Download - Alliance Group Limited

Alliance Group 

Annual Report 

2012

ALLIANCE GROUP LIMITED ANNUAL REPORT 2012 

Contents 

Summary of the Year 1 

Shareholder Information 1 

Chairman’s and Chief Executive’s Review 2 

Board of Directors 6 

Corporate Governance 8 

Annual Meeting of Shareholders 10 

Summary Financial Statements 11 

Statutory Information 22 

Five Year Review 24 

Directory 

IBC 

Sixty-Fourth Annual Report and Financial Statements 

for Alliance Group Limited for the Year Ended 

30 September 2012


Summary of the Year 

Profit 

• $57.0 million operating loss before restructuring costs of $13.5 

million and tax from a turnover of $1.4 billion 

• Net loss after tax $50.8 million 

Equity Ratio 

• Shareholders’ equity 51% at year-end 

Distributions to Shareholders 

• There will be no distributions to shareholders this year 

Yield Quality Contract 

• The average premium on qualifying lambs was $4.65 per lamb 

Shareholder Information 

Directorate 

Mr D A Brown and Mr M W A Donald retire by rotation and offer 

themselves for re-election. 

Three nominations have been received for the two vacancies. A 

postal ballot will be held to elect two of the following candidates: 

D A Brown; 

M W A Donald; 

N L Gardyne. 

Annual Meeting of Shareholders 

The annual meeting of shareholders will be held at 10:30am on 

Friday, 14 December 2012 at the Ascot Park Hotel, Racecourse 

Road, Invercargill. 

The business being dealt with at the annual meeting is set out on 

page 10. A formal Notice of Annual Meeting of Shareholders is set out 

in a separate document sent to shareholders with this annual report. 

1


Chairman’s and Chief Executive’s Review 

Introduction 

The 2012 season has been both challenging and difficult, particularly 

for sheepmeats. After a strong year in 2011, export market prices 

for lamb suffered a steep decline in a number of key markets due to 

widespread economic crises. Consumers substituting lower valued 

proteins for lamb, and consequently slower sales, combined to impact 

adversely on price. In New Zealand under the competitive model, 

exporter processors did not respond to the rapidly changing world 

circumstances early enough and paid too much for livestock for too 

long. That said, the market was dynamic – the degree of downward 

price adjustment in the market was material, compounded by the 

increasing value of the New Zealand dollar. Some stability has now 

been achieved, albeit at lower in‐market prices. 

Owen Poole (Chairman) 

Financial 

From a financial perspective, the 2012 year has been very difficult 

with the company recording its first operating loss in 20 years. 

The result for the year is a consolidated operating loss, before 

restructuring costs, of $57.0 million (2011 $20.7 million profit). 

Restructuring costs of $13.5 million arising from the cessation of 

sheep and lamb processing at the Mataura Plant were in addition to 

this. Taking into account the future tax benefit of these losses, the 

net loss after tax for the year is $50.8 million (2011 $9.0 million loss). 

A combination of the operating loss and slower markets, with 

associated higher stocks and debtors, has resulted in an operating 

cash deficit of $163.5 million for the year. 

Grant Cuff (Chief Executive) 

Despite the significant loss recorded, and after providing for the 

redundancy and asset write‐down costs associated with the cessation 

of sheepmeat processing at Mataura Plant and closure of Sockburn 

Plant, the company’s balance sheet remains robust with shareholders’ 

funds of $294.7 million and an equity ratio of 51%. 

The operating results for the year are not satisfactory. The decisions 

in respect of the Sockburn Plant and sheep and lamb processing 

at Mataura, as well as investments in beef at Mataura, venison at 

Smithfield and rendering at Lorneville, will provide significant ongoing 

cost savings and benefits. The company is targeting a much improved 

financial result for the 2013 year, along with an increase in the 

company’s equity ratio and reduced bank debt. 

Distributions to Shareholders 

There will be no distributions to shareholders this year. 

2


Year in Review 

Over the past 12 months, there has been substantial change in the 

world we export to. The economies of Europe, the United Kingdom 

and the United States have struggled with high debt, low growth and 

high unemployment. China too has slowed from a growth rate of 

10% to around 7% per annum. Debt and bad debt risk has moved 

from banks to countries and taxpayers. Exporting to customers and 

consumers in a debt laden and uncertain world has become even 

tougher for New Zealand exporters. 

Within New Zealand, early season lamb pricing was set too high 

relative to market returns. Competition for livestock resulted in all 

companies maintaining these prices as the market began to indicate 

otherwise. Downward adjustments could not keep pace with the 

decline in market prices and the rising New Zealand dollar. 

Land use change has resulted in a declining number of sheep and 

lambs available for processing, while cattle volumes have increased. 

The company has reconfigured a number of its assets over the last 

year to reflect the changes in livestock availability, reduce overhead 

cost and improve efficiencies. While over-capacity for sheepmeat 

is an industry-wide issue, Alliance Group has been committed to 

continuing its own initiatives over the last 12 months. As announced 

last year, the company closed its Sockburn Plant in Christchurch 

in June. Venison processing was transferred to a new facility built 

at Smithfield Plant in Timaru and beef capacity increased by the 

addition of a further shift at Pukeuri Plant and a $15 million upgrade 

at the Mataura Plant. 

In September, the company announced a proposal to cease sheep 

and lamb processing at Mataura Plant. The proposal was driven by 

declining sheep and lamb numbers in the southern region. Ceasing 

sheep and lamb operations at Mataura provides overhead savings 

that are not available by reducing capacity at other plants. The 

Lorneville Plant has sufficient capacity to manage available sheep 

and lamb supply in the southern region. Alliance Group recognises 

the cost in people and financial terms is high. The company is able 

to accommodate all processing workers at its Lorneville Plant 

and worked with the Meat Workers Union to make the transfer 

option viable. Over 60 management, supervisors, administration and 

engineering staff are also affected. Decisions that impact heavily on 

people’s livelihoods, their families and communities are not taken 

easily, but sadly they are necessary to reflect changing livestock 

supply circumstances. 

This year, the company invested $13 million in a new rendering 

facility at the Lorneville Plant. The rendering plant will reduce 

Alliance Group’s energy and operating costs, as well as improve 

product recovery. It incorporates the latest technology which uses 

less energy and is virtually “zero waste” resulting in higher product 

yields and low wastewater output. The new plant is the first stage 

in a larger rendering redevelopment project. The complete project 

is estimated to save around 9,000 tonnes of coal and more than 1.5 

million kilowatt hours of electricity per annum. 

The company recently extended its innovative VIAscan® technology 

to venison processing. VIAscan® technology calculates meat yield for 

each area of the carcase and has been used for lamb carcases since 

2003. Providing suppliers with the opportunity to improve returns, 

VIAscan® aligns farmers with market information and helps them 

with decision-making and the selection of genetics. The company is 

also involved in the establishment of a deer progeny test programme, 

which will complement the VIAscan® information. 

In the north, the Levin Plant operated a second shift for beef and 

processed bobby calves this season for the first time. This was 

successful and consistent with the company’s objective to better 

spread overheads across a wider range of livestock species. 

The company’s major brand, Pure South, has been refreshed. After a 

decade in the market, the refreshed Pure South brand will inject new 

energy into the product, enhancing its reputation as the superior farm 

fresh New Zealand meat product. It is part of Alliance Group’s wider 

strategic move to consolidate branding, which will bring beef, lamb 

and venison under one name, rationalise packaging, reach out to new 

customers and ultimately grow the brand’s strong market position. 

Pure South is very well established representing the company’s lamb 

in Europe, South‐east Asia and China predominantly. New imaging 

blends aspects of the old with the new to reflect Alliance Group’s 

history as one of New Zealand’s leading meat exporters. Ashley 

brand will be retained for specific European customers. Ashley is 

currently the most valuable sheepmeat brand in Europe. 

Meanwhile, Alliance Group is well positioned in China with its 

in‐market partner, Grand Farm. Previously low value items dominated 

sales but increasingly high value products have been added to the 

offer, both for food service and retail. Alliance Group’s 12‐year 

relationship with Grand Farm has evolved to the point of offering 

joint branded product, further market research in three major cities, 

and providing technical support from New Zealand. These are very 

positive developments and reflect more than a decade of joint effort 

in the market. 

3


After two years of market development work, the first shipment 

of Pure South lamb arrived in Brazil in September. As a new 

market, Brazil offers good potential and the ability to provide 

significant returns. The country has a natural affinity for red meat, a 

growing population and an emerging middle class. Products will be 

co‐branded with the company’s in‐market partner, Wessel. 

Alliance Group has also secured an exclusive deal to supply chilled 

New Zealand lamb to iconic UK retailer, Marks & Spencer. The 

supply arrangement is the first time Marks & Spencer has agreed to 

an exclusive deal for chilled lamb from a single New Zealand supplier. 

Alliance is also actively exploring a number of other initiatives with 

Marks & Spencer to maximise the benefits of the partnership. 

During the year, the company’s hoofprint programme was made 

available to all suppliers. Hoofprint helps farmers monitor the 

carbon footprint associated with their farm and improve their 

productivity. The web-based farmer-friendly programme produces 

farm performance information based on the data collected to 

determine the carbon footprint. Future enhancements to hoofprint 

will enable suppliers to obtain more information on their emissions 

and benchmark their performance against past years and against 

other suppliers. Hoofprint was developed to help protect and grow 

future access to key markets, primarily retail and food service in the 

United Kingdom, Europe and the United States and potentially Asia. 

Procurement Policy Changes 

The company is introducing a number of changes in its procurement 

policies. Alliance Group’s co‐operative ownership structure is its 

foundation and strength. The company was established to benefit 

its farmer shareholders and improve the returns received for their 

livestock. Alliance Group actively encourages suppliers to commit 

100% of their livestock to the company. It is in this environment, 

suppliers and the company working together to achieve market 

objectives, that benefits are maximised. Alliance Group’s relationship 

with suppliers is continually focused towards encouraging and 

rewarding 100% supply commitment. The changes in procurement 

policy this year are intended to reinforce those principles. 

Suppliers will be categorised into three groups referred to as 

Platinum, Gold and Silver. Platinum is defined as shareholders who 

commit 100% of all species, Gold suppliers are shareholders who 

commit 100% of one species but supply other species to other 

companies, and Silver suppliers are shareholders who provide a 

regular percentage of their livestock to the company each year. The 

company intends to develop further offerings for each of these 

groups into the future. 

4 

Photo by permission: Deer Industry New Zealand


An advance upfront payment for lambs is being made available to 

Platinum and Gold suppliers from this year. The advance payment 

will be recovered at the time of processing or on sale of store stock. 

Fixed price options for lamb, beef and venison which may be offered 

during the year will be made available firstly to Platinum and Gold 

suppliers with eligibility for Silver suppliers depending on the uptake. 

The 10% retention for the pool supply option has been removed. 

The company will now pay 100% of schedule price at the time 

of processing. Shareholders electing the pool supply option will 

remain eligible for profit distributions at year‐end, subject to 

satisfactory profitability. 

These are important first steps and the company will evaluate 

these initiatives over the next 12 months and make amendments as 

appropriate to ensure the changes achieve the aims of the company 

and shareholders for the future. 

Governance 

A review of the constitution was carried out during the year with the 

assistance of our legal advisers, Bell Gully. A number of amendments 

have been proposed for shareholders’ approval at the annual 

meeting. Full details are set out in the explanatory notes for the 

special resolution in the notice of annual meeting. The amendments 

are not material and bring the constitution up‐to‐date with best 

practice and simplify some processes affecting director nominations, 

director share qualification and proxies. 

People and Acknowledgements 

David Mackenzie, whose appointment as an independent director 

expires this year, retired from the board at the end of the company’s 

financial year. David has been a director since 2005 and has made a 

valuable contribution to the company bringing to the board a wealth 

of commercial experience from his former role as a partner and 

chairman of the national legal firm, Buddle Findlay. Directors and 

management wish David and Jean a long and enjoyable retirement. 

Michael Horn, Company Secretary, is also retiring at the end of 

December. Michael joined the company with the acquisition of 

Ocean Beach in 1981. His roles with the company over time have 

been wide-ranging and his contribution has been exemplary. His 

experience, knowledge and commonsense will be missed. 

Challenging times for the company mean challenging times for 

directors, management and employees. We wish to acknowledge 

and extend thanks to all those involved in the operations of the 

company during the year. We also wish to thank shareholders 

supplying livestock to the company for their ongoing commitment 

and support and look forward to improving prospects for Alliance 

Group in the year ahead. 

During the process of reviewing the constitution, the board 

established a board charter to formalise process and practice that has 

developed over recent years. The board charter is available on the 

company’s website. One new provision in the charter is for elected 

farmer directors to retire after 12 years service and independent 

directors after 9 years service. The board has the right to waive this 

provision when it is considered prudent to do so in order to ensure 

an appropriate mix of experience alongside fresh thinking. 

G O POOLE 

G R CUFF 

5


Board of Directors 

Chairman 

Owen Poole 

Wanaka 

Independent director appointed 2008 

Chief Executive, Alliance Group Ltd, 

1995‐2005 

Director and Chairman of The Lamb 

Companies, North America, 1995‐2011 

Chief Executive 

Grant Cuff 

Invercargill 

Appointed Chief Executive 2005 

Joined company in 1990 

Member, Meat Industry Association Council 

Chairman, New Zealand Holdings (UK) Ltd 

Director, The Lamb Companies, North 

America 

Doug Brown, JP 

Oamaru 

Supplier representative elected 2001 

Councillor, Otago Regional Council 

Farming “Punchbowl” in North 

Otago - 520 hectares carrying sheep 

Murray Donald 

Winton 


Chairman, Alliance Group Trustee Ltd 

Director, Farmers Mutual Group 

Operates an intensive 455 hectare 

farming operation focused on 

sheepmeat production in the 

Waianiwa district of Southland 

John Lindsay 

Dipton 


Member of the Audit and Risk 

Committee 

Farming sheep, cattle and deer on 

888 hectares at Dipton, Southland 

David Mackenzie 

Christchurch 

Independent director appointed 

2005 

Formerly a partner and chairman of 

the national legal firm, Buddle Findlay 

specialising in commercial law and 

business advice 

Chairman, Christchurch International 

Airport Ltd 

(Mr Mackenzie retired on 

30 September 2012.) 

6 

Jason Miller 

Southdown 



Committee 

Farms 846 hectare sheep and beef 

property at Glencoe 

Dawn Sangster 

Ranfurly 


Councillor, Mohair New Zealand Inc 

Councillor, Beef+Lamb Central South 

Island Farmers’ Council 

A director of Glenayr Ltd farming 

sheep and beef on 2,540 hectares in 

Central Otago 

Murray Taggart 

Oxford 



Committee 

Director, Ballance Agri-Nutrients 

Co‐operative Ltd 

Director, CRT Society Ltd 

Director, Southern Farms NZ Ltd 

Operates a 407 hectare sheep and 

cropping farm under irrigation in 

North Canterbury 

John Waller 

Auckland 

Independent director appointed 2009 

Chairman of the Audit and Risk 

Committee 

Formerly a partner of the 

national accounting firm, 

PricewaterhouseCoopers specialising 

in corporate financial management 

Chairman, Bank of New Zealand Ltd 

Director, Fonterra Co-operative Ltd 

Director, National Australia Bank Ltd 

Director, Donaghys Ltd 

Director, Sky Network Television Ltd 

Director, Direct Property Fund Ltd 

Director, Yealands Wine Group Ltd


Doug Brown 

Murray Donald 

John Lindsay 

David Mackenzie 

Jason Miller 

Dawn Sangster 

Murray Taggart 

John Waller 

7


Corporate Governance 

Shareholders’ Equity 

as a percentage of total assets 

Alliance Group Limited is a co-operative company owned by 5,000 farmers 

who supply livestock to the company for processing and sale of the resulting 

meat and co-products. Over 90% of the company’s products are exported to 

international markets. 

90 

80 

70 

The company’s shares are not listed on any stock exchange. 

Board of Directors 

60 

50 

40 

The constitution provides that there shall be not more than ten directors of the 

company at any time, of which not less than six and not more than eight shall be 

directors elected by the shareholders. One-third of the elected directors retire by 

rotation each year and may stand for re-election. The directors who retire each 

year are those who have been longest in office since their last election. 

Provided that the total number of directors does not exceed ten, the board 

may from time-to-time appoint up to four directors who, in the opinion of the 

board, are capable of rendering special services in relation to the affairs of the 

company. These directors are appointed for a term of up to three years and 

may be re-appointed for subsequent terms of up to three years at a time. The 

board exercises the discretion to appoint independent directors to the board 

to ensure that the board comprises directors with an appropriate range of skills 

and experience. 

30 

20 

10 

0 

1600 

1400 

1200 

08 09 10 11 12 

Turnover 

($ millions) 

The board currently comprises eight directors of which two are independent 

directors and six are elected directors, one of whom is appointed chairman on an 

annual basis. 

In 2012 the board established a board charter which sets out the role and 

responsibilities of the board and formalises board process and practice. A copy of 

the charter may be viewed on the company’s website (www.alliance.co.nz). 

1000 

800 

600 

400 

200 

Board Responsibilities 

The board has statutory responsibility for the affairs and activities of the company. 

The responsibility for the day-to-day operation and administration of the 

company is delegated by the board to the chief executive. The long-term strategic 

direction of the company, the annual business plan and capital expenditure budget 

are approved by the board. The board also approves expenditure on specific 

projects that are outside normally delegated authorities and reviews operational 

performance against the business plan objectives. 

The board ensures that the affairs of the company adhere to all regulatory 

obligations, that high ethical standards are maintained and that the company is 

a responsible corporate citizen. Particular emphasis is placed on the health and 

welfare of employees and the protection and sustainable use of the environment. 

All directors register and formally record any conflicts of interest. 

0 

200 

175 

150 

125 

100 

75 

08 09 10 11 12 

Debt (Parent Co) 

($ millions) 

Succession planning is undertaken for both directors and management to ensure 

appropriate skill sets are available to the company on an ongoing basis. 

50 

25 

0 

08 09 10 11 12 

8


Operating Cash Flow 

($ millions) 

Board Meetings 

Eleven board meetings are scheduled each year with extra meetings 

held if required. Comprehensive management reports are provided to 

directors prior to board meetings being held. The board encourages 

the chief executive to bring to board meetings employees who can 

provide additional insight into the matters being discussed because 

of personal involvement in those matters. 

125 

100 

75 

50 

25 

0 

-25 

Audit and Risk Committee 

The Audit and Risk Committee comprises four directors who 

meet three times a year. The committee operates under a charter 

approved by the board and is required to establish a framework of 

internal control mechanisms and ethical standards to ensure proper 

management of the company’s affairs. The committee is responsible 

for ensuring that arrangements are in place to adequately manage 

areas of significant business risk. The committee reviews the 

annual external audit plan and the report of the auditors following 

completion of the audit. It assists the board to meet its accounting 

and reporting responsibilities under the Companies Act 1993 and 

related legislation. The committee is also responsible for the internal 

audit plan and reviews all internal audit reports. 

-50 

-75 

-100 

-125 

-150 

-175 

40 

30 

20 

08 09 10 11 12 

Net Profit 

after tax for the year 

($ millions) 

Communication with Shareholders 

Alliance Group makes every effort to keep shareholders informed 

of all major developments affecting their company. Information is 

communicated to shareholders through the Alliance Group website, 

annual report and regular company newsletters and emails. Each 

year a series of meetings is held throughout the company’s stock 

catchment areas at which the chairman and chief executive update 

shareholders on issues affecting the company and the industry. 

These meetings also provide the opportunity to receive and discuss 

feedback on issues important to shareholders. The board welcomes 

full participation of shareholders at these meetings. 

10 

0 

-10 

-20 

-30 

-40 

-50 

-60 

08 09 10 11 12 

Average Lamb 

Price to Farmers ($) 

Source: Beef & Lamb NZ Economic Service 

120 

100 

80 

60 

40 

20 

0 

08 09 10 11 12 

9


Annual Meeting of 

Shareholders 

The annual meeting of shareholders of Alliance Group Limited (the company) 

will be held in Invercargill at 10:30am on Friday, 14 December 2012, at the Ascot 

Park Hotel, Racecourse Road, Invercargill. 

Business 

1. To receive the financial statements and the reports of the directors and 

auditors for the year ended 30 September 2012. 

2. To record the appointment of two directors. 

3. To record the reappointment of KPMG as auditors and to authorise the 

directors to set the fees and expenses of the auditors. 

4. To consider and, if thought fit, pass the following resolution as a special 

resolution: 

“That the Constitution of the Company be amended as set out in the 

Annexure to the Explanatory Notes accompanying the Notice of Meeting”. 

Proxies 

Any member, entitled to attend and vote, may appoint another person as proxy 

to attend and vote at the meeting using the form sent with this report. A 

person who is appointed proxy need not be a member of the company. The 

signature to a form of proxy must be witnessed. The duly signed form of proxy, 

to be valid, must be deposited at the registered office of the company at Level 2, 

51 Don Street, Invercargill, not later than forty-eight (48) hours before the 

meeting. If a proxy is executed by an agent or attorney the authority to execute 

the same must be produced at the time of deposit of the proxy. 

Shareholding Companies 

Voting rights for shares held in the name of a registered company can only be 

exercised if the shareholding company appoints a representative to attend the 

meeting on its behalf. The appointment of a representative should be made in 

the same manner and on the same form as that in which it could appoint a proxy 

using the form sent with this report. The duly signed notice of appointment, to 

be valid, must be deposited at the registered office of Alliance Group Limited at 

Level 2, 51 Don Street, Invercargill, not later than forty-eight (48) hours before 

the meeting. 

The formal Notice of Annual Meeting of Shareholders is set out in a 

separate document sent to shareholders with this annual report. The 

notice includes explanatory notes for item 4 of the business together with 

an annexure detailing the specific amendments to the constitution on a 

clause-by-clause basis. 

A copy of the company’s constitution marked up to show the proposed 

changes may be viewed on the company’s website (www.alliance.co.nz). 

10


Summary Financial Statements 

Summary Income Statement 12 

Statement of Comprehensive Income 12 

Statement of Changes in Equity 13 

Statement of Financial Position 14 

Statement of Cash Flows 15 

Notes to the Summary Financial Statements 16 

Audit Report 21 

11


Financial Statements 

Summary Income Statement 

For the year ended 30 September 2012 

Note Group Group 

2012 2011 

$000 $000 

Total operating revenue 2 1,371,063 1,499,365 

Total operating expenses 3 (1,425,193) (1,477,529) 

(54,130) 21,836 

Restructuring costs 4 (13,503) (19,414) 

Operating profit/(loss) before financing costs (67,633) 2,422 

Dividends received 1 3 

Interest received 321 405 

Interest paid (8,747) (5,030) 

Gain on fair value adjustments to financial instruments 5,774 2,891 

Net financing costs (2,651) (1,731) 

Equity accounted earnings (267) 621 

Profit/(Loss) before pool surplus distributions (70,551) 1,312 

Pool surplus distributions - (10,815) 

Profit/(Loss) before tax (70,551) (9,503) 

Income tax (expense)/benefit 5 19,751 500 

Profit/(Loss) after tax for the year ($50,800) ($9,003) 

Statement of Comprehensive Income 


Group 


2012 2011 

$000 $000 

Fair value changes in derivatives: 

recognised in cash flow hedge reserve 4,518 (3,448) 

transferred and recognised in income statement 3,448 (618) 

7,966 (4,066) 

tax effect of cash flow hedge reserve (2,299) 1,220 

5,667 (2,846) 

Movement in foreign currency translation reserve (2,096) (1,576) 

Other comprehensive income/(loss), net of tax 3,571 (4,422) 

Profit/(Loss) after tax for the year (50,800) (9,003) 

Total comprehensive income/(loss) for the year ($47,229) ($13,425) 

12


Statement of Changes in Equity 


Share Share Foreign Cash Flow Retained Total 

Capital Premium Currency Hedge Earnings 

Reserve Translation Reserve 

Reserve 


$000 $000 $000 $000 $000 $000 

Balance at 1 October 2010 78,279 48,865 (11,026) 433 241,715 358,266 

Profit after tax for the year - - - - (9,003) (9,003) 

Net change in fair value of financial instruments - - - (2,846) - (2,846) 

Movement in foreign currency translation reserve - - (1,576) - - (1,576) 

Total comprehensive income for the year - - (1,576) (2,846) (9,003) (13,425) 

Shares issued - ordinary shares 132 - - - - 132 

Shares surrendered - ordinary shares (2,125) - - - - (2,125) 

Share issue pending 1,391 - - - - 1,391 

Provision for dividend - - - - 3 3 

Total transactions with owners (602) - - - 3 (599) 

Balance at 30 September 2011 $77,677 $48,865 ($12,602) ($2,413) $232,715 $344,242 

Balance at 1 October 2011 77,677 48,865 (12,602) (2,413) 232,715 344,242 

Profit after tax for the year - - - - (50,800) (50,800) 

Net change in fair value of financial instruments - - - 5,667 - 5,667 

Movement in foreign currency translation reserve - - (2,096) - - (2,096) 

Total comprehensive income for the year - - (2,096) 5,667 (50,800) (47,229) 

Shares issued - ordinary shares 8 - - - - 8 

Shares surrendered - ordinary shares (2,288) - - - - (2,288) 

Total transactions with owners (2,280) - - - - (2,280) 

Balance at 30 September 2012 $75,397 $48,865 ($14,698) $3,254 $181,915 $294,733 

13


Financial Statements continued 

Statement of Financial Position 

As at 30 September 2012 

Equity 


2012 2011 

$000 $000 

Share capital 6 75,397 77,677 

Reserves 37,421 33,850 

Retained earnings 181,915 232,715 

Total equity 294,733 344,242 

Liabilities 

Bank overdraft 9 1,488 4,073 

Trade and other payables 8 65,944 79,486 

Employee benefits 12,083 11,759 

Financial liabilities - derivatives 2,637 10,166 

Income tax payable - 431 

Interest bearing loans and borrowings 7 569 569 

Total current liabilities 82,721 106,484 

Interest bearing loans and borrowings 7 196,093 1,662 

Employee benefits 6,160 6,086 

Total non-current liabilities 202,253 7,748 

Total liabilities 284,974 114,232 

Total liabilities and equity $579,707 $458,474 

Assets 

Cash and cash equivalents 9 4,029 7,976 

Trade and other receivables 114,146 106,519 

Inventories 189,948 101,283 

Assets held for sale 12 14,405 - 

Income tax receivable 738 - 

Financial assets - derivatives 8,492 1,631 

Total current assets 331,758 217,409 

Investments in equity accounted investees 10 15,485 15,617 

Deferred tax assets 30,517 13,587 

Other assets 597 765 

Property, plant and equipment 11 201,350 211,096 

Total non-current assets 247,949 241,065 

Total assets $579,707 $458,474 

On behalf of the Directors 

G O Poole 

Director 

J A Waller 

Director 

9 November 2012 

14


Statement of Cash Flows 



2012 2011 

$000 $000 

Cash flows from operating activities 

Cash receipts from customers 1,351,024 1,489,019 

Refund of GST and other taxes 3,003 - 

Income tax refund - 899 

Interest received 104 411 

Dividends received 151 153 

Other receipts 1,534 2,296 

1,355,816 1,492,778 

Cash paid to suppliers and employees (1,510,830) (1,482,785) 

Interest paid (7,637) (4,688) 

Income tax paid (875) (1,378) 

Payment of GST and other taxes - (792) 

(1,519,342) (1,489,643) 

Net cash flow from operating activities 13 (163,526) 3,135 

Cash flows from investing activities 

Repayment of investment - 1,768 

Dividends received - 524 

Proceeds from the sale of property, plant and equipment 713 59 

713 2,351 

Acquisition of property, plant and equipment (30,942) (23,424) 

Net cash flow from investing activities (30,229) (21,073) 

Cash flows from financing activities 

Increase in term debt 195,000 - 

Issue of share capital 101 125 

195,101 125 

Dividends paid - (3,799) 

Redemption of share capital (2,288) (2,125) 

Payment of finance lease liabilities (569) (569) 

(2,857) (6,493) 

Net cash flow from financing activities 192,244 (6,368) 

Net movement in cash and cash equivalents (1,511) (24,306) 

Opening cash and cash equivalents 3,903 28,287 

Effect of exchange rate fluctuations on cash held 149 (78) 

Closing cash and cash equivalents 9 $2,541 $3,903 

15


Notes to the Summary Financial Statements 

1 Significant Accounting Policies 

Alliance Group Ltd is a company domiciled in New Zealand, registered under the Companies Act 1993 and the Co‐operative Companies Act 1996. The 

company is an issuer in terms of the Financial Reporting Act 1993. 

These summary financial statements of the company as at and for the year ended 30 September 2012 comprise the company and its subsidiaries 

(together referred to as the “group”) and the group’s interest in associates and jointly controlled entities. 

Alliance Group Ltd is primarily involved in meat processing and export. 

These summary financial statements have been prepared in compliance with FRS-43 “Summary Financial Statements” and comply with Generally Accepted 

Accounting Practice in New Zealand (NZ GAAP) as it relates to summary financial statements. The specific disclosures included in the summary financial 

statements have been extracted from the full financial statements dated 9 November 2012. The full financial statements have been audited by KPMG, who 

provided an unqualified opinion in respect to those financial statements on 9 November 2012. The full financial statements have been prepared in accordance 

with NZ GAAP, applying the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), and its interpretations as appropriate to 

profit‐oriented entities. The financial statements also comply with International Financial Reporting Standards (IFRS). 

The summary financial statements were authorised by the Board of Directors of Alliance Group Ltd on 9 November 2012. 

The summary financial statements are presented in New Zealand dollars (NZD), which is the company’s functional currency, and are rounded to the nearest 

thousand dollars. 

Users of the summary financial statements should note that the information contained therein cannot be expected to provide as complete an understanding 

as provided by the full financial statements. 

Users who require additional information are encouraged to access the full Alliance Group Ltd financial statements on the company’s website at www.alliance.co.nz. 

Alternatively, users may request a printed copy of the full financial statements by contacting Alliance Group at the following address – 

The Company Secretary 

Alliance Group Ltd 

PO Box 845 

Invercargill 9840 

16




2012 2011 

$000 $000 

2 Total Operating Revenue 

Turnover 1,369,954 1,496,758 

Rebates received from associates 808 2,474 

Rent received 103 111 

Net gain on sale of property, plant and equipment 198 22 

Total Operating Revenue $1,371,063 $1,499,365 

3 Total Operating Expenses include: 

Depreciation 21,900 21,331 

Write-off of property, plant and equipment 134 1,946 

Audit fees 174 175 

Bad debts written off 28 283 

Movement in provision for doubtful debts (21) (283) 

Directors’ fees – Alliance Group Ltd 535 449 

Operating leases 4,303 4,162 

Demolition costs 207 - 

Restructuring costs - redundancies - 4 

4 Restructuring Costs 

Redundancy costs 9,445 8,631 

Write-down of property, plant and equipment 3,303 10,783 

Write-down of consumable stores 755 - 

$13,503 $19,414 

The redundancy costs, write-down in the value of property, plant and equipment and the write-down of consumable stores relate to provisions established 

at 30 September 2012 following the announcement of the closure of sheep and lamb processing operations at the company’s Mataura Plant. 

The costs shown for the 2011 year relate to similar provisioning established at 30 September 2011 for the pending closure of the company’s Sockburn Plant 

which permanently closed at the cessation of the 2012 processing season. 

5 Income Tax (Expense)/Benefit 

The tax benefit shown of $19.751 million includes recognition of a $16.5 million deferred tax asset arising from the tax loss incurred for the year. 

17


Notes to the Summary Financial Statements continued 

6 Equity 

The company has 75,397,470 fully paid shares on issue (2011 76,285,159). The difference for the 2011 year between the number of fully paid shares on 

issue and the balance of share capital shown in the statement of changes in equity ($77.677 million) reflects the share issue pending of $1.39 million shares 

which were issued and paid from the pool surplus distributions to shareholders in December 2011. Shares on issue are ordinary shares with a nominal value 

of $1.00 each. All shares have equal voting rights and shareholders are entitled to one vote per share. The maximum shareholding is 145,000 shares. Upon 

winding up, shares rank equally with regard to the company’s residual assets. 

Shares are issued and surrendered at their nominal value under the company’s constitution and the Co-operative Companies Act 1996. Co-operative shares 

may be surrendered where shareholders have not transacted with the company for five years or do not have the capacity to be a transacting shareholder. 



2012 2011 

$000 $000 

7 Interest Bearing Loans and Borrowings 

Current Liabilities 

Current portion of finance lease liabilities $569 $569 

Non-current liabilities 

Secured bank loans 195,000 - 

Finance lease liabilities 1,093 1,662 

$196,093 $1,662 

In January 2012, the company renegotiated its syndicated revolving cash advances facility with its consortium of banks, increasing the facility’s debt cap 

levels and extending the maturity date for a further year to November 2014. This facility is denominated in New Zealand dollars. Loans made under this 

arrangement are secured by a charge over property and assets given under a Debenture Trust Deed. Interest rates under the facility agreement are floating 

rates based on bank bill interest rates. Various covenants such as minimum net worth and working capital ratios apply to the bank lending facilities. In March 

2012, due to the very difficult trading conditions the company was experiencing, and the financial results being recorded to date, the company sought and 

was granted waivers from the banking syndicate for the interest cover ratio covenant requirement for the March and June 2012 quarters. In September 

2012, the company negotiated an amendment to its bank facility. The amendment to the facility waived the interest cover ratio covenant for September 2012, 

amended and added certain covenants and further increased the quantum of the facility. In exchange the company accepted an increase to the fee structure 

which will revert once compliance with original covenants is achieved. As at 30 September 2012 there were no breaches to the terms of the amended facility. 

8 Trade and Other Payables 

Current 

Trade payables and accrued expenses 55,749 61,431 

Pool surplus distributions payable - 9,424 

Redundancy provision 10,195 8,631 

$65,944 $79,486 

18




2012 2011 

$000 $000 

9 Cash and Cash Equivalents 

Cash and cash equivalents 4,029 7,976 

Bank overdraft (1,488) (4,073) 

Net cash and cash equivalents $2,541 $3,903 

10 Investments 

(a) Investments in equity accounted investees 

This balance comprises: 

Shares in associate companies and joint ventures 4,308 4,308 

Advances to associated companies at cost 10,626 9,781 

Share of post-acquisition increases in net assets 6,129 6,546 

Share of foreign exchange translation reserve (5,578) (5,018) 

$15,485 $15,617 

The company has the following investments: 

Associates 

The New Zealand and Australian Lamb Group of Companies operating in the US and Canada (various percentages of ownership) 

Porkcorp New Zealand Ltd (50% ownership) 

(b) Investments in subsidiaries – comprises 100% in - 

Waitaki International Ltd (non-trading) 

New Zealand Holdings (UK) Ltd and its trading subsidiary New Zealand Farmers Ltd 

11 Property, Plant and Equipment 

Cost - 

Freehold land 27,223 44,223 

Buildings 130,373 133,915 

Plant and Equipment 362,852 345,998 

Capital work-in-progress 10,618 20,228 

531,066 544,364 

Book value - 

Freehold land 27,223 42,023 

Buildings 49,832 48,665 

Plant and equipment 113,677 100,180 

Capital work-in-progress 10,618 20,228 

Book value at end of year $201,350 $211,096 

19


Notes to the Summary Financial Statements continued 

12 Assets Held for Sale 

Certain land and buildings are surplus to requirements and have been reclassified as “assets held for sale” following approval of the directors to sell the 

facilities. Assets included in this group either have conditional contracts or are currently under sale negotiation. 

The carrying amount is at fair value less costs to sell. 

At 30 September 2012, the disposal group comprised the following assets - 



2012 2011 

$000 $000 

Property, plant and equipment $14,405 - 

13 Reconciliation of Profit to Cash Surplus from Operating Activities 

Profit for the year (50,800) (9,003) 

Adjustments for items not involving cash flows: 

Depreciation 21,900 21,331 

Net (profit) loss on sale or write-off of assets (63) 1,923 

Write-down of property, plant and equipment 3,304 10,783 

Earnings from associates 267 (621) 

Associated company dividends eliminated 150 150 

Movement in deferred tax (16,930) (3,914) 

Share issues retained from pool surplus - 1,397 

Bad debts written off 28 283 

Doubtful debts (21) (283) 

Employee entitlements 74 488 

Fair value of financial derivatives (8,723) 6,139 

Effect of exchange rate movement on working capital (1,309) (955) 

Finance lease reclassified as financing 569 569 

Accounts receivable movements involving investing and financing activities (1,214) (978) 

Accounts payable movements involving investing and financing activities (79) 3,465 

Operating cash flow before changes in working capital provisions (52,847) 30,774 

Movement in trade and other receivables (7,627) (16,034) 

Movement in inventories (88,665) (33,481) 

Movement in trade and other payables (13,542) 20,597 

Movement in employee benefits 324 (232) 

Movement in income tax payable (1,169) 1,511 

Cash flow from operating activities ($163,526) $3,135 

20


Audit Report 

Independent Auditor’s Report on the Summary Financial Statements 

To the shareholders of Alliance Group Limited 

The accompanying summary financial statements on pages 12 to 20, which comprise the summary statements of financial position as at 30 

September 2012, the summary income statements and summary statements of comprehensive income, changes in equity and cash flows for 

the year then ended and notes, for both the company and the group, are derived from the audited financial statements of Alliance Group 

Limited (‘’the company’’) and the group, comprising the company and its subsidiaries, for the year ended 30 September 2012. We expressed an 

unmodified audit opinion on those financial statements in our report dated 9 November 2012. 

The summary financial statements do not contain all the disclosures required for full financial statements under generally accepted accounting 

practice in New Zealand. Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements 

of Alliance Group Limited and the group. 

Directors’ responsibility for the company and group financial statements 

The directors are responsible for the preparation of a summary of the audited financial statements, in accordance with FRS-43 Summary Financial 

Statements. 

Auditor’s responsibility 

Our responsibility is to express an opinion on the summary company and group financial statements based on our procedures, which were 

conducted in accordance with International Standards on Auditing (New Zealand) (ISA (NZ)) 810 Engagements to Report on Summary Financial 

Statements. 

Other than in our capacity as auditor we have no relationship with, or interests in, the company and group. 

Opinion 

In our opinion, the summary financial statements, derived from the audited financial statements of Alliance Group Limited and the consolidated 

financial statements of the group for the year ended 30 September 2012, are a fair summary of those financial statements, in accordance with 

FRS-43 Summary Financial Statements. 


Christchurch 

21


Statutory Information 

The directors present to shareholders the Sixty-Fourth Annual Report and Financial Statements of the company for the year ended 

30 September 2012. 

Financial Result 

The result for the year is a net loss of $50.8 million after tax. 

Interests Register 

The company maintains an Interests Register in which particulars of certain transactions and matters involving the directors are recorded. 

Entries in the Interests Register must in turn be disclosed in the annual report. The following entries were recorded in the Interests Register for 

the period 1 October 2011 to 30 September 2012. 

Disclosures of Interest 

Directors have disclosed interests in the following entities pursuant to Section 140 of the Companies Act 1993: 

Entity 

Relationship 

D A Brown Otago Regional Council Councillor 

M W A Donald Alliance Group Trustee Ltd Chairman 

Farmers Mutual Group 

Director 

D J Mackenzie Christchurch International Airport Ltd Chairman 

G O Poole The Lamb Companies, North America Chairman 

H D Sangster Mohair New Zealand Inc Councillor 

M J Taggart Ballance Agri-Nutrients Co-operative Ltd Director 

CRT Society Ltd 

Director 

Southern Farms NZ Ltd 

Director 

J A Waller Bank of New Zealand Ltd Chairman 

Fonterra Co-operative Group Ltd 

Director 

National Australia Bank Ltd 

Director 

Donaghy’s Ltd 

Chairman 

Sky Network Television Ltd 

Director 

Direct Property Fund Ltd 

Director 

Yealands Wine Group Ltd 

Director 

Relevant Interests in Shares 

Directors have disclosed the following holdings of relevant interests in Alliance Group Ltd shares pursuant to Section 148 of the Companies 

Act 1993: 

Shares Held at Pool Surplus Retention Shares Held at 

30 September 2011 December 2011 30 September 2012 

D A Brown 40,019 219 40,238 

M W A Donald 71,713 - 71,713 

J A Lindsay 101,159 - 101,159 

J A Miller 76,997 - 76,997 

H D Sangster 45,566 4,735 50,301 

M J Taggart 43,274 - 43,274 

All share transactions were carried out at their nominal value of $1.00 per share. 

Related Party Transactions 

The company has frequent transactions with its elected directors conducted on an arm’s length basis in the ordinary course of business. 

22


Directors’ Remuneration 

The following remuneration was paid during the 2012 financial year: 

Parent 

Alliance Group Ltd: 

D A Brown $50,000 

O D Buckingham $13,750 

M W A Donald $54,000 

J A Lindsay $50,000 

D J Mackenzie $50,000 

J A Miller $50,000 

G O Poole (Chairman) $126,000 

H D Sangster $37,500 

M J Taggart $50,000 

J A Waller $53,750 

Employee Remuneration 

During the year, the numbers of employees of the group who received remuneration including benefits, of $100,000 or more were: 

Remuneration No. of Employees Remuneration No. of Employees 

$100,000-$110,000 16 $240,000-$250,000 1 

$110,000-$120,000 8 $250,000-$260,000 1 

$120,000-$130,000 5 $260,000-$270,000 2 

$130,000-$140,000 8 $290,000-$300,000 1 

$140,000-$150,000 4 $310,000-$320,000 1 

$150,000-$160,000 2 $350,000-$360,000 1 

$160,000-$170,000 4 $370,000-$380,000 1 

$170,000-$180,000 4 $770,000-$780,000 1 

The above details include 8 employees employed by the company’s UK‐based subsidiary, New Zealand Farmers Ltd. 

Insurance and Indemnities 

Under the provisions of Section 162 of the Companies Act 1993, the company has entered into deeds of indemnity with its directors and has 

effected directors’ and officers’ liability insurance to indemnify them against liabilities and costs associated with claims made against them in their 

capacity as directors of the company. 

Co-operative Status 

As required by Section 10 of the Co-operative Companies Act 1996, the following resolution was passed by the board on 9 November 2012. 

All directors present voted in favour of the resolution: 

“It was the opinion of the board that Alliance Group Ltd has, throughout the year ended 30 September 2012, been a co‐operative company 

within the meaning of the Co-operative Companies Act 1996 on the following grounds: 

(a) the company carries on, as its principal activity, a co-operative activity as that term is defined in the Co‐operative Companies Act 1996; 

(b) the constitution of Alliance Group Ltd states its principal activities as being co‐operative activities; 

(c) not less than 60% of the voting rights of Alliance Group Ltd were held by Transacting Shareholders as that term is defined in the 

Co-operative Companies Act 1996.” 

Directors 

The names of persons holding office as directors of the company as at 30 September 2012 are listed in the directory on the inside of the back cover. 

Mr D A Brown and Mr M W A Donald retire by rotation and offer themselves for re-election. As nominations exceed the number of vacancies, 

a postal ballot will be held in accordance with clause 17.21 of the constitution. Candidates for the two vacancies are: 

Douglas Alexander Brown; 

Murray Wilson Arthur Donald; 

Neil Leslie Gardyne. 

23


Statutory Information continued 

Auditors 

Under Section 200 of the Companies Act 1993 KPMG, Chartered Accountants, continue in office as auditors. 

Company’s Affairs 

The operating results for the year are not satisfactory and decisions have been taken to provide significant ongoing cost savings and benefits 

to restore profitability. Despite the loss for the year the company’s balance sheet remains robust with an equity ratio of 51%. Further details 

of the year under review, including material changes in the nature of the business of the company or any of its subsidiaries, are included in the 

Chairman’s and Chief Executive’s Review and the financial statements of the company accompanying this report. 

On behalf of the Board 

G O Poole 

Director 

J A Waller 

Director 


Five Year Review 

2012 2011 2010 2009 2008 

$000 $000 $000 $000 $000 

Turnover 1,369,954 1,496,758 1,384,908 1,492,312 1,281,803 

Net operating profit/(loss) before restructuring costs and 

pool surplus distribution (57,048) 20,726 29,560 42,139 67,947 

Restructuring costs 13,503 19,414 - - - 

Pool surplus distributions - 10,815 12,650 15,000 20,509 

Consolidated net surplus/(loss) after tax (50,800) (9,003) 6,318 19,008 33,493 

Fixed assets at book value 201,350 211,096 221,445 215,998 192,142 

Total assets 579,707 458,474 439,556 517,624 492,702 

Shareholders’ funds 294,733 344,242 358,266 360,920 339,825 

Shareholders’ funds as a percentage of total assets 50.8% 75.1% 81.5% 69.7% 69.0% 

Ordinary shares (000) 75,397 76,285 76,057 56,224 57,032 

24


Directory 

Corporate Office 

51 Don Street 

PO Box 845 


Telephone: 03 214 2700 

Email : executive@alliance.co.nz 

Web site: www.alliance.co.nz 

Elected Directors D A Brown, JP Oamaru 

M W A Donald 

Winton 

J A Lindsay 

Dipton 

J A Miller 

Southdown 

H D Sangster 

Ranfurly 

M J Taggart 

Oxford 

Appointed Directors G O Poole (Chairman) Wanaka 

D J Mackenzie* 

Wanaka 

J A Waller 

Auckland 

* Mr Mackenzie retired on 30 September 2012 

Board of Management Chief Executive G R Cuff 

Company Secretary 

M J Horn, JP 

General Manager Marketing 

M D Brown 

General Manager Processing 

J E Brader 

General Manager Corporate Affairs J G Bayley 

Group Livestock Manager 

M R Behrent 

Chief Financial Officer 

J A McGrath 

Managers Dannevirke Plant B A Poole 

Levin Plant 

P L Hansen 

Lorneville Plant 

D G Kean 

Mataura Plant 

A G Gilder 

Nelson Plant 

T M Kreft 

Pukeuri Plant 

G W Proctor 

Smithfield Plant 

R J Lindsay 

Sockburn Plant 

K R Ashby 

Alliance Meats 

D J Baines 

New Zealand Farmers Ltd 

B D Johnston 

Auditors 

KPMG 

Bankers 

ANZ Bank Ltd 

The Hongkong and Shanghai Banking Corporation Ltd 

Rabobank NZ Branch 

Registered Office 

51 Don Street 


The information in this annual report is for shareholders only and is not to be reproduced in whole or in part without the consent of Alliance Group Ltd.

Photo by permission: Beef and Lamb New Zealand

Download - Alliance Group Limited

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?