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AnnualReport2020_Comvita.pdf
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Comvita Financial Statements 2020 Comvita Financial Statements 2020 - P1
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C O N T E N T S
DIRECTORS’ DECLARATION
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
AUDIT REPORT
STATUTORY INFORMATION
COMPANY DIRECTORY
Comvita Financial Statements 2020 - P2 Comvita Financial Statements 2020- P3
D I R E C T O R S ’ D E C L A R A T I O N C O N S O L I D A T E D I NC O M E S T A T E M E N T
Brett Hewlett Luke Bunt 24 August 2020 24 August 2020
For the year ended In thousands of New Zealand dollars
30 June 2020
30 June 2019
Note
Revenue 6 195,912 171,104 Cost of sales (99,969) (107,343) Gross profit 95,943 63,761
Other income 7 2,209 6,583 Selling and marketing expenses (60,403) (43,726) Administrative expenses 10 (24,395) (19,739) Distribution expenses (10,301) (8,394) Research and development expenses (1,299) (1,689) Operating profit/(loss) before financing costs 1,754 (3,204)
Finance income 8 307 524 Finance expenses 8 (6,217) (6,667) Net finance costs (5,910) (6,143)
Share of (loss)/profit of equity accounted investees 17b (174) 448 Impairment of equity accounted investees 17c (5,928) (2,401) Impairment of goodwill 14 - (19,825) Loss before income tax (10,258) (31,125)
Income tax benefit 11 557 3,408 Loss for the year (9,701) (27,717)
Earnings per share Basic earnings per share (NZ cents) 25 (19.10) (61.05)
Diluted earnings per share (NZ cents) 25 (19.10) (61.05)
The notes on pages 8 to 42 are an integral part of these financial statements
In the opinion of the directors of Comvita Limited, the financial statements and the notes, on pages 3 to 42:
• comply with New Zealand generally accepted accounting practice and fairly reflect the financial position of the Group as at 30 June 2020 and the results of their operations and cash flows for the year ended on that date
• have been prepared using appropriate accounting policies, which unless otherwise stated have been consistently applied, and supported by reasonable judgements and estimates
The directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the financial position of the Group and facilitate compliance of the financial statements with the Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013.
The directors consider that they have taken adequate steps to safeguard the assets of the Group, and to prevent and detect fraud and other irregularities. Internal control procedures are also considered to be sufficient to provide reasonable assurance as to the integrity and reliability of the financial statements.
The directors are pleased to present the financial report, incorporating the financial statements of Comvita Limited for the year ended 30 June 2020.
For and on behalf of the Board of Directors:
Comvita Financial Statements 2020 - P4 Comvita Financial Statements 2020- P5
For the year ended 30 June 2020 In thousands of New Zealand dollars
Share capital
Foreign currency
translation reserve
Hedging reserve
Fair value reserve
Retained earnings Total
Balance at 30 June 2018 137,744 (1,659) (2,348) - 55,955 189,692 Total comprehensive income for the year - (Loss) for the year - - - - (27,717) (27,717) Other comprehensive income (net of tax): - Foreign investor tax credits received - - - - 10 10 Foreign currency translation differences for equity accounted investees - (853) - - - (853)
Foreign currency translation differences for foreign operations - (1,955) - - - (1,955) Effective portion of changes in fair value of cash flow hedges - - 625 - - 625 Total other comprehensive income - (2,808) 625 - 10 (2,173) Total comprehensive income for the year - (2,808) 625 - (27,707) (29,890)
Transactions with owners, recorded directly in equity Share based payment (Note 9) - - - - 678 678 Issue of ordinary shares - investment in Comvita China 12,312 - - - - 12,312 - executive share scheme 530 - - - - 530 - employee share purchase scheme 77 - - - - 77 Issue of treasury stock – investment in Apiter 580 - - - 305 885 Issue of treasury stock – supplier share scheme 2 - - - (13) (11) Dividend paid - - - - (918) (918) Total transactions with owners 13,501 - - - 52 13,553 Balance at 30 June 2019 151,245 (4,467) (1,723) - 28,300 173,355
Total comprehensive income for the year (Loss) for the year - - - - (9,701) (9,701) Other comprehensive income (net of tax): Foreign currency translation differences for equity accounted investees (Note 17b) - (467) - - - (467)
Foreign currency translation differences for foreign operations - 1,125 - - - 1,125 Financial asset – fair value movement - - - (2,640) - (2,640) Effective portion of changes in fair value of cash flow hedges - - 1,196 - - 1,196 Total other comprehensive income - 658 1,196 (2,640) - (786) Total comprehensive income for the year - 658 1,196 (2,640) (9,701) (10,487)
Transactions with owners, recorded directly in equity Capital Raising – rights offer 50,000 - - - - 50,000 Issue expenses related to capital raising (1,950) - - - - (1,950) Share based payment (Note 9) - - - - 329 329 Issue of treasury stock - - Supplier share scheme 502 - - - (43) 459 - Issued to CEO (Note 30) 915 - - - (265) 650 Acquisition of treasury stock (572) - - - - (572) Redemption of ordinary shares related to share schemes (36) - - - - (36) Total transactions with owners 48,859 - - - 21 48,880 Balance at 30 June 2020 200,104 (3,809) (527) (2,640) 18,620 211,748
The notes on pages 8 to 42 are an integral part of these financial statements
C O N S O L I D A T E D S T A T E M E N T O F C O M P R E H E N S I V E I NC O M E
C O N S O L I D A T E D S T A T E M E N T O F C H A NG E S I N E Q U I T Y
The notes on pages 8 to 42 are an integral part of these financial statements
For the year ended In thousands of New Zealand dollars
30 June 2020
30 June 2019
Note
Loss for the year (9,701) (27,717)
Items that are or may be reclassified subsequently to the income statement Foreign currency translation differences for foreign operations 1,431 (2,504) Foreign currency translation differences for equity accounted investees (467) (853) Effective portion of changes in fair value of cash flow hedges 1,658 868 Fair value movement – financial asset (2,640) - Foreign investor tax credits received - 10 Income tax on these items 11 (768) 306 Income and expense recognised directly in other comprehensive income (786) (2,173) Total comprehensive income for the year (10,487) (29,890)
Comvita Financial Statements 2020 - P6 Comvita Financial Statements 2020- P7
As at 30 June 2020 2019
In thousands of New Zealand dollars Note
Assets Property, plant and equipment 13 56,829 56,921
Intangible assets and goodwill 14 39,467 41,082
Right of use assets 15 11,447 -
Biological assets 16 3,795 4,048
Investment in equity accounted investees 17 6,261 9,755
Other investments 17 8 2,648
Deferred tax asset 12 8,043 6,757
Total non-current assets 125,850 121,211
Inventory 19 112,679 132,192
Trade receivables 20 17,726 30,878
Sundry receivables 21 12,349 16,289
Cash and cash equivalents 16,680 10,314
Derivatives 18 - 192
Tax receivable 366 553
Assets held for sale 13 773 1,414
Total current assets 160,573 191,832 Total assets 286,423 313,043
Equity Issued capital 200,104 151,245
Retained earnings 18,620 28,300
Reserves (6,976) (6,190)
Total equity 24 211,748 173,355
Liabilities Loans and borrowings 26 32,200 99,250
Employee benefits 22 414 446
Lease liability 7,891 -
Deferred tax liability 12 2,194 3,321
Total non-current liabilities 42,699 103,017
Trade and other payables 23 22,707 29,471
Lease liability 3,744 -
Employee benefits 22 3,653 4,041
Tax payable 1,158 739
Derivatives 18 714 2,420
Total current liabilities 31,976 36,671 Total liabilities 74,675 139,688 Total equity and liabilities 286,423 313,043
For the year ended 30 June In thousands of New Zealand dollars
2020 2019
Note
Receipts from customers 207,143 191,331
Payments to suppliers and employees (161,394) (163,963)
Interest received 34 4
Interest paid (4,421) (4,782)
Taxation paid (2,065) (1,504)
Net cash flows from operating activities 27 39,297 21,086
Investment in equity accounted investees - (6,512)
(Consideration paid)/cash acquired from business combination (4,505) 5,456
Prepayments and loans to equity accounted investees (1,621) (1,307)
Interest from equity accounted investees - 268
Receipt of dividend from equity accounted investee - 519
Interest from related parties 36 36
Payment for the purchase of property, plant and equipment (5,206) (16,125)
Receipt for the disposal of property, plant and equipment 2,336 336
Payment for the purchase of biological assets - 148
Receipt from sale of intangibles 26 22
Payment for the purchase of intangibles (496) (545)
Payment for derivative settlement (263) -
Net cash flows from investing activities (9,693) (17,704)
Proceeds from the issue of share capital 47,641 607
Repayment of lease liabilities (3,862) -
(Repayment)/proceeds from loans and borrowings (67,050) 2,550
Payment of dividends - (918)
Net cash flows from financing activities (23,271) 2,239
Net increase in cash and cash equivalents 6,333 5,621 Cash and cash equivalents at the beginning of the year 10,314 4,947
Effect of exchange rate fluctuations on cash held 33 (254)
Cash and cash equivalents at the end of the year 16,680 10,314
Represented as: Cash and cash equivalents 26 16,680 10,314
Total 16,680 10,314
C O N S O L I D A T E D S T A T E M E N T O F F I N A NC I A L P O S I T I O N
C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
The notes on pages 8 to 42 are an integral part of these financial statements The notes on pages 8 to 42 are an integral part of these financial statements
Comvita Financial Statements 2020 - P8 Comvita Financial Statements 2020- P9
1. REPORTING ENTITY Comvita Limited (the “Company”) is a Company domiciled in New Zealand, and registered under the Companies Act 1993 and listed on the New Zealand Stock Exchange (“NZX”). The Company is an issuer in terms of the Financial Reporting Act 2013 and Financial Markets Conduct Act 2013. The financial statements of the Group for the year ended 30 June 2020 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in equity accounted investees.
The principal activity of the Group is that of manufacturing and marketing quality natural health products, apiary ownership and management.
2. BASIS OF PREPARATION
(a) Statement of compliance
The Company is a FMC reporting entity for the purposes of the Financial Reporting Act 2013 and under part 7 of the Financial Markets Conduct Act 2013. These Financial Statements comply with these Acts and have been prepared in accordance with the New Zealand Equivalents to International Financial Reporting Standards and International Financial Reporting Standards as appropriate for profit-oriented entities.
The financial statements were approved by the Board of Directors on 24 August 2020.
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis except for derivative financial instruments, financial instruments designated as fair value through other comprehensive income, biological assets and leases which are measured at fair value.
The methods used to measure fair values are discussed further in the respective notes.
(c) Functional and presentation currency
These financial statements are presented in New Zealand dollars ($), which is the Company’s functional currency. Amounts have been rounded to the nearest thousand.
(d) Accounting estimates and judgements
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are set out below:
(i) Measurement of recoverability of cash generating units
Impairment reviews are performed by management annually to assess the carrying value of cash generating units containing goodwill. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. Refer to Note 14.
(ii) Intangible assets
The estimation of useful lives of intangible assets such as distribution networks have been based on historical experience. The useful lives are reviewed at least once per year and adjustments to useful lives are made when considered necessary.
(iii) Valuation of equity accounted investees
An assessment of the carrying value of investments in equity accounted investees is performed at least annually and considers objective evidence for impairment on each investment, taking into account observable data on the investment, the status or context of markets, its own view of fair value, and its long term investment intentions. The assessment also requires judgements about the expected future performance and cash flows of the investment.
(v) Deferred consideration on business combinations
The valuation of the deferred consideration on the Group’s business combinations are based on the post-acquisition performance of the business and the amounts payable shall be remeasured at their fair value resulting from events or factors that emerge after the acquisition date, with any resulting gain or loss recognized in the income statement. Refer note 17.
(vi) Leases
Comvita assesses at lease commencement whether it is reasonably certain to exercise extension options where included in the contract, and where it is reasonably certain, the extension period has been included in the lease liability calculation.
The Group calculates its incremental borrowing rate with reference to the external borrowing facilities available to the Group. The incremental borrowing rate is used to measure lease liabilities.
(vii) Recoverability of Deferred Tax Assets
The utilisation of tax loss carry-forwards is dependent on expected future taxable profits in excess of the profits from the reversal of existing taxable temporary differences. This recognition is based on current budgets and financial forecasts completed by management.
(viii) Valuation of biological assets
The fair value of biological assets is assessed on an annual basis which involves reviewing the number of operational hives in use as well as ensuring the value per hive is in line with guidance provided by the Ministry of Primary Industries, refer note 16.
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
(i) Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
3. SIGNIFICANT ACCOUNTING POLICIES (iii) Investments in equity accounted investees
Associates and Joint Ventures are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Associates and Joint Ventures are accounted for using the equity method (equity accounted investees). The consolidated financial statements include the Group’s share of the income and expenses of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases.
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date.
(ii) Foreign operations
The assets and liabilities of foreign operations with currencies different to the Company including goodwill and fair value adjustments arising on acquisition, are translated to New Zealand dollars at exchange rates at the reporting date. The income and expenses of such foreign operations are translated to New Zealand dollars at exchange rates at the dates of the transactions. Foreign currency differences are recognised in the foreign currency translation reserve (FCTR).
(c) Financial assets and financial liabilities
(i) Classification
The Group classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
• those to be measured at amortised cost.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the group classifies its debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the income statement.
• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as a separate line item in the income statement.
• Fair Value through Profit or Loss (FVPL): Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the group’s right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the income statement as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
Accounting for finance income and expense is discussed in Note 3(m).
(d) Financial instruments
(i) Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at FVPL, any directly attributable transaction costs.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P10 Comvita Financial Statements 2020- P11
3. SIGNIFICANT ACCOUNTING POLICIES A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and demand deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Accounting for finance income and expense is discussed in Note 3(m).
Instruments at fair value through the income statement An instrument is classified as at FVPL if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at FVPL if the Group manages such investments and makes purchase and sale decisions based on their fair value. Upon initial recognition, attributable transaction costs are recognised in the income statement when incurred. Subsequent to initial recognition, financial instruments are measured at fair value, and changes therein are recognised in the income statement.
(ii) Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as financial instruments designated at FVPL.
Derivative financial instruments are recognised initially at fair value and transaction costs are expensed immediately. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the hedging relationship .
Cash flow hedges Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised in other comprehensive income and presented in equity in the hedging reserve to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in the income statement.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the forecast transaction occurs. The amount recognised in equity is transferred to the income statement in the same period that the hedged item affects the income statement.
(e) Share capital
(i) Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share entitlements are recognised as a deduction from equity.
(ii) Repurchase of share capital
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity.
(f) Property, plant and equipment
(i) Recognition and measurement
IItems of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.
(iii) Depreciation
Depreciation is recognised in the income statement on a straight- line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
• Buildings up to 50 years
• Plant and machinery 2 - 20 years
• Vehicles 4 -10 years
• Office equipment, furniture and fittings 2 -10 years
• Bearer plants 100 years
Depreciation methods, useful lives and residual values are reassessed at the reporting date.
3. SIGNIFICANT ACCOUNTING POLICIES
(g) Biological assets
Biological assets are measured at fair value less point-of-sale costs, with any change therein recognised in the income statement. Point- of-sale costs include all costs that would be necessary to sell the assets. Agricultural produce from biological assets is transferred to inventory at fair value, by reference to market prices for honey, less estimated point-of-sale costs at the date of harvest.
(h) Intangible assets and goodwill
(i) Goodwill
Goodwill that arises on the acquisition of subsidiaries and other business combinations is presented within intangible assets. Goodwill is measured at cost less accumulated impairment losses.
(ii) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the income statement when incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in the income statement when incurred. Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.
(iii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in the income statement when incurred.
(iv) Amortisation
Amortisation is recognised in the income statement on a straight- line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:
• Intellectual property and other intangible assets 3 – 20 years
• Capitalised development costs 2 – 5 years
• Software 3 – 10 years
(i) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average principle, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
The cost of items transferred from biological assets is their fair value less point-of-sale costs at the date of transfer.
(j) Impairment
The Group’s assets are reviewed at each reporting date to determine whether there is any objective evidence of impairment.
An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses directly reduce the carrying amounts of assets and are recognised in the income statement.
(i) Impairment of receivables
The group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the company applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
The recoverable amount of the Group’s investments in receivables carried at amortised cost is calculated as the present value of estimated future cash flows. Impairment losses on an individual basis are determined by an evaluation of the exposures on an instrument by instrument basis. All individual instruments that are considered significant are subject to this approach.
(ii) Non-financial assets
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. When an event occurring after the impairment was recognised causes the amount of the impairment to decrease, the decrease in impairment loss is reversed through the income statement.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P12 Comvita Financial Statements 2020- P13
3. SIGNIFICANT ACCOUNTING POLICIES
(k) Employee benefits
Share-based payment transactions The grant date fair value of entitlements granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the entitlements. The amount recognised as an expense is adjusted to reflect the actual number of share entitlements that vest.
(l) Revenue
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised at the point of time performance obligations are satisfied by transferring control of goods to the customer. For wholesale sales, control passes to the customer in accordance with the individual terms of the contract of sale – for domestic sales this is ordinarily on delivery to the customer’s premises and acceptance by the customer and for export sales, this is ordinarily on delivery to the port of origin. For in-store sales, control passes to the customer at point of sale. For online sales, the order along with delivery to the customer are considered to comprise a single performance obligation, therefore control is considered to pass to the customer on delivery of the goods.
(m) Finance income and expenses
Finance income comprises interest income on funds invested, foreign exchange gains, dividend income and gains on the disposal of FVOCI financial assets that are recognised in the income statement. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.
Finance expenses comprise interest expense on borrowings, foreign exchange losses, unwinding of the discount on provisions, impairment losses recognised on financial assets (except for trade receivables) and losses on the disposal of FVOCI financial assets that are recognised in the income statement. All borrowing costs are recognised in the income statement using the effective interest method.
(n) Income tax expense
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous periods.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the
initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.
(o) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share entitlements granted to employees.
(p) Segments
Segment results that are reported to the CEO include costs directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly head office expenses.
(q) New and amended standards adopted by the group
Except as described below, the accounting policies applied in these consolidated financial statements are the same as those applied in the Group’s consolidated financial statements as at and for the year ended 30 June 2019.
NZ IFRS 16 Leases
Effective for Group reporting period beginning on: 1 July 2019
NZ IFRS 16 replaces NZ IAS 17 Leases and removes the classification of leases as either operating leases or finance leases – for the lessee – effectively treating all leases as finance leases. This has resulted in the Group recognising right of use assets and related lease liabilities in the statement of financial position. Lease payments previously recorded as operating lease expenses in’the income statement are now split between interest expense and repayment of financial lease liabilities. Amortisation of right of use assets is recognised on a straight line basis over the lease term in the income statement.
The Group transitioned to NZ IFRS 16 with a date of initial application of 1 July using the modified retrospective approach and has not restated comparative amounts for the period prior to first adoption. The Group has utilised practical expedients permitted by NZ IFRS 16 in respect of short-term and low value leases where appropriate.
3. SIGNIFICANT ACCOUNTING POLICIES The Group has also elected not to reassess whether an existing contract contains a lease at the date of initial application. The lease liability was measured at the present value of the minimum lease payments, discounted at the incremental borrowing rate applicable to that lease (or portfolio of leases) at 1 July 2019. In line with the modified retrospective approach, the associated right of use assets were measured at the amount equal to the lease liability relating to that lease at 1 July 2019, with no overall change in net assets.
Consolidated statement of financial position effect The impact of adoption of NZ IFRS 16 in the Statement of Financial Position is summarised in the table below:
In thousands of New Zealand dollars 2020 2019
Right of use assets 11,447 12,300
Lease liabilities 11,635 12,300
Change in net assets (188) -
When compared to the accounting policies applied in the prior comparative period, the adoption of NZ IFRS 16 on the Group’s Consolidated Statement of Comprehensive Income for the year ended 30 June 2020 is summarised below.
Consolidated statement of comprehensive income effect In thousands of New Zealand dollars
2020
Other operating expenses (4,096)
Depreciation 3,675
Interest expense 421
(r) Covid-19 considerations
Comvita is classified as an ‘Essential’ business by the New Zealand Government, therefore having no impact on the manufacturing process of the Group. For the year ended 30 June 2020 the Group has not been significantly impacted by COVID-19. There has been a strong demand in sales, in particular in online channels across all markets. An assessment over the carrying value of assets and liabilities has been performed and the Group has recognised provisions where necessary relating to the impact of COVID-19. The Group continues to operate as a going concern and Senior Management continue to closely monitor the situation.
4. SEGMENT REPORTING A review of operating segments has been completed in the current year and this has resulted in a change to reported segments. Previously reported segment information has been restated in line with the operating segments described below.
Segment information is presented in the financial statements in respect of the Group’s contribution segments which are the primary basis of decision making. The contribution segment reporting format reflects the Group’s management and internal reporting structure.
Performance is measured based on contribution which is a measure of profitability that the segment contributes to the Group. Contribution is used to measure performance as management believes that such information is most relevant in evaluating the results of certain segments. Inter-segment pricing is determined on an arms-length basis.
Each segment sells Comvita’s range of products. Comvita’s range of products primarily include products with apiary and other natural ingredients.
The Company is organised primarily by geographic location of its subsidiaries.
The Group has five reportable segments as described below:
Greater China This segment reports both revenue and related costs of the China and Hong Kong markets. This includes sales to our China Joint Venture and our share of the China Joint Venture’s profits up to 31 May 2019. From that date, Comvita China was consolidated, refer note 5.
ANZ Australia and New Zealand (ANZ) segment captures both revenue and related costs for the ANZ market.
Rest of Asia This segment captures both revenue and related costs of all of our Asian operations and customers excluding Greater China.
North America This segment captures both revenue and related costs for sales to customers in North America.
EMEA The Europe, Middle East and Africa (EMEA) segment captures both revenue and related costs for the EMEA markets.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P14 Comvita Financial Statements 2020- P15
5. BUSINESS COMBINATIONS – COMVITA CHINA Effective 31 May 2019 the Company owned 100% of Comvita Food (China) Limited and Comvita China Limited, collectively referred to as Comvita China. In the 30 June 2019 financial statements, it was noted that the identification of the fair value of assets and liabilities acquired was incomplete. A Distribution Network intangible asset has now been recognised effective 31 May 2019 for NZD $9,870,000 reducing goodwill on acquisition at 31 May 2019 to $17,794,000, comparatives have been updated to reflect this change. The Comvita China Goodwill has been allocated to the Greater China CGU – refer to note 4 for details. The distribution network created a deferred tax liability. 2019 deferred tax and intangible assets balances have been restated.
6. REVENUE
In thousands of New Zealand dollars 2020 2019 30 June 30 June
Sales 195,280 159,975
Equity accounted investee sales elimination movement - 9,328
Other 632 1,801
Total revenue 195,912 171,104
7. OTHER INCOME
In thousands of New Zealand dollars 2020
30 June 2019
30 June
Change in fair value of contingent consideration * 1,039 497
Government grants 535 1,023
Gain on disposal of PP&E 243 -
Gain on deemed sale of 51% of Comvita China - 4,055
Comvita China JV – 49% of earnings before consolidation - 587
Gain on discontinuing equity accounting - SeaDragon - 113
Other 392 308
Total other income 2,209 6,583
* On acquisition of the Apiter S.A. investment the Company recognised a potential liability of USD$1,115,000 (NZD $1,651,000) if certain earnout conditions are met. At 30 June 2020 two earnouts have been reversed through the income statement as they have not met the earnout conditions. It is still probable that the last earnout will be met, a liability of USD $115,000 (NZD: $179,000) continues to be recognised at 30 June 2020, refer note 23.
4. SEGMENT REPORTING (CONTINUED) For the year ended 30 June
In thousands of New Zealand dollars
Greater China ANZ Rest of Asia North America EMEA
Total reportable segments
Other segments Total
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Contribution segments
Revenue 79,022 51,442 52,802 69,562 20,533 16,722 22,137 13,361 6,916 6,211 181,410 157,298 14,502 13,806 195,912 171,104
Contribution 11,154 5,083 16,265 23,151 4,199 2,234 4,392 1,484 (511) (463) 35,499 31,489 2,280 1,508 37,779 32,997
Non attributable (other corporate expenses) (38,234) (42,784)
Other income (Note 7) - 587 2,209 6,583
Financial income and expenses (Note 8) (5,910) (6,143)
Share of (loss)/profit of equity accounted investees (Note 17) - 2,087 (174) (1,639) (174) 448
Impairment of goodwill (Note 14) - (15,607) - (2,027) - (2,191) - (19,825)
Impairment of equity accounted investees (Note 17) (5,928) (2,401) (5,928) (2,401)
Net (loss) before tax (10,258) (31,125)
Geographical segments
30 June 2020 30 June 2019
In thousands of New Zealand dollars Revenue Non-current assets Revenue Non-current
assets Greater China 84,336 41,066 26,904 8,552 ANZ 44,274 83,483 67,931 10,207 Rest of Asia 25,510 643 46,230 25,425 North America 30,840 544 23,345 8 EMEA 6,781 86 6,177 16 Other Countries 4,171 28 517 - Total 195,912 125,850 171,104 100,719
Total reportable segment assets As at 30 June
In thousands of New Zealand dollars 2020 2019 Total assets for reportable segments 128,266 128,162 Other investments 8 2,648 Investment in equity accounted investees 6,261 9,755 Other unallocated assets 151,888 172,478 Consolidated total assets 286,423 313,043
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P16 Comvita Financial Statements 2020- P17
8. FINANCIAL INCOME AND EXPENSES
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Interest income 298 522
Dividend income 9 2
Finance income 307 524
Interest expense on financial liabilities measured at amortised cost (4,421) (4,782)
Net foreign exchange loss (1,340) (894)
Net loss in fair value of derivatives designated at fair value through the income statement:
- Interest rate swaps (264) -
- SeaDragon options and convertible loan notes (192) (991)
Finance expense (6,217) (6,667) Net finance costs (5,910) (6,143)
9. PERSONNEL EXPENSES
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Wages and salaries 43,135 39,004
KiwiSaver – employer contribution 558 561
Movement in long-service leave provision (33) 58
Equity settled share based payment transactions 329 678
Total personnel expenses 43,989 40,301
10. EXPENSES
Administrative expenses The following items of expenditure are included in administrative expenses:
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Auditors’ remuneration:
To KPMG for audit services (ii) 360 341
To KPMG for audit related service 7 -
To KPMG for tax services (iii) 112 59
To Mercer & Hole (UK auditors) 33 12
Personnel expenses (i) 6,347 7,244
Depreciation (i) 578 775
Depreciation-leased assets (i) 627 -
Amortisation (i) 1,831 1,185
Insurance (i) 284 280
Doubtful debts expense 984 219
Bad debts written off (iv) 1,852 23
Restructure costs 1,768 884
Change in fair value of biological assets 389 652
Directors’ fees (v) 550 514
Directors – other costs 17 36
Other legal & professional expenses 309 557
Loss on disposal of property, plant & equipment - 93
Loss on disposal of intangible assets 9 9
Donations 6 35
(i) Only the portion of this expense which is included in administrative expenses (ii) Audit services include fee for annual audit of the financial statements of the group and its foreign subsidiaries based in China, Hong Kong and
Australia, and the review of the interim financial statements (iii) Tax services is for tax compliance and advisory work (iv) $1,673,000 of this balance relates to the wind-up of the Kaimanawa Joint Venture, see note 17c (v) Refer to Statutory Information
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P18 Comvita Financial Statements 2020- P19
11. INCOME TAX EXPENSE IN THE INCOME STATEMENT
In thousands of New Zealand dollars Note 2020 30 June
2019 30 June
Current tax expense Current period 2,382 435
Adjustment for prior periods (60) 325
Total current income tax expense 2,322 760
Deferred tax expense Origination and reversal of temporary differences 12 (2,879) (4,168)
Total deferred income tax (benefit) (2,879) (4,168)
Total income tax (benefit) (557) (3,408)
Reconciliation of effective tax expense
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Loss for the period (9,701) (27,717)
Total income tax (benefit) (557) (3,408)
(Loss) excluding income tax (10,258) (31,125)
Income tax using the Company’s domestic tax rate of 28% (2019: 28%) (2,872) (8,715)
Effect of different tax rates in foreign jurisdictions (354) (115)
Non-deductible expenses 3,118 7,795
Non-assessable income (714) (1,698)
Income tax relating to equity accounted associates - (682)
Research and development tax credits - (59)
Under provided in prior periods 265 66
Total income tax (benefit) (557) (3,408)
11. INCOME TAX EXPENSE IN THE INCOME STATEMENT (CONTINUED)
Income tax recognised directly in other comprehensive income
In thousands of New Zealand dollars Note 2020 30 June
2019 30 June
Derivatives 12 465 243
Other items 303 (549)
Total income tax recognised directly in other comprehensive income 768 (306)
Imputation credit account
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Imputation credits available for use in subsequent reporting periods 8,767 8,900
12. DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
In thousands of New Zealand dollars
Assets Liabilities Net
2020 2019 2020 2019 2020 2019 Property, plant & equipment - - (831) (1,042) (831) (1,042) Intangible assets - - (2,194) (2,405) (2,194) (2,405)
Biological assets - - (50) (397) (50) (397)
Inventories 2,973 3,519 - (916) 2,973 2,603
Derivatives 199 664 - - 199 664
Investments 105 94 - - 105 94
Other items 1,283 802 - - 1,283 802
Tax loss carry-forwards 4,364 2,868 - - 4,364 2,868
Non-refundable tax credits carried forward
- 249 - - - 249
Tax assets/(liabilities) 8,924 8,196 (3,075) (4,760) 5,849 3,436
Set-off of tax (881) (1,439) 881 1,439 - - Net tax assets/(liabilities) 8,043 6,757 (2,194) (3,321) 5,849 3,436
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P20 Comvita Financial Statements 2020- P21
13. PROPERTY, PLANT & EQUIPMENT
In thousands of New Zealand dollars Land Buildings Owned plant &
machinery
Vehicles Bearer plants
Office equipment, furniture &
fittings
Capital WIP
Total
Cost Balance at 30 June 2018 10,320 17,133 26,512 2,232 5,626 5,869 3,172 70,864
Additions/Transfers 2,225 10,401 2,299 259 414 677 (550) 15,725
Disposals - (121) (371) (121) - (636) - (1,249)
Business combinations - 27 251 - - 42 - 320
Reclassification to assets held for sale (731) (791) (32) - - (3) - (1,557)
Effect of movements in exchange rates (87) (48) (106) (6) (221) 13 (16) (471)
Balance at 30 June 2019 11,727 26,601 28,553 2,364 5,819 5,962 2,606 83,632
Additions/Transfers 220 804 1,034 159 - 1,276 2,132 5,625
Disposals (120) (447) (778) (173) - (843) - (2,361)
Reclassification to assets held for sale* (420) (328) (388) - - - - (1,136)
Effect of movements in exchange rates 48 28 60 3 131 136 1 407
Balance at 30 June 2020 11,455 26,658 28,481 2,353 5,950 6,531 4,739 86,167
Depreciation Balance at 30 June 2018 - (5,687) (11,946) (1,548) (318) (3,857) - (23,356)
Depreciation - (1,044) (2,214) (204) (66) (1,028) - (4,556)
Disposals - 17 220 104 - 634 - 975
Reclassification to assets held for sale - 110 31 - - 2 - 143
Effect of movements in exchange rates - 18 51 6 13 (5) - 83
Balance at 30 June 2019 - (6,586) (13,858) (1,642) (371) (4,254) - (26,711)
Depreciation - (1,098) (2,123) (203) (67) (1,025) - (4,516)
Disposals - 254 682 162 - 584 - 1,682
Reclassification to assets held for sale* - 57 306 - - - - 363
Effect of movements in exchange rates - (11) (34) (3) (9) (99) - (156)
Balance at 30 June 2020 - (7,384) (15,027) (1,686) (447) (4,794) - (29,338)
Carrying amount At 30 June 2018 10,320 11,446 14,566 684 5,308 2,012 3,172 47,508
At 30 June 2019 11,727 20,015 14,695 722 5,448 1,708 2,606 56,921
At 30 June 2020 11,455 19,274 13,454 667 5,503 1,737 4,739 56,829
Depreciation charge in the income statement
Depreciation is allocated to cost of sales, selling and marketing expenses, distribution expenses, research and development expenses and administrative expenses.
* Assets held for sale
As at 30 June 2020, management committed to a plan to sell a site in Nelson, New Zealand. The site had a net book value of $773,000 immediately before the initial classification to being held for sale. There were no impairment losses incurred as part of this initial classification. The site and plant and equipment are being actively marketed for sale.
12. DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
Movement in temporary differences during the year
2020 In thousands of New Zealand dollars Balance
1 July 2019 Recognised in the
income statement Recognised in other
comprehensive income Balance
30 June 2020 Property, plant & equipment (1,042) 211 - (831) Intangible assets (2,405) 211 - (2,194) Biological assets (397) 347 - (50) Inventories 2,603 370 - 2,973 Derivatives 664 - (466) 198 Investments 94 11 - 105 Other items 802 482 - 1,284 Tax loss carry-forwards 2,868 1,496 - 4,364 Tax credit carry-forwards 249 (249) - - Total 3,436 2,879 (466) 5,849
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
In thousands of New Zealand dollars 2020 2019 Tax loss carry-forwards 1,453 1,445
Intangible assets 914 893
Total 2,367 2,338
The tax loss carry-forwards do not expire under current tax legislation.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P22 Comvita Financial Statements 2020- P23
14. INTANGIBLE ASSETS AND GOODWILL
In thousands of New Zealand dollars Note Goodwill Brands, patents, trademarks and
other
Software Total
Cost Balance at 30 June 2018 28,476 6,158 9,928 44,562
Additions - 201 341 542 Additions - Business combinations 5 19,748 9,619 37 29,404 Impairment (19,825) - - (19,825) Disposals - (50) (272) (322) Effect of movements in exchange rates (559) (22) (7) (588) Balance at 30 June 2019 27,840 15,906 10,027 53,773
Additions - 205 285 490 Disposals - - (538) (538) Effect of movements in exchange rates (104) 145 19 60 Balance at 30 June 2020 27,736 16,256 9,793 53,785
Amortisation Balance at 30 June 2018 - (4,044) (7,121) (11,165)
Amortisation - (189) (1,676) (1,865) Disposals - 40 269 309 Effect of movements in exchange rates - 23 7 30 Balance at 30 June 2019 - (4,170) (8,521) (12,691)
Amortisation - (1,286) (836) (2,122) Disposals - - 502 502 Effect of movements in exchange rates - 4 (11) (7) Balance at 30 June 2020 - (5,452) (8,866) (14,318)
Carrying Amount At 30 June 2018 28,476 2,114 2,807 33,397
At 30 June 2019 27,840 11,736 1,506 41,082
At 30 June 2020 27,736 10,804 927 39,467
Amortisation charge in the income statement
Amortisation is allocated to cost of sales, selling and marketing expenses, distribution expenses, research and development expenses and administrative expenses.
14. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
Impairment testing for cash-generating units containing goodwill (CGU)
For the purpose of impairment testing, goodwill is allocated to the Group’s CGUs which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes.
The aggregate carrying amounts of goodwill allocated to each CGU are as follows:
In thousands of New Zealand dollars Segment (Note 4)
2020 30 June
2019 30 June
Greater China Greater China 25,902 26,006
Apiaries 1,766 1,766
Other 68 68
Total goodwill 27,736 27,840
During the year the operating segments of the business were reviewed and Hong Kong and China have been combined into a new segment called ‘Greater China’. Refer to Note 4 for details.
Greater China CGU:
Value in use was determined by discounting the future cash flows generated from the continuing use of the unit and were based on the following key assumptions:
2020 30 June
Anticipated annual revenue growth included in the cash flow projections for the combined CGU’s (normalised) for the years 2021 to 2025
1.5% to 8%
Post tax discount rate 12.5%
Discount rate based on the average weighted cost of capital which was based on debt leveraging of: 20%
-at a cost of debt rate of: 12.3%
Terminal growth rate applied beyond June 2025 2.0%
Cash flows were projected on actual operating results, the 30 June 2021 budget and business plan.
Sensitivity to changes in assumptions
In thousands of New Zealand dollars 2020 30 June
The recoverable amount of the CGU exceeds its carrying amount by 53,100
If projected Earnings before Interest and Tax (EBIT) is reduced by 10% year on year, it changes the amount the recoverable amount exceeds its carrying amount to
41,900
The post tax discount rate for the recoverable amount to equal carrying amount is calculated at 22.1%
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P24 Comvita Financial Statements 2020- P25
14. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
Apiaries:
Value in use was determined by discounting the future cash flows generated from the continuing use of the unit and were based on the following key assumptions:
2020 30 June
Anticipated annual revenue growth included in the cash flow projections for the combined CGU’s (normalised) for the years 2021 to 2030
(16.6)% to 24.7%
Post tax discount rate 10.0% Discount rate based on the average weighted cost of capital which was based on debt leveraging of:: 20%
-at a cost of debt rate of: 4.4% Terminal growth rate applied beyond June 2030 1.5%
Cash flows were projected on actual operating results, the 30 June 2021 budget and business plan.
Sensitivity to changes in assumptions:
In thousands of New Zealand dollars 2020 30 June
The recoverable amount of the CGU exceeds its carrying amount by 13,300
If projected Earnings before Interest and Tax (EBIT) is reduced by 10% year on year, it changes the amount the recoverable amount exceeds its carrying amount to
9,000
The post tax discount rate for the recoverable amount to equal carrying amount is calculated at 13%
The percentage movement in yields for each Manuka Honey grade range (with the resulting difference being added to non-manuka) for the recoverable amount to equal the carrying amount
9%
The increase in forecast hive costs required for the recoverable amount to equal the carrying amount 1.6%
15. LEASES
The Group leases warehouses, retail stores, administration premises, vehicles and land used for hive placements.
Right of use assets
2020 Buildings Vehicles Plantations Total In thousands of New Zealand dollars
Adoption of NZ IFRS 16 7,136 1,681 3,483 12,300
Additions 3,301 82 - 3,383
Disposals (149) - - (149)
Depreciation (2,971) (670) (178) (3,819)
Remeasurements (413) - - (413)
Effect of movement in exchange rates 140 5 - 145
Balance at the end of the year 7,044 1,098 3,305 11,447
Amounts recognised in the statement of comprehensive income Total
Interest on lease liabilities 421
Variable lease payments not included in the measurement of lease liabilities 4,101
Expenses relating to short-term leases 33
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets 38
Lease liabilities
The weighted average incremental borrowing cost applied to lease liabilities at 1 July 2019 was 5.3%. Total cash outflow for leases for the year ended 30 June 2020 was $4.1 million.
Maturity analysis - contractual undiscounted cash flow
Non-cancellable lease rentals ae payable as follows:
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Less than 1 year 4,820 5,515
Between one and five years 4,605 5,055 Greater than five years 1,817 19
Total 11,242 10,589
Capital commitments
The total capital commitment is $3.1 million (2019: $4.5 million over 3 years) and will be paid over the next 2 years. The capital commitment relates to plantation costs.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P26 Comvita Financial Statements 2020- P27
16. BIOLOGICAL ASSETS
Total In thousands of New Zealand dollars 2020
30 June 2019
30 June
Bees 3,370 3,542
Olive Leaf 425 506
Total biological assets 3,795 4,048
Bees
In thousands of New Zealand dollars
2020 30 June
2019 30 June
Balance at beginning of the year 3,542 3,641
Acquisition 665 532
Sales - (142)
Fair value increase 161 -
Net movement in operational hives (998) (489)
Balance at the end of the year 3,370 3,542
Number of operational hives
Balance at beginning of the year 22,628 27,379
Acquisition 5,000 (1,070)
Net movement in operational hives (7,503) (3,681)
Balance at the end of the year 20,125 22,628
The Group is exposed to a number of risks related to owning bees, primarily the risk of damage from climatic changes and diseases. The Group has processes in place aimed at monitoring and mitigating those risks, through hiring of experienced bee keepers, the intensive maintenance of bee hives and disease prevention programmes.
Fair value hierarchy
The Group’s bees are level 3 on the fair value hierarchy, being calculations for which inputs are not based on observable market data (unobservable inputs).
As the bee hives are continually regenerating the fair value assigned to a hive is on a $ per kg basis, plus queen and brood. The value attributed to these quantities has been sourced from the Ministry of Primary Industries. The value per hive is $141 (2019: $133).
17. INVESTMENTS
In thousands of New Zealand dollars Note 2020 30 June
2019 30 June
Equity accounted investees 17a 6,261 9,755
Investment in listed shares - 822
Convertible loan note - 1,818
Investment in unlisted shares 8 8
Total investments 6,269 12,403
Equity Accounted Investees (EAI)
(a) Investments in Equity Accounted Investees comprises:
Country of Incorporation
Ownership Interest Held
Balance Date
Principal Activity
Makino Station Limited New Zealand 50% 30 June Apiary and land ownership
Gan Supply JV Limited * New Zealand 33% 30 June Apiary
Putake Group Holdings Limited New Zealand 50% 30 June Apiary
Manuka Research Partnership Limited New Zealand 31.77% 30 June Research and development
Medibee Pty Limited ** Australia 50% 30 June Apiary
Apiter S.A Uruguay 20% 31 July Manufacturing, selling and distribution Kaimanawa Honey Limited Partnership
New Zealand 50% 30 June Ceased operating 10 November 2019 * On 30 September 2019 Nga Pi Honey Limited changed its name to Gan Supply JV Limited and Gan Enterprises Limited changed its name to Nga Pi Honey Limited.
** Medibee Apiaries has a funding arrangement with HSBC and Comvita has signed a several guarantee for its share of the facility, which is AUD $5,500,000.
(b) Carrying value of Investments in Equity Accounted Investees
In thousands of New Zealand dollars Note 2020 2019
Balance at 1 July 9,755 30,621 Acquisitions – Apiter S.A. - 9,048 Dividend - (519) Impairment 17c (2,543) (2,401) Share of (loss)/profit (174) 448 Profit elimination - 1,623 Transfer share of (profit)/loss to receivable (310) 62 Foreign exchange movements recognised in other income (467) (1,707)
Derecognition of EAI - China - (26,711) Derecognition of EAI - SeaDragon - (709) Balance at 30 June 6,261 9,755
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P28 Comvita Financial Statements 2020- P29
17. INVESTMENTS (CONTINUED)
(c) Impairment of Investments in Equity Accounted investees
An impairment Expense of $5,928,000 has been recognised as an expense in profit and loss as at 30 June 2020 (2019: $2,401,000). The impairment expense is made of the following amounts:
Apiter S.A.
The impairment expense of $1,300,000 (2019: nil) has been recognised against the the Apiter S.A investment due to a delay in projected sales growth.
Putake Group
An impairment expense of $1,243,000 (2019: $2,300,000) has been recognised against the Putake Group investment and $1,075,000 against the shareholder loan, refer to note 17d.
This investment has been impaired as it is in the process of winding up.
A provision of $675,000 has also been recognised at 30 June 2020 against the related loan to Casa Base Trustees, refer to note 17e.
Medibee
The loan to Medibee has been impaired, refer note 17d, with an impairment expense of $2,310,000 recognised in the income statement due to the impact of the Australian bush fires on the honey crop.
Kaimanawa
The Kaimanawa shareholder loan of $1,673,000 was written off when the Joint Venture ceased. Refer note 17d.
(d) Loans to Equity Accounted Investees
In thousands of New Zealand dollars Note 2020 30 June
Loan receivable
2019 30 June
Loan receivable
2020 12 months
Interest income
2020 30 June
Interest Receivable
Makino 4,007 3,815 192 192 Medibee 17c - 2,469 - - Kaimanawa 17c - 1,133 - - Putake 17c - 875 - - Apiter S.A 600 575 21 23 Gan Supply JV 212 252 - - Total 4,819 9,119 213 215
All loans to equity accounted investees are repayable on demand.
Makino
Interest is accrued on the balance of loan at the a rate of 6.36% p.a. (2019: 6.36%).
Apiter S.A.
The loan is denominated in USD. Interest is accrued on the balance of the loan at a rate of 3.5% p.a. (2019: 3.5%).
Gan Supply JV
The loan is non-interest bearing.
17. INVESTMENTS (CONTINUED)
(e) Loans to Related Parties
In thousands of New Zealand dollars Note 2020 30 June
Loan receivable
2019 30 June
Loan receivable
2020 12 months
Interest income
2020 30 June
Interest receivable
Nga Pi Honey Ltd (Gan Supply JV) 567 567 36 - Casa Base Trustees (Putake) 17c - 639 36 - Total 567 1,206 72 -
Nga Pi Honey Ltd
Interest is accrued on the balance of the loan at a rate of 6.36% p.a. (2019: 6.36%), the loan is repayable on demand.
(f) Transactions with Equity Accounted Investees
In thousands of New Zealand dollars Sale of goods and services Purchases of goods and services (including prepayments)
Transaction value Balance due from Transaction value Balance owing to
2020 Kaimanawa 616 - 19 - Makino 92 - 174 - Gan Supply JV 80 3 1,870 - Putake 60 - 18 - Medibee - - - - Apiter S.A 19 23 2,598 418
2019 Comvita China* 12,560 - - - Kaimanawa 2,013 443 2,551 - Makino 210 - 674 338 Gan Supply JV 28 16 572 - Putake 27 - 351 34 Medibee - - 553 - SeaDragon 39 - - - Apiter S.A 13 - 3,464 -
* Transactions included for the period while the investment was still recognised as an EAI.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P30 Comvita Financial Statements 2020- P31
18. DERIVATIVES The table below analyses financial instruments carried at fair value, by valuation method. They are all level 2 on the fair value hierarchy, as they include inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e. derived from prices). There have been no transfers between levels in either direction during the period.
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Derivatives – SeaDragon - 192
Total assets - 192
Derivatives – liabilities (hedging instrument) (714) (2,420)
Total liabilities (714) (2,420)
Derivatives – assets and liabilities (hedged) and designated at fair value through the income statement
The Group’s Level 2 fair values for simple over-the-counter derivative financial instruments are based on broker quotes. Those quotes are tested for reasonableness by discounting expected future cash flows using market interest rate for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty when appropriate.
19. INVENTORY
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Raw materials 79,925 83,996 Work in progress 842 1,854 Finished goods 36,699 48,202 Provision (3,787) (1,860) Total inventory 112,679 132,192
Inventory disposed of during the year ended 30 June 2020 has been recognised within cost of goods sold - $827,000 (2019: $1,716,000).
20. TRADE RECEIVABLES
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Trade receivables 17,726 30,878 Total trade receivables 17,726 30,878
The status of trade receivables at the reporting date is as follows:
In thousands of New Zealand dollars Gross receivable 2020
Impairment 2020
Gross receivable 2019
Impairment 2019
Not past due 11,388 (162) 23,521 - Past due 0-30 days 2,296 (69) 5,279 - Past due 31-60 days 3,269 (254) 807 (4) Past due 61-365 days 1,319 (87) 1,460 (237) Past due > 365 days 59 (33) 105 (53) Total 18,331 (605) 31,172 (294)
The Company has not renegotiated the terms of any financial assets which would result in the carrying amount no longer being past due or avoid a possible past due status.
20. TRADE RECEIVABLES (CONTINUED)
Credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Australia 2,085 5,073 China 7,288 6,002 New Zealand 5,322 10,361 United States 392 6,269 United Kingdom 529 1,262 Hong Kong 733 991 Other regions 1,377 920 Total 17,726 30,878
21. SUNDRY RECEIVABLES
In thousands of New Zealand dollars Note 2020 30 June
2019 30 June
Loans to equity accounted investees 17d 4,819 9,119 Loan receivable – related parties 1,017 1,206 Prepayments 5,307 3,393 Other receivables 1,206 2,571 Total sundry receivables 12,349 16,289
22. EMPLOYEE BENEFITS
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Annual leave 1,598 1,693 Performance accrual 1,796 1,976 Accrued wages and salaries 259 372 Total current employee benefits 3,653 4,041
Long service leave (non-current) 414 446 Total employee benefits 4,067 4,487
23. TRADE AND OTHER PAYABLES
In thousands of New Zealand dollars Note 2020 30 June
2019 30 June
Trade creditors 10,449 14,113
Accruals 12,020 9,597
Business combination consideration payable - 4,506
Contingent consideration – equity accounted investees 7 179 1,167
Due to directors 59 88
Total trade and other payables 22,707 29,471
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P32 Comvita Financial Statements 2020- P33
24. CAPITAL AND RESERVES
Ordinary and partly paid redeemable share capital
In thousands of shares 2020 30 June
2019 30 June
Note
On issue at beginning of the year 49,555 45,163
Capital raise – Placement and Rights offer 20,000 -
Share issue - CEO 308 -
Supplier Partnership Group Share Scheme 134 26
Acquisition of treasury stock (217) -
Share issue – Comvita China acquisition - 4,050
Share issue – Apiter acquisition - 155 Issued to members of executive share scheme - 144
Issued to employee share purchase scheme - 17
Ordinary shares on issue at end of the year 69,780 49,555 Closing partly paid shares 28 1,228 2,028
Total shares including part paid at end of the year 71,008 51,583
Treasury Stock
In thousands of shares 2020 30 June
2019 30 June
Treasury stock at beginning of the year 227 408
Acquired on market 217 -
Issued – CEO (308) (155)
Supplier Partnership Group Share Scheme (134) (26)
Total treasury stock at end of the year 2 227
Ordinary shares
All ordinary shares issued are fully paid and have no par value. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
Hedging reserve
The hedging reserve comprises the cumulative change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.
Fair value reserve
The fair value reserve comprises the cumulative change in the fair value of Financial Assets designated as Fair Value through Other Comprehensive Income.
24. CAPITAL AND RESERVES (CONTINUED)
Capital management
The Group’s capital includes share capital, reserves and retained earnings. The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the geographic spread of shareholders, as well as the return on capital.
Public share offerings and private offerings are made, where applicable. This and acquisitions are key to ensuring the future development of the business.
The Board has an employee share purchase scheme and an executive employee share scheme to ensure the employees hold an investment in the Group. The Board has also implemented a Supplier Group Share Scheme to assist in security of raw material honey supply.
Other than the banking requirements, neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
25 . EARNINGS PER SHARE
Basic earnings per share - weighted average number of ordinary shares In thousands of shares
2020 30 June
2019 30 June
Issued ordinary shares at beginning of year 49,555 45,164
Effect of shares issued during the year 1,231 1,138
Weighted average number of ordinary shares at the end of the year 50,786 46,302
Basic earnings per share (NZ cents) (19.10) (61.05)
Diluted earnings per share - weighted average number of ordinary shares (diluted) In thousands of shares
Weighted average number of ordinary shares (basic) 50,786 46,302
Effect of share entitlements issued - 30
Weighted average number of diluted shares at end of the year 50,786 46,332
Diluted earnings per share (NZ cents) (19.10) (61.05)
26. LOANS AND BORROWINGS This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings.
Terms and debt repayment schedule
In thousands of New Zealand dollars Facility Local
Currency
Currency Nominal Interest rate
Maturity Carrying Amount
Carrying Amount
2020 2019 Secured bank loan – Westpac NZ 20,000 NZD 3.25% July 2022 20,000 44,000
Multi option credit line – Westpac NZ 60,000 NZD 2.05% & 2.25% July 2022 12,200 55,250
Total borrowings 80,000 32,200 99,250 Less current portion of borrowings - -
Borrowings – Non current 32,200 99,250
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P34 Comvita Financial Statements 2020- P35
26. LOANS AND BORROWINGS (CONTINUED)
Covenants and security
The Group was in compliance with all banking covenants during the year and as at 30 June 2020. All debt with Westpac New Zealand Limited is secured by way of registered first and exclusive Composite Debentures and a General Security Agreement, cross collateralised, over all the assets, undertakings and uncalled capital of all Charging Group companies and an interlocking supported guarantee between all Charging Group companies.
“Charging Group” - Comvita Limited, Comvita New Zealand Limited, Comvita Holdings Pty Limited, Comvita Australia Pty Limited, Comvita Holdings UK Limited and Comvita UK Limited.
Net debt In thousands of New Zealand dollars 2020
30 June 2019
30 June
Cash 16,680 10,314
Less Debt – Non-Current (32,200) (99,250)
Net Debt (15,520) (88,936)
Interest rate risk
At reporting date the interest rate profile of the Group’s interest-bearing financial instruments is the balances of the loans above. The Group has a policy of ensuring that its exposure to interest rates for borrowings is managed. Interest rate swaps have been entered into to achieve an appropriate mix of fixed and floating rate exposure with the Group’s policy.
Sensitivity analysis
In managing interest rate risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer- term, however, permanent changes in interest rates will have an impact on profit. At 30 June 2020 it is estimated that a general increase of one percentage point in interest rates would decrease the Group’s profit before income tax by approximately $598,000 (30 June 2019: $718,000).
Other Facilities
Overdraft schedule
In thousands of New Zealand dollars Facility Local Currency
Currency Interest rate 2020
Interest rate 2019
Overdraft facility NZD – Westpac NZ 750 NZD 7.25% 8.35%
Overdraft facility GBP – Westpac NZ 1,650 GBP 7.25% 8.35%
Overdraft facility YEN – Westpac NZ 500 JPY 7.25% 8.35%
The balance drawn on each of these at 30 June 2020 is nil (2019: nil).
27. RECONCILIATION OF THE PROFIT FOR THE PERIOD WITH THE NET CASH FROM OPERATING ACTIVITIES
In thousands of New Zealand dollars
Note
2020 30 June
2019 30 June
(Loss)/Profit for the period (9,701) (27,717)
Adjustments for:
Depreciation 13/15 8,748 4,556
Amortisation 14 2,122 1,865
(Gain) on disposal of property, plant & equipment (233) (62)
Share based payments 9 329 678
Supplier share scheme – inventory purchase 459 -
Fair value loss in biological assets 10 389 652
Net loss on fair value of derivatives 8 456 991
Wind-up of equity accounted investee 1,070 -
Interest income from investing activities (264) (518)
Gain on deemed sale of 51% of Comvita China 7 - (4,055)
Equity accounted investees – profit elimination movement 17b - (1,623)
Share of loss/(profit) equity accounted investees 17b 174 (448)
Impairment – goodwill 14 - 19,825
Impairment – equity accounted associates 17c 5,928 2,401
Change in fair value of contingent consideration - (484)
Other - (123)
Profit adjusted for non-cash items 9,477 (4,062)
Change in trade payables relating to investing activities (209) (5,243)
Changes in sundry receivables related to shares - (11)
Movement in working capital items: Change in inventories 19,513 (15,700)
Change in trade receivables 13,152 24,935
Change in sundry debtors and prepayments 128 3,926
Change in trade and other payables (2,258) 6,533
Change in employee benefits (420) 33
Change in tax payable 606 (806)
Change in deferred tax (2,413) (2,850)
Change in working capital items from foreign currency translation reserve 1,084 (1,156)
Other movements: Change related to business combination - 15,086
Movement of deferred tax in equity (768) 306
Prepayment to equity accounted investee 1,435 -
Foreign investor tax credits - 10
Foreign currency reserve (30) 85
Net cash from operating activities 39,297 21,086
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P36 Comvita Financial Statements 2020- P37
28. EMPLOYEE SHARE SCHEMES
(a) Executive share scheme
Comvita Limited has an Executive Employee Share Scheme called the Comvita Limited Partly Paid Share Scheme (“The Scheme”). The Scheme is designed to provide key employees with an opportunity to benefit from share price growth. A summary of the key points of the Scheme are as follows:
• Comvita will periodically offer the rights to acquire a certain number of ordinary shares to key employees. The issue price of the shares will be at fair value.
• When the offer is accepted Comvita will issue the shares to the Scheme Trustee (Comvita Share Scheme Trustee Limited, which is a subsidiary Company) who will hold the shares on the employees behalf.
• The employee will pay 1 cent for each share at issue date. The partly paid shares will carry entitlements to voting rights, dividend rights and rights to share in surplus assets of Comvita to the extent that they are paid up.
• The release of shares are subject to a share price hurdle threshold being met as described in the Scheme and certain vesting conditions, primarily ongoing service to the Group, and insider trading legislation and other applicable laws.
• On transfer the employee has to pay up the balance of the released shares. If the share price hurdle applicable to any shares is not met on or before each of their respective anniversary dates, the employee will not be able to pay up the balance of the released shares and they will receive back the initial payment for those shares not released and the associated shares are forfeited.
Entitlements on issue at
In thousands 30 June 2020 30 June 2019
Number of entitlements
Weighted average
exercise price Number of
entitlements
Weighted average
exercise price
Entitlements outstanding at beginning of year 2,028 7.59 2,057 7.67
Entitlements granted during the year - - 578 6.33
Entitlements forfeited during the year (800) 8.52 (463) 7.44
Entitlements converted to ordinary shares (Note 24)
- - (144) 3.67
Entitlements outstanding at end of year 1,228 7.05 2,028 7.59
There are 40 (2019: 53) employees in the scheme. The number of entitlements at 30 June 2020 is 1.7% (30 June 2019: 3.9%) of total shares.
Fair Value of Share rights granted
The Group’s share based payments are level 2 on the fair value hierarchy, involving a combination of quoted (the Company’s share price) and unquoted prices. The fair value of services received in return for share entitlements granted to employees is measured by reference to the fair value of shares. The estimate of the fair value of the services received is measured based on a Monte Carlo simulation model.
Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.
28. EMPLOYEE SHARE SCHEMES (CONTINUED)
(a) Executive share scheme (continued)
Fair value of share entitlements and assumptions
Issue Date 30-Sep-16 30-Jun-17 8-Oct-18
Entitlements issued (number) 801,250 582,500 577,500
Entitlements on hand (at 30 June 2020) 255,625 447,500 525,000
Fair value at measurement date $1.26 $1.59 $1.08
Share price at grant date $11.30 $5.80 $6.00
Grant date 30-Sep-16 30-Jun-17 8-Oct-18
Exercise price $11.08 $5.60 $6.33
Expected price volatility 23.7% 52.6% 34.2%
Share life (weighted average life of each tranche)
2-4 years 2-4 years 2-4 years
Expected dividend yield 2.73% 3.26% 1.02%
Risk-free interest rate 1.87% 1.81% 1.88%
Forecast share hurdles at 30 June 2020* $14.74 - $16.16 $7.34 – $7.98 $7.60 - $8.71 The expected volatility is based on analysing the historic volatility (calculated based on the weighted average remaining life of the share entitlements), adjusted for any expected changes to future volatility due to publicly available information. Share entitlements are granted under a service condition. Such conditions are not taken into account in the grant date fair value measurement of the services received. The grants in relation to key management personnel also contain a market condition relating to a share price hurdle. This condition has been taken into account in the grant date fair value measurement of the services received.
* The forecast share price hurdle calculation can change based on the WACC percentage used and future dividends paid.
There are no entitlements exercisable at the end of the year.
(b) Staff share scheme
Employees who have served continuously with the Company for a period of at least 12 months, are given the opportunity to subscribe for ordinary shares in the Company from time to time. An interest free loan is advanced by the Company not exceeding $2,340, repayable over three years.
2020 2019 Employees in the scheme 44 75
Number of shares held 25,184 30,911
% of share capital 0.03% 0.06%
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P38 Comvita Financial Statements 2020- P39
29. FINANCIAL INSTRUMENTS
Overview
Exposure to credit, liquidity and market risks arises in the normal course of the Company’s business.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk and the Group’s management of capital. Further quantitative disclosures are included throughout these financial statements.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Audit and Risk Committee is designated to develop and monitor the Group’s risk management policies. The committee reports regularly to the Board of Directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group through its training and management standards and processes aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers. As the counterparty of financial instruments is Westpac New Zealand Limited, it is considered there is minimal credit risk.
The majority of revenue is generated from retailers and consumers and there is no geographical concentration of credit risk. In order to determine which customers are classified as having payment difficulties, the Group applies a mix of duration and frequency of default. Trade receivables aging are monitored on a monthly basis and the Company does not require collateral in respect of trade and other receivables, however Personal Guarantees are obtained where the Company considers it is appropriate.
The Board has approved a credit policy under which new customers are analysed individually for credit worthiness before the Group’s standard payment terms and conditions are offered. The Group’s review includes reviewing references. Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis.
Where possible, our interest in goods sold are subject to retention of title clauses and a security interest is registered on the Personal Property Securities Register (PPSR), so that in the event of non-payment the Group may have a secured claim.
The Group’s policy is to provide financial guarantees only to subsidiaries and equity accounted investees.
Liquidity risk
Liquidity risk represents the Group’s ability to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Due to the seasonal nature of raw materials supply the Group has credit lines in place to cover timing differences to offset the mismatch of receipts and payments. The borrowings are by way of overdraft and committed credit facilities.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising return on risk. The Group buys and sells derivatives, and also incurs financial liabilities in order to manage market risks. All transactions are carried out within the Treasury Policy guidelines set by the Board of Directors. Generally the Group seeks to apply hedge accounting in order to manage volatility in the income statement..
Currency risk
The Group is exposed to currency risk on sales that are denominated in a currency other than its functional currency, the New Zealand Dollar. The currencies in which transactions are primarily denominated are United States Dollars, Japanese Yen, Australian Dollars, Hong Kong Dollars, British Pounds and Chinese Yuan.
The Group hedges are based on net foreign currency receipts. At any point in time the Group hedges between 40% to 100% of its estimated foreign currency exposure in respect of net cash receipts expected to be received over the following 12 months. The Group uses a mixture of forward exchange contracts, collars and options to hedge its currency risk, most with a maturity of less than one year from the reporting date. When necessary, forward exchange contracts are rolled over at maturity.
29. FINANCIAL INSTRUMENTS (CONTINUED)
Liquidity risk
The following table sets out the contractual maturities of financial liabilities including interest payments and derivatives:
In thousands of New Zealand dollars Stmt of financial position
Contractual cash flows
6 months or less
6-12 months
1-2 years 2-5 years 5-10 years
2020
Non-derivative financial liabilities Secured bank loans (32,200) (33,206) (14,502) (8,379) (10,325) - -
Trade and other payables (22,707) (22,707) (22,707) - - - -
Total non-derivative liabilities (54,907) (55,913) (37,209) (8,379) (10,325) - -
Derivatives Inflow - 32,757 19,194 13,486 43 34 -
Outflow (714) (33,465) (18,949) (13,375) (616) (525) -
Total (714) (708) 245 111 (573) (491) -
2019 Secured bank loans (99,250) (105,227) (1,695) (1,695) (101,837) - -
Trade and other payables (29,471) (29,471) (29,471) - - - -
Total non-derivative liabilities (128,721) (134,698) (31,166) (1,695) (101,837) - -
Derivatives Inflow - 27,029 17,681 8,547 367 433 -
Outflow (2,420) (29,329) (18,336) (8,914) (939) (1,141) -
Total (2,420) (2,300) (655) (367) (572) (708) -
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P40 Comvita Financial Statements 2020- P41
29. FINANCIAL INSTRUMENTS (CONTINUED)
Currency risk
In thousands of New Zealand dollars
Group
2020 RMB AUD GBP HKD USD Other
Trade receivables 7,288 1,860 383 733 1,586 1,589
Trade and other payables (1,293) (2,602) (438) (1,024) (1,993) (1,006)
Gross statement of financial position exposure 5,995 (742) (55) (291) (407) 583
Forward exchange contracts (local currency) 40,000 6,750 750 12,000 6,500 126,000
2019 RMB AUD GBP HKD USD Other
Trade receivables 6,002 5,073 1,262 991 6,269 920
Trade and other payables (2,050) (1,530) (570) (815) (1,630) (513)
Gross statement of financial position exposure 3,952 3,543 692 176 4,639 407
Forward exchange contracts (local currency) - 2,820 1,317 29,250 7,359 -
Sensitivity analysis
A 20 percent strengthening and 20% weakening of the NZD against the following currencies at 30 June would have changed the asset or liability values in the statement of financial position at 30 June through a change in equity and the income statement by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis for 2020 assumes a 20 percent (30 June 2019: 20 percent) strengthening and weakening of the NZD.
2020 2020 2019 2019 Equity Income statement Equity Income statement
+20% -20% +20% -20% +20% -20% +20% -20%
AUD 1,204 (1,807) - - 491 (737) - -
GBP 241 (361) - - 461 (692) - -
USD 1,679 (2,519) - - 1,806 (2,706) - -
HKD 399 (598) - - 921 (1,380) - -
CNH 1,436 (2,146) - - - - - -
JPY 303 (456) - - 581 (874) - -
Classification and Fair Values
The carrying amount of all assets and liabilities reflects the fair value. They are classified as follows:
Classification Asset or liability Amortised cost Trade and other receivables, cash and cash equivalents, trade and other
payables, loans and borrowings
Fair value through profit and or loss Derivatives
Fair value through OCI Other investments
30. RELATED PARTIES
Transactions with key management personnel
The key management personnel consists of the Leadership team of Comvita.
Key management and director compensation comprised:
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Director fees 550 514
Short term employee benefits 2,227 2,663
KiwiSaver employer contribution 69 48
Share based payments 84 349
Total 2,930 3,574
On the 13 March 2020, the Company issued 307,488 ordinary shares from treasury stock to CEO David Banfield. The subscription price for the shares was satisfied partly through the provision of a $450,000 interest free loan, with the remainder settled by David Banfield in cash. The acquisition of shares by David Banfield was at market value, calculated as the volume weighted average of prices at which CVT shares traded over the prior 10 trading days.
At 30 June 2020 Directors and other key management personnel of the Company control 3.72% (2019: 4.84%) of the voting shares of the Company.
Other transactions with key management personnel
Other related party transactions
In thousands of New Zealand dollars 2020 30 June
2019 30 June
Consulting fees
- Brett Hewlett 82 12
- Luke Bunt 31 -
- Neil Craig 5 -
Craigs Investments
- Custodial and secretarial fees 22 48
- Capital raise underwriting fee 800 -
Total 940 60
No amounts are payable as at 30 June 2020 for the transactions listed in the table above (2019: nil).
Consulting fees were paid to Directors acting in an Executive Director capacity in respect of the Strategic Review and in relation to Due Diligence Committee duties for the Capital Raise
Craigs Investment Partners Limited are considered to be a related party as Neil Craig was Chairman of both entities for a portion of the financial year. Craigs Investment Partners Limited manage the Comvita share purchase program (START Scheme), provided secretarial services and underwriting services related to Comvita’s capital raise.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Comvita Financial Statements 2020 - P42 Comvita Financial Statements 2020- P43
30. RELATED PARTIES (CONTINUED)
Subsidiaries
Country of Incorporation
Ownership Interest Held
Balance Date
Principal Activity
Comvita New Zealand Limited New Zealand 100% 30 June Manufacturing and marketing Medibee Limited New Zealand 100% 30 June Not trading
Comvita Taiwan Limited New Zealand 100% 30 June Not trading
Bee & Herbal New Zealand Limited New Zealand 100% 30 June IP ownership
Apimed Medical Honey Limited New Zealand 100% 30 June IP ownership
Comvita Landowner Share Scheme Trustee Limited
New Zealand 100% 30 June Apicultural land owner share scheme
Kiwi Bee Medical Limited * New Zealand 100% 30 June Apiary and medical honey extraction
Jonno Developments Limited * New Zealand 100% 30 June Research and development
Kyoto Forests of New Zealand Limited New Zealand 100% 30 June Not trading
Comvita Share Scheme Trustee Limited New Zealand Management control
30 June Executive employee share scheme
Comvita USA, Inc USA 100% 30 June Selling and distribution
Comvita Japan Company Limited Japan 100% 30 June Selling and distribution
Comvita Korea Co Limited Korea 100% 30 June Selling and distribution
Comvita Food (China) Limited China 100% 31 December Selling and distribution
Comvita China Limited Hong Kong 100% 30 June Selling and distribution
Comvita Holdings HK Limited Hong Kong 100% 30 June Holding Company
Greenlife (New Zealand) Product Limited Hong Kong 100% 30 June Not trading
Comvita HK Limited Hong Kong 100% 30 June Selling and distribution
Comvita Holdings Pty Limited Australia 100% 30 June Holding Company
Comvita Australia Pty Limited Australia 100% 30 June Manufacturing, selling & distribution
Olive Leaf Australia Pty Limited Australia 100% 30 June Not trading
Olive Products Australia Pty Limited Australia 100% 30 June Property ownership
Comvita IP Pty Limited Australia 100% 30 June IP ownership
Comvita Health Pty Limited Australia 100% 30 June Not trading
Medihoney Pty Limited Australia 100% 30 June Not trading
Medihoney (Europe) Limited United Kingdom 100% 30 June Not trading
Comvita Holdings UK Limited United Kingdom 100% 30 June Holding Company
Comvita UK Limited United Kingdom 100% 30 June Selling and distribution
New Zealand Natural Foods Limited United Kingdom 100% 30 June Not trading
* Kiwibee Medical Limited and Jonno Developments Limited amalgamated into Comvita New Zealand Limited effective 1 July 2020.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Independent Auditor’s Report To the Shareholders of Comvita Limited
Report on the audit of the consolidated financial statements
Opinion In our opinion, the accompanying consolidated financial statements of Comvita Limited (the ’Company’) and its subsidiaries (the 'Group') on pages 3 to 42:
i. Present fairly in all material respects the Group’s financial position as at 30 June 2020 and its financial performance and cash flows for the year ended on that date; and
ii. Comply with New Zealand Equivalents to International Financial Reporting Standards and International Financial Reporting Standards.
We have audited the accompanying consolidated financial statements which comprise:
— The consolidated statement of financial position as at 30 June 2020;
— The consolidated income statement, statements of comprehensive income, changes in equity and cash flows for the year then ended; and
— Notes, including a summary of significant accounting policies and other explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
Our firm has also provided other services to the Group in relation to taxation services. Subject to certain restrictions, partners and employees of our firm may also deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group. These matters have not impaired our independence as auditor of the Group. The firm has no other relationship with, or interest in, the Group.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the Shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements.
Comvita Financial Statements 2020 - P44 Comvita Financial Statements 2020- P45
The key audit matter How the matter was addressed in our audit
Business Combination – Comvita China
Refer to Note 5 to the Financial Statements.
During the prior year the Group acquired Comvita Food (China) Limited and Comvita China Limited (collectively referred to as “Comvita China”). The finalisation of the purchase price allocation component of the business combination was completed during the current financial year.
Accounting for business combinations requires management to make judgements in order to:
— Identify all assets acquired and liabilities assumed; and
— Estimate the fair value of the identified assets and liabilities.
Determining the fair value of identifiable assets and liabilities assumed may require management to estimate cash flow forecasts, discount rates and other unobservable assumptions.
Our audit procedures included the following, amongst others:
— We reviewed the sale and purchase agreements underpinning the acquisition;
— We reviewed and challenged management’s assessment of the identifiable assets acquired and liabilities assumed, including exploring the possibility that further unidentified assets or liabilities could exist;
— We obtained an understanding of the approach to the valuation of each identifiable asset and liability, employed by managements external expert;
— We utilised KPMG specialists to review management’s valuation of identifiable assets and liabilities; and
— We assessed disclosures of the transactions in the financial statements against applicable accounting standards.
There were no material findings in respect of the purchase price allocation or the related disclosure.
Other information
The Directors, on behalf of the Group, are responsible for the other information included in the entity’s financial statements and Annual Report. Other information includes the Directors’ Declaration, Statutory Information and Company Directory and the other information included in the Annual Report. Our opinion on the consolidated financial statements does not cover any other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have received the Directors’ Declaration, Statutory Information and Company Directory and have nothing to report in regards to it. The Annual Report is expected to be made available to us after the date of this Independent Auditor's Report and we will report the matters identified, if any, to those charged with governance.
Use of this independent auditor’s report
This independent auditor’s report is made solely to the Shareholders as a body. Our audit work has been undertaken so that we might state to the Shareholders those matters we are required to state to them in the independent auditor’s 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 Shareholders as a body for our audit work, this independent auditor’s report, or any of the opinions we have formed.
The key audit matter How the matter was addressed in our audit
Impairment of Non-Current Assets
Refer to the impairment expense recognised in the Income Statement on Page 3, the Statement of Financial Position on Page 5 and Note 3(j).
The Group has $125m of non-current assets. In light of performance in the current year and the Group’s net assets exceeding market capitalisation at 30 June 2020, the consideration of impairment of non-current assets is considered to be a key audit matter. This is due to the significance of the assets and the range of judgemental assumptions about future performance.
In the current year the Group has identified the following cash generating units (CGU’s):
— Greater China;
— Apiaries; and
— Other. The Group utilises value in use models to determine the recoverable amount of the Group’s CGU’s, which is then compared to the CGU’s net assets. In relation to these models, particular attention was required of:
— The strategic direction of the Group;
— The future cash flows, including the impacts of Covid-19 (if any);
— UMF Honey quality and annual yield (KGs) per Hives;
— Terminal growth rates; and
— The discount rate applied to those cash flows.
Our audit procedures included the following, amongst others:
— We assessed the Group’s determination of CGU’s based on our understanding of the nature of the Group, their operations and the internal reporting of the business;
— We assessed the value in use models (VIU) for each CGU considering the methodology adopted in the discounted cash flow valuation models against the requirements of the applicable financial reporting standards;
— We considered the consistency of assumptions in individual VIU models with the overall Group 5 year strategic plan to ensure appropriate and consistent cash flows reported. We analysed the future cash flow forecasts used and determined whether they are reasonable based on the implementation of the strategic plan and historical achievements;
— We utilised valuation specialists to challenge key judgements, which included the weighted average cost of capital applied and terminal growth rates, through comparison to market data and industry research;
— We performed sensitivity analysis on key cash flow forecast assumptions, UMF quality, annual honey yields, WACC and terminal growth, to understand the impact of reasonable possible changes in key assumptions in various scenarios;
— We performed testing to compare the calculated recoverable values to the associated carrying amounts, and assessed whether any impairment expense is to be recognised;
— We examined conceptually and in detail why net assets exceeded market capitalisation as at 30 June 2020; and
— We considered and reviewed appropriateness, sufficiency and clarity of required disclosures included in the Group financial statements.
The procedures performed did not identify any material adjustments to the impairment expense recognised or the related disclosure.
Comvita Financial Statements 2020 - P46 Comvita Financial Statements 2020- P47
Principal activity
The principal activity of the Company is that of manufacturing and marketing quality natural health products.
Dividend
No dividends have been declared or paid for the year ended 30 June 2020.
Directors’ remuneration for the year ended 30 June 2020
In thousands of New Zealand dollars Fee Other Total B Hewlett 101 82 183 N. J Craig (ceased 30 June 2020) 93 5 98 L.N.E Bunt 82 31 113 S.J Kennedy 77 - 77 P Reid 63 - 63 B Major (appointed 1 September 2019) 52 - 52 C Dayong (appointed 17 October 2019) 46 - 46 Z Guangping (appointed 17 October 2019)* 22 - 22 M.J Denyer (Retired 16 August 2019) 14 - 14 Total 550 118 668 *Z Guangping was granted a leave of absence in accordance with the constitution for the period 1 February to 30 June 2020.
INTERESTS REGISTER Directors have disclosed the following directorships held by them excluding family companies and companies with no association to their appointment as director of the Company or any companies in the Group:
N.J Craig Chairman - Craigs Investment Partners Director - Comvita Limited Chairman - Pohutukawa Private Equity Limited Director – Comvita New Zealand Limited Director – New Zealand Cricket Director - Hendry Nominees Limited Director – AGInvest Holdings Limited Director – Deutsche Craigs Limited Member - Oriens Capital Investment Committee
B. Major Chairman – Gibb Holdings (Nelson) Ltd Chairman - High Value Nutrition National Science Challenge Chairman - Go Global Avocado Primary Growth Partnership Deputy Chairman – Hautupua General Partner Ltd Deputy Chairman – Miro Trading General Partner Ltd Managing Director – Sinotearoa Ltd Director – Comvita Limited Director – BioVittoria Ltd Director – BioVittoria Investments Ltd Member – Oriens Capital Investment Committee
P.R.T Reid Chairman - Figured Limited Chairman – Volpara Health Technologies Limited Director – Comvita Limited Director – The Equanut Company Limited Director – Christchurch International Airport Limited Director - Pukeko Pictures GP Limited (ceased 31 March 2020)
S.J Kennedy Director - Comvita Limited Director – SJK Consulting Limited Director – Lifestream International Limited Director – Lanaco Limited Director – Middlemore Foundation Limited Director – Calocurb Ltd Director – New Zealand Rural Land Co
L.N.E Bunt Director – Comvita Limited Chairman - Heat Treatments Ltd
B.D Hewlett Chairman – Priority One Inc. Chairman – Bluelab Corporation Limited Chairman – Comvita Limited Director – Quayside Holdings Limited
Z. Guangping Director – Comvita Limited
C. Dayong Director – Comvita Limited Director - China Resources Ng Fung Limited Director - China Resources Retail (Group) Company Limited Director - Pacific Coffee (Holdings) Limited Director - China Resources Snow Breweries Limited Director - CRE Alliance Fund Management Company Limited
S T A T U T O R Y I N F O R M A T I O N
Responsibilities of the Directors for the consolidated financial statements
The Directors, on behalf of the Group, are responsible for:
— The preparation and fair presentation of the consolidated financial statements in accordance with generally accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial Reporting Standards) and International Financial Reporting Standards;
— Implementing necessary internal control to enable the preparation of a consolidated set of financial statements that is fairly presented and free from material misstatement, whether due to fraud or error; and
— Assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objective is:
— To obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error; and
— To issue an independent auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at the External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is Trevor Newland.
For and on behalf of
KPMG Tauranga
24 August 2020
Comvita Financial Statements 2020 - P48 Comvita Financial Statements 2020- P49
DIRECTORS OF GROUP COMPANIES OTHER THAN SHOWN ABOVE
Companies Directors Apimed Medical Honey Limited D Banfield*
Bee & Herbal New Zealand Limited D Banfield *
Comvita Australia Pty Limited B Hewlett M Tobin
Comvita China Limited M Sadd G Zhu
Comvita Food (China) Limited D Banfield* A Chen G Zhu
Comvita Health Pty Limited B Hewlett M Tobin
Comvita HK Limited D Banfield*
Comvita Holdings HK Limited D Banfield*
Comvita Holdings Pty Limited B Hewlett M Tobin
Comvita Holdings UK Limited B Hewlett
Comvita IP Pty Limited B Hewlett M Tobin
Comvita Japan K. K. D Banfield* R Shida*
Comvita Korea Co Limited J Keast J Park*
Comvita Landowner Share Scheme Trustee Limited D Banfield*
Comvita New Zealand Limited N J Craig B D Hewlett
Comvita Share Scheme Trustee Limited S Kennedy L Bunt
Comvita Taiwan Limited D Banfield*
Comvita UK Limited B Hewlett
Comvita USA, Inc D Banfield* A Barr*
Green Life (New Zealand) Product Limited D Banfield*
Jonno Developments Limited D Banfield*
Kiwi Bee Medical Limited A J Bougen C T Baskin*
Kyoto Forests of New Zealand Limited D Banfield*
Medibee Limited D Banfield*
Medihoney Europe Ltd B Hewlett
Medihoney Pty Ltd B Hewlett M Tobin
New Zealand Natural Foods Limited B Hewlett
Olive Leaf Australia Pty Limited B Hewlett M Tobin
Olive Products Australia Pty Limited B Hewlett M Tobin
* denotes an executive of a Group Company ** Kiwibee Medical Limited and Jonno Developments Limited amalgamated into Comvita New Zealand Limited effective 1 July 2020
DIRECTORS OF GROUP COMPANIES (CONTINUED)
Share Dealings of Directors - beneficial
Director Number of
Shares Sold Value of
Shares Sold Number of Shares
Purchased Value of Shares
Purchased N.J Craig - - 395,940 997,197 S.J Kennedy (61) (181) 7,090 18,778 L.N.E Bunt - - 20,000 47,027 P.R.T Reid - - 11,517 28,793 B. Major - - 24,402 68,071 B.D Hewlett (152) (440) 13,300 32,900
Directors Shareholding
Directors, or entities associated with directors, held the following shareholding in Comvita Limited at 30 June 2020:
Director Opening Balance Shares Sold/ Transferred
Shares Purchased/ Transferred
Closing Balance
N.J Craig Beneficial Custodial Services Limited (A/C 4) 500,000 - 171,875 671,875 Eaglesham Trust 420,000 - 171,250 591,250 Sheryl Denise Tebbutt 75,000 - 25,780 100,780 Anna Beth Craig 25,000 - 8,593 33,593 Custodial Start Scheme 11,098 - 18,383 29,481 Craigs KiwiSaver Scheme Account 177 - 59 236 Non-beneficial 170,000 - 78,078 248,078 Total 1,201,275 - 474,018 1,675,293
S.J Kennedy Beneficial S.J Kennedy 8,865 - 4,000 12,865 Custodial start scheme 7,088 (61) 3,090 10,117 Total 15,953 (61) 7,090 22,982
L.N.E Bunt L.N.E Bunt and G.E Bunt 15,000 - 11,510 26,510 The Bunt Family Trust 35,000 - 8,490 43,490 Total 50,000 - 20,000 70,000
P.R.T Reid Beneficial Craigs KiwiSaver Scheme Account 47,797 - 11,517 59,314 Total 47,797 - 11,517 59,314
B. Major Beneficial Ms S A Parkinson & Mr R M Major 3,550 - 24,402 27,952 Total 3,550 - 24,402 27,952
S T A T U T O R Y I N F O R M A T I O NS T A T U T O R Y I N F O R M A T I O N
Comvita Financial Statements 2020 - P50 Comvita Financial Statements 2020- P51
Directors Indemnity and Insurance
The Company has insured all its Directors and the Directors of its wholly owned subsidiaries against liabilities to other parties (except the Company or a related party of the Company) that may arise from their positions as Directors. The insurance does not cover liabilities arising from criminal actions. The Company has not been required to indemnify its Directors for any liabilities during the year.
Director Opening Balance Shares Sold/ Transferred
Shares Purchased/ Transferred
Closing Balance
B.D Hewlett Beneficial
Brett Donald Hewlett 60,490 - 4,800 65,290
YRW Trustees 2005 Limited 310,889 - 8,500 319,389
Brett Donald Hewlett – Start Scheme
13,439 (152) - 13,287
Total 384,818 (152) 13,300 397,966
Beneficial 1,533,393 (213) 472,429 2,005,429
Non-beneficial 170,000 - 78,078 248,078
Total 1,703,393 (213) 550,327 2,253,507
DIRECTORS OF GROUP COMPANIES (CONTINUED) Employees’ remuneration During the 12-month period to 30 June 2020 the following numbers of employees received remuneration of at least $100,000.
Number of employees $100,000 to $110,000 13 $110,000 to $120,000 10 $120,000 to $130,000 13 $130,000 to $140,000 4 $140,000 to $150,000 5 $150,000 to $160,000 6 $160,000 to $170,000 6 $170,000 to $180,000 5 $180,000 to $190,000 2 $190,000 to $200,000 3 $230,000 to $240,000 3 $250,000 to $260,000 1 $260,000 to $270,000 1 $290,000 to $300,000 1 $310,000 to $320,000 1 $320,000 to $330,000 1 $330,000 to $340,000 1 $340,000 to $350,000 1 $350,000 to $360,000 1 $370,000 to $380,000 1 $380,000 to $390,000 1 $410,000 to $420,000 1
Note: these bands are New Zealand dollar equivalents and reflect the impact of fluctuations in the foreign exchange rates for remuneration of overseas based employees. The figures include bonus provisions made during the year which may have not been paid at period end. It does not include any remuneration or benefit relating to the Executive Share Scheme.
Donations
During the period the Group made cash donations of $6,000 (2019: $22,000). The Company also made donations of products to charitable organisations.
S T A T U T O R Y I N F O R M A T I O NS T A T U T O R Y I N F O R M A T I O N
Comvita Financial Statements 2020 - P52
DIRECTORS C o m v i t a B o a r d O f D i r e c t o r s
Neil John Craig (ceased 30 June 2020)
Lucas (Luke) Nicholas Elias Bunt
Sarah Jane Kennedy
Paul Robert Thomas Reid
Brett Donald Hewlett
Robert Malcolm Major (appointed 1 September 2019)
Guangping Zhu (appointed 17 October 2019)
Dayong Cheng (appointed 17 October 2019)
REGISTERED OFFICE C o m v i t a L i m i t e d
23 Wilson Road South, Paengaroa Private Bag 1, Te Puke 3153 Bay of Plenty, New Zealand Phone +64 7 533 1426 Fax +64 7 533 1118 Freephone 0800 504 959 Email [email protected] www.comvita.com
BANKERS W e s t p a c B a n k i n g C o r p o r a t i o n
Level 8 16 Takutai Square PO Box 934 Auckland 1140
AUDITORS K P M G T a u r a n g a
Level 2 247 Cameron Road PO Box 110 Tauranga 3140
SOLICITORS S h a r p T u d h o p e
Level 4 152 Devonport Road Private Bag TG12020 Tauranga 3110
SHARE REGISTRY L i n k M a r k e t S e r v i c e s L i m i t e d
PO Box 91976 Auckland 1142
Analysis of shareholder by size as at 1 August 2020
Category No of shareholders Shares held Percentage of
shareholders Percentage of
shares Up to 1,000 shares 1,228 607,541 35.63% 0.87%
1,001 – 5,000 shares 1,407 3,509,152 40.82% 5.03%
5,001 – 10,000 shares 383 2,751,754 11.11% 3.94%
10,001 – 100,000 shares 382 9,635,633 11.08% 13.81%
100,001 shares or more 47 53,275,872 1.36% 76.35%
Total 3,447* 69,779,952 100.0% 100.0%
*This number does not include a number of shareholders within Custodial and Nominee companies
Top 20 shareholders as at 1 August 2020
Shareholder Shares held Percentage of shares
Li Wang 8,552,736 12.26%
National Nominees New Zealand Limited 4,585,428 6.57%
China Resources Ng Fung Limited 4,582,000 6.57%
Kauri NZ Investments Limited 3,558,077 5.10%
Alan John Bougen & Lynda Ann Bougen & Graeme William Elvin 2,397,550 3.44%
Custodial Services Limited - Account 3 2,266,850 3.25%
Accident Compensation Corporation 1,907,641 2.73%
Custodial Services Limited - Account 4 1,804,256 2.59%
Junxian Li 1,738,657 2.49%
Bnp Paribas Nominees NZ Limited 1,532,117 2.20%
Forsyth Barr Custodians Limited 1,421,934 2.04%
Li Sun 1,410,000 2.02%
Robert Bertram Tait & Jane Gibbons Tait & Ian James Craig 1,327,053 1.90%
Pt Booster Investments Nominees Limited 1,007,255 1.44%
Maori Investments Limited 1,000,000 1.43%
JBWERE (Nz) Nominees Limited 986,506 1.41%
FNZ Custodians Limited 899,978 1.29%
Citibank Nominees (Nz) Ltd 787,876 1.13%
Kevin Glen Douglas & Michelle Mckenney Douglas 753,655 1.08%
Masfen Securities Limited 734,010 1.05% Other 26,526,373 38.01% Total Ordinary Shares** 69,779,952 100.00%
** does not include 1,228,125 partly paid redeemable share entitlements as detailed in Note 28 to the annual accounts
Substantial security holders as at 1 August 2020
Shareholder Shares held Percentage of shares
Li Wang 8,552,736 12.26%
China Resources Ng Fung Limited 4,582,000 6.57%
Milford Asset Management Limited 4,448,042 6.37%
Kauri NZ Investments Limited 3,558,077 5.10%
D I R E C T O R YS H A R E H O L D E R A N A LY S I S
NORTH AMERICA C o m v i t a U S A I n c .
Comvita USA Inc., 506 Chapala Street Santa Barbara, CA 93101 | USA
Phone +1 855 449 2201 [email protected]
UNITED KINGDOM C o m v i t a U K L i m i t e d
2nd Floor, 47a High Street Maidenhead, SL61JT United Kingdom
Phone +44 1628 779 460 [email protected]
JAPAN C o m v i t a J a p a n C o m p a n y L i m i t e d
Sangenjaya Horisho Bld 4F 1-12-39 Taishido, Setagaya-Ku Tokyo 154-0004 | Japan
Phone +81 3 6805 4780 [email protected]
KOREA C o m v i t a K o r e a C o L i m i t e d
18F Gwanghwamun Building, 149 Sejong-daero, Jongno-gu, Seoul(03186), Korea
Phone +82 2 2631 0041 [email protected]
AUSTRALIA C o m v i t a A u s t r a l i a P t y L i m i t e d
10 Edmondstone Street South Brisbane Queensland 4101 | Australia
Phone +61 7 3845 1400 Freephone 1800 466 392 Customer Service 1300 653 436 [email protected]
CHINA C o m v i t a F o o d ( C h i n a ) L i m i t e d
2501 - 2502 No. 7018 Sunhope E-Metro Caitan Road Futian District Shenzhen | China
Phone +86 755 8366 1958 [email protected]
HONG KONG C o m v i t a H o n g K o n g L i m i t e d
Room 1320 – 1322 Leighton Centre 77 Leighton Road Causeway Bay Hong Kong
Phone +852 2562 2335 [email protected]
Comvita Financial Statements 2020- P54
