1948
2023 1
Alliance Group Limited Annual Report 2023
Introduction Our co-operative
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ALLIANCE GROUP ANNUAL REP ORT 2023
In 1948, a collective of Southland farmers came together to establish Alliance Freezing Company Limited, with the aim of processing and promoting premium-quality meat and associated products to international markets. The initial processing facility, which remains our largest to this day, was inaugurated in Lorneville in 1960. In 1980, the company underwent a change in ownership structure, transitioning into a co-operative. Today, Alliance Group takes great pride in being New Zealand's only 100 per cent farmer-owned red meat co-operative. This is why we carry this same sense of pride and dedication into every facet of our operations, including the well-being of our people, the vitality of our rural communities, and the health of the planet. Our journey, beginning as a small Kiwi enterprise and evolving into a global success story, can be attributed to our unwavering reputation for food excellence. While our success originates on farms across the country, it is our mission to identify opportunities across the entire supply chain and capture greater market value that sets us apart. This is why we continuously invest in technology, our people, and robust systems, as we strive to uphold the highest standards of environmental sustainability to ensure this success continues in the years ahead. We proudly employ nearly 5,000 people across New Zealand, as well as in the United Kingdom, Asia, and the United States. Our role as a significant employer in the rural communities where we operate is a responsibility we take seriously, and we recognise the privilege of being an integral part of New Zealand's primary sector.
The Queen was gifted a lamb from the first shipment of lambs processed at Alliance for the British market. Buckingham Palace sent a letter dated 28 June 1960 that said, “Her Majesty is very pleased to accept your offer of a New Zealand lamb and desires me to say how much your kind thought is appreciated.” The letter carried on to say, “The Queen would be glad if you would also kindly convey Her Majesty’s appreciation to the management in New Zealand.” Photograph and excerpt from A Cut Above, Early history of the Alliance Freezing Company (Southland) Ltd, written by Clive A. Lind.
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Contents
Longridge, Banks Peninsula
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ALLIANCE GROUP ANNUAL REP ORT 2023
08
01 Shareholder information
36
07 Our farmers and their produce
10
02 Year in review
42
08 Sales and marketing
12
03 Chairman and Chief Executive review
48
09 Manufacturing excellence
18
04 Strategy refresh
52
10 Governance
22
05 Our people
60
11 Our Financial Review
28
06 Caring for our environment and our communities
98
12 Statutory Information and Five Year Review
104
13 Directory
7
01
Shareholder information DIRECTOR ATE
KEY SENIOR LEADERSHIP CHANGES
Pat McEvedy and Dawn Sangster retire by rotation. Pat McEvedy offered himself for reelection. Dawn Sangster is retiring and will not stand for re-election. With five nominations for two director vacancies, an election will be conducted by internet and postal voting. The election result will be announced at the company’s Annual Meeting of shareholders.
Alliance is proud of the depth of leadership ability across the organisation. While there were a number of senior personnel changes during the year, several staff were promoted into senior leadership roles.
Ashleigh Dobson joined as an associate director in August 2023 following the conclusion of Ross Bowmar’s term in July 2023. ANNUAL MEETING OF SHAREHOLDERS The 2023 Annual Meeting of shareholders will be held on 15 December in Alexandra at 10.30am. A formal Notice of Annual Meeting of shareholders is set out in a separate document sent to shareholders.
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David Surveyor resigned after eight years as CEO. He left the business in February 2023. Willie Wiese was appointed interim CEO in February and confirmed as CEO in March 2023. Chris Selbie resigned as General Manager of People and Safety in May 2023. Stephanie Manning suceeded Chris in the role of General Manager People and Culture. Jo Irvine, General Manager Governance, Legal and Risk, took on interim responsibility for Safety. Rachel O’Brien joined Alliance in May 2023 as Chief Transformation Officer to lead strategy delivery and transformation.
ALLIANCE GROUP ANNUAL REP ORT 2023
IMAGE CAPTION
Danny Hailes resigned as General Manager Livestock and Shareholder Services in June 2023 after 30 years of service. During his time he held a wide range of roles and contributed significantly to the co-operative. He was awarded a Lifetime Achievement Award at the 2023 NZ Business Cooperatives Awards. Danny was replaced by Murray Behrent initially in an Interim role which was made permanent in October 2023. Ivan Docherty was appointed Interim General Manager Manufacturing in June 2023. We have subsequently appointed Wayne Shaw to the role of GM Safety & Processing. Wayne joins us on 6 December 2023. Shane Kingston, General Manager Sales and Marketing resigned in September 2023. He will leave the business in December 2023. An interim structure has been put in place until an appointment is made. The wool room in plant hasn't changed much from inception until today.
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02 Year in review
Co-operative Performance
97.9M
LOSS BEFORE TA X
$
2.0B
ANNUAL TURNOVER
$
57.7M
C APITAL SPEND
$
Fairlie, Canterbury.
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ALLIANCE GROUP ANNUAL REP ORT 2023
Benefits to Shareholders
30.2M
A D VA N C E PAY M E N T S M A D E T O P L AT I N U M A N D G O L D S U P P L I E R S
$
17.1M
L OYA LT Y PAY M E N T S
$
STO R E STO C K FAC I L I TAT I O N LAMB
EWES
969,195 72,136
C AT TLE
DEER
24,825 2,135 11
03
Chairman and Chief Executive review
On 23 May 1968 a New Zealand record was achieved with the 2 millionth lamb processed. Donald Buckley Photography, taken from A Cut Above, Early history of the Alliance Freezing Company (Southland) Ltd, written by Clive A. Lind.
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ALLIANCE GROUP ANNUAL REP ORT 2023
13
SECTION 03
CHAIRMAN AND CHIEF EXECUTIVE REVIEW
Chairman and Chief Executive review Alliance Group proudly marked a significant milestone this year, celebrating 75 years since the company's inception in 1948. This journey stands as a testament to the dedication of our people and our valued farmers to New Zealand's red meat sector. Over the past 75 years, the company has experienced highs and lows. 2023 has been an extremely difficult year for Alliance Group, the toughest since 2012, which was highlighted by a significant change in inventory value between October and December 2022 driven by changes in global market prices. We announced a loss before tax of $97.9 million for the year ending 30 September 2023 (FY2022 profit $116.3m) on a turnover of $2.0 billion (FY2022 $2.2b). Given the challenging operating environment, we are not in a position to make a distribution to our farmer shareholders.
S E A S O N S U M M A RY The past 12 months have been a tough year for farmers and the co-operative. Alliance faced significant volatility as a result of geo-political tensions, labour constraints, inflationary pressures and weakening global markets. Around the world, consumer discretionary spend was subdued due to persistently high inflation. Fewer people dined in restaurants, and more people swapped higher priced red meat proteins such as lamb for less expensive white meats in their weekly grocery shop. There were also high levels of inventory across all proteins in various markets, particularly lower cost Australian sheepmeat, which drove demand for fresh product down. This impacted all New Zealand processors. Prices in our key global markets began falling steeply through the October-December period and remained weaker for the remainder of the year. For example the global market price for lamb fell almost 25 per cent in just two weeks in October 2022. 14
China, our largest export market by value and volume, has yet to bounce back after the COVID-19 pandemic. Retail sales in China fell significantly in the latter part of 2022, as did consumer confidence. There were also ongoing labour challenges including immigration restrictions on seasonal labour, rising wage demands and increased competition which represented a significant cost to the business. Our farmer-shareholders not only faced lower farm-gate prices but on-farm inflation increased markedly and this impacted farm profitability. We are confident in our long-term strategy, however we have made changes across the business in response to the tough trading environment. These conditions have highlighted significant opportunities for improvement.
ALLIANCE GROUP ANNUAL REP ORT 2023
OUR PEOPLE
ROADSHOWS
Our people are our greatest asset. Ensuring they are engaged in the work they’re doing is pivotal to our success. That is why it was incredibly pleasing to hear from our people that they are the most engaged they’ve ever been.
During October 2022, Alliance Group 20 roadshow meetings across the country. We always enjoy talking with our farmers, listening to their feedback and having good open and honest discussions. We held seven woolshed meetings with farmers over the past year, and numerous farm visits. These informal on-farm meetings were invaluable for the Alliance team.
Our annual employee engagement survey saw 86 per cent of our people participate and share their thoughts on working at Alliance. This was a record number of survey responses. Not only did they want to participate, they also told us that they are more engaged now than in previous years, with an overall employee engagement survey score of 69 per cent, up from 67 per cent in 2022. H E A LT H A N D S A F E T Y At Alliance, the safety of our people is our number one priority, whether they be on plant, in the office, or out on farm with our farmers. We want our teams to go home safe and well every day. Our Total Recordable Injury Frequency Rate (the number of fatalities, lost time injuries, substitute work, and injuries requiring treatment by a medical professional per million hours worked) reached 15.7, compared to 14.8 in 2022 and 17.9 in 2021. However, this is still not good enough. We are still hurting too many people. We need to work harder to improve our health and safety performance, in particular, muscular skeletal injuries, which account for 60 per cent of our injuries due to the repetitive and manual nature of tasks. We also supported the launch of the Safer Farms 'Half Arsed Stops Here' campaign and Farm Without Harm strategy in June. Primary sector organisations and farmers, including Pat McEvedy, Supplier Representative on the Alliance Group Board, signed a pledge to help reduce injuries and fatalities on farms and address the human toll of producing food in New Zealand.
INVESTING IN OUR PLANTS Alliance Group has invested significantly in our plant network over the past 12 months. This has included a $16m warehouse automation project at Lorneville, a comprehensive decarbonisation programme and the introduction of cuttingedge artificial intelligence technology to measure the level of Intramuscular Fat (IMF) in ovine and bovine. Our commitment to investing in our sites is paying dividends with improved plant reliability, yield and product quality. SALES AND MARKETING Alliance Group’s sales and marketing team faced a vastly different landscape compared to the previous year. High inflation in our global markets saw demand for our products decline and pricing in our key geographies fall. Heightened competition through significantly increased volume supply from the likes of Australia compounded the situation. Despite the challenges, our investment in retail and food service channels, along with the expansion of our premium portfolio in Europe, US, South-east Asia and New Zealand, continued despite the fluctuations in global economies. South-east Asia, in particular, remains a region of growth potential, and we are committed to strengthening our branded presence there. Despite the challenges posed by inflation and weaker global market, our domestic New Zealand volume has surged, more than doubling over the last five years. This growth underscores our resilience and unwavering commitment to local expansion.
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SECTION 03
CHAIRMAN AND CHIEF EXECUTIVE REVIEW
Solutions, ingredients and materials also remained a key focus and we recognised some great opportunities to capture market value, albeit within a difficult environment. Currently, 14 per cent of all our products sit in the enhanced products solution space and we have a clear pathway to increase that to 33 per cent over the coming years, with positive steps made in 2023. A DV E R S E FA R M I N G C O N D I T I O N S Our farmers faced difficult farming conditions throughout the year. In the first quarter of the year, there were dry conditions in the South Island. We were shocked by the distressing images of destruction in Northland, Tairawhiti Gisborne, Hawke's Bay, and Tararua in the wake of Cyclone Gabrielle in February. The cyclone resulted in the loss of valuable grazing land and livestock for many farmers, extensive damage to countless kilometres of fencing, and substantial harm to the local road infrastructure. In response, Alliance Group swiftly launched a comprehensive support package, with a particular focus on farmers severely affected along the East Coast. Our North Island teams participated in multiple farm clean-ups in the months following the cyclone. ENTERPRISE RESOURCE PROJECT We have continued the roll-out of our Enterprise Resource Planning (ERP) project, which is ushering in significant improvements in our operational efficiency and facilitating our business transformation. The adoption of ERP will eventually affect every team member of the co-operative as we transition away from technology that has been in use for four decades. Unfortunately, the project has experienced pauses and restarts that have delayed the completion of some critical projects. We made changes to our delivery approach and operating model to give us the best possible chance of delivering successful outcomes. The new model included the establishment of a new ERP Leadership Team and revising the ERP Integrated Delivery Roadmap.
16
The purpose of these changes was to consolidate the delivery functions under a single leadership team with single line of sight of outcomes required, dedicated resources, and ensuring our people are collaborating effectively. R EG U L ATO RY C H A N G E S Our farmers are currently contending with significant shifts in regulations, and the speed and magnitude of these reforms have been overwhelming. The cumulative impact of the various regulations was laid bare in a report commissioned by Beef + Lamb New Zealand. The BakerAg report, which assessed the cumulative impact of Government policy on New Zealand sheep and beef farms, quantified the combined effects of the Government's environmental reform agenda on farms. In the past six years, over 20 new regulations, laws, and reforms have been introduced or are planned by central and local government, directly impacting agriculture, particularly in the areas of climate change, freshwater, and biodiversity. As a co-operative, we have advocated for rational and practical policies that work for our farmers, but also lead to good environmental outcomes. The worrying conversion of productive sheep and beef land into carbon farms due to the rising carbon price is continuing apace. New Zealand stands alone globally in not imposing limits on fossil fuel emitters planting trees to offset their emissions. It is imperative that we urgently address this and rectify the issues within the Emissions Trading Scheme (ETS). Without substantial changes, New Zealand's productive sheep and beef farmland will be permanently lost, and rural communities will suffer. The uncertainty around emissions pricing remains a concern. New Zealand farmers are willing to play their part in addressing climate change and the sector has made considerable progress over the past 30 years including reducing absolute emissions by 30 per cent.
ALLIANCE GROUP ANNUAL REP ORT 2023
However, the focus should be on setting up a practical and cost-effective emissions measurement and reporting framework, and ensuring genuine sequestration is recognised and there are viable mitigation tools available, before pricing is considered. THE ENVIRONMENT Our global customers and consumers expect Alliance Group, as a food producer, to continually improve our environmental performance. Our goal is to enhance the operational efficiency of our plants, reduce their environmental impact while sustaining the employment of our dedicated people and support the livelihoods of rural communities. Our environmental blueprint encompasses decarbonisation, enhanced water management, and reduced waste to landfill across our plant network.
THANK YOU This year has tested our resolve, but it's also been a year in which our team truly exemplified their care for our farmers and communities. Their commitment and dedication in the face of extraordinary challenges and pressure was exceptional. This resilience speaks volumes about the cooperative's enduring spirit and its ability to adapt in the face of adversity. On behalf of the co-operative, we extend our thanks to our farmers for their support during these trying times. We recognise that farmers have options, and we deeply appreciate their continued support of New Zealand's only 100 per cent farmer-owned red meat co-operative.
In 2019, we committed to phasing out coal usage at our plants within a decade, and we have established an Energy Transition Pathway to reduce our energy emissions by 77% compared to the 2018/19 baseline. We have already initiated various projects that are close to completion and these will provide a notable 22 per cent reduction in our Scope 1 and 2 carbon emissions. GOVERNANCE CHANGE After 12 years, Dawn Sangster will retire from the Board in December 2023. She has made a significant contribution to the cooperative and will leave a legacy of improved communications with shareholder farmers and more involvement from women in governance and leadership roles.
Murray Taggart
Willie Wiese
Chairman
Chief Executive
November 2023
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04 Strategy refresh
Lumina Lamb boneless loin.
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ALLIANCE GROUP ANNUAL REP ORT 2023
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SECTION 04
STR ATEGY REFRE SH
Strategy refresh Over the past year. Alliance undertook a major refresh and validation of our strategy. This included: + A focus on enhancing farmer/shareholder value at the farm-gate + Capturing more value from every part of the animal + Investing further down the value chain + Growing our in-market presence with enhanced branding
MAXIMISE SHAREHOLDER / SUPPLIER VALUE
MAXIMISE ENTERPRISE PERFORMANCE
CRE ATE MORE MA R K E T VA LUE
Our Macro-Strategic Outcomes Deliver for our
Become the most
Create more
shareholders / suppliers
efficient processor in NZ
market value
By providing a sustainable
By leveraging the full
By delivering innovative
economic model that
potential of our enterprise
products and solutions for
delivers for our farmer
capabilities
our customers.
communities
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ALLIANCE GROUP ANNUAL REP ORT 2023
AT THE HE ART OF THE STR ATEGY IS A SERIE S OF KE Y STR ATEGIC PRIORITIES + M aximise farmer shareholder value through: streamlined and improved farmer interactions, clear communication about how farmers can maximise the value of their livestock, more direct supply through premium programmes and enhanced competitive offerings.
+C reate more value from our products by: converting low value items to high value nutritionals, strategically build our branded portfolio, secure growth in attractive geographies, reduce market risk, and extract more value from our core products.
+ M aximise Enterprise Performance by: leveraging technologies and assets to create cost efficiencies, investing in our people for success and meeting our environmental, social, and corporate governance (ESG) goals.
More direct supply through premium programmes such as Handpicked Beef.
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05 Our people
The Pukeuri load out team in 1982 when all exports were in carcasse form – No cut to order cartons.
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ALLIANCE GROUP ANNUAL REP ORT 2023
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SECTION 05
OUR PEOPLE
Our people As part of our strategy refresh we also took the opportunity to reset our Organisational People Strategy. Through our annual staff engagement survey our people told us what’s working, what’s not, and what steps we can take to make sure that Alliance is a place where people want to come and do their best work. In 2023 our people told us that compared with previous years, they are more engaged than ever. Over 85% of our staff completed the survey with an overall engagement score of 69%, an increase of 2% from 2022. Our People Strategy has been created in response to our survey results but also as a key enabler of our refreshed business strategy. Our mission? To make Alliance a great place to work where people can thrive. How will we do that? We will focus on four key strategic outcomes: +
Create a positive culture
+
Build capable people and leaders
+
Optimise our resources
+
Get the basics right
By delivering on these four outcomes, we will live and lead our values every day, provide meaningful and rewarding work, provide opportunities for people to grow, learn and develop, and prioritise people going home safe every day in every way. PRIORITISING SAFETY
50
5 0 Sept 23
Jul 23
May 23
Mar 23
Jan 23
Nov 22
Sept 22
+ Training and Competency
Jul 22
0
Recordable Injuries
100
10
May 22
+ Personal Injury Reduction
150
15
Mar 22
+ Health and Wellbeing
20
Jan 22
+ S afety Leadership
200
Nov 21
+ Critical Risk
25
Sept 21
Our health and safety strategy has seven pillars:
Group TRIFR and recordable injuries (September 2021 – September 2023)
TRIFR
The health and safety of our people is our top priority and we are proud to be among the safest red meat processors in New Zealand.
+ Safety Management System + Worker Engagement
The number of recordable injuries in line with targets
TRIFR
24
17.9
15.7
2021
2023
9 2028 target
ALLIANCE GROUP ANNUAL REP ORT 2023
We have a detailed plan in place to reduce risk of injuries to our employees and ensure they go home safe every day. We have also invested in a safety management system to standardise our policies and procedures across the plant network to ensure we can consistently provide a safe working environment for our people. We have expanded the work we do around critical risks to provide safe working spaces and ensure everyone goes home safe to their families every day. When we began the programme in 2018, Alliance Group had 950 substantial risks. Today that has dropped to 424. We will never remove risk completely from the business so the key focus is to reduce the risk profile across the entire organisation. We are also focusing on worker engagement and having more conversations with our people about health and safety. Alliance continues to focus on the root causes of muscular skeletal injuries and we have made significant progress rolling out Personal Protective Equipment on the slaughter board.
T H E WAY W E W O R K A key enabler to achieve our strategy is through our people and the culture we create. We deliver results through both what we do, and how we do it. The Way We Work initiative was launched across all sites in October 2023 and included the development of a set of behaviours that support our people to live and lead our Alliance values every day. Behaviours are what bring our values to life, and by defining the way we work we set expectations for what good looks like, provide clarity for individuals and teams, and enable measurement and feedback of behaviours. The focus for the year ahead is to embed the way we work in everything we do. To support the launch, collateral was developed for all sites including posters, a handbook, and flip cards to support leaders to have conversations about behaviours. A series of development programs are now available for people to participate in, and work has now started to embed behaviours in all people processes including reward and recognition, end-to-end recruitment, performance and development, and onboarding.
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SECTION 05
OUR PEOPLE
LEARNING AND DEVELOPMENT In September, the first ever Alliance Learner Management System (LMS) “Learn” was launched to the support and livestock divisions. The new Alliance LMS has been designed to provide an enhanced learning experience for our people enabling them to grow both personally and professionally. An LMS enables us to have a ‘one-stop-shop’ for all learning, talent, and development initiatives. So irrespective of whether we’re talking about Health & Safety Training, leadership development, external courses, eLearning, or development plans, the LMS will be a centralised ‘hub’ to bring initiatives to life. Alliance continues to invest in the development of leaders at all levels. Since the launch of the Alliance three-day leadership program in 2021, 71 leaders from across the Alliance family have participated. For Frontline Supervisors, we invest in the New Zealand Certificate in Business Level 3 (Introduction to Team Leadership). We have had 30 leaders achieve this nationally recognised qualification to date. A new comprehensive leadership development framework has now been endorsed and includes a matrix of different development options tailored to meet the specific needs of the leadership level and further enhance behaviours in the Way We Work. Three new development programs launched in 2023 including the Way We Work programme, the 7 Habits of Highly Effective People©, and People Foundations. Further options will be developed and launched in 2024, supporting the behaviour and capability development of all Alliance leaders. Every year we invest heavily in supporting our employees to complete nationally recognised qualifications through our Bronze to Gold learning pathway and manufacturing training programmes. These qualifications are often the first New Zealand certifications that our employees have been awarded and we find that this achievement often reignites a passion to engage in new lifelong learning journeys. Over 700 employees completed Bronze Level 3 Certifications, six staff successfully completed Silver New Zealand Certificate level 3 qualifications, and three staff completed Gold New Zealand Certificate level 4 qualifications.
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This year we are proud to report that 43 staff also completed their two-year Apprenticeship Programme and have achieved both Level 3 and Level 4 qualifications in either Export Meat Boning or Slaughter Floor Operations. Through our Manufacturing leadership pathway a further 43 Supervisors achieved New Zealand Certificate in Competitive Systems and Practices (Level 3). These achievements represent a significant investment of time and effort from our learners, who are supported at every stage by our assessors and training networks. As part of this ongoing commitment an additional nine employees achieved Professional Development Assessor Qualifications in order to play a valuable part in supporting other learners continue to develop and grow across all of our processing sites. NURTURING THE LE ADER S OF TOMORROW This year marked the second round of our graduate programme, which is designed to build a pipeline of talented individuals with leadership potential to meet the future capability needs of Alliance Group. Our inaugural class which started in 2022 graduates in January 2024. We are identifying opportunities for all four to take up permanent roles across the business using the skills and experience they acquired during the programme to progress their careers. By actively engaging across our diverse business operations, our graduates can develop robust networks, gain invaluable insights into various functions and opportunities, and acquire a comprehensive understanding of our industry and markets. This multi-faceted programme empowers our graduates to make informed choices about their career paths within the co-operative. Our second cohort, comprising Abigail Stewart, Chloe Lennox, Travis McKenzie, and William Hii, embarked on their Alliance Group journey in January 2023. They spent their first eight months in Manufacturing and are now based within Livestock for three months. In February they start a three month Sales rotation before moving into elective rotations which include
ALLIANCE GROUP ANNUAL REP ORT 2023
support functions such as Finance, Logistics and Planning. We have moved to a two yearly programme. The next intake of Graduates will start in January 2025. T E RT I A RY S C H O L A R S H I P S Each year, Alliance offers two bursary scholarships – the Employees Family Members Bursary, and the Shareholder Undergraduate Bursary. Each bursary is valued at $1,500 per annum for a maximum of three years. The Employees Family Members Bursary is open to candidates who have a parent or guardian working at Alliance Group, and who are planning to study in areas relating to the meat industry, its associated industries and/or primary production. The Shareholder Bursary is open to the children of Alliance Group shareholders. In 2023 we had such a high calibre of applicants that we awarded two bursaries in each category The two successful applicants for our Employee Bursary Programme were: Joe Drury Joe is studying for a Bachelor of Commerce, Double Major in Economics & Marketing, at Canterbury University
Shareholder Bursary Programme Kate Melville (daughter of Anna and William Melville) Kate is studying a Massey Diploma in Agriculture at Telford College. Thomas Fountaine (son of Paul and Dawn Fountaine) Thomas is studying Bachelor of Agribusiness and Food Marketing at Lincoln University. LIONATI FOTOFILI It is with great sadness that we lost Lionati Fotofili, known as Lio, a long-time member of our Smithfield plant team in Timaru. Lio went missing following a fishing trip near the mouth of the Ōpihi River in South Canterbury in December. His Smithfield colleagues, including some who are qualified scuba divers, helped with the search. Lio joined the company in 2009 and became a supervisor in 2018. He was well-liked, respected and known for his big heart and generosity. Leo’s wife Suliana also works at Smithfield. We offered support to the family to help with accommodation during the search and food collections were organised at the plant.
Ashley Phillips Ashley is studying Law and a Bachelor of Arts consisting of Psychology, Marketing and Spanish at University of Otago.
Our 2022 inaugural class will graduate in January 2024. L-R: Wah Lin, Kayla Storey, Hamish Watson, Ana Gatrell.
27
06
Caring for our environment and our communities
Alliance Lorneville Plant 28
ALLIANCE GROUP ANNUAL REP ORT 2023
29
SECTION 06
CARING FOR OUR ENVIRONMENT AND OUR COMMUNITIES
Caring for our environment and our communities As a 100 per cent farmer-owned co-operative employing nearly 5,000 people, Alliance Group places utmost importance on environmental and community sustainability. Our people and our communities depend on a healthy and sustainable environment to be successful. Our commitment to sustainability means a focus on responsible farming and food production practices aimed at minimising our environmental footprint, conserving natural resources, reducing emissions, and enhancing biodiversity. These actions are the cornerstone of a sustainable and prosperous future for farming families. Our farmers, who act as custodians of the land, uphold our core values of environmental respect and stewardship. Their dedication involves nurturing the soil, safeguarding water resources, and preserving the land's health to leave a lasting legacy for future generations. In our role as processors and exporters of our farmers' products, we carry the same pride and respect for the environment. Alliance Group is equally committed to the well-being of the regional communities where we operate. This commitment extends to creating employment opportunities, fostering economic growth, and supporting various social initiatives that benefit the people who call these regions home.
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ALLIANCE GROUP ANNUAL REP ORT 2023
IMPROVING THE CO-OPER ATIVE’S ENVIRONMENTAL FO OTPRINT As a company, we value the environment. We want to be recognised as an environmentally responsible company that respects the environment in which we operate. We pursue ambitious targets aimed at improving our overall environmental footprint to meet the expectation of our customers and consumers. In 2019, Alliance was the first major red meat processor to commit to reducing its emissions, and reaffirmed this by a commitment that no coal will be burnt in its plants from 2029. This is a benefit to decarbonisation and local air quality.
OUR SUSTAINABILIT Y ROADMAP
2023
Implementation of major energy and carbon reduction projects across four coal-using sites will reduce annual energy emissions by 23% going forwards, with 21 per cent reduction achieved within the FY24 year.
2024
Alliance specific GHG lifecycle assessment completed. All processing departments to have water meters installed, which will enable departmental water use measurement and inter-departmental benchmarking.
2025
Scope 3 GHG emission and reduction plan developed for Alliance.
This year, Alliance has been working with Toitu to provide external assurance over our emissions reporting which will be captured in our first sustainability report which is expected to be released in the first half of 2024.
All plastic packaging waste recycled.
Our most substantial opportunity to mitigate our direct Scope 1 emissions impact is at our processing facilities. We have been driving an aggressive decarbonisation strategy in an effort to reduce on-plant emissions.
2026
In 2019, Alliance Group set a goal: to cease the use of coal at our plants within a decade. Our journey involves meticulous monitoring of carbon emissions at our sites, extensive exploration of alternative fuel options throughout our network, and the implementation of a series of energy-saving initiatives.
Sustainable sourcing strategy implemented for all Alliance non-livestock procurement. Reduction in water use intensity by 10 per cent off base.
All wastewater treatment plants assessed and long-term infrastructure upgrade plan to improve wastewater discharge quality. Reduction of waste to landfill by 10 per cent off base.
2027
Reduction in water use by 15 per cent off base. No organic waste to landfill.
2028
We will reduce our on-plant energy emissions by 77 per cent.
Last year, we began decarbonisation projects at four of our South Island plants, reaffirming our commitment to sustainability.
2029
Projects currently underway will see the cooperative achieve a 21 per cent emissions reduction during the current financial year and a 56 per cent reduction once implemented. These strides underscore our dedication to a greener, more sustainable future.
2030
We are continuing to develop our pathway with a number of further projects that are at an early stage.
With coal use entirely removed from our operations, plus reductions in natural gas and diesel use, we will have reduced on-plant energy emissions by 86 per cent.
30 per cent reduction in water use intensity off base. 30 per cent reduction in waste to landfill off base.
2035
We will no longer use fossil fuels in boilers, and expect our on-plant energy emissions to have reduced by 91 per cent (Scope 1 and 2).
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SECTION 06
CARING FOR OUR ENVIRONMENT AND OUR COMMUNITIES
Levin
Dannevirke
In planning — Biogas plant (2025 /2026)
In planning — 1 MW Heat pump (2025)
Nelson 1MW heat pump (2019)
Smithfield Mataura 4MW heat pumps (2024)
1.5MW heat recovery (2024) 2 MW heat pump (2025)
Electric boilers to replace coal fired boilers (2025)
Lorneville 2MW heat pumps (2022) 1 MW heat pump expansion (2024) 16MW Electrode Boiler (Mid 2025)
We have implemented several heat pump and heat recovery projects, with further underway. We also have electric boilers, and biogas plants in detailed planning. These will significantly reduce fossil fuel use across our operations. We have projects in place across every plant, co-funded by the co-operative and the Energy Efficiency Conservation Authority (EECA). Lorneville has two 1MW heat pumps, a third 1MW heat pump is currently being commissioned. Together, these will save 8,400 tonnes of carbon per year. We will also install a 16MW electrode boiler that will be operational by mid 2025. This will reduce the use of existing coal-fired boilers at Lorneville, increasing carbon savings to 20,100 tonnes per year. Smithfield – installation of a 1.5MW heat recovery system. This project will result in carbon savings of 2,560 tonnes per year. We will install two further heat pumps for Smithfield in 2025 increasing carbon savings to 6,760 tonnes per year. Pukeuri – installation of a 5MW heat pump and heat recovery system, which will provide approximately 50 per cent of the plant’s requirement for hot water heating, and reduce emissions by more than 9,000 tonnes. A biogas plant is scheduled for installation at Pukeuri in
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Pukeuri 5MW heat pumps (2024) Biogas plant scheduled (2025/2026)
2025/early 2026 which will remove the majority of the remaining coal use from the site. Mataura – we are replacing the existing main coal-fired boiler with a 4MW high temperature heat pump system and a package of electric boilers. This programme of work will save 12,100 tonnes of carbon per annum and significantly improve the air quality for local residents. The heat pump will be operational in early 2024 and the electric boilers will be installed in 2025. The main coal-fired boiler will then be removed along with the coal-fired tannery boiler. Nelson – A 1 MW heat pump and heat recovery systems (completed in 2019) has achieved a 60 per cent reduction in boiler fuel use. Dannevirke – installation of a 1 MW heat pump is planned for 2025 which will remove the majority of natural gas use from the site. Levin – planned installation of a biogas digester for Levin, which will run using waste material to create an emissions neutral fuel to replace the majority of natural gas use at the site. This will be installed in late 2025/early 2026. Projects completed and currently underway will result in the equivalent of 23,080 Ford Rangers being taken off the road.
ALLIANCE GROUP ANNUAL REP ORT 2023
EFFICIENT WATER MANAGEMENT Our commitment to sustainable environmental practices extends to water management. Sensor technology at all of our production sites has been implemented to ensure that water is only used when required during production requirements. This innovation not only curtails water wastage but also reduces energy consumption associated with water pumping. Furthermore, we have taken steps to enhance our understanding of water usage by installing water meters in key areas across all our plants. All departments will be metered by spring 2024. This strategic move will enable us to monitor water consumption meticulously and identify specific areas for targeted reductions, reinforcing our dedication to responsible resource management. Our most efficient water use plant is Levin followed by Dannevirke and we have plans to do the same in the South Island, especially, as local government tightens regulations around discharges /compliance conditions.
REVIEWING ELECTRICAL EFFICIENCY ACROSS SITES Work is underway to review electrical efficiency and enhance demand reduction across all of our sites. HARNESSING SOL AR ENERGY We have embraced solar farming as a sustainable energy solution. Through a strategic partnership with a solar farm at Waimate in Canterbury, we are establishing a sleeving arrangement with an electricity provider. This arrangement will enable the environmentally-friendly energy generated by the solar farm back into the grid, effectively offsetting our own energy consumption. The Waimate project boasts an impressive photovoltaic (PV) size capacity of 10 MWdc. Under a direct-to-generator power purchase agreement (PPA), this initiative will enable Alliance to procure renewable energy, aligning with our commitment to environmentally responsible practices.
Capital projects for hot water reticulation upgrades have been approved for the Lorneville and Pukeuri plants. These will increase the utilisation and efficiency of the heat pumps and reduce steam use and carbon emissions. This is an example of what a solar farm looks like.
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CARING FOR OUR ENVIRONMENT AND OUR COMMUNITIES
Our communities ALLIANCE CONTINUE S TO SUPP ORT RONALD MCD ONALD HOUSE Since 2021, we have partnered with Ronald McDonald House South Island, an independent charitable trust that provides free accommodation and support to families with children who require medical treatment away from home. The organisation is close to the hearts of many of our people, particularly our farmer shareholders and the wider rural communities, who have had the need to make use of the facility when young family members have been unwell. We are proud to be part of the ‘Ronald McDonald family’ and over the past year have been glad to again play a key naming rights sponsorship role and provide New Zealand's finest lamb, beef, and venison for the charity’s supper club events in Christchurch (June 2023) and Queenstown (September 2023). We also provided lamb and prizes for the Christchurch Polo event (November 2022). We sponsored a room at RMHC NZ Christchurch, provided meat donations for the house and supported events through live auction prizes and participation in the Family Dinner programme. At Christmas we donated food and corporate gifts. We are proud to support the work of the RMHC team so they can keep providing a home-awayfrom-home for rural families. Earlier this year as part of our 2023 Graduate induction programme, the group visited Ronald McDonald House in Christchurch to cook their guests a delicious evening meal.
CYCLONE GABRIELLE Like all New Zealanders, we were saddened by the scenes of devastation and damage in Northland, Tairawhiti Gisborne, Hawke’s Bay and Tararua as a result of Cyclone Gabrielle in February. Many of our farmers lost valuable grazing land, countless kilometres of fencing were destroyed, and the roading network sustained significant damage. Alliance Group launched a comprehensive support package with a focus on farmers badly impacted on the East Coast including: + A $200,000 donation to the East Coast Rural Support Trust to support the rural communities of Gisborne, Hawke’s Bay, Tararua, and the Wairarapa. + An Alliance shareholder-supplier stock donation programme for farmers to donate stock (lamb, sheep, cattle, deer) with the proceeds being donated to the East Coast Rural Support Trust. + Access to free counselling services through the co-operative’s employee assistance partner OCP for affected employees, farmer shareholders and their families. This service will be extended over the next 12 months for additional support when needed. + Care packages for Alliance farmershareholders and affected employees. We also ensured that our North Island plants in Levin and Dannevirke were operating at full capacity to process our farmers’ livestock and used our national plant network to provide further capacity as needed. Our North Island livestock team kept in close contact with the East Coast Rural Support Trust and was on the ground helping farmers with the clean-up. They were joined by other farmers who wanted to help.
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ALLIANCE GROUP ANNUAL REP ORT 2023
Ronald McDonald House is very close to the hearts of many of our people, our farmers and the wider community. A number of our employees and farmers have been helped by RMH facilities and appreciate the very valuable role it fulfils.
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07
Our farmers and their produce
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ALLIANCE GROUP ANNUAL REP ORT 2023
Longridge, Banks Peninsula
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SECTION 07
O U R FA R M E R S A N D T H E I R P RO D U C E
Our farmers and their produce The past year was a challenging period for our farmers with rising onfarm costs, weaker livestock prices as a result of softening global markets, a wave of regulatory reforms, extreme dry spells and flooding in various regions. These trials tested the resilience and determination of our farmers and the co-operative. From October-December, there was a major pricing correction in global markets from the highs of the previous financial year and we had to adjust our farm-gate pricing position to reflect the situation. A slight recovery early in 2023 was driven by a lift in China as the country moved out of COVID-19 lock downs. Ultimately though, the 12-month accumulative adjustment was down more than 25 per cent, which highlighted how much global market conditions had weakened. Despite these headwinds, we continued to step up to deliver for our farmers when it mattered, including boosting processing capacity and providing free store stock facilitation. Over the year, we increased our market share and bolstered our presence in prime bull, manufacturing cow, deer and bobby calf processing.
Informal woolshed meetings were held across the regions for farmers to talk with senior executives about the challenges, understand the opportunities and share ideas. Pictured above: Farmers at the Amuri Woolshed Meeting held in Waiau in August 2023.
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ALLIANCE GROUP ANNUAL REP ORT 2023
W E A R E H E R E F O R O U R FA R M E R S Over the last year the business has continued to build on prior feedback from shareholder farmers and suppliers, through roadshows, woolshed meetings, farmer and internal surveys. We are determined to make it easier for our farmers to deal with Alliance and we have made solid progress in the following areas: + Improved our price competitiveness + Increased premium payments and provided more transparency + Revalidated the volume tiers and supply profiles + Set up a dedicated Service Centre to answer or resolve queries + Digitised key business processes to improve engagement and performance via the Farm Alliance website app + Developed and implemented a Bobby app for farmers to book space and transport for calves from their phone + Developed and implemented a new Rep app to better manage census and forecasts LIVESTOCK PRICING Our livestock pricing reflects the prices we can capture for our farmers’ products in our global markets. Like all red meat exporters, Alliance Group faced tough global market conditions with weaker demand and pricing. Persistently high inflation levels reduced consumers’ discretionary spend. This led to a decline in people eating out in restaurants and some shoppers trading down from higher priced red meat proteins such as lamb in their weekly grocery shops. There were also consistently high levels of inventory across all proteins in various markets, which drove down demand for fresh product. Our own inventory was on a par with levels in previous years. China, our largest export market by value and volume, has yet to bounce back after the COVID-19 pandemic. Consumers there were more cautious with their spending. The situation was compounded by Australia producing increased volumes of sheepmeat into our key markets.
As the only 100 per cent farmer-owned red meat co-operative in New Zealand we did everything we could to mitigate the pricing volatility by re-directing product away from China into other markets. We also ramped up capacity for our farmers for the busy processing period for lambs and nonreplacement calves. LIVESTOCK PRICING CHANGES BY SPECIES
29 %
19 %
53 %
0%
Lamb
Mutton
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Beef
Venison
%
VEAL
BOBBY C ALF PRO CESSING Alliance Group lifted processing capacity by almost a quarter at our Levin, Nelson, Smithfield and Lorneville plants to support the needs of farmers for the bobby calf season. This was in response to a decision by Fonterra to update its supply conditions requiring all non-replacement calves to enter a value stream. Our mandatory user-friendly app also enabled farmers to streamline booking management for bobby calves and automatically sync with transport companies. The new app saved time and effort for farmers, enabling them to delegate booking responsibilities to a calf rearer or another staff member.
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SECTION 07
O U R FA R M E R S A N D T H E I R P RO D U C E
L OYA LT Y PAY M E N T S
FA R M W I T H O U T H A R M
As New Zealand’s only 100 per cent farmerowned red meat co-operative, we return every cent we can to our farmers or re-invest it back into the co-operative.
In June Alliance Group supported the health and safety campaign and strategy to help reduce injuries and fatalities on farms and address the human toll from producing food in New Zealand.
Over the season we distributed more than $17 million in loyalty payments to Platinum and Gold suppliers who sent 100 per cent of their livestock to the company. Under the Alliance loyalty programme, Platinum and Gold status suppliers were paid an additional 10 cents per kilogram for each lamb, six cents /kg for a sheep, 8.5 cents /kg for cattle and 10 cents /kg for deer supplied. A D VA N C E PAY M E N T S Our advance payments programme supports farmers with cashflow when they are at their normal seasonal low period. These payments are open to Platinum and Gold shareholders and we pay farmers in advance for livestock they commit to processing with us. This provides farmers with regular income and ensures supply for the co-operative so that we can meet commitments to global customers. Alliance Group advances a cash payment on up to 80 per cent of farmers’ animals that are committed for processing.
The Half Arsed Stops Here campaign and Farm Without Harm strategy is taking the health and safety message straight to the heart of rural communities. As part of the initiative, Alliance, alongside industry leaders and farmers from across the country, signed a pledge, committing to keeping those working on farms healthy and safe. The Alliance team attended the programme launch at a dairy farm near Dunsandel in midCanterbury. Developed over two years ago, the Farm Without Harm strategy was co-designed with farmers and their communities, iwi, Māori, industry leadership bodies and primary sector organisations to deliver tangible on the ground impact. It involves gaining a deeper understanding of different forms of harm, redesigning farming systems to prevent harm, and fostering a caring culture among us. To address these harms, the strategy has identified ways the sector needs to work differently and four high harm areas that need an urgent focus: + Risks to mental health resulting in reduced wellbeing + Harm experienced while working with vehicles and machinery + Physical stress and injuries from handling livestock + Harm caused by exposure to agricultural chemicals and airborne risks. Instead of relying on high vis vests or helmets, the sector is looking to eliminate harm from the system wherever it can by working and learning together to find solutions, understanding that safety starts with a culture of care and continuing to invest in new approaches.
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ALLIANCE GROUP ANNUAL REP ORT 2023
Pat McEvedy, Supplier Representative, signed the Farm Without Harm pledge on behalf of Alliance Group at the Dunsandel launch in June 2023.
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08
Sales and marketing
The town butcher shop on Thames Street, Oamaru was closed in the 1980’s and transferred to the old Pukeuri post office building just outside the plant.
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SECTION 08
SALES AND MARKETING
Sales and marketing Over the past 12 months, the global economy faced unprecedented challenges including the impact of rising global inflation on consumer spending in grocery and food service sectors. Furthermore, the slower-than-expected recovery in the Chinese economy across all protein markets required a re-evaluation of our strategy in this critical market. Australia experienced a significant increase in the supply of sheepmeat, putting substantial price pressure on our products in key markets. Simultaneously, ongoing geo-political tensions and beyond added complexity to our global operations, demanding agility in risk management. Despite these challenges, Alliance made notable progress in enhancing our product solutions portfolio. We successfully scaled up the launch of Handpicked Lamb in South-East Asia, with a particular focus on Malaysia, diversifying our product offerings and accessing new markets. Additionally, our Lumina, Silere and Handpicked Beef programmes grew in key markets, highlighting our adaptability in challenging trading conditions. In response to changing consumer preferences, we also introduced a freeze-dried nutraceutical powder range to several US-based customers. This innovative product offering not only opened new revenue streams but also garnered positive feedback. We also remained committed to shaping the future of the industry by securing funding and approvals for several upcoming products, ensuring longterm growth and sustainability. Although it was a challenging year, the co-operative, showcased its resilience, flexibility, and commitment to innovation. As we look ahead, we remain dedicated to providing high-quality products, adapting to evolving market dynamics, and delivering value to our farmer shareholders.
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ALLIANCE GROUP ANNUAL REP ORT 2023
E A STER CHILLED PRO GR AMME Up to 20 per cent of Alliance’s full year lamb volume participates in the key Easter programmes for the UK, Europe, North America and New Zealand. It is critical to ensure lamb remains relevant to shoppers, particularly for the great occasion, family and friend moments, where people gather for a roast leg of lamb. It is also important for retail partners to drive up weighted basket spend. There is strong evidence across our Northern Hemisphere retail partners that lamb drives increased spend. Pleasingly, we are achieving more of our branded Pure South presence in these key programmes. While there was strong demand across our key markets, pricing was depressed compared to last year. BOOST FOR CHINA MARKET In June, Alliance Group and our in-market Chinese partner Grand Farm committed to a significant expansion of the co-operative’s grass-fed lamb, mutton, beef and venison across China Both companies signed a memorandum of understanding (MoU) in Beijing in the presence of former New Zealand Prime Minister Chris Hipkins.
The MoU outlines a vision to significantly expand the presence of Alliance Group’s lamb, mutton, beef and venison, including our premium Pure South and Handpicked programmes, further into Southern China and cities such as Shanghai. Alliance General Manager Sales and Marketing Shane Kingston, part of the New Zealand Prime Minister’s business delegation to China, signed the MoU alongside Grand Farm President Mr Xibin Chen. The agreement marks a new phase in the longstanding partnership between Alliance and Grand Farm, China’s largest importer of sheep meat. It reflects our shared ambition for Grand Farm and Alliance to be the leading red meat provider in China and for more Chinese consumers to have the opportunity to purchase the world’s best grass-fed beef, lamb, mutton and venison from New Zealand’s only 100 per cent farmer-owned red meat co-operative. Grand Farm holds a very prominent position in the beef and sheep industry in China, encompassing production, processing and sales channels. It owns and operates 105 specialty retail butcheries, supplies products to more than 2000 meat counters in selected supermarkets, minimarts and hypermarkets and a wholesale distribution network extending beyond 2400 outlets supplying retail in China.
Alliance Group and in-market Chinese partner Grand Farm signed a Memorandum of Understanding in Bejing in the presence of New Zealand Prime Minister the Rt. Hon Chris Hipkins to expand the co-operative’s grass-fed lamb, mutton, beef and venison across China.
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SECTION 08
SALES AND MARKETING
SUPP ORTING NEW ZE AL AND D E E R FA R M E R S
PURE GOLD FOR HANDPICKED 55 DAY AG E D B E E F
Alliance Group is committed to New Zealand’s deer industry and we’re investing not only in our processing capabilities, but also sales and marketing in our global markets.
In September, Alliance Group’s Pure South Handpicked 55 Day Aged Beef won top honours in the prestigious World Steak Challenge.
The European game season remains pivotal to the success of venison and we are also working to diversify further into the food service industry in North America, Asia and the UK. To mark New Zealand Venison BBQ Week in September, our UK team presented an event for ten leading UK chefs around our free range grass-fed venison and how to prepare it ‘over fire’. Held in the stunning Wiltshire countryside, the day kicked off with learning about the intricacies of barbecuing venison for a perfect result. A light lunch of venison burgers was washed down with some ‘real ale’ and a talk from the craft brewer on how beer pairings are currently taking tasting menus by storm. A chef from Deer Industry New Zealand provided a venison masterclass, covering everything from husbandry and diet on farm to welfare and sustainability and how to break down a carcase. The chefs then each prepared a range of venison dishes, and sides and desserts, all cooked over fire, for a shared feast.
Pure South Handpicked 55 Day Aged Beef was awarded two gold medals and two silver medals by a panel of expert judges at the competition in the Netherlands. The co-operative won gold medals for ribeye and fillet steaks processed at the company’s Pukeuri plant near Oamaru. Ribeye and fillet steaks processed at the Mataura plant in Southland won silver medals. This global recognition validates our exceptional focus on excellence as we continue to grow our scale in premium beef. Pure South Handpicked 55 Day Aged Beef is carefully selected by internationally-accredited assessors from prime cattle of any breed. Only a fraction of the very finest beef makes the grade and it is in demand by customers across the world. The selection is based on quantifiable meat quality characteristics including marbling, fat colour and pH levels. Selected cuts are then aged in vacuum bags. The quality of product and the aging process results in a milder beef profile with exceptional levels of tenderness. GOLDEN SUCCESS FOR PURE SOUTH In March, Alliance Group was awarded five gold medals for our beef, lamb and venison at the Outstanding NZ Food Producers Awards. The co-operative won gold for our Pure South Lamb, Pure South Handpicked Lamb, Pure South Beef, Pure South Handpicked 55 Day Aged Beef and Pure South Venison. The awards celebrate inspiring Kiwis who harvest, grow and produce New Zealand’s outstanding food and drink. Entries are judged on a range of criteria including aroma, visual appearance, flavour, consistency, quality, sustainability, brand story and packaging.
Free range grass-fed venison prepared over fire to mark New Zealand Venison BBQ Week in the UK in September 2023.
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ALLIANCE GROUP ANNUAL REP ORT 2023
Judges praised the Pure South Lamb for its delicate, mild and mellow flavour and pleasant fine grained texture, and the Pure South Handpicked Lamb for its texture, mature depth of flavour and “tarty layer of fat”. The Pure South Venison won accolades for its tenderness, succulence and delicious flavours. Pure South Beef was described as mild, juicy and tender with good clean tasting fat. The Pure South Handpicked 55 Day Aged Beef was singled out for its marbling and “good beefy flavour that is reminiscent of Grandma’s classic beef and Yorkshire pudding”. PURE SOUTH HANDPICKED LAMB L AUNCHED IN SOUTH-EAST ASIA Alliance Group expanded our award-winning Pure South Handpicked Lamb premium range into Malaysia and Singapore as part of our strategy to capture greater value for farmershareholders. In Singapore, the co-operative is targeting chefs in the premium food service sector with fine dining cuts and providing a range into the mainstream consumer segment with a focus on specialty butchery.
ALLIANCE LAMB AND VENISON STAR IN NZ TE SHOWC A SE Silere lamb loin and Pure South venison leg were on the menu at a successful 'Made with Care' event organised by New Zealand Trade and Enterprise (NZTE) at the UK’s Waitrose & Partners Cookery school. Members of our UK team attended this showcase of New Zealand’s finest produce where guests were told the story of the role that kai (food) and waina (wine) play in Māori culture. Guests were welcomed by UK and Ireland Trade Commissioner Joseph Nelson, along with a performance from members of Ngāti Rānana – London Māori, and served canapés and drinks. The menu, curated by renowned Kiwi chef Anna Hansen, included Silere marinated in fenugreek and ancho, with charred golden kiwi fruit, chilli and avocado, and venison rubbed with cocoa nibs, pink peppercorns and sumac, topped with a dark chocolate and miso cream.
PureSouth Handpicked Lamb was launched into Malaysia and Singapore during 2023.
In Malaysia, the lamb was launched into two premium supermarket chains as well as a selection of premium fine dining outlets. Alliance launched Handpicked Lamb in 2020 as part of our differentiated premium portfolio. The lamb, hand-selected using a rigorous assessment system to measure eating quality, is already available in many premium retail markets in Asia. Our mission is to expand distribution and build scale for Handpicked Lamb, further differentiate our range from our competitors, and meet the needs of increasingly discerning consumers around the world who are willing to pay a price premium for our red meat products and certain attributes. We already have a commanding position in Malaysia with our Pure South and Silere Alpine Origin Merino distribution, and Pure South Handpicked Lamb will enable us to capture more consumer sectors and roll-out a full portfolio.
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09
Manufacturing excellence
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ALLIANCE GROUP ANNUAL REP ORT 2023
Our state of the art X-Ray Primal System creates a 3D map of the bones within the carcasse to guide the primal cutter with an accuracy far greater than human capabilities.
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SECTION 09
M A N U FAC T U R I N G E XC E L L E N C E
Manufacturing excellence Despite the difficult year, we continued to work hard to make our processing network more efficient, so we can stay ahead in New Zealand's red meat industry. By becoming more productive, we can create a stronger co-operative and share these benefits with our farmer shareholders. Our Manufacturing Excellence programme is a pivotal element within our strategy to lift the performance and efficiency of all our sites, thereby reinforcing our position as the leader in New Zealand's red meat processing industry. The programme has also played a crucial role ensuring our resilience and adaptability, enabling us to optimise our operations, particularly in navigating the challenges both domestically and globally.
Product is automatically moved through the warehouse and palletised without being touched by human hands at our Lorneville plant near Invercargill.
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ALLIANCE GROUP ANNUAL REP ORT 2023
PRO CESSING Our processing network is one of our greatest strengths. The improvements and investment we have made over the past 12 months have enabled the company to successfully move livestock around the network without compromising capacity or our cost base. This is reflected in our increasing market share across all species. Our goal is to be the most cost efficient processor in New Zealand so we can maximise value back to farmers. We are now becoming more cost-efficient in our processing and this has been underlined by an internal benchmarking exercise for our seven plants, which shows we are narrowing the gap between our most efficient plant and the remaining sites. We also continued to maximise the flexibility of our network to drive efficiencies. The Alliance team achieved record throughputs across multiple sites. Ovine: Dannevirke Bovine: Mataura, Pukeuri and Levin Calves: Levin, Lorneville, Smithfield and Nelson Our meat yield also improved across all species. Our efficiency plan is on track and we see more opportunities to become more efficient and ensure we can be more competitive and return more value back to farmers.
WAREHOUSE AUTOMATION In September we completed the installation of our $16 million automated warehouse technology system at our Lorneville plant near Invercargill. The fully integrated storage and warehouse management system for frozen products has introduced automation to the warehousing process and automation rather than manual lifting for the storage and retrieval of product. Product is automatically moved through the warehouse and palletised without being touched by human hands. The technology has improved the health and safety of employees, unlocked advantages of scale and lifted the efficiency and competitiveness of the plant. Previously, 66 people were required to work in the warehousing operation during peak processing, manually handling more than three million boxes of fresh product, each weighing up to 27kg. That lifting poses a risk of muscular skeletal injury to our employees. The new system also includes a more effective stacking system for frozen boxes, minimising product damage and potential safety risks. It has enabled the improved handling of cartons and product, reduced the use of forklifts and fewer cases of conveyors jamming, resulting in less downtime in the further processing rooms. This investment also reflects our commitment to the Lorneville site and the Southland region. We have been continually investing in Lorneville over the past five years including the opening of a new venison plant and the installation of primal cutters for processing.
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10
Governance
Minaret Station, Wanaka
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ALLIANCE GROUP ANNUAL REP ORT 2023
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SECTION 10
GOVERNANCE
Board of directors Murray Taggart Chairman B.Agr.Sc.
Member of Audit and Risk, Enterprise Resource Planning and People Committees
Murray was elected as a Supplier Representative in 2010 and elected Chair in 2013. He was also on the Alliance board from 2002-2007. Murray farms lambs, beef and arable crops on 732ha near Oxford, North Canterbury. He is Chair of Taumata Plantations Ltd, a director of FMG Insurance Ltd, and involved with other businesses.
Supplier Representative Member of the Audit and Risk and Enterprise Resource Planning Committees
Pat was elected as a supplier representative in 2020. He operates a sheep breeding, finishing and intensive arable farming operation in Southbridge in Canterbury. He is an Independent Director of CORDE Ltd (Infrastructure, Construction and Water), Chairman of Central Plains Water Trust, and holds various community positions. Pat is a Chartered Fellow of the NZ Institute of Directors.
Jason Miller
Don Morrison
Supplier Representative
Supplier Representative B.Com.Ag.
Member of People Committee
Jason was elected as a supplier representative in 2015. He was also a director on the Alliance board from 20072013. Jason operates 800 hectares of sheep and cattle farmland in Southdown, Southland. Jason is a director and shareholder of Roslyn Downs Limited and Claymore Dairy.
Member of Audit and Risk Committee
Don was elected as a supplier representative in 2013. He is a director of DG & BC Morrison Ltd, farming sheep and cattle on 465 hectares at Waikaka Valley, Southland. He is also a director of Pure Taste New Zealand (NZ) Ltd, Ahika Journeys Ltd, chairman of W9, director of Te Ao Kakano and a member of the Alpha Sheep Genetics Group.
Dawn Sangster
Jared Collie
Supplier Representative B.Com.Ag, CFInstD
Supplier Representative B.Com.Ag. (VFM)
Member of Audit and Risk Committee
Dawn was elected as a supplier representative in 2011. She is a director of Glenayr Ltd, farming sheep and beef on 2670ha hectares in Central Otago and has a dairy equity in North Otago. She is a facilitator for the Agri-Women’s Development Trust, chair of Community Trust of Maniototo, and director of Farmlands Co-operative Society Ltd.
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Pat McEvedy
Member of the Enterprise Resource Planning and People Committees
Jared was elected as a Supplier Representative to the board in 2015. He operates a 1,330-hectare sheep, cattle and dairy farm in Central Southland and is a director of Benmore Downs Ltd, chairman, director and shareholder of Platinum Dairies Ltd, deputy chairman of the Jeff Farm Management Board, director of Ballance Agri Nutrients Limited, presiding member of Limehill's School Board, and a facilitator for the Takitimu Discussion Group.
ALLIANCE GROUP ANNUAL REP ORT 2023
Mark Wynne
Sarah Brown
Independent Director
Independent Director BHSc.(Home Science)(Distinction)
Member of the Enterprise Resource Planning, and People Committees
Mark has extensive experience in agribusiness, including 20 years in the dairy industry. He stepped down as Chief Executive of Ballance Agri-Nutrients in September 2023. Mark was previously President South Asia for Kimberly-Clark, growing the United States multinational’s market share with brands like Kleenex and Huggies. He has a respected international track record for building brands and in managing mergers and acquisitions. Mark is passionate about growth, innovation and talent. He has invested in and advised innovative New Zealand export-oriented growth companies and holds a number of Board Directorships.
Chair of the People Committee Member of Enterprise Resource Planning Committee
Sarah was appointed as a Director in March 2018. She lives in Manawatu where she owns a sheep and beef farm. Sarah has held a number of senior management positions in marketing and consumer insights with high profile companies including Lion Nathan, Colmar Brunton, Australian Pork, Coca-Cola Amatil, Diageo and Goodman Fielder International. She sits on the board of Dairy Goat Co-op and runs an International Marketing Consultancy for clients such as Boehringer Ingelheim (Australia, Asia, NZ), NZ Pork and Frucor-Suntory.
Simon Robertson
Ross Bowmar
Independent Director
Associate Director (August 2022-August 2023)
Chair of the Audit and Risk, and Enterprise Resource Planning Committees
Masters in Agricultural Economics
Simon was appointed as an Independent Director in June 2021. An experienced director with an extensive corporate and governance background Simon also sits on the board of Ballance AgriNutrients. Previously he was Chair of Synlait Milk, on the board of Independent Timber Merchants Cooperative (ITM), Apata Group and Flick Energy, and was chief financial officer at Auckland Airport.
Raised in Southland, Ross and his wife Jess and their young family now own and operate, a high country sheep and beef station in the Rakaia Gorge in Canterbury. Ross completed a Masters in Agricultural Economics at Michigan State University in the United States before spending 10 years with one of the world’s largest agricultural processing companies, Archer Daniels Midland (ADM).
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SECTION 10
GOVERNANCE
Executive leadership team Willie Wiese
Kristian Saksida
Chief Executive
Chief Financial Officer
Willie was appointed CEO in March 2023 after his appointment to Interim CEO in February 2023. Prior to this he was General Manager Manufacturing, a role he held since December 2017. Having led significant manufacturing operations in both Australia and South Africa, Willie is experienced in the implementation of strategies that deliver performance improvements in complex manufacturing operations. Willie has Masters degrees in Electrical Engineering; Engineering Science and Business Administration; and Supply Chain and Business from the University of the Witwatersrand, Johannesburg.
Kristian resigned from the business outside of the reporting period. John O'Callaghan has been appointed as Interim CFO until a replacement is made. Kristian will continue to contract to the business for a period of time to support some of our critical strategic finance projects.
Murray Behrent
Joanna Irvine
General Manager Livestock and Shareholder Services
General Manager of Governance, Legal and Risk
Murray was appointed General Manager Livestock and Shareholder Services in October 2023 after carrying out the interim role from June 2023. Having joined the company in 1990, Murray has held a variety of roles from livestock representative in the North Otago region, Group Livestock Services Manager through to General Manager Livestock in 2007, a role he held until 2016. In recent years, Murray has been responsible for the large corporate and key account farming businesses, along with managing the Northern Regional Livestock team. Murray has a Dip. Business Management.
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Kristian was appointed Chief Financial Officer in September 2021. Kristian is an experienced finance executive who has gained significant commercial leadership experience across a variety of senior roles. Prior to joining Alliance, Kristian was the President, Global Shared Services and Group CIO based in Brussels, Belgium. Kristian holds a BSc (Honours, Business Studies) from the University of Bradford, UK.
Joanna was appointed General Manager of Governance, Legal, and Risk in January 2022. She took on the additional responsibilities for sustainability and health and safety during 2023. She is an experienced senior leader with more than 15 years strategic and operational management experience across the corporate, commercial and legal sectors. Joanna has a Bachelor of Arts majoring in politics and a Bachelor of Law both from Victoria University. Joanna resigned from the business outside of the reporting period and leaves the business on 5 December 2023. Rachel O'Brien will take responsibility for the Sustainability portfolio.
ALLIANCE GROUP ANNUAL REP ORT 2023
Nigel Jones
Rachel O'Brien
General Manager Supply Chain and Planning
Chief Transformation Officer
Nigel was appointed General Manager Supply Chain and Planning in May 2023, after holding the position of General Manager Strategy since September 2015. Prior to this, Nigel spent 16 years in the dairy industry, including General Manager roles in strategy, supply chain and logistics with Fonterra. Nigel has significant experience in business strategy and planning, marketing, key account management, procurement, supply chain and logistics and has worked in a range of international markets. He has Bachelor of Business Degree in Accountancy and Finance, a Master of Science in Supply Chain and Logistics (Cranfield University, UK) and has completed an executive programme in Strategy at Stanford University.
Rachel was appointed Chief Transformation Officer in May 2023. She has a track record of shaping and delivering global programmes that drive performance transformation, build capability, and deliver growth. Rachel has expertise in programme governance, strategy, and digital innovation. Rachel has a Bachelor’s Degree in Education from Massey University and a Post Graduate Diploma in Secondary Education. She joined us from Ravensdown where she spent 12 months as Chief Transformation Officer. Prior to Ravensdown, she held similar roles for both CWT and Santander in the UK.
Shane Kingston
Stephanie Manning
General Manager Sales and Marketing
General Manager People & Culture
Shane joined Alliance as General Manager Sales in 2018. He has significant sales leadership experience, most recently at Diageo, a global leader in beverage and consumer products company, where he was Global Commercial Performance Director – Global Sales, based in Singapore. He has also held both sales management and sales strategy roles within Diageo Australia, being part of the company’s leadership team. His earlier career includes sales roles with leading consumer companies GlaxoSmithKline and Britvic in Europe. Shane holds a Bachelor of Science in Food Business from University College Cork. Shane resigned from the business during the reporting period. His last day with Alliance is 6 December 2023. An interim reporting structure has been put in place until Shane's successor is appointed.
Stephanie was appointed General Manager People & Culture in June 2023 after 18 months as Group Manager Human Resources for Alliance. Stephanie has held public and private leadership roles across complex stakeholder environments, including manufacturing, health, financial services and the legal sector. She has significant experience delivering people and workforce strategies, operating model transformations and service redesigns. An employment lawyer by training, her career over the last decade has been spent delivering people strategy, finding and nurturing great talent, connecting people with purpose, enhancing culture with values-based leadership, and reimagining the experience we give people at work. With a Bachelor of Laws with First Class Honours Stephanie was admitted as a Barrister and Solicitor of the High Court of New Zealand in the early 2000’s.
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SECTION 10
GOVERNANCE
Corporate governance Alliance Group is a co-operative company owned by more than 4,400 farmers who supply livestock to the company for processing and then sale of the resulting meat and co-products to international markets. BOARD OF DIRECTORS The constitution provides that there shall be not more than ten directors of the company at any time, of which not less than six and not more than eight shall be directors elected by the shareholders. One-third of the elected directors retire by rotation each year and may stand for re-election. The directors who retire each year are those who have been in office for the longest time since their last election. Provided that the total number of directors does not exceed ten, the board may from time to time appoint up to four directors who, in the opinion of the board, are capable of rendering services in relation to the affairs of the company. These directors are appointed for a term of up to three years and may be re-appointed for subsequent terms of up to three years at a time. The board exercises the discretion to appoint independent directors to the board to ensure that the board comprises directors with an appropriate range of skills and experience. The board currently comprises nine directors of which three are independent directors and six are elected directors, one of whom is appointed chair on an annual basis. BOARD RESPONSIBILITIES The board has statutory responsibility for the affairs and activities of the company. The responsibility for the day-to-day operation and administration of the company is delegated by the board to the chief executive. The long-term strategic direction of the company, the annual business plan and capital expenditure budget are approved by the board. The board also approves expenditure on specific projects that are outside normally delegated authorities and reviews operational performance against the business plan objectives.
58
The board ensures the affairs of the company adhere to all regulatory obligations, that high ethical standards are maintained and that the company is a responsible corporate citizen. Particular emphasis is placed on the health and safety of employees and the protection and sustainable use of the environment. All directors register and formally record any conflicts of interest. Succession planning is undertaken for both directors and management to ensure appropriate skill sets are available to the company on an ongoing basis. BOARD MEETINGS Ten board meetings are scheduled each year with extra meetings held if required. Comprehensive management reports are provided to directors prior to board meetings. The board encourages the chief executive to bring employees who can provide additional insights to board meetings. BOARD COMMITTEES Three board committees have been formed to assist with governance and help guide effective decision making. Each committee operates under its own terms of reference and reports to the board.
ALLIANCE GROUP ANNUAL REP ORT 2023
AUDIT AND RISK COMMIT TEE The Audit and Risk Committee comprises five directors and is chaired by Simon Robertson. The committee oversees, reviews and advises the board on the company’s risk management, financial reporting, internal and external audit activities, treasury matters and internal control frameworks. PEOPLE COMMITTEE The People Committee comprises five directors and is chaired by Sarah Brown. The committee provides oversight of the people strategy of the company and assists the board on remuneration and performance management policies and procedures for the company. In particular, it assists the board in fulfilling its responsibilities relating to the appointment, remuneration and reviews of directors, the chief executive and senior management. ENTERPRISE RESOURCE PLANNING COMMITTEES
A SS O CIATE DIRECTOR APPOINTMENT The Associate Director is appointed at the discretion of the Board for a period of 12 months. Whilst an Associate Director attends all board meetings they do not have a vote. COMMUNIC ATION WITH SHAREHOLDERS Alliance Group makes every effort to keep shareholders informed of all major developments affecting their company. Information is communicated to shareholders through the Alliance Group website, Annual Report, Product Disclosure Statement and a fortnightly e-newsletter called ‘Brief Bites’. This year we were also able to reconnect in person hosting seven Woolshed meetings and 20 roadshow meetings around the country.
The Enterprise Resource Planning (ERP) Committee comprises five directors and is chaired by Simon Robertson. The committee assists the board in assessing the progress, risks and key decisions associated with the ERP project. DIRECTOR MEE TING AT TENDANCE The table below reports attendance of directors (by percentage by relevant tenure) at board and board committee meetings during the year ended 30 September 2023. Board
Audit & Risk ERP People Committee Committee Committee
Don Morrison
100%
100%
N/A
N/A
Murray Taggart
100%
100%
100%
100%
Dawn Sangster
100%
80%
N/A
N/A
Jared Collie
100%
N/A
100%
100%
Mark Wynne
100%
N/A
100%
100%
Jason Miller
100%
N/A
N/A
100%
Sarah Brown
100%
N/A
100%
100%
Pat McEvedy
100%
100%
75%
N/A
Simon Robertson 100%
100%
100%
N/A
59
11
Our Financial Review
Wool bag stencil at Paua Bay Farm, Banks Peninsula.
60
ALLIANCE GROUP ANNUAL REP ORT 2023
61
SECTION 11
OUR FINANCIAL REVIEW
OUR FINANCIAL REVIEW
63
Consolidated Income Statement
65
Consolidated Statement of Cash Flows
63
Consolidated Statement of Comprehensive Income
66
Notes to the Financial Statements
64
Consolidated Statement of Financial Position
90
Consolidated Statement of Changes in Equity
62
ALLIANCE GROUP ANNUAL REP ORT 2023
CONS OLIDATED INCOME STATEMENT For the year ended 30 September 2023 The income earned and expenses incurred by Alliance Group Note
2023 $000 2,033,584 (2,035,126) (1,542)
2022 $000 2,240,702 (2,041,608) 199,094
Revenue Cost of sales Gross (loss)/profit
A1.1
Other operating income Sales and marketing expenses Administrative expenses Other operating expenses Operating result
A1.1
4,190 (7,529) (70,286) (1,317) (76,484)
3,749 (8,417) (67,489) (1,460) 125,477
Financial income Financial expenses Net financing costs
A2 A2
617 (26,908) (26,291)
53 (15,758) (15,705)
Equity accounted earnings Profit/(loss) on disposal of property, plant and equipment (Loss)/profit before provisions, distribution and tax Allowance for historical employee entitlements (Loss)/profit before distribution and tax
E2
4,769 82 (97,924) (97,924)
7,456 (22) 117,206 (859) 116,347
C6
Profit distribution (Loss)/profit before tax
A1.2
(97,924)
(11,342) 105,005
Income tax income/(expense) (Loss)/profit after tax
A4
27,753 (70,171)
(31,369) 73,636
CONS OLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 September 2023 Other comprehensive income that may be reclassified to profit or loss in subsequent periods
Fair value changes in derivatives: - recognised in cash flow hedge reserve - transferred and recognised in income statement Movement in foreign currency translation reserve Other comprehensive income, net of tax (Loss)/Profit after tax for the year Total comprehensive (loss)/income for the year
2023 $000 3,421 862 4,283 (180) 4,103 (70,171) (66,068)
The notes to the Group financial statements form an integral part of these financial statements.
2022 $000 (862) (161) (1,023) 719 (304) 73,636 73,332
63
SECTION 11
OUR FINANCIAL REVIEW
CONS OLIDATED STATEMENT OF FINANCIAL P OSITION As at 30 September 2023 A summary of the Alliance Group assets and liabilities at the end of the financial year Note
2023 $000
2022 $000
C2 C3
104,350 (8,987) 284,847 380,210
95,783 (13,090) 365,066 447,759
C7 C6 C9 C7 C8
8,359 180,665 21,861 171,855 4,294 2,937 413 390,384
17,073 152,133 20,684 102,867 2,865 17,903 23,614 337,139
C9 C8
4,742 7,830 12,572
4,369 7,324 11,693
Total liabilities
402,956
348,832
Total liabilities and equity
783,166
796,591
10,638 141,141 152,041 648
13,089 198,489 167,756 -
3,259 307,727
4,846 384,180
63,535 32,881 115 14,624 306,445 57,839 475,439
59,248 5,957 115 10,690 284,202 52,199 412,411
783,166
796,591
Equity Share capital Reserves Retained earnings Total equity Liabilities Bank credit facilities Trade and other payables Employee benefits Interest bearing loans and borrowings Lease liabilities Financial liabilities - derivatives Income tax payable Total current liabilities Employee benefits Lease liabilities Total non-current liabilities
Assets Cash and cash equivalents Trade and other receivables Inventories Intangible assets
F4
C4 C5 B2 B3
Financial assets - derivatives Total current assets Investments in equity accounted investees Deferred tax assets Other assets Right of use assets Property, plant and equipment Intangible assets Total non-current assets Total assets
64
E2 A4 B4 B1 B3
The notes to the Group financial statements form an integral part of these financial statements.
ALLIANCE GROUP ANNUAL REP ORT 2023
CONS OLIDATED STATEMENT OF C A SH FLOWS For the year ended 30 September 2023 Cash generated and used by the Alliance Group during the financial year Note
2023 $000 2,073,658 617 (2,023,771) (26,173) (22,372) 1,959
2022 $000 2,235,072 53 (2,110,411) (15,265) (2,905) 106,544
Cash flows from investing activities Dividends received from associates and joint ventures Purchase of intangibles Acquisition of property, plant and equipment Net cash flow from investing activities
482 (10,383) (47,261) (57,162)
1,996 (10,097) (37,647) (45,748)
Cash flows from financing activities Net increase/(decrease) in external debt Issue of share capital Repayment of principal and interest on lease liabilities Redemption of share capital Net cash flow from financing activities
60,274 3,158 (6,056) (4,639) 52,737
(46,426) 4,342 (4,484) (2,915) (49,483)
Net movement in cash and cash equivalents Opening cash and cash equivalents Effect of exchange rate fluctuations on cash held Closing cash and cash equivalents
(2,466) 13,089 15 10,638
11,313 1,769 7 13,089
2023 (70,171)
2022 73,636
30,664 (26,924) (9,098) 755 (82) 1,855 (4,769) (169) 735 (195) (7,228)
23,301 859 5,074 9,018 2,324 13,136 751 22 5,724 (7,456) 136 493 (1,335) 52,047
Movement in trade and other receivables Movement in employee benefits Movement in inventories Movement in income tax payable
57,517 1,550 15,715 (23,201)
(21,390) 6,281 (35,564) 23,390
Movement in trade and other payables Movement in working capital items
27,777 79,358
8,144 (19,139)
Cash flow from operating activities
1,959
106,544
The notes to the Group financial statements form an integral part of these financial statements.
65
Cash flows from operating activities Cash receipts from customers Interest received Cash paid to suppliers and employees Interest paid Taxes paid Net cash flow from operating activities
Reconciliation of profit to cash surplus/(deficit) from operating activities (Loss)/Profit for the year Adjustments for items not involving cash flows: Depreciation and amortisation Provision for personnel expenses Movement in deferred tax Profit distribution accrual Profit distribution settled in shares Fair value of financial derivatives Effect of exchange rate movement on working capital (Loss)/gain on sale Accounts payable movements for investing and financing activities (Earnings) from associates Movement in provision for doubtful debts Lease interest recognised in financing activities Other non cash items
C4
SECTION 11
OUR FINANCIAL REVIEW
NOTE S TO THE CONS OLIDATED FINANCIAL STATEMENT S IN THIS SECTION The notes to the financial statements within sections A to F include information that is considered relevant and material to assist the reader in understanding changes in the Group's financial position or performance. Information is considered material if: the amount is significant because of its size and nature; it is important for understanding the results of the Group; it helps explain changes in the Group’s business; or it relates to an aspect of the Group’s operations that is important to future performance.
AB OUT THIS REP ORT Reporting entity Alliance Group Limited (the Company) is a for-profit entity domiciled in New Zealand and registered under the Companies Act 1993 and the Co-operative Companies Act 1996. The Company is an FMC Entity in terms of the Financial Markets Conduct Act 2013 and prepares its financial statements in accordance with this Act and the Financial Reporting Act 2013. These consolidated financial statements are for the Company and its subsidiaries (together referred to as "Group") and the Company's interests in associates as at and for the year ended 30 September 2023. The Group is primarily involved in meat processing and export sales. Statement of compliance and basis of preparation The financial statements have been prepared: in accordance with Generally Accepted Accounting Practice (GAAP) in New Zealand and comply with International Financial Reporting Standards (IFRS) and the New Zealand equivalents (NZ IFRS), as appropriate for a for-profit entity; on the basis of going concern, see separate Going concern note below; and in New Zealand dollars, with all values rounded to the nearest thousand dollars unless otherwise stated. In preparing the Group financial statements, all material intragroup transactions, balances, income and expenses have been eliminated. Subsidiaries are consolidated on the date on which control is obtained to the date on which control is lost. The financial statements are prepared for the 52-week period ending 30 September 2023 (2022: 52-week period ending 1 October 2022) due to the 4-4-5 calendar used by the Group, therefore the amounts presented in the financial statements may not be entirely comparable. This method is used to ensure comparability given the weekly trading cycles of the Group. For simplicity the financial statements and accompanying notes will be presented and referred to as a 30 September year end. Going concern In preparing these financial statements, the Directors have assessed various events, conditions and uncertainties facing the Group and how these factors may cast doubt on the Group’s ability to continue as a going concern. During 2023 the global economy has been impacted by significant inflationary pressures and increases in interest rates, the industry has also experienced significant market volatility, uncertainty regarding volumes and overall price reductions. These events and conditions have heavily impacted on the financial results of the Group for the year, with a loss before tax of $97.9m, net operating cash flows of $2.0m, current liabilities exceeding current assets by $82.6m and closing syndicated debt and other loan balance of $171.9m, an increase of $69.0m from the prior year. The Group has responded to these events and conditions by: Engaging external experts and reviewing the Group’s forecasting, pricing and procurement processes. Renewing the Group’s working capital facilities on the 29th of September 2023 for a period of one year (which is within twelve months of the financial statements being approved but is consistent with the historical annual rolling of these facilities). Enacting initiatives to optimise working capital and manage peak debt, including: – – – – –
66
Implementing cost reduction activities, price optimisation and sales velocity initiatives; Deferring discretionary capital expenditure; Adjusting livestock procurement practises; Implementing a new debtor finance facility; and Advancing the sale and lease back of assets and/or other similar arrangements.
ALLIANCE GROUP ANNUAL REP ORT 2023
The Directors have incorporated these responses in the forecast for the next financial year, and beyond into the Group’s five year integrated plan. As with any forecast, there are a number of assumptions, the forecasts have therefore included considering a range of scenarios of cash flow projections and considering viability of initiatives. The Group’s forecasts assume: Stable to slightly higher in-market prices and more ‘normal’ seasonal supply, relative to FY23; Relatively stable livestock volumes; - Continued delivery on optimising working capital, including the new receivables financing arrangements and optimising inventory levels; Support of our banking partners; and - Management of profitability and investments, including deferment of capital expenditure, cost reduction activities and adjustments to livestock procurement practises. The Directors have considered the aforementioned facts and circumstances, placing particular emphasis on the forecast improvement in financial performance, initiatives to manage working capital and reduce debt levels, the recently executed facilities and the support of our banking partners. Further alternative debt and equity funding sources and or the sale of selected assets could be explored if required by future performance uncertainties. While the Directors acknowledge that key future events and requirements noted above inherently have a degree of uncertainty, the Directors consider that the range of possible outcomes does not give rise to a material uncertainty that may cast significant doubt upon the Group’s ability to continue as a going concern. Accordingly, the financial statements have been prepared on a going concern basis. Foreign currency Transactions denominated in a foreign currency are converted at the exchange rates at the dates of the transactions. Foreign currency assets and liabilities (such as receivables and payables) are translated at the rate prevailing at balance date. The assets and liabilities of international subsidiaries are translated to New Zealand dollars at the closing rate at balance date. The revenue and expenses of these subsidiaries are translated at rates approximating the exchange rates at the dates of the transactions. Exchange differences arising on the translation of subsidiary financial statements are recorded in the foreign currency translation reserve (equity). Cumulative translation differences are recognised in the income statement in the period in which any international subsidiary is disposed of. The principal functional currency of international subsidiaries is the British Pound Stirling; the closing rate at balance date was 0.4916 (30 September 2022: 0.5013). Other accounting policies Other accounting policies that are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. The accounting policies have been consistently applied to the periods in these financial statements. Where applicable comparatives have been amended to align with current year’s expenses. Critical judgements and estimates The preparation of financial statements requires management to exercise its judgement in applying the Group's accounting policies. Estimates and judgements are reviewed by management on an on-going basis, with revisions recognised in the period in which the estimate is revised and in any future periods affected. Areas of estimate or judgement that have most significant impact on the amounts recognised in the financial statements are: Note B1 Impairment Note B2 Inventories Note B3 Intangible assets Note D2 Derivative financial instruments Basis of Going Concern preparation
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SECTION 11
OUR FINANCIAL REVIEW
A. FINANCIAL PERFORMANCE IN THIS SECTION This section explains the financial performance of Alliance providing additional information about individual items in the income statement, including: accounting policies, judgements and estimates that are relevant for understanding items recognised in the income statement. analysis of Alliance's performance for the year by reference to key areas including: revenue, payments to our farmers, expenses and taxation.
A1
C R E AT I N G W E A LT H A N D A D D I N G VA LU E TO O U R FA R M E R S
A1.1
Revenue 2023 $000 2,033,584 4,190 2,037,774
Revenue - sale of goods Other operating income Total income
2022 $000 2,240,702 3,749 2,244,451
Disaggregation of revenue from contracts with customers In the following table, revenue from the sale of goods is disaggregated by geographical market. 2023 $000 1,306,133 369,837 357,614 2,033,584
Asia-Pacific Europe, the Middle East and Africa Americas Total Revenue - sale of goods
2022 $000 1,388,913 499,628 352,161 2,240,702
Revenue measurement and recognition Revenue from the sale of goods is measured at an amount that reflects the consideration expected to be received in exchange for transferring those goods or services. The measurement is based on the transaction price, net of commissions, volume rebate, and excludes amounts incurred on behalf of the customer. In respect of export sales, the largest category of sales, the Group has determined that there are two performance obligations. The Group is obligated under the contract to supply specified goods and also to arrange and pay for shipping and insurance on behalf of the customer. Control of goods passes, and the service of arranging shipping and insurance is complete, at the point when the goods have been loaded onto the first point of carriage, to be delivered to the customer’s chosen destination. Revenue is recognised at this point in time. Other operating income materially consists of rebates from associates and insurance proceeds.
A1.2
68
Distribution payable
2023 $000
2022 $000
Distribution per income statement
-
11,342
Transfer to share issues pending Resident withholding tax Total payable at end of year
-
(2,324) (788) 8,230
C6
ALLIANCE GROUP ANNUAL REP ORT 2023
A2
FINANCE INCOME AND EXPENSES
Interest from bank Dividend received Financial income Interest paid on loans & borrowings Interest on lease liabilities Financial expenses Net finance costs
2023 $000 523 94 617
2022 $000 50 3 53
26,173 735 26,908 26,291
15,265 493 15,758 15,705
Measurement & recognition Interest income or expense is recognised using the effective interest rate method. Financial expenses comprise interest expense on borrowings including related fees and losses on interest rate hedging instruments and the interest component of lease payments.
A3
PERSONNEL EXPENSES
Wages and salaries Employer contribution to defined contribution plans Increase/(decrease) in liability for long service leave Total personnel expenses
2023 $000 385,510 7,387 230 393,127
2023 $000 350,935 7,064 (776) 357,223
Included within cost of sales in the income statement are wages and salaries of $354.5m (2022: $312.7m). The remaining personnel expenses are included within administrative expenses, sales and marketing expenses and allowance for historical employee entitlements. Measurement & recognition Provision is made for benefits owing to employees in respect of wages and salaries, annual leave, long service leave and short term and long term employee incentives for services rendered. Provisions are recognised when it is probable they will be settled and can be measured reliably. They are carried at the remuneration rate expected to apply at the time of settlement. Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss when they are due. Liabilities recognised in respect of long service leave are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect of services provided by employees up to the reporting date.
69
SECTION 11
A4
OUR FINANCIAL REVIEW
TA X ATION 2023 $000
2022 $000
Recognised in the income statement Current tax expense Current income tax expense Adjustments for prior years Unutilised prior year tax credits Deferred tax expense Total income tax (income)/expense in income statement
1,428 (97)
25,966 269
(29,084) (27,753)
5,134 31,369
Income tax expense calculation Net (loss)/profit after distribution before tax for the year Income tax using the company’s tax rate (28%) Non deductible expenses Tax effect of post-tax equity accounted earnings Tax effect of lower tax for overseas subsidiary Tax effect of consolidation adjustments Under provided in prior years Adjustments for prior years Income tax expense
(97,924) (27,419) 160 551 (306) (642) (97) (27,753)
105,005 29,401 (374) 1,764 (445) 752 2 269 31,369
Measurement & recognition Income tax expense is the income tax assessed on taxable profit for the year. Taxable profit differs from profit before tax reported in the income statement as it excludes items of income and expense that are taxable or deductible in future years (i.e. deferred tax) and also excludes items that will never be taxable or deductible. Income tax expense components are current income tax and deferred tax. Imputation credits As at balance date imputation credits available for use in subsequent periods totalled $46.4 million (2022: $28.3 million)
70
ALLIANCE GROUP ANNUAL REP ORT 2023
A4
TA X ATION (CONT) Deferred tax Movement in temporary differences during the year
2022 Property, plant and equipment Inventories Employee benefits Other items 2023 Property, plant and equipment Inventories Employee benefits Other items Derivatives Tax loss carry forward
Opening balance
Recognised in income
Recognised in equity
Closing balance
$000 15 15
Reallocate prior year between current and deferred tax $000 (376) 421 45
$000 745 537 7,454 2,295 11,031
$000 (1,847) (428) (2,269) (590) (5,134)
(1,102) 109 4,824 2,126 -
(970) 125 475 443 957
(1) -
(1,348) (714) (97) -
(3,421) 234 4,585 2,472 957
5,957
28,054 29,084
(1)
(2,159)
28,054 32,881
$000 (1,102) 109 4,824 2,126 5,957
Key judgement: A deferred tax asset is recognised to the extent it is probable that future taxable profits will be available to use the asset. This is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available in the future to utilise the asset. Measurement and recognition: Deferred tax is income tax that is expected to be payable or recoverable in the future as a result of the unwinding of temporary differences. These arise from differences in the recognition of assets and liabilities for financial reporting and for the filing of income tax returns. Deferred tax is recognised on all temporary differences, other than those arising from goodwill and the initial recognition of assets and liabilities in a transaction (other than in a business combination) that affects neither the accounting nor taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the year when a liability is settled or an asset realised, based on tax rates and tax laws that have been enacted or substantively enacted at balance date.
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SECTION 11
OUR FINANCIAL REVIEW
B. OPER ATING A SSE T S IN THIS SECTION This section shows the assets the Group uses in the processing of red meat products supplied by our New Zealand farmers in order to generate operating revenues. Key revenue generating assets include: Property, plant and equipment Inventories Intangible assets
B1
P R O P E RT Y, P L A N T A N D E Q U I P M E N T
Group Cost Balance at 1 October 2021 Transfers from work in progress Additions Disposals Reclassification to intangible assets Effect of movements in exchange rates Balance at 30 September 2022 Balance at 1 October 2022 Transfers from work in progress Additions Disposals Effect of movements in exchange rates
$000
$000
Plant and equipment $000
26,413 26,413 26,413 -
137,648 1,279 1,023 (126) 139,824 139,824 380 925 (166) -
493,959 30,572 11,574 (91) (220) 41 535,835 535,835 21,895 14,947 (172) 27
52,951 (31,851) 24,831 45,931 45,931 (22,275) 31,230 -
710,971 37,428 (217) (220) 41 748,003 748,003 47,102 (338) 27
Balance at 30 September 2023
26,413
140,963
572,532
54,886
794,794
318 86 404 404 51 455
81,479 2,187 83,666 83,666 2,133 (146) 85,653
360,047 19,918 (70) (194) 30 379,731 379,731 22,504 (9) 15 402,241
-
441,844 22,191 (70) (194) 30 463,801 463,801 24,688 (155) 15 488,349
26,095 26,009 25,958
56,169 56,158 55,310
133,912 156,104 170,291
52,951 45,931 54,886
269,127 284,202 306,445
Depreciation and impairment losses Balance at 1 October 2021 Depreciation Disposals Reclassification to intangible assets Effect of movements in exchange rates Balance at 30 September 2022 Balance at 1 October 2022 Depreciation Disposals Effect of movements in exchange rates Balance at 30 September 2023 Net book value Balance at 30 September 2021 Balance at 30 September 2022 Balance at 30 September 2023
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Land
Buildings
Work in progress $000
Total $000
ALLIANCE GROUP ANNUAL REP ORT 2023
Measurement & recognition Owned assets Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the purchase of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Work in progress relates to expenditure on items of property, plant and equipment which are not yet available for use. When an asset is made available for use it is transferred from work in progress to the relevant asset category and depreciated across its useful life. Impairment The carrying value of property, plant and equipment are reviewed at each reporting date. If an indicator of impairment exists, then the recoverable amount is estimated. An impairment loss is recognised in the income statement if the carrying amount exceeds the recoverable amount. Disposals The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement. Depreciation Depreciation of property plant and equipment assets is calculated on a straight-line or diminishing value basis. This allocates the cost of an asset, less any residual values (estimated value at time of disposal) over the estimated remaining useful life of the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives. Impairment tests The group reported significantly lower earnings for the period, largely reflecting the downturn of global markets and increased operating costs. This, combined with higher interest rates, led the Group to conclude that indicators of impairment, under the accounting standard, exist as at 30 September 2023. There were no indicators of impairment in the prior year. Where an indicator of impairment is identified, accounting standards require that an impairment test is performed for each cash-generating unit (“CGU”). The Group uses a value-in-use (“VIU”) discounted cash flow analysis to calculate the recoverable amount of the CGU. An impairment loss is recognised if the carrying amount of an CGU exceeds its recoverable amount. The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represent the Group’s assessment of future trends in the industry and have been based on data from both external and internal sources. The VIU calculation used five-year future cash flows based on Board approved business plans and is discounted based on a weighted average cost of capital (WACC) for which the Group engaged the assistance of an independent third party of 9.7% post tax. Based on these projected future cash flows, the Group has determined that the recoverable amount of the CGU exceeds its carrying amount and therefore there is no impairment. The cash flow forecast included specific estimates for five years and a terminal growth rate of 2.1% thereafter. Cash flows are based on margins ‘normalising' to historical average levels, relatively stable but slightly declining livestock volumes, management’s views on market trends, pricing and yields and incorporates optimising working capital and cost reduction measures that management have begun implementing during the 2023 financial year. The Group is confident in the results of the planned initiatives, and the results of the VIU indicated significant headroom above the carrying amount of the assets. The group has carried out sensitivity analysis and determined the following reasonably possible changes in key assumptions, across the forecast period, and their impact on headroom: Changes in key assumption 5% reduction in contribution margin* ($)
Decrease in headroom $000 (47,875)
0.5% increase in discount rate
(31,248)
Cost saving initiatives not achieved by 50% 10% reduction in Livestock volumes
(38,202) (144,597)
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SECTION 11
OUR FINANCIAL REVIEW
B 1 P R O P E RT Y, P L A N T A N D E Q U I P M E N T ( C O N T ) *Contribution margin includes livestock costs and plant operation costs but excludes some processing overheads costs, therefore is not directly comparable to measures within the consolidated income statement. Contribution margin is a key measure that the Group reviews to measure performance and a key measure included within the discounted cashflow model. Based on the sensitivity analysis the Group believes that a reasonable deterioration in an individual key assumption, in isolation, would not cause the carrying amount of the assets to exceed or be near to their recoverable amount. However, the sensitivity analysis indicated that, in combination, a deterioration in all of these key assumptions could indicate that the carrying amount of the assets could exceed their recoverable amount, in which case, management would take required steps to mitigate the impact of these risks. An improvement in the key assumptions would increase the headroom further. No impairment expense of the assets has been recognised (2022: nil). Key judgement The Group makes estimates of the remaining useful lives of assets, which are as follows; - Buildings 15 - 67 years - Plant and equipment 2.5 - 25 years The residual value and useful lives are reviewed and if appropriate adjusted, at each reporting date. The Group makes estimates or execises judgement in assessing indictors of impairment, forecast future cash flows, and determining other key assumptions used for assessing fair values (less cost of disposal) or value in use.
B2
INVENTORIES Inventories 2023
2022
Raw materials and consumables Livestock Trading stocks
$000 22,602 17,554 111,885
$000 21,346 2,100 144,310
Total inventories
152,041
167,756
Measurement & recognition Inventories are valued at the lower of cost and net realisable value. Cost: Consistent with other meat processors, the Group utilises the “retail method” to value trading stocks, in accordance with NZ IAS 2 - Inventory, to value the cost of inventory. Under the “retail method”, the cost of trading stock inventory is ascertained by deducting from sales value an estimated profit margin expected to be earned on the future sale of inventory. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Estimated selling price is determined based on a valuation hierarchy where the Group looks to use directly observable prices on trading stocks where possible. In the first instance the Group will use values on committed sales orders to determine estimated selling price. In the event that the inventory is not on a committed sales order then estimated selling price will be determined with reference to post year end sales price. In the event that the inventory item in question is not on a committed sales order or sold post year end then forecasted selling price will be used. If the forecast sales price was increased by 10% then this would increase profit by $2.7m (2022: $1.9m). If the forecast sales price was decreased by 10% then this would decrease profit by $2.7m (2022: $1.9m). Livestock is valued at fair value. Key judgement The Group determines the sale values used to calculate the cost of inventory by reference to: - contract sale prices, or - for uncontracted inventory, the future anticipated realisable value.
74
ALLIANCE GROUP ANNUAL REP ORT 2023
B3 INTANGIBLE A SSE T S Resource consents
Software
Goodwill
Work in progress $000 35,163 (16,119) 8,127 -
New Zealand Units $000 -
Cost Balance at 1 October 2021 Transfers from work in progress Additions Reclassification from property, plant and equipment
$000 455 1,721 61 -
$000 15,715 14,398 1,010 220
$000 692 -
Effect of movements in exchange rates Disposals Balance at 30 September 2022 Balance at 1 October 2022 Transfers from work in progress Additions Effect of movements in exchange rates Disposals Balance at 30 September 2023
2,237 2,237 67 16 2,320
5 31,348 31,348 855 4,967 4 37,174
Amortisation Balance at 1 October 2021 Amortisation Reclassification from tangible assets Effect of movements in exchange rates Balance at 30 September 2022 Balance at 1 October 2022 Amortisation Effect of movements in exchange rates
63 102 165 165 80 -
Balance at 30 September 2023 Net book value Balance at 30 September 2021 Balance at 30 September 2022 Balance at 30 September 2023
Total $000 52,025 9,198 220
692 692 692
27,171 27,171 (922) 2,906 29,155
4,491 (3,843) 648
5 61,448 61,448 12,380 4 (3,843) 69,989
6,529 2,356 194 5 9,084 9,084 2,162 11
-
-
-
6,592 2,458 194 5 9,249 9,249 2,242 11
245
11,257
-
-
-
11,502
392 2,072 2,075
9,186 22,264 25,917
692 692 692
35,163 27,171 29,155
648
45,433 52,199 58,487
Work in progress additions above relate to expenditure on the ERP system which will be transferred to software as it is made available for use. The ERP system is being transferred to software in stages as the relevant components of the system are made available for use.
75
SECTION 11
OUR FINANCIAL REVIEW
B3 INTANGIBLE A SSE T S (CONT) Measurement & recognition Resource consents Costs incurred in obtaining resource consents for processing sites are capitalised and amortised from the granting of the consent on a straight line basis for the period of the consent. Software Costs associated with acquiring and developing identifiable software assets controlled by the Group are capitalised at cost and amortised over the expected life of the asset. The costs of internally generated identifiable software assets controlled by the Group comprise all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. The costs to configure and customise a Software-as-a-Service (SaaS) arrangement may be recognised as an intangible asset when the application is controlled by the Group. Control requires the Group to have the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to those benefits. Configuration and customisation of SaaS arrangements meeting these criteria are capitalised and amortised over the useful life of the software. Goodwill Goodwill that arises upon an acquisition is included in intangible assets. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Work in progress Work in progress relates to expenditure on items of intangible assets which are not yet available for use. When an asset is made available for use it is transferred from work in progress to the relevant intangible asset category and amortised across its useful life. New Zealand Units New Zealand Units are purchased to offset carbon emissions under the New Zealand Emissions Trading Scheme. The units are measured at cost and expensed using weighted average method. Units are surrendered during the year to meet our obligations under the New Zealand Emissions Trading Scheme. The liability is measured at the carrying amount of units to the extent of available units on hand. Any additional liability is measured by market value of units at the period end. Key judgement The Group makes estimates of the remaining useful lives of assets, which are as follows; - Software - 2 - 15 years - Resource consents - 5 - 35 years The residual value and useful lives are reviewed and if appropriate adjusted, at each reporting date.
76
ALLIANCE GROUP ANNUAL REP ORT 2023
B4
RIGHT OF USE ASSETS Right of use buildings Cost Balance at 1 October 2021 Transfers from capital work-in-progress
$000 9,025
Right of use plant and vehicles $000 5,003
Work in Progress
Total
$000 -
$000 14,028
0
0
-
0
Additions
541
4,729
366
5,636
Disposals
(1,097)
(2,723)
-
(3,820)
Effect of movements in exchange rates Balance at 30 September 2022 Balance at 1 October 2022
29 8,498 8,498
0 7,009 7,009
366 366
29 15,873 15,873
Transfers from work in progress Additions Disposals Effect of movements in exchange rates Balance at 30 September 2023
(1,239) 20 7,279
366 6,643 (910) 13,108
(366) 613 613
7,256 (2,149) 20 21,000
Depreciation Balance at 1 October 2021 Depreciation Disposals Effect of movements in exchange rates Balance at 30 September 2022 Balance at 1 October 2022 Depreciation Disposals Effect of movements in exchange rates Balance at 30 September 2023
2,205 1,213 (1,072) 21 2,367 2,367 1,213 (1,705) 53 1,928
3,628 1,691 (2,503) 0 2,816 2,816 2,521 (889) 4,448
-
5,833 2,904 (3,575) 21 5,183 5,183 3,734 (2,594) 53 6,376
Net book value Balance at 30 September 2021 Balance at 30 September 2022 Balance at 30 September 2023
6,820 6,131 5,351
1,375 4,193 8,660
366 613
8,195 10,690 14,624
Measurement & recognition Right of use assets are initially measured at cost. This comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated from the commencement date to the end of the lease term.
77
SECTION 11
OUR FINANCIAL REVIEW
C. MANAGING FUNDING IN THIS SECTION This section explains how the Group manages its capital structure and working capital along with the various funding sources.
C1
C APITAL MANAGEMENT
The Group's capital includes share capital, reserves and retained earnings. The Board's objective when managing capital is to maintain a strong capital base to ensure the Group is able to undertake future growth opportunities and maximise the return to shareholders. The Board considers a strong capital base is necessary to protect the Group from volatility and changes in capital and operating market conditions. The Board monitors forecast capital inflows and outflows, and the level of shareholding relative to shareholders’ supply to ensure that the company retains a strong capital base, with a key reference point being the shareholder's equity ratio. The equity ratio calculated as total equity relative to total assets is a non-GAAP (generally accepted accounting practice) measure. Non-GAAP financial information does not have a standardised meaning prescribed by GAAP and therefore may not be comparable to similar financial information presented by other entities.
Total equity Total assets Equity ratio
C2
2023
2022
2021
2020
$000 380,210 783,166 48.5%
$000 447,759 796,591 56.2%
$000 370,676 703,099 52.7%
$000 347,188 610,126 56.9%
2023 000’s 92,165 16,380 (4,639) 103,906
2022 000’s 88,634 6,446 (2,915) 92,165
2023 000’s 103,906 444 104,350
2022 000’s 92,165 3,618 95,783
SHARE C APITAL Co-operative shares Shares on issue at 1 October Shares allotted during the year Shares surrendered during the year Shares on issue at 30 September Share capital Shares issued at 30 September Share issue pending Share capital
All co-operative shares are fully paid up and have a par value per share of $1. As at 30 September 2023 there was share issues pending of 0.444 million shares (2022: 3.618 million shares). All shares have equal voting rights and shareholders are entitled to one vote per share. The maximum individual shareholding is 1.6 million shares. Upon winding up, shares rank equally with regard to the Company's residual assets. Shares are issued and surrendered at their nominal value under the Company’s constitution and the Co-operative Companies Act 1996. Co-operative shares may be surrendered where shareholders have not transacted with the company for five years or do not have the capacity to be a transacting shareholder.
C3
RE SERVE S
Foreign currency translation reserve Cash flow hedge reserve Reserves
78
2023 $000 (12,407) 3,420 (8,987)
2022 $000 (12,227) (863) (13,090)
ALLIANCE GROUP ANNUAL REP ORT 2023
C3
RE SERVE S (CONT) Measurement and recognition Foreign currency translation reserve The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations as well as from the translation of financial instruments that hedge the company’s net investment in a foreign subsidiary. Cash flow hedge reserve The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet been settled.
C4
C A SH AND C A SH EQ UIVALENT S 2023 $000 10,638 10,638
2022 $000 13,089 13,089
2023 $000 98,596 13,247 29,298 141,141 307
2022 $000 160,647 5,164 32,678 198,489 476
Not yet due
> 30 days overdue $000 5,536 (476) 5,060
$000 161,123 (476) 160,647
626 (307) 319
98,903 (307) 98,596
Cash and cash equivalents Net cash and cash equivalents
C5
TR ADE AND OTHER RECEIVABLE S
Trade receivables - net of impairment Prepayments Amounts owed to the Company by associates Total receivables Impairment included in trade receivables The status of trade receivables at the reporting date is as follows: Group trade receivables 2022 Gross receivable Impairment Net receivable
$000 103,687 103,687
1 - 30 days overdue $000 51,900 51,900
2023 Gross receivable Impairment Net receivable
81,235 81,235
17,042 17,042
Total
Measurement and recognition Trade receivables are measured on initial recognition at fair value, and are subsequently carried at amortised cost. Receivables are reviewed on an individual basis to determine whether any amounts are unrecoverable and a specific provision is made. The provision for expected credit losses is the estimated amount of the receivable that is not expected to be paid. Debts known to be uncollectible are written off as bad debts to the profit and loss immediately. In assessing the collectability of receivables the Group considers the customers credit history and historical recovery performance and trends. The Group has derecognised trade receivables that have been sold to the bank under the receivables financing agreement and where the Group has determined that substantially all the risks and rewards have been transferred to the bank. The Group has assigned $42.7m of receivables as at 30th September, of which $1.8m has been derecognised.
79
SECTION 11
C6
OUR FINANCIAL REVIEW
T R A D E A N D O T H E R PAYA B L E S
Trade payables Distributions payable Provisions Payables to related parties Total payables Provisions Opening Balance Paid out during the year Increase/ (decrease) in provisions Provisions
A1.2
2023 $000 180,584 81 180,665
2022 $000 143,807 8,230 96 152,133
2023 $000 -
2022 $000 10,912
-
(11,771) 859 -
Provisions above represent amounts required to settle historic claims in relation to partial non-compliance for employee entitlements. Measurement and recognition Trade payables and other accounts payable are recognised when the entity becomes obliged to make future payments resulting from the purchase of goods and services. The entity has financial risk management policies in place to ensure that all payables are paid with in the credit timeframe. A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the provision can be reliably measured.
C7
INTEREST BE ARING LOANS AND BORROWINGS
Secured bank loans - current Other loans Bank credit facilities
2023 $000 120,053 51,802 8,359 180,214
2022 $000 86,920 15,947 17,073 119,940
Measurement and recognition Borrowings are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost (using the effective interest method). Fees for establishing new borrowings are spread over the term of those borrowings. The loan facility is a syndicated facility with four AA- rated banks and three A rated banks. It comprises a Seasonal Facility expiring 30 September 2024. The loan facility is secured against the property and assets of the Group given under a Security Trust Deed. As such all Group's inventory is effectively pledged as security for the borrowing facility. The Seasonal Facility is tailored to reflect the seasonal working capital cycle. The financial covenants under this facility were compliant at the end of the year. Other loans are funds received from the Provincial Growth Fund to fund qualifying projects and receivables financing with HSBC.
80
ALLIANCE GROUP ANNUAL REP ORT 2023
C8
LEASE LIABILITIES
Opening balance Net additions Interest of lease liabilities Repayments Foreign Currency Movements Closing balance Current Non-current
2023 $000 10,189 7,256 735 (6,065) 9 12,124
2022 $000 8,544 5,636 493 (4,484) 10,189
4,294 7,830
2,865 7,324
Measurement and recognition Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date. The lease payments are discounted using the Group’s incremental borrowing rate, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar environment under similar terms and conditions. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that are based on an index or a rate, amounts expected to be payable under a residual value guarantee, and any exercise price the Group is reasonably certain to exercise. The lease liability is measured at amortised cost using the effective interest method. The lease liability is increased to reflect interest expense incurred on the lease liability and reduced to reflect the cash lease payments made. Lease liabilities are remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset.
Lease expenses The Income statement includes expenses relating to short term leases of $0.9m (2022: $0.7m) and expenses relating to leases of low value assets of $0.9m (2022: $0.8m). Depreciation of right of use assets is reported in note B4. Interest on lease liabilities are reported as financial expenses (see note A2). The Group has considered the potential impact of lease payments should it exercise all extension options and have determined that the amounts are negligible.
C9
EMPLOYEE BENEFITS
Annual leave Long service leave Payroll accruals Other Employee benefits current
2023 $000 13,367 176 8,153 165 21,861
2022 $000 12,585 319 7,780 20,684
2023
2022
Long service leave - non-current Employee benefits - non-current
$000 4,742 4,742
$000 4,369 4,369
Measurement and recognition Provision is made for benefits owing to employees in respect of wages and salaries, annual leave, long service leave and short term and long term employee incentives for services rendered. Provisions are recognised when it is probable they will be settled and can be measured reliably. They are carried at the remuneration rate expected to apply at the time of settlement. Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss when they are due.
81
SECTION 11
OUR FINANCIAL REVIEW
D . F I N A N C I A L I N S T R U M E N T S U S E D T O MANAGE RISK IN THIS SECTION This section explains the financial risks that the Group faces and how these risks are managed. This includes reviewing the hedging instruments used to manage risk.
D1
MANAGEMENT OF FINANCIAL RISKS The Group is subject to a variety of financial risks relating to its operations that are managed by the Group's Treasury Policy. This policy provides guidance to management on minimising the exposure to these risks and the use of derivative financial instruments. The Group is exposed to foreign currency, interest rate, credit and liquidity risks which arise during the normal course of business. The Group manages commodity risk through negotiated supply contracts. Management of the Group's key financial risks Credit risk Credit risk is the risk of financial loss to the Group if a customer or counter-party fails to meet its financial obligations. The group is exposed to concentrations of credit risk principally in relation to cash and cash equivalents, and derivatives. The Group mitigates this by transacting with seven major trading banks. Exposure to credit risk also arises in relation to trade debtors. Refer to Note C5 for the status of trade receivables. This risk is managed through a credit approval process and on-going monitoring being undertaken. Offshore debtor credit risk is also partially managed by the use of confirmed letters of credit from reputable banks. There are no significant concentrations of credit risk in relation to trade debtors. The carrying amount of financial assets represents the group’s maximum credit exposure. A provision for impairment of receivables is established using the expected credit losses model, which is based on forward-looking analysis which considers historical provisioning rates and relevant macro-economic factors. Commodity risk The Group is exposed to commodity pricing risk on Inventory, in particular trading stock. Liquidity risk Liquidity risk represents the group’s ability to meet its contractual obligations as they fall due. The primary objective is to ensure that sufficient liquidity is available to meet the Group’s short and long term cash obligations. The secondary objective is the optimal use of cash resources to minimise total funding costs. The primary source of liquidity will be from foreign currency and domestic receipts. The secondary source will generally be from prior arranged borrowing facilities with financial institutions. The funding facilities negotiated will need to reflect sufficient headroom to accommodate the various uncertainties associated with the nature of the business and industry. The finance division prepares an annual budget and a revolving 12-week cash flow forecast profiling expected cash flows and projected liquidity requirements. These projected liquidity requirements are monitored against funding facilities to ensure sufficient liquidity resources are available. In general, the group generates sufficient cash flows from its operating activities to meet its obligations arising from its financial liabilities and maintains adequate banking facilities to cover potential shortfalls.
82
ALLIANCE GROUP ANNUAL REP ORT 2023
D1
MANAGEMENT OF FINANCIAL RISKS (CONT) The Group is required to disclose the expected timings of cash outflows for each of its financial liabilities. The amounts in the table below are the contractual undiscounted cash flows (including interest), so will not always reconcile to the amount disclosed on the statement of financial position. Balance sheet $000
Contractual cash flow $000
< 3 months
3 - 12 mths
1 - 2 yrs
2022 Loans and borrowings
102,867
Trade and other payables Bank credit facilities Lease Liabilities Financial liabilities - derivatives
152,133 17,073 10,189 17,903
2023 Loans and borrowings Trade and other payables Bank credit facilities Lease Liabilities Financial liabilities - derivatives
171,855 180,665 8,359 12,124 2,938
2 - 5 yrs
> 5 yrs
$000
$000
$000
107,768
35,695
30,454
30,954
10,665
-
152,133 17,073 10,189 17,903
152,133 17,073 526 17,903
2,404 -
2,475 -
4,276 -
508 -
177,267 180,665 8,359 12,123 2,938
52,984 180,665 8,359 1,178 2,938
113,983 3,117 -
3,061 -
10,300 4,125 -
642 -
Interest rate risk The Group is exposed to interest rate risk on movements in floating interest rates on loans and borrowings. The Group adopts a policy of ensuring that between 0 - 90% (dependant on the facility type, see breakdown below) of its interest rate risk exposure is at a fixed rate. This is achieved partly by entering into fixed-rate risk instruments and partly by borrowing at a floating rate and using interest rate swaps as hedges of the variability in cash flows attributable to movements in reference interest rates. The Group applies a hedge ratio of 1:1. The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the reference interest rates, tenors, repricing dates and maturities and the notional or par amounts. If a hedging relationship is directly affected by uncertainty arising from IBOR reform, then the Group assumes for this purpose that the benchmark interest rate is not altered as a result of interest rate benchmark reform. The Group assesses whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in cash flows of the hedged item using the hypothetical derivative method. The Group manages interest rate volatility to cash flow using pay-fixed interest rate swap (IRSs) and forward rate agreements (FRA's). Interest rate risk hedging parameters Facility Type Seasonal debt 0 - 1 year Seasonal debt 1 - 2 years Core debt 2 - 5 years
Hedging band 40% - 90% 0% - 35% 0% - 30%
Interest rate sensitivity The following table shows the estimated pre-tax impact on the group of a general 100 basis point (BPS) change in interest in respect to interest rate derivatives that the company had in place at balance date:
100 BPS increase in interest rates 100 BPS decrease in interest rates
2023 Profit & Loss
Equity
2022 Profit & Loss
Equity
$000 -
$000 1,369 (1,400)
$000 (24) 9
$000 (807) 843
83
SECTION 11
D1
OUR FINANCIAL REVIEW
MANAGEMENT OF FINANCIAL RISKS (CONT) Foreign currency risk The Group operates internationally, and is subject to the risk of financial losses arising from adverse exchange rate movements in USD, EUR, GBP, CAD, JPY and AUD. Risks arise due to the risk associated with the cash receipts made in currency exposure other than the functional currency. To manage the foreign exchange risks the Group enters into financial market derivatives. All foreign exchange contracts on hand at balance date are expected to impact the income statement within 12 months. The Group's policy is for the critical terms of the forward exchange contracts to align with the hedged item. The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Group assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in cashflows of the hedged item using the hypothetical derivative method. In these hedge relationships, the sources of any ineffectiveness, should it arise, are expect to be attributable differences in the amount of, or repricing dates between, the swaps and the borrowings . The Group did not have any new sources of hedge ineffectiveness emerging in designated hedging relationships. If it had, then it would be required to disclose those sources by risk category and explain the resulting hedge ineffectiveness. The Group uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date. These contracts are generally designated as cash flow hedges. The Group currently hedge up to 100% of trade debtors denominated in a foreign currency. The Group also hedges inventory to the extent it can identify inventory values that will be sold in a foreign currency. The following disclosures relate to the valuation of foreign exchange exposures as at 30 September. The Group has foreign exposures throughout the financial year which fluctuate both in terms of the amount of the exposures at any one time and the effect of movements in the exchange rate. The NZD equivalent of the notional amount of foreign exchange contracts at balance date are in D2.
The following table shows the estimated pre-tax impact on the group of a general 10% change in the value of the New Zealand dollar in respect to foreign exchange currency derivatives that the company had in place at balance date (note the sensitivity analysis excludes the equivalent impact on the underlying hedged item to which the derivatives relate):
10% increase in value of NZD 10% decrease in value of NZD
84
2023 Profit & Loss $000 7,047 (8,613)
Equity $000 10,827 (13,233)
2022 Profit & Loss $000 15,742 (19,240)
Equity $000 8,265 (10,102)
ALLIANCE GROUP ANNUAL REP ORT 2023
D2
DER IVATIVE FINANCIAL INST RU MENT S What is a derivative? A derivative is a type of financial instrument typically used to manage the interest rate and foreign exchange risks that the Group faces due to its business operations. The different types of derivative used are: Forward Exchange Contracts: A contract between two parties (for example, a bank and a customer) where one party agrees to sell or buy a fixed amount of a currency, at an agreed rate, on a certain date. The agreed foreign exchange rate is referred to as the forward rate. Foreign exchange option: An option gives the right to buy or sell an instrument at a fixed price on or before a certain date in the future. The buyer of an option has a right but not an obligation and can only lose the premium paid. The seller of an option has an obligation with no rights. The seller receives premium but has full risk of loss should rates move against them and the buyer chooses to exercise the option. Interest rate derivatives: Forward Rate Agreement (FRA) A contract that fixes the interest rate now that will apply to a loan or deposit for an amount for a given period starting on a certain date in the future (the settlement date). The most common FRA is for 3 months therefore the amount exposed is limited compared to the longer duration of an Interest Rate Swap. Interest Rate Swap (IRS) A swap contract whereby two parties agree to swap interest payments on a notional principal sum over an agreed period. The most frequently used Interest Rate Swap structure is a fixed-variable structure, in which one party to the agreement pays a fixed rate over the term of the swap in exchange for variable-rate interest payments from the other party. One to five-year Interest Rate Swaps are commonly traded and hence the risk exposure is greater than a FRA. Recognition Derivative financial instruments are recognised at fair value on the date the contracts are agreed and are re-measured on a periodic basis. The recognition of movements in fair value depends upon the hedging instrument and its designation or classification, as summarised below: Cash flow hedge: Changes in fair value of hedges that are designated and qualify as cash flow hedges and are considered effective for accounting purposes are recognised through other comprehensive income into the cash flow hedge reserve (in equity). The gain or loss relating to any ineffective element is recognised immediately in the income statement. Amounts accumulated in other comprehensive income are recognised in the income statement in the periods when the forecast transactions take place. Measurement of fair value The Group's financial instruments carried at fair value are defined as level 2 for valuation purposes for 2023 and 2022 financial periods. At 30 September the fair value of the Group’s derivative financial instruments was a $0.3m asset (2022: $13.1m liability) Foreign exchange contract: Fair value is the difference between the contract exchange rate and the quoted forward exchange rates to close it out at the reporting date. This is calculated by using the present value of the estimated future cash flows and applying published forward exchange rates and discount rates based on the forward interest rate swap curve. Foreign exchange options The fair value has two components being; • intrinsic value, being the difference between the option strike rate and the current market rate, and • time value, this can never be negative, and represents the dollar value that the option has of the time left to run to maturity The intrinsic value of the option, if it is deemed effective is taken through the hedge reserve in equity. The time value is deferred to the cashflow hedge reserve. The fair value uses a discounted cash flow and applies observable option volatilities and quoted forward exchange and interest rates that match the maturity dates of the contracts. Interest rate derivatives: The fair value is the estimated amount that the Group would pay or receive if the contract stopped at the reporting date. This is calculated by discounting the future interest and principal cash flows using published market interest rates that match the maturity dates of the contracts and discount rates based on the forward interest rate swap curve. The fair value uses a discounted cash flow and applies observable option volatilities and quoted forward exchange and interest rates that match the maturity dates of the contracts. The Group enters into derivative transactions under international Swaps and Derivatives Association (ISDA) master netting agreements. In general under these agreements the amounts owed by each counterparty on a single day in respect of all transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other. In certain circumstances - e.g. when a credit event such as a default occurs - all outstanding transactions under the agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.
85
SECTION 11
D2
OUR FINANCIAL REVIEW
DER IVATIVE FINANCIAL INST RU MENT S (CO NT) The following table details the notional principal amounts of derivatives at the end of the reporting period: 2023 Notional Fair value principal $000 $000
2022 Notional Fair value principal $000 $000
- Foreign exchange contracts - Interest rate swaps
123,160 230,000
695 720
86,066 199,000
(4,816) 3,689
- Forward rate agreements - Foreign exchange options
79,478
40
35,000 -
264 -
72,714 505,352
(1,135) 320
160,987 481,053
(12,194) (13,057)
Derivatives designated as cash flow hedges
Derivatives not designated as cash flow hedges - Foreign exchange contracts
The following table details the instruments held to hedge exposures to changes in foreign currency and interest rates:
1-6 months
Maturity 6-12 months
More than 1 year
Forward exchange contracts Net exposure (in thousands of New Zealand Dollars) - Average New Zealand Dollars:USD forward contract rate - Average New Zealand Dollars:EUR forward contract rate - Average New Zealand Dollars:GBP forward contract rate - Average New Zealand Dollars:AUD forward contract rate - Average New Zealand Dollars:CAD forward contract rate - Average New Zealand Dollars:JPY forward contract rate
277,967 0.6043 0.5611 0.4769 0.9253 0.8050 88.3124
nil nil nil nil nil nil nil
nil nil nil nil nil nil nil
Interest rate risk Interest rate swaps Net exposure (in thousands of New Zealand Dollars)
60,000
115,000
55,000
Average fixed interest rate
4.60%
5.61%
5.29%
Foreign currency risk
86
ALLIANCE GROUP ANNUAL REP ORT 2023
E. GROUP STRUCTURE IN THIS SECTION This section provides information to help readers understand the Group's structure and how it affects the financial position and performance of the Group.
E1
SUBSIDIARIES
The financial statements include the financial statements of the Company and the subsidiaries listed below. Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of the entity so as to obtain benefit from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Country
Balance date
2023 Ownership interest
2022 Ownership interest
United Kingdom
30-Sep
100.0%
100.0%
The Company has the following investments:
(b)
E2
Investments in subsidiaries New Zealand Holdings (UK) Limited and its trading subsidiary Alliance Group (NZ) Ltd
A SS O CIATE S
Measurement & recognition Associates are those entities in which the Company has significant influence, being the ability to participate in however not control the financial and operating decisions of the entity. Joint ventures are those entities in which the Company has joint control and has rights to the net assets of the venture. Associates and joint ventures are accounted for using the equity method of accounting where the investment is recorded at cost plus its share of any profit or loss during the ownership period. Any dividends received are deducted from the investment value. If the Company’s share of losses exceeds its interest in the associate, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the entity. Other Investments recognise entities which the Company holds an investment but no significant influence or joint control.
87
SECTION 11
E2
OUR FINANCIAL REVIEW
A SS O CIATE S (CONT) The Company has the following investments:
2023
2022
Principal activity
Country
Balance date
Ownership interest
Ownership interest
Sales, distribution and marketing Sales, distribution and marketing
USA
30-Sep
43.8%
43.8%
CAN
30-Sep
41.1%
41.1%
Research and development Research and development Supply of meat ingredients to pet food industry
NZ
30-Sep
50.0%
50.0%
NZ
30-Sep
50.0%
50.0%
NZ
31-Dec
50.0%
50.0%
Sales, distribution and marketing
IND
30-Sep
10.5%
10.5%
2023 $000
2022 $000
Investments in equity accounted investees Movements in carrying value of equity accounted investments: Balance at beginning of year Investment/(return) in share capital Add patronage dividends reinvested Less withholding tax on dividends Add/(less) share of foreign exchange translation reserve
59,248 -
54,644 5,445 (855) -
Add share of profit after tax Less dividends received
59,248 4,769 (482)
59,234 7,456 (7,442)
Closing balance
63,535
59,248
This balance comprises: Shares in associate companies and joint ventures Advances to associated companies at cost Share of post-acquisition increases in net assets Share of foreign exchange translation reserve
36,569 10,896 20,462 (4,392)
36,569 10,896 16,175 (4,392)
Closing balance
63,535
59,248
Associates The Lamb Co-operative Inc. The NZ and Australian Lamb Company Ltd
Joint ventures Alpine Origin Merino Ltd High Health Alliance Limited Meateor GP Limited
Other investments Quality New Zealand Limited
Summary financial information for equity accounted investees and proportionately consolidated entities, not adjusted for the percentage ownership:
88
Total liabilities $000 241,453
Revenues
Associates and joint ventures 2022
Total assets $000 383,957
$000 1,216,020
Profit (loss) $000 16,642
2023
327,554
189,734
1,172,928
10,123
ALLIANCE GROUP ANNUAL REP ORT 2023
F. O T H E R IN THIS SECTION This section includes information required to comply with financial reporting standards that is not covered in other sections.
F1
R E L AT E D PA RT I E S Transactions with related parties, including directors, are made on terms equivalent to those that prevail in arm’s length transactions. Parent and ultimate controlling party The immediate parent and ultimate controlling party of the Group is Alliance Group Ltd. Identity of associates and joint ventures The Group’s associates and joint ventures are outlined in Section E. Transactions with related parties and equity accounted investments: 2023
2022
$000
$000
Sales and recharges to associates
165,792
194,853
Sales and recharges to joint ventures
13,053
10,825
482
6,442
Dividends from associates Dividends from joint ventures
-
1,000
(6,617)
(7,537)
395
629
29,298
32,678
Amounts owed to the Company by joint ventures
7
367
Amounts owed to Directors by the Company
81
96
3,175
3,388
Purchases from Directors Sales to Directors Balances with related parties Amounts owed to the Company by associates
Loans to associates Key management personnel compensation
Short term employee benefits
2023
2022
$000
$000
6,347
5,083
Post-employee benefits
190
178
Directors fees - the Company
994
865
Key management personnel are the Company's Executive Leadership Team and its Board of Directors Benefits paid to the Leadership Team include salaries, non cash benefits and contributions to post employment superannuation schemes.
89
SECTION 11
OUR FINANCIAL REVIEW
F2 AUDITOR S’ REMUNER ATION
Audit fees - KPMG
2023
2022
$000
$000
293
269
Audit fees - KPMG (UK)
102
86
Total
395
355
F3 COMMITMENTS Capital expenditure commitments Committed payments for approved capital expenditure
2023
2022
$000
$000
14,233
11,187
F4 CONS OLIDATED STATEMENT OF CHANGE S IN EQUIT Y For the year ended 30 September 2023 Components that make up the capital and reserves of the Group and the changes of each component during the year Reserves Group
Share capital
Foreign currency translation
Cashflow hedge
Retained earnings
Total
$000
$000
$000
$000
$000
Balance at 1 October 2021
92,032
(12,946)
160
291,430
370,676
Profit after tax for the year
-
-
-
73,636
73,636
Net change in fair value of financial instruments
-
-
(1,023)
-
(1,023)
Movement in foreign currency translation reserve
-
719
-
-
719
Total comprehensive income for the year
-
719
(1,023)
73,636
73,332
Shares issued - ordinary shares
3,048
-
-
-
3,048
Shares surrendered - ordinary shares
(2,915)
-
-
-
(2,915)
Share issue pending
3,618
-
-
-
3,618
Total transactions with owners
3,751
-
-
-
3,751
Balance at 30 September 2022
95,783
(12,227)
(863)
365,066
447,759
Balance at 1 October 2022
95,783
(12,227)
(863)
365,066
447,759
Profit after tax for the year
-
-
-
(70,171)
(70,171)
Net change in fair value of financial instruments
-
-
4,283
-
4,283
Movement in foreign currency translation reserve
-
(180)
-
-
(180)
Total comprehensive income for the year
-
(180)
4,283
(70,171)
(66,068)
10,048
-
-
(10,048)
-
Bonus share issue
6,332
-
-
-
6,332
Shares surrendered - ordinary shares
(4,639)
-
-
-
(4,639)
Movement in share issue pending
(3,174)
-
-
-
(3,174)
Shares issued - ordinary shares
90
Total transactions with owners
8,567
-
-
(10,048)
(1,481)
Balance at 30 September 2023
104,350
(12,407)
3,420
284,847
380,210
ALLIANCE GROUP ANNUAL REP ORT 2023
F5 E VENT S SUBSEQUENT TO BAL ANCE DATE No subsequent events.
F6 NE W STANDARDS AND INTERPRE TATIONS New accounting standards There are no accounting standards issued but not yet effective that are expected to have a material impact on the Group.
91
SECTION 11
OUR FINANCIAL REVIEW
Key audit matters Independent Auditor’s Report
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the shareholders as a body may better understand the process To the shareholders of Alliance Group Limited by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our opinion on thefinancial consolidated financial statements as a whole and we do not express Report on thestatutory audit of audit the consolidated statements discrete opinions on separate elements of the consolidated financial statements
The key audit How the matter was addressed Opinion In our opinion, the consolidated financial statements We have audited the accompanying consolidated matter in our audit of Alliance Group Limited (the ’company’) and its financial statements which comprise:
subsidiaries (the 'group') on pages 63 to 91 present — the consolidated statement of financial position Software Servicerespects: (‘SaaS’) cloud computing arrangements (refer to note A) fairly, inas allamaterial as at 30 September 2023; i. the Group’s financial position as at 30 September As a result of the IFRIC agenda Our audit procedures —included: the consolidated income statement, statements 2023 and its financial performance and cash flows decision that was issued in April 2021, of comprehensive income, changes in equity and for the year ended on that date; — Analysing management’s assessment of SaaS cloud computing during the year the group has revised cash flows for the year then ended ; and arrangements; their policy in New relation to ii. accounting in accordance with Zealand Equivalents to — notes, including a summary of significant implementation costsFinancial on SaaS cloud International Reporting Standards source contracts and other correspondence with IT vendors — Examining accounting policies. computing This Zealand has issuedarrangements. by the New Accounting to understand contractual arrangements and consider the impacts of resulted in the Group restating $4.4 Standards Board and International Financial these arrangements on the group’s control of software assets; millionReporting of expenditure Standardspreviously issued by the International — Utilising our accounting technical specialists to assess the consistency recognised as an Standards intangible asset Accounting Board.as of management’s approach against the requirements of the accounting at 30 September 2021, $0.9 million to standards and IFRIC agenda decision; administrative expenses in FY21 and $3.4 million to FY21 opening retained — Obtaining and challenging managements cost allocation model. earnings. This is considered a key Assessing the logic and mathematical accuracy of the model; audit matter due to the complexity — On a sample basis, vouching expenditure back to supporting involved in assessing the software documentation, such as invoices, to assess whether the expenditures systems, there is a risk that We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We have been appropriately treated; expenditure on computer software is believe thatrecorded the auditasevidence have obtained is sufficient and appropriate to provide a basis for our opinion. incorrectly an assetwe due — Challenging the useful lives applied to resulting intangible assets; and to technical complexity We the are independent of the group of in accordance with Professional and Ethical Standard 1 International Code of — Assessing the accuracy of the disclosure of the restatement of the determining whether Practitioners an asset (Including is Ethics for Assurance International Independence Standards) (New Zealand) issued by the previous accounting period. created which is controlled by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Group and complexity in allocating We have no matters toAccountants report as a result of ourInternational procedures.. Independence Accountants’ International Code of Ethics for Professional (including expenditure incurred between Standards) (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these activities determined to create an requirements and the IESBA Code. asset and activities which do not. Our responsibilities under ISAs (NZ) are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements of the our retail report.method (refer to note B2) Carrying value of trading stocks section applying
Basis for opinion
Other than in our capacity as auditor we have no relationship with, or interests in, the group. Consistent with industry practice, the Our audit procedures included: Group adopt the ‘retail method’ to — Comparing management’s inventory valuation approach under the determine the carrying value of retail method with the requirements of New Zealand Equivalents to trading stock. Under the retail method International Reporting Standards; inventory units are measured at the
Materiality
expected sales value adjusted for — Comparing the expected selling price for trading stock items to actual The scope ouran audit was influenced by our application of materiality. Materiality subsequent helped us to cost to sell of and expected profit contracted volumes and sales completed to determine year end; the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and margin. trading stock items no contracted or completed on the consolidated financial statements— as aFor whole. The materiality for with the consolidated financial statementssales as a The retail method is required as subsequent to year end, comparing the expected selling pricechose to recent whole was set at $6.5 million determined with reference to a benchmark of group revenue. We the livestock inputs can result in a varying sales values; benchmark because, in our view, this is a key measure of the group’s performance. combination of trading stock outputs
2
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ALLIANCE GROUP ANNUAL REP ORT 2023
Key matters Keyaudit audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of Keyconsolidated audit matters financial are thosestatements matters that,ininthe our current professional judgement, were of most of the period. Except for the mattersignificance described ininour theaudit material the consolidated financial statements in the current period. summarise below matters and our key audit uncertainty related to going concern, we summarise below We those matters and ourthose key audit procedures to address procedures to in address those in orderas that the shareholders as a body may understand those matters order that thematters shareholders a body may better understand the better process by which the we process arrived at by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory purpose of ouronstatutory audit opinion on the statements consolidatedasfinancial asnot a whole anddiscrete we do not expresson audit opinion the consolidated financial a wholestatements and we do express opinions discrete opinions elementsfinancial of the consolidated separate elementsonofseparate the consolidated statements.financial statements
Thekeykey matter addressed The auditaudit matter How How the the matter was was addressed in our audit matter in our audit Going concern basis of accounting (refer to the about this report section) Software as ause Service (‘SaaS’) computing arrangements (refer to note A) The Group’s of the going cloud concern Our audit procedures included: assumption and the associated extent of — We considered the Group’s assessment of their forecast As a resultis of the audit IFRIC agenda uncertainty a key matter due toOur audit procedures included: compliance with debt facility covenants, the reasonableness of decision was issuedrequired in April 2021, the level that of judgement by us in — Analysing management’s assessment cloud computing the debt reductions strategies as of wellSaaS as the consequential during the the yearGroup’s the group has revised evaluating assessment of the arrangements; impact of these matters on the Directors’ assessment of the their accounting policy in relation to events or conditions that may cast Group’s abilitycontracts to continue a going concern, including implementation costs SaaS ability cloud to— Examining source andas other correspondence with ITwhether vendors significant doubt onontheir or not material uncertainties exist. computing arrangements. This has to understand contractual arrangements and consider the impacts of continue as a going concern. These are resulted in the Group restating $4.4 — We read and challenged: these arrangements on the group’s control of software assets; outlined in the about this report section. million of expenditure previously — the Group’s going concern paper to obtain an The Directors determined recognised as have an intangible assetthat as the— Utilising our accounting technical specialists to assess the consistency understanding the key judgements of management’s approachofagainst theassumptions requirementsand of the accounting use the going 2021, concern at 30ofSeptember $0.9assumption million to is made; standards and IFRIC agenda decision; appropriate. Their in FY21 assessment administrative expenses and — the Audit and Risk Committee and Board papers $3.4 milliona to FY21ofopening retained considers range scenarios of cash— Obtaining and challenging managements cost allocation model. addressing potential future capital structure, funding and earnings. This is considered a key flow projections, the viability of other Assessing the logic and mathematical accuracy of the model; forecast cash flows; audit matterstrategies due to the alternative to complexity manage and basis, vouching expenditure back to involved debt in assessing software of— On a—sample reduce and the the expectation management’s independent advisor reports; andsupporting documentation, such as invoices, to assess whether the expenditures systems, the there is a risk renewing debt facilities whichthat expire — the newly executed debt facility arrangement between the have been appropriately treated; expenditure on computer is on 30 September 2024 software (within twelve Group and its banking syndicate to obtain an incorrectly recorded months of year end). as an asset due — Challengingunderstanding the useful livesofapplied to resulting intangiblepeak assets; and the key terms including facility to the technical complexity of repayment and banking covenants. The preparation of these projections — Assessing limits, the accuracy of terms the disclosure of the restatement of the determining whether an asset is incorporated a number of assumptions previous accounting period. — We analysed the cash flow projections by: created which is controlled by the and judgements, Group significant and complexity in allocating andWe have no to report as a result of our procedures.. — matters Challenging management’s forecasted cash flow the Directors have concluded that the expenditure incurred between assumptions and sensitivity analysis in the FY24 Budget, range of possible outcomes considered activities determined to create an in including the assumptions around initiatives to be put in arriving at activities this judgement does asset and which do not.not give place to manage the Group’s cash flows within peak debt rise to a material uncertainty casting under the revised facility. This included obtaining evidence significant doubt of ontrading the Group’s ability to Carrying value stocks applying the retail method (refer to note B2) of: continue as a going concern. — the communication to stakeholders and Consistent withassessed industry practice, the ofOur audit procedures included: We critically the levels implementation of adjustments to livestock Group adopt the ‘retail method’ to uncertainty, focusing on the following: procurementinventory practices;valuation approach under the — Comparing management’s determine the carrying value of — Board approval deferring discretionaryto retail method with the requirements of Newidentified Zealand Equivalents — the Group’s ability to repay debt in trading stock. Under the retail method capital expenditure; International Reporting Standards; line with maturity dates, comply with inventory units are measured at the financing commitments expected sales value adjusted forand— Comparing — the new selling debtorprice finance facility entered into in the expected for trading stock items to actual renew the cost covenants, to sell and and an expected profitdebt September andsubsequent Management contracted volumes and sales 2023, completed to year analysis end; facility beyond 30 September margin. supporting the increasing utilisation of the debtor items withgoing no contracted 2024. This includes the nature of— For trading stock finance facility forward; andor completed sales The retail method is required as subsequent to year end, comparing the expected selling price to recent planned methods to achieve these — reading external advisor reports and conclusions livestock inputs can result in a varying sales values; actions, feasibility and from their review over the accuracy of management’s combination of trading stock outputs status/progress of these plans; forecasting, implementation of price optimisation
2 2
93
SECTION 11
OUR FINANCIAL REVIEW
The keyKey auditaudit matter matters How the matter was addressed in our audit Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of andbelow salesthose velocity improvement initiatives, — consolidated the Group’sfinancial significant cash inflow the statements in the current period. Weinitiatives summarise matters and our key audit and opportunities for better sale ofunderstand selected assets. assumptions particularly in light procedures to address those matters in of order that the shareholders as a body may the process economic andatmarket conditions; by which we arrived our audit opinion. Our procedures were undertaken in the context and solely for — Assessing the planned levels ofof operating andthecapital and purpose of our statutory audit opinion on the consolidated financial asof a whole and weand do not express expenditures forstatements consistency relationships trends to the discrete on separate of the consolidated statements Group’s financial historical results, and our understanding of the — theopinions Group’s planned elements levels of operational and capital business, industry and economic conditions of the Group; expenditures, and the ability of the — Testing the mathematical accuracy of management’s forecasted Group to manage cash outflows covenant calculations for the year ending 30 September 2024; within available funding, particularly — We considered the Group’s plans and intentions with in light of recent loss making respect to the maturity of its debt facilities at 30 September operations. 2024; and In assessing this key audit matter, we Software as a Service (‘SaaS’) cloud computing — arrangements (refer note A) We evaluated theto Group’s going concern disclosures in the involved senior audit team members who financial report by comparing them to our understanding of understand the Group’s business, the matter, the Group’s plans to address those events or As a result of the IFRIC agenda Our audit procedures included: industry and the economic environment it conditions, and accounting standard requirements. decision that was issued in April 2021, operates in. — Analysing management’s assessment of SaaS cloud computing during the year the group has revised We have no findings to report as a result of our procedures. arrangements; their accounting policy in relation to
The key audit matter
How the matter was addressed in our audit
implementation costs on SaaS cloud — Examining Impairment of non-currentThis assets B1) source contracts and other correspondence with IT vendors computing arrangements. has(refer totonote understand contractual arrangements and consider the impacts of resulted in the Group restating $4.4 these arrangements on the group’s control of software assets; The group significantly lower million of reported expenditure previously OurUtilising audit procedures included: — our accounting technical specialists to assess the consistency earnings theintangible period,asset largely recognised for as an as management’s approach against the requirements of the accounting reflecting the 2021, downturn global at 30 September $0.9 of million to management’s assessment of indicators of impairment — ofReviewing standards agenda decision; markets and expenses increased operating administrative in FY21 and against and the IFRIC requirements of the applicable financial reporting costs.. This,to FY21 combined withretained higher $3.4 million opening framework; — Obtaining and challenging managements cost allocation model. interest ledconsidered management to earnings.rates, This is a key Assessing the logic and mathematical accuracy of the model; — Reviewing management’s value-in-use discounted cash flow conclude of audit matter that due to indicators the complexity calculating recoverable amount of back the CGU; — Onanalysis a sample basis,thevouching expenditure to supporting impairment as at 30 involved in exist assessing theSeptember software documentation, such as invoices, to assess whether the expenditures 2023. systems, there is a risk that — have Assessing the reasonableness of, and challenging key been appropriately treated; expenditure on computer software is Where an indicator of impairment is assumptions, including: incorrectly recorded as an asset due identified, an impairment test must be — Challenging the useful lives applied to resulting intangible assets; and to the technical complexity of — forecast financial performance, including achievement of performed for each cash-generating — Assessing the accuracy of expectations, the disclosurelivestock of the restatement the determining whether an asset is contribution margin volumes andofcost unit (“CGU”). previous accounting period. created which is controlled by the savings; Group and complexity in the allocating As disclosed in note B1, Group We have no matters to report as a result of our procedures.. — the discount rate; and expenditure incurred between uses a value-in-use discounted cash activities determined to create an flow analysis to calculate the — terminal growth rate. asset and activities not. recoverable amountwhich of thedo CGU.
— Checking the appropriateness and accuracy of the methodology Determining theofrecoverable amount Carrying value trading stocks applying the retail method (referthe torecoverable note B2) amount for the CGU; applied to determine of the CGU requires management to make assumptions relating to the the — Performing cross-checks of the model assumptions and outcomes Consistent with industry practice, Our audit procedures included: discount rate, forecast financial against relevant internal and external information. This included Group adopt the ‘retail method’ to performance, terminal growth — Comparing inventory valuationin approach the assessing management’s against procedures we performed relation to under the going determine theand carrying value of rates otherthe factors). These retail method with the requirements of matter New Zealand Equivalents concern basis of accounting key audit discussed above; to trading(amongst stock. Under retail method assumptions areare subject to estimation International Reporting Standards; inventory units measured at the — Performing sensitivity analysis over reasonably possible changes in uncertainty and adjusted requires expected sales value for — Comparing the expected key assumptions; and selling price for trading stock items to actual management judgement. cost to sell and an expected profit contracted volumes and sales completed subsequent to year end; margin. — Checking the appropriateness of the disclosures in the consolidated For these reasons, we considered the — For trading stock items with no contracted or completed sales financial statements. impairment assets to a key audit The retail of method is be required as subsequent to year end, comparing the expected selling price to recent matter. livestock inputs can result in a varying sales values;of certain matters, we have no findings to report regarding After resolution combination of trading stock outputs the group’s conclusion that there is no material impairment of the CGU’s carrying amount. 2
94 3
ALLIANCE GROUP ANNUAL REP ORT 2023
The keyKey audit audit matter matters How the matter was addressed in our audit Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial in the current period. We summarise below those matters and our key audit Carrying value of tradingstatements stocks applying the retail method (refer to note B2) procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion. Consistent with industry practice, the Our procedures were undertaken in the context of and solely for the Ourconsolidated audit procedures included: purposeadopt of ourthe statutory opinion financial statements as a whole and we do not express Group ‘retailaudit method’ to on the discrete opinions on separate elements consolidated financial statements determine the carrying value of of the — Comparing management’s inventory valuation approach under trading stock. Under the retail method the retail method with the requirements of New Zealand inventory units are measured at the Equivalents to International Reporting Standards; expected sales value adjusted for — Comparing the expected selling price for trading stock items to cost to sell and an expected profit actual contracted volumes and sales completed subsequent to margin. year end; The retail method is required as livestock can result in a varying — For trading stock(refer itemstowith Softwareinputs as a Service (‘SaaS’) cloud computing arrangements notenoA)contracted or completed sales combination of trading stock outputs subsequent to recent selling values; depending on ofthethe assessed market Our audit procedures included: As a result IFRIC agenda — Assessing the mathematical accuracy of the profit margin demand, and the Group does not decision that was issued in April 2021, adjustment, including consistency closing trading stock — Analysing management’s assessment ofofthe SaaS cloud computing allocate processing costs to individual during the year the group has revised volumes and production costs to other audit procedures arrangements; inventory units. policy in relation to their accounting completed; implementation costs on SaaS cloud We consider that the carrying value of — Examining source contracts and other correspondence with IT vendors computing arrangements. This has Challenging management’s assessment of the inclusion —understand to contractual arrangements and consider impactsorof trading stock to be a key audit matter resulted in the Group restating $4.4 of certain expense within the margin adjustment theseexclusion arrangements on the group’sitems control of software assets; due to the unique nature of the retail million of expenditure previously calculation; and method and the judgement — Utilising our accounting technical specialists to assess the consistency recognised as an intangible asset as associated in determining the of approach against themargin requirements of thepercentage accounting Assessing the calculated profit adjustment —management’s at 30 September 2021, $0.9 million to expected selling price and margin standards and IFRIC agenda decision;indicators, expectations and for consistency with market administrative expenses in FY21 and adjustment. historical $3.4 million to FY21 opening retained — Obtaining andlevels. challenging managements cost allocation model. earnings. This is considered a key Assessing the logic mathematical accuracy of the model; We have no findings to and report as a result of our procedures. audit matter due to the complexity — On a sample basis, vouching expenditure back to supporting involved in assessing the software documentation, such as invoices, to assess whether the expenditures systems, there is a risk that have been appropriately treated; expenditure on computer software is incorrectly recorded as an asset due — Challenging the useful lives applied to resulting intangible assets; and to the technical complexity of — Assessing the accuracy of the disclosure of the restatement of the determining whether an asset is previous accounting period. The Directors, of the for the other information included in the entity’s Annual created which on is behalf controlled bygroup, the are responsible Report. Our opinion on the consolidated financial statements does not cover any of other Group and complexity in allocating We have no matters to report as a result our information procedures..and we do not express any formincurred of assurance conclusion thereon. expenditure between activities determined to create an In connection with our audit of the consolidated financial statements our responsibility is to read the other asset and activities which do not. information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears materially misstated. If, based Carrying value of trading stocks applying the retail method (refer to note B2) on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Consistent with industry practice, the Our audit procedures included: Group adopt the ‘retail method’ to — Comparing management’s inventory valuation approach under the determine the carrying value of retail method with the requirements of New Zealand Equivalents to trading stock. Under the retail method International Reporting Standards; inventory units are measured at the
The key audit matter
How the matter was addressed in our audit
Other information
Use of this independent auditor’s report
expected sales value adjusted This independent auditor’s reportfor is made solely to the as price a body. Our audit work has been — Comparing theshareholders expected selling for trading stock items to actual cost to sell and an expected profitto the shareholders undertaken so that we might state those matters wecompleted are required to state totoyear them in the contracted volumes and sales subsequent end; margin. independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or — For stock as items withfornoour contracted or this completed sales assume responsibility anyone other the trading shareholders a body audit work, independent The retail method isto required as thansubsequent to year end, comparing the expected selling price to recent auditor’s or any of the formed. livestock report, inputs can result in aopinions varying we have sales values; combination of trading stock outputs
2
95 4
SECTION 11
OUR FINANCIAL REVIEW
Responsibilities of the Directors for the consolidated Key audit matters financial statements
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit The Directors, on behalf of the company, are that responsible for: procedures to address those matters in order the shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the — the preparation and fair presentation of the consolidated financial statements in accordance with generally purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial discrete opinions on separate elements of the consolidated financial statements Reporting Standards) and International Financial Reporting Standards issued by the New Zealand Accounting Standards Board;
The key audit How the matter was addressed that is free from material misstatement, whether due to fraud or error; and matter our audit — assessing the ability to continue as in a going concern. This includes disclosing, as applicable, matters related
— implementing necessary internal control to enable the preparation of a consolidated set of financial statements to going concern and using the going concern basis of accounting unless they either intend to liquidate or to ceaseas operations have nocloud realistic alternative but to do so. (refer to note A) Software a Serviceor(‘SaaS’) computing arrangements
As a result of the IFRIC agenda Our audit procedures included: decision that was issued in April 2021, — Analysing management’s assessment of SaaS cloud computing during the year the group has revised arrangements; their accounting policy in relation to implementation costs on SaaS cloud — Examining source contracts and other correspondence with IT vendors computing arrangements. This has to understand contractual arrangements and consider the impacts of resulted in the Group restating $4.4 these arrangements on the group’s control of software assets; Our objective is: million of expenditure previously — whether Utilising our accounting technical specialists to assess the consistency recognised as reasonable an intangible asset as about — to obtain assurance the financial statements as a whole are free from material of management’s approach against the requirements of the accounting at 30misstatement, September 2021, $0.9 million to whether due to fraud or error; and standards and IFRIC agenda decision; administrative expenses in FY21 and — to issue an independent auditor’s report that includes our opinion. $3.4 million to FY21 opening retained — Obtaining and challenging managements cost allocation model. earnings. This is considered a key Assessing logic and mathematical of the model; Reasonable assurance is a high level of assurance but the is not a guarantee that an accuracy audit conducted in accordance auditISAs matter to the detect complexity with NZ due will always a material misstatement when it exists. — On a sample basis, vouching expenditure back to supporting involved in assessing the software documentation, such material as invoices, to assess or whether the expenditures Misstatements can is arisea from are considered if, individually in the aggregate , they systems, there riskfraud thator error. They have been appropriately treated; could reasonably be expected to influence the economic decisions of users taken on the basis of these expenditure on computer software is consolidated financialasstatements. incorrectly recorded an asset due — Challenging the useful lives applied to resulting intangible assets; and to the technical complexity of A further description of our responsibilities the audit of these consolidated financial statements is located at —forAssessing the accuracy of the disclosure of the restatement of the the determining whether an asset is External Reporting Board (XRB) website at: previous accounting period. created which is controlled by the Group and complexity in allocating We have no matters to report as a result of our procedures.. http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/ expenditure incurred between This description forms part of our independent auditor’s report. activities determined to create an assetengagement and activities which on do the not.audit resulting in this independent auditor’s report is David Gates. The partner
Auditor’s responsibilities for the audit of the consolidated financial statements
Carrying value of trading stocks applying the retail method (refer to note B2) Consistent with industry practice, the Group adopt the ‘retail method’ to determine the carrying value of trading stock. Under the retail method inventory units are measured at the expected sales value adjusted for cost to sell and an expected profit margin. KPMG The retail method is required as Christchurch livestock inputs can result in a varying 15 Novemberof2023 combination trading stock outputs
Our audit procedures included:
— Comparing management’s inventory valuation approach under the retail method with the requirements of New Zealand Equivalents to International Reporting Standards;
— Comparing the expected selling price for trading stock items to actual contracted volumes and sales completed subsequent to year end;
— For trading stock items with no contracted or completed sales subsequent to year end, comparing the expected selling price to recent sales values;
2
96
5
ALLIANCE GROUP ANNUAL REP ORT 2023
Pure South Beef Fillet. Chef nappaying (laddleing) melted butter and aromats from the pan back over the meat cut to enhance flavour.
97
12
Statutory Information and Five Year Review
Rye grass in a hoar frost in South Canterbury.
98
ALLIANCE GROUP ANNUAL REP ORT 2023
99
SECTION 12
STAT U TO RY I N F O R M AT I O N A N D F I V E Y E A R R E V I E W
Statutory information and five year review The directors present to the shareholders the seventy third annual report and financial statements of the company for the year ended 30 September 2023.
F I N A N C I A L R E S U LT
INTERESTS REGISTER
The result for the year ended 30 September 2023 is a net loss of $70.2 million after tax.
The Company maintains an Interests Register in which particulars of certain transactions and matters involving the directors are recorded. Entries in the Interests Register must in turn be disclosed in the Annual Report.
100
ALLIANCE GROUP ANNUAL REP ORT 2023
DISCLOSURES OF INTEREST Directors have disclosed interests in the following entities pursuant to section 140 of the Companies Act 1993 during the period 1 October 2022 until 30 September 2023. All interests held during the period are included below and reflect the status of those interests as at 30 September 2023: Director
Entity
Relationship
S M Brown
Brown Land Holdings Limited Dairy Goat Co-operative (N.Z.) Limited Sarah Brown and Associates Limited
Director and Shareholder Director Director and Shareholder
Mark Wynne
Ballance Agri-Nutrients *
Employee (Chief Executive Officer) and Director of various trading and non-trading subsidiaries
Trading Subs: • Ballance Agri-Nutrients (Kapuni) Limited* • Seales Winslow Limited* • Super-Air Limited* • Te Ata Hydrogen Limited* Non-Trading Subs: • Kapuni Green Hydrogen Hold GP Limited* • Kapuni Green Hydrogen Project GP Limited* • Encoate Holdings Limited* • New Zealand Phosphate Limited* • Overseer Limited* J G Collie
Arrow Dairy Limited* Benmore Downs Limited Platinum Dairies Limited Salvation Army Jeff Farm Management Board Takitimu Discussion Group Limehill's School Board Ballance Agri Nutrients Limited
Independent Advisor Director and Shareholder Chairman, Director and Shareholder Deputy Chairman Facilitator Presiding Member Director
D P McEvedy
Central Plains Water Trust Phoenix Park Farm Limited Robeen Trust Sicon Limited Shooting Creek Limited Vintage Village Trust (Abbeyfield Ellesmere)
Chair Director and Shareholder Trustee and Chairman Director Director and Shareholder Trustee and Chairman
J A Miller
Roslyn Downs Limited Claymore Dairy Limited
Director and Shareholder Director and Shareholder
D G Morrison
Ahika Journeys Limited Te Ao Kakano Alpha Sheep Genetics Group DG & BC Morrison Limited Pure Taste New Zealand (NZ) Limited W9
Director and Shareholder Director and Shareholder Member Director and Shareholder Director and Shareholder Chairman
H D Sangster
Community Trust of Maniototo Farmlands Co-operative Society Limited GlenAyr Limited GlenAyr Dairy Limited GlenAyr Properties Limited Agri-Women’s Development Trust Nottingham Dairy Limited Maniototo East Side Irrigation Company Limited Maniototo Irrigation Company Limited
Chair Director Director and Shareholder Director and Shareholder Shareholder Facilitator Director and Shareholder Director Director
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SECTION 12
STAT U TO RY I N F O R M AT I O N A N D F I V E Y E A R R E V I E W
DISCLOSURES OF INTEREST (CONT) Director
Entity
Relationship
S Robertson
Norman Family Trust G R Foot Trust Ballance Agri-nutrients Limited Synlait Milk Limited Synlait Milk Finance Limited Robertson Family Trust
Trustee Trustee Director Director/Chair Director Trustee
M J Taggart
FMG Insurance Limited Oxford Health Charitable Trust Oxford Health Charity Limited Taggart Farms Taumata Plantations Limited
Director Trustee Director Partner Chairman
* – Entry removed by notices given by the directors during the year ended 30 September 2023
The Interests Register also includes, pursuant to section 140(1) of the Companies Act 1993, entries for authorising the remuneration and particulars of indemnities and insurance for the directors. RELE VANT INTERE ST S IN SHARE S Directors have disclosed the following holdings of relevant interests in Alliance Group Limited shares pursuant to Section 148 of the Companies Act 1993:
Director
Shares acquired since 30 September 2021
Shares held at 30 September 2022
Shares held at 30 September 2023
S Brown
7,491
12,386
19,877
J G Collie
158,364
13,785
172,149
D P McEvedy
28,589
6,188
34,777
J A Miller
130,878
10,423
141,301
D G Morrison
56,203
4,353
60,556
H D Sangster
124,182
18,160
142,342
M J Taggart
77,106
6,768
83,874
All share transactions were carried out at their nominal value of $1.00 per share.
102
ALLIANCE GROUP ANNUAL REP ORT 2023
DIRECTOR S REMUNER ATION The following remuneration was paid (and received) during the year ended 30 September 2023. Director
Renumeration
Brown
$105,000
Collie
$91,250
Mcevedy
$91,250
Miller
$91,250
Morrison $91,250 Robertson
$113,750
Sangster
$91,250
Taggart
$228,125
Wynne $91,250
During the year ended 30 September 2023 the numbers of employees of the group who received remuneration including benefits of $100,000 or more were: $100,000 – $110,000
No. of Employees 255
$110,001 – $120,000
171
$120,001 – $130,000
105
$130,001 – $140,000
74
$140,001 – $150,000
26
$150,001 – $160,000
21
$160,001 – $170,000
16
$170,001 – $180,000
12
$180,001 – $190,000
7
$190,001 – $200,000
7
$200,001 – $210,000
7
$210,001 – $220,000
3
$220,001 – $230,000
3
$240,001 – $250,000
5
$250,001 – $260,000
3
$260,001 – $270,000
3
$270,001 – $280,000
2
$280,001 – $290,000
1
$290,001 – $300,000
1
$300,001 – $310,000
1
$330,001 – $340,000
1
$340,001 – $350,000
1
$380,001 – $390,000
1
$390,001 – $400,000
1
$450,001 – $460,000
1
$520,001 – $530,000
1
$540,001 – $550,000
1
$570,001 – $580,000
1
$670,001 – $680,000
1
$810,001 – $820,000
1
$1,360,001 – $1,370,000
1
$1,560,001 – $1,570,000
CO-OPER ATIVE STATUS As required by Section 10 of the Co-operative Companies Act 1996, the following resolution was passed by the board on 9 November 2023. All directors present voted in favour of the resolution,
EMPLOYEE REMUNER ATION
Remuneration
Our remuneration policy and practices are designed to attract, retain and reward high calibre senior leaders for the delivery of results that create value for our shareholders. This is achieved through market benchmarked remuneration that balances fixed and variable pay linked directly to the performance of the co-operative. The remuneration package for the Chief Executive and Executive Leadership Team is reviewed annually by the People Committee taking into account company results, individual performance and market data supplied by external specialist remuneration advisors.
“ It was the opinion of the board that Alliance Group Limited has throughout the year ended 30 September 2023 been a co-operative company within the meaning of the Co-operative Companies Act 1996 on the following grounds: (a) Alliance Group Limited carries on as its principal activity a co-operative activity as that term is defined in the Co-operative Companies Act 1996; (b) The Constitution of Alliance Group Limited states its principal activities as being cooperative activities; ands (c) Not less than 60% of the voting rights of Alliance Group Limited were held by transacting shareholders as that term is defined in the Co-operative Companies Act 1996.”.
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SECTION 12
STAT U TO RY I N F O R M AT I O N A N D F I V E Y E A R R E V I E W
STAT U TO RY I N F O R M AT I O N ( C O N T )
DIRECTORS
C O M PA N Y ’ S A F FA I R S
The names of the persons holding office as directors of the company as at 30 September 2023 are listed in the Directory in the inside of the back cover.
A loss for the year has been recorded, however the Company is undertaking a range of measures to improve performance. These measures are referred in the notes to the Consolidated Financial Statements – which can be found in the section titled Our Financial Review accompanying this report.
AUDITORS Under section 200 of the Companies Act, KPMG, Chartered Accountants, continue in office as auditors.
Murray Taggart Chairman
15 November 2023
104
Further details of the year under review, including material changes in the nature of the business of the company or any of its subsidiaries are included in the Chairman and Chief Executive review and the financial statements of the Company accompanying this report.
S Robertson Director
ALLIANCE GROUP ANNUAL REP ORT 2023
Consolidated five year review FIVE YEAR REVIEW
Turnover Net (loss)/profit before restructuring, provisions and distributions Restructuring and provisions Distributions (Loss)/profit after tax Fixed assets Total assets Shareholders' funds Shareholders' funds as a percentage of total assets Ordinary shares
2023 000's 2,033,584 (97,924)
2022 000's 2,240,702 117,206
2021 000's 1,847,097 42,182
2020 000's 1,834,096 27,428
2019 000's 1,712,937 20,997
(70,171) 306,445 783,166 380,210 48.5% 103,906
949 11,342 73,636 284,202 796,591 447,759 56.2% 92,165
2,334 8,509 23,811 269,127 703,099 370,676 52.7% 88,634
19,959 6,956 245,022 610,126 347,188 56.9% 88,843
260 8,953 4,970 236,126 541,007 340,322 62.9% 85,276
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13
Directory CORP OR ATE OFFICE
MANAGERS
51 Don Street PO Box 845, Invercargill 9840 Telephone: 03 214 2700 Email: executive@alliance.co.nz Website: www.alliance.co.nz
Dannevirke Plant
K W Adams
Levin Plant
C G Mason
Lorneville Plant
J Graham
Mataura Plant
A Pelser
Nelson Plant
S Baird
CHRISTCHURCH OFFICE
Pukeuri Plant
P Shuker
Level 3 123 Victoria Street
Smithfield Plant
K Morris
Christchurch Central 8013
Alliance NZ Sales
J Skurr
Alliance Group (NZ) Ltd (UK subsidiary)
H Scott
Alliance Asia
M Talbot
ELECTED DIRECTORS J G Collie
Winton
D P McEvedy
Southbridge
J A Miller
Southdown
D G Morrison
Gore
H D Sangster
Ranfurly
M J Taggart (Chair)
Oxford
APPOINTED DIRECTORS
AUDITORS KPMG
BANKERS ANZ Bank New Zealand Limited Bank of New Zealand The Hongkong and Shanghai Banking Corporation Ltd Bank of China Rabobank NZ Branch
S M Brown
Kimbolton
REGISTERED OFFICE
M D Wynne
Auckland
S D Robertson
Auckland
Level 3 51 Don Street Invercargill 9810
EXECUTIVE LEADERSHIP TEAM A S AT 30 SEP TEMBER 2023 Chief Executive W P Wiese Prevously held by D R Surveyor until February 2023 Chief Financial Officer
K T Saksida
General Manager Sales and Marketing
S S Kingston
Chief Transformation Officer
R O'Brien
General Manager Supply Chain and Planning
N C Jones
General Manager People and Culture
S Manning
General Manager Livestock and Shareholder Services
M Behrent
Interim General Manager Manufacturing
I Docherty
General Manager Governance, Legal and Risk and Company Secretary 106
J M Irvine
The information in this annual report is for shareholders only and is not to be reproduced in whole or in part without the consent of Alliance Group Limited.
51 Don Street, Invercargill 9810 PO Box 845, Invercargill 9840 0800 354 435 03 214 2700 executive@alliance.co.nz
ALLIANCE.CO.NZ