ANNUAL REPORT 2021 Business Review
Highlights 4
Chair Review 6
What We Do 8
Global Reach 10
CEO Review 12
Skellerup Strengths 18
Financial Review 20
Skellerup People 24
Sustainable Growth 26
Board of Directors 28
Corporate Governance 32
Financial Statements
Independent Auditor’s Report 40
Directors’ Responsibility Statement 43
Income Statement 44
Statement of Comprehensive Income 45
Balance Sheet 46
Statement of Changes in Equity 47
Cash Flow Statement 48
Notes to the Financial Statements 49
Shareholder Information
Directors’ Disclosures, Remuneration and Shareholding 78
Corporate Directory 82 Skellerup is a global leader in the design, manufacture and distribution of precision engineered products. We make essential components, often within larger products used in dairy, potable and waste water, roofing, plumbing, sport and leisure, electrical, health and hygiene, automotive and mining.
We employ a diverse and highly skilled workforce of over 800 people. Our ethos is to develop strong and deep relationships with key partners, in particular original equipment manufacturers (OEMs) and major distributors. Our customers see us as a key part of their R&D team and our branded products carry a strong and reliable reputation.
We are a global business with almost 80% of our revenue derived from international markets. We have manufacturing and distribution facilities and partners in New Zealand, Australia, China, Vietnam, UK, Italy and the USA. SKELLERUP ANNUAL REPORT FY21 4 Highlights Jiangsu Jiangsu Wigram Productivity Driving operational efficiency efficiency operational Driving Diverse and experiencedDiverse team Vacuum Systems volume up Footwear volumeFootwear up Production volume up $ No change in staffing in change staffing No On staffing increase of 2% of increase staffing On Strong financialStrong growth 813 813 People $251.4m) (FY20 growth Revenue (FY20 798) (FY20 279.5 2% 11%
M $ injury rate injury Total $42.5m) (FY20 (EBIT) Earnings 0.87 (FY20 1.33) (FY20 56.4 33% 35%
38% 10% 14% M 3 $ office people all for training cyber-security Regular (FY20 $29.1m)(FY20 (NPAT) Earnings (FY20 1) (FY20 Upgrades ERP Education 40.2 38%
M $ (FY20 $48.0m) (FY20 (gender) (gender) Demographic vacuum systems vacuum packaging for cardboard Of Elimination reductions Waste Cashflow Cashflow Operating 48 FEMALE (FY20 – f:49% m:51%) –f:49% (FY20 58.8 22% %
52 MALE M
% Delivering Financial return EPS growth Dividend per for our ratio (RONA) share growth customers
25% 38% 31%
29 % 20.6 CPS 17CPS (FY20 23%) (FY20 14.9CPS) (FY20 13CPS)
OVER 4,500 Customers
SOLD TO Years’ service for staff 73 Fewer than 2 years 20% Countries
2 - 10 years 42%
10 -20 years 26%
Greater than 20 years 12% OVER 700 New products to market last 24 months Focused on community & environment
GHG* GHG emissions / Water emissions revenue reductions 3 (Tonnes C0 2-e) Acquisitions over last 5 years 2,339 8% 55% (Silclear / Nexus / Simlim) (FY20 2,278) C02-e emissions per At Jiangsu $1million of revenue facility in China
*Greenhouse Gas
5 SKELLERUP ANNUAL REPORT FY21 6 Chair Review Chair milestone too, reflecting bothrecord earnings Operating cashflow of$58.8millionwas a over prior the year’s record result. represents per a38 cent of improvement million $40.2 (NPAT) tax for result Skellerup. Audited net profit record afteranother financial that with and year to pleasing It is report 2021 on the financial working onnew solutionsforkey customers. customers, improving how we dothingsand adaptability asthey remain focusedonsatisfying extremely grateful forour people’s tenacityand to ensure customerneedsare met. We are planning, prompt action, andadjustments andfreightmaterials have required flexible freight availability andescalatingcostsofboth limited supply ofsomematerials, limited time working from home. More recently, the conditions, requiring prolonged of periods people have endured longandmore restrictive the years preceding. Insomecountries, our 12 monthsandthedevelopment work donein their outstandingcontributions over thepast We thankourpeoplearound theworld for not beprouder oftheirunwavering commitment. the very bestinourpeopleandtheBoard could challengesofCOVID-19The have brought out per centhigherthanachieved five years ago. returns toshareholders. FY21NPAT was 82 to deliver substantialgrowth and inearnings business modelandstrategy are continuing message anddemonstrates thatSkellerup’s pandemic. year’sThis result reaffirms that by thestress testprovided by theCOVID-19 business modelandstrategy was highlighted In lastyear’s report, theresilience ofour and strengthen ourbusiness. andacquisitionsthatcomplement opportunities fromplatform which tofundorganic investment continued tostrengthen, which provides agreat at $8.7million. Skellerup’s positionhas financial Accordingly netdebtattheendofFY21stood and excellent managementofworking capital.
comfort ofyour andleisurecomfort sporting equipment; in hospitals, shopsandhomes; thesafetyand your homesandworkplaces; healthandhygiene milk products; ofappliancesin theperformance water;(drinkable) theproduction ofmilkand are tothesupply critical ofsafepotable we interfacewithevery day. Skellerup’s products products usedinarange applications ofcritical with key customers toprovide engineered teams continuing tofocusonworking closely growthThe istheoutcomeofour inearnings operating business. aninternational to dealwiththecomplexities thatcomewith skills, knowledge andgovernance experience and theUS. OurBoard have adiverse range of in New Zealand, Australia, China, Italy, theUK hasaglobalfootprint,Skellerup withbusinesses how we present inthefuture. thisinformation are evaluating ofadoptiontoenhance themerits website. As theframeworks are maturing, we on pages26to27ofthisreport andonour more onourESGapproach andachievements withyouon sharing what we do. You canread one oftheseframeworks, ourfocushasbeen governance matters (ESG). Ratherthanadopting for reporting onenvironmental, socialand several frameworks have beendeveloped way.sustainable andefficient Inrecent years place towork, andtogrow ourbusiness ina people, provide themwithasafe andvibrant We embrace ourresponsibility todevelop our 8 to9ofthisreport. a visualrepresentation, pleaseseepages provides more detail inhisstatementandfor homes andworkplaces. OurCEO, David Mair, oftheroofand totheintegrity systemsonyour
In August 2020, Paul Shearer, Senior Vice- President – Sales and Marketing for Fisher & Paykel Healthcare, joined as a Director, and his skill set has further strengthened the Board. Our collective experience has been especially critical over the past 18 months and the Board are committed to the work required to govern what is a growing worldwide business. Gaining detailed and regular insight into Skellerup’s businesses is a key part of being an effective board. While COVID-19 has restricted The growth in earnings is the international travel over the past 12 months, outcome of our teams continuing we have visited sites in New Zealand to to focus on working closely observe and understand our operating with key customers to provide environments and meet with our people. The engineered products used in a profiles and skills of our Board are on pages range of critical applications we 28 to 31 of this report and on our website. interface with every day. The Directors are very pleased to announce a final dividend, imputed to 50 per cent, of 10.5 cents per share, which takes the total full-year dividend to 17.0 cents per share, a 31 per cent increase on the prior year. The final dividend will be paid on 15 October 2021 with a record date of 1 October 2021.
We are pleased with our record result in FY21 and, in line with our strategy, will continue to focus on working closely with key customers to provide engineered products used in a range of critical applications and to look for investment opportunities that complement and contribute to our ongoing growth.
We expect FY22 will again be challenging given continued disruptions due to the COVID-19 pandemic, but this will also provide opportunities for growth.
We look forward to the challenge and thank shareholders for their ongoing support and trust in the Board, executive and employees of Skellerup.
Elizabeth (Liz) Coutts Chair and Director
7 SKELLERUP ANNUAL REPORT FY21 8 What WeWhat Do food, drinking water, standards. safety hygiene and food, drinking of range a wide everyday meet applications often must stringent that components products in and used manufactures and designs Skellerup • • • • • Recreation Gumboot throwing! and fendersystems Foam forbuoyancy applications and hockey includingrugby sports for field Foam usedinprotective equipment boot liners Foam usedinskiandsnowboard Foam decking usedinmarine • • • • • • Retail & Industrial Components forpoint-of-saledevices Components formobileequipment Covers andlidsforwater, onstreets fire services andelectrical stormwater pipes Gaskets, joiners, couplings andsealsforpotable, waste and solar, plumbingandHVAC applications Flashings, washers, sealingandinsulationproducts forroofing, processingmaterial plants Valves andsealsforcontrol systemsusedinfood, liquid, and • • • • • Medical &Health management systems Hospital equipmentandvisual Hygiene andsanitisationdevices andprostheticsOrthotics respiratory devices Filters andsealsusedin theatres equipment forhospitaloperating Face masksandprotective Skellerup has extensive expertise in combining materials including rubber (including silicone and liquid silicone), plastic, and metals to meet these demanding requirements.
Transport • Vacuum systems on trucks for transportation of water and liquid waste
• Seals, injectors and drive shaft couplings for motor vehicles (cars and trucks)
• Seals and gaskets for GPS and payment applications and systems Residential • Seals, diaphragms, and valves used in home appliances (washing machines, dryers, dishwashers, refrigerators and gas cooktops), hot water systems and heating systems
• Diaphragms and seals for residential and commercial irrigation systems Dairy • Seals and cartridges used in taps and • Milking liners, tubing, filters and showerheads in kitchens and bathrooms components for dairy milking systems • Flashings, washers, sealing products and • Animal hygiene products insulation for roofing, solar, plumbing and HVAC applications • Protective rubber footwear
• Gaskets, joiners, couplings and seals for • Pumps for dairy milking systems potable, waste and stormwater pipes • Valves and seals for irrigation systems • Bedding and furniture materials
9 SKELLERUP ANNUAL REPORT FY21 10 Australia, China, Vietnam, UK, Italy and the US. the and Italy UK, Vietnam, China, Australia, New Zealand, in based are facilities distribution and manufacturing world. the around world-classlocations to customers Our our serve all peoplemultiple Our geographies. collaborate across and teams We aglobal is business. Skellerup employ people over 800 spanning Global Reach Global 20 UK &Europe Of Group Revenue Group Of 22 Of Group Revenue Group Of Zealand New % 10 Of Group Revenue Group Of Asia % % 18 Of Group Revenue Group Of Australia % Potable and waste Global Reach water, appliances and automotive North America (Gulf, Tumedei and Skellerup) Design, manufacture and distribution in New Zealand, Australia, North 29 % America, Asia, UK and Europe Of Group Revenue
Roofing, construction and plumbing (Deks) Design, manufacture and distribution in New Zealand, Australia, North America, Asia, UK and Europe
Sport, Leisure, Health & Medical (Ultralon and Nexus) Design, manufacture and distribution in New Zealand, Australia, North America, Asia, UK, Europe and Central America Central & South America 1% Extraction and waste Of Group Revenue (Masport and Flexiflo) Design, manufacture and distribution in New Zealand, Australia, North America, and China and Europe
Agri (Skellerup, Conewango Ambic, Silclear and Stevens)
Design, manufacture and distribution in New Zealand, Australia, UK, Europe, China, North America and South America
11 SKELLERUP ANNUAL REPORT FY21 12 CEO Review CEO These were not achieved by accident; they they accident; by achieved were not These 12 months. past the over delivered have team our results excellent the with delighted I am responsibility. and employees opportunity more 800 agreat privilege, is than of over shareholders on 6,000 behalf Skellerup and Leading and FY19. and FY20 both in achieved record previous our over increase cent per a38 million, $40.2 arecord was (NPAT) tax after profit net FY21 shareholders. our of behalf on delivered outcomes world for the the across team proud our of to and grateful extremely Iam times. challenging very through working people our of commitment and skill the of areflection to and acredit are Skellerup community in the know mentalhealth isareal issueinthelives ofourpeopleandcommunities. theworkto support ofMike andhisremarkable teamwho helpouryoung peopleaswe is theirkey nationalfundraising initiative andthisyear was heldon28May. We are proud groupsupport tohelpeducateandfundcounsellingforyoung people. GumbootFriday Trust, by MikeKingin2010, started theI run Am Hopeyouth-and community-focused ofGumbootFriday continuedSkellerup itssupport in2021. KeyThe toLifeCharitable our Wigram teamheldaPinkRibbon Breakfast raising additionalmoney. Five dollars from every pairsoldwas donatedtoBreast CancerFoundation NZand the addedcomplexities ofaccesstotreatment fortreatment. andtakingtimeofffarm with breast cancerevery day, athird ofwhom live outsidethemaincentres andhave disease, withinrural particularly communities. NineNew Zealanders are diagnosed Breast CancerFoundation NZtohelpraise awareness andassistthoseaffectedby the In May of 2021, launchedalimited-editionPinkBandgumbootinsupport Skellerup
as outlinedby our Chair, LizCoutts, inher reduce debtandsubstantially liftourdividend, to fundourcapitalexpenditure requirements, in FY20. achievementsThese have enabledus record- up22percentontheprior achieved a record operating cashflow of$58.8million measure but soiscash. InFY21, we achieved contributed tothisresult. NPAT isakey financial good managementofourindirect costsall operational improvements atourfacilitiesand Revenue growth from new andexisting products, results onpages20to23. report. You canread more aboutourfinancial
STUDY
E S A C Today there is a great deal of focus on Several of our teams used this opportunity to measuring business success through a broader review and permanently change our processes lens than traditional financial metrics. This very and invest in systems to improve how we interact overt emphasis may seem relatively new, but the with customers. imperative to build a business with sustainable Our emphasis on health and safety is evident financial returns has always been central to in our results. Most importantly, we have active our business philosophy. We continue to work teams at every site owning their programmes. closely with customers to innovate and grow. For FY21, we achieved a significant To do this successfully we develop and invest improvement on all metrics. Lost-time injuries in our people, minimise waste and we make a were reduced, and we did not have any serious positive contribution to the communities and harm incidents. We engage external parties to environments in which we operate. help identify improvements and we invest in Earlier this year I wrote to our teams about our facilities to eliminate risks. You can read purpose. There are five groups of people we more about our approach to health and safety consider: and our results on page 24 to 25.
1. Customers – without demanding customers, we have no business and no opportunities to develop new solutions. We must keep STUDY E S A C developing true customer focus – good for
Ensuring the our customers and good for Skellerup. safe supply of 2. Suppliers – we want to be a demanding but potable water fair customer of our suppliers. We want to be the best supplier to our customers and In past reports I have mentioned how the best customer for our suppliers. we work closely with customers to 3. Employees – we have a responsibility to create solutions for problems they face. look after our employees and pay them Often this requires a combination of well. We offer training based on attitude deep material science, engineering, and willingness to learn but it is not an tooling and process expertise to automatic right for all employees. ensure our products deliver more value for customers. In FY21, we 4. The community that we influence, which is concluded a project to reformulate made up of our customers, our suppliers compounds for a range of potable and our staff (that includes their family and water products in Australia. Supplying friends). This is the immediate scope of our products critical to the delivery of influence and we focus on integrity in all safe water and food means we must our dealings. therefore meet strict and evolving 5. Shareholders – the shareholders are the standards. By working closely with owners of the business and deserve a good the customer and local regulatory return from the business for the choice they authorities we have demonstrated make to invest in Skellerup. a capability and understanding that has enhanced customers’ trust in our COVID-19 has challenged our business leaders products and this is now resulting in and teams to change the way in which we additional growth opportunities. operate and to embed new processes to keep our people safe while maintaining the flow of the many essential products we supply to customers all over the world.
13 SKELLERUP ANNUAL REPORT FY21 14 decking U-DEK for Rapid growth which grew by FY21. 68percentduring properties. Proof are ofitsbenefits sales, and provides water superior sealing substantially reduces installationtime lead-free,This self-adhesive product launched theRapidFlashDektite. andEurope.America In2019DEKS roofs inNew Zealand, Australia, North with sealingpenetrations through metal Dektites have longbeensynonymous solutions sealing faster DEKS providing comfort andcosmeticappearance.comfort performance,its superior durability, using U-DEKontheirboatdecksdue Zealand, Australia, Asia andEurope are boat manufacturers intheUS, New in FY21.andleisure Leadingsporting including a54percentincrease insales have all otherapplications surpassed years, decking sales ourU-DEKmarine and sportswear formany years. Inrecent boots aswell asinprotective headgear orthotics, prosthetics, skiandsnow in thisproduct hasseenitusedin critical. consistentcellstructureThe foam isusedwhere is performance closed-cell cross-linked foam. Ultralon formulations toproduce world-leading developed usingUltralon’s unique deckinghasbeen U-DEK marine ® marine marine Photo Credit: Lissa Photography Lissa Credit: Photo
®
STUDY STUDY
C A S E E S A C E S A C
materials todelivermaterials valuable solutionstoourkey increasingly demandingstandards andcombine to changeourproduct formulations tomeet US and Australian markets. Ourcapability FY21weDuring achieved growth inourlargest the largest Division sliceofIndustrial revenue. applications across theworld continue tobe andwasteused inpotable(drinkable) water our product range andgeography. Products FY21 revenue growth was broad-based across (pcp)toarecordperiod $32.7million. by 57percentover corresponding theprior increase before earnings interest andtax(EBIT) gross margin improvements combinedto applications. FY21salesgrowth During and inawiderangemetals toperform ofcritical multiple suchasrubber, materials plasticand manufactures products thatoftencombine Division designsandOur Industrial Division Industrial customer onnew product developments. the exit well andcontinue towork withthe in roofing applicationsintheUS. We managed we discontinued asmallrange ofproducts used disproportionate resource todoso. FY21 During that generates marginal returns andrequires we are alsodisciplinedineliminatingbusiness While we are focusedongrowing thebusiness, market. to the products key new two launch we as FY22 in business systems vacuum for our growth significant generate will approach this We FY21. expect during products foam marine our and products construction and roofing for our growth significant drive helped approach This businesses. Division’s Industrial our across thread common the is perform that products designing and needs their to understand customers with Working our ongoinggrowth. customers hasbeen-andwillremain -key to Agri Division STUDY E S A C Our Agri Division is primarily focused on World-leading and is a world leader in the design and manufacture of essential consumables for the dairy business global dairy industry. We also design and Skellerup’s dairy rubberware design, manufacture rubber footwear for farming and manufacture and distribution facility in specialty applications including fire, forestry Wigram, Christchurch, New Zealand, and electricity. During FY21, sales growth which opened in November 2016, and gross margin improvements combined to supplies essential food-grade dairy increase EBIT by 20 per cent over the pcp to a consumables to over 100 customers in record $30.5 million. 24 countries around the world. Skellerup is the second largest manufacturer of food-grade dairy rubberware in the world. Our products are critical to the supply of fresh milk and milk products. The US and New Zealand remain our largest markets, but Europe and Asia were the fastest-growing regions in FY21. Growth in Europe was helped by the successful integration of Silclear, acquired during FY20. Silclear designs and manufactures silicone tubing and consumables used in dairy sheds globally but particularly in Europe. A broadened product range and a European presence provide a strong platform for future growth.
Our Wigram facility is the largest in our Group and the hub for the design and manufacture of our dairy rubberware products. Throughout FY21 we continued to improve our processes to STUDY E S A C meet a nine per cent increase in demand without Acquisitions significant capital investment nor increases in operating costs. We have further plans to to enhance increase capacity for relatively low investment our business to ensure we meet growing demand in our In November 2019 we added Silclear international markets. to the Skellerup Group. Silclear design Skellerup’s Red Band gumboot is synonymous and manufacture food-grade silicone with New Zealand. In FY21, sales grew not only rubber tubing, diaphragms, valves and through traditional rural channels but also in liners particularly for the dairy industry. urban markets. Everyone appreciates the quality Growth in demand has resulted in an and durability of the Red Band. additional manufacturing shift and an Process improvements generated gains that increase in the size of our team. We helped offset the impact of increased raw expect to continue to grow sales of material and freight transport costs. Indirect this product range and to seek further costs were well managed, and our hedging opportunities to expand the Skellerup programme offset the impact of a stronger Group so we can further enhance what New Zealand dollar. As a result, Agri Division we offer to our customers. EBIT increased by $5.1 million over FY20.
15 SKELLERUP ANNUAL REPORT FY21 16
Investing in in Investing better business better completed in May. in completed successfully was project This critical. is this underpins that platform systems information an Having success. our to key is customers for our products reliable precise, Delivering exact. means Tika businesses. Division Industrial our of for two platform the changing involved Tika Project we needforbusiness growth. providing thebusiness withtheplatform was successfully concludedinMarch customers andpeople. projectThe and ultimately betteroutcomesforour information, amore secure environment tools, enablingaccesstomore insightful standardised business processes and our objective tosimplifyandadopt name Vanilla was chosentosymbolise changed markedly inthemeantime! The implementation andthebusiness has It hadbeen15years sincetheprevious in Wigram, Christchurch, New Zealand. Division forour businessplatform Agri Project Vanilla was theupgrade ofour several businesses withintheGroup. for systemsplatform our information FY21weDuring invested inimproving
STUDY
E S A C make gooddecisions. theythe information needtoenablethem systemsthatprovideinformation ourteamswith philosophy toensure we have robust, secure threeThese elementsare thecornerstone ofour are secure risks. andminimisecybersecurity thirdThe istoensure we have that platforms substantive resource internal toown theprojects. flows.and information secondiscommittingThe to eliminatewaste andsimplifydatastructures firstThe istostandardise business processes elements togettingtheseinvestments right. FY21.during We believe there are three critical systems across theGroup. continuedThis business processes andtherelated information we have invested steadily inimproving our making gooddecisions. Over thepastfive years Accurate to andtimely iscritical information Systems and Processes The Future I started this statement reflecting on what we have achieved in FY21. We are very pleased with the outcomes, but, other than building on what we have learnt and achieved, FY21 is now firmly in our rear-vision mirror. COVID-19 unfortunately remains ever present and continues to cause challenges and disruptions. To date, we have navigated the impacts of restricted supply of raw materials, congested freight channels (and We continue to work closely with increased costs on both) and interruption to customers to innovate and grow. manufacturing operations. However, these risks To do this successfully we develop have not abated and with COVID-19 variants and invest in our people, minimise arising, we will need to continue to be quick waste and we make a positive and agile to react to these impacts and more. In contribution to the communities and addition, we have a pipeline of new products and environments in which we operate. opportunities for the future.
I am confident we have the team and capabilities to overcome these challenges and deliver further revenue and earnings growth.
David Mair Chief Executive Officer and Director
17 SKELLERUP ANNUAL REPORT FY21 18 01 03 02 Our team know their markets and their know team Our Skellerup Strengths Skellerup are constantly delivering new delivering constantly are based on customerbased real needs. products improvements. and Our our developmentour is investment deep customer relationships mean Our products products Our and health. health. and essential are and astrong dividend yield. Excellent year-on-year infrastructure delivery the in performance witharobustperformance balance of food, water, components sheet, growing cashflow, low debt Proven track record record track Proven cashflow growth cashflow earnings and of A track record record track A for rapid R&D rapidfor R&D in key markets key in Focus on products Focus on products Automotive &Machinery Roofing & Construction &Construction Roofing Electrical & Appliances Electrical Exploration &Mining
Health&Medical Potable & WastePotable Water (incl Plumbing) Sport &LeisureSport Agriculture Other (18%) (21%) (37%) (4%) (1%) (4%) (5%) (5%) (5%)
Earnings Earnings per share
FY18
700 700 Over new products in new products the last two years years two last the FY19 20.6 Revenue by Application FY21
FY20 C
FY21 04 Highly experienced technical team Global team Our team are highly skilled and trained, from our technical salespeople through to our product designers; we 813 understand our customers and markets across 6 countries
Customer relationships Our top 20 customers shows a balance of strong 05 with growth potential long-term customers and new business growth. We have strong and deep relationships with our 4,500 customers, particularly OEM customers, where we continue to deliver new products and developments.
Top 20 15 5 Customers Of our top 20 customers New inclusions to in FY21 were also top 20 our top 20 customers FY21 customers in FY17. since FY17.
Strong relationships 06 across global markets
We are a global business with world- class manufacturing New Zealand (22%) Strong and distribution Australia (18%) Global Delivery facilities allowing us US (29%) to serve customers Europe (14%) FY21 and markets all UK & Ireland (6%) around the world. Asia (10%) Other (1%)
19 SKELLERUP ANNUAL REPORT FY21 20 We are committed to delivering sustainable growth in financial financial in growth We sustainable to delivering committed are 1 and earnings in growth to due the pcp the on cent per 22 by improved flow cash Operating period (pcp).corresponding prior the in achieved result record the on improvement cent per a38 is achieved NPAT The imputed). cent per (50 share per cents 17 of pay-out dividend agross declared and million, $58.8 of flow cash operating record a achieved million, $40.2 of (NPAT) tax after profit net audited arecord recorded Skellerup 2021 (FY21), June 30 ended year For the returns for our shareholders, providing opportunities and growth growth for and shareholders, our returns opportunities providing they need now and in the future. the need in they now and for our employees, and assurance for our customers that we will for for employees, customers our our we will that assurance and FY21 Earnings and Group Dividends continue to provide them with the essential engineered solutions engineered tocontinue essential the provide with them Net Profit After After Tax Profit Net FY21 FY17 FY18 FY19 FY20 Financial Review Review Financial with the closing share price on 30 June 2021. June 30 on imputed) price (50% share share per 17 closing cents the with totalling declared and paid dividends FY21 the comparing by determined is yield Gross ($m) 40.2 27.3 29.1 29.1 22.1 a gross yield a gross represents and (31 pcp the on cent) 4 cents per up is declared pay-out dividend gross The year-end. at outstanding days 55 representing managed, well to be continued receivables and year-end prior the on cent per four down was year-end at held Inventory capital. working of management sound continued Dividend Declared FY17 FY18 FY19 FY20 FY21 1 of 4.1 per cent for shareholders. 4.1 of cent per (cents per share) per (cents
13.0 13.0 17.0 11.0 9.5
To enable Directors and management to lead Skellerup and measure our results, we segment our financial results into two divisions – Industrial and Agri.
Industrial Division Agri Division
Industrial Division sales were a record $177.4 million, Agri Division sales were a record $102.2 million, up 12 per cent on FY20. EBIT was $32.7 million – also up nine per cent on FY20. EBIT was $30.5 million, a record and up 57 per cent on FY20. also a record and up 20 per cent on FY20.
Our Industrial Division focuses on international Our Agri Division is primarily focused on and is markets, working closely with customers to design a world leader in the design and manufacture of and manufacture products that often combine essential consumables for the global dairy industry. multiple materials such as rubber, plastic and metals During FY21, sales growth was achieved in all markets, to perform in a wide range of critical applications. particularly Europe, New Zealand and Asia. Sales During FY21, sales growth was broad-based. were also boosted by a full-year contribution from Growth in market share from the sale of existing Silclear (acquired in November 2019). Skellerup’s and new products in all markets for potable and Agri Division also designs and manufactures rubber waste water, roofing and plumbing, sport and footwear for farming and specialty applications leisure, and appliance applications increased including fire, forestry and electricity. Sales growth in revenue by $19.5 million. the New Zealand market, particularly through hardware channels, contributed to the overall $8.6 million Sales growth from higher-margin new products increase in FY21 Agri Division revenue. helped increase the overall gross margin percentage despite the impact of recent increases Revenue growth was further boosted by improved in raw material and freight costs and the stronger operational performance at our key manufacturing New Zealand dollar. The growth in sales was facilities in New Zealand and China. Process achieved without any overall increase in indirect improvements generated gains which more than costs. As a result, FY21 Industrial Division EBIT offset the impact of increased raw material and freight increased by $11.8 million over the prior year. This transport costs. Indirect costs were well managed, improvement includes $1.2 million from the US and and our hedging programme offset the impact of Australian governments’ COVID-19 support which a stronger New Zealand dollar. As a result, EBIT related to FY20, but conditions meant this could not increased by $5.1 million over FY20. be recognised until FY21.
Corporate
Corporate costs were up $3.0 million on the prior year due to provisioning for costs associated with defending a claim against a business Skellerup sold in 2008 as well as increased performance-related employee expenses.
Industrial Division EBIT ($m) Agri Division EBIT ($m)
35 20% 35 32% 30 30 16% 25 25 28% 20 12% 20
15 8% 15 24% 10 10 4% 5 5
0 FY17 FY18 FY19 FY20 FY21 0% 0 FY17 FY18 FY19 FY20 FY21 20%
Industrial Division EBIT EBIT % Agri Division EBIT EBIT %
21 SKELLERUP ANNUAL REPORT FY21 22 times has resulted in increased levels of levels increased in resulted has times shipping Longer difficult. been has this more recently although possible, where levels buffer to build us allowing anticipated, was materials raw some of availability Restricted revenue. in 11 increase the below cent per just year-end, prior the 10 on up cent per FY21 closed Receivables markets. and chains to supply interruptions the from arising risks heightened the given maintained was receivables on focus close and A continued FY21 Financial Position million was up 22 per cent on the pcp. the on cent per 22 up was million $58.8 of flow cash operating Consequently, year-end. prior the with compared FY21 of end the at inventory of reduction cent per afour enabled focus adetailed challenges these Despite warehouses. customers’ our and own our to both transit in inventory Operating Cash Flow Cash Operating FY18 FY19 FY20 FY21 FY17 ($m) 48.0 58.8 28.9 28.3 21.2 and down year-end. $19.8millionontheprior $8.7 million-just3percentofourtotalassets management meantnetdebtreduced to operating cashflows withsoundcapital combinationofrecordThe and earnings $1.7 millionover theprevious year-end. increasedinformation intangibleassetsby systemstoprovideinformation betterbusiness year-end.prior Investment inimproving our by $2.4million, orthree percent, over the value ofplant, property andequipmentreduced depreciation inFY21. As aresult, thenetbook mean ourcapitalexpenditure was againbelow partnerships withourmanufacturing partners in our Wigram facilitycompletedin2016and development, ofourinvestment thebenefit Our business model ofcustomer-focused Return on Net Assets Assets on Net Return FY17 FY18 FY19 FY20 FY21 (%)
23.0 23.4 20.6 28.7 23.1 Five-year financial summary
The table below shows the financial results and position of the Skellerup Group for each of the last five years. Over this five-year period, revenue has grown by 33 per cent and NPAT has increased by 82 per cent. The sustained earnings growth has enabled an increase in the gross dividend pay-out (excluding imputation credits) of 79 per cent over the same period.
Period Ending $000 FY21 FY20 FY19 FY18 FY17
Total Revenue 279,515 251,389 245,792 240,408 210,322
EBIT 56,361 42,486 41,798 39,781 32,824
Finance Costs 2,081 2,582 1,785 1,863 1,414
Share of net profit of associates (35) (73) 23 - -
Profit before Tax 54,245 39,831 40,036 37,918 31,410
Tax 14,070 10,767 10,973 10,641 9,300
Net Profit After Tax 40,175 29,064 29,063 27,277 22,110
EPS (c) 20.6 14.9 15.0 14.1 11.5
Dividend (c) 17.0 13.0 13.0 11.0 9.5
Operating Cash Flow 58,796 48,006 28,920 28,345 21,229
Cash Reserves (Net Debt) (8,736) (28,513) (36,576) (30,719) (35,755)
Total Assets 284,874 283,642 257,059 252,025 237,932
Total Liabilities 88,725 99,079 78,667 79,739 78,685
Net Assets 196,149 184,563 178,392 172,286 159,247
Return on Net Assets 28.7% 23.0% 23.4% 23.1% 20.6%
23 SKELLERUP ANNUAL REPORT FY21 24 Skellerup People Skellerup Our peopleOur stay close to customers workto them so we can with understand their needs and provide and needs solutions perform. their that understand of 55 (7 per cent) on five years earlier. These These earlier. years five on cent) per (7 55 of increase an and 12 months previous the on 15 of cent) (2 per to 813 increase an people, grown have team global too. Our have needs our changed, and grown has business our As composition isshown onpage4ofthisreport. or politicalbeliefs. A breakdown ofourgender or attributes, age, sexual orientation, religious ethnicity, cultural background, physical ability ongenderoridentity,discriminate race, changing environment we operate in. We donot future successandresponding totheever- Our diverse teamsare essentialtoSkellerup’s resilience ofourbusinesses shocks. toexternal andadapt,of ourteamstolearn andthe adapted andgrown. reflectsThis theability redundancies; infact, ourbusinesses have first appeared, we have hadnosignificant the US, China, theUKandItaly. SinceCOVID-19 Our teamsare basedinNew Zealand, Australia, years. five past the during cent per 33 and year past the over cent 11 of per growth to revenue compare increases their involvement in these projects developed developed projects these in involvement their implementation. successful Equally ensured and excellent was projects to these people our of commitment The systems. information our upgrading in capital human and financial significant invested we CEO’s statement) the in (as highlighted FY21 In to this. linked is or people capital human our of development The business. to our improvement meaningful a make will that big projects the on to focus resources financial required the with equipped people best our aligning is allocation Capital management. for senior responsibilities key the of one is allocation capital We believe work in our facilities around the world. the around facilities our work in to needed behaviour in or tohome changes from working of stints to prolonged adapted either have they Australia, and US the Europe, in people our of For tenacity. many and skill outstanding -with lives personal their on also work but their on just -not this of impacts the navigated world have the throughout teams and leaders Our adaptable. and flexible resilient, is that organisation an having of importance the demonstrated starkly has COVID-19 business. our and leaders to grow people our of development the in to invest continue We will programmes. university of part as and courses short at papers commercial and financial management, studied have leaders team and business our of some 12 months, past the Group. Over the across training functional and leadership skills, formal by complemented is people our of development On-the-job shareholders. for our returns greater and employees, our for satisfaction and development customers, for our experiences to better translate improvements these all Ultimately accounting. or operations service, customer it be roles, day-to-day their in manner more effective a in to perform expertise and skills their We look forward to the time when COVID-19 is under control, but having flexible working arrangements to ensure we retain and attract the right people will remain a key part of how we do business. We have had for many years and will continue to have roles that suit working from home, flexible hours and part-time arrangements.
Skellerup’s footprint is global and includes working with manufacturing partners, international suppliers and customers throughout the world. The strength of our relationships has enabled us to successfully introduce new products remotely, since our old model required engineers to visit in person. Skellerup does not employ child or slave labour and we ensure that our key partners have the same standard. Regardless of our global footprint, our commitment to maintaining a high standard of ethics in how we operate and do business is uniform across the world. Each year, we work with our leaders to ensure they observe and to report on improvements they and their teams spend time reviewing and required. Oversight of our programmes is discussing the behaviours that are required (as provided by the Board’s Health and Safety outlined in our Code of Ethics) and, equally Committee. A Health and Safety Report is also importantly, how they respond in the event they submitted at each Board meeting, and Board do witness or suspect behaviour inconsistent members periodically visit sites to observe with this Code. We also educate on key policies activities, and meet and discuss these with our including Information Security and Acceptable managers and teams. Use of Skellerup property. This is supplemented Ultimately the success of our programmes by regular online cyber security training. is measured by the number of injuries and We consider education is a key defence against incidents that occur. In FY21 and for the second unwanted intrusions to our business. successive year, we did not suffer any serious The protection and safety of our people and harm injuries. We did have two staff members others from accidental harm in our workplaces suffer injuries which resulted in absences from is Skellerup’s highest priority. All our practices work (lost-time injuries) and we had five staff and programmes are established with the require medical treatment for injuries that did not objective to keep our people safe and free from require an absence from work (medically treated workplace injury. Every Skellerup site has an injuries). We not only measure and review active Health and Safety Committee that meet injuries and medical treatment, we also actively monthly, follow an annual plan of activities and review near hits or incidents that could have improvements to keep their workplaces safe, caused injury to ensure we learn and eliminate and report monthly to the CEO on progress. the cause. Overall, in FY21 our total injury rate1 We use internal experts to complete peer was 0.87 down from 1.33 in FY20 and down reviews on sites across the Group to ensure from 1.61 in FY19. We are committed to leading, the benefit of specific expertise is shared (for educating and investing time and resources to example, guarding of machines). We also use continue this level of improvement and achieving external experts to assess on a site-by-site our goal of protecting our people and others basis the processes, risks and behaviours from accidental harm in our workplaces.
1The total injury rate (TIR) is the total number of serious harm injuries, lost-time injuries and medically treated injuries multiplied by 2,000 (the estimated annual hours worked by an individual), divided by the actual year-to-date hours worked, annualised and expressed as a percentage. The TIR represents the percentage likelihood of being injured on each site. Zero TIR is the benchmark that all our sites are striving to achieve.
25 SKELLERUP ANNUAL REPORT FY21 26 10 Achieving increasing sustainable financial returns has always been always has returns financial sustainable increasing Achieving Sustainable Growth means developing and investing in our people people our in investing and developing means It relationships. valuable long-lasting, to build us to enable needs their understand truly we that so customers with closely working means It broad meaning. has Skellerup at Sustainability On PCP On gainsincreases on production efficiency energy Wigram (GHG) gas 2greenhouse 1and scope of cent is ourlargest siteandgenerates per 40 over and distribution facilityin Wigram, Christchurch, rubberwareOur dairy design, manufacturing Italy.and UK US, the China, Australia, Zealand, New in facilities with business aglobal is Skellerup Reducing ouremissionsatSkellerup returns. financial improved generated and environment for the good been have below describe we projects the in demonstrated and made have we changes the of many experience our In to abusiness. cost anet at come improvements linked environmentally that perceived is it Sometimes operate. we which in environments and communities the to positively contribute activities our ensure to waste and emissions minimising means it And needs. customers’ our meet sustainably and to grow expertise the have we that so and will continue to be central to to continue Skellerup’s be central philosophy. will and Volume moulded Wigram product of %
7 UK we invested in a series of improvements improvements of aseries in invested we UK the in facility Ambic our At to Wigram. limited were not achievements and initiatives Our manufactured andrevenue generated. despite anincrease inthevolume ofproducts surpassed, witha7percentreduction achieved lights. actionsresultedThese inourgoalbeing improving plantutilisationandinstallingLED equipment (withoutahigherenergy usage), including increasing thecapacityofexisting initiatives were implementedthroughout FY21, emissions at Wigram by 5percent. Several we setatarget toreduce scope1and2GHG emissions fortheGroup. ofFY21 At thestart Wigram scope 1&2GHG emissions scope Wigram lowering emissionsandreducing waste. continuous environmental improvement including siteshaveAll Skellerup initiatives todeliver Continuous improvementatSkellerup FY21. in emissions GHG scope in reduction a21 cent per achieve and usage energy to reduce were we able plant operating some upgrading and system control climate anew installing windows, double-glazed fitting By emissions. 2GHG scope to reduce On PCP On % Process improvements Reducing packaging waste During FY21 we made a series of improvements In prior years we have highlighted reductions in at our facility in Jiangsu, China, to reduce production waste through reducing the number our environmental impact and upgrade our of product rejects and improving tooling and workplace. product design, as well as decreasing waste by eliminating plastic bags from packaging dairy In FY18 we highlighted the replacement of our liners. Reducing production waste is a constant coal-powered boiler with natural gas. During focus – along with environmental benefits, any FY21 we made further improvements to the reduction in rejects translates to an increase in process to reduce the generated discharge saleable product, which enables us to meet our levels by 66 per cent. customers’ needs faster or simply sell more! Until late 2020 our Jiangsu facility utilised an In FY21 we eliminated cardboard box packaging on-site well for its process and hygiene water of our vacuum pumps by bolting the pumps to requirements. With a change to town water pallets for transportation. We manufacture over supply we installed a water circulation system 5,000 pumps per year, so the packaging saving to recycle water used in our manufacturing is significant. In addition to the environmental process. The installation of this system has benefits of less waste, we have reduced cost and reduced our water usage by 55 per cent. generated more productive time for our team We also invested in systems to improve the to build and assemble products – ultimately collection and disposal of emissions generated translating to improved economic benefits for from our manufacturing process at Jiangsu shareholders. in FY21.
Group energy efficiency gains on growing revenue
2,278 2,339 GHG emissions 2500 GHG emissions 10 9.06 8.37 (tonnes CO2-e) per $1 million 2000 revenue 8 1500 (tonnes CO2-e) 6 1,416 1,379
Scope 1 1000 4 Emissions 500 2 Scope 2 862 960 Emissions 0 0
FY20 FY21 FY20 FY21
Skellerup Group revenue up 11% and scope 1 and 2 GHG emissions for the corresponding period increased by only 3% on pcp
27 SKELLERUP ANNUAL REPORT FY21 28 Board of Directors of Board Nomination Committees. Nomination and Safety, Remuneration and Health Audit, the of a member is and 2002 May in Board the joined 2016. in Liz (ONZM) Merit of Order Zealand New to the Officer an as appointment her with acknowledged was to governance contribution Liz’s Zealand. New in Accountants Chartered of Institute the of Board Standards Reporting Financial the also and Zealand New of Bank Reserve the of Committee Policy Monetary the of member former Directors, of Institute the of President apast is She Board. Advisory Zealand New Marsh the of amember and Limited Group EBOS and Limited Healthcare Oceania of Chair currently is She years. 20 than more for sector public and private the both in roles governance of range extensive an 2017. held has Liz January in Chair appointed was Elizabeth discipline. business sound and vigour robust are pursued with and plans our ensures across Skellerup’s Board diverse of range skills and experience The Independent Chair Independent CFIoD) FCA, BMS, (ONZM, Coutts Liz
Nomination Committees. Committees. Nomination and Safety, Remuneration and Health the of amember also and Committee Audit the of Chair is 2013. in Alan (CNZM) Merit of Order Zealand New the of aCompanion as appointment his with acknowledged was business and to sport contribution Alan’s Directors. of Institute Zealand New the and Council Cricket International the of President past and NZ Cricket of Chairman apast is 2006, until 10 for years NZ KPMG of Chairman was He Limited. Corporation Scales and Limited Healthcare Oceania of director a also is He Trust. Community Zealand New the of Chairman currently is Alan organisations. leading businesses and sporting and governing experience considerable has 2016. Alan August in Board Holdings Skellerup to the appointed was Alan Independent Director FCA) BCA, (CNZM, Alan Alan Isaac
Strowger Committee. Management Risk and Audit the of amember and Committee Safety and Health the of Chair is John Zealand. New and China between pertaining to investment and trade does it work the coordinates which desk, China firm’s that co-heads John Tripp, Chapman at A partner Awards. Law 2015 Australasian 2019, the Year at 2017 the of and Maker Deal NZ named was He &acquisitions. mergers and law securities and contract corporate, in specialises who lawyer commercial aleading is 2015. John March in Board Holdings Skellerup to the appointed was John Independent Director LLB (Hons) John John
David Paul David Cushing Shearer Mair (BCom, ACA) BCom (BE, MBA) Independent Director Independent Director Executive Director
David was appointed to the Paul was appointed to the Skellerup David was appointed to the Skellerup Holdings Board in Holdings Board in August 2020. Skellerup Holdings Board in August 2017. He is a former Paul is Senior Vice President - November 2006, and as CEO investment banker with over Sales and Marketing for Fisher & in August 2011. He has been 20 years’ experience as a director Paykel Healthcare. Paul has global leading the Group for ten years of listed companies. David is business experience spanning during which time it has achieved currently Executive Chairman thirty years with proven success significant revenue and earnings of Rural Equities Limited and growing international markets and growth by focusing on designing Managing Director of private leading multi-disciplinary teams and delivering critical engineered investment company H&G Limited. across forty countries. Paul is a products for OEM customers. David has expertise across a member of the Audit Committee In particular, he has overseen the broad range of industries having and the Health & Safety Committee. transformation of the Agri Division previously been a director of into a design-led, customer focused, Fruitfed Supplies Limited, Williams growth business following on from & Kettle Limited, Tourism Holdings the relocation from Woolston to Limited, Acurity Health Group Wigram after the Christchurch Limited, PGG Wrightson Limited, earthquakes. David is currently Red Steel Limited and NPT Limited. a Director of Forté Funds David is a member of the Audit, Management Limited. David is a Health and Safety, Remuneration member of the Health and Safety and Nomination Committees. Committee. COMPETENCIES E R O C Governance International Finance & Accounting Growth Risk Management Agriculture Capital Markets Infrastructure Regulatory Manufacturing & Supply Chain Human Resources Technology Health & Safety
29 SKELLERUP ANNUAL REPORT FY21 30 for to applications water. used deliver food safe and products particularly deliver world specialist engineered leading toSkellerup’s and design on capability seek team to our capitalise Board SkillsBoard Matrix Governance Infrastructure Agriculture Growth International Regulatory Technology Safety & Health Resources Human Manufacturing & Supply ChainManufacturing & Markets Capital Risk Management Accounting & Finance 4/6 4/6 3/6 6/6 5/6 6/6 6/6 6/6 6/6 6/6 4/6 4/6 5/6 Manufacturing, 3. Manufacturing, 1. Core 2. & Technology & Chain Supply Markets & Markets Customers
1. Core 2. Markets & Customers
Governance International i. Commitment to the highest standard of i. Experience as a leader or advisor for a business governance including social and environmental with a substantial presence in global markets performance including understanding commodity and financial markets ii. Prior Board experience (ideally NZX50 or equivalent) or experience as Executive or advisor ii. Experience as a leader or advisor for a business to Board for at least 5 years with a substantial OEM customer base
iii. Experience in governing highly effective iii. Experience as a leader or advisor for a business executive leaders with a strong range of branded products
Finance & Accounting Growth i. Senior Executive or Board experience in i. A track record of developing and implementing a international finance, accounting, reporting, successful and sustainable strategy controls and taxation of growth in business
Risk Management Agriculture i. Experience in developing or overseeing an i. Experience and understanding of the dynamics of appropriate risk framework and culture the international and domestic agriculture (in particular dairy) market ii. Experience in evaluating and managing financial and non-financial risks, including intellectual Infrastructure property, technology and cyber i. Experience and understanding of customers, Capital Markets products and risks associated with infrastructure for potable water, construction, automotive and i. Experience with equity and debt markets and general applications capital structuring
ii. Experience with mergers, acquisitions and dispositions and investment analysis 3. Manufacturing, Supply iii. Experience and understanding of dealing with investors and the investment community Chain & Technology
Regulatory Manufacturing & i. Understanding of the regulatory environment of Supply Chain Skellerup’s business i. Experience as a leader or advisor for a business with substantial manufacturing capability Human Resources ii. Experience as a leader or advisor dealing with i. Experience in leading teams and with best- international contract manufacturers and contracts practice development, performance and remuneration structures for international business iii. Experience as a leader in international logistics and supply chain Health & Safety iv. Understanding of contractual arrangements i. Understanding of health and safety requirements with large OEM customers (protection of IP, and management for a global business counterparty style and approach, risk)
Technology i. Understanding of the opportunity and risks provided by technological development and disruption, and development and protection of IP
31 SKELLERUP ANNUAL REPORT FY21 32 Corporate Governance Corporate similarly; they hold management accountable accountable management hold they similarly; themselves to conduct team management the of members require and behaviour ethical of standards high set Directors Skellerup 1. Principle of recommendations the with complies Skellerup Principle 1–Code of Ethical Behaviour below. detailed 2021 is June 30 ended year financial for the approach Our at website Company’s the of section Governance the on available are section Governance Corporate this to in referred Policies and Charters the of each and Constitution Skellerup’s ended 30June2021. respectsNZX Codeinallmaterial fortheyear full compliancewithallrecommendations ofthe by theNZXListing Rules. hasachieved Skellerup Governance Code2020(NZXCode)asrequired recommendations oftheNZXCorporate and effective. reports Skellerup againstthe and practices toensure they are appropriate Skellerup’s governance policies, procedures BoardThe regularly reviews andassesses value. shareholder long-term to building committed are and Company the of success long-term the ensuring on focused are management and Board The shareholders. our of confidence the to maintaining and business the of management effective to the central is this We believe governance. corporate of standards high to achieving committed are management and Board Skellerup’s is current asatthatdate. containedinthisCorporate information GovernanceThe statement by theBoard HoldingsLimitedon18 ofSkellerup August 2021. the year. CorporateThe Governance statementwas approved structures andprocesses, andhow they have beenappliedduring outlinesourcorporate sectionofthe This Annual governance Report organisation. the throughout standards these for delivering www.skellerupholdings.com. legislative compliance, and the confidentiality consideration ofinterest, ofconflicts conduct, for allCompany personnel andincludes of EthicsoutlinestheCompany’s expectations are expected toconductthemselves. CodeThe management andallemployees oftheCompany Directors, to which according behaviour ethical of standards minimum of framework a provides Ethics of Code Skellerup’s compliance. It imposes further restrictions on restrictions further imposes It compliance. with employees and Directors to assist information material of examples provides and prohibited always is trading insider that notes Policy Trading Products Financial Skellerup’s thereof. derivatives other or any shares ordinary Skellerup in for dealing rules and on policy its understand employees and Directors its to ensuring committed is Skellerup year. the during behaviour unethical of instances serious of reports any received not has Skellerup 2000. Act Disclosures Protected the of requirements the with consistent Policy Whistle-blower its in out set is or employees directors its of conduct the of respect in concerns any with dealing and for reporting procedure Skellerup’s CEO. to the so done have they that confirm and staff with to review required are turn in Managers The annually. Managers Business Group and all with Group policies, key other with together Code, this reviews CEO The behaviour. unethical any reporting for mechanism the and Code’s purpose the explaining employees, and to Directors Ethics of Code its communicates Skellerup areto politicalparties expressly prohibited. Under Skellerup’s CodeofEthics, contributions use oftheCompany’s assetsandinformation.
Directors and senior management and permits The Board Charter requires that the Chair be an trading only in prescribed trading windows or independent, non-executive director and that the with consent. roles of the Chair and CEO are separate.
The table on page 35 shows each director’s Principle 2 – Board Composition Board Committee memberships, the number of and Performance meetings of the Board and its Committees held Skellerup complies with the recommendations during the year and the number of meetings of Principle 2. attended by each director. Minutes are taken The Board has adopted a formal Board of all Board and Committee meetings. Charter, which distinguishes and discloses The Board is responsible for managing the respective roles and responsibilities of the conflicts of interest identified by Directors. Board and Management. Written agreements Each Director is responsible for minimising have been entered into for all Director the possibility of any conflict of interest as appointments since 2017. regards their involvement with the Company The members of Skellerup’s Board collectively by restricting involvement in other businesses provide the broad range of strategic, business, that would likely lead to a conflict of interest. commercial and financial skills and knowledge, Board procedures ensure that all Directors and the independence and experience have the information needed to contribute required to lead and govern the Company to informed discussion and decisions on a effectively. consistent basis and to carry out their duties The Board regularly reviews its performance effectively. Senior managers make direct presentations to the Board as required to give and composition to ensure it has the range of the Directors an understanding of management capabilities required. During FY20 Skellerup’s strategies, priorities, style and capabilities. Board appointed an external adviser to assist Directors also visit Skellerup’s facilities with the identification of a potential additional throughout the world as part of their ongoing director to provide succession and continuity engagement to ensure they are familiar with for the Group. Paul Shearer was appointed as an all aspects of the Group. Training is made independent director by the Board on 21 August available to Directors and in the last financial 2020 and then elected by shareholders at the year Directors participated in training on a 2020 annual meeting on 29 October 2020. wide range of topics. Currently, the Board comprises five non- Skellerup has a written Diversity Policy in executive, independent Directors and one place. Diversity in Skellerup includes (but executive Director. There is no shareholding is not limited to) gender, race, ethnicity qualification for directors under Skellerup’s and cultural background, disability and Constitution, although all directors currently hold physical capability, age, sexual orientation, a beneficial interest in Skellerup shares. See and religious or political belief. A gender page 78 for details of these interests. composition table of the Skellerup Directors, The independence of Directors is officers, management and staff is included on reconsidered at least annually. Skellerup’s page 80. Skellerup maintains a merit-based Board most recently reviewed each director’s environment which provides equal opportunity independence status at its Board Meeting on for development and recognition based on 18 August 2021. Having regard to the NZX performance and a flexible and inclusive work Listing Rules and the NZX Code, all five non- environment that values differences that create executive directors have been determined value. Skellerup remunerates equivalent roles to be independent. See pages 28 to 31 or the in an equitable manner. Company’s website for more information on the tenure, skills and experience of Skellerup’s current Board. The Independence status of each Director is noted also on pages 28 and 29.
33 SKELLERUP ANNUAL REPORT FY21 34 disability, age, religious beliefs. beliefs. religious age, disability, background, colour, race/ethnicity/cultural gender, orientation, gender identity, sexual of grounds the on against discriminated not are employees where workplace inclusive an to operate aims Skellerup 1. follows: as progress reports and objectives measurable set Skellerup For FY21 annually. reviewed and Board the by set to be objectives measurable requires Policy Diversity Skellerup’s role. No issues arose from this review. this from arose role. issues No the in person the of independent performance and effort responsibility, experience, skills, relevant on review the based and defined, were clearly roles all ensured management review salary annual Skellerup’s of part as 2021 July In equitably. paid are employees its of all to ensuring committed is Skellerup 3. roles. for certain arrangements home from working and employment time part implementing arrangements, working flexible with staff to support continued has Skellerup FY21 During pandemic. COVID-19 the of aresult as were imposed movement on restrictions when period the with coinciding 2020, April in adopted being Policy Home from Working to aformal led review The employees. of circumstances the and business the of needs the to meet suitable where Group the throughout implemented to be continue and well working are arrangements workplace flexible current that identified review That required. improvements any identify and provided currently arrangements environment workplace flexible the to review undertook Company the FY20 In workforce. its of diversity to encourage ameans as arrangements working flexible accommodates that aworkplace to provide aims Skellerup 2. FY21. in were reported incidents such No or victimisation. discrimination harassment, of complaints/findings zero of atarget adopted Skellerup FY21 In
Pay equity Pay No discrimination Flexible workplace environment workplace Flexible
invitation of the Chair. the of invitation by attend auditors external the Committee; the of invitation the at members ex-officio as (CFO) attend Officer Financial Chief the and CEO The Chair. as appointed is whom of one Directors, independent non-executive, five comprises currently Committee This 1. below.described are Committees these of authorities and powers responsibilities, delegated The charter. written specific its against Committee standing each of performance the reviews regularly Board The charter. awritten under operates effectively, eachresponsibilities of which its out carrying in to assist Committees Board four appointed has Board The 3. of Principle recommendations the with complies Skellerup Principle 3–Board Committees • to: are responsibilities year. Its each times three of aminimum meets Committee This member. ex-officio an as meetings attends also CFO The Director. Executive the plus Chair, as appointed is whom of one Directors, independent non-executive, five comprises Committee This 2. Shearer. Paul and Cushing Strowger, David John Coutts, Elizabeth (Chair), Isaac Alan is Committee the of composition current The Board. full to the meetings its of each of proceedings the reports Committee Audit The • • • to: are responsibilities year. Its each times four of aminimum meets Committee This
Skellerup GroupSkellerup the within management (H&S) Safety and Board. the by to approval prior statements audit external disclosure and practices Audit Committee Committee Audit Provide leadership and policy for Health for Health policy and leadership Provide Committee Safety and Health half-yearly and annual the Review the of outcome and scope the Review policies, accounting on Board the Advise
• Advise the Board on H&S strategy Remuneration packages are reviewed annually. and policy and specify targets to track Independent external surveys are used as a performance basis for establishing competitive packages. Management only attend Remuneration • Review management systems to ensure that Committee meetings at the invitation of the they are appropriate to manage hazards Committee. and risks of the business The current composition of the Remuneration • Monitor and review performance by Committee is Elizabeth Coutts (Chair), specifying and receiving timely reports Alan Isaac and David Cushing. on incidents, investigations and resultant actions and with the assistance of internal 4. Board Nomination Committee and external audits. This Committee comprises three non- The H&S Committee reports proceedings executive Directors, one of whom is appointed of each of its meetings to the full Board. The as Chair. It meets as required to recommend current composition of the Committee is John new appointments to the Board. Strowger (Chair), Elizabeth Coutts, Alan Isaac, Board composition is regularly reviewed by David Cushing, Paul Shearer and David Mair. the full Board and the Committee to ensure the 3. Remuneration Committee collective skillset is appropriate for the Group and to provide continuity and succession. This Committee comprises three non- executive, independent Directors, one of whom The current composition of the Board is appointed as Chair. It meets as required to: Nomination Committee is Elizabeth Coutts (Chair), Alan Isaac and David Cushing. • Review the remuneration packages of the CEO and senior managers
• Make recommendations to shareholders in relation to non-executive Directors’ remuneration packages.
Board and Committee Attendance 1 July 2020 to 30 June 2021
Director Board Audit Health & Safety Remuneration Nomination
Liz Coutts 8 of 8 5 of 5 3 of 3 2 of 2 1 of 1 Alan Isaac 8 of 8 5 of 5 3 of 3 2 of 2 1 of 1 John Strowger 8 of 8 5 of 5 3 of 3 N/A N/A David Cushing 8 of 8 4 of 5 3 of 3 2 of 2 1 of 1 Paul Shearer † 7 of 7 4 of 4 3 of 3 N/A N/A David Mair 8 of 8 5 of 5* 3 of 3 N/A N/A
* David Mair attends Audit Committee meetings ex-officio at the invitation of the Committee † Paul Shearer was appointed to the Board on 21 August 2020
Skellerup has a formal Takeover Response Policy in place. The purpose of the Policy is to ensure that Skellerup is well prepared for an approach and, therefore, it will be better able to control the takeover response process and respond to any approach in a professional, timely and coordinated manner and in the best interests of Skellerup and its shareholders.
35 SKELLERUP ANNUAL REPORT FY21 36 Monthly reporting also provides information on information provides also reporting Monthly objectives. and strategies Company’s the of context the in reviewed to be performance financial divisional to enable month each Board to the separately reported is divisions two Skellerup’s of progress financial The disclosed. information of balance and timeliness the in and reporting financial in integrity demands Board The 4. Principle of recommendations the with complies Skellerup Principle 4–Reporting and Disclosure recommendations to shareholders in relation relation in to shareholders recommendations making and managers senior and CEO the of packages remuneration for reviewing responsible is Committee Remuneration The authority. and membership, procedures, responsibilities its outlines which Charter, aformal under operates Committee Board’s Remuneration The 5. Principle of recommendations the with complies Skellerup Principle 5–Remuneration company. a listed being with come that requirements disclosure continuous the with compliance to ensure place in processes clear and Policy Disclosure Continuous awritten has Company The the Group. fairly present results thefinancial andpositionof statements of theCEOandCFOthatfinancial reporting isreinforced by inwriting certification oftheCompany’sfor theintegrity financial this Annual Report. Managementaccountability managementasreportedsustainability risk in including environmental, economicandsocial information andnon-financial with financial recognises thevalue ofproviding shareholders provide clear, statementsand concisefinancial statements.financial CompanyThe seeks to the accuracy, completenessandtimelinessof reporting, financial ofexternal integrity including The Audit Committeeoversees thequalityand outcomes. to optimise taken being steps the and business, the facing risks and customers personnel, key opportunities, H&S,
The currentThe approved poolofremuneration does notpay retirement toDirectors. benefits responsibilities ofthesepositions. Skellerup Audit Committeetoreflect theadditional fees are paidtotheChairs oftheBoard and ofdirector’sis paidintheform fees. Additional Directors’The remuneration, except fortheCEO, Remuneration Directors’ shareholders. and business the of needs the to meet reasonable and fair transparent, be will managers and officers of Directors, remuneration the that are Policy this of principles guiding The performance. and remuneration between link aclear is there and organisation, for the appropriate and fair are practices remuneration that to ensure Skellerup of managers senior and officers to Directors, apply that principles remuneration the outlines Policy This place. in Policy Remuneration awritten has Skellerup remuneration. Directors’ to non-executive market data and organisational context. context. organisational and data market external relative of assessment an by informed needed, as reviews remuneration undertakes Group role. The the of complexity and scale the by determined is salary Base provided. where contributions, employer superannuation and salary base includes remuneration Fixed Remuneration Annual Fixed 79. page on detailed is CEO, the for place in scheme incentive share-based term long- the of adescription with together years, prior the in 2021 and June 30 ended year the in CEO to the paid remuneration Total Board. the and Committee Remuneration the by annually reviewed is This (LTI). incentive long-term and (STI) incentive ashort-term remuneration, fixed of consists CEO’s remuneration The Remuneration CEO remuneration are shown onpage78. amounted to$534,917. DetailsofDirectors’ 2021, totalfeespaidtonon-executive Directors or share scheme. Intheyear ended 30June a fixed cashfeeandare ofany incentive notpart October 2016. Non-executive Directors are paid shareholders atthe Annual Meetingon26 Directors is$550,000. wasThis approved by available forthepayment ofnon-executive Short-term Incentives (STI) Each Director has a sound understanding of the Senior executives’ remuneration comprises a key risks faced by Skellerup. combination of fixed and at-risk components. The Board reviews the Group’s Risk Payment of the at-risk component is linked Management Report prepared by the CEO to exceeding previous best annual financial and management team on a semi-annual performance in the areas of the business basis and specific items including the Group’s for which each executive is responsible or, approach to managing information systems in some circumstances, the achievement of risks are monitored monthly. The Risk specific targets. The goals and targets set Management Report identifies key risks and in each category are specific, objective and strategies to manage these risks. The Board measurable, such that there is an accurate ensures that adequate external insurance judgment each year as to whether the goal has cover is in place appropriate to the Company’s been achieved or not. size and risk profile.
The CEO approves (with notification to The Audit Committee monitors the Company’s Remuneration Committee) the annual STI system of internal financial control with the aid payments for all entitled staff other than the of reviews and reports prepared by external CEO and CFO. STI payments are fully accrued providers and periodic certification by the in the year to which they relate. The Board CEO and CFO. This system includes clearly approves the annual STI payments for the CEO defined policies controlling treasury operations and CFO and targets for the year ahead. and capital expenditure authorisation. The CFO Long-term Incentive (LTI) is responsible for ensuring that all operations within the Company adhere to the Board- The CEO and CFO participate in the approved financial control policies. Company’s LTI plan. Details of this plan are provided on page 67 and note 18 to the The H&S Committee leads and monitors H&S Financial Statements. management within the Skellerup Group. The Company operates a comprehensive H&S Performance, Development and framework across all its businesses to identify Remuneration Review and address workplace hazards and to monitor Performance and development reviews and review compliance with H&S policies and are completed to inform decisions around procedures. Board review of H&S is a priority remuneration adjustments. The remuneration and is facilitated by both the activities of the review process also includes consideration H&S Committee and the receipt and review of market information and in the case of of H&S reports at each Board meeting. This employees under Collective Employment review is further facilitated by regular visits to Agreements, negotiations with unions. key sites providing the opportunity to engage Pay Gap and query staff at all levels of the organisation. The pay gap represents the number of Details of Skellerup’s key H&S risks and its times greater the CEO remuneration is to an performance for the year ended 30 June 2021 employee paid at the median of all Group are included on pages 24 to 25. employees. At 30 June 2021, the CEO’s base salary at $740,111 was 14.40 times that of the Principle 7 – Auditors median employee at $51,405 per annum. Skellerup complies with the recommendations of Principle 7.
Principle 6 – Risk Management The Board annually reviews the quality and Skellerup complies with the recommendations independence of the external audit process, of Principle 6. which culminates in the audit report issued in The Board is responsible for the Group’s risk relation to the annual financial statements. management and internal control system.
37 SKELLERUP ANNUAL REPORT FY21 38 Management and the external auditors auditors external the and Management auditor. external the by provided are that services non-audit any approves Committee Audit auditor. The role the of independent the with conflicting as perceived not are auditors Skellerup’s by provided services other and assurance related that to ensure followed to be guidelines out sets Policy The implemented. been has Policy Independence Audit awritten maintained, is auditor external Company’s the of independence to ensure and auditors its with relationship Skellerup’s for framework established an has Board The on page 50 of the financial statements. on page50ofthefinancial by the Audit Committeeare disclosedinNotef issues andjudgementsconsidered significant The required. as auditors internal the with meets and activity audit internal all approves and reviews Committee Audit The PwC. of assistance the with review audit for internal for consideration priorities to determine Report Management Risk semi-annual its from risks residual the reviews Skellerup PwC. of assistance the with function audit internal an maintains Skellerup Group. to the services non-audit any provided not have EY 2021, June 30 ended year the During audit. the to relating questions to answer available is and Meetings Annual the attends partner audit The 5years. of for amaximum act 2018 will and June 30 ended year the during appointed was audit Skellerup for the responsible partner audit 1993. The Act Companies the with accordance in Meeting Annual 2020 the at shareholders by reappointed was and (EY) &Young Ernst is auditor external Skellerup’s year. per twice least at present management of representatives any without auditors the with meets Committee Audit The Committee. Audit the of meetings to attend invited are
www.skellerupholdings.com website its on for shareholders The Company maintains information performance. its and Company the about questions ask to opportunity the exercise they to ensure Meetings Annual at fully participate and to attend shareholders encourages Board The Meetings. Annual at and NZX, to the disclosure continuous and periodic and reports, interim and annual the through to shareholders communicated is Information Company. the with to engage shareholders encourages and Company the affecting developments of informed kept are shareholders that to ensure aims Board The 8. Principle of recommendations the with complies Skellerup Relations & Principle 8–Shareholder Rights in which the Company operates. operates. Company the which in environments the in requirements compliance the or exceeds meets and employees its for opportunities development delivers and safe is that awork environment customers, for solutions quality consistent delivering by value shareholder long-term delivers that amanner in business its to manage strives Skellerup Company. the in stakeholders all of interests the respects Board The NZX. to the disclosures and Meeting Shareholders Annual the Company, the of reports Interim and Annual through informed kept also are stakeholders key other and Shareholders NZX. to the released information all and policies and documents governance corporate key of copies structure, and business Skellerup’s of a description . This includes includes . This
Consolidated Financial Statements For the year ended 30 June 2021
39 SKELLERUP ANNUAL REPORT FY21 40 interest in, the in, interest the of business the of activities trading of course ordinary opinionsthe we formed. have for or report, this for audit work, our and company than the anyone to other responsibility assume purpose.no andother report auditor's for we that This report is made solely to the company's shareholder to the company's report madeis This solely the for flows cash and performance financial its subsidiaries its than in in, thecompany have Other our capacity auditorno we as orinterest relationship with, our opinion. We bel the respects, In our opinion, the to International Financial Reporting Standards Reporting Financial to International other ethical responsibilities in accordance with responsibilities ethical other including a Zealand) s Code of Ethics for We are independent of the the of independent are We income, comprehensive of the Financial the of the g “the (together subsidiaries responsibilities under those under responsibilities We have audited the audited have We Opinion Independent A member firm of Ernst & Young Global Limited theaudit of our of context the audit of are matters Keyaudit Key audit matters with in accordance We conducted audit our Basis for statements responsibi the We havefulfilled context. provided in that is audit matter addressed our the how of description matters. on these opinion separate a not provide do but we thereon, Report on the of audit statements the financial A member firm of Ernst & Young Global Limited statements responsibi the We havefulfilled context. provided in that is audit matter addressed our the how of description matters. on these opinion separate a not provide do but we thereon, theaudit of our of context the audit of are matters Keyaudit Key the in, interest the of business the of activities trading of course ordinary subsidiaries its than in in, thecompany have Other our capacity auditorno we as orinterest relationship with, our opinion. We bel in accordance with responsibilities ethical other Zealand) Code of Ethics for the of independent are We Financial the of those under responsibilities with in accordance We conducted audit our Basis for opinionsthe we formed. have for or report, this for audit work, our and company than the anyone to other responsibility assume purpose.no andother report auditor's for we that shareholder to the company's report madeis This solely Standards Reporting Financial to International the for flows cash and performance financial the respects, In our opinion, the including a s income, comprehensive the g “the (together subsidiaries the audited have We Opinion Report on the of audit statements the financial Independent tatement tatement group group audit matters ieve that the audit evidence we have obtained is sufficient and appropriate to provide a basis for providefor to basis and a appropriate sufficient is obtained have we audit evidence the that ieve ieve that the audit evidence we have obtained is sufficient and appropriate to provide a basis for providefor to basis and a appropriate sufficient is obtained have we audit evidence the that ieve might to the shareholder state company's might to the shareholder state company's
issued byN the issued issued byN the issued
opinion opinion for the for for the for
summary summary summary summary as at at as as at at as
section of the audit report, including in relation to these matters. these to relation in including audit report, the of section section of the audit report, including in relation to these matters. these to relation in including audit report, the of section consolidated consolidated consolidated consolidated consolidated consolidated . . group group Statements Statements auditor’s report to the auditor’s report to the Partners and employees of our firm and our Partners of the employees may with deal Partners and employees of our firm and our Partners of the employees may with deal year year 30 June 30 June
consolidated consolidated
Assurance Practitioners Assurance Assurance Practitioners Assurance . . of significant accounting policies accounting significant of of significant accounting policies accounting significant of
those matters that, in our professional judgment, were of most significance in our our in most of significance were judgment, professional in our that, matters those those matters that, in our professional judgment, were of most significance in our our in most of significance were judgment, professional in our that, matters those
then ended then ended financial financial financial financial ew ew ew ew financial statements financial financial statements financial consolidated consolidated consolidated consolidated
section of our repo our of section
group section of our repo our of section
group standards are further described further standardsare in the standards are further described further standardsare in the financial position of the position of financial Z financial position of the position of financial Z roup”) roup”) consolidated consolidated 202 202 ealand ealand lities described in the described lities lities described in the described lities 1 statements 1 financ statements ial statements on statements ial financ
in accordance with with accordance in in accordance with with accordance in , and , and
, and , and
on pages of the of on pages of the of
Auditing and Assurance Standards Board, Standards Assurance and Auditing Auditing and Assurance Standards Board, Standards Assurance and Auditing ial statements on statements ial statement of changes in equity and and changes inequity of statement statement of changes in equity and and changes inequity of statement consolidated income statement, incomestatement, consolidated consolidated income statement, incomestatement, consolidated group financial financial group financial financial
To theTo permitted fullestextent by law, we donot acceptor To theTo permitted fullestextent by law, we donot acceptor Shareholder year Shareholder year
44 44
of of
of of
International Standards on Auditing (New Zealand) on Auditing (New Standards International
International Standards on Auditing (New Zealand) on Auditing (New Standards International of the current current the of of the current current the of and International Financial Reporting Standards. Reporting Financial and International (including International Independence Standards) (New (New Standards) Independence International (including rt. and International Financial Reporting Standards. Reporting Financial and International (including International Independence Standards) (New (New Standards) Independence International (including rt.
, these requirements these , to to these requirements these to to
then ended Skellerup Holdings Skellerup
then ended and the Skellerup Holdings Skellerup
and the
s
s 77
77,
those matters we are we to them required matters in to state anthose statements those matters we are we to them required matters in to state anthose statements Auditor’s responsibilities for the audit of the financial financial the auditof the for responsibilities Auditor’s Auditor’s responsibilities for the audit of the financial financial the auditof the for responsibilities Auditor’s , . group . group
Professional and Ethical Standard and Ethical Professional
Professional and Ethical Standard and Ethical Professional
which comprise the which
which comprise the which s, as a bodya as s, s, as a bodya as s,
consolidated consolidated
consolidated consolidated
pages pages pages pages group s group s
in accordance with New Zealand equivalents with Zealand equivalents New in accordance of of
as at at as in accordance with New Zealand equivalents with Zealand equivalents New in accordance of of
as at at as year the company's shareholder the company's year the company's shareholder the company's
as a whole, and in formingopinion whole, our a as Skellerup Holdings as a whole, and in formingopinion whole, our a as Skellerup Holdings . . 44 44 . We have no other relationship with, or We have with, no relationship other . Auditor’s Responsibilities Auditor’s We have no other relationship with, or We have with, no relationship other
Auditor’s Responsibilities Auditor’s
These matters were addressed addressed in the were matters These 30 June 30
These matters were addressed addressed in the were matters These 30 June 30 .
.
to to .
to to
.
Limited
Limited Our audit has been undertaken so so been undertaken has audit Our Our audit has been undertaken so so been undertaken has audit Our group notes to notes group notes to notes 77 77
consolidated For each matter below, our our each below, matter For present in allfairly, material consolidated balance sheet For each matter below, our our each below, matter For present in allfairly, material
consolidated consolidated 2021
consolidated consolidated
on normal terms within the within terms on normal 2021 on normal terms within the within terms on normal
(“the c (“the (“the c (“the
and we have fulfilled our our fulfilled andhave we the financial and we have fulfilled our our fulfilled andhave we consolidated consolidated the financial
consolidated consolidated
Accordingly, our audit audit our Accordingly, Accordingly, our audit audit our Accordingly,
and and and and ompany ompany
Limited balance sheet its s, as a bodya as s, Limited
its s, as a bodya as s,
1 1
statement of of statement
statement of of statement International consolidated consolidated for the Audit Audit the for
International consolidated consolidated for the Audit Audit the for
statements statements statements statements ” cash flow cash ”
cash flow cash )
or any of any of or
)
or any of any of or
and its its and
and its its and
. .
, for for ,
Our Our , for for , Our Our
of of
of of
included the performance of procedures designed to respond to our assessment of the risks of material misstatementIndependent of theauditor’s financial report statements. to the The Shareholderresults of our audits of procedures,Skellerup including Holdings the Limited procedures performedReport on to theaddress audit the ofmatters the financial below, provide statements the basis for our audit opinion on the accompanying consolidated financial statements. Opinion Scoping of the audit We have audited the financial statements of Skellerup Holdings Limited (“the company”) and its Whysubsidiaries significant (together “the group”) on pages How44 to our 77 audit, which addressed comprise the the key consolidated audit matter balance sheet of the group as at 30 June 2021, and consolidated income statement, consolidated statement of Skellerup is a global business with over half As the coordinating primary team (“group audit team”), EY New comprehensive income, consolidated statement of changes in equity and consolidated cash flow of the group’s revenue generated in Zealand assigned a scope to each component team in all countriesstatement other for thethan year New then Zealand. ended of the groupsignificant, and the locations. consolidated Consideration notes to was the given financial to the statements nature, size including a summary of significant accountingand policies risks. associated with each of the group’s significant A significant area of focus when conducting businesses. theIn ouraudit opinion, was assessing the consolidated the sufficien financcy ialof statements on pages 44 to 77 present fairly, in all material auditrespects, evidence the consolidated obtained financialin differing position As of a theresult group of this as assessment,at 30 June each2021 business and its wasconsolidated allocated a geographicfinancial performance locations and cashbusinesses flows for tothe yearscope then and ended materiality in accordance reflecting withthe business New Zealandes risk equivalents profile. enableto International us to reach Financial our Reportingopinion on Standards the and International Financial Reporting Standards. The group audit team communicated to the component audit consolidated financial statements as a whole. teams the significant risk areas to be considered and the ThisThis reportwas isboth made with solely respect to the company'sto the shareholders, as a body. Our audit has been undertaken so information to be reported back to the group audit team. The determinationthat we might andstate allocation to the company's of materiality shareholder components those and matters group we teams are requiredthen determined to state tothe them extent in an and asauditor's well as reportthe determination and for no otherof the purpose. nature Tonature the fullestof audit extent procedures permitted to be by performed law, we do in notaccordance accept orwith andassume extent responsibility of procedures to to anyone be performed other than at theInternational company andStandards the company's on Auditing shareholder (New Zealands, as). a body, for eachour auditlocation. work, for this report, or for the opinions we have formed. In order to obtain sufficient coverage of group balances, the Basis for opinion group audit team performed analytical procedures in relation to a number of smaller business units. We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those standards are furtherAll com describedponent inteams the Auditor’s were Responsibilitiesrequired to provide for the Auditwritten of the Financial Statements section of our repoconfirmationrt. to the group audit team explaining the work performed, the results of that work as well as key documents We are independent of the group in accordancesupporting with Professional any significant and findings Ethical or Standard observations. 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New The group audit team held discussions with Skellerup Zealand) issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our management and component teams in all major locations (New other ethical responsibilities in accordance withZealand, these Australia,requirements Italy,. USA, UK and China). During these discussions, the work performed by each team was discussed We believe that the audit evidence we have obtainedincluding anyis sufficient key judgements and appropriate as well as to findings provide relevant a basis tofor th e our opinion. group audit.
Other than in our capacity as auditor we haveWe no reported relationship to the with, Audit or Committee: interest in, the company or any of its subsidiaries. Partners and employees of ouri) The firm results may deal of audit with procedures the group onand normal testing terms performed within by the both the group and components teams; and ordinary course of trading activities of the business of the group. We have no other relationship with, or interest in, the group. ii) Any misstatements identified that warrant reporting based on quantitative or qualitative grounds. Key audit matters InformationKey audit matters other are than those the matters financial that, statements in our professional and auditor’s judgment, report were of most significance in our Theaudit directors of the consolidated of the company financial are responsible statements for of the the Annual current Report, year. Thesewhich mattersincludes wereinformation addressed other in the thancontext the consolidatedof our audit financialof the consolidated statements and financial auditor’s statements report. as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial
Astatements member firm of sectionErnst & Young of Globalthe audit Limited report, including in relation to these matters. Accordingly, our audit
A member firm of Ernst & Young Global Limited 41 SKELLERUP ANNUAL REPORT FY21 42 A member firm of Ernst & Young Global Limited statements responsibi the We havefulfilled context. provided in that is audit matter addressed our the how of description matters. on these opinion separate a not provide do but we thereon, theaudit of our of context the audit of are matters Keyaudit Key the in, interest the of business the of activities trading of course ordinary subsidiaries its than in in, thecompany have Other our capacity auditorno we as orinterest relationship with, our opinion. We bel in accordance with responsibilities ethical other Zealand) Code of Ethics for the of independent are We Financial the of those under responsibilities with in accordance We conducted audit our Basis for opinionsthe we formed. have for or report, this for audit work, our and company than the anyone to other responsibility assume purpose.no andother report auditor's for we that shareholder to the company's report madeis This solely Standards Reporting Financial to International the for flows cash and performance financial the respects, In our opinion, the including a s income, comprehensive the g “the (together subsidiaries the audited have We Opinion Report on the of audit statements the financial Independent tatement liquidate the to entity the of In preparing the preparing In w misstatement, material 19 Auckland Chartered The engagement partner on the audit resulting in this independe in auditthis resulting the on partner engagement The report. d Standards Reporting Financial International and Standards Reporting practitioners/auditors consolidated consolidated the with inconsistent materially is information other the whether consider so, doing in and, information other other information, we are required to report that fact. We have nothing to report in this regard. in this report to nothing have We fact. that report required to are we information, other thisof misstatement material a is there that conclude we performed, have based we uponwork If, the misstated. to be materially is located at located is the audit of the for responsibilities auditor’s the of description A further o taken users of decisions economic the expectedinfluence to be could they reasonably individuallyaggregate, in the or if, material considered are and error or fraud from arise can Misstatements exists. it when misstatement material detecta opinion. our includes that report whole a as In connection with our audit of the of audit our with connection In thereon. conclusion assurance anyof form express that an audit conducted in accordance with with in accordance an audit conducted that A member firm of Ernst & Young Global Limited the whether about assurance obtain toreasonable are objectives Our Auditor’s d The Directo on the opinion Our irectors determine determine irectors going concern and using and concern going
August group audit matters consolidated ieve that the audit evidence we have obtained is sufficient and appropriate to provide a basis for providefor to basis and a appropriate sufficient is obtained have we audit evidence the that ieve irectors are responsible are irectors might to the shareholder state company's
issued byN the issued rs’ rs’
opinion for the for
summary summary as at at as Accountants
section of the audit report, including in relation to these matters. these to relation in including audit report, the of section 2021 are responsibilities for the audit of the financial statement consolidated responsibilitiesfor the financial statements
the the group financial financial consolidated consolidated . group
Statements auditor’s report to the Partners and employees of our firm and our Partners of the employees may with deal free from material misstatement, whether due to fraud or error, and to issue an auditor’s auditor’s an andissue to error, or duefraud to whether misstatement, material from free
consolidated consolidated group External Reporting Board External financial statements financial year 30 June
consolidated
consolidated consolidated
or cease operations, or have no realistic alternative but to do so. so. but do to alternative have no or realistic operations, cease or Assurance Practitioners Assurance . of significant accounting policies accounting significant of
is those matters that, in our professional judgment, were of most significance in our our in most of significance were judgment, professional in our that, matters those
- statements statements then ended
financial financial ’s responsibilities/audit of preparation toenablethe necessary ew ew
financial statements financial consolidated consolidated ability to continue as a going concern, concern, going a as continue to ability hether due to fraud or error. or duefraud to hether
section of our repo our of section
group standards are further described further standardsare in the financial position of the position of financial Z roup”)
consolidated 202 the going concern concern going the ealand lities described in the described lities , financial financial
on behalf of the entity the of on behalf
financial financial 1 statements financ Reasonable a Reasonable
in accordance with with accordance in , and , and
in accordance with with in accordance on pages of the of
Auditing and Assurance Standards Board, Standards Assurance and Auditing consolidated consolidated
or our knowledge obtained our knowledgeor obtained ial statements on statements ial statement of changes in equity and and changes inequity of statement statements n the basis of th of basis n the consolidated income statement, incomestatement, consolidated group statements statements financial financial
’s To theTo permitted fullestextent by law, we donot acceptor International Standards on Auditing (New Zealand) (New on Auditing Standards International Shareholder year
-
44 website: website: report
of of
International Standards on Auditing (New Zealand) on Auditing (New Standards International of the current current the of ssurance is a high level of assurance, but is not a guarantee guarantee butnot a is assurance, high a of level is ssurance and International Financial Reporting Standards. Reporting Financial and International (including International Independence Standards) (New (New Standards) Independence International (including rt.
, these requirements these to to basis of accounting unless the d the unless accounting of basis
then ended Skellerup Holdings Skellerup
and the
s 77
financial statements financial , those matters we are we to them required matters in to state anthose statements -
Auditor’s responsibilities for the audit of the financial financial the auditof the for responsibilities Auditor’s 1/ the d the , . group does not cover the other information and we do not not do we and information other the does not cover
Professional and Ethical Standard and Ethical Professional https://www.xrb.govt.nz/standards New Zealand equivalents to Zealand equivalents New
. which comprise the which
,
s, as a bodya as s, for t for ese This description This
consolidated consolidated
irectors are responsible for a for responsible are irectors pages pages group s
in accordance with New Zealand equivalents with Zealand equivalents New in accordance
consolidated as at at as of of he preparation he preparation year the company's shareholder the company's
as a whole, and in formingopinion whole, our a as Skellerup Holdings disclosing, as applicable, matters related related matters applicable, as disclosing, . 44 financial statements statements financial nt auditor’s report is is report nt auditor’s . We have no other relationship with, or We have with, no relationship other Auditor’s Responsibilities Auditor’s
during
These matters were addressed addressed in the were matters These 30 June 30 .
to to .
, Limited Our audit has been undertaken so so been undertaken has audit Our and fo and group
notes to notes , our responsibility is is responsibility our , consolidated consolidated 77 consolidated consolidated
the audit s
financial statements financial
consolidated For each matter below, our our each below, matter For forms part of our auditor’s auditor’s our partof forms present in allfairly, material
consolidated consolidated r such internal control as the the as control internal r such and fair presentation presentation fair and 2021
on normal terms within the within terms on normal
(“the c (“the
and we have fulfilled our our fulfilled andhave we the financial consolidated consolidated
irectors either intend to to intend either irectors Accordingly, our audit audit our Accordingly,
, International Financial Financial International
and and or otherwise appears appears otherwise or financial statements financial financial statements statements financial
ompany that that Simon O’Connor ssessing ssessing
Limited balance sheet its s, as a bodya as s,
1 - f
statement of of statement are
or International consolidated consolidated for the Audit Audit the for
statements statements - to read the read to ”
cash flow cash assurance . will always always will
)
or any of any of or free from from free
on behalf on behalf
and its its and
. of of
, for for , Our Our
the of of .
-
Directors’ Responsibility Statement for the year ended 30 June 2021
The Directors are responsible for the preparation, The Directors are pleased to present the Group in accordance with New Zealand law and generally financial statements of Skellerup Holdings Limited for accepted accounting practice, of financial statements, the year ended 30 June 2021. which give a true and fair view of the financial The Group financial statements are dated 19 August position of the Skellerup Holdings Limited Group as at 2021 and are signed in accordance with a resolution 30 June 2021, and the results of their operations and of the Directors made pursuant to section 211 of the cash flows for the year ended 30 June 2021. Companies Act 1993. The Directors consider that the financial statements For and on behalf of the Directors of the Group have been prepared using accounting policies appropriate to the Group’s circumstances, consistently applied and supported by reasonable judgements and estimates, and that all applicable New Zealand Equivalents to International Financial Reporting Standards have been followed.
The Directors have responsibility for ensuring that proper accounting records have been kept which enable, with reasonable accuracy, the determination EM Coutts of the financial position of the Group and enable them Independent Chair to ensure that the financial statements comply with the Financial Reporting Act 1993.
The Directors have responsibility for the maintenance of a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting. The Directors consider that adequate steps have been taken to safeguard the assets of the Group and to prevent and detect fraud and AR Isaac other irregularities. Independent Director
43 SKELLERUP ANNUAL REPORT FY21 44 Administration expenses Cost ofsales of associates Income Statement Income Statement The above Income Statement should be read in conjunction with the accompanying notes. accompanying the with conjunction in read be should Statement Income above The Other income Other Gross profit Income taxexpense Marketing expenses Basic earnings per shareBasic earnings (cents) Finance costs Earnings pershareEarnings Share ofnetprofit ofassociatesaccountedforusingtheequitymethod for the year ended 30 June 2021 30 ended year the for Distribution expenses Diluted earnings pershareDiluted earnings (cents) Net after-taxprofit theyear, for attributable toowners oftheParent Profit theyear for before tax Profit theyear for before tax, costsandshare finance ofprofit Revenue
Note 16 19 19 5 2 4
(165,890) 113,625 279,515 (14,070) (28,005) (15,767) (15,822) 40,175 54,245 56,361 (2,081) 2,330 20.40 20.59 $000 2021 (35)
(155,115) 251,389 (21,619) (20,622) (14,038) (10,767) 42,486 96,274 29,064 39,831 (2,582) 14.80 14.92 2,491 2020 $000 (73)
Statement of Comprehensive Income for the year ended 30 June 2021
2021 2020 Note $000 $000 Net profit after tax for the year 40,175 29,064 Other comprehensive income Items that may be reclassified subsequently to profit or loss Net gains/(losses) on cash flow hedges 17 (14) 61 Income tax related to gains/(losses) on cash flow hedges 5 4 (17) Foreign exchange movements on translation of overseas subsidiaries 17 (1,971) 2,265 Income tax related to gains/(losses) on foreign exchange movements of loans with overseas subsidiaries 5 125 (109) Other comprehensive income net of tax (1,856) 2,200 Total comprehensive income for the year attributable to equity holders of the Parent 38,319 31,264
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
45 SKELLERUP ANNUAL REPORT FY21 46 The above Balance Sheet should be read in conjunction with the accompanying notes. accompanying the with conjunction in read be should Sheet Balance above The Total equity Retained earnings Reserves Share capital Equity attributable toequityholders oftheParent Equity Net assets Total liabilities Total non-current liabilities Derivative liabilities financial Lease liabilities–longterm Deferred taxliabilities Interest-bearing loansandborrowings Provisions Non-current liabilities Total current liabilities Derivative liabilities financial term Lease liabilities–short Interest-bearing loansandborrowings Income taxpayable Provisions Trade andotherpayables Current liabilities Total assets Total non-current assets Derivative assets financial Investment inassociate Intangible assets Goodwill Deferred taxassets Right-of-use assets Property, plantandequipment Non-current assets Total current assets Derivative assets financial Income taxreceivable Inventories Trade andotherreceivables andprepayments Cash andcashequivalents Current assets June 2021 30 at as Sheet Balance Note 20 17 15 22 10 10 22 22 14 13 12 22 14 13 12 11 5 5 9 9 8 7 6
166,063 196,149 132,742 196,149 284,874 118,811 88,725 42,373 72,406 14,225 24,000 46,352 31,207 54,906 17,850 85,457 50,259 52,084 15,673 (8,999) 1,561 2,914 3,351 1,915 2,198 4,569 4,241 5,669 $000 2021 257 409 492 303 24 35 171,070 184,563 119,455 184,563 112,572 283,642 99,079 62,529 72,173 17,772 41,300 36,550 24,806 54,908 21,811 87,846 52,098 46,405 13,617 (7,065) 2,042 1,283 4,544 1,119 4,811 1,725 1,217 3,125 2020 $000 132 440 830 438 378 74 Statement of Changes in Equity for the year ended 30 June 2021
Fully Paid Cash Flow Foreign Employee Retained Total Ordinary Hedge Currency Share Plan Earnings Shares Reserve Translation Reserve Reserve Note $000 $000 $000 $000 $000 $000 Balance 1 July 2019 72,173 132 (9,771) 149 115,709 178,392
Net profit after tax for the year ending 30 June 2020 - - - - 29,064 29,064 Other comprehensive income - 44 2,156 - - 2,200 Total comprehensive income for the year - 44 2,156 - 29,064 31,264
Share incentive scheme - - - 225 - 225 Dividends - - - - (25,318) (25,318) Balance 30 June 2020 72,173 176 (7,615) 374 119,455 184,563
Net profit after tax for the year ending 30 June 2021 - - - - 40,175 40,175 Other comprehensive income 17 - (10) (1,846) - - (1,856) Total comprehensive income for the year - (10) (1,846) - 40,175 38,319
Share incentive scheme 18 233 - - (78) 411 566 Dividends 20 - - - - (27,299) (27,299) Balance 30 June 2021 72,406 166 (9,461) 296 132,742 196,149
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
47 SKELLERUP ANNUAL REPORT FY21 48 Net cashinflow from operating activities Net movement inworking capital Share ofprofit inassociates Increase/(decrease) inprovision fordoubtfuldebts off Bad debtswritten Foreign currency movements ontranslating foreign assetsandliabilities Loss onsaleofassets Amortisation Depreciation assets –right-of-use andimpairment Depreciation –property, andimpairment plantandequipment Adjustments for: Net profit after tax notes. accompanying the with conjunction in read Reconciliation ofnetprofit aftertaxto netcashflow frombe operations should Statement Flow Cash above The Cash andcashequivalents attheendofyear Effect ofexchange rate fluctuations Cash andcashequivalents atthe beginningoftheyear Net increase/(decrease) incashandequivalents Net cashflows from/(used activities in)financing Dividends paidtoequityholders ofParent Repayments ofleaseliabilities Proceeds from issueofshares Proceeds from/(repayments for)loansandadvances Cash flows from activities financing Net cashflows from/(used in)investing activities Acquisition ofabusiness, netofcashacquired Payments forintangibleassets Payments forproperty, plantandequipment Proceeds from saleofproperty, plantandequipment Cash flows from investing activities Net cashflows from/(used in)operating activities Interest assetleases onright-of-use Interest andbankfeespaid Income taxrefund/(paid) Payments tosuppliers andemployees Dividends received Interest received Receipts from customers Cash flows from operating activities June 2021 30 ended year the for FlowCash Statement Note 6
(202,125) 274,326 (11,375) (49,234) (27,299) (17,640) 58,796 58,796 40,175 15,673 13,617 (7,073) (2,073) (5,405) (1,208) (4,528) 5,897 4,971 7,156 2,489 (424) (873) (433) $000 2021 $000 2021 638 370 405 233 (35) 37 11 49 2 - (198,310) 258,378 (10,146) (34,071) (25,318) 48,006 48,006 29,064 13,617 (6,204) (3,944) (1,644) (9,508) (4,671) (4,082) 5,173 5,228 7,339 9,639 3,789 (439) (938) 2020 2020 $000 $000 195 283 508 267 189 441 (73) 22 26 2 -
Notes to the Financial Statements
Reporting Entity Skellerup Holdings Limited (‘the Company’ or ‘the Parent’) is a limited liability company incorporated and domiciled in New Zealand. It is registered under the Companies Act 1993 with its registered office at Level 3, 205 Great South Road, Greenlane, Auckland. The Company is a Reporting Entity in terms of the Financial Markets Conduct Act 2013 and is listed on the New Zealand Exchange (NZX Main Board) with the ticker SKL. These financial statements were authorised for issue in accordance with a resolution of the directors on 19 August 2021.
(a) Nature of operations The Skellerup Group of companies is design, manufacture, and distribute engineered products for a variety of specialist industrial and agricultural applications. Skellerup’s operations are split into two units: the Agri Division, a world leading provider of food grade dairy rubberware, filters, and animal health products to the global dairy industry; and the Industrial Division, a global specialist for technically demanding products used in water, roofing, plumbing, sport and leisure, electrical, health and hygiene, automotive and mining applications.
(b) Basis of preparation These financial statements of the Group, a profit-oriented business, are for the year ended 30 June 2021.
(c) Statement of compliance The consolidated financial statements for the year ended 30 June 2021 have been prepared in accordance with New Zealand Generally Accepted Accounting Practices (NZ GAAP) and the requirements of the Financial Markets Conduct Act 2013. For the purpose of complying with NZ GAAP, the Group is a for-profit entity. The financial statements comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). The financial statements also comply with International Financial Reporting Standards (IFRS). The financial statements are presented in New Zealand dollars (NZD) and all values are rounded to the nearest thousand dollars ($000) unless indicated otherwise.
The accounting principles recognised as appropriate for the measuring and reporting of profit and loss and financial position on a historical-cost basis have been applied, except for derivative financial instruments, which have been measured at fair value.
The preparation of financial statements in accordance with NZ IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Critical accounting judgements, estimates and assumptions are detailed in Note (f).
(d) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries (together ‘the Group’) as at 30 June 2021. Control is achieved when the Group is exposed, or has rights, to variable return from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:
• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
• Exposure, or rights, to variable returns from its involvement with the investee; and
• The ability to use its power over the investee to affect its returns.
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value. Fair value is calculated as the sum of: the acquisition-date fair values of the assets transferred by the Group; the liabilities incurred by the Group to former owners; the equity issued by the Group; and the amount of any non-controlling interest in the acquiree. For each business combination, the Group measures the non- controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.
In preparing the consolidated financial statements, all inter-company balances, income and expense transactions, and profit and losses resulting from intra-Group activities, have been eliminated.
49 SKELLERUP ANNUAL REPORT FY21 50 The assets and liabilities of all Group companies that have a functional currency that differs from the presentation presentation the from differs that currency afunctional have that companies Group all of liabilities and assets The Group companies determined. are statedatfairvalue are translated toNew Zealanddollars atforeign exchange rates atthedatesfairvalue ruling was the exchange rate atthedateoftransaction. assetsandliabilitiesdenominatedinforeign Non-monetary currencies that assetsandliabilitiesthatareNon-monetary measured costinaforeign ofhistorical interms currency are translated using income statement, except when deferred inOCIasqualifyingcashflow hedges. at theforeign exchange rate atthatdate. ruling Foreign exchange differences ontranslation arising are recognised inthe assets andliabilitiesdenominatedinforeign currencies atthebalancesheetdateare translated toNew Zealanddollars Transactions inforeign currencies are translated attheforeign exchange rate atthedateoftransaction. ruling Monetary balances and Transactions functional currency oftheParent. statementsare consolidatedfinancial The presented inNew Zealanddollars (the ‘presentation currency’), which isthe the economicsubstanceofunderlying events andcircumstances relevant tothatentity(the ‘functional currency’). statementsofeachentityintheGroupItems includedinthefinancial are measured usingthecurrency thatbestreflects currency Functional and presentation translation currency Foreign (e) (including expected credit losses). debt facilities. COVID-19 hasnothadany impactonthemeasurement ofGroup assets(includinggoodwill) andprovisions a strong balancesheetandforecast cashneeds caneasily bemetby with cashheld, expected operating cashflows and ongoing pandemic. GroupThe reported record netprofit aftertaxandrecord operating cashflow inFY21. GroupThe has DirectorsThe have considered whether there was ofassetsbecausethe any orimpairment impactongoingconcern and working from homearrangements forvaryingperiods. combination ofprocesses andprotocols year establishedintheprior where (modified required) forstaffworking onsite outbreak andspread ofCOVID-19. FY21theGroup’s During businesses across theworld have operated effectively witha year financial In theprior (on11March 2020)the World HealthOrganisation declared aglobalpandemicbecauseofthe COVID-19 Pandemic (g) • • following notes. of future events applied. Judgementsandestimateswhich are statementsare tothefinancial material foundinthe In theprocess ofapplying theGroup’s accountingpolicies, anumber ofjudgementshave beenmadeandestimates Significant andaccounting(f) assumptions judgements date. sheet balance the at ruling rates exchange foreign the at translated are and entity foreign liabilities the of and assets as treated are entity aforeign of acquisition the on arising adjustments value fair and Goodwill or loss. to profit reclassified is operation foreign particular to that relating OCI of component the operation, aforeign of disposal any On reserve. translation foreign the in currency recognised are operations foreign of translation the from arising differences Exchange transactions. the of dates the at ruling rates exchange foreign the approximating rates at dollars Zealand to New translated are operations foreign these of expenses and revenues The date. sheet balance the at ruling rates dollars exchange foreign at Zealand to New translated are consolidation, on arising adjustments value fair and goodwill including currency, Note 5 Note 10 Recovery ofdeferred taxasset ofgoodwill Impairment page 56 page 61
Notes to the Financial Statements For the year ended 30 June 2021
1. Segment Information An operating segment is a distinguishable component of the entity which is reported as an organisational unit, engages in business activities, earns revenue and incurs expenses, and whose operating results are reviewed regularly by the chief operating decision-maker to allocate resources and assess performance.
The Group’s operating segments are Agri, Industrial and Corporate, being the divisions reported to the executive management and Board of Directors to assess performance of the Group and allocate resources. The principal measure of performance for each segment is EBIT (earnings before interest and tax). As a result, finance costs and taxation have not been allocated to each segment.
Agri Division The Agri Division manufactures and distributes dairy rubberware which includes milking liners, tubing, filters and feeding teats, together with other related agricultural products and dairy vacuum pumps to global agricultural markets.
Industrial Division The Industrial Division manufactures engineered products across a range of industrial applications, including potable and waste water, roofing, plumbing, sport and leisure, electrical, health and hygiene, automotive and mining.
Corporate Division The Corporate Division includes the Parent company and other central administration expenses that have not been allocated to the Agri and Industrial Divisions.
(a) Business segment analysis Agri Industrial Corporate Eliminations Total For the year ended 30 June 2021 $000 $000 $000 $000 $000 Revenue 102,201 177,428 - (114) 279,515 Segment EBIT 30,464 32,664 (6,767) - 56,361 Profit before tax, finance costs and share of profit of associate 56,361 Finance costs (2,081) Share of net profit of associate (35) Profit for the year before tax 54,245 Income tax expense (14,070) Net after-tax profit 40,175 Assets and liabilities Segment assets 124,097 138,245 22,532 - 284,874 Segment liabilities 14,969 38,154 35,602 - 88,725 Net assets 109,128 100,091 (13,070) - 196,149 Other segment information Additions to fixed assets and intangibles 3,043 4,293 139 - 7,475 Cash flow Segment EBIT 30,464 32,664 (6,767) - 56,361 Adjustments for: - Depreciation and amortisation 4,754 7,503 116 - 12,373 - Non-cash items - - 351 - 351 Movement in working capital 2,155 27 3,715 - 5,897 Segment cash flow 37,373 40,194 (2,585) - 74,982 Finance and tax cash expense (12,583) Movement in finance and tax accrual (3,603) Net cash flow from operating activities 58,796
51 SKELLERUP ANNUAL REPORT FY21 52 Net cashflow from operating activities For Division, theIndustrial thethree largest customers accountfor9.6%(2020: Division 9.9%)oftheIndustrial revenue. For Division, the Agri thethree largest customers accountfor35.0%(2020: Division 36.6%)ofthe revenue.Agri Divisions generate andIndustrial The Agri revenue from alarge number ofcustomers. Major customers Movement andtaxaccrual infinance Finance andtaxcashexpense Segment cashflow Movement inworking capital -Non-cashitems -Depreciation andamortisation Adjustments for: Other segmentinformation Net assets Segment liabilities Segment assets Assets andliabilities Net after-taxprofit Income taxexpense Profit fortheyear before tax Share ofnetprofit ofassociate Finance costs of profit ofassociate Profit before tax, costsandshare finance Segment EBIT Revenue For theyear ended30June 2020 1. (continued) Information Segment Segment EBIT Cash flow Additions tofixed assetsandintangibles
110,987 127,056 29,474 25,405 16,069 25,405 93,609 4,953 6,707 $000 (884) Agri - Industrial 100,241 157,932 136,231 20,862 33,002 20,862 35,990 4,437 7,703 2,740 $000 - Corporate (26,665) 47,020 20,355 (1,048) (3,783) (3,783) 1,622 1,002
$000 111 12 - Eliminations $000 (152) (2) 2 2 ------
184,563 251,389 283,642 (11,152) (10,767) 48,006 29,064 61,428 42,486 12,767 42,486 99,079 39,831 42,486 (2,270) (2,582) 5,173 1,002 9,459 Total $000
(73)
1. Segment Information (continued)
(b) Geographical revenue Revenue from external customers by geographical location is detailed below. Revenue is attributed to each geographical location based on the location of the customers. Differences in foreign currency translation rates can impact comparisons between years.
2021 2020 $000 $000 New Zealand 62,029 55,980 Australia 51,588 48,054 North America 81,514 81,111 Europe 38,483 32,320 United Kingdom and Ireland 16,882 12,691 Asia 26,985 20,341 Other 2,034 892 Total revenue 279,515 251,389
(c) Assets by geographical location The non-current segment assets are scheduled by the geographical location in which the asset is held. The non- current assets, which include property, plant and equipment, right of use assets, goodwill and intangible assets for each geographical location, are as follows:
2021 2020 $000 $000 New Zealand 109,282 110,658 Australia 11,280 11,802 Europe 12,805 13,926 United Kingdom and Ireland 17,843 17,787 Asia 6,130 7,023 North America 3,787 4,586 Non-current assets 161,127 165,782
2. Operating Revenue The Group is in the business of designing, manufacturing and distributing engineered products. Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods and services. The Group has concluded that it is the principal in its revenue arrangements, because it controls the goods and services before transferring them to the customer.
The Agri and Industrial segments have similar performance obligations. The performance obligation is satisfied upon delivery of product and payment is generally due within 30 to 120 days of delivery. Some contracts provide customers with volume rebates which give rise to variable consideration and are accounted for accordingly. There are no maintenance or service contracts with customers.
53 SKELLERUP ANNUAL REPORT FY21 54 Total (gain)/loss ondisposalofproperty, plantandequipment Total otherincome income Other sundry Realised andunrealised foreign currency gains/(losses) Government grants received Total remuneration ofauditors in foreign jurisdictions Other auditors’ statements feesfortheauditoffinancial statementsbyAudit ofthefinancial Parent company auditors Remuneration ofauditors termandlowShort value leasecosts Total product development costs Total depreciation, andimpairmentexpense amortisation ofintangibleassets Amortisation Depreciation assets ofright-of-use andimpairment Depreciation ofproperty, andimpairment plantandequipment Depreciation, andimpairmentexpense amortisation Total employee expense benefit contribution expenseDefined Termination benefits sick leave andexecutive share scheme) Wages (includingannual andsalaries leave, leave, long-service Employee expense benefits expense itemasapplicable. purchase isnotrecoverable ofgoodsandservices from thetaxationauthority, theGST/VAT isrecognised ofthe aspart Net profit fortheyear hasbeenarrived ataftercharging theitemsnotedbelow. Where theGST/VAT incurred ona the for includedYear Profit in3. Net Expenditure schemes offered by Governments of Australia andtheUSAinresponse toCOVID-19. Government grants have beenreceived by someentitiesintheGroup underwage subsidy andjobretention support Interest income income Other 4.
Note 10 9 9
12,497 60,122 57,515 4,045 4,971 7,156 2,582 2,330 1,234 $000 2021 $000 2021 269 370 754 673 796 251 11 25 81 49
12,834 54,601 52,104 3,863 5,228 7,339 2,466 2,491 2020 $000 $000 2020 463 906 685 874 592 499 267 22 26 93 31
5. Taxation Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid to, the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• For a deferred income tax liability arising from the initial recognition of goodwill; or
• Where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
(a) Income statement
2021 2020 $000 $000 Current income tax Current income tax charge/(credit) 14,348 10,948 Prior-year adjustments 47 8
Deferred income tax Temporary difference reversal/(origination) (386) (147) Prior-year adjustments 37 (32) Effect of movements in tax rates 24 (10) Income tax expense as per income statement 14,070 10,767
(b) Amounts charged/(credited) to other comprehensive income
2021 2020 Note $000 $000 Current income tax Fair value of derivative financial instruments 17 (4) 17 Translation of foreign operations 17 (125) 109 Total income tax expense/(credit) relating to other comprehensive income (129) 126
55 SKELLERUP ANNUAL REPORT FY21 56 Total imputationcredits Income taxpaid/payable inNew Zealand Attached todividends paid (d) Deferred tax assets and liabilities and assets tax Deferred (d) Income taxasperincomestatement Effect ofmovements intaxrates yearsAdjustments forprior Tax effectsofnon-New Zealandprofits Non-deductible expenses/(non-assessable income) Tax atParent company rate Tax percentage atParent company rate Total profit before taxasreported (c) Reconciliation 5. Taxation (continued) Balance atthebeginningofyear credit(e) account Imputation Net taxasset Other Financial derivatives Provisions andaccruals Property, plantandequipment 2020 Net taxasset Financial derivatives Provisions andaccruals Property, plantandequipment 2021 movementThe inthenetdeferred taxassetsandliabilitiesisprovided below: Net taxasset Deferred taxliability Deferred taxasset Opening Opening Balance Balance (2,044) (2,282) 1,083 2,926 3,434 $000 $000 872 (52) (69) 42 Charged to Charged to Income Income (212) (176) $000 $000 219 324 475 500 (44) - - Charged toOther Charged toOther Comprehensive Comprehensive Note 20
Income Income
$000 $000 (17) (17) 4 4 - - - - - Movements Movements 54,245 14,070 15,189 (1,915) (5,152) Currency Currency 2,056 7,061 1,436 3,351 (746) (481) 28% $000 2021 $000 2021 $000 2021 Foreign Foreign 147 24 84 $000 $000 (26) (24) 25 33 49 9 2 - - Balance Balance Closing Closing 39,831 10,767 11,153 (2,042) (4,795) (2,282) (2,409) 1,083 1,436 1,083 3,125 4,901 3,434 3,910 (625) 2020 2020 2020 $000 $000 $000 $000 $000 28% 147 273 (69) (65) (10) (24) 41 41 -
6. Cash and Cash Equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.
For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Cash flows are included in the cash flow statement on a gross basis and the GST/VAT component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, is classified as operating cash flows.
In New Zealand, some Group companies operate bank accounts in overdraft. Under the Group facilities arrangement, bank facility overdrafts have a legal right of set-off against bank accounts in funds. Therefore, only the net in funds position has been disclosed.
Cash and cash equivalents at the end of the year as shown in the cash flow statement can be reconciled to the related items in the balance sheet.
All cash is available and under the control of the Group and there are no restrictions relating to the use of the cash balances disclosed.
7. Trade and Other Receivables and Prepayments Trade receivables represent the Group’s right to an amount of consideration that is unconditional. Trade receivables are recognised and measured at the transaction price determined under NZ IFRS 15 Revenue. The Group recognises an allowance for expected credit losses where there is an increase in credit risk subsequent to initial recognition.
2021 2020 $000 $000 Trade receivables 46,014 42,510 Less allowance for expected credit losses (227) (725) 45,787 41,785 GST/VAT receivable 910 311 Other 5,387 4,309 Total trade and other receivables and prepayments 52,084 46,405
The average credit period for the sale of goods is 55 days (2020: 56 days). The Group offers credit terms ranging from 30 to 120 days to those customers for whom the Group has been able to validate acceptable credit quality. The credit terms and limits are reviewed monthly. No interest is charged on the trade receivables.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The matrix uses a probability weighted outcome that takes into account the age of receivables, past events and current and future conditions. Trade receivables are written off if considered uncollectable.
Of the trade receivables balance at the end of the year, $8.84 million (2020: $9.82 million) representing 19.3% (2020: 23.5%) of the trade receivables are due from the Group’s three largest customers. The balances due from these customers are current and are considered to be a low credit risk to the Group.
2021 2020 Ageing of past due but not impaired trade receivables $000 $000 One to 30 days 3,412 9,257 31 to 60 days 210 187 61 days plus 220 925 Total past due trade receivables 3,842 10,369 Movement in the allowance for doubtful debts: Balance at the beginning of the year 725 548 Impaired losses recognised 30 258 Amounts written off as uncollectable (84) (92) Impairment losses reversed (439) - Net foreign currency exchange differences (5) 11 Balance at the end of the year 227 725
57 SKELLERUP ANNUAL REPORT FY21 58 Work-in-progress Raw materials Upon sale, value of inventories thecarrying isrecognised incostofsalestheincomestatement. tomakethesale. and theestimatedcostsnecessary Net realisable value intheordinary istheestimatedsellingprice course ofbusiness, lessestimatedcostsofcompletion • • Costs incurred eachproduct inbringing toitspresent locationandconditionsare accountedforasfollows: value. realisable net the to determine to sell cost less value realisable the of made are estimates cost, below down written is inventory Where value. realisable or net cost original of lower the at valuing of policy valuation inventory an applies Group The Inventories 8. considered impaired down andiswritten toitsrecoverable amount. estimate oftherecoverable amount. Where amountofanassetexceeds itsrecoverable thecarrying amount, theassetis there isany indicationthatanassetmay beimpaired. Where exists, anindicatorofimpairment theGroup makesaformal necessary. depreciationThe charges are disclosedbelow. At eachreporting date, theGroup assesseswhether ornot management’s oftheasset. judgementontheperformance Adjustments tousefullives are madewhen considered estimationoftheusefullivesThe experience, ofassetshasbeenbasedonhistorical manufacturers’ warranties and Right-of-use assets: Furniture, andother: fittings Plant andequipment: Buildings: as follows: than freehold land, atcost, which iscarried iscalculatedonastraight-line basisover theestimatedusefullifeofasset at costlessaccumulated depreciation andaccumulated impairment. Depreciation ofproperty, plantandequipment, other the assettoworking conditionandready foritsintended use. Subsequently, property, plantandequipmentismeasured All classesofproperty, plantandequipmentare recorded initially atcost, includingcostsdirectly attributable tobringing and Plant Equipment 9. Property, sales. of cost the in included are movements write-down inventory All value. realisable to net inventory of categories all across write-downs of respect in $2,695,266) (2020: $2,518,095 of net is inventories of value The Total inventories Finished goods Finished goodsandwork-in-progress asthecostofdirect andlabouraproportion materials ofmanufacturing Raw asthepurchase materials costonafirst-in, first-out basis; overheads operating basedonnormal capacitybut excluding borrowing costs.
40years Oneto11years Two to30years Two to10years
50,259 36,810 11,533 1,916 $000 2021
52,098 38,603 10,643 2,852 2020 $000
9. Property, Plant and Equipment (continued) An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year in which the item is derecognised.
Right-of-use assets comprise property, motor vehicles and plant and equipment and represents the Group’s right to use those underlying assets as a lessee under lease agreements.
Freehold Freehold Plant and Furniture, Right of Total Land Buildings Equipment Fittings use assets and Other $000 $000 $000 $000 $000 $000 Note
Cost Balance 1 July 2019 7,084 34,483 110,731 8,015 - 160,313 Initial recognition - - - - 18,491 18,491 Additions - - 3,333 727 8,608 12,668 Disposals - - (1,599) (383) - (1,982) Net foreign currency exchange differences - - 1,055 111 (61) 1,105 Balance 30 June 2020 7,084 34,483 113,520 8,470 27,038 190,595
Additions - - 4,756 649 1,249 6,654 Disposals - - (947) (825) - (1,772) Net foreign currency exchange differences - - (596) (89) (459) (1,144) Balance 30 June 2021 7,084 34,483 116,733 8,205 27,828 194,333
Accumulated depreciation and impairment Balance 1 July 2019 - 2,428 60,688 5,901 - 69,017 Depreciation expense 3 - 911 5,635 727 4,972 12,245 Disposals - - (1,168) (351) - (1,519) Impairment 3 - - 67 - 255 322 Net foreign currency exchange differences - - 790 83 - 873 Balance 30 June 2020 - 3,339 66,012 6,360 5,227 80,938
Depreciation expense 3 - 911 5,410 711 4,971 12,003 Disposals - - (552) (804) - (1,356) Impairment 3 - - 124 - - 124 Net foreign currency exchange differences - - (361) (102) (220) (683) Balance 30 June 2021 - 4,250 70,633 6,165 9,978 91,026
Carrying value As at 30 June 2020 7,084 31,144 47,508 2,110 21,811 109,657 As at 30 June 2021 7,084 30,233 46,100 2,040 17,850 103,307
Plant and equipment and freehold buildings include work in progress of $1,742,000 (2020: $1,069,000). Capital expenditure commitments are $867,000 (2020: $767,000).
59 SKELLERUP ANNUAL REPORT FY21 60 Balance 30June 2021 Net foreign currency exchange differences Disposals Additions Balance 30June 2020 Net foreign currency exchange differences Disposals Additions Balance 1July 2019 Cost Group’sThe intangibleassetsconsistmainly ofgoodwill, software costsandcustomerrelationships. 10. Assets Intangible used in determining therecoverableused indetermining amountofgoodwill are amount andthecarrying detailedbelow. units, usingavalue-in-use discountedcashflow methodology, towhich thegoodwill hasbeenallocated. assumptionsThe annual basis. requiresThis therecoverable assumptionsbeingmadeindetermining certain amountofthecash-generating GroupThe whether usefullives determines ornotgoodwill associatedwithitemsindefinite isimpaired atleastonan losses.impairment lossesongoodwill are Impairment notreversed. statement. Separately recognised goodwill atcostlessany istestedannually accumulated andcarried forimpairment lower acquired, thanthefairvalue assetsofthesubsidiary ofthenetidentifiable thedifference isrecognised intheincome over thefairvalue oftheGroup’s assetsacquired netidentifiable andliabilitiesassumed. Ifthisconsideration transferred is Goodwill acquired inabusiness combinationismeasured initially atcost, beingtheexcess oftheconsideration transferred Goodwill As at30June 2021 As at30June2020 value ofgoodwillCarrying andintangible assets Balance 30June 2021 Net foreign currency exchange differences expense Amortisation Disposals Balance 30June 2020 Net foreign currency exchange differences expense Amortisation Disposals Balance 1July 2019 Accumulated amortisation Note 3 3
Goodwill 54,906 54,906 54,908 49,476 54,908 4,907 $000 525 (2) ------
------
Software 11,286 8,894 2,073 2,462 8,824 9,457 9,319 8,782 (329) (565) (562) (328) $000 (26) 321 324 280 177 493 675 39
Relationships Customer $000 632 632 632 452 180 542 90 90 90 ------
- - - - - 66,824 57,820 64,997 59,427 56,125 9,004 8,894 8,872 2,073 5,400 Total (562) (565) (328) $000 (26) 324 370 319 267 196 39
10. Intangible Assets (continued)
Software and customer relationships Identifiable intangible assets, which are acquired separately or in a business combination, are capitalised at cost at the date of acquisition and stated at cost less any accumulated amortisation and impairment losses. Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Software costs are recorded as intangible assets and amortised over periods of five to 10 years.
Research and development costs Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can be regarded reasonably as assured. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses.
Any expenditure carried forward is amortised over the period of expected future sales from the related project. The amortisation period and amortisation method for development costs are reviewed at each financial year-end. If the useful life or method of consumption is different from that of the previous assessment, changes are made accordingly.
Impairment tests for goodwill (i) Description of cash-generating units Goodwill acquired through business combinations has been allocated to the business units acquired, with the exception of the purchase of Silclear Limited and Nexus Performance Foams Limited, which have their own cash generating units (CGUs). In some circumstances business units are combined into a larger CGU for the purposes of testing to determine fairly the recoverable amount against the value in use.
The goodwill allocated to each cash-generating unit is shown in the table below. The changes in goodwill recorded are attributable to exchange rate movements on the translation of the goodwill balances denominated in foreign currencies. The net present value of future estimated cash flows exceeds the recoverable amount of goodwill allocated to each cash-generating unit based on a value-in-use calculation. A pre-tax discount rate of 10.36% (2020: 11.35%%) has been applied to discount future estimated cash flows to their present value.
2021 2020 Cash-generating unit $000 $000 Gulf 33,729 33,931 Ambic 7,873 7,645 Deks 3,818 3,801 Stevens Filterite 431 431 Nexus 4,163 4,163 Silclear 4,892 4,937 Total goodwill 54,906 54,908
(ii) Assumptions used to determine the recoverable amount The estimated future cash flows generated have been determined from the business plans and detailed budgets prepared by management as part of the annual business planning that is reviewed and approved by the Board of Directors. Such forecasts analyse and quantify a range of growth objectives which form the basis for determining the business growth and direction over the next three years.
For periods beyond 2021, the Group anticipates that business results will continue to improve due to new product developments, the benefits of established customer relationships and expansion into new and existing niche markets. The estimated cash flow in perpetuity is based upon the forecast year five cash flows and then an estimate of sustainable growth beyond this time period of 1.5% per annum.
61 SKELLERUP ANNUAL REPORT FY21 62 influenced by globalsupplyinfluenced anddemand factors. assumptionshave Pricing beenmadeintheGroup forecasts that canfluctuate: manymaterials ofthesyntheticsare by-products ofthepetrochemical industry, andnatural rubbers are thebaserawWith componentbeingsyntheticandnatural material rubbers sourced from Asia, oftheseraw thepricing pricing cost assumptions Commodity is notexpected toresult inany ofgoodwill. impairment interest rates andtheadditionalcostofcapitalapplicableincurrent environment. risk Any reasonable changeto WACC average costofcapital(WACC) oftheGroup, which hasbeenupdatedasat30June2021, toreflect thecurrent market achieving itsforecast cashflows. theappropriate Indetermining discountrate, regard hasbeengiven totheweighted discountrateThe isintendedtoreflect thetimevalue ofmoney toeachcash-generating specific andtherisks unit assumptions rate Discount andgrowcontinuing tosupport theGroup’s existing globalcustomerrelationships. five-year inlinewiththeGroup’s period strategic business plansto develop andintroduce new products, inadditionto Revenue hasbeenforecast toincrease inarange of1%to20%perannum onaweighted average basisover thefollowing Revenue assumptions Key assumptionsusedinthevalue-in-use calculationsare asfollows: (continued) 10. Assets Intangible are met within acceptable terms and conditions of purchase. of conditions and terms acceptable within met are payables all that to ensure place in policies management risk financial has Group The 31 credit). days (2020: credit days 33 of average an represents services and goods all of purchases on period credit average The Total trade andother payables GST payable payablesSundry andaccruals Employee entitlementsforpay andincentives Trade payables recognition. of days to 60 30 within usually paid and unsecured are amounts The services. and goods these of purchase the of respect in payments future to make obliged becomes Group the when arise and unpaid, are that year financial the of end to the prior Group to the provided services and goods for liabilities represent They discounted. not are nature, short-term to their due and, cost amortised at carried are payables other and Trade 11. Trade Payables and Other value ofeachcash-generating unittestedwell above value ofassets, thecarrying includinggoodwill. tothegoodwill allocatedtothevarious risk cash-generatingimpairment units, withtheestimated netpresent particularly foreign currency movements andcompetitoractivities, isexpected tohave only minimalimpactandisunlikely tocausean to cashflow projections ismitigated. Any changeinfuture cashflow projections, by changes, which price isinfluenced products covering base, awideindustry andthrough markets, anumber ofinternational change ofsignificant therisk changes Estimates madeoffuture cashflows are basedoncurrent market conditions. tradingWith assumption across anumber ofdifferent to Sensitivity (iii) management andsignedoffby theBoard ofDirectors. processThis isbasedonkey strategies thathave ataproduct beenquantified andcustomerlevel, reviewed by senior new year financial andthefollowing two years, withassumedlower growth rates inyears fourandfive andinperpetuity. growthThe rates have beenbasedonbusiness planassumptionsappliedinthepreparation oftheannual budgets forthe assumptions rate Growth generating unit, which hasdedicatedmanufacturing anddistribution capabilitiesestablishedinthesemarkets. to expand inglobalmarkets, andEurope. especiallyAmerica inNorth fortheGulfcash- isthecaseparticularly This In preparing forecasts, theGroup’s business plansshow nolossofmarket share. Group’sThe strategy istocontinue assumptions share Market any costincreases driven by changeswillbepassedthrough commodityprice tocustomers.
31,207 14,238 1,418 9,377 6,174 $000 2021
24,806 12,635 1,411 8,045 2,715 2020 $000
12. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. Provisions are measured at the present value of management’s best estimates of the expenditure required to settle the present obligation at the balance date.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
2021 2020 $000 $000 Provisions Employee entitlements for annual and long-service leave 5,956 5,759 Warranties 1,911 335 Total provisions 7,867 6,094 Current 5,669 4,811 Non-current 2,198 1,283 Total provisions 7,867 6,094
2021 2020 Warranties $000 $000 Balance at the beginning of the year 335 708 Additional provisions recognised 1,775 143 Reductions arising from payments/sacrifices of economic benefits (138) (454) Reductions arising from remeasurement or settlement without cost (62) (66) Net foreign currency exchange differences 1 4 Balance at the end of the year 1,911 335
Employee entitlements (i) Wages, salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non- accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.
(ii) Long-service leave The liability for long-service leave is recognised and measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using a probability calculation of the employee reaching the future service milestones. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields on high quality corporate bonds at the reporting date with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.
63 SKELLERUP ANNUAL REPORT FY21 64 product quality. in place. actualcostmayThe vary asaresult ofnew materials, altered manufacturing processes orotherevents affecting of rectifying any products thatdonotmeetthecustomers’ qualitystandards andinsurance arrangements theGroup has estimatehasbeenmadeonthebasisofexpected ofproducts,The performance warranty historical trends, thecosts thatwillberequiredof economicbenefits undertheGroup’s various product warranty programmes. provision forwarranty claimsrepresents thepresent value oftheDirectors’ bestjudgementorestimateofthefuture outflow ofproductsperformance andthecostsofrectifying any products thatdonotmeetthecustomers’ qualitystandards. The thelevelIn determining ofprovision required forwarranties, theGroup hasmadejudgementsinrespect oftheexpected Warranties expense. or the obligation the measure to required are assumptions actuarial no period, each during paid amount the by determined are Group’s obligations the because Therefore, employee. the by entirely borne is risk investment and actuarial the hence, and, returns investment any with Group, together the by paid contribution the of amount the by determined are employee the by received benefits the schemes, these Under employees. its for schemes scheme to post-employment contributes Group The contribution Defined (iii) 12. (continued) Provisions that asset. All other borrowing costsare expensed inwhich intheperiod they occur. oftimetopreparenecessarily takesasubstantialperiod foritsintendeduseorsale)are ofthecost capitalisedaspart Borrowing costsdirectly attributable totheacquisition, orproduction construction ofaqualifying asset(i.e. anassetwhich loans. term above the to secure security as pledged is $193 million Group) the totalling in entities smaller other and Limited Jiangsu Products Rubber Skellerup Group excludes (which Charging the of assets tangible of amount carrying The rates. exchange foreign and interest in to fluctuations exposure to order hedge in business of course normal the in Group the by used are instruments financial Derivative 2024. 31 August syndicated facilityagreement with ANZ BankNew ZealandLimitedandBankofNew Zealandwhich dateof hasanexpiry amountsdisclosedabove carrying The approximate fairvalue. Bankloansare provided undera$70millionmulti-currency Effective interest rate Balance attheendofyear Net foreign currency exchange differences Repayments Drawdowns Balance atthebeginningofyear Secured cost atamortised to defersettlementoftheliabilityforatleast12monthsafterreporting date. the effective interest method. Borrowings are ascurrent classified liabilitiesunlesstheGroup hasanunconditionalright transaction costs. After initialrecognition, interest-bearing loansandborrowings are measured costusing atamortised All loansandborrowings are recognised initially atthefairvalue oftheconsideration received lessdirectly attributable and Borrowings 13. Loans Interest-bearing
(46,628) 24,409 28,988 42,130 1.96% $000 2021 (81)
(40,133) 42,130 36,051 46,215 2.14% 2020 $000
(3)
14. Lease Liabilities The Group recognises right-of-use leased assets and lease liabilities at the present value of future lease payments for existing lease terms and all lease renewal options that are reasonably certain to be exercised. Certain low value and short term leases are excluded. Lease payments are recorded as a repayment of the lease obligation and interest expense instead of as an operating expense in the income statement. Right-of-use assets are depreciated on a straight-line basis over the current lease term. Lease payments are discounted at the rate implicit in the lease, or if not readily determinable, the Groups incremental borrowing rate.
The costs of low value and short term leases continue to be recognised as an expense in the Income Statement. The lease liabilities disclosed do not include future cash flows for leases where the Group does not intend to exercise its rights to extend existing leases nor the future cash flows following the dates at which Skellerup intends to exercise termination options.
2021 2020 $000 $000 Balance at the beginning of the year 22,316 - Initial recognition - 18,491 Additions/terminations 1,251 8,551 Accretion of interest 873 938 Payments (5,401) (5,609) Net foreign currency exchange differences (245) (55) Balance at the end of the year 18,794 22,316 Current 4,569 4,544 Non-current 14,225 17,772 Balance at the end of the year 18,794 22,316
15. Contributed Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Number Value of shares $000 Balance 1 July 2019 194,753,340 72,173 Balance 30 June 2020 194,753,340 72,173 Balance 30 June 2021 195,276,382 72,406
All shares are fully paid and have no par value. Each ordinary share confers on the holder one vote at any shareholder meeting of the Company and carries the right to dividends.
The Directors’ objective is to ensure the entity continues as a going concern, as well as to maintain optimal returns to shareholders and benefits for other stakeholders. The Directors aim to provide a capital structure which:
• Provides an efficient and cost-effective source of funds;
• Is balanced with external debt to provide a secure structure to support the short and long-term funding of the Group; and
• Ensures that the ratio of funds sourced from shareholders and external debt is maintained proportionately at a level which does not create a credit and liquidity risk to the Group.
The Company is listed on the New Zealand Exchange and is, therefore, subject to continuous disclosure obligations to inform shareholders and the market of any matters which affect the capital of the Company. This includes changes to the capital structure, new share issues, dividend payments and any other significant matter which affects the creditworthiness or liquidity of the Group.
The Group is not subject to any externally imposed capital requirements.
65 SKELLERUP ANNUAL REPORT FY21 66 Balance attheendofyear Movement fortheyear Income taxrelated - togains/(losses)recognised inothercomprehensive -Foreign exchange movements ontranslation offoreign operations Gain/(loss) recognition: Balance atthebeginningofyear Balance attheendofyear Movement fortheyear - -Interest rate swaps -Foreign exchange contracts andoptions Gain/(loss) recognised oncashflow hedges: Balance atthebeginningofyear Total reserves Employee share planreserve Foreign currency translation reserve Total costsinIncomeStatement finance Interest oncapitalisedleases Cash flow hedgereserve Reserve balances 17. Reserves Bank facilityfees Interest onbankoverdrafts andborrowings 16. Finance Costs Foreign currency translation reserve ofmovementsA summary isshown inthetablebelow. into New Zealanddollars are brought toaccountby madedirectly entries totheforeign currency translation reserve. Exchange differences relating tothetranslation ofvalues from thefunctionalcurrencies oftheGroup’s foreign subsidiaries Cash flow hedge reserve interest rate andforeign currency risk. ofmovements A summary isshown inthetablebelow. cashflowThe hedgereserve isintendedtorecognise thefairvalue movements oftheeffective derivatives heldtohedge Income taxrelated togains/(losses)recognised inother comprehensive income income
Note Note 5 5
(8,999) (9,461) (9,461) (1,846) (1,971) (7,615) 2,081 (262) 2021 $000 2021 $000 2021 $000 2021 $000 296 166 873 530 678 125 166 248 176 (10) 4 (7,065) (7,615) (7,615) (9,771) 2,582 1,200 2,156 2,265 (109) 2020 2020 2020 2020 $000 $000 $000 $000 176 130 132 374 176 938 444 (17) (69) 44
17. Reserves (continued) The employee share plan reserve is used to record the value of share-based payments provided to employees, including key management personnel, as part of their remuneration. A summary of movements is shown in the table below.
2021 2020 Note $000 $000 Employee share plan reserve Balance at the beginning of the year 374 149 Shares redeemed during the year (411) - Expense recognised for the year 18 333 225 Balance at the end of the year 296 374
18. Share-based Incentive Scheme Skellerup Group operates a long-term incentive scheme for the benefit of senior executives. The scheme permits the Board to grant options to acquire fully paid shares in the Company. The options are able to be exercised by the recipients subject to their continued employment in a future period as determined by the Board of Skellerup.
On 30 October 2020 the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) converted 1,600,000 options to 523,042 ordinary shares. 110,000 ordinary shares were issued upon payment of the option exercise price of NZ$2.12 per share. An additional 413,042 ordinary shares were issued, representing the number of shares equal to the difference between the market value of Skellerup’s ordinary shares at the exercise date and the exercise price of NZ$2.12 per share. The shares were issued under a Share-based Incentive Scheme which expired on 1 November 2020. The fair value of this scheme was NZ$411,000 and was determined using the Black-Scholes formula.
Upon conversion of the shares the NZ$411,000 recorded as an expense in prior periods was transferred from the Employee Share Plan Reserve to Retained Earnings.
On 29 October 2020 the Board awarded 1,800,000 options to the CEO and CFO (the option holders), issued at an exercise price of NZ$2.91, being the weighted average price of Skellerup’s shares in the prior twenty-day trading period. Option holders will be able to exercise the options in the period beginning on 1 September 2022 and ending on 1 November 2022. Upon exercise, they will be issued one ordinary share in Skellerup per option exercised or alternatively they may elect to be issued the number of shares as is equal to the difference between the market value of Skellerup’s ordinary shares on the exercise date and the exercise price. The options have been fair valued using the Black-Scholes formula. The fair value has been determined as NZ$813,000. The expense recognised in the current period for the incentive scheme is NZ$333,000.
19. Earnings per Share Earnings per share is calculated as net profit attributable to members of the Parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares.
2021 2020 Cents Cents per share per share Basic earnings per share 20.59 14.92 Diluted earnings per share 20.40 14.80
The earnings and weighted average number of ordinary shares used in the calculation of earnings per share are as follows:
2021 2020 $000 $000 Earnings used in the calculation of earnings per share 40,175 29,064 Weighted average number of ordinary shares for - Basic earnings per share 195,101,557 194,753,340 - Diluted earnings per share 196,901,557 196,353,340
67 SKELLERUP ANNUAL REPORT FY21 68 Net exposure Bank loans Financial liabilities Cash andcashequivalents Balance attheendofyear Payment ofdividends movements in foreign currency and interest rates. Credit risk and liquidity risk are considered also to be risk areas areas risk to be also considered are risk liquidity and risk Credit rates. are Group to the interest and risks currency foreign in financial movements principal the instruments, financial these of Because derivatives. and cash lease liabilities, overdrafts, and loans bank payables, receivables, comprise instruments financial Group’s principal The 21. Financial and Policies Objectives Risk Management per share (imputed50%)on18March 2021. imputationtaxcreditsThe totalled$5,151,687(2020: $4,794,626). thereporting adividendDuring of7.5centspershare period (imputed50%)was paidon16October2020and6.5cents Share incentive scheme Net profit fortheyear Balance atthebeginningofyear Earnings 20. Retained Financial assets interest rate are inplacetomanagethisrisk risk. instruments Detailsoffinancial disclosedinNote22. impact onprofit orequity. At balancedate, theGroup hadthefollowing assetsandliabilitiesexposed mixoffinancial to levelThe ofdebtisdisclosedinNote13. A reasonably expected movement intheinterest rate would nothave amaterial time horizon. asdebtinexcessis defined of$15millionthatisnotexpected toberepaid from available cashflows withinan18-month into interestentering rate swap contracts thatcover aminimum of25%andamaximum of75%thecore debt. Core debt Group’sThe policyistomonitoritsinterest rate exposure andtohedgethevolatility from arising interest rate changesby Group’sThe exposure tomarket interest rates relates totheGroup’s primarily debtobligations. long-term risk rate Interest (i) andRisk responses exposures forecastsThese are monitored constantly againstlimitationsoftheentire debtfacility. cash flow forecasts are updatedonaweekly emphasisplacedontheprospective basiswithparticular four-week period. receivables recorded inNote7. ismonitored Liquidityrisk through thereview offuture rolling cashflow forecasts. These Credit ismanagedthrough risk regular review ofagedanalysis ofreceivable ledgers. creditThe exposures risk are the rate from arising risks theGroup’s operations anditssources offinance. principally forward foreign currency contracts andinterest rate swaps. istomanagethecurrency purpose The andinterest BoardThe reviews andagrees risk. uponpoliciesformanagingfinancial GroupThe enters intoderivative transactions, managed. closely therefore, are, and 132,742 119,455 (27,299) 40,175 24,409 15,673 (8,736) $000 2021 $000 2021 411 119,455 115,709 (25,318) (28,513) 29,064 42,130 13,617 2020 2020 $000 $000 -
21. Financial Risk Management Objectives and Policies (continued) (ii) Foreign currency risk The Group imports raw materials and finished goods and exports finished goods to a number of foreign customers. The main foreign currencies traded are US dollars (USD), Australian dollars (AUD), British pounds (GBP) and Euro (EUR).
The Group seeks to cover up to 100% of the net foreign currency cash flow forecast, for the next 12-month period, with foreign currency contracts. Where the foreign currency cash flows can be forecasted reliably beyond the future 12-month period, such cash flows may also be covered by foreign currency contracts of up to 50% of the forecast cash flows.
The Group also has translational currency exposures. Such exposures arise from subsidiary operating entities that transact in currencies other than the Group’s functional currency. Currently, the Group does not hedge these exposures.
Foreign currency net monetary assets The Group has the following net monetary assets in foreign currency values which are in different currencies from the subsidiary’s base currency and will revalue either through the income statement or the statement of comprehensive income:
Cash and Cash Receivables Payables Net Monetary Equivalents Assets $000 $000 $000 $000 30 June 2021 USD 1,676 4,142 1,252 4,566 AUD 1,633 1,918 254 3,297 GBP 161 320 - 481 EUR 966 1,532 325 2,173
30 June 2020 USD 1,420 4,802 2,072 4,150 AUD 393 1,376 260 1,509 GBP 97 473 2 568 EUR 467 1,716 406 1,777 The foreign currency denominated values as shown in the table above converted to New Zealand dollars as follows:
2021 2020 $000 $000 Financial assets Cash and cash equivalents 6,111 3,611 Trade and other receivables 11,223 14,778 17,334 18,389 Financial liabilities Trade and other payables 2,619 5,236 Net exposure 14,715 13,153
69 SKELLERUP ANNUAL REPORT FY21 70 (d) (c) (b) (a) assumptionsusedintheforeignSignificant currency exposure sensitivity analysis are asfollows: Decrease -5% Increase +10% Foreign currency rates Higher/(Lower) sensitivity currency Foreign 21. Financial and Policies Objectives Risk Management (continued) to bealow risk. business togenerate future positive operating cashinflows, theobligationtomeetforward commitmentsisconsidered shows theprofile offuture payment commitmentsoftheGroup. theavailableWith bankfacilityandtheabilityfor reporting positive operating cashgeneration fortheGroup over thenext year. financial followingThe analysis maturity isconsideredrisk tobelow withthebankfacilitynotfully drawn, compliancewithbankcovenants, andforecast cashflows GroupThe monitors itsfuture cashinflows andoutflows through rolling cashflow forecasts. At balancedate, theliquidity risk Liquidity (iv) for doubtfuldebts. interest intheproducts supplied. Receivable balancesare monitored on anongoingbasiswithappropriate provisions held according profile totherisk ofeachand, where itisconsidered appropriate, registrations are madetorecord asecured an assessmentoftheirindependentcredit rating position. andfinancial Risklimitsare setforindividual customers All customers who trade withany Group oncredit subsidiary are terms subjecttocredit verification procedures including risk Credit (iii) (f) (e) not considered togive toacurrency rise risk. reserve and theforeign currency translation reserve. at balancedate. to remain relatively consistentforthefuture 12-monthperiod. movements andeconomists’ views offuture movements. The price sensitivity price ofderivativesThe hasbeenbasedonareasonably possiblemovement ofthespotrate applied Group’sThe netexposure toforeign currency atbalancedateisrepresentative andisexpected ofpastperiods Group’sThe trend oftrading inforeign currency values isnotexpected tochangematerially over future periods. rangeThe ofpossibleforeign exchange rate movements was by determined areview ofthelasttwo years’ historical The sensitivity thatareThe analysis instruments itemsastheseare doesnotincludefinancial non-monetary effectonothercomprehensiveThe incomeresults from foreign currency revaluations through thecashflow hedge Net Profit after Tax (991) $000 2021 574 (872) 2020 $000 505
(9,299) 5,384 $000 2021 Net Equity
(9,483)
5,490 2020 $000
21. Financial Risk Management Objectives and Policies (continued)
Maturity analysis of financial assets and liabilities The following table represents both the expected and contractual maturity and cash flows of receipts and payments.
Balance 30 June 2021 Zero to Six Seven to 12 One to Five More than Total Months Months Years Five Years $000 $000 $000 $000 $000 Financial assets Cash and cash equivalents 15,673 - - - 15,673 Trade and other receivables and prepayments 51,264 545 275 - 52,084 Derivatives 298 194 24 - 516 67,235 739 299 - 68,273 Financial liabilities Trade and other payables 30,980 113 114 - 31,207 Lease liabilities 2,351 2,218 11,291 2,934 18,794 Interest-bearing loans 409 - 24,000 - 24,409 Derivatives 132 125 35 - 292 33,872 2,456 35,440 2,934 74,702 Net total 33,363 (1,717) (35,141) (2,934) (6,429)
Zero to Six Seven to 12 One to Five More than Total Balance 30 June 2020 Months Months Years Five Years $000 $000 $000 $000 $000 Financial assets Cash and cash equivalents 13,617 - - - 13,617 Trade and other receivables and prepayments 44,962 483 950 10 46,405 Derivatives 378 - 438 - 816 58,957 483 1,388 10 60,838 Financial liabilities Trade and other payables 24,637 68 101 - 24,806 Lease liabilities 2,168 2,376 12,792 4,980 22,316 Interest-bearing loans 830 - 41,300 - 42,130 Derivatives 440 - 132 - 572 28,075 2,444 54,325 4,980 89,824 Net total 30,882 (1,961) (52,937) (4,970) (28,986)
Fair value The financial instruments that have been fair valued by the Group are detailed in Note 22 and have a fair value of $224,000 (2020: $244,000).
Under NZ IFRS, there are three methods available for estimating the fair value of financial instruments. These are:
Level 1 – the fair value is calculated using quoted prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
In determining the fair value of all derivatives, the Group has applied the Level 2 method of calculating fair value by using estimated inputs, other than quoted prices, that are observable for assets and liabilities, either directly (as prices) or indirectly (derived from prices).
71 SKELLERUP ANNUAL REPORT FY21 72 Total assets financial Derivatives designatedashedginginstruments cost atamortised Debt instruments Fair value through profit andloss Balance 30June 2020 Total assets financial Derivatives designatedashedginginstruments cost atamortised Debt instruments Fair value through profit andloss Balance 30June 2021 (i) Financial assets and liabilities and assets Financial (i) are recognised separately. through toanindependentthird party. assetsare Gainsandlossesonfinancial exclusive ofinterest anddividends, which which isnormally thecasewhen issold, theinstrument orallthecashflows are attributable totheinstrument passed assets are derecognised when theGroup nolongercontrols instrument, thecontractual thefinancial thatcomprise rights delivery establishedgenerally oftheassetswithinperiod by regulation orconvention inthemarket place. Financial to purchase theasset. Regularpurchases orsalesare purchases assetsundercontracts orsalesoffinancial thatrequire All regular purchases assetsare andsalesoffinancial recognised onthetrade date: i.e. thedatethatGroup commits Recognition and derecognition reclassified. not are liabilities Financial model. Group’s to the business achange upon made only are assets financial of recognition. initial on Reclassifications liabilities and assets financial its of classification the determines Group The costs. transaction attributable directly or loss, profit through value fair at not investments they of case the in initially, plus, value, fair at recognised are measured are liabilities and assets financial When loans. bearing or interest instruments, hedging designated as derivatives cost, amortised at instruments debt or loss, profit through value fair financial at either as liabilities and classified are assets Instruments 9Financial IFRS NZ of scope the in liabilities and assets Financial 22. Financial Instruments Financial Assets the in disclosed are notes. instrument, preceding equity and liability financial asset, financial of class each of respect in recognised, are expenses and income which in basis the and measurement of basis the recognition, for criteria the including methods adopted, and policies accounting below. Significant shown are liabilities and assets Group’s the of financial Detail hedging instruments. the intentionofmakingaprofit. Derivatives are alsoasheldfortrading classified unlessthey are designatedaseffective loss’. Financialassetsare asheldfortrading classified ifthey are acquired with ofsellinginthenearterm forthepurpose asheldfortradingFinancial assetsclassified are assetsatfairvalue includedinthecategory ‘financial through profit and Cash andBank Balances 15,673 15,673 13,617 13,617 $000 - - - - Trade andOther Receivables 52,084 52,084 46,405 46,405 $000 - - - - Derivatives $000 516 516 816 816 - - - -
Total Financial 68,273 52,084 15,673 60,838 46,405 13,617 Assets $000 516 816
22. Financial Instruments (continued)
Trade and Derivatives Lease Liabilities Borrowings Total Financial Other Payables Liabilities Financial Liabilities $000 $000 $000 $000 $000 Balance 30 June 2021 Derivatives designated - 292 - - 292 as hedging instruments Other financial liabilities 31,207 - 18,794 - 50,001 at amortised cost Interest bearing loans - - - 24,409 24,409 Total financial liabilities 31,207 292 18,794 24,409 74,702
Balance 30 June 2020 Derivatives designated as hedging instruments - 572 - - 572 Other financial liabilities at amortised cost 24,806 - 22,316 - 47,122 Interest bearing loans - - - 42,130 42,130 Total financial liabilities 24,806 572 22,316 42,130 89,824
Where the financial assets and financial liabilities are shown at amortised cost, their cost approximates fair value. The Group uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are recognised initially at fair value on the date on which a derivative contract is entered into and are remeasured subsequently to fair value. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are taken directly to profit or loss for the year. The fair values of forward currency contracts are calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair values of interest rate swap contracts are determined by reference to market values for similar instruments.
For the purposes of hedge accounting, hedges are classified as:
• Fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability; or
• Cash flow hedges when they hedge the exposure to variability in cash flows that is attributable either to a particular risk associated with a recognised asset or liability or to a forecast transaction.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting, and the risk management objectives and strategies for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair values or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair values or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
73 SKELLERUP ANNUAL REPORT FY21 74 Net assets/(liabilities) Total liabilities Non-current liabilities Interest rate swaps -cashflow hedge Forward currency contracts -cashflow hedge Non-current liabilities Current liabilities Interest rate swaps -cashflow hedge Forward currency contracts -cashflow hedge Current liabilities Total assets Non-current assets Forward currency contracts -cashflow hedge Non-current assets Current assets Forward currency contracts -cashflow hedge Derivative financial instruments financial Derivative recognised intheincomestatement. comprehensive incomeuntiltheforecast transaction occurs. Iftherelated transaction isnotexpected tooccur, theamountis a hedgeisrevoked, amountspreviously recognised inthestatementofcomprehensive incomeremain inthestatementof expiresIf thehedginginstrument orissold, orexercised terminated withoutreplacement orrollover, or, ifitsdesignationas income are transferred totheincomestatement. If theforecast transaction isnolongerexpected tooccur, amountspreviously recognised inthestatementofcomprehensive included inthemeasurement ofthehedgedtransaction (salesorinventory purchases) when theforecast transaction occurs. Amounts takentothestatementofcomprehensive incomeare transferred outofthestatementcomprehensive incomeand income, while theineffective isrecognised portion intheincomestatement. effectiveThe isrecognised ofthegainorlossonhedginginstrument portion directly inthestatementofcomprehensive associated witharecognised assetorliabilityahighly probable forecast transaction and thatcouldaffectprofit orloss. Cash flow hedgesare hedgesoftheGroup’s exposure tovariability incashflows, risk which isattributable toaparticular hedges flow Cash (ii) forhedgeaccountingare criteria Hedges thatmeetthestrict accountedforasfollows: (continued) 22. Financial Instruments Current assets Details ofthederivatives heldandtheirfairvalues atbalancedatewere asfollows: $000 2021 224 292 257 214 516 492 492 35 35 43 24 24 - 2020 $000 244 572 132 113 440 177 263 816 438 438 378 378 19
22. Financial Instruments (continued)
Foreign exchange contracts The Group imports a large proportion of its raw materials and finished goods, and has export sales to a number of customers. As a result, the Group has both inward and outward foreign currency cash flows. Both the inward cash flows and the outward cash flows are tested and hedged against highly probable forecasted sales and purchases. The main currency exposures are in US dollars, Euro, Australian dollars and British pounds. At balance date, details of outstanding foreign currency contracts are as follows:
Notional Amount Average Exchange Rates 2021 2020 2021 2020 $000 $000 Buy NZD/Sell EUR Maturing 2021: two to 14 months (2020: two to 27 months) 4,125 9,184 0.5576 0.5553
Buy NZD/Sell GBP Maturing 2021: one to 12 months (2020: one to 21 months) 2,818 6,415 0.4968 0.4988
Buy NZD/Sell USD Maturing 2021: one to 18 months (2020: one to 27 months) 19,445 10,931 0.7020 0.6312
Buy NZD/Sell AUD Maturing 2021: one to 11 months (2020: one to 12 months) 8,220 7,484 0.9246 0.9354
Buy CNY/Sell AUD Maturing 2021: one to nine months (2020: one to 12 months) 4,056 5,606 0.1971 0.2079
The forward currency contracts are considered to be highly effective hedges as they are matched against forecast inventory purchases and export sales, and any gain or loss on the contracts attributable to the hedge risk is taken directly to other comprehensive income.
Amounts are transferred out of other comprehensive income and included in the measurement of the hedged transaction (sales or purchases) when the forecast transaction occurs. Movements in the cash flow hedge reserve are recorded in the Statement of Comprehensive Income.
Interest rate swap agreements The Group seeks to fix a minimum of 25% and a maximum of 75% of its interest rate risk where debt exceeds $15 million. At 30 June 2021 the Group had $5 million fixed at a rate of 1.34% plus bank margin expiring 26 June 2022.
The interest swap agreements are considered to be highly effective hedges as they are matched against forecast interest payments and any gain or loss on the contracts attributable to the hedge risk is taken directly to other comprehensive income. Amounts are transferred out of other comprehensive income and included in the measurement of the hedged transaction when the forecast interest payment is made. Movements in the cash flow hedge reserve are recorded in the Statement of Comprehensive Income.
Credit risk Credit risk arises from potential failure of counterparties to meet their obligations at the maturity dates of contracts. Because the counterparties of the above financial derivatives are ANZ Bank of New Zealand Limited and Bank of New Zealand, there is minimal credit risk.
75 SKELLERUP ANNUAL REPORT FY21 76 Sim Lim2020 Silclear Limited Nexus Performance Foams Limited Incorporated Masport Gulf USIncorporated Gulf Rubber Australia PtyLimited Limited America Deks North PtyLimited Deks Industries Conewango Products Corporation Ambic EquipmentLimited GrowthSkellerup Limited Limited Industries Skellerup Name ofEntity companies Subsidiary (a) statementsincorporate consolidatedfinancial thefollowingThe companies: significant 23. Parties Related Sim Lim2021 statements. financial consolidated the in method equity the using for accounted is interest Skellerup’s Lim. Sim in interest a35% holds below. Skellerup disclosed Lim) been (Sim have LLC Technic Lim Sim and Group Skellerup the between transactions those only Consequently, been have eliminated. Group the within parties related between transactions statements, financial consolidated are these As Investment Associate (b) Ultralon Foam Limited International Tumedei SpA Limited Rubber Services Skellerup Limited Rubber ProductsSkellerup Jiangsu Manufacturing andSales Manufacturing andSales Manufacturing andSales Manufacturing andSales Manufacturing andSales Manufacturing andSales Manufacturing andSales Distribution Manufacturing andSales Distribution Manufacturing andSales Distribution Manufacturing andSales Property Manufacturing andSales ActivitiesPrincipal related party Sales to 1,533 $000 331
Purchases from related Party Italy New Zealand China UK New Zealand USA USA Australia USA Australia USA UK New Zealand New Zealand Incorporation of Country New Zealand $000 112 65
by related party Amounts owed 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2021
Holding $000 36 10 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2020
to related party Amounts owed 31 December Balance Date 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June $000 71 7
23. Related Parties (continued)
(c) Compensation of Directors and key management The remuneration of Directors and senior management personnel during the year was as follows:
2021 2020 $000 $000 Short-term benefits Directors' fees 535 460 Senior management's salaries and incentives 4,042 1,654 Contribution to defined contribution scheme for senior management personnel 55 19 Long-term benefits Share-based incentive scheme expensed during the year 333 225
Mr John Strowger is a Director of Skellerup and a partner of Chapman Tripp, the Group’s legal advisors. Chapman Tripp has charged fees during the year amounting to $172,492 (2020: $170,971) excluding GST. There was $9,674 (2020: $6,532) outstanding (excluding GST) at balance date relating to these transactions. Mr Strowger did not personally provide any of these services.
24. Contingent Liabilities
2021 2020 $000 $000 Bank guarantee provided to the New Zealand Exchange 75 75
The Group receives claims from time to time in relation to products supplied. Where the Group expects to incur a cost to replace or repair the product supplied and can reliably measure that cost, that cost is recognised. The Group has general liability and professional indemnity insurance in the event that there are warranty claims.
25. Significant Events after Balance Date The Directors agreed to pay a final dividend, imputed to 50%, of 10.5 cents per share on 15 October 2021, to shareholders on the register at 5.00pm on 1 October 2021. This dividend is not recorded in the financial statements.
There are no other events subsequent to balance date that require additional disclosure.
26. New Accounting Standards, Amendments, Interpretations and IFRIC Interpretations There is no new Accounting standard, amendment or interpretation, which has been issued and is effective, that has a significant impact on the Group.
77 SKELLERUP ANNUAL REPORT FY21 78 Directors’ Disclosures, Remuneration and Shareholding Pursuant tosection140(2)oftheCompanies Act 1993andsection299oftheFinancialMarkets Conduct Act 2013, the Directors’ Interests Paul Shearer John Strowger David Mair Alan Isaac David Cushing Liz Coutts Directors heldinterests inthefollowing shares intheCompany asat30June2021. shareholdings their and year the during office holding Directors 1. David MairisanExecutive Director. He isremunerated forhisrole asCEOanddoesnotreceive any director Note: Total David Mair Paul Shearer John Strowger Alan Isaac David Cushing Liz Coutts 25 October2017. Director remuneration forFY21isshown inthetablebelow. totalremunerationThe tonon-executive Directors is$550,000asapproved by theshareholders atthe Annual Meetingon Remuneration Director Remuneration Employee and CEO Director, • Shearer Paul • Mair David • Isaac Alan • Cushing David • • Liz Coutts by ageneral noticedisclosedtotheBoard andentered intheCompany’s Interest Register. Directors namedbelow have madeageneral disclosure ofinterest 01July theperiod 2020to2 during August 2021 Interest in100,000shares purchased on28 August 2020. Interest in5,502,248shares following thesaleof250,000shares on9November 2020. Resigned asPresident ofInstituteDirectors Inc. on23July 2021. Resigned asDirector ofPGG Limitedon 30 2021. Wrightson April Resigned asDirector andChairofPorts of 2021. Auckland on31January Interest in720,000shares heldby ComoNomineesLimitesfollowing thesaleof200,000shares on23 2021. April remuneration. (Independent) (Independent) (Chief Executive) (Independent) (Independent) (Independent) Note 1
Board Chair 87,000 87,000
- Beneficial InterestBeneficial Board Director Held with 100,000 422,917 74,917 87,000 87,000 87,000 87,000 - - - - -
- Non-beneficial InterestNon-beneficial Audit Chair Held with 25,000 25,000 ------
- Held by Associated 5,502,248 9,866,169 534,917 118,320 720,000 112,000 174,000 Persons
50,000 74,917 87,000 87,000 Total
- - CEO Remuneration CEO remuneration is made up of three components: Fixed remuneration, short-term performance incentive (STI) and long-term performance incentive (LTI). The STI and LTI are at risk because the outcome is determined by performance against financial objectives. The table below shows CEO remuneration in FY21 and FY20.
$000 Fixed Salary STI1 Subtotal LTI2 Total David Mair FY21 740 626 1,367 813 2,180 David Mair FY20 690 - 690 - 690
1 The FY21 STI was accrued but not paid at 30 June 2021. 2 The FY21 LTI represents the market value of shares issued upon exercise of options on 30 October 2020.
Short-term Incentive The STI is an at-risk payment designed to motivate and reward for financial performance that exceeds the previous best achieved by Skellerup under the incumbent CEO management. The financial measure used for determining this performance is earnings before interest and tax (EBIT). The STI is set so that the CEO receives 5% of EBIT in excess of the previous best EBIT achieved by Skellerup under his management.
Long-term Incentive The LTI is a share option scheme. For financial reporting purposes, the fair value of options issued under the scheme is determined using the Black -Scholes formula.
David Mair was granted 1,000,000 options on 26 October 2018, at an exercise price of $2.12 per share. The exercise price was the weighted average share price on the twenty day trading period preceding issuance. On 30 October 2020 the options were exercised and converted to 277,209 ordinary shares, representing the number of shares equal to the difference between the market value of Skellerup’s ordinary shares at the exercise date and the exercise price of NZ$2.12 per share.
David Mair was granted 1,000,000 options on 29 October 2020, at an exercise price of NZ$2.91 per share. The exercise price was the weighted average share price on the twenty day trading period preceding issuance. The options are exercisable in the period beginning on 1 September 2022 and ending on 1 November 2022.
Financial Number of Price per Financial SharePrice Value Year of Grant Options Option Year Exercised at Exercise at Exercise NZ$ NZ$ $000 David Mair FY21 1,000,000 2.91 Exercisable in FY23 N/A N/A FY19 1,000,000 2.12 FY21 2.93 813
CEO Remuneration: Five Year Summary
$000 Salary Kiwisaver STI Total LTI Vesting LTI Span David Mair FY21 740 - 626 1,367 - 2020-2022 100% 2018-2020 David Mair FY20 690 - - 690 - 2018-2020 David Mair FY19 650 20 101 771 - 2018-2020 David Mair FY18 600 18 347 965 - 2011-2018 David Mair FY17 600 18 31 649 50% 2011-2018
79 SKELLERUP ANNUAL REPORT FY21 80 directors) theFY21year during inthefollowing bands. GroupThe paidremuneration inexcess to123employees of$100,000includingbenefits (notincludingnon-executive Employee Remuneration Total 1,000,000 Over 500,000 -999,999 100,000 -499,999 50,000 -99,999 10,000 -49,999 1,000 -9,999 1 -999 Range 2021 9August at as Shareholders and Shares Ordinary of Distribution Total Female Male 2021 June 30 at as Diversity and Gender Remuneration Range $000 230-240 220-230 210-220 200-210 190-200 180-190 170-180 160-170 150-160 140-150 130-140 120-130 110-120 100-110 2021 6 1 5 Directors Employees Number of NumberofShareholders 16 12 21 2020 2 2 1 3 5 5 5 6 9 9 8 5 1 4 6,238 1,903 3,508 133 223 439 23 9 2021 2 0 2 Remuneration 1,550-1,560 1,050-1,060 Range $000 680-690 570-580 450-460 360-370 340-350 300-310 290-300 280-290 270-280 250-260 240-250 Officers Number ofShares 2020 2 0 2 195,276,382 101,885,018 22,070,881 14,291,168 36,632,788 14,771,877 5,424,125 200,525 2021 36 28 8 Employees Number of Management 1 1 1 1 1 1 1 1 1 4 2 2 2 % ofShares
2020 100.00% 37 29 8 52.17 11.30 18.76 2.78 7.32 7.57 0.10 Substantial Product Holders Pursuant to the Financial Markets Conduct Act 2013, the following parties had given notice as at 9 August 2021 that they were substantial product holders in the Company and held a relevant interest in the number of ordinary shares shown below:
Name Number of Shares % Sir Selwyn Cushing (21 August 2018) 12,523,826 6.50 H&G Limited (21 August 2018) 10,866,169 5.64 Forsyth Barr Investment Management (26 June 2020) 9,785,782 5.02
Twenty Largest Shareholders as at 9 August 2021
Rank Name Number of Shares % 1 Forsyth Barr Custodians Limited 17,397,594 8.91 2 Custodial Services Limited 11,936,190 6.11 3 H & G Limited 9,866,169 5.05 4 FNZ Custodians Limited 9,034,081 4.63 5 Citibank Nominees (New Zealand) Limited 6,877,308 3.52 6 Accident Compensation Corporation 6,027,276 3.09 7 David William Mair & John Gordon Phipps 5,502,248 2.82 8 BNP Paribas Nominees (NZ) Limited 4,794,447 2.46 9 New Zealand Depository Nominee Limited 3,910,106 2.00 10 HSBC Nominees A/C NZ Superannuation Fund Nominees Limited 2,829,944 1.45 11 HSBC Nominees (New Zealand) Limited 2,707,120 1.39 12 Public Trust Forte Nominees Limited 2,372,506 1.21 13 HSBC Nominees (New Zealand) Limited 2,348,822 1.20 14 Hobson Wealth Custodian Limited 2,169,974 1.11 15 FNZ Custodians Limited 2,008,015 1.03 16 Investment Custodial Services Limited 1,708,531 0.87 17 JBWere (NZ) Nominees Limited 1,702,790 0.87 18 Leveraged Equities Finance Limited 1,664,515 0.85 19 Forsyth Barr Custodians Limited 1,655,459 0.85 20 Seajay Securities Limited 1,457,642 0.75
81 SKELLERUP ANNUAL REPORT FY21 82 Officers WJ Strowger, LLB(Hons) PN Shearer, BCom DW Mair, BE, MBA AR Isaac, CNZM, BCA, FCA BD Cushing, BCom, ACA Chair EM Coutts, ONZM, BMS, FCA, CFloD Directors Directory Corporate Please assistourregistrar by quotingyour CommonShareholder Number(CSN). Facsimile: +6494888787 Telephone: +6494888777 Email: [email protected] enquiries General www.computershare.co.nz/investorcentre to view your investment including transactions, portfolio please visit: To changeyour address, updateyour payment and instructions Online Managing your shareholding Website: www.skellerupholdings.com Telephone: +6495238240 Email: [email protected] New Zealand Auckland 1546 Greenlane PO Box 74526 New Zealand Auckland 1051 Greenlane L3, 205Great SouthRoad Registered Office Chief FinancialOfficer GR Leaming, BCom, CA Chief Executive Officer DW Mair, BE, MBA
New Zealand Auckland 1010 80 QueenStreet Level 4 Bank ofNew Zealand New Zealand Auckland 1010 Street23 –29 Albert ANZ BankNew ZealandLimited Bankers New Zealand Auckland 1010 Street23 –29 Albert Chapman Tripp Advisors Legal New Zealand Auckland 0622 Takapuna 159 Hurstmere Road New Zealand Auckland 1142 Private Bag92119 Computershare Investor Limited Services Registrar Share New Zealand Auckland 1010 Britomart 2 TakutaiSquare & Young Ernst Auditors
Skellerup Holdings Limited L3, 205 Great South Road Greenlane, Auckland 1051, New Zealand
PO Box 74526, Greenlane Auckland 1546, New Zealand
E [email protected] T +64 9 523 8240 W www.skellerupholdings.com