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Contents Directors and Executive Team ..................................................................... 2 About Us ...................................................................................................... 4 Annual General Meeting .............................................................................. 5 Chairman’s Review ......................................................................................
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Retail Review ................................................................................................ 14 Food for Thought ......................................................................................... 18 Foodstuffs (South Island) Community Trust ................................................ 19 National Progress Report ............................................................................ 20 Executive Team ............................................................................................ 24 Auditors’ Report ........................................................................................... 26 Foodstuffs South Island Limited Group Financial Statements ................................................................................... 27
Foodstuffs Soutn Island Limited
Annual Report 2011
The Network ................................................................................................. 32
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2 PAK’nSAVE Northlands
Stephen Boock
John Mullins
General Manager Wholesale Operations & Procurement
New World St Martins
Russell McKenzie
New World Alexandra Deputy Chairman
Kevin Ryan
New World Rangiora Chairman
Robin Brown
General Manager Administration & Members’ Services, Company Secretary
Kim DeGarnham
General Manager Retail Operations
Alan Malcolmson
Chief Executive Officer
Steve Anderson
Foodstuffs Soutn Island Limited
Annual Report 2011
General Manager Trents Wholesale Limited
Philip Lemon
General Manager Property & Retail Development
Roger Davidson
General Manager Finance
Malcolm Wratt
General Manager Information Technology
Phil Wright
PAK’nSAVE Wainoni
Marcel Gray
PAK’nSAVE Dunedin
Chris McDonald
New World Rolleston
Roy Bridgman
Four Square Owaka
John Niles
2011 line up
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About Us Foodstuffs South Island Limited is a South Island, 100% New Zealand owned co-operative, formed in 1988 from the merger of two longestablished grocery co-operatives Foodstuffs (Christchurch) Limited and Foodstuffs (Otago/Southland) Limited. Foodstuffs South Island Limited, whose membership consists of independent grocers who own and operate their own businesses and work together for their mutual benefit and the benefit of the co-operative, trades only in the South Island of New Zealand. It has two sister co-operatives, Foodstuffs (Auckland) Limited and Foodstuffs (Wellington) Co-operative Society Limited, which trade in the northern and southern sectors, respectively, of the North Island of New Zealand. The three co-operatives are independent of each other and have their own boards and executive structures. The three co-operatives jointly own Foodstuffs (New Zealand) Limited, a small non-trading entity, which represents the three co-operatives’ interests on issues of national or grocery specific importance. They have also jointly entered into a purchasing group with an Australian grocery wholesaler to achieve economies of scale for the purchase of housebranded product.
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Currently, Foodstuffs South Island Limited has a membership of 686 banner group, independent grocer or foodservice members. These members recognise that shareholding in the co-operative confers on its members the right to enjoy the benefits of the co-operative and the shares are not held as a form of investment in equity shares. As such, our members are caretakers of the co-operative and its assets. They have a responsibility to hand them on to enable future generations of grocers to trade. The co-operative is principally funded using Retained Patronage Shares (previously five-year Redeemable Preference Shares). These shares are issued to our members in direct ratio to their last year’s trading with the cooperative and paid for by deferring the physical payout of the year-end rebate of profits until each tranche of shares is redeemed. Our membership generally falls in two categories; independent grocers trading as members of one of our banner groups: PAK’nSAVE food warehouses New World supermarkets Four Square supermarkets On the Spot convenience stores Henry’s Beer, Wine and Spirits
or members who trade independently of these groups in the convenience grocery or foodservice industries. Over recent years, the foodservice industry and the number of customers/members involved in that industry have grown dramatically. These people trade with our whollyowned subsidiary, Trents Wholesale Limited. This subsidiary was specifically created to service this sector of the South Island economy and now has a strong South Islandwide customer base. Trents trade via seven Cash’nCarry sites throughout the South Island or through one of our Trents distribution partners. Many of our grocery members lease their supermarket or shop premises from the Company which, in turn, is the registered proprietor or holds the head lease of the property concerned. The Company offers a substantial degree of assistance to its members as well as its core activity as a wholesale merchant. These ancillary activities include the marketing of their business and products, industryrelated training and education, food safety programmes, business services, merchant guarantee funding arrangements with major banks, and, at-call deposit facilities for trading members, former members and related parties.
Annual General Meeting The 23rd Annual General Meeting of Shareholders of Foodstuffs South Island Limited will be held on Thursday, 21 July 2011 at the registered office of the Company, 167 Main North Road, Christchurch at 5.00pm.
Ordinary Business 1. To receive, consider and adopt the Directors’ Report, Group Income Statements, Statements of Comprehensive Income, Statements of Changes in Shareholders’ Equity, Balance Sheets and Audit Report for the year ended 28 February 2011. 2. To receive the results of the postal ballot conducted to elect two directors. 3. To fix the remuneration of directors for the ensuing year. 4. To authorise the Board of Directors to appoint an Auditor and fix the remuneration of the Auditors for the year to 28 February 2012. A tender for Auditor is being undertaken for the 2012 year. 5. To transact any other business whether by ordinary or special resolution that may be properly transacted at the Annual General Meeting. ‘A’ and ‘D’ Shareholders have the right and are entitled to attend and vote at the meeting. These members may appoint a proxy to attend and vote on their behalf. A form of proxy may be obtained from the Secretary. The completed proxy form must be deposited at the registered office of the Company not later than 48 hours before the time of the meeting. A proxy holder need not necessarily be an ‘A’ or ‘D’ Shareholder of the Company. Dated this 14th day of June 2011. By order of the board
Foodstuffs Soutn Island Limited
Annual Report 2011
K N DeGarnham Company Secretary
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Chairman’s Review
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The Board would like to congratulate the Crisis Management Team (CMT) and Foodstuffs South Island staff for the professional manner in which they conducted themselves after the September 2010 and February 2011 earthquakes. The Team’s methodical and solid approach was vital for the Co-operative in order to navigate the Company through these turbulent times. In addition, the Board also recognises the trying times our Christchurch Members went through after each earthquake and can only applaud our Members in getting their stores fully functional in such a short period.
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The Co-operative has once again delivered a strong financial result for the 2010/11 financial year. Revenues increased despite the disruption caused by the Christchurch
Br o m wn
The impact of the earthquakes on Foodstuffs South Island was largely mitigated due to a comprehensive insurance programme. This meant that despite the damage the Co-operative and its Members suffered during the September and February earthquakes there was no significant financial impact, as insurance fully covered all costs incurred.
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• ensuring the fundamental business model and company strategy are still sound, • further investigation to improve the visibility on margin management, • managing the earthquake insurance process and ensuing costs, • training within banner groups to
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The hospitality and food service industry was particularly hard hit by the recession which was even further exacerbated by the Christchurch earthquakes forcing numerous businesses to close. Coming out of the recession and the aftermath of the earthquakes, the Co-operative strived to place itself in the best possible position to capitalise on future opportunities available. Consequently, in the year under review members of the Co-operative devoted their energies, amongst other things, to;
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During the reported period the aftereffects of the recession were taking its toll on all businesses and uncertainty continued to plague the New Zealand economy. The lacklustre economic growth during the latter half of the year was further compounded by the Canterbury earthquakes, rise in fuel prices and increase in GST which placed an added burden on the already fragile New Zealand economy. Businesses had to re-evaluate their situation to incorporate the effects of the disaster. The cost of the two major earthquakes will ensure that financial restraint remains the norm as New Zealand slowly recovers from the recession.
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improve the customers’ overall shopping experience, dealing with changes in tax depreciation rules and the consequences thereof, realising the benefits of the past investments in information technology and investing in further retail technology initiatives, refurbishment and expansions of several retail properties, investment in the development of logistics infrastructure, and streamlining SAP procurement efficiencies.
bin
On behalf of the Board of Directors of Foodstuffs South Island Ltd, I present to you the 23rd Annual Report detailing our activities, highlights, challenges and financial results achieved for the year ended 28 February 2011.
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Chairman’s Review (continued)
Trents Wholesale Ltd, the Company’s specialist food and beverage sector subsidiary, experienced an extremely challenging and demanding trading environment across all segments of their business. The likely impact on the 2012 year for Trents from the February earthquake, particularly affecting Christchurch central business district, cannot yet be estimated but may be significant.
Group Sales and Profitability Positive sales growth of $61M or 2.7% was recorded this year despite the challenging trading conditions. The first half of the year was characterised by slow growth with low food price inflation, while the second half of the year was impacted by the Canterbury earthquakes. Despite the disruption caused by the earthquakes, sales were broadly in line with expectations for the year. The underlying profitability of the Co-operative was very solid, with total Operating Profit increased by $16M or 8%.
2. A net $35.863M deferred tax provision has been recorded this year in the Income Statement, as a result of both the Government’s removal of tax depreciation for buildings with a tax life of over 50 years, and the reduction in the corporate tax rate from next year. This entry is required under International Financial Reporting Standards, but is a non-cash, accounting entry only. As such, the Board have decided it will not affect the level of rebates paid to Members this year. However, it will mean that the Co-operative will record an accounting loss for the year.
Distribution to Members Total value of distributions to Members this year is $215.5m, an increase of $17.3m or 8.7%. We have continued our practice of paying monthly rebates, based on bulk and repack purchases during the year, and distributing these and supplier driven rebates directly to Members during the year. A total $145.7m will be distributed to Members in this manner.
Year end rebates will total $59.0m and be distributed in three main ways. • Firstly there will be the standard Meat, Produce and Loyalty rebate totalling $38.9m, which will be issued this year through a combination of Retained Patronage Shares and cash dividends. 33 million shares will be issued, with a specified value of $1.00, partly paid up to a value of $0.92 per share. A $0.26 dividend will be paid immediately after these shares are issued, with $0.08 being used to fully pay up the share to its specified value of $1.00, and the remaining $0.18 paid as a cash dividend. The $0.26 dividend will be issued fully imputed. • Secondly there will be the payment of two cash rebates totalling 1.1m. The Produce rebate will be based on purchases made under the new initiative to supply Produce ex-warehouse, and will be paid at a rate of 3% on qualifying sales. An IT Leasing rebate will also be paid out of extra profits made on the IT Leasing scheme and distributed pro-rata based on Members’ IT leasing charges. • Thirdly there will be special $19.0m Trading Deposit rebate issued. This rebate will be distributed to Members based on their qualifying sales for the year ended 28 February 2011, and will be directly credited to Members’ Trading Deposit Account. Any amounts in excess of the required two weeks Trading Deposit or owing to exMembers will be paid into their at call deposit accounts. In addition to the year end rebates there are $5.0m of dividends on RPS shares which will be paid out fully imputed. Together with the imputation credits issued with the 2011 RPS
Annual Report 2011
The banner groups traded steadily despite the difficult trading conditions. Over the reported year, competition has been fierce in the retail market and was driven by increased advertising and aggressive pricing between the major retailers. New World stores have experienced a steady trading period with increased sales despite the closure of New Worlds Kaiapoi, St Martins and Redcliffs. Henry’s Beer Wine & Spirits stores have showed significant growth. Their focus is placed on increasing the brand profile of Henry’s Beer Wine & Spirits to South Island customers.
However, there are two significant items of note in the financials accounts. 1. Operating Expenses include an additional $31M of earthquake related costs incurred by the Co-operative this year, and Other Income includes a similar amount for the expected insurance payments received and to be received. The net impact of the earthquake in the Co-operative’s Income Statement this year is negligible, with all costs being offset by insurance revenues. While there is still a considerable amount of work to be carried out on the claims we are confident that all material costs will be covered under our insurance policies.
Foodstuffs Soutn Island Limited
earthquakes. Total distributable profit increased due to improved margins, increased supplier rebates and lower interest costs thereby contributing to an excellent trading result.
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Chairman’s Review (continued) share dividend, imputation credits totalling $5.8m will be issued.
Rebates and Dividends In summary, this year’s total rebates and dividends to Members are; Bulk and repack rebate
$126.9m
Supplier rebates
$18.8m
Monthly cash rebates
$145.7m
2011 Retained Patronage shares issued
$30.4m
2010 Retained Patronage dividend – capitalised
$2.6m
– cash
$5.9m
Total RPS and dividend Produce rebate IT leasing rebate Trading deposit rebate Dividends on RPS shares Total dividends and rebates Imputation credits Total value of distributions to Members
$38.9m $0.5m $0.6m $19.0m $5.0m $209.7m $5.8m $215.5m
Information Technology – Project Valentine / SAP It is pleasing to report that SAP has become business as usual for Foodstuffs South Island and we are currently realising the multitude of benefits it holds for the Co-operative as well as our Members. Currently our main focus is on the deployment of SAP to our Members, and even with the adverse events we faced recently, we can report that the retail rollout has progressed well. The implementation has gained momentum as the rollout team acquired experience and confidence over the last year. By the end of the financial year we had 13 stores fully on SAP and 33 stores in various phases of implementation. SAP is a fundamental change in the way Members manage their businesses. Stores using SAP have the benefit of increased visibility and timeliness of data, more robust processes, penetration of eCommerce, better margin management, inventory management, purchasing
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opportunities and operational efficiencies through the wireless handheld terminals. Over the next year, the retail rollout programme will continue in the PAK’nSAVE and New World stores whilst a rollout strategy is being devised for the Henry’s Beer Wine & Spirits and Four Square banner groups. Christmas Club 2010 was the first year of operation for the Dunedin based Christmas Club call centre. The new electronic Christmas Club scheme has been very successful; not only has this scheme reduced administration overheads but it has resulted in a dramatic increase in funds flowing through the Christmas Club card scheme. Retail Development Last financial year, Foodstuffs (South Island) Properties Ltd undertook the expansion and refurbishment of several of our retail properties and provided assistance to Co-operative Members undertaking refurbishment in leased properties. The refurbishment of New World Rangiora was completed by the end of the financial year and it now boasts a new interactive bakery display, where products are baked in front of the customer for instant selection. New World Oamaru underwent a complete retail refurbishment which was completed early in 2011. The store now has new style flooring and ceilings and a modern wine display which allows the customers a better opportunity to peruse the expanded selection. Henry’s Beer Wine and Spirit stores continue to expand and our 18th Henry’s opened in Greymouth in October 2010. We have seen
Chairman’s Review (continued) this group going from strength to strength over the last few years. Other projects undertaken over the last year included the refurbishment of Four Square Lawrence, Murdoch Manufacturing’s canopy extension, the chiller/ freezer facility in the Invercargill warehouse, refurbishment of our Papanui main office and IT department and various other minor refurbishments. Foodstuffs South Island (Properties) continually strives to deliver energy efficient practices within our buildings to reduce our carbon footprint and lessen our retails Members’ use of electricity. These areas of focus continue to be on: • CO2 refrigeration • • • • • •
Rain water retention Lighting controls Double glazing Increased windows / sky lights Fluorescent & LED lighting Heat reclaimation.
The year ahead will be a very busy period for the property team as they will oversee amongst other projects the construction of our new Hornby distribution centre (DC). This DC will have new state-of-the-art features and will strive to be the most efficient and effective DC in New Zealand, covering 38,000m2 and including greener energy and lightning systems, 11 metre high racking and enhanced staff facilities. Construction work is expected to commence late 2011 for completion in 2012. Other major projects earmarked will be the rebuilding of New Worlds Kaiapoi, St Martins and Redcliffs, which had to be demolished due to earthquake damage.
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Wholesale Operations & Procurement Our Wholesale Operations and Procurement division have concentrated on further developing Foodstuffs Inbound (FIN) which currently has 102 suppliers with a further 20 scheduled to commence during the April / May period. The reported year was also the 10th anniversary of our Vendor Management Inventory (VMI) Procurement Programme. Currently we have 77 vendors on board representing 68% of total purchase order volume into our distribution centres, representing 62% of total product SKUs. Over the years, this programme has improved service levels, inventory management and enhanced our relationship with our suppliers.
Administrative After reviewing our submissions, The Reserve Bank confirmed late in 2010 that Foodstuffs South Island Ltd would not be classified as a Non Bank Deposit Taker (NBDT). This was very positive news as complying under the Act would have been a major imposition on our Company as we would have been required to make significant changes to the way we operate. Once again we have seen a significant lowering of both claim numbers and costs within the ACC Accredited Employers Partnership (AEP) program. These results are pleasing and can be ascribed to our continuing focus on case management practices and on claims handling.
During the reported year, we tendered our company medical insurance to various medical providers. After reviewing various providers we accepted the tender from Southern Cross which resulted in savings to the Co-operative whilst maintaining the same coverage.
Summary To summarise, I would like to reiterate that our Co-operative has once again delivered a strong financial result for the 2010/11 financial year. Our Co-operative and Members are positive and in good heart even after the trials and tribulations we faced during the year under review. We now know that we are well equipped to face future challenges; we are strong, resilient and well positioned for the future. On behalf of the Board, I would like to thank all our Executive, Staff, Members, suppliers and contractors whose help assisted us through this turbulent year!
Robin Brown Chairman
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New World had a very successful year, recording strong sales growth and market share. These results were achieved during a period of difficult trading conditions and the unprecedented impact of South Island disasters.
• The Southland Snow Storm in September, forcing the temporary closure of New World Windsor.
• Canterbury Earthquakes which forced the closure of three of the 40 South Island stores – New World Kaiapoi in September and New Worlds St Martins and Redcliffs in February.
The year has also brought a number of positives including the alignment of national marketing campaigns; Clever Baskets and the ‘Slice’ which showcase the banners core values of Service, Quality, Value and the
• The Pike River mine disaster, impacting the community on the West Coast.
commitment to meeting customers’ different needs. The New World Group welcomed Justin and Claire Vaudrey as the new Owners of New World Westport, a vacancy created with the relocation of Kathy and Wayne Frampton to New World Northwood, Christchurch.
‘Stickman’ continues to be used nationally, maintaining the Group’s
PAK’nSAVE store standards continue to improve with the ‘Fresh’nUp’ project creating better product presentation, installation of new plant and refrigeration, self checkouts and neon lighting. The PAK’nSAVE group are currently implementing SAP into stores with the entire group planning to use
the system by the end of 2011. Once SAP is fully operational in all PAK’nSAVEs, the group will look to use the benchmarking of KPIs to improve overall performance.
Annual Report 2011
The Christchurch earthquakes caused heavy stock losses but we are pleased to report that our Members had their stores operational after each earthquake rapidly.
key price grocery offer; ensuring customers are offered the lowest prices on everyday products.
Foodstuffs Soutn Island Limited
The PAK’nSAVE group had a steady trading year even during the tough economic conditions which caused reduced discretionary spending amongst consumers.
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During what was once again a difficult and competitive trading environment, we are pleased to report that The Four Square Group has once again had a good trading year achieving a sales growth of 4.94%. The group continued to focus on the ‘Fresh’nUp’ campaign with operators’ emphasis on maintaining high store standards and focusing on customer services. The group has also improved their fresh foods offer whilst food safety and ranging remained a priority along with focus on loss prevention, liquor compliance and staff/owner training and development. Highlights during the year included a ‘new look’ weekly circular, gross profit alignment through retail pricing analysis, the holding of regional forums along with the addition of Four Square Lyttelton to the family which unfortunately was affected by the 22 February Earthquake and is currently under repair.
The Henry’s BWS group has continued to grow and consolidate in the South Island. The number of stores is now 18 with the latest addition being Greymouth which opened in October 2010. June 2010 saw the Timaru store move into new premises in the completed Highfield Mall development. Both of these stores are an excellent example of the future of traditional liquor retailing. The highlight during the last 12 months has been the very successful roll out of the new branding and signage. This has given the group a very vibrant but down-toearth look and ensures that Henry’s continues to lead the way in store standards and presentation. In addition to the rebranding of the stores the group’s website has also been updated and now includes many new and interesting features. Fly Buys continues to develop under the Henry’s brand and is now emerging as a very strong sales tool as customer awareness grows. The group has achieved very good sales and customer growth during the last financial year and continues to look for opportunities to further increase store numbers.
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Trents has had a challenging year within the highly competitive South Island Foodservice market. Although sales growth has been difficult, the Trents company has been able to grow its share in liquor categories, especially in the off premise market segment. During the 2010 financial year, Trents celebrated its 10th birthday with various customer promotional offers throughout the business which provided our customers with additional value. The utilisation of Foodstuffs Wholesale Franchise Members to undertake the distribution of Chilled and Frozen products continues to add significant value to our collective offer.
Murdoch Manufacturing played a significant role providing bulk fresh water to our Christchurch supermarkets who were impacted by the February earthquake, ensuring those supermarkets had water for fresh food processing.
Foodstuffs Soutn Island Limited
During the year, Murdoch through our joint venture partner Metfood, undertook several tenders, a number of which were successful. Over all, the year end financial result for this subsidiary was extremely pleasing.
Annual Report 2011
In the previous year, we reported that there was a resurgence of customers increasing their purchasing of private label due to the recession. Last year we saw this stabilising, which impacted the growth that Murdoch Manufacturing had been experiencing.
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Food for thought In October 2010, the Food for Thought Trustees and the National Heart Foundation signed a Collaborative Agreement to pilot a joint programme called Food For Thought and Heart Start. The launch of the pilot was attended by the Honourable Tony Ryall, Minister of Health. The nutrition and exercise programme will pilot over the first two terms of 2011 within primary schools throughout New Zealand. The Food for Thought programme and the Heart Start programme complement each other and fit within the school curriculum requirements.
The Food for Thought Trust employs four nutritionists throughout New Zealand. The programme targets 9 to 10 year olds and meets the health and wellbeing components within the school curriculum. Students attend classroom-based nutrition sessions and an inquiry learning session within their local PAK’nSAVE, New World or Four Square supermarket. The owner/operator of their local supermarket then sponsors the ingredients for a healthy class lunch which is budgeted, planned and made by the students.
Foodstuffs’ Wellness Initiative
Summer kick start 2010 This year, Foodstuffs South Island Ltd introduced further wellness initiatives for all staff within the co-operative. The programme was to launch in spring, but the September earthquake postponed the launch to November. The earthquake highlighted the importance of looking after our own health and wellbeing and Foodstuffs was proud to implement this initiative for its people.
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The “Summer Kick Start 2010” offering included: • Free Fruit – one piece per person each day for three months – November, December and February • Nutrition support and weekly information • A vegetable of the week (Friday each week for 3 months) – November, December and February • An opportunity to submit a vegetable recipe to complement the vegetable of the week – with a prize per week for the winning recipe
Community Trust Report St John presented their sponsorship report to the Board at the November 2010 meeting of the Trust and the Trustees agreed to sponsor the St John FEDs for a further two years. With the help from the Community Trust, St John FEDs has been able to expand their services to Wairau Hospital, Dunedin Oncology Hospital Friends, Dunedin Hospital Host and Christchurch Hospital Care of Relatives of Community Deaths. Volunteer hours have increased from 22,500 to 28,000 hours. With further ongoing support from the Trust, St John would like to roll out a programme at Grey Base Hospital, Hospital friends in Oamaru, Balclutha and Ashburton Hospitals. That would increase volunteer hours by another 10,000.
First Foundation The Trust is continuing to support Emma Muir and Hannah Davidson in their education pursuits. Emma has had a successful year at Lincoln University. She is now in her third year studying two majors, namely accounting and finance. Emma works at Foodstuffs Papanui during the holiday periods. Hannah our latest candidate has started studying at Otago University. She is studying first year health science in anticipation of being accepted into medical school. She completed work experience at Foodstuffs head office during the Christmas break and has gained experience at Foodstuffs Dunedin and New World Gardens.
As well as supporting the major grant recipients, grants in the following categories were distributed by the Trust Education Grants
$72,600
Community Grants
$95,507
Earthquake Grants September 2010
$55,000
Earthquake Grants February 2011
$262,850
Hardship Grants
$3,750
Canterbury Earthquake On 4th September 2010, Canterbury was hit with a major earthquake and the Trust responded by distributing $55,000 in New World and PAK’nSAVE vouchers to 138 people who were adversely affected by the quake. This included vouchers to all New World Kaiapoi staff who lost their jobs due to the closure of the New World. On 22nd February 2011, Canterbury was hit, yet again, with a far more devastating quake. The Trust to date has distributed $262,850 in New World and PAK’nSAVE vouchers to over 400 individuals who have suffered hardship as a direct result of the quake. This included vouchers to all Redcliffs and St Martins staff who lost their jobs in February. The Trust has been overwhelmingly supported by many generous one-off donations from our South Island New World and PAK’nSAVE Members along with substantial assistance from Foodstuffs New Zealand Limited and several North Island stores.
New Sponsors • Bond Ventures Limited – New World South City • High Street Grocer Limited – New World Greymouth • Wildelife Limited – New World Stanmore • Evershot Supermarket Limited – New World Northwood • J & C Vaudrey Limited – New World Westport • Lincoln Supermarket Limited – New World Lincoln • Anderson Supermarkets Limited – New World Waimate • Roslyn Traders Limited – New World Port Chalmers • CJ & JH Broderick Limited – New World Redcliffs
Resignations I and the Trustees would like to thank Grant and Robyn Stiven (New World Belfast) along with Doug and Lois Spence (PAK’nSAVE Moorhouse) for their past financial contributions and wish them well in their future endeavours. In summary, the Foodstuffs (South Island) Community Trust is operating well and I am appreciative of all our sponsors, existing, new and those who have upgraded their contributions during the past year. The Trust and Trustees thank Foodstuffs personnel for their assistance, PricewaterhouseCoopers for their voluntary auditing of accounts and, once again, all our sponsors.
Sponsors During the year, we welcomed nine new sponsors and two supporters. New Supporters Kim De Garnham Malcolm Wratt
Chris Griffin Chairman Foodstuffs (South Island) Community Trust
Annual Report 2011
Major Sponsorship
Grants
Foodstuffs Soutn Island Limited
I am pleased to report another successful year for the Foodstuffs (South Island) Community Trust
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National Progress Report The year ended February 2011 proved to be a challenging one for the organisation, with the New Zealand economy recovering much more slowly than anticipated from the economic recession and international factors driving high commodity prices which, in turn, has fuelled food price inflation and an increase in operating costs in an otherwise flat market. The two Canterbury earthquakes provided additional challenges for our South Island Company. The combined wholesale turnover for the three Foodstuffs companies was $8.07 billion, up $89 million or 1.12% on the 2010 result reflecting the stagnant retail market conditions. During the year, new New World stores were opened in Mt Roskill, Waipukuarau, and Marton while major refurbishment projects were completed at New World Broadway, New World Levin, New World Wairoa, New World Rangiora, and New World Oamaru. New PAK’nSAVE stores were opened in Papamoa and Te Awamutu, and store refurbishment projects completed at PAK’nSAVE Mill Street in Hamilton, PAK’nSAVE Palmerston North, and PAK’nSAVE Kapiti, Paraparaumu. The companies continue to devote considerable energy to the regeneration of our Four Square heritage brand and this has translated to a busy store development programme for the group. New Four Square stores were opened in Papamoa, Ahuriri, and Foxton Beach while the store refurbishment programme included upgrades at Four Square Cloverlea, Four Square Patea, Four Square Kaponga, Four Square Eltham, Four Square Waterloo, Four Square BJ’s
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Waitara, and Four Square Lawrence. A new Henry’s Beer, Wine, & Spirits was opened in Greymouth, and five new fuel sites were opened – at PAK’nSAVE Mt Albert, PAK’nSAVE Tauranga, PAK’nSAVE Papamoa, PAK’nSAVE Te Awamutu, and New World Marton. New markets and extensions to existing markets provided an additional gross retail floor area of 22,720m2. Nationally, at the end of February, Foodstuffs co-operative members operated 47 PAK’nSAVE stores, 132 New World stores (excluding the 3 New World stores in Christchurch which are being rebuilt after the Canterbury quakes), 278 Four Square stores, 148 On the Spot convenience stores, 19 Henry’s Beer, Wine and Spirit outlets and 37 fuel sites. The companies continue to make substantial investments in their wholesale business infrastructure. In the Auckland region, additional space was leased at the Wiri Foodstuffs Fresh Distribution Centre, increasing the facility’s capacity from 4,500 to 6,500 pallets. Foodstuffs (Auckland) Ltd shifted its ambient primary freight operations to this site. The conversion of the Company’s Gilmours branches to owneroperated businesses was completed and 8 member-owned Gilmours stores now service the non-member trade business. A major transformational project to increase business operational efficiency, called Project Lightning, was initiated to drive the adoption of more efficient business processes and enabling technologies across both the retail and wholesale business. The key focuses are making improvements in the
effectiveness of buying operations, inventory management, and business analytics. Foodstuffs (Wellington) Co-op Society Ltd officially opened its Robert’s Line Distribution Centre on the 6th April 2010. This new facility has consolidated goods warehousing and manufacturing facilities for the Company and includes equipment for automated split-case picking. Stackflow machines, for mechanical milk crate picking, were installed at the Company’s Grenada and Mihaere Drive (Palmerston North) distribution centres to improve picking efficiency at those sites. The Company’s Silverstream warehouse was officially closed on 31 March 2011. In a major IT development, the Company deployed a new software application which analyses product sales to predict the optimal retail pricing for individual product lines. In February, Foodstuffs South Island Ltd announced the development of a new $45 million 25,000m2. distribution centre to be built in Hornby, Christchurch, adjacent to the Company’s existing 13,000m2. Hornby Distribution Centre. The plans include green energy and lighting systems, 11 metre high racking, and enhanced staff facilities. Construction commences late in 2011 for completion in late 2012. The existing Papanui Distribution Centre will be closed, and all Christchurch based distribution consolidated at the Hornby site when it is completed. The Company’s corporate headquarters will remain at the Papanui property. The Company is continuing the roll out of the SAP information technology platform to its retail stores and has completed implementation at 13 stores while another 35
After the first earthquake of 4 September, the Foodstuffs South Island Community Trust distributed $55,000 of grocery vouchers to 140 staff of Foodstuffs and members who experienced hardship due to the earthquake. Following the more widespread devastation of the 22 February earthquake, sponsors and supporters rallied round with extra funding and, along with donations from Foodstuffs (NZ) Ltd and our Auckland and Wellington members’ quake-relief funding, contributions rose to more than $500,000. At the time of writing, the Community Trust had assisted more than 400 individuals with finance totalling just under $275,000. It is expecting an influx of earthquake related requests from community groups over the coming months.
The companies also work closely together on e-commerce initiatives and are making good progress increasing the penetration of supplier transactions processed electronically via the Foodstuffs eXchange. Around 86% of suppliers are now using the eXchange for one or more transaction type and 65% of supplier invoices are now transmitted via the portal. The GS1net project continues to gain momentum and steps taken by the companies to align and streamline their supplier engagement processes has seen the roll-out of GS1net speed up.
The companies’ joint primary freight initiative is progressing well. At year end FIN was providing primary freight services to 102 suppliers, an increase of 63 over the previous year.
Other national projects included the adoption of unit pricing in retail stores and the redevelopment of Foodstuffs’ national websites, both now completed. The website projects involved upgrading of the retail brand sites, suppliers’ website, the development of an e-recruitment tool and the development of a supplier relationship management tool.
In recent years the three companies have worked more closely together on national marketing initiatives and this continued in the year under
Foodstuffs (NZ) Limited, as the Federation Headquarters of the Foodstuffs Group of Companies, continued its role of co-ordinating
Annual Report 2011
The two Canterbury quakes lead to some disruption to the operations for the South Island Company, the temporary closure of most Christchurch stores and the Hornby ambient distribution centre and the longer-term closure of three New Worlds and a Four Square store. Operators, management, staff and suppliers demonstrated huge resilience and fortitude under pressure, and pulled together to resume near-normal services in a very short time.
review. During the year, the New World group launched the “Different like You” brand campaign and “Cleverbaskets” to point customers to value buys. New World continued its association with the Silver Ferns International Netball series and ran another successful Eat Wise & Exercise promotion. National New World competitions included the highly successful Shop, Scratch, & Score competition and the “Great Car Give Away” in which every New World store gave away a Suzuki Swift car. National marketing collaboration will step up again in the 2011/2012 year with the appointment of a National Marketing General Manager.
Foodstuffs Soutn Island Limited
stores are part-way through their implementations.
21
National Progress Report (continued) the national activities of the Group where appropriate. The organisation continues to be involved with administrative and secretarial activities for the wider group, including the production of calendars and the organisation of national meetings, and the Federation body plays an important advocacy role representing Foodstuffs’ views nationally. National submissions were made in response to: the Alcohol Reform Bill, the Smoke-free (Controls and Enforcement) Amendment Bill, the Food Bill, two Employment Relations Amendment Bills, and the Holidays’ Amendment Bill. Submissions were also prepared for: the Ministry of Consumer Affairs’ review of Consumer Law, the MED’s draft fuel rationing regulations, the COAG Review of Food Labelling Law and Policy, Medsafe’s review of the medical classification of cough and cold medicines, and the IRD’s consultation on depreciation for non-residential building. An application was made for bakers to be reinstated on Immigration NZ’s Essential Skills Shortage Lists which will be decided mid-2011. Foodstuffs Own Brands Ltd (FOBL) continues to be responsible for the development and management of private label products, as well as managing national procurement and supplier relations. During the year, the Company launched a new consumer marketing programme for Pams,
22
and launched a “Pick Me” label to assist consumers in identifying food healthier choices. FOBL, together with the national trans-Tasman joint venture, Metfood Pty Ltd, continues to run a joint tendering programme and has achieved considerable savings in procurement costs for the Foodstuffs group of companies. Foodstuffs’ Food for Thought Trust, sponsored by Pams, signed a Collaborative Agreement with the Heart Foundation which runs a school programme named Heart Start. Under the Collaborative Agreement the two organisations promote each other’s programme as part of their dealings with schools. The venture has commenced with a pilot programme which will be reviewed in 2011. The Trust has employed a second nutritionist based in Auckland to meet increased demand for the programme from schools in the wider Auckland region. In conclusion, as Chairman of Directors, I would like to express my appreciation to my fellow Directors and to the executives and staff of the respective Foodstuffs companies for the commitment and enthusiasm they show in ensuring the ongoing progress, development, and success of the Foodstuffs organisation. I would like to make special mention of Tony Carter who stood down from the dual roles of Managing Director
of Foodstuffs (Auckland) Ltd and Foodstuffs (NZ) Ltd in late 2010 to pursue a career as a Company Director. Tony Carter’s contribution to the organisation over a 17-year period was enormous and we are very much indebted to him for his capable leadership over this time. We extend to Tony and his wife Frances our very best wishes for their future lives. I would also like to thank all the retail members of the Foodstuffs group nationally for the support that they have shown both to their own Foodstuffs Company and to the national organisation. The Foodstuffs companies continue to face challenges at a wholesale and retail level, but the organisation has shown great resilience in the face of these challenges, drawing on the considerable strength that has built up over many years. The close co-operation which occurs between the three companies is a major strength of the organisation and we are confident that the organisation will continue to build on this foundation to make further progress in the year ahead.
Brian Drake Chairman
Executive Team PAK’nSAVE Executive Committee PAK’nSAVE Wainoni
Steve Anderson
Chief Executive Officer
Stephen Boock
PAK’nSAVE Northlands
Yvonne Botha
Executive Assistant
Bryan Dobson
PAK’nSAVE Invercargill
Andrew Howard
PAK’nSAVE Richmond
Alan Malcolmson
John Lee
PAK’nSAVE Hornby
Steven McDonald
PAK’nSAVE Riccarton
William McDonald
PAK’nSAVE Dunedin
Chris McDonald
PAK’nSAVE Dunedin
Brad Spence
PAK’nSAVE Moorhouse
Jason Williams
PAK’nSAVE Timaru
John Mullins
General Manager Retail Operations General Manager Property & Retail Development General Manager Administration & Members Services / Company Secretary General Manager Trents Wholesale Limited General Manager Wholesale Operations & Procurement
Malcolm Wratt
General Manager Finance
Philip Wright
General Manager Information Technology
New World Executive Committee
Roger Davidson Kim DeGarnham Philip Lemon
Chris Griffin [Chairman]
New World Gore
Phil Blackburn
New World Balclutha
Nigel Bond
New World South City
Senior Executive
Kathy Frampton
New World Northwood
Finance
Warren McKenzie
New World Windsor
Simon Hughes
Group Finance Manager
Craig Nieper
New World Centre City
Murray Trim
Head of Decision Support
Andrew Wright
Internal Audit Manager
Four Square Executive Committee Rick Haaima [Chairman]
Four Square Palmerston
Lynette Eddington
Four Square Top Notch
Peter Gillaly
Four Square Tarbert Street
Cushla Jones
Four Square Fern Grove
John McDonald
Four Square Pleasant Point
Graeme Neilson
Four Square Ascot
John Niles
Four Square Owaka
Ian Steele
Four Square Hanmer Springs
Henry’s Executive Committee Carl Wild [Chairman] & Keith Miles
24
Corporate Executives
Marcel Gray [Chairman]
Henry’s City Henry’s Rolleston Henry’s New Brighton Henry’s Rangiora Henry’s Hornby Henry’s Woolston Henry’s Bishopdale Henry’s Tower Junction Henry’s Ferrymead Henry’s Shirley
Craig Smith & Tracy Catanach
Henry’s Kaikoura
Gerry Breen
Henry’s Queenstown
Marty & Raewyn Hay
Henry’s Centre City Henry’s Foodlands
Brad Spence
Henry’s Moorhouse
Howard Smith
Henry’s Timaru
Kevin Ryan
Henry’s Alexandra
Victoria Boyes
Henry’s Greymouth
Administration & Members Services Ron Bitschcat
Employee Services Manager
Chris Dorward
Manager Membership Services
Information Technology Chris Cameron
Online Media Manager
Ana Connor
eCommerce Manager
Gary Cowens
IT Operation Services Manager
Gordon McCoy
Business Systems Manager
Philip Smith
Project Delivery Manager
Retail Operations Retail Brands Tim Donaldson
Retail Brands Manager
Alan Smith
Foodmarket Group Manager
Kent Mahon
New World Group Manager
David Wise
PAK’nSAVE Group Manager
Annie Hay David MacKenzie
Retail Merchandise Manager – Fresh Retail Merchandise Manger – Packaged
Support Services Stephanie Feldbrugge Support Services Manager Nick Dawson
Group Communications Manager
Mark Hamilton
Training & Development Manager
David Norton
Loss Prevention Manager
Murdoch Manufacturing Paul Johnston
General Manager
Wholesale Operations & Procurement Kris Lancaster
Logistics Operations Manager
Patrick O’Leary
Article Master Manager
David Pawson
Wholesale Merchandise Manager
Distribution Centres Scott Fairweather
Manager, Hornby, Christchurch
Bill Robertson
Manager, Dunedin
Grant Weatherston
Manager, Dunedin
Tony Ziolo
Manager, Papanui, Christchurch
Trents Cash’nCarry Phil Olsen
Operations Manager, Christchurch
Anthony Haslam
Manager, Greymouth
Allan McKenzie
Manager, Tuam St, Christchurch
Paul Stanton
Manager, Blenheim
John Warren
Manager, Invercargill
Grant Watt
Manager, Timaru
Paul Witty
Manager, Nelson
Property & Retail Development Rebecca Parish
Property Development Manager
Clayton Young
Property Manager
Foodservices Sales Manager
Alan Wicks
Promotions and Merchandise Manager
Foodstuffs Soutn Island Limited
Michael Arlidge
Annual Report 2011
Trents Wholesale
25
Independent Auditors’ Report to the shareholders of Foodstuffs South Island Limited We have audited the accompanying summary financial statements on pages 28 to 31 which comprise the 31, summary balance sheet as at 28 February 2011, summary income statement, summary statement of comprehensive income and summary statement of changes in equity and summary cash flow statement for the year then ended, and related notes, which are derived from the audited financial statements of Foodstuffs South Island Limited for the year ended 28 February 2011. We expressed an unmodified audit opinion on those financial statements in our report dated 14 April 2011. The summary financial statements do not contain all the disclosures required for full financial statements under generally accepted accounting practice in New Zealand. Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of Foodstuffs South Island Limited.
Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation of a summary of the audited financial statements in accordance with FRS-43: Summary Financial Statements.
Auditors’ Responsibility Our responsibility is to express an opinion on the summary financial statements based on our procedures, which were conducted in accordance with International Standard on Auditing (New Zealand) 810: Engagements to Report on Summary Financial Statements. We have no relationship with, or interests in, Foodstuffs South Island Limited or any of its subsidiaries other than in our capacities as auditors, taxation advisors, consulting advisors and providers of other assurance related services. These services have not impaired our independence as auditors of the Company and Group.
Opinion In our opinion, the summary financial statements derived from the audited financial statements of Foodstuffs South Island Limited for the year ended 28 February 2011 are consistent, in all material respects, with those financial statements, in accordance with FRS-43.
Restriction on Distribution or Use This report is made solely to the Company’s shareholders, as a body, in accordance with Section 205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.
Chartered Accountants 14 April 2011
26
Christchurch
Foodstuffs South Island Limited Group Financial Statements Income Statements
28
Statements of Comprehensive Income
29
Statements of Changes in Shareholders’ Equity
29
Balance Sheets
30
Consolidated Statement of Cash Flows
31
27
Income Statements
for the year ended 28 February 2011
GROUP
Operating revenue Other income Total revenue and other income Operating profit Net finance costs Rebates to members Share of profit/(loss) from associates Profit/(Loss) before tax
parent
2011
2010
2011
2010
$000
$000
$000
$000
2,339,141
2,278,386
2,139,841
2,080,446
120,901
75,830
91,823
50,190
2,460,042
2,354,216
2,231,664
2,130,636
219,273
202,989
193,482
175,982
7,999
9,179
604
2,682
196,112
177,575
195,987
177,575
140
( 35)
-
-
15,302
16,200
( 3,109)
( 4,275) ( 4,523)
Income tax expense: 3,300
4,100
( 3,853)
Income tax on change to tax depreciation on buildings
Income tax before budget changes
36,276
-
-
-
Effect of change in tax rate
( 413)
-
( 88)
-
Total income tax
39,163
4,100
( 3,941)
( 4,523)
( 23,861)
12,100
832
248
(23,861)
12,100
832
248
Net Profit/(Loss) for the year after tax Attributable to: Shareholders of the parent company
The loss attributable to Shareholders of the parent company is after a one-off tax change of $35,863,000 and before dividend distributions of $11,778,000, (2010:$11,911,000)which are disclosed in the Statement of Changes to Shareholder’s Equity.
28
The attached notes form part of and are to be read in conjunction with the audited financial statements.
Statements of Comprehensive Income for the year ended 28 February 2011
GROUP
Net Profit/(Loss) for the year
parent
2011
2010
2011
2010
$000
$000
$000
$000
( 23,861)
12,100
832
248
38
Other comprehensive income: Movement in other reserves (not taxable) Movement in available for sale reserve (not taxable) Total comprehensive income for the year
482
202
122
( 3,296)
5,252
-
-
( 26,675)
17,554
954
286
( 26,675)
17,554
954
286
2011
2010
2011
2010
$000
$000
$000
$000
203,190
180,672
29,016
23,766
Attributable to: Shareholders of the parent company
Statements of Changes in Shareholders’ Equity for the year ended 28 February 2011
At 1 March 2010
parent
Total comprehensive income
( 26,675)
17,554
954
286
Dividend on retained patronage shares
( 11,778)
( 11,911)
( 11,778)
( 11,911)
Total recognised income and expenses
( 38,453)
5,643
( 10,824)
( 11,625)
Share issue At 28 February 2011
43,274
16,875
43,274
16,875
208,011
203,190
61,466
29,016
Basis of preparation These summary financial statements on pages 28 to 31, comprising the Income Statements, Statements of Comprehensive Income, Statements of Changes in Shareholders Equity, Balance Sheets, and Consolidated Statement Cash Flows are those of Foodstuffs South Island Limited (the “Parent”) and its subsidiaries (the “Group”). They have been prepared in accordance with Financial Reporting Standard No. 43 “Summary Financial Statements” and have been extracted from full financial statements that have been prepared in accordance with New Zealand Standards that comply with International Financial Reporting Standards. The full financial statements for the year ended 28 February 2011, authorised for issue and signed on 14 April 2011 have been audited by PricewaterhouseCoopers and given an unqualified opinion. The Group is a profit-oriented entity. For a complete understanding of the financial affairs of the Group, the full financial statements are available to qualifying members on request.
The attached notes form part of and are to be read in conjunction with the audited financial statements.
Foodstuffs (South Island) Limited and Subsidiary Companies
GROUP
29
Balance Sheets
for the year ended 28 February 2011
GROUP
parent
2011
2010
2011
2010
$000
$000
$000
$000
435,978
429,759
25,712
25,555
17,457
18,660
17,167
18,108
ASSETS Non-current assets Property, plant and equipment Intangible assets Investments in subsidiaries Investments in associates
-
-
276,156
277,589
5,035
4,895
803
803
35,611
38,906
-
-
Investments held at fair value: Investments in listed companies Investments in other related companies Total non-current assets
11,896
10,385
11,896
10,385
505,977
502,605
331,734
332,440
Current assets Cash and cash equivalents
41,783
( 7,356)
41,783
( 7,356)
Trade and other receivables
153,784
176,487
132,301
162,385
77,398
80,733
73,519
77,438
Inventories Current income tax receivable
( 1,042)
489
10,179
6,254
Total current assets
271,923
250,353
257,782
238,721
TOTAL ASSETS
777,900
752,958
589,516
571,161
EQUITY Capital and reserves attributable to equity holders Share capital
87,158
43,884
87,158
43,884
Other reserves
95,931
136,847
1,127
1,515
Retained earnings TOTAL EQUITY
24,922
22,459
( 26,819)
( 16,383)
208,011
203,190
61,466
29,016
74,037
112,895
74,037
112,895
1,902
1,902
1,902
1,902
Liabilities Non-current liabilities Borrowings Retirement benefit obligations Deferred income tax liability
42,013
6,991
3,084
2,876
117,952
121,788
79,023
117,673
Trade and other payables
205,179
192,548
202,289
189,082
Borrowings
174,952
174,182
174,952
174,182
71,054
60,522
71,034
60,480
752
728
752
728
Total current liabilities
451,937
427,980
449,027
424,472
TOTAL LIABILITIES
569,889
549,768
528,050
542,145
TOTAL EQUITY AND LIABILITIES
777,900
752,958
589,516
571,161
Total non-current liabilities Current liabilities
Rebates payable Provisions
On behalf of the Board 14 April 2011
Robin Brown, Director
30
Stephen Boock, Director
The attached notes form part of and are to be read in conjunction with the audited financial statements.
Statements of Cash Flows for the year ended 28 February 2011
GROUP
parent
2011
2010
2011
2010
$000
$000
$000
$000
2,116,978
Cash flows from operating activities Cash was provided from: Customers
2,466,497
2,356,076
2,242,384
Insurance proceeds received (excluding Property, Plant, & Equipment)
5,439
-
5,439
-
Interest received
2,290
1,725
2,289
1,728
Member trading accounts
4,779
-
4,779
-
2,479,005
2,357,801
2,254,891
2,118,706
2,201,938
2,119,102
2,011,449
1,924,401
185,558
154,468
185,412
154,182
8,266
8,410
592
1,546 4,837
Cash was applied to: Purchases, wages and expenses Members rebates Interest paid Member Trading accounts
-
4,831
-
2,250
6,490
(224)
-
2,398,012
2,293,301
2,197,229
2,084,966
80,993
64,500
57,662
33,740
Advances from other companies
6,670
2,518
4,514
1,521
Dividends
3,475
3,761
10,382
11,069
Insurance proceeds received for replacement Property, Plant, & Equipment
9,778
-
1,040
-
Sale of property plant and equipment
3,439
742
354
598
23,362
7,021
16,290
13,188
3,489
4,142
3,440
3,628
40,139
30,819
9,784
6,097
Income tax paid Net cash flow from operating activities Cash flows from investing activities Cash was provided from:
Cash was applied to: Purchase of intangibles Purchase of property plant and equipment Advances to related parties Net cash flow from investing activities
1,517
4,977
1,518
5,620
45,145
39,938
14,742
15,345
(21,783)
(32,917)
1,548
(2,157)
43,274
16,875
43,274
16,875
43,274
16,875
43,274
16,875
1,804
2,577
1,804
2,577
Cash flows from financing activities Cash was provided from: Share capital raised
Interest paid on Redeemable Preference Shares Dividends paid on Retained Patronage Shares
12,683
1,689
12,683
1,689
Long term borrowings
38,858
53,359
38,858
53,359
53,345
57,625
53,345
57,625
(10,071)
(40,750)
(10,071)
(40,750)
Net (decrease)/increase in cash held
49,139
(9,167)
49,139
(9,167)
Opening cash brought forward
(7,356)
1,811
(7,356)
1,811
Ending Cash carried forward
41,783
(7,356)
41,783
(7,356)
41,304
(8,823)
41,304
(8,823)
467
1,455
467
1,455
12
12
12
12
41,783
(7,356)
41,783
(7,356)
Net cash flow from financing activities
Represented by: Bank Overseas currency accounts Cash on hand
The attached notes form part of and are to be read in conjunction with the audited financial statements.
Foodstuffs (South Island) Limited and Subsidiary Companies
Cash was applied to:
31
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