ANNUAL REPORT - OPAC

ANNUAL REPORT

31 December 2019

New Zealand dollars ( in thousands ) 2019 2018 2017

Earnings before interest, tax, depreciation and amortisation (EBITDA) $ 5,262 $ 6,990 $ 7,969

Depreciation and amortisation $ 4,035 $ 3,447 $ 2,174

Earnings before interest and tax (EBIT) $ 1,227 $ 3,543 $ 5,795

Finance costs and interest on lease liability $ 1,021 $ 760 $ 505

Income tax expense $ 96 $ 744 $ 379

Net profit attributable to shareholders (NPAT) $ 110 $ 2,039 $ 4,911

Other comprehensive income $ 690 $ 1,416 $(235)

Total comprehensive income attributable to shareholders $ 800 $ 3,455 $ 4,676

Total assets $ 60,748 $ 56,374 $ 45,935

Total shareholder funds $ 25,748 $ 25,734 $ 23,205

Total shares on issue (in thousands) 4,748 4,748 4,748

Financial ratios

Shareholder equity ratio 42% 46% 51%

Dividends paid (in thousands) $ 760 $ 926 $ 997

Dividend per share $ 0.16 $ 0.195 $ 0.21

EBITDA per share $ 1.11 $ 1.47 $ 1.68

Net profit after tax per share $ 0.02 $ 0.43 $ 1.03

Net assets per share $ 5.42 $ 5.42 $ 4.89

Key indicators

Page

Page

1 Chair and Chief Executive’s Report

9 Financial Report

OPAC ANNUAL REPORT 2019 1

Executive summary

The 2019 year saw OPAC process a similar volume to the previous season at 8.2m trays packed. Operational challenges, including not realising the expected efficiency benefits of the new MAF RODA packing line and early season Kiwistart quality issues, weighed on the financial performance for the year. A number of improvement initiatives were implemented prior to the 2020 season, which coupled with the completion for the current capital build programme had OPAC well placed to build on the 2019 learnings and significantly improve operational and financial performance.

Unfortunately, the COVID-19 pandemic and the Government’s response has now cast considerable uncertainty over the 2020 kiwifruit season. OPAC along with the rest of the industry has been declared an essential service, growing and processing high quality and healthy fresh produce for the New Zealand and global markets. We have reconfigured our operations to meet stringent MPI requirements and maintain employee safety, and while these will impact capacity and profitability, we remain focussed on running as efficiently as possible and maximising the potential of the 2020 crop.

While the COVID-19 impact cannot currently be quantified, management and directors have taken actions to minimise the financial implications of this unprecedented issue.

Chair and Chief Executive’s Report

OPAC ANNUAL REPORT 20192

OPAC’s changing product mixMillions of class 1 trays packed

Other varieties

Hayward

SunGold

2.1m

37%

5.6m

0.4m

3.1m

57%

1.0m

23%

4.2m

0.5m

2.7m

64%

0.3m

0.8m

3.4m

2.3m

65%5.3m

65%

8.2m

2.9m

35%

25k

4.8m

64%

7.5m

2.7m

36%

27k

4.1m

58%

7.0m

2.8m

40%

0.1m

4.8m

60%

8.1m

3.2m

40%

53k

3.1m

48%

6.5m3.2m

50%

6.5m

2013 2014 2015 2016 2017 2018 2019 2020 FORECAST

0.2m


Operations

During harvest 2019 OPAC handled a record 8.2m class 1 trays, marginally up on the prior season as a 12% lift in Zespri SunGold production was offset by a seasonal drop in Hayward volumes. Our facility packed 5.25m trays of SunGold (2018: 4.8m trays) at an average 14,531 trays per hectare, and 2.9m trays of Hayward (2018: 3.2m) as the long, dry summer impacted Hayward fruit size with industry yields falling 9%.

While harvest conditions were excellent, the hot summer and dry conditions impacted Kiwistart fruit maturity, with SunGold Brix levels lagging the speed of dry matter accumulation at the start of the harvest programme. The outcome was a small population of fruit with a propensity for excessive early ripening, creating inventory performance issues across a number of post harvest operators. With OPAC’s catchment including a high proportion of early-maturing SunGold, our growers were adversely impacted by these Kiwistart losses. OPAC has initiated an insurance claim to recover lost income, and in the interim have compensated our supplying growers for the elevated and unexpected fruit losses arising from this issue.

The Hayward harvest was smooth with fruit characteristics excellent at picking, and coolstore inventory performance was excellent over the winter and early spring period. By late September, however, fruit firmness quickly deteriorated and fruit loss started to accelerate across the industry. Analysis and competitor comparisons indicate some regionality to the extent of the issue, with Ōpōtiki-based supply more affected. The late season performance contributed to OPAC recording 2.6% Hayward fruit loss compared to an industry average 1.6%.

2019 was the first full season of the MAF RODA packing line, and operational staff had to adjust their processes to accommodate the new automated grading technology. The MAF RODA’s optical grading system is designed to reduce labour costs and improve operational efficiencies, crucial factors in a tight labour market. These efficiencies were not fully realised in 2019, particularly when handling challenging fruit lines, and the financial performance of the packing operation was well below budgeted expectations. A thorough review resulted in the implementation of new structures and procedures to take full advantage of automated grading, which delivered improved outcomes early in the 2020 season.


Financial indicators

Returns

Revenue

Net Profit After Tax

Net Assets

Earnings per Share (NPAT)

EBITDA

Return on Net Assets Dividends Paid in Year

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

$17.

6m

$37.

1m

$3.2

m

$42.

4m

$19.

5m

$47.

3m

$23.

2m

$3.8

m

$8.0

m

$54.

1m

$25.

7m

$7.0

m

$53.

3m

$25.

7m

$5.3

m

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

$0.9

m

$0.2

0 5.4%

14.0

c

$0.9

m

$0.2

0

4.8%

$ 0.

00

$4.9

m

$1.0

3

21.2

%

21.0

c

$2.0

m

$0.4

3

7.9%

19.5

c

$0.1

m

$0.0

2

0.04

%

16.0

c


Business performance

Total revenue of $53.34m was slightly down on 2018 ($54.08m) on similar post harvest volumes, while higher labour rates, the sub-optimal use of the grading technology, and compensation payments made to growers associated with the Kiwistart fruit issue contributed to a slight increase in operating costs to $46.87m (2018: $46.36m). This resulted in a gross operating profit to $6.47m; a decrease of 16% on the prior year (2018: $7.72m).

Earnings before interest, tax, depreciation and amortisation (EBITDA) at $5.26m was down $1.73m on the prior period (2018: $6.99m), while increased depreciation from capital projects and capacity expansion lowered earnings before interest and tax (EBIT) to $1.23m; down $2.31m on 2018 ($3.54m).

Net profit after tax was a disappointing $0.11m (2018: $2.04m) as a result of the below-budget operating performance, along with increases in depreciation and interest costs. Revaluations of assets included an effective gain of $0.42m from the sale of land adjoining our facility to Whakatohea Mussels Ōpōtiki Limited for their new mussel processing plant. At balance date the sale and purchase agreement was unsigned and the sale was accounted for below the profit line, contributing to a lift in total comprehensive income to shareholders to $0.73m (2018: $3.46m).

The completion of the capital build programme saw a further $7.09m invested in property, plant and equipment, with total assets up 8% to $60.75m (2018: $56.37m), bringing total net assets to $25.75m with a net asset backing of $5.42 per share. Funding of the capacity build increased net bank debt to $28.38m (2018: $24.34m), raising OPAC’s debt to tangible asset ratio to 47% (2018: 43%). The current phase of capacity building is now complete and bank debt is forecast to be progressively repaid from operating cash flow.

A dividend of 12 cents per share was paid to investors in May 2019, with a further 4 cents paid in December 2019, bringing total dividends paid in the year to 16 cents per share with $0.76m returned to shareholders (2018: 19.5 cents per share - $0.93m).

2019 financial performance was materially impacted by two operational issues; early season fruit performance and compensation to Kiwistart growers, and the sub optimal productivity through our automated grading technologies. Our business is founded on an excellent working relationship with our supplying growers, and this extends to financially supporting them while we seek compensation for the losses from our insurers. While this has impacted our 2019 financial performance, OPAC’s board and management look forward to a positive settlement in the 2020 financial year and a corresponding contribution to shareholder returns.

A major focus for harvest 2020 is to fully capture the operational efficiencies offered by our investment in modern grading technologies to improve shed throughput and operating margins. Early results from harvest 2020 are positive and we are looking forward to a much-improved financial performance.


Growing great fruit, Growing great people, Growing great communities“Whakatipu Hua, Whakawhanake Tangata, Whakawhanui Iwi Ki Tono Ike Ike”

For harvest 2020, OPAC is forecasting to process a similar crop profile to 2019. For the second consecutive season, our catchment has been subject to drought conditions and its impact on fruit development and Hayward yields. Our orcharding operations, which grow about 50% of the crop supplied to post harvest each season, continue to focus on creating value for orchard owners, and produce high yields of quality fruit.

Our Kiwistart protocols have been refined to mitigate the risk of fruit loss from the early harvest period, and we have reorganised our post harvest functions to maximise the use of technology, lift peak throughput and deliver site efficiencies. This includes better decision making around the allocation of labour resources with the focus on optimising our automatic grading technology to handle more product in a shorter time using less labour.

Seasonal labour continues to be an issue, both on the orchard and in the packhouse, and while OPAC pays better than the minimum, we operate in a low wage industry whereby increases to the minimum rate extend up multiple levels of our pay structure. Seasonal labour is further constrained in 2020 by the wide ranging and evolving response to the COVID-19 pandemic, and necessity to implement new health protocols to protect our workers, and our community, as we focus on handling this season’s crop.

OPAC was a leader in the development of East Cape orchards in Te Kaha, and it is with great sadness that we marked the passing of Hoani Kerei in February 2020. More than 20 years ago Hoani saw that investor plans to develop orchards in Te Kaha was the pathway to realise future prosperity and opportunity from coastal land for local iwi. The ground-breaking TKG partnership orchard developments overseen by Hoani are now coming to completion, with ownership of these high-quality SunGold orchards being fully transferred to iwi landowners over the next several years. These orchards have helped create a generational change in the development of our coastal communities and provided the resources and local expertise for future orchard developments and wealth creation. OPAC and the TKG investors owe much to Hoani and his whānau for the success of these ventures and we will miss him.

While fruit revenue from our TKG investments will start to decline as the orchards are progressively transferred to iwi landowners, the OTK orchards which follow a similar model are now in full production, and are delivering fruit revenues to OPAC as an investor partner, along with volumes to our post harvest operations.

Following the completion of our post harvest capacity build, in 2019 OPAC built a new modern office and staff canteen complex. This replaced the 30+ year old administration building and created a professional office space and rewarding work environment for our valued staff, and by housing all operating divisions under a single roof, has significantly boosted inter-team communication.


In 2019 we agreed to sell four hectares adjacent to our facility to Whakatōhea Mussels Ōpōtiki Limited for their onshore mussel processing and coolstorage facility. With site build starting in 2020, we anticipate a beneficial relationship with Whakatōhea Mussels including sharing of administration services, longer periods of employment for seasonal staff, and counter-seasonal access to coolstores and other infrastructure.

OPAC continues to invest in our communities, and along with the OPAC Tertiary Scholarship and our career pathways work with local secondary schools, we are very proud sponsors of two kapa haka groups of Te Whānau a Apanui and Ōpōtiki Mai Tawhiti that took the top two spots at the Mataatua Kapa Haka Regionals 2020. As part of our community initiatives, OPAC also funds administration of the Ōpōtiki Kiwifruit Growers Community Fund whereby local growers collectively support initiatives to build a strong, resilient and cohesive community.

Director Tim Chrisp has announced he will retire from the board at the 2020 annual shareholders meeting. Highly experienced in the primary export sector, over the last 14 years Tim has helped shape our business to focus on supply chain efficiencies from the orchard to the market. On behalf of all staff and directors, we thank Tim for his significant contribution to our business.


2020 – a year of unprecedented challenges

Our facility and office builds are complete, and we have reset our systems to deliver performance for our growers and for our shareholders. Our industry continues to be in a period of strong growth driven by both growing New Zealand supply and offshore demand; growers are planting more SunGold, and consumers continue to pay top prices for our kiwifruit.

OPAC currently has the packing capacity to handle 25% more fruit, with our coolstore capacity along with the potential use of slow shipping able to manage projected volume growth over the next two seasons. By 2022, however, we anticipate new SunGold developments from our supplying growers to increase post harvest volumes to greater than 9m trays. This will require new coolstorage options and OPAC is currently assessing the use of controlled atmosphere facilities which will allow us to extend the packing season and improve site efficiency. This follows 2019’s successful trial of SunGold CA storage.

While operators continue to invest in capacity, volume growth is challenging our supply chain, including labour access and industry information systems. Our dependence on industry supply structures was exposed in 2020 with delays to maturity testing and fruit clearance. Clearly our industry must develop robust systems that best meet the needs of our growers, our post harvest operators and our markets.

While we are entering uncharted waters as our industry strives to harvest, supply and sell a crop during the COVID-19 pandemic, we continue to support our growers with a dedicated team that is focussed on performance, and a modern facility that has the capacity and systems to efficiently handle this season’s crop, and generate wealth for growers, employees and shareholders.

On behalf of the board and management, we thank our growers, suppliers, business partners and shareholders for supporting us, and our dedicated OPAC people as we work to achieve the best possible outcome in 2020.

AE (Tony) de Farias Ian Coventry Chairman Chief Executive

Financial Report

31 December 2019

Financial statements

Profit and Loss and Other Comprehensive Income 10 Changes in Equity 11 Financial Position 12 Cash Flows 13

Notes to the financial statements

1. Statement of accounting policies 142. Critical accounting estimates and judgments 153. Financial risk management 154. Revenue 165. Income and expenses 166. Taxation 177. Property, plant and equipment 198. Intangible assets 209. Subsidiaries and joint operations 2110. Equity accounted investments 2211. Other investments 2312. Trade and other receivables 2313. Biological assets – Kiwifruit crop on vine 2414. Share capital 2415. Dividends paid 2416. Loans and borrowings 2517. Trade and other payables 2518. Leases 2619. Capital commitments 2720. Contingencies 2721. Related party transactions 2722. Events subsequent to balance date 28

Audit report and other information

Independent Auditor’s Report 29 Statutory Information 31 Directors 34 Management 35 Shareholders 36 Directory 37


STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOMESTATEMENT OF CHANGES IN EQUITYSTATEMENT OF FINANCIAL POSITIONSTATEMENT OF CASH FLOWSNOTES TO THE FINANCIAL STATEMENTS

OPAC FINANCIAL REPORT 2019

10

ProfitandLossandOther Comprehensive IncomeStatement of

New Zealand dollars in thousands Notes 2019 2018

Revenue 4 53,339 54,083

Direct operating costs 46,868 46,364

Gross operating profit 6,471 7,719

Other income 5 - 150

Share of profits of equity accounted investments 10 663 570

Total other income 663 720

General and administrative costs 5 1,523 1,340

Losses associated with property, plant and equipment 349 109

Depreciation expense 7 3,582 3,314

Amortisation expense 8 84 133

Depreciation on right of use assets 18 369 -

Total other expenses 5,907 4,896

Profit before finance costs (EBIT) 1,227 3,543

Finance costs 984 760

Interest on lease liability 37 -

Profit before income tax 206 2,783

Income tax expense 6A 96 744

Net profit attributable to shareholders 110 2,039

Other comprehensive income

Revaluation of other investments, net of tax 11 124 81

Revaluation of property, plant and equipment, net of tax 1 7 576 1,372

Revaluation of property, plant and equipment in associates, net of tax 10 (10) (37)

Total of items that will not be reclassified to profit or loss 690 1,416

Total other comprehensive income net of tax 690 1,416

Total comprehensive income for the period attributable to shareholders 800 3,455

1. This revaluation uplift includes $420,000 relating to four hectares of land for which there was an unsigned sale and purchase agreement as at 31 December 2019. As the agreement was unsigned at year end the movement had to be recognised in Other Comprehensive Income.

for the year ended 31 December 2019

The notes to the financial statements form part of and are to be read in conjunction with these financial statements


STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOMESTATEMENT OF CHANGES IN EQUITYSTATEMENT OF FINANCIAL POSITION

STATEMENT OF CASH FLOWSNOTES TO THE FINANCIAL STATEMENTS


11

Changes in EquityStatement of

New Zealand dollars in thousands NotesShare

capitalCapital reserve

Other investments revaluation

reserve

Property, plant and

equipment revaluation

reserve

Property, plant and

equipment revaluation

reserve associates

Retained earnings Total

Equity at 1 January 2018 9,582 1,543 972 3,476 727 6,905 23,205

Net profit for the year - - - - - 2,039 2,039

Other comprehensive income/(loss) for the year - - 81 1,372 (37) - 1,416

Total comprehensive income/(loss) - - 81 1,372 (37) 2,039 3,455

Transactions with owners

Dividends paid 15 - - - - (926) (926)

Transactions with owners - - - (926) (926)

Equity at 31 December 2018 9,582 1,543 1,053 4,848 690 8,018 25,734

Net profit for the year - - - - - 110 110

Other comprehensive income/(loss) for the year - - 124 576 (10) - 690

Transfer to retained earnings upon disposal of PPE - - - (73) - 73 -

Adjustment on initial application of IFRS 16 - - - - - (26) (26)

Total comprehensive income/(loss) - - 124 503 (10) 157 774

Transactions with owners

Dividends paid 15 - - - - - (760) (760)

Transactions with owners - - - - - (760) (760)

Equity at 31 December 2019 9,582 1,543 1,177 5,351 680 7,415 25,748






12

as at 31 December 2019



EQUITY

Share capital 14 9,582 9,582

Reserves 8,751 8,134

Retained earnings 7,415 8,018

Total equity 25,748 25,734

ASSETS

Non-current assets

Property, plant and equipment 7 50,417 47,146

Right of use assets 18 760 -

Intangible assets 8 283 366

Equity accounted investments 10 1,704 1,768

Other Investments 11 1,329 1,205

Total non-current assets 54,493 50,485

Current assets

Cash and cash equivalents 734 801

Trade and other receivables 12 3,548 3,640

Inventories 1,240 744

Biological assets - Kiwifruit crop on vine 13 463 704

Income tax receivable 6c 270 -

Total current assets 6,255 5,889

Total assets 60,748 56,374

LIABILITIES

Non-current liabilities

Loans and borrowings 16 3,845 17,717

Lease liabilities 408 -

Deferred tax liabilities 6D 1,736 1,914

Total non-current liabilities 5,989 19,631

Current liabilities

Loans and borrowings 16 24,532 6,624

Trade and other payables 17 4,096 4,118

Lease liabilities 383 -

Income tax liabilities 6C - 267

Total current liabilities 29,011 11,009

Total liabilities 35,000 30,640

Net assets 25,748 25,734

On behalf of the board

A E de Farias T D Chrisp Chairman Director 27 March 2020

Financial PositionStatement of





13



New Zealand dollars in thousands 2019 2018

Operating activities

Cash was provided from:

Receipts from customers 53,517 53,577

Cash was distributed to:

Payments to suppliers and employees (48,138) (46,817)

Interest paid (1,090) (979)

Income taxes paid (698) (899)

Net cash flows from operating activities 3,591 4,882

Investing activities


Sale of property, plant and equipment - 5

Repayment of loans to associates & subsidiaries - 111

Capital distributions received from associates 606 648

Proceeds from other investments - 142

Cash was applied to:

Loans to related parties (86) -

Purchase of property, plant and equipment (7,091) (11,768)

Purchase of intangible assets - (156)

Net cash flows from investing activities (6,571) (11,018)

Financing activities


Proceeds of short term bank borrowings 589 6,364

Proceeds of long term bank borrowings 3,845 1,031

Cash was applied to:

Principal reduction of lease liability (363) -

Dividends paid (760) (926)

Repayment of loans and borrowings (398) (260)

Net cash flows from financing activities 2,913 6,209

Net increase / (decrease) in cash and cash equivalents (67) 73

Cash and cash equivalents at beginning of year 801 728

Cash and cash equivalents at end of year 734 801

Cash FlowsStatement of




14

1. STATEMENT OF ACCOUNTING POLICIES

Reporting entity and statutory base

Opotiki Packing and Cool Storage Limited (“the Company”) is domiciled in New Zealand. These consolidated financial statements comprise the Company, its subsidiaries, joint operations and equity accounted investments (together referred to as the “Group”). The Group provides and manages service activities to the horticultural industry. The Company is a limited liability Company incorporated and registered under the New Zealand Companies Act 1993.

1A. Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP) and comply with New Zealand equivalents to International Financial Reporting Standards – Reduced Disclosure Regime (“NZ IFRS RDR”) and other applicable Financial Reporting Standards, as appropriate for Tier 2 for-profit entities. The Group is eligible and has elected to report in accordance with Tier 2 for-profit Accounting Standards on the basis that it does not have public accountability and is not a large for-profit public sector entity.

The consolidated financial statements are presented in New Zealand dollars, which is the Group’s functional and presentation currency. Foreign exchange differences are recognised in the statement of profit and loss and other comprehensive income and presented within other income.

1B. Historical cost convention

The consolidated financial statements have been prepared on the historical cost bases except for those assets carried at fair value, being Financial Instruments measured at fair value through other comprehensive income, Biological Assets, and Land, Buildings, Coolstore Plant and Equipment and Bearer plants.

1C. Basis of consolidation

The consolidated financial statements incorporate the assets and liabilities of the Group as at 31 December 2019 and the results of the Group for the year then ended.

Accounting policies of subsidiaries, associates and joint operations have been changed where necessary to ensure consistency with the policies adopted by the Company.

Inter-entity transactions, balances and unrealised gains on transactions between entities are eliminated on consolidation. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

1D. Goods and Services Tax (GST)

The statement of profit and loss and other comprehensive income has been prepared so that all components are stated exclusive of GST. All items in the statement of financial position are stated net of GST, with the exception of receivables and payables, which include GST invoiced.

1E. Going concern

The financial statements have been prepared on a going concern basis. The Group has a negative working capital balance at 31 December 2019, this is mostly due to two factors:

i. The timing of cash flows in relation to preparation for the coming harvest, which takes place after balance date in the months of March to June; and

ii. Current banking facilities with maturity dates in 2020 (as described in per Note 16)

The Group is negotiating its banking facilities and has the continuing support of its bankers. The Directors have considered positive crop volumes forecast for the 2020 season onwards, their strong banking relationship and positive operating cashflows and are satisfied that the going concern basis is appropriate.

1F. Changes in significant accounting policies

The Group has initially applied IFRS 16 - Leases from 1 January 2019.

The Group applied IFRS 16 - Leases using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019. Accordingly, the comparative information presented for 2018 is not restated – i.e. it is presented, as previously reported, under IAS 17 and related interpretations. The details of the changes in accounting policies are disclosed below. Additionally, the disclosure requirements in IFRS 16 have not generally been applied to comparative information.

Lessee

As a lessee, the Group leases several assets the majority of which are vehicles and forklifts. The Group previously classified all leases as operating leases. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most of these leases – i.e. these leases are now on-balance sheet.

Notes to the Financial Statements for the year ended 31 December 2019





15

On transition, for these leases, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at 1 January 2019 (see impact on Financial Statements below). Right-of-use assets are measured at an amount equal to the lease liability.

The Group used a number of practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17. In particular, the Group:

- did not recognise right-of-use assets and liabilities for leases for which the lease term ends within 12 months of the date of initial application;

- did not recognise right-of-use assets and liabilities for leases of low value assets; and

- excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application

The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor.

Impact on Financial Statements

On transition to IFRS 16 at 1 January 2019, the Group recognised right-of-use assets, and lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below.

New Zealand dollars in thousands 2019

Right-of-use assets property, plant and equipment 954

Lease liabilities 980

Retained earnings (26)

When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at 1 January 2019. The weighted average rate applied is 4.05%.

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Management have made judgments, estimates and assumptions that affect the amounts reported in the financial statements. These are continually evaluated and are based on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Revisions to estimates are recognised in the period in which the estimate is revised.

The estimates and assumptions that have a risk of causing a material adjustment in the year ending 31 December 2019 are:

• Land, buildings, bearer plants and coolstore plant valuations (Note 7)

• Equity accounted investments (Note 10)

• Other investments (Note 11)

The Directors have assessed judgments and estimates at balance date based on information available up to the date of approving the financial statements.

3. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks. The Group has disclosed the following risks in relation to these financial statements;

i. Interest rate risk

The Group’s interest rate risk arises from both long and short-term borrowing. The Group adopts a policy of ensuring between 25% and 80% of its interest rate risk exposure is at a fixed rate. This is achieved partly by entering into fixed-rate instruments and partly by borrowing at a floating rate.

ii. Foreign currency risk

The Group and the Company have no material direct currency risk aside from when purchasing equipment in a foreign currency. The Group hedges 100% of its contractual obligations to purchase equipment denominated in a foreign currency where the value is deemed significant at the time of entering into such purchase agreements. Most hedges have a maturity of less than 1 year from the reporting date.

The Group is also exposed to foreign currency risk indirectly through its fruit income received from leased and owned orchards. The foreign currency risk associated with the offshore sale is managed by Zespri Group Limited (Zespri).




16

5. INCOME AND EXPENSES


5A. OTHER INCOME

Dividend and distribution income - 142

Gain on sale of property, plant and equipment - 5

Foreign currency gain - 3

Total other income - 150

5B. EXPENSES

General and administration costs include the following paid to KPMG:

Audit fees 43 40

Audit disbursements 4 4

Taxation services 16 9

Share registry audit 2 1

Total 65 54


4. REVENUE


Revenue

Orchard services 13,247 13,015

Kiwifruit sales 2,411 2,732

Post harvest services 36,787 37,481

Other sales 894 855

Total revenue 53,339 54,083

Accounting policy

Revenue is measured at the fair value of consideration received or receivable for the sale of goods and services, net of GST, rebates and discounts and after eliminating sales within the Group.

Revenue is recognised as follows:

Orchard services

This includes orchard management and associated services provided to growers who supply fruit to the Group. Fees for these services are invoiced on a monthly basis and recognised as the service is provided.

Kiwifruit sales

Kiwifruit sales include revenue from the sale of fruit from owned and leased orchards. The revenue from the sale of fruit is recognised when Zespri take control of the fruit, which occurs within the financial year.

Post harvest services

This includes fruit packing, coolstorage and other associated activities. These services are predominantly provided during the period from April to October with the majority of revenues collected by the end of November each year. Revenue is recognised as the service is provided.





17

6. TAXATION


6A. INCOME TAX

Income tax recognised in the statement of financial profit and loss and other comprehensive income

Current tax expense

Current year 6C 172 827

Adjustments prior year 6C (10) 17

Total current tax expense 162 844

Deferred tax expense

Origination and reversal of temporary differences 6D (66) (100)

Total deferred tax (credit) (66) (100)

Total income tax expense 96 744

6B. NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE/RECEIVABLE

Profit before tax 206 2,783

Tax at New Zealand tax rate of 28% (2018: 28%) 58 779

Tax exempt income 8 12

Effect of share of profit / (loss) of equity accounted investments - (40)

Change in recognised deductible temporary differences 10 25

Impact on deferred tax of buildings with tax base nil 66 -

Under / (over) provided in prior years - income tax (46) (32)

Total income tax expense 96 744

6C. CURRENT TAX LIABILITY/(ASSET)

The following table shows the group’s current tax liability/asset:

Opening balance of current tax liabilities 6A 267 322

Adjustments for prior periods 6A (10) 17

Current year tax 6A 172 827

Less tax paid (699) (899)

Current tax (asset) / liability (270) 267




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6D. DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:

Balance as at 31 December

New Zealand dollars in thousandsNet balance as

at 1 JanuaryRecognised in

profit or loss

Recognised in other

comprehensive income Net

Deferred tax asset

Deferred tax liability

2019

Property, plant and equipment 1,411 (1) (3) 1,407 - 1,407

Property, plant and equipment in associates 437 - (111) 326 - 326

Biological assets 200 (86) - 114 - 114

Employee benefits and accruals (134) 23 - (111) (111) -

1,914 (64) (114) 1,736 (111) 1,847

2018

Property, plant and equipment 1,161 (20) 270 1,411 - 1,411

Property, plant and equipment in associates 437 - - 437 - 437

Biological assets 200 - - 200 - 200

Employee benefits and accruals (54) (80) - (134) (134) -

1,744 (100) 270 1,914 (134) 2,048

Accounting policy

The income tax expense comprises both current and deferred tax and is calculated using rates enacted or substantively enacted at balance date.

Current and deferred tax is recognised in the statement of profit and loss and other comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. 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.






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7. PROPERTY, PLANT AND EQUIPMENT

New Zealand dollars in thousandsLand and buildings

Plant and machinery

Coolstore plant and

equipment Motor vehicles

Office equipment, fixtures and

fittings

Bearer plants (kiwifruit

vines)

Partially completed

projects Total

As at 1 January 2018

Cost or valuation 24,049 21,915 7,773 620 339 2,051 4,127 60,874

Accumulated depreciation and impairment (1,848) (9,606) (1,299) (507) (210) (258) - (13,728)

Net book amount 22,201 12,309 6,474 113 129 1,793 4,127 47,146

Year ended 31 December 2019

Opening net book amount 22,201 12,309 6,474 113 129 1,793 4,127 47,146

Additions - 6,629 6,629

Revaluation through other comprehensive income 916 - (10) - - (333) - 573

Disposals (347) - (1) - (1) - - (349)

Depreciation expense (1,036) (1,711) (679) (28) (30) (98) - (3,582)

Projects completed during year 8,211 722 1,256 119 220 8 (10,536) -

Closing net book amount 29,945 11,320 7,040 204 318 1,370 220 50,417

As at 31 December 2019

Cost or valuation 32,829 22,637 9,018 739 558 1,726 220 67,727

Accumulated depreciation and impairment (2,884) (11,317) (1,978) (535) (240) (356) - (17,310)

Net book amount 29,945 11,320 7,040 204 318 1,370 220 50,417

Partially completed projects

As at 31 December 2019, the Group had incurred construction costs for capital works which totalled, $219,816 (2018: $4,127,408). Refer to note 19 capital commitments for capital works committed for the 2019 financial year.

Borrowing costs

As at 31 December 2019, $232,703 borrowing costs were capitalised (2018: $219,195).

Security

At 31 December 2019, assets with a carrying amount of $48,827,000 (2018: $45,330,000) are subject to a registered debenture to secure bank loans (see note 16).

Fair values of land, buildings and coolstore plant and equipment

A valuation was completed for land, buildings, coolstore plant and equipment and bearer plants (kiwifruit vines) by an external, independent valuer (Telfer Young) at 31 December 2019. The valuer considers three different approaches to arrive at a fair value. These are;

1. Market Approach - Considers sales of other comparable properties.

2. Income Capitalisation – The conversion of net income to value via the application of a capitalisation rate or yield of 10%. Income and yield are analysed from available rental and sales evidence.

3. Discounted Cash Flow – Variation on the income capitalisation method whereby cash flows are explicitly forecast over a ten-year investment horizon. Cash flows are adjusted for expected growth in market rentals and estimated costs incurred to maintain land and buildings in operational use. The cash flows are discounted at the market-based discount rate, as analysed from sales. This method assumes land and buildings are sold in year 11.




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Accounting policy

Land, buildings, cool store plant and equipment and owned bearer plants (kiwifruit vines) are shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation. Increases in the carrying amounts arising on revaluation are credited to reserves in shareholders’ equity. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

Bearer plants – kiwifruit vines (equity accounted investees and joint operations) are shown at fair value, based on periodic valuations using a discounted cash flow model, less any subsequent depreciation. The fair value of orchard areas under development is determined at cost due to insufficient biological transformation.

All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Depreciation of PPE, other than land, is calculated using the straight line (SL) or diminishing value (DV) method and expensed over their estimated useful lives, as follows:

• Buildings: 5 - 40 years

• Plant & Machinery: 5 - 40 years

• Coolstore Plant & Equipment: 5 - 40 years

• Motor Vehicles: 4 - 7 years

• Office Equipment, Fixtures and Fittings: 3 - 10 years

• Bearer Plants: 10 years

• Partially completed Projects: nil

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are recognised in the statement of profit and loss and other comprehensive income. When revalued assets are sold the amounts included in other reserves in respect of those assets are transferred to retained earnings.

Accounting policy

Intangible assets are initially measured at cost and subsequently stated after any accumulated amortisation and impairment loss. Kiwifruit licenses are amortised using the straight-line method over their useful life (23 years). Computer Software is amortised using the diminishing value method at 48%.

8. INTANGIBLE ASSETS

New Zealand dollars in thousands Software Licences Other Total


Opening net book amount 149 191 26 366

Additions - - 1 1

Amortisation expense (67) (10) (7) (84)

Closing net book amount 82 181 20 283

As at 31 December 2019

Cost or valuation 946 218 36 1,200

Accumulated amortisation and impairment (864) (37) (16) (917)

Net book amount 82 181 20 283






21

Accounting policy

Joint operations are those entities which the Group jointly controls. The consolidated financial statements include the assets and the liabilities of the joint operations in respect of the Groups interest in the joint operation, until the date on which joint control ceases.

9. SUBSIDIARIES AND JOINT OPERATIONS

9A. SUBSIDIARIES

Opotiki Packing and Cool Storage Limited is the ultimate parent Company of the Group. The consolidated financial statements incorporate the assets, liabilities, and results of the following subsidiaries listed below in accordance with the accounting policy described in note 1C:

NameCountry of operation Nature of business

Interest held by parent Balance date

OPAC Properties Limited New Zealand Investment in associates and joint ventures 100% 31 December

OPAC Growers Supply Limited New Zealand Kiwifruit supply and logistics 100% 31 December

9B. JOINT OPERATIONS

Set out below are the joint operations of the Group as at 31 December 2019, which, in the opinion of the directors, are material to the Group.

NameCountry of incorporation

Percentage of ownership interest Nature of relationship

Measurement method

Apanui Road Orchards Joint Venture New Zealand 50% Growing of kiwifruit supplying OPAC Proportionate

The Apanui Road Orchards Joint Venture investment is considered a joint operation based on the following:

• There is equal voting rights and influence;

• There is no investment vehicle that separates it from the parties to the arrangement; and,

• The legal form and contractual arrangements through which the investee operates, give the parties rights to the individual assets and liailities of the investee (rather than the net assets as a whole).

The orchards of Apanui Road Orchards Joint Venture have a finite life and are therefore carried at their fair value.

Summarised financial information for joint operation

New Zealand dollars in thousands Assets Liabilities Equity Revenue Profit

2019

Apanui Road Orchards JV 909 14 895 260 111

Share in joint ventures 909 14 895 260 111

2018

Apanui Road Orchards JV 840 31 810 245 114

Share in joint ventures 840 31 810 245 114

Accounting policy

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Company based on the most recently available financial statements. They are no longer consolidated from the date that control ceases.




22

10. EQUITY ACCOUNTED INVESTMENTS

The amounts recognised as equity accounted investments in the statement of financial position are as follows:


Associates 1,704 1,768

Equity accounted investments 1,704 1,768

10A. INVESTMENTS IN ASSOCIATES

Set out below are the associates of the Group as at 31 December 2019, which, in the opinion of the directors, are material to the Group. Te Kaha Gold Investments Partnership is structured as a partnership.

NameCountry of incorporation

Percentage of ownership interest Nature of relationship

Measurement method

Te Kaha Gold Investment Partnership New Zealand 33.3% 2018 - 33.3%

TKGIP’s main activity is the growing of kiwifruit, supplying OPAC.

Equity

The Group holds over 20%, but not more than half of the voting rights in all entities reported as associates above and has assessed that there are currently no indicators that the Group does not have significant influence consistent with these voting rights.

10B. SUMMARISED FINANCIAL INFORMATION FOR ASSOCIATES

Set out below are the summarised financial information for associate entities which are accounted for using the equity method. The below table represents the Group’s share of financial information.

New Zealand dollars in thousands Assets Liabilities Equity Revenue Profit

2019

Te Kaha Gold Investment Partnership 2,607 903 1,704 1,162 663

Share in associates 2,607 903 1,704 1,162 663

2018

Te Kaha Gold Investment Partnership 2,531 763 1,768 929 570

Share in associates 2,531 763 1,768 929 570

10C. RECONCILIATION OF MOVEMENT IN THE CARRYING VALUES OF ASSOCIATE’S FINANCIAL INFORMATIONReconciliation of summarised financial information presented to the carrying amounts of its interest in the associate entities:


Carrying amount at 1 January 1,768 1,883

Share of profit 663 570

Dividends and capital distributions received (606) (648)

Movements in other comprehensive income (121) (37)

Carrying amount at 31 December 1,704 1,768

Accounting policy

The Group’s interests in equity accounted investees comprise interests in associates. Associates being those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Interests in associates are accounted for using the equity accounting method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income in equity accounted investees, until the date on which significant influence ceases. Where equity accounted investments hold assets in orchards these assets are measured at fair value. Fair value is determined using a discounted cash flow model for fully developed orchard areas and at cost for orchard areas under development.






23

11. OTHER INVESTMENTS


As at 1 January 1,205 1,124

Revaluation recognised in other comprehensive income 124 81

As at 31 December 1,329 1,205

Other investments include the following:

Unlisted equity securities

Ballance Agri Nutrients Limited 96 96

Farmlands Trading Society 15 15

OTK Orchards Limited 1,171 1,047

Ravensdown Fertiliser Co-operative Limited 24 24

G3 Kiwi Supply Limited 6 6

The Nutritious Kiwifruit Company Limited 17 17

Total other investments 1,329 1,205

Accounting policy

Equity investments are classified as other investments. Subsequent to initial recognition, other investments are measured at fair value. Unrealised gains and losses arising from changes in the fair value are recognised in profit and loss unless the Group designates the equity investments as fair value through other comprehensive income upon initial recognition. If designated as at FVOCI unrealised gains and losses are recognised in the other investment’s revaluation reserve. When other investments held at FVOCI are sold, any accumulated fair value adjustments are transferred to retained earnings within equity. The Group has designated all other investments currently held as FVOCI. Where the investments are not valued on a quoted market (the bid price), the Group establishes fair value by using valuation techniques, including discounted cash flow models and recent sales prices of the same or similar instruments.

12. TRADE AND OTHER RECEIVABLES


Trade and other receivables 2,584 2,145

Related parties advance 100 79

Prepayments and accrued income 864 1,416

Total trade and other receivables 3,548 3,640

Within trade receivables $129,973 (2018: $13,355) are past due, of which $38,277 (2018: $10,300) are more than 90 days. Trade receivables are considered to be recoverable.

Accounting policy

Trade and other receivables are initially recognised at fair value. They are subsequently adjusted for impairment losses.

A provision for doubtful debts is considered based on the collectability of receivables, which is reviewed on an ongoing basis. Where a receivable is known to be uncollectible, it is written off to the statement of profit and loss and other comprehensive income. Trade and other receivables are classed as ‘financial assets at amortised cost’.




24

13. BIOLOGICAL ASSETS – KIWIFRUIT CROP ON VINE

The Group, as part of its operations, leases kiwifruit orchards for terms not exceeding three years. Harvesting of orchards takes place from approximately March to June each year. The orchards are situated in the Bay of Plenty and East Cape, New Zealand.


Carrying amount at beginning of year 704 820

Harvested and sold (704) (820)

Costs incurred in growing crop 463 704

Total biological assets – kiwifruit crop on vine 463 704

As at 31 December 2019 the Group had leases on a total of 17.83 hectares (2018: 45.33) of kiwifruit orchards. During the year ending 31 December 2019, the Group harvested 286,994 trays of kiwifruit (2018: 345,635) from its leased orchards. After the 2019 harvest 14.86 hectares of leased orchards transitioned to managed orchards.

Accounting policy

Biological assets are held at fair value. They consist of the crops growing on bearer plants in the Group’s leased and owned orchards. The method to determine fair value depends on the degree of biological transformation (the maturity of the fruit) at balance date.

When insufficient biological transformation has occurred, the fair value is the costs incurred up to balance date to grow the crops (provided the costs are considered recoverable). When costs are not recoverable, they are expensed in the statement of profit and loss and other comprehensive income.

14. SHARE CAPITAL

New Zealand dollars in thousands

Number of shares

(thousands)

Ordinary shares

(amount) Total

As at 1 January 2018 4,748 9,582 9,582

Issue of fully paid shares - - -

Issue of partly paid shares - - -

As at 31 December 2018 4,748 9,582 9,582

Issue of fully paid shares - - -

Issue of partly paid shares - - -

As at 31 December 2019 4,748 9,582 9,582

All shares are authorised and issued with no par value.

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of fully paid shares held.

15. DIVIDENDS PAID

2019 2018

New Zealand dollars in thousands AmountPer share

(cents) AmountPer share

(cents)

Dividend paid May 570 12.0 546 11.5

Dividend paid December 190 4.0 380 8.0

Total dividend paid 760 16.0 926 19.5

The dividends are imputed to the extent allowable in the tax year. At the end of December 2019, no further dividends have been declared by the Parent Company.






25

16. LOANS AND BORROWINGS


Non current loans and borrowings

Term loans 3,845 17,717

Total non current loans and borrowings 3,845 17,717

Current loans and borrowings

Loans 24,532 6,624

Total current loans and borrowings 24,532 6,624

Total loans and borrowings 28,377 24,341

The bank overdraft and term debt are secured under the same debentures and mortgages over all Group assets (see note 7). The Group has total facilities of $34,867,000 made up of the facilities in the table below.

Term loans Overdraft facility

$29,867,000 with maturity dates of March 2020 ($14,067,000), July 2020 ($4,500,000), December 2020 ($6,300,000), February 2022 ($5,000,000). Repayments of $20,833 are made each month.

$5,000,000 bank overdraft of which $2,516,052 was drawn as at 31 December 2019.

OPAC are renegotiating the debt facilities that expire within 12 months from year end. OPAC’s bankers have issued letters of support whilst these negotiations are happening.

Accounting policy

Borrowings are recognised initially at fair value, net of costs incurred. Borrowings are subsequently stated at amortised cost.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after balance date. Borrowings are classed as ‘financial liabilities at amortised cost’.

17. TRADE AND OTHER PAYABLES


Trade creditors 1,385 1,622

Employee entitlements 354 255

Sundry creditors and accruals 2,357 2,241

Total trade and other payables 4,096 4,118

All trade and other payables will be settled within one year. The fair value of trade payables equals their carrying value.

Accounting policy

Trade creditors, sundry creditors and accruals are recognised at cost. They are classed as ‘financial liabilities at amortised cost’.

Employee entitlements which remain unused at balance date and amounts expected to be paid under short term cash bonus plans are accrued for.




26

Accounting policy

IFRS 16 – applicable from 1 January 2019

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. Leases with variable lease payments (eg a portion of OGR for orchard leases) are excluded from the recognition requirements of IFRS 16.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

18. LEASES

The Group leases vehicles, equipment and office space under non-cancellable leases.

18A. RIGHT OF USE ASSETS

The right-of-use assets recognised in respect of these leases is as follows;

New Zealand dollars in thousands Land and buildings

Motor vehicles

Office equipment Total


Balance at 1 January 12 870 72 954

Depreciation charge for the year (9) (339) (21) (369)

Additions to right-of-use assets 25 150 - 175

Total operating leases 28 681 51 760

18B. AMOUNTS RECOGNISED IN PROFIT OR LOSS

The below amounts were recongised in the statement of profit and loss but were not recognised as right of use assets under IFRS 16 as they did not meet the recognition requirements.


Expenses relating to variable lease payments 1,023

Expenses relating to short-term leases 484

Expenses relating to leases of low-value assets 43

18C. AMOUNTS RECOGNISED IN THE STATEMENT OF CASH FLOWS


Total cash outflow for leases 1,955






27

19. CAPITAL COMMITMENTS

The estimated capital expenditure for Property, Plant and Equipment contracted for at balance date but not provided for is $14,500 (2018: $5,294,787).

20. CONTINGENCIES

There are no contingent liabilities as at 31 December 2019.

21. RELATED PARTY TRANSACTIONS

Related parties of the Group include the associates (see note 10), joint operations (see note 9), key management personnel (directors and senior executives) and OPAC Growers Limited (a related party which administers all monies from the sale of kiwifruit on behalf of growers with whom it holds a contract).

Transactions with associates and joint operations

The Group received dividends and capital distributions as per note 10C. The Group have made no loans or advances to associates and joint operations (2018: nil). All advances to subsidiary companies and associates are payable on demand.

Transactions with OPAC Growers Limited

In the current period the Group received post-harvest payments for services from its grower entity to the value of $32,160,349 (2018: $32,144,282). The Group also received harvest payments for services from its grower entity to the value of $4,326,307. These were charged directly to the grower in 2018 and therefore did not go through the grower entity. As at the end of 31 December the Group owed $276,415 (2018: $474,383) to the grower entity. OPAC Growers Limited owed the Group $100,190 (2018: $79,151).

Transactions with key management personnel


Executive salaries 1,222 1,209

Director fees 245 240

Total compensation expense 1,467 1,449

Transactions with other related parties

The following table shows transactions that were entered into with other related parties during the period (excluding transactions outlined above). Key management personnel refers to those entities in which key management personnel hold positions which result in them having control or significant influence.


Sales of services

Associates 1,489 1,878

Joint operations and unlisted equity securities 1,345 1,455

Key management personnel 3,113 4,497

Purchase of services

Associates - 2

Key management personnel 1,424 955




28

The following table shows the outstanding balances at the reporting date in relation to transactions with related parties.


Current trade receivables

Associates 281 239

Joint operations 219 221

Key management personnel 174 764

Current trade payables

Key management personnel 12 -

No related party debts have been forgiven or written off during the year.

22. EVENTS SUBSEQUENT TO BALANCE DATE

OPAC are renegotiating the debt facilities that expire within 12 months from year end. OPAC’s bankers have issued letters of support whilst these negotiations are happening.

Between the end of the financial year and the approval of the annual financial statements by the Board on 27 March 2020, New Zealand entered a State of Emergency because of COVID-19 and has locked down non-essential movements of people for four weeks. OPAC is permitted to continue operating because it is part of the food supply chain which is considered an essential industry. OPAC has worked through the issues of protecting all staff whilst being operational. As at 27 March 2020 the directors were unable to quantify any impact of COVID-19.

The directors note that all judgements and estimates used in the financial statements are based on 31 December 2019 fact patterns and assumptions.

No other events occurred subsequent to balance date requiring adjustment to or disclosure in the financial statements.


Independent Auditor’s Report

Page 29 of 37

Independent Auditor’s Report To the Shareholders of Opotiki Packing and Cool Storage Limited

Report on the audit of the consolidated financial statements

Opinion In our opinion, the accompanying consolidated financial statements of Opotiki Packing and Cool Storage Limited (the ’Company’) and its subsidiaries (the 'Group') on pages 10 to 28:

i. Present fairly in all material respects the Group’s financial position as at 31 December 2019 and itsfinancial performance and cash flows for the year ended on that date; and

ii. Comply with New Zealand Equivalents toInternational Financial Reporting Standards Reduced Disclosure Regime.

We have audited the accompanying consolidated financial statements which comprise:

— The consolidated statement of financial position asat 31 December 2019;

— The consolidated statements of profit and loss and other comprehensive income, changes in equity and cash flows for the year then ended; and

— Notes, including a summary of significantaccounting 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 and a share registry audit. 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.

Other information

The Directors, on behalf of the Group, are responsible for the other information included in the entity’s 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.


Page 30 of 37

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 nothing to report in this regard.

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.

Responsibilities of the Directors for the consolidated financial statements

The Directors, on behalf of the Company, 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 Reduced Disclosure Regime);

— 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-7/

This description forms part of our independent auditor’s report.

KPMG

Tauranga 27 March 2020


Statutory Information for the year ended 31 December 2019

Principal activities

The principal activity of the company is to provide and manage service activities to the horticulture industry. The nature of the group’s business has not changed in the year under review.

Dividends

IImputed dividends of 12 cents per share was paid on 10th May 2019 and 4.0 cents per share was paid on 13th December 2019.

Directors holding office during the year

A E de Farias (Chairman) T D Chrisp (Audit Committee Chairman) C Anstis (Appointed 10 May 2019) I J Craig (Ceased 10 May 2019)

D J Emslie (Ceased 10 May 2019) A S HamiltonN J King (Ceased 20 February 2019) C H Rich (Appointed 18 February 2019)

C M Thompson (Appointed 10 May 2019)

Use of company information

During the year the board received no notices from directors requesting authority to use company information, which would not otherwise have been available to them.

Directors’ shareholding

Directors held the following shares at 31 December 2019:

SharesBeneficially held shares

Non-beneficially held shares

C M Thompson 183,558 -

Share dealings

No directors noted above acquired or sold interests, either directly or indirectly, in ordinary shares issued by the company during the year.

Directors’ remuneration and other benefits

New Zealad dollars Fees Other benefits Total

A E de Farias 61,000 2,000 63,000

T D Chrisp 40,700 2,000 42,700

I J Craig 14,583 833 15,416

D J Emslie 14,583 833 15,416

C Anstis 21,117 2,000 23,117

C M Thompson 21,117 1,167 22,284

A S Hamilton 35,700 2,000 37,700

C H Rich 35,700 2,000 37,700

Total 244,500 12,833 257,333

Other benefits include reimbursements, bonuses and employee benefits.

Subsidiaries

No directors’ remuneration was paid during the year by subsidiaries to their directors.

Employee remuneration

During the year 10 (2018: 8) employees who are not directors received remuneration of $100,000 or more.

Number of employees by salary band in New Zealand dollars 2019 2018

$100,000 - $110,000 1 2

$110,000 - $120,000 3 2

$120,000 - $130,000 2 -

$130,000 - $140,000 1 1

$170,000 - $180,000 1 1

$190,000 - $200,000 1 1

$340,000 - $350,000 1 -

$370,000 - $380,000 - 1

Remuneration includes employee benefits, vehicles and all bonus payments.


Directors’ interests in transactions

Company

During the year the directors undertook transactions with the Company as set out in note 21 to the financial statements, related party transactions. At 31 December 2019, the following general disclosures of interests have been made by the directors in terms of section 140(2) of the Companies Act 1993.

Subsidiaries

Other than directors stating their directorships in the parent Company and its subsidiaries no other interests were noted.

Other interests

A S Hamilton and N J King (ceased 20 February 2019) and C H Rich (appointed 8 March 2019) are Investor Directors, as defined in the shareholder agreements with Quayside Holdings Limited and The Maori Trustee, and have been nominated by such entities respectively.

Directors have disclosed the following interests held by them:

A E de Farias ChairmanNgati Awa Farms Limited DirectorWhite Island Tours Limited DirectorWhakatane District Council Commercial Advisory Board ChairmanThe Fresh Fruit Company of Nelson Limited IndependentChairmanKawerau Dairy Group GP Limited Independent DirectorHorizon Energy Distribution Limited and Subsidiaries Independent ChairmanAquaheat New Zealand Limited DirectorOpotiki Packing & Cool Storage Limited Independent ChairmanDFR Consultants Limited Director and PrincipleMelreben Limited / Rivas Orchards Limited ShareholderAquaheat Facility Serviced Limited DirectorCoollogic Refridgeration Limited DirectorLeaderbrand Holdings Limited and Associated Companies Independent DirectorNgati Awa Farms (Rangitaiki) Limited DirectorOPAC Properties Limited DirectorTumurau GP Limited DirectorMatai Pacific Iwi Collective Independent Director Aquaheat South Pacific Limited Director

T D Chrisp Links PHC Limited Director & ShareholderCedenco Foods New Zealand Limited Managing DirectorOPAC Properties Limited DirectorOpotiki Packing & Cool Storage Limited DirectorCoroglen Investments Limited Director & ShareholderCedenco Aquaculture Limited Managing DirectorNorth Island Mussels Limited DirectorCedenco Dairy Limited DirectorKawerau Dairy General Partner Limited DirectorENZA Foods Limited Managing DirectorZeffer Brewing Limited Director

A S Hamilton WNT Ventures General Partner Limited Chairman/DirectorWNT Ventures Management Limited DirectorQuayside Holdings Limited OfficerQuayside Securities Limited OfficerQuayside Properties Limited OfficerOpotiki Packing and Cool Storage Limited DirectorOPAC Properties Limited DirectorOriens Capital Limited DirectorRhondium Holdings Limited and Associated Entities DirectorHuakiwi Services Limited Chairman/DirectorSeeka Limited Quayside ShareholderLakes Commercial Development Limited Director


C H Rich Te Matai Kiwi Number 8 Limited DirectorM9 Limited DirectorO39 Limited DirectorTTP Services (Manuka) Limited DirectorManuka Research Prtnership Limited DirectorMTD1 Limited Director Opotiki Packing and Cool Storage Limited Director Huakiwi Services Limited Director

C Anstis Anstis Orchards II Director/Shareholder Anstis Dairies DirectorOpotiki Packing and Cool Storage Limited Associate DirectorOPAC Growers Limited DirectorDMS Shareholder

C M Thompson Opotiki Packing and Coolstorage Limited Director ShareholderOPAC Properties Limited DirectorOhiwa Hort Limited Director ShareholderThompson Horticulture Limited Director ShareholderParadise Kiwi Limited Director ShareholderOhiwa Investments Director ShareholderAllandale Farms Limited Director ShareholderDCD Limited Director ShareholderKaiaponi Farms DirectorCM Thompson family trust Trustee and beneficiary Gibbons Family trust Trustee and beneficiary ID & NA Greaves family trust TrusteeZespri Group Limited Director ShareholderZespri International Limited DirectorKiwifruit Vine Health Incorporated DirectorKiwifruit Vine Health Foundation Incorporated DirectorG.I.K. ss Shareholder

Directors’ indemnity and insurance

The Company has insured all its directors and the directors of its 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.

Donations

During the year various small amounts were donated to various charities by either the company or its subsidiaries.


Directors

Tony de FariasChairman

Tony is an experienced director and currently holds a number of directorships within New Zealand, both in the horticultural and other sectors. He is chairman of Horizon Energy Group and subsidiary companies, an independent director of The Fresh Fruit Company of Nelson Limited and Leaderbrand Holdings Limited and associated companies.

Other roles in the dairy sector include the board of iwi-owned Ngati Awa Farms Limited in the Eastern Bay of Plenty and as independent chairman of Waiu Dairy Group GP Limited. He acts as an agri-business advisor to Māori Investments Limited.

Tony has been a member of the OPAC board since 2006. He is a Chartered Fellow of the Institute of Directors, New Zealand.

Tim ChrispDirector, chair audit and finance committee

Tim has been involved in the production and export of agricultural products for the past 30 years.

He is managing director of Cedenco, who are food ingredient manufacturers with investments across New Zealand in dairy, aquaculture, brewing and fruit and vegetable processing.

Tim has served as an OPAC director for 14 years and is chairman of the audit and finance committee.

Chris AnstisDirector

A second generation Opotiki grower, Chris has been working in the kiwifruit industry for the past 15 years. His experience spans both sides of the kiwifruit supply chain, having spent six years as OPAC’s technical manager and grower liaison before returning to his grower roots to manage the family kiwifruit operations.

Chris is a representative on New Zealand Kiwifruit Growers Incorporated (NZKGI) and the Industry Supply Group (ISG) and a director of Anstis Dairies. He is also chairman of OPAC Growers Limited (OGL).

Scott HamiltonDirector

Scott has over 25 years experience in the banking and financial services sector. He is currently CEO for an investment entity based in the Bay of Plenty, Quayside Holdings Limited, which is the majority holder of the Port of Tauranga.

Other directorships include Huakiwi Services, a horticulture investor on iwi land. Scott also serves as director on WNT Ventures, Oriens Capital GP, and Lakes Commercial Development Limited.

Scott has served as investor director on OPAC since 2016 and is a member of the Institute of Directors and Chartered Accountants of Australia and New Zealand.

Chris RichDirector

Chris is responsible for managing the Maori Trustee’s investments. Based out of Wellington, Chris has a B.Ag. Comm. from Lincoln and also undertook post-graduate studies in horticulture and marketing before embarking on a career in financial markets. He previously worked in National Bank’s treasury and wholesale banking before concentrating on risk management, commodity/currency hedging, and investment management in London and New Zealand.

Craig ThompsonDirector

Craig is a former managing director of OPAC and had a working career of nearly 20 years with OPAC. Craig is involved in two other companies which operate mixed horticulture crops and kiwifruit orchards along with post harvest operations. He also has investments in kiwifruit orchards and vineyards in Gisborne, Opotiki and Te Puke.

After a period of three and a half years working for Zespri in Italy as the European supply manager, Craig is now a resident back in New Zealand from March 2019 and is actively involved in his own orchard business as well as associated company directorships.


Management

Ian CoventryChief Executive Officer

Ian was appointed CEO in August 2015 following previous roles as OPAC’s Commercial Manager and Grower Services Manager. Ian is a qualified accountant and in his previous roles oversaw OPAC’s financial, IT and strategic planning processes as well as key areas of grower liaison and administration of the grower pools. Ian has first-hand knowledge of the industry’s grower oriented structures, gained from personal experience as an OPAC grower, as well as bringing previous experience from senior financial roles in the pulp and paper, forestry, research, and education sectors.

John AndersonChief Financial Officer

John manages the finance team and is secretary to the Board. John joined OPAC in October 2018. John is a Chartered Accountant and Chartered Member of the Institute of Directors. John has many years of senior financial management experience in a range of different industries including utilities, construction, health and retail.

Rona SimanuPeople and Capability Manager

Rona has over 20 years human resource and change management experience across public sector, entertainment, banking and professional services. Originally from Kawerau, Rona ran his own management consultancy in Auckland before moving back to the Eastern Bay of Plenty to join OPAC. Rona oversees human resources and health & safety.

Jackson EdwardsLogistics and Assets Manager

Jackson joined OPAC in 2016 as Production manager before taking on the role of Logistics and Assets Manager at the end of 2019. Previous to this he worked for Linfox Logistics on a 3PL contract with Lion Breweries where he managed a number of secondments in the business from Warehousing to Inventory, eventually taking a lead operations role. Securing a role here at OPAC has given him the opportunity to return home closer to family and contribute to the local community.

Jessie CollierSupply Chain Manager

After spending 6 years in Australia, Jessie joined OPAC in late 2019 as the Supply Chain Manager. She previously worked at OPAC in Post Harvest from 2005 to 2012, after this she worked in China on new cultivars projects for Zespri. She brings over 15 years’ experience in production and supply chain within the kiwifruit Industry.

Rameez KhanProduction Manager

Rameez joined OPAC as the production manager in 2020. Rameez has over 10 years experience in Production environments over several different industries. He is learning quickly about the dynamic nature of kiwifruit.

Simon DondiOrchard Operations Manager

Simon joined OPAC in 2009 after coming to New Zealand from Kenya; initially working as Orchard Manager before being appointed as the Orchard Operations Manager in January 2016. Simon holds a Bachelor of Science degree in agriculture from the University of Nairobi-Kenya. He had a strong background in managing large-scale horticultural operations before joining OPAC and has now added an excellent knowledge of growing kiwifruit.

Jaco GrobbelaarCommercial Manager

Jaco joined OPAC as a commercial and agricultural production specialist and was previously employed by ANZ Bank as Commercial and Agribusiness Manager. Jaco made New Zealand his home in 2013. Prior to his family’s relocation, he was in various customer facing and management roles in the agribusiness sector of South Africa. Key focus for Jaco in his role as Commercial Manager, is delivering a high standard of service to OPAC’s grower clients through his leadership of the grower liaison team. Jaco is also responsible for OPAC’s communication, marketing and business development strategies.

Jasper HeijtelInformation Technology Manager

Jasper has over 20 years of IT and management experience across public as well as private sector. Jasper moved with his family from the Netherlands to New Zealand in 2016 and joined OPAC January 2020. Main focus for Jasper in his role as Information Technology Manager will be ensuring OPAC’s IT Infrastructure and Information Management processes are further developed utilising the latest technology available within the kiwifruit industry.


Shareholders

ShareholderNumber of

sharesPercentage of total

shareholding

Quayside Holdings Limited 479,538 10.10%The Maori Trustee 479,538 10.10%David Emslie, Deborah Emslie, Sharp & Cookson Trustee Services Limited 478,000 10.07%Sheryl Tebbutt 400,000 8.42%Jared Agri Limited 321,595 6.77%Ann Davidson 236,086 4.97%Marilyn Thompson 220,016 4.63%Ian Craig 204,081 4.30%Craig Murray Thompson 183,558 3.87%Development Enterprises Limited 147,489 3.11%Sally Spencer 137,154 2.89%Roger & Colleen Clark 128,729 2.71%Ian & Denise Robertson 104,634 2.20%Mary-Anne Barton 96,974 2.04%Christopher Urry, Sally Urry, Donald Finlayson 96,000 2.02%Judy Fisher 96,000 2.02%Peter Anstis, Marian Anstis, Robert Tait 78,700 1.66%I-Hort Limited 72,960 1.54%John Connor 71,600 1.51%Michelle Ruth Thompson 66,880 1.41%Susan Cowie, Sheryl Herbert 62,151 1.31%Donald & Katherine Murray 62,000 1.31%Hamish Spencer 53,212 1.12%Sharp & Cookson Trustee Services, Anne Larkey, Shona Devoy 48,000 1.01%Te Kaha 15B Ahu Whenua Trust 40,000 0.84%WD & BA Orchard-Farming Limited 36,194 0.76%Brian Young, Kathleen Young, Cookson Forbes BDR Trustees Limited 29,200 0.62%Hamish Deuchar Spencer, Sally Gibbons Spencer, Brett Anthony Hart 29,111 0.61%Rex & Ngaire Henderson 26,880 0.57%Tom & Jennifer Newman 26,750 0.56%Ian and Justine Coventry & Hammertons Trustee Services 25,000 0.53%Julian and Nghaire Lowe Family Trust 25,000 0.53%Hedley Farms Ltd 24,000 0.51%Ian Greaves, Nicola Greaves, Craig Thompson 24,000 0.51%Jean Smithson 24,000 0.51%Richard Anstis, Peter Anstis, Beverley Butchart 24,000 0.51%Rushaven Farms 13,682 0.29%Te Kaha 9b Ahu Whenua Trust 13,333 0.28%Andrew Taylor, Robert Tait 11,094 0.23%Ocean Ridge Trust 10,000 0.21%Graeme & Delwyn Redpath 9,600 0.20%Te Kaha 86 Lands Trust 9,600 0.20%Robert Tait, Jane Tait 9,556 0.20%Alan & Krystene Connolly 5,000 0.11%Te Ehutu Lands Trust 5,000 0.11%Helen Brown 2,000 0.04%

4,747,895 100.00%

as at 31 December 2019


Directors

A E de Farias (Chairman)

T D Chrisp

C Anstis

A S Hamilton

C H Rich

C M Thompson

Contact Details

93 Waioeka Road, Opotiki

Telephone: (07) 315 8700

Facsimile: (07) 315 8577

[email protected]

www.opac.co.nz

Address for Service and Registered Office


Auditors

KPMG, Tauranga

Directory

mailto:info%40opac.co.nz?subject=Enquiry

http://www.opac.co.nz

Opotiki Packing and Cool Storage Limited


Telephone: (07) 315 8700

Facsimile: (07) 315 8577

Email: [email protected]

Website: www.opac.co.nz

mailto:info%40opac.co.nz?subject=Enquiry

http://www.opac.co.nz

ANNUAL REPORT - OPAC

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