® Market Gardeners Limited Annual Review 2018 Annual Review 2018 MG’s core purpose is to Contents grow the overall wealth and profitability of the Co-operative, Chairman & CEO's Review 02 ® Financial Highlights 06 Stronger. Together. its shareholders and growers Income & Cash Flow Statements 28 Balance Sheet 29 through relevant initiatives Branch Register, Bank & Advisors 31 while maintaining co-operative principles .®Together. Stronger. RESILIENCE VALUE CO-OPERATIVE Show true leadership to grow Keep reviewing the benefits our BEHAVIOUR the business and overcome grower shareholders receive Work hard together to make challenges by making decisions while finding new and relevant sure the benefits of our that protect the future of our ways to add value. Co-operative model drive grower Co-operative and make growth, value, trust and a sure the benefits are enjoyed by willingness to work closely generations to come. alongside each other. PARTNERSHIPS GROWTH CAPABILITY Expand the level of Diversify and expand produce Continue to have the best communication to keep our lines locally as well as make our people, doing the right job, grower shareholders up-to-date Co-operative attractive to off- with the right tools to support and support a positive delivery shore markets so we can grow the wide range of needs of our of our shared vision, direction our export activity. grower network. and values. 1 We entered the 2018 financial year Annual Review 2018 full of anticipation that we could build on a great 2017. However, Annual Review 2018 the year has presented unforeseen challenges to the business to ® which we have needed to adapt. impairment (reduction in the value Stronger. Together. The year has therefore ended with recorded for the brand and goodwill) and does not impact on our debt facilities or mixed results - a record result for compliance with banking covenants. This Together. Stronger. Together. is explained in more detail in the financial ® New Zealand but a disappointing section later in this review. outcome for Australia. We remain The combined trading profit, before confident that the strategic tax and impairment, and including the gain on acquisition, was $13.667 million initiatives of recent years well for the year, down from $16.018 million for positions your Co-operative for a the previous year. The vagaries of climate and other sound and sustainable future. disruptions are becoming the norm for the horticulture industry. We witness first-hand the vulnerability of growers and marketers, alike, to these variables and The New Zealand trading operations the need to develop sustainable farming recorded another strong performance practices in the long-term interest of with record turnover and profitability. the industry. These industry challenges Market share gains and generally good demonstrate, once again, the benefits values across a broad product range, of working together to meet the ever- together with tight management of discerning needs of our customers and Chairman & expenses, have assisted in achieving this consumers – as a co-operative we are Bruce Irvine result. Our associates also performed ® Together. Stronger. It also demonstrates Chairman well and are in a good position for future the value of diversification across growth and profitability gains. countries and key categories. CEO’s Review CEO’s The Australian market suffered from Today’s consumer is defining our depressed pricing with many product business like never before. They seek lines undervalued because of weak what were seasonal products on an demand, over production or, in some all year-round basis and continually cases, both. This impacted not only our look for better eating experiences. farming operations but the marketing Given traditional growing models, the divisions, resulting in a reduction of impact of the weather and the lead Peter Hendry revenue and a significant loss for the year. times associated with new varietal Chief Executive Officer The LaManna Premier Group (LPG) board development, this becomes a challenging and management teams recognised the proposition to deliver on. Our focus ongoing effect of weak market conditions remains on ensuring we are assisting and pricing throughout the year, and while our growers in meeting these consumer merger synergies had already assisted, demands by being an integrated part of further business improvements were their business, providing the necessary necessary. While these improvements support around planning to meet will take time to bed in, the Company is demand expectations, supporting with confident that an enhanced performance marketing insight on buying behaviour, will be achieved. The specifics of this meeting customer expectations and strategy are discussed in the LPG section the further enhancement through the of this review. use of Intellectual Property rights (IP). Given the difficult trading environment Successfully delivering on these key and trading loss in Australia, the board priorities creates competitive advantages has decided to take a $32.330 million that assist with the sustainability of ← Peter Collinge from Conifer Pete's impairment of the brand and goodwill our grower suppliers, our customer and Rob Hollier from MG Marketing. related to the business. This is a non-cash relationships and our Co-operative. 2 3 Our people are vital to delivering Co-operative, its shareholders and We remain confident that the Annual Review 2018 on these priorities. We continue to growers through relevant initiatives. work on attracting the right people Despite the setback this year, there strategic initiatives of recent years into our business and developing have been significant positives. Our well positions your Co-operative for Annual Review 2018 their capabilities within our cultural New Zealand operations continue to boundaries. It is essential that they are perform strongly and we are well placed a sound and sustainable future. philosophically aligned with the grower, for further growth. LPG is working hard understand and deliver on customer on its business remodelling and the early ® Together. Stronger. Together. expectations, and have the skills to signs of improving performance create game-changing innovation. To this are encouraging. end, our capability to support this wide The Board remains focused on range of demands is a core focus of ‘our strategically positioning the company Together. Stronger. Together. ® people’ strategies. for future success and we thank the Information technology is also a Board members for their governance and critical component of our business leadership in the face of some significant success. Our current IT platform has industry-wide challenges. The Board’s served the business extremely well and engagement on the health, safety and will be phased out over the following wellbeing of our people is paramount and year with the new system currently our culture of care strategies are under under development. This will greatly constant review to achieve this goal. assist with further efficiency gains and We pay tribute to our prior Chairman improved flexibility to adopt new Brian Gargiulo’s service to the company digital technologies. later in this review - on behalf of the The use of smart technology and Board and management we thank Brian digital responses for business are also for his outstanding contribution to the necessary for efficiency gains, improved success of the Co-operative. communication and decision making. And finally, on behalf of the Board and A good example of this is MG’s Grower management team, we acknowledge and Delivery Advice (GDA) web portal which thank the support of all our stakeholders is now well established in the business, – our suppliers, customers and fellow with close to 60% of all growers using staff - as we work together to grow our the system and over 75% of all produce Co-operative for a stronger future. currently supplied now being pre- MG has operated now for 95 years and receipted online. has a proud history. We will continue to We will continue to strategically be creative, identifying new opportunities review and invest in growing operations, for our shareholders, grower suppliers joint ventures, partnerships and provide and customers, take controlled risks and grower financial assistance where this remain passionate about what we do. We strengthens the Co-operative and is in look forward to working with you all on line with our Co-operative principles, this endeavour in 2019. to grow the overall wealth of the ® Together. Stronger. Bruce Irvine Peter Hendry Chairman Chief Executive Officer 4 5 Annual Review 2018 Group gross sales under management $862.391 million 900 130.0 894.3 862.3 129.6 Annual Review 2018 Group profit before income tax 800 120.0 and impairment (including gain $13.667 million 700 110.0 107.1 ® on acquisition) Stronger. Together. 103.1 600 590.3 588.7 100.0 Impairment of intangible asset 93.1 (goodwill and brand) ($32.330 million) 500 90.0 Together. Stronger. Together. ® 400 80.0 Group (loss) before income tax ($18.663 million) 2015 2016 2017 2018 2015 2016 2017 2018 Group gross sales under Group total equity ($M) management ($M) Group (loss) for the year (after income tax and impairment) ($19.502 million) 18 280 Group total equity 277.1 $107.147 million 262.7 16 16.0 260 14 240 Group total assets 13.6 $262.749 million 12 220 200 10 9.7 8.6 197.3 8 180 180.1 6 160 2015 2016 2017 2018 2015 2016 2017 2018 Financial Highlights Shareholder distributions 2018 2017 Group profit before income tax and