2021 Annual Results announcement
Scales Corporation Limited
Head Office: 52 Cashel Street | Christchurch 8013 | New Zealand
Postal: PO Box 1590 | Christchurch 8140 | New Zealand
Phone: +64 3 379 7720
scalescorporation.co.nz
NZX & Media Release
24 February 2022
SCALES CORPORATION’S DIVERSIFIED STRATEGY UNDERPINS STRONG GROUP
PERFORMANCE
Highlights – 12 months to 31 December 2021
Diversified agribusiness group Scales Corporation Limited (NZX:SCL) today reported its FY2021 full
year results. Profit for the Year was $36.9 million (FY2020: $26.6 million). Earnings per share for
FY2021 were 19.1 cents per share (FY2020: 15.0 cents per share).
• Group FY2021 financial results:
o Revenue of $514.6 million, up 9 per cent (FY2020: $470.7 million)
o Reported NPAT of $36.9 million, up 39 per cent (FY2020: $26.6 million)
o Underlying
1
NPAT attributable to shareholders of $29.7m, up 8 per cent (FY2020:
$27.5m)
o Underlying NPAT of $39.8 million, up 20 per cent (FY2020: $33.0 million)
o Underlying EBITDA of $73.8 million, up 15 per cent (FY2020: $64.1 million)
• Outstanding performance across all divisions:
o Food Ingredients exceeding the EBITDA target for the division
o Horticulture performing strongly in a challenging environment
o Logistics financial performance returning to previous levels
Scales Corporation Chair Tim Goodacre commented: “Once again, the hard work and dedication of
the entire Scales team has excelled in what has been another challenging year, with all divisions
performing strongly.”
“Our diversified agribusiness strategy has underpinned record revenue and record Underlying NPAT
notwithstanding the effect of COVID-19 on both global and domestic markets. In particular, the Food
Ingredients division has recorded another outstanding result, partly aided by the growing demand for
petfood together with its geographical and protein diversity.”
1
Underlying results exclude some New Zealand International Financial Reporting Standards (NZ IFRS) non-cash and other
adjustments. Note that we have adjusted our definition of “Underlying” so that it now includes the effects of NZ IFRS 16
Leases. This is in line with current market practice. A reconciliation between Net Profit and Underlying Net Profit, EBITDA and
Underlying EBITDA is provided in Appendix 1 of our annual results presentation pack.
2
“Mr Apple also benefited from diversification in terms of both markets and varieties. Whilst volumes
were affected by weather and orchard redevelopment, it was aided by strong in-market pricing.
Scales Logistics’ strategic value to its customers, including in house customers Mr Apple and
Meateor, once again proved to be invaluable, with supply chain challenges successfully navigated.”
Andy Borland, Managing Director of Scales Corporation, noted: “It has been another demanding year
for the Group, and the Board and senior leadership team are indebted to all staff for their unwavering
commitment. We are especially proud of their ability to adapt to the changing operations and
conditions throughout the year. Their health, safety and wellbeing is our priority, and we continue to
introduce and develop initiatives to assist in this area.”
“In addition to a record financial year, we have progressed our strategic plans. Mr Apple has
commenced its multi-year packhouse automation project, as well as continuing the redevelopment of
its orchards. Food Ingredients has identified a number of growth opportunities and its divisional CEO,
John Sainsbury, expects to relocate to the USA this year to progress a number of those.”
“Our sustainability team responded to new challenges and developed new initiatives, including an
initial in-house carbon footprint assessment for Meateor NZ. Our new Whakatu coolstore has also
exhibited environmental benefits, by reducing freight movements between it and our coolstores as
well as reducing power consumption.”
“Our financial position is strong, with net cash at 31 December 2021 of $82.1 million. This gives us
security to invest in both organic and acquisitive growth opportunities.”
During the year Scales declared dividends of 19.0 cents per share
2
. As in previous years, the Board
expects to declare a final dividend in respect of FY2021 in May, with payment in July.
Divisions
Horticulture
Underlying FY2021 EBITDA for the Horticulture division was $39.1 million (FY2020: $40.8 million).
Mr Borland commented “The Horticulture division delivered a very strong result given the significant
market uncertainty and logistics challenges. The Mr Apple harvest of 3,651k TCEs
3
was picked,
packed and exported in full and on time to global markets, with a pleasing 6 per cent increase in
premium varieties compared to 2020. Weather and orchard redevelopment impacted the volumes of
traditional varieties.”
2
Scales declared a final dividend of 9.5 cents per share for FY2020 on 30 April 2021, which was paid on 9 July 2021 and
declared an interim dividend of 9.5 cents per share for FY2021 on 8 December 2021, which was paid on 14 January 2022.
3
Tray carton equivalent, a measure of apple and pear weight, defined as 18.6kg packed weight which equates to 18.0kg sale weight.
3
“We experienced continued growth in the Asia and Middle East markets despite disruptions caused
by COVID-19. In-market pricing was also strong, with pricing above the prior year for most varieties.
This reflected reduced in-market volumes, larger fruit for certain varieties and strong demand for our
new varieties such as Dazzle
TM
. Mr Apple’s diversified strategy, both in terms of geographical
markets and varieties, continues to prove successful.”
“Mr Apple implemented its multi-year investment and automation plan to increase productivity and
sustain margins, with the installation of tray de-nesting machines at the Whakatu packhouse. We
believe that this project, once complete, will result in the Whakatu packhouse becoming one of the
world’s most automated apple packhouses. We also redeveloped 35 hectares of orchard, primarily
into Dazzle
TM
and NZ Prince
TM
varieties, as well as continuing to implement our ‘intensive planting’
techniques to enable pruning, thinning and picking efficiencies”
Food Ingredients
The Food Ingredients division generated Underlying EBITDA of $35.1 million (FY2020: $23.1 million),
an increase of 52 per cent.
Mr Borland noted “This was an outstanding performance by Food Ingredients, causing it to easily
exceed its long-run EBITDA target of $25 million. Volumes of petfood ingredients sold increased by
29 per cent compared to FY2020, reflecting a sustained growth in the global and domestic petfood
market. Increased volumes were processed by Shelby in part due to the commissioning of a new
plate freezing facility in the Dodge City, Kansas, premises.”
“The division continues to take advantage of its diversified geographical and protein supplies, which
reduced the impact of COVID-19 on global supply chains. We have confidence in the growth
opportunities available to this division both domestically and overseas.”
Logistics
The Logistics division delivered Underlying EBITDA of $4.9 million (FY2020: $4.2 million), an increase
of 17 per cent.
Mr Borland said “the strategic value of Scales Logistics was once again apparent, with the business
successfully navigating a challenging and complex international supply network on behalf of its
customers. Financially, it generated a strong full year result despite being impacted by global logistics
pressures and increased costs.”
4
Outlook
Mr Goodacre commented: “Whilst Scales’ diversification has helped mitigate disruption to both
domestic and international operations, there continues to be significant uncertainty about the year
ahead. Global supply network pressures are expected to remain in place at least throughout 2022,
with a significant increase in shipping and other logistics costs anticipated. There is also an ongoing
shortage of labour within the agribusiness sector.”
“In our Food Ingredients division, exports from Australia have outperformed expectations however, we
note that as of 31 December 2023, we will no longer have an exclusive ongoing relationship with our
existing supplier.”
“Notwithstanding the market pressures, picking and packing of the 2022 season has commenced at
Mr Apple and current indications are positive, with strong early demand for our branded varieties such
as Posy
TM
and Dazzle
TM
. Global petfood demand also shows little sign of slowing, and we believe our
Food Ingredients businesses are well placed to capitalise on this growth. The relocation of John
Sainsbury to the USA reinforces our confidence in the opportunities available to the division.”
“Accordingly, the Board reconfirms the Underlying Net Profit Attributable to Shareholders guidance
for the group to be between $23.5 million and $28.5 million, implying an Underlying Net Profit range of
$30.5 million to $35.5 million and an Underlying EBITDA range of $62.0 million to $67.0 million.’
Mr Goodacre also noted “Once again I would like to extend my thanks and appreciation on behalf of
the Scales Directors and Shareholders to the entire Scales team. Without their commitment our
strong results would not be possible.”
Contact
Andy Borland, Managing Director, Scales Corporation Limited, Mob: 021 975 999,
email: andy.borland@scalescorporation.co.nz
About Scales Corporation
Scales Corporation is a diversified agribusiness group. It comprises three operating divisions:
Horticulture, Food Ingredients and Logistics. The company’s diverse spread of activities gives Scales
broad exposure to New Zealand’s agribusiness sector. Scales Corporation was founded in 1897 as a
shipping business by George Herbert Scales. Today it has operations across New Zealand, Australia
and the United States. Find out more at www.scalescorporation.co.nz.
---
Annual Results Presentation
For the Year Ended 31 December 2021
24 February 2022
SCALES CORPORATION LIMITED
Growing Your Diversified Agribusiness
2
Scales Corporation Limited – 2021 Full Year Results
Agenda
1.Operating Summary
2.Sustainability and COVID-19 Update
3.Financial Overview
4.Divisional Performance
5.Capital Management
6.Governance
7.Trading Outlook
8.Appendices
Scales Corporation Limited – 2021 Full Year Results
Operating
Summary
1
4
Scales Corporation Limited – 2021 Full Year Results
Operating Summary
Diversified strategy underpinned the Group’s outstanding result during a challenging year
Statutory Profit for the Year $36.9m, up 39% (2020: $26.6m)
Underlying* NPAT attributable to shareholders of $29.7m, up 8% (2020: $27.5m)
Record Underlying NPAT of $39.8m, up 20% (2020: $33.0m)
UnderlyingEBITDA $73.8m, up 15% (2020: $64.1m)
Apple season successfully negotiated in a challenging year
Very strong performance from Food Ingredients, exceeding the EBITDA target set for this division
Invaluable expertise and strategic value provided by Scales Logistics
Horticulture Underlying EBITDA of $39.1m(2020: $40.8m), aided by strong in-market pricing
Mr Apple own-grown export volumes of 3,651 TCEs (2020: 3,915k)
Diversity of channels and markets supported earnings resilience
Multi-year automation project commenced
Food Ingredients Underlying EBITDA of $35.1m, up 52% (2020: $23.1m), benefitting from sustained global petfood demand
Diversify of geographic operations and protein sources continued to be advantageous
Affected by ongoing supply chain difficulties
* Underlying Results exclude some New Zealand International Financial Report Standards (NZ IFRS) non-cash and other adjustments.Management and the Board believe that Underlying Results more accurately demonstrate the change in operational performance of
the Group. Underlying NPAT and Underlying EBITDA are shown before the deduction of share of Non-Controlling Interests (Fern Ridge and Shelby). Note that we have adjusted our definition of “Underlying” so that it now includes the effects of NZ IFRS 16 Leases.
This is in line with current market practice. All Underlying result numbers, including comparatives, are now inclusive of NZ IFRS 16 effects. A reconciliation of Underlying to Reported Measures is provided in Appendix I.
5
Scales Corporation Limited – 2021 Full Year Results
Our Year in Numbers
4,983,000
TCEs of apples exported
1
(2020: 5,739,000)
$82.1m
Net cash
(2020: $97.6mnet cash)
30,313
TEU
2
equivalents
managed
(2020: 35,502)
19.0 cents
Dividends declared
per share
149,207 MT
Petfood ingredients sold
4
(2020: 115,739)
3,651,000
TCEs of own-grown apples
exported
(2020: 3,915,000)
$514.6m
Record revenue
(2020: $470.7m)
13.8%
ROCE
3
(2020: 12.3%)
1.Tray carton equivalent, a measure of apple and pear weight, defined as 18.6kg packed weight which equates to 18.0kg sale weight.Includes own grown and external grower volumes including those volumes exported by Fern Ridge Fresh.
2.TEU is aTwenty-foot Equivalent Unit is a unit of cargo capacity to describe container volumes.
3.Return on Capital Employed, calculated as EBIT divided by Capital Employed, where Capital Employed is calculated as non-current assets plus working capital (excluding cash, overdrafts and borrowings, NZ IFRS 16 right of use asset and lease liability, dividends declared, derivative
assets / liabilities and employee loans).
4.Includes 100% of volumes from MeateorNZ; i.e. total volumes controlled directly and indirectly by the Meateor Group.
Scales Corporation Limited – 2021 Full Year Results
6
Scales Corporation Limited – 2021 Full Year Results
2021 Highlights
Top priority given to health and wellbeing of staff during uncertain times
Extraordinary effort made by the Mr Apple team to pick, pack and export the harvest – in full and on time to global markets
Food Ingredients continued its remarkable growth trajectory
Sufficient containers and capacity procured by Scales Logistics, enabling our businesses and customers to successfully exporttheir finished
product
Financial performance ahead of expectations, exceeding Revised Guidance
Teamwork and personal commitment succeeded over uncertainty and disruption
Scales Corporation Limited – 2021 Full Year Results
Sustainability and
COVID-19 Update
2
8
Scales Corporation Limited – 2021 Full Year Results
COVID-19 and Health & Safety
COVID-19
•Business operations continued during the lockdowns, in line with our pandemic preparedness policies
•Reducing risk, whilst supporting all our staff, is of ultimate importance
•COVID-19 continues to present challenges in areas such as labour availability, markets, supply chains and
logistics
•We expect these challenges to continue this year
Health and Safety
•Targeted injury management focus with specific prevention initiatives developed across the businesses
•Leading engagement with forklift simulator programme, including upskilling and cross-site safety standard
auditing
•Adaptable COVID-19 response planning put in place, embracing new contact tracing technology
•Partnership with Mentemiato provide wellbeing tools and resources to our employees
•Continued growth of wellbeing strategy
Health and safety remains our primary priority
Scales Corporation Limited – 2021 Full Year Results
9
Scales Corporation Limited – 2021 Full Year Results
Sustainability
Environment
•Reduced freight movements as a result of the commissioning of the Whakatucoolstore
•Creation of sustainability champions at packhouses to increase communication and feedback between sites and head office
•LED replacement at an orchard accommodation site to reduce electricity usage
•Project commenced to monitor and improve soil health, helping us to understand our impact on the ecosystem
•In-house carbon footprint assessment undertaken for Meateor NZ
•Participation in a Sustainable is Attainable initiative, aiming to find the most cost effective and valuable disposal method for waste streams
•Installation of liner-less labellers for carton end labels at the Whakatupackhouse
•Received initial report on the potential carbon sequestration of apple trees from AUT
Governance
•First hybrid (in-person and online) Annual Shareholders Meeting held
•Board succession process initiated
•Continued participation in the IoDFuture Director’s programme, with the appointment of our 5
th
Future Director, Kelly Brown
Responding to new challenges
Scales Corporation Limited – 2021 Full Year Results
Financial
Overview
3
11
Scales Corporation Limited – 2021 Full Year Results
Group Financial Performance
•Record revenue of $514.6m, up 9% (2020: $470.7m)
•Underlying EBITDA of $73.8m, up 15% (2020: $64.1m)
•Record Underlying NPAT of $39.8m, up 20% (2020: $33.0m)
•Underlying NPAT attributable to shareholders of $29.7m, up 8% (2020: $27.5m)
•Earnings per share of 19.1 cents per share, up 27% (2020: 15.0 cents per share)
Outstanding results aided by diversification strategy and exceptional team performance
Scales Corporation Limited – 2021 Full Year Results
Income Statement
NPAT Attributable to
Shareholders
$m20212020
% chg.
1
20212020
% chg.
1
20212020
% chg.
1
20212020
% chg.
1
Underlying (excluding NZ IFRS 16)514.6470.79%63.053.917%40.433.820%30.428.28%
NZ IFRS 16 Leases10.810.3(0.7)(0.7)(0.7)(0.7)
Underlying (including NZ IFRS 16)514.6470.79%73.864.115%39.833.020%29.727.58%
NZ IFRS & other adjustments:
Impairment of non-current assets1.6(4.3)1.2(3.1)1.2(3.1)
Other NZ IFRS adjustments(3.8)(3.1)(4.0)(3.4)(4.0)(3.4)
Reported
2
514.6470.79%71.656.726%36.926.639%26.921.028%
Notes:
1. %'s are calculated based on non-rounded figures, figures may not sum due to rounding
2. Earnings are shown before the deduction of share of NPAT for Non-Controlling Interests (Fern Ridge and Shelby)
NPATRevenueEBITDA
12
Scales Corporation Limited – 2021 Full Year Results
$32.3m
$35.4m
$31.8m
$27.5m
$29.8m
20172018201920202021
$393.1m
$402.5m
$484.6m
$470.7m
$514.6m
20172018201920202021
$62.0m
$67.1m
$62.2m
$64.1m
$73.8m
20172018201920202021
Trends in Group Financial Performance
Historic results are unadjusted for businesses that have been sold or acquired
2017 and 2018 results have not been restated for the effects of NZ IFRS 16
Underlying EBITDA
Underlying NPAT
Attributable to Shareholders
Scales Corporation Limited – 2021 Full Year Results
Revenue
13
Scales Corporation Limited – 2021 Full Year Results
Divisional Performance
% chg.
$m1H212H212021Margin1H202H202020Margin2021 v 2020
Horticulture38.01.139.116.1%36.93.940.816.6%-4%
Food Ingredients16.119.035.116.0%11.012.123.113.3%52%
Logistics2.72.24.96.0%3.60.64.25.4%17%
Corporate(2.0)(3.3)(5.3)N/A(2.2)(1.8)(4.0)N/A33%
Underlying EBITDA54.819.073.814.3%49.414.864.113.6%15%
Underlying NPAT33.36.539.87.7%28.94.233.07.0%20%
Notes:
1. Prepared on an Underlying basis. A reconciliation to NZ IFRS is provided in the Appendices.
2. %'s are calculated based on non-rounded figures, figures may not sum due to rounding.
3. NZ IAS 41 Agriculture requires unsold agricultural produce to be measured at fair value less costs to sell meaning the expected profit on unsold
fruit is recognised in the interim result, giving rise to seasonality in profitability as shown above.
Divisional Financial Performance Overview
•Horticulture – lower export volumes offset by strong in-market prices, and aided by diversified markets and varieties
•Food Ingredients –benefitted from continued global petfood demand together with changes in product origin, mix and margin
•Logistics – strong 2021 despite difficult conditions
Strong results from all divisions
Scales Corporation Limited – 2021 Full Year Results
14
Scales Corporation Limited – 2021 Full Year Results
$38.9m
$42.6m
$48.3m
$40.8m
$39.1m
2017
2018
20192020
2021
$8.0m
$10.2m
$13.6m
$23.1m
$35.1m
2017
20182019
2020
2021
$3.3m
$4.9m
$4.1m
$4.2m
$4.9m
20172018
2019
20202021
Trends in Divisional Performance
Trends in Underlying EBITDA by division are shown in the graphs below
2017 and 2018 results have not been restated for the effects of NZ IFRS 16
HorticultureLogistics*Food Ingredients
* Previously ‘Storage and Logistics’ up to and including 2018, shows performance of continuing business only
Scales Corporation Limited – 2021 Full Year Results
15
Scales Corporation Limited – 2021 Full Year Results
Balance Sheet
$m
20212020
Current Assets (Excluding Cash)
Trade and other receivables28.719.5
Inventories29.625.8
Unharvested agricultural produce24.624.0
Other10.016.6
Assets held for sale - 2.6
92.888.4
Trade and other payables(23.5)(25.1)
Lease liability(10.2)(10.1)
Other(7.9)(5.9)
(41.6)(41.1)
Net Working Capital51.247.4
Non-Current Assets
Land and buildings at fair value142.2106.0
Apple trees at fair value33.731.0
Other property, plant and equipment38.044.3
Investments, intangibles and goodwill70.268.4
Right of use asset76.477.9
Other11.118.1
371.5345.7
Capital Employed422.8393.1
Current Liabilities (Excluding Overdraft,
Borrowings and Dividends Declared)
Balance Sheet
Strong financial position
•Movement in capital employed reflects:
◦Revaluation of land and buildings
◦Capital expenditure, including orchard redevelopment, the Whakatucoolstoreand the
Mr Apple automation project
◦Increase in working capital
◦Revaluation of FX derivatives
Scales Corporation Limited – 2021 Full Year Results
16
Scales Corporation Limited – 2021 Full Year Results
Balance Sheet (continued)
$m20212020
Non-Current or Other Liabilities
Deferred tax liabilities(22.9)(25.6)
Lease liability(69.5)(70.2)
Other financial liabilities(8.8)(3.2)
Dividends declared(13.4)(13.4)
(114.6)(112.3)
Net Cash/(Debt)
Cash less overdraft33.246.0
Term deposits85.0104.6
Borrowings(36.1)(53.1)
82.197.6
Total Equity390.3378.4
Balance Sheet (continued)
Security to invest in growth opportunities
•Net cash as at 31 December 2021 of $82.1m(2020: $97.6m), comprised:
◦Cash and term deposits of $118.2m(2020: $150.6m)
◦Borrowings of $36.1m (2020: $53.1m)
◦Movement in net cash mostly relates to the investment in the new Whakatu
Coolstore
Scales Corporation Limited – 2021 Full Year Results
Divisional
Performance
4
18
Scales Corporation Limited – 2021 Full Year Results
Horticulture –Financial Performance
Outstanding performance in difficult environment
•Revenue of $243.4m, in line with 2020 ($246.0m)
•Underlying EBITDA of $39.1m (2020: $40.8m)
◦A very strong result given significant market uncertainty, supply chain challenges and
lower volumes of fruit
◦Strong in-market pricing balanced reduced volumes and cost pressures (labour and shipping)
◦Continued and pleasing growth in Asia and Middle East markets
◦Diversification of markets and varieties continues to benefit Mr Apple
•All fruit picked, although volumes and yields affected by weather and orchard redevelopment:
◦3,651kTCEs, 7% decrease on 2020 (3,915kTCEs)
◦Export packout of 77% (2020: 76%)
•Impacted by availability of skilled RSE workforce:
◦Extraordinary effort by the entire Mr Apple team to pick, pack and export the harvest
◦Compared to 2020, the RSEworkforce was ~14% lower over the key harvest period, team supplemented by
NZ and Working Holiday Scheme workers
◦Confirmed the vital role that RSEworkers play
◦Skills acquired and wages earned benefit the RSE workers, their whānauand their Pacific communities
Scales Corporation Limited – 2021 Full Year Results
$m20212020% change
Revenue243.4 246.0
-1%
Underlying EBITDA39.1
40.8 -4%
Underlying EBIT
21.2 23.7
-10%
Financial Performance - Horticulture
19
Scales Corporation Limited – 2021 Full Year Results
0%
2%
4%
6%
8%
10%
12%
14%
16%
201720182019202020212022F2023F2024F
Horticulture –Automation and Orchard Development
Commencement of automation plan helping to stabilise Mr Apple margins
•Multi-year investment and automation plan implemented to increase productivity and
sustain margins
•First phase was Whakatucoolstore– reducing: power consumption, double-handling
of fruit, transport costs and carbon emissions
•Automation of the Whakatupackhouse has commenced with installation of tray de-
nesting machines:
◦The project will result in the Whakatupackhouse becoming one of the world’s most
automated apple packhouses
◦This is a multi-year project that will significantly enhance labour productivity when completed
•Continued progress on our orchard redevelopment programme:
◦35 ha of orchard planted / redeveloped during the 2021 winter, primarily into Dazzle
TM
and
NZ Prince
TM
◦Ongoing implementation of our ‘intensive planting’ techniques, to enable pruning, thinning and
picking efficiencies
Scales Corporation Limited – 2021 Full Year Results
Mr Apple Own Export Volumes (Actual/Forecast) (TCE 000s)
Mr Apple EBIT Margins Through Time*
* EBIT Margins are calculated on an Underlying basis and prior to the impact of IFRS-16
2,161
2,238
2,370
2,374
2,540
2,689
2,760
1,661
1,678
1,281
1,530
1,490
1,496
1,484
3,822
3,915
3,651
3,904
4,031
4,184 4,244
2019202020212022F2023F2024F2025F
Premium VarietiesTraditional Varieties
20
Scales Corporation Limited – 2021 Full Year Results
Horticulture –Own-Grown Volumes
Continued strong growth in Premium varieties
•Increase in Premium varieties of 6% compared to 2020:
◦Compound Annual Growth Rate (CAGR) of 14% since 2012
◦Significant growth in sales of Dazzle
TM
and Posy
TM
•Weather and orchard redevelopment (reducing planted hectares of traditional varieties) impacted Traditional volumes
•Benefitted from geographical and channel diversification:
◦Strong growth in Asia and Middle East, UK stable, Europe affected by lower Traditional volumes
Scales Corporation Limited – 2021 Full Year Results
Mr Apple Own Export Volumes (TCE 000s)Growth in Premium Volumes (TCE 000s)
741
1,059
1,036
1,454
1,656
1,616
1,901
2,161
2,238
2,366
1,404
1,773
1,716
1,701
1,890
1,929
1,966
1,661
1,678
1,285
2,144
2,833
2,752
3,155
3,546
3,545
3,867
3,822
3,915
3,651
2012201320142015201620172018201920202021
Premium VarietiesTraditional Varieties
214
343
406
457
538
534
510
185
245
245
282
301
253
359
378
401
426
393
585
574
831
866
809
959
1,046
1,049
1,061
199
253
370
741
1,059
1,036
1,454
1,656
1,616
1,901
2,161
2,238
2,366
2012201320142015201620172018201920202021
NZ QueenPink LadyHigh Colour Fuji & Royal GalaOther
21
Scales Corporation Limited – 2021 Full Year Results
Horticulture –Pricing and Other KPIs
Benefitted from both geographical and channel diversification
•Pricing above prior year levels for most varieties, reflecting:
◦Reduced volumes
◦Larger fruit for certain varieties
◦Strong market demand for Dazzle
TM
•Total volumes sold (including those on behalf of other growers), were 4,983k TCEs
(2020: 5,739k TCEs):
◦Reduced external grower volumes largely reflect a challenging season for Nelson growers
Scales Corporation Limited – 2021 Full Year Results
Horticulture KPIs
Apple Prices by Variety (NZD / TCE, FOB)
20212020% change
Premium Varieties39.836.98%
Traditional Varieties33.330.110%
Weighted Average all Apples37.534.010%
FX Rates
20212020% change
NZD:USD0.680.64-6%
NZD:EUR0.550.573%
NZD:GBP0.500.511%
NZD:CAD0.870.870%
Volumes (TCE 000s)
20212020% change
Mr Apple own-grown volumes3,6513,915-7%
External grower volumes*1,3321,824-27%
Total volume exported4,9835,739-13%
* External grower volumes comprise external grower volumes handled by Mr Apple (884kTCEs) and Fern Ridge Fresh (449kTCEs)
22
Scales Corporation Limited – 2021 Full Year Results
Horticulture –Meeting the Challenges of a Changing International Market
Investment made in brand positioning, design and digital infrastructure
•Continued growth in Asia and Middle East markets despite disruptions:
◦China and Hong Kong represented ~20% of Mr Apple total export sales (2020: ~17%)
◦Near Markets (Asia, India and Middle East) accounted for ~72% of Mr Apple export sales (2020: ~62%)
•Focus on key customers in these markets to generate impact and deliver value
•Consolidating Dazzle’s early strong and growing presence in key markets
•Market research undertaken with China, Vietnam and Thailand consumers, providing a baseline of consumer brand awareness, affinity and conversion:
◦Mr Apple brand seen as meaningful, opportunities to differentiate it and make it more salient
•New, simplified branding generated for Mr Apple:
◦Incorporates new brand design, logo, packaging and direction, providing consistency and linking the Mr Apple story to the 5 point promise
◦Impact of COVID-19 has increased preference for packaged product in China
Scales Corporation Limited – 2021 Full Year Results
23
Scales Corporation Limited – 2021 Full Year Results
Horticulture –Digital Marketing and Social Media
Using digital tools to actively build our brand awareness and conversion with consumers throughout Asia
•Mr Apple has a presence on Facebook across SE Asia, and in China on WeChat, Weibo,
Douyin(TikTok) and Little Red Book
•Facebook and Instagram campaigns held May to September in Vietnam, Indonesia
and Japan to reach Mr Apple consumers
•270,000 QR code scans and interactions with our online game, with highest scan rates
in China, India and Vietnam
•Participated in NZTEMade with Carecampaigns, promoting NZ food and beverage to
the world, in Thailand, Vietnam, India and Bahrain
•Continued increase of e-commerce trade in China:
◦Modern trade (e-commerce / online-to-offline / supermarket / fruit chain stores / community
groups) represents ~60% of sales
◦Worked with TMallto raise conversion rate, including key word search, brand name formatting,
responding to reviews
•Targeting festivals and gifting opportunities, in particular China’s Mid-Autumn Festival
Scales Corporation Limited – 2021 Full Year Results
NZTEcampaign in Thailand to
highlight QR code game
Mid-Autumn Festival video used on all
social media platforms in China
24
Scales Corporation Limited – 2021 Full Year Results
27.7
29.0
111.0
115.7
149.2
201720182019
20202021
Food Ingredients –Performance
Outstanding performance, reflecting ongoing demand for global petfood
•Excellent full year result:
◦29% increase in volumes sold
◦26% increase in revenue
◦52% increase in Underlying EBITDA, exceeding the division’s long-run EBITDA target
◦Increased profitability reflects movements in product origin, mix and margin together with
the changing contribution of operations within the division
◦One-off US wage subsidy scheme of NZ$0.9mreceived by Shelby during the year
•Profruitsales volumes down only slightly on record 2020 year:
◦Lower availability of product and reduced yield
◦Local demand helped to offset shipping difficulties
for export sales
Scales Corporation Limited – 2021 Full Year Results
Pet Food Ingredients Sold (MT 000s)
* EBIT Margins are calculated on an Underlying basis and prior to the impact of IFRS-16
$m2021
2020
% change
Revenue218.9
173.7
26%
Underlying EBITDA35.1 23.1 52%
Underlying EBIT34.3 22.0 56%
KPIs
2021
2020% change
Food Ingredients Volume Sold (MT)149,207115,73929%
Juice Concentrate Sold (000 L)6,4976,544-1%
Financial Performance - Food Ingredients
25
Scales Corporation Limited – 2021 Full Year Results
Food Ingredients –Industry and Strategy Update
Growth in petfood market reinforces Food Ingredients’ strategy
•Growth of 8.2% in global petfood production, with a 17.1% increase in Asia-Pacific
*
•Reported increase in USA and worldwide petfood sales:
◦Petfood and treat sales in the USA increased 9.7% in 2020, growth of ~5% was projected for 2021
**
◦Strong growth registered for other worldwide markets
***
•Strength of the industry largely attributed to:
◦Rise in pet ownership due to the COVID-19 pandemic
◦Focus on pets’ health and well-being
•Supply chains continue to be impacted by strong global shipping demand and port & logistics constraints:
◦Impact on Shelby lessened due to domestic customer base
◦Similarly, MeateorNZ has also increased sales to domestic petfood manufacturers
•Internal and external growth opportunities continue to be investigated:
◦Our confidence in the opportunities available to the division has led to the Division CEO, John Sainsbury, preparing to
relocate to the USA on a permanent basis to further drive growth
Scales Corporation Limited – 2021 Full Year Results
* https://www.petfoodindustry.com/articles/10971-global-pet-food-production-up-82-in-2021-asia-led
** https://www.petfoodindustry.com/articles/10128-us-pet-food-sales-rose-10-in-2020-5-projected-for-2021
*** https://www.petfoodindustry.com/blogs/7-adventures-in-pet-food/post/10737-us-pet-food-spending-worldwide-pet-food-sales-up-in-2020?utm_source=Omeda&utm_medium=Email&utm_content=NL-
Petfood+Industry+News&utm_campaign=NL-Petfood+Industry+News_20211025_0200&oly_enc_id=3803J1451478D1W
26
Scales Corporation Limited – 2021 Full Year Results
Logistics –Performance
2021 performance underlines strategic benefit of division
•Strong full year performance:
◦5% increase in revenue
◦17% increase in Underlying EBITDA, with performance returning to previous levels
◦Decrease in volumes due to reduced volumes of agricultural exports and impact of COVID-19
•Exceptional effort by the entire team
•Invaluable expertise and strategic value provided to customers:
◦Team’s resilience and ability to innovate and adapt ensured produce shipped and airfreighted
as required
◦Reinforces benefit of the full logistics services provided by the division
•Supply chain pressures and challenges expected to continue through 2022:
◦Scarcity of containers and shipping capacity
◦Labour shortages
◦High shipping, airfreight and fuel costs
◦High demand and port congestion
Scales Corporation Limited – 2021 Full Year Results
Financial Performance - Logistics
$m2021
2020% change
Revenue81.9 77.9 5%
Underlying EBITDA
4.9 4.2 17%
Underlying EBIT
4.1 3.4
22%
KPIs
20212020% change
Ocean Freight Volume (TEUs)30,31335,502-15%
Airfreight Volume (tonnes)3,6455,656
-36%
Capital
Management
5
28
Scales Corporation Limited – 2021 Full Year Results
Capital Management
Return on Capital Employed
2021
2020
Horticulture7.4%8.9%
Food ingredients
46.2%28.9%
Logistics37.3%32.0%
Group13.8%12.3%
Target12.5%12.5%
Capital Management
Return on Capital Employed (ROCE) levels vary according to business structure and operations
•Divisional and target ROCEcalculations updated for effect of NZ IFRS 16
•Horticulture impacted by capital expenditure and to a significant extent by the ongoing
revaluation of horticultural land over the last few years
•Food Ingredients and Logistics’ ROCE benefit from a lower capital requirement
Scales Corporation Limited – 2021 Full Year Results
29
Scales Corporation Limited – 2021 Full Year Results
Capital Expenditure
$m
20212020
Horticulture3.74.3
Food Ingredients0.50.5
Logistics0.10.1
Other0.00.0
4.44.9
Margin Sustainability
$m20212020
Horticulture6.0
11.5
6.011.5
Growth
$m2021
2020
Horticulture6.18.0
6.18.0
Total Capital Expenditure16.524.4
Maintenance
Capital Expenditure
Investing in growth and margin sustainability projects
•2021 capital expenditure included:
◦Mr Apple orchard redevelopment
◦Completion of Mr Apple Whakatucoolstore
◦Commencement of the Mr Apple automation programme – tray de-nesting machines
•In addition to reviewing investment opportunities, Scales continues to assess opportunities
to deliver increased earnings through appropriate growth capital expenditure
Scales Corporation Limited – 2021 Full Year Results
Governance
6
31
Scales Corporation Limited – 2021 Full Year Results
Governance and Management
Strengthening our Director and Senior Management Team
•Commenced Board succession process, assisted by external advisors, Boardworks
•Qi Xin appointed as Non-Executive Director in December 2021:
◦Senior Director of a department within China Resources Enterprise, Limited
•Continued participation in the Institute of Directors’ Future Director programme:
◦Appointment of Kelly Brown, Wine and Agribusiness Consultant in June 2021
◦Brings agricultural and international business expertise
•Appointment of Geoff Smith as Chief Operations and Sustainability Officer in January 2022:
◦Extensive operational, supply chain, strategy and investment experience across a variety of agribusinesses
•Outstanding leadership, management and teamwork throughout the Group:
◦Health and safety of our staff remain our top priority, including compliance with our pandemic preparedness policies
Scales Corporation Limited – 2021 Full Year Results
Trading
Outlook
7
33
Scales Corporation Limited – 2021 Full Year Results
2022 Outlook
Groupupdate
•Directors have reconfirmed the Underlying Net Profit Attributable to Shareholders Guidance for 2022:
◦$23.5 million to $28.5 million, in line with the 2021 initial Guidance
◦Implies an Underlying Net Profit range of $30.5 million to $35.5 million and an Underlying EBITDA range of $62.0 million to $67.0 million
•The Directors note:
◦Horticulture pricing expected to be in line with 2021
◦Significant increase in shipping and other logistics costs anticipated
◦Ongoing shortage of labour within the agribusiness sector (current initiatives are expected to source sufficient labour for the 2022 harvest)
◦Assumed that operations will continue as essential businesses
◦A substantial level of capital expenditure will be invested in gross margin sustainability initiatives within Mr Apple
•Whilst Scales’ diversification has helped mitigate disruption to both domestic and international operations, there continues to be significant
uncertainty about the year ahead
•Our ongoing focus will be to minimise the effects of COVID-19, whilst stabilising margins at Mr Apple, taking advantage of the growth initiatives
within Food Ingredients and pursuing other investment opportunities
Scales Corporation Limited – 2021 Full Year Results
Note: Scales’ Horticulture division is particularly reliant on the ability to harvest and process fresh produce at the optimum timing. This impacts on volumes and quality
and our ability to market our fresh produce globally. The harvest window does not allow for delays. The Group’s ability to manage the expected disruption concerning our
critical employees will not only rely on their ongoing commitment but also the full support and understanding of all government agencies
34
Scales Corporation Limited – 2021 Full Year Results
2022 Outlook (continued)
Divisionalupdate – Horticulture and Logistics
Horticulture
•Picking and packing has commenced for the 2022 season, and current indications are positive with volumes in line with earlierpr ojections. As
always, our ability to pick and pack the entire crop is dependent on the availability of seasonal labour
•Early demand for our branded varieties, including Posy
TM
and Dazzle
TM
, has been strong
•For the forthcoming season we anticipate a significant increase in shipping costs and capacity constraints
•At the conclusion of the season we expect to make significant progress on the Whakatupackhouse automation project. This project is likely to
continue into 2023
Logistics
•Global supply chain conditions outlined earlier in this presentation are expected to remain in place through 2022
•Scales Logistics is expected to continue to play a key strategic role in supporting its customers’, including MrApple and Meateor, supply chain
requirements for the coming year
Scales Corporation Limited – 2021 Full Year Results
35
Scales Corporation Limited – 2021 Full Year Results
2022 Outlook (continued)
Divisionalupdate – Food Ingredients
Food Ingredients
•The petfood businesses within this division have performed strongly and we continue to investigate opportunities for further growth
•Our New Zealand joint venture with Alliance has performed well and is focused on both supporting the strongly growing domestic petfood
manufacturing industry as well as existing and new export markets. Value adding options are being actively pursued
•Our exports from Australia have outperformed expectations, however, we note that as of 31 December 2023 we will no longer have an exclusive
ongoing relationship with our existing supplier
•Shelby has continued to grow strongly, assisted by increased volumes being available through commissioning of the new plate freezing facility in
Dodge City, Kansas – we are actively exploring opportunities for further growth within Shelby
Scales Corporation Limited – 2021 Full Year Results
Appendices
8
37
Scales Corporation Limited – 2021 Full Year Results
Appendix I -Reconciliation of Underlying to Reported Measures
Scales Corporation Limited – 2021 Full Year Results
Reconciliation of Divisional Underlying Profitability to Reported Profitability
GroupHorticultureFood ingredientsLogistics
Corporate and eliminations
2021202020212020202120202021202020212020
EBITDA Reconciliation
Underlying EBITDA (excluding NZ IFRS 16)63.053.929.231.435.023.14.23.4(5.4)(4.1)
NZ IFRS 16 Leases10.810.39.99.40.10.10.80.80.10.1
Underlying EBITDA (including NZ IFRS 16)73.8
64.139.140.835.123.14.94.2(5.3)(4.0)
Other adjustments:
(Impairment)/reversal of impariment of non-current assets1.6(4.3)1.6(4.3) - - - - - -
Gain on sale of property, plant and equipment1.1 - 1.1 - - -
Equi ty s ettl ed empl oyee benefi ts(0.7)(0.7) - - - - - - (0.7)(0.7)
Meateor NZ Sale - Working Capital Adjustment - (0.5) - - - (0.5) - - - -
Change in fair value gain on apple inventory(0.9)(0.8)(0.9)(0.8) - - - - - -
Change in gross liability for non-controlling interests(1.9)(0.6)0.30.1(2.2)(0.8) - - - -
Tra ns a cti on cos ts(1.4)(0.4) - - - - - - (1.4)(0.4)
Reported71.656.741.235.832.921.94.94.2(7.5)(5.1)
EBIT Reconciliation
Underlying EBIT (excluding NZ IFRS 16)52.243.019.421.934.322.04.03.2(5.4)(4.1)
NZ IFRS 16
Leases
2.02.01.81.80.00.00.20.20.00.0
Underlying EBIT (including NZ IFRS 16)54.245.021.223.734.322.04.13.4(5.4)(4.1)
Other adjustments:
(Impairment)/reversal of impariment of non-current assets1.6(4.3)1.6(4.3) - - - - - -
Gain on sale of property, plant and equipment1.1 - 1.1 - - - - - - -
Equi ty s ettl ed empl oyee benefi ts(0.7)(0.7) - - - - - - (0.7)(0.7)
Meateor NZ Sale - Working Capital Adjustment - (0.5) - - - (0.5) - - - -
Change in fair value gain on apple inventory(0.9)(0.8)(0.9)(0.8) - - - - - -
Change in gross liability for non-controlling interests(1.9)(0.6)0.30.1(2.2)(0.8) - - - -
Tra ns a cti on cos ts(1.4)(0.4) - - - - - - (1.4)(0.4)
Reported52.137.623.418.732.120.84.13.4(7.6)(5.3)
NPAT Reconciliation
Underlying NPAT (excluding NZ IFRS 16)40.433.813.815.428.218.52.82.3(4.5)(2.4)
NZ IFRS 16
Leases
, net of ta x(0.7)(0.7)(0.6)(0.6)(0.0)(0.0)(0.1)(0.1)(0.0)(0.0)
Underlying NPAT (including NZ IFRS 16)39.833.013.314.828.218.52.72.2(4.5)(2.4)
Other adjustments:
(Impairment)/reversal of impariment of non-current assets1.6(4.3)1.6(4.3) - - - - - -
Gain on sale of property, plant and equipment1.1 - 1.1 - - - - - - -
Equi ty s ettl ed empl oyee benefi ts(0.7)(0.7) - - - - - - (0.7)(0.7)
Meateor NZ Sale - Working Capital Adjustment - (0.5) - - - (0.5) - - - -
Change in fair value gain on apple inventory(0.9)(0.8)(0.9)(0.8) - - - - - -
Change in gross liability for non-controlling interests(1.9)(0.6)0.30.1(2.2)(0.8) - - - -
Tra ns a cti on cos ts(1.4)(0.4) - - - - - - (1.4)(0.4)
Ta x effec t of other NZ I FRS a dj us tments(0.7)0.9(0.2)1.4(0.5)(0.5) - - - -
Reported36.926.615.211.225.616.72.72.2(6.6)(3.6)
38
Scales Corporation Limited – 2021 Full Year Results
Appendix II -Disclaimer
The information in this presentation has been prepared by Scales Corporation Limited with due care and attention. However, neither Scales Corporation Limited nor any of its directors, employees,
shareholders nor any other person shall have any liability whatsoever to any person for any loss (including, without limitation,arising from any fault or negligence) arising from this presentation or
any information supplied in connection with it.
This presentation supplements our full year results announcement. It should be read subject to and in conjunction with the additional information in that release, and other material which we have
released to the NZX.
This presentation may contain projections or forward-looking statements regarding a variety of items. Such projections or forward-looking statements are based on current expectations, estimates
and assumptions and are subject to a number of risks, uncertainties and assumptions. There is no assurance that results contemplated in any projections and forward-looking statements in this
presentation will be realised. Actual results may differ materially from those projected in this presentation. No person is under any obligation to update this presentation at any time after its release
to you or to provide you with further information about Scales Corporation Limited.
Our results are reported under NZ IFRS. This presentation includes non-GAAP financial measures which are not prepared in accordance with NZ IFRS. The non-GAAP financial measures used in
this presentation include:
•EBITDA. We calculate EBITDA by adding back (or deducting) depreciation, amortisation, finance charges / (revenue), and taxation expense to net earnings / (loss) from continuing operations
•EBIT. We calculate EBIT by adding back (or deducting) finance charges / (revenue), and taxation expense to net earnings / (loss)from continuing operations
•Underlying EBITDA and EBIT are calculated by adding back (or deducting) certain non cash NZ IFRS and other adjustments as detailed in Appendix I
•Underlying Net Profit is calculated by adding back or (or deducting) the after-tax effect of certain non cash NZ IFRS and other adjustments as detailed in Appendix I
We believe that these non-GAAP financial measures provide useful information to readers to assist in the understanding of our financial performance, financial position or returns, but that they
should not be viewed in isolation, nor considered as a substitute for measures reported in accordance with NZ IFRS. Non-GAAP financial measures may not be comparable to similarly titled
amounts reported by other companies.
Forward-looking statements are subject to any material adverse events, significant one-off expenses or other unforeseeable circumstances.
The information in this presentation is of a general nature and does not constitute financial product advice, investment advice or any recommendation. Nothing in this presentation constitutes
legal, financial, tax or other advice.
Scales Corporation Limited – 2021 Full Year Results
---
Scales Corporation Limited
consolidated financial statements
for the year ended 31 December 2021
Scales Corporation Limited
Contents
Directory3
Consolidated statement of comprehensive income4
Consolidated statement of changes in equity6
Consolidated statement of financial position7
Consolidated statement of cash flows8
Notes to the consolidated financial statements10
Independent auditor's report45
2
Scales Corporation Limited
Directory
Board of DirectorsAuditor
Tim Goodacre (Chair)Deloitte Limited
Andrew Borland (Managing Director)Level 4
Nick Harris151 Cambridge Terrace
Mark HuttonChristchurch 8013
Alan Isaac
Lai Po Sing, Tomakin (resigned on 13 September 2021)Bankers
Nadine TunleyANZ Bank New Zealand Limited
Sun Qiang (Alex) (appointed on 13 September 2021,Level 3
resigned on 14 December 2021)ANZ Centre
Qi Xin (appointed on 15 December 2021)267 High Street
Christchurch 8011
Audit and Risk Management Committee
Alan Isaac (Chair)Coöperatieve Rabobank U.A., New Zealand Branch
Nick HarrisLevel 4
Mark Hutton32 Hood street
Hamilton 3204
Nominations and Remuneration Committee
Mark Hutton (Chair)Westpac New Zealand Limited
Tim GoodacreLevel 4
The Terrace
Finance and Treasury Committee83 Cashel Street
Mark Hutton (Chair)Christchurch 8011
Andrew Borland
Solicitors
Health & Safety and Sustainability CommitteeAnthony Harper
Nick Harris (Chair)Level 9
Andrew BorlandAnthony Harper Tower
Nadine Tunley62 Worcester Boulevard
Christchurch 8013
Registered Office
52 Cashel StreetChapman Tripp
Christchurch 801315 Customs Street West
New ZealandAuckland 1010
Postal AddressCorporate Advisor
PO Box 1590Maher & Associates
Christchurch 814017 Albert Street
New ZealandAuckland 1010
TelephoneShare Registry
+64 3 379 7720Computershare Investor Services Limited
Level 2
Website159 Hurstmere Road
www.scalescorporation.co.nzTakapuna
North Shore City
Auckland 0622
3
Scales Corporation Limited
Consolidated statement of comprehensive income for the year ended 31 December 2021
20212020
Note$000's$000's
RevenueB1514,551470,709
Cost of salesB2(400,663)(366,800)
113,888103,909
Administration and operating expensesB2(47,241)(44,382)
Reversal of impairment (impairment) on revaluationC11,650(4,311)
Share of profit of entities accounted for using the equity methodC33,1622,224
Other incomeB36,0221,645
Other lossesB3(5,862)(2,345)
EBITDA71,61956,740
Amortisation(342)(584)
DepreciationC1(10,443)(10,294)
Depreciation of right-of-use assetG2(8,760)(8,301)
EBIT52,07437,561
Finance revenue1,2032,584
Finance costB4(1,786)(1,915)
Finance cost of lease liabilityG2(2,964)(2,981)
PROFIT BEFORE INCOME TAX EXPENSE48,52735,249
Income tax expenseB5
(11,577)(8,668)
PROFIT FOR THE YEAR36,95026,581
Profit for the year is attributable to:
Equity holders of the Company26,92521,025
Non-controlling interests10,0255,556
36,95026,581
EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:
Basic earnings per share (cents)D519.115.0
Diluted earnings per share (cents)D519.114.9
The notes to the financial statements on pages 10 to 44 form part of and should be read in conjunction with this statement.
4
Scales Corporation Limited
Consolidated statement of comprehensive income for the year ended 31 December 2021 (continued)
20212020
Note$000's$000's
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
(Loss) gain on cash flow hedges(20,730)
20,861
Income tax relating to cash flow hedges5,804
(5,841)
Share of other comprehensive income of joint venturesC3(1,015)
708
Income tax relating to share of other comprehensive income of joint ventures284
(198)
Foreign exchange gain (loss) on translating foreign operations692
(784)
(14,965)14,746
Items that will not be reclassified to profit or loss:
Revaluation of land and buildings22,362
9,133
Income tax relating to buildings(1,647)
(448)
Revaluation of apple trees3,048
(31)
Income tax relating to apple trees(854)
9
Remeasurement of net defined benefit liability318
(440)
Income tax relating to remeasurement of net defined benefit liability-
67
23,2278,290
OTHER COMPREHENSIVE INCOME FOR THE YEAR8,26223,036
TOTAL COMPREHENSIVE INCOME FOR THE YEAR45,21249,617
Total comprehensive income for the year attributable to:
Equity holders of the Company35,06044,374
Non-controlling interests10,1525,243
45,21249,617
The notes to the financial statements on pages 10 to 44 form part of and should be read in conjunction with this statement.
5
Scales Corporation Limited
Consolidated statement of changes in equity for the year ended 31 December 2021
Share
capital
ReservesRetained
earnings
Attributable
to owners
of the
Company
Non-
controlling
interests
Total
Note$000's$000's$000's$000's$000's$000's
Balance at 1 January 2020
95,273 62,511 197,230 355,0143,989
359,003
Profit for the year--21,02521,0255,55626,581
Other comprehensive income for the year-23,349-23,349(313)23,036
Total comprehensive income for the year-23,34921,02544,3745,24349,617
Reclassification of revaluation reserveD2-1,093
(1,093)-
--
Reclassification of pension reserveD2-(341)
341-
--
Recognition of share-based paymentsD2-
698
-
698-
698
Shares fully vestedD1, D2
1,098(536)(165)397-
397
DividendsD3
--(26,716)(26,716)(4,594)
(31,310)
Balance at 31 December 202096,37186,774190,622373,7674,638378,405
Profit for the year--26,92526,92510,02536,950
Other comprehensive income for the year-8,135-8,1351278,262
Total comprehensive income for the year-8,13526,92535,06010,15245,212
Reclassification of revaluation reserveD2-(2,224)
2,224-
--
Recognition of share-based paymentsD2
-726-726-
726
Shares soldD1
347--347-
347
Shares fully vestedD1, D2
2,870 (1,251)(295)1,324-
1,324
DividendsD3
--(26,832)(26,832)(8,868)
(35,700)
Balance at 31 December 202199,58892,160192,644384,3925,922390,314
The notes to the financial statements on pages 10 to 44 form part of and should be read in conjunction with this statement.
6
Scales Corporation Limited
Consolidated statement of financial position as at 31 December 2021
20212020
Note$000's$000's
EQUITY
Share capitalD1
99,58896,371
ReservesD2
92,16086,774
Retained earnings
192,644190,622
Equity attributable to Scales Corporation Limited shareholders384,392373,767
Equity attributable to non-controlling interests5,9224,638
TOTAL EQUITY390,314378,405
CURRENT ASSETS
Cash and bank balances
35,39847,418
Term deposits
85,000104,632
Trade and other receivablesE1
28,65819,452
Other financial assetsE2
5,92312,688
Unharvested agricultural produceC2
24,56124,022
InventoriesC5
29,64125,805
Prepayments
4,0563,899
213,237237,916
Assets held for sale
-2,550
TOTAL CURRENT ASSETS213,237240,466
NON-CURRENT ASSETS
Property, plant and equipmentC1
213,869181,311
Investments accounted for using the equity methodC3
26,05126,154
GoodwillC4
43,39241,905
Other financial assetsE211,07418,143
Computer software
717354
Right-of-use assetG2
76,43177,877
TOTAL NON-CURRENT ASSETS371,534345,744
TOTAL ASSETS584,771586,210
CURRENT LIABILITIES
Bank overdrafts
2,1961,384
Trade and other payablesE3
23,46625,117
Dividend declaredD3
13,41913,359
BorrowingsE4
-860
Current tax liabilities
4791,593
Other financial liabilitiesE57,4104,300
Lease liabilityG2
10,23710,053
TOTAL CURRENT LIABILITIES57,20756,666
NON-CURRENT LIABILITIES
BorrowingsE4
36,06052,199
Deferred tax liabilitiesB5
22,94425,596
Defined benefit plan net liability
427632
Other financial liabilitiesE58,3382,522
Lease liabilityG2
69,48170,190
TOTAL NON-CURRENT LIABILITIES137,250151,139
TOTAL LIABILITIES194,457207,805
NET ASSETS390,314378,405
The notes to the financial statements on pages 10 to 44 form part of and should be read in conjunction with this statement.
7
Scales Corporation Limited
Consolidated statement of cash flows for the year ended 31 December 2021
20212020
Note$000's$000's
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from:
Receipts from customers505,854469,559
Dividends and distributions received2,2511,509
Interest received1,4164,042
509,521475,110
Cash was disbursed to:
Payments to suppliers and employees(453,109)(407,074)
Interest paid(4,750)(4,896)
Income tax paid(11,823)(9,916)
(469,682)(421,886)
NET CASH PROVIDED BY OPERATING ACTIVITIES39,83953,224
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from:
Proceeds from maturing term deposits19,63237,368
Advances repaid1,231382
Sale of property, plant and equipment and computer software3,773298
24,63638,048
Cash was applied to:
Purchase of property, plant and equipment(15,822)(24,237)
Purchase of computer software(705)(131)
Purchase of financial instruments(325)-
(16,852)(24,368)
NET CASH PROVIDED BY INVESTING ACTIVITIES7,78413,680
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was provided from:
Proceeds from seasonal and other facility borrowingsE4-3,955
Treasury stock sold347-
3473,955
Cash was applied to:
Dividends paid(26,772)(26,685)
Dividends paid to non-controlling interests(8,868)(4,594)
Repayments of lease liabilities(7,839)(7,300)
Repayments of seasonal facility borrowingsE4-(3,000)
Repayments of term facility borrowingsE4(18,000)-
(61,479)(41,579)
NET CASH USED IN FINANCING ACTIVITIES(61,132)(37,624)
NET (DECREASE) INCREASE IN NET CASH(13,509)29,280
Net foreign exchange difference677(690)
Cash and cash equivalents at the beginning of the year46,03417,444
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR33,20246,034
Represented by:
Cash and bank balances
35,398
47,418
Bank overdrafts
(2,196)
(1,384)
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR33,20246,034
The notes to the financial statements on pages 10 to 44 form part of and should be read in conjunction with this statement.
8
Scales Corporation Limited
Consolidated statement of cash flows for the year ended 31 December 2021 (continued)
20212020
Note$000's$000's
NET CASH GENERATED BY OPERATING ACTIVITIES
Reconciliation of profit for the year to net cash generated by operating activities:
Profit for the year36,95026,581
Non-cash items:
Depreciation (including on right-of-use asset)19,20318,595
Reversal of impairment (impairment) on revaluation(1,650)4,311
Amortisation342584
Share of equity accounted results(3,162)(2,224)
Hedging instruments358(205)
Government grant(879)-
(Gain) loss on disposal of property, plant and equipment(1,132)62
Share-based payments726698
Change in gross liability on put options1,852647
Deferred tax871(203)
Operating cash receipts not included in profit for the year:
Dividends received from equity accounted entities2,2501,500
Changes in net assets and liabilities:
Trade and other receivables(8,828)764
Unharvested agricultural produce(539)(2,403)
Inventories(3,498)28
Prepayments(148)(426)
Trade and other payables(1,760)5,960
Current tax assets and liabilities(1,117)(1,045)
NET CASH PROVIDED BY OPERATING ACTIVITIES39,83953,224
Statement of cash flows
For the purpose of the statement of cash flows, cash and cash equivalents include cash and bank balances and
bank overdrafts.
The following terms are used in the statement of cash flows:
Operating activitiesare the principal revenue producing activities of the Group and other activities that are not
investing or financing activities.
Investing activitiesare the acquisition and disposal of long-term assets and other investments not included in cash
equivalents.
Financing activitiesare activities that result in changes in the size and composition of the contributed equity and
borrowings of the Group.
For and on behalf of the Board of Directors who authorised the issue of the financial statements on 23 February 2022.
Tim Goodacre, ChairAndy Borland, Managing Director
The notes to the financial statements on pages 10 to 44 form part of and should be read in conjunction with this statement.
9
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
ABOUT THIS REPORT
IN THIS SECTION
The notes to the financial statements include information which is considered relevant and material to assist the
reader in understanding the financial performance and financial position of the Scales Corporation Limited Group
("Scales" or the "Group"). Information is considered relevant and material if:
• the amount is significant because of its size and nature;
• it is important for understanding the results of Scales;
• it helps to explain changes in Scales’ business; or
• it relates to an aspect of Scales’ operations that is important to future performance.
Scales Corporation Limited (the "Company") is a for-profit entity domiciled and registered under the Companies
Act 1993 in New Zealand. It is an FMC reporting entity for the purposes of the Financial Markets Conduct Act
2013. The Group consists of Scales Corporation Limited, its subsidiaries and joint ventures. The principal activities
of the Group are to grow apples, provide logistics services, export products, manufacture and trade food ingredients,
provide insurance services to companies within the Group and operate processing facilities.
The financial statements have been prepared:
• in accordance with Generally Accepted Accounting Practice (GAAP), International Financial Reporting Standards
(IFRS), the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable
financial reporting standards, as appropriate for a Tier 1 for-profit entity;
• in accordance with the requirements of the Financial Markets Conduct Act 2013;
• in accordance with accounting policies that are consistent with those applied in the previous year;
• on the basis of historical cost, except for certain assets and financial instruments that are measured at fair
values; and
• in New Zealand dollars with all values rounded to the nearest thousand dollars.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or liability, the Group takes
into account the characteristics of the asset or liability if market participants would take those characteristics into
account when pricing the asset or liability at the measurement date.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree
to which the inputs to the fair value measurements are observable. The levels are described as:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity
can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
Key judgements and estimates
In the process of applying the Group’s accounting policies and the application of financial reporting standards,
Scales has made a number of judgements and estimates. The estimates and underlying assumptions are based on
historical experience and various other factors that are considered to be appropriate under the circumstances.
Actual results may differ from these estimates.
10
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
ABOUT THIS REPORT (CONTINUED)
Key judgements and estimates (continued)
Judgements and estimates which are considered material to understanding the performance of Scales are
explained in the following notes:
• Apple trees in note C1;
• Unharvested agricultural produce in note C2;
• Assessment of Group investment in Meateor Pet Foods Limited Partnership for impairment in note C3.
Basis of consolidation
The Group financial statements incorporate the financial statements of the Company and its subsidiaries (being
entities controlled by Scales Corporation Limited), and the equity accounted result, assets and liabilities of the
joint ventures.
The financial statements of members of the Group, are prepared for the same reporting period as the parent
company, using consistent accounting policies.
In preparing the Group financial statements, all material intra-group transactions, balances, income, expenses and
cash flows have been eliminated. Subsidiaries are consolidated from the date on which control is obtained to the
date on which control is lost.
Other accounting policies
Other accounting policies that are relevant to an understanding of the financial statements are provided
throughout the notes to the financial statements.
Adoption of new and revised standards and interpretations; standards and Interpretations issued but not yet effective
All mandatory amendments and interpretations have been adopted in the current year. None had a material impact
on these financial statements.
The Group has reviewed all Standards, Interpretations and Amendments to existing Standards in issue not yet
effective and does not expect these to have a material effect on the financial statements of the Group.
11
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
A. SEGMENT INFORMATION
IN THIS SECTION
This section explains the financial performance of the operating segments of Scales, providing additional
information about individual segments, including:
• total segment revenue and revenue from external customers;
• segment profit before income tax; and
• total segment assets and liabilities.
SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker, being the Managing Director. The Managing Director monitors the operating
performance of each segment for the purpose of making decisions on resource allocation and strategic direction.
Inter-segment pricing is determined on an arm’s length basis. Segment results include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis.
No single external customer’s revenue accounts for 10% or more of the Group’s revenue.
The Group comprises the following operating segments:
Food Ingredients: processing and marketing of food ingredients such as pet food ingredients and juice
concentrate. Meateor Foods Limited, Meateor Foods Australia Pty Limited, Meateor Group Limited, Meateor US LLC,
Shelby JV LLC Group (Shelby Cold Storage LLC, Shelby Exports Inc, Shelby Foods LLC, Shelby JV LLC, Shelby Properties LLC,
Shelby Trucking LLC), Meateor GP Limited, Meateor Pet Foods Limited Partnership and Profruit (2006) Limited.
Horticulture: orchards, fruit packing and marketing. Mr Apple New Zealand Limited, New Zealand Apple Limited,
Fern Ridge Produce Limited and Longview Group Holdings Limited.
Logistics: logistics services. Scales Logistics Limited and Scales Logistics Australia Pty Ltd.
Other: Scales Corporation Limited, Geo. H. Scales Limited, Scales Employees Limited, Scales Holdings Limited
and Selacs Insurance Limited.
Horticulture
Food
IngredientsLogisticsOtherEliminationsTotal
$000's$000's$000's$000's$000's$000's
2021
Total segment revenue243,422218,85281,8783,453(33,054)514,551
Inter-segment revenue--(30,166)(2,888)33,054-
Revenue from external customers243,422218,85251,712565-514,551
Gain on sale of non-current assets1,132----1,132
Share of profit of entities accounted for-3,162---3,162
using the equity method
Reversal of impairment (impairment) on revaluation1,650----1,650
EBITDA41,23932,9334,942(7,495)-71,619
Amortisation expense(298)-(33)(11)-(342)
Depreciation expense(9,522)(733)(177)(11)-(10,443)
Depreciation of right-of-use asset(8,047)(58)(596)(59)-(8,760)
Finance revenue---1,203-1,203
Finance costs(18)(24)(31)(1,713)-(1,786)
Finance cost of lease liability(2,666)(14)(271)(13)-(2,964)
Segment profit (loss) before income tax20,68832,1043,834(8,099)-48,527
12
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
SEGMENT REPORTING (CONTINUED)
Horticulture
Food
IngredientsLogisticsOtherEliminationsTotal
$000's$000's$000's$000's$000's$000's
Segment assets347,376112,53022,382102,483-584,771
Segment liabilities126,00527,06412,96128,427-194,457
Segment carrying value of investment-26,051---26,051
accounted for using the equity method
Segment acquisition of property, plant and15,921542584-16,525
equipment and computer software
2020
Total segment revenue245,984173,69477,9173,784(30,670)470,709
Inter-segment revenue--(28,082)(2,588)30,670-
Revenue from external customers245,984173,69449,8351,196-470,709
Gain on sale of non-current assets46-(108)--(62)
Share of profit of entity accounted for-2,224---2,224
using the equity method
Reversal of impairment (impairment) on revaluation(4,311)---(4,311)
EBITDA35,78121,8724,215(5,128)-56,740
Amortisation expense(475)-(43)(66)-(584)
Depreciation expense(9,049)(1,045)(187)(13)-(10,294)
Depreciation of right-of-use asset(7,586)(63)(594)(58)-(8,301)
Finance revenue11-2,582-2,584
Finance costs(36)(32)(28)(1,819)-(1,915)
Finance cost of lease liability(2,660)(18)(289)(14)-(2,981)
Segment profit (loss) before income tax15,97620,7153,074(4,516)-35,249
Segment assets329,055103,79317,867135,495-586,210
Segment liabilities122,83819,08211,87054,015-207,805
Segment carrying value of investment-26,154---26,154
accounted for using the equity method
Segment acquisition of property, plant and23,800471926-24,369
equipment and computer software
Non-current assets other than financial instruments by geographical location
New ZealandAustraliaUSATotal
20212020202120202021202020212020
$000's$000's$000's$000's$000's$000's$000's$000's
Property, plant and equipment210,074177,51734403,7613,754213,869181,311
Investments accounted for26,05126,154----26,05126,154
using the equity method
Goodwill16,18816,188--27,20425,71743,39241,905
Computer software717354----717354
Right-of-use asset75,89777,29418019235439176,43177,877
13
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
B. FINANCIAL PERFORMANCE
IN THIS SECTION
This section explains the financial performance of Scales, providing additional information about individual items
in the statement of comprehensive income, including:
• accounting policies, judgements and estimates that are relevant for understanding items recognised in the
statement of comprehensive income; and
• analysis of Scales’ performance for the year by reference to key areas including revenue, expenses and taxation.
B1. REVENUE
20212020
$000's$000's
By nature:
Revenue from the sale of goods
428,738 402,194
Revenue from the rendering of services
69,082 64,357
Fees and commission
1359
Net foreign exchange loss
12,268(730)
Rental revenue
4,4504,829
514,551 470,709
By market:
New Zealand
96,972 81,549
Asia
140,261 128,582
Europe
45,668 75,041
North America
224,301 184,894
Other
7,349643
514,551 470,709
By segment and type:
Horticulture - sale of agricultural produce226,606229,033
Horticulture - agricultural produce related services12,37512,133
Horticulture - other4,4414,818
Food ingredients - sale of pet food ingredients213,416171,144
Food ingredients - other5,4362,550
Logistics services51,71249,835
Other5651,196
514,551 470,709
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts
collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service
to a customer.
14
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
B1. REVENUE (CONTINUED)
Sale of agricultural produce
The Group sells apples to more than 160 customers in 40 countries. Sales-related quality claim provisions are
recorded in accordance with NZ IAS 37Provisions, Contingent Liabilities and Contingent Assets. Revenue is
recognised when control of the goods has transferred, being when the goods have been shipped to the customer
("outright sales") or when the goods have been sold by the customer ("consignment sales"). In addition, the apple
season finishes before the end of the calendar year, with performance obligations under both sales types satisfied
for all sales made during that season.
Outright sales
Following shipment, revenue is recognised when the customer obtains control as it has full discretion over the
manner of distribution and price to sell the goods, has the primary responsibility when onselling the goods and
bears the risks of loss in relation to the goods. A receivable is recognised by the Group when it loses control,
which is when the goods are delivered on the ship at the port of shipment as this represents the point in time at
which the right to consideration becomes unconditional, as only the passage of time is required before the
payment is due. Terms of payment are up to 45 days on arrival.
Consignment sales
Revenue is recognised by the Group when it loses control, which is when the goods are confirmed to be on-sold
to the ultimate customer as this represents the point in time at which the right to consideration becomes
unconditional, as only the passage of time is required before the payment is due. Terms of payment are
immediate upon on-sale.
Sale of petfood ingredients
The Group sells petfood ingredients to a number of international and domestic customers. Revenue is recognised
when control of the goods has transferred, being when the goods have been delivered to the customer ("delivered
to destination sales") or when shipped to the customer ("outright sales"). Terms of payment are up to 120 days.
Delivered to destination sales
Following delivery, revenue is recognised when the customer obtains control as it has full discretion over the
manner of distribution and price to sell the goods, has the primary responsibility when onselling the goods and
bears the risks of loss in relation to the goods. A receivable is recognised by the Group when it loses control, which is
when the goods are delivered to the destination named by the customer as this represents the point in time at
which the right to consideration becomes unconditional, as only the passage of time is required before the
payment is due.
Outright sales
Same as above under "Sale of agricultural produce - outright sales".
Agricultural produce related services
The Group provides a number of agricultural produce related services to external apple growers, including
packaging, cartage, export documentation and export services. Each of those services is considered to be a distinct
service as it is both regularly supplied by the Group to customers on a stand-alone basis and is available for
customers from other providers in the market.
A receivable is recognised by the Group when the service performance has been completed, and the performance
obligation is satisfied as this represents the point in time at which the right to consideration becomes unconditional,
as only the passage of time is required before the payment is due. Terms of payment are up to 45 days.
Logistics services
The Group provides marine and air logistics services to domestic customers. Revenue is recognised by the Group
at a point in time, which is when the shipment is organised and the goods are on the ship or the aeroplane. The
performance obligation is satisfied at the point in time at which the right to consideration becomes
unconditional, as only the passage of time is required before the payment is due. Terms of payment are up to 60 days.
15
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
B2. COST OF SALES, ADMINISTRATION AND OPERATING EXPENSES
20212020
$000's$000's
Auditor's remuneration:
Deloitte Limited (New Zealand):
Audit of the financial statements:
Audit of the annual financial statements
232175
Review of interim financial statements
4848
Other assurance services:
Audit of solvency certificate for Selacs Insurance Limited
76
Sheehan & Company CPA, PC (United States):
Group reporting audit
8892
Review of subsidiary financial statements
2831
Bad debts incurred
14251
Change in fair value adjustment to unharvested agricultural produce
932802
Change in inventories
(3,743)252
Direct expenses
71,145 58,852
Directors' fees
596596
Donations
245
Electricity
2,8992,778
Employee benefits expense:
Post employment benefits - defined contribution plans
1,3391,254
Post employment benefits - defined benefit plans
438508
Salaries, wages and related benefits
83,363 79,809
Other employee benefits
726698
Grower payments
47,803 49,017
Insurance
3,9463,609
Management fees
4848
Materials and consumables
136,854 112,758
Ocean and air freight
76,414 72,056
Operating lease expenses
2,3192,960
Packaging
16,487 19,225
Provision for write-down of inventories
405377
Repairs and maintenance
5,5144,935
447,904 411,182
Disclosed as:
Cost of sales400,663366,800
Administration and operating expenses47,24144,382
447,904 411,182
Employee benefits
An accrual is made for benefits due to employees in respect of wages and salaries, annual leave and long service
leave when it is probable that settlement will be required and they are capable of being measured reliably.
Accruals are measured at their nominal values using the remuneration rate expected to apply at the time of
settlement.
Contributions to defined contribution plans are recognised as an expense when employees have rendered service
entitling them to the contributions.
The costs relating to shares issued in accordance with the Senior Executive Share Scheme are explained in note D2.
16
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
B3. OTHER INCOME AND LOSSES
20212020
$000's$000's
Dividends
19
Gain (loss) on disposal of property, plant and equipment
1,132(62)
Government grants
879-
Insurance claims expense paid (Note G4)
(4,010)(1,636)
Reinsurance income (Note G4)
4,0101,636
Remeasurement of gross liability to non-controlling interest
(1,852)(647)
160(700)
Disclosed as:
Other income6,0221,645
Other losses(5,862)(2,345)
160(700)
B4. FINANCE COST
Interest on loans
1,2811,867
Other interest
44312
Bank facility fees
6236
1,7861,915
Finance costs consist of interest and other costs incurred in connection with the borrowing of funds. Interest
expense is accrued on a time basis using the effective interest method.
B5. TAXATION
Income tax recognised in profit or loss
Income tax expense comprises:
Current tax expense
10,3538,827
Adjustments recognised in the current year in relation to the current tax of prior years
369-
Deferred tax expense relating to the origination and reversal of temporary differences
855(159)
Total income tax expense recognised in profit or loss
11,5778,668
The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense in the
financial statements as follows:
Profit before tax48,52735,249
Income tax expense calculated at applicable corporate tax rates13,0659,590
Non-assessable income(3,092)(1,698)
Non-deductible expenses1,235472
Under provision of income tax in previous year - current tax369-
Under provision of income tax in previous year - deferred tax-304
11,5778,668
17
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
B5. TAXATION (CONTINUED)
The tax rates used in the above reconciliation are the corporate tax rate of 28% payable by New Zealand companies
under New Zealand tax law, 30% payable by Australian companies under Australian tax law and 25.5% payable by
US entities under US tax law (being federal tax 21% and weighted average state tax 4.5%).
Opening
balance
Charged to
profit or
loss
Charged to
other
comprehen-
sive income
Foreign
exchange
movements
Closing
Balance
$000's$000's$000's$000's$000's
Deferred tax liability
Taxable and deductible temporary differences
arise from the following:
31 December 2021
Deferred tax liabilities (assets):
Trade and other receivables(164)175--11
Unharvested agricultural produce6,719158--6,877
Property, plant and equipment and computer software12,5148872,5018315,985
Trade and other payables(748)(102)--(850)
Lease liability and right-of-use asset (NZ IFRS 16)(676)(263)--(939)
Other financial assets and liabilities, joint ventures and pension plan7,951-(6,088)(3)1,860
Net deferred tax liability25,596855(3,587)8022,944
31 December 2020
Deferred tax liabilities (assets):
Trade and other receivables(23)(141)--(164)
Unharvested agricultural produce6,048671--6,719
Property, plant and equipment and computer software12,820(745)439-12,514
Trade and other payables(703)(45)--(748)
Lease liability and right-of-use asset (NZ IFRS 16)(381)(295)--(676)
Other financial assets and liabilities, joint ventures and pension plan1,6812985,972-7,951
Net deferred tax liability19,442(257)6,411-25,596
Current tax is the taxation expected to be paid to taxation authorities in respect of the current year. Deferred taxation
is recognised in respect of temporary differences between the tax bases of assets and liabilities and their carrying
amounts in the Financial Statements. Current and deferred tax is calculated on the basis of the laws enacted or
substantively enacted at balance date.
Income tax
Current and deferred tax are recognised in profit or loss, except when the tax relates to items charged or credited
to other comprehensive income, in which case the tax is also recognised in other comprehensive income.
18
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
B6. FOREIGN CURRENCY TRANSACTIONS
In preparing the financial statements of the individual entities, the transactions in currencies other than New
Zealand dollars are recorded at the rates of exchange prevailing at the dates of the transaction. At the end of each
reporting period financial assets and liabilities denominated in foreign currencies are retranslated into New
Zealand dollars at the rates prevailing at the end of the reporting period.
Exchange differences from these transactions are recognised in profit or loss in the period in which they arise.
Income and expenses for each subsidiary whose functional currency is not New Zealand dollars are translated at
exchange rates that approximate the rates at the actual dates of the transactions. Assets and liabilities of each
subsidiary are translated at exchange rates at balance date.
All resulting exchange differences are recognised in the foreign exchange translation reserve, which is a separate
component of equity.
The effective portion of exchange differences on foreign currency borrowings designated as hedges of net
investments in foreign operations is also recognised in the foreign exchange translation reserve.
19
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
C. KEY ASSETS
IN THIS SECTION
This section shows the key assets Scales uses to generate operating revenues. There is information about:
• property, plant and equipment;
• unharvested agricultural produce;
• investments accounted for using the equity method;
• goodwill; and
• inventories.
C1. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings at
fair value
Apple trees
at fair value
Plant and
equipment
at cost
Office
equipment
and motor
vehicles at
cost
Capital work
in progress
at costTotal
$000's$000's$000's$000's$000's$000's
Gross carrying amount
Balance at 1 January 2020
96,779 33,914 61,152 12,1027,513
211,460
Additions
6,7121,9703,7711,569 10,215
24,237
Reclassified as held for sale
(3,148)----
(3,148)
Disposals
--(671)(660)-
(1,331)
Revaluation
7,693 (3,080)---
4,613
Effect of foreign currency translation
(137)-(270)(2)10
(399)
Balance at 31 December 2020107,89932,80463,98213,00917,738235,432
Additions
14,8252,5687,428684 (9,683)
15,822
Disposals
--(304)(1,293)-
(1,597)
Revaluation
20,61822---
20,640
Effect of foreign currency translation
109-202110
322
Balance at 31 December 2021143,45135,39471,30812,4018,065270,619
Accumulated depreciation, and impairment
Balance at 1 January 2020
--36,5269,193
-45,719
Depreciation expense
1,4403,0494,5851,220
-10,294
Reclassified as held for sale
(598)---
-(598)
Disposals
--(347)(626)
-(973)
Revaluation
(1,440)(3,049)--
-(4,489)
Impairment on revaluation
2,4711,840--
-4,311
Effect of foreign currency translation
--(143)-
-(143)
Balance at 31 December 20201,8731,84040,6219,787-54,121
Depreciation expense
1,7453,0264,5121,160
-10,443
Disposals
--(259)(1,247)
-(1,506)
Revaluation
(1,744)(3,026)--
-(4,770)
Reversal of impairment on revaluation
(610)(1,040)--
-(1,650)
Effect of foreign currency translation
--112-
-112
Balance at 31 December 20211,26480044,9869,700-56,750
Net book value
As at 31 December 2020106,02630,96423,3613,22217,738181,311
As at 31 December 2021142,18734,59426,3222,7018,065213,869
20
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
C1. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Accounting policy
Land, buildings and apple trees are included in the statement of financial position at their fair value at the date of
revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
Valuations are performed with sufficient regularity such that the carrying amounts do not differ materially from
those that would be determined using fair values at the end of the reporting period.
Any valuation increase arising on the revaluation of such land, buildings and apple trees is recognised in other
comprehensive income and accumulated as a separate component of equity in the revaluation reserve, except to
the extent that it reverses a valuation decrease for the same asset previously recognised in profit or loss, in which
case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in
carrying amount arising on the revaluation of such land, buildings and apple trees is charged to profit or loss to
the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of
that asset.
Depreciation on revalued buildings and apple trees is charged to profit or loss. On the subsequent sale or
retirement of revalued property or apple trees, the attributable revaluation surplus remaining in the revaluation
reserve is transferred directly to retained earnings. No transfer is made from the revaluation reserve to retained
earnings except when an asset is derecognised.
Office equipment, motor vehicles, plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the
item.
Depreciation is provided on property, plant and equipment, including buildings and apple trees but excluding land
and capital work in progress. Depreciation is charged so as to write off the cost or valuation of assets, other than
land and capital work in progress, over their estimated useful lives, using the straight-line method. The estimated
useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes
in estimate accounted for on a prospective basis. The following estimated useful lives are used in the calculation of
depreciation:
Apple trees30 years
Buildings10 to 50 years
Office Equipment and Motor Vehicles2 to 20 years
Plant and Equipment2 to 25 years
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined
as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or
loss.
Land and buildings carried at fair value
Land and buildings shown at valuation were valued at fair value as at 31 December 2021 by independent registered
valuers Added Valuation Limited and Logan Stone Limited. The valuations were arrived at by reference to market
evidence of transaction prices for similar properties.
21
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
C1. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Land and buildings carried at fair value (continued)
The fair value of land and buildings is calculated on the basis of market value. Market value is determined by applying
income capitalisation and comparative sales calculations which are benchmarked against depreciated replacement
cost calculations. The valuations include adjustments to observable data for similar properties to take into
account property-specific attributes.
The significant unobservable inputs, based on regional averages, for the land and buildings (mainly coolstores and
packhouses) are potential market comparative rentals $5 - $250 per square metre (2020: $5 - $283) and the capitalisation
rates of 5.3% - 10% (2020: 7.6% - 11%).
The higher the rental rates the higher the fair value. The higher the capitalisation rates the lower the fair value.
Significant changes in either of these inputs would result in significant changes to the fair value measurement.
Orchard land is valued within the range of $31,600 to $176,800 per hectare (2020: $28,300 to $135,000).
The Group’s land and buildings are classified as Level 3 in the fair value hierarchy.
The carrying amount of land and buildings had it been recognised under the cost model is $64,114,000
(31 December 2020: $50,794,000).
Apple trees carried at fair value
The Group’s apple orchards, being the apple trees other than the existing crop on the trees, were valued at fair value by
Boyd Gross B.Agr (Rural Val), Dip Bus Std, FNZIV, FPINZ of Logan Stone Limited as at 31 December 2021.
The market valuations completed by Boyd Gross were based on a discounted cash flows analysis of forecast
income streams and costs. They were benchmarked against a comparison of sales of other orchards adjusted to reflect
the location, plantings, age and varieties of trees and productive capabilities of the orchards. The fair value of
orchard land and buildings are deducted from the overall orchard valuation to give rise to the apple trees valuation.
The significant unobservable inputs, based on district averages, for the apple trees are:
20212020
Production levels (gross tray carton equivalent (tce)) per hectare3,262 - 7,5992,277 - 7,105
Orchard gate returns per tce$25.00 - $40.00$24.75 - $37.62
Orchard costs per tce$13.63 to $31.14$12.95 to $41.83
Discount rate15.5% - 16.5%14.84% - 17.84%
The higher the production levels and orchard gate return the higher the fair value. The higher the orchard costs
and discount rate the lower the fair value. Significant changes in any of these inputs would result in significant
changes to the fair value measurement. The Group’s apple trees are classified as level 3 in the fair value hierarchy.
The carrying amount of apple trees had it been recognised under the cost model is $15,421,000
(31 December 2020: $16,673,024).
22
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
C1. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The apple trees, on owned and leased orchards, have the following planting profile:
Total hectares planted
20212020
Premium varieties:
NZ Queen
207210
Pink Lady
118121
Red sports (Fuji and Royal Gala)
264265
Other premium
173169
Traditional varieties:
Braeburn
89101
Royal Gala
160177
Other traditional
150158
1,1611,201
Risk management strategy:
The Group is exposed to financial risks arising from changes in climatic conditions, market prices and the value of
the New Zealand dollar. The Group mitigates these risks by geographical spread of orchards, installing hail and frost
protection on orchards which have shown to be more susceptible to these risks, obtaining hail insurance cover,
utilising foreign currency derivative instruments and building close working relationships with key customers.
C2. UNHARVESTED AGRICULTURAL PRODUCE
20212020
$000's$000's
Balance at beginning of the year
24,022 21,619
Decrease due to harvest
(24,022)(21,619)
Development expenditure
25,931 24,460
Fair value adjustment
(1,370)(438)
Balance at end of the year
24,561 24,022
The assessment of the value of unharvested agricultural produce was undertaken by management, using a
discounted cash flow model, and is calculated as the fair value less estimated harvest and post-harvest costs of
the unharvested crop on the trees at the reporting date. The risk adjusting discount rate represents an allowance
for adverse events that may affect crop, harvest and/or market conditions. This calculation is also benchmarked
against orchard costs incurred during the current growing cycle.
The Group’s unharvested agricultural produce is classified as Level 3 in the fair value hierarchy.
The significant unobservable inputs included in the model are the:
20212020
Production levels (tonnes per hectare per annum)27 - 13137 - 159
Orchard gate returns per tce$24 to $57$22 to $48
Risk adjusting discount rates46% to 64%43% to 61%
The higher the yield per hectare and the higher the orchard gate returns per tce, the higher the fair value. The
higher the risk adjusting discount rate, the lower the fair value.
23
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
C3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Details of each of the Group’s material joint ventures at the end of the reporting period are as follows:
Joint venturesPrincipal activityCountry of
Holding
Balance date
incorporation
20212020
Profruit (2006) LimitedTrading companyNew Zealand50%50% 31 December
Meateor Pet Foods Limited Partnership Trading companyNew Zealand50%50% 31 December
Summarised financial information in respect of the Group’s joint ventures is set out below. The aggregate summarised
financial information below represents amounts in joint ventures financial statements prepared in accordance
with NZ IFRS Standards.
20212020
$000's$000's
Current assets
31,656 35,738
Non-current assets
35,461 36,430
Current liabilities
(9,559)(13,616)
Non-current liabilities
(5,457)(6,245)
Net assets
52,101 52,307
Group's share in the net assets of equity accounted entities (50%)
26,051 26,154
Carrying amount of investment in equity accounted entities
26,051 26,154
The above amounts of assets and liabilities include the following:
Cash and cash equivalents
5451,627
Current financial liabilities (excluding trade and other payables and provisions)
(1,425)(2,441)
Non-current financial liabilities (excluding trade and other payables and provisions)
(2,466)(2,790)
Revenue
71,223 61,541
Profit for the year after tax
6,3254,446
Other comprehensive income attributable to the owners of the company
2,0301,416
Total comprehensive income
8,3555,862
The above profit for the year includes the following:
Depreciation and amortisation
1,7931,576
Interest expense
400295
Income tax expense
1,3521,559
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint
venture recognised in the consolidated financial statements:
Share of profit before taxation
3,8293,003
Share of income tax
(667)(780)
Share of other comprehensive income (net of tax)
(1,015)708
Share of net profit for the year and total comprehensive income2,1472,931
Carrying value at beginning of the year
26,154 24,973
Interest retained (foregone) in Meateor Pet Foods Limited Partnership
-(250)
Dividends and distributions paid by equity accounted entities
(2,250)(1,500)
Investment in equity accounted entities26,05126,154
24
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
C3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
The Group share of the guarantee of the Profruit (2006) Limited bank loan facilities is $1,464,676 (2020: $1,096,301).
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights
to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control.
The results and assets and liabilities of joint ventures are incorporated in these consolidated financial statements
using the equity method of accounting. Under the equity method, an investment in a joint venture is initially
recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the
Group’s share of the profit or loss and other comprehensive income of the joint venture. Dividends or
distributions received from a joint venture reduce the carrying amount of the investment in that joint venture in
the Group financial statements. When the Group’s share of losses of a joint venture exceeds the Group’s interest
in that joint venture, the Group discontinues recognising its share of further losses. Additional losses are
recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on
behalf of the joint venture.
An investment in a joint venture is accounted for using the equity method from the date on which the investee
becomes a joint venture until the date it ceases to be a joint venture. On acquisition of the investment in a joint
venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable
assets and liabilities of the investee is recognised as goodwill, which is included within the carrying value of the
investment. The requirements of NZ IAS 36Impairment of Assetsare applied to determine whether it is
necessary to recognise any impairment loss.
The Directors have assessed the investment in Meateor Pet Foods Limited Partnership ("LP") for impairment,
considering the LP budget for 2022 adopted by Group Board of Directors, as well as the growth assumptions for
the following years, including the terminal growth rate, when considering the carrying value of the investment in
the LP.
The Directors determined the recoverable amount of the investment in the LP based on the value in use of the business
which uses future cash flows covering a minimum 5 year period based on the LP budget for 2022 adopted by Group
Board of Directors and growth assumptions for following years, as well as the terminal growth rate.
The directors concluded that there is no impairment of the investment in the LP as the recoverable amount exceeded the
$19.4 million carrying value of the investment in the LP.
Key assumptions:
Pre-tax discount rate11.45%
Sales and cost of sales growth rate in years 1-54.50%
Overhead cost growth rate in years 1-53.10%
Terminal growth rate beyond year 52.20%
The pre-tax discount rate was determined based on the weighted average cost of capital which utilises past
experience and external sources.
25
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
C4. GOODWILL
20212020
$000's$000's
Gross carrying amount
Balance at beginning of the year41,90543,784
Effect of foreign currency exchange differences1,487(1,879)
Balance at end of the year
43,392 41,905
Goodwill arising on the acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any. Goodwill is tested for impairment annually, or more
frequently if there are indications that goodwill might be impaired. For the purpose of impairment testing,
goodwill has been allocated to the cash-generating units (CGUs) listed below which represent the lowest level at
which the Directors monitor goodwill.
20212020
$000's$000's
Horticulture - Fern Ridge5,7025,702
Horticulture - Mr Apple8,5318,531
Food Ingredients - Shelby27,20425,717
Logistics1,9551,955
43,392 41,905
As at 31 December 2021, the Directors have determined, based on discounted cash flow and value in use
calculations, that there is no impairment of goodwill associated with any of the above CGUs.
The discounted cash flow and value in use calculation uses future cash flows covering a five year period based on
a Board approved budget. The model was based on the following key assumptions:
20212020
Pre-tax discount rates10-13%10-13%
Annual growth rates3%2%
The Directors consider that any reasonably possible changes in the key assumptions would not cause the carrying
amount of any of the CGUs to exceed their recoverable amount.
C5. INVENTORIES
20212020
$000's$000's
Finished goods
25,041 20,871
Other
4,6004,934
29,641 25,805
Inventories are stated at the lower of cost and net realisable value. Cost means the actual cost of the inventory
and in determining cost the first in first out basis of stock movement is followed, with due allowance having been
made for obsolescence. Net realisable value represents the estimated selling price for inventories less all
estimated costs of completion and costs necessary to make the sale.
26
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
C6. IMPAIRMENT OF ASSETS
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the
Group estimates the recoverable amount of the CGU to which the asset belongs.
A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to
the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss
for goodwill is recognised directly in profit or loss and is not reversed in subsequent periods.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future pre-tax cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying
amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately
in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
27
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
D. CAPITAL FUNDING
IN THIS SECTION
This section explains how Scales manages its capital structure and how dividends are returned to shareholders.
In this section there is information about:
• equity;
• dividends paid; and
• earnings per share.
Capital management
The Group’s capital includes share capital, reserves and retained earnings. The Group’s policy is to maintain a
strong capital base so as to maintain investor, creditor and customer confidence and to sustain the future
development of the business. The impact of the level of capital on shareholders’ return is also recognised and the
Group recognises the need to maintain a balance between the higher returns that might be possible with greater
gearing and the advantages and security afforded by a sound capital position.
D1. SHARE CAPITAL
Issued and paid up capital consists of 142,394,837 fully paid ordinary shares (2020: 142,090,521) less treasury stock of
1,230,166 shares (2020: 1,580,229 shares) (refer to note D2). All shares rank equally in all respects.
Shares issued or purchased on market under the Senior Executive Share Scheme ("Share Scheme") (note D2) are
treated as treasury stock until vesting to the employee.
Number of shares
Fully paid ordinary shares:
20212020
Opening balance142,090,521141,579,238
Share Scheme - shares issued304,316511,283
Closing balance142,394,837142,090,521
Treasury stock:
Opening balance1,580,2291,383,659
Share Scheme - shares issued304,316511,283
Share Scheme - shares forfeited and sold(61,074)-
Share Scheme - shares fully vested(593,305)(314,713)
Closing balance1,230,1661,580,229
The available subscribed capital of $47,456,844 (2020: $46,072,206) represents the amount of the shareholders’ equity
that is available to be returned to shareholders on a tax-free basis.
In accordance with the Companies Act 1993 the Company does not have a limited amount of authorised capital
and issued shares do not have a par value.
20212020
Movement in share capital related to share-based payments:$000's$000's
Equity-settled employee benefit share scheme vested
Interest-free loan became full recourse1,324397
Accumulated share option value reclassified from reserve into share capital1,251536
Accumulated dividends reclassified from retained earnings into share capital295165
2,8701,098
28
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
D2. RESERVES
Revaluation
Cash flow
hedge
Share of
joint
ventures
Equity-
settled
employee
benefits
Foreign
exchange
translation
Pension plan
reserve
Total
reserves
$000's$000's$000's$000's$000's$000's$000's
Balance at 1 January 2020
55,8694,9271511,640(76)-
62,511
Other comprehensive income (loss)8,66315,020510-(784)
(60)
23,349
Transfer to retained earnings
1,093----(341)
752
Recognition of share-based payments
---698--
698
Shares fully vested
---(536)--
(536)
Balance at 31 December 202065,62519,9476611,802(860)(401)86,774
Other comprehensive income (loss)22,909 (14,926)(731)-692
191
8,135
Transfer to retained earnings
(2,224)-----
(2,224)
Recognition of share-based payments
---726--
726
Shares fully vested
---(1,251)--
(1,251)
Balance at 31 December 202186,3105,021(70)1,277(168)(210)92,160
Revaluation reserve
The revaluation reserve arises on the revaluation of land, buildings and apple trees, net of the related deferred tax.
Cash flow hedge reserve
The cash flow hedge reserve represents the unrealised gains and losses on interest rate and foreign currency
contracts taken out to manage the Group interest rate and foreign currency risks, net of the related deferred tax.
Equity-settled employee benefits reserve
The Share Scheme involves the Company making available interest-free loans to selected senior executives to
acquire shares in the Company. The senior executives will not gain any benefit with respect to the shares purchased
under the Share Scheme unless they remain in employment with the Group for a period of three years from the
date of acquisition of those shares.
The shares are held by a custodian during the restricted period and are then transferred to the senior executive.
All net dividends or distributions received in respect of the shares must be applied to repayment of the
interest-free loan.
Grant dateVesting dateExercise price, $
Number of shares
Opening
balanceGrantedForfeited
Vested and
exercised
Closing
balance
20 April 2018 - FY17A20 April 20211.70309,698--(309,698)-
20 April 2018 - FY17B 20 April 20212.5136,007--(36,007)-
20 April 2018 - FY17C20 April 20213.6240,577--(40,577)-
28 June 2018 - FY17R28 June 20214.13207,023--(207,023)-
30 April 2019 - FY1830 April 20222.71261,356-(12,177)-249,179
28 June 2019 - FY18R28 June 20224.06214,285-(13,547)-200,738
30 April 2020 - FY1930 April 20233.20301,657-(10,313)-291,344
28 June 2020 - FY19R28 June 20234.19209,626-(15,115)-194,511
30 April 2021 - FY2030 April 20243.20-304,316(9,922)294,394
Total1,580,229 304,316 (61,074)(593,305) 1,230,166
29
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
D2. RESERVES (CONTINUED)
The weighted average share price for shares that vested during 2021 was $4.76.
The shares issued vest over three years. The estimated value of the share options is determined using the
Black-Scholes pricing calculator and is amortised over the restricted period. This cost is expensed with the
corresponding credit included in the equity-settled employee benefits reserve. Expected share price volatility was
based on historical volatility of the Company's ordinary shares.
20212020
FY20FY19FY19R
The inputs into the "option pricing calculator" are:
Issue date share price, $4.554.904.96
Expected share price volatility, %232121
Option life, years333
Risk-free interest rate, %0.410.510.14
Exercise price, $3.203.204.19
Fair value, at the grant date, $1.541.831.12
Foreign exchange translation reserve
Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as
part of the net investment, are accounted for in two ways. Gains or losses relating to the effective portion of the
hedge are recognised in other comprehensive income. Any gains or losses relating to the ineffective portion of the
hedge are recognised in profit or loss.
Gains or losses arising on translation of foreign subsidiaries results (Note B6) are also recognised in this reserve.
D3. DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
20212020
$000's$000's
Final dividend paid - 9.50 (2020: 9.50) cents per share13,41313,357
Interim dividend declared - 9.50 (2020: 9.50) cents per share13,41913,359
26,83226,716
All above dividends were fully imputed.
The 2021 interim dividend was declared on 8 December 2021 and paid on 14 January 2022.
D4. IMPUTATION CREDIT ACCOUNT
20212020
$000's$000's
Balance at end of the year20,89520,773
The imputation credit account balance represents the net amount available at the reporting date that can be
attached to future dividends declared.
The Scales Corporation Limited consolidated tax group for income tax includes Scales Corporation Limited and all
New Zealand registered subsidiary companies other than Scales Employees Limited.
30
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
D5. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit attributable to shareholders of the company by the
weighted average number of ordinary shares on issue during the year, excluding shares held as treasury stock.
Diluted earnings per share assumes conversion of all dilutive potential ordinary shares in determining the
denominator.
20212020
Profit attributable to equity holders of the Company ($000's):26,92521,025
Weighted average number of shares:
Ordinary shares140,900,047 140,402,514
Effect of dilutive ordinary shares (non-vested Senior Executive Share Scheme)351,554467,735
Weighted average number of Ordinary Shares for diluted earnings per share141,251,601 140,870,249
Earnings per share (cents):
Basic - continuing19.115.0
Diluted - continuing19.114.9
31
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
E. FINANCIAL ASSETS AND LIABILITIES
IN THIS SECTION
This section explains the financial assets and liabilities of Scales, the related risks and how Scales manages these
risks. In this section of the notes there is information on:
• the accounting policies, judgements and estimates relating to financial assets and liabilities; and
• the financial instruments used to manage risk.
ACCOUNTING POLICIES
Financial assets
Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or
loss’ (FVTPL) and ‘measured at amortised cost’.
The classification depends on the business model for managing the financial asset and the cash flow
characteristics of the financial asset and is determined at the time of initial recognition or when a change in the
business model occurs.
Financial assets at fair value through profit or loss
Financial assets are classified as financial assets at fair value through profit or loss if they are not measured at cost or
amortised cost. Gains and losses on a financial asset designated in this category and not part of a hedging
relationship are recognised in profit or loss.
Financial assets measured at amortised cost
The Group’s financial assets held in order to collect contractual cash flows that are solely payments of principal
and interest on the principal outstanding are measured at amortised cost. Cash and cash equivalents, trade
receivables and employee loans are classified in this category.
Impairment of financial assets
The Group recognises aloss allowance for expected credit losses (ECL) on investments in debt instruments that
are measured at amortised cost, trade and other receivables. Theamount of expected credit losses is updated at
each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.
The Group always recognises lifetime ECL for trade receivables. Theexpected credit losses on these financial assets
is estimated using aprovision matrix based on the Group’s historical credit loss experience, adjusted for factors
that are specific to the debtors, general economic conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including time value of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been asignificant increase in
credit risk since initial recognition. However,if the credit risk on the financial instrument has not increased
significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an
amount equal to twelve-monthECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected
life of afinancial instrument. Incontrast, twelve-month ECL represents the portion of lifetime ECL that is expected to
result from default events on afinancial instrument that are possible within twelve months after the reportingdate.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that
are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at the original effective interest rate.
32
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
E. FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
Financial liabilities measured at amortised cost
The Group’s financial liabilities include trade and other payables and borrowings. These financial liabilities are
initially recognised at fair value net of any directly attributable costs. Subsequent to initial recognition, they are
measured at amortised cost using the effective interest method.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value with reference to observable market data at the end of each reporting
period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated as
an effective hedging instrument, in which event the timing of the recognition in profit or loss depends on the
nature of the hedge relationship. The Group designates certain derivatives as cash flow hedges. A derivative is
presented as a non-current asset or a non-current liability where the cash flow will occur after twelve months and it is
not expected to be realised or settled within twelve months. Other derivatives are presented as current assets or
current liabilities.
Hedge accounting
At the inception of a hedge relationship, the Group documents the relationship between the hedging instrument
and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge
transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether
the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in cash flows
of the hedged item, attributable to the hedged risk.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognised in other comprehensive income and accumulated as a separate component of equity in the hedging
reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is
included in ‘other income’ or ‘other losses’.
Amounts recognised in the hedging reserve are reclassified from equity to profit or loss in the periods when the
hedged item is recognised in profit or loss, in the same line as the recognised hedged item. Hedge accounting is
discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in the
hedging reserve at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss
that was deferred in the hedging reserve is recognised immediately in profit or loss.
Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss
on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive
income and accumulated under the heading of foreign exchange translation reserve. The gain or loss relating to
the ineffective portion is recognised immediately in profit or loss. Gains and losses on the hedging instrument
relating to the effective portion of the hedge accumulated in the foreign exchange translation reserve are
reclassified to profit or loss on the disposal of the foreign operation.
33
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
E1. TRADE AND OTHER RECEIVABLES
20212020
$000's$000's
Trade receivables
23,945 14,151
Interest receivable
372585
Other receivables
1,2241,091
Owing by entity accounted for using the equity method
-157
Goods and services tax
3,1173,468
28,65819,452
Credit risk management
The Group activities expose it to credit risk which refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. Financial instruments which potentially subject the
Group to credit risk principally consist of cash and cash equivalents, trade and other receivables and advances.
The Group performs credit evaluations on trade customers, obtains trade credit insurance as appropriate but
generally does not require collateral. The Group continuously monitors the credit quality of its major receivables
and does not anticipate non-performance of those customers. Cash and cash equivalents are placed with high
credit quality financial institutions.
There is a significant concentration of credit risk with 5 customers who represent 36.87% (2020: 5 customers
who represented 38.07%) of trade and other receivables.
The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum
exposure to credit risk.
Included in trade receivables are debtors which are past due at balance date, as payment was not received within
one month, and for which provision for expected credit losses was not material as there has not been a significant
change in credit quality and the amounts are still considered recoverable. No collateral is held over these balances
although trade credit insurance cover is obtained in respect of some specific receivables. Interest is not charged on
overdue debtors. The ageing of these past due trade receivables is:
1 month5,7402,316
2 months1,508616
More than 2 months2,2602,169
9,5085,101
There was no material ECL based on Group assessment as at 31 December 2021 (2020: nil).
E2. OTHER FINANCIAL ASSETS
Current:
At fair value:
Foreign currency derivative instruments
5,923 12,688
5,92312,688
Non-current:
At fair value:
Foreign currency derivative instruments
10,185 17,572
Interest rate swap contracts and forward rate agreements
198-
Shares in unlisted companies
184184
At amortised cost:
Employee loans
507387
11,07418,143
34
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
E3. TRADE AND OTHER PAYABLES
20212020
$000's$000's
Trade payables11,55113,707
Accruals6,8586,494
Employee entitlements5,0574,916
23,46625,117
E4. BORROWINGS
Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition,
borrowings are measured at amortised cost with any difference between the initial recognised amount and the
redemption value being recognised in profit or loss over the period of the borrowing using the effective interest
method. The fair value of current and non-current borrowings is approximately equal to their carrying amount.
The Group replaced existing Multi-Option Facility Agreements with Coöperatieve Rabobank U.A., New Zealand
Branch ("Rabobank") and Westpac New Zealand Limited ("Westpac") with new agreements on 11 November 2021.
The existing facility agreement with ANZ bank New Zealand Limited ("ANZ") was also replaced with a new agreement
on 11 November 2021. The USD denominated loans are designated as a hedge of net investment in foreign operations.
Facility limit
Undrawn facility
2021202020212020
Facility
$000's$000's$000's$000's
Rabobank term facility, NZD1,00010,000--
Rabobank term facility, USD11,63511,635--
Rabobank seasonal facility, NZD1,0001,0001,0001,000
Westpac term facility, NZD1,00010,000--
Westpac term facility, USD11,63511,635--
Westpac seasonal facility, NZD1,0001,000--
ANZ overdraft, NZD1,0001,0001,0001,000
The floating interest rate is 1.22% to 2.17% (2020: 1.25% to 2.44%) and the term borrowing facility expiry date is
1 July 2024. Seasonal facility presented as current borrowings is due for repayment within one year. The bank
facilities are secured by a first ranking security interest granted by each of the Charging Group Companies
over all its present and after-acquired property (including proceeds) and a first ranking security interest
over any of the Charging Group Companies' present and future assets and undertakings which are not personal
property. The bank facilities are also secured by first and exclusive registered mortgages over property comprising
coolstores, orchards and industrial and commercial property owned by members of the Charging Group.
Charging Group Companies as at 31 December 2021 are Scales Corporation Limited, Scales Holdings Limited,
Mr Apple New Zealand Limited, New Zealand Apple Limited, Geo.H.Scales Limited, Meateor Foods Limited, Scales
Logistics Limited and Meateor Group Limited.
Seasonal facility
Other current
borrowings
Term borrowings
202120202021202020212020
$000's$000's$000's$000's$000's$000's
Seasonal (current) and term (non-current) borrowings:
Opening balance--860-52,19954,551
Drawdowns-3,000-955--
Repayments-(3,000)--(18,000)-
Loans forgiven--(860)---
Effect of foreign currency translation---(95)1,861(2,352)
---86036,06052,199
35
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
E5. OTHER FINANCIAL LIABILITIES
20212020
$000's$000's
Current financial liabilities at fair value:
Foreign currency derivative instruments
1,82235
Interest rate swap contracts and forward rate agreements
173618
Put option
5,4153,647
7,4104,300
Non-current financial liabilities at fair value:
Foreign currency derivative instruments
6,387366
Interest rate swap contracts and forward rate agreements
-554
Put option
1,9511,602
8,3382,522
In 2016 the Group increased its shareholding in Fern Ridge Produce Limited ("Fern Ridge") to 75%. As
part of the transaction, 2.12% of the shares were then sold to an employee of Fern Ridge, and Scales entered into
agreements with the remaining shareholders of Fern Ridge whereby those shareholders have an option to put
their shares to Scales at a value based on a multiple of Fern Ridge profits, but with a minimum value equivalent
to that paid to the selling shareholders.
In 2018 the Group acquired 60% of Shelby JV LLC and its subsidiaries Shelby Foods LLC, Shelby
Exports Inc, Shelby Cold Storage LLC, Shelby Trucking LLC and Shelby Properties LLC (collectively, "Shelby Group").
As part of the transaction, the Company entered into an agreement with the vendor whereby the vendor has an
option to put a further 5% of total units in Shelby Group to Scales at a value based on a multiple of Shelby Group
EBITDA. The obligation to acquire the ownership interest under the put option is included in other financial liabilities.
E6. INTEREST RATE RISK
Interest rate risk management
The Group is exposed to interest rate risk as it borrows funds at floating interest rates. Management monitors the
level of interest rates on an ongoing basis and may use interest rate swaps and forward rate agreements to
manage interest rate risk.
Interest rate swap contracts and forward rate agreements
Under interest rate swap contracts and forward rate agreements, the Group agrees to exchange the difference
between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts,
some of which can commence in future reporting years, enable the Group to mitigate the risk of changing interest
rates on the cash flow exposures on the issued floating rate debt. The fair value of these contracts at the reporting
date is determined by discounting the future cash flows using the forward interest rate curves at reporting date
and the credit risk inherent in the contracts. The average contracted fixed interest rate is based on the notional
principal amount at balance date.
36
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
E6. INTEREST RATE RISK (CONTINUED)
The Group’s interest rate swap contracts and forward rate agreements are classified as Level 2 in the fair value
hierarchy.
Details of interest rate swap contracts and forward rate agreements for the Group are:
Fixed Interest Rate
Notional principal
amountFair value
202120202021202020212020
%%$000's$000's$000's$000's
Maturity Date
Interest rate swap contracts:
Within 1 year-4.62-10,000-(323)
2-5 years1.203.2516,10110,00025(849)
After 5 years------
16,10120,00025(1,172)
These interest rate swap contracts and forward rate agreements, exchanging floating rate interest amounts for
fixed rate interest amounts, are designated as cash flow hedges in order to reduce the Group’s cash flow exposure
resulting from floating interest rates on borrowings. The interest rate swap and forward rate agreement
payments, and the interest payments on the loans occur simultaneously, and the amount deferred in equity is
recognised in profit or loss over the period that the floating rate interest payments on debt impact profit or loss.
As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the
Group performs a qualitative assessment of effectiveness and it is expected that the value of the interest rate
swap contracts and the value of the corresponding hedged items will systematically change in opposite directions
in response to movements in the underlying interest rates. The main source of hedge ineffectiveness in these
hedge relationships (which is not material) is the effect of the counterparty and the Group's own credit risk on
the fair value of the interest rate swap contract, which is not reflected in the fair value of the hedged item
attributable to the change in interest rates. No other sources of ineffectiveness emerged from these hedging
relationships.
The sensitivity analysis below has been determined based on the exposure to interest rates for both derivatives
and non-derivative instruments at the reporting date. For floating rate liabilities, the analysis is prepared
assuming the amount of liability outstanding at reporting date was outstanding for the whole year. A 1%
increase or decrease is used when reporting interest rate risk internally to key management personnel and
represents management’s assessment of the reasonably possible change in interest rates. Impact on net profit
after tax assumes that none of floating interest rate borrowings were hedged.
20212020
+1%-1%+1%-1%
$000's$000's$000's$000's
Impact on net profit after tax(14)14192(192)
Impact on cash flow hedge reserve net of tax460(485)238(247)
37
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
E7. FOREIGN CURRENCY RISK
Foreign currency risk management
Foreign currency risk is the risk that the value of the Group’s assets and liabilities or revenues and expenses will
fluctuate due to changes in foreign exchange rates. The Group is exposed to currency risk as a result of normal
trading transactions denominated in foreign currencies. The currencies in which the Group primarily trades are the
Australian dollar, Euro, Canadian dollar, Great Britain pound and United States dollar, with the largest exposure
being to the United States dollar.
Currency risk is managed by the natural hedge of foreign currency receivables and payables and the use of foreign
currency derivative financial instruments. The fair value of foreign currency derivative financial instruments at the
reporting date is determined on a discounted cash flow basis whereby future cash flows are estimated based on
forward exchange rates and contract forward rates, discounted at a rate that reflects the credit risk of various
counterparties.
The Group’s forward foreign exchange contracts and foreign exchange options are classified as Level 2 in the fair
value hierarchy.
Details of foreign currency instruments at balance date for the Group are:
20212020
Contract
ValueFair Value
Contract
ValueFair Value
$000's$000's$000's$000's
Sale commitments forward foreign exchange contracts315,2841,754217,51214,979
Sale commitments foreign exchange options171,6806,145106,64014,880
These foreign currency instruments are designated as cash flow hedges in order to reduce the Group’s cash flow
exposure resulting from movements in foreign currency exchange rates on anticipated future transactions. It is
anticipated that the sales will take place during the 2022 to 2026 financial years at which stage the amount
deferred in equity will be released into profit or loss.
For hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount, life
and underlying) of the foreign exchange forward contracts and their corresponding hedged items are the same,
the Group performs a qualitative assessment of effectiveness and it is expected that the value of the forward
contracts and the value of the corresponding hedged items will systematically change in opposite directions in
response to movements in the underlying exchange rates. The Group uses the hypothetical derivative method
for the hedge effectiveness assessment and measurement of hedge ineffectiveness. As for the hedge of the net
investment in Meateor US LLC sub-group, the Group assesses effectiveness by comparing the nominal amount
of the net assets designated in the hedge relationship with the nominal amount of the hedging instrument.
This is a simplified approach because the currency of the exposure and hedging instruments perfectly match
and the Group excludes from the designation the foreign currency basis spread.
The following table demonstrates the sensitivity to a reasonably possible change of 5% in the value of New
Zealand dollar against other foreign currencies, with all other variables held constant. The impact on the Group’s
profit before tax is due to changes in the fair value of monetary assets and liabilities. The impact on the Group’s
equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges.
20212020
+5%-5%+5%-5%
$000's$000's$000's$000's
Impact on net profit after tax(494)546(273)302
Impact on cash flow hedge reserve net of tax(16,811)15,552(11,694)10,811
38
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
E8. CATEGORIES OF FINANCIAL INSTRUMENTS
20212020
$000's$000's
Financial assets:
Amortised cost61,44663,789
Derivative instruments in designated hedge accounting relationships16,10830,260
Fair value through profit or loss184184
77,73894,233
Financial liabilities:
Amortised cost75,14192,919
Derivative instruments in designated hedge accounting relationships8,3821,573
Fair value through profit or loss7,3665,249
90,88999,741
The carrying amount of financial instruments at amortised cost approximates their fair value.
E9. MATURITY PROFILE OF FINANCIAL LIABILITIES
Liquidity risk management
The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the Group can be required to pay. The table includes both interest and principal cash flows.
Within 3
months
4 months
to 1 year1-5 yearsTotal
$000's$000's$000's$000's
2021
Trade and other payables23,466--23,466
Dividend declared13,419--13,419
Put options5,415-1,9517,366
Borrowings16550037,05537,720
Interest rate swaps and forward rate agreements962921,2931,681
42,56179240,29983,652
2020
Trade and other payables25,117--25,117
Dividend declared13,359--13,359
Put options3,647-1,6025,249
Borrowings20863052,61653,454
Interest rate swaps and forward rate agreements1964376141,247
42,5271,06754,83298,426
39
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
F. GROUP STRUCTURE
IN THIS SECTION
This section provides information to help readers understand the Scales Group structure and how it affects the
financial position and performance of the Group. In this section there is information about subsidiaries.
F1. SUBSIDIARY COMPANIES
Subsidiary companies:Principal activityCountry of
Holding
Balance date
incorporation
20212020
Fern Ridge Produce LimitedTrading companyNew Zealand72.88%72.88% 31 December
Geo. H. Scales LimitedNon trading companyNew Zealand100%100% 31 December
Longview Group Holdings LimitedNon trading companyNew Zealand100%100% 31 December
Meateor Foods Australia Pty LimitedTrading companyAustralia100%100% 31 December
Meateor Foods LimitedTrading companyNew Zealand100%100% 31 December
Meateor Group LimitedHolding companyNew Zealand100%100% 31 December
Meateor US LLCHolding companyUnited States100%100% 31 December
Mr Apple New Zealand LimitedTrading companyNew Zealand100%100% 31 December
New Zealand Apple LimitedTrading companyNew Zealand100%100% 31 December
Scales Employees LimitedCustodial companyNew Zealand100%100% 31 December
Scales Holdings LimitedHolding companyNew Zealand100%100% 31 December
Scales Logistics LimitedFreight consolidatorNew Zealand100%100% 31 December
Scales Logistics Australia Pty LtdFreight consolidatorAustralia100%100% 31 December
Selacs Insurance LimitedInsurance companyNew Zealand100%100% 31 December
Shelby Cold Storage, LLCColdstore operatorUnited States60%60% 31 December
Shelby Exports, IncNon trading companyUnited States60%60% 31 December
Shelby Foods, LLCTrading companyUnited States60%60% 31 December
Shelby JV LLCHolding companyUnited States60%60% 31 December
Shelby Properties LLCNon trading companyUnited States60%60% 31 December
Shelby Trucking LLCTrading companyUnited States60%60% 31 December
Subsidiary companies are controlled by the Company. Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
company loses control of the subsidiary.
40
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
G. OTHER
IN THIS SECTION
This section includes the remaining information relating to Scales’ financial statements which is required to
comply with NZ IFRS.
G1. CAPITAL COMMITMENTS
20212020
$000's$000's
Commitments entered into in respect of apple trees purchases as at balance date1,264289
G2. LEASES
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognised a
right-of-use asset and a corresponding liability with respect to all lease arrangements in which it is the lessee,
except for short-term leases (defined as leases with a lease term of twelve months or less) and leases of low value
assets. For these leases, the Group applies the practical expedient and recognises the lease payments as an
operating expense on a straight-line basis over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from the lease assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined,
the Group uses its incremental borrowing rate (IBR).
Lease payments included in the measurement of the lease liability comprise:
- fixed lease payments (including in-substance fixed payments), less any lease incentives;
- variable lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date;
- the amount expected to be payable by the lessee under residual value guarantees;
- the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
- payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate
the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease
liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments
made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
- the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case
the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
- the lease payments change due to changes in an index or rate or a change in expected payment under a
guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease
payments using the initial discount rate;
- a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case
the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
41
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
G2. LEASES (CONTINUED)
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments
made at or before the commencement date and any initial direct costs. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on
which it is located or restore the underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under NZ IAS 37Provisions, Contingent Liabilities and Contingent Assets.
Right-of-use assets are depreciated over the shorter period of either the lease term or the useful life of the
underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects
that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful
life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
The Group applies NZ IAS 36Impairment of Assetsto determine whether a right-of-use asset is impaired and
accounts for any identified impairment loss under this standard.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and
the right-of-use asset. The related payments are recognised as an expense in the period in which the event or
condition that triggers those payments occurs and are included in the line "Administration and operating expenses"
in the statement of comprehensive income.
As a practical expedient, NZ IFRS 16 permits a lessee not to separate non-lease components, and instead account for
any lease and associated non-lease components as a single arrangement.
Right-of-use assets
Land and
buildings
Plant and
equipment
Office
equipment
motor and
vehiclesTotal
$000's$000's$000's$000's
Carrying Amount
Balance at 1 January 202074,0782144,48378,775
Additions4,831-2,5727,403
Depreciation expense(6,082)(185)(2,034)(8,301)
Balance at 31 December 202072,827295,02177,877
Additions5,2124511,6517,314
Depreciation expense(6,372)(180)(2,208)(8,760)
Balance at 31 December 202171,6673004,46476,431
42
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
G2. LEASES (CONTINUED)
20212020
$000's$000's
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets8,7608,301
Interest expense on lease liabilities2,9642,981
Expense relating to short-term leases and low-value assets2,3192,960
Lease liabilities
Current10,23710,053
Non-current69,48170,190
Maturity analysis (undiscounted cash flows)
Year 110,24410,053
Year 29,2059,003
Year 38,6138,089
Year 48,0837,535
Year 57,4517,146
Onwards59,86061,983
103,456103,809
Cash outflows for leases
Interest on lease liabilities2,9642,981
Repayments of lease liabilities7,8397,300
Short-term leases and low-value asset leases2,3192,960
13,12213,241
G3. RELATED PARTY DISCLOSURES
Transactions with related parties
Certain Directors or senior management have relevant interests in companies with which Scales has transactions
in the normal course of business. A number of Scales directors are also non-executive directors of other
companies. Any transactions undertaken with these entities have been entered in the ordinary course of business.
Key management personnel remuneration
The compensation of the directors and executives, being the key management personnel
of the Group, is as follows:
Short-term employee benefits2,9862,784
Share-based payments416367
Post-employment benefits9995
3,5013,246
During 2021, 1,201,923 (2020: 1,062,451) shares were on issue to key management personnel in accordance with the
Share Scheme described in note D2.
Transactions with equity accounted entities
Revenue from sale of goods1,6231,189
Revenue from services4,5473,910
Dividends and distributions received2,2501,500
Trade receivables at balance date479257
43
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2021
G4. CONTINGENT LIABILITY
In December 2018 an insurance claim was notified to Selacs Insurance Limited, a wholly owned subsidiary of
Scales Holdings Limited, which in turn is a wholly owned subsidiary of Scales Corporation Limited.
The claim arose in consequence of the collapse of the roof of a leased coldstore located in Hastings, Hawke's Bay.
The material damage component of the claim was settled during the current year. The business interruption component
of the claim was also agreed and partially settled during the current year.
The risk was fully reinsured, and there was no impact on net income or net assets of the Group.
Claim expense and reinsurance revenue recorded during the year are disclosed in Note B3. Preliminary payments
from reinsurers paid to the insured party were recorded as claim expense and reinsurance revenue in previous years.
G5. EVENTS OCCURRING AFTER BALANCE DATE
There were no events occurring subsequent to balance date which require adjustment to or disclosure in the
financial statements.
G6. COVID-19
On 24 March 2020, the New Zealand Government announced a number of Orders under the Health Act 1956 and the
Epidemic Preparedness Act 2006 to restrict certain activities for the purposes of preventing the outbreak and spread of
COVID-19. The Group's business units were classified as "essential services" and complied with the respective health
requirements within each jurisdiction they operated in.
As at the date of authorisation of these financial statements, the Group was operating at the Red Level of the COVID-19
Protection Framework in New Zealand with strict border restrictions remaining in place and contact tracing encouraged.
The Group operations outside of New Zealand continue to be also impacted by the COVID-19 pandemic.
(a) Uncertainties, estimates and judgements
The economic and public health conditions globally have impacted these trading results, and the current uncertainties are
expected to impact the results in the future.
The risks impacted by the uncertainty arising from COVID-19 include credit risk and market risks which impact the
Group's assessment of expected credit losses, carrying value of inventories and the recoverability of non-current
assets and goodwill.
The Directors have assessed the impact of COVID-19 on these judgements and estimates and concluded that no significant
changes to the carrying values of assets or liabilities are currently necessary.
(b) Government grants
Government support was received in the United States of America by way of government loans during 2020.
These loans may be forgiven if the eligibility criteria are met. This criteria was met during 2021 and therefore
the Group recognised $866,000 as other income in the consolidated statement of comprehensive income.
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions
attaching to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic
basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to
compensate.
44
---
Results announcement
Results for announcement to the market
Name of issuer Scales Corporation Limited
Reporting Period 12 months to 31 December 2021
Previous Reporting Period 12 months to 31 December 2020
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$514,551 9%
Total Revenue $514,551 9%
Net profit/(loss) from
continuing operations
$26,925 28%
Total net profit/(loss) $26,925 28%
Interim/Final Dividend
Amount per Quoted Equity
Security
N/A
Imputed amount per Quoted
Equity Security
N/A
Record Date N/A
Dividend Payment Date N/A
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$2.39 $2.33
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please refer to the attached reports for commentary and audited
consolidated financial statements.
Authority for this announcement
Name of person
authorised
to make this announcement
Steve Kennelly
Contact person for this
announcement
Steve Kennelly
Contact phone number +64 3 3712263
Contact email address steve.kennelly@scalescorporation.co.nz
Date of release through MAP
24/02/2022
Audited financial statements accompany this announcement.
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.