Monetary Fund is predicting global growth
to be slightly higher in 2014 when compared with that
of 2013, at around 3.7 percent and rising to 3.9 percent
in 2015, our own planning factors in the potential for
continued global uncertainty.
Zespri Group Limited
Equity and dividend returned
$90
$72.8
$0.31 *
$60
$30
$15
$0
$67.8
$0.16 *
$45
$74.0
$72.8
$77.9
$0.16 *
Equity NZD (m)
6 Zespri Annual Report 2013/14
2006/07
2008/09
* (adjusted
$0.40
$0.35
$0.30
$0.25
$0.14
2007/08
Dividend NZD
$89.4
$0.20
*
$0.08
2005/06
$78.2
$0.20 *
$0.10 *
2004/05
$71.9
$85.2
2009/10
for 5 for 1 share split in 2010)
2010/11
$0.11
$0.10
2011/12
2012/13
$0.15
$0.10
$0.05
$0.05
2013/14
NZ FRS figures to 2005/06 and NZ IFRS figures from 2006/07
$0.00
Dividend NZD
Equity NZD (m)
$75
$77.0
Zespri Chairman & CEO’s Report (continued)
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Zespri strategy
The global kiwifruit category – challenges
The core of our strategy is to develop demand for
our products ahead of supply coming on and avoid
overexposure to particular markets. So we are investing
heavily in developing markets in China, Southeast Asia and
the Middle East, while we have also increased our focus on
Brazil, India and France. While more established markets
such as Japan, Korea, Taiwan, Spain, Germany, Belgium
and the Netherlands will grow more slowly, they remain an
integral part of our future. We are excited about the growth
prospects for Zespri SunGold3 in these traditional markets.
Kiwifruit remains a niche product in the global fruit bowl,
which brings significant challenges for winning shelf space
and consumer attention in markets.
Globally, the kiwifruit industry is seeing a significant
shift in production as volumes in China increase, while Psa
impacts on production outside of China. The growth in
volumes in China and an increasing number of new
varieties – in particular competitor gold varieties – means
that, at some point in the next decade, China is likely to
become a significant exporter of kiwifruit, particularly
to Asia, and a competitor to northern hemisphere
kiwifruit-growing countries.
Long-term challenges
The New Zealand kiwifruit industry faces a number of
challenges it must overcome to achieve the sustainable
competitive advantage we need in the global market to
underpin long-term grower wealth.
More broadly, the global kiwifruit industry is evolving with a
strong focus on quality improvements and increased use of
storage technologies to lengthen selling windows. Despite
efforts to improve quality and storage, the kiwifruit category
remains a commodity category. Around 70 percent of the
global volume of kiwifruit is sold in the same continent in
which it is grown, with over 80 percent of globally traded
kiwifruit consumed in the northern hemisphere.
These challenges can be broadly divided into
two areas: firstly, the challenges common to growing in
New Zealand; and, secondly, challenges specific to the
global kiwifruit category.
Growing in New Zealand – challenges
In our opinion, the greatest constraint to the growth
of the global kiwifruit category is that kiwifruit products
are characterised by variable quality, with around
45 brands of kiwifruit sold internationally (not including
in China). Very simply, this means that many consumers
have disappointing eating experiences with kiwifruit, and
are discouraged from buying kiwifruit again. Often, the
kiwifruit on the shelf is of very poor quality or the taste is
unsatisfactory. High quality and taste are core to Zespri’s
brand strength, providing a key competitive advantage that
supports our premium price position.
New Zealand kiwifruit producers face significant challenges,
specifically – distance-to-market, relatively high production
costs, a small domestic market, a lack of scale and the
relatively high cost of capital.
The global food business also continues to become more
challenging as international trends mean continuing
consolidation of supply chains – shipping, distribution,
logistics providers and retail – which pushes risk and
compliance costs back onto fragmented suppliers.
Because of this, New Zealand kiwifruit producers struggle
to compete globally on a commodity/lowest-cost basis and
instead have adopted a branded value-added strategy.
New Zealand-grown kiwifruit (excluding loyalty payments)
Total fruit and service payments
NZD (m)
521.5
548.4
532.7
525.1
547.2
530.6
442.1
440.8
355.7
174.5
160.4
21.5
23.6
11.2
2006/07
Green
11.1
2007/08
Organic Green
27.1
12.2
2008/09
Gold
271.2
269.6
218.2
353.6
179.7
30.3
9.0
2009/10
Other
30.3 24.6
31.2
2010/11
2011/12
17.5
28.5
17.7 3.7
2012/13
30.1
17.2 5.7
2013/14
Green14
All figures are NZ IFRS figures
7
Zespri Chairman & CEO’s Report (continued)
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
New varieties
The value of investing in the new variety breeding
programme was demonstrated by the success of Hort16A
before Psa was confirmed in New Zealand, and the speed
at which Gold3 has become the leading Gold variety for
the future.
Growers have embraced a multi-cultivar future, with over
60 percent of New Zealand kiwifruit growers now growing
at least one licensed variety. By adding new products
alongside our leading Zespri Green offering, we can attract
new consumers into the category, earn supermarket shelf
space, and offer growers the opportunity to diversify or
grow their businesses by grafting or planting part of their
orchards in higher-risk but higher-returning new varieties.
The success of the New Zealand kiwifruit industry will be
reflected in its rate of innovation as compared to that of its
competitors. Continued investment in Zespri’s new variety
breeding programme, in partnership with Plant & Food
Research, is critical as the New Zealand kiwifruit industry
competes in a rapidly evolving global market place.
Internationally, a tremendous amount of work is under way
in the kiwifruit breeding space. Our challenge is to go faster.
As well as investing in the breeding programme, Zespri
is actively monitoring what third-party varieties are being
developed around the world. As part of this, we will
continue to explore partnering opportunities globally.
Organisational development
Zespri is a relatively small organisation with around 160
employees based in Mount Maunganui, New Zealand, and
around 120 people based in markets around the world.
We have just four significant offices – Mount Maunganui,
China, Japan and Belgium. Our other operations around the
world are very small, each usually comprising of a Market
Manager and a small support team.
Despite being relatively small from a resourcing and
human capability perspective, Zespri has many of the
characteristics of a much larger business; it operates
in 53 markets, with complex information systems and
associated legal and taxation complexity.
The company has moved from a regional structure to a
global structure in recent years and the Global Sales and
Marketing team is now led by Daniel Mathieson, President
of Global Sales and Marketing. As we move to big company
disciplines, we are working to strengthen our internal
processes, systems and culture. Despite the extent of this
change, our focus remains on sustainable partnerships that
grow value for all supply chain participants.
This organisational development lays the foundation for the
future as Gold3 volumes increase to 50 million trays by 2018,
we develop our 12-month supply, and we introduce new
products and markets. This will empower decision-making
at a market level and encourage employees globally to own
and continuously improve processes, while simultaneously
strengthening core global legal and financial controls.
8 Zespri Annual Report 2013/14
Zespri is not driving radical change overnight. These
improvements will be part of business as usual and link
to Zespri’s strategic vision and values.
Outlook
While not without its challenges, the future is bright.
We expect relatively stable Green volume combined with
strong demand should support Green returns over the
next several seasons, even in the face of adverse foreign
exchange conditions.
As the industry recovers from Psa, we anticipate Gold
volume will grow strongly over the next several seasons.
Market mix and moderating pricing will see Gold returns
trend back towards the $7 range, depending on foreign
exchange rates and seasonal factors, as we head towards
50 million trays. To achieve this it is important that we
develop demand across a range of markets ahead of supply
coming on and it is for this reason that we continue to
support our traditional markets, as well as investing heavily
across a number of high-growth emerging markets.
Bigger picture, committing to a premium/branded strategy,
rather than a commodity/lowest-cost strategy, is the only
realistic sustainable option for the New Zealand kiwifruit
industry. The competitive disadvantage of our high cost of
production, distance-to-market and lack of scale leave us no
other option.
This means our strategy must remain to develop and
market the world’s leading portfolio of kiwifruit products
for 12 months of the year.
Our industry structure, combined with a clear market
strategy, allows us to collectively take a long-term view of
the future and invest with confidence in the sustainable,
competitive advantages that will underpin our future.
Lain Jager
CHIEF EXECUTIVE OFFICER
Peter McBride
CHAIRMAN
9
Industry Performance
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Zespri Alternative Revenue Statement
2013/14
2012/13
$’000
1,256,298
(62,305)
1,193,993
10,528
922
1,205,443
Gross sales of New Zealand-grown kiwifruit
Promotional rebates, claims and discounts
Net sales of New Zealand-grown kiwifruit
Net fruit return through collaborative marketers
Other pool income
Revenue attributable to New Zealand pools 1
Less pool costs:
Freight
Insurance (onshore and offshore excluding hail)
Hail self-insurance
Duty and customs
Other direct pool costs – offshore
Other direct pool costs – onshore 5
KVH funding 6
Gold Psa levy
Promotion
Interest income 2
KNZ fees 3
NZKGI funding 3
Total pool costs
114,221
1,873
168
58,917
40,867
24,286
980
68,549
(867)
318
770
2011/12
$’000
$’000
1,519,707
(78,417)
1,441,290
14,437
2,120
1,457,847
134,555
2,551
378
76,143
55,019
30,302
89,288
(373)
285
902
1,596,943
(96,586)
1,500,357
21,886
1,793
1,524,036
148,429
2,512
188
87,167
70,794
31,331
849
92,949
(899)
244
751
310,082
389,050
434,315
895,361
1,068,797
1,089,721
New Zealand fruit and service payments
Zespri margin 4
779,793
115,568
934,157
134,640
952,762
136,959
Other non-pool revenue
Psa funding
Royalty income from new cultivars 5
Research grant co-funding
Zespri income attributable to New Zealand-grown kiwifruit
Onshore costs:
Innovation
Class 2 Mainpack Subsidy/Green 46 top-up 8
Psa funding
Amortisation of new cultivars
Onshore overheads
623
844
3,059
120,094
1,012
461
4,311
140,424
1,137
14,200
5,523
157,819
Return from fruit sales
12,381
43
1,148
35,749
13,198
382
4,205
304
32,205
18,018
506
8,498
36,305
49,321
40,434
30,339
50,294
57,454
32,676
63,327
46,865
47,627
Add operating surplus from other business units:
Non-New Zealand-grown supply (before taxation) 7
Gold Defence fund
Income from sale of Zespri licences (before taxation)
EBIT before loyalty premium
9,853
805
3,660
44,657
5,266
524
3,537
42,003
4,591
307
3,554
56,079
Net interest income
Zespri profit before tax and loyalty premium
3,443
48,100
4,355
46,358
3,277
59,356
Loyalty premium
20,999
24,991
27,658
Zespri Group profit before taxation
Tax expense
Zespri Group profit after taxation
27,101
9,856
17,245
21,367
13,798
7,569
31,698
11,170
20,528
779,793
20,999
934,157
24,991
952,762
27,658
800,792
959,148
980,420
Offshore costs
Total fruit and service payments
Loyalty premium
Total fruit and service payments
(including loyalty premium)
The Alternative Revenue Statement is used for management information and is the basis for the calculation of the Supplier Return. Foreign exchange
gains and losses are allocated differently from the way that they are allocated in the Financial Statements in that they are apportioned to the relevant
line items above. The Alternative Revenue Statement is consistent with the business segment analysis in Note 31 of the Financial Statements.
Notes 1 to 8: Refer to page 11.
A reconciliation of key measures included above to amounts disclosed in the Financial Statements is available on the company website.
10 Zespri Annual Report 2013/14
Industry Performance (continued)
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Cause of Change – 2013/14 vs 2012/13
$m
118.3
Sales price/size profile/offshore fruit loss
Volume
258.8
21.3
Foreign exchange
4.9
Other income/costs
4.2
New Zealand Psa funding
3.9
Taxation
Total
148.7
The ‘Cause of Change’ chart outlines the decrease in the return to the
industry in 2013/14 to $818 million from $967 million in 2012/13.
$’000
Total fruit and service payments 2012/13
(including loyalty premium)
Add Zespri net profit after tax 2012/13
Return to industry 2012/13
Sales price/size profile
Foreign exchange
Other income/costs
New Zealand Psa funding
Taxation
Return to industry 2013/14
Total fruit and service payments 2013/14
Add Zespri loyalty premium 2013/14
Total including loyalty premium 2013/14
Add Zespri net profit after tax 2013/14
Return to industry 2013/14
New Zealand Pool Costs
as a Percentage of Pool Revenue
The interest income is made up of the following: interest income
of $1.72 million, interest paid of $0.79 million and an interest
charge from Zespri of $0.06 million. This results in an overall
interest income to the pools of $0.87 million.
2
959,148
7,569
966,717
Movements due to change in:
Volume
Net revenue attributable to the pools includes sales of
New Zealand-grown kiwifruit, income from collaborative
programmes and other pool income as noted in the Alternative
Revenue Statement.
1
118,324
(258,791)
(21,288)
4,930
4,203
3,942
818,037
779,793
20,999
800,792
Kiwifruit New Zealand (KNZ) is the statutory board funded
under regulation 39 of the Kiwifruit Export Regulations 1999.
New Zealand Kiwifruit Growers Incorporated (NZKGI) is the
kiwifruit grower representation body and Zespri Group Limited is
required by The Commodity Levies (Kiwifruit) Order 2012 to pay
a levy to NZKGI on behalf of New Zealand growers. The rate for
the 2013/14 year was $0.009 per tray of kiwifruit exported to
markets other than Australia. In 2011/12 NZKGI was funded
directly from the National Pool rather than through a levy as in
2012/13 and 2013/14.
3
Zespri margin is calculated in accordance with the New Zealand
Supply Agreement, being 5.00 percent of net sales (excluding
collaborative marketing programmes) and 7.75 percent of fruit
payments to suppliers for 2013/14. For 2012/13 and 2011/12
the Zespri margin was calculated as 6.00 percent of net sales
(excluding collaborative marketing programmes) and 6.00 percent
of fruit payments to suppliers.
4
17,245
2013/14
2012/13
2011/12
Zespri margin (net of loyalty premium) 4
7.8%
7.5%
7.2%
Freight
9.5%
9.2%
9.7%
Insurance
0.2%
0.2%
0.2%
Duty and customs
4.9%
5.2%
5.7%
Other onshore direct costs
2.0%
2.1%
2.1%
Other offshore direct costs
3.4%
3.8%
4.6%
Gold Psa Levy
0.1%
0.0%
0.1%
Promotion
5.7%
6.1%
6.1%
Interest 2
(0.1%)
0.1%
0.0%
0.1%
(0.1%)
0.1%
KNZ/NZKGI 3
Total fruit and service payments
(including loyalty premium)
Revenue attributable to New Zealand pools ($’000) 1
Within other direct pool costs – onshore
is the 3.00 percent royalty on net sales for
Gold3, Gold9 and Green14 pools.
This royalty is made up of three
components: 1.35 percent of this royalty
is paid to The New Zealand Institute for
Plant & Food Research Limited, 0.65
percent transferred to a defence fund
reserve in Zespri Group, and 1.00 percent
royalty income in Zespri Group. The 1.00
percent royalty income from new cultivars
is included in the Zespri Group profit.
5
818,037
66.4%
65.8%
64.3%
100.0%
100.0%
100.0%
1,205,443
1,457,847
1,524,036
In 2013/14, the pool funded Kiwifruit Vine
Health Inc (KVH). The rate was $0.01 per
tray Class 1 Green and $0.02 per tray
Class 1 Gold exported to markets other
then Australia.
6
Further analysis of non-New Zealandgrown supply is available within the
segment reporting in Note 31 of the
Financial Statements.
7
Green 46 top-up only applied to
2012/13 season.
8
11
Corporate Governance
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Good corporate governance is not only about written policies and
procedures – it is about acting and leading with integrity and
maintaining a high standard of business ethics. The Board considers
it essential that a high standard of corporate governance practices
are in place across the organisation, starting with the Directors and
Executive team.
This section provides an overview of the key elements of the
Company’s corporate governance framework.
Legislative and regulatory framework
Zespri Group Limited is regulated by the provisions of the
Companies Act 1993 and other relevant legislation governing the
duties of directors, including financial reporting obligations, offering
and trading in securities, employment, environment, and health and
safety. As the Company also issues shares, it is required to comply
with all requirements of the Securities Act 1978 and therefore share
transactions and some company publications are subject to scrutiny
by the Financial Markets Authority.
The Company and its Directors are bound by the Zespri Group
Limited Constitution, which contains more detail regarding shares in
the Company, transfer and voting of shares, procedures for
shareholder meetings, and director election and tenure (among
other matters). The Kiwifruit Export Regulations 1999 contain
provisions that also impact on the governance of the Company,
which are monitored and enforced by the industry regulator,
Kiwifruit New Zealand. Under the Regulations:
•Zespri must not discriminate between suppliers and potential
suppliers in relation to the decision to purchase kiwifruit or
the terms of purchase, other than on commercially
justifiable grounds;
•Zespri must not carry out any activity, nor own nor operate
assets, that are not necessary for the core business of
exporting kiwifruit, unless approved by the majority of
providers of capital (being the shareholders or the kiwifruit
suppliers as the case may be), and only if the risks of the
activity are minimised for those who have not given approval;
•Zespri must comply with certain specific information
disclosure requirements regarding its activities; and
•Zespri must publish disclosure accounts which are audited
and available on request.
The Company has policies and procedures in place to ensure
compliance with all of the aforementioned obligations and, at the
end of each financial year, both the Chief Financial Officer and the
General Counsel provide an assurance to the Board regarding
legislative and regulatory compliance.
The Zespri Group Limited Constitution also contains provisions
regarding confidentiality of shareholder proxy and voting
information which exceed legal and regulatory requirements,
and reflect standards of corporate governance in relation to
shareholder democracy that go beyond those required of
publicly listed companies.
The Board
The Company’s eight-member Board is made up of five Directors
drawn from the kiwifruit industry and three independent Directors.
The convention of having at least three independent Directors is in
line with good governance practice, and collectively the eight
Directors bring together a wide range of experience, from
international marketing and agribusiness, to kiwifruit industry
knowledge and financial expertise. Background profiles of each
Director are included in the 2013/14 Annual Review document,
on the Company’s corporate website (www.zespri.com) and the
Company’s grower website, The Canopy (www.zespricanopy.com).
The Board’s task is to govern the Company, in particular by
12 Zespri Annual Report 2013/14
providing strong strategic direction to sustainably maximise
returns for shareholders and growers, while at the same time
safeguarding the interests of shareholders and other relevant
stakeholders as appropriate.
Each Board member is issued with a comprehensive Director’s
Manual which contains detailed information on the corporate
governance regime that applies to the Company, and the
Directors’ duties and responsibilities in that regard. This Manual
is kept up to date by the General Counsel and recirculated to
Directors periodically.
Under the Company’s Constitution, at least one-third of the
Directors must retire by rotation at each Annual Meeting. The Board
has generally sought to organise the rotation of directors so that one
independent and two grower Directors retire each year. For the past
several years, the Board has focused on succession planning,
particularly for independent Directors, and adopted a policy of
formally reviewing the contribution of each independent Director,
the desired mix of skills for the future that should be contributed by
the independent Directors and the general desirability of rotation
among the independent Directors. The intention for the future is that
where an independent Director intends to step down, such
retirement would occur in sufficient time to enable the Board to
recruit and appoint a new independent director with the desired
skills as assessed by the Board. Any Director appointed by the Board
to fill a vacancy is required by the Constitution to be confirmed by
shareholders at the subsequent Annual Meeting. Where the Board
considers that an incumbent independent Director should continue
on the Board then this assessment will be conveyed to shareholders.
Details of Directors’ remuneration and interests are recorded on
pages 63 to 67, under Directors’ Disclosures and Director and
Employee Remuneration.
Board committees
The Board has an Audit and Risk Management Committee which
reviews and monitors the Company’s overall risk (both financial and
non-financial) and its risk management strategies. It reviews the
effectiveness of, and monitors compliance with, all internal controls
including those relevant to finance and treasury and supports
management in reviewing key accounting judgements and that the
financial statements are consistent with New Zealand Generally
Accepted Accounting Practice (NZ GAAP). The Committee also
reviews and monitors both the internal and external audit processes.
Jonathan Mason has chaired this Committee since January 2014.
Mr Mason has 30 years of work experience as a finance executive
with multinational companies including Exxon Mobil, International
Paper, and Fonterra (see full biography in Annual Review).
The Board’s Organisation and Administration Committee oversees
the appointment and remuneration of senior executives and
strategic employment matters, such as general employee
remuneration and incentive policies, and organisational
development strategies. This Committee also maintains oversight
of health and safety issues and compliance. Tony Marks has been
Chairman of this Committee since 2012.
In 2011, the Board determined that much of the work of the
Innovation Advisory Forum was overlapping with the Psa R&D
Steering Group, and accordingly adopted a smaller subcommittee
for Board oversight of Innovation activities in areas other than
Psa. This subcommittee is known as the Board Innovation
Subcommittee. David Pilkington was Chairman of the
Innovation Advisory Forum and is Chairman of the Board
Innovation Subcommittee.
In 2012, the Board created the Supply Chain Committee to oversee
the multi-year supply chain change programme to develop the best
kiwifruit supply chains globally by drawing on world-class supply
chain knowledge and practice to optimise the New Zealand Kiwifruit
supply chains, both globally and by market, for the purpose of
Corporate Governance (continued)
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
maximising grower returns. This Committee is chaired by
Tony De Farias and consists of at least three Zespri Directors and up
to five external members appointed for their expertise in supply
chain, logistics, consultancy, post-harvest, growing, or fruit
handling. David Pilkington and Craig Greenlees are current Board
representatives, and external members of this committee are
Tim Chrisp, Michael Franks, Tony Hawken, Alister Hawkey
and John Shaskey.
Minutes are kept of all Board and Board Committee meetings, and
all Directors receive copies of the Board Committee papers.
A table showing frequency of meetings of the Board and its
Committees, and attendance by Directors at those meetings,
is shown on page 63.
Directors also represent the Company in other industry bodies
including the Industry Advisory Council (IAC) and Kiwifruit Vine
Health Incorporated (KVH).
Conflicts of interest
With five industry Directors on the Board, governance of the
Company is partly in the hands of individuals who have their own
private interests in the wider kiwifruit industry. The Company
benefits greatly from the industry experience and knowledge that
these Directors bring to the boardroom table. However, it also
means that conflicts of interest need to be managed carefully.
The Company has comprehensive policies and practices to manage
actual and potential conflicts of interest that meet, and in some cases
exceed, Companies Act 1993 requirements:
•All Directors, including independent Directors, are required
to declare actual or potential conflicts of interest as soon as
they arise. These are discussed and managed as necessary at
the beginning of each Board meeting, and are recorded in
the Company’s Interests Register. Details of all relevant matters
to 31 March 2014 which have been entered in the Interests
Register by individual Directors are set out under Directors’
Disclosures on pages 63 to 67.
•As a matter of good governance practice at Board meetings,
Directors with any relevant interests excuse themselves from
the meeting while issues which may present significant
conflicts are discussed or decided upon. Board papers and
minutes are edited for each Director to remove references to
any matters on which they have a significant conflict.
A Conflicts of Interest Policy is also in place for Zespri employees.
Like Directors, employees are required to declare actual or potential
conflicts of interest on a regular basis to ensure these are managed
appropriately, and an interests register is maintained and monitored.
In certain circumstances, a conflict of interest may not be
manageable using the steps noted above. In these cases, Directors
may need to choose between continuing as a Director and their
other business interests.
Share trading
Comprehensive approval and disclosure policies and procedures
are in place for trading in Zespri Group Limited shares by Directors
and employees. This ensures that Directors and employees only
complete such transactions in a market where potential stakeholders
have had a reasonable opportunity to be fairly informed of
knowledge which may affect the price of shares. Pursuant to these
policies and procedures, Directors may transact:
•only with the approval of an independent Director acting as
Approval Officer (currently David Pilkington); and
At the end of each Board meeting, the Board considers whether
there is any price-sensitive information known to the Board which
should preclude Directors or employees from transacting in
securities. Any approvals previously granted are suspended where
the Board believes that there may be price-sensitive information
known to the Directors or employees. In the 2013/14 financial year,
Director trading was suspended a number of times due to various
issues such as new variety licence allocations, forecasts, margin
discussions and issues in China.
Details of shares held by Directors and their relevant interests
are published on the Company’s grower website, the Canopy
(www.zespricanopy.com).
Ethics
High ethical standards are of critical importance to the Company,
and the Board periodically receives presentations and/or training in
respect of ethical issues for Directors. In addition to these sessions,
the Director’s Manual addresses ethical issues across a number of
areas such as legislative requirements, conflicts of interest and best
practice guidance. Directors and employees are governed by a
Code of Conduct which is periodically reviewed and updated to
ensure the maintenance of high standards.
Confidentiality
In order to support compliance for both Directors and employees
with their obligations under law, comprehensive policies on
confidential information and privacy are in place.
Delegation of Board power
Under the Companies Act 1993, the business and affairs of a
company must be managed by, or under the direction or
supervision of, the Board of the company; however, decisionmaking on all but a few critical matters may be delegated to
management. Given the size and complexity of the Company’s
operations, many activities are delegated to management, pursuant
to a comprehensive Delegated Authorities Policy which specifies
the kinds of decisions and approvals that can be made by managers
at various levels within the Company, and those which are reserved
for the Board or one of its Committees. A number of other internal
policies are in place which guide certain aspects of day-to-day
management of the business and sit below the Delegated
Authorities Policy.
Evaluating Board performance
The Board undertakes a comprehensive self-evaluation process to
assess performance on an annual basis, and works with the Institute
of Directors to provide training and evaluation of individual
Directors. Feedback from both the self-evaluation and the Institute
of Directors is discussed with a view to continuously improving
performance. Any individual Director’s training requirements may be
identified at this time also.
Director remuneration
The Company’s Constitution provides that shareholders shall from
time to time set the maximum total amount payable to Directors as
Directors’ fees. The amount actually paid to Directors is determined
by the Board up to the maximum set by shareholders, and the total
Directors’ fees may be distributed among them in such manner as
the Board determines periodically. Details of Director remuneration
are set out on page 64.
•only when no information which may impact on the share
price is known to Directors or employees but not known to
the industry as a whole.
13
Corporate Governance (continued)
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Consideration of Director’s fees is undertaken by the Director
Remuneration Committee (DRC), which comprises three elected
shareholder members – John Bourke (Chair), John Cook and
John Griffin – and one independent member appointed by the
Board, Warren Larsen. The Director Remuneration Committee
considers Director remuneration and governance succession issues,
including mechanisms for the identification and guidance of future
industry leaders. The 2013/14 report of this Committee is included
with the Annual Report.
The Board works closely with the DRC in respect of initiatives around
succession planning for the industry as a whole, including
supporting participation by future young leaders in governance and
leadership programmes such as the Kellogg Rural Leaders
Programme operated by Lincoln University and the Fonterra
Governance Development Programme.
Insurance
During the year, the Board resolved to continue with Directors’ and
Officers’ liability insurance cover, with the premium costs met by
Zespri Group Limited.
Approval of major transactions
At the 2010 Annual Meeting, the Company obtained a five-year
approval to enter into certain major transactions. Such transactions
are: acquisitions or disposal of assets whose value is more than
half the value of the Company’s assets before the transaction; or a
transaction that has the effect of the Company acquiring rights or
interests or incurring obligations or liabilities, the value of which
is more than half the value of the Company’s assets before
the transaction.
Transactions identified under this authority include entering into the
seasonal funding facility with our banking syndicate, conversion of
foreign currency into New Zealand dollars, entering into the annual
New Zealand Supply Agreement and entering into freight contracts
with shipping companies.
Information disclosure requirements under the
Kiwifruit Export Regulations
Regulation 12 of the Kiwifruit Export Regulations 1999 requires that
the Company must publicly disclose financial statements as defined
in the Kiwifruit Export Information Disclosure Handbook.
The principal disclosures required are included within the Industry
Performance section of the Annual Review or within the Financial
Statements of the Annual Report. A full copy of the special-purpose
Financial Statements, including the certificate from the auditor,
are available from the Company’s offices as required under
the regulations.
Compliance issues
Zespri maintains an internal audit function which regularly monitors
compliance with all of the above policies and procedures, with
any exceptions being reported to the Audit and Risk
Management Committee.
In the past few seasons, several non-compliance issues have arisen
around the world in relation to the distribution of New Zealand
kiwifruit (see notes below under China Customs litigation and
Taiwan distribution channels below). While these issues have
primarily resulted from the improper actions of independent third
parties, the Board is committed to ensuring that the Zespri
reputation and business is not adversely affected by such types of
incidents, and that the Company and the business partners are
legally compliant. This means improving internal processes and
understanding of the legal obligations throughout the distribution
chain to ensure that opportunities for unlawful conduct by third
14 Zespri Annual Report 2013/14
parties are mitigated as far as possible, and that the Company’s
business and culture are consistent with the operations of
multinational businesses and the laws of the countries in which
Zespri Kiwifruit is sold.
In this regard, the Company is working with external professional
advisors to develop an in-depth understanding of the applicable
customs and duty compliance regimes in all markets where Zespri is
not the importer of record, and conducted duty audits on a number
of customers in relation to the 2013 season ahead of appointing
customers for 2014. This type of compliance audit and other control
improvements through areas of risk in the global supply chain are
being, and will continue to be, incorporated into standard business
practices of the Company going forward to mitigate against future
non-compliance issues.
China Customs litigation
The financial results for the 2012/13 financial year were significantly
impacted by provisions for potential penalties and legal costs
relating to litigation in China arising from failures by Zespri’s former
Chinese importers to pay import duty on Zespri Kiwifruit in prior
seasons. In addition, an employee of Zespri’s Chinese subsidiary
company, Zespri Jia Pei Fruit (Shanghai) Co.,Ltd, was convicted and
jailed in relation to some of these matters. Zespri’s subsidiary
company and the employee appealed the Court decisions but were
unsuccessful and thus the penalties remain applicable and are
reflected in the financial accounts for 2013/14. These penalties
included a fine in the amount of RMB5M, and a statement that an
unspecified amount of illegal gains should be repaid.
As a consequence of our assessment of the risks following the China
Customs matters but also in consideration of the context of industry
growth, global financial markets and the industry’s exposure to
emerging markets, the Company is moving to rebalance the
emphasis in systems and authorities to strengthen the global
compliance framework without losing our execution capability.
Initiatives which form part of this workstream include a customs audit
of all direct sale markets/customers to ensure that all Zespri
importers are acting in accordance with international best customs
practice, and an organisational development initiative to ensure
there is improved oversight of the intersections between different
business teams and their functions.
Serious Fraud Office (SFO) investigation
In October 2013, the New Zealand SFO advised that it had
commenced an investigation into Zespri Group Limited, and served
the Company with two very broad-ranging notices requiring the
production of electronic and physical information. The Company
has engaged experienced senior counsel in respect of this matter,
and a subcommittee of the Board has been established to oversee
this issue together with the Company’s General Counsel. Beyond
such information requests, the SFO has not provided any further
information or details regarding the focus or timeframes for their
inquiry; however, advice from independent experts suggests that,
based on the breadth of the information requests, work on this issue
could continue for a further 12 to 18 months.
Taiwan distribution channels
In the course of a routine audit by Taiwan Customs authorities, the
Company learned that its former Taiwanese importers had been
fraudulently creating documentation for customs purposes; such
documentation included Zespri logos and forged signatures of
Zespri personnel. Upon learning of this situation, the Company
terminated the relationships with the importers and conducted a
review of its Taiwan operations. New distributors have been
appointed for the 2014 season following an extensive due diligence
process, and the Company does not anticipate any material impact
on returns as a result of this issue.
Financial Statements
and Statutory
Information
For the year ended 31 March 2014
Your Directors take pleasure in presenting the Financial
Statements of the Company and its subsidiaries (collectively
Zespri Group) and Statutory Information for the year ended
31 March 2014.
For and on behalf of the Board of Directors
P J McBride
CHAIRMAN
J P Mason
DIRECTOR
15
This page was
left intentionally blank
16 Zespri Annual Report 2013/14
Auditor’s Report
Report on the Company and Group financial statements
We have audited the accompanying financial statements of Zespri Group Limited (“the Company”) and the group, comprising the Company and its
subsidiaries, on pages 18 to 61. The financial statements comprise the balance sheets as at 31 March 2014, the income statements and statements of
comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other
explanatory information, for both the Company and the Group.
Directors’ responsibility for the Company and Group financial statements
The directors are responsible for the preparation of Company and Group financial statements in accordance with generally accepted accounting
practice in New Zealand and International Financial Reporting Standards that give a true and fair view of the matters to which they relate, and for such
internal control as the directors determine is necessary to enable the preparation of Company and Group financial statements that are free from material
misstatement whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these Company and Group financial statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the Company and Group financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Company and Group financial statements.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company and Group’s preparation
of the financial statements that give a true and fair view of the matters to which they relate in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and Group’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Our firm has also provided other services to the Company and Group in relation to advisory, compliance and regulatory services. Subject to certain
restrictions, partners and employees of our firm may also deal with the Company and Group on normal terms within the ordinary course of trading
activities of the business of the Company and Group. These matters have not impaired our independence as auditor of the Company and Group. The
firm has no other relationship with, or interest in, the Company and Group.
Opinion
In our opinion the financial statements on pages 18 to 61:
–
comply with generally accepted accounting practice in New Zealand;
–
comply with International Financial Reporting Standards;
–
give a true and fair view of the financial position of the Company and the Group as at 31 March 2014 and of the financial performance and cash
flows of the company and the group for the year then ended.
Report on other legal and regulatory requirements
In accordance with the requirements of sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993, we report that:
we have obtained all the information and explanations that we have required; and
–
in our opinion, proper accounting records have been kept by Zespri Group Limited as far as appears from our examination of those records.
21 May 2014
Auckland
17
Income Statements and Statements
of Comprehensive Income
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Income Statements
Group
Note
Operating revenue
Other revenue
Operating expenses
Other net gains/(losses)
Operating profit/(loss) before taxation
2(a)
2(b)
3
5
Finance revenue
Finance expense
Net profit before taxation
6(a)
6(b)
Taxation (expense)/income
Net profit after taxation
7(a)
Earnings per share: basic and diluted
8
2014
$’000
Parent
2013
$’000
1,218,641 1,448,474
6,383
6,614
(1,309,794) (1,530,856)
108,228
93,114
23,458
17,346
5,188
5,818
(1,545)
(1,797)
27,101
21,367
(9,856)
(13,798)
17,245
7,569
$0.143
$0.063
2014
$’000
2013
$’000
836,630 1,014,884
2,074
1,448
(839,839) (1,006,928)
(622)
(441)
(1,757)
8,963
4,848
25,252
(14)
(374)
3,077
33,841
(878)
(3,929)
2,199
29,912
$0.018
$0.248
Statements of Comprehensive Income
Group
2014
$’000
Profit for the year
Other comprehensive income in the year
Total comprehensive income for the year
17,245
17,245
Parent
2013
$’000
7,569
7,569
2014
$’000
2,199
2,199
The above Income Statements and Statements of Comprehensive Income should be read in conjunction with the accompanying notes.
18 Zespri Annual Report 2013/14
2013
$’000
29,912
29,912
Balance Sheets
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Balance Sheets at 31 March
Group
Parent
2014
$’000
2013
$’000
2014
$’000
2013
$’000
132,725
36,071
7,933
106,833
20,076
16,973
320,611
155,688
28,880
5,951
121,946
10,454
12,860
335,779
109,802
96,259
105,278
14,745
326,084
141,316
72,576
120,394
5,290
339,576
12
15(a)
17
18
7(b)
19
13
2,898
97,963
2,649
16,422
3,616
405
123,953
444,564
2,077
122,272
3,567
9,256
4,481
45
141,698
477,477
2,898
97,828
5,279
44
106,049
432,133
2,077
121,894
5,151
499
94
129,715
469,291
20
111,700
4,620
30,222
106,423
252,965
110,243
7,073
34,429
120,642
272,387
157,888
2,456
15,458
105,278
281,080
148,071
2,280
19,787
120,394
290,532
20
21
7(b)
15(b)
1,322
2,886
97,963
102,171
1,331
755
2,507
122,272
126,865
203
97,828
98,031
121,894
121,894
10(b)
9(a)
9(b)
18,017
1,263
70,148
89,428
444,564
18,017
683
59,525
78,225
477,477
18,017
1,263
33,742
53,022
432,133
18,017
683
38,165
56,865
469,291
Note
Current assets
Cash and cash equivalents
Accounts receivable
Income tax receivable
Other financial assets
Prepayments
Inventories
24(b)
12
15(a)
13
16
Non-current assets
Accounts receivable
Other financial assets
Property, plant and equipment
Intangibles
Deferred tax assets
Investments in subsidiary companies
Prepayments
Total assets
Current liabilities
Accounts payable and accruals
Income tax payable
Provisions
Other financial liabilities
21
15(b)
Non-current liabilities
Accounts payable and accruals
Provisions
Deferred tax liabilities
Other financial liabilities
Equity
Share capital
Other reserves
Retained earnings
Total liabilities and equity
The above Balance Sheets should be read in conjunction with the accompanying notes.
The Financial Statements were authorised for issue by the Directors of Zespri Group Limited on 20 May 2014.
Authorised for, and on behalf of, the Board:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P J McBride
J P Mason
ChairmanDirector
19
Statements of Changes in Equity
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Statements of Changes in Equity
Share capital
Notes
Retained earnings
Other reserves
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
18,017
18,017
59,525
66,792
683
-
-
17,245
7,569
-
-
(580)
-
-
-
Total
2014
$’000
2013
$’000
349
78,225
85,158
-
-
17,245
7,569
(334)
580
334
-
-
16,665
7,235
580
334
17,245
7,569
-
(6,042)
(14,502)
-
-
(6,042)
(14,502)
-
-
(6,042)
(14,502)
-
-
(6,042)
(14,502)
18,017
18,017
70,148
59,525
1,263
683
89,428
78,225
2013
$’000
Group
Attributable to owners of the parent:
Balance at 1 April
Comprehensive income:
Net profit after taxation
Transfers to/(from)
retained earnings
Total comprehensive income
for the year
Transactions with owners:
Dividends paid during the year
Total transactions with owners
in their capacity as owners
9
11
Balance at 31 March
Share capital
Notes
Retained earnings
Other reserves
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
18,017
18,017
38,165
23,089
683
-
-
2,199
29,912
-
-
(580)
-
-
-
Total
2014
$’000
2013
$’000
349
56,865
41,455
-
-
2,199
29,912
(334)
580
334
-
-
1,619
29,578
580
334
2,199
29,912
-
(6,042)
(14,502)
-
-
(6,042)
(14,502)
-
-
(6,042)
(14,502)
-
-
(6,042)
(14,502)
18,017
18,017
33,742
38,165
1,263
683
53,022
56,865
2013
$’000
Parent
Attributable to owners of the parent:
Balance at 1 April
Comprehensive income:
Net profit after taxation
Transfers to/(from)
retained earnings
9
Total comprehensive income
for the year
Transactions with owners:
Dividends paid during the year
Total transactions with owners
in their capacity as owners
Balance at 31 March
11
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
20 Zespri Annual Report 2013/14
Statements of Cash Flows
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Statements of Cash Flows
Group
Note
Cash flows from operating activities
Cash was provided from:
Receipts from sales 1
Receipts from sales of Zespri licences
Receipts from Psa co-funding
Receipts from research co-funding
Other sundry items
Insurance receipts – reinsurance assets
Proceeds from derivatives
Proceeds from inter-company derivatives
14(a)
5
Cash was applied to:
Payments to contracted suppliers – New Zealand-grown fruit
Payments to contracted suppliers – non-New Zealand-grown fruit
Payments to other suppliers and employees
Insurance claims
Taxation paid
Net cash available from/(used in) operating activities
Cash flows from investing activities
Cash was provided from:
Dividends received
Proceeds from sale of property, plant and equipment and intangibles
23
Cash was applied to:
Investments in subsidiaries
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash (used in)/available from investing activities
Cash flows from financing activities
Cash was provided from:
Interest received
Cash was applied to:
Interest paid
Dividend payments
11
Net cash used in financing activities
Net increase in/(decrease) cash held
Effect of exchange rate changes on foreign currency cash balances
Add opening cash brought forward
Ending cash carried forward
Represented by:
Cash and cash equivalents
1
24(b)
Parent
2014
$’000
2013
$’000
2014
$’000
1,207,948
4,117
2,563
3,201
518
107,483
1,325,830
1,436,465
4,452
13,351
4,887
5,962
1,767
88,983
1,555,867
832,236
4,117
2,320
107,483
946,156
1,012,377
4,452
13,351
1,844
88,983
1,121,007
811,725
114,764
387,021
168
13,047
1,326,725
(895)
962,842
85,109
476,996
379
10,045
1,535,371
20,496
813,524
157,043
168
970,735
(24,579)
968,793
137,052
379
2,959
1,109,183
11,824
29
29
62
62
13,121
682
13,803
(13,774)
2,099
937
3,036
(2,974)
470
5,151
5,621
(5,621)
691
691
19,316
5,070
5,070
5,584
5,584
4,730
4,730
5,011
5,011
90
6,042
6,132
(1,062)
229
14,502
14,731
(9,147)
2
6,042
6,044
(1,314)
186
14,502
14,688
(9,677)
(15,731)
(7,232)
155,688
132,725
8,375
3,763
143,550
155,688
(31,514)
141,316
109,802
21,463
119,853
141,316
132,725
132,725
155,688
155,688
109,802
109,802
141,316
141,316
2013
$’000
-
20,007
20,007
Cash receipts from sales includes inter-company sales for the parent.
The above Statements of Cash Flows should be read in conjunction with the accompanying notes.
21
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
1.
Summary of significant accounting policies
Statement of compliance
The Financial Statements are those of the parent company, Zespri Group Limited (the Company), and its subsidiaries (collectively
Zespri Group). The Company is domiciled in New Zealand and is a profit-oriented entity incorporated under the Companies Act 1993
of New Zealand. Zespri Group’s primary activity is the purchase, export and marketing of fresh kiwifruit.
The Financial Statements of the Company have been prepared in accordance with the Financial Reporting Act 1993.
The Financial Statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP).
They comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and with International Financial
Reporting Standards (IFRS).
The Financial Statements and Notes to the Financial Statements are presented in New Zealand dollars, the functional currency of the
Company and presentational currency of the Group.
Basis of preparation
The following accounting principles have been followed in the preparation of the consolidated Financial Statements:
–
historical cost basis, modified by the revaluation of certain items as identified in the specific accounting policies below;
–
accrual accounting.
Considering the current situation and developments in the industry regarding Psa (Pseudomonas syringae pv actinidiae) (see Note 20), the
Directors and management have reviewed the Zespri Group current business plans, financial forecasts and related assumptions for the next
12 months and beyond, and are satisfied that it is appropriate for reliance to be placed on the fact that Zespri Group is a going concern.
Use of estimates and judgements
The preparation of Financial Statements and related disclosures that conform with NZ IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
Financial Statements. Judgement is applied in determining estimates.
Critical accounting estimates in applying significant accounting policies
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the
related actual results.
Judgements and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. Because judgement is applied, actual results could differ from estimates
made. Estimates and assumptions are reviewed periodically and the effects of any changes are reflected immediately in the Income
Statements.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are in accounting for new variety licence revenue, insurance, provisions, derivatives and contingent liabilities.
Assumptions applied, methods used and uncertainties pertaining to these areas are discussed in the related specific accounting policies
below, and in Notes 2, 7, 14, 15, 21, 24, 25 and 28.
Specific accounting policies
The principal accounting policies adopted in the preparation of the Financial Statements are set out below:
(a)
Basis of consolidation
The consolidated Financial Statements include the results and balances of all entities over which the Company and its subsidiary
companies (refer Note 19) have control. All companies in Zespri Group are wholly owned by companies within the Group and, as such,
are ultimately fully controlled by the Company.
All subsidiaries have been incorporated and consolidated at inception by Zespri Group companies. No subsidiaries have been
obtained by acquisition. The results and balances of subsidiaries are included in consolidated Financial Statements of Zespri Group
from the date of inception.
All significant inter-company transactions are eliminated on consolidation.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Company.
(b)
Indirect tax
The Income Statements, Statements of Comprehensive Income, Statements of Cash Flows, Statements of Changes in Equity and
Balance Sheets have been presented so that all components are stated net of indirect tax (such as Goods and Services Tax (GST) and
Value Added Tax (VAT)) where such taxes can be reclaimed from the relevant authorities with the exception of receivables and payables,
which include indirect tax invoiced.
(c)
Revenue recognition
Revenue is recognised as follows:
(i)Sale of goods and licences: Sales revenue (including collaborative marketing sales) is recognised when the risks and rewards of
ownership of the goods or licences have passed to the customer. Sales revenue reflects the fair value of the sale of goods, net of
rebates and discounts.
(ii)Interest: Interest income is recognised on a time-proportion basis using the effective interest method.
22 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
1.
Summary of significant accounting policies (continued)
(iii)Dividends: Dividend income is recognised when the right to receive payment is established.
(iv)Sale of services: Revenue from the provision of services is recognised to the extent that the service has been provided.
Services revenue reflects the fair value for the sale of services, net of rebates and discounts.
(d)
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily
take a substantial period of time to prepare for the intended use or sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the Income Statements in the
period in which they have been incurred.
(e)Co-funding
Co-funding is recognised as follows:
(i)Research co-funding relating to research and development costs is recognised over the period necessary to match it with the
costs that it is intended to compensate.
Where research and development (R&D) expenditure is expensed in the Income Statements, co-funding income to which it
relates is shown separately as income. Where R&D costs are capitalised as intangible assets, co-funding income is netted off the
expenses being capitalised.
(ii)In 2012/13, co-funding was received from the New Zealand Kiwifruit Industry to contribute to the cost of Psa in New Zealand.
Expenditure relating to Psa is expensed in the Income Statements; co-funding income is shown separately as income.
Co-funding income is recognised only when there is reasonable assurance that any conditions attached to the co-funding have
been complied with, and that the co-funding will be received.
(f)
Earnings per share
Basic earnings per share are calculated by dividing net profit after tax by the weighted average number of shares outstanding during
the year. In the calculation of diluted earnings per share, the weighted average number of shares outstanding is adjusted assuming
conversion of all potential dilutive shares.
(g)Taxation
(i)Current tax payable or receivable:
Current tax is calculated by reference to the amount of income taxes payable or receivable in respect of the taxable profit or tax
loss for the period in the tax jurisdictions in which Zespri Group’s companies operate. It is calculated using tax rates and laws that
have been enacted or substantively enacted by the reporting date.
Current tax for the current and prior period is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
Income taxes payable or receivable are shown net where there is a legal right of offset for balances recognised in the same tax
jurisdiction.
(ii)
Deferred tax:
Deferred income tax is provided in full using the liability method on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts. Deferred income tax is determined using tax rates and laws that have been enacted or
substantially enacted by balance date and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except when the timing of the
reversal of the temporary difference is controlled by Zespri Group and it is probable that the temporary difference will not reverse
in the foreseeable future.
Deferred income tax assets or liabilities are shown net where there is a legal right of offset for balances recognised in the same
tax jurisdiction.
(iii)
Current and deferred tax for the period:
Current and deferred tax is recognised as an expense or income in the Income Statements, except when it relates to items
credited or debited directly to equity, in which case the related tax is also recognised directly in equity.
(h)
Foreign currency translation
(i)
Functional and presentation currency:
Transactions in each of Zespri Group’s entities are measured using the currency of the primary economic environment in which
the entity operates. The functional currency of foreign operations is also considered in light of its dependence on the Company.
All Zespri Group companies are currently deemed to have New Zealand dollars as both their functional and presentational
currencies.
(ii) Transactions and balances in functional currency:
Foreign currency transactions are translated into the functional currency of each entity using the exchange rates prevailing at the
date of the transaction. Foreign exchange gains and losses resulting from the settlement of transactions during the year and from
the translation of monetary assets and liabilities at balance date are recognised in the Income Statements.
Non-monetary items held at historical cost are translated using the historical exchange rate at the date of the transaction.
23
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
1.
Summary of significant accounting policies (continued)
(i)
Share capital
On the issue of shares, the value of the shares issued at the issue price is recognised in shareholders’ equity.
Costs associated with the issue of shares are recognised (net of any tax deduction) as a deduction from the amount collected from the
share issue.
(j)Dividends
Dividends are reported as a movement in shareholders’ equity in the period in which they are declared by the Board of Directors.
(k)
Other reserves
Retained earnings are set aside in other reserves where the Board of Directors resolves to separate certain funds from those able to
be distributed from retained earnings. A separate Defence Fund Reserve has been transferred from retained earnings to hold funds
for use in defending any challenges on Plant Variety Rights (PVRs). This fund will be increased by a royalty equivalent of between
0.50 percent and 0.65 percent of the sales value of the fruit from new cultivars. This reserve transfer will be reviewed by the Directors
on a yearly basis.
Any movement in other reserves is by transfer to or from retained earnings as related revenues are earned and costs are incurred.
(l)
Cash and cash equivalents
Cash and cash equivalents include cash on hand and demand deposits, and short-term investments that are readily convertible to
known amounts of cash.
Bank overdrafts are shown within borrowings in current liabilities.
(m) Accounts receivable and payable
Accounts receivable are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
method, less any provision for doubtful debts.
Collectability of accounts receivable is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off.
A provision for doubtful debts is established when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivable.
The movement in the provision is recognised in the Income Statements. When a receivable is uncollectable, it is written off against the
provision. Subsequent recoveries of amounts previously written off are credited against other expenses in the Income Statements.
Accounts payable are initially measured at fair value and subsequently measured at amortised cost.
(n)Inventories
Inventories are valued at the lower of cost or net realisable value. Costs incurred in bringing inventory to its present location and
condition are accounted for at purchased cost on a first-in first-out basis. Borrowing costs are excluded.
(o)Derivatives
Zespri Group may reduce its exposure to fluctuations in foreign currency exchange rates, interest rates and commodity prices affecting
operating costs, through the use of derivatives. Derivatives are not entered into for speculative purposes.
Derivatives able to be utilised under the Treasury Management Policy include interest rate swaps, oil swaps, foreign exchange options
and forward contracts.
Zespri Group’s policy is to manage risk from an economic perspective. As a result, Zespri Group manages the risks of net positions
subject to market risks. Hedge accounting has not been applied. Therefore, all derivatives are required to be classified as ‘held for
trading’, and are measured at fair value with changes recognised through the Income Statements.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedging
derivative is for more than 12 months, and as a current asset or liability when the remaining maturity of the hedging derivative is for less
than 12 months.
(i)
Recognition and de-recognition:
Derivatives are recognised initially and subsequently measured at fair value. Revenues and expenses relating to changes in fair
value of derivatives are recognised in the Income Statements. The fair value of all financial instruments is recorded in the Balance
Sheets. Derivatives are de-recognised when the contractual rights or obligations relating to the cash flow expire.
(ii)
Embedded derivatives:
Embedded derivatives are derivatives that are included within the terms of a non-derivative host contract. They affect the cash
flows of the combined instrument in a way similar to a stand-alone derivative. An embedded derivative causes some or all of the
cash flows that otherwise would be required by the contract to be modified according to a specified index, price, rate or
other variable.
Companies within Zespri Group enter into contracts in the normal course of their operations. Within some of these contracts are
embedded derivatives. Where the embedded derivatives are deemed to be closely related to the host contract, they are not
valued or recognised separately from the accounting required for the host contract in the Financial Statements. Embedded
derivatives deemed to not be closely related to the host contract are accounted for as if they were stand-alone derivatives.
24 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
1.
Summary of significant accounting policies (continued)
(iii)
Fair value estimation:
The fair value of derivatives traded in an active market is based on the current bid price for assets, and the current ask price for
liabilities (refer Note 15).
The fair value of forward foreign exchange contracts is determined using forward foreign exchange market rates at balance date.
The fair value of derivatives that are not traded in an active market is determined by using valuation techniques as specified at
Note 24 adjusted for credit risk of the counter-party.
(p)
Equity investments
Investments in subsidiaries are stated at cost or, where a decline in the value has occurred, at recoverable amount.
(q)
Property, plant and equipment
The cost of purchased property, plant and equipment is the value of the consideration given to acquire the assets and the value of other
directly attributable costs which have been incurred in bringing the assets to the location and condition necessary for their intended use.
The cost of assets constructed by Zespri Group includes the cost of all materials used in construction and direct labour on the project,
and financing costs that are directly attributable to the project. Costs cease to be capitalised as soon as the asset is ready for
productive use.
The major asset classes are leasehold improvements, plant and equipment, motor vehicles and capital work in progress.
(r)Depreciation
Depreciation is provided on a straight-line basis at rates calculated to allocate the cost of assets over their estimated useful lives.
Capital work in progress is not depreciated until the work is complete and the asset is fit for its intended use. The estimated useful lives
used for depreciation purposes are as follows:
Leasehold improvements
Lower of 10 years or unexpired portion of lease
Property, plant and equipment
2 – 10 years
Motor vehicles
5 years
The useful life and residual value of property, plant and equipment are reviewed annually. Any change required as a result of alterations
to these estimates is recognised in the Income Statements during the period.
(s)Intangibles
(i)
Research and development costs:
Research expenditure is expensed in the period incurred. Development costs are capitalised as internally generated
intangible assets where future benefits are expected to exceed those costs; otherwise, development costs are expensed in
the period incurred.
Development costs include costs relating to the development of markets and production for Zespri-developed cultivars.
Costs capitalised include those of budwood, legal fees and costs of obtaining Plant Variety Rights less any research co-funding
received in respect of this expenditure. Development costs capitalised as an internally generated intangible asset have finite
useful lives and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the cost over the estimated useful life of five years.
(ii)
Computer software:
Zespri Group purchases and develops software for use in its own business only. Because the software is without physical
substance and is not linked to a producing asset with substance, it is classified as an intangible asset.
The cost of computer software acquired is the value of the purchase price to acquire the assets and the value of other directly
attributable costs which have been incurred in bringing the assets to the location and condition necessary for their intended use.
The cost of software developed by, and for the use of, Zespri Group includes the cost of all materials used in construction and
direct labour on the project, and financing costs that are directly attributable to the project. Computer software has a definite
useful life and is carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the cost over the estimated useful life of three to five years.
(iii)
Intangibles work in progress:
Intangibles work in progress is not amortised until work is complete and the asset is fit for its intended use.
The useful life and residual value of intangibles are reviewed annually. Any change required as a result of alterations to these
estimates is recognised in the Income Statements during the period.
(t)
Impairment of non-financial assets
Non-financial assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable.
An impairment loss is recognised when an asset’s carrying amount exceeds its recoverable amount. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.
25
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
1.
Summary of significant accounting policies (continued)
(u)
Employee benefits
Employee entitlements to salaries and wages, bonuses, annual leave, contributions to defined-contribution pension schemes and
other accumulating benefits are recognised when they accrue to employees. Liabilities for employee benefits are carried at the value of
the estimated future cash flows required to settle the obligation arising from services rendered by employees up until balance date.
Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever
an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is
demonstrably committed to either terminate the employment of current employees, or to provide termination benefits as a result of an
offer made to encourage voluntary redundancy.
(v)Provisions
Zespri Group records provisions when: it has a legal or constructive obligation to satisfy a claim as the result of a past event; it is more
likely than not that an outflow of resources will be required to satisfy the obligation; and a reliable estimate of the amount can be made.
The amount recognised as a provision is the net present value of the best estimate of the outflows required to settle the obligation.
(w) Insurance cover offered
(i)
Marine cargo insurance:
The Company insures New Zealand contractors to the New Zealand Supply Agreement for loss of kiwifruit resulting from specific
risks between picking and ‘Free on board stowed’ (FOBS). The annual period of cover is from 1 April to 31 March the following
year. Zespri Group purchases marine cargo insurance as reinsurance of this risk.
An insurance liability is recognised to the extent of the estimated future cash flows that may be required to settle claims to
New Zealand-contracted suppliers and related costs. An expense is recognised for known liabilities under the terms of insurance,
and estimated for claims made but not yet settled. Claims are expected to be settled within one year. There is no discounting or
inflation adjustment in measuring the liability because of the short settlement period.
An insurance asset and resultant revenue, relating to claims made pre-FOBS, are recognised to the extent of the estimated future
cash flows that may be receivable from Zespri Group’s insurer as a result of known claims made against the reinsurance policy.
(ii)
Hail insurance:
The Company insures New Zealand contractors to the New Zealand Supply Agreement annually for kiwifruit lost as a result of hail
during the New Zealand growing period. The period of cover is from 1 August to 30 June the following year.
An insurance liability is recognised to the extent of the estimated future cash flows that may be required to settle claims and
related costs. An expense is recognised for known liabilities under the terms of insurance, and estimated for claims made but not
yet settled. Claims are settled at the end of the insurance period. There is no discounting or inflation adjustment in measuring the
liability because of the short settlement period.
(x)Leases
Zespri Group leases land, buildings, certain plant and equipment, and motor vehicles. Operating lease payments, where the lessor
effectively retains substantially all the risks and benefits of ownership of the leased item, are included in the Income Statements in equal
instalments over the lease term. Lease payments are shown net of any receipts earned from the subleases of these assets.
The cost of improvements to leasehold property is capitalised, disclosed as leasehold improvements and depreciated over the
unexpired period of the lease or the estimated useful life of the improvements, whichever is the shorter.
(y)
Statements of Cash Flows
The following definitions are the terms used in the Statements of Cash Flows:
(i)Cash and cash equivalents are considered to be cash on hand, current accounts and short-term money market deposits in banks,
net of bank overdrafts.
(ii)Investing activities are those activities relating to the acquisition, holding and disposal of property, plant and equipment and
investments. Investments can include securities not falling within the definition of cash.
(iii)Financing activities are those activities which result in changes in the size and composition of the capital structure of
Zespri Group. This includes both equity and debt not falling within the definition of cash. Dividends paid in relation to the capital
structure are included in financing activities.
(iv)
(z)
Operating activities include all transactions and other events that are not investing or financing activities.
Segment reporting
Zespri Group determines its reportable segments by reference to the internal reporting of the activities of the Group to the Board of
Directors, the chief operating decision-maker, as defined in NZ IFRS 8 (Operating Segments). Reportable segments have been
determined to follow the strategic business lines of the Group, which also reflect groups of similar products and services. Zespri Group
has four reportable segments:
(i)New Zealand fresh kiwifruit: the marketing and sale of New Zealand-grown kiwifruit;
(ii)Non-New Zealand fresh kiwifruit: the marketing and sale of kiwifruit supplied from countries other than New Zealand;
(iii)Research and development: research activities undertaken by Zespri Group to develop new cultivars and to improve kiwifruit
production, storage and handling practices; and
26 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
1.
Summary of significant accounting policies (continued)
(iv)Corporate services: the servicing and administration of all of the activities above, including the operation and support of supply chain
functions, grower and shareholder services, legal and secretarial services, information systems, central treasury and cash management,
finance and other typical head-office-type functions.
(aa) Discontinued operations
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale,
if earlier.
(ab) Changes in accounting policies and disclosures
The following standards came into effect during the reporting period:
–NZ IFRS 13 (Fair Value Measurement) – Effective for periods beginning on or after 1 January 2013. This revised standard defines fair
value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements.
Zespri Group has adopted NZ IFRS 13 (Fair Value Measurement) with a date of initial application of the 1 April 2013. The nature and
effects of the changes are explained in the following paragraph.
NZ IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements when such
measurements are required or permitted by other NZ IFRSs. It unifies the definition of fair value as 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. It replaces and
expands the disclosure requirements about fair value measurements in other NZ IFRSs, including NZ IFRS 7. As a result Zespri Group
has included additional disclosures in this regard (see Notes 15 and 24).
In accordance with the transitional provisions of NZ IFRS 13, Zespri Group has applied the new fair value measurement guidance
prospectively and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no
significant impact on the measurement of Zespri Group’s assets and liabilities.
–NZ IAS 19 Employee Benefits – This amended standard revises the definition of short-term and other long-term benefits resulting in the
provision for annual leave being classified as other long-term benefits if the leave is not expected to be taken in two years.
There are a number of other standards that became effective during the period which have no significant effect on the financial
statements as a result of applying the standard.
Certain new standards, amendments and interpretations issued by the International Accounting Standards Board (IASB) and the Accounting
Standards Review Board in New Zealand (ASRB) have been published which will be mandatory for the Company in the accounting period
beginning on or after 1 April 2014.
The following standards are not yet effective and have not been early adopted by the Group but will be applicable to the Group:
–NZ IFRS 9 (Financial Instruments) – Effective on or after 1 January 2018. This standard will eventually replace NZ IAS 39 (Financial
Instruments: Recognition and Measurement), and is expected to be adopted by the Group in the Financial Statements for the year
ending 31 March 2019. This standard simplifies how an entity should classify and measure financial assets. This will result in revised
disclosure but does not affect recognition or measurement of any balances within the Financial Statements.
Management has not yet completed its full assessment of the impact of the above-mentioned accounting policies but it is expected that these
changes will not materially affect the Group’s Financial Statements. The Group does not intend to adopt these standards early.
A number of other new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 April 2014,
and have not been applied in preparing these consolidated Financial Statements. None of these are expected to have a significant effect on
the consolidated Financial Statements of the Group.
27
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
2.Revenue
Group
(a)
Operating revenue
Sale of kiwifruit (at spot foreign exchange rates):
– New Zealand-grown kiwifruit
– Inter-company New Zealand-grown kiwifruit
– Non-New Zealand-grown kiwifruit
– Collaborative marketing
Total revenue from kiwifruit product sales
Sale of Zespri variety licences 1
Revenue from royalties
Insurance revenue 2
Parent
2014
$’000
2013
$’000
1,058,209
144,935
10,652
1,213,796
3,660
38
1,147
1,218,641
1,322,247
106,572
13,618
1,442,437
3,537
81
2,419
1,448,474
2014
$’000
2013
$’000
822,465
10,505
832,970
3,660
836,630
998,071
13,276
1,011,347
3,537
1,014,884
1
The sale of Zespri variety licences is recognised when the risks and rewards of ownership of the licences have passed to the customer.
In 2013/14 additional licences were issued for new varieties that were commercialised in previous financial years. The total receivable
under these licences was $12,313,754 (2013: $18,295,648) with payment due over five years. Revenue from the sale of new variety
licences that include deferred payments, hardship or surrender clauses which result in uncertainty as to the collectability of the
outstanding consideration, will not be recognised until the time that the uncertainty is removed. Net revenue of $3,659,860 (2013:
$3,536,924) after issuance costs of $456,798 (2013: $914,939) has been received and recognised in 2013/14. As at 31 March 2014
$22,073,139 (2013: $13,843,786) of licence fee revenue has been deferred and will not be recognised until the uncertainty as to
collectability is removed.
2
Insurance revenue includes revenue received or receivable on policies taken out for pre-FOBS (refer Note 14) and post-FOBS
kiwifruit losses.
Group
(b)
Other revenue
Gain on sale of assets
Co-funding for new cultivar research 1
Co-funding from Kiwifruit Vine Health Incorporated for Psa research
Co-funding for other projects
Other income
1
2014
$’000
29
2,426
496
137
3,295
6,383
Parent
2013
$’000
2
2,009
2,112
190
2,301
6,614
2014
$’000
2,074
2,074
2013
$’000
1,448
1,448
On 1 October 2009, Zespri International Limited entered into a co-funding research agreement with the New Zealand Government
entity Foundation for Research, Science and Technology (FRST). The agreement for new cultivar pre-commercial R&D co-funding has a
term of seven years, and a FRST contribution value of up to $13,511,111 (excluding GST). The Zespri Group recognises FRST
contributions as co-funding sundry revenue only when all the contractual conditions have been met. As at 31 March 2014, $8,555,542
has been recognised over the life of the agreement by the Zespri Group (2013: $6,129,905), and $130,176 has been received from
FRST for which contractual obligations are outstanding (2013: $625,655). As such, the amount for which contractual obligations are
outstanding is recorded as income in advance (refer Note 20).
28 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
3. Operating expenses
Group
Notes
Zespri Group’s operating expenses include the following
(at spot foreign exchange rates):
Amortisation
Bad debts written off/provision for doubtful debts
Commissions
Depreciation
Directors’ fees
Employee benefits
Employee benefits – defined contribution plan
Freight, distribution and insurance
Inter-company charges
Litigation/dispute settlements
Loss on sale of assets
Other selling and direct costs
Payments for kiwifruit including:
– Fruit and service payments – New Zealand-grown kiwifruit 1
– Fruit purchases – non-New Zealand-grown kiwifruit
– Loyalty premium – New Zealand-grown kiwifruit
Penalties provision
Promotion
Psa funding
– New Zealand 2
– Italy
– France
Research – New Zealand-grown kiwifruit
Restructuring cost
Serious Fraud Office (SFO) investigation costs
18
12(a)
17
21
21
21
Parent
2014
$’000
2013
$’000
2014
$’000
2,615
(12)
12,840
1,576
691
39,321
938
139,578
63
41
97,330
2,061
1,389
16,625
1,799
687
40,859
837
164,698
161
133,020
1,148
573
169
26,880
7,906
304
1,295
24,262
11,327
779,793
114,987
20,999
63,454
934,157
82,920
24,991
12,547
83,187
781,592
20,999
66
940,108
24,991
-
83
12,381
174
2,818
4,204
116
21
13,199
86
-
2013
$’000
-
4,204
-
Contracted-supplier fruit returns by means of fruit and service payments reflect the value of sales from New Zealand-grown kiwifruit
after deducting those expenses defined under the annual New Zealand Supply Agreement, including derivative gains and losses.
The expense in the Parent includes inter-company inventory movements for the future season’s kiwifruit shipped prior to year-end.
1
2
For 2013/14, Psa research conducted in conjunction with KVH of $496,027 (2013: $2,111,628) is included in the New Zealand-grown
kiwifruit research figure.
4. Fees to auditors
Fees are paid to the auditors of the Company and its subsidiaries for the audit of the Financial Statements and for other services. The auditor of
the Company is KPMG.
Group
2014
$’000
Parent
2013
$’000
2014
$’000
2013
$’000
Audit of the Financial Statements of the Group
Audit of the Financial Statements of the Group's Subsidiaries
171
64
235
161
59
220
71
71
70
70
Regulatory compliance
Electronic discovery services 1
Financial reporting advisory
Other advisory
Total fees paid to the Company’s auditors
12
114
9
13
383
12
19
251
71
70
Other audit fees of $103,227 (2013: $70,751) have been paid to other auditors to meet local audit requirements.
1
Electronic discovery services relates to the provision of documents relating to the Serious Fraud Office investigation.
29
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
5. Other net gains/(losses)
Group
2014
$’000
Net gains from derivatives
Net foreign exchange gains/(losses) from non-derivatives
Total other net gains/(losses)
Parent
2013
$’000
107,483
745
108,228
88,983
4,131
93,114
2014
$’000
2013
$’000
(622)
(622)
(441)
(441)
6. Finance revenue and expense
Group
(a)
Finance revenue
Interest revenue
Inter-company dividend income
Total finance revenue
2014
$’000
Parent
2013
$’000
5,188
5,188
5,818
5,818
2014
$’000
4,848
4,848
Group
(b)
Finance expense
Interest expense
Fee expense
Total finance expense
2014
$’000
5,245
20,007
25,252
Parent
2013
$’000
90
1,455
1,545
2013
$’000
2014
$’000
2013
$’000
2
12
14
229
1,568
1,797
186
188
374
7.Taxation
Group
(a)
Taxation expense
Net profit before taxation
Taxation at 28%
Tax effect of:
– Non-deductible or non-assessable items
– Translation differences on foreign tax
– Tax under/(over)-provided in prior year
– Foreign income at different tax rates
– Movement in distribution of accumulated retained earnings of subsidiaries
Taxation expense
Effective tax rate (%)
Taxation expense is represented by:
Current taxation expense:
– Current income tax charge
– Adjustments of prior years
Deferred taxation expense:
– Origination and reversal of temporary differences
Taxation expense
2014
$’000
Parent
2013
$’000
2014
$’000
27,101
7,588
21,367
5,983
3,077
862
33,841
9,475
1,195
(125)
(477)
1,561
114
4,389
145
318
2,675
288
139
(123)
-
(5,497)
(49)
-
9,856
36.4%
13,798
64.6%
878
28.5%
3,929
11.6%
9,263
(477)
1,070
9,856
12,348
318
1,132
13,798
299
(123)
702
878
1,941
(49)
2,037
3,929
The 28 percent tax rate used above is the corporate tax rate payable by New Zealand corporate entities on taxable profit under
New Zealand tax law.
30 Zespri Annual Report 2013/14
2013
$’000
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
7.Taxation (continued)
Group
(b)
Components of deferred taxation
2014
$’000
Parent
2013
$’000
2014
$’000
2013
$’000
Property, plant and equipment, and intangibles
Inventories and receivables
Retained earnings in subsidiaries
Provisions and accruals
Other financial assets and liabilities
Employee entitlements
Net deferred assets
(557)
(112)
(2,622)
2,829
(27)
1,219
730
(760)
(220)
(2,507)
3,907
(1)
1,555
1,974
(1,041)
(41)
879
(203)
(967)
1,466
Deferred tax assets
Deferred tax liabilities
Net deferred assets
3,616
(2,886)
730
4,481
(2,507)
1,974
(203)
(203)
499
499
Group
(c)
Net change in deferred tax balances
Net deferred assets at 1 April
Charged to Income Statements
Exchange differences and other
Net deferred assets at 31 March
2014
$’000
1,974
(1,063)
(181)
730
499
Parent
2013
$’000
2014
$’000
2013
$’000
499
(702)
(203)
3,308
(1,132)
(202)
1,974
2,537
(2,038)
499
All movements have been charged to the Income Statements. No movements have been recorded directly within equity.
Group
(d)
Tax credits available to shareholders
2014
$’000
2013
$’000
Imputation credit account
Balance at 1 April credit
Income tax payments made during the year
Imputation credits attached to dividends paid
Transfers/refunds
Other credits 1
Balance at 31 March credit
1,256
3,050
(2,341)
(1,206)
7,897
8,656
7,349
2,900
(6,000)
(2,993)
1,256
Adjustments required under FRS-44:
Imputation credits available to refund excess tax
Total tax credits available for use at 31 March
(4,932)
3,724
(1,256)
-
1
The ‘Other credits’ relates to the elimination of a debit balance upon removal of a subsidiary from the Company Register, increasing the
imputation credits available for use. The debit balance did not give rise to further tax payments or tax penalties.
On 20 May 2014, the Board of Directors announced an intention to declare a dividend of 7.0 cents which will not be recognised in the
Financial Statements until August 2014. It is intended that the dividend will be fully imputed. On payment, $3,285,443 of imputation credits
will be attached to dividends paid from income tax refunds due as at 31 March 2014 as a result of those refunds due being applied to 2015
provisional tax due and therefore not refunded.
31
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
8. Earnings per share
Group
Net profit after taxation attributable to shareholders ($’000)
Weighted average shares (’000)
Basic and diluted earnings per share ($)
Parent
2014
$’000
2013
$’000
2014
$’000
2013
$’000
17,245
120,717
0.143
7,569
120,717
0.063
2,199
120,717
0.018
29,912
120,717
0.248
9. Reconciliation of movements in reserves
Group and Parent
Defence fund reserve
(a)
2014
$’000
Other reserves
2013
$’000
683
805
(225)
1,263
Balance at 1 April
Revenue transferred from retained earnings
Expenses transferred from retained earnings
Income tax effect on items transferred from retained earnings
Balance at 31 March
349
524
(60)
(130)
683
In 2013/14, $579,658 (2013: $333,862) was transferred from retained earnings to the Defence Fund Reserve. The transfer amounts to the
net after-taxation levied amount from new cultivar royalties and offshore Hort16A proceeds less costs incurred defending Zespri PVRs.
Group
(b) Retained earnings
Balance at 1 April
Dividend paid during the year
Net profit after taxation attributable to shareholders
Revenue attributed to defence fund transferred to other reserves
Expenses attributed to defence fund transferred to other reserves
Income tax effect on items transferred to other reserves
Balance at 31 March
Note
11
2014
$’000
59,525
(6,042)
17,245
(805)
225
70,148
Parent
2013
$’000
66,792
(14,502)
7,569
(524)
60
130
59,525
2014
$’000
38,165
(6,042)
2,199
(805)
225
33,742
2013
$’000
23,089
(14,502)
29,912
(524)
60
130
38,165
10. Share capital
Group and Parent
(a) Number of shares issued
Number of authorised and fully paid issued ordinary shares at 31 March, at no par value
2014
2013
No. of shares No. of shares
120,717,335 120,717,335
Group and Parent
(b) Share capital value
Balance at 31 March
2014
$’000
18,017
2013
$’000
18,017
Ordinary shares: All ordinary shares rank equally, subject to the voting cap. Each shareholder is entitled to one vote per ordinary share up to a
maximum that is calculated by reference to that shareholder’s share of total New Zealand production supplied to Zespri Group.
32 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
10. Share capital (continued)
(c)
Capital management
The Company’s activities are restricted under the Kiwifruit Export Regulations 1999 in order to protect shareholders and contracted
suppliers. The providers of capital must agree to the use of capital for any non-core activities and those who have not agreed cannot be
exposed to more than minimal risk.
Because Zespri Group is a short-term borrower, capital management is restricted to the management of authorised and issued share
capital, retained earnings and other reserves.
Under its Constitution, the Company may issue, buy-back, consolidate or subdivide shares. Since incorporation in 2000, the
Company has:
–issued shares under the Kiwifruit Industry Restructuring Act 1999 in line with the production of New Zealand kiwifruit vines
existing at the time;
–issued shares in a pro-rata offer in 2001 to obtain equity required to support activities stemming from increases in new plantings
in New Zealand;
–issued shares in 2005 in a targeted offer to growers to realign shareholdings with levels of production of growers, while offering
a voluntary share buy-back to dry shareholders or growers holding more shares than their proportion of production;
–transferred retained earnings to other reserves (refer Notes 1(k) and 9(a)) to separate funds from those available for distribution
to shareholders;
–performed a share split in September 2010 to achieve a better alignment between trays supplied and total shares; and
–transferred other reserves to retained earnings (refer Note 9(a)) to cover Psa-related funding.
Share capital
The Regulations do not restrict the levels of share capital able to be authorised for issue by the Company. The Company’s Constitution
provides some restriction over the scale of individual offers for shares. To date, in line with the Kiwifruit Export Regulations 1999, shares
have been issued by the Company to producing New Zealand kiwifruit growers.
As noted in (b) above, voting rights of shareholders are capped by reference to the shareholder’s share of total New Zealand
production supplied to the Company during the year. Divergence between shareholdings and production can occur through the
production impact of new plantings, ownership of shares and orchards, and as growers enter or exit the industry in New Zealand.
This divergence is monitored by the Company at least annually, through the process of determining the voting caps of shareholders
prior to the Annual Meeting of the Company.
Future issues or buy-backs may occur to support increases in core or other approved activities, or to achieve a closer alignment
between production levels and shareholdings of shareholders.
Payment of dividends
Capital levels are monitored as part of the solvency tests required under the Companies Act 1993 to approve the payment of dividends
to shareholders. Capital retained in the Company is measured for solvency purposes, and to determine whether the minimum level of
equity retained in Zespri Group, as agreed by the Board of Directors, is maintained.
Information provided to the Board of Directors includes a measure of liquidity, a balance sheet test and a cash flow forecast to 31 March.
A summary of the liquidity test and balance sheet test at 31 March is set out below:
Group
2014
$’000
Liquidity test:
Current assets
Less non-liquid items
Less current liabilities
Current assets in excess of current obligations
Balance sheet test:
Net assets
Less estimated value of contingent liabilities
Net assets in excess of contingent liabilities
Parent
2013
$’000
2014
$’000
2013
$’000
320,611
(28,009)
(252,965)
39,637
335,779
(16,405)
(272,387)
46,987
326,084
(14,745)
(281,080)
30,259
339,576
(5,290)
(290,532)
43,754
89,428
(29,728)
59,700
78,225
(25,569)
52,656
53,022
(29,394)
23,628
56,865
(24,929)
31,936
There has been no change in the requirements, policies or processes from the prior year.
33
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
11. Dividends paid
Group and Parent
2014
$’000
Ordinary dividends:
On ordinary shares – final (refer below)
On ordinary shares – interim (current year)
Supplementary dividends (to non-residents)
Total dividends paid
2013
$’000
1,207
4,829
6
6,042
9,657
4,829
16
14,502
The dividends are fully imputed. Supplementary dividends of $6,119 (2013: $16,333) were paid to shareholders not tax resident in
New Zealand, for which Zespri Group received a foreign investor tax credit entitlement.
On 20 May 2014, the Board of Directors announced an intention to pay a fully imputed final dividend of 7.0 cents per share (2013: 1.0 cents
per share), totalling $8,450,213 (2013: $1,207,173). This dividend will be paid in August 2014. Because the intention was announced after
balance date, the financial effect has not been recognised in the Financial Statements. During the year, the 2013 final dividend declared on
23 July 2013 of 1.0 cents per share and the 2014 interim dividend declared on 23 October 2013 of 4.0 cents per share were paid and
recognised in the Financial Statements.
12. Accounts receivable
Group
2014
$’000
Current:
Trade receivables
Other receivables
Less: Provision for doubtful debts
Parent
2013
$’000
2014
$’000
2013
$’000
Receivables from subsidiaries
Indirect taxation
Total current receivables
25,027
1,330
26,357
9,714
36,071
20,519
551
(1,440)
19,630
9,250
28,880
1,222
120
1,342
88,501
6,416
96,259
488
248
736
67,093
4,747
72,576
Non-current:
Trade receivables
Total non-current receivables
2,898
2,898
2,077
2,077
2,898
2,898
2,077
2,077
38,969
38,969
32,397
(1,440)
30,957
99,157
99,157
74,653
74,653
Total gross receivables
Less: Total provision for doubtful debts
Total receivables
The carrying value of the items above has been determined by the Board of Directors as being representative of the fair value of the assets.
Amounts receivable from related parties are disclosed at Note 28.
A provision for doubtful debts is recognised where there is evidence that an individual trade receivable is impaired. As at 31 March 2014,
$Nil trade receivables (2013: $1,439,590) were impaired and provided for.
34 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
12. Accounts receivable (continued)
Group
(a) Movement in provision for doubtful debts
Balance at 1 April
Bad Debts written off
Reversal of provision
Additional provision
Balance at 31 March
2014
$’000
Parent
2014
$’000
2013
$’000
1,440
(1,428)
(12)
-
-
51
(51)
1,440
1,440
Group
(b)
Accounts receivable past due but not impaired
Less than 3 months overdue
Between 3 and 6 months overdue
Between 6 and 12 months overdue
More than 12 months overdue
Accounts receivable past due but not impaired at 31 March
2014
$’000
-
Parent
2014
$’000
2013
$’000
7,039
142
41
251
7,473
2013
$’000
5,126
513
1
5,640
2013
$’000
170
19
250
439
484
4
488
The amount outstanding for more than 12 months is subject to an insurance claim by one of Zespri’s suppliers and is still considered
collectable.
In certain regions, accounts receivable amounts are secured by bank guarantees or other collateral, with all others being unsecured.
13.Prepayments
Group
2014
$’000
Current:
Prepaid submit payments for 2014/15 season fruit
Insurance
Other
Total current prepayments
Non-current:
Other
Total non-current prepayments
Total prepayments
Parent
2014
$’000
2013
$’000
2013
$’000
14,543
2,238
3,295
20,076
5,163
1,753
3,538
10,454
14,543
180
22
14,745
5,163
127
5,290
405
405
45
45
-
-
20,481
10,499
14,745
5,290
35
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
14. Insurance cover offered
Group
(a)
Insurance offered revenue and insurance offered expense
Insurance revenue from insurance offered: 1
Included in operating revenue:
– Marine cargo pre-FOBS for current season
– Marine cargo pre-FOBS for prior season
Insurance expense from insurance offered: 1
Included in operating expenses ‘freight, distribution and insurance’:
Insurance claims and costs for current season:
– Marine cargo pre-FOBS
Insurance claims and costs for next season:
– Hail
Net insurance income/(expense) from insurance cover offered 2
2014
$’000
Parent
2013
$’000
2014
$’000
27
491
518
1,520
247
1,767
-
(981)
(965)
(981)
(965)
168
(813)
(295)
(965)
802
168
(813)
(813)
(965)
(965)
-
1
The disclosures above relate only to the pre-FOBS activities of the Company with the New Zealand-contracted suppliers. As such, the
balances exclude any effect of insurance purchased by Zespri Group to cover risks post-FOBS whether ultimately attributed to
New Zealand-contracted suppliers’ fruit return under the New Zealand Supply Agreement or to the results of Zespri Group.
2
The net insurance expense is a cost to the New Zealand-contracted suppliers under the New Zealand Supply Agreement.
Group
(b) Insurance assets and insurance liabilities from insurance offered
Movements in assets:
Balance at 1 April
Additional claims
Amounts received
Insurance assets from insurance offered at 31 March
Movements in liabilities:
Balance at 1 April
Additional claims and costs
Claims and costs settled
Insurance liabilities from insurance offered at 31 March
2013
$’000
(c)
2014
$’000
Parent
2013
$’000
27
(27)
-
1,520
(1,520)
-
168
(168)
-
275
104
(379)
-
2014
$’000
2013
$’000
-
168
(168)
-
-
275
104
(379)
-
Objectives in managing risks
The insurance offered to New Zealand-contracted suppliers for hail and marine cargo pre-FOBS is agreed annually and is set out in
the New Zealand Supply Agreement. The Company’s objective in managing these risks is to protect the New Zealand-contracted
suppliers for losses that would otherwise be compensated by the Company’s sale of their fruit: i.e. to cover costs incurred by the
contracted supplier up to the date of the loss. The Company’s ultimate financial exposure to the risks of insurance offered and related
reinsurance is limited because the cost of the insurance is a deductible item in calculating the final fruit return payable to New Zealandcontracted suppliers.
36 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
14. Insurance cover offered (continued)
(d) Terms and conditions of insurance
Hail cover
An annual policy is offered to New Zealand-contracted suppliers on approval by the Company’s Board of Directors and the Industry
Advisory Council (IAC). The terms of cover are contained in the Insurance Update published annually circa August, and the annual
New Zealand Supply Agreement.
The insurance period is 1 August to 30 June the following year. Subject to the policy terms, the Company covers contracted suppliers
in New Zealand for loss of Class 1 yield of kiwifruit which is directly struck by hail and whose kiwifruit on the vine is destined for the
Company’s export markets. The Company’s cover limit per policy period is $3.0 million for each of the Green (including Green
Organic) and ‘other varieties’ pools.
In addition to the indemnity offered by the Company, each of the Green and ‘other varieties’ pools is covered by $3.0 million
(2013: $3.0 million) of commercially purchased insurance. The commercial cover is activated only if the $3.0 million self-insurance
provided by the Company is exceeded.
Claims are paid at the end of the insurance period. In the event of the agreed value of all claims from hail exceeding $6.0 million
(2013: $6.0 million) for either the Green or ‘other varieties’ pools, the payment to all Zespri growers who have suffered hail losses after
the deductible percentage is limited to $6.0 million (2013: $6.0 million) per variety. All claims for the variety in which the limit has been
exceeded will be pro-rated in proportion to that limit.
Marine cargo cover pre-FOBS
Cover for marine cargo insurance offered to New Zealand-contracted suppliers is dependent on the terms of cover able to be obtained
annually by the Company as reinsurance. The terms of cover are contained in the annual New Zealand Supply Agreement issued every
year to New Zealand-contracted suppliers and in April’s edition of Kiwiflier.
The basis of valuation is the agreed FOBS value, as declared by the insurer in monthly Kiwiflier declarations, less costs not incurred after
discovery of the loss or damage. Claims are paid when the value of the loss is agreed upon, net of a deductible amount disclosed in the
annual New Zealand Supply Agreement.
Assumptions
The Company’s assumptions are:
(e)
–
volume assessed as lost: actual agreed volumes plus assessor estimate where settlement is pending;
–
settlement timing: within 12 months of the claim – therefore no interest rate or inflation adjustment is applied;
–
claim unit value;
–
hail – as documented in Insurance Update published in August each year; and
–
marine cargo – pre-FOBS – as published in Kiwiflier at the time of the claim.
Insurance and reinsurance risks
Credit risk
No premiums are charged directly by the Company to the parties covered by hail and marine cargo insurance pre-FOBS. Instead,
certain costs of cover are deducted from the calculation of the fruit return payable to New Zealand-contracted suppliers.
The Company is exposed to credit risk in relation to the reinsurance taken out with its insurer of marine cargo. Its insurer has a Standard
& Poor’s credit rating of A+ and is not considered by the Board of Directors to pose a credit risk should significant claims be made by
the Company under the terms of the cover.
Interest rate risk
Because of the short life of the insurance cover, there is no material interest rate risk associated with the cover offered by or to
the Company.
Concentration of insurance risks
Hail cover: The risk of a hail event is concentrated from 1 August each season until harvest is complete, which is normally mid-June.
The contracted suppliers’ kiwifruit orchards are situated throughout New Zealand but a significant proportion are located in the
Bay of Plenty.
Marine cargo cover pre-FOBS: The risk of a pre-FOBS insurance claim is concentrated from the beginning of each season’s harvest,
normally in March, until all produce is shipped, which is normally in November. Produce at risk is situated throughout New Zealand,
but a significant proportion of the produce is located in the Bay of Plenty prior to shipping. In addition, produce is concentrated within
individual post-harvest facilities prior to shipping.
37
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
14. Insurance cover offered (continued)
(f)
Sensitivity of results to changes in variables
Hail cover
The quantum of hail insurance expense is dependent on three variables, which are:
–
the volume assessed as lost as a result of a hail event;
–
whether the hail event occurred pre or post the setting of kiwifruit on the vines; and
–
the claims history of the insured.
A movement in any one of these factors could cause a change in the insurance expense, reinsurance revenue, insurance asset or liability
balances. The results are contingent on weather variables and growing conditions prevailing during the season of cover.
By 31 March, however, most of these variables are measurable because of the annual nature of the insurance cover, the timing of the
activities covered and the requirement of claim notification within 48 hours. The Company’s hail insurance exposure is limited to a total
of $6.0 million (2013: $6.0 million) per insurance period, as documented in the insurance policy terms, plus any related costs such as
loss assessment fees. Any sensitivity in the above factors is, therefore, not deemed by the Board of Directors to be material to the results
of the Company.
Marine cargo cover – pre-FOBS
The quantum of marine cargo insurance expense is dependent on:
–
the volume assessed as lost as a result of an insurable event;
–
the grade of kiwifruit assessed as lost; and
–the forecast return published. The return is dependent on the market mix of export volumes, offshore office predictions of
revenues and costs, foreign exchange movements and hedge cover.
A movement in any one of these factors could cause a change in the insurance expense, reinsurance revenue, insurance asset or
liability balances.
By 31 March, however, most of these variables are measurable because of the annual nature of the insurance cover and the timing of the
activities covered. Any sensitivity in the above factors is, therefore, not deemed by the Board of Directors to be material to the results of
the Company.
15. Financial assets and liabilities
Group
(a)Financial assets
per Balance Sheets
Derivatives – held for trading
Accounts receivable
Cash and cash equivalents
Total other financial assets
Loans and
receivables
Notes
12
24(b)
Represented by:
Current
Non-current
Total other financial assets
Derivatives – held for trading
Contracted future suppliers
Accounts payable and accruals
Total other financial liabilities
Represented by:
Current
Non-current
Total other financial liabilities
38 Zespri Annual Report 2013/14
Notes
20
Total
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
2013
$’000
38,969
132,725
171,694
30,957
155,688
186,645
204,796
204,796
244,218
244,218
204,796
38,969
132,725
376,490
244,218
30,957
155,688
430,863
168,796
2,898
171,694
184,568
2,077
186,645
106,833
97,963
204,796
121,946
122,272
244,218
275,629
100,861
376,490
306,514
124,349
430,863
Liabilities at
amortised cost
(b)Financial liabilities
per Balance Sheets
Assets designated
at fair value through the
Income Statements
Liabilities designated
at fair value through the
Income Statements
Total
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
2013
$’000
113,022
113,022
111,574
111,574
1,280
203,106
204,386
626
242,288
242,914
1,280
203,106
113,022
317,408
626
242,288
111,574
354,488
111,700
1,322
113,022
110,243
1,331
111,574
106,423
97,963
204,386
120,642
122,272
242,914
218,123
99,285
317,408
230,885
123,603
354,488
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
15. Financial assets and liabilities (continued)
Parent
Loans and
receivables
(a) Financial assets
per Balance Sheets
Inter-company derivatives
– held for trading
Accounts receivable
Cash and cash equivalents
Total other financial assets
Notes
12
24(b)
Represented by:
Current
Non-current
Total other financial assets
Contracted future suppliers
Accounts payable and accruals
Total other financial liabilities
Represented by:
Current
Non-current
Total other financial liabilities
Notes
20
Total
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
2013
$’000
99,157
109,802
208,959
74,653
141,316
215,969
203,106
203,106
242,288
242,288
203,106
99,157
109,802
412,065
242,288
74,653
141,316
458,257
206,061
2,898
208,959
213,892
2,077
215,969
105,278
97,828
203,106
120,394
121,894
242,288
311,339
100,726
412,065
334,286
123,971
458,257
Liabilities at
amortised cost
(b) Financial liabilities
per Balance Sheets
Assets designated
at fair value through the
Income Statements
Liabilities designated
at fair value through the
Income Statements
Total
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
2013
$’000
157,888
157,888
148,071
148,071
203,106
203,106
242,288
242,288
203,106
157,888
360,994
242,288
148,071
390,359
157,888
157,888
148,071
148,071
105,278
97,828
203,106
120,394
121,894
242,288
263,166
97,828
360,994
268,465
121,894
390,359
Fair value of financial assets and liabilities
The fair value of financial instruments is determined by using valuation techniques. These valuation techniques maximise the use of observable
market data where it is available and rely as little as possible on entity-specific estimates. Where necessary, estimated future cash flows are
calculated using forward prices and interest rate yield curves. Forward prices and interest rate yields are sourced from the relevant published
market-observable exchange rates and interest rates applicable to the remaining life of the instrument, at the valuation date.
The derivative financial instruments below have been valued using a discounted cash flow valuation methodology.
The table below presents assets and liabilities that are measured at fair value by the following fair value measurement hierarchy:
Level 1
–
Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 –Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices);
Level 3 –
Inputs for the asset or liability that are not based on market-observable data (i.e. unobservable inputs).
39
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
15. Financial assets and liabilities (continued)
Fair value of financial assets and liabilities valuation hierarchy
Group
Assets
Derivatives – held for trading
Liabilities
Derivatives – held for trading
Contracted future suppliers
Parent
Assets
Inter-company derivatives – held for trading
Liabilities
Contracted future suppliers
Level 2
Total
2014
$’000
2013
$’000
2014
$’000
2013
$’000
204,796
204,796
244,218
244,218
204,796
204,796
244,218
244,218
1,280
203,106
204,386
626
242,288
242,914
1,280
203,106
204,386
626
242,288
242,914
203,106
203,106
242,288
242,288
203,106
203,106
242,288
242,288
203,106
203,106
242,288
242,288
203,106
203,106
242,288
242,288
16.Inventories
Group
2014
$’000
New Zealand kiwifruit inventory (future season)
Non-New Zealand kiwifruit inventory
Packaging materials
Other
Total inventories
Security pledged
Refer to Note 26 for details of security pledged by Zespri Group.
40 Zespri Annual Report 2013/14
7,752
3,835
5,276
110
16,973
2013
$’000
5,953
2,444
4,399
64
12,860
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
17. Property, plant and equipment
Leasehold
improvements
$’000
Group – 2014
Cost as at 1 April
Accumulated depreciation
Net book value 1 April
Motor
vehicles
$’000
Work in
progress
$’000
Total
$’000
2,635
(1,798)
837
7,858
(5,440)
2,418
960
(682)
278
34
34
11,487
(7,920)
3,567
(227)
32
642
(1,249)
421
(4)
34
1,620
(100)
178
209
(34)
209
(1,576)
662
(4)
2,649
Cost as at 31 March
Accumulated depreciation
Net book value 31 March
2,667
(2,025)
642
7,980
(6,360)
1,620
769
(591)
178
209
209
11,625
(8,976)
2,649
Group – 2013
Cost as at 1 April
Accumulated depreciation
Net book value 1 April
2,705
(1,554)
1,151
8,488
(4,995)
3,493
885
(583)
302
217
217
12,295
(7,132)
5,163
(268)
3
(49)
837
(1,432)
236
(96)
217
2,418
(99)
75
278
34
(217)
34
(1,799)
348
(145)
3,567
2,635
(1,798)
837
7,858
(5,440)
2,418
960
(682)
278
34
34
11,487
(7,920)
3,567
Depreciation expense
Additions
Disposals (net)
Transfers
Net book value 31 March
Depreciation expense
Additions
Disposals (net)
Transfers
Net book value 31 March
Cost as at 31 March
Accumulated depreciation
Net book value 31 March
Plant and
equipment
$’000
Security pledged
Refer to Note 26 for details of security pledged by Zespri Group.
41
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
18.Intangibles
Development
costs
$’000
Computer
software
$’000
Work in
progress
$’000
Total
$’000
Group – 2014
Cost as at 1 April
Accumulated amortisation
Net book value 1 April
11,835
(6,758)
5,077
12,773
(9,842)
2,931
1,248
1,248
25,856
(16,600)
9,256
Amortisation expense
Additions
Disposals (net)
Transfers
Net book value 31 March
(1,148)
1,175
74
5,178
(1,467)
312
(38)
710
2,448
8,332
(784)
8,796
(2,615)
9,819
(38)
16,422
Cost as at 31 March
Accumulated amortisation
Net book value 31 March
13,084
(7,906)
5,178
13,488
(11,040)
2,448
8,796
8,796
35,368
(18,946)
16,422
Group – 2013
Cost as at 1 April
Accumulated amortisation
Net book value 1 April
7,242
(6,454)
788
11,992
(8,865)
3,127
1,131
1,131
20,365
(15,319)
5,046
Amortisation expense
Additions
Disposals (net)
Transfers
Net book value 31 March
(304)
4,593
5,077
(1,757)
506
(76)
1,131
2,931
1,248
(1,131)
1,248
(2,061)
6,347
(76)
9,256
Cost as at 31 March
Accumulated amortisation
Net book value 31 March
11,835
(6,758)
5,077
12,773
(9,842)
2,931
1,248
1,248
25,856
(16,600)
9,256
42 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
18.Intangibles (continued)
Development
costs
$’000
Work in
progress
$’000
Total
$’000
Parent – 2014
Cost as at 1 April
Accumulated amortisation
Net book value 1 April
11,835
(6,758)
5,077
74
74
11,909
(6,758)
5,151
Amortisation expense
Additions
Transfers
Net book value 31 March
(1,148)
1,175
74
5,178
101
(74)
101
(1,148)
1,276
5,279
Cost as at 31 March
Accumulated amortisation
Net book value 31 March
13,084
(7,906)
5,178
101
101
13,185
(7,906)
5,279
Parent – 2013
Cost as at 1 April
Accumulated amortisation
Net book value 1 April
7,242
(6,454)
788
-
7,242
(6,454)
788
Amortisation expense
Additions
Net book value 31 March
(304)
4,593
5,077
74
74
(304)
4,667
5,151
Cost as at 31 March
Accumulated amortisation
Net book value 31 March
11,835
(6,758)
5,077
74
74
11,909
(6,758)
5,151
Development costs
The Company has applied for PVRs for the three new varieties (Gold3, Gold9 and Green14) which were commercialised for production in
mid-2010. The corresponding development costs have been capitalised since commercialisation and will be amortised at a rate of 20 percent
per annum. The development costs include, but are not limited to, legal fees, PVR application fees, budwood collection and GPS mapping.
Once granted, a PVR will establish exclusive intellectual property rights in the jurisdictions where they apply. On all post-commercialisation
sales of the new cultivars a royalty is payable to The New Zealand Institute for Plant & Food Research Limited.
The Company purchased Hort16A PVRs from The New Zealand Institute for Plant & Food Research Limited, effective 1 April 2004. The
purchase of the PVRs gives the Company the exclusive intellectual property rights on all Hort16A kiwifruit in the jurisdictions in which the PVRs
apply. As part of the purchase, the Company will continue to pay a royalty to The New Zealand Institute for Plant & Food Research Limited, and
as collateral for these future royalty payments, The New Zealand Institute for Plant & Food Research Limited holds a security interest in the
Hort16A PVRs and all Hort16A intellectual property. In addition, the assignment of the Hort16A PVRs and its associated rights and obligations
outside Zespri Group requires the consent of The New Zealand Institute for Plant & Food Research Limited.
In New Zealand, the Company holds the exclusive right to propagate and distribute plant material, and market and sell the variety of kiwifruit
known in New Zealand as Hort16A, until 14 November 2018.
As at 31 March 2014, the book value of development costs relating to new cultivars is $5,178,126 (2013: $5,076,868).
Intangibles work in progress
As at 31 March 2014, 99 percent (2013: 94 percent) of the Group intangibles work in progress relates to ongoing computer software projects.
Security pledged
In addition to The New Zealand Institute for Plant & Food Research Limited security interest mentioned above, refer to Note 26 for further
details of security pledged by Zespri Group.
43
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
19. Investment in subsidiary companies
Parent
2014
$’000
Investment in subsidiary companies
Balance at 1 April
Additions
Impairment/write-off
Value at 31 March
2013
$’000
94
470
(520)
44
94
94
Zespri Group Limited is the ultimate holding company for the Zespri Group of companies. All subsidiaries have a 31 March balance date with
the exception of Zespri Jia Pei Fruit (Shanghai) Co.,Ltd and Zespri Fruit (Shanghai) Co. Limited 1 which both have a 31 December balance date
due to local requirements. The results of the operations of the following wholly owned subsidiaries have been included in the consolidated
Financial Statements:
Subsidiary
Incorporated
Nature of activities
Zespri International Limited
New Zealand
Management of the export and marketing of
New Zealand-grown kiwifruit and management of the
sale and marketing of non-New Zealand-grown kiwifruit
Aragorn Limited
New Zealand
Non-trading company
Kiwifruit Marketing NZ Limited 1
New Zealand
Non-trading company (de-registered 10 February 2014)
Zespri Innovation Company Limited
New Zealand
Research
Zespri International (Asia) Limited
New Zealand
Marketing and promotion services
Zespri International (Japan) Limited
New Zealand
Non-trading company
Zespri International Trading Limited
New Zealand
Investment company
Zespri New Zealand Limited
New Zealand
Investment company
Zespri International (Australia) Pty Limited
Australia
Management of the growing, sourcing and sale of
Zespri Gold Kiwifruit grown in Australia
Zespri International (Europe) N.V.
Belgium
Management of sales and marketing in Europe of all
New Zealand-grown kiwifruit and non-New Zealandgrown Zespri Gold Kiwifruit. Management of trading in
non-New Zealand-grown Zespri Green Kiwifruit in Europe
Zespri Service Centre N.V.
Belgium
Service provision to Zespri Group companies
Zespri Jia Pei Fruit (Shanghai) Co.,Ltd
China
Management of sales and marketing of all New Zealand
and non-New Zealand-grown kiwifruit
Zespri Fruit (Shanghai) Co Limited 1
China
In-market support, sales and marketing
Zespri Fresh Produce France S.A.R.L.
France
Management of the growing, sourcing and sale of
Zespri Gold Kiwifruit grown in France
Zespri International France S.A.R.L.
France
In-market support of Belgian companies
Zespri International Germany GmbH
Germany
In-market support of Belgian companies
Zespri Fresh Produce Italy S.r.l.
Italy
Management of the growing, sourcing and sale of
Zespri Gold Kiwifruit grown in Italy
Zespri International Italy S.r.l.
Italy
In-market support of Belgian companies
Zespri International (Japan) K.K.
Japan
Management of the growing, sourcing and sale of
Zespri Gold Kiwifruit grown in Japan, and management
of the sale of New Zealand-grown kiwifruit
Zespri International (Korea) Co. Limited
Korea
Management of the growing, sourcing and sale of
Zespri Gold Kiwifruit grown in Korea, and management
of the sale of New Zealand-grown kiwifruit
Zespri International (Singapore) Pte Limited
Singapore
Marketing and promotion services
Zespri International Iberica SL
Spain
In-market support of Belgian companies
Zespri International Nordic AB
Sweden
In-market support of Belgian companies (non-trading
from January 2013)
Zespri International (United Kingdom) Limited
United Kingdom
In-market support of Belgian companies
Zespri Fresh Produce North America Inc.
United States of America
Non-trading company
New Zealand Kiwi Holdings Inc.
United States of America
Marketing and promotion services
New Zealand Kiwi Corporation Inc.
United States of America
Non-trading company
A new entity was incorporated in China, including the capability to import, manage sales and marketing in China of New Zealand and
Non-New Zealand-grown kiwifruit.
1
44 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
20. Accounts payable and accruals
Group
Current:
Trade creditors
Accrued expenses
New Zealand fruit and service payments accrued – current season 1
New Zealand fruit and service payments accrued – future season
Amounts payable to subsidiaries
Advances received from customers
Income in advance 2
Payroll tax deductions payable
Employee entitlements
Total current accounts payable and accruals
Non-current:
Employee entitlements
Total non-current accounts payable and accruals
Total accounts payable and accruals
Parent
2014
$’000
2013
$’000
2014
$’000
2013
$’000
25,330
36,248
33,553
8,560
130
1,027
6,852
111,700
16,433
40,316
27,222
12,188
3,356
626
708
9,394
110,243
1,581
33,553
8,560
114,194
157,888
1,491
27,222
12,188
107,170
148,071
1,322
1,322
1,331
1,331
-
-
113,022
111,574
157,888
148,071
1
Relates to contracted suppliers of New Zealand-grown kiwifruit. As at 31 March 2014, 97 percent (2013: 97 percent) of fruit and service
payments had been made.
2
As at 31 March 2014, $130,176 (2013: $625,655) relates to funding received from the Foundation for Research, Science and
Technology (FRST) for new cultivar pre-commercial R&D, discussed in Note 2(b). Contractual conditions to allow recognition of the
FRST co-funding as sundry revenue had not been met at 31 March 2014.
The carrying value of the items above has been determined by the Board of Directors as representative of the fair value of the liabilities.
Amounts payable to, or accrued to, related parties are disclosed at Note 28.
45
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
21.Provisions
Loyalty premium
2013
$’000
Group
Value at 1 April
Amounts charged
Reversal of provision
15,004
(23,381)
-
16,613
(26,600)
-
Additional provision
20,999
24,991
-
Exchange differences
Value at 31 March
Represented by:
Current
Non-current
Parent
Value at 1 April
Amounts charged
Additional provision
Value at 31 March
Represented by:
Current
Non-current
Psa provision
2014
$’000
2014
$’000
Other provisions
2014
$’000
2013
$’000
4,784
(1,947)
-
Total
2013
$’000
2014
$’000
2013
$’000
5,192
(4,612)
-
15,396
(2,685)
(181)
5,433
(3,512)
(1,015)
35,184
(28,013)
(181)
27,238
(34,724)
(1,015)
-
4,204
2,555
14,656
23,554
43,851
-
-
-
(322)
(166)
(322)
(166)
12,622
15,004
2,837
4,784
14,763
15,396
30,222
35,184
12,622
12,622
15,004
15,004
2,837
2,837
4,784
4,784
14,763
14,763
14,641
755
15,396
30,222
30,222
34,429
755
35,184
15,004
(23,381)
20,999
12,622
16,613
(26,600)
24,991
15,004
4,783
(1,947)
2,836
5,192
(4,613)
4,204
4,783
-
-
19,787
(25,328)
20,999
15,458
21,805
(31,213)
29,195
19,787
12,622
12,622
15,004
15,004
2,836
4,783
2,836
4,783
-
-
15,458
15,458
19,787
19,787
Loyalty premium
A loyalty premium is paid to each New Zealand grower who has signed a three-year rolling grower contract and met the conditions of that
contract. The loyalty premium is 25 cents (2013: 25 cents) per tray equivalent of New Zealand Class 1 kiwifruit supplied to the Company.
The premium is paid in two instalments. The first instalment of 10 cents per Class 1 tray equivalent was paid on 17 January 2014 (2013:
18 January 2013). The remaining 15 cents of loyalty premium per Class 1 tray equivalent will be paid on 13 June 2014 (2013: 14 June 2013).
Psa (Pseudomonas syringae pv actinidiae) provision
In November 2010, Psa was first found on a New Zealand orchard and has since developed into a serious challenge for the New Zealand
kiwifruit industry. Psa is an airborne bacterial disease of kiwifruit vines that can significantly impact the orchard productivity. In February 2011,
the Company and MPI Biosecurity NZ (formerly MAF Biosecurity NZ) entered into a funding agreement with Kiwifruit Vine Health Incorporated
(KVH) which provides for funding to be paid to KVH. This agreement requires the Company to at least match funding provided by MPI
Biosecurity NZ to KVH, up to a maximum of $25.0 million (excluding GST). This contract was extended during the 2012/13 financial year.
The provision recognises that Zespri Group has received the co-funding from the growers and will fund KVH for the balance of the
$25.0 million commitment, being $2.8 million (2013: $4.8 million).
46 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
21.Provisions (continued)
Other provisions
In the normal course of business, the Group is party to various lawsuits and claims (refer Note 25).
Zespri Jia Pei Fruit (Shanghai) Co.,Ltd was found guilty of being an accessory to the underpayment of customs duties in China in 2013.
This follows the failure by independent Chinese importers to pay import duty on Zespri Kiwifruit in the 2008 to 2010 sales seasons.
As at 31 March 2014, $12.1 million (2013: 12.6 million) has been included in other provisions in recognition of the fine imposed and illegal
gains alleged by the court.
Included in other provisions as at 31 March 2013 was $805,444 representing the estimate of legal costs and amounts payable in identified
claims or penalties.
The SFO has issued notices to the company seeking company documents and information pursuant to Section 9 of the Serious Fraud Act
1990. This information is being compiled and provided to the SFO as required. As at 31 March 2014, an amount of $1.5 million representing
the estimate of legal and other costs to be incurred to meet the requirements of the SFO investigation is included in other provisions.
As at 31 March 2014, an amount of $1,134,005 (2013: $2,401,942) recorded in other provisions relates to restructuring and represents
obligations under employment and signed termination contracts.
22. Operating lease and other commitments
Group
(a) Operating lease commitments
Non-cancellable operating leases payments:
Payable within one year
Payable between one and five years
Total future non-cancellable operating sublease receipts:
Receivable within one year
Lease expense recognised in the Income Statements under operating
expenses:
– Minimum lease payments
– Sublease receipts
2014
$’000
2013
$’000
2,562
3,198
5,760
1,973
2,313
4,286
(18)
(18)
(16)
(16)
1,975
(22)
1,953
1,973
(20)
1,953
Zespri Group leases premises, motor vehicles and office equipment under operating leases, and sublets excess office capacity. Operating
leases for premises give Zespri Group companies, in most cases, the right to renew the lease subject to a redetermination of the lease rental
by the lessor. There is no option to purchase any of the leased assets at the expiry of the lease period.
47
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
23. Reconciliation of net profit after taxation with net cash from operating activities
Group
Notes
Net profit after taxation
Non-cash items:
Net loss on sale of property, plant and equipment and intangibles
Write-down of investment in subsidiary
Net loss/(gain) on foreign currency cash balances
Additional provisions net of reversals and foreign exchange
differences
Depreciation of plant, property and equipment
Amortisation of intangibles
Movement in deferred taxation
Movement in working capital:
Increase in inter-company receivables
Decrease/(increase) in receivables and prepayments
Decrease/(increase) in net current income tax
Decrease/(increase) in other financial assets
Increase in inventories
Increase in inter-company payables
(Decrease)/increase in payables to contracted suppliers 1
Decrease in accounts payable, accruals, provisions and employee
entitlements
Decrease in insurance liability
(Decrease)/increase in other financial liabilities
Items classified as investing activities
Items classified as financing activities
Net cash available from/(utilised by) operating activities
1
17
18
2014
$’000
Parent
2013
$’000
2013
$’000
17,245
7,569
2,199
29,912
12
7,232
159
(3,763)
520
-
-
23,051
1,576
2,615
1,244
35,730
42,670
1,799
2,061
1,334
44,260
20,999
1,148
702
23,369
29,195
304
2,038
31,537
(17,994)
(4,435)
39,422
(4,113)
545
12,236
2,419
(57,938)
(6,498)
(1,543)
(21,408)
(12,551)
176
39,182
7,024
321
(19,879)
17,353
(1,068)
(59,855)
11,475
646
(23,787)
(38,528)
(48,890)
(4,980)
(895)
(32,070)
(275)
57,691
(25,978)
(5,355)
20,496
(18,981)
(39,182)
(45,419)
(4,728)
(24,579)
(33,045)
(275)
59,855
(24,793)
(20,007)
(4,825)
11,824
Group totals include amounts payable to contracted suppliers of non-New Zealand-grown kiwifruit.
48 Zespri Annual Report 2013/14
2014
$’000
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
24. Financial instruments
Zespri Group is subject to a number of financial risks that arise as a result of its operational activities. To manage and limit the effect of these
financial risks, the Board of Directors has approved policy guidelines and authorised the use of various financial instruments. The policies and
financial instruments permitted are documented in the Treasury Management Policy which is reviewed and approved annually. The policies
and financial instruments being utilised at balance date are discussed under the sections Liquidity risk, Credit risk and Market risk below.
(a)
Liquidity risk
The liquidity risk to which Zespri Group is exposed is managed under the Treasury Management Policy. The objective is to ensure that
cash is available to pay obligations as they fall due. There are three forms of liquidity management recognised: day-to-day cash
management to ensure funds are available for short-term requirements; long-term going-concern liquidity management to ensure
facilities are in place to meet future requirements; and short-term liquidity crisis management to cover unforeseen crisis events.
Contractual maturities as at 31 March
Notes
< 1 year
$’000
1-2 years
$’000
2-5 years
$’000
Total
$’000
Group – 2014
Non-derivative liabilities
Trade creditors
Accruals and other payables
20
20
25,330
78,491
103,821
-
-
25,330
78,491
103,821
Derivatives:
Derivatives – held for trading
Contracted future suppliers
15(b)
15(b)
1,145
105,278
106,423
135
71,875
72,010
25,953
25,953
1,280
203,106
204,386
210,244
72,010
25,953
308,207
Total contractual maturities
Group – 2013
Non-derivative liabilities
Trade creditors
Accruals and other payables
20
20
16,433
83,708
100,141
-
-
16,433
83,708
100,141
Derivative liabilities
Derivatives – held for trading
Contracted future suppliers
15(b)
15(b)
248
120,394
120,642
378
65,835
66,213
56,059
56,059
626
242,287
242,914
220,783
66,213
56,059
343,055
Total contractual maturities
49
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
24. Financial instruments (continued)
(a)
Liquidity risk (continued)
Contractual maturities as at 31 March
Parent – 2014
Non-derivative liabilities
Accounts payable to subsidiaries
Accruals and other payables
Derivative liabilities
Contracted future suppliers
Notes
Derivative liabilities
Contracted future suppliers
Total contractual maturities
(b)
1-2 years
$’000
2-5 years
$’000
Total
$’000
20
20
114,194
43,694
157,888
-
-
114,194
43,694
157,888
15(b)
105,278
105,278
71,875
71,875
25,953
25,953
203,106
203,106
263,166
71,875
25,953
360,994
20
20
107,170
40,901
148,071
-
-
107,170
40,901
148,071
15(b)
120,394
120,394
65,835
65,835
56,059
56,059
242,288
242,288
268,465
65,835
56,059
390,359
Total contractual maturities
Parent – 2013
Non-derivative liabilities
Accounts payable to subsidiaries
Accruals and other payables
< 1 year
$’000
Credit risk
Zespri Group is exposed to credit risk from transactions with trade debtors and financial institutions in the normal course of business.
Zespri Group has a credit approval policy which restricts the exposure to individual debtors and the Board of Directors reviews
exposures to trade debtors on a regular basis. In certain regions amounts owed by trade debtors are secured by way of bank
guarantees or other collateral, with all others being unsecured. Zespri Group does not require any collateral or security from financial
institutions to support its transactions with those institutions. The counter-parties used for banking and finance activities are financial
institutions with high credit ratings, ranging from A to A-.
(i) Credit risk counter-parties:
Financial instruments to which Zespri Group is exposed to credit risk consist principally of bank balances, short-term deposits,
inter-company receivables, accounts receivable and foreign exchange contracts with banks. Zespri Group does not consider
balances owed by government tax authorities to be a credit risk.
Zespri Group continuously monitors the credit quality of the counter-parties to its financial instruments. Zespri Group does not
anticipate non-performance by any of its counter-parties.
50 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
24. Financial instruments (continued)
(b) Credit risk (continued)
(ii) Maximum exposures to credit risk at 31 March:
Group
Maximum exposures to credit risk
Notes
Bank balances
Short-term deposits
Cash and cash equivalents
Accounts receivable
Receivables from subsidiaries
Derivative assets – held for trading
Inter-company derivative assets – held for trading
Total maximum exposures to credit risk
12
12
15(a)
15(a)
Parent
2014
$’000
2013
$’000
2014
$’000
2013
$’000
22,943
109,782
132,725
14,374
141,314
155,688
20
109,782
109,802
2
141,314
141,316
29,255
204,796
366,776
21,707
244,218
421,613
4,240
88,501
203,106
405,649
2,813
67,093
242,288
453,510
The amounts above have been determined by the Board of Directors to be the fair value of these classes of financial instruments.
Exposure risk on guarantees pledged is further disclosed in Note 25.
Refer to Note 12 for further information on credit risk of accounts receivable.
(iii)
Concentration of credit risk:
Concentration of credit risk by geographical location is indicated below:
Location of counter-party
Group – 2014
Bank balances
Short-term deposits
Cash and cash equivalents
Accounts receivable
Derivative assets – held for trading
Total location of counter-party
Group – 2013
Bank balances
Short-term deposits
Cash and cash equivalents
Accounts receivable
Derivative assets – held for trading
Total location of counter-party
Europe
Japan
$’000
$’000
Other
Asia
$’000
USA
Canada
$’000
New
Zealand
$’000
Australia
Other
Total
$’000
$’000
$’000
4,102
4,102
222
222
14,352
14,352
4,054
32
- 109,782
4,054 109,814
181
181
- 22,943
- 109,782
- 132,725
18,091
17,068
39,261
259
481
4,334
18,686
6,304
- 179,473
4,054 295,591
8,255
8,436
267 29,255
- 204,796
267 366,776
2,823
2,823
64
64
11,273
11,273
108
104
- 140,609
108 140,713
2
705
707
- 14,374
- 141,314
- 155,688
15,658
19,313
37,794
1
65
2,170
13,443
3,273
- 211,092
108 355,078
13,813
14,520
605 21,707
- 244,218
605 421,613
51
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
24. Financial instruments (continued)
(b) Credit risk (continued)
(iii) Concentration of credit risk (continued):
Location of counter-party
Parent – 2014
Bank balances
Short-term deposits
Cash and cash equivalents
Accounts receivable
Receivables from subsidiaries
Inter-company derivative assets
– held for trading
Parent – 2013
Bank balances
Short-term deposits
Cash and cash equivalents
Accounts receivable
Receivables from subsidiaries
Inter-company derivative assets
– held for trading
Europe
Japan
$’000
$’000
Other
Asia
$’000
USA
Canada
$’000
New
Zealand
$’000
Australia
Other
Total
$’000
$’000
$’000
-
-
-
20
- 109,782
- 109,802
-
20
- 109,782
- 109,802
264
9
-
-
4,240
88,228
-
-
16,748
17,012
9
-
- 178,200
- 380,470
8,158
8,158
- 203,106
- 405,649
-
-
-
2
- 140,609
- 140,611
705
705
2
- 141,314
- 141,316
-
11
-
-
18,998
18,998
11
-
- 209,477 13,813
- 419,983 14,518
2,813
67,082
-
-
4,240
88,501
2,813
67,093
- 242,288
- 453,510
(c) Market risk
Zespri Group is subject to market risks that arise as a result of its operational activities. The key types of market risk that Zespri Group is
exposed to include interest rate risk, currency risk and commodity price risk.
(i) Interest rate risk:
Zespri Group’s policy relating to interest rate risk management aims to achieve the lowest cost of funds while meeting seasonal
funding needs.
Zespri Group may put in place seasonal funding facilities if required (refer Note 26). Zespri Group is primarily a short-term
borrower and investor and generally carries any interest rate risk itself. Investments consist of on-call funds and short-term
deposits. Interest rate derivative instruments may be used at Zespri Group’s discretion. No interest rate derivative contracts were
entered into during the year (2013: Nil).
(ii) Currency risk:
During the course of business, Zespri Group procures and exports fruit, incurs selling, marketing and administrative costs, and
carries cash denominated in foreign currencies. As a result of these transactions, exposures to fluctuations in foreign currency
exchange rates occur. The foreign currencies in which Zespri Group primarily deals are Euro (EUR), Japanese Yen (JPY),
United States Dollars (USD) and Korean Won (KRW).
Zespri Group’s primary objective in managing foreign exchange risk is to mitigate excess volatility in the New Zealand dollar
return to shareholders and the New Zealand kiwifruit industry arising from foreign currency movements.
Net exposures of expected foreign currency income and expenditures are estimated. The Treasury Management Policy provides
guidelines within which Zespri Group may enter into contracts to manage the expected net exposures. Based on these
guidelines, contracts are taken out for the current year and up to two years in advance. With express Board approval, the
Company can take out contracts that are in excess of two years in advance. The Treasury Management Policy is reviewed by the
Board of Directors and is approved annually.
52 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
24. Financial instruments (continued)
(c) Market risk (continued)
(ii) Currency risk (continued):
Foreign exchange contracts
As part of the foreign currency hedging strategy, Zespri Group has entered into forward foreign exchange contracts and options.
The value of these contracts held at balance date were:
Group
At fair value through the Income Statements
– held for trading
Sell forward exchange contracts
Currency option contracts
Notional value
Fair value gain/(loss)
2014
$’000
2013
$’000
1,001,336
277,359
1,278,695
1,088,721
149,365
1,238,086
Represented by:
Other financial assets
Other financial liabilities
By currency:
EUR/NZD
JPY/NZD
USD/NZD
USD/KRW
391,529
604,846
226,741
55,579
1,278,695
258,494
847,400
132,192
1,238,086
2014
$’000
2013
$’000
188,627
14,949
203,576
232,994
9,538
242,532
204,684
(1,108)
203,576
242,946
(414)
242,532
20,067
175,582
5,566
2,361
203,576
41,385
193,661
7,486
242,532
Group
Notional value
Maturity of foreign exchange contracts
Less than one year
Within one to two years
More than two years
Fair value gain/(loss)
2014
$’000
2013
$’000
750,898
351,487
176,310
1,278,695
629,309
322,584
286,193
1,238,086
2014
$’000
2013
$’000
105,747
71,876
25,953
203,576
120,639
65,835
56,058
242,532
(iii) Commodity price risk:
During the course of business, Zespri Group exports fruit incurring significant freight expenses which are impacted by
fluctuations in the price of oil.
As part of the commodity hedging strategy, oil forward contracts were entered into during the year. The value of these contracts
held at balance date were:
Group
At fair value through the Income Statements
– held for trading
Oil price forward contracts
Represented by:
Other financial assets
Other financial liabilities
Notional value
2014
$’000
26,884
26,884
2013
$’000
29,684
29,684
Fair value gain/(loss)
2014
$’000
2013
$’000
(59)
(59)
1,059
1,059
113
(172)
(59)
1,272
(213)
1,059
53
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
24. Financial instruments (continued)
(c) Market risk (continued)
(iii) Commodity price risk (continued):
Group
Notional value
Maturity of oil price forward contracts
Less than one year
2014
$’000
26,884
2013
$’000
Fair value gain/(loss)
2014
$’000
2013
$’000
(59)
29,684
1,059
Fair value estimation
The fair value of forward exchange, currency option and oil price forward contracts is determined using valuation techniques with
observable inputs. The fair values of financial assets and financial liabilities are measured by discounting future cash flows at the
current market interest rate plus an estimated credit margin that are available for similar financial instruments. (refer Note 15).
(d) Market risk sensitivity as at 31 March
Zespri Group is exposed to various market risks in relation to balances held at 31 March.
Due to the seasonal nature of the business, the impact on the Income Statements and Equity resulting from movements in foreign
exchange rates and interest rates that could have occurred at 31 March is unrepresentative of the exposure during the year and is
immaterial to the results for the year ended 31 March 2014.
Management has considered the seasonal risk to the business and the sensitivity using average balances held during the year.
Under the terms of the New Zealand Supply Agreement, the supplier assumes the risk of foreign exchange, and any change in foreign
currency rates on average balances would not be material to the pre-tax profit of the Group. The effect of exchange rate movements is
managed by the use of forward contracts and options to mitigate excess volatility.
Under the terms of the New Zealand Supply Agreement, interest costs incurred on the funding facility and interest income earned on
short-term deposits are largely assumed by the supplier. A change in interest rates using average funding facility and short-term deposit
balances for the year would not be material to the pre-tax profit of the Group.
(e) Embedded derivatives
Zespri International Limited acts as treasury agent for Zespri Group. The Company is responsible for paying New Zealand-contracted
suppliers based on the net results earned by Zespri Group.
The Company has entered into back-to-back arrangements with New Zealand-contracted suppliers (supply entities which have signed
the New Zealand Supply Agreement) and Zespri International Limited, primarily reflecting the results of any derivatives taken out for the
purposes of managing risk to the New Zealand fruit return.
Notional value
Group
Contracted future suppliers
2014
$’000
2013
$’000
1,305,579
1,267,770
Notional value
Fair value gain/(loss)
2014
$’000
2013
$’000
(203,517)
(243,591)
Fair value gain/(loss)
2014
$’000
2013
$’000
Contracted future suppliers
1,305,579
1,267,770
(203,517)
(243,591)
Inter-company derivatives – held for trading
1,305,579
1,267,770
203,517
243,591
Parent
2014
$’000
2013
$’000
25. Guarantees and contingent liabilities
Group
(a) Guarantees
Zespri International Limited has secured, by letter of intent, a credit facility with Belfius Bank
(formerly Dexia Bank) for Zespri Service Centre N.V. The maximum exposure level is $1,171,926
(2013: $1,184,470). Under this letter of intent, the current exposure level is:
– Zespri Service Centre N.V. has provided a guarantee in favour of Cofinimmo N.V. for a lease
guarantee on an office building
– Zespri Service Centre N.V. has provided a guarantee in favour of LeasePlan Servicios S.A. Spain
for a lease guarantee on company vehicles
Zespri International Limited has guaranteed, by way of three bank guarantees, an Italian VAT recovery.
54 Zespri Annual Report 2013/14
2014
$’000
2013
$’000
-
142
2
334
336
11
487
640
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
25. Guarantees and contingent liabilities (continued)
No settlement relating to any of the above guarantees has occurred since their inception. The likelihood and value of any future outflow
resulting from these guarantees is uncertain.
(b) Contingent liabilities
New cultivars
A contingent liability exists for licences issued under the variety licence agreement signed by Zespri and the growers in 2013/14,
2012/13 , 2011/12 and 2010/11. During this financial year Zespri issued in total 1,189.00 hectares (2013: 2,320.00 hectares) of Gold3
and 134.00 hectares of Gold9 licences were transferred to Gold3. No Gold9 or Green14 hectares were issued during 2013/14.
In 2012/13 11.04 hectares of Gold9 and 79.00 hectares of Green14 were issued. The variety licence agreement commits Zespri to a
possible obligation under two different scenarios, these being as follows:
Zespri Group chooses to de-commercialise a variety
Under the variety licence agreement, should the Company decide to withdraw any variety for any reason, the Company is required to
reimburse the tenderers a calculated rate of $5,000 (including GST) per hectare, provided that no more than four whole years have
elapsed. In addition, the Company is required to refund a percentage of the original licence price.
Plant Variety Right (PVR) not granted
In the event that a decision is made by the relevant New Zealand authorities not to grant a PVR for any of the new cultivars, then the full
original licence fee for that cultivar will be refunded to the relevant tenderers, regardless of time elapsed from commercialisation.
Furthermore, if the Company decides to remove all plant material for the respective variety for which a PVR has not been granted, it will
pay an additional fee of $5,000 (including GST) per hectare. The Company has not yet been granted a PVR in New Zealand for any of
the three cultivars commercialised in 2010 but has provisional protection, pending determination of these applications.
As at 31 March 2014, the maximum exposure for each variety under the two scenarios is the same, as the PVR application is still
pending. The total combined new cultivar contingent liability as at 31 March 2014 is $29.4 million (2013: $24.9 million), this being
new cultivar licence proceeds received and refundable under the terms of the licence of $9.0 million (gross of licence costs), and
$20.4 million for the GST exclusive flat fee per hectare for 4,690 hectares. By variety the total contingent liability is $25.9 million
(2013: $19.8 million) for Gold3, $1.13 million (2013: $2.5 million) for Gold9 and $2.36 million (2013: $2.6 million) for Green14.
New Variety succumbs to Psa
For licences granted in 2013/14 in the event that a new variety has, in the opinion of the Company, succumbed to Psa a licence holder
may elect to surrender the licence and the Company will refund 80 percent of the purchase price of the licence. The company will have
a contingent liability to the extent that more than 20 percent of the purchase price of the licence has been paid. As at 31 March 2014,
the maximum exposure is $1.2 million being the amount received in excess of 20 percent of the purchase price of licences issued in
2013/14. For licences issued in earlier periods, the refund is limited to the unpaid portion of the licence fee. As licence fee income is
not recognised until received, there is no contingent liability in relation to new variety licences issued in 2012/13 and earlier
succumbing to Psa.
Serious Fraud Office
The Serious Fraud Office (SFO) has issued notices to the company seeking company documents and information pursuant to Section 9
of the Serious Fraud Act 1990. This information is being provided to the SFO as required, and it is uncertain whether any claim will be
made against the Company. It is therefore unknown what the impact if any will ultimately be. Provision for legal and other costs in
relation to meeting the requirements of the SFO investigation have been included in other provisions (refer Note 21).
China
Provision for penalties relating to litigation as a result of a failure by independent Chinese importers based in Shanghai to pay import duty
on Zespri Kiwifruit in the 2008-2010 sales seasons has been included in other provisions (see Note 21). Investigations by local customs
authorities in relation to two other importers in China have not resulted in any proceedings or any Zespri Group company being named
as a suspect or defendant in relation to the potential under declaration of customs duty in these other China jurisdictions. Given that there
is currently no claim being made against Zespri Group, and there is uncertainty around possible outcomes, it is not considered possible
to reliably quantify the impact of any potential claim, if any, by the Chinese Customs authorities against Zespri Group.
Other
During the course of the year Zespri has terminated customer relationships in certain countries due to irregularities in import
documentation relating to Zespri Kiwifruit. Compliance with import laws and regulations is the legal responsibility of the importer
of record. It is not possible to determine or reliably quantify any potential claim if any that may be made against Zespri arising from
such termination.
In the normal course of business, Zespri Group is party to various lawsuits and claims, both as a plaintiff and as a defendant.
It is not possible to predict with certainty whether Zespri Group will ultimately be successful in defending lawsuits and claims taken
against it or, if not, what the impact might ultimately be. Provisions are made in accordance with the accounting policy and
disclosed in Note 21.
55
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
26. Funding facilities
Funding arrangements for Zespri Group Limited are made when required following the assessment of cash requirements for the season.
The security for day-to-day operational treasury activities and potential funding arrangements is a first-ranking general security deed dated
30 April 2007, registered to the ANZ Bank Limited for Zespri Group Companies that form a Guaranteeing Group. Pursuant to the general
security deed under which debt certificates have been issued, the collateral at risk is all property for those entities within the Guaranteeing
Group, except where The New Zealand Institute for Plant & Food Research Limited has a higher priority security interest in the Hort16A PVR
and Hort16A intellectual property (refer Note 18). Property within the definition of collateral includes (but is not limited to) cash balances,
inventory, accounts receivable, other financial assets, intangible assets, and property, plant and equipment.
As at 31 March 2014, the members of the Guaranteeing Group are:
Zespri Group Limited
Aragorn Limited (non-trading)
Zespri Innovation Company Limited
Zespri International Limited
Zespri International (Asia) Limited
Zespri International (Japan) Limited
Zespri International Trading Limited
Zespri New Zealand Limited
As at 31 March 2014, the outstanding borrowing under the funding facility is $Nil (2013: $Nil). The maximum exposure relating to the
operational treasury activities as at 31 March 2014 is $1,279,499 (2013: $627,069). This exposure relates entirely to the unrealised
mark-to-market losses on derivatives as at 31 March 2014.
27. Capital commitments
(a) Property, plant and equipment commitments
As at 31 March 2014, there are outstanding capital commitments totalling $684,834 for property, plant and equipment
(2013: $58,147).
(b) Intangibles commitments
As at 31 March 2014, there are outstanding capital commitments totalling $7,588,924 for intangible assets relating to ongoing
computer software projects (2013: $848,337).
28. Related party transactions
(a) Key management personnel
Zespri Group’s key management personnel include:
–
Directors of the Company; and
–
Members of the global executive of Zespri Group.
During the year, key management personnel received the following compensation:
Group
2014
$’000
2013
$’000
Short-term employee benefits (including Directors’ fees) 1
9,081
8,807
Short-term employee benefits outstanding as at 31 March 1
1,204
1,485
1
As at 31 March 2014, provision for restructuring, to complete the global restructuring process begun in 2012, is $1.1 million
(2013: $2.4 million) (refer Note 21). Amounts relating to this restructure paid to key management personnel in 2013/14 are
$1,442,296 (2013: $1,333,023) and are included in short-term employee benefits expense above. No amount under the
provision is payable as at 31 March 2014 and as such, the 2013/14 employee benefits outstanding for key management
personnel does not include amounts provided for in the restructuring provision (2013: $Nil).
Certain Directors, including C S Greenlees, P J McBride, A E de Farias, N W Flowerday and B L Cameron, conduct business with the
Company and its subsidiaries in the normal course of their business activities as growers and as shareholders. All these transactions are
conducted on commercial terms and conditions. Directors are required to record all interests in the Company’s Interests Register.
56 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
28. Related party transactions (continued)
(b) External related parties through common directorship, control or significant influence by key management personnel
During the year ended 31 March 2014, the Company conducted transactions with the following entities in the normal course
of business:
Aronia Corporation Limited, DMS Progrowers Limited, Golf Course Orchard Limited Partnership, G3 Kiwi Supply Limited,
High Fives Orchard Limited, Kiwifruit Vine Health Incorporated, Mainland Kiwi Growers Entity Limited, Mangatarata Orchards Limited,
Opotiki Packing and Coolstorage Limited, Port of Tauranga Limited, Trinity Lands Limited and Waterview Downs Orchards Limited.
(2013: Aronia Corporation Limited, DMS Progrowers Limited, House of Travel Limited, G3 Kiwi Supply Limited, High Fives Orchard
Limited, Kiwifruit Vine Health Incorporated, Mainland Kiwi Growers Entity Limited, Mangatarata Orchards Limited, Opotiki Packing and
Coolstorage Limited, Port of Tauranga Limited and Trinity Lands Limited.)
These entities are, or were, related to the Company by virtue of shareholding, common directorship, control or significant influence.
(i)
Types of transactions with external related parties include:
– The Company pays fruit and service payments under the terms of the New Zealand Supply Agreement;
–The entities are charged penalties and other charges under the terms of the New Zealand Supply Agreement and the Quality
Manual. There are standard dispute procedures which may be enacted if the entities receiving the charges do not agree with
these charges.
–Under the terms of the New Zealand Supply Agreement, growers and contracted suppliers are able to make insurance
claims to the Company for specific risks (refer Note 14). In certain cases, the Company pays out insurance for losses under
these claims.
–The Company may, at its discretion, sell licences for kiwifruit varieties for which it controls the PVRs.
All of the transactions above, including any disputes, were entered into under the same contracted and commercial terms as for
all other growers and contracted suppliers in New Zealand.
(ii) Transactions during the year and balances outstanding as at 31 March 2014 with external related parties. All related party
disclosures are GST exclusive.
Group
2014
$’000
Revenue/(expenses):
Sale of Zespri variety licences 1
Income received from KVH
Sundry income
Fruit and service payments 2
Loyalty premium
Psa expenses paid to KVH 3
Other expenses
Balances receivable/(payable):
Fruit and service payments outstanding
Loyalty premium payable
Provision for KVH funding
Sundry accounts payable (includes research and royalty) 1
Parent
2013
$’000
2014
$’000
2013
$’000
43
549
145
(105,549)
(2,845)
(3,110)
(3,326)
123
4,333
244
(134,711)
(3,589)
(4,430)
(3,164)
43
(105,549)
(2,845)
(3,110)
(2,003)
123
(134,711)
(3,589)
(4,430)
(1,369)
(1,943)
(1,707)
(2,873)
(62)
(4,228)
(2,154)
(4,783)
(25)
(1,943)
(1,707)
(2,837)
-
(4,228)
(2,154)
(4,783)
-
1
In 2013/14, interests directly associated with Directors purchased 36.00 hectares of new variety licences (2013: 95.00 hectares).
Revenue of $37,296 (2013: $121,824) has been recognised which in the current year consists of licence deposits. Hardship
status was given to a licence for 8.30 hectares (2013: 6.60 hectares) with a total value of $57,391 of which $11,478 would have
otherwise been paid as a deposit in 2013/14. In 2013/14, 10.98 hectares (2012/13: Nil) of new variety licences were issued
for no consideration to related parties who conducted block trials. As at 31 March 2014, $814,637 of licence fee revenue is
due in future years (2013: $616,344).
2
Includes payments for various monitoring and research projects being carried out on orchards directly associated with
Directors. In 2013/14, interests directly associated with Directors conducted new variety block trials on 1.25 hectares
(2013: 0.80 hectares) of orchards. Upon commercialisation trial orchards are eligible, at no cost, to obtain a licence to
cultivate a new variety or an existing variety in the event a trial is terminated.
3
Psa expenses recognised during the financial year relating to KVH, which became a related party during 2010/11 with the
appointment of a Director of the Company (P J McBride) and a global executive member to the KVH Board. P J McBride
resigned from directorship as at March 2013 and N W Flowerday was appointed a new Director as at May 2013.
57
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
28. Related party transactions (continued)
(c) Subsidiaries
Subsidiaries, listed at Note 19, are considered to be related parties to the Company. The Company has recorded the following material
related party transactions:
–
Inter-company sale of New Zealand kiwifruit to Zespri International Limited, $822,464,955 (2013: $998,070,999)
–
Funding to Zespri Innovation Company Limited for research and development, $9,647,719 (2013: $9,186,631)
–
Service fee and expense for the recharge of overheads incurred on its behalf, $17,232,567 (2013: $15,075,103)
–
Payment or receipt of Group GST on behalf of the GST tax group in New Zealand
–
Dividend income from subsidiaries, $Nil (2013: $20,000,000) (refer Note 6(a)).
The total of balances owing to or from the Company’s subsidiaries is disclosed in Notes 12, 15, 20 and 24. All of these balances are
unsecured and payable on demand.
29. Events occurring after balance date
On 20 May 2014, the Board of Directors of Zespri Group Limited announced its intention to pay a final dividend of 7.0 cents per fully paid
ordinary share (2013: 1.0 cent), to be paid in August 2014. As the intention was announced after balance date, the financial effect has not
been recognised in the Financial Statements.
Subsequent to 31 March 2014, no events have occurred that require disclosure in the Financial Statements.
30. Statutory board and grower representation funding
The Company is required, under Regulation 39 of the Kiwifruit Export Regulations 1999, to fund the statutory board, Kiwifruit New Zealand.
Zespri Group Limited is required by The Commodity Levies (Kiwifruit) Order 2012 to pay a levy to New Zealand Kiwifruit Growers
Incorporated on behalf of growers. The rate for the 2013/14 year was $0.009 per tray of kiwifruit exported to markets other than Australia
(2013: $0.009 per tray). The total amount of Commodity Levy paid during the year was $770,216 (2013: $902,000).
Group and Parent
2014
$’000
Kiwifruit New Zealand
New Zealand Kiwifruit Growers Incorporated
– General funding
The financial statements of New Zealand Kiwifruit Growers Incorporated are available for viewing on request.
58 Zespri Annual Report 2013/14
2013
$’000
318
318
285
285
770
770
902
902
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
31. Group segment results
Revenues, direct costs, promotion and overheads are identified and recognised for each business unit under the application of NZ IFRS.
The internal management information on which segment results are based uses a different method for allocating realised gains and losses on
treasury activities. For internal management reporting, realised gains and losses from the management of foreign exchange risk are allocated
to the business unit’s individual revenue and expense lines, based on the underlying currencies of the transactions to effect what would be a
‘hedged’ rate on the cumulative transactions. For financial reporting purposes, these net realised foreign exchange gains/(losses) on
derivatives are disclosed separately from the operating revenue and operating expense within other net gains/(losses) (refer Note 5).
NonResearch
New Zealand New Zealand
and
fresh kiwifruit fresh kiwifruit development
Group 2014
$’000
$’000
$’000
Corporate
services
Eliminations
Total
$’000
$’000
$’000
Total sales revenue – external customers
Inter-segment revenue
Inter-segment commission
Interest revenue
Other revenue
Total revenue
1,204,521
922
1,205,443
144,235
88
107
144,430
9,460
2,921
12,381
1,393
115,567
5,100
4,677
126,737
(10,853)
(115,567)
(126,420)
1,348,756
5,188
8,627
1,362,571
Freight
Insurance (onshore and offshore)
Duty and customs
Promotion
Other direct costs – offshore
Other direct costs – onshore
Gold Psa levy expense
Interest expense
KNZ/NZKGI costs
Fruit and service payments
Loyalty premium
Research 1
New cultivar amortisation
Inter-segment expense 1
Inter-segment interest (income)/expense
Other offshore costs
Other onshore costs
Green Class 2 subsidy
Total expense
114,221
2,042
58,917
68,549
40,867
22,893
980
789
1,088
779,793
116,960
(1,656)
1,205,443
3,775
94
3,218
4,560
115,275
3,076
4,579
134,577
12,381
12,381
20,999
1,148
9,460
1,656
40,435
35,748
43
109,489
(126,420)
(126,420)
117,996
2,136
58,917
71,767
45,427
22,893
980
789
1,088
895,068
20,999
12,381
1,148
43,511
40,327
43
1,335,470
9,853
-
17,248
Segment profit before taxation
1
-
-
27,101
The total New Zealand-grown supply research cost is $12,380,687. This is funded $9,460,283 from corporate services and
$2,920,664 from external co-funders (refer Note 2(b)). The non-New Zealand-grown supply research is funded from the
non-New Zealand-grown supply segment.
59
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
31. Group segment results (continued)
NonResearch
New Zealand New Zealand
and
fresh kiwifruit fresh kiwifruit development
Group 2013
$’000
$’000
$’000
Corporate
services
Eliminations
Total
$’000
$’000
$’000
Total sales revenue – external customers
Inter-segment revenue
Inter-segment commission
Interest revenue
Other revenue
Total revenue 1
1,455,727
41
2,079
1,457,847
105,486
45
100
105,631
9,078
4,120
13,198
760
134,640
5,773
4,662
145,835
(9,879)
(134,640)
(144,519)
1,561,213
5,818
10,961
1,577,992
Freight
Insurance (onshore and offshore)
Duty and customs
Promotion
Other direct costs – offshore
Other direct costs – onshore
New Zealand Psa funding
Interest expense
KNZ/NZKGI costs
Fruit and service payments
Loyalty premium
Research
New cultivar amortisation
Inter-segment expense 1
Inter-segment interest (income)/expense
Other offshore costs
Other onshore costs
Green class 2 subsidy
Total expense
134,555
2,929
76,143
89,288
55,019
29,542
1,045
1,188
934,157
135,400
(1,419)
1,457,847
3,208
79
10
2,524
4,157
83,733
2,075
4,579
100,365
13,156
42
13,198
4,205
24,991
304
9,078
1,419
57,454
31,901
382
129,734
(144,519)
(144,519)
137,763
3,008
76,153
91,812
59,176
29,542
4,205
1,045
1,188
1,017,890
24,991
13,156
1
59,529
36,784
382
1,556,625
5,266
-
16,101
Segment profit before taxation
1
-
-
21,367
The total New Zealand-grown supply research cost is $13,198,489. This is funded $9,077,855 from corporate services and $4,120,634
from external co-funders (refer Note 2(b)). The non-New Zealand-grown supply research is funded from the non-New Zealand-grown
supply segment.
60 Zespri Annual Report 2013/14
Notes to the Financial Statements
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
31. Group segment results (continued)
Methods and assumptions
Zespri Group allocates assets, and any related depreciation and amortisation, on a basis which reflects where the assets are generated
or utilised.
Zespri Group employs a central treasury function and does not allocate cash between the segments because it is managed centrally.
Interest revenue and expense has been allocated on the basis of where funds are being utilised.
Inter-company debtor and creditor accounts are settled through the central treasury function. Any other outstanding balances created
between companies as part of this settlement process, or any other intra-group borrowing or lending transactions, are not allocated to any
segment but form part of the centrally managed funding of Zespri Group.
Zespri Group does not allocate income tax to reportable segments.
Group sales revenue
– by location of external customers
Japan
Spain
China
The Netherlands
South Korea
Italy
Taiwan
Germany
France
Belgium
Hong Kong
New Zealand
Other
Total revenue from product sales
2014
2013
2014
2013
Local currency ’000
Local currency ’000
$’000
$’000
JPY 27,358,717
EUR
92,021
USD
107,493
EUR
50,391
KRW 105,819,565
EUR
32,548
USD
88,518
EUR
53,285
EUR
33,130
EUR
26,270
USD
27,333
NZD
910
various
450,262
159,035
98,715
82,462
80,218
70,819
66,913
JPY 27,111,099
EUR
92,591
USD
78,529
EUR
47,807
KRW 70,410,462
EUR
40,947
USD
53,249
EUR
EUR
EUR
USD
NZD
36,165
32,711
26,837
18,644
877
63,039
57,130
46,340
23,439
877
149,507
1,348,756
459,054
164,410
138,856
90,568
119,366
59,184
114,281
96,185
59,895
46,674
34,537
910
177,293
1,561,213
Individual customers account for less than 10 percent of sales across the Group.
Group
Non-current assets – by location of asset
New Zealand
Belgium
Japan
Other
Other non-current assets (no assigned location):
– Deferred tax
– Non-current other financial assets
Total non-current assets
2014
$’000
2013
$’000
20,548
1,066
441
319
22,374
11,946
2,241
431
326
14,944
3,616
97,963
123,953
4,481
122,273
141,698
61
Statutory Information
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Shareholder Information
Top 20 shareholders at 31 March 2014
Number of
shares
%
Hopai Holdings Limited
Christopher Warren Dunstan & Shirley Margaret Dunstan & Murray Crossman Trustee Company Limited
Mark Lionel William Gardiner & Robyn Anne Gardiner
DMS Horticulture Limited
Trinity Lands Limited
Maketu Estates Limited
Mangatarata Orchards Ltd
South-East Hort Limited
Anaru Timutimu & Carlos Jason Ellis & Mere Lambert & Te Timatanga Neil Te Kani & Ngawa Hall
& Riri Te Whara Ellis & Peter Cross
Seeka Kiwifruit Industries Ltd
Kiwi Green New Zealand Limited
Birdhurst Limited
John David Anderson & IML Aerocool Trustee Company Limited
Beverley Ann Reid & David Murray Reid & John Alexander Stewart
Matai Pacific Limited
Sunnyvale Enterprises Limited
Eastpack Limited
Stephen John Brennan & Baats Trustee 2004 Limited & Susanna Mary Wild & Holland Beckett Trustee
No 7 Limited
Aronia Corporation Limited
Wakatu Incorporation
2,073,020
1,634,645
1,418,120
1,407,500
1,372,915
1,283,270
1,085,310
850,000
1.72%
1.35%
1.17%
1.17%
1.14%
1.06%
0.90%
0.70%
816,590
740,825
690,605
675,610
605,470
596,450
591,330
568,515
548,435
0.68%
0.61%
0.57%
0.56%
0.50%
0.49%
0.49%
0.47%
0.45%
545,730
535,500
531,360
18,571,200
0.45%
0.44%
0.44%
15.36%
Distribution of ordinary shares and registered shareholders at 31 March 2014
Number of shareholders
Size of holding
1 – 5,000
5,001 – 25,000
25,001 – 50,000
50,001 – 250,000
Over 250,000
Total
62 Zespri Annual Report 2013/14
Number of shares
%
151
822
502
589
69
2,133
7.1%
38.6%
23.5%
27.6%
3.2%
100.0%
%
475,070
11,776,378
18,288,037
55,573,302
34,604,548
120,717,335
0.4%
9.8%
15.1%
46.0%
28.7%
100.0%
Statutory Information
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Shareholder Information (continued)
2014
Shareholder statistics
Number of shares (’000) 1
Interim and final dividend (per share) – fully imputed
Share price at year-end
Earnings per share
Net dividend yield 1
Gross dividend yield at 28% tax rate (2012: 30%/33%) 1
Share trading
Number of shares sold: on-market trades
Number of shares sold: off-market
Number of shares transferred with sale of property
Family Trust share transfers
Equity ratio
Net tangible assets value per share
1
2013
2012
120,717
$0.11
$0.77
$0.14
14.3%
19.8%
120,717
$0.05
$0.48
$0.06
10.4%
14.5%
120,717
$0.10
$0. 50
$0.17
20.0%
28.6%
2,156,738
2,237,595
454,097
1,366,095
929,685
787,948
51,975
2,469,685
947,795
47,842
1,398,395
1,215,303
20.1%
$0.60
16.4%
$0.57
20.5%
$0.66
The dividend paid in August 2012 and prior dividends referred to above were imputed at a 30/70 Ratio. All subsequent dividends have been
imputed at a 28/72 ratio, including those eligible under IRD transition rules.
Directors’ Disclosures
Directors’ meeting attendances and business travel overseas
Organisation
Zespri Group Audit and Risk
and
Limited
Management Administration
1
Board
Committee
Committee
Industry
Advisory
Council
Board
Number of
Supply Chain Innovation business trips
Committee Subcommittee overseas
B L Cameron
16
-
4
6
-
-
2
A E de Farias
N W Flowerday
16
16
5
4
-
6
2
5
-
6
1
2
C S Greenlees
15
6
-
4
5
-
2
1
1
-
1
-
-
-
15
-
4
-
-
6
2
J J Loughlin 3
A J Marks
14
4
2
-
-
-
-
P J McBride
16
6
4
6
5
6
5
D A Pilkington
15
-
2
-
5
6
-
J P Mason
2
Regions visited
Europe, China
and East Asia
Americas
Japan, East
Asia, China and
Europe
Europe and
China
Southeast Asia
China, Europe
and Japan
1
In addition to the scheduled Board meetings, three special purpose Board meetings were convened at short notice as a consequence of
industry-wide events that required immediate consideration by the Board.
2
J P Mason was appointed in 22 May 2013 and attended Board meetings from June 2013.
3
J J Loughlin resigned on 17 April 2013 and attended Board meetings to April 2013.
All Directors have a standing invitation to attend meetings of all committees, irrespective of whether or not they are a member of that committee.
In addition to the meetings detailed above, the Directors’ attendances included planning meetings, Directors’ conferences and grower meetings.
63
Statutory Information
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Directors’ Disclosures (continued)
2014
$
Remuneration of Directors
2013
$
B L Cameron
88,750
75,000
A E de Farias
75,000
75,000
N W Flowerday
70,000
46,667
C S Greenlees
78,333
80,000
J J Loughlin (resigned 17 April 2013)
13,333
160,000
A J Marks
70,000
80,000
J P Mason (appointed 22 May 2013)
65,833
-
154,583
95,000
P J McBride
D A Pilkington
Total
75,000
75,000
690,832
686,667
Directors’ interests – shareholdings
The following table sets out the shareholdings in Zespri Group Limited held by each Director as at 31 March 2014:
Shareholding
as at
Date of
31 March 2013 transaction
Share price
Number
purchased/
transferred
Number sold
Interest
Shareholding
commenced/
as at
(ceased)
31 March 2014
B L Cameron
101,619
101,619
A E de Farias
233,545
233,545
N W Flowerday
105,705
1/11/13
0.48
185,910
C S Greenlees
2,725,9001
5/07/13
0.39
61,790
8/08/13
0.50
22,835
19/11/13
0.61
17,780
19/11/13
0.71
30,000
19/11/13
0.68
171,780
28/11/13
0.70
66,555
10/02/14
0.74
351,200
291,615
3,447,840
J J Loughlin (resigned April 2013)
-
-
A J Marks
-
-
J P Mason
-
-
850,000
850,000
-
-
P J McBride
D A Pilkington
1
Shareholding of 947,930 in relation to two entities were omitted from shareholding as at 31 March 2013 in the 2013 Annual Report.
Shares above are held personally by Directors or are held by way of relevant interest.
Industry Directors may also hold indirect minority interests in companies holding Zespri Group shares which are not significant.
64 Zespri Annual Report 2013/14
Statutory Information
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Directors’ Disclosures (continued)
Directors’ interests – Directors in office as at 31 March 2014
B L Cameron
Director of, and shareholder in, Zespri Group Limited
Director of Zespri International Limited
Director of, and shareholder in, Cameron Farms Limited
Director of, and shareholder, Cameron Orchards Limited (interest commenced July 2013)
Director of, and shareholder in, Pacific Orchard Limited
Director of, and shareholder in, Gilston Mains Limited
Director of Te Awanui Huka Pak Limited
Director of New Zealand Rugby Promotions Limited
Director of New Zealand Rugby Union
Trustee of B L and G M Cameron Family Trust
Trustee of Waipuna Foundation Board
Member of the Institute of Directors
A E de Farias
Director of, and shareholder in, Zespri Group Limited
Director of Zespri International Limited
Director of Biolumic Limited
Director and Chairman of Grasslands Group and other subsidiaries (interest ceased as chairman October 2013)
Director and Chairman of Maxwell Farms Limited and subsidiaries
Director of Mamaku South Limited (interest commenced July 2013)
Director and Chairman of Opotiki Packing and Coolstorage Limited and subsidiaries (related party interests in various orchards)
Director and Chairman of The Fresh Fruit Company of Nelson Limited
Director and Principal of DFR Consultants Limited
Director of, and shareholder in, Waterview Downs Orchards Limited
Director of Bay of Plenty Rugby Union (interest ceased February 2014)
Director of Horizon Energy Distribution Limited and subsidiaries
Director of Chiefs Rugby Club GP Limited (interest commenced February 2014)
Shareholder of Rivas Orchard Limited (interest commenced May 2013)
Chairman of Toi EDA (Eastern Bay of Plenty Economic Development Agency) (interest ceased July 2013)
Chairman of Whakatane Airport Board (interest ceased November 2013)
Independent Chairman of Grow Whakatane Advisory Board (interest commenced November 2013)
N W Flowerday
Director of, and shareholder in, Zespri Group Limited
Director of Zespri International Limited
Director of, and shareholder in, NWF Holdings Limited
Director of, and shareholder in, High Fives Orchard Limited
Director of Kiwifruit Vine Health Incorporated (interest commenced in May 2013)
Director of Kiwifruit Vine Health Foundation Incorporated
Shareholder in Apata Limited
65
Statutory Information
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
C S Greenlees
Director of, and shareholder in, Zespri Group Limited
Director of Zespri International Limited
Director of Zespri International (Asia) Limited
Director and Chairman of, and shareholder in, Avocado Oil NZ Ltd and subsidiaries
Director of, and shareholder in, Camestate Holdings Limited
Director of, and shareholder in, DMS Group Limited and subsidiaries
Director of, and shareholder in, Direct Management Services Limited
Director of, and shareholder in, DMS Orchard Management Limited and subsidiaries (related party interests in various orchards and
shareholder in supplier)
Director of, and shareholder in, DMS Progrowers Supply Entity Limited
Director of, and shareholder in, UPNZ Limited
Director of, and shareholder in, Velocity Orchard Limited (related party interests in various orchards)
Director of, and shareholder in, Barnlees Orchard Limited
Director of G3 Kiwi Supply Limited
Director of Larkridge Investments (No. 1) Limited (related party interests in various orchards)
Director of Mark Stuart Orchards Limited
Director of Mainland Kiwi Growers Entity Limited
Director of, and shareholder in, Mangatarata Orchards Limited (related party interests in various orchards)
Director of The Nutritious Kiwifruit Company (interest commenced February 2014)
Alternate Director of Avocado New Zealand Marketing Limited
Partner of Golf Course Orchard Limited Partnership
Partner in Progeny Kiwifruit Partnership (related party interests in various orchards)
Partner in Direct Management Services
Shareholder in Ashton Orchard Limited (related party interests in various orchards)
Shareholder in Fruit Force Holdings Limited (related party interests in various orchards)
Shareholder in Tinopai Orchard Limited (related party interests in various orchards)
Lessee or owner of a number of orchards
Management interest in Aronia Corporation Limited
Management interests in various orchards
Member of Crasborns Advisory Board
Trustee and beneficiary of C S and S M Greenlees Family Trusts (related party interests in various orchards)
Trustee of DMS Progrowers Supply Entity Trust
A J Marks
Director of Zespri Group Limited
Director of Zespri International Limited
Chairman and Director of Raripo Limited and subsidiaries
Chairman of Rotorua Tourism Committee (interest ceased January 2014)
Director of Avocado Oil NZ Limited
Director of Grow Rotorua Limited
Director of Leigh Fisheries Limited
Director of Ngai Tahu Tourism Limited
Director of Redwood Cider Company Limited (formerly Redwood Cellars Limited)
Director of Somerset Marketing Limited
Director of Virgin Samoa Limited (interest ceased January 2014)
Chairman of the Advisory Board of The Lovely Little Food Company Limited (interest commenced November 2013)
66 Zespri Annual Report 2013/14
Statutory Information
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
J P Mason
Director of Zespri Group Limited (interest commenced May 2013)
Director of Zespri International Limited (interest commenced May 2013)
Director of Vector Limited (interest commenced May 2013)
Director of Air New Zealand Limited (interest commenced March 2014)
Director of several subsidiary companies of Fonterra Co-operative Group Limited (interests ceased December 2013)
Trustee of The University of Auckland Endowment Fund
Trustee of Beloit College
P J McBride
Director and Chairman of, and shareholder in, Zespri Group Limited (elected Chairman May 2013) and a number of
other Zespri Group subsidiaries
Director of Zespri International Limited
Director of, and shareholder in, Flint Capital Limited
Director of, and shareholder in, South-East Hort Limited and subsidiaries (related party interests in various orchards, and
shareholder in some suppliers)
Director of Centrefarm Aboriginal Horticulture Limited, NT, Australia
Director of Centreprise Resources Group Pty Limited, Australia
Director of David Crafts & Co. Pty Ltd (Australia)
Director of New Zealand International Business Forum
Director of, and shareholder in, Apex Genetics Limited (interest ceased September 2013)
Director of, and shareholder in, Carmel Trustee Co. Limited (interest ceased October 2013)
Director and trustee of the Encounter Charitable Trust (interest ceased August 2013)
Director of Sequal Enterprises (2007) Limited (interest ceased August 2013)
General Manager of Kiwifruit for Trinity Lands Limited
Managing Director of Montrose Partnership
Trustee of P J and L R McBride Family Trust
Trustee of Somerset Trust
D A Pilkington
Director of Zespri Group Limited
Director of Zespri International Limited
Director of Aragorn Limited
Director and Chairman of, and shareholder in, Ruapehu Alpine Lifts Limited (Director/Chairman interest ceased July 2013)
Director and Chairman of Rangatira Limited and subsidiaries (elected Chairman September 2013)
Director of, and shareholder in, Excelsa Associates Limited
Director of Ballance Agri-Nutrients Limited and subsidiaries
Director of Douglas Pharmaceuticals Limited and subsidiaries
Director and Chairman of Port of Tauranga Limited (elected Chairman October 2013)
Director of Primeport Timaru Limited (interest commenced November 2013)
Director of Northport Limited (interest commenced November 2013)
Director of Restaurant Brands New Zealand Limited and subsidiaries
Independent Member of Wellington City Council – Audit and Risk Management Committee (interest ceased September 2013)
Trustee of New Zealand Community Trust
Trustee and Beneficiary of Pilkington Family Trust
Trustee and Beneficiary of Pohutukawa Trust
67
Statutory Information
Zespri Group Limited and Subsidiaries
Annual Report for the year ended 31 March 2014
Employee Remuneration
For the year ended 31 March 2014, the number of employees whose total remuneration and value of any benefits received or receivable
exceeded $100,000 between the following bands were:
Number of non-New Zealand-based employees
Number of New Zealand-based employees
Total remuneration and benefits
$
6
5
4
6
2
4
4
6
3
2
2
1
2
2
1
15
2
4
5
4
5
4
2
3
3
4
2
1
2
1
2
1
1
2
1
1
1
2
1
1
1
1
1
1
1
1
1
Note: These bands are New Zealand dollar equivalents and reflect foreign exchange fluctuations.
68 Zespri Annual Report 2013/14
$100,000 to $109,999
$110,000 to $119,999
$120,000 to $129,999
$130,000 to $139,999
$140,000 to $149,999
$150,000 to $159,999
$160,000 to $169,999
$170,000 to $179,999
$180,000 to $189,999
$190,000 to $199,999
$200,000 to $209,999
$210,000 to $219,999
$220,000 to $229,999
$230,000 to $239,999
$240,000 to $249,999
$250,000 to $259,999
$260,000 to $269,999
$290,000 to $299,999
$320,000 to $329,999
$330,000 to $339,999
$370,000 to $379,999
$390,000 to $399,999
$420,000 to $429,999
$440,000 to $449,999
$470,000 to $479,999
$490,000 to $499,999
$500,000 to $509,999
$550,000 to $559,999
$650,000 to $659,999
$810,000 to $819,999
$850,000 to $859,999
$1,000,000 to $1,009,999
$1,160,000 to $1,169,999
New Zealand and Australia
Europe
New Zealand
Zespri Group Limited
Zespri International Limited
PO Box 4043
Mount Maunganui South
400 Maunganui Road
Mount Maunganui 3116
New Zealand
Telephone: +64 7 572 7600
Facsimile: +64 7 572 7646
www.zespri.com
Belgium
Zespri International (Europe) NV
Posthofbrug 10 bus 3
2600 - Berchem (Antwerpen)
Belgium
Telephone: +32 3 201 0801
Facsimile: +32 3 201 0888
www.zespri.eu
Australia
Zespri International (Australia) Pty Limited
3 Palermo Street
South Yarra, VIC 3141
Australia
Asia
China
Zespri Fruit (Shanghai) Co.,Ltd
Suites 3307 & 3308, Building A,
No. 1, Hongqiao Road, Xuhui District
200030,
PR China
www.zespri.com.cn
Japan
Zespri International (Japan) K. K.
3rd Floor, Sanbancho Yayoikan
6 - 2 Chiyoda-ku
Tokyo 102-0075
Japan
Telephone: +81 3 3288 9341
Facsimile: +81 3 3288 9353
www.zespri-jp.com
Korea
Zespri International (Korea) Co., Ltd
8th Floor, Maru Building
12, Teheran-ro 84-gil
Gangnam-Gu, Seoul 135-280
Korea
Telephone: +82 2 547 5935
Facsimile: +82 2 547 5938
www.zespri.co.kr
Singapore
Zespri International (Singapore) Pte Limited
7 Temasek Boulevard
14-02A Suntec Tower One
Singapore 038987
Telephone: +65 6 884 8745
Facsimile: +65 6 884 8746
www.zespri.com.sg
Taiwan
Zespri International (Asia) Limited
Suite 1701, 17th Floor
International Trade Building
333 Keelung Road / Section 1
Taipei 110
Taiwan
Telephone: +886 2 2757 7266
Facsimile: +886 2 2345 9633
www.zespri.com.tw
USA
United States of America
New Zealand Kiwi Holdings Inc.
1420 5th Avenue, Suite 4100
Seattle
WA 98101-2338
United States of America
Telephone: +1 206 223 7000
Facsimile: +1 206 223 7107
www.zesprikiwi.com
Zespri Service Centre NV
Posthofbrug 10 bus 7
2600 - Berchem (Antwerpen)
Belgium
Telephone: +32 3 201 0877
Facsimile: +32 3 201 0890
www.zespri.eu
France
Zespri International France EURL
14 Boulevard Ganteaume
13400 Aubagne
France
Telephone: +33 04 4262 4190
Facsimile: +33 04 4270 0542
www.zespri.eu
Zespri Fresh Produce France S.A.R.L.
42 Rue de Tauzia
33800 Bordeaux
France
Germany
Zespri International Germany GmbH
Postweg 26
46499 Hamminkeln
Germany
Telephone: +49 285 296 0440
Facsimile: +49 285 296 0439
www.zespri.eu
Italy
Zespri International Italy S.r.l
Via Cesare Lombroso 54
20137 Milan
Italy
Telephone: +39 025 4107 492
Facsimile: +39 025 410 4627
www.zespri.eu
Zespri Fresh Produce Italy S.r.l
Via Ercolani 28
40026 Imola (BO)
Italy
Telephone: +39 05 4223 523
Facsimile: +39 05 4261 2909
Spain
Zespri International Iberica SL
Mercamadrid – Zona Commercial
Local D14-A
28053 Madrid
Spain
Telephone: +34 915 079 368
Facsimile: +34 915 079 259
www.zespri.eu
Sweden
Zespri International Nordic AB
Tallkrogsplan 93
122 60 Enskede
Sweden
Telephone: +46 08 448 0217
Facsimile: +46 08 659 4870
www.zespri.eu
United Kingdom
Zespri International (United Kingdom) Ltd
Pendragon House
65 London Road
St Albans, Hertfordshire, AL1 1LJ
United Kingdom
Telephone: +44 01 727 750 000
Facsimile: +44 01 727 750 000
www.zespri.eu
ZESPRI ® 2013/14 ANNUAL REPORT
PURE VITALITY FROM WITHIN

Terrence M Loomis (Dr) - Institute for Governance and Policy Studies

PEP 53473 Takapou

April Newsletter - Aongatete Coolstores Limited

日本ニュージーランド学会主催 国際シンポジウム International

February 2015 - New Zealand Tertiary College

CONFERENCE 2014 - Aquaculture New Zealand

CONSOLIDATEDBALANCESH EETS - 東芝

New Zealand ASEAN Scholars Awards New Zealand Postgraduate

JPCA Show 2014 - DKSH New Zealand

Domestic PhD Tuition Fees for non