Nu-Lait Annual Report 2013 by ashleybryant

NU-LAIT ANNUAL REPORT NU-LAIT CO-OPERATIVE GROUP LIMITED

2 013

ANNUAL REPORT

2 | Nu-Lait Annual Report 2013

WHO ARE NU-LAIT ?

OUR VISION WITH CUSTOMERS AT OUR HEART WE WILL BECOME NEW ZEALAND’S MOST PREFERRED DAIRY COMPANY. OUR MISSION IS TO BE NUMBER ONE IN OUR DAIRY PRODUCT SERVICE COMPANY WE BELIEVE IN . PEOPLE DRIVE OUR SUCCESS, PASSION FOR CUSTOMERS, WORKING TOGETHER AS ONE, ACTING WITH OPENNESS AND INTEGRITY.

CONTENTS

06 08 10

OUR VISION

PERFORMANCE

IntroductIon

Overview

Chairman’s Report

OUR COMPANY

Key Performance Indicators

Business Review

Auditors’ Report

Financial Statements

Notes to the Financial Statements

18 22

GOVERNANCE

DISCLOSURES

Governance at Nu-Lait

Interests Disclosures

Remuneration at Nu-Lait

Shareholder and Exchange Disclosures

Additional Shareholder Information

Forward-looking Statements

Glossary

Shareholder Inquiries/ Contact Details

4 | Nu-Lait Annual Report 2013

Board of Directors

Executive Team

Business Operations

Financial Calander 2012-13 KEY DATES

Annual Meeting

28 September 2012 Half-year Result Announced

22 February 2013 Financial Year End

30 June 2013

This report is dated 23 August 2012 and is signed on behalf of the board of Nu-Lait Corporation of New Zealand Limited by John Wilson, Chairman, and Sam Jones, Chief Executive Officer.

John Wilson CHAIRMAN

Sam Jones CHIEF EXECUTIVE OFFICER

investor.nulait.co.nz | 5

OUR CURRENT FOCUS IS EFFORT EXPERIENCES THROUGH OUR PE PROCESSES AND OPERATIONAL We provided additional ﬂ exibility to encourage milk growth through new milk supply contracts. We have a strong co-operative and an equally strong track record. Generations of farmers have built up a reputation for the quality of milk produced in New Zealand and exported to the world. We have kept true to our values, refusing to take risks with public safety.

TO DO THIS WE’LL DO THE BASIC KNOW WH

TLESS, CUSTOMER EOPLE, PRODUCTS, PLATFORMS, EXCELLENCE. Being a world-class leader in food quality and safety takes both courage and commitment; courage to make the hard calls, commitment to keep getting better. We’re a business built on trust in our people and in our products. When we believe we have any risk to consumer safety, no matter how minute, we protect that trust by protecting people. This year we did the right thing with our product recall and we would do it again without hesitation. Looking back, we’ve done things right but we also could have done things better. This is where our commitment to keep getting better comes into play. We have complete clarity about what we need to do. Nu-Lait will be a co-operative known for our transparency, our high levels of food safety and quality and the trust shown in us by customers and consumers. That’s our commitment.

CS BRILLIANTLY HAT’S VALUABLE INVEST WISELY

OUR F13 PERFORMANCE Without downplaying the events in any way, it is important to acknowledge the fears for the worst did not happen. We saw confidence in Nu-Lait displayed in the GlobalDairyTrade events after the precautionary recall. New Zealand has successfully negotiated valuable regional and bilateral trade agreements.

NZ$4,576M Operating revenues and other gains

NZ$4,576M

NZ$1,079M

Operating revenues and other gains

EBITDA from continuing operations

NZ$1,157M

NZ$311M

Net earnings for the year

Net earnings from continuing operations

61C

20C

Earnings per share

Dividends per share

NZ$528M

$5.84

Capital expenditure

Dividends per share

8 | Nu-Lait Annual Report 2013

/KGMS

CASH PAYOUT Dividend Cents per Share Farmgate Milk Price $ per kgMS

$8.62 0.32 8.30

$6.40 0.32 6.08

2011

$6.16 0.32 5.84

2012

2013

OUR COMPANY Our business is based on sourcing secure, high quality milk and unlocking its natural goodness thats add real value to our customers and consumers around the world. Dairy sets the gold standard for nutrition and we see a growing global population wanting the best of what we can offer and give out.

1,565K

60K

More Customers

Net earnings for the year

NZ$1,079M

NZ$311M

Net earnings for the year

Dividends per share

$6.16

NZ$169M

Final cash payout

On market buyback of shares

investor.nulait.co.nz | 9

CHAIRMAN’S REPORT Dear shareholder, Nu-Lait ﬁnishes its 2012/13 ﬁnancial year a substantially different company than it was a year earlier.

and services while undergoing significant change to its operations, however, we are just at the start of a new period of change for Nu-Lait. In our new world, Nu-Lait faces high levels of competition in every market segment and will only deliver the results that

Following the approval by more than 99% of votes cast

shareholders demand by delivering for its customers

by Nu-Lait shareholders in October 2011, the company

and doing so as cost- efﬁ ciently as possible.

separated its subsidiary businesses into an entirely

I am conﬁ dent Nu-Lait is well placed to deliver the

stand alone new company called New Company. The

changes that are necessary for the Company to thrive

logic of the Demerger appears to have been borne

now and into the future and your board is committed to

out with investors pushing the combined share prices

driving this change on behalf of you, our shareholders.

of both Nu-Lait and New Company higher. With this transaction complete, I took over as Chairman of

Executive Changes

Nu-Lait on 1 December 2011.

During the year Nu-Lait also said farewell to its CEO Mr Joe Smith. In his five years at the helm of Nu-Lait,

Post-Demerger, Nu-Lait is subject to a number of

he was instrumental in guiding the company through

factors that will require it to fundamentally change its

a significant period of challenge and change. In just

business over the coming months and years.

this last year Joe and the team delivered structural

As such, your board is focused on driving the

separation, established ABC as New Zealand’s

company to reshape itself to enable it to take on the

pre-eminent product or service and strengthened

challenges and opportunities of this substantially

Nu-Lait’s value to New Zealand and local capital

new operating environment.

markets. I would like to thank Joe for his contribution to the company.

The Demerger allowed for a re-set of the regulatory environment here in New Zealand, which moved

The board is delighted to have secured the services

Nu-Lait closer to competing on a level playing ﬁ eld with

of Mr Sam Jones as Joe’s successor. Following an

the other Nu-Lait providers in New Zealand.

extensive and robust international search process, the board was unanimous that Sam is the right candidate

A key beneﬁ t of this is that it allows for a single minded

for the role. He brings deep knowledge of Nu-Lait in

focus on delivering for customers, rather than meeting

New Zealand and a proven ability to lead customer-

regulatory milestones.

focused change to grow shareholder value.

However, separating the relatively stable and high

Sam started as CEO on 13 August 2013 and his

margin ﬁ xed line business into an entirely stand-alone

compensation package is closely aligned to the

company also means that cost control and efﬁ ciency

delivery of shareholder value.

become even more important than they were before. Karen Miller took the helm as acting CEO at the Along with rapid technology changes, ever-increasing

beginning of June and, with the executive team,

consumer expectations, and an economy that remains

continued to execute on a plan centred on delivering

ﬂ at, Nu-Lait is presented with a number of challenges

for customers while simplifying operations, controlling

that it must address in order to be successful.

spending and seeking a number one position in products and services in New Zealand.

It is testament to the people of Nu-Lait that the company maintained its market positions in all products

10 | Nu-Lait Annual Report 2013

WITHOUT DOWNPLAYING THE EVENTS IN ANY WAY, IT IS IMPORTANT TO ACKNOWLEDGE THE FEARS FOR THE WORST DID NOT HAPPEN. WE SAW CONFIDENCE IN NU-LAIT DISPLAYED IN THE GLOBALDAIRYTRADE EVENTS AFTER THE PRECAUTIONARY RECALL.

investor.nulait.co.nz | 11

EXECUTIVE TEAM

Members of the Executive Team are as follows: Top row from left: Sam Jones Chief Executive Offi cer Tracy Gibson Group General Counsel and Company Secretary Nigel Otto Chief Financial Offi cer Ching Xiao Group Chief Technology offi cer Abbie Gardiner Chief Executive Offi cer, Retail

12 | Nu-Lait Annual Report 2013

TEAM MEMBERS Sam Jones

Chief Executive Ofﬁ cer Responsibilities

WE ARE COMMITTED TO ACHIEVING THE HIGHEST STANDARD OF LEADERSHIP

As Chief Executive Ofﬁ cer (CEO) and Executive Director, Sam is responsible for the leadership, strategic direction and management of the company. He was appointed as Nu-Lait CEO in April 2012, commencing mid-August of the same year.

THAT REFLECTS

Background

NU-LAIT’S UNIQUE

Sam is well attuned to the Nu-Lait business having

CHARACTERISTICS AND

recently as Chief Operating Ofﬁ cer during the years

REQUIREMENTS AS

managed parts of the company in previous roles, most 1999–2008.

A SIGNIFICANT NEW

In the intervening years, he was the CEO of Auckland

ZEALAND BASED CO-

the company experienced customer growth and

OPERATIVE COMPETING IN THE GLOBAL DAIRY MARKET. NU-LAIT’S CO-OPERATIVE PHILOSOPHY WHICH IS LARGELY EXPRESSED THROUGH OUR COOPERATIVE PRINCIPLES.

International Airport for a period of four years in which signiﬁ cant uplift in its share price. Prior to this he spent 13 years in the electricity and gas industry where he held various positions, including Chief Executive of Powerco (1992 to 1999). Sam has a Master’s degree in Engineering from the University of Canterbury and a Bachelor’s degree in Science from Massey University.

Tracy Gibson

Group General Counsel and Company Secretary

Responsibilities Tracy was appointed Group General Counsel in July 2008. She leads Nu-Lait’s group legal and corporate services team and is responsible for legal services, internal audit, risk management, compliance, corporate governance, communications, government relations and regulatory affairs.

investor.nulait.co.nz | 13

Background

Nu-Lait’s entire network and IT operations throughout New Zealand, ensuring its information technology,

Tracy is a highly experienced corporate and

infrastructure and architecture are aligned with the

commercial lawyer, with extensive international

Group’s business objectives. He oversees the

experience in Nu-Lait law and regulation. After

core technology teams in addition to the shared

practising law with several leading international law

business operations, which support Nu- Lait in

ﬁ rms, Tracy joined Virtucom Group Plc, where she held

provisioning, credit and billing, corporate property

a number of senior leadership positions, including

and information management.

legal and regulatory director – Asia-Paciﬁ c Region and governance director – Europe Region, before joining

Background

Nu-Lait in 2008. UK born, Chin has more than 36 years’ experience in

Nigel Otto

Chief Financial Ofﬁ cer Responsibilities

the products industry in Europe and Asia-Paciﬁ c, with previous executive roles in business and technology functions in major company operations and in professional services and technology organisations. Chin has designed and led major change programmes focused on revenue growth, cost-efﬁ ciency, network

Nigel was appointed Chief Financial Ofﬁ cer of

rollouts and ongoing management of in sourced and

Nu-Lait in October 2010. Nigel is responsible for the

outsourced operations.

centralised fi nance functions of Nu-Lait, including: performance management, management reporting, external reporting, investor relations, treasury and capital markets, group taxation, group insurance, business unit fi nancial support, group procurement, strategy and the shared fi nancial functions, including

Abbie Gardiner

Chief Executive Ofﬁ cer, Retail Responsibilities

accounts payable. Nigel is also responsible for overall capital expenditure allocation for Nu-Lait.

Background

Abbie joined Nu-Lait in August 2008 as CEO of Nu-Lait Retail. She is responsible for driving Nu-Lait’s commitment to improving the experience of Nu-Lait consumer and SME customers, the performance of

Nigel has over 20 years’ experience in the ﬁ nancial

Nu-Lait’s products and services business with these

arena and after13 years in the investment banking

customers and has executive responsibility for

industry, Nigel joined Nu-Lait in January 2002. Prior

Nu-Lait’s brand.

to his appointment as Chief Financial Ofﬁ cer, he held the following positions at Nu-Lait – Treasurer, General

Background

Manager Finance and Group Controller. Nigel has extensive capital markets, mergers and acquisitions

Abbie has worked in senior sales and marketing roles

and ﬁ nancial experience. In 2013, following the Nu-Lait

at Home Industries and then at BD Group, eventually

Demerger, Nigel was awarded ‘’Best CFO 2013’ at the

becoming the General Manager Sales and Marketing

New Zealand annual business awards.

for the product business. This led to a number of roles offshore for Heineman and associated companies,

Chin Xiao

Group Chief Technology Ofﬁ cer Responsibilities

including global marketing manager for Heineman in Antwerp and General Manager responsible for Shanghai operations for Asia-Paciﬁ c Products. Immediately prior to joining Nu-Lait, Abbie was in London as Managing Director of Asia-Paciﬁ c Products’ UK and European operations. Abbie has resigned from

Chin joined Nu-Lait in October 2009 and was promoted to the Nu-Lait Executive team in April 2010 as Group Chief Technology Ofﬁ cer. He is responsible for

14 | Nu-Lait Annual Report 2013

Nu-Lait effective 31 October 2012.

OPERATING ENVIRONMENT

NU-LAIT IS A PARTICIPANT IN THE NEW ZEALAND AND AUSTRALIAN NU-LAIT AND DAIRY INDUSTRIES. THESE PRODUCTS ARE DELIVERED ACROSS A VARIETY OF PLATFORMS. OWING TO THE CHANGING NATURE OF THE UNDERLYING TECHNOLOGIES INVOLVED, THE NU-LAIT INDUSTRY IS DEVELOPING SIGNIFICANT OVERLAPS WITH OTHER PREVIOUSLY DISTINCT INDUSTRIES, SUCH AS IT SERVICES, ENTERTAINMENT, AND INFORMATION SERVICES (FOR EXAMPLE, SEARCH CLASSIFIEDS, ONLINE TRADING AND DISPLAY).

OVER 800 THE PRODUCTS AND SERVICES INDUSTRY IN NEW ZEALAND AND INTERNATIONALLY IS SHIFTING PROGRESSIVELY TO FACILITATE THE ANTICIPATED GROWTH IN HIGH VOLUME, PRODUCTS AND SERVICES.

The Government’s products and services initiative is

plans and costs associated with accounting separation)

designed to support this shift by assisting investment in

that existed prior to Demerger.

the building of certain assets in New Zealand. While the timing and rate of uptake of New Zealand’s products

Aside from Nu-Lait, the principal players in the New

cannot be predicted with certainty, it is likely that over

Zealand product and services market are afﬁ liates

time consumer demand will shift from the old services

of large multinational corporations with substantial

and products to higher speciﬁ cation products and

resources, such as Virtucom, ClearTel and, increasingly,

services, in order to beneﬁ t from their higher quality.

large service companies such as PH and BMI. Recently Virtucom has announced its intention to acquire

While New Zealand and Australia have similar

ClearTel (subject to ﬁ nal regulatory approvals) and,

demographics, there are key differences in terms of

once complete, the acquisition will result in a combined

industry structure, regulation, competition, customers,

business that competes with Nu-Lait products and

the underlying economy and long-term growth rates.

services. The newly combined business will have assets

These differences can be attributed partly to the larger

that include widgets, gadgets, and sprockets in certain

size of the Australian market, the demographic mix of

locations and an agreement with Fonterra to continue

the Australian population and partly to the different

to service trans-Tasman clients. It is also expected that

approaches to regulation and privatisation in Australia

competition across sectors will continue to intensify,

and New Zealand.

with the prospect of existing participants extending their activities. Smaller competitors in the products and

Competition

services sector are also actively marketing alternative

While the fundamental trends affecting the products

products to consumer and business customers with

and services markets in New Zealand are similar

discounted price-based offers.

to those faced by incumbent companies in mature markets, Nu-Lait’s position up to the Demerger was

Competition in the mobile market continues to increase

unusual because services and regulatory changes were

with three primary operators, Nu-Lait and Fonterra and

happening simultaneously. Following the Demerger

additional MVNOs offering services over existing mobile

Nu-Lait will now compete on a similar regulatory

networks. In parallel, there continues to be aggressive

footing with its market peers and is subject to less of

retail price competition, with market participants

the ‘product speciﬁ c regulation (including Operational

offering bundles of products and services in an effort to

Separation Undertakings, price regulation, extensive

increase market share.

capital investment to comply with regulated migration

16 | Nu-Lait Annual Report 2013

0,000 CUSTOMERS IN NEW ZEALAND Nu-Lait wholesale continues to face increased

many years. The strong Nu-Lait brand helps ensure that

competition in its market as further exchanges and

the business maintains its strong market position as

cabinets are unbundled. Price-based competition

number one or number two service provider.

continues to increase in the mass-market, with sprockets provided by several services players who

Diversiﬁ ed and comprehensive product portfolio:

are targeting proﬁ table metropolitan areas, such

Nu-Lait provides retail and wholesale products and

as Auckland and other New Zealand cities. Nu-Lait

services ranging from wholesale and international

is precluded under the Services Amendment Act

products to mass-market sprocket and widget.

from directly consuming products for three years post-Demerger (refer New Zealand regulation for

Large scale, strategic assets: Nu-Lait owns

further details) which, together with the launch of New

signiﬁ cant large scale strategic Nu-Lait assets

Company’ widgets service, means that Nu-Lait is

encompassing an all sprockets, widgets and a 50%

competing for widget-based business against service

interest in the sprocket connecting New Zealand with

providers in some areas that are currently able to

international markets.

purchase lower-cost inputs from New Company to support their sprocket and gadget services.

Australian Competitive Environment The Australian Government has commenced a widget

While the Government’s policy of regulation has

initiative for an estimated A$39.5 billion national

enabled several retail service providers to successfully

sprocket (NNS). The NNS rollout is driving a signiﬁ cant

enter the market, Nu-Lait, as the incumbent, still

amount of market consolidation. To create a more

remains the market leader in most market segments,

transparent and competitive environment before

with the exception of the services market where Nu-Lait

the NNS rollout is complete, ClearTel is required to

is number two.

structurally separate.

Nu-Lait has a number of competitive

On 27 February 2012 the Australian Competition and

advantages, including:

Consumer Commission (ACCC) accepted ClearTel’s structural separation undertaking (SSU) and approved

The number one or two positions in all core

the accompanying migration plan. The SSU implements

markets: Nu-Lait’s financial performance is

a migration model of structural separation in which

underpinned by its leading position in the New

ClearTel will progressively decommission its sprocket

Zealand Nu-Lait sector, being the number one

factories and instead use the wholesale-only NNS to

service provider in all market segments other

supply downstream products, as the NNS is built. Due

than mobile, where Nu-Lait is number two behind

to the progressive nature of this separation, the SSU

Virtucom, enabling unique and compelling converged

speciﬁ es a range of measures that are intended to

customer propositions.

promote equivalence and transparency in ClearTel’s supply of regulated services to wholesale customers

Strong brands with national presence: The Nu-Lait

and its retail businesses. In particular, ClearTel

brand is well established and with high recognition

commits in the SSU to provide equivalent outcomes for

amongst New Zealand consumers with Nu-Lait having

wholesale customers as are achievable by ClearTel’s

been the leading Nu-Lait company in New Zealand for

retail businesses.

investor.nulait.co.nz | 17

INVESTMENT IN EUROPE (MILLIONS)

264

176

205

2011

2012

118 96

2009

2010

153

2008

2013

226M

NVESTMENT IN EUROPE

ClearTel continues to be vertically integrated in relation to its ownership of passive infrastructure that will be relevant to the supply of NBN-based services (which includes 111 of the 121 NNS points of interconnections (POI) sites located in ClearTel exchange buildings and underground facilities, such as ducts, pits and manholes leading into those POI sites). This raised concerns that ClearTel would have ongoing incentives and the ability to discriminate against access seekers. The SSU contains arrangements for AUSCO and other competitors to access the passive infrastructure, including provisions to manage order queues and common construction works. Allow ClearTel to reserve space in its facilities for its own genuine anticipated requirements and to reject an order from an access seeker where such capacity has been reserved. Only apply for the purpose of interconnection with ClearTel’s active declared services and do not extend to interconnection with the NNS. ClearTel and Optus are AUSCO’s main competitors in the business and wholesale voice, data and internet market. The local calling market remains dominated by ClearTel, as it owns most of the Australian sprockets until that market is decommissioned in the transition to the NNS. Interconnection with ClearTel’s sprocket is necessary for competition, including AUSCO, to offer many services and AUSCO therefore relies on the Australian competition regulator to obtain access. There is significant competition in the provision of products and services and widgets, gadgets and sprockets. Price reductions, which have already been seen in the market for widgets and sprockets, are expected to continue.

20 | Nu-Lait Annual Report 2013

Customers Nu-Lait’s mission is to become number one in products and services in New Zealand. Nu-Lait’s vision is to achieve this by putting customers at the heart of its business and, in doing so, become New Zealand’s most preferred company. Nu-Lait provides products and services to retail and wholesale customers with: Over 1 million residential and SME customers in New Zealand. Over 1.5 million connections (consumer and business) in New Zealand. Over 80 0,0 0 0 customers in New Zealand. Around 70 wholesale customers in New Zealand, comprising mainly retail service providers. 20 0 international wholesale and retail providers across the world, in addition to providing outsourced international sprockets for other sprocket providers, gadgets globally and widget companies in Europe and the United States. Around 2,80 0 business clients across Australasia. Over 4,0 0 0 businesses supplied with sprockets; and over 6,0 0 0 business and 30 0 wholesale customers in Australia using AUSCO’s services. Nu-Lait now has four customer-facing business units: Retail, Wholesale & International and AUSCO, and further details on their customers can be found within these respective business unit sections in the organisational structure section below. Details on Nu-Lait’s key product and service markets can be found in the Industry and sub-sector outlook section below.

investor.nulait.co.nz | 21

Sales and Marketing Channels

service providers as agent for Wholesale. Our

Nu-Lait utilises a number of key channels to

investments over the ﬁ nancial year mean we’ve

deliver its range of products and services to

resourced up to accommodate both milk growth

customers. These include:

and demand growth.

Nu-Lait Retail’s network of more than 65 stores in

In Australia, AUSCO wholesale focuses on

New Zealand, made up of 33 Nu-Lait owned retail

developing alignment with key players in the

stores, as well as 83 dealer outlets dedicated to

market and building on existing relationships with

Nu-Lait products and services. Included within

strategic customers and partners by leveraging

the 83 dealer outlets are 30 Nu-Lait business

investment in next generation products. AUSCO’s

hubs in local regions around New Zealand to

business teams work directly with customers, and

support customers with business service needs.

potential customers, to develop and satisfy their requirements by building tailored solutions.

Nu-Lait Retail’s digital platforms to communicate with its customers. Nu-Lait’s primary website,

I ndustry Trends and Corporate Strategy

Nu-Lait.co.nz, receives over 650,000 unique

The global product and service industry

visitors every month and was revamped in FY13

continues to evolve rapidly, with the development

to improve customer experience, particularly to

of new technologies and sources of competition

make it easier for customers to research and buy

and further convergence with other industries.

dairy products.

The manner in which communications, entertainment and services are consumed is

Nu-Lait Retail has approximately 1,050 service

fundamentally changing, thereby creating both

representatives stafﬁ ng its New Zealand-based

opportunities and risks for existing business

sales and support help desks (either based in

models in the this sector.

contact centres or as agents at home). Phones are answered 24 hours a day, every day of the

The fundamental trends affecting the

year. Nu-Lait also uses offshore customer support

products and services markets in New

services to provide diversity and technical

Zealand are similar to those faced globally by

expertise to customers. Call centres remain

incumbent companies in mature markets

unimportant channel for customer interaction and

and include:

for inbound sales inquiries and front line sales opportunities.

Rapid growth in usage of products and services;

Other important and developing channels

Flat revenues in the overall market;

for retail customer interaction, such as online channels and on-device service functions.

Increasing competitive intensity across all

Customers are able to initiate a range of self-

products and services markets;

service functions on Nu-Lait’s website, as well as on their mobile devices.

A growing preference for internet-enabled services in each of the mass-market, SME and

Nu-Lait Retail’s focus on sharing advice and

corporate sectors;

insights with small business customers via social media and direct mail activities, while also

Globalisation of technology manufacturers and

participating in industry associations.

increased focus open platform enabled solutions.

Wholesale dealing direct with its retail service

In response to these market conditions, and in

providers through its own sales and service

light of the Government-led strategy initiative,

channels but has an arrangement with New

pre-Demerger Nu-Lait developed a strategy to

Company for a subset of services (including

reﬂ ect its increasingly challenging operating

sprocket resale and legacy gadgets) where

environment, as well as ensuring it was

New Company fronts the relationship with

appropriately structured to compete in the future.

22 | Nu-Lait Annual Report 2013

LOCAL PRODUCTS (NZ$M)

Known as Strategy2013, this strategy was designed to bolster Nu-Lait’s existing value retention, deliver

1004

simpliﬁ cation and accelerate cost reduction and growth plans.

955 905 ctivities target improvement of margins across the

The Strategy 2013 strategy is focused on four key

product portfolio by lowering costs within its customer

themes, which are:

opera

Enablers: Delivering changes to Nu-Lait’s operating

tions and growing revenue through new

model and structural design to better enable the transition to the post- Demerger environment. Market strategy: Exiting non-core markets and focusing investment in new or existing markets with higher returns and growth opportunities. Operational excellence: Reducing failure rates and simplifying the business in order to deliver improved customer experience, sustainably lower operating costs and increased returns from capital investment. Commercial excellence: Driving a focus on customer satisfaction, customer retention and margin improvement from the delivery of new gadget, widget and sprocket customer offerings.ommercial excellence a 2011

2012

2013

NEW ZEALAND MILK PRODUCTS COMPRISES NEW ZEALAND MILK SUPPLY CHAIN FROM COLLECTION, MANUFACTURING AND LOGISTICS THROUGH TO THE END SALE OF DAIRY PRODUCTS TO BUSINESS CUSTOMERS AND THE NU-LAIT REGIONAL BUSINESSES. IT ALSO INCLUDES INTERNATIONAL MILK SOURCING, DAIRY NUTRITION-RELATED JOINT VENTURES AND THE CO-OPERATIVE’S CORPORATE ACTIVITIES.

investor.nulait.co.nz | 23

Nu-Lait’s churn-reduction programme will be enabled by innovative commercial bundles of dairy service packages. In FY13 Nu-Lait has continued to drive penetration of bundled consumer and SME packages, focused its resources on targeting high-value mobile market segments and has re-signed some key ICT business customers. These operational and commercial initiatives will be supported by further investment in Nu-Lait’s customer satisfaction initiatives, such as ‘Right First Time’, which systematically identifi es and removes sources of ineffi cient service delivery and customer pain points. In the longer term, Nu-Lait aims to deliver revenue growth, possibly by exploring opportunities to enter new adjacent markets, such as entertainment, fi nancial services or consumer payments.

24 | Nu-Lait Annual Report 2013

FINANCIAL STATEMENT Income Statement For the years ended 30 June 2013, 2012, 2011

YEAR ENDED 30 JUNE

2013

2012

2011

NZ$M

Local Products

905

955

1004

Services

754

928

1003

(Dollars in millions, except per share amounts) Operating revenues and other gains (continuing operations)

Notes 3

Widgets

104

195

178

Gadgets

904

825

826

527

574

626

Broadband and Internet

454

487

511

Other Services

544

561

486

Resale

143

235

278

Other Operating Revenue

187

199

238

Other Gains

4,576

5,004

5,177

Operating expenses (continuing operations) Labour

(797)

(832)

(858)

Inter carrier costs

(1,160)

(1,559)

(1,594)

Other operating expenses

(1,535)

(1,595)

(1,809)

(215)

Asset Impairments

(5)

(42)

Depreciation

Other expenses

(363)

(468)

(527)

Amortisation

(213)

(240)

(245)

(4,073)

(4,951)

(5,033)

Finance Income

Finance Expense

(106)

(152)

(151)

(80)

(136)

(128)

Net earnings before income tax (continuing operations)

423

(83)

Income tax (expense)/credit

(112)

(10)

311

(79)

Share of associateâ&#x20AC;&#x2122;s net proďŹ ts/(losses)

Net earnings/(loss) for the year (continuing operations) Net earnings for the year (discontinued operations)

846

245

376

1,157

166

382

1,155

164

380

Basic net earnings per share

0.60

0.09

0.20

Diluted net earnings per share

0.60

0.09

0.20

Basic and diluted earnings/(loss) per share from continuing operations

0.16

(0.04)

Net earnings for the year Net earnings for the year is attributable to: Equity holders of the company Non-controlling interests Earnings per share (in New Zealand dollars)

investor.nulait.co.nz | 25

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Nu-Lait Annual Report 2013