2014
Annual Report Ashburton Trading Society
CONTENTS
1
2
7
ATS at a glance
Chairman & Chief Executive Review
Community Involvement
9
13
24
DIRECTORS
Neal Shaw
AUDITORS
Philip McKendry
GROUP CHIEF EXECUTIVE/ COMPANY SECRETARY
Directors’ Report
(Chairman)
Ian Mackenzie
Financial Statements
Jono Pavey
(Deputy Chairman)
GENERAL MANAGER OPERATIONS
Alister Body
Chris Bristol
Jessie Chan-Dorman
GROUP BUSINESS DEVELOPMENT MANAGER
Andrew Priest
Notice of Annual General Meeting
PricewaterhouseCoopers Sir Gil Simpson Drive Christchurch SOLICITORS
Tavendale and Partners Tancred Street Ashburton BANKERS
Mark Saunders
Bank of New Zealand East Street Ashburton
Gabrielle Thompson
REGISTERED OFFICE
(Independent)
97 Burnett Street Ashburton
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The year at a glance MEMBERSHIP GROWTH
AVERAGE SPEND PER MEMBER $85,000
2,721 2,698
$42,000*
2013
2014
2013
TURNOVER ($M CONSOLIDATED)
2014
OPERATING SURPLUS ($M CONSOLIDATED)
$5,381
$232.00
$115.70*
-$261
2013
2014
2013
EFFICIENCY RATIO: GROUP
2014
PROFIT DISTRIBUTION: GROUP
7.1% 30% TAXATION ON OPERATING PROFIT
3.4%
70% RETAINED
2013
2014 *Excludes Ruralco card spend
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Chairman & Group Chief Executive Review
It has been a landmark year at ATS IT HAS BEEN A LANDMARK YEAR AT ATS WITH THE LAUNCH OF RURALCO AND A RENEWED FOCUS ON REMAINING CORE BUSINESS IN YOUR CO-OPERATIVE BUYING GROUP. THESE CHANGES ARE OUTLINED IN THIS, THE 51ST ANNUAL REPORT OF ATS.
STRATEGIC OVERVIEW This year’s ATS annual report describes considerable change to your co-operative buying group. At a national level we have witnessed further amalgamation of competitors, a buoyant national economy, and strong markets for farm products. Closer to home there has been generally favourable weather for our farming members, and a “rock star” regional economy, based on irrigated agriculture and overlaid with the momentum developing in the Canterbury earthquakes’ rebuild. It has been a good environment for ATS to establish its platform for the next 50 years. The year under review has seen greater change to the strategy and structure of ATS than possibly any other
year in its history. On 1 July 2013 ATS sold its card and some fuel business which comprised almost 50% of its turnover and over half of its operating surplus in 2012/13, into Ruralco, a Joint Venture between Ravensdown and ATS. Considerable behind the scenes work went into Ruralco in the two years prior to its launch on 1 July 2013. Since that date the management team have been working hard to ensure its success. At the same time the Board and management have fully reviewed ATS in order to make it an even more efficient and effective buying group. These major changes to ATS have created a high level of excitement within the Directors, management and staff
PHILIP MCKENDRY (CHAIRMAN)
NEAL SHAW (GROUP CEO)
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of ATS. Our challenge is to ensure your co-operative buying group sticks to its farmer roots, and continues to deliver outstanding value to its shareholders, and to the wider community.
RESULTS The divestment of ATS’s card and Mobil fuel business into Ruralco left ATS with the trading divisions of farm supplies, electricity, fertiliser and ATS Seed, complemented by wholly or partially owned investments in Ruralco, Pro Active NZ Ltd, ATS Fuel, Watermetrics NZ Ltd, and Coulter Seeds Ltd. Consequently the Financial Position and Performance statements of the 2013/14 year differ substantially from
previous years’ results which reported ATS with full ownership of its card and fuel businesses. The headline numbers for 2013/14 are turnover of $116m ($232m FY13) and operating loss for the year of $261k. ($5.4m FY13). Turnover Comparative: A like for like comparison shows turnover increased for FY14 to $116m versus YE13 $108m with solid growth in Farm Supplies, fuel, ATS Seed, and fertiliser, while electricity was hindered by the low irrigation demand in the late summer and autumn and the damage to irrigators caused by the storms. Divisionally this means, Farm Supplies turnover $3m or 10% ahead of FY13; Electricity Turnover the same as FY13; Ballance turnover $2.3m or 12% ahead and Seeds $2.2m or 28% ahead of FY13. Profit Comparative: An operating deficit was always forecast by the Board to occur in FY14, given the investments made to establish Ruralco, and the nature of the Joint Venture agreement with Ravensdown. Members should be aware that last year’s surplus was
an extraordinary result due to the one off gain on the sale of the card and fuel business into Ruralco. Like for like comparative: To give a like for like comparison with previous years, we would have to assume no Ruralco initiative. Such a counter-factual scenario requires a significant body of development investment in Ruralco not to have occurred, and requires the forecast Ruralco dividend to be realised pre-balance date instead of in FY15. The result would have been an outstanding year for the ‘old’ ATS. Further detail of such a comparison and a more in-depth review of progress to date with the Ruralco initiative will be given at the AGM.
SUBSIDIARIES AND ASSOCIATES Ruralco Ruralco offers ATS members three key benefits: 1. Access to a price leading card supplier network nationwide; 2. The benefit of a dividend stream to their co‑operative from growth in the card business; and 3. An improved focus by ATS Board and management on the performance of the remaining divisions of ATS. The overall outcome is a more competitive and sustainable ATS. Ruralco operates as a stand-alone business with its own Board of Directors, appointed by its two shareholder entities, ATS and Ravensdown. That Board has appointed Neal Shaw as Ruralco CEO, and he has a team of Ruralco staff reporting to him. For the ATS member, it has been a seamless transition to this new structure as their Ruralco branded card (which they now use across the nationwide supplier network) has been issued by ATS, their farm supplies co-operative.
4
Chairman & Group Chief Executive Review
The ATS Board has significant expectations for Ruralco. We are aware it is a new business. We are also aware it has substantial growth and value adding opportunities for both shareholder co-operatives. With straightforward commitment and discipline from shareholders and management, we believe Ruralco will transform ATS into a significantly more competitive and effective buying group for its members. Other Subsidiaries & Associates Our subsidiary and associate companies ATS Fuel Ltd, ProActive New Zealand Limited, Watermetrics New Zealand Limited and Coulter Seeds Limited have had varying results throughout the financial year. ATS divested itself of its minority shareholding in Coulter Seeds during the year, and is continuing to evaluate its other subsidiaries and associates in line with its strategy.
HEALTH AND SAFETY The Pike River tragedy has initiated a review of health and safety across virtually all of corporate New Zealand. At ATS we are working to engender a culture of safety and well-being throughout the whole business, including staff, members and visitors. We continue to strive to improve our safety performance by providing our staff with a hazard free environment and encouraging them to protect themselves and their colleagues on a daily basis. Furthermore the co‑operative has invested significantly over recent years to ensure not only compliant but industry leading facilities for the handling and storage of the wide variety of potentially hazardous products we trade. We are pleased to report there has been a reduction in accidents and incidents throughout the year, ATS has successfully retained its tertiary status with ACC ensuring levy reductions for the cooperative. Contributing to this result is the programme conducted by the Ashburton Fire Brigade of training our staff to a very high level for both medical and fire emergencies.
BUILDINGS ATS continues to face ongoing challenges in relation to earthquake damage of its buildings. The minor damage to the Rakaia and Methven stores has been repaired during the year. In Ashburton we have staff based on two sites, one being Burnett Street and the other being the old Electricity Ashburton site on Kermode Street. The lease on the latter building expires in December 2015. The Board has reviewed various options, from repairing the existing Burnett Street site to selling the site and rebuilding somewhere new. The decision has been made to stay at the Burnett Street site and repair the damage. While final plans are yet to be confirmed, we will be demolishing a portion of the Burnett St end of the main shop and thus creating an opportunity to redevelop that same area which may enable all ATS staff to be on one site.
STAFF There has been significant change imposed upon the staff, as they deal with earthquake related building issues, and the large workload associated with the development and launch of Ruralco. While the headline financial result is markedly different from the preceding year, the result is one that all staff should be very proud of. Whilst business and member needs change, we recognise that so do the needs of our staff. ATS has various strategies in place to support its staff. Two examples of this are EAP Services (confidential counselling for staff ), and staff life insurance. During this financial year, we saw the retirement of Trish Burrowes after 31 years of service to ATS and Jenny McLachlan after 17 years, however you will certainly see both ladies continuing to be involved in the ‘ATS Family’.
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COMMUNITY SUPPORT ATS is committed to supporting many community projects and this continues to be part of our philosophy. We signed up as a silver sponsor for the EA Networks Centre and are proud we have been able to contribute to this outstanding facility. We also continue to be the naming sponsor for the ATS Longbeach Coastal Challenge and we are involved in a number of agricultural industry education, community and sports groups. We have listed these on pages 7–8 of the Annual Report for your review.
BUSINESS RENEWAL The farm supplies market is competitive, low margin, and largely price driven. As a trading society with a lean balance sheet, ATS has to earn its way on each sale and transaction it does—its viability is only ever as good as its next sale. This reality means an on‑going commitment to business efficiency, innovation and competitiveness, which have always been great strengths of ATS. Compliance costs have increased during the year with the instigation of Anti-Money Laundering legislation. This law requires extra levels of identification and security around any new membership accounts, and is another burden put upon both members and staff.
However as with other regulatory aspects of our business environment, the Board has taken the view that compliance is not only essential but also offers an opportunity for improving the value of the buying group to its members. The divestment of ATS’s traditional card business into Ruralco has enabled a greater focus by ATS Board and management on the remaining ATS divisions. A number of significant changes, focussed on improving business efficiency and effectiveness, are underway. Some of these changes are behind the scenes while members will notice some differences in other areas.
During the year, the freight free service was reviewed and some further disciplines put in place with regard to minimum order size. This has been well received by members and will result in greater business efficiency for the buying group. Another review focussed on the value given by having specialist dairy representatives. In a price driven commodity supplies market where any extra service is largely discounted, we failed to identify significant gains from our investment in a specialist representative team. The conclusion of the review was that we could more effectively and efficiently service our dairy members through our existing Customer Services Centre. This
6
Chairman & Group Chief Executive Review
NEAL SHAW (GROUP CHIEF EXECUTIVE)
JONO PAVEY (GM OPERATIONS)
service has been resourced so we now individually contact ATS dairy members and create an account manager over the phone, whilst still providing the delivery of service and having some specific field staff available to come out and provide solutions as required. This is far more targeted and capital efficient than saturating the sector with field reps in the hope they will bring business back in to ATS. At the same time we have retained the arable and pastoral reps that provide a very different service, particularly around agricultural chemical, maize, fodder beet, and general pastoral advice. We also recognize the value of having an electricity market specialist as we are able to clearly demonstrate value and provide solutions for members in what is a very difficult market with regards to billing. There is an on-going review of operations within the buying group, and especially farm supplies which is the most capital intensive division of the business. Under review are a wide range of processes such as stock level management, margin management, staffing structures, and procurement efficiencies. Many of the changes that have resulted or will result from these reviews will have no direct impact upon members but will make their buying group more efficient and competitive.
AT S V I S I O N
To lead the member experience in the farm supplies sector
CHRIS BRISTOL (GROUP BUSINESS DEVELOPMENT MANAGER)
OUTLOOK ATS is a very different entity from twelve months ago. From a member perspective, the changes have been seamless and relatively minor—a different brand on the card and access to a wider network of suppliers. For the senior management team and Directors, the Ruralco initiative has invoked substantially greater and immediate change. The turnover of the buying group is now dominated by farm supplies, electricity and fertiliser. The turnover and profit of our card business is now in an associate business, Ruralco, which has its own distinct Board and management team. Despite these changes, the purpose of each shareholder’s investment in ATS remains exactly as it has been since the buying group first started. That purpose is to lower your farm supplies costs. ATS achieves that purpose by staying focused on the farming community and by operating efficiently. This enables ATS to have a price leading strategy and compelling offering in the most competitive farm supplies market in NZ. The robust local farm economy, underpinned by irrigation of world-class dairy and arable land, will continue to drive much of the future fortunes of ATS. However we are also planning for ATS benefit in the coming years from the much wider reach of the Ruralco card business. Success in both these endeavours will mean our members can rely even more on ATS to ensure they have a competitive farm supplies partner. We would like to take this opportunity to thank the management and staff for their continued hard work and determination this financial year.
P J McKendry Chairman
N D Shaw Group Chief Executive
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Working with our community
AGRICULTURE INDUSTRY
EDUCATION
COMMUNITY
Ashburton Fanciers Society
Christchurch Boys High School
Ashburton A&P Show
Beef and Lamb NZ
Dorie Primary School
Ashburton Lions Club
Glen R Angus Bull Sale
Hampstead Primary School
Bookarama-Rotary Club
Hinds Young Farmers Club
Hinds Primary School
Cancer Society of NZ
Methven Collie Club
Hororata Primary School
Dorie Community Trust
Pendarves Young Farmers
Lauriston Primary School
Dorie Social Committee
Rylib Group
Lincoln University
Ellesmere Lions Club
South Pacific Seeds
Mayfield Primary School
Greenstreet / Ashburton Forks Hall
Mt Hutt College
Hinds Lions Club
Rakaia Primary School
Hororata St Johns Church
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Leukaemia and Blood Cancer NZ
SPORTS GROUPS
Lincoln University
Ashburton Area Show Jumping
Mayfield & Districts Lion Club
Ashburton Golf Club
Methven A&P Show
Carew Indoor Bowls
Mt Somers Playcentre
Hinds Outdoor Bowls Club
North Canterbury Rural Support Trust
Lake Aviemore-Otematata Annual Fishing Competition
Parent to Parent Organisation Ashburton
Mt Nimrod Endurance Riders Club & ESNZ Endurance Rakaia Bowling Club Rakaia Ladies Bowling Club Rakaia Squash Club Tinwald Pony Club
ANNUAL SPONSORSHIP
Methven Golf Club
ATS Longbeach Coastal Challenge
Presbyterian Support
Methven Trotting Club
EA Network Sports Centre
Rakaia Community Trust
Mid Canterbury Football
FAR Arable Y’s
Rakaia Volunteer Fire Brigade
MSA Indoor Bowls
Special Children’s Christmas Party
Directors’ Report
Your Directors have pleasure in submitting their 51st Annual Report
YOUR DIRECTORS HAVE PLEASURE IN SUBMITTING THEIR 51ST ANNUAL REPORT, TOGETHER WITH THE CHAIRMAN AND CHIEF EXECUTIVE’S REPORT AND FINANCIAL STATEMENTS FOR THE SOCIETY FOR THE YEAR ENDED 30 JUNE 2014.
Operating Surplus/(Deficit) Before Distribution Taxation for the Year Net Surplus/(Deficit) After Taxation and Distribution Plus Retained Earnings Brought Forward Retained Earnings Carried Forward
PARENT PARENT 2014 2013 ($000) ($000)
(122)
9,095
46
(2,641)
(76)
6,454
13,892
7,438
13,816
13,892
PRINCIPAL ACTIVITIES The principal activities of the Ashburton Trading Society during the period ending 30 June 2014 was to conduct the Shareholders’ group buying activity in the areas of Fuel; Fertiliser; Seed; Electricity; Farm Supplies; Ruralco, Pro-Active NZ Ltd; ATS Fuel Ltd; Watermetrics NZ Ltd and Coulter Seeds Ltd. During the financial period under review, ATS divested its card business into Ruralco, a 50:50 JV with Ravensdown. As disclosed by the attached Financial Statements your Directors consider the affairs of the Society to be satisfactory.
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10
Directors’ Report
ROLE OF THE BOARD
Directors’ Remuneration
The role of the Board of Directors is to provide the proper governance, direction and control of the Society’s activities. Directors have the prime responsibility of setting the strategic direction of the Society.
P McKendry
$46,000
I Mackenzie
$23,000
A Priest
$18,000
A Body
$18,000
Directors
G Thompson
$19,000
The Board of Directors currently comprises of six Directors who have been elected by the shareholders and one independent Director whom has been appointed by the Board. The Directors in office at 30 June 2014 and their special responsibilities include:
M Saunders
$18,000
J Chan-Dorman
$10,500
Philip McKendry
Directors’ Insurance
Alister Body
Chairman ATS; Director Watermetrics NZ Ltd Chairman Ruralco NZ Limited; Member Audit and Risk Committee
Jessie Chan-Dorman Member Audit and Risk Committee Ian Mackenzie
Deputy Chairman ATS; Director Ruralco NZ Limited; Chairman ATS Fuel Ltd
Andrew Priest
Member Audit and Risk Committee
Mark Saunders
Chairman Pro-Active NZ Ltd, Member Audit and Risk Committee
Gabrielle Thompson Chair Audit and Risk Committee •
The Directors’ meeting obligations were fulfilled for the year ending 30 June 2014;
•
J Sim retired by rotation in November 2013;
•
J Chan-Dorman was elected as a Director in November 2013;
•
The Directors retiring by rotation this year are Messrs. R.I.C. Mackenzie and A.C. Body, both Mr. Mackenzie and Mr. Body are seeking re-election.
J Sim (Retired)
$7,500
Total $160,000
Ashburton Trading Society Ltd has a policy of Directors’ and Officers’ liability insurance, which ensures Directors and Officers will incur no monetary loss as a result of actions undertaken by them provided they operate within the law. This policy includes actions carried out by the Directors in their capacity as Directors of ProActive New Zealand Ltd, ATS Fuel Ltd, Coulter Seeds Ltd and Watermetrics NZ Ltd. Directors’ Benefits No Director of the Society has, since the end of the previous financial period, received or become entitled to receive a benefit (other than a benefit included in the total emoluments received or due and receivable by Directors shown in this report) other than normal rebates received by them as shareholders as a result of trading with the Society in the same manner as all other shareholders. Procedure to Identify and Manage Risk The Directors acknowledge that they are ultimately responsible for the management of risk to the Society. Risk Management forms part of the monthly Board meetings. Use of Information There were no notices from Directors of the company requesting to use company information received in their capacity as Directors which would not otherwise have been available to them. Auditors Following a recommendation at the 2013 AGM, PricewaterhouseCoopers were appointed ATS auditors.
P J McKendry Chairman
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Your Directors Philip McKendry CHAIRMAN
ATS Chairman Philip McKendry and his wife Judith farm a 200ha arable property near Methven. Philip received a BAgSc (Hons) from Lincoln and is a member of the Institute of Directors (loD). He was elected to the ATS Board of Directors in 1998, was elected Deputy Chair in 2005 and Chair in 2011. Former founding Chairman of Barrhill Chertsey Irrigation Ltd, Philip has had a long involvement in community irrigation development. He is currently a director of Electricity Ashburton Limited and Watermetrics NZ Limited. He is also a trustee of the Advance Ashburton Community Foundation. When not supporting his three teenagers in their academic, sporting and cultural activities, Philip enjoys running, skiing, reading and following sport.
Ian Mackenzie DEPUT Y CHAIRMAN
Since graduating from Lincoln in 1976 with a BAgSc, Nuffield Scholar Ian Mackenzie has been farming at Akaunui, Eiffelton. The intensive cropping farm also includes a dairy farm operation, with the property now running to 490ha. Ian has several roles off the farm including being the Chairman of Eiffelton Irrigation Scheme, the Ashburton Community Water Trust, the Mid Canterbury Farmers Charitable Trust and the Grain and Seeds section of Federated Farmers. He is a Director of Mackenzie Harvesting and sits on the National Board of Federated Farmers, where he is the spokesman for water, biodiversity, the environment and transport. Ian was elected to the ATS Board of Directors in 2005. When time permits he enjoys skiing, sailing and jet boating.
Alister Body DIREC TOR
Alister Body graduated from Lincoln University with a B.Com in Agriculture and was elected to the ATS Board of Directors in 2011. Alister is also a current Director of DairyNZ as well as Chair of the Dairy Environment Leadership Group, Ruralco NZ Limited and DairyNZ’s Human Capability Leadership Group. Past governance experience includes Provincial Dairy Chairman with Federated Farmers and National President of New Zealand Young Farmers Club. Alister and his wife Janine Peters farm at Methven where they milk 650 cows. Alister’s other off farm interests include skiing, sailing and theatre.
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Jessie Chan-Dorman DIREC TOR
Jessie Chan-Dorman was elected to the ATS Board of Directors in 2013. Jessie and her husband Hayden are dairy business owners leasing 420 ha at Dorie and milking 1700 cows. She has an Honours degree in Animal Science and has worked in a range of rural professional jobs over the past 15 years including Policy Manager for Federated Farmers, R&D Programme Manager for Meat and Wool NZ, and Developer for Dairy NZ. Jessie has completed the Fonterra Governance Development Programme, the Food and Agribusiness Marketing Experience and the Kellogg Rural Leaders Programme. She is currently Vice President and Dairy Chair of Federated Farmers Mid Canterbury, a Trustee on the FAME Alumni Trust Board, Board member of the Mid Canterbury Industry Association and a member of the Institute of Directors. Jessie and Hayden have a 15 month old son, Adam.
Andrew Priest INDEPENDENT DIREC TOR
Andrew Priest is a Christchurch-based Management Consultant specialising in strategic growth and performance improvement at board and executive level. He was appointed Independent Director of ATS in 2010. His international experience encompasses a wide range of industries including building products, fast moving consumer goods, tourism, mining and energy, and high tech. While holding a senior position for Carter Holt Harvey based in the United States, Andrew and his team built an award winning multi-million dollar business from start-up across North America, Asia and the Middle East. Andrew holds a BSc from the University of Waikato, an MForSc from the University of Canterbury, and has attended an executive education finance programme at The Wharton School, University of Pennsylvania.
Mark Saunders DIREC TOR
Mark Saunders was elected to the ATS Board of Directors in 2012 and is Chairman of Pro-Active New Zealand Limited, Member of the Institute of Directors, Member of the Hinds Plains Land and Water Partnership and has held leadership roles within AgITO Mid Canterbury and Young Farmers. He is a Past President of the Ashburton Toastmasters Club. Mark and his wife Pennie farm 1600 cows at Lagmhor, having farmed in the Westerfield district in partnership since 2003. In addition to supporting his three young boys with coaching their rugby at Southern, Mark enjoys being actively involved in the community, fishing, hunting, training and competing in multi-sport events, specifically the Coast to Coast.
Gabrielle Thompson DIREC TOR
Elected to the Board in 2012, Gabrielle Thompson graduated from Massey University with a Veterinary degree in 2000. Initially working for Riverside Vets she opened her own companion animal clinic in 2004, growing to five clinics around the lower South Island over a 10 year period and is now part of a nationwide group, Vetent. Gabrielle and her husband, along with their family, own and operate a 360ha arable and store lamb farm at Dorie. In her free time, Gabrielle spends time with family, including three and a half year old Frances. She likes to go to the gym, spend time with friends, travel, ski and be outdoors.
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Financials CONTENTS
14
15
15
Summary of Accounting Policies and Preparation Statement
Summary Statements of Comprehensive Income
Summary Statements of Changes in Equity and Members’ Interests
16
17
Summary Balance Sheets
Summary Statements of Consolidated Cash Flows
18
Summary Notes to the Accounts
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SUMMARY OF ACCOUNTING POLICIES AND PREPARATION STATEMENT The Ashburton Trading Society Limited is a Society incorporated in New Zealand under the Industrial and Provident Societies Act 1908. Ashburton Trading Society Limited (ATS) is a farming co-operative, based in Mid Canterbury, formed in 1963. ATS facilitates trade between its members and approved suppliers. ATS also has three farm merchandise stores located in Ashburton, Methven and Rakaia. The group consists of Ashburton Trading Society Limited, Pro‑Active NZ Limited, ATS Fuel Limited, Watermetrics NZ Limited, Coulter Seeds Limited, and Ruralco NZ Limited.
The financial statements are presented in New Zealand currency, rounded to the nearest thousand dollars.
FULL ACCOUNTS A copy of the full annual accounts for Ashburton Trading Society Limited can be downloaded from www.ats.co.nz, or collected from 97 Burnett Street, Ashburton during business hours.
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SUMMARY STATEMENTS OF COMPREHENSIVE INCOME For the year ended 30 June 2014 GROUP GROUP PARENT PARENT 30 JUNE 30 JUNE 30 JUNE 30 JUNE 2014 2013 2014 2013 ($000) ($000) ($000) ($000)
Revenue—Sales 115,744 Cost of Sales (107,743)
231,955 (222,575)
114,321 230,782 (106,806) (221,961)
Gross Profit 8,001 Interest Income 69 Dividend Received - Gain on Sale of Assets 9 Gain on Sale of Intangibles - Impairment of Associate (expense)/recovery 8 Share of Associate Surplus 7 Other Operating Expenses (3,099) Salaries and Wages (4,251) Audit Fees (35) Directors’ Fees (160) Depreciation (314) Amortisation of Intangibles (134) Rentals and Operating Leases (234) Finance Cost—Interest (128)
9,380 91 - - 4,192 (322) (35) (2,843) (4,176) (32) (150) (319) (169) (138) (98)
7,515 8,821 52 72 570 9 - 8,384 - (322) - (3,033) (2,800) (4,251) (4,176) (35) (32) (160) (150) (310) (314) (133) (169) (220) (121) (126) (98)
Net Surplus/(Deficit) before Taxation (261)
5,381
(122) 9,095
Provision for Taxation (Tax)/Credit on Net Surplus/ (Defiecit) before Taxation
(78)
(1,609)
46
(2,641)
Total Comprehensive Income/(Loss) for the period, net of Tax
(339)
3,772
(76)
6,454
SUMMARY STATEMENTS OF CHANGES IN EQUITY AND MEMBERS’ INTERESTS For the year ended 30 June 2014 GROUP GROUP PARENT PARENT 30 JUNE 30 JUNE 30 JUNE 30 JUNE 2014 2013 2014 2013 ($000) ($000) ($000) ($000)
Balance at Start of the Year Total Comprehensive Income for the period, net of Tax
14,702 (339)
11,204 3,772
17,396 (76)
11,216 6,454
14,363 Contributions from Owners: Movement in Ordinary Shares Issued 10 Movement in Deferred Shares (14)
14,976
17,320
17,670
Balance at End of the Year 14,359
14,702
12 (286)
10 (14) 17,316
12 (286) 17,396
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SUMMARY BALANCE SHEETS As at 30 June 2014 GROUP GROUP PARENT PARENT 30 JUNE 30 JUNE 30 JUNE 30 JUNE 2014 2013 2014 2013 ($000) ($000) ($000) ($000)
Equity and Members’ Interests Share Capital Deferred Shares Retained Earnings
1,360 2,140 10,859
1,349 2,155 11,198
1,360 2,140 13,816
14,359 Current Liabilities Trade Payables 7,752 Employee Entitlements 388 Taxation Payable 113 Provision for Bonus Rebate - Current Portion of Term Liabilities 3,000
14,702
17,316 17,396
11,253 Non Current Liabilities Deferred Tax Liability 1,996 Bank Loan (Secured) 3,000 Less Current Portion Term Liabilities (3,000)
19,204
10,705 18,894
2,021 3,303 (3,303)
3,169 3,000 (3,000)
1,996 Total Equity and Liabilities 27,608 Non Current Assets Investment in Subsidiaries - Investment in Associate 67 Advance to Associates 605 Deferred Consideration Term 3,335 Deferred Tax Asset 135 Property Plant & Equipment 5,521 Intangibles 142
15,317 377 207 - 3,303
2,021 35,927
- 52 858 4,245 129 5,761 240
7,317 388 - - 3,000
3,169 31,190
1,349 2,155 13,892
15,145 377 69 3,303
3,194 3,303 (3,303) 3,194 39,484
420 420 44 44 605 858 6,614 8,437 135 129 5,483 5,719 140 236
9,805 Current Assets Cash and Cash Equivalents 1,781 Inventory - Finished Goods 9,160 Taxation Refundable - Advance to Associates 186 Deferred Consideration Current 911 Trade & Other Receivables 5,765
11,285
17,803
24,642
17,749
23,641
Total Assets 27,608
35,927
31,190
39,484
1,078 8,484 - - - 15,080
For and on behalf of the Board
P J McKendry (Chairman)
R I C Mackenzie (Deputy Chairman)
Date: 26 September 2014
13,441 15,843 1,243 8,739 11 186 1,823 5,747
430 8,166 15,045
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SUMMARY STATEMENTS OF CONSOLIDATED CASH FLOWS For the year ended 30 June 2014 GROUP GROUP PARENT PARENT 30 JUNE 30 JUNE 30 JUNE 30 JUNE 2014 2013 2014 2013 ($000) ($000) ($000) ($000)
Cash Flow From Operating Activities: Cash was provided from: Receipts from Customers 125,294 231,998 123,801 230,780 Income from Interest 70 80 56 65 Taxation Refund - 40 - 40 GST - 9 - 125,364 232,127 123,857 230,885 Cash was disbursed to: Payments to Suppliers & Employees 123,287 231,625 122,419 230,712 Interest Paid 128 90 127 90 Income Tax Paid 196 375 58 258 GST 192 3 151 16 123,803
232,093
Net Flow from Operating 1,561 Cash Flow From Investing Activities: Cash was provided from: Proceeds from Sale of Property Plant & Equip Dividend from Subsidiary Proceeds from Sale of Shares Repayment of Advance
35 - - -
35 Cash was applied to: Advance to Associate 453 Investment in Associate - Purchase of Property Plant & Equip 100 Purchase of Intangibles 36 589 Net Flow from Investing Activities (554) Cash Flow From Financing Activities: Cash was provided from: Issues of Shares Proceeds from Loans
28 -
34
122,755 1,102
231,076 (191)
214 - - -
35 570 - -
214
605 213
500 - 566 209
453 - 100 37
1,275 (1,061)
28 3,300
213 -
500 563 208
590 1,271 15 (1,058)
28 -
28 3,300
28 3,328 Cash was applied to: Rebates Paid to Members - 500 Shares Repaid 32 302 Loan Repaid 300 1,000
- 32 300
332
1,802
332 1,802
Net Flow from Financing Activities (304)
1,526
(304)
1,526
Net Increase / (Decrease) in Cash Held 703 Add Opening Cash Brought Forward 1,078
500 578
813 430
277 153
Ending Cash Carried Forward 1,781
1,078
1,243
430
Cash Comprises Bank Accounts and Cash
1,078
1,243
430
1,781
28 3,328 500 302 1,000
18
SUMMARY NOTES TO THE ACCOUNTS GROUP GROUP PARENT PARENT 2014 2013 2014 2013 ($000) ($000) ($000) ($000)
1.
Share Capital Issued Ordinary Shares Deferred Shares
2,000 4,000
2,000 4,000
2,000 4,000
2,000 4,000
6,000
6,000
6,000
6,000
Unallotted Ordinary Shares Deferred Shares
651 1,845
640 1,860
651 1,845
2,500
2,496
2,500
2,496
Allotted Ordinary Shares Deferred Shares
1,349 2,155
1,360 2,140
1,349 2,155
3,504
3,500
3,504
640 1,860
1,360 2,140
3,500
Ordinary Shares In accordance with the Rules of Ashburton Trading Society Limited (the Rules), each member of the Society is required to hold such number of shares in the Society as fixed by the Board (currently 500 ordinary shares). Ordinary shares are issued and redeemed at the nominal value of $1 for each share. All ordinary shares rank equally with one vote for each financial member of the Society. Ordinary shares are entitled to a pro rata share of any surplus on wind-up of the Society. Deferred Shares Deferred shares are issued in accordance with the Rules at the discretion of the Board as part of the settlement for annual rebates to members. Deferred shares are issued and redeemed at the nominal value of $1 for each share. Deferred shares do not carry an entitlement to vote but qualify for dividends at the discretion of the Board and a pro rata share of any surplus on wind-up of the Society. Deferred shares are repaid to members at the discretion of the Board. Withdrawal of Members A member may withdraw from the Society by providing notice in writing of their intention to withdraw once the Board has consented to their withdrawal. The Rules state that the Board has absolute discretion to either accept or decline the withdrawal of a member. Accordingly, repayment of ordinary and deferred shares is at the discretion of the Society, not the member. For this reason, ordinary and deferred shares have been classified as equity. 2.
Movement in Capital Share Capital at start of the Year New Members at $1 per share Less Redemptions During the Year
1,349 28 (17)
1,337 28 (16)
1,349 28 (17)
1,337 28 (16)
Share Capital Issued and Paid Up at end of year
1,360
1,349
1,360
1,349
Deferred Shares Brought Forward Less 2002 Shares Paid Out Less Paid Out Withdrawals
2,155 - (15)
2,441 (277) (9)
2,155 - (15)
2,441 (277) (9)
Deferred Shares Balance
2,140
2,155
2,140
2,155
3,500
3,504
3,500
3,504
Total Capital at end of the Year 3.
Investment in Associates Ashburton Trading Society has a 40% interest in Watermetrics NZ Limited (2013 40%). Watermetrics NZ Limited is incorporated in New Zealand. The principal activity of Watermetrics NZ Limited is water meter wholesale and retail. Watermetrics NZ Limited has a 30 June balance date and is unaudited. The directors are not aware of any significant events or transactions since Watermetrics NZ Limited balance date. Watermetrics NZ Limited share capital is $70,000. Ashburton Trading Society has a 45% interest in Coulter Seeds Limited (2013 45%). Coulter Seeds Limited is incorporated in New Zealand. The principal activity of Coulter Seeds Limited was seed dressing, mixing, and treatment. Coulter Seeds Limited has a 30 June balance date and is unaudited. As the investment in Coulter Seeds Limited has been written off during the 2013 Financial Year, the ATS Group has discontinued taking its share of losses from the year ended 30 June 2013. Coulter Seeds
19 Limited has entered a conditional sale agreement for the assets of Coulter Seeds Limited. On 1 July 2014 Coulter Seeds Limited will cease trading and will look to exit any lease or other obligations not being taken over by the purchases of it assets. Coulter Seeds Limited share capital is $1,000. Ashburton Trading Society has a 50% interest in Ruralco NZ Limited (2013 50%). Ruralco NZ Limited is incorporated in New Zealand. The principal activity of Ruralco NZ Limited is facilitating trade between cardholders and approved suppliers. Ruralco NZ Limited has a 30 June balance date and started operations from 1 July 2013. The share of surpluses/losses taken up is disclosed in the Statement of Comprehensive Income. The directors are not aware of any significant events or transactions since Ruralco NZ Limited balance date. Ruralco NZ Limited share capital is $NIL. In valuing the deferred consideration receivable for the card business transferred, management has used estimates and assumptions. This included allocation of revenues and costs in accordance with the JV agreement, future expected cash flows from existing business, discount rates, and the timing of payments. The amounts of deferred consideration are reviewed at each balance date and updated based on best available estimates and assumptions at that time. The fair value of deferred consideration payments was initially determined as at the acquisition date of 30 June 2013. Subsequent changes to the fair value of the deferred consideration are recognised through the income statement. The portion of the fair value adjustment due to the time value of money (unwinding of discount) is recognised as a finance cost. Model inputs The fair value of the future preferential dividends is estimated using a discount rate of 15% (2013 NIL%). As deferred consideration is payable for profits from the existing business transferred to Ruralco, the discount rate is comprised of the weighted average cost of capital based on 10 year Government Bond rate plus risk premiums. The cost allocation method is based on an avoidable cost basis. The future profit from the existing business is based on the current year actual performance with growth rate of between 3–5% over the next four years. The following table summarise the sensitivity of the deferred consideration to changes in the discount rate: Discount rate sensitivity Movement in deferred consideration receivable
-1%
1%
-104,080
100,929
Unwinding of discount The unwinding of discount adjustment relates to the fair value impact on the deferred consideration calculation of the time value of money. Deferred cash consideration The deferred cash consideration is made up of the present value of up to five annual dividends totalling $8,437,000, the first being payable upon the profit being derived from card holders associated with ATS (“existing business”) for the year ended 30 June 2014 and continuing for the remaining four years unless the business profits derived from Ravensdown member base is equal to, or within 10% of the existing business. The first year dividend calculated on this basis is $1,823,000, and the non-current portion remaining $6,614,000. The potential undiscounted amount of all future cash payments that Ruralco could be required to make under these arrangements is $10,099,000. The deferred cash consideration is valued at each reporting date based on expected timing of the cash payment and an appropriate discount rate. Revaluations are recognised in the income statement. Ruralco does not have the option to defer the payment of the deferred consideration and the annual payments must be funded by ATS and Ravensdown if Ruralco has insufficient cash to pay the dividend. Fair value measurements The fair value of assets and liabilities must be estimated for recognition and measurement or for disclosure purposes. Fair value measurements by level of the following fair value measurement hierarchy: (a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) (b) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2), and (c) Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). Deferred consideration for transfer of card business has been categorised as level 3 under the fair value hierarchy. Shares in Associates
GROUP GROUP PARENT PARENT 2014 2013 2014 2013
Watermetrics NZ Limited Ruralco NZ Limited
28 8,437
28 -
28 8,437
28 -
Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting and are carried at cost by the parent entity. INTEREST HELD BY CONSOLIDATED CONSOLIDATED GROUP CARRYING AMOUNT 2014 2013 2014 2013 % % ($000) ($000)
Watermetrics NZ Limited Ruralco NZ Limited
40% 50%
40% 50%
68 (45)
17 -
20 Summarised financial information in respect of the Group’s associates is set out below: RURALCO OTHER GROUP As at 30 June 2014 ($000) ($000) ($000)
Current Assets Non-Current Assets
11,248 9,020
1,116 302
12,364 9,322
Total Assets
20,268
1,418
21,686
Current Liabilities Non-Current Liabilities
12,744 7,613
1,162 -
13,906 7,613
Total Liabilities
20,357
1,162
21,519
Net Assets
(89)
256
167
Groups Share of net assets of associate
(44)
102
58
Current Assets Non-Current Assets
1,144 -
1,083 299
2,227 299
Total Assets 2013
1,144
1,382
2,526
Current Liabilities Non-Current Liabilities
144 1,000
920 332
1,064 1,332
Total Liabilities 2013
1,144
1,252
2,396
Net Assets
-
130
130
Groups Share of net assets of associate
-
52
52
Statement of Comprehensive Income As at 30 June 2014 Total revenue Total Profits/(Loss) from continuing operations Post-tax profit/(Loss) from discontinued Operations - Other comprehensive income Total Comprehensive income
132,722 (124) - - (124)
1,866 144 - 144
134,588 20
Tax Expense Groups’ share of Profits/(Loss) after tax of associates
35 (44)
15 51
As at 30 June 2013 Total revenue Total Profits/(Loss) from continuing operations Post-tax profit/(Loss) from discontinued Operations - Other comprehensive income Total Comprehensive income
- - - - -
2,490 (86) - (86)
2,490 (86)
Groups’ share of Profit/(Loss) before tax of associates
-
(34)
(34)
20
7
(86)
21 GROUP 2014 ($000)
GROUP PARENT PARENT 2013 2014 2013 ($000) ($000) ($000)
Movements in Carrying Amount Shares at Cost 44 44 Balance At Start of the Year 52 409 Shares of Recognised Revenues and Expenses 7 (35) Share of Dividends - - Shares Purchased - - (Write down)/Recovered 8 (322) Disposals - -
44 44 44 365 - - - - (321) - -
Balance At End of the Year
44
67
52
44
2014 2013 PARENT PARENT ($000) ($000)
4.
Related Party Transactions Pro-Active NZ Limited During the period there have been material transactions between Ashburton Trading Society Limited and its subsidiary, Pro-Active NZ Limited, as follows: Goods Purchased from Pro-Active NZ Ltd Management Fee Received Amounts Payable Amounts Receivable
2,306 40 4 6
2,213 40 14 4
ATS Fuel Limited During the period there have been material transactions between Ashburton Trading Society Limited and its subsidiary, ATS Fuel Limited, as follows: Amounts Receivable Sales to Society Members
- 746
873
Watermetrics NZ Limited During the period there have been material transactions between Ashburton Trading Society Limited and its associate, Watermetrics NZ Limited, as follows: Goods Purchased from Watermetrics NZ Limited Director Fees Amounts Receivable Amounts Payable Cash Advance
513 - 35 11 105
825 14 112 41
Coulter Seeds Limited During the period there have been material transactions between Ashburton Trading Society Limited and its associate, Coulter Seeds Limited, as follows: Sales to Society Members Cash Advance Director Fees Amounts Receivable Amounts Payable
236 388 - 186 -
299 316 1 -
Ruralco NZ Limited During the period there have been material transactions between Ashburton Trading Society Limited and its associate, Ruralco NZ Limited, as follows: Purchases from Ruralco Management Fee Charged to Ruralco Amounts Recharged to Ruralco Cash Advance Deferred Consideration Receivable Amounts Receivable Amounts Payable
300 769 338 - - 108 25
500 8,437 -
Key Personnel & Directors Short-term remuneration to key management personnel and directors during the period totalled $1,107,106 (2013 $1,092,651). All directors and staff of the Society hold ATS trading accounts and transact with ATS on the same basis as other members.
22
23
24
Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT THE 51ST ANNUAL GENERAL MEETING OF MEMBERS OF THE ASHBURTON TRADING SOCIETY LIMITED WILL BE HELD AT THE HOTEL ASHBURTON, VALETTA AND ARROWSMITH LOUNGES, RACECOURSE ROAD, ASHBURTON ON MONDAY 17TH NOVEMBER 2014 AT 7.30PM
BUSINESS 1. To approve the Minutes of the 50th Annual General Meeting held on Monday 18th November 2013. 2. To receive and adopt the Chairman and Group Chief Executive Review and Financial Statements for the year ended 30 June 2014 3. To elect Directors—Messrs Alister Body and Ian Mackenzie retire by rotation in accordance with rule 6(c), Mr Alister Body and Mr Ian Mackenzie are available for re-election. 4. To appoint the Auditors 5. To receive the report of the Independent Board Remuneration Sub Committee and to approve their recommendation. 6. To transact any other business that may be properly brought before the meeting.
PROXIES Under the present Rules of the Society there is provision for voting by proxy.
Neal Shaw Group Chief Executive/Company Secretary
ASHBURTON
METHVEN
RAKAIA
HEAD OFFICE
97 Burnett St Tel: 03 307 5100 Fax: 03 307 6721 ashburton@ats.co.nz
88 Main St Tel: 03 303 2020 Fax: 03 302 8184 methven@ats.co.nz
68 Elizabeth Ave Tel: 03 303 5440 Fax: 03 303 5430 rakaia@ats.co.nz
PO Box 131, Ashburton Tel: 03 307 5100 Fax: 03 307 6721 ats@ats.co.nz
www.ats.co.nz