Annual Report 2022

Annual Report

Our Co-operative

In 1948, a group of farmers in Southland formed Alliance Freezing Company Limited to process and market high-quality meat and co-products to international markets. The first processing plant, and still our largest, was opened in Lorneville, in 1960. In 1980, the company’s ownership structure changed to become a co-operative.

Today, Alliance Group proudly is New Zealand’s only 100% farmer-owned red meat co-operative.

As guardians of the land, our farmers respect and value the environment. They are committed to taking care of the soil, water and land so they can pass their farms onto future generations. We take that same pride and passion into everything we do, looking after our people, our communities and the planet.

Our journey from a small Kiwi business to success on the global stage is down to our reputation for food excellence. Our success starts on the farm but it’s an ongoing journey to identify opportunities across the entire cooperative to capture more market value. That is why we continually invest in technology, our people and systems, and have the highest levels of environmental sustainability to continue this success into the future.

We employ almost 5,000 people across New Zealand and in major cities in the UK, Asia and the US. We take our responsibility as a major employer in the rural communities we operate in seriously and recognise the privilege we have to be an important part of farming in New Zealand.

Shareholder Information

DIRECTORATE

Murray Taggart and Don Morrison retire by rotation and offered themselves for re-election. Stuart Campbell of Feilding and George Tatham of Masterton have also been nominated. With four nominations for two director vacancies, an election will be conducted by internet and postal voting. The election result will be announced at the company’s Annual Meeting of shareholders. In December 2021, Graeme Milne retired from the Board after nine years and Mark Wynne joined the Board. Ross Bowmar joined as an associate director in August, following the conclusion of Victoria Trayner’s term in July 2021.

COMPANY CHANGES POST SEPTEMBER 2022

In November 2022, David Surveyor resigned as Chief Executive Officer of Alliance Group. Mr Surveyor has made a significant contribution to Alliance Group over an almost 8 year tenure. Mr Surveyor will continue in his role during the transition period before returning to Australia in early 2023.

ANNUAL MEETING OF SHAREHOLDERS

The 2022 Annual Meeting of shareholders will be held on Thursday 15th December in Timaru from 10:30AM.

A formal Notice of Annual Meeting of shareholders is set out in a separate document sent to shareholders.

Chairman and Chief Executive Review

OUR STRATEGY: SERVING THE CO-OPERATIVE AND OUR FARMERS WELL

2022 has been a record year for the Alliance Group. We have achieved record profits, record revenue and a record safety performance.

Our operating profit of $117.2 million for the year to September 2022 represents a 186 per cent increase on 2021 and as a result, we are pleased to be making a profit distribution of $11.3 million to our farmer shareholders as well as a bonus share issue.

The credit for the success of the co-operative this year sits with our people and our shareholders. It has been a year when we have truly seen the benefit of longstanding, mutually respectful and loyal relationships.

SEASON SUMMARY

2022 has been a very positive year for the company. Our record operating profit reflects strong global demand for our products, and shows our success in capturing greater value from our markets, the hard work and dedication of our people and our farmers’ passion for producing the world’s best beef, lamb and venison.

Like many businesses, the co-operative faced significant volatility including geopolitical tensions, labour constraints, the ongoing impact of COVID-19, global supply chain disruption and inflationary pressures, but the strategy and investment we have had in place for several years meant we were able to successfully navigate the challanging environment.

An existing labour shortage was amplified by a number of our people isolating or looking after family members due to COVID-19, and this impacted both our ovine and bovine processing capacity. We thank all our farmers for the patience and understanding they showed as we worked our way through the back-log of animals.

In addition to the processing constraints, many of our farmers also demonstrated remarkable resilience as they dealt with a wide range of extreme weather conditions including drought, snow and flooding.

Alliance Group continued to face significant challenges around global logistics with poor vessel adherence to shipping schedules and freight costs increasing. As a co-operative, we adopted an agile approach, and where necessary, re-balanced our product mix, forms and channels so we could continue to meet the needs of our customers.

Our business strategy enabled us to mitigate the effects of the global disruption and volatility and provided a foundation for our performance.

Phase one of our strategy is about ensuring we are as efficient and fit as we can be. This focus on continuous improvement means we have been able to navigate the volatility of our operating environment be it, COVID, the floods, drought and economic conditions.

Phase two is focused on making sure we continue to invest in the business, in our plants, markets and our people so we extend and grow our core competencies.

Phase three is centred on finding ways to drive further growth into the business, such as investing in pet food, strengthening our presence in food service, capturing more value from specialty ingredients and materials and growing our brands.

Over the past 12 months, we have continually evaluated the strategy to ensure it remains fit for purpose and identify the actions and activities that will ensure we keep on evolving the business model and have a co-operative that is strong and robust for the future.

HEALTH AND SAFETY

The health and safety of our people is the single most important thing we do as a company. We had a record safety performance across the company this year. Our total recordable injury frequency rate (TRIFR) was 14.8 — that means 14.8 injuries per every million hours that our people worked. That makes us the safest meat company in New Zealand.

ROADSHOWS

— RECONNECTING IN PERSON

Following a virtual roadshow programme last year, we were pleased to be able to meet farmers in person at our twenty roadshow meetings held during September and October. The meetings included an update on our performance, progress on our strategy and our plans for the future. Following the easing of COVID-19 restrictions, we were also able to host five woolshed meetings, and visit farms much more regularly. These in person opportunities will continue to grow as COVID-19 restrictions ease and normal travel resumes.

LIVESTOCK PRICING

With the recent addition of handpicked venison to our premium portfolio, we now have a differentiated premium portfolio across venison, beef and lamb. That means every farmer now has the chance to partner with us on our premium range and be rewarded for producing quality animals aligned to the needs of our customers across the globe.

We are seeing great opportunities to connect our farmers with discerning consumers around the world who are prepared to pay a premium for red meat with desired attributes guaranteed by a New Zealand brand they trust.

We continued to make improvements to our pricing approach this year to ensure our livestock pricing is better aligned with our co-operative principles. The enhancements to flexi payments, volume payments and space allocation helped increase the fairness and transparency of our pricing model.

Thank you to shareholders who gave feedback on our remittance advice. It became clear that some livestock payments should be processed with more supporting information to help farmers track payments. We have made changes to our system, which will now see you receive kill sheets, store stock invoices and other invoices information to match actual payment.

LABOUR SHORTAGES

Labour shortages have been a significant issue for Alliance Group and the meat processing sector for some time. Without sufficient employees, we cannot run plants to the desired capacity, fully process all products and capture the maximum value. For example, the shortage of skilled knife people means that a reduced number of cuts can be prepared for the high value chilled market and the product is exported at a lower value. Co-products are also sent to rendering instead of further processing.

This deprives the co-operative and farmers of revenue but also rural communities and the New Zealand economy of income.

In August, the Government announced a sector agreement with the industry. This agreement included access to migrant workers for entrylevel red meat processing roles at a minimum of $24.00 per hour with a cap on the number of visas. Migrants taking up these places receive seven-month visas. This should go some way to addressing the significant labour shortages in our sector but is not enough to solve the challenge altogether.

We remain committed to training and employing New Zealanders first, investing in training and development and continuing to work closely with the Ministry for Social Development and regional agencies to recruit people from local communities to work in our plants.

COVID-19

We are incredibly proud of the way people across our business lifted to mitigate the impact of COVID-19 on our processing network. Our staff worked hard to ensure we kept our people safe, kept our plants running and continued to sell and ship our products to our global markets.

As a farmer-owned co-operative, we had four goals:

+ Ensuring the health, safety and wellbeing of our people

+ Minimising the impact on processing capacity

+ Being open and transparent with our farmers

+ Maintaining our agile approach by exploring new channels, shifting between open markets, changing product forms and managing costs and capital expenditure.

Inevitably, there was disruption to our processing capacity because of staff shortages. As Omicron gathered pace, there were rising levels of absenteeism across our plant network as some of our people isolated or were required to stay at home to look after children because schools had closed.

Due to the efforts of our staff, we kept all plants open throughout the entire pandemic. To ensure that we could continue processing, we consolidated day and night shifts at some plants, shifting employees between plants and utilised our full network to move livestock and process our farmers’ livestock as quickly as possible.

The co-operative moved to RAT testing for all employees in February. Although this brought additional costs, we made the decision because it was the lowest risk approach at that particular stage of the outbreak.

SALES AND MARKETING

We have continued our investment in developing our brands globally including our premium portfolio of Handpicked Lamb, Handpicked Beef, Lumina and Silere. Pricing and demand for our products in China and North America were strong. Overall, our sales velocity was good and we finished the year with good inventory levels. New Zealand remains an important and growing market for Alliance Group and our sales over the past year have exceeded expectations.

INVESTING IN OUR PLANTS

We invested approximately $45m in capital across our plant network over the past year and this played a key role in significantly improving our operational performance. This comprehensive programme included upgrading engine room two and installing automated primal cutters, middles and fores technology at Lorneville. Work is also continuing on the automation of warehousing at Lorneville.

Pleasingly, plant reliability, product quality and yield performance all improved across the board.

ENTERPRISE RESOURCE PLANNING PROJECT

We continue to roll out our Enterprise Resource Planning (ERP) project, which is driving major efficiencies in the way we run the business and supporting our business transformation.

Every single person in the co-operative will eventually be impacted by ERP as the cooperative moves on from technology that is 40 years old.

In November last year, we added a continuous improvement function for the ERP to accelerate the modules we have deployed so far. We have largely completed the back-end functions of ERP such as HR, payroll, finance and logistics.

REGULATORY REFORM

Our farmers are continuing to face substantial regulatory changes and the speed and scale of this reform has been overwhelming. Emission

pricing, freshwater reforms and changes to bio-diversity regulations are ongoing. As a cooperative, we support sensible and workable policies for our farmers.

The sector is experiencing the conversion of productive sheep and beef land into carbon farms due to the soaring carbon price. New Zealand is the only country in the world not to have a limit on fossil fuel emitters planting trees to offset their emissions. It is critical the Emissions Trading Scheme is fixed to address this as a matter of urgency. Without real change, New Zealand’s productive land will be lost forever and rural communities hollowed out.

Alliance supports He Waka Eke Noa Primary Sector Climate Action Partnership’s recommended option for emissions pricing, which was carefully designed by 11 primary sector groups to be as equitable as possible across all parts of the industry. The Government has recently proposed changes which we do not support and will be making a submission on.

From a market perspective, we must demonstrate to our global customers that we’re committed to producing environmentally sustainable products and that our story is backed by science and modern farm management practices.

THE ENVIRONMENT

Our customers and consumers in our global markets expect food producers like Alliance Group to continuously improve our environmental performance.

Our goal is to improve our plants' operational performance to reduce their impact on the environment and maintain the employment of our people who work at the sites and continue to support rural communities' livelihoods.

As a priority for Alliance Group, the environmental strategic objectives include decarbonisation, improvement of water management and reduction of waste to landfill across our plant network. In 2019, we announced we would end the use of coal at our plants within 10 years and we have an Energy Transition Pathway that will lower our carbon footprint by 77 per cent (from the 2018/19 base).

Initiatives already underway will be completed next year and will deliver a 31 per cent reduction in carbon emissions. We remain on track to achieve the continuous improvement targets set for fuel use efficiency. There has been a 23% per cent improvement in energy efficiency per tonne of product processed over the last two years.

BOARD APPOINTMENTS

We welcomed Mark Wynne as an appointed director to the Alliance Board in December and farewelled Graeme Milne. Graeme was a director for nine years and made an outstanding contribution to the co-operative.

THANK YOU

This was a year in which our people really demonstrated care for our farmers and care for our communities. The commitment and dedication shown by them under extraordinary circumstances was exceptional. On behalf of the co-operative, we also wish to thank our farmers for their support under difficult circumstances. We know you have a choice so thank you for backing New Zealand’s only 100 per cent farmerowned red meat co-operative.

M J Taggart

CHAIRMAN D R Surveyor CHIEF EXECUTIVE

Our People

OUR PEOPLE

The health and safety of our people is our top priority and we are proud to say we are the safest red meat processor in New Zealand.

It is one thing to talk safety but when addressing a safety issue requires an investment, companies need to be prepared to spend. To date, we have invested significantly in our health and safety programme and on building a powerful safety leadership culture that empowers our people at every level of our business.

We have an ongoing multi-million-dollar programme of investment in safer plants and equipment. We are continuously reviewing our safety rules and procedures for our core activities from handling knives or machinery to personal protective equipment.

We are also investing in improving areas we have identified that pose greater risks to our people. Our new primal cutters and middle cutter

machines at Lorneville eliminate the need to lift carcasses manually from the rail, reducing strain and sprain risk.

But there is still much to be done. Safety is fragile and it has a human face – it impacts the injured person, their family and all our employees.

We are continually improving our safety performance to ensure safety is embedded in our culture - nothing is more important. Today, our people are safer, their families are safer and, as a result, our business is stronger and safer.

We’ve made great strides, but we aren’t satisfied with our performance yet and we will not be satisfied until everyone goes home safely to their family every single day.

PRIMED AT THE GATES PROGRAMME

Musculoskeletal injuries such as sprains and sore backs are the single largest category of injuries experienced by our people.

We are investing in technology to understand the risks and potential for injury before an event happens. This has involved fitting sensors on our people performing high risk tasks and monitoring the physical impacts they are being exposed to.

If we know there is a substantive chance of someone getting injured, we can either change the task, break it into smaller tasks, alternatively, we can decide to automate it and remove the risk.

By using this technology, we have had a 30 per cent reduction in the number of injuries. We are excited about what this means for our people and their health and safety.

INVESTING IN OUR PEOPLE

We are committed to investing in and developing our people to create rewarding career opportunities.

We are focused on building the capability and capacity to take us to the next level in our business transformation journey, deliver our strategy and address strategic risk to deliver tangible commercial benefits.

We are providing training and coaching to help leadership teams, as well as the individual leaders, to work together more effectively. We are engaging with leaders at all levels to create a climate that motivates employees to perform to their best and that demonstrates commitment to the long-term process of cultural evolution.

TRAINING PROGRAMMES

The co-operative launched a training programme and is now offering opportunities for our people across meat processing and a range of electrical and engineering roles. Developed in consultation with the Primary ITO, employees are undertaking an accelerated path through the Bronze, Silver, Gold and Platinum stages of the Alliance training pathways, gaining New Zealand Certificates in Meat Processing Level 3 and Level 4. This is equivalent to a trade qualification. A range of trade apprenticeships are also being offered in electrical, mechanical and general engineering. Graduates of these programmes will achieve New Zealand Certificate Level 4. The programme is being promoted to Alliance Group staff, schools, polytechnics and communities and through Government programmes such as 'Mana in Mahi'.

This is a meaningful programme, which is benefiting our people, the co-operative and our farmer shareholders. It provides an opportunity for people to increase their range of skills so they can apply for other roles within our business and progress their careers in the red meat sector.

We want Alliance to be an employer of choice in all the communities we operate in. It is vital that people, in every area of our business, have opportunities to develop their careers within the company.

INVESTING IN THE FUTURE

This year, we launched a new graduate programme to build a pipeline of talented individuals with leadership potential to meet the future capability needs of Alliance Group. Working across the businesses will give these graduates strong networks, visibility of different functions and opportunities, and an overview of the industry and markets, helping them to decide where they will build their careers within the co-operative.

Applications were invited from graduates of all disciplines. Our goal is to recruit graduates who will challenge us by bringing a fresh approach to the way we work, be interested, and be able to build rapport with people across the business senior leaders and board directors, and willing to go where the opportunity takes them.

The first intake – Kayla Storey, Wah Lin, Ana Gattrell and Hamish Watson - joined Alliance Group in January 2022 with the successful candidates starting in the livestock and plant operations side of our business and going on to work in a range of functions, locations and roles across the co-operative.

TERTIARY SCHOLARSHIPS

Each year Alliance offers two bursary scholarships - The Employees Family Members Bursary, and the Shareholder Undergraduate Bursary. Each bursary is valued at $1,500 per annum for a maximum of three years.

The Employees Family Members Bursary is open to candidates who have a parent or guardian working at Alliance Group, and who are planning to study in areas relating to the meat industry, its associated industries and/or primary production.

The Shareholder Bursary is open to the children of Alliance Group shareholders.

2021/2022 Employees' Family Members Bursary

This year, to recognise the hardship that some of our families had experienced during COVID, and the sacrifices they made for the co-operative, we awarded two additional Family Member Bursaries.

The three recipients of the Employees’ Family Member Bursaries were:

Megan Small Holli Bannister-Russell Libby McChlery

The winner of the 2021/2022 Shareholder Undergraduate Bursary was Jake Tither.

ASSOCIATE DIRECTOR PROGRAMME

Ross Bowmar joined the Alliance Board in August this year as our 2022/23 Associate Director. Raised in Southland where his parents still farm, Ross and his young family own and operate Redcliffs Station, a high-country sheep and beef station in the Rakaia Gorge in Canterbury.

Ross brings a wealth of international experience and knowledge to the role, having completed a Masters in Agricultural Economics at Michigan State University in the United States before spending 10 years with one of the world’s largest agricultural processing companies, Archer Daniels Midland (ADM).

Ross gained experience in direct management of sales, import and export logistics, processing, staff, risk management and profit and loss ownership in various roles across the US and Australia. He then returned home to New Zealand, starting the business here and building it to over $100 million turnover and 1,000 customers (mostly farmers) within five years.

“I returned home to raise my young family and play a lead role in the future of agribusiness in New Zealand. I am excited about this opportunity and look forward to contributing my knowledge in a meaningful way, while also learning from some of the best and most experienced directors in the rural sector.”

Ross is actively involved in the rural community and was recently appointed Chair of the Meat & Wool section of Federated Farmers Mid Canterbury, among several other roles.

He replaced inaugural Associate Director Victoria Trayner, who finished her 12-month appointment in June 2022.

Victoria and her husband Glen are fifth generation farmers, sharemilking 650 cows near Oxford in North Canterbury. They are also actively involved in their family's wider farming enterprise across pig farms, cropping, dairy and an Angus beef stud. Victoria lectures in Agribusiness and Production Management with Primary ITO and is Chair of the Waimakariri District's Primary Sector Plan Change 7 Committee, coordinating a sector response to the Regional Plan. She is also a Director of Waimakariri Irrigation Limited, which

delivers irrigation water to 23,000ha within the Waimakariri District.

Reflecting on her time on the board Victoria said the role offered “unparallel insight to one of New Zealand most unique businesses.”

A particular highlight for Victoria was the mentoring programme that “enriched knowledge, fostered insight to decision making, and expanded personal growth opportunities to learn.

The one-on-one time with directors, sharing expertise, bouncing ideas, moral support and governance insight was extremely valuable.”

KNOW YOUR CO-OPERATIVE

The 2022 Know Your Co-operative seminar was held in Christchurch in May. Over the three days, 12 participants from across New Zealand were given a detailed insight into all parts of Alliance Group, with presentations, interaction and workshops with Board members, our Executive Leadership Team and several other leaders across the business.

Participants were extremely positive about the experience and in particular, the “depth and breadth of talent across the organisation” and the “genuine and heartfelt connection staff have to the co-op model.”

This is the third time Alliance has run the programme.

Left to Right: Kayla Storey, Hamish Watson, Wah Yin and Ana Gattrell.

Sustainability: The Environment and Our Communities

SUSTAINABILITY: THE ENVIRONMENT AND OUR COMMUNITIES

As guardians of the land, our farmers respect and value the environment. They are committed to taking care of the soil, water and land so they can pass their farms onto future generations.

We want to be recognised as an environmentally responsible company that respects the environment in which we operate.

We have ambitious targets around minimising adverse environmental impacts and reducing our environmental footprint.

DELIVERING ON DECARBONISATION

In 2019, Alliance Group set a goal of ending the use of coal at our plants within 10 years. We have been tracking the carbon emissions from our plants, examining other fuel options across our network and rolling out a range of energy-saving projects. The co-operative aims to cut our carbon footprint significantly.

Work on decarbonisation projects at four of our South Island processing plants got underway this year.

Alliance Group and the Energy Efficiency and Conservation Authority (EECA) are co-funding the projects at our Lorneville and Mataura plants in Southland, at Smithfield plant in Timaru and Pukeuri near Oamaru. Together, the plants employ more than 3,000 people at peak season.

Carbon emissions have reduced 22 percent since 2000, carbon emission efficiency has improved 27 per cent since 2000.

LEVIN

In planning — Biogas plant and Heat pump (2025)

NELSON

1.5MW heat recovery (2019)

PUKEURI

5MW heat pump recovery (Now)

LORNEVILLE

2.5MW heat pump (Completed 22); Replace coal with 16MW Elec Boiler (July 24)

Electrode boilers and high temperature heat pump systems are replacing coal fired boilers across plants.

As part of the decarbonisation project, Alliance is installing an electrode boiler to reduce the use of existing coal-fired boilers at Lorneville, saving 11,739 tonnes of carbon per annum.

We are also replacing the existing main coal-fired boiler at Mataura with a high temperature heat pump system and small diesel boiler used only for peak season, saving 6,401 tonnes of carbon per annum and significantly improving the air quality for local residents.

In another project, Alliance will capture waste heat from the refrigeration plant at Smithfield to replace coal use for process heat, saving 3,811 tonnes of carbon per annum.

Meanwhile a high-temperature heat pump has been installed at our Pukeuri plant near Oamaru. It will provide about five megawatts of hot water heating, which is nearly 50 per cent of the plant’s requirement.

We are proud to be contributing to New Zealand industry’s decarbonisation journey. This investment also enables us to keep jobs in the region, will stimulate the local economy and support local employment.

Importantly, adopting clean technology means a healthier work environment and air for our people and our communities.

DANNEVIRKE

In planning — Heat pump (2025)

SMITHFIELD

1.5MW heat recovery August 2023)

MATAURA 4MW heat pumps and recovery (replaces coal fired boiler 2023)

+ The Lorneville project will be delivered by October 2024 and will result in the equivalent of taking 4,348 average sized passenger cars off the road

+ The Mataura project will be delivered by March 2023 and will result in the equivalent of taking 2,370 average sized passenger cars off the road

+ The Smithfield project will be delivered by June 2023 and will result in the equivalent of taking 1,411 average sized passenger cars off the road

SUPPORTING HOKONUI RŪNANGA AND THE MATAURA RIVER

Alliance always aims to minimise our plants’ impact as much as practical from environmental and cultural perspectives through our environmental programmes.

At our Mataura plant, monitoring of tuna and kanakana assists with that process and helps us identify where effort is needed to minimise impacts.

It also provides an opportunity to work with and strengthen our relationship with Hokonui Rūnanga, which will assist us to improve the health of the river while ensuring Alliance, as a major regional employer and service provider, is able to continue to operate successfully.

Alliance recognises that the Mataura River has significant cultural values for Hokonui Rūnanga and Ngai Tahu. The Mataura River and its tributaries were important for local tangata whenua for its resources as a place of mahinga kai notably at Te Au-Nui-Pihapiha-Kanakana (Mataura Falls).

We have undertaken a significant amount of work with them in recent years as well as the commencement of a kaitiaki plan to enable continued collaboration into the future.

The co-operative runs the programme in collaboration with Hokonui Rūnanga, to help native New Zealand baby eels (elvers) – or tuna – to migrate up the Mataura River. The weir that diverts water from the river into Mataura’s hydroelectric scheme has a smooth surface that poses a barrier for the elvers.

Over the last two years, Alliance has supported Hokonui Rūnanga to install and monitor a trap with flowing water to encourage the elvers towards it. This joint project has so far enabled the transfer of elvers from below the falls to some distance upstream.

At Mataura, we are also improving the wastewater discharge with the installation of a new $4 million disinfection plant by 2024. This will result in a meaningful improvement in the water quality for the Mataura River.

A $10 million biological treatment system will reduce the total nitrogen discharged by approximately 50% to improve the health of the river and the Toetoes Estuary. We also have a series of habitat enhancement projects underway.

We are also working through a draft trial plan in collaboration with external technical advisors that will reduce the freshwater intake requirement from the Mataura River by 30%.

SUPPORTING THE COMMUNITIES WE OPERATE IN

Many of the charities that support the communities we are part of were negatively affected as COVID-19 restrictions banned 'inperson' fundraising events. We wanted to do our bit to help them continue to deliver the services that are integral to rural communities.

We asked our staff to nominate charities in their local areas for us to support during COVID-19 lockdowns, and were proud to donate more than $20,000 to charities including the Oamaru Foodbank, Nelson/ Marlborough Rescue Helicopter, Kidscan Timaru, the Southland Charity Hospital and the Salvation Army.

We also continued to partner with Ronald McDonald House South Island, an independent charitable trust that provides free accommodation and support to families who need to travel to Christchurch and Invercargill for their children's medical treatment.

The organisation is close to the hearts of many of our people, our farmer shareholders and the wider rural communities, who have needed to make use of the facility when their children have been unwell.

We are proud to play a key role in the charity’s annual Supper Club events in Christchurch, Queenstown and Invercargill. We also show our support through the Family Dinner Programme, with staff cooking dinner for families that stay in the Christchurch House on a regular basis.

We provide meat donations for the House, and show support for events through live auction prizes, services and product. Our staff and shareholders also love to support campaigns such as Host a Roast.

We see Ronald McDonald House as part of our wider Alliance family. Our staff are proud of the partnership and embrace every opportunity to support the work of the RMH team so they can keep providing a home-away-from-home for rural families across the South Island and beyond.

RURAL MENTAL HEALTH

We continue to focus on improving mental health in our rural communities, supporting causes including Southland and Oamaru Surfing for Farmers groups by providing meat for their weekly summer barbecues. Surfing for Farmers was launched in Gisborne in 2018 with the aim of giving farmers a break during the busiest time of the year, an opportunity to ‘switch off’ from the farm and to get together to support mental health. It has now expanded countrywide. Equipment and coaching is provided by local surf groups and newcomers to surfing are warmly welcomed.

We were also pleased to help Ag Proud bring people together at ‘drought shout’ events in Southland by providing product for three ‘Beers & Banter’ events in Dipton, Winton and Wyndham, and we supported comedy nights organised by Farmstrong and Beef + Lamb New Zealand in Southland and Otago that brought together just under 400 farmers over two nights.

SUPPORTING OUR PACIFIC NEIGHBOURS

On 14th January this year, Hunga Tonga-Hunga Ha'apai erupted, causing catastrophic damage to Tonga.

We are proud of the cultural diversity across our co-operative, and, in particular, of our very long and strong partnerships with Pacific communities. Across our seven plants, we have more than 250 Tongan employees.

To provide some immediate relief and support for our staff and their families, Alliance donated $10,000 to the Red Cross Pacific Tsunami appeal and provided product for fundraisers run by the Tongan community in Oamaru.

Our Farmers and Their Produce

OUR FARMERS AND THEIR PRODUCE

CONNECTING OUR FARMERS WITH OUR MARKETS

The disruption caused by the COVID-19 pandemic, rising farm input costs, regulatory reform, extreme dry conditions and flooding in parts of the country meant our farmers faced difficult times and these events certainly tested the sector’s resilience and fortitude.

However, it also showed the value of belonging to a co-operative. This year, we welcomed a record number of new shareholders to Alliance Group as more and more farmers recognised how the co-operative has their back during difficult times. With additional shareholders joining the co-operative, Alliance continued to grow our market share for prime bull and manufacturing cow and we made gains with deer.

Over the past year, we invested in improving our farmers’ experience including improved forecasting with better capacity planning, ensuring space availability. We also worked hard to provide better information to farmers so they could make more informed decisions. This included farmer webinars, woolshed meetings and our popular annual roadshow.

The co-operative went to great lengths for our farmers, moving more than 1.3m store animals this year — a record for the company. This was a reflection of the drought conditions that many parts of the country experienced.

LIVESTOCK PRICING

Despite the global supply chain disruption and the ongoing global pandemic, overall livestock pricing was strong for ovine and bovine and cervine recovered from low levels.

SUPPORTING EACH OTHER THROUGH THE PANDEMIC

One of the few positives to come out of the COVID-19 pandemic was everyone in the sector supporting each other. Our Western Southland livestock representative Blayne De Vries and members of the Waiau Rugby Club rose to the occasion when Alliance shareholder Nathan Parris broke his collarbone while dirt biking. Nathan was about to move 1,300 lambs to Canterbury using our free store stock facilitation service, but they needed to be crutched. All contractors were busy, and Nathan didn’t think it could be done until Blayne stepped in, enlisted members of the rugby club and crutched the lambs in one evening.

PREMIUM WAGYU BEEF

Five years ago, our farmers told us they wanted a better beef solution, and we listened. We are continuing to invest in lifting our performance in beef. Our global award-winning Pure South Handpicked Beef has proven extremely popular and last year we announced an Angus programme.

In January, Alliance Group launched a Wagyu premium beef programme to farmers as we continued our drive to build our differentiated portfolio to capture greater value and meet consumer needs across its global markets.

The supply programme, for cattle with a minimum of 50 per cent red or black Wagyu genetics, is for farmers interested in high value cattle programmes and in managing stock to optimise marbling and fat colour.

Alliance offers farmers a supply contract premium above the ruling schedule at the time of processing for qualifying stock that meets the requirements for the range.

Carcasses must meet certain marbling, pH levels, fat colour and meat colour specifications to achieve the premium, which starts at 40c per kilo and ranges as high as $3.00 per kilo above the schedule price.

LOYALTY PAYMENTS

As New Zealand’s only 100 per cent farmer-owned red meat co-operative, we are in business for our farmers. We return every cent we can to our farmers you or re-invest it back into the co-operative.

Over the season, we distributed more than $17.3 million in loyalty payments to Platinum and Gold suppliers who sent 100 per cent of their livestock to the company.

Under the Alliance loyalty programme, Platinum and Gold status suppliers are paid an additional 10 cents per kilogram for each lamb, six cents/kg for a sheep, 8.5 cents/kg for cattle and 10 cents/ kg for deer supplied.

This Wagyu programme provides our farmers with an opportunity to tap into the growing number of discerning customers around the world who are willing to pay a premium for naturally-raised beef and attributes guaranteed by a brand they trust.

Red Wagyu and Black Wagyu are different breeds of Japanese cattle, both known for their high intramuscular fat content and marbling ability.

Red Wagyu’s fat is described as more like olive oil, while Black Wagyu’s fat has a buttery nature. Both are high in good oleic acid and low in cholesterol.

Blayne DeVries and Nathan Parris

MINIMUM PRICE CONTRACTS

We continued to increase the number of Minimum Price Contracts (MPC) we offer to our farmers who supply livestock directly to the cooperative. These contracts mean suppliers benefit from higher pricing certainty so they can manage risk and plan farming activities.

Farmers also benefit from the schedule upside while the contracts also mean that the cooperative has improved supply visibility. They ensure everyone gets paid the same price because those who sign MPCs receive no volume payments, flexis or other payments.

ADVANCE PAYMENTS

Our advance payments programme supports farmers with cashflow when they are at their normal seasonal low period. These payments are open to Platinum and Gold shareholders and we pay farmers in advance for livestock they commit to processing with us.

This provides farmers with regular income and ensures supply for the co-operative so that we can meet commitments to global customers. Alliance Group advances a cash payment on up to 80 per cent of farmers’ animals that are committed for processing.

INVESTING IN THE FUTURE OF WOOL

In June, Alliance Group, alongside a number of other meat companies, invested in Wool Impact, a collaboration between the Government and sheep sector partners under the Sustainable Food and Fibre Futures fund, to grow export revenues for wool.

Wool Impact’s purpose is to facilitate innovation and investment, support demand growth, boost sector services, and enable a unified voice for strong wool in New Zealand. Its formation is based on the 2021 recommendations of the Strong Wool Action Group (SWAG).

We invested in this initiative because we believe in a successful strong wool sector and its contribution to the long-term viability of sheep farming in New Zealand.

Sales and Marketing

SALES AND MARKETING

OUR GLOBAL MARKETS

Across the world, we continued to deepen our presence in market, through a review of our existing partnerships, a reset of our product portfolios and improved performance management.

In retail, we strengthened our brand portfolio, led by Pure South, across New Zealand, Asia and parts of Europe. We also continued to build the presence of Silere alpine origin merino in UK and Malaysia.

The food service sector remains important to create great experiences and further develop our branded portfolio, especially Lumina, Silere and Handpicked.

This channel has enabled us to showcase our creativity and innovation, which are both key to delivering excellent consumer experiences and building confidence in our red meat.

In the UK, the team launched a new range of premium added value food solutions to compensate for the 43% increase in role vacancies in chef roles within restaurant channel.

Digital commerce continues to grow in New Zealand, wider Asia and the European Union. This channel is exciting as it allows direct connection to the end consumer, which enables us to better understand product, price and trends.

NORTH AMERICA

+ Strong year across all categories

+ Ovine growth has slowed as inflation bites

+ Significant domestic beef liquidation in recent months, lessened demand for NZ supply

UNITED KINGDOM

+ Retail & Food Service remains opportunity for branded programmes

+ FTA agreement, sizable opportunity for beef

+ Inflationar y pressures causing short-term headwinds

CHINA

+ COVID-19 lockdowns have caused consumer buying changes

+ Demand remains positive across all products

+ Risk of further lockdowns and market access sensitivities always exist

ASIA

+ Continued improved performance across all countries

+ Korean 2024 quota change creates new opportunity

+ Building branded lamb and beef programmes

EUROPE

+ Improved perfomance, steady outlook

+ B eef an emerging opportunity

NEW ZEALAND

+ Trebled revenue in last 5 years

+ Growth across all channels

+ More opportunities

GLOBAL SUPPLY DISRUPTION

The global supply chain disruption caused by the global pandemic remained a key challenge over the past year. Vessel schedule reliability, wider transit delays and port and landside productivity issues all presented major issues for the Alliance team. There were regular waiting times of more than 28 days at Long Beach port and Oakland port in the United States. Rotterdam in the Netherlands was substantially impacted by the Ukraine war, as sanctioned cargo previously bound for Russia and shipping to Ukraine was diverted to this important hub. We saw flow-on impacts to other ports. In China, Omicron also impacted Dalian, Shanghai and Yingkou.

While Shanghai is not the major import port in China for New Zealand red meat, it is still an important entry point. The port continued to operate, but there was significant disruption and congestion. As Shanghai is one of the largest ports, the disruption spread throughout the Chinese port network and led to delays and congestion at other ports.

This meant delays in getting containers cleared and higher costs as containers had to be re-routed to other ports. There was also a knock-on effect on the inland distribution network for our products.

All these issues resulted in the removal of a considerable volume of reefers and dry containers from the global supply chain. The co-operative had to carefully balance livestock flow and processing volumes with our ability to ship products to our global markets and customers

SPOTLIGHT ON ASIA

Across Asia, COVID-19 has driven changes in the market including a pivot from food service into retail channels. In-home consumption has increased as time-poor and discerning shoppers seek new red meat experiences. There is also a growing interest in westernstyle cooking methods.

We launched a range of retail-ready Pure South products for Asian customers as the demand for easy and convenient food grows.

The popularity of digital and e-commerce channels has risen significantly as shoppers deal with lockdowns and access to traditional distribution points. There is also an evolution beyond typical table cuts and a growth in secondary cuts and slow cook methods, which is an exciting evolution for the category.

Equally, shoppers are seeking branded offers to guide their red meat choices and constantly looking for premium options. Driving brand equity and the ‘premiumisation’ of the Alliance offering have been key focuses for the Asia team along with value capture, category development and evolving pathways to market.

Premiumisation offers a major opportunity for growth with a strong focus on taste differentiation and the grass-fed natural New Zealand proposition. This includes our Handpicked range and Alliance’s Wagyu programme.

Building and evolving optimal strategic partnerships, such as Alliance’s relationship with our Chinese in-market partner Grand Farm, is vital and there is a focus on working to build on relationships with other customers with scale, capability and reach across Asian markets.

China is a major market for Alliance. There has been good demand for a broad range of items, which helps the co-operative maximise the value and utility from each carcass.

Grand Farm is extending further into Southern China and also moving further into the beef category, providing further opportunities for Alliance, particularly for chilled product. We collaborated with Grand Farm to renovate our branded offers in China, especially as we focus on distribution across retail and e-commerce.

However, China was severely impacted by COVID-19 with many cities put in some form of lockdown and there was growing pressure on the Chinese economy. This highlighted the importance of balancing our portfolio of markets by continuing our strong focus on building and strengthening our position in other markets.

Malaysia is an important Alliance market. This market is growing quickly with sheepmeat extremely popular. Our premium lamb brand Silere is generating significant interest, and we are exploring the Handpicked range for Malaysia.

We also see good opportunities to grow the Japanese and Korean markets, particularly for beef and lamb, and undertaking work to establish more business there.

Taiwanese demand for Alliance product is growing year on year, and strong sales rates are being achieved across multiple channels as we access the discerning Taiwanese consumer base.

The Hong Kong premium market remains a good performer, despite the impacts of the pandemic, with growth in the e-commerce trade.

Thailand sales have doubled over the past year with a greater share of the beef market captured following the lifting of quota limits. We’re working to build more brand presence in Singapore where the largest demand is currently for lamb and mutton.

TARGETING TIME-POOR CONSUMERS IN SHANGHAI

In September, Alliance Group partnered with Beef + Lamb New Zealand (B+LNZ) and another exporter to pilot beef and lamb vending machines in China.

The two Pure Box vending machines in Shanghai serve convenient and nutritious ready to eat meals featuring New Zealand premium grassfed beef and lamb for busy Chinese consumers.

The meals, co-developed by B+LNZ and wellknown Shanghai chef Jamie Pea, fuse traditional Chinese ingredients and flavours with Western food trends. Each of the six recipes were designed to highlight the unrivalled natural flavour and nutritional benefits of Pure South lamb from Alliance.

The vending machines, marketed under B+LNZ’s Taste Pure Nature country of origin brand, are located in Shanghai’s top business districts where time-poor consumers are known to seek out convenient and healthy food options.

This pilot is a great example of disrupting consumer purchasing activity to create both consideration and conversion to high quality beef and lamb.

The Chinese market is strategically important for New Zealand’s red meat sector. Research shows a growing number of Chinese consumers are seeking nutritious and healthy food. The unique attributes of New Zealand grassfed beef and lamb can meet this need.

It’s important we offer these consumers a range of eating options such as Pure Box, which are convenient to access and eat, in addition to supermarkets and dining in restaurants.

We want more and more consumers in China to get to know and recognise the benefits of New Zealand grass-fed beef and lamb and choose our red meat in the future.

GOLD FOR PURE SOUTH LAMB AND PURE SOUTH HANDPICKED BEEF

Alliance Group’s Pure South Lamb and Pure South Handpicked Beef 55 Day Aged were awarded gold medals at New Zealand’s Outstanding Food Producers Awards in May.

The awards celebrate inspiring Kiwis who harvest, grow and produce New Zealand’s outstanding food and drink. Entries were judged on a range of criteria including aroma, visual appearance, flavour, consistency, quality, sustainability, brand story and packaging.

The judges commented that Pure South Lamb was “an incredibly luxurious fine textured lamb. The little layer of fat around the rack was perfectly proportioned and made the cut. The flavour of fat was tasty and fantastic have not tasted better.”

Pure South Handpicked Beef 55 Day Aged has won repeated gold medals at the coveted World Steak Challenge.

SPECIALTY, INGREDIENTS AND MATERIALS

We continued to seek partnerships in the SIM category, which enable us better visibility of end-to-end commercial return. We have also been focused on improving our offering.

The tallow price per metric tonne increased substantially through the growing demand for biofuels while blood collection value has increased 10%.

FUELLING OUR COMMONWEALTH

GAMES ATHLETES

The outstanding efforts of our athletes at the Commonwealth Games in Birmingham in the UK in July and August were powered by Alliance Group’s beef and lamb.

Alliance Group was the official supplier to the New Zealand Olympic Committee for the Commonwealth Games.

We supplied Pure South beef and lamb range and Lumina lamb for the protein-packed meals for the New Zealand athletes as well as their entourage and official delegates including Deputy Prime Minister Grant Robertson and New Zealand Governor-General the Rt Hon Dame Cindy Kiro.

A highlight of our Commonwealth Games support was a Lumina BBQ where an Argentinian Asado Cross Grill was used to cook the whole carcass.

Gaby Broad, who is the fifth generation of the Nelson farming family that sent lamb in the first shipment container of New Zealand lamb to the United Kingdom 140 years ago, was among the attendees.

VENISON IN CHINA

We made pleasing progress with retail sales of our venison in China, alongside our partner Grand Farm.

Venison rolls and brisket cubes were added to the Grand Farm range on jd.com, China’s second largest e-commerce retailer at the end of December in a programme supported by Deer Industry New Zealand’s Market Innovation Fund.

The meat roll is a familiar format for Chinese consumers and used in traditional hot pot cuisine, where the rolls are dipped in boiling stock with other ingredients. It uses venison extracted from the flaps and brisket that is compacted and then sliced very thinly to a one-millimetre thickness. Seasonings are added during the processing for added flavour.

Another two packs, venison leg meat, which can be sliced and diced at home by the consumer, and leg cubes, were also introduced to the range.

All four products are available in two independent retailers’ stores in five cities – Harbin in Heilongjiang Province, Dalian in Liaoning Province, Nanning City in Guangxi Province, Luzhou in Sichuan and Sanya in Hainan.

RE-CONNECTING WITH OUR CUSTOMERS

Over the past two years, our regular customer visit programme has been disrupted by the COVID-19 pandemic, so we were thrilled to welcome a number of our partners to New Zealand and also re-connect with partners overseas.

In April, Alliance Chief Executive David Surveyor and General Manager Sales Shane Kingston visited Canada and the United States, our first offshore market visit for more than two years. They evaluated the protein category and consumer changes post-pandemic, reconnected with existing customers and visited recently formed and potential new partnerships.

During the visit, it was clear lamb and beef was very much in demand across the food service and retail sectors. Sustainability and regenerative practices existed in messaging but these themes were not as evident as one would expect.

Across our customer base, they saw continuing demand for New Zealand-sourced product, across all species, recognising the pasture-raised systems we have in place. Our antibiotic-free, non-GMO, hormone growth promotant-free attributes remain important considerations for consumers in North America. In September, a delegation from our India partner QualityNZ visited our Lorneville plant near Invercargill. Quality NZ is a key strategic partner for the cooperative, providing an important avenue for our Pure South products into the retail and food service sectors in India including more than 350 five-star hotels.

Manufacturing Excellence

MANUFACTURING EXCELLENCE

Manufacturing excellence is a key part of our programme to lift the performance and productivity of all plants and ensure we remain the leader in New Zealand red meat processing. The programme has also helped to build our resilience and improve our agility, which has enabled us to maximise our operational performance, especially during the COVID-19 crisis. Driving efficiency and lowering our costs means we can pass these gains on to our farmer shareholders.

PRIMAL CUTTERS

In November last year, Alliance Group commissioned a $12.5 million upgrade at our Lorneville plant, including new generation primal cutters, middles and automated fores technology. The investment features an X-ray unit that analyses each carcasse, the latest forequarter robotic cutting technology and a footprint that will enable the addition of a fulllength flap removal station in the future.

This project marked another milestone in our eight-year manufacturing excellence programme. Earlier versions of this technology are in place at Dannevirke, Pukeuri and Smithfield plants, but the latest addition means Lorneville is now one of the two most advanced meat processing plants in the Southern Hemisphere.

High-tech automation is at the heart of our manufacturing excellence programme as we seek opportunities to automate and improve the quality of products that we supply to our global customers.

This technology is helping the co-operative to mitigate the impact of our continuing labour shortages, but also improve health and safety.

For Alliance Group, automation means that a carcasse can enter the plant and move through the processing line without being touched by a human hand right up to the point of shoulder cuts.

WAREHOUSE AUTOMATION

Work is continuing on our $16m fully integrated storage and warehouse system at Lorneville, which is expected to go live next year. Products will automatically move through the warehouse and be palletised — again without being touched by human hands.

In addition to the improved health and safety and efficiency, automation is delivering greater capacity and flexibility in our processing network, enabling us to start using new run modes and unlocking significant beef capacity.

PLANT PERFORMANCE

We made good gains in our yield performance over the past year. Yield performance is a measure for every single animal and we work hard to get as much as we can off each animal and into the box as possible. Across all our species, we are improving how much value we can extract off each animal. Plant reliability is also improving largely due to our preventative maintenance.

Governance

BOARD OF DIRECTORS

MURRAY TAGGART

Chairman and Supplier Representative

B.Agr.Sc. CFinstD

Audit & Risk Committee

ERP Committee

People Committee

Murray was elected as a supplier representative in 2010 and appointed chairman in 2013. He was also on the Alliance Group board from 2002-2007. Murray operates a 732-hectare sheep, beef and cropping farm in North Canterbury. He is a director of FMG Insurance Ltd and a number of other companies and organisations.

JARED COLLIE

Supplier Representative B.Com.Ag. (VFM)

ERP Committee People Committee

Jared was elected as a supplier representative to the board in 2015. He operates a 1,400-hectare sheep, cattle and dairy farm in Central Southland and is a director of Benmore Downs Ltd, chairman of Platinum Dairies Ltd, deputy chairman of the Jeff Farm Management Board, and a facilitator for the Takitimu Discussion Group.

PAT MCEVEDY

Supplier Representative

CFinstD

Audit & Risk Committee

ERP Committee

Pat was elected as a supplier representative in 2020. He operates a sheep breeding, finishing and intensive arable farming operation at Southbridge in Canterbury. Pat is an independent director of Corde Ltd (Infrastructure and Construction), Chairman of Central Plains Water Trust and Chairman of Shooting Creek Ltd (Syndicate Dairy Farm).

DON MORRISON Supplier Representative B.Com.Ag.

Audit & Risk Committee

Don was elected as a supplier representative in 2013. He is a director of DG & BC Morrison Ltd, farming sheep and cattle on 465 hectares at Waikaka Valley, Southland. He is also a director of Pure Taste New Zealand (NZ) Ltd, Ahika Journeys Ltd, Te Ao Kakano, chairman of W9 and a member of the Alpha Sheep Genetics Group.

MARK WYNNE

Appointed Director

BAgSc. (Double Major Marketing & Farm Management)

Advanced Management Programme, INSEAD

Appointed as a director in December 2021, Mark has extensive experience in agribusiness, including 20 years in the dairy industry. Mark was previously President South Asia for Kimberly-Clark, growing the United States multinational’s market share with brands such as Kleenex and Huggies. He has a respected international track record for building brands and in managing mergers and acquisitions.

Mark is passionate about growth, innovation and talent. He has invested in and advised innovative New Zealand export-oriented growth companies. Mark holds a number of Board Directorships and is currently CEO at Ballance Agri-Nutrients.

SANGSTER

Supplier Representative

B.Com.Ag CFinstD

Audit & Risk Committee

Dawn was elected as a supplier representative in 2011. She is a director of GlenAyr Ltd, farming sheep and beef on 2,670 hectares in Central Otago. She is also a Director of Nottingham Dairy Ltd and has an equity interest in this business in North Otago. Dawn is the chair of Community Trust of Maniototo and a director of Farmlands Cooperative Society Ltd.

JASON MILLER

Supplier Representative Dip. Farm Management People Committee

Jason was elected as a supplier representative in 2015. He was also a director on the Alliance Group board from 2007-2013. Jason operates 1,200 hectares of sheep and cattle farmland in Southdown, Southland.

SIMON ROBERTSON Appointed Director B.Com

Audit & Risk Committee (Chair) ERP Committee (Chair)

Simon was appointed as a director in June 2021. He is an experienced director with an extensive corporate and governance background. He is currently also a director of Synlait Milk and Ballance Agri-Nutrients. Simon was previously a director of Independent Timber Merchants Cooperative (ITM) and Apata Group. His executive career was with Auckland International Airport as Chief Financial Officer.

ROSS BOWMAR Associate Director

MAgEc.

Ross joined the Board as an Associate Director for 12 months from August 2022. Raised in Southland, Ross and his wife Jess and their young family now own and operate, a high-country sheep and beef station in the Rakaia Gorge in Canterbury.

Ross brings a wealth of international experience and knowledge to the role, having completed a Masters in Agricultural Economics at Michigan State University in the United States before spending 10 years with one of the world’s largest agricultural processing companies, Archer Daniels Midland (ADM).

VICTORIA TRAYNER

Associate Director

Sarah was appointed as a director in March 2018. She lives in Manawatu where she owns a sheep and beef farm. Sarah has held a number of senior management positions in marketing and consumer insights with high profile companies including Lion Nathan, Colmar Brunton, Australian Pork, Coca-Cola Amatil, Diageo and Goodman Fielder International. She sits on the board of Dairy Goat Co-op and runs an International Marketing Consultancy for clients such as Boehringer Ingelheim, NZ Pork and Frucor-Suntory.

B.FA B.Com.Ag DipTL MInstD

Victoria joined the Board as an Associate Director for 12 months from August 2021. She is a descendant of Waitaha and Ngāti Māmoe, both of which are represented by the Ngāi Tahu iwi.

Graeme was appointed as a director in April 2013 and retired in December 2021. He is a partner in GR & JA Milne, director of Nyriad Ltd, chairman of PF Olsen Group Ltd and subsidiaries, Rimanui Farms Ltd Advisory Board, Synlait Milk Ltd and subsidiaries and Terracare Fertilisers Ltd. He is a Council member of the University of Waikato and a trustee of Rockhaven Trust.

Victoria and her husband Glen are fifth generation farmers, sharemilking 650 cows near Oxford in North Canterbury. They are also actively involved in their family's wider farming enterprise across pig farms, cropping, dairy, and an Angus beef stud. Victoria lectures in Agribusiness and Production Management with Primary ITO and is Chair of the Waimakariri District's Primary Sector Plan Change 7 Committee, coordinating a sector response to the Regional Plan. She is also a Director of Waimakariri Irrigation Limited, which delivers irrigation water to 23,000ha within the Waimakariri District.

SARAH BROWN Appointed Director BHSc.(Home Science)(Distinction)

People Committee (Chair) ERP Committee

DAWN

GRAEME MILNE Appointed Director (Retired December 2021) B.Tech. (Biotech) 1 st class Hons CFinstD ONZM Audit & Risk Committee People Committee

EXECUTIVE LEADERSHIP TEAM

DAVID SURVEYOR Chief Executive

David was appointed Chief Executive in 2015. He is Chairman of Alliance Group (NZ) Ltd, the UK subsidiary; a director of The Lamb Company (North America), Meateor GP Limited, and Beef + Lamb New Zealand boards; and a member of the Meat Industry Association Council.

David was previously Executive General Manager of Laminex and has also held roles with BHP and Bluescope Steel in Australia and as President of Bluescope Lysaght in Malaysia.

David has a Bachelor of Economics from the University of Western Australia, a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia and completed an Advanced Management Programme at Wharton Business School at the University of Pennsylvania.

SHANE KINGSTON

General Manager Sales, Marketing & Outbound Logistics

Shane joined Alliance Group as General Manager Sales in 2018. He has significant sales leadership experience, most recently at Diageo, a global leader in beverage and consumer products company, where he was Global Commercial Performance Director — Global Sales, based in Singapore. He has also held both sales management and sales strategy roles within Diageo Australia, being part of the company’s leadership team.

His earlier career includes sales roles with leading consumer companies GlaxoSmithKline and Britvic in Europe. Shane holds a Bachelor of Science in Food Business from University College, Cork.

Nigel was appointed General Manager Strategy in September 2015 after 16 years in the dairy industry, including General Manager roles in strategy, supply chain and logistics with Fonterra. Nigel has significant experience in business strategy and planning, marketing, key account management, procurement, supply chain and logistics and has worked in a range of international markets.

He has Bachelor of Business Degrees in Accountancy and Finance, a Master of Science in Supply Chain and Logistics (Cranfield University, UK) and completed an executive programme in Strategy at Stanford University. He is a member of the board of Deer Industry New Zealand.

KRISTIAN SAKSIDA Chief Financial Officer

Kristian was appointed Chief Financial Officer in August 2021. Before joining Alliance Kristian worked for 24 years for Solvay in both Pharmaceuticals and Chemicals working in the UK, Amsterdam, Milan and Brussels in various divisional CFO roles and also as Group Chief Procurement Officer. He was most recently Solvay’s President of Global Shared Services and Chief Information Officer and a member of the group’s senior leadership team.

Kristian has a Bachelor of Science in Business Studies from the University of Bradford and is also a Fellow of the Chartered Institute of Management Accountants and a Fellow of the Institute of Directors.

WILLIE WIESE General Manager

Manufacturing

Willie was appointed General Manager Manufacturing in December 2017 and has led significant manufacturing operations in both Australia and South Africa. He has extensive experience in the development and implementation of strategies to deliver performance improvements in complex manufacturing operations.

Willie holds Masters’ Degrees in Electrical Engineering, Engineering Science and Business Administration, and Supply Chain and Business from the University of the Witwatersrand, Johannesburg, South Africa.

DANNY HAILES General Manager Livestock and Shareholder Services

Danny was appointed General Manager Livestock and Shareholder Services in 2019 after previously serving as Company Secretary. He has been with the company since 1993. His other previous roles at Alliance Group include Group Legal Counsel, Plant Manager Dannevirke, Plant Manager Pukeuri, Acting Plant Manager Mataura and General Manager Commercial.

Danny has an honours degree in Law from the University of Otago, is a barrister and solicitor of the High Court of New Zealand and a graduate of the Advanced Management Programme at Harvard Business School in Boston, USA.

Chris was appointed General Manager People and Safety in July 2015. Chris has significant experience in developing and implementing HR and performance improvement strategies across a range of organisations and industries. He is strongly committed to safety leadership and strengthening workplace safety culture.

Chris has a Bachelor of Commerce from the University of Otago and his career includes senior human resources leadership roles in various multinational companies.

Joanna was appointed General Manager of Governance, Legal, and Risk in January 2022 in addition to her responsibilities as the Company Secretary. She is an experienced senior leader and legal advisor having worked across professional services, manufacturing, and legal sectors.

Joanna has a Bachelor of Arts majoring in Political Science and a Bachelor of Law both from Victoria University and is a barrister and solicitor of the High Court of New Zealand.

NIGEL JONES General Manager Strategy

CHRIS SELBIE General Manager People and Safety

JOANNA IRVINE General Manager of Governance, Legal and Risk, and Company Secretary

CORPORATE GOVERNANCE

Alliance Group is a co-operative company owned by more than 4,500 farmers who supply livestock to the company for processing and then sale of the resulting meat and co-products to international markets.

BOARD OF DIRECTORS

The constitution provides that there shall be not more than ten directors of the company at any time, of which not less than six and not more than eight shall be directors elected by the shareholders. One-third of the elected directors retire by rotation each year and may stand for re-election. The directors who retire each year are those who have been in office for the longest time since their last election. Provided that the total number of directors does not exceed ten, the board may from time to time appoint up to four directors who, in the opinion of the board, are capable of rendering services in relation to the affairs of the company. These directors are appointed for a term of up to three years and may be re- appointed for subsequent terms of up to three years at a time. The board exercises the discretion to appoint independent directors to the board to ensure that the board comprises directors with an appropriate range of skills and experience. The board currently comprises nine directors of which three are independent directors and six are elected directors, one of whom is appointed chairman on an annual basis.

BOARD RESPONSIBILITIES

The board has statutory responsibility for the affairs and activities of the company. The responsibility for the day-to-day operation and administration of the company is delegated by the board to the chief executive. The long-term strategic direction of the company, the annual business plan and capital expenditure budget are approved by the board. The board also approves expenditure on specific projects that are outside normally delegated authorities and reviews operational performance against the business plan objectives.

The board ensures the affairs of the company adhere to all regulatory obligations, that high ethical standards are maintained and that the company is a responsible corporate citizen. Particular emphasis is placed on the health and safety of employees and the protection and sustainable use of the environment. All directors register and formally record any conflicts of interest.

Succession planning is undertaken for both directors and management to ensure appropriate skill sets are available to the company on an ongoing basis.

BOARD MEETINGS

Ten board meetings are scheduled each year with extra meetings held if required. Comprehensive management reports are provided to directors prior to board meetings. The board encourages the chief executive to bring employees who can provide additional insights to board meetings.

BOARD COMMITTEES

Three board committees have been formed to assist with governance and help guide effective decision making. Each committee operates under its own terms of reference and reports to the board.

AUDIT AND RISK COMMITTEE

The Audit and Risk Committee comprises five directors and is chaired by Simon Robertson. The committee oversees, reviews and advises the board on the company’s risk management, financial reporting, internal and external audit activities, treasury matters and internal control frameworks.

PEOPLE COMMITTEE

The People Committee comprises five directors and is chaired by Sarah Brown. The committee provides oversight of the people strategy of the company and assists the board on remuneration and performance management policies and procedures for the company. In particular, it assists the board in fulfilling its responsibilities relating to the appointment, remuneration and reviews of directors, the chief executive and senior management.

ENTERPRISE RESOURCE PLANNING COMMITTEE

The Enterprise Resource Planning (ERP) Committee comprises five directors and is chaired by Simon Robertson. The committee assists the board in assessing the progress, risks and key decisions associated with the ERP project.

DIRECTOR MEETING ATTENDANCE

The table below reports attendance of directors (by percentage by relevant tenure) at board and board committee meetings during the year ended 30 September 2022.

Board Audit & Risk Committee ERP Committee People Committee

Number of Meetings 11 4 2 6

M J Taggart 100% 100% 100% 100%

S M Brown 100% N/A 50% 100%

J G Collie 100% N/A 100% 100%

D P McEvedy 100% 100% 100% N/A

J A Miller 100% N/A N/A 100%

D G Morrison 100% 100% N/A N/A

S D Robertson 100% 100% 100% N/A

H D Sangster 91% 75% N/A N/A

G Milne* 100% 100% N/A 100%

M Wynne* 100% N/A N/A 100%

*Attendance % reflects the number of meetings attended by that director since their appointment to the board of relevant committee or prior to retirement (as appropriate).

ASSOCIATE DIRECTOR APPOINTMENT

The Associate Director is appointed at the discretion of the Board for a period of 12 months. Whilst an Associate Director attends all board meetings they do not have a vote.

COMMUNICATION WITH SHAREHOLDERS

Alliance Group makes every effort to keep shareholders informed of all major developments affecting their company.

Information is communicated to shareholders through the Alliance Group website, Annual Report, Product Disclosure Statement and a fortnightly e-newsletter called ‘Brief Bites’.

This year we were also able to reconnect in person hosting five Woolshed meetings, 20 roadshow meetings around the country, as well as three plant visits. These in person opportunities will continue to grow as COVID-19 restrictions dissipate and travel resumes.

Our Financial Review

Consolidated Income Statement

Notes to the Financial Statements

CONSOLIDATED INCOME STATEMENT

For the year ended 30 September 2022

The income earned and expenses incurred by Alliance Group

Group

Note 2022 2021 (Restated) $000 $000

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Financial Position

About This Report

Consolidated Statement of Cash Flows

Revenue

A1.1 2,240,702 1,847,097 Cost of sales (2,041,608) (1,740,713) Gross profit 199,094 106,384

Other operating income

A1.1 3,749 448 Sales and marketing expenses (8,417) (7,262) Administrative expenses (67,489) (54,829) Other operating expenses (1,460) (1,978) Operating result 125,477 42,763

Financial income

A2 53 28 Financial expenses A2 (15,758) (10,590) Net financing costs (15,705) (10,562)

Equity accounted earnings E2 7,456 8,926 Loss on disposal of property, plant and equipment (22) (166) Profit before provisions, distribution and tax 117,206 40,961 Allowance for historical employee entitlements C6 (859) (2,096) Profit before distribution and tax 116,347 38,865

Profit distribution

A1.2 (11,342) (8,509) Profit before tax 105,005 30,356

Income tax expense

A4 (31,369) (7,253) Profit after tax 73,636 23,103

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2022

Items of income and expenditure that are not recognised in the income statement and hence taken to reserves in equity

Group 2022 2021 (Restated) $000 $000

Fair value changes in derivatives: recognised in cash flow hedge reserve (862) 161 transferred and recognised in income statement (161) (12) (1,023) 149

Movement in foreign currency translation reserve 719 99 Other comprehensive income, net of tax (304) 248 Profit after tax for the year 73,636 23,103

Total comprehensive income for the year 73,332 23,351

CONSOLIDATED STATEMENT OF

As at 30 September 2022

FINANCIAL

A summary of the Alliance Group assets and liabilities at the end of the financial year

POSITION

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 September 2022

Cash generated and used by the Alliance Group during the financial year

Equity

Share capital

Group Note 2022 2021 (Restated) $000 $000

C2 95,783 92,032

Reserves C3 (13,090) (12,786)

Retained earnings 365,066 291,430

Total equity F4 447,759 370,676

Liabilities

Bank credit facilities

C7 17,073 6,549

Trade and other payables C6 152,133 132,915

Employee benefits C9 20,684 15,712

Interest bearing loans and borrowings C7 102,867 120,000

Lease liabilities C8 2,865 1,927

Financial liabilities - derivatives 17,903 4,301

Income tax payable 23,614 1,525

Total current liabilities 337,139 282,929

Interest bearing loans and borrowings C7 - 39,817

Employee benefits C9 4,369 3,060

Lease liabilities C8 7,324 6,617 Total non-current liabilities 11,693 49,494

Total liabilities 348,832 332,423

Total liabilities and equity 796,591 703,099

Assets

Cash and cash equivalents

C4 13,089 1,769

Trade and other receivables C5 198,489 177,234

Inventories B2 167,756 132,192

Financial assets - derivatives 4,846 3,358

Total current assets 384,180 314,553

Investments in equity accounted investees

E2 59,248 54,644

Deferred tax assets A4 5,957 11,031 Other assets 115 116

Right of use assets B4 10,690 8,195

Property, plant and equipment B1 284,202 269,127

Intangible assets B3 52,199 45,433

Total non-current assets 412,411 388,546

Total assets 796,591 703,099

The notes to the Group financial statements form an integral part of these financial statements.

Group Note 2022 2021 (Restated)

Cash flows from operating activities $000 $000

Cash receipts from customers 2,235,072 1,783,977

Interest received 53 28

Cash paid to suppliers and employees (2,110,411) (1,787,181)

Interest paid (15,265) (10,311) Taxes paid (2,905) (193)

Net cash flow from operating activities 106,544 (13,680)

Cash flows from investing activities

Repayment of investment - 500

Dividends received from associates and joint ventures 1,996 2,450

Purchase of intangibles (10,097) (17,822)

Acquisition of property, plant and equipment (37,647) (41,357)

Net cash flow from investing activities (45,748) (56,229)

Cash flows from financing activities

Net increase/(decrease) in external debt (46,426) 67,649

Issue of share capital 4,342 3,565

Repayment of principal and interest on lease liabilities (4,484) (3,251)

Redemption of share capital (2,915) (3,789)

Net cash flow from financing activities (49,483) 64,174

Net movement in cash and cash equivalents 11,313 (5,735)

Opening cash and cash equivalents 1,769 7,499

Effect of exchange rate fluctuations on cash held 7 5

Closing cash and cash equivalents C4 13,089 1,769

Reconciliation of profit to cash surplus/(deficit) from operating activities

Profit for the year 73,636 23,103

Adjustments for items not involving cash flows:

Depreciation and amortisation 23,301 21,244

Provision for personnel expenses 859 2,096

Movement in deferred tax 5,074 6,235

Profit distribution accrual 9,018 5,076

Profit distribution settled in shares 2,324 2,842

Fair value of financial derivatives 13,136 170

Non-cash rebate from associates - -

Effect of exchange rate movement on working capital 751 178

Gain/(Loss) on sale 22 166

Accounts payable movements for investing and financing activities 5,724 (1,274)

(Earnings)/Loss from associates (7,456) (8,926)

Movement in provision for doubtful debts 136 247

Movement in stock provision - -

Lease interest recognised in financing activities 493 279

Other non cash items (1,335) 570 52,047 28,903

Movement in trade and other receivables (21,390) (60,657)

Movement in employee benefits 6,281 (3,790)

Movement in inventories (35,564) 3,224

Movement in income tax payable 23,390 1,691

Movement in trade and other payables 8,144 (6,154)

Cash flow from operating activities 106,544 (13,680)

The notes to the Group financial statements form an integral part of these financial statements.

A. FINANCIAL PERFORMANCE

IN THIS SECTION

This section explains the financial performance of Alliance providing additional information about individual items in the income statement, including:

accounting policies, judgements and estimates that are relevant for understanding items recognised in the income statement.

analysis of Alliance's performance for the year by reference to key areas including: revenue, payments to our farmers, expenses and taxation.

Implementation of IFRS Interpretations Committee ('IFRIC') agenda decision on configuration and customisation costs incurred in implementing Software-as-a-Service ('SaaS')

In March 2021 the International Financial Reporting Interpretations Committee (IFRIC) finalised its interpretation of IAS 38 Intangible Assets with regard to configuration and customisation costs incurred in Software as a Service (SaaS) arrangements. The decision was ratified by the International Accounting Standards Board (IASB) in April 2021.

SaaS arrangements are cloud computing applications where the underlying software and associated infrastructure are hosted by a service provider, independent of the Group.

The costs to configure and customise a SaaS arrangement may be recognised as an intangible asset when the appli cation is controlled by the Group. Control requires the Group to have the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to those benefits. Configuration and customisation of SaaS arrangements meeting these criteria are capitalised and amortised over the useful life of the software.

The Group is in the process of implementing an Enterprise Resource Planning (ERP) solution comprising multiple SaaS solutions in stages over multiple years. An analysis of the costs to date identified certain project costs which do not meet the new criteria for capitalisation as intangible assets and which should now be expensed under the new IFRIC guidance.

Some of the costs to be expensed rather than capitalised were incurred in prior years. As a change in accounting policy the Group has adjusted the Statement of Financial Position to reflect these changes as though they had been expensed at the time.

The impact of these changes is shown below:

Previously reported year ended 30 Sep tember 2021

Change in accounting policy Restated audited year ended 30 September 2021

$000 $000 $000

Retained Earnings 294,619 (3,189) 291,430

Deferred tax asset A4 9,791 1,240 11,031

Intangible assets B3 49,862 (4,429) 45,433

Profit after tax and distribution 23,811 (708) 23,103

The restatement has resulted in a 2021 cashflow restatement of $983k from 'Purchase of intangibles' to 'Cash paid to suppliers and employees'

A1 CREATING WEALTH AND ADDING VALUE TO

OUR FARMERS

A1.1 Revenue Group 2022 2021 $000 $000

Revenue - sale of goods 2,240,702 1,847,097

Other operating income 3,749 448

Total income 2,244,451 1,847,545

Disaggregation of revenue from contracts with customers

In the following table, revenue from the sale of goods is disaggregated by geographical market.

Group 2022 2021 $000 $000

Asia-Pacific 1,388,913 1,042,255 Europe, the Middle East and Africa 499,628 453,431 Americas 352,161 351,411

Total Revenue - sale of goods 2,240,702 1,847,097

Revenue measurement and recognition

Revenue from the sale of goods is measured at an amount that reflects the consideration expected to be received in exchange for transferring those goods or services. The measurement is based on the transaction price, net of commissions, volume rebate, and excludes amounts incurred on behalf of the customer.

In respect of export sales, the largest category of sales, the Group has determined that there are two performance obligations. The Group is obligated under the contract to supply specified goods and also to arrange and pay for shipping and insurance on behalf of the customer. Control of goods passes, and the service of arranging shipping and insurance is complete, at the point when the goods have been loaded onto the first point of carriage, to be delivered to the customer’s chosen destination. Revenue is recognised at this point in time.

Other operating income materially consists of rebates from associates and insurance proceeds.

Group

A1.2 Distribution payable 2022 2021 $000 $000

Distribution per income statement* 11,342 8,509

Transfer to share issues pending (2,324) (2,842) Resident withholding tax (788) (591) Total payable at end of year C6 8,230 5,076

*The 2021 distribution was fully imputed.

A2 FINANCE INCOME AND EXPENSES

Group 2022 2021 $000 $000

Interest from bank 50 28 Dividend received 3Financial income 53 28

Interest paid on loans & borrowings 15,265 10,311 Interest on lease liabilities 493 279

Financial expenses 15,758 10,590

Net finance costs 15,705 10,562

Measurement & recognition

Interest income or expense is recognised using the effective interest rate method.

Financial expenses comprise interest expense on borrowings including related fees and losses on interest rate hedging instruments and the interest component of lease payments.

A4

PERSONNEL EXPENSES

A4 TAXATION (CONT)

Deferred tax

Group 2022 2021 $000 $000

Wages and salaries 349,626 304,086

Employer contribution to defined contribution plans 7,064 5,035 Increase / (decrease) in liability for long service leave 533 (2,253)

Total personnel expenses 357,223 306,868

Included within cost of sales in the income statement are wages and salaries of $312.7m (2021: $272.6m). The remaining personnel expenses are included within administrative expenses, sales and marketing expenses and allowance for historical employee entitlements.

Measurement & recognition

Provision is made for benefits owing to employees in respect of wages and salaries, annual leave, long service leave and short term and long term employee incentives for services rendered. Provisions are recognised when it is probable they will be settled and can be measured reliably. They are carried at the remuneration rate expected to apply at the time of settlement. Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss when they are due.

Liabilities recognised in respect of long service leave are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect of services provided by employees up to the reporting date.

TAXATION

Group 2022 2021 (Restated) $000 $000

Recognised in the income statement

Current tax expense

Current income tax expense 25,966 1,507

Adjustments for prior years 269 (214)

Unutilised prior year tax credits -

Deferred tax expense 5,134 5,960

Total income tax expense in income statement 31,369 7,253

Income tax expense calculation

Net profit after distribution before tax for the year 105,005 30,356

Income tax using the company’s tax rate (28%) 29,401 8,500

Non assessable income 1

Non deductible expenses (374) 2,701

Tax effect of post-tax equity accounted earnings 1,764 (2,163)

Tax effect of lower tax for overseas subsidiary (445)(504)

Imputation credits converted to a loss (476)

Reinstatement of deferred tax on buildings -(594)

Tax effect of consolidation adjustments 752 -

Under provided in prior years 2 1

Adjustments for prior years 269 -

Previously expensed withholding tax refunded -(213)

Income tax expense 31,369 7,253

Measurement & recognition

Income tax expense is the income tax assessed on taxable profit for the year. Taxable profit differs from profit before tax reported in the income statement as it excludes items of income and expense that are taxable or deductible in future years (i.e. deferred tax) and also excludes items that will never be taxable or deductible. Income tax expense components are current income tax and deferred tax.

Imputation credits

As at balance date imputation credits available for use in subsequent periods totalled $28.3m (2021: $30.3m)

Movement in temporary differences during the year Opening balance Recognised in income Recognised in equity Reallocate prior year between current and deferred tax

Closing balance $000$000$000$000$000

Property, plant and equipment 1,842 (1,097) - - 745 Inventories 545 (8) - - 537

Employee benefits 9,874 (2,420) - - 7,454 Other items 2,494 (199) - - 2,295 Tax loss carry forward 2,236 (2,236) - -16,991 (5,960) - - 11,031

Property, plant and equipment 745 (1,847) - - (1,102) Inventories 537 (428) - - 109 Employee benefits 7,454 (2,269) 15 (376) 4,824 Other items 2,295 (590) - 421 2,126 11,031 (5,134) 15 45 5,957

Measurement and recognition:

Deferred tax is income tax that is expected to be payable or recoverable in the future as a result of the unwinding of temporary differences. These arise from differences in the recognition of assets and liabilities for financial reporting and for the filing of income tax returns. Deferred tax is recognised on all temporary differences, other than those arising from goodwill and the initial recognition of assets and liabilities in a transaction (other than in a business combination) that affects neither the accounting nor taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the year when a liability is settled or an asset realised, based on tax rates and tax laws that have been enacted or substantively enacted at balance date.

B. OPERATING ASSETS

IN

THIS SECTION

This section shows the assets Alliance uses in the processing of red meat products supplied by our New Zealand farmers in order to generate operating revenues. Key revenue generating assets include:

Property, plant and equipment

Inventories

Intangible assets

B1 PROPERTY, PLANT AND EQUIPMENT

Land Buildings Plant and equipment Work in progress Total

Group $000 $000 $000 $000 $000 Cost

Balance at 1 October 2020 26,413 136,692 485,584 18,821 667,510

Transfers from work in progress - 956 9,189 (10,145)Additions - - 238 44,275 44,513 Disposals - - (1,052) - (1,052)

Balance at 30 September 2021 26,413 137,648 493,959 52,951 710,971

Balance at 1 October 2021 26,413 137,648 493,959 52,951 710,971

Transfers from work in progress - 1,279 30,572 (31,851)Additions - 1,023 11,574 24,831 37,428 Disposals - (126) (91) - (217)

Reclassification to intangible assets - - (220) - (220) Effect of movements in exchange rates - - 41 - 41

Balance at 30 September 2022 26,413 139,824 535,835 45,931 748,003

Depreciation and impairment losses

Balance at 1 October 2020 231 79,272 342,985 - 422,488 Depreciation 87 2,207 17,842 - 20,136 Disposals - - (780) - (780) Balance at 30 September 2021 318 81,479 360,047 - 441,844 Balance at 1 October 2021 318 81,479 360,047 - 441,844 Depreciation 86 2,187 19,918 - 22,191 Disposals - - (70) - (70) Reclassification to intangible assets - - (194)Effect of movements in exchange rates - - 30 - 30 Balance at 30 September 2022 404 83,666 379,731 - 463,995

Net book value

Balance at 30 September 2020 26,182 57,420 142,599 18,821 245,022

Balance at 30 September 2021 26,095 56,169 133,912 52,951 269,127

Balance at 30 September 2022 26,009 56,158 156,104 45,931 284,202

Measurement & recognition

Owned assets

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the purchase 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 costs 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.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Work in progress relates to expenditure on items of property,plant and equipment which are not yet available for use. When an asset is made available for use it is transferred from work in progress to the relevant asset category and depreciated across its useful life.

Impairment

The carrying value of property, plant and equipment are reviewed at each reporting date. If an indicator of impairment exists, then the recoverable amount is estimated. An impairment loss is recognised in the income statement if the carrying amount exceeds the recoverable amount.

Disposals

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement.

Depreciation

Depreciation of property plant and equipment assets is calculated on a straight-line or diminishing value basis. This allocates the cost of an asset, less any residual values (estimated value at time of disposal) over the estimated remaining useful life of the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives.

Key judgement

Alliance makes estimates of the remaining useful lives of assets, which are as follows;

- Buildings 15 - 50 years

- Plant and equipment 2.5 - 25 years

The residual value and useful lives are reviewed and if appropriate adjusted, at each reporting date.

B2 INVENTORIES

Inventories

Group 2022 2021 (Restated) $000 $000

Raw materials and consumables 21,346 18,696 Livestock 2,100 2,541 Trading stocks 144,310 110,955 Total inventories 167,756 132,192

Measurement & recognition

Inventories are valued at the lower of cost and net realisable value.

Cost: Consistent with other meat processors, Alliance utilises the “retail method” to value trading stocks, in accordance with NZ IAS 2 - Inventory, to value the cost of inventory. Under the “retail method”, the cost of trading stock inventory is ascertained by deducting from sales value an estimated profit margin expected to be earned on the future sale of inventory.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Estimated selling price is determined based on a valuation hierarchy where the Group looks to use directly observable prices on trading stocks where possible. In the first instance the Group will use values on committed sales orders to determine estimated selling price. In the event that the inventory is not on a committed sales order then estimated selling price will be determined with reference to post year end sales price. In the event that the inventory item in question is not on a committed sales order or sold post year end then forecasted selling price will be used. If the forecast sales price was increased by 10% then this would increase profit by $1.2m (2021: $0.9m). If the forecast sales price was decreased by 10% then this would decrease profit by $1.2m ($0.9m)

Livestock is valued at fair value.

Key judgement

Alliance determines the sale values used to calculate the cost of inventory by reference to: - contract sale prices, or - for uncontracted inventory, the future anticipated realisable value.

INTANGIBLE ASSETS

Group Resource consents Software Goodwill Work in progress Total

Cost $000 $000 $000 $000 $000

Balance at 1 October 2020 (Restated) 455 15,715 692 15,788 32,650

Transfers from work in progress - - - -Additions - - - 19,375 19,375 Disposals - - - - -

Balance at 30 September 2021 (Restated) 455 15,715 692 35,163 52,025 Balance at 1 October 2021 455 15,715 692 35,163 52,025

Transfers from work in progress 1,721 14,398 - (16,119)Additions 61 1,010 - 8,127 9,198

Reclassification from property, plant and equipment - 220 - - 220 Effect of movements in exchange rates - 5 - - 5

Disposals - - - - -

Balance at 30 September 2022 2,237 31,348 692 27,171 61,448

Amortisation

Balance at 1 October 2020 (Restated) 35 5,447 - - 5,482 Amortisation 28 1,082 - - 1,110 Disposals - - - - -

Balance at 30 September 2021 (Restated) 63 6,529 - - 6,592 Balance at 1 October 2021 63 6,529 - - 6,592 Amortisation 102 2,356 - - 2,458

Disposals - - - - -

Reclassification from tangible assets - 194 - - 194 Effect of movements in exchange rates - 5 - - 5

Balance at 30 September 2022 165 9,084 - - 9,249

Net book value

Balance at 30 September 2020 (Restated) 420 10,268 692 15,788 27,168

Balance at 30 September 2021 (Restated) 392 9,186 692 35,163 45,433

Balance at 30 September 2022 2,072 22,264 692 27,171 52,199

Work in progress additions above relate to expenditure on the ERP system which will be transferred to software as it is made available for use. The ERP system is being transferred to software in stages as the relevant components of the system are made available for use.

Measurement & recognition

Resource consents

Costs incurred in obtaining resource consents for processing sites are capitalised and amortised from the granting of the consent on a straight line basis for the period of the consent. Resource consents are granted for periods 5 - 35 years.

Software

Costs associated with acquiring and developing software are capitalised at cost and amortised over the life of the assets. The costs of internally generated software comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management.

Goodwill

Goodwill that arises upon an acquisition is included in intangible assets. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Work in progress

Work in progress relates to expenditure on items of intangible assets which are not yet available for use. When an asset is made available for use it is transferred from work in progress to the relevant intangible asset category and amortised across its useful life.

Key judgement

Alliance makes estimates of the remaining useful lives of assets, which are as follows; - Software - 2 - 15 years

The residual value and useful lives are reviewed and if appropriate adjusted, at each reporting date.

B4 RIGHT OF USE ASSETS

Group

Right of use buildings Right of use plant and vehicles

Work in Progress Total

Cost $000 $000 $000 $000

Balance at 1 October 2020 5,329 4,904 - 10,233 Additions 3,692 99 - 3,791

Effect of movements in exchange rates 4 - - 4 Balance at 30 September 2021 9,025 5,003 - 14,028 Balance at 1 October 2021 9,025 5,003 - 14,028

Transfers from work in progress - - -Additions 541 4,729 366 5,636 Disposals (1,097) (2,723) - (3,820) Effect of movements in exchange rates 29 - - 29 Balance at 30 September 2022 8,498 7,009 366 15,873

Depreciation

Balance at 1 October 2020 1,113 1,670 - 2,783 Depreciation 1,092 1,958 - 3,050 Disposals - - - -

Effect of movements in exchange rates - - -Balance at 30 September 2021 2,205 3,628 - 5,833 Balance at 1 October 2021 2,205 3,628 - 5,833 Depreciation 1,213 1,691 - 2,904 Disposals (1,072) (2,503) - (3,575) Effect of movements in exchange rates 21 - - 21 Balance at 30 September 2022 2,367 2,816 - 5,183

Net book value

Balance at 30 September 2020 4,216 3,234 - 7,450 Balance at 30 September 2021 6,820 1,375 - 8,195 Balance at 30 September 2022 6,131 4,193 366 10,690

Measurement & recognition

Right of use assets are initially measured at cost. This comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated from the commencement date to the end of the lease term.

C. MANAGING FUNDING

IN THIS SECTION

This section explains how Alliance Group manages its capital structure and working capital along with the various funding sources.

C1 CAPITAL MANAGEMENT

Alliance Group's capital includes share capital, reserves and retained earnings.

The Board's objective when managing capital is to maintain a strong capital base to ensure Alliance are able to undertake future growth opportunities and maximise the return to shareholders. The board considers a strong capital base is necessary to protect the company from volatility and changes in capital and operating market conditions.

The board monitors forecast capital inflows and outflows, and the level of shareholding relative to shareholders’ supply to ensure that the company retains a strong capital base, with a key reference point being the shareholders equity ratio.

The equity ratio calculated as total equity relative to total assets is a non-GAAP (generally accepted accounting practice) measure. Non-GAAP financial information does not have a standardised meaning prescribed by GAAP and therefore may not be comparable to similar financial information presented by other entities.

2022 2021 (Restated) 2020 (Restated) 2019 $000 $000 $000 $000

Total equity 447,759 370,676 347,188 340,322

Total assets 796,591 703,099 610,126 541,007

Equity ratio 56.2% 52.7% 56.9% 62.9%

C2 SHARE CAPITAL

Group

Co-operative shares 2022 2021 000’s 000’s

Shares on issue at 1 October 88,634 88,843

Shares allotted during the year 6,446 3,580

Shares surrendered during the year (2,915) (3,789)

Shares on issue at 30 September 92,165 88,634

Share capital 2022 2021 $000 $000

Shares issued at 30 September 92,165 88,634

Share issue pending 3,618 3,398

Share capital 95,783 92,032

All co-operative shares are fully paid up and have a par value per share of $1.

As at 30 September 2022 there was share issues pending of 3.618 million shares (2021: 3.398 million shares).

All shares have equal voting rights and shareholders are entitled to one vote per share. The maximum individual shareholding is 1.6 million shares. Upon winding up, shares rank equally with regard to the company’s residual assets.

Shares are issued and surrendered at their nominal value under the company’s constitution and the Co-operative Companies Act 1996. Co-operative shares may be surrendered where shareholders have not transacted with the company for five years or do not have the capacity to be a transacting shareholder.

C3 RESERVES

2021 2022

C3 RESERVES (CONT)

Measurement and recognition

Foreign currency translation reserve

The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations as well as from the translation of financial instruments that hedge the company’s net investment in a foreign subsidiary.

Cash flow hedge reserve

The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet been settled.

C4 CASH AND CASH EQUIVALENTS

Group 2022 2021 $000 $000

Cash and cash equivalents 13,089 1,769 Net cash and cash equivalents 13,089 1,769

C5 TRADE AND OTHER RECEIVABLES

Group 2022 2021 $000 $000

Trade receivables - net of impairment 160,647 146,869 Prepayments 5,164 4,757 Amounts owed to the Company by associates 32,678 25,608 Total receivables 198,489 177,234 Impairment included in trade receivables 476 341

The status of trade receivables at the reporting date is as follows:

Group trade receivables Not yet due 1 - 30 days overdue > 30 days overdue Total $000 $000 $000 $000

Gross receivable 95,087 50,348 1,775 147,210 Impairment - - (341) (341) Net receivable 95,087 50,348 1,434 146,869

Gross receivable 103,687 51,900 5,536 161,123 Impairment - - (476) (476) Net receivable 103,687 51,900 5,060 160,647

Measurement and recognition

Trade receivables are measured on initial recognition at fair value, and are subsequently carried at amortised cost.

Receivables are reviewed on an individual basis to determine whether any amounts are unrecoverable and a specific provision is made. The provision for expected credit losses is the estimated amount of the receivable that is not expected to be paid. Debts known to be uncollectible are written off as bad debts to the profit and loss immediately.

In assessing the collectability of receivables Alliance considers the customers credit history and historical recovery performance and trends.

Group 2022 2021 $000 $000

Foreign currency translation (12,227) (12,946)

Cash flow hedge (863) 160 Reserves (13,090) (12,786)

C6 TRADE AND OTHER PAYABLES

C8 LEASE LIABILITIES

Group 2022 2021 $000 $000

Trade payables 143,807 116,523

Distributions payable A1.2 8,230 5,076

Provisions - 10,912

Payables to related parties 96 404

Total payables 152,133 132,915

Group

Provisions 2022 2021 $000 $000

Opening Balance 10,912 19,918

Paid out during the year (11,771) (11,102)

Increase/ (decrease) in provisions 859 2,096

Total provisions - 10,912

Provisions above represent amounts required to settle historic claims in relation to partial non-compliance for employee entitlements.

Measurement and recognition

Trade payables and other accounts payable are recognised when the entity becomes obliged to make future payments resulting from the purchase of goods and services. No interest is charged on the trade payables. The entity has financial risk management policies in place to ensure that all payables are paid with in the credit timeframe.

A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the provision can be reliably measured.

C7 INTEREST BEARING LOANS AND BORROWINGS

Group 2022 2021 $000 $000

Secured bank loans - current 86,920 120,000

Secured bank loans - non-current - 33,500

Other loans 15,947 6,317

Bank credit facilities 17,073 6,549

Total interest bearing loans and borrowings 119,940 166,366

Measurement and recognition

Borrowings are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost (using the effective interest method). Fees for establishing new borrowings are spread over the term of those borrowings.

The loan facility is a syndicated facility with four AA- rated banks and three A rated banks. It comprises a Core Facility and a Seasonal Facility (both expiring 30 September 2023). The loan facilities are secured against the property and assets of Alliance given under a Security Trust Deed. As such all Parent company inventory is effectively pledged as security for the borrowing facility. The Seasonal Facility is tailored to reflect the seasonal working capital cycle.

The financial covenants under these facilities have been fully complied with during the year.

The Bank credit facilities is a receivable finance facility utilised by the UK subsidiary.

Other loans are funds received from the Provincial Growth Fund to fund qualifying projects and receivables factoring with HSBC.

Group 2022 2021 $000 $000

Opening balance 8,544 7,724 Net additions 5,636 3,792

Interest of lease liabilities 493 279 Repayments (4,484) (3,251) Closing balance 10,189 8,544

Current 2,865 1,927 Non-current 7,324 6,617

Measurement and recognition

Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date. The lease payments are discounted using the Group’s incremental borrowing rate, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar environment under similar terms and conditions.

Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that are based on an index or a rate, amounts expected to be payable under a residual value guarantee, and any exercise price the Company is reasonably certain to exercise.

The lease liability is measured at amortised cost using the effective interest method. The lease liability is increased to reflect interest expense incurred on the lease liability and reduced to reflect the cash lease payments made.

Lease liabilities are remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset.

Lease expenses

The Income statement includes expenses relating to short term leases of $0.7m (2021: $1.4m) and expenses relating to leases of low value assets of $0.8m (2021: $0.3m). Depreciation of right of use assets is reported in note B4. Interest on lease liabilities are reported as financial expenses (see note A2).

The Group has considered the potential impact of lease payments should it exercise all extension options and have determined that the amounts are negligible.

C9 EMPLOYEE BENEFITS

2022 2021 $000 $000

Annual leave 12,585 9,345

Long service leave 319 1,095 Payroll accruals 7,780 4,466

Other - 806

Employee benefits current 20,684 15,712

2022 2021 $000 $000

Long service leave - non-current 4,369 3,060 Employee benefits - non-current 4,369 3,060

Measurement and recognition

Provision is made for benefits owing to employees in respect of wages and salaries, annual leave, long service leave and short term and long term employee incentives for services rendered. Provisions are recognised when it is probable they will be settled and can be measured reliably. They are carried at the remuneration rate expected to apply at the time of settlement. Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss when they are due.

D.

FINANCIAL INSTRUMENTS USED TO MANAGE RISK

IN THIS SECTION

This section explains the financial risks that the Alliance Group faces and how these risks are managed. This includes reviewing the hedging instruments used to manage risk.

D1 MANAGEMENT OF FINANCIAL RISKS

Alliance is subject to a variety of financial risks relating to its operations that are managed by the Group's Treasury Policy. This policy provides guidance to management on minimising the exposure to these risks and the use of derivative financial instruments. Alliance is exposed to foreign currency, interest rate, credit and liquidity risks which arise during the normal course of business. The group manages commodity risk through negotiated supply contracts.

Management of Alliance’s key financial risks

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counter-party fails to meet its financial obligations.

The group is exposed to concentrations of credit risk principally in relation to cash and cash equivalents, and derivatives. The Group mitigates this by transacting with seven major trading banks.

Exposure to credit risk also arises in relation to trade debtors. Refer to Note C5 for the status of trade receivables. This risk is managed through a credit approval process and on-going monitoring being undertaken. Offshore debtor credit risk is also partially managed by the use of confirmed letters of credit from reputable banks.

There are no significant concentrations of credit risk in relation to trade debtors. The carrying amount of financial assets represents the group’s maximum credit exposure. A provision for impairment of receivables is established using the expected credit losses model, which is based on forward-looking analysis which considers historical provisioning rates and relevant macro-economic factors.

Commodity risk

The Group is exposed to commodity pricing risk on inventory, in particular trading stock. This is mitigated by the Group having policies around unmatched positions.

Liquidity risk

Liquidity risk represents the group’s ability to meet its contractual obligations as they fall due.

The primary objective is to ensure that sufficient liquidity is available to meet the Group’s short and long term cash obligations.

The secondary objective is the optimal use of cash resources to minimise total funding costs.

The primary source of liquidity will be from foreign currency and domestic receipts. The secondary source will generally be from prior arranged borrowing facilities with financial institutions. The funding facilities negotiated will need to reflect sufficient headroom to accommodate the various uncertainties associated with the nature of the business and industry.

The finance division prepares an annual budget and a revolving 12-week cash flow forecast profiling expected cash flows and projected liquidity requirements. These projected liquidity requirements are monitored against funding facilities to ensure sufficient liquidity resources are available.

In general, the group generates sufficient cash flows from its operating activities to meet its obligations arising from its financial liabilities and maintains adequate banking facilities to cover potential shortfalls.

MANAGEMENT OF FINANCIAL RISKS (CONT)

The Group is required to disclose the expected timings of cash outflows for each of its financial liabilities. The amounts in the table below are the contractual undiscounted cash flows (including interest), so will not always reconcile to the amount disclosed on the statement of financial position.

Balance sheet Contractual cash flow < 3 months 3 - 12 mths 1 - 2 yrs 3 - 5 yrs >5 yrs

$000 $000 $000 $000 $000 $000 $000 2021

Loans and borrowings 159,817 165,143 111,131 13,527 36,024 4,461Trade and other payables 132,915 132,915 132,915 - - -Bank credit facilities 6,549 6,549 6,549 - - -Lease Liabilities 8,544 8,544 539 1,388 1,481 3,131 2,005 Financial liabilities - derivatives 4,301 4,301 4,301 - - - -

2022

Loans and borrowings 102,867 107,768 35,695 30,454 30,954 10,665Trade and other payables 152,133 152,133 152,133 - - -Bank credit facilities 17,073 17,073 17,073 - - -Lease Liabilities 10,189 10,189 526 2,404 2,475 4,276 508 Financial liabilities - derivatives 17,903 17,903 17,903 - - - -

Subsequent to the year end the Group has extended the term of its seasonal banking facility.

Interest rate risk

The group is exposed to interest rate risk on movements in floating interest rates on loans and borrowings.

The group adopts a policy of ensuring that between 0 - 90% (dependant on the facility type, see breakdown below) of its interest rate risk exposure is at a fixed rate. This is achieved partly by entering into fixed-rate risk instruments and partly by borrowing at a floating rate and using interest rate swaps as hedges of the variability in cash flows attributable to movements in reference interest rates. The Group applies a hedge ratio of 1:1.

The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the reference interest rates, tenors, repricing dates and maturities and the notional or par amounts. If a hedging relationship is directly affected by uncertainty arising from IBOR reform, then the Group assumes for this purpose that the benchmark interest rate is not altered as a result of interest rate benchmark reform.

The Group assesses whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in cash flows of the hedged item using the hypothetical derivative method.

Alliance manages interest rate volatility to cash flow using pay-fixed interest rate swap (IRSs) and forward rate agreements (FRA's).

Interest

rate risk hedging parameters

Facility Type Hedging band

Seasonal debt 0 - 1 year 40% - 90%

Seasonal debt 1 - 2 years 0% - 35%

Core debt 2 - 5 years 0% - 30%

Interest rate sensitivity

*The following table shows the estimated pre-tax impact on the group of a general 100 basis point (BPS) change in interest in respect to interest rate derivatives that the company had in place at balance date:

2022 2021

Profit & Loss Equity Profit & Loss Equity

$000 $000 $000 $000

100 BPS increase in interest rates (24) (807) (24) (2,061)

100 BPS decrease in interest rates 9 843 5 2,141

MANAGEMENT OF FINANCIAL RISKS (CONT)

Foreign currency risk

The Group operates internationally, and is subject to the risk of financial losses arising from adverse exchange rate movements in USD, EUR, GBP, CAD, JPY and AUD. Risks arise due to the risk associated with the cash receipts made in currency exposure other than the functional currency. To manage the foreign exchange risks the Group enters into financial market derivatives. All foreign exchange contracts on hand at balance date are expected to impact the income statement within 12 months.

The Group's policy is for the critical terms of the forward exchange contracts to align with the hedged item. The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Group assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in cashflows of the hedged item using the hypothetical derivative method.

In these hedge relationships, the sources of any ineffectiveness, should it arise, are expect to be attributable differences in the amount of, or repricing dates between, the swaps and the borrowings . The Group did not have any new sources of hedge ineffectiveness emerging in designated hedging relationships. If it had, then it would be required to disclose those sources by risk category and explain the resulting hedge ineffectiveness.

The group uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date. These contracts are generally designated as cash flow hedges.

Alliance currently hedge up to 100% of trade debtors denominated in a foreign currency. Alliance also hedges inventory to the extent it can identify inventory values that will be sold in a foreign currency.

The following disclosures relate to the valuation of foreign exchange exposures as at 30 September. Alliance Group has foreign exposures throughout the financial year which fluctuate both in terms of the amount of the exposures at any one time and the effect of movements in the exchange rate. The NZD equivalent of the notional amount of foreign exchange contracts at balance date are in D2.

The following table shows the estimated pre-tax impact on the group of a general 10% change in the value of the New Zealand dollar in respect to foreign exchange currency derivatives that the company had in place at balance date (note the sensitivity analysis excludes the equivalent impact on the underlying hedged item to which the derivatives relate):

2022 2021

Profit & Loss Equity Profit & Loss Equity $000 $000 $000 $000

10% increase in value of NZD 15,742 8,265 10,409 25,994

10% decrease in value of NZD (19,240) (10,102) (13,100) (28,338)

D2 DERIVATIVE FINANCIAL INSTRUMENTS

What is a derivative? A derivative is a type of financial instrument typically used to manage the interest rate and foreign exchange risks that the Group faces due to its business operations. The different types of derivative used are:

Forward Exchange Contracts:

A contract between two parties (for example, a bank and a customer) where one party agrees to sell or buy a fixed amount of a currency, at an agreed rate, on a certain date. The agreed foreign exchange rate is referred to as the forward rate.

Foreign exchange option: An option gives the right to buy or sell an instrument at a fixed price on or before a certain date in the future. The buyer of an option has a right but not an obligation and can only lose the premium paid. The seller of an option has an obligation with no rights. The seller receives premium but has full risk of loss should rates move against them and the buyer chooses to exercise the option.

Interest rate derivatives: Forward Rate Agreement (FRA): A contract that fixes the interest rate now that will apply to a loan or deposit for an amount for a given period starting on a certain date in the future (the settlement date). The most common FRA is for 3 months therefore the amount exposed is limited compared to the longer duration of an Interest Rate Swap.

Interest Rate Swap (IRS): A swap contract whereby two parties agree to swap interest payments on a notional principal sum over an agreed period. The most frequently used Interest Rate Swap structure is a fixed-variable structure, in which one party to the agreement pays a fixed rate over the term of the swap in exchange for variable-rate interest payments from the other party. One to five-year Interest Rate Swaps are commonly traded and hence the risk exposure is greater than a FRA.

Recognition

Derivative financial instruments are recognised at fair value on the date the contracts are agreed and are re-measured on a periodic basis. The recognition of movements in fair value depends upon the hedging instrument and its designation or classification, as summarised below:

Cash flow hedge:

Changes in fair value of hedges that are designated and qualify as cash flow hedges and are considered effective for accounting purposes are recognised through other comprehensive income into the cash flow hedge reserve (in equity). The gain or loss relating to any ineffective element is recognised immediately in the income statement. Amounts accumulated in other comprehensive income are recycled in the income statement in the periods when the forecast transactions take place.

Measurement of fair value

Alliance's financial instruments carried at fair value are defined as level 2 for valuation purposes for 2022 and 2021 financial periods. At 30 September the fair value of Alliance’s net derivative financial instruments was a $13.1m liability (2021: $0.9m liability).

Foreign exchange contract:

Fair value is the difference between the contract exchange rate and the quoted forward exchange rates to close it out at the reporting date. This is calculated by using the present value of the estimated future cash flows and applying published forward exchange rates and discount rates based on the forward interest rate swap curve.

Foreign exchange options

The fair value has two components being: • intrinsic value, being the difference between the option strike rate and the current market rate, and • time value, this can never be negative, and represents the dollar value that the option has of the time left to run to maturity

The intrinsic value of the option, if it is deemed effective is taken through the hedge reserve in equity. The time value is deferred to the cashflow hedge reserve.

The fair value uses a discounted cash flow and applies observable option volatilities and quoted forward exchange and interest rates that match the maturity dates of the contracts.

Interest rate derivatives:

The fair value is the estimated amount that the Group would pay or receive if the contract stopped at the reporting date. This is calculated by discounting the future interest and principal cash flows using published market interest rates that match the maturity dates of the contracts and discount rates based on the forward interest rate swap curve. The fair value uses a discounted cash flow and applies observable option volatilities and quoted forward exchange and interest rates that match the maturity dates of the contracts.

The group enters into derivative transactions under international Swaps and Derivatives Association (ISDA) master netting agreements. In general under these agreements the amounts owed by each counterparty on a single day in respect of all transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other. In certain circumstances - e.g. when a credit event such as a default occurs - all outstanding transactions under the agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions

DERIVATIVE FINANCIAL INSTRUMENTS (CONT)

The following table details the notional principal amounts of derivatives at the end of the reporting period:

2022 2021 Notional principal Fair value Notional principal Fair value $000 $000 $000 $000

Derivatives designated as cash flow hedges

- Foreign exchange contracts 86,066 (4,816) 333,823 (1,915)

- Interest rate swaps 199,000 3,689 75,000 1,384

- Forward rate agreements 35,000 264 230,000 343

Derivatives not designated as cash flow hedges

- Foreign exchange contracts 160,987 (12,194) 55,383 (533)

- Interest rate swaps - - 35,000 (222) 481,053 (13,057) 729,206 (943)

The following table details the instruments held to hedge exposures to changes in foreign currency and interest rates:

Maturity

Foreign currency risk 1-6 months 6-12 months More than 1 year

Forward exchange contracts

Net exposure (in thousands of New Zealand Dollars) 312,547 nil nil

Average New Zealand Dollars:USD forward contract rate 0.5982 nil nil

Average New Zealand Dollars:EUR forward contract rate 0.5988 nil nil

Average New Zealand Dollars:GBP forward contract rate 0.5208 nil nil

Average New Zealand Dollars:AUD forward contract rate 0.8908 nil nil

Average New Zealand Dollars:CAD forward contract rate 0.7921 nil nil

Average New Zealand Dollars:JPY forward contract rate 84.9905 nil nil

Interest rate risk

Interest rate swaps

Net exposure (in thousands of New Zealand Dollars) 35,000 109,000 55,000

Average fixed interest rate 1.36% 3.64% 1.56%

Forward rate agreements

Net exposure (in thousands of New Zealand Dollars) 35,000 0 0

Average fixed interest rate 0.91% 0.00% 0.00%

E. GROUP STRUCTURE

IN THIS SECTION

This section provides information to help readers understand the Alliance group structure and how it affects the financial position and performance of the group.

E1 SUBSIDIARIES

The financial statements include the financial statements of Alliance Group Limited and the subsidiaries listed below.

Subsidiaries are entities controlled by the group. Control exists when the group has the power to govern the financial and operating policies of the entity so as to obtain benefit from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

The Company has the following investments: 2022 2021 Country Balance date Ownership interest Ownership interest Investments in subsidiaries New Zealand Holdings (UK) Limited and its trading subsidiary Alliance Group (NZ) Ltd

E2 ASSOCIATES

Measurement & recognition

United Kingdom 30-Sep 100.0% 100.0%

Associates are those entities in which Alliance has significant influence, being the ability to participate in however not control the financial and operating decisions of the entity.

Joint ventures are those entities in which Alliance has joint control and has rights to the net assets of the venture.

Associates and joint ventures are accounted for using the equity method of accounting where the investment is recorded at cost plus its share of any profit or loss during the ownership period. Any dividends received are deducted from the investment value.

If Alliance’s share of losses exceeds its interest in the associate, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that Alliance has an obligation or has made payments on behalf of the entity.

E2 ASSOCIATES (CONT)

The Company has the following investments:

Associates

2022 2021

Principal activity Country Balance date Ownership interest Ownership interest

The Lamb Co-operative Inc. Sales, distribution and marketing USA 30-Sep 43.8% 48.9%

The NZ and Australian Lamb Company Ltd Sales, distribution and marketing CAN 30-Sep 41.1% 41.0%

Joint ventures

Alpine Origin Merino Ltd Research and development NZ 30-Sep 50.0% 50.0%

High Health Alliance Limited Research and development NZ 30-Sep 50.0% 50.0%

Meateor GP Limited Supply of meat ingredients to pet food industry

NZ 31-Dec 50.0% 50.0%

Quality New Zealand Limited Sales, distribution and marketing IND 30-Sep 10.5% 10.5% 2022 2021 $000 $000

Investments in equity accounted investees

Movements in carrying value of equity accounted investments:

Balance at beginning of year 54,644 49,756

Investment/ (return) in share capital - (500)

Add patronage dividends reinvested 5,445 4,757

Less withholding tax on dividends (855) (610)

Add/(less) share of foreign exchange translation reserve - (477) 59,234 52,926

Add share of profit after tax 7,456 8,926

Less dividends received (7,442) (7,208)

Closing balance 59,248 54,644

This balance comprises:

Shares in associate companies and joint ventures 36,569 31,124

Advances to associated companies at cost 10,896 10,896

Share of post-acquisition increases in net assets 16,175 17,016

Share of foreign exchange translation reserve (4,392) (4,392)

Closing balance 59,248 54,644

On the 30th September 2021 the shares in Porkcorp New Zealand Ltd were sold to the joint venture partner for consideration of $500,000. This resulted in a gain on sale of $35,000 being the difference between the carrying value of the equity accounted investment at this date and the consideration received for the sale of shares. This gain is included within the share of profit after tax above.

Summary financial information for equity accounted investees and proportionately consolidated entities, not adjusted for the percentage ownership:

Total assets Total liabilities Revenues Profit (loss)

Associates and joint ventures $000 $000 $000 $000 2021 240,514 128,587 937,782 20,369 2022 383,957 241,453 1,216,020 16,642

F. OTHER

IN THIS SECTION

This section includes information required to comply with financial reporting standards that is not covered in other sections.

F1 RELATED PARTIES

Transactions with related parties, including directors, are made on terms equivalent to those that prevail in arm’s length transactions.

Parent and ultimate controlling party

The immediate parent and ultimate controlling party of the Group is Alliance Group Ltd.

Identity of associates and joint ventures Alliance Group’s associates and joint ventures are outlined in Section E.

Transactions with related parties and equity accounted investments: Group 2022 2021 $000 $000

Sales and recharges to associates 194,853 198,595 Sales and recharges to joint ventures 10,825 10,678

Dividends from associates 6,442 4,758 Dividends from joint ventures 1,000 2,450 Purchases from Directors (7,537) (7,443) Sales to Directors 629 736

Balances with related parties

Amount owed to the Group by associates 32,678 25,035 Amount owed to the Group by joint ventures 367 573 Loans to associates 3,388 3,485

Key management personnel compensation: Group 2022 2021 $000 $000

Short term employee benefits 5,083 4,701 Post-employee benefits 178 179 Directors fees - Alliance Group Ltd 865 859

Key management personnel are the Alliance Group Executive Leadership Team and Alliance Group’s Board of Directors. Benefits paid to the Leadership Team include salaries, non cash benefits and contributions to post employment superannuation schemes.

F2 AUDITORS’ REMUNERATION

Group 2022 2021 $000 $000

Audit fees - KPMG 269 247

Audit fees - KPMG (UK) 86 -

Audit fees - Grant Thornton (UK) - 58 Fees for other services - Grant Thornton (UK) - 13

Total 355 318

COMMITMENTS

F5 EVENTS SUBSEQUENT TO BALANCE DATE

Group

Capital expenditure commitments 2022 2022 (Restated) $000 $000

Committed payments for approved capital expenditure 11,187 13,367

F4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 September 2022

Components that make up the capital and reserves of Alliance Group and the changes of each component during the year

Reserves

Group

Share capital Foreign currency translation

Cashflow hedge Retained earnings Total $000 $000 $000 $000 $000

Balance at 1 October 2020 (Restated) 89,414 (13,045) 11 268,327 344,707

Profit after tax for the year (Restated) - - - 23,103 23,103

Net change in fair value of financial instruments - - 149 - 149

Movement in foreign currency translation reserve - 99 - - 99

Total comprehensive income for the year - 99 149 23,103 23,351

Bonus share issue - - -

Shares issued - ordinary shares 3,009 - - - 3,009

Shares surrendered - ordinary shares (3,789) - - - (3,789) Share issue pending 3,398 - - - 3,398

Total transactions with owners 2,618 - - - 2,618

Balance at 30 September 2021 (Restated) 92,032 (12,946) 160 291,430 370,676

Balance at 1 October 2021 92,032 (12,946) 160 291,430 370,676

Profit after tax for the year - - - 73,636 73,636

Net change in fair value of financial instruments - - (1,023) - (1,023)

Movement in foreign currency translation reserve - 719 - - 719

Total comprehensive income for the year - 719 (1,023) 73,636 73,332

Bonus share issue - - - - -

Shares issued - ordinary shares 3,048 - - - 3,048

Shares surrendered - ordinary shares (2,915) - - - (2,915)

Share issue pending 3,618 - - - 3,618

Total transactions with owners 3,751 - - - 3,751

Balance at 30 September 2022 95,783 (12,227) (863) 365,066 447,759

Subsequent to balance date the Board of Directors have approved a bonus share issue of 1 share per qualifying stock unit supplied during the financial year, to be issued at the same time as the profit distribution in December 2022, totalling $10m which will impact the FY23 financial statements. This distribution will have imputation credits attached for shareholders.

F6 NEW STANDARDS AND INTERPRETATIONS

There are no accounting standards issued but not yet effective that are expected to have a material impact on the Group.

ABOUT THIS REPORT

IN THIS SECTION

The notes to the financial statements within sections A to F include information that is considered relevant and material to assist the reader in understanding changes in Alliance Groups financial position or performance. Information is considered material if:

the amount is significant because of its size and nature;

-it is important for understanding the results of Alliance;

-it helps explain changes in Alliance’s business; or -it relates to an aspect of Alliance’s operations that is important to future performance.

Reporting entity

Alliance Group Limited is a for-profit entity domiciled in New Zealand and registered under the Companies Act 1993 and the Co operative Companies Act 1996. The company is an FMC Entity in terms of the Financial Markets Conduct Act 2013 and prepares its financial statements in accordance with this Act and the Financial Reporting Act 2013.

The consolidated financial statements are for Alliance Group Limited and its subsidiaries (together referred to as “Alliance”) and Alliance’s interests in associates as at and for the year ended 30 September 2022.

Alliance is primarily involved in meat processing and export sales.

Statement of compliance and basis of preparation

The financial statements have been prepared:

-in accordance with Generally Accepted Accounting Practice (GAAP) in New Zealand and comply with International Financial Reporting Standards (IFRS) and the New Zealand equivalents (NZ IFRS), as appropriate for a for-profit entity;

-on the basis of going concern. The directors, having considered projected future performance and the availability of financing, consider the going concern basis to be appropriate; and

-in New Zealand dollars, with all values rounded to the nearest thousand dollars unless otherwise stated.

In preparing the Group financial statements, all material intragroup transactions, balances, income and expenses have been eliminated. Subsidiaries are consolidated on the date on which control is obtained to the date on which control is lost.

The financial statements are prepared for the 52-week period ending 1 October 2022 (2021: 53-week period ending 2 October 2021) due to the 4-4-5 calendar used by the Group, therefore the amounts presented in the financial statements may not be entirely comparable.

This method is used to ensure comparability given the weekly trading cycles of the Group. For simplicity the financial statements and accompanying notes will be presented and referred to as a 30 September year end.

Foreign currency

Transactions denominated in a foreign currency are converted at the exchange rates at the dates of the transactions. Foreign currency assets and liabilities (such as receivables and payables) are translated at the rate prevailing at balance date.

The assets and liabilities of international subsidiaries are translated to New Zealand dollars at the closing rate at balance date. The revenue and expenses of these subsidiaries are translated at rates approximating the exchange rates at the dates of the transactions.

Exchange differences arising on the translation of subsidiary financial statements are recorded in the foreign currency translation reserve (equity). Cumulative translation differences are recognised in the income statement in the period in which any international subsidiary is disposed of.

The principal functional currency of international subsidiaries is the British Pound Sterling; the closing rate at balance date was 0.5013 (30 September 2021: 0.5127).

Other accounting policies

Other accounting policies that are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. The accounting policies have been consistently applied to the periods in these financial statements. Where applicable comparatives have been amended to align with current year’s expenses.

Critical judgements and estimates

The preparation of financial statements requires management to exercise its judgement in applying Alliance’s accounting policies. Estimates and judgements are reviewed by management on an on-going basis, with revisions recognised in the period in which the estimate is revised and in any future periods affected. Areas of estimate or judgement that have most significant impact on the amounts recognised in the financial statements are:

-Note B2Inventories -Note B3Intangible assets -Note D2 Derivative financial instruments

Impact of COVID-19

On 11 March 2020, the World Health Organisation declared the outbreak of Coronavirus ("COVID-19") a global pandemic. Consistent with other Global economies, the New Zealand Government announced an Alert Level system which required varying level of operational restrictions for the business and consumers. Whilst the Group's plants continued operating as an "essential service" during all of New Zealand's alert levels, the Group incurred additional costs such as increased processing costs and costs of purchasing additional personal protective equipment for employees. The pandemic has also had a significant impact on global shipping , steaming times and container availability. Alliance has been able to continue serving our customers however there has been an increase in cost across all shipping routes and also a large impact on working capital and consequently the equity ratio.

Management will continue to monitor and assess the impacts of future developments of COVID-19, which are highly uncertain and cannot be predicted, on the Group’s operations, judgements and estimates.

Independent Auditor’s Report

Key audit matters

Key audit matters

Key audit matters

To the shareholders of Alliance Group Limited

Report on the audit of the consolidated financial statements

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements

Opinion

The key audit matter How the matter was addressed in our audit

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements

In our opinion, the consolidated financial statements of Alliance Group Limited (the company ) and its subsidiaries (the 'group') on pages 59 to 85 present fairly, in all material respects:

Software as a Service (‘SaaS’) cloud computing arrangements (refer to note A)

i. the Group’s financial position as at 30 September 2022 and its financial performance and cash flows for the year ended on that date;

Our audit procedures included:

Analysing management’s assessment of SaaS cloud computing arrangements;

in accordance with New Zealand Equivalents to International Financial Reporting Standards and International Financial Reporting Standards issued by the New Zealand Accounting Standards Board.

Examining source contracts and other correspondence with IT vendors to understand contractual arrangements and consider the impacts of these arrangements on the group’s control of software assets;

We have audited the accompanying consolidated financial statements which comprise: the consolidated statement of financial position as at 30 September 2022; the consolidated income statement, statements of comprehensive income, changes in equity and cash flows for the year then ended; and notes, including a summary of significant accounting policies

The key audit matter

The key audit matter

Software

as a

Service

How the matter was addressed in our audit

How the matter was addressed in our audit

(‘SaaS’) cloud computing arrangements (refer to note A)

Software as a Service (‘SaaS’) cloud computing arrangements (refer to note A)

Our audit procedures included:

Utilising our accounting technical specialists to assess the consistency of management’s approach against the requirements of the accounting standards and IFRIC agenda decision;

Obtaining and challenging managements cost allocation model. Assessing the logic and mathematical accuracy of the model;

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (New Zealand) ( ISAs (NZ)’) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

As a result of the IFRIC agenda decision that was issued in April 2021, during the year the group has revised their accounting policy in relation to implementation costs on SaaS cloud computing arrangements. This has resulted in the Group restating $4.4 million of expenditure previously recognised as an intangible asset as at 30 September 2021, $0.9 million to administrative expenses in FY21 and $3.4 million to FY21 opening retained earnings. This is considered a key audit matter due to the complexity involved in assessing the software systems, there is a risk that expenditure on computer software is incorrectly recorded as an asset due to the technical complexity of determining whether an asset is created which is controlled by the Group and complexity in allocating expenditure incurred between activities determined to create an asset and activities which do not

On a sample basis, vouching expenditure back to supporting documentation, such as invoices, to assess whether the expenditures have been appropriately treated;

Challenging the useful lives applied to resulting intangible assets; and Assessing the accuracy of the disclosure of the restatement of the previous accounting period.

We have no matters to report as a result of our procedures.

We are independent of the group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

As a result of the IFRIC agenda decision that was issued in April 2021, during the year the group has revised their accounting policy in relation to implementation costs on SaaS cloud computing arrangements. This has resulted in the Group restating $4.4 million of expenditure previously recognised as an intangible asset as at 30 September 2021, $0.9 million to administrative expenses in FY21 and $3.4 million to FY21 opening retained earnings. This is considered a key audit matter due to the complexity involved in assessing the software systems, there is a risk that expenditure on computer software is incorrectly recorded as an asset due to the technical complexity of determining whether an asset is created which is controlled by the Group and complexity in allocating expenditure incurred between activities determined to create an asset and activities which do not

As a result of the IFRIC agenda decision that was issued in April 2021, during the year the group has revised their accounting policy in relation to implementation costs on SaaS cloud computing arrangements. This has resulted in the Group restating $4.4 million of expenditure previously recognised as an intangible asset as at 30 September 2021, $0.9 million to administrative expenses in FY21 and $3.4 million to FY21 opening retained earnings. This is considered a key audit matter due to the complexity involved in assessing the software systems, there is a risk that expenditure on computer software is incorrectly recorded as an asset due to the technical complexity of determining whether an asset is created which is controlled by the Group and complexity in allocating expenditure incurred between activities determined to create an asset and activities which do not

Our audit procedures included:

Analysing management’s assessment of SaaS cloud computing arrangements;

Analysing management’s assessment of SaaS cloud computing arrangements;

Examining source contracts and other correspondence with IT vendors to understand contractual arrangements and consider the impacts of these arrangements on the group’s control of software assets;

Examining source contracts and other correspondence with IT vendors to understand contractual arrangements and consider the impacts of these arrangements on the group’s control of software assets;

Utilising our accounting technical specialists to assess the consistency of management’s approach against the requirements of the accounting standards and IFRIC agenda decision;

Utilising our accounting technical specialists to assess the consistency of management’s approach against the requirements of the accounting standards and IFRIC agenda decision;

Obtaining and challenging managements cost allocation model. Assessing the logic and mathematical accuracy of the model;

Obtaining and challenging managements cost allocation model. Assessing the logic and mathematical accuracy of the model;

On a sample basis, vouching expenditure back to supporting documentation, such as invoices, to assess whether the expenditures have been appropriately treated;

On a sample basis, vouching expenditure back to supporting documentation, such as invoices, to assess whether the expenditures have been appropriately treated;

Challenging the useful lives applied to resulting intangible assets; and

Challenging the useful lives applied to resulting intangible assets; and

Assessing the accuracy of the disclosure of the restatement of the previous accounting period.

We have no matters to report as a result of our procedures..

Assessing the accuracy of the disclosure of the restatement of the previous accounting period.

We have no matters to report as a result of our procedures.

Our responsibilities under ISAs (NZ) are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.

Carrying value of trading stocks applying the retail method (refer to note B2)

Carrying value of trading stocks applying the retail method (refer to note B2)

Other than in our capacity as auditor we have no relationship with, or interests in, the group.

Consistent with industry practice, the Group adopt the ‘retail method’ to determine the carrying value of trading stock. Under the retail method inventory units are measured at the expected sales value adjusted for cost to sell and an expected profit margin.

Materiality

Our audit procedures included:

Comparing management’s inventory valuation approach under the retail method with the requirements of New Zealand Equivalents to International Reporting Standards;

Comparing the expected selling price for trading stock items to actual contracted volumes and sales completed subsequent to year end;

Carrying value of trading stocks applying the retail method (refer to note B2)

Consistent with industry practice, the Group adopt the ‘retail method’ to determine the carrying value of trading stock. Under the retail method inventory units are measured at the expected sales value adjusted for cost to sell and an expected profit margin.

Our audit procedures included:

Our audit procedures included:

Comparing management’s inventory valuation approach under the retail method with the requirements of New Zealand Equivalents to International Reporting Standards;

Comparing management’s inventory valuation approach under the retail method with the requirements of New Zealand Equivalents to International Reporting Standards;

Comparing the expected selling price for trading stock items to actual contracted volumes and sales completed subsequent to year end;

The retail method is required as livestock inputs can result in a varying combination of trading stock outputs

For trading stock items with no contracted or completed sales subsequent to year end, comparing the expected selling price to recent sales values;

The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the consolidated financial statements as a whole. The materiality for the consolidated financial statements as a whole was set at $4,000,000 determined with reference to a benchmark of group revenue. We chose the benchmark because, in our view, this is a key measure of the group’s performance.

Consistent with industry practice, the Group adopt the ‘retail method’ to determine the carrying value of trading stock. Under the retail method inventory units are measured at the expected sales value adjusted for cost to sell and an expected profit margin.

The retail method is required as livestock inputs can result in a varying combination of trading stock outputs

The retail method is required as livestock inputs can result in a varying combination of trading stock outputs

Comparing the expected selling price for trading stock items to actual contracted volumes and sales completed subsequent to year end;

For trading stock items with no contracted or completed sales subsequent to year end, comparing the expected selling price to recent sales values;

For trading stock items with no contracted or completed sales subsequent to year end, comparing the expected selling price to recent sales values;

Key audit matters

The key audit matter How the matter was addressed in our audit

Use of this independent auditor’s report

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements

depending on the assessed market demand, and the Group does not allocate processing costs to individual inventory units.

Assessing the mathematical accuracy of the profit margin adjustment, including consistency of the closing trading stock volumes and production costs to other audit procedures completed;

This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been undertaken so that we might state to the shareholders those matters we are required to state to them in the independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the shareholders as a body for our audit work, this independent auditor’s report, or any of the opinions we have formed.

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements

We consider that the carrying value of trading stock to be a key audit matter due to the unique nature of the retail method and the judgement associated in determining the expected selling price and margin adjustment.

Challenging management’s assessment of inclusion or exclusion of certain expense items within the margin adjustment calculation; and

The key audit matter How the matter was addressed in our audit

Assessing the calculated profit margin adjustment percentage for consistency with market indicators, expectations and historical levels

We have no matters to report as a result of our procedures.

Software as a Service (‘SaaS’) cloud computing arrangements (refer to note A)

Revenue recognition (refer to note A1.1)

Responsibilities of the Directors for the consolidated financial statements

The key audit matter

How the matter was addressed in our audit

Software as a Service (‘SaaS’) cloud computing arrangements (refer to note A)

Revenue represents a key financial statement caption and is a primary driver to financial performance.

We consider that revenue recognition, in particular around year end, is a key audit matter as the criteria for recognising revenue is based on the contracted performance obligations and requires and assessment of when control of the goods transfers, including consideration of when the risks and rewards of ownership are transferred.

As a result of the IFRIC agenda decision that was issued in April 2021, during the year the group has revised their accounting policy in relation to implementation costs on SaaS cloud computing arrangements. This has resulted in the Group restating $4.4 million of expenditure previously recognised as an intangible asset as at 30 September 2021, $0.9 million to administrative expenses in FY21 and $3.4 million to FY21 opening retained earnings. This is considered a key audit matter due to the complexity involved in assessing the software systems, there is a risk that expenditure on computer software is incorrectly recorded as an asset due to the technical complexity of determining whether an asset is created which is controlled by the Group and complexity in allocating expenditure incurred between activities determined to create an asset and activities which do not

Our audit procedures included:

Our audit procedures included:

Assessing and testing of key revenue controls;

Analysing management’s assessment of SaaS cloud computing arrangements;

Assessing the revenue recognition policies of the group, and considering against the requirements of the accounting standards;

Examining source contracts and other correspondence with IT vendors to understand contractual arrangements and consider the impacts of these arrangements on the group’s control of software assets;

Reconciling cash receipts to revenue recorded;

Testing a sample of revenue transactions, vouching to supporting evidence; and

Utilising our accounting technical specialists to assess the consistency of management’s approach against the requirements of the accounting standards and IFRIC agenda decision;

Obtaining and challenging managements cost allocation model.

Assessing the logic and mathematical accuracy of the model;

Obtaining evidence of the delivery for a sample of sales transactions which occurred close to balance date to ensure that the sales were recognised in the appropriate period.

We have no matters to report as a result of our procedures.

On a sample basis, vouching expenditure back to supporting documentation, such as invoices, to assess whether the expenditures have been appropriately treated;

Challenging the useful lives applied to resulting intangible assets; and

Assessing the accuracy of the disclosure of the restatement of the previous accounting period.

Other information

We have no matters to report as a result of our procedures.

The Directors, on behalf of the group, are responsible for the other information included in the entity’s Annual Report. Other information includes the introduction, sections 1 through 9, 11 and 12 of the Annual Report introduction, sections 1 through 9, 11 and 12 of the Annual Report. Our opinion on the consolidated financial statements does not cover any other information and we do not express any form of assurance conclusion thereon.

Carrying value of trading stocks applying the retail method (refer to note B2)

Consistent with industry practice, the Group adopt the ‘retail method’ to determine the carrying value of trading stock. Under the retail method inventory units are measured at the expected sales value adjusted for cost to sell and an expected profit margin.

The retail method is required as livestock inputs can result in a varying combination of trading stock outputs

Our audit procedures included:

In connection with our audit of the consolidated financial statements our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Comparing management’s inventory valuation approach under the retail method with the requirements of New Zealand Equivalents to International Reporting Standards;

Comparing the expected selling price for trading stock items to actual contracted volumes and sales completed subsequent to year end;

For trading stock items with no contracted or completed sales subsequent to year end, comparing the expected selling price to recent sales values;

The Directors, on behalf of the company, are responsible for: the preparation and fair presentation of the consolidated financial statements in accordance with generally accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial Reporting Standards) and International Financial Reporting Standards issued by the New Zealand Accounting Standards Board;

Our audit procedures included:

implementing necessary internal control to enable the preparation of a consolidated set of financial statements that is free from material misstatement, whether due to fraud or error; and assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations or have no realistic alternative but to do so

Analysing management’s assessment of SaaS cloud computing arrangements;

Examining source contracts and other correspondence with IT vendors to understand contractual arrangements and consider the impacts of these arrangements on the group’s control of software assets;

Utilising our accounting technical specialists to assess the consistency of management’s approach against the requirements of the accounting standards and IFRIC agenda decision;

Auditor’s responsibilities for the audit of the consolidated financial statements

Obtaining and challenging managements cost allocation model. Assessing the logic and mathematical accuracy of the model;

On a sample basis, vouching expenditure back to supporting documentation, such as invoices, to assess whether the expenditures have been appropriately treated;

Our objective is: to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error; and to issue an ndependent auditor’s report that includes our opinion.

Challenging the useful lives applied to resulting intangible assets; and Assessing the accuracy of the disclosure of the restatement of the previous accounting period.

As a result of the IFRIC agenda decision that was issued in April 2021, during the year the group has revised their accounting policy in relation to implementation costs on SaaS cloud computing arrangements. This has resulted in the Group restating $4.4 million of expenditure previously recognised as an intangible asset as at 30 September 2021, $0.9 million to administrative expenses in FY21 and $3.4 million to FY21 opening retained earnings. This is considered a key audit matter due to the complexity involved in assessing the software systems, there is a risk that expenditure on computer software is incorrectly recorded as an asset due to the technical complexity of determining whether an asset is created which is controlled by the Group and complexity in allocating expenditure incurred between activities determined to create an asset and activities which do not

We have no matters to report as a result of our procedures.

Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs NZ will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate , they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements

Carrying value

of trading stocks applying the retail method (refer to note B2)

A further description of our responsibilities for the audit of these consolidated financial statements is located at the External Reporting Board (XRB) website at: http://www.xrb.govt.nz/standards for assurance practitioners/auditors responsibilities/audit report 1/

Our audit procedures included:

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

The engagement partner on the audit resulting in this independent auditor's report is David Gates.

For and on behalf of

Consistent with industry practice, the Group adopt the ‘retail method’ to determine the carrying value of trading stock. Under the retail method inventory units are measured at the expected sales value adjusted for cost to sell and an expected profit

The retail method is required as livestock inputs can result in a varying combination of trading stock outputs

Comparing management’s inventory valuation approach under the retail method with the requirements of New Zealand Equivalents to International Reporting Standards;

Comparing the expected selling price for trading stock items to actual contracted volumes and sales completed subsequent to year end;

For trading stock items with no contracted or completed sales subsequent to year end, comparing the expected selling price to recent sales values;

Statutory Information and Five Year Review

STATUTORY INFORMATION

The directors present to shareholders the seventy second Annual Report and Financial Statements of the company for the year ended 30 September 2022.

FINANCIAL RESULT

The result for the year ended 30 September 2022 is a net profit of $73.6 Million after tax.

INTERESTS REGISTER

The company maintains an Interests Register in which particulars of certain transactions and matters involving the directors are recorded. Entries in the Interests Register must in turn be disclosed in the Annual Report.

DISCLOSURES OF INTEREST

Directors have disclosed interests in the following entities pursuant to Section 140 of the Companies Act 1993 for the period 1 October 2021 to 30 September 2022:

Director Entity Relationship

S M Brown Brown Land Holdings Limited

Dairy Goat Co-operative (N.Z.) Limited

Sarah Brown and Associates Limited

Mark Wynne Ballance Agri-Nutrients

Trading Subs:

• Ballance Agri-Nutrients (Kapuni) Limited

• Seales Winslow Limited

• Super-Air Limited

• Te Ata Hydrogen Limited

Non-Trading Subs:

• Kapuni Green Hydrogen Hold GP Limited

• Kapuni Green Hydrogen Project GP Limited

• Encoate Holdings Limited

• New Zealand Phosphate Limited

• Overseer Limited

J G Collie Arrow Dairy Limited*

Benmore Downs Limited

Platinum Dairies Limited

Salvation Army Jeff Farm Management Board

Takitimu Discussion Group

Limehill's School Board

D P McEvedy Central Plains Water Trust

Phoenix Park Farm Limited

Robeen Trust

Corde Limited

Shooting Creek Limited

Vintage Village Trust (Abbeyfield Ellesmere)

J A Miller Roslyn Downs Limited

Claymore Dairy Limited

Director and Shareholder Director Director and Shareholder

Employee (Chief Executive Officer) and Director of various trading and non-trading subsidiaries

G R Milne

(Retired 16 December 2021)

Braemar Hospital Limited

G R & J A Milne

Nyriad Trustee Services Ltd

PF Olsen Group Limited and subsidiaries

Rimanui Farms Limited Advisory Board

Rockhaven Trust

Synlait Milk Limited and subsidiaries

Terracare Fertilisers Limited

Waikato University

Zespri Director Remuneration Committee

D G Morrison Ahika Journeys Limited

Te Ao Kakano

Alpha Sheep Genetics Group

DG & BC Morrison Limited

Pure Taste New Zealand (NZ) Limited

W9

H D Sangster Community Trust of Maniototo

Farmlands Co-operative Society Limited

GlenAyr Limited

GlenAyr Dairy Limited

GlenAyr Properties Limited

Agri-Women’s Development Trust

Nottingham Dairy Limited

Independent Advisor Director Chairman Deputy Chairman Facilitator

Deputy Presiding Member

Chair Director and Shareholder Trustee and Chairman Director

Director and Shareholder Trustee and Chairman

Director and Shareholder Director and Shareholder

Chairman Partner Director Chairman Chairman Trustee Chairman Chairman Council Member Member

Director and Shareholder Director and Shareholder Member

Director and Shareholder Director and Shareholder Chairman

Chair Director Director and Shareholder Director and Shareholder Shareholder Facilitator Director and Shareholder

DISCLOSURES OF INTEREST (CONT)

Director Entity

S Robertson Norman Family Trust

G R Foot Trust

Ballance Agri-nutrients Limited

Independent Timber Merchants Co-Operative Limited*

Synlait Milk Limited

Synlait Milk Finance Limited

Robertson Family Trust

Relationship

Trustee Trustee Director Director Director Director Trustee

M J Taggart

FMG Insurance Limited

Oxford Health Charitable Trust

Oxford Health Charity Limited

Taggart Farms

Taumata Plantations Limited

Director Trustee Director Partner Chairman

*Entry removed by notices given by the directors during the year ended 30 September 2022.

The Interests Register also includes, pursuant to section 140(1) of the Companies Act 1993, entries for authorising the remuneration and particulars of indemnities and insurance for the directors.

RELEVANT INTERESTS IN SHARES

Directors have disclosed the following holdings of relevant interests in Alliance Group Limited shares pursuant to Section 148 of the Companies Act 1993:

S Brown 1,862 5,629 7,491

J G Collie 135,135 23,229 158,364

D P McEvedy 26,188 2,401 28,589

J A Miller 129,026 1,852 130,878

D G Morrison 55,375 828 56,203

H D Sangster 114,088 10,094 124,182

M J Taggart 76,165 941 77,106

All share transactions were carried out at their nominal value of $1.00 per share.

DIRECTORS REMUNERATION

The following remuneration was paid (and received) during the year ended 30 September 2022.

Director R enumeration

Brown $90,000 Collie $80,000 Mcevedy $80,000 Miller $80,000 Milne $16,739* Morrison $80,000 Rober tson $121,360** Sangster $80,000 Taggar t $200,000 Wynne $63,514

*Retired December 2021

**Includes $26,360 received after 1 October 2021 for fees relating to the 2021 financial year.

E M P LOYEE RE M U NER ATION

During the year ended 30 September 2022, the numbers of employees of the group who received remuneration including benefits of $100,000 or more were:

Remuneration No. of Employees

$100,000-$110,000 245 $110,001-$120,000 140 $120,001-$130,000 81 $130,001-$140,000 27 $140,001-$150,000 18 $150,001-$160,000 10 $160,001-$170,000 11 $170,001-$180,000 5 $180,001-$190,000 8 $190,001-$200,000 4 $200,001-$210,000 5 $210,001-$220,000 1 $220,001-$230,000 2 $230,001-$240,000 5 $250,001-$260,000 3 $260,001-$270,000 4 $280,001-$290,000 1 $290,001-$300,000 2 $300,001-$310,000 1 $350,001-$360,000 1 $470,001-$480,000 1 $480,001-$490,000 2 $550,001-$560,000 1 $580,001-$590,000 1 $710,001-$720,000 1 $1,730,001-$1,740,000 1 581

Our remuneration policy and practices are designed to attract, retain and reward high calibre senior leaders for the delivery of results that create value for our shareholders. This is achieved through market benchmarked remuneration that balances fixed and variable pay linked directly to the performance of the co-operative. The remuneration package for the Chief Executive and Executive Leadership Team is reviewed annually by the People Committee taking into account company results, individual performance and market data supplied by external specialist remuneration advisors.

CO-OPERATIVE STATUS

As required by section 10 of the Co-operative Companies Act 1996, the following resolution was passed by the board on 8 November 2022. All directors present voted in favour of the resolution.

“It was the opinion of the board that Alliance Group Limited has, throughout the year ended 30 September 2022, been a co-operative company within the meaning of the Co-operative Companies Act 1996 on the following grounds:

(a) Alliance Group Limited carries on, as its principal activity, a co-operative activity as that term is defined in the Co-operative Companies Act 1996;

(b) The constitution of Alliance Group Limited states its principal activities as being cooperative activities

(c) Not less than 60% of the voting rights of Alliance Group Limited were held by Transacting Shareholders as that term is defined in the Co-operative Companies Act 1996”.

Director Shares held at 30 September 2021 Shares acquired since 30 September 2021 Shares held at 30 September 2022

CONSOLIDATED FIVE YEAR REVIEW

DIRECTORS

The names of the persons holding office as directors of the company as at 30 September 2022 are listed in the directory on the inside of the back cover.

AUDITORS

Under section 200 of the Companies Act 1993, KPMG, Chartered Accountants, continue in office as auditors.

COMPANY’S AFFAIRS

A profit for the year has been recorded and the company’s balance sheet remains robust with an equity ratio of 56%. Further details of the year under review, including material changes in the nature of the business of the company or any of its subsidiaries are included in the Chairman and Chief Executive review and the financial statements of the company accompanying this report.

M J Taggart DIRECTOR S Robertson DIRECTOR

2022 Restated 2021 20202019 2018

000’s000’s000’s000’s000’s

Turnover 2,240,702 1,847,097 1,834,096 1,712,937 1,715,460

Net profit before restructuring, provisions and distributions 117,206 42,182 27,428 20,997 10,435

Restructuring and provisions 949 2,334 19,959 260 79

Distributions 11,342 8,509 -8,953 26

Profit after tax 73,636 23,811 6,956 4,970 6,602

Fixed assets 284,202 269,127 245,022 236,126 231,562

Total assets 796,591 703,099 610,126 541,007 519,505

Shareholders’ funds 447,759 370,676 347,188 340,322 333,073

Shareholders’ funds as a percentage of total assets 56.2% 52.7% 56.9%62.9%64.1%

Ordinary shares 92,165 88,634 88,843 85,276 76,467

CORPORATE

MANAGERS

CHRISTCHURCH

APPOINTED

REGISTERED

EXECUTIVE LEADERSHIP TEAM

0800 354 435 PO Box 845, Invercargill 9840 51 Don Street, Invercargill 9810

03 214 2700

executive@alliance.co.nz

ALLIANCE.CO.NZ