Annual Report

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Introduction

2019 Highlights Chairman and Chief Executive Officer’s report

2 4

Our Company

Board of Directors 10 Executive Team 12 The year in review 14 Agency – Birch Hill Station 20 Retail & Water – Ātihau Whanganui Inc. 22 Agency – Gray Family 24 PGG Wrightson in the community 26 Environmental, Social and Governance Reporting 28 Financial information Key Financial Disclosures 29 Directors’ Responsibility Statement 30 Additional Financial Disclosures including Notes to the Financial Statements 39 75

Key Financial Disclosures Directors’ Responsibility Statement Additional Financial Disclosures including Notes to the Financial Statements Independent Auditor’s Report

Governance

Corporate Governance and Board Charter 78 Statutory Disclosures 87 General Disclosures 92 Shareholder Information 94 96

Corporate Directory

Calendar

Annual shareholders’ meeting 22 October 2019

Half-year earnings announcement 26 February 2020

Year-end earnings announcement 18 August 2020

Front cover: LeaderBrand S.I. General Manager Mike Arnold monitors a young crop of broccoli with Fruitfed Technical Horticulture Representative Malcolm Duncan near Chertsey in the early morning in August 2019.

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Financial
performance
highlights
Operating EBITDA of
$24.4m
Net profit after tax of
$131.8m
Earnings per share (EPS) of
17.4¢
($1.74 per share
on a post-share
consolidation basis)
Fully imputed dividends of
15.0¢
per share
(on a post-share
consolidation basis)
The White Rock Station team wean calves with
PGG Wrightson Livestock Agent Andy Jennings
on the South Wairarapa Coast in March 2019.
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ANNUAL REPORT 2019 | 1

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Net profit after tax benefited from the gain on
sale of the Seed & Grain business and led to a
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The sale of Seed &
Grain to DLF Seeds
A/S was completed on
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Go- Beef
and
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of $131.8 million.
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1 May 2019.
A capital distribution
to shareholders of $234
million was completed
on 14 August 2019.
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Go- Lamb
products continue to
grow strongly with the
balance peaking at $49.3
million during FY2019.
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PGG Wrightson Livestock Auctioneers John
Farrell and Greg Cook look for bids at the
Mt Arrowsmith calf sale in the Ashburton
Gorge in April 2019.
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ANNUAL REPORT 2019 | 3

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Chairman and Chief Executive Officer’s Report

PGG Wrightson Limited (“PGW”, “the Group” or “the Company”) delivered Operating earnings before interest, tax, depreciation and amortisation (Operating EBITDA) for the year ended 30 June 2019 of $24.4 million and net profit after tax (NPAT) of $131.8 million.

Rodger Finlay Stephen Guerin CHAIRMAN CHIEF EXECUTIVE OFFICER

A transformational year for PGW

W
	2019 $M	2018* $M
Revenue	809.3	808.7
Gross Proft	219.5	220.1
Operating EBITDA	24.4	34.5
Net Proft After Tax	131.8	18.9
Net Cash Flow from Operating Activities	(49.0)	5.8

The 2018 comparatives have been restated to present Seed & Grain as a discontinued operation and for NZ IFRS 15.

FY2019 has been a transformational

On 1 May 2019, PGW announced year for PGW, both for the business the completion of the sale of all and shareholders. The change brought of its shares in PGG Wrightson about by the sale of the Seed & Grain Seeds Holdings Limited to DLF business completed on 1 May 2019 was Seeds A/S. significant for PGW with the proceeds from the transaction paving the way for a capital distribution to shareholders of Shareholders will receive a fully $234 million.

Shareholders will receive a fully $234 million. imputed dividend of 7.5 cents per share, which will be paid on Our strategic relationship with the new 2 October 2019, making a total owners of Seed & Grain, DLF Seeds A/S, is of 15.0 cents per share (on a post a positive one. While this deal has been share consolidation basis) for the transformational for PGW, it remains financial year. very much business as usual for our frontline staff and our customers. We will continue to work closely with the PGG Wrightson Seeds team to bring their products to our customers, and the seed category will continue to be profitable for our retail business.

Reflecting on FY2019, we believe it was one of the most operationally challenging of recent years. Farmer confidence in parts of the agriculture sector remains subdued, constraining farm spending and therefore our revenue growth over the year. This has also been evident in recent months with a discernible tightening in the credit environment. This has seen a small

increase in our overdue debtors and increased provisions taken at year-end for doubtful debts.

As a result, PGW finished the year slightly under the lower end of our Operating EBITDA guidance range of $25 million. On the other hand, net profit after tax benefited from the gain on sale of the Seed & Grain business and at $131.8 million is a record result for PGW.

It is important to note that this Operating EBITDA result no longer includes any contribution from the Seed & Grain business which has been reported as a discontinued operation in our results for FY2019 and the comparative prior year.

Nevertheless, we’ve chosen to continue to invest in and build our business as we plan for farm spending to recover. Notably we’ve increased the pace of our IT spend as a number of key projects are being implemented.

We indicated in May that we expected to end the financial year near the bottom of our Operating EBITDA guidance range given that we were cautious about trading conditions through the last quarter. As is often the case,

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ANNUAL REPORT 2019 | 5

on farm conditions have had an influence on performance in the sector and in turn PGW and FY2019, was no exception.

The impact of Mycoplasma bovis (M bovis) was felt across the Livestock and Rural Supplies businesses. Most particularly with reduced dairy herd settlements, a reduction in tallies, a softening of demand for dairy beef, and a more cautious approach to spending in the dairy sector across a range of farm inputs.

Market conditions continued to challenge both our Real Estate and Wool businesses with results down on last year.

Commodity prices were generally strong, especially in New Zealand dollar terms, therefore many of our customers have enjoyed good returns even where production reduced. This flowed through to our Livestock business with sheep and beef markets remaining strong and continuing to strengthen. In addition, the horticulture sector continues to go from strength to strength with an increasing global demand and a growing trend of conversion of livestock farms to orchards and vineyards in key areas across the country including Northland and Marlborough which benefited Fruitfed Supplies (Fruitfed).

On farm and market conditions

Looking back on the 2018/2019 season, on farm conditions were positive for most of our customers.

Above-average rainfall and temperatures supported strong pasture growth across many regions. The weather was less kind to our horticultural and arable customers, though, with cool conditions during key times during spring affecting pollination and a hot, dry summer limiting the yield potential of harvests.

Consequently, production estimates are a mix of good and bad news compared to the 2017/2018 season. The Ministry for Primary Industries estimates dairy production increased, similar production levels in beef, lamb and pipfruit as 2017/2018, and reduced production in kiwifruit and wine. Commodity prices were generally strong, especially in New Zealand dollar terms.

However, the impact of M bovis on dairy and beef and the pace of regulatory change that affects the agriculture sector has kept farmer confidence low. More recently, the proposal to increase the amount of capital banks are required to hold has the potential to reduce the amount of debt capital that might be available to agriculture. As a result, we are seeing a more cautious approach to investment and expenditure from those customers most impacted by these factors.

Our people

At 30 June 2019 PGW employed 1,800 employees (including casual, fixed-term, commission and permanent staff).

In early 2019, we concluded the Holidays Act Remediation Project. The goals of this project were to; comprehensively review calculations back to March 2011, update our systems and processes to ensure future calculations are in line with the Holidays Act, and to remediate any arrears.

Health, safety and wellbeing

Our health, safety and wellbeing culture will continue to evolve as we move from a focus of compliance to genuine safety and wellbeing leadership. A key initiative, which supports this change in focus, is the Zero Incident Process (ZIP) programme (with over 1,000 employees completing the ZIP programme to date).

We have continued to see an improvement in our benchmark performance measures for safety incident events with a reduction in frequency rates for lost time of 35 percent and frequency rates for total recordable injuries of 29 percent for this year (compared to the year ended June 2018).

The wellbeing of our people and the communities in which they operate is a focus for PGW. Early in FY2019 we undertook an employee assessment initiative with Dr Tom Mulholland and his KYND wellness tool. Due to the positive feedback from employees regarding this initiative, we entered into a sponsorship partnership with Dr Tom‘s ‘Walk the Talk’ Wellness Tour, which commenced in early FY2020.

Corporate structure review

The PGW Board commenced a review of the corporate service model for the business, following the divestment of the Seed & Grain business in May 2019.

Outcomes from the review have been largely implemented as we recalibrate our corporate structure to capture efficiencies while also configuring our back office to best serve our customers and our re-sized operation. We expect to see the benefit of reduced costs flowing through progressively with savings in excess of $2.5 million expected in FY2020.

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ANNUAL REPORT 2019 | 7

Net Group cash flows were $199.6 million which predominantly relates to the cash received for the sale of Seed & Grain, leaving a cash balance of $210.5 million at 30 June 2019.

Net cash flow (including the Seed & Grain business), prior to sale, from operating activities was a $49 million outflow. This outflow results from investments in working capital including investment in Go livestock products of $8.3 million. In addition, lump sum funding payments of approximately $10.3 million were made to the Group’s Defined Benefit Pension Scheme (Plan) to bring the Plan into actuarial equilibrium in June 2019.

PGW negotiated and entered into new bank facilities in July 2019 providing for core facilities of up to $50 million and a working capital facility of up to $70 million. It is pleasing to note that very competitive terms have been struck for these banking arrangements and this further

of the business and PGW’s future.

“Our health, safety and wellbeing culture will continue to evolve as we move from a focus of compliance to genuine safety and wellbeing leadership.”

Dividends

The Board has resolved to declare a fully imputed final dividend of 7.5 cents per share, which will be paid on 2 October 2019. This will effectively bring the total fully-imputed dividends paid for the year to 15.0 cents per share on a post share consolidation basis.

Outlook

As noted earlier, with the significant change that PGW has undergone over the last 12 months, we believe that we are well positioned for the current financial year and beyond.

As previously noted, we would anticipate that the impact of M bovis on dairy and beef and uncertainty regarding regulatory change affecting agriculture will continue to impact confidence levels in the rural sector. We are seeing a more cautious approach to investment and expenditure from our customers.

With continued strong global demand for protein, and as livestock farmers and the wider industry gain a better understanding and increased confidence in the management of M bovis, we believe we will see the positive effect of those factors flow through into improved trading. We are also buoyed by the ongoing confidence in the horticulture sector and we anticipate that the Fruitfed business will continue to go from strength to strength as this sector grows.

Whilst it is too soon to provide firm guidance about expectations for FY2020, the Board considers that post implementation of the corporate restructuring, and assuming a more normal trading year and continuing confidence in commodity prices, we expect to see PGW achieving Operating EBITDA in excess of $30 million (before adjusting for the impact from the new accounting standard for leases).

Strategy update

With the Seed & Grain transaction and the capital return behind us, we are sharpening our focus on the core PGW offerings that have made the business a key part of the New Zealand agricultural landscape for more than 160 years. The Board and management team will be reassessing our strategy and exploring opportunities to innovate and grow our business as we continue to demonstrate to our customers why PGW is their preferred partner for their agri-business needs.

Governance changes

The PGG Wrightson Limited Board had a number of membership changes:

Guanglin (Alan) Lai retired as Director and Chairman of the Board effective 30 October 2018.
Joo Hai Lee was appointed interim Chairman effective from 31 October 2018. Following the appointment of Rodger Finlay as Chairman, Joo Hai Lee became Deputy Chairman on 30 April 2019.
Rodger Finlay joined the Board as an Independent Director and Chairman on 30 April 2019.
David Cushing and Sarah Brown were appointed to the Board as Independent Directors on 30 April 2019.
Trevor Burt retired as Director and Deputy Chairman of the Board effective 30 April 2019.
Bruce Irvine and John Nichol retired from the Board effective 30 April 2019.
Lim Siang (Ronald) Seah retired from the Board effective 31 August 2019.

Executive team changes

The PGW executive team had a number of changes:

Natalie Thain was appointed into an acting role as General Manager Human Resources in February 2019 on a fixed term basis to cover a period of parental leave.
Ian Glasson stepped down as Chief Executive Officer on 31 May 2019.
Stephen Guerin was appointed as Chief Executive Officer on 1 June 2019, prior to this appointment he was the Group General Manager of Retail & Water.
Nick Berry was appointed General Manager Retail & Water on 1 August 2019.

Acknowledgements

On behalf of the Board and management team, we extend our thanks to the 1,800 outstanding individuals who make up the PGW team, along with our customers and suppliers.

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Rodger Finlay

Chairman

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Stephen Guerin

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Board of Directors

GUANGLIN ALAN LAI

SARAH BROWN

RODGER FINLAY

JOO HAI LEE

U KEAN SENG

DAVID CUSHING

ACA (ICAEW), CPA (Australia), FCCA (UK), CA (ISCA) Deputy Chairman

LLB (Hons), B.Ec

BA, LLB, CFInstD Independent Director

BCom, FCA, CFInstD

B.Com ACA Independent Director

Alan retired as Director and Chairman of the Board of PGG Wrightson Ltd effective 30 October 2018.

Chairman

U Kean Seng was appointed to the PGG Wrightson Limited Board on 4 December 2012. He is Head of Corporate and Legal Affairs for Agria Corporation, a role he has held since December 2008. U Kean Seng previously practiced as a partner at Singaporean law firm, Shooklin & Bok LLP, focused on East Asia, and he led a corporate finance team in Allen & Overy Shooklin & Bok, JLV, an international law venture partnership with London based Allen & Overy LLP.

Rodger Finlay joined the PGG Wrightson Joo Hai Lee was appointed as Deputy Limited Board on 30 April 2019 as an Chairman of PGG Wrightson Ltd on 30 Independent Director and Chairman, and April 2019 and has been a Director since as a member of the Audit Committee. An 31 October 2017. He is a member of the experienced Chairman and Company Director, Audit Committee. He was appointed as an Rodger has governance skills specialising in Independent Director of Agria Corporation in finance, natural resources, agriculture, media November 2008. and corporate recovery. Additionally, he has Mr Lee, aged 63, has more than 30 years’ amassed significant knowledge of financial experience in accounting and auditing. He and jurisdictional systems globally having was a partner of an international public conducted investment banking activities in accounting firm in Singapore until his Australasia, South East Asia, Africa, the United retirement from the firm in 2012. He has Kingdom, continental Europe and North serviced clients in the manufacturing, America. hospitality, insurance, insurance brokers and After 26 years in the investment banking and other service industries. His clients included fund management areas, Rodger, since 2008, large multinational corporations and listed now acts as a full time Company Director entities. His professional memberships and Trustee with governance assignments include those of the Institute of Chartered in New Zealand and the UK. Rodger Chairs Accountants in England and Wales, CPA both the Independent Advisory Panel of the (Australia), ACCA (UK), Institute of Directors of Provincial Growth Fund and NZ Post. He both Hong Kong and Singapore. Mr Lee also holds directorships in Ngāi Tahu Holdings sits on the Board of several listed companies Corporation, Moeraki Limited and Rural in Singapore and one in Hong Kong.

David Cushing was appointed to the PGG Wrightson Limited Board as an Independent Director on 30 April 2019 and is Chairman of the Audit Committee. David is a former investment banker. He is Executive Chairman of Rural Equities Limited and a Director of Skellerup Holdings Limited, H&G Limited and Red Steel Limited and ASX listed Webster Limited. David has previously been a director of Williams & Kettle Limited, Fruitfed Supplies Limited, Tourism Holdings Limited, NPT Limited, New Zealand Farming Systems Uruguay Limited and Wakefield Health Limited.

Sarah Brown was appointed to the PGG Wrightson Limited Board on 30 April 2019 as an Independent Director. Sarah is from a rural background, having grown up on a Southland sheep farm. She is a former Commercial Lawyer who now holds a number of Independent Director roles. Sarah’s directorships include PowerNet Limited, Electricity Invercargill Limited and OtagoNet Limited and she was previously on the Southern Institute of Technology Council for 11 years, six of them as Council Chair. She is a member of the Independent Advisory Panel for the New Zealand Provincial Growth Fund and a Director of the Southland Regional Development Agency. Sarah is a passionate Southlander, strongly committed to regional New Zealand’s economic development.

TREVOR BURT

Trevor retired as Deputy Chairman of the Board of PGG Wrightson Ltd effective 30 April 2019.

BRUCE IRVINE

Bruce retired from the Board of PGG Wrightson Ltd effective 30 April 2019.

U Kean Seng previously sat as an Independent and Non-Executive Director of several public listed corporations. He received a Bachelor of Laws (Honours) degree from Monash University Australia. He is a Barrister and Solicitor, Supreme Court of Victoria, Australia; Advocate and Solicitor, Supreme Court of Singapore and Solicitor of England and Wales. In addition to his extensive legal knowledge, U Kean Seng is also a qualified economist, having completed his degree majoring in Economics and Accounting, B.Ec at Monash University, Australia.

JOHN NICHOL

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John retired from the Board of PGG Wrightson Ltd effective 30 April 2019.

After 26 years in the investment banking and fund management areas, Rodger, since 2008, now acts as a full time Company Director and Trustee with governance assignments in New Zealand and the UK. Rodger Chairs both the Independent Advisory Panel of the Provincial Growth Fund and NZ Post. He holds directorships in Ngāi Tahu Holdings Corporation, Moeraki Limited and Rural Equities Limited. Rodger previously served on the PGG Wrightson Agritech Governance Board and retired in 2013.

LIM SIANG RONALD SEAH

Ronald retired from the Board of PGG Wrightson Ltd effective 31 August 2019.

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Board of Directors; (left to right)
Lim Siang (Ronald) Seah,
David Cushing, Sarah Brown,
Rodger Finlay, Joo Hai Lee
and U Kean Seng.
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Executive Team

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PETER MOORE

PETER NEWBOLD

NICK BERRY

STEPHEN GUERIN

GRANT EDWARDS

PETER SCOTT

JULIAN DALY

NATALIE THAIN

NICK BERRY

STEPHEN GUERIN

General Manager Retail & Water

Stephen was appointed Chief Nick was appointed General Executive Officer of PGG Manager Retail & Water in August Wrightson Limited in June 2019. 2019. Nick joined PGW as New Prior to this appointment he was Business Growth Manager for responsible for all aspects of the Agritrade in 2014 and over the last Retail & Water group business five years has grown the business which includes the Rural Supplies, substantially. Prior to joining Agritrade, Fruitfed Supplies and PGW, Nick was General Manager Water businesses. He has worked for RD1 for eight years and prior for PGG Wrightson Limited and to that National Operations its predecessor companies for Manager. Nick has an extensive 31 years. He holds a Bachelor of track record of experience at Business Studies (Accounting) general management level. Nick’s from Massey University. Stephen strengths are leadership, business is a Director of several Group management, along with strong subsidiaries and a Director of the sales and service focus, backed up PGG Wrightson Employee Plan with a strong affinity for retail and Trustee Limited. the agribusiness sector.

JULIAN DALY

General Manager Corporate

Julian is responsible for the Group Strategy, Marketing, Legal, Corporate Communications, Business Services, and Investor Relations functions for PGG Wrightson Limited. He is also Company Secretary and previously held a number of responsibilities including, General Manager of PGG Wrightson Real Estate Limited and Internal Audit. Julian has broad operational involvement across the business and is Chairman of the Credit Committee and Risk Committee, Director of a number of Group subsidiaries and a Director of the PGG Wrightson Employee Benefits Plan Trustee Limited. He is a former General Counsel of DB Breweries Limited and has previously worked for law firms in the Middle East and New Zealand.

GRANT EDWARDS

General Manager Wool

Grant was appointed as General Manager Wool in October 2017. He is responsible for all aspects of the Wool business including procurement, logistics, sales and wool export. Grant holds a Bachelor in Agriculture Science from Lincoln University majoring in Wool Science. He began his career in Livestock with Reid Farmers Ltd in the mid 1980’s and then joined their Wool Business. He has held the position of Wool Manager at Reid Farmers and Pyne Gould Guinness Limited. Grant more recently held roles with PGG Wrightson being General Manager Regions and Otago Regional Manager, and General Manager Insurance and Financial Services. Grant has spent over 20 years directly in the wool industry and states, “once you have a passion for wool it never leaves.”

PETER MOORE

General Manager Livestock

Peter has been responsible for the Livestock division since August 2014. Prior to joining the business, he headed up Fonterra’s international farming ventures business from 2008 until 2013, responsible for developing and implementing the strategy to selectively invest in milk pools outside of New Zealand and Australia. His major focus was the development of the scale farms in China plus dairy development in Latin America and Asia. Prior to this Peter worked in Fonterra’s risk management team and before joining Fonterra in 2005 he managed AgResearch farms across New Zealand. Peter grew up on the family hill country sheep and beef farm in the Waikato and spent a number of years managing this in partnership with his family.

PETER NEWBOLD

General Manager Real Estate

Peter is the General Manager of PGG Wrightson Real Estate Limited, a role he has held since September 2013. Peter was previously General Manager of New Zealand Sotheby’s International Realty. Peter was previously employed by Wrightson Limited from 19952005 during which time he held a range of roles including Marketing Manager and Business Development Manager. Prior to this, he had an extensive career in retail ownership management and franchising.

PETER SCOTT

NATALIE THAIN General Manager Human Resources (Acting)

Peter was appointed as PGG Natalie was appointed into an Wrightson Limited’s Chief acting role, to cover maternity Financial Officer in March 2015 leave, as General Manager and leads the finance function. Human Resources in February Peter started his career at 2019. Natalie leads our Change Fletcher Challenge and has Management, Human Resources broad multinational experience Shared Services, Human Resources spending five years in Scandinavia Business Partnering and Safety, where he was the Vice President Wellbeing and Environment of Accounting and Tax for Norske functions. In this role she oversees Skog, a large global newsprint the PGW People Strategy with and magazine paper producer. the foundations of this being He relocated to Australia in 2005 performance, leadership and and was appointed to the lead culture. Natalie has worked in finance role for the Australasian a wide range of senior human region for Norske Skog. In 2008 resource management consulting Peter joined Gloucester Coal and in-house roles both in New Limited, an Australian Securities Zealand and abroad with a Exchange listed mining company specialist focus in working with as the Chief Financial Officer. Executive teams and Boards In 2010 he joined the majority on Business Transformation, shareholder Nobel Group, a leader Organisational Design and in managing the supply chain of Change Management and agriculture, energy, metals and Leadership Development. In mining resources, headquartered addition to her human resources in Hong Kong and listed in and governance consulting, Singapore. He was the Chief Natalie is also an Independent Financial Officer for Noble Group Director on a number of local in Australia. Boards including that of the Crusaders.

Ian was Chief Executive Officer and stepped down on 31 May 2019.

IAN GLASSON

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	2019 $M 2018 $M
Revenue	193.8 200.6
Operating EBITDA 15.4 20.1

Agency group

Our Agency group incorporates the Livestock, Wool and Real Estate businesses, as well as our referral commissions for insurance and finance services. Agency’s Operating EBITDA was back 23.4 percent on last year.

The demand for Go products continues to grow strongly, with the balance peaking at $49.3 million during FY2019. As a consequence, the total number of stock cycling the scheme increased from FY2018, with 309,035 sheep and 44,862 cattle entering the scheme this year. We expect the demand for Go products to continue to grow in the years ahead, so we are considering alternative funding options.

Livestock

Real Estate

The largest business within the Agency group is Livestock.

The Real Estate business has been challenged by a soft rural market due to a number of factors but particularly the changes to the application of the Overseas Investment Act resulting in a tightening of foreign investment requirements. In addition, high farm values, the impact of M bovis on the dairy sector, along with increasingly regulatory compliance requirements, and changes to bank lending criteria impacted the Real Estate result.

Livestock is principally an agency business, with revenue predominantly reflecting commissions earned on the trading of livestock. Consequently, the key drivers of business performance are the volume and value of livestock traded.

The Operating EBITDA performance of the Livestock business was back 7.8 percent on their strong FY2018 result.

Innovation continues to be a focus for the Livestock team with a major project coming to fruition during the year. PGW’s new online livestock trading channel, bidr®, was delivered to market during the last quarter of FY2019. bidr® has the potential to be a gamechanger in the livestock trading market with strong interest from the industry to date. In addition, digital tools for the highly mobile Livestock team were delivered throughout the year to keep agents up to date with the latest market intelligence.

Livestock was down on earnings at the half year mark and did not recover to the extent expected over the second half, despite strong sheep and beef commodity pricing and demand.

Despite these difficult conditions, the business completed a number of market leading sales in the horticulture and sheep and beef sectors. The Lifestyle and Residential sectors again performed well with continued growth in both areas.

Unfortunately, the effects of a wet spring lingered and the added impact of a dry autumn compounded already difficult feed supply conditions at that time across most of the country. This delayed the finishing of sheep and cattle, with many farmers holding onto stock through until the late-autumn and into the winter months.

Wool

This year the Wool business was negatively impacted by continued depressed crossbred wool prices globally, a reduction in the number of bales sold compared to FY2018, and poor trading conditions for the export business.

Livestock has continued its focus on its people during FY2019. This year saw the successful completion of the fourth Livestock Trainee programme allowing for graduates to take up positions around the country. Keeping our people safe was another key focus with resource added to further support the health, safety and wellbeing of the team.

Livestock tallies for all stock categories across all sales channels were marginally lower year on year. A key contributor to the lower tallies was the effects of M bovis on the dairy sector which impacted dairy herd settlements and farmers trading dairy beef.

Last year’s strong result was buoyed by the sale of stockpiled wool, whereas this year’s result is more reflective of the subdued market of FY2017.

The sale yards rationalisation project continues with the focus being to create efficiencies and enhance the welfare of animals and the safety of our people.

Insurance and Finance Commissions

Our Insurance and Finance businesses earn commissions from Aon Insurance and Heartland Bank. These businesses performed broadly in line with the corresponding period last year.

PGW Livestock Area Manager Maurice Stewart auctions a pen of lambs at the Feilding Saleyards in January 2019.

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2019 $M 2018 $M Revenue 611.7 603.8 Operating EBITDA 19.6 23.8

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Retail & Water group

The Retail & Water business incorporates Rural Supplies, Fruitfed Supplies, Agritrade and Water. Retail & Water’s Operating EBITDA was back $4.2 million on the record result of FY2018.

Fruitfed Supplies

Our investment in technology and people continues. The roll out of our new retail point of sale system in the first quarter of FY2019, along with the team progressing the discovery phase of the e-commerce project reflects the group’s focus on technology. A key aspect of the group’s strategy is its continued investment in its people - with one of the key goals being to enhance technical expertise which in turn adds value to customers.

Water

The strong performer within the Retail & Water group continues to be Fruitfed Supplies (Fruitfed).

The star performer in our Water business was Advanced Irrigation Systems (AIS). This business had an impressive year due to an established growth strategy around golf, landscape, sports turf and horticulture with major developments at prestigious sites such as the Royal Auckland and Grange Golf Club and the Millbrook Resort near Arrowtown. The pleasing performance of AIS is set to continue, with a number of major projects in the pipeline.

Market conditions for the horticultural sector remained positive throughout the 2018/2019 season despite some adverse conditions at key pollination, growing and harvesting periods.

For example, our export onion grower customers in the Pukekohe area and Canterbury region received strong returns for their produce that market commentators say is the best price they have received in the last 30 years.

A factor in the reduction in Operating EBITDA for the group was a claim event noted in our half-year results in February 2019. A settlement was reached with our supplier that partially compensated PGW for the consequences arising from the supply of their defective product with a financial impact of approximately $1.8 million that was not recovered. In addition, higher fuel prices over the year also impacted earnings in Retail & Water along with other parts of our business.

Elsewhere in the Water business, the performance continued to disappoint largely due to a lack of on farm development. Therefore, it was deemed prudent to re-size the Water business’s cost base. We believe that the benefits of this restructing will flow into FY2020.

The development of orchards and vineyards around the country continue to drive revenue growth for Fruitfed. In particular we have seen significant development in Northland, a region ideally suited to grow avocados, grapes and pipfruit. This investment in development by many of our customers was offset slightly by a reduction in demand of inputs for winery ingredients for the 2019 vintage due to favourable autumn climatic conditions during the critical harvest period.

Rural Supplies

The Rural Supplies business has a core foundation centred on the agronomy categories of agchem, seed and grain, and fertiliser. We proudly position ourselves as providing the best product and technical advice to our customers, which in turn adds value to the specific requirements of their farming operation. We believe the evidence of this is reflected in the continued strong performance of our market share in these agronomy input categories.

Agritrade

The Agritrade business continued its growth year on year with revenue up on the same period last year due to product acquisition and increased distribution services. Time Capsule sales were back on FY2018 as conditions were not conducive for facial eczema.

Looking forward, new product initiatives are expected to deliver increased margin to the group.

PGG Wrightson Technical Field Representative Nikki Barbarich-Waikari inspects a paddock of Clover Plantain with Rob Faulkner at Wairakaia Station near Young Nick’s Head on the East Coast in November 2018.

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AGENCY
LIVESTOCK
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late March 2019.
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The Wairarapa is a region of contrasts, featuring rugged coastlines, fertile plains and hard hill country. The region is well known for producing quality sheep and beef stock that move well off the hills.

Just a short drive from the township of Martinborough is the picturesque Birch Hill Station, a sheep and beef breeding operation. The 1604 hectare (1300 hectare effective) Station is owned by the Baigent family and has been managed by Stuart and Caroline Ross since March 1997.

Considered hard country, Birch Hill Station includes steep hill land with some flats. The Station runs 300 Hereford breeding cows and 70 replacement heifers, along with 6,100 Romney/Texel breeding ewes.

Birch Hill Station Manager Stuart Ross describes their farming operation as traditional sheep and beef breeding on summer dry country. The male lambs are all gone by the first week in December, approximately 45 percent of these lambs are sent to the works and the balance sent store (the 2018 lambing season was exceptional with 60 percent of the male lambs sent to the works). All the white face Angus Hereford steers are sold at

auction, with Hereford bull calves sold on farm. Weaner white face heifers are retained until the spring and sold privately as a breeding proposition.

Stuart said, “Despite the land being prone to drying out, we have a strong focus on getting weight on capital stock and optimising pasture. Our investment in genetics over a number of years is really paying off with an increase in scanning and docking rates year on year, along with improvements in weaning weights. We keep pushing for better results and we need to work with people who can help us with that. That’s where the PGG Wrightson (PGW) livestock team come into play with forward knowledge and expertise in the market.”

“In the 22 years we have been here we have been lucky enough to have had a long-lasting relationship with Livestock Agent Jim Brasell who retired a few years ago, and more recently with Rihi Brown. It’s good to work with a team you know

and who knows how you operate. It helps when they understand how we like to get things done.”

“Rihi worked alongside Jim for a couple of years before he became our agent, which included his trainee tenure, so we knew him well. The transition was seamless. Rihi is positive and proactive. He looks for opportunities,” said Stuart.

PGW Livestock Agent Rihi Brown was born in Martinborough, so he knows the farming community well. Rihi entered the PGW livestock trainee programme in November 2015. After his trainee programme finished he remained working alongside Jim until August 2017. At that time, he took over the area formerly serviced by Jim, who retired. As a sheep and beef specialist, Rihi services customers in the South Wairarapa area from Carterton to Martinborough to the coast.

Rihi said, “It’s a dream job for me. I really enjoy working alongside farmers and PGG Wrightson Livestock seeing a range of farming operations. Trainee Programme Stuart and Caroline Ross are very good This highly competitive 18-month operators and they are respected in the programme was developed to community for producing exceptional stock at Birch Hill Station which attracts provide successful applicants with the exposure, education and handsregular repeat buyers.” on training to support a career as a “To be a livestock agent you need to PGW Livestock Agent.

“To be a livestock agent you need to PGW Livestock Agent. understand and respect how each This nationally recognised customer operates. It’s also important programme, which has successfully to seek out opportunities for customers, as every year brings different conditions attracted young people into the livestock industry since 2016, - so they need to modify their farming provides a well-rounded PGW operation to maximise those unique climatic and market conditions. It’s experience with short term definitely a career I would recommend. placements with livestock teams in other regions, along with time As I went through the training working alongside other PGW programme, I got great support from the local team. PGW have a network of business units such as Wool, Real Estate, Water and Rural Supplies. agents throughout the country so it’s good to have that back up too,” Rihi said.

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RETAIL & WATER
TECHNICAL
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technical expertise
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Under the gaze of

Mount Ruapehu in the Waimarino area in the central North Island lies the Ātihau Whanganui Incorporation (known

as ‘Awhi’) farming operation.

Awhi is an extensive operation comprising

sheep and beef, a dairy farm, forestry and an apiary. The operation incorporates eight stations with a total land area of 42,000 hectares (ha).

Awhi Business Manager Farming Siwan Shaw said, “we run a large operation with many moving parts, so we need to partner with technical experts who understand the complexity of our operation. We have been working with PGW for many years, across a number of business units, but primarily with the rural supplies (agronomy, pasture and cropping technical expertise) and livestock teams.”

PGG Wrightson Technical Field Representative Nathaniel Turner has worked with Siwan and the station managers for over four years.

Nathaniel said, “located within the Central Plateau area, Awhi has the advantage of nutrient rich volcanic soil, however the topography ranges from flat highly productive land including Whanganui river flats (100 metres above sea level)

through to hard hill country (with an altitude of up to 700 metres above sea level). I work with the team to plan and support a crop and agronomy programme to suit the variation in growing conditions across the farming operation. Climatic conditions can be extreme with very challenging summers and wet, cold winters, so that’s another factor we need to consider.”

“In early June every year, we start preparing a crop management plan for all eight stations for the year ahead. The programme includes pasture and winter cropping, along with trial crops. In mid/ late spring we sow pasture and in late spring we sow winter feed including brassica and fodder beet.”

“Collectively the eight stations annually sow 900 ha of both short and long-term pasture, and sow 650 ha of winter feed (brassica and fodder beet). So, it’s busy all year round.”

“Pasture and summer forages are grown to increase livestock performance. Chicory

and clover swards provide a source of high-quality feed which has the ability to achieve higher growth rates in livestock compared with a straight grass-based system. A plantain/clover mix has been adapted for a rich source of feed for lambing and lactation to increase yields at weaning (it is also used in the finishing/ fattening system).”

“Brassicas and fodder beet are sown for high quality bulk winter feed where feed demand is at its highest in periods of pasture feed deficit. Cropping is also part of Awhi’s pasture renewal process which involves a two-year rotation from existing under-performing pasture back into a high performing pasture, which contributes to an overall lift in farm productivity,” said Nathaniel.

Siwan Shaw said, “Nathaniel understands our business and provides technical expertise that we don’t have within our team. However, due to the scale and complexity of our operation we don’t expect Nathaniel to have all of the answers. So, it’s great that PGW have a

team of technical experts who provide Nathaniel with support when he needs Ātihau Whanganui it, so he is able to draw on that expertise and can come back to us with a solution Incorporation quickly.”

Awhi, which was established in 1970, comprises eight stations.

Nathaniel concludes, “Awhi’s team are innovative and future focused, so we are always planning ahead and thinking of ways to further enhance what is already a high performing operation. This makes my job both challenging and rewarding and I wouldn’t have it any other way.”

The operation covers 42,000 ha (20,000 ha in farming operation under pasture).

The farm runs 75,000 Romney and Perendale breeding ewes, 4,200 Angus breeding cows and milks 700 Friesian cows.

Working with PGW

Nathaniel Turner joined the PGW team in a customer service role in the Ohakune rural supplies store in December 2011. He moved into a Technical Field Representative role four years later, servicing the wider Ohakune area. Along with Nathaniel, the Awhi team also work closely with Senior Livestock Agent Simon Luoni.

Produces its own brand of honey from 2,400 beehives.

The farm’s established woodlots cover 728 ha.

Awhi represents the interests of over 9,000 shareholders.

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AGENCY
REAL ESTATE
Trust and reputation
results in a
PGG Wrightson Southland Real Estate Manager
successful outcome Andrew Patterson takes a final look over Crosslea
Farm with vendors Barry and Heather Gray, the
day before their clearing sale in May 2019.
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In 2008 Barry and Heather Gray, their son Richard, and his wife Juliet, bought Hakataramea Station near Kurow in South Canterbury.

It was a big change for the Gray family as they had been farming in Southland since 1975. However, the move to Canterbury gave them the opportunity to farm together as a family, as their previous properties had been spread over an area of 15 kilometres. Barry and Richard knew they could work smarter on one property, but it had to be the right one. Hakataramea Station was it.

When their move to Hakataramea Station was complete, they turned their attention to the sale of their remaining Southland property, Crosslea Farm. Located 30 minutes from Edendale, the 265 hectare farm was ideally suited to dairy support and grazing.

The Gray family contacted PGG Wrightson Southland Real Estate Manager Andrew Patterson to market the property on their behalf. Interest in the farm was muted due to a number of factors

negatively impacting the dairy industry at that time. With that in mind, the Gray family decided to continue to farm the property until the market picked up, with Andrew continuing to monitor interest and identify opportunities for the sale of Crosslea Farm.

In 2016 the market picked up, so the Gray family listed the property. Interest in Crosslea Farm as a grazing unit to support local dairy farmers increased partly due to the effect of Mycoplasma bovis (M bovis) in the Southland region – as it allowed farmers to graze their animals on land that was M bovis free.

Andrew fielded a number of enquiries, resulting in the property being sold to a local dairy farmer in November 2018. Handover took place in May 2019.

Barry Gray said, “Southland is a close community and we only work with people who we trust and who have a

good reputation. Andrew is one of those people. He’s straight up front and given his extensive experience in the region we knew he could manage the complexity that M bovis may add to any potential outcome.” sale. While the farm wasn’t infected with M bovis, there were a number of conditions related to the sale that we had to comply with.” Working with PGW

and manage the land in the interim. When the market did pick up, we got a good price for the property, with both vendor and buyer pleased with the outcome.”

Andrew Patterson is the PGG Wrightson Southland Real Estate Manager and has sold rural real estate in Southland since 1993. Prior to that he held the role of Livestock Agent for 12 years with the company.

“We were all delighted with the outcome Andrew got for us. The proceeds of the sale will fund future development at Hakataramea Station. Since we bought the Station our family has grown with the arrival of Ben, Sophie and Phoebe so these funds will allow us to set up the farm for the next generation too,” Barry said.

Andrew added, “Timing is everything in real estate. While the Gray family had a great property to market, the demand wasn’t there in 2008. They were in a fortunate position of being able to retain

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PGG Wrightson
in the community
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Luka Erikson enjoys spending
time with a calf born on his aunty’s
Southland dairy farm.
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PGW people have lived and worked alongside our customers throughout rural New Zealand for over 160 years. As a result, we have been part of and supported rural communities for multiple generations. Therefore, we are proud to support a range of community and industry events throughout the country.

Cash for Communities

IHC Calf and Rural Scheme

The Cash for Communities programme is run by PGW and Ballance Agri-Nutrients. To date the programme has raised over $500,000 for rural communities throughout New Zealand. For every tonne of qualifying Ballance Agri-Nutrients fertiliser purchased by PGW customers who have registered for the programme, PGW and Ballance donated $1 to the customer’s choice of community programme.

PGG Wrightson Livestock and the IHC have enjoyed a close working relationship for over 30 years to jointly deliver the IHC Calf & Rural Scheme.

The Scheme provides funds which allow IHC to deliver services to people with intellectual disabilities and their families by facilitating donations from farmers throughout New Zealand. The amount raised to date totals more than $37 million.

The ninth season of Cash for Communities ran in spring 2018, with over 300 farmers registering a community programme of their choice, raising over $19,000. Tatuanui School near Morrinsville was one of the recipients of this year’s programme, with the students also receiving three iPads for being the school with the most nominations in the North Island.

However, the format of the Scheme which ran in FY2019 differed to previous years due to the risk of the Scheme spreading M bovis. In July 2018 the IHC, in consultation with the Ministry for Primary Industries and PGG Wrightson Livestock, made the difficult decision to ask farmers to donate a ‘virtual calf’ or to organise transport for calves to sale themselves. This new approach resulted in less funds achieved compared with previous years, yet despite those challenges $760,000 was donated by farmers to the IHC.

Supporting the Horticulture Sector

Fruitfed Supplies has a long association with the Young Horticulturalist, Young Grower of the Year and Young Viticulturist of the Year competitions.

In addition to our support of IHC, the Livestock business supports a number of sheep and beef associations, along with a number of livestock competitions across New Zealand.

Supporting industry events, A&P Shows and regional field days

National Shearing Circuit

PGG Wrightson Wool is proud to support our country’s shearers through the National Shearing Circuit sponsorship.

The PGG Wrightson Wool National Shearing Circuit is a prestigious competition celebrating excellence in the skill of shearing. The competition is made up of heats held across New Zealand between September and March, with the final held at the Golden Shears in Masterton in March each year.

The 2019 PGG Wrightson Wool National Shearing Circuit overall winner was Paerata Abraham from Masterton.

A&P Shows, regional field days and Fieldays NZ

PGW is proud to be involved with numerous Agricultural and Pastoral shows (A&P) and field days throughout the year. These events bring the local rural community together and provide us with the opportunity to acknowledge the ongoing support of our customers.

This year, we were delighted to win the award for the best large site and the Hamish Reid Memorial Trophy for the Best Overall Site at the South Island Agricultural Field Days.

Supporting Māori Excellence in Farming

The Ahuwhenua Trophy, Te Puni Kōkiri Excellence in Māori Farming Award acknowledges and celebrates business excellence in New Zealand’s pastoral sector (to date alternating each year between dairy and sheep and beef with horticulture to be included from 2020).

The 2019 sheep and beef competition was won by Eugene and Pania King of Kiriroa Station near Gisborne.

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Environmental, Social and Governance Reporting

Adopting and modelling best practice Social animal welfare methods in our Livestock business, including working closely with the Ministry of Primary Industries (MPI) to help develop industry policy and regulation and ensure compliance. An example is the development and use of MPI’s fit for transport app to improve animal welfare.

PGG Wrightson’s purpose is to help grow the country. To achieve this purpose, we must do the right thing by our shareholders, our people, our customers and ultimately for the

Health, safety and wellbeing is a key focus of our Board, our Executive team and our people, with a number of new initiatives as outlined on page 7.

PGW has a series of human resources policies which reference and are actively compliant with current New Zealand employee and health and safety legislation, supported by our Code of Conduct and our core company values – accountability, leadership, integrity, smarter and teamwork.

Launching our online livestock trading channel, bidr®, in the third quarter of FY2019 which we expect will contribute positively to reduced unnecessary transport of livestock, resulting in less disease transmission, enhanced animal welfare and better

PGW proudly supports the rural communities in which we operate with a number of community and sponsorship arrangements as set out on page 27.

environment.

PGW has been part of rural New Zealand for over 160 years and we take pride in our stewardship role in conjunction with our customers and stakeholders to ensure that the agricultural sector continues to prosper in a sustainable way for the generations to come.

Embarking on a review of saleyard efficiency and utilisation.

In supply chain management, our supplier contracts insist on compliance with specified human and social standards including working conditions, ethical behaviour, antibribery, no child labour etc.

Making available the latest irrigation technology to allow for efficient use of water and technological innovation to reduce the operating noise of frost machines.

PGW’s overall strategy and framework for environmental and social reporting remains under development as this area rapidly evolves, however PGW has a number of current initiatives in place to assist us in achieving our purpose.

Implementing a new supply chain risk assessment tool in our Agritrade wholesale product business regarding supplier selection and product sourcing and manufacturing, developed in accordance with New Zealand Food Safety Authority Good Manufacturing Practice and MPI compliance requirements.

Governance

PGW applies best practice governance and risk management procedures, including:

Some of the initiatives we have in place across the three key areas of reporting are:

PGW uses accurate and transparent accounting methods.

Environmental

Shareholders are given an opportunity to vote on important issues.

Refining our Approved Handler policies for hazardous chemicals.

Using, trialling and investing in technological innovation and developments in both our own activities and in the products and services that we sell, to help reduce our own environmental impact and that of our customers, and improve efficient and sustainable agriculture methods.
Governance measures as outlined in PGW’s Corporate Governance and Board Charter on page 78.

Reviewing our own energy use, waste, pollution and natural resource conservation in our procurement, property and fleet functions, including implementing a recycling process for cardboard and paper at all PGW and Fruitfed Supplies stores.

Continuing to support the Agrecovery
Investment in training and upskilling recycling programmes.
of our technical team, who are expert in the areas of agronomy, soil science, horticulture and animal health.

Our financial reporting has changed as a result of the sale of the Seed & Grain business to DLF Seeds A/S. The key change is:

For the statement of profit or loss, we have removed the impact of Seed & Grain from the respective profit or loss lines and disclosed Seed & Grain’s result in a separate discontinued operations line. Note that this treatment also applies to the comparative period.

Please note that the statement of cash flows includes the Seed & Grain business (up until the date of sale) and the comparative period statement of financial position (balance sheet) includes the Seed & Grain business.

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KEY FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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DIRECTORS’ RESPONSIBILITY STATEMENT

STATEMENT OF PROFIT OR LOSS

For the year ended 30 June 2019

FOR THE YEAR ENDED 30 JUNE 2019

The Directors are responsible for ensuring that the financial statements give a true and fair view of the financial position of the Group as at 30 June 2019 and the financial performance and cash flows for the year ended on that date.

The Directors consider that the financial statements of the Group have been prepared using appropriate accounting policies, consistently applied and supported by reasonable judgements and estimates and that all of the relevant financial reporting and accounting standards have been followed.

The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the financial position of the Group and facilitate compliance of the financial statements with the Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013.

The Directors are pleased to present the financial statements for PGG Wrightson Limited and its controlled entities (together the “Group” ) set out on pages 31 to 74 for the year ended 30 June 2019.

The financial statements contained on pages 31 to 74 have been authorised for issue on 12 August 2019.

For and on behalf of the Board.

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Rodger Finlay Chairman

David Cushing Director and Audit Committee Chairman

NOTE	2019 2018* $000 $000
Continuing operations Operating revenue 1 Cost of sales 2 Gross proft Other income Employee expenses Other operating expenses 3 Equity accounted earnings/(losses) of investees Operating EBITDA Non-operating items Holidays Act 2003 remediation costs 18 Impairment and fair value adjustments 4 Depreciation and amortisation expense EBIT Net interest and fnance costs 5 Proft from continuing operations before income tax Income tax beneft/(expense) 6 Proft from continuing operations, net of income tax Discontinued operations Results from discontinued operations, net of income tax 7 Gain on sale of discontinued operations, net of income tax 7 Proft from discontinued operations, net of income tax 7 Net proft after tax Proft attributable to: Shareholders of the Company Non-controlling interest Net proft after tax Earnings per share Basic earnings per share (New Zealand Dollars) 8 Continuing operations Basic earnings per share (New Zealand Dollars) 8	809,255 808,695 (589,714) (588,600)
	219,541 220,095 241 221 (123,311) (117,935) (72,006) (67,794) (40) (72)
	24,425 34,515 (4,482) 136 2,303 (7,160) (3,187) (1,086) (9,362) (6,918)
	9,697 19,487 (6,067) (6,901)
	3,630 12,586 370 (3,582)
	4,000 9,004 (6,475) 9,883 134,281 –
	127,806 9,883
	131,806 18,887
	131,123 17,964 683 923
	131,806 18,887
	0.174 0.024 0.005 0.012

* The 2018 comparatives have been restated to present Seed & Grain as a discontinued operation and for NZ IFRS 15. The accompanying notes form an integral part of these financial statements.

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KEY FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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STATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended 30 June 2019

NOTE	2019 2018 $000 $000
Net proft after tax Other comprehensive income/(loss) for continuing operations Items that will never be reclassifed to proft or loss Changes in fair value of equity instruments Remeasurements of defned beneft liability 19 Deferred tax on remeasurements of defned beneft liability 6 Items that are or may be reclassifed to proft or loss Foreign currency translation diferences for foreign operations Other comprehensive income/(loss) for the period, net of income tax Other comprehensive income/(loss) for discontinued operations Changes in asset revaluation reserve Total comprehensive income for the period Total comprehensive income/(loss) attributable to: Shareholders of the Company Non-controlling interest Total comprehensive income for the period	131,806 18,887
	21 – (6,101) 2,746 703 (961)
	(5,377) 1,785 (884) 6,408
	(884) 6,408
	(6,261) 8,193
	403 –
	403 –
	125,948 27,080
	125,282 26,307 666 773
	125,948 27,080

The accompanying notes form an integral part of these financial statements.

SEGMENT REPORT

For the year ended / as at 30 June 2019

(a) Operating Segments

Following the sale of Seed & Grain and its reclassification to discontinued operations, the Group has two primary operating segments, Agency and Retail & Water, which are the Group’s strategic divisions. Agency and Retail & Water operate within New Zealand. The two operating segments offer different products and services, and are managed separately because they require different skills, technology and marketing strategies. There is a Group General Manager for each segment. Within each segment, further business unit analysis may be provided to management where there are significant differences in the nature of activities. The Chief Executive Officer or Chairman of the Board reviews internal management reports on each strategic business unit on at least a monthly basis.

The Group’s segments are described below:

Agency: Includes rural Livestock trading activities, Export Livestock, Wool, Insurance, Real Estate and Finance Commission.
Retail & Water: Includes the Rural Supplies and Fruitfed retail operations, PGG Wrightson Water, PGW Consulting, Agritrade and ancillary sales support, supply chain and marketing functions.
Other: Other non-segmented amounts relate to certain Group Corporate activities including Governance, Finance, Treasury, HR and other support services (including corporate property services) and include consolidation/elimination adjustments.
Discontinued operations: Pertains to PGG Wrightson Seeds Holdings Limited together with its subsidiaries and investments in jointly controlled entities (formerly the Seed & Grain segment), and PGW Rural Capital Limited. Seed & Grain includes Australasia (New Zealand and Australian manufacturing and distribution of forage seed and turf, sale of cereal seed, grain trading, international trading and seed production), South America (various related activities in the developing seeds markets including the sale of pasture and crop seed and farm inputs, together with operations in the areas of livestock, real estate and irrigation) and other Seed & Grain (research and development and corporate seeds).

”Other” cost allocation

The Group applies an allocation methodology which allocates certain corporate costs to an operating segment where they can be directly attributed to that segment or based on the use of the following methods:

IT hardware, support, licence and other costs are attributed based on a per user basis.
Property costs which are not directly attributable are allocated on a property space utilisation basis.
Business operations costs (Accounts Payable, Accounts Receivable, Call Centre) are allocated based on FTE usage by each operating segment or transactional volumes. Credit Services costs are allocated based on the operating segment to which overdue accounts relate.

Other costs including non-operating items, impairment and fair value adjustments, net interest and finance costs, income tax expense as well as the reporting of discontinued operations are not fully allocated by the Group across the operating segments. The Group Finance, Risk and Assurance, Treasury, HR, Credit and the Executive Team functions continue to be reported outside of the operating segments.

(b) Geographical Segment Information

Following the sale of Seed & Grain and its reclassification to discontinued operations, the Group operates within New Zealand only and its revenue is primarily derived from New Zealand.

Assets and liabilities allocated to each business unit combine to form total assets and liabilities for the Agency and Retail & Water business segments. Certain other assets and liabilities are held at a Corporate level including those for the Corporate functions noted above.

The profit/(loss) for each business unit combines to form total profit/ (loss) of the Agency and Retail & Water business segments. Certain other revenues and expenses are recorded at the Corporate level for the Corporate functions noted above.

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KEY FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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SEGMENT REPORT CONTINUED

For the year ended / as at 30 June 2019

(c) Operating Segment Information

(c) Operating Segment Information
	AGENCY RETAIL & WATER OTHER DISCONTINUED OPERATIONS TOTAL 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018* $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Total external operating revenues Operating EBITDA Non-operating items Holidays Act 2003 remediation costs Impairment and fair value adjustments Depreciation and amortisation expense EBIT Net interest and fnance costs Proft/(loss) from continuing operations before income tax Income tax beneft/(expense) Proft/(loss) from continuing operations, net of income tax Discontinued operations Net proft after tax Segment assets Investment in equity accounted investees Assets held for sale Total segment assets Total segment liabilities Capital expenditure	193,843 200,574 611,732 603,816 3,680 4,305 – – 809,255 808,695
	15,394 20,112 19,626 23,810 (10,595) (9,407) – – 24,425 34,515 (665) 688 (406) 590 (3,411) (1,141) – – (4,482) 136 752 (2,441) 1,724 (3,422) (173) (1,297) – – 2,303 (7,160) (2,286) (1,087) – – (901) – – – (3,187) (1,086) (1,740) (1,086) (5,016) (3,097) (2,606) (2,735) – – (9,362) (6,918)
	11,455 16,186 15,928 17,881 (17,686) (14,580) – – 9,697 19,487 1,460 (1,388) (357) 385 (7,170) (5,898) – – (6,067) (6,901)
	12,915 14,798 15,571 18,266 (24,856) (20,478) – – 3,630 12,586 (3,315) (4,366) (3,926) (4,680) 7,611 5,464 – – 370 (3,582)
	9,600 10,432 11,645 13,586 (17,245) (15,014) – – 4,000 9,004 – – – – – – 127,806 9,883 127,806 9,883
	9,600 10,432 11,645 13,586 (17,245) (15,014) 127,806 9,883 131,806 18,887
	168,921 161,378 156,643 149,107 236,391 16,599 1,202 414,603 563,157 741,687 – – – – 71 59 – 14,264 71 14,323 – – 218 218 2,108 2,398 – – 2,326 2,616
	168,921 161,378 156,861 149,325 238,570 19,055 1,202 428,867 565,554 758,626
	(82,021) (87,182) (75,214) (82,109) (10,055) (137,728) – (164,145) (167,290) (471,164)
	2,857 3,212 5,064 9,689 2,736 3,326 7,251 13,204 17,908 29,431

* The 2018 comparatives have been restated to present Seed & Grain as a discontinued operation and for NZ IFRS 15. The accompanying notes form an integral part of these financial statements.

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KEY FINANCIAL DISCLOSURES

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STATEMENT OF CASH FLOWS

For the year ended 30 June 2019

NOTE	2019 2018 $000 $000
Cash fows from operating activities Cash was provided from: Receipts from customers Dividends received Interest received Cash was applied to: Payments to suppliers and employees Lump sum contributions to defned beneft plans (ESCT inclusive) Interest paid Income tax paid Net cash infow/(outfow) from operating activities Cash fows from investing activities Cash was provided from: Proceeds from sale of property, plant and equipment and assets held for sale Cash acquired on purchase of investments Net proceeds from sale of investments Cash was applied to: Purchase of property, plant and equipment Purchase of intangibles Investment sale costs Cash disposed on sale of investments Net cash paid for purchase of investments Net cash infow/(outfow) from investing activities Cash fows from fnancing activities Cash was provided from: Increase in external borrowings and bank overdraft Repayment of loans by related parties Cash was applied to: Share repurchase and cancellation Dividends paid to shareholders Dividends paid to minority interests Repayment of external borrowings and bank overdraft Net cash infow/(outfow) from fnancing activities Net increase/(decrease) in cash held Opening cash Cash and cash equivalents 9	1,226,807 1,214,939 2 3 6,399 5,225
	1,233,208 1,220,167 (1,248,659) (1,190,563) (10,274) (2,842) (8,322) (8,550) (14,954) (12,446)
	(1,282,209) (1,214,401)
	(49,001) 5,766 624 3,407 1,523 – 425,851 111
	427,998 3,518 (11,571) (15,183) (4,934) (7,974) (6,799) – (25,414) – – (1,215)
	(48,718) (24,372)
	379,280 (20,854) – 42,499 – 3,441
	– 45,940 (6) – (15,267) (28,570) (1,189) (759) (114,252) –
	(130,714) (29,329)
	(130,714) 16,611
	199,565 1,523 10,926 9,403
	210,491 10,926

RECONCILIATION OF PROFIT AFTER TAX WITH NET CASH FLOW FROM OPERATING ACTIVITIES

For the year ended 30 June 2019

	2019 2018 $000 $000
Net proft after tax Add/(deduct) non-cash/non-operating items: Depreciation, amortisation and impairment Fair value adjustments Net (proft)/loss on sale of assets/investments Bad debts written of (net) Change in deferred taxation Earnings from equity accounted investees Defned beneft expense Efect of foreign exchange movements Pension contributions (operating cash) not expensed through proft and loss Other non-cash/non-operating items Add/(deduct) movement in working capital items: Change in working capital due to sale/purchase of businesses Change in working capital due to balance sheet reclassifcation Change in inventories and biological assets Change in accounts receivable and prepayments Change in trade creditors, provisions and accruals Change in income tax payable/receivable Change in other current assets/liabilities Net cash fow from operating activities	131,806 18,887 13,891 12,974 4,079 3,877 (134,218) (1,746) 2,519 429 2,111 (1,114) 6,412 1,885 (817) 142 (5,879) 3,618 (10,274) (2,842) (2,357) (2,491)
	7,273 33,619
	(199,376) (2,683) (24,957) – 176,575 (7,374) 110,893 (45,081) (112,759) 19,360 (4,997) 3,326 (1,653) 4,599
	(56,274) (27,853)
	(49,001) 5,766

The accompanying notes form an integral part of these financial statements

The accompanying notes form an integral part of these financial statements.

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KEY FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

STATEMENT OF FINANCIAL POSITION

As at 30 June 2019

NOTE	2019 2018 $000 $000
ASSETS Current Cash and cash equivalents 9 Short-term derivative assets 10 Trade and other receivables 11 Finance receivables _Go_livestock receivables 12 Assets classifed as held for sale Biological assets Inventories 13 Other investments 15 Intangible assets 16 Total current assets Non-current Long-term derivative assets 10 Biological assets Deferred tax asset 6 Investments in equity accounted investees Other investments 15 Intangible assets 16 Property, plant and equipment 17 Total non-current assets Total assets LIABILITIES Current Debt due within one year 9 Short-term derivative liabilities 10 Accounts payable and accruals 18 Income tax payable Defned beneft liability 19 Total current liabilities Non-current Long-term debt 9 Long-term derivative liabilities 10 Other long-term provisions 18 Defned beneft liability 19 Total non-current liabilities Total liabilities EQUITY Share capital 30 Reserves 30 Retained earnings 30 Total equity attributable to shareholders of the Company Non-controlling interest Total equity Total liabilities and equity	210,491 10,926 614 827 145,881 267,627 – 733 47,754 39,419 2,326 2,616 35 911 85,969 262,538 – 30 2,222 2,641
	495,292 588,268 387 20 12 – 9,976 16,259 71 14,323 470 2,520 14,644 13,017 44,702 124,220
	70,262 170,359
	565,554 758,626
	2,680 30,806 280 3,645 155,903 267,096 851 6,751 – 905
	159,714 309,203 – 149,205 62 966 1,631 2,121 5,883 9,669
	7,576 161,961
	167,290 471,164
	606,318 606,324 10,424 8,647 (218,478) (329,987)
	398,264 284,984 – 2,478
	398,264 287,462
	565,554 758,626

Additional Financial Disclosures

including Notes to the Financial Statements for the year ended 30 June 2019

The accompanying notes form an integral part of these financial statements.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2019

1 OPERATING REVENUE

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----- Start of picture text -----

2019 2018
$000 $000
Sales 677,453 666,855
Commissions 105,355 107,368
Construction contract revenue 20,985 29,627
Interest revenue on Go livestock product receivables 3,900 3,397
Debtor interest charges 1,562 1,448
Total operating revenue 809,255 808,695
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2 COST OF SALES

2 COST OF SALES
NOTE	2019 2018* $000 $000
Cost of Sales includes the following items by nature: Depreciation and amortisation Employee benefts including commissions Inventories, fnished goods, work in progress, raw materials and consumables 13 Other	182 172 30,710 32,420 483,853 472,912 74,969 83,096
	589,714 588,600

3 OTHER OPERATING EXPENSES

Income Recognition Accounting Policies

NZ IFRS 15 Revenue from Contracts with Customers

The Group has initially applied NZ IFRS 15 from 1 July 2018. Comparatives have been restated to reflect the requirements for this new standard.

The effect of applying this standard is the reclassification of $2.16 million of rebate expense from Cost of Sales to Sales Revenue for the year ended 30 June 2019 (2018: $2.36 million). There is no impact to Retained Earnings upon the adoption of this standard.

Recognition of Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised.

Sales Revenue

Sales revenue comprises the sale value of transactions where the Group acts as a principal.

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.

Revenue is recognised at a point in time when the single performance obligation is satisfied and control has been transferred to the buyer, which is generally upon delivery. Control is transferred when the risks and rewards of ownership has been transferred to the customer, the recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

The Group offers a range of payment terms, and in some cases can be up to 12 months. The Company does not recognise a financing element for contracts with terms of 12 months or less.

When part of the Group’s performance obligation in selling its products is to arrange freight and/or insurance, the Group is considered to be acting as an agent and these costs are recognised net against freight recoveries.

The Group offers warranties and returns as required by New Zealand law and/or per the terms and conditions of the contracts with customers. The Group recognises the obligations under these warranties as a provision.

Commission Revenue

Commission revenue comprises commission for transactions where the Group acts as an agent. For agency commissions, the Group does not take inventory risk or title for inventories, or for the Group’s Livestock and Real Estate businesses, biological assets and properties respectively. The Group also generates commissions from the successful referral of clients to unrelated lending and insurance partners. Revenue is recognised at a point in time upon completion of service.

Construction Contract Revenue

3 OTHER OPERATING EXPENSES
	2019 2018* $000 $000
Other operating expenses includes the following items: Audit of annual fnancial statements of the Company - KPMG** Other non-audit services provided by KPMG: – Trust account audit of PGG Wrightson Real Estate Limited – Review of charging group consolidation for bank syndicate Directors’ fees Donations Doubtful debts – (decrease)/increase in provision for doubtful debts Net doubtful debts – bad debts written of/(recovered) IT & telecommunications costs Marketing Motor vehicle costs Rental and operating lease costs Occupancy costs (excluding rental and operating lease) Other staf costs Other expenses	290 276 12 12 2 2 718 767 1 1 1,072 529 485 (543) 9,829 10,719 4,037 4,195 6,588 5,700 21,904 22,041 5,027 5,129 7,546 6,416 14,495 12,550
	72,006 67,794

** The Group has paid additional fees to KPMG which have been disclosed separately within the results of discontinued operations. These additional amounts are:
FY19: $0.34 million for the audit of PGG Wrightson Seeds Holdings Limited’s balance sheets as part of the sale of the Seed & Grain segment and for the audit of annual financial statements of the subsidiaries and equity accounted investees within the Seed & Grain segment.
FY18: $0.13 million for the audit of annual financial statements of the subsidiaries and equity accounted investees within the Seed & Grain segment.

Construction services are provided to customers in the Water business. Most contracts contain a single performance obligation. The size and duration of the contracts can vary significantly and customers are invoiced as work progresses.

The Group accounts for revenue over time, which best depicts the pattern of transfer of the construction services to the customer. The Group uses an input method to recognise revenue based on a percentage of cost completed.

Interest and Similar Income and Expense

For all financial instruments measured at amortised cost, interest income or expense is recorded at the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses.

Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the original effective interest rate applied to the new carrying amount.

The Group recognises interest revenue, management fees, and establishment fees on an accruals basis when the services are rendered using the effective interest rate method.

4 IMPAIRMENT AND FAIR VALUE ADJUSTMENTS

4 IMPAIRMENT AND FAIR VALUE ADJUSTMENTS
	2019 2018* $000 $000
Biological assets Impairment – Property, plant and equipment Impairment – Assets held for sale Impairment – Investment in equity accounted investee	(26) (16) (2,260) (1,070) (181) – (720) –
	(3,187) (1,086)

* The 2018 comparatives have been restated to present Seed & Grain as a discontinued operation and for NZ IFRS 15.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

5 INTEREST  FINANCE INCOME AND EXPENSE

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2019 2018
$000 $000
Finance income contains the following items:
Other interest income 771 214
Finance income 771 214
Interest funding contains the following items:
Interest on loans and overdrafts (4,928) (3,857)
Net interest on interest rate derivatives (761) (533)
Fair value change on interest rate derivatives 535 (42)
Effective interest on defined benefit pension ESCT payments (299) (401)
Other interest expense (312) (32)
Bank facility fees (1,885) (1,215)
Interest funding expense (7,650) (6,080)
Foreign exchange contains the following items:
Net gain/(loss) on foreign denominated items (423) 13
Fair value change on foreign exchange derivatives 1,235 (1,048)
Foreign exchange income/(expense) 812 (1,035)
Net interest and finance costs (6,067) (6,901)
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Fair Value Change on Foreign Exchange Derivatives Accounting Policies

The Group undertakes transactions denominated in foreign currencies and exposure to movements in foreign currency arises from these activities. The Group uses forward, spot foreign exchange contracts and foreign exchange options to manage these exposures. These derivatives are recorded at their fair value with mark-to-market fair value movements flowing through fair value change on foreign exchange derivatives in the profit or loss. A portion of the underlying hedged future sale or purchase transactions have not yet been recognised by the Group. For this portion, no corresponding offsetting net gain/(loss) on foreign denominated items has been recognised.

* The 2018 comparatives have been restated to present Seed & Grain as a discontinued operation and for NZ IFRS 15.

6 INCOME TAXES

6 INCOME TAXES
	2019 2018* $000 $000
(a) Income tax expense recognised in Proft or Loss Current tax beneft/(expense) Current year Adjustments for prior years Deferred tax beneft/(expense) Origination and reversal of temporary diferences Adjustments for prior years Income tax beneft/(expense)	1,982 (5,898) 612 40
	2,594 (5,858)
	(2,559) 1,999 335 277
	(2,224) 2,276
	370 (3,582)
	2019 2018* $000 $000
Proft from continuing operations before income tax Income tax using the Company’s domestic tax rate Non-deductible expenditure Tax exempt income and defned beneft scheme contributions Tax credits Over/(under) provided in prior years Income tax beneft/(expense) (b) Income tax recognised directly in equity	3,630 12,586 (1,016) (3,524) (768) (1,157) 1,037 501 170 281 947 317
	370 (3,582)
	2019 2018* $000 $000
Deferred tax on movement of actuarial gains/losses on employee beneft plans Deferred tax on transition adjustment upon adoption of NZ IFRS 9 Total income tax (expense)/beneft recognised directly in equity	703 (961) 126 –
	829 (961)

* The 2018 comparatives have been restated to present Seed & Grain as a discontinued operation and for NZ IFRS 15.

Refer to Accounting Policies – page 45.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

6 INCOME TAXES CONTINUED

(c) Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

		ASSETS ASSETS LIABILITIES LIABILITIES NET NET 2019 2018 2019 2018 2019 2018 $000 $000 $000 $000 $000 $000
Property, plant and equipment Intangible assets Employee benefts Provisions Other items Deferred tax asset/(liability) BALANCE 1 JUL 2018 $000		818 – – (162) 818 (162) – – (759) (97) (759) (97) 6,294 10,689 – – 6,294 10,689 3,623 5,596 – (718) 3,623 4,878 – 951 – – – 951
		10,735 17,236 (759) (977) 9,976 16,259
		RECOGNISED RECOGNISED IN RECOGNISED IN IN PROFIT IN PROFIT OTHER RECOGNISED ACQUISITION / OR LOSS OR LOSS COMPREHENSIVE IN RETAINED SALE OF BALANCE (CONTINUING) (DISCONTINUED) INCOME EARNINGS SUBSIDIARIES 30 JUN 2019 $000 $000 $000 $000 $000 $000
Property, plant and equipment Intangible assets Employee benefts Provisions Other items	(162) (97) 10,689 4,878 951	1,175 (983) – – 788 818 (524) 2,600 – – (2,738) (759) (3,973) (329) 703 – (796) 6,294 1,098 (2,582) – 126 103 3,623 – – – – (951) –
	16,259	(2,224) (1,294) 703 126 (3,594) 9,976

	RECOGNISED RECOGNISED IN RECOGNISED IN IN PROFIT IN PROFIT OTHER RECOGNISED ACQUISITION / BALANCE OR LOSS OR LOSS COMPREHENSIVE IN RETAINED SALE OF BALANCE 1 JUL 2017 (CONTINUING) (DISCONTINUED) INCOME EARNINGS SUBSIDIARIES 30 JUN 2018 $000 $000 $000 $000 $000 $000 $000
Property, plant and equipment Intangible assets Employee benefts Provisions Other items	(518) 236 120 – – – (162) (455) 269 89 – – – (97) 9,635 1,421 594 (961) – – 10,689 5,096 350 (568) – – – 4,878 1,387 – (436) – – – 951
	15,145 2,276 (201) (961) – – 16,259

6 INCOME TAXES CONTINUED

(d) Unrecognised tax losses and temporary differences

At 30 June 2019, the Group has no unrecognised deferred tax assets relating to tax losses and temporary differences (2018: $7.44 million and $2.64 million, respectively). The unrecognised deferred tax assets in the comparative period relate to the Australian and South American subsidiaries of the Group sold during the current period.

(e) Imputation credits

The Group has $7.1 million imputation credits as at 30 June 2019 (2018: $3.58 million). This balance includes the third provisional tax instalment made in July 2019 in respect of the year ended 30 June 2019.

Income Tax Accounting Policies

Income tax expense comprises current and deferred taxation and is recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income or equity, in which case it is recognised directly in other comprehensive income or equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable with respect to previous periods.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: – the initial recognition of goodwill

differences relating to subsidiaries, associates and jointly controlled entities to the extent that they will probably not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantially enacted at the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be recognised.

7 DISCONTINUED OPERATIONS

(a) Seed & Grain segment

On 1 May 2019, the Group settled the sale of shares of its subsidiary, PGG Wrightson Seeds Holdings Limited. The share sale represents the sale of the Group’s Seed & Grain segment. The sale price was $425.82 million and included interest of $12.58 million. The gain on sale (net of tax) of $134.28 million is included within profits from discontinued operations.

In the Statement of Profit or Loss for both the current and comparative periods, the result for the Seed & Grain segment is shown within discontinued operations and is disclosed separately from continuing operations.

(b) PGW Rural Capital Limited (PGWRC)

The discontinued operations also pertain to the Group’s wholly owned subsidiary, PGWRC, which was established during 2012 to hold and recover certain excluded loans related to the sale of the Group’s finance subsidiary, PGG Wrightson Finance Limited.

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----- Start of picture text -----

Refer to
Accounting
Policies
– page 45.
----- End of picture text -----

44 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2019 | 45

ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

7 DISCONTINUED OPERATIONS CONTINUED

(c) Results from discontinued operations were as follows:

3	SEED & GRAIN PGWRC TOTAL PERIOD TO 0 APRIL 2019 2018 2019 2018 2019 2018 $000 $000 $000 $000 $000 $000
Total segment revenue Intersegment revenue Total external operating revenue Total external cost of sales Gross proft Other operating expenses Equity accounted earnings/(losses) of investees Operating EBITDA Non–operating items Holidays Act 2003 remediation costs Impairment and fair value adjustments Depreciation and amortisation expense EBIT Net interest and fnance costs Result from discontinued activities before tax Income tax beneft/(expense) Result from discontinued activities, net of tax Gain on sale of discontinued operations Gain on sale of discontinued operations before tax Tax on gain on sale of discontinued operations Gain on sale of Seed & Grain, net of tax Total proft/(loss) from discontinued activities, net of tax Basic earnings per share (New Zealand dollars) (d) Cash fows from discontinued operations 3	434,338 449,495 – 1 434,338 449,496 (63,675) (63,532) – – (63,675) (63,532)
	370,663 385,963 – 1 370,663 385,964 (259,681) (256,369) – – (259,681) (256,369)
	110,982 129,594 – 1 110,982 129,595 (90,503) (92,123) (117) 690 (90,620) (91,433) (6,372) (1,812) – – (6,372) (1,812)
	14,107 35,659 (117) 691 13,990 36,350 (1,867) (217) – – (1,867) (217) 338 (1,066) – – 338 (1,066) (892) (2,790) – – (892) (2,790) (3,287) (6,056) – – (3,287) (6,056)
	8,399 25,530 (117) 691 8,282 26,221 (4,481) (7,261) – – (4,481) (7,261)
	3,918 18,269 (117) 691 3,801 18,960 (10,309) (8,878) 33 (199) (10,276) (9,077)
	(6,391) 9,391 (84) 492 (6,475) 9,883 137,802 – – – 137,802 – (3,521) – – – (3,521) –
	134,281 – – – 134,281 –
	127,890 9,391 (84) 492 127,806 9,883
	0.169 0.012 (0.000) 0.001 0.169 0.013 PERIOD TO 0 APRIL 2019 2018 2019 2018 2019 2018 $000 $000 $000 $000 $000 $000
Net cash from operating activities Net cash from investing activities Net cash from fnancing activities Net cash from/(used in) discontinued operations	2,210 (29,465) (418) (225) 1,792 (29,690) (4,238) (9,181) 758 5 (3,480) (9,176) 19,178 38,866 (340) 220 18,838 39,086
	17,150 220 – – 17,150 220

7 DISCONTINUED OPERATIONS CONTINUED

(e) Effect of disposal on the financial position of the Group

(e) Efect of disposal on the fnancial position of the Group
	2019 $000
Cash and cash equivalents Trade and other receivables Inventories Fixed assets (including property, plant & equipment, intangibles and goodwill) Other assets Short-term debt Accounts payables and accruals Term debt Other liabilities Net assets and liabilities sold _less_Minority interest Foreign currency translation reserve gain/(loss) taken to proft or loss Consideration received satisfed in cash Gain on sale _less_Transaction costs _less_Tax on interest received Gain on sale, net of income tax	(25,414) (166,011) (207,875) (103,027) (5,076) 33,118 163,458 3,859 30,921
	(276,047) 2,101 (3,742)
	(277,688) 425,851
	148,163 (10,361) (3,521)
	134,281

(f) Agimol Corporation S.A. (AgroCentro Group)

In the period to 31 August 2018, the Group impaired its investment in Agimol Corporation S.A. (AgroCentro Group) by $6.00 million (US$3.64 million). This brought the fair value of the Group’s equity accounted interest in the AgroCentro Group as at 31 August 2018 to $5.83 million (US$3.95 million). This fair value was supported by the value attributed to the AgroCentro Group as part of the sale of PGG Wrightson Seeds Holdings Limited.

On 31 August 2018, the Group increased its investment in Agimol Corporation S.A. (AgroCentro Group) from 50% to 100% and obtained control of the AgroCentro Group. As a result of obtaining control of the company from 31 August 2018, the Group has consolidated the AgroCentro Group. Upon consolidation, the Group recorded goodwill of $13.74 million (USD 9.27 million), representing the difference between the fair value of the net liability acquired of $6.66 million (US$4.47 million), the pre-existing equity interest held of $5.83 million (US$3.95 million) and the consideration provided of $1.25 million (USD 0.85 million). An impairment of $1.25 million (US$ 0.85 million) was then recorded against the goodwill to align the carrying value of the AgroCentro Group to that supported by the sale of PGG Wrightson Seeds Holdings Limited of $5.83 million (US$3.95 million). The goodwill of $12.55 million (US$8.42 million), along with the assets and liabilities of the AgroCentro Group, were subsequently sold as part of the sale of PGG Wrightson Seeds Holdings Limited.

46 | PGG WRIGHTSON LIMITED

ANNUAL REPORT 2019 | 47

ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

8 EARNINGS PER SHARE AND NET TANGIBLE ASSETS

Basic earnings per share (EPS)

The calculation of basic EPS is based on the following profit attributable to ordinary shareholders and weighted average number of ordinary shares outstanding. There are no dilutive shares or options (2018: Nil).

outstanding. There are no dilutive shares or options (2018: Nil).
	2019 2018 000 000
Issued ordinary shares at 30 June Weighted average number of ordinary shares Issued ordinary shares at 1 July Efect of ordinary shares repurchased Weighted average number of ordinary shares at 30 June	754,839 754,849 754,849 754,849 (5) –
	754,844 754,849
	2019 2018* $000 $000
Proft (net of tax) attributable to Shareholders of the Company Proft from continuing operations (net of tax) attributable to Shareholders of the Company Net tangible assets Total assets Total liabilities _less_intangible assets _less_deferred tax Net tangible assets	131,123 17,964 4,000 9,004 565,554 758,626 (167,290) (471,164) (16,866) (13,017) (9,976) (16,259)
	371,422 258,186
	2019 2018 $ $
Basic EPS Basic EPS – continuing operations Net tangible assets per share	0.174 0.024 0.005 0.012 0.492 0.342
*Earnings per Share Accounting Policies* The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the proft or loss attributable to shareholders by the weighted average number of shares outstanding during the period. Diluted EPS is determined by adjusting the proft or loss attributable to shareholders and the number of shares outstanding to include the efects of all potential dilutive shares.

9 CASH AND FINANCING FACILITIES

9 CASH AND FINANCING FACILITIES
	2019 2018 $000 $000
Cash and cash equivalents Current fnancing facilities Term fnancing facilities Net interest-bearing (debt)/cash and cash equivalents _Go_range of livestock product receivables Cash and cash equivalents plusGo livestock receivables / (net interest-bearing debt lessGo livestock receivables)	210,491 10,926 (2,680) (30,806) – (149,205)
	207,811 (169,085)
	47,754 39,419
	255,565 (129,666)

New Zealand financing facilities

The Company fully repaid and cancelled its syndicated bank facilities during the year using the proceeds from the sale of the Seed & Grain segment.

As at 30 June 2019, the Group had the following financing facilities. These senior secured facilities, which amount to $9.58 million, comprise:

Overdraft facilities of $3.50 million.

10 DERIVATIVE FINANCIAL INSTRUMENTS

10 DERIVATIVE FINANCIAL INSTRUMENTS
	2019 2018 $000 $000
Derivative assets held for risk management Current Non-current Derivative liabilities held for risk management Current Non-current Net derivatives held for risk management	614 827 387 20
	1,001 847 (280) (3,645) (62) (966)
	(342) (4,611)
	659 (3,764)

Derivatives held for risk management

Earnings per Share Accounting Policies

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to shareholders by the weighted average number of shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to shareholders and the number of shares outstanding to include the effects of all potential dilutive shares.

* The 2018 comparatives have been restated to present Seed & Grain as a discontinued operation and for NZ IFRS 15.

The Group uses interest rate swaps and options to hedge its exposure to changes in the market rates of variable and fixed interest rates. The Group also uses forward foreign exchange contracts, spot foreign exchange contracts and foreign exchange options to manage its exposure to foreign currency fluctuations.

Derivative Financial Instruments Accounting Policies

The Group uses derivative financial instruments to manage its exposure to interest rate and foreign currency risks arising from operational, financing and investment activities. In accordance with Treasury policy, the Group does not hold or issue derivative instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at fair value and transaction costs are expensed immediately. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on re-measurement to fair value is recognised immediately in profit or loss.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

11 TRADE AND OTHER RECEIVABLES

11 TRADE AND OTHER RECEIVABLES
	2019 2018 $000 $000
Accounts receivable Trade receivables due from related parties _less_Provision for doubtful debts Net accounts receivable Other receivables and prepayments Analysis of movements in provision for doubtful debts Balance at beginning of year Increase in provision upon adoption of NZ IFRS 9 Increase in provision due to acquisition of subsidiary Reduction in provision due to sale of Seed & Grain Movement in provision Balance at end of year	136,838 213,262 – 25,827
	136,838 239,089 (4,635) (6,887)
	132,203 232,202 13,678 35,425
	145,881 267,627
	(6,887) (6,358) (450) – (4,956) – 9,683 – (2,025) (529)
	(4,635) (6,887)

The aging status of the accounts receivable at the reporting date is as follows:

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TOTAL TOTAL
DEBTORS PROVISION DEBTORS PROVISION
2019 2019 2018 2018
$000 $000 $000 $000
Not past due 125,625 (1,403) 192,533 (20)
Past due 1 – 30 days 6,474 (41) 18,702 (95)
Past due 31 – 60 days 978 (20) 12,391 (81)
Past due 61 – 90 days 1,523 (987) 1,070 (32)
Past due 90 plus days 2,238 (2,184) 14,393 (6,659)
136,838 (4,635) 239,089 (6,887)
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Trade and Other Receivables Accounting Policies

NZ IFRS 9 Financial Instruments

The Group has applied NZ IFRS 9 from 1 July 2018. The new standard changes how the impairment of financial assets are calculated from an ‘incurred credit loss’ model to an ‘expected credit loss’ model. Based on the Group’s assessment of historical provision rates and forwardlooking analysis, the Group has recognised an additional provision of $0.45 million as at 30 June 2018 which is expensed directly to Retained Earnings upon adoption of NZ IFRS 9.

12 GO LIVESTOCK PRODUCT RECEIVABLES

The Group holds receivables in respect of its Go range of livestock products. The Go range allows farmers to defer payment for the purchase of livestock. The counterparty to the Go product is fully exposed to the risks and rewards of ownership. To mitigate credit risk, the Group retains title to the livestock until sale. Fee income received in respect of the Go range of livestock receivables is recognised by the Group as interest income over the respective contract period and is included within operating revenue of the Agency operating segment (refer to Note 1 Operating Revenue).

		2019 2018 $000 $000
_Go_livestock receivables – less than one year _Go_livestock receivables – greater than one year _less_Provision for doubtful debts –_Go_range of livestock receivables The status of the_Go_range of livestock receivables at the reporting date is as follows: NOT IMPAIRED IMPAIRED 2019 2019 $000 $000		47,754 39,419 – – – –
		47,754 39,419
		NOT IMPAIRED IMPAIRED 2018 2018 $000 $000
Not past due –_Go_range of livestock receivables Past due 0 – 90 days Past due 91 – 365 days 13 INVENTORY	47,754 – – – – –	39,419 – – – – –
	47,754 –	39,419 –
		2019 2018 $000 $000
Merchandise/fnished goods Work in progress Less provision for inventory write down		88,016 266,471 562 842 (2,609) (4,775)
		85,969 262,538

During the year ended 30 June 2019, finished goods, work in progress, raw materials and consumables included in cost of sales in the Statement of Profit or Loss amounted to $483.85 million (2018: $472.91 million) (refer Note 2 Cost of Sales).

During the year ended 30 June 2019, inventories written down to net realisable value amounted to $0.66 million (2018: $2.34 million; $1.4 million excluding Seed & Grain). The write-downs are included in cost of sales in the Statement of Profit or Loss.

Determination of Fair Values

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

Accounts receivables include accrued interest. Specific provisions are maintained to cover identified doubtful debts.

Impairment of Trade Receivables

Inventories Accounting Policies

Finished Goods

Raw materials and finished goods are stated at the lower of cost or net realisable value. Cost is determined on a weighted average cost basis, and, in the case of manufactured goods, includes direct materials, labour and production overheads.

Trade receivables are considered past due when they have been operated outside of the normal key trade terms. When forming a view management considers the counterparty’s ability to pay, the level of security and the risk of loss.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

14 GROUP ENTITIES

14 GROUP ENTITIES
			OWNERSHIP	INTEREST
	COUNTRY OF		2019	2018
SIGNIFICANT SUBSIDIARIES	INCORPORATION	DIRECT PARENT	%	%
Bloch & Behrens Wool (NZ) Limited	New Zealand	PGG Wrightson Limited	100%	100%
NZ Agritrade Limited	New Zealand	PGG Wrightson Limited	100%	100%
PGG Wrightson Investments Limited	New Zealand	PGG Wrightson Limited	100%	100%
PGG Wrightson Real Estate Limited	New Zealand	PGG Wrightson Limited	100%	100%
PGW Rural Capital Limited	New Zealand	PGG Wrightson Limited	100%	100%
Agriculture New Zealand Limited	New Zealand	PGG Wrightson Limited	100%	100%
AgriServices South America Limited	New Zealand	PGG Wrightson Limited	100%	100%
PGG Wrightson Trustee Limited	New Zealand	PGG Wrightson Limited	100%	100%
PGG Wrightson Employee Benefts Plan Trustee Limited New Zealand		PGG Wrightson Limited	100%	100%
Bidr Limited	New Zealand	PGG Wrightson Limited	100%	0%
PGG Wrightson Employee Benefts Plan Limited	New Zealand	PGG Wrightson Employee Benefts Plan
		Trustee Limited	100%	100%
Ag Property Holdings Limited	New Zealand	PGG Wrightson Investments Limited	100%	100%

The subsidiaries of the Seed & Grain segment were sold on 30 April 2019 (refer to Note 7 Discontinued Operations) and are excluded from the above listing.

15 OTHER INVESTMENTS

15 OTHER INVESTMENTS
	2019 2018 $000 $000
Current investments BioPacifcVentures Non-current investments Advances to equity accounted investees Sundry other investments	– 30
	– 30
	– 150 470 2,370
	470 2,520

Sundry other investments including saleyards

Sundry other investments including saleyards, which do not have a market price in an active market and whose fair value cannot be reliably determined, are carried at cost. The comparative period included investments pertaining to the Seed & Grain segment that were sold during the current period.

16 INTANGIBLE ASSETS

16 INTANGIBLE ASSETS
	TRADEMARKS, SOFTWARE PATENTS & RIGHTS GOODWILL TOTAL $000 $000 $000 $000
Cost Balance at 1 July 2017 Additions Efect of movement in exchange rates Balance at 30 June 2018 Balance at 1 July 2018 Additions Added as part of a business combination/amalgamation Disposals and reclassifcations Disposed as part of a business disposal Efect of movement in exchange rates Balance at 30 June 2019 Amortisation and impairment losses Balance at 1 July 2017 Amortisation for the year Efect of movement in exchange rates Balance at 30 June 2018 Balance at 1 July 2018 Amortisation for the year Impairment Disposals and reclassifcations Disposed as part of a business disposal Efect of movement in exchange rates Balance at 30 June 2019 Carrying amounts At 1 July 2017 At 30 June 2018 At 1 July 2018 At 30 June 2019	18,580 2,930 – 21,510 10,412 221 – 10,633 23 43 – 66
	29,015 3,194 – 32,209
	29,015 3,194 – 32,209 7,442 131 – 7,573 – – 13,741 13,741 (2,531) – – (2,531) (4,983) (1,479) (13,741) (20,203) (67) (28) – (95)
	28,876 1,818 – 30,694
	11,146 1,235 – 12,381 3,600 527 – 4,127 22 21 – 43
	14,768 1,783 – 16,551
	14,768 1,783 – 16,551 4,978 23 – 5,001 – – 1,190 1,190 (2,647) – – (2,647) (4,562) (493) (1,190) (6,245) (8) (14) – (22)
	12,529 1,299 – 13,828
	7,434 1,695 – 9,129 14,247 1,411 – 15,658 14,247 1,411 – 15,658 16,347 519 – 16,866

The carrying amount includes software cost of $2.22 million included as a current asset (2018: $2.64 million).

Refer to Accounting Policies – page 54.

Other Investments Accounting Policies

Determination of Fair Values

The fair value of financial assets at fair value through profit or loss and available-for-sale financial assets is determined by reference to the market price, unless other objective reliable evidence suggests a different value. Other investments where no active market exists are held at historical cost.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

16 INTANGIBLE ASSETS CONTINUED

Intangible Assets Accounting Policies

Software

Software is a finite life intangible and is recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over an estimated useful life between 1 and 10 years. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period.

Rights

Manufacturing and production rights are finite life intangibles and are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over an estimated useful life between 2 and 10 years. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period.

Determination of Fair Values

The fair value of intangible assets acquired in a business combination is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

Impairment

The carrying amounts of the Group’s intangible assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the recoverable amount of the asset is estimated. For intangible assets that have indefinite lives, the recoverable amount is estimated at each reporting date. An impairment loss is recognised in the profit or loss if the carrying amount of an asset exceeds the recoverable amount.

17 PROPERTY, PLANT AND EQUIPMENT

17 PROPERTY, PLANT AND EQUIPMENT
	PLANT AND CAPITAL WORKS LAND BUILDINGS EQUIPMENT PROJECT* TOTAL $000 $000 $000 $000 $000
Cost Balance at 1 July 2017 Additions Added as part of a business combination/amalgamation Disposals and transfers to other asset classes Efect of movements in exchange rates Balance at 30 June 2018 Balance at 1 July 2018 Additions Added as part of a business combination/amalgamation Disposals and transfers to other asset classes Disposed as part of a business disposal Efect of movements in exchange rates Balance at 30 June 2019 Depreciation and impairment losses Balance at 1 July 2017 Depreciation for the year Depreciation recovered to COGS Disposals and transfers to other asset classes Impairment Efect of movements in exchange rates Balance at 30 June 2018 Balance at 1 July 2018 Depreciation for the year Depreciation recovered to COGS Added as part of a business combination/amalgamation Disposals and transfers to other asset classes Disposed as part of a business disposal Impairment Efect of movements in exchange rates Balance at 30 June 2019 Carrying amounts At 1 July 2017 At 30 June 2018 At 1 July 2018 At 30 June 2019	20,372 42,560 116,701 4,003 183,636 551 3,162 11,652 (181) 15,184 – 12 801 – 813 (169) (122) (2,399) – (2,690) 233 1,829 1,753 – 3,815
	20,987 47,441 128,508 3,822 200,758
	20,987 47,441 128,508 3,822 200,758 6 700 10,812 54 11,572 1,306 6,584 3,019 – 10,909 (71) (164) (2,142) – (2,377) (8,741) (40,042) (89,019) (1,072) (138,874) (304) (274) (1,500) – (2,078)
	13,183 14,245 49,678 2,804 79,910
	– 5,542 60,729 – 66,271 – 1,296 7,551 – 8,847 – – 1,068 – 1,068 – (82) (1,713) – (1,795) – 1,070 – – 1,070 – 171 906 – 1,077
	– 7,997 68,541 – 76,538
	– 7,997 68,541 – 76,538 – 848 6,800 – 7,648 – – 182 – 182 – 526 1,237 – 1,763 – (64) (1,766) – (1,830) – (5,119) (44,686) – (49,805) – 2,256 – – 2,256 – (104) (1,440) – (1,544)
	– 6,340 28,868 – 35,208
	20,372 37,018 55,972 4,003 117,365 20,987 39,444 59,967 3,822 124,220 20,987 39,444 59,967 3,822 124,220 13,183 7,905 20,810 2,804 44,702

* Capital works projects are recorded net of transfers to other asset classes.

Capital gains on the sale of property, plant and equipment of $0.20 million were recognised in non-operating items in the current period (2018: $1.69 million).

Refer to Accounting Policies – page 56.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

17 PROPERTY, PLANT AND EQUIPMENT CONTINUED

Property, Plant & Equipment Accounting Policies

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Subsequent Costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of day-to-day servicing of property, plant and equipment is recognised in profit or loss as incurred.

Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. All other borrowing costs are expensed as they are incurred.

Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each item of property, buildings, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated. The estimated useful lives for the current and comparative periods are between 2 and 40 years for plant and equipment and 50 years for buildings. Depreciation methods, useful lives and residual values are reassessed at reporting date.

Determination of Fair Values

The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which the property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items.

18 TRADE AND OTHER PAYABLES

18 TRADE AND OTHER PAYABLES
	2019 2018 $000 $000
Trade creditors Trade payables due to related parties Loyalty reward programme Deposits received in advance Accruals and other liabilities Employee entitlements Payable within 12 months Payable beyond 12 months	96,802 147,134 – 4,822 1,015 1,177 1,042 3,196 41,854 81,725 16,821 31,163
	157,534 269,217
	155,903 267,096 1,631 2,121
	157,534 269,217

Holidays Act 2003 – Remediation Costs

During the year ended 30 June 2018 the Group recognised a $8.06 million provision for remediation costs of historical liabilities under the Holidays Act 2003. The Group has now completed the remediation work and as has made remediation payments to current staff and those terminated staff for which the Group has been able to make contact with. Following these payments the remaining provision has been released apart from an amount of $1.20 million which continues to be held in respect of terminated employees for which the Group is yet to make contact with.

Onerous lease

The Group has recognised a provision in respect of property leases entered into that are now considered onerous. An onerous provision of $1.88 million has been expensed within non-operating items and represents the Directors’ best estimate of the expected excess of costs over benefits for the remaining term of the lease contracts.

Corporate Structure review

Following the divestment of the Seed & Grain business the PGW Board commenced a review of the corporate service model for the business. The Group has recognised costs of $3.02 million, expensed through non-operating items, in respect of the recalibration. As at 30 June 2019, a provision of $1.74 million was held and is included within accruals and other liabilities above.

Impairment

The carrying amounts of the Group’s property, plant & equipment assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the recoverable amount of the asset is estimated. An impairment loss is recognised in the profit or loss if the carrying amount of an asset exceeds the recoverable amount.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

Refer to Accounting Policies – page 60.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

19 DEFINED BENEFIT ASSET / LIABILITY

19 DEFINED BENEFIT ASSET / LIABILITY
	2019 2018 $000 $000
Present value of funded obligations Fair value of plan assets Net defned beneft asset / (liability) ESCT on committed contributions – short-term ESCT on committed contributions – long-term Total defned beneft asset / (liability)	(61,624) (66,814) 55,741 59,092
	(5,883) (7,722)
	– (905) – (1,947)
	(5,883) (10,574)

The Group makes contributions to the PGG Wrightson Employee Benefits Plan, a defined benefit plan that provides a range of superannuation and insurance benefits for employees and former employees. The defined benefit plan is not open to new members. The plan’s retired employees are entitled to receive an annual pension payment payable on their life and in some cases on the life of a surviving spouse.

During 2017, the Group made a commitment to provide certain contributions over a five year period in order to bring the underlying plan to an actuarial equilibrium position (calculated on a different basis to the IFRS amounts above). The plan reached actuarial equilibrium following the cash contributions made in the period to 30 June 2019. Accordingly, no provision for ESCT on committed contributions remain.

	2019 2018 % %
Group / Company Plan assets consist of: Equities Fixed interest Cash	54% 59% 28% 31% 18% 10%
	100% 100%

19 DEFINED BENEFIT ASSET / LIABILITY CONTINUED

Sensitivity analysis

The sensitivity of the defined benefit obligation (DBO) to changes in the weighted principal assumption is:

	2019 2019 2018 2018 IMPACT ON DBO IMPACT ON DBO IMPACT ON DBO IMPACT ON DBO WITH INCREASE IN WITH DECREASE IN WITH INCREASE IN WITH DECREASE IN ASSUMPTION ASSUMPTION ASSUMPTION ASSUMPTION $000 $000 $000 $000
Change in assumption Discount rate (0.50% movement) Salary growth rate (0.50% movement) Pension growth rate (0.25% movement) Life expectancy (1 year movement)	1,541 (1,849) 1,403 (1,537) (185) 123 (200) 200 (801) 616 (601) 601 (1,787) 1,787 (1,470) 1,470 2019 2018 2017 2016 2015 $000 $000 $000 $000 $000
Historical information Present value of the defned beneft obligation Fair value of plan assets (Defcit) / surplus in the plan	(61,624) (66,814) (71,106) (73,417) (72,153) 55,741 59,092 58,835 52,702 57,498
	(5,883) (7,722) (12,271) (20,715) (14,655)

The Group expects to pay $1.01 million in contributions to the defined benefit plan in 2020 (2019: expected $2.94 million and paid $6.68 million). Member contributions are expected to be $0.65 million in 2020 (2019: expected $0.86 million and paid $1.27 million).

Plan assets included exposure to the Company’s ordinary shares of Nil (2018: Nil).

Plan assets included exposure to the Company’s ordinary shares of Nil (2018: Nil).
	2019	2018
	%	%
Actuarial Assumptions:
Principal actuarial assumptions at the reporting date
(expressed as weighted averages):
Discount rate used (10 year New Zealand Government Bond rate)	1.57%	2.85%
Infation	2.00%	2.00%
Future salary increases	3.00%	3.00%
Future pension increases	2.00%	2.00%

Assumptions regarding future mortality are based on published statistics and mortality tables. The current longevities underlying the values of the defined benefit obligation at the reporting date were as follows:

			2019	2018
			YEARS	YEARS
Longevity at age	65	for current pensioners
Males			21	21
Females			24	24
Longevity at age	65	for current members aged 45
Males			24	24
Females			28	28

As at 30 June 2019, the weighted average duration of the defined benefit obligation is 12.4 years for the PGG Wrightson Employee Benefits Plan.

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Refer to
Accounting
Policies
– page 60.
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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

19 DEFINED BENEFIT ASSET / LIABILITY CONTINUED

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2019 2018
$000 $000
Movement in the liability for defined benefit obligations:
Liability for defined benefit obligations at 1 July 66,814 71,106
Benefits paid by the plan (14,044) (8,914)
Current service costs 842 858
Interest costs 1,734 2,010
Member contributions 1,268 1,170
Actuarial (gains)/losses recognised in other comprehensive income arising from:
(Gains)/losses from change in financial assumptions 3,797 510
Experience (gains)/losses 1,213 74
Liability for defined benefit obligations at 30 June 61,624 66,814
Movement in plan assets:
Fair value of plan assets at 1 July 59,092 58,835
Contributions paid into the plan 8,455 3,011
Member contributions 1,268 1,170
Benefits paid by the plan (14,044) (8,914)
Current service costs – –
Interest costs 1,623 1,677
Other Actuarial items recognised in other comprehensive income:
Expected return on plan assets (653) 3,313
Fair value of plan assets at 30 June 55,741 59,092
Expense recognised in profit or loss:
Current service costs 842 858
Interest 111 333
953 1,191
Recognised in non-operating items (817) 142
Recognised in Employee Expenses 1,770 1,049
953 1,191
Movements recognised in equity:
Cumulative gains/(losses) at 1 July (33,090) (34,645)
Net profit or loss impact from current period costs (953) (1,191)
Gains /(losses) recognised during the year (5,663) 2,729
ESCT provision (438) 17
Cumulative gains/(losses) at 30 June (40,144) (33,090)
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20 FINANCIAL INSTRUMENTS

The Group is committed to the management of risk to achieve sustainability of service, employment and profits, and therefore, takes on controlled amounts of risk when considered appropriate.

The primary risks are those of liquidity, market (foreign currency, price and interest rate), funding and credit risk.

The Board of Directors is responsible for the review and ratification of the Group’s systems of risk management, internal compliance and control, code of conduct and legal compliance. The Board maintains a formal set of delegated authorities (including policies for credit and treasury), that clearly define the responsibilities delegated to Management and those retained by the Board. The Board approves these delegated authorities and reviews them annually.

Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulties in raising funds at short notice to meet commitments associated with financial instruments. The Group monitors its liquidity daily, weekly and monthly and maintains appropriate liquid assets and committed bank funding facilities to meet all obligations in a timely and cost efficient manner. Management of liquidity risk is designed to ensure that the Group has the ability to meet financial obligations as they fall due.

The objectives of the Group’s funding and liquidity policy is to:

Ensure all financial obligations are met when due;
Provide adequate protection, even under crisis scenarios; and
Achieve competitive funding within the limitations of liquidity requirements.

The Group manages this risk by forecasting daily cash requirements, forecasting future funding requirements and maintaining an adequate liquidity buffer.

Market Risk

Market risk is the potential for change in the value of balance sheet positions caused by a change in the value, volatility or relationship between market risks and prices. Market risk arises from the mismatch between assets and liabilities, both on and off balance sheet. Market risk includes price, foreign currency and interest rate risk which are explained as follows:

Foreign Currency Risk

The Group undertakes transactions denominated in foreign currencies and exposure to movements in foreign currency arises from these activities. It is the Group’s policy to hedge foreign currency risks as they arise. In some circumstances foreign exchange options are used to hedge potential foreign exchange risk. The Group uses forward, spot foreign exchange contracts and foreign exchange options to manage these exposures.

Interest Rate Risk

Interest rate risk is the risk that the value of financial instruments and the interest margin will fluctuate as a result of changes in market interest rates. The risk is that financial assets may be repriced at a different time and/or by a different amount than financial liabilities. This risk is managed by operating within approved policy limits using an interest rate duration approach.

Floating rate borrowings are used for general funding activities. Interest rate swaps, interest rate options and forward rate agreements are used to hedge the floating rate exposure as deemed appropriate. The Group had no interest rate derivatives at balance date (2018: $78.0 million).

Funding Risk

Funding risk is the risk of over-reliance on a funding source to the extent that a change in that funding source could increase overall funding costs or cause difficulty in raising funds. The Group has a policy of funding diversification. The funding policy augments the Group’s liquidity policy with its aim to ensure the Group has a stable diversified funding base without over-reliance on any one market sector.

Credit Risk

The Group’s net obligation with respect to defined benefit pension plans is calculated by estimating the future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value, and any unrecognised past service costs and the fair value of any plan assets is deducted. The discount rate is the yield at the reporting date on bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the lower of the net assets of the plan or the current value of the contributions holiday that is expected to be generated. Actuarial gains and losses and the expected return on plan assets are recognised directly in other comprehensive income and the defined benefit plan reserve in equity. Short-term employee benefit obligations are measured on an undiscounted basis and expensed as the related service is provided. A provision is recognised for the amount of outstanding short-term benefits at each reporting date.

Provisions made with respect to employee benefits which are not expected to be settled within twelve months are measured as the present value of the estimated future cash outflows to be made by the Group with respect to services provided by employees up to reporting date.

Credit risk is the potential for loss that could occur as a result of a counterparty failing to discharge its obligations. This may be due to drought, biosecurity issues or volatility in commodity prices. Management formally reports on all aspects of key risks to the Audit Committee at least two times each year. In addition, the following management committees review and manage key risks:

The Senior Management Team meets regularly to consider new and emerging risks, reviews actions required to manage and mitigate key risks, and monitors progress.
The Group has a Credit Committee, comprising of management appointees, which meets regularly as required to review credit risk, new loans and provisioning.

Capital Management

The capital of the Group consists of share capital, reserves, and retained earnings. The policy of the Group is to maintain a strong capital base so as to maintain investor, creditor and market confidence while providing the ability to develop future business initiatives. This policy has not been changed during the period.

Refer to Accounting Policies – page 65.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

20 FINANCIAL INSTRUMENTS CONTINUED

Quantitative disclosures

(a) Liquidity Risk – Contractual Maturity Analysis

The following tables analyse the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date (reported on an undiscounted basis). History demonstrates that such accounts provide a stable source of long term funding for the Group.

long term funding for the Group.
	WITHIN CONTRACTUAL 12 MONTHS 1 TO 5 YEARS BEYOND 5 YEARS CASH FLOW BALANCE SHEET $000 $000 $000 $000 $000
2019 Liabilities Debt Derivative fnancial instruments Trade and other payables 2018 Liabilities Debt Derivative fnancial instruments Trade and other payables	2,813 – – 2,813 2,680 280 62 – 342 342 96,802 – – 96,802 96,802
	99,895 62 – 99,957 99,824
	41,041 163,231 – 204,272 180,011 3,645 62 – 4,611 4,611 151,956 – – 151,956 151,956
	196,642 163,293 – 360,839 336,578

(b) Foreign Currency Exposure Risk

The Group’s exposure to foreign currency risk can be summarised as:

	GBP USD AUD EURO NZ$000 NZ$000 NZ$000 NZ$000
2019 Cash and cash equivalents Trade and other receivables Trade and other payables Net balance sheet position Forward exchange contracts Notional forward exchange cover Net unhedged position 2018 Cash and cash equivalents Trade and other receivables Debt Trade and other payables Net balance sheet position Forward exchange contracts Notional forward exchange cover Net unhedged position	– 1 1 1 1,213 2,235 237 4,697 (565) (5,122) (1,758) (1,991)
	648 (2,886) (1,520) 2,707
	9,483 1,585 (1,758) 21,356
	(8,835) (4,471) 238 (18,649)
	5 4,510 1,531 19 6,830 50,406 10,702 55,627 – (5,908) – – (119) (5,363) (2,704) (1,565)
	6,716 43,645 9,529 54,081
	6,711 45,043 7,998 54,062
	5 (1,398) 1,531 19

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----- Start of picture text -----

Refer to
Accounting
Policies
– page 65.
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20 FINANCIAL INSTRUMENTS CONTINUED

(c) Interest Rate Repricing Schedule

The following tables include the Group’s liabilities at their carrying amounts, categorised by the earlier of contractual repricing or maturity dates.

	WITHIN 1 TO 2 OVER 2 NON INTEREST 12 MONTHS YEARS YEARS BEARING TOTAL $000 $000 $000 $000 $000
2019 Liabilities Debt Derivative fnancial instruments Trade and other payables 2018 Liabilities Debt Derivative fnancial instruments Trade and other payables	2,680 – – – 2,680 – – – 342 342 – – – 96,802 96,802
	2,680 – – 97,144 99,824
	180,011 – – – 180,011 (63,000) 15,000 48,000 4,611 4,611 – – – 151,956 151,956
	117,011 15,000 48,000 156,567 336,578

(d) Accounting classifications and fair values

The tables below set out the Group’s classification of each class of financial assets and liabilities, and their fair values.

A THR COMPREHEN	DESIGNATED DESIGNATED T FAIR VALUE AT FAIR VALUE OUGH OTHER THROUGH PROFIT OTHER TOTAL CARRYING FAIR SIVE INCOME AND LOSS AMORTISED COST AMOUNT VALUE $000 $000 $000 $000 $000
2019 Assets Cash and cash equivalents Derivative fnancial instruments Trade and other receivables Other investments _Go_livestock receivables Liabilities Debt Derivative fnancial instruments Trade and other payables 2018 Assets Cash and cash equivalents Derivative fnancial instruments Trade and other receivables Other investments _Go_livestock receivables Finance receivables Liabilities Debt Derivative fnancial instruments Trade and other payables	– – 210,491 210,491 210,491 – 1,001 – 1,001 1,001 – – 132,203 132,203 132,203 – – 470 470 470 – – 47,754 47,754 47,754
	– 1,001 390,918 391,919 391,919
	– – 2,680 2,680 2,680 – 342 – 342 342 – – 96,802 96,802 96,802
	– 342 99,482 99,824 99,824
	– – 10,926 10,926 10,926 – 847 – 847 847 – – 232,201 232,201 232,201 30 – 2,370 2,400 2,400 – – 39,419 39,419 39,419 – – 733 733 733
	30 847 285,649 286,526 286,526
	– – 180,011 180,011 180,011 – 4,611 – 4,611 4,611 – – 151,956 151,956 151,956
	– 4,611 331,967 336,578 336,578

The Group’s banking facilities are based on floating interest rates therefore the fair value of the banking facilities equals the carrying value.

Refer to Accounting Policies – page 65.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

20 FINANCIAL INSTRUMENTS CONTINUED

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie. as prices) or indirectly (ie. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

There have been no material movements between the fair value hierarchy during the year ended 30 June 2019.

NOTE	LEVEL 1 LEVEL 2 LEVEL 3 TOTAL $000 $000 $000 $000
2019 Assets Derivative fnancial instruments Other investments 15 Liabilities Derivative fnancial instruments 2018 Assets Derivative fnancial instruments Other investments 15 Liabilities Derivative fnancial instruments	– 1,001 – 1,001 – – – –
	– 1,001 – 1,001
	– 342 – 342
	– 342 – 342
	– 847 – 847 – – 30 30
	– 847 30 877
	– 4,611 – 4,611
	– 4,611 – 4,611

(e) Credit Risk

Concentrations of Credit Risk

Financial instruments which potentially subject the Group to concentrations of credit risk principally consist of bank balances, advances, trade debtors, and forward foreign exchange contracts. The Group places its cash and short term investments with three major trading banks. Concentrations of credit risk with respect to advances are limited due to the large number of customers included in the Group’s farming customer base in New Zealand.

Refer to Accounting Policies – page 65.

Financial Instruments Accounting Policies

(i) Non-derivative Financial Assets

Non-derivative financial assets comprise investments in equity and debt securities, finance receivables, trade and other receivables, cash and cash equivalents and intercompany advances. The Group early adopted NZ IFRS 9 (2009) Financial Instruments from 1 January 2012. NZ IFRS 9 (2009) requires that an entity classifies its financial assets at either amortised cost or fair value depending on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The Group early adopted IFRS 9 (2013) Financial Instruments from 1 January 2015. IFRS 9 (2013) provides amended general hedge accounting requirements.

The Group initially recognises financial assets on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

Financial assets are initially measured at fair value. If the financial asset is not subsequently measured at fair value through profit and loss, the initial investment includes transaction costs that are directly attributable to the asset’s acquisition or origination. The Group subsequently measures financial assets at either fair value or amortised cost.

Financial assets measured at amortised cost

A financial asset is subsequently measured at amortised cost using the effective interest method and net of any impairment loss, if:

– the asset is held within a business model with an objective to hold assets in order to collect contractual cash flows; and

the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest.

–

Financial assets measured at fair value

Financial assets other than those classified as financial assets measured at amortised cost are subsequently measured at fair value with all changes recognised in profit or loss.

However, for investments in equity instruments that are not held for trading, the Group may elect at initial recognition to present gains and losses through other comprehensive income. For instruments measured at fair value through other comprehensive income gains and losses are never reclassified to profit and loss and no impairments are recognised in profit and loss. Dividends earned from such investments are recognised in profit and loss unless the dividends clearly represent a repayment of part of the cost of investment.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly liquid investments with maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents.

Trade and Other Receivables

Trade and other receivables are stated at their amortised cost less impairment losses.

(ii) Non-derivative Financial Liabilities

Interest-bearing Borrowings

Interest-bearing borrowings are classified as other financial liabilities and are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest rate method. Trade and Other Payables

Trade and other payables are stated at cost.

Determination of Fair Values

Determination of Fair Values for Derivatives

The fair value of forward exchange contracts is based on broker quotes, if available. If broker quotes are not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price at the reporting date for the residual maturity of the contract using a risk-free interest rate based on government bonds.

The fair value of interest rate swaps is based on broker quotes. These quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract using market interest rates for a similar instrument at the reporting date.

Determination of Fair Values for Non-derivative Financial Instruments

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

21 OPERATING LEASES

21 OPERATING LEASES
	2019 2018 $000 $000
Non-cancellable operating lease rentals are payable as follows: Within one year Between one and fve years Beyond fve years	19,884 26,869 45,871 68,281 18,648 42,976
	84,403 138,126

The Group leases a fleet of vehicles for use by employees, agents and representatives. These leases are typically for a period of between four and six years.

The Group leases office and computer equipment. These leases are typically for a period of four years.

The Group also leases and subleases land and buildings from which it conducts operations. These leases range in length from one to fifteen years with various rights of renewal. Where surplus properties are unable to be exited, sublease revenue is obtained where possible on a short-term temporary basis. During the year ended 30 June 2019, sublease revenue totalling $0.90 million (2018: $1.18 million) was received.

22 COMMITMENTS

22 COMMITMENTS
NOTE	2019 2018 $000 $000
There are commitments with respect to: Capital expenditure not provided for Investment in BioPacifcVentures 15 Contributions to Primary Growth Partnership – Seed and Nutritional Technology Development Programme	111 2,463 – 51 – 277
	111 2,791

Forward purchase commitments

The Group as part of its ordinary course of business enters into forward purchase agreements with wool and velvet growers. These commitments extend for periods of up to 3 years. These commitments are at varying stages of execution, therefore there remains uncertainty associated with yield, quality and market price. The Group is unable to sufficiently quantify the value of these commitments.

23 CONTINGENT LIABILITIES


	2019 2018 $000 $000
There are contingent liabilities with respect to: PGG Wrightson Loyalty Reward Programme Guarantee	88 102 – 3,693
	88 3,795

PGG Wrightson Loyalty Reward Programme

25 RELATED PARTIES

Transactions with Key Management Personnel

Transactions with Key Management Personnel
	2019 2018 $000 $000
Key management personnel compensation comprised: Short-term employee benefts Post-employment benefts Termination benefts	7,129 6,079 151 151 1,169 –
	8,449 6,230

Directors fees incurred during the year are disclosed in Note 3 Other Operating Expenses.

Other Transactions with Key Management Personnel

Several Directors, Senior Executives or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these entities. A number of these entities transacted with the Group during the reporting period. The terms and conditions of these transactions with Key Management Personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-Key Management Personnel related entities on an arm’s length basis. The aggregate value of transactions and outstanding balances relating to Directors, Senior Executives and entities over which they have control or significant influence were as follows:


	TRANSACTION BALANCE TRANSACTION BALANCE VALUE OUTSTANDING VALUE OUTSTANDING 2019 2019 2018 2018 $000 $000 $000 $000
Key Management Personnel/Director Transaction John Nichol (retired 30 April 2019) Purchase of retail goods Trevor Burt (retired 30 April 2019) Purchase of retail goods and livestock transactions David Cushing (appointed 30 April 2019) Purchase of retail goods, wool and livestock transactions. Also includes provision of defned beneft pension fund advisory services via related party Rural Equities Limited David Green (to 30 April 2019) Purchase of retail goods and rental receipts Stephen Guerin Purchase of retail goods and livestock transactions John McKenzie (to 30 April 2019) Purchase of retail goods, sale of seed under production contracts, sale of wool, water services and livestock transactions Peter Newbold Purchase of retail goods Grant Edwards Purchase of retail goods	1 – 2 –
	137 – 184 –
	392 37 – –
	– – 87 –
	7 1 9 –
	3,911 (265) 3,345 (593)
	27 2 35 3
	1 – 1 –

A provision is retained for the expected level of points redemption from the PGG Wrightson Loyalty Reward Programme. A contingent liability of $0.09 million represents the balance of live points that do not form part of the provision (2018: $0.10 million). Losses are not expected to arise from this contingent liability.

24 SEASONALITY OF OPERATIONS

The Group is subject to significant seasonal fluctuations. The Retail business is weighted towards the first half of the financial year as demand for New Zealand farming inputs are generally weighted towards the Spring season. New Zealand generally has Spring calving and lambing and so Livestock trading is weighted towards the second half of the financial year in order for farmers to maximise their income. Other business units have similar but less material cycles. The Group recognises that this seasonality is the nature of the industry and plans and manages its business accordingly.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

26 EVENT SUBSEQUENT TO BALANCE DATE

New bank facilities

During July 2019, the Group arranged new bank facilities. These new facilities provide core facilities of up to $50.00 million and a working capital facility of up to $70.00 million.

Capital return

On 4 July 2019, the Group announced that a Special Shareholders Meeting would be convened to consider and vote upon a special resolution to approve a proposed capital distribution of approximately $234.00 million. On 23 July 2019, shareholders approved the special resolution for the Company to implement the scheme of arrangement and distribution of capital to shareholders. On 31 July 2019, the Company received final High Court orders approving the return of capital by way of the scheme of arrangement. The distribution of capital is to be made on 14 August 2019. A consolidation of the Company’s ordinary shares will be implemented following the capital distribution on a 1 for 10 basis, whereby every 10 existing shares in the Company (following completion of the scheme) will be consolidated into one share.

Dividend

On 12 August 2019, the Directors of PGG Wrightson Limited resolved to pay a final dividend of 7.5 cents per share (on a post share consolidation basis) on 2 October 2019 to shareholders on the Company’s share register as at 5.00pm on 11 September 2019. This dividend will be fully imputed.

28 BASIS OF PREPARATION CONTINUED

Use of Estimates and Judgements

The preparation of the consolidated financial statements in conformity with NZ IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates and assumptions.

Estimates and assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes:

Note Judgement

1 Operating revenue – construction contracts 11 Carrying value of trade and other receivables
18 Estimates used in determining onerous lease provision

Certain comparative amounts have been reclassified to conform with the current period’s presentation.

27 REPORTING ENTITY

29 OTHER SIGNIFICANT ACCOUNTING POLICIES

PGG Wrightson Limited (the “Company”) is a company domiciled in New Zealand, registered under the Companies Act 1993 and listed on the New Zealand Stock Exchange. The Company is an FMC Entity in terms of the Financial Markets Conduct Act 2013.

Financial statements of PGG Wrightson Limited for the year ended 30 June 2019 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities. Financial statements have been prepared in accordance with the requirements of the Financial Markets Conduct Act 2013 and the Financial Reporting Act 2013.

The Group is primarily involved in the provision of goods and services within the agricultural sector.

28 BASIS OF PREPARATION

Statement of Compliance

The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (“NZ GAAP”). They comply with the New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”) and other applicable Financial Reporting Standards as applicable for profit oriented entities. The financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board, as applicable for profit oriented entities.

The accounting policies set out in these financial statements have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

(a) Basis of Consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Transactions Eliminated on Consolidation

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

These statements were approved by the Board of Directors on 12 August 2019.

Basis of Measurement

The financial statements have been prepared on the historical cost basis except for the following:

Financial instruments at fair value through profit or loss are measured at fair value.
Investments are measured at fair value.
Biological assets are measured at fair value less point-of-sale costs.
Assets classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell.

(b) Foreign Currencies

Foreign Currency Transactions

Transactions in foreign currencies are translated to the respective functional currencies of the group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss.

Functional and Presentation Currency

These financial statements are presented in New Zealand dollars ($), which is the Group’s functional currency. All financial information presented in New Zealand dollars has been rounded to the nearest thousand.

Foreign Operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to New Zealand dollars at the exchange rates at the reporting date. The income and expenses of foreign operations are translated to New Zealand dollars at exchange rates at the date of the transactions.

Foreign currency differences are recognised in other comprehensive income and the Foreign Currency Translation Reserve (“FCTR”). When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

29 OTHER SIGNIFICANT ACCOUNTING POLICIES CONTINUED

(c) Impairment

The carrying value of the Group’s assets are reviewed at each reporting date to determine whether there is any objective evidence of impairment. An impairment loss is recognised whenever the carrying amount exceeds its recoverable amount. Impairment losses directly reduce the carrying value of assets and are recognised in profit or loss unless the asset is carried at a revalued amount in accordance with another standard.

Impairment of Equity Instruments

The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of assets is impaired. In the case of equity instruments that are not held for trading, the Group may elect to present gains and losses through other comprehensive income. If no election is made fair value gains and losses are recognised in profit or loss.

The recoverable amount of the Group’s investments in held-to-maturity debt instruments and receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with short duration are not discounted.

Impairment losses on an individual basis are determined by an evaluation of the exposures on an instrument by instrument basis. All individual instruments that are considered significant are subject to this approach.

All known losses are expensed in the period in which it becomes apparent that the receivables are not collectable.

The carrying amounts of the Group’s non-financial assets, other than biological assets, inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the recoverable amount of the asset is estimated.

An impairment loss is recognised if the carrying amount of an asset or the cash-generating unit to which it relates, exceeds the recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in profit or loss. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or unit. In determining the fair value using value in use, regard is given to external market evidence.

29 OTHER SIGNIFICANT ACCOUNTING POLICIES CONTINUED

(g) Disclosure of non-GAAP financial information

Non-GAAP reporting measures have been presented in the Statement of Profit or Loss or referenced to in the notes to the financial statements. The following non-GAAP measures are relevant to the understanding of the Group financial performance:

EBIT (a non-GAAP measure) represents earnings before net interest and finance costs, income tax and the results from discontinued operations.
Operating EBITDA (a non-GAAP measure) represents earnings before net interest and finance costs, income tax, depreciation, amortisation, results from discontinued operations, fair value adjustments and non-operating items.

The PGW Board and management consider the Operating EBITDA measure to promote a more meaningful communication of financial information. This measure is also the required information for certain stakeholders and for internal management reporting and review.

(h) Standards and Interpretations That Have Been Issued or Amended But Are Not Yet Effective

A number of new standards and interpretations are not yet effective for the year ended 30 June 2019 and have not been applied in preparing

NZ IFRS 16 Leases becomes effective for the Group from the period beginning 1 July 2019. The new standard replaces NZ IAS 17 and requires implementation of a new lessee accounting model. This is accomplished by recognising a new right of use asset and a corresponding lease liability. This is calculated as the present value of the remaining payments on the lease. Under the standard leases of less than 12 months, or of low value can be excluded from recognition.
There will be a material impact on the group’s financial statements from NZ IFRS 16. The impact to the Statement of Financial Position upon the recognition of right of use assets and liabilities is estimated to be $164.40 million subject to finalisation of the level of assumed leased roll overs. There is expected to be an increase in depreciation expense of approximately $16.00 million, and interest expense of approximately $6.00 million. This is subject to the transition modelling and assumptions used. Operating expenses are expected to reduce by an estimated $21.40 million resulting in a corresponding increase in Operating EBITDA.
A variety of minor improvements to standards have been made in order to clarify various treatments of specific transactions. These are not expected to have an impact on the Group’s financial results.

(d) Determination of Fair Values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the methods outlined in the respective notes for the assets and liabilities. Where applicable, further information about the assumptions made is disclosed in the notes specific to that asset or liability.

(e ) Intangible Assets

Research and Development

The principal research and development activities are in the development of systems and processes.

Research expenditure on the development of new systems and processes is recognised in profit or loss as incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss when incurred.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.

(f) Statement of Cash Flows

The statement of cash flows has been prepared using the direct approach modified by the netting of certain items as disclosed below.

Deposits received less withdrawals are netted as the cash flows are received and disbursed on behalf of customers and reflect the activities of the customers rather than those of the Group.

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

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STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2019

	FOREIGN CURRENCY REALISED CAPITAL SHARE TRANSLATION AND REVALUATION DEFINED BENEFIT FAIR VALUE RETAINED NON-CONTROLLING TOTAL CAPITAL RESERVE RESERVES PLAN RESERVE RESERVE EARNINGS INTEREST EQUITY $000 $000 $000 $000 $000 $000 $000 $000
Balance at 1 July 2017 Total comprehensive income for the period Proft or loss Other comprehensive income: Foreign currency translation diferences Defned beneft plan actuarial gains/(losses), net of tax Total other comprehensive income Total comprehensive income for the period Transactions with shareholders recorded directly in equity Contributions by and distributions to shareholders Dividends to shareholders Total contributions by and distributions to shareholders Transfer to retained earnings Balance at 30 June 2018 Balance at 1 July 2018 Adjustment on adoption of NZ IFRS 9, net of tax Adjusted balance at 1 July 2018 Total comprehensive income for the period Proft or loss Other comprehensive income: Foreign currency translation diferences Changes in asset revaluation reserve Changes in fair value of equity instrument, net of tax Defned beneft plan actuarial gains/(losses), net of tax Total other comprehensive income Total comprehensive income for the period Transactions with shareholders recorded directly in equity Contributions by and distributions to shareholders Share repurchase and cancellation Dividends to shareholders Total contributions by and distributions to shareholders Sale of PGG Wrightson Seeds Holdings Limited Reclassifcation of reserves to Proft & Loss Reclassifcation of reserves to Retained Earnings Total reclassifcation to Proft of Loss Transfer to retained earnings Total transfer to retained earnings Balance at 30 June 2019	606,324 (10,281) 23,999 (14,087) (2,587) (316,121) 2,464 289,711 – – – – – 17,964 923 18,887 – 6,558 – – – – (150) 6,408 – – – 1,785 – – – 1,785
	– 6,558 – 1,785 – – (150) 8,193
	– 6,558 – 1,785 – 17,964 773 27,080
	– – – – – (28,570) (759) (29,329)
	– – – – – (28,570) (759) (29,329) – – – 3,260 – (3,260) – –
	606,324 (3,723) 23,999 (9,042) (2,587) (329,987) 2,478 287,462
	606,324 (3,723) 23,999 (9,042) (2,587) (329,987) 2,478 287,462 – – – – – (324) – (324)
	606,324 (3,723) 23,999 (9,042) (2,587) (330,311) 2,478 287,138 – – – – – 131,123 683 131,806 – (867) – – – – (17) (884) – – 403 – – – – 403 – – – – 21 – – 21 – – – (5,398) – – – (5,398)
	– (867) 403 (5,398) 21 – (17) (5,858)
	- (867) 403 (5,398) 21 131,123 666 125,948
	(6) – – – – – – (6) – – – – – (15,267) (1,189) (16,456)
	(6) – – – – (15,267) (1,189) (16,462)
	– 3,741 – – – – (2,101) 1,640 – 849 260 – – (1,255) 146 –
	– 4,590 260 – – (1,255) (1,955) 1,640
	– – – 2,768 – (2,768) – –
	– – – 2,768 – (2,768) – –
	606,318 – 24,662 (11,672) (2,566) (218,478) – 398,264

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ADDITIONAL FINANCIAL DISCLOSURES

PGG WRIGHTSON LIMITED

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

30 CAPITAL AND RESERVES

30 CAPITAL AND RESERVES
	No. OF SHARES No. OF SHARES 2019 2018 2019 2018 000 000 $000 $000
On issue at 1 July Share capital on issue at 30 June	754,839 754,849 606,318 606,324
	754,839 754,849 606,318 606,324

All shares are ordinary fully paid shares with no par value, carry equal voting rights and share equally in any profit on the winding up of the Group.

Foreign currency translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations and the translation of liabilities that hedge the Group’s net investment in a foreign subsidiary. Following the sale of the Seed & Grain segment which includes all of the Group’s foreign operations and subsidiaries, the amount in the translation reserve has been taken to the Profit or Loss (within gain on sale in discontinued operations) and the translation reserve was cleared to nil.

Realised capital and revaluation reserves

The realised capital reserve comprises the cumulative net capital gains that have been realised. The revaluation reserve relates to historic revaluations of property, plant and equipment. The balances relating to the Seed & Grain segment have been transferred to Retained Earnings.

Defined benefit plan reserve

The defined benefit plan reserve contains actuarial gains and losses on plan assets and defined benefit obligations. During the year ended 30 June 2019, the amount of $2.77 million was transferred from the defined benefit reserve to retained earnings (30 June 2018: $3.26 million). This amount represents the tax impact of lump sum cash contributions made.

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets and equity investments elected at fair value through other comprehensive income until the investments are derecognised or impaired.

Retained earnings

Retained earnings equals accumulated undistributed profit.

Dividends

A fully imputed 2019 interim dividend of 0.75 cents per share was paid on 5 April 2019 and a fully imputed 2018 final dividend of 1.25 cents per share was paid on 3 October 2018 (2018: Fully imputed 2018 interim dividend of 1.75 cents per share was paid on 5 April 2018 and a fully imputed 2017 final dividend of 2.0 cents per share was paid on 4 October 2017).

Share Capital Accounting Policies

Ordinary Share Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

Repurchase of Share Capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares are cancelled. Treasury stock for which unrestricted ownership has not yet been transferred are not cancelled.

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Corporate Governance and Board Charter

Incorporating Disclosure of Compliance with the NZX Corporate Governance Code

Introduction

The Board of PGG Wrightson Limited is committed to acting with integrity and expects high standards of behaviour and accountability from all of PGG Wrightson’s officers and staff. As part of this commitment, the Board has adopted this Corporate Governance Code which incorporates the Board Charter in section 2 below.

This Code complies with the Recommendations in the NZX 2019 Corporate Governance Code (NZX Code) except where specifically disclosed in this annual report. This Corporate Governance section is current as at 30 June 2019 and has been approved by PGG Wrightson’s Board of Directors.

The Board’s primary objective is the creation of shareholder value through following appropriate strategies and ensuring effective and innovative use of PGG Wrightson’s resources in providing customer satisfaction. PGG Wrightson will be a good employer and a responsible corporate citizen.

1. Ethical Behaviour and Code of Conduct

1.1 Directors recognise that it is their role to set high standards of ethical behaviour, model this behaviour and hold management accountable for observing, fostering and delivering high ethical standards throughout the PGG Wrightson Group. In compliance with NZX Code Recommendation 1.1, the Board has several documents that codify minimum standards of ethical behaviour, being the Code of Conduct, Conflict of Interest Policy, Fraud Prevention Policy and Whistle-Blower Policy, and the Board Charter listed in section 2 below.

Smarter:

Find ways to be more effective and efficient.
Think, decide and act quickly (without compromising quality).

Learn from mistakes and celebrate successes.

Teamwork:

Share knowledge and information.
Work together to create solutions.

The Board has developed and adopted a written Code of Conduct which requires all members of the PGG Wrightson Group, including Directors and employees, to observe the highest of standards of ethics and conduct, in alignment with these PGG Wrightson Group Values:

Think and act as ‘One-PGW’.

The Code of Conduct also requires members and staff of the PGG Wrightson Group to:

Comply with standards including all applicable laws, regulations, codes, policies and procedures and lawful and reasonable directions;

Accountability:

Stand by our word and meet commitments.

Behave in a professional manner in a way that upholds the PGG Wrightson Group Values and maintains public confidence in our professionalism, honesty and integrity;

Be accountable to our customers and each other.

Leadership:

Use PGG Wrightson resources, assets, time, funds and information only for their authorised/intended purpose;

Set standards and exceed expectations.

Take action and strive to excel.

Treat customers, suppliers, other PGG Wrightson personnel and third parties with respect, courtesy and dignity;

Lead through innovation.

Integrity:

Ensure their own and others’ health, safety and wellbeing in the workplace, and protect the environment;

Operate ethically and with integrity.

Avoid and/or disclose any Conflicts of Interest (real or apparent). The PGG Wrightson Group has a detailed Conflicts of Interest Policy which contains good practice guidelines surrounding the identification, disclosure and management of staff conflicts of interest;

Treat others with respect.

Act professionally.

independent director, to help encourage a culture of promoting ethical behaviour and being able to speak up.

Follow company policy on receiving and giving gifts and gratuities;

PGG Wrightson Limited maintains a Directors and Officers Interests Register which is regularly updated, documenting interests disclosed by all Board members and senior management. The statutory disclosures section in the 2019 Annual Report is compiled from entries in the Directors Interests Register during the reporting period. Directors may not participate in Board discussions nor vote on matters in which they have a personal interest.

Protect PGG Wrightson Group Assets and comply with our Group Fraud Prevention Policy;
Give proper attention to all matters and create an open communication environment that results in all material items being brought to the attention of the appropriate management; and
Protect the confidentiality of and intellectual property rights in all non-public information about our customers, suppliers, PGG Wrightson personnel and business.

In compliance with NZX Code Recommendation 1.2, the Company has a detailed securities trading policy applying to all Directors and staff which incorporates insider trading restraints. The Securities Trading Policy is available at www.pggwrightson. co.nz under Our Company > Governance. The Securities Trading Policy specifies that no Director or employee may buy or sell PGG Wrightson shares while in possession of inside information. Inside information is information that is not generally available and, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of PGG Wrightson shares. The policy also states that Directors and staff in possession of inside information cannot directly or indirectly advise or encourage any person to deal in PGG Wrightson shares. Compliance with the Securities Trading Policy is monitored through the consent process, by education and by notification by PGG Wrightson’s share registrar Computershare when any Director or Officer engages in trading activities. Trading in PGG Wrightson shares by Directors and Officers is disclosed to the NZX.

The Code of Conduct is available to view on PGG Wrightson’s website at www.pggwrightson.co.nz under Our Company > Governance. The Code of Conduct, and where to find it, is communicated to all staff and is included in regular staff training and inductions.

The Code of Conduct provides mechanisms to report breaches of the Code including unethical behaviour and specifies the disciplinary procedures in place for any breaches. It is the responsibility of the Board to review the Code of Conduct, to implement the Code and to monitor compliance. The Board receives reports on compliance with the Code of Conduct from its internal audit function. No instances of material breaches have been reported. PGG Wrightson has a Whistle-Blower policy that allows any reports of serious wrongdoing including material breaches of the Code of Conduct to be made on a protected disclosure basis, which contains a process for direct access to an

2. Board Charter including Board Composition and Performance

Chief Executive and approving the business strategy. There is a clear understanding of the division of responsibilities between, and the respective roles of, the Board and management. To ensure efficiency, the Board has delegated to the Chief Executive and subsidiary company boards the day to day management and leadership of the PGG Wrightson Group operations. The Company has a formal delegated authority framework and policy that sets out matters reserved for the Board and sub-delegates certain authorities to the Chief Executive and Managers within

2.1 This section 2 outlines the Board’s Charter which is in compliance with NZX Code Recommendation 2.1. The Board is committed to the principle that there should be a balance of independence, skills, knowledge and experience among Directors so that the Board works effectively. Directors are, except where permitted by law, required to act in the best interests of PGG Wrightson Limited and to give proper attention to the matters before them. The Board is satisfied that the Directors commit the time needed to be fully effective in the role. Directors are entitled to seek independent professional advice to assist them in meeting their responsibilities. The Board is responsible for employing the

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Corporate Governance and Board Charter continued

2.2 In compliance with NZX Code Recommendation 2.2 that every issuer should have a procedure for the nomination and appointment of directors to the Board, this is done as circumstances require. PGG Wrightson Limited has a formal and transparent method for the nomination and appointment of directors to the Board – nominations are publicly called for by notice on the NZX and considered at the Annual Meeting. Checks will be done and key information about a candidate provided to shareholders in the Notice of Annual Meeting, including any material adverse information disclosed in the checks where a candidate is standing for the first time or the term of office if seeking re-election. Directors may be appointed by the Board between Annual Meetings as permitted by the Constitution but are required to seek re-election at the next Annual Meeting. The Constitution contains no provisions for compulsory retirement or a fixed tenure for Directors, although Directors must periodically retire and seek re-election in accordance with the Constitution and NZX Listing Rules.
2.3 In compliance with NZX Code Recommendation 2.3 that an issuer should enter into written agreements with each newly appointed Director establishing the terms of their appointment, the Board has a template Director Letter of Appointment available for use which sets out the written expectations of Directors and which is used for all new Directors.

2.4 In compliance with NZX Code Recommendation 2.4, information about each Director is disclosed in this annual report, including a profile of experience, length of service, independence, ownership interests and attendance at Board meetings. As at 30 June 2019 the Board had six Directors. Their experience, qualifications and the value that they contribute to the Board are listed in the Board of Directors biographies set out in the 2019 Annual Report. The full Board met in person seven times during the year ended 30 June 2019. Directors also meet on other occasions for strategic planning and held conference calls from time to time as required. The attendance at physical Board meetings of all Directors who served during the financial year to 30 June 2019 is set out below, including attendance in part:

The table below lists the numerical quantitative breakdown of the gender composition of PGG Wrightson’s Board of Directors and its Officers as at 30 June 2019 and comparative figures for 30 June 2018. An Officer means a person, however designated, who is concerned or takes part in the management of PGG Wrightson Limited’s business, but excludes a person who does not report directly to the Board or who does not report directly to a person who reports to the Board.

2.5 In compliance with NZX Code Recommendation 2.5, the Board has a Diversity Policy which is available at www.pggwrightson. co.nz under Our Company > Governance. Attributes that are particularly relevant to PGG Wrightson are culture, ethnicity/ nationality, gender and skills. The Board has evaluated PGG Wrightson’s performance against its Diversity Policy objectives which relate to the working environment, employment and selection opportunities, Board appointment recommendations, leadership training and HR management support, and considers that these objectives have been met.

PGG WRIGHTSON LTD’S	PGG WRIGHTSON LTD’S	PGG WRIGHTSON LTD’S	PGG WRIGHTSON LTD’S	PGG WRIGHTSON LTD’S	PGG WRIGHTSON LTD’S	PGG WRIGHTSON GROUP	PGG WRIGHTSON GROUP	PGG WRIGHTSON GROUP
BOARD OF DIRECTORS AS AT		BOARD OF DIRECTORS AS		OFFICERS	OFFICERS		WORKFORCE*	WORKFORCE*
	30 JUNE 2019	AT 30 JUNE 2018	AS AT 30 JUNE 2019+		AS AT 30 JUNE 2018	AS AT 30 JUNE 2019+		AS AT 30 JUNE 2018
Number of Males	5	7		7	11		989	1408
Percentage of Males	83%	100%		88%	91%		61%	65%
Number of Females	1	0		1	1		629	753
Percentage of Females	17%	0%		12%	9%		39%	35%

Calculation methodology excludes casuals, fixed term employees and independent commission agents/independent contractors.

	NUMBER OF BOARD	NUMBER OF AUDIT	NUMBER OF REMUNERATION
DIRECTOR	MEETINGS ATTENDED	COMMITTEE MEETINGS ATTENDED	COMMITTEE MEETINGS ATTENDED
Rodger Finlay(from 30 April 2019)	2	1	1
Sarah Brown(from 30 April 2019)	2		1
David Cushing(from 30 April 2019)	2	1	1
Joo Hai Lee	6	3	2
Ronald Seah	7	1	2
U Kean Seng	7		2
Alan Lai(until 30 October 2018)	2		1
Trevor Burt(until 30 April 2019)	5		1
Bruce Irvine(until 30 April 2019)	5	3	1
John Nichol(until 30 April 2019)	5	3	1

Note that 30 June 2018 Officers and Workforce figures include Seed & Grain employees whereas 30 June figures 2019 do not due to the sale of PGG Wrightson Seeds Holdings Ltd.

The statutory disclosures section in the 2019 Annual Report lists the Company’s Directors’ independence status. The Board reviews any determination that it makes on a Director’s independence on becoming aware of any information that indicates that a Director may have a relevant material relationship. Directors are required to immediately advise of any new or changed relationships so the Board can consider and determine its materiality. Directors’ interests including other relevant directorships that they hold are listed on pages 87 to 88 of the 2019 Annual Report. None of the Directors sit on any PGG Wrightson Group companies apart from the parent PGG Wrightson Limited.

2.6 In compliance with NZX Code Recommendation 2.6, Directors are expected to undertake appropriate training to remain current on how best to perform their duties as a Director of a listed company. Directors are regularly updated on relevant industry and company issues, undertake visits to PGG Wrightson and customer branches and operations, and receive briefings from Executive Managers from all Business Units. Directors are able to attend PGG Wrightson Business Unit conference sessions to further their training.
2.7 In compliance with NZX Code Recommendation 2.7, the Board has a process to regularly assess the performance of each Director, the Board as a whole, and Board Committees. 2.9
In compliance with NZX Code Recommendation 2.9, the Chairman Rodger Finlay is an Independent Director.
2.8 In compliance with NZX Code Recommendation 2.8, a majority of the Board are Independent Directors, with four out of six Directors being independent. In accordance with NZX requirements, no less than one third of the total number of Directors are required to be Independent Directors. The Board meets this requirement. The Board defines an Independent Director as one who:–

is not an executive of the Company; and

has no disqualifying relationship within the meaning of the NZX Listing Rules.

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Corporate Governance and Board Charter continued

3. Board Committees

The Board has delegated some of its powers to Board Committees where it will enhance its effectiveness in key areas while still retaining Board responsibility. As at 30 June 2019 the Board had two standing Committees – the Audit Committee, the Remuneration and Appointments Committee.

The Committees are made up of a minimum of three nonExecutive Director members and each Committee has a written Board-approved charter which outlines that Committee’s role, rights, responsibilities, membership requirements and relationship with the Board. In compliance with NZX Code Recommendation 2.7, the Board has a process to formally review the performance of each Committee from time to time in accordance with the relevant Committee’s written charter. Proceedings of Committees are reported back to the full Board to allow other Directors to question Committee members.

3.1 Audit Committee

In compliance with NZX Code Recommendation 3.1, as explained below, the Audit Committee operates under a written charter, membership is majority independent and comprises solely of non-Executive Directors, and the Chairman of the Audit Committee David Cushing is an Independent Director and is not also the Chairman of the Board.

The Audit Committee Charter has been recently reviewed and is available on PGG Wrightson’s website at www.pggwrightson.co.nz under Our Company > Governance.

The members of the Audit Committee are currently David Cushing (Chairman), Rodger Finlay and Joo Hai Lee. The majority of the members of the Audit Committee are Independent Directors. No member of the Audit Committee is an Executive Director. The Audit Committee has appropriate financial expertise, with all current members having an accounting or financial background. The Audit Committee met four times during the financial year.

The main responsibilities of the Audit Committee are:

Ensuring effectiveness of the accounting and internal control systems;

Ensuring the Board is properly and regularly informed and updated on corporate financial matters;
Monitoring and reviewing the independent and internal auditing practices;
Recommending the appointment and removal of the external auditor and considering a change in the lead audit partner where the auditors continue in office for a period exceeding five years;
Ensuring the ability and independence of the auditors to carry out their statutory audit role is not impaired or could reasonably be perceived to be impaired.
To interface with management, internal auditors and external auditors and review the financial reports, as well as advising all Directors whether they comply with appropriate laws and regulations.
Overseeing matters relating to the values, ethics and financial integrity of the Group;

To report Audit Committee proceedings back to the Board.

The Audit Committee has the authority to appoint outside legal or other professional advisors if it considers necessary. The Audit Committee on occasions meets with the internal auditors and external auditors without the management present.

3.2 In compliance with NZX Code Recommendation 3.2, employees only attend Committee meetings at the invitation of the Committee as is considered appropriate.

3.3 Remuneration and Appointments Committee

In compliance with NZX Code Recommendation 3.3, the Remuneration and Appointments Committee operates under a written Charter, and the majority of members are independent directors as the Committee is comprised of the full Board. In compliance with NZX Code Recommendation 4.2 the Charter is available on PGG Wrightson’s website at www.pggwrightson. co.nz under Our Company > Governance. The Remuneration and Appointments Committee is chaired by Rodger Finlay. The Remuneration and Appointments Committee met twice during the financial year as part of a full Board meeting. Employees only attend Committee meetings at the invitation of the Committee as is considered appropriate.

The main responsibilities of the Remuneration and Appointments Committee are:

To undertake an annual performance appraisal of the Chief Executive and review the appraisal of direct reports to the Chief Executive;
To review compensation policy and procedures, including employee benefits and superannuation, and recommend to the Board remuneration changes for the Chief Executive and direct reports to the Chief Executive;
To review succession planning and senior management development plans;

To report Committee proceedings back to the Board.

A subcommittee of the Remuneration and Appointments Committee was established during the year, chaired by Rodger Finlay, for the purpose of recruiting the new Chief Executive. That culminated in the recommendation from the subcommittee to appoint Stephen Guerin, which was approved by a full Board resolution.

The role of the Remuneration and Appointments Committee as set out in its Charter will be expanded to include the function

4. Reporting and Disclosure

4.1 The Board endorses the principle that it should demand integrity both in financial and non-financial reporting and in the provision by management of information of sufficient content, balance, quality and timeliness to enable the Board to effectively discharge its disclosure duties.

In compliance with NZX Code Recommendation 4.1, the Board has adopted a Continuous Disclosure Policy which is available on PGG Wrightson’s website at www.pggwrightson.co.nz under Our Company > Governance. The Company will provide timely and adequate disclosure of information on matters of material impact to shareholders and comply with the continuous disclosure and other listing requirements of the NZX relating to shareholder reporting. PGG Wrightson has established and will maintain processes for the provision of information to the Board by management of sufficient content, quality and timeliness, as the Board considers necessary to enable the Board to effectively discharge its duties.

4.2 In compliance with NZX Code Recommendation 4.2, PGG Wrightson’s Code of Conduct, Board and Committee Charters, Diversity Policy and other key governance policies are available to view on PGG Wrightson’s website at www.pggwrightson.co.nz under Our Company > Governance.

of recommending remuneration packages for Directors to shareholders in future when such a recommendation to shareholders is put forward.

3.4 In relation to NZX Code Recommendation 3.4, the Board does not have a nomination Committee to recommend director appointments to the Board as that is carried out by the whole Board.
3.5 In compliance with NZX Code Recommendation 3.5, the Board has considered but does not think it is currently necessary to have any other Board committees as standing Board committees. Other committees are formed as and when required.
3.6 In relation to NZX Code Recommendation 3.6, if and when necessary the Board will establish appropriate protocols that set out the procedure to be followed if there is a takeover offer for the issuer including any communication between insiders and the bidder. The protocols will disclose the scope of independent advisory reports to shareholders, the option of establishing an independent takeover committee, and the likely composition and implementation of an independent takeover committee. The Board does not consider it necessary to establish such protocols in advance as standing protocols but will do so if the need arises.

4.3 In compliance with NZX Code Recommendation 4.3, PGG Wrightson considers that its financial reporting is balanced, clear and objective. The Board receives assurances from the Chief Executive Officer and Chief Financial Officer that the Directors’ declaration provided in accordance with International Financial Reporting Standards (IFRS) and NZ IFRS is founded on a sound system of risk management and internal control, and that the system is operating effectively in all material respects in relation to financial reporting risks.

PGG Wrightson considers that its non-financial reporting is informative, contains forward-looking assessment, and aligns with key strategies and metrics monitored by the Board. Nonfinancial disclosure, including material environmental, economic and social sustainability factors and practices, risks and other key risks, risk management and relevant internal controls, is outlined in various sections of this annual report. The Company also communicates through the Interim and Annual Reports, releases to the NZX and media, and on its website at www.pggwrightson.co.nz.

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Corporate Governance and Board Charter continued

5.1 The Board is committed to the policy that remuneration of Directors and Officers/Executives should be transparent, fair and reasonable. The Board’s Remuneration Policy for Directors is that Directors’ fees in aggregate must be formally approved by shareholders. In compliance with NZX Code Recommendation 5.1, the statutory disclosures section in the 2019 Annual Report lists the Company’s Directors’ actual remuneration including any Board Committee fees paid. There are no performance incentives for any Directors. The Board has not elected to create a performance-based Equity Security Compensation Plan. Further the Board supports Directors investing a portion of their Directors’ remuneration in purchasing shares in the Company but it does not consider this should be mandatory.
5.2 The Board considers that it partially complies with NZX Code Recommendation 5.2, being that PGG Wrightson’s policy for remuneration of Officers outlines the relative weightings of remuneration components and relevant performance criteria. Directors’ remuneration does not have performance criteria attached to it. All executive remuneration incentives align with financial and non-financial performance measures relating to PGG Wrightson’s objectives and are compatible with PGG Wrightson’s risk management policies and systems.
5.3 In compliance with NZX Code Recommendation 5.3, the remuneration arrangements in place for the Chief Executives, during the year ended 30 June 2019 including disclosure of the base salary, short-term incentives and long-term incentives and the performance criteria used to determine performance-based payments, are outlined on page 91 of this annual report.

6 Risk Management

In conjunction with the Chief Executive and Audit Committee, reviewed the effectiveness and integrity of compliance and risk management systems within the business. The Board receives and reviews regular reports on the operation of the risk management framework that includes policies and internal control processes, as well as any developments in relation to key risks. Reports include oversight of the Company’s Group risk register and highlight the main risks to the Company’s performance and the steps being taken to manage these; and
6.1 In compliance with NZX Code Recommendation 6.1, PGG Wrightson has in place a risk management framework for its business to manage any existing risks and to report the material risks facing the business and how these are being managed. The Board receives and reviews regular reports.

It is the responsibility of the Board to monitor the broader risk management processes in place to identify and manage potential and relevant risks. Directors have a sound understanding of the key risks faced by the business.

In discharging this obligation, the Board has:

Established a separate management Risk and Compliance Committee that is responsible for the oversight of business risks and future risk strategy.
In conjunction with the Chief Executive, Audit Committee, internal and external audit, set up and monitored rigorous processes for risk management and internal controls to ensure that management prudently and efficiently manage resources, and the identification of the nature and magnitude of the Company’s material risks. PGG Wrightson has a comprehensive Risk Policy and Group Risk Management Framework;

The Board maintains insurance coverage with reputable insurers for relevant insurable risks and recently renewed its insurance policies in accordance with the policy approach determined by the Board.

6.2 In compliance with NZX Code Recommendation 6.2, PGG Wrightson has on page 7 of this 2019 Annual Report disclosed how it manages its health and safety risks and has reported on our health and safety risks, performance and management.
Considered the nature and extent of risks the Board is willing to take to achieve its strategic objectives. The Company is committed to the management of risk to achieve sustainability of service, employment and profits, and therefore takes on controlled amounts of risk when considered appropriate;

7 Independent Auditors

7.1 In compliance with NZX Code Recommendation 7.1, the Board has established a framework as set out below for the Company’s relationship with its external auditors. This includes procedures:
(a) for sustaining communication with the external auditors;
(b) to ensure that the ability of the external auditors to carry out their statutory audit role is not impaired, or could reasonably be perceived to be impaired;
(c) to address what, if any, services (whether by type or level) other than their statutory audit roles may be provided by the auditors; and
(d) to provide for the monitoring and approval by the Audit Committee of any service provided by the external auditors other than in their statutory audit role.

The Board subscribes to the principle that it has a key function to ensure the quality and independence of the external audit process. The Board operates formal and transparent procedures for sustaining communication with PGG Wrightson’s independent and internal auditors. The Board seeks to ensure that the ability, objectivity and independence of the auditors to carry out their statutory audit role is not compromised or impaired or could reasonably be perceived to be compromised or impaired. The auditors are invited to attend all Audit Committee meetings (except where auditor remuneration is discussed). This attendance can include invitations for private sessions between the Audit Committee and the external auditor without management present. In addition, the lead audit partner of the external auditor is rotated at least every five years.

To ensure there is no conflict with other services that may be provided by the external auditors, the Company has adopted a policy whereby the external auditors will not provide any other services unless specifically approved by the Audit Committee. The external auditors KPMG did provide some small value nonfinancial statement audit work in the year ended 30 June 2019 which was pre-approved by the Audit Committee. The nature of the types of work completed and the remuneration received is disclosed on page 41 of the Annual Report. The external auditors confirmed in their audit report on pages 75 to 77 of this Annual Report that those matters did not impair their independence as auditor of the Group.

7.2 In compliance with NZX Code Recommendation 7.2, the external auditor attends the Annual Meeting to answer questions from shareholders in relation to the audit.
In compliance with NZX Code Recommendation 7.3, PGG Wrightson’s internal audit functions are disclosed here. The internal audit function comprised a Team Leader and a Business Assurance Manager supported by a Panel of co-source partners. The internal audit function is responsible for carrying out internal audits in accordance with the internal audit plan approved by the Audit Committee. The function reviews and reports on the effectiveness of internal control systems and processes for the Company.
7.3

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Corporate Governance and Board Charter continued

Statutory Disclosures

The following particulars of notices were given by Directors of the Company pursuant to section 140(2) of the Companies Act 1993 for the year 1 July 2018 to 30 June 2019

8 Shareholder Rights & Relations

8.1 While the Company does not have a formal shareholder or stakeholder relations policy, the Board actively fosters constructive relationships with its shareholders, as appropriate. The Board is at all times cognisant of the need to protect and act in the best interests of the Company’s shareholders.

In compliance with NZX Code Recommendation 8.1, PGG Wrightson’s website www.pggwrightson.co.nz has an Investors Section where investors and interested stakeholders can access financial and operational information and key corporate governance information. This contains key governance documents and policies, contact details for investor matters, current and past Annual Reports, notices of meetings and other key dates in the investor schedule, the constitution, media releases and NZX announcements, periodic financial information, dividend histories and other information. PGG Wrightson lists its Business Unit descriptions and key activities on its website, and its releases contain information on business goals and performance. The Company encourages shareholder participation at the Annual Meeting, by providing as an item of General Business, the conducting of a shareholder discussion, where a reasonable opportunity is given for shareholders to question, discuss or comment on the management of the Company.

9 Annual Review

9.1 A review of this Corporate Governance Code and associated processes and procedures is completed on an annual basis to ensure the Company adheres to best practice governance principles (as promulgated by the relevant authoritative bodies) and maintains high ethical standards.
8.2 In compliance with NZX Code Recommendation 8.2, PGG Wrightson allows investors the ability to easily communicate with it, including providing the option to receive communications electronically. The Company has continued to seek to improve shareholder participation, efficiency and cost effectiveness of communication with shareholders by offering them its e-comms programme, where shareholders can elect to receive their security holder communication by full electronic communications.
8.3 In compliance with NZX Code Recommendation 8.3, shareholders have the right to vote on major decisions which may change the nature of the Company.
8.4 If PGG Wrightson was seeking additional equity capital in the future, it would consider the recommendation in NZX Code Recommendation 8.4 to offer further equity securities to existing equity security holders of the same class on a pro rata basis and no less favourable terms before further equity securities are
8.5 In compliance with NZX Code Recommendation 8.5, the shareholders’ Notice of Annual Meeting is posted on the website as soon as possible and at least 20 working days prior to the meeting.

DIRECTOR	INTEREST	ORGANISATION
R Finlay
Chairman
Appointed 30 April 2019	Chairman	Mundane Asset Management Limited (UK)
		Independent Advisory Panel of Provincial Growth Fund
		St Andrews College Foundation (Trustee)
	Deputy Chairman	Rural Equities Limited
	Director	Moeraki Limited
		Ngāi Tahu Holdings Ltd
		Mundane World Leaders Fund Limited (Cayman)
	Trustee	Burnett Valley Trust
	Governor	Radio New Zealand Ltd
J H Lee
Deputy Chairman	Director	Hayfux Limited
		Sinocloud Group Limited
		Agria Corporation
		Agria (Singapore) Pte Ltd
		Lung Kee (Bermuda) Holdings Limited
		Rafes United Holdings Limited
S Brown
Appointed 30 April 2019	Director	Electricity Invercargill Limited
		PowerNet Limited
		OtagoNet Limited
		OtagoNet Properties Limited
		Electricity Southland Limited
		Pylon Limited
		Southland Regional Development Agency Limited
	Panellist	Independent Advisory Panel for the Provincial Growth Fund
	Trustee	Southland Boys High School
		1000 Days Trust
		Turnbull Trust

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Statutory Disclosures continued

DIRECTOR	INTEREST	ORGANISATION
B D Cushing
Appointed 30 April 2019	Executive Chairman	Rural Equities Limited
	Director	Skellerup Holdings Limited
		H&G Ltd
		Red Steel Limited
		Makowai Farm Limited
		Webster Limited (ASX)
L S Seah	Chairman	Nucleus Connect Pte Limited
	Director	M&C Reit Management Limited
		M&C Business Trust Management Limited
		Global Investments Limited
		Telechoice International Limited Yanlord Land Group Limited
	Non-Executive Director	Life Health Group Ltd
		Life Clinic Ltd
	Sole Proprietor	Soft Capital Sg
U Kean Seng	Head of Corporate	Agria Corporation
	and Legal Afairs

In addition, R Finlay and B D Cushing advised that they hold interests in farming operations that transact business with PGG Wrightson Limited companies on normal terms of trade.

Directors’ Remuneration

The following persons held office, or ceased to hold office, as a Director during the year to 30 June 2019 and received the following remuneration (including the value of any benefits). Fees are not paid for membership of the Remuneration & Appointments Committee. Figures are gross and exclude GST (if any):

					TOTAL
DIRECTOR	PGG WRIGHTSON LIMITED	DIRECTORS’ FEES	AUDIT COMMITTEE	COMMITTEE FEES	REMUNERATION
R J Finlay1	Chairman	$35,769.23		$1,703.30	$37,472.53
J H Lee3	Deputy Chairman	$106,739.13		10,000.00	$116,739.13
S Brown1		$13,626.37		–	$13,626.37
B D Cushing1		$13,626.37	Chairman	$3,406.59	$17,032.96
L S Seah		$80,000.00		–	$80,000.00
U Kean Seng		$80,000.00		–	$80,000.00
G Lai2	Previous Chairman	$69,619.57		–	$69,619.57
T J Burt4	Previous Deputy Chairman	$144,970.73		–	$144,970.73
B R Irvine4		$66,593.41	Previous Chairman	$16,648.35	$83,241.76
J E Nichol4		$66,593.41		$8,324.18	$74,917.59

1 Appointed 30 April 2019

2 Resigned 30 October 2018

3 Appointed Interim Chairman 31 October 2018 to 30 April 2019 and becoming Deputy Chairman from 1 May 2019 4 Resigned 30 April 2019

Directors’ Shareholdings

NZX Waivers

As at 30 June 2019 no Directors of PGG Wrightson Limited held shares in PGG Wrightson. J H Lee and U Kean Seng are associated persons of substantial product holder Agria (Singapore) Pte Limited holding 33,463,399 shares post share consolidation as at 12 August 2019 (379,068,619 as at 30 June 2018).

No waivers have been granted and published by the NZX during the 12 months ending 30 June 2019.

Directors’ Indemnity and Insurance

In accordance with section 162 of the Companies Act 1993 and the Constitution of the Company, the Company has insured Directors and Officers against liabilities to other parties that may arise from their positions as Directors and Officers of the Company, Subsidiaries and Associates. This insurance does not cover liabilities arising from criminal actions and deliberate and reckless acts or omissions.

B D Cushing is an associated person of H & G Limited holding 2,006,732 shares post share consolidation as at 12 August 2019.

Directors’ Share Transactions

No Directors of the Company have notified the Company of any share transactions between 1 July 2018 and 30 June 2019 apart from interests in substantial product holder transactions separately disclosed.

Use of Company Information by Directors

The Board has implemented a protocol governing the disclosure of Company information to its substantial product holders. In accordance with this protocol and section 145 of the Companies Act 1993, J H Lee and U Kean Seng have given notice that while directors they may disclose certain information to Agria Corporation in order to seek, and inform the Board of, its view as to the governance and operation of the Company and in order to enable Agria Corporation to comply with certain statutory obligations.

Directors’ Independence

The Board has determined that as at 30 June 2019:

The following Directors are Independent Directors: R Finlay, B D Cushing, S Brown and L S Seah.

The following Directors are not Independent Directors by virtue of their association with a substantial product holder: J H Lee and U Kean Seng.

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Statutory Disclosures continued

Employee Remuneration

Set out below are the numbers of employees of the Company and its subsidiaries who received remuneration and other benefits of $100,000 or more during the year, in their capacity as employees. The schedule includes:

The schedule excludes:

amounts paid post 30 June 2019 that related to services provided in the 2018/2019 financial year;

telephone concessions to some employees that can include free telephone line rental, national and international phone calls and online services;

all monetary payments actually made during the year, including termination payments and the face value of any at-risk long-term incentives granted, where applicable;

independent real estate/livestock commission agents;

the employer’s contributions to superannuation funds, retiring entitlements, health insurance schemes and other payments to terminating employees (e.g. long service leave);

any benefits received by employees that do not have an attributable value.

The remuneration details of employees paid outside of New Zealand have been converted into New Zealand dollars. No employees appointed as a director of a subsidiary company of PGG Wrightson Limited receives or retains any remuneration or other benefits from PGG Wrightson Limited for acting as such.

livestock employees who are remunerated on a commission basis and whose remuneration fluctuates materially from year to year. Livestock remuneration includes incentives paid in the current year that were earned in respect of the prior year’s performance; and
Seed & Grain staff payments from 1 July 2018 until 1 May 2019 as they ceased to be part of the Group effective from settlement of the sale of PGG Wrightson Seeds Holdings Limited on 1 May 2019.

REMUNERATION RANGE NUMBER OF EMPLOYEES $100,000 – $110,000 67 $110,001 – $120,000 62 $120,001 – $130,000 55 $130,001 – $140,000 51 $140,001 – $150,000 30 $150,001 – $160,000 31 $160,001 – $170,000 21 $170,001 – $180,000 13 $180,001 – $190,000 13 $190,001 – $200,000 10 $200,001 – $210,000 16 $210,001 – $220,000 9 $220,001 – $230,000 8 $230,001 – $240,000 4 $240,001 – $250,000 7 $250,001 – $260,000 5 $260,001 – $270,000 6 $270,001 – $280,000 3 $280,001 – $290,000 3 $290,001 – $300,000 1	REMUNERATION RANGE NUMBER OF EMPLOYEES
	$300,001 – $310,000 1 $310,001 – $320,000 2 $320,001 – $330,000 4 $330,001 – $340,000 2 $340,001 – $350,000 4 $350,001 – $360,000 3 $360,001 – $370,000 3 $370,001 – $380,000 2 $380,001 – $390,000 1 $390,001 – $400,000 1 $410,001 – $420,000 1 $430,001 – $440,000 1 $630,001 – $640,000 1 $640,001 – $650,000 1 $670,001 – $680,000 1 $700,001 – $710,000 1 $730,001 – $740,000 1 $1,020,001 – $1,030,000 1 $3,830,001 – $3,840,000 1

REMUNERATION RANGE
NUMBER OF EMPLOYEES
$100,000 – $110,000
67
$110,001 – $120,000
62
$120,001 – $130,000
55
$130,001 – $140,000
51
$140,001 – $150,000
30
$150,001 – $160,000
31
$160,001 – $170,000
21
$170,001 – $180,000
13
$180,001 – $190,000
13
$190,001 – $200,000
10
$200,001 – $210,000
16
$210,001 – $220,000
9
$220,001 – $230,000
8
$230,001 – $240,000
4
$240,001 – $250,000
7
$250,001 – $260,000
5
$260,001 – $270,000
6
$270,001 – $280,000
3
$280,001 – $290,000
3
$290,001 – $300,000
1

REMUNERATION RANGE
NUMBER OF EMPLOYEES

$300,001 – $310,000
1
$310,001 – $320,000
2
$320,001 – $330,000
4
$330,001 – $340,000
2
$340,001 – $350,000
4
$350,001 – $360,000
3
$360,001 – $370,000
3
$370,001 – $380,000
2
$380,001 – $390,000
1
$390,001 – $400,000
1
$410,001 – $420,000
1
$430,001 – $440,000
1
$630,001 – $640,000
1
$640,001 – $650,000
1
$670,001 – $680,000
1
$700,001 – $710,000
1
$730,001 – $740,000
1
$1,020,001 – $1,030,000
1
$3,830,001 – $3,840,000
1

The Board’s Remuneration and Appointments Committee approves the Group’s remuneration policy. The Committee also reviews and recommends to the Board for approval the remuneration of the Chief Executive Officer and the remuneration of the executives who report directly to the Chief Executive Officer.

In compliance with the NZX Code Recommendation 5.3, the remuneration arrangements in place for PGG Wrightson’s Chief Executives during the year ended 30 June 2019 are set out below. Ian Glasson received payments totalling $3,838,939 as follows:

$1,506,939 - part year base salary (including annual leave entitlements on termination).
$1,132,000 - termination payment received upon completion of employment contract.
$1,000,000 - 100% of the long-term incentive with the following performance criteria - Financial Results, Strategic Objectives and Health and Safety performance.
$200,000 - annual short term incentive for FY2018 with the following performance criteria - Financial Results, Strategic Objectives and Health and Safety performance.

Stephen Guerin in his role as Chief Executive received a payment of $57,538 for part year base salary.

The Board of Directors’ general policy for Chief Executive remuneration is payment of a base salary and an annual short-term incentive based on achievement of performance criteria being Financial Results, Strategic Objectives and Health and Safety performance.

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General Disclosures

Subsidiary Company Directors

The following persons held the office of Director of the respective subsidiaries (as defined in the Companies Act 1993) during the year or part year as indicated on behalf of the Group. Directors appointed (A) or who resigned (R) during the year or part year are indicated. Staff appointments do not receive Director fees or other benefits as a Director. Unless otherwise indicated, Group ownership is 100%.

New Zealand Companies during the full year 1 July 2018 to 30 June 2019

LEGAL COMPANY NAME	PGG WRIGHTSON DIRECTORS
Agriculture New Zealand Limited	JS Daly, I Glasson (R), SJ Guerin (A)
Ag Property Holdings Limited	JS Daly, I Glasson (R), SJ Guerin (A)
AgriServices South America Limited	JS Daly, I Glasson (R), SJ Guerin (A)
Bidr Limited	SJ Guerin (A), PJ Moore (A), PC Scott (A)
Bloch & Behrens Wool (NZ) Limited	JS Daly, I Glasson (R), SJ Guerin (A), G Edwards
NZ Agritrade Limited	JS Daly, I Glasson (R), SJ Guerin
PGW Rural Capital Limited	JS Daly, I Glasson (R), SJ Guerin (A)
PGG Wrightson Employee Benefts Plan Limited	CD Adam, JS Daly, GR Davis, SJ Guerin
PGG Wrightson Employee Benefts Plan Trustee Limited	CD Adam, PR Drury, GR Davis, SJ Guerin
PGG Wrightson Investments Limited	JS Daly, I Glasson (R), SJ Guerin (A)
PGG Wrightson Real Estate Limited	JS Daly, I Glasson (R), SJ Guerin (A)
PGG Wrightson Trustee Limited	JS Daly, SJ Guerin

New Zealand Companies during the part year 1 July 2018 to 1 May 2019

These Companies ceased to be part of the PGG Wrightson Ltd Group from 1 May 2019.

LEGAL COMPANY NAME	PGG WRIGHTSON DIRECTORS
Agricom Limited	JS Daly (R), I Glasson (R), JD McKenzie
Forage Innovations Limited (51%)	DHF Green, JD McKenzie
Grasslands Innovation Limited (70%)	DHF Green, JD McKenzie, JD Stewart (A)
PGG Wrightson Consortia Research Limited	JS Daly (R), I Glasson (R), JD McKenzie
PGG Wrightson Seeds Holdings Limited	JD McKenzie, I Glasson (R)
PGG Wrightson Seeds Limited	JS Daly (R), I Glasson (R), JD McKenzie
PGG Wrightson Seeds New Zealand Limited	JD McKenzie, I Glasson (R)
PGG Wrightson Seeds South America Holdings Limited	JS Daly (R), I Glasson (R)
Wrightson Seeds Limited	JD McKenzie, I Glasson (R)

Australian Companies during the part year 1 July 2018 to 1 May 2019

These Companies ceased to be part of the PGG Wrightson Ltd Group from 1 May 2019.

LEGAL COMPANY NAME Agricom Australia Pty Limited (previously Agricom Australia Seeds Pty Limited) PGG Wrightson Seeds Australia Holdings Pty Limited PGG Wrightson Seeds (Australia) Pty Limited

PGG WRIGHTSON DIRECTORS I Glasson (R), JD McKenzie, J Stewart I Glasson (R), JD McKenzie, J Stewart I Glasson (R), JD McKenzie, J Stewart

* PGG Wrightson Ltd staff directors who resigned as at 1 May 2019.

South American Companies during the part year 1 July 2018 to 1 May 2019

These Companies ceased to be part of the PGG Wrightson Ltd Group from 1 May 2019.

LEGAL COMPANY NAME PGG WRIGHTSON DIRECTORS Afinlux S.A. (51.2%) (Uruguay) M Banchero, R Rodriguez, JD McKenzie Agimol Corporation S.A. M Banchero, JD McKenzie Agrosan S.A. (Uruguay) M Banchero, JD McKenzie, I Glasson (R) PGG Wrightson Seeds Argentina S.A. M Banchero, JD McKenzie, R Moyano, E Beccar Varela, MD Auro APL San Jose S.A. (60%) (Uruguay) M Banchero, A Ponte, F Valverde Escritorio Romualdo Rodriguez Ltda (99.6%)(Uruguay) Administrator: Afinlux S.A. Hunker S.A. (Uruguay) M Banchero, JD McKenzie, I Glasson (R) Juzay S.A. (Uruguay) M Banchero, JD McKenzie, I Glasson (R) Kroslyn S.A. (Uruguay) M Banchero, JD McKenzie, I Glasson (R) Lanelle S.A. (Uruguay) M Banchero, JD McKenzie, I Glasson (R) PGW Sementes Ltda (97.22%) (Brazil) M Banchero, H De Boni Patagonia Seeds Sociedad Anonima (75%) (Argentina) M Banchero, JM Allonca PGG Wrightson Uruguay Limited S.A. (Uruguay) M Banchero, JD McKenzie, I Glasson (R) PGW AgriTech South America S.A. (Uruguay) M Banchero, JD McKenzie, I Glasson (R) Wrightson Pas S.A. (Uruguay) M Banchero, JD McKenzie, I Glasson (R)

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Shareholder Information

PGG Wrightson Limited is quoted on the New Zealand Stock Market of NZX Limited (code PGW). Post share consolidation, on 12 August 2019, PGG Wrightson Limited had 75,484,083 ordinary shares on issue. As at 30 June 2019, PGG Wrightson Limited had 754,839,050 ordinary shares on issue.

Substantial Product Holders

At 31 July 2019, the following security holders had given notices in accordance with the Financial Markets Conduct Act 2013 that they were, or in the case of Ngāi Tahu Capital Limited had ceased to be, a substantial product holder in the Company. The number of shares shown below are as advised in the substantial product holder notices to the Company.

SHAREHOLDER	NUMBER OF SHARES	DATE OF NOTICE
Agria (Singapore) Pte Ltd	334,633,994	10 April 2019
Agria (Singapore) Pte Ltd	351,633,994	1 April 2019
Agria Group*	351,633,994	17 December 2018
Ngāi Tahu Capital Limited	27,434,625	17 December 2018

* Agria Group being Agria Group Limited, Agria Corporation, Agria Asia Investments Limited, Agria (Singapore) Pte Ltd, New Hope International and New Hope Group Co., Ltd as listed in the substantial security product notice.

Twenty Largest Registered Shareholders

Analysis of Shareholdings

Distribution of ordinary shares and shareholdings at 12 August 2019 was:

RANGE	TOTAL HOLDERS	UNITS	% UNITS
1 – 499	6,082	1,044,188	1.38
500 – 999	1,510	1,016,627	1.35
1,000 – 1,999	1,452	1,917,174	2.54
2,000 – 4,999	1,410	4,205,499	5.57
5,000 – 9,999	574	3,745,091	4.96
10,000 – 49,999	464	8,370,338	11.09
50,000 – 99,999	36	2,393,346	3.17
100,000 – 499,999	39	7,470,003	9.90
500,000 – 999,999	2	1,293,433	1.71
1,000,000 Over	8	44,028,384	58.33
Total	11,577	75,484,083	100.00

The 20 largest shareholders in PGG Wrightson Limited as at 12 August 2019 were:

SHAREHOLDER	SHAREHOLDER	NUMBER OF SHARES HELD	% OF SHARES HELD
1.	Agria (Singapore) Pte Limited	33,463,399	44.33
2.	Ngāi Tahu Capital Limited	2,743,463	3.63
3.	HSBC Nominees (New Zealand) Limited*	2,508,838	3.32
4.	Forsyth Barr Custodians Limited	2,357,017	3.12
5.	H & G Limited	2,006,732	2.66
6.	FNZ Custodians Limited	1,280,724	1.69
7.	Masfen Securities Limited	1,240,000	1.64
8.	Accident Compensation Corporation*	653,354	0.87
9.	BNP Paribas Nominees (NZ) Limited	479,170	0.63
10.	Gould Holdings Limited	430,000	0.57
11.	Citibank Nominees (New Zealand) Limited*	420,773	0.56
12.	Philip Carter	335,870	0.44
13.	Arden Capital Limited	328,258	0.43
14.	Leveraged Equities Finance Limited	306,991	0.41
15.	Michael Benjamin	300,000	0.40
16.	Custodial Services Limited	242,554	0.32
17.	Nicolas Kaptein	200,041	0.27
18.	JBWERE (NZ) Nominees Limited*	200,000	0.26
19.	Woolf Fisher Trust Incorporated	185,000	0.25
20.	Totara Grove Investments Limited	180,000	0.24

Registered addresses of shareholders as at 12 August 2019 were:

	NUMBER OF	% OF	NUMBER OF	% OF
ADDRESS	SHAREHOLDERS	SHAREHOLDERS	SHARES	SHARES
Singapore	11	0.1	33,526,403	44.42
New Zealand	11,300	97.60	41,133,288	54.49
Australia	142	1.23	647,682	0.86
Other	124	1.07	176,710	0.23
Total	11,577	100.00	75,484,083	100.00

* New Zealand Central Securities Depository Limited

94 | PGG WRIGHTSON LIMITED

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Corporate Directory

Company number 142962 NZBN 9429040323497

Board of Directors As at 30 June 2019

Rodger Finlay Chairman

– appointed 30 April 2019

Joo Hai Lee Deputy Chairman

David Cushing – appointed 30 April 2019

Sarah Brown

– appointed 30 April 2019

Stephen Guerin – appointed 1 June 2019

Peter Scott

General Manager Corporate Affairs/ Company Secretary

Julian Daly

Registered Office

PGG Wrightson Limited 57 Waterloo Road Hornby Christchurch 8042

PO Box 292 Christchurch 8140 Telephone: 0800 10 22 76 (NZ only) +64 3 372 0800 (International) Email: [email protected]

Lim Siang (Ronald) Seah

U Kean Seng

Auditors

KPMG Level 5 79 Cashel Street PO Box 1739 Christchurch 8140 Telephone +64 3 363 5600

Managing your shareholding online:

To change your address, update your payment instructions and to view your investment portfolio, including transactions, please visit:

www.investorcentre.com/nz

General enquiries can be directed to: Computershare Investor Services Limited Level 2, 159 Hurstmere Road Takapuna, Auckland 0622

[email protected]

Private Bag 92119, Auckland 1142, New Zealand Telephone +64 9 488 8777

Facsimile +64 9 488 8787

Please assist our registrar by quoting your CSN or shareholder number.

96 | PGG WRIGHTSON LIMITED

AI assistant

PGG Wrightson Limited — Annual Report 2019

66253_rns_2019-09-20_f050187d-3ffb-451d-a5f1-4a03ce2b8ab1.pdf

Annual Report

Contents

Introduction

Our Company

Governance

Calendar

Chairman and Chief Executive Officer’s Report

A transformational year for PGW

On farm and market conditions

Our people

Health, safety and wellbeing

Corporate structure review

Dividends

Outlook

Strategy update

Governance changes

Executive team changes

Acknowledgements

Rodger Finlay

Stephen Guerin

Board of Directors

GUANGLIN ALAN LAI

SARAH BROWN

RODGER FINLAY

JOO HAI LEE

U KEAN SENG

DAVID CUSHING

LLB (Hons), B.Ec

TREVOR BURT

BRUCE IRVINE

JOHN NICHOL

LIM SIANG RONALD SEAH

Executive Team

NICK BERRY

STEPHEN GUERIN

General Manager Retail & Water

JULIAN DALY

GRANT EDWARDS

PETER MOORE

General Manager Livestock

PETER NEWBOLD

PETER SCOTT

Agency group

Livestock

Real Estate

Wool

Insurance and Finance Commissions

Retail & Water group

Fruitfed Supplies

Water

Rural Supplies

Agritrade

Working with PGW

Cash for Communities

IHC Calf and Rural Scheme

Supporting the Horticulture Sector

Supporting industry events, A&P Shows and regional field days

National Shearing Circuit

A&P Shows, regional field days and Fieldays NZ

Supporting Māori Excellence in Farming

Environmental, Social and Governance Reporting

environment.

Governance

Environmental

DIRECTORS’ RESPONSIBILITY STATEMENT

STATEMENT OF PROFIT OR LOSS

FOR THE YEAR ENDED 30 JUNE 2019

STATEMENT OF OTHER COMPREHENSIVE INCOME

SEGMENT REPORT

(a) Operating Segments

”Other” cost allocation

(b) Geographical Segment Information

SEGMENT REPORT CONTINUED

(c) Operating Segment Information

STATEMENT OF CASH FLOWS

RECONCILIATION OF PROFIT AFTER TAX WITH NET CASH FLOW FROM OPERATING ACTIVITIES

STATEMENT OF FINANCIAL POSITION

PGG Wrightson Limited Annual Report 2019