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Ashburton Trading Society Ltd

Annual Report 2013

With you all the way


Directors

Philip McKendry (Chairman)

Ian Mackenzie

(Deputy Chairman)

Group Chief Executive/ Company Secretary

Neal Shaw General Manager Operations

Jono Pavey

Alister Body

General Manager Business Development

Andrew Priest

Chris Bristol

(Independent)

Mark Saunders James Sim Gabrielle Thompson

Auditors

Bankers

PricewaterhouseCoopers Sir Gil Simpson Drive Christchurch

Bank of New Zealand East Street Ashburton

Solicitors

Registered Office

Cooney Silva Evatt Tancred Street Ashburton

97 Burnett Street Ashburton

Finance Manager

Andrew Collis IT Manager

Matthew McGurk

CONTENTS

1 8

ATS at a glance

Directors’ Report

2 13

Chairman & Chief Executive Review

Financial Statements

6 24

Community Involvement

Notice of Annual General Meeting


1

ATS at a glance Average Spend Per Member

Membership Growth

2,674

2012

2,698

2013

Operating Surplus ($m consolidated)

$5,381

$83,000

2012

$85,000

2013

Efficiency Ratio: Group

3.2%

Turnover

($m consolidated)

$221.90

$232.00

2012

2013

Profit Distribution: Group TAXATION ON OPERATING PROFIT

3.4% 30%

$2,057

70% 2012

2013

2012

2013

RETAINED


2

Chairman & group Chief Executive review

We are delighted to present this, the 50th annual report to shareholders of ATS. The diverse nature of the Canterbury farming operations, and the robust irrigation schemes which support them, provide this region with the unique opportunity to minimise the effects of climate, particularly the extremely dry conditions that were experienced across most of the country towards the end of 2012 and into 2013.

Consequently our members’ farm businesses, mostly across Canterbury, continued to grow and develop throughout the year, and ATS grew alongside them as an effective investment ensuring lower cost farm supplies.

Fifty Years of Lowering Costs 2013 is ATS’s 50th year of operation. Today we are still delivering what the co-operative was set up to do back in 1963, that is to reduce costs for farmers. Our founding directors would never have anticipated their cooperative being as successful as it has become over the last 50 years and I’m sure many of the local farming families appreciate the lasting legacy created by those visionaries back in 1963. Celebrations this year have included a morning tea for members along with a shareholders’ ball held in June, with the official cake cutting ceremony celebrated on the actual incorporation date of 21 August.

Mission and Strategy The purpose of ATS remains as it always has, to lower the cost of farm inputs to its members. There has been considerable effort during the year put into developing and implementing a strategy to ensure that ATS remains the most competitive and efficient supplier of farm

inputs to its members. Clearly ATS has chosen a different path to many of its competitors in that it remains independent while still being able to offer significant tangible benefits to members. Work continues on investigating ways ATS can provide additional growth and benefits for shareholders while retaining its culture and identity, along with its focus on the local farming community.

Our Performance The 2013 financial year saw your co-operative sales grow to a record $232 million (up 4.5% vs 2012) with an operating surplus of $5.4 million which is a significant improvement in profitability from last year. However the improvement in profitabitiy is a result of a one-off gain on the sale of the ATS Card business and Mobil/Allied fuel business into a 50% owned joint venture company with Ravensdown. This gain on sale is non-cash as the consideration paid is deferred and will be realised over a maximum of five years. The value of the Deferred Consideration may change over time depending on the value of Card and Fuel business transacted by ATS members. Directors resolved not to pay a bonus rebate to members as there are ongoing expenses with regard to buildings that


3

will need to be dealt with over the coming financial years. The divestment of ATS’s card and Mobil/Allied fuel businesses into Ruralco means future financial results will look different from recent years. We anticipate lower turnover for the ATS parent but greater dividend income than has been traditional.  

Our Operations The ATS revenue streams of rural supplies, card, fuel, energy, seed, electricity and fertiliser all performed well in the 2012/2013 financial year with the strongest growth coming from the electricity segment. This was due to drier conditions combined with the specialised service offered by ATS Energy.

Our Buildings

BELOW: Philip McKendry (Chairman) and Neal Shaw (Group Chief Executive)

Like many Canterbury businesses, ATS’s buildings have been affected by the earthquakes. As a result of structural evaluations the decision was taken to close down part of the existing ATS Burnett Street site as it was deemed unsafe. There will be some strengthening and potential rebuild of parts of the site during 2013/2014, to enable ATS to incorporate staff in a safe, healthy and

efficient work environment. Plans have to take into account not just current but also future building and infrastructure needs. There are a number of options available to ATS at the moment and we continue to work through the full implications of a partial rebuild of the Burnett Street site or a complete relocation to a new development.

Ruralco NZ Limited The concept of Ruralco was founded in February 2011 after some strategic planning work carried out in August 2010. This work identified a key strength of the ATS business being the ATS Card. A strength of ATS has been its ability to work with other businesses to provide mutual benefit to farmers, the supplier businesses and the community. It was a logical step to investigate taking this to the farming community on a wider geographic basis. ATS had been aware that Ravensdown was looking to introduce a discount charge card to shareholders over many years, while ATS was looking for access to the farming community for the ATS Card outside of its immediate region. An agreement was reached between Ravensdown and ATS in September 2012 with the Ruralco initiative being launched to the central South Island region (including the West Coast) on 1 July 2013. For ATS shareholders, apart from the change and the look of the ATS Card, it was very much business as usual but with greater benefits in terms of increased access geographically to a broader range of suppliers. The initial roll out, in the central South Island only, was to ensure the card platform was fully operational and all IT issues were clearly resolved before taking the offer to a wider market. During the development of the Ruralco Card, work was specifically carried out to ensure the discount charge card could be used at Mobil service stations. This has


4

Chairman & group Chief Executive review

been a particular issue for the old ATS Card in the past as shareholders of ATS have needed to carry two cards; one for Mobil fuel and one to make ATS purchases. As the Ruralco Card is enhanced we believe that within 12 months you will no longer require a separate Mobilcard as you will be able to transact all Mobil fuel purchases, whether it is at service stations or truck stops, with the Ruralco Card.

Subsidiaries and Associates Our subsidiaries and associate companies, ATS Fuel Limited, Pro-Active NZ Limited, Watermetrics NZ Limited and Coulter Seeds

Limited have had varying results throughout the financial year. ATS Fuel Limited and Pro-Active NZ Limited continue to perform strongly while Watermetrics NZ Limited is moving from meter installation to information management as the installation of meters within the area matures. The Coulter Seeds investment has not performed to our expectations and growth in this company has been modest.

Community ATS is committed to supporting many community projects and this continues to be a part of our philosophy. We remain supportive of these projects in a variety of ways, either through donations of goods and services or by providing financial assistance. We continue to be the naming sponsor for the ATS Longbeach Coastal Challenge as well as being involved in a number of agricultural industry, education, community and sports groups. We have listed these in the annual report for your review.

Health and Safety We continue to strive to improve our safety performance by providing our staff with a

hazard free environment and encouraging them to protect themselves and their colleagues on a daily basis. There has been a significant reduction in accidents and incidents throughout the year and we continue to work towards initiatives to reduce that number to zero.

Board of Directors It has been a big year for the Board with three new directors since November 2011, and the overseeing of the launch of Ruralco, which is one of the biggest strategic initiatives in ATS history. All directors have responded fully to

all challenges throughout the year. We thank Jim Sim, who is retiring from the Board at this year’s AGM, for his wholehearted contribution to the Board during his tenure. We look forward to welcoming a new director at the AGM on 18 November.

ATS Staff We would like to thank the executive team and the ATS staff for their hard work and dedication over the past 12 months. This financial result is an improvement on the previous year and one the team should be very proud of. During the financial year we saw the retirement of Allan Lilley and Mike Broadfoot who were both long-serving staff members completing 30 years and 25 years of service respectively.

Outlook Since 1 July 2013 we have launched the Ruralco Card offer to the central South Island. This will be followed by a launch into the Otago/Southland and Nelson/Marlborough regions. 2014 will see development of the card offer into the North Island as we continue to enhance the supplier network for the benefit of all farmers. The separation of the two businesses leaves ATS with a more traditional


5

CLOCKWISE FROM TOP LEFT: Neal Shaw (Group Chief Executive), Chris Bristol (General Manager Business Development), Jono Pavey (General Manager Operations) Matthew McGurk (IT Manager), and Andrew Collis (Finance Manager)

offer of rural supplies, electricity, fertiliser and seed along with some bulk fuel and card fuel business not affiliated with Mobil or Allied Petroleum. ATS will very much retain the local member focus leaving Ruralco to concentrate on a national offer. ATS members will benefit from the Ruralco offer by being able to utilise their card anywhere in New Zealand by the end of 2014 with some national offers such as fuel and supermarkets already being available. We acknowledge there are risks in developing these types of businesses but the alternative was for ATS to remain as it is with a substantial risk of medium term irrelevance by not being able to lead or create competition in the farm supplies market. The Ruralco initiative taken in ATS’s 50th year of existence will give ATS the best possible chance of being able to influence the market on behalf of its members for another 50 years

and beyond. ATS will continue to work hard at strategic and operational levels to ensure it continues to deliver on-going value and by doing so, it will fulfil its mission of lowering costs for its farming communities.

P J McKendry Chairman

N D Shaw Group Chief Executive


6

Community involvement AGRICULTURE INDUSTRY

AGITO Skills Day Ashburton Agricultural & Pastoral Association Ashburton Agrikids Coalgate Young Farmers Fencing Dairy Women’s Network Filipino Dairy Workers in New Zealand Hinds Young Farmers Mayfield Collie Sheepdog Club Methven Ploughing Association Mid Canterbury Black & Coloured Sheep Breeders Association New Zealand Young Farmers Northern South Island South Suffolk Breeders Club NZ Arab Horse Breeders Society Inc. Pendarves Young Farmers Club Rural Women New Zealand RYUB Group South Island Dairy Event EDUCATION

Ashburton Christian School Chertsey School Hinds School Lagmhor School Lauriston Primary School Lincoln University Longbeach Play Centre Mayfield Plunket Methven Primary School Methven Summer School Mid Canterbury Playcentre Association Mount Hutt College Peel Forest Montessori Preschool Rakaia School Rakaia Plunket

COMMUNITY

Alford Forest Reserve Board Aorangi Holstein Friesian Club Ashburton A & P Association Ashburton Child Youth & Family Ashburton County Lions Club Ashburton District Council Ashburton Fanciers Society Ashburton Forkes Community Ashburton Hospital Ashburton Play Centre Ashburton Toy Library Canterbury West Coast Regional Rural Fire Committee Dorie Community Trust Ellesmere Lions Geraldine Summer Fete Hampstead School Fair Hinds Lions Hororata Spring Fair Lions Club of Ashburton Mayfield A & P Association Mayfield & District Lions Club Methven A & P Association Methven Community Board Methven Lions Methven Theatre Company Mid Canterbury Child Cancer Foundation Mid Canterbury Children’s Theatre Mid South Canterbury Plunket Car Seat Service Northern South Island Regional Rural Fire Committee Parent to Parent New Zealand Presbyterian Support Property Brokers Rakaia Lions Rakaia Toy Library Save the Children NZ

SPORTS GROUPS

Allenton Netball Team Ashburton Area Show Jumping & Showhunter Club Ashburton College Girls Football 1st XI Ashburton Golf Club ATS Aces Golf Team ATS Women’s Teams Christmas Tournament Canterbury Cutting Horse Club Carew Indoor Bowls Club Carew Indoor Sports Hinds Outdoor Bowling Club Mayfield Golf Club Methven A Netball Team Methven Bowling Club Methven Golf Club Methven Ladies Golf Club Social Fundraising Methven Softball Team Methven Tennis Club Mid Canterbury 12th Grade Japan Football Trip Mid Canterbury Football Team Mid Canterbury Hunting Competition Mid Canterbury Hockey Mid Canterbury Mountain Bike Club Mount Hutt College Rugby 1st XV Mount Somers Rugby Peel Forest Children’s Day Rakaia Pony Club Rakaia Squash Club Southern Rugby Football Club Tinwald Pony Club Windwhistle Golf Classic Tournament annual Sponsorship

ATS Longbeach Coastal Challenge EA Networks Sports Centre FAR Arable Ys


7


8

directors’ report

Your Directors present the 50th annual report of Ashburton Trading Society for the year ended 30 June 2013

Philip McKendry

Ian Mackenzie

Alister Body

CHAIRMAN ATS Chairman Philip McKendry and his wife Judith farm a 200ha arable property near Methven. Philip received a BAgSc (Hons) from Lincoln and is a member of the Institute of Directors (loD). He was elected to the ATS Board of Directors in 1998 and was elected Deputy Chair in 2005. Former founding chairman of Barrhill Chertsey Irrigation Ltd, Philip has had a long involvement in community irrigation development. He is currently a director of Electricity Ashburton Limited and Watermetrics NZ Limited. He is also a trustee of the Advance Ashburton Community Foundation. When not supporting his three teenagers in their academic, sporting and cultural activities, Philip enjoys running, skiing, reading and following sport.

DEPUTY CHAIRMAN Since graduating from Lincoln in 1976 with a BAgSc, Nuffield Scholar Ian Mackenzie has been farming at Akaunui, Eiffelton. The intensive cropping farm also includes a dairy farm operation, with the property now running to 490ha. Ian has several roles off the farm including being the Chairman of Eiffelton Irrigation Scheme, the Ashburton Community Water Trust, the Mid Canterbury Farmers Charitable Trust and the Grain and Seeds section of Federated Farmers. He is a Director of Mackenzie Harvesting and sits on the Boards of Irrigation NZ and the National Board of Federated Farmers, where he is the spokesman for water, biodiversity, the environment and transport. Ian was elected to the ATS Board of Directors in 2005. When time permits he enjoys skiing, sailing and jet boating.

DIRECTOR Alister Body graduated from Lincoln University with a B.Com in Agriculture and was elected to the ATS Board of Directors in 2011. Alister is also a current Director of DairyNZ as well as Chair of the Dairy Environment Leadership Group, Ruralco NZ Limited and DairyNZ’s Human Capability Leadership Group. Past governance experience includes Provincial Dairy Chairman with Federated Farmers and National President of New Zealand Young Farmers Clubs. Alister and his wife Janine Peters farm at Methven where they milk 580 cows. Alister’s other off farm interests include skiing, sailing and theatre.


9

Your Directors have pleasure in submitting their 50th Annual Report, together with the Chairman and Chief Executive’s Review and Summary Financial Statements for the Society for the year ended 30 June 2013.

Parent 2013 ($000)

Parent 2012 ($000)

9,095

2,017

-

(500)

9,095

1,517

(2,641)

(302)

Net Surplus After Taxation and Distribution

6,454

1,215

Plus Retained Earnings Brought Forward

7,438

6,223

13,892

7,438

Operating Surplus Before Distribution Less Rebate to Members Taxation for the Year

Retained Earnings Carried Forward

Andrew Priest

Mark Saunders

James Sim

Gabrielle Thompson

INDEPENDENT DIRECTOR Andrew Priest is a Christchurchbased Management Consultant specialising in strategic growth and performance improvement at board and executive level. He was appointed Independent Director of ATS in 2010. His international experience includes business across industries encompassing building products, fast moving consumer goods, tourism, mining and energy and high tech. While holding a senior position for Carter Holt Harvey based in the United States, Andrew and his team built a multi-million dollar business from start-up across North America, Asia and the Middle East. Andrew holds a BSc from the University of Waikato, an MForSc from the University of Canterbury, and has attended an executive education finance programme at The Wharton School, University of Pennsylvania.

DIRECTOR Mark Saunders was elected to the ATS Board of Directors in 2012 and has held leadership roles within AgITO Mid Canterbury and Young Farmers. He is a Past President of the Ashburton Toastmasters Club and in 2013 enrolled with the Institute of Directors whilst being a member of the Hinds Plains Land and Water Partnership. Mark and his wife Pennie farm 1600 cows at Lagmhor, having farmed in the Westerfield district in partnership since 2003. In addition to supporting his three young boys with their rugby and adventures, Mark enjoys being actively involved in the community, jet boating the Mid Canterbury Rivers, fishing, hunting and public speaking.

DIRECTOR James Sim was elected to the ATS Board of Directors in 2004 and he is Chairman of the ATS Audit and Risk Committee, Pro-Active NZ Limited, QAgrainz and United Wheatgrowers NZ Limited. He is also a director of Process Vegetables NZ, Tarmigan Farm Limited and is a Trustee of Toraja Rural Development Trust. He and wife Sandy own an irrigated arable farm north-east of Ashburton. Crops grown include cereals, grass and vegetable seeds, as well as process crops. Lambs are bought in and fattened during the winter. James received a Dip Ag from Lincoln University and his off farm interests include mountain and water sports.

DIRECTOR Gabrielle Thompson graduated from Massey University with a Veterinary degree in 2000. Initially working for Riverside Vets she opened her own companion animal clinic in 2004, growing to 5 clinics around the lower South Island over a 10 year period and is now part of a nationwide group. She is also a director of Pets n Vets, CareVets, and chair for the Christchurch After Hours Veterinary Clinic. Gabrielle and her husband, along with their family also own an arable and store lamb farm at Dorie. In her free time, Gabrielle spends time with family, including two and a half year old Frances. She likes to go to the gym, spend time with friends, and travel.


10

directors’ report

Principal Activities

Directors

The principal activities of the Ashburton Trading Society Limited (ATS) during the year ending 30 June 2013 was to conduct the Shareholders’ group buying activity in the areas of the ATS Card and ATS Supplier Network; Fuel; Fertiliser; Seed; Electricity; Retail; Pro-Active NZ Limited; ATS Fuel Limited; Watermetrics NZ Limited, Coulter Seeds Limited, and Ruralco NZ Limited.

The Board of Directors currently comprises of six Directors who have been elected by the shareholders and one independent director whom has been appointed by the board. The Directors in office at 30 June 2013 and their special responsibilities include:

During the financial year under review there were no material changes to the nature of the Society’s business. There has been a change to the way the Society transacts its Card Business with the ATS Supplier Network. The Society sold its Card Business into Ruralco NZ Limited on 1 July 2013. ATS members still have access to the Supplier Network through Ruralco NZ Limited and ATS is entitled to a dividend from Ruralco NZ Limited. The sale of the Card Business resulted in a non-cash Gain on Sale before tax of $8,384,000. The Gain on Sale is a result of the Deferred Consideration paid by Ruralco NZ Limited. The cash flow form the Deferred Consideration is expected to be realised over 5 years. The value of the Deferred Consideration may change over time depending on the value of Card Business transacted by ATS members. As disclosed by the attached Summary Financial Statements your Directors consider the affairs of the Society to be satisfactory.

Role of the Board The role of the Board of Directors is to provide the proper governance, direction and control of the Society’s activities. Directors have the prime responsibility of setting the strategic direction of the Society.

Philip McKendry

Ian Mackenzie

Chairman ATS; Director Watermetrics NZ Limited; Member Audit, Remuneration, and Rules Committees Deputy Chairman ATS; Chairman ATS Fuel Limited; Director Ruralco NZ Limited; Member Audit, and Rules Committees

Alister Body

Chairman Ruralco NZ Limited; Member Audit Committee

Andrew Priest

Member Audit, and Remuneration Committees

Mark Saunders

Member Audit Committee

James Sim

Chairman Pro-Active NZ Limited; Chairman Audit Committee

Gabrielle Thompson Member Audit Committee

• The Directors’ meeting obligations were fulfilled for the year ending 30 June 2013; • D Keeley and R Watson retired by rotation in November 2012; • G Thompson and M Saunders were elected as Directors in November 2012; • The Directors retiring by rotation this year are Messrs J Sim and P McKendry. Mr Sim is not seeking re-election.

Directors’ Remuneration P McKendry

$42,000

I Mackenzie

$22,000

A Body

$17,000

A Priest

$17,000

M Saunders J Sim

$9,917 $18,000

G Thompson

$9,917

D Keeley (Retired)

$7,083

R Watson (Retired)

$7,083

Total

$150,000


11

Directors’ Insurance Ashburton Trading Society Limited has a policy of Directors’ and Officers’ liability insurance, which ensures Directors and Officers will incur no monetary loss as a result of actions undertaken by them provided they operate within the law. This policy includes actions carried out by the Directors in their capacity as Directors of Pro-Active New Zealand Limited, ATS Fuel Limited, Coulter Seeds Limited, Watermetrics NZ Limited, and Ruralco NZ Limited.

Directors’ Benefits No Director of the Society has, since the end of the previous financial period, received or become entitled to receive a benefit (other than a benefit included in the total emoluments received or due and receivable by Directors shown in this report) other than normal rebates received by them as shareholders as a result of trading with the Society in the same manner as all other shareholders.

Procedure to Identify and Manage Risk The Directors acknowledge that they are ultimately responsible for the management of risk to the Society. Risk Management forms part of the monthly Board meetings.

Use of Information There were no notices from Directors of the company requesting to use company information received in their capacity as Directors which would not otherwise have been available to them.

Auditors Following a recommendation at the 2012 AGM, PricewaterhouseCoopers were appointed ATS auditors.

P J McKendry Chairman


12

CONTENTS

13

Summary of Accounting Policies & Preparation Statement

16

Summary Balance Sheets

14

Summary Statements of Comprehensive Income

15

Summary Statements of Changes In Equity and Members’ Interests

17

Summary Statements of Consolidated Cash Flows

18

Summary Notes to the Accounts

22

Independent Auditors’ Report


13

Financial Statements Summary of Accounting Policies and Preparation Statement The Ashburton Trading Society Limited is a Society incorporated in New Zealand under the Industrial and Provident Societies Act 1908. Ashburton Trading Society Limited (ATS) is a farming co-operative, based in Mid Canterbury, formed in 1963. ATS facilitates trade between its members and approved suppliers. ATS also has three farm merchandise stores located in Ashburton, Methven and Rakaia. The group consists of Ashburton Trading Society Limited, Pro-Active NZ Limited, ATS Fuel Limited, Watermetrics NZ Limited, Coulter Seeds Limited, and Ruralco NZ Limited. The financial statements are presented in New Zealand currency, rounded to the nearest thousand dollars. FULL ACCOUNTS A copy of the full annual accounts for Ashburton Trading Society Limited can be downloaded from www.ats.co.nz, or collected from 97 Burnett Street, Ashburton during business hours.


14

SUMMARY Statements of Comprehensive Income For the year ended 30 June 2013

Group 30 June 2013 ($000)

Group 30 June 2012 ($000)

Parent 30 June 2013 ($000)

Parent 30 June 2012 ($000)

Revenue—Sales Cost of Sales

231,955 (222,575)

221,941 (212,866)

230,782 (221,961)

220,988 (212,398)

Gross Profit Interest Income Dividend Received Gain on Sale of Intangibles Impairment of Associate Share of Associate Surplus Other Operating Expenses Salaries and Wages Audit of Financial Statements Directors’ Fees Depreciation Amortisation of Intangibles Rentals and Operating Leases Finance Cost—Interest

9,380 91 - 4,192 (322) (35) (2,843) (4,176) (32) (150) (319) (169) (138) (98)

9,075 81 - - - 56 (2,510) (3,703) (37) (144) (311) (245) (92) (113)

8,821 72 - 8,384 (322) - (2,800) (4,176) (32) (150) (314) (169) (121) (98)

8,590 58 450 (2,457) (3,703) (37) (144) (306) (244) (78) (112)

Operating Surplus Less Rebates to Members

5,381 -

2,057 (500)

9,095 -

2,017 (500)

Net Surplus before Taxation

5,381

1,557

9,095

1,517

Provision for Taxation Tax on Net Surplus before Taxation

(1,609)

(439)

(2,641)

(302)

Total Comprehensive Income for the period, net of Tax

3,772

1,118

6,454

1,215


15

SUMMARY STATEMENTS OF CHANGES IN EQUITY AND MEMBERS’ INTERESTS For the year ended 30 June 2013

Group 30 June 2013 ($000)

Group 30 June 2012 ($000)

Parent 30 June 2013 ($000)

Parent 30 June 2012 ($000)

Balance at Start of Period Total Comprehensive Income for the period, net of Tax

11,204

10,361

11,216

10,276

3,772

1,118

6,454

1,215

Contributions from Owners: Movement in Ordinary Shares Issued Movement in Deferred Shares

14,976

11,479

17,670

11,491

12 (286)

26 (301)

Balance at End of Period

14,702

17,396

11,216

12 (286)

26 (301) 11,204


16

SUMMARY BALANCE SHEETS As at 30 June 2013

Group 30 June 2013 ($000)

Group 30 June 2012 ($000)

Parent 30 June 2013 ($000)

Parent 30 June 2012 ($000)

Equity and Members’ Interests Share Capital Deferred Shares Retained Earnings

1,349 2,155 11,198

1,337 2,441 7,426

1,349 2,155 13,892

1,337 2,441 7,438

14,702

11,204

17,396

11,216

15,317 377 207 - 3,303

15,182 323 74 500 1,003

15,145 377 69 - 3,303

14,855 323 500 1,003

Current Liabilities Trade Payables Employee Entitlements Taxation Payable Provision for Bonus Rebate Current Portion of Term Liabilities Non Current Liabilities Deferred Tax Liability Bank Loan (Secured) Less Current Portion Term Liabilities

19,204

17,082

18,894

16,681

2,021 3,303 (3,303)

880 1,003 (1,003)

3,194 3,303 (3,303)

880 1,003 (1,003)

2,021

880

3,194

880

Total Equity and Liabilities

35,927

29,166

39,484

28,777

Non Current Assets Investment in Subsidiaries Investment in Associate Advance to Associates Deferred Consideration Term Deferred Tax Asset Property Plant & Equipment Intangibles

- 52 858 4,245 129 5,761 240

- 409 316 - 124 5,719 253

420 44 858 8,437 129 5,719 236

420 365 316 124 5,675 249

Current Assets Cash and Cash Equivalents Inventory - Finished Goods Taxation Refundable Advance to Associates Trade & Other Receivables

11,285

6,821

15,843

7,149

1,078 8,484 - - 15,080

578 6,725 - 41 15,001

430 8,166 - - 15,045

153 6,466 40 41 14,928

24,642

22,345

23,641

21,628

Total Assets

35,927

29,166

39,484

28,777

For and on behalf of the Board

P J McKendry R I C Mackenzie (Chairman) (Deputy Chairman)

Date: 9 September 2013


17

SUMMARY STATEMENTS OF CONSOLIDATED CASH FLOWS For the year ended 30 June 2013

Group 30 June 2013 ($000)

Group 30 June 2012 ($000)

Parent 30 June 2013 ($000)

Parent 30 June 2012 ($000)

Cash Flow From Operating Activities: Cash was provided from: Receipts from Customers Income from Interest Taxation Refund GST

231,998 80 40 9

222,174 71 43 -

230,780 65 40 -

221,183 50 43 -

Cash was disbursed to: Payments to Suppliers & Employees Interest Paid Income Tax Paid GST

232,127

22,288

230,885

221,276

231,625 90 375 3

219,120 116 477 52

230,712 90 258 16

218,594 112 390 27

232,093

219,765

231,076

219,123

Net Flow from Operating

34

2,523

(191)

2,153

Cash Flow From Investing Activities: Cash was provided from: Proceeds from Sale of Property Plant & Equip Dividend from Subsidiary Proceeds from Sale of Shares Repayment of Advance

214 - - -

59 - 7 -

213 - - -

59 450 7 -

Cash was applied to: Advance to Associate Investment in Associate Purchase of Property Plant & Equip Purchase of Intangibles

214

66

213

516

500 - 566 209

316 322 463 93

500 - 563 208

316 322 463 93

1,275

1,194

1,271

1,194

Net Flow from Investing Activities

(1,061)

(1,128)

(1,058)

(678)

Cash Flow From Financing Activities: Cash was provided from: Issues of Shares Proceeds from Loans

28 3,300

50 -

28 3,300

50 -

Cash was applied to: Rebates Paid to Members Shares Repaid Loan Repaid

3,328

50

3,328

50

500 302 1,000

550 325 850

500 302 1,000

550 325 850

1,802

1,725

1,802

1,725

Net Flow from Financing Activities

1,526

(1,675)

1,526

(1,675)

Net Increase / (Decrease) in Cash Held Add Opening Cash Brought Forward

500 578

(280) 858

277 153

(200) 353

Ending Cash Carried Forward

1,078

578

430

153

Cash Comprises Bank Accounts and Cash

1,078

578

430

153


18

SUMMARY NOTES TO THE ACCOUNTS

Group 2013 ($000)

1. Rebates Paid to Members Rebates have been provided for in the Financial Statements as follows: Bonus Rebate - Deferred Rebate - Total Rebates

-

Group 2012 ($000)

Parent 2013 ($000)

Parent 2012 ($000)

500 -

- -

500 -

500

-

500

The level of rebates distribution is determined by the Directors having regard to the Society’s projected profitability and future capital requirements for reinvestment in the co-operative. The bonus rebate is paid out each year after balance date. Deferred rebates are converted to Deferred Shares at the time of crediting to member accounts. Please also refer to note 9 (Movement in Capital). 2.

Share Capital Issued Ordinary Shares Deferred Shares

2,000 4,000

2,000 4,000

2,000 4,000

2,000 4,000

6,000

6,000

6,000

6,000

Unallotted Ordinary Shares Deferred Shares

651 1845

663 1,559

651 1,845

663 1,559

2,496

2,222

2,496

2,222

Allotted Ordinary Shares Deferred Shares

1,349 2,155

1,337 2,441

1,349 2,155

1,337 2,441

3,504

3,778

3,504

3,778

Ordinary Shares In accordance with the Rules of Ashburton Trading Society Limited (the Rules), each member of the Society is required to hold such number of shares in the Society as fixed by the Board (currently 500 ordinary shares). Ordinary shares are issued and redeemed at the nominal value of $1 for each share. All ordinary shares rank equally with one vote for each financial member of the Society. Ordinary shares are entitled to a pro rata share of any surplus on wind-up of the Society.

Deferred Shares Deferred shares are issued in accordance with the Rules at the discretion of the Board as part of the settlement for annual rebates to members. Deferred shares are issued and redeemed at the nominal value of $1 for each share. Deferred shares do not carry an entitlement to vote but qualify for dividends at the discretion of the Board and a pro rata share of any surplus on windup of the Society. Deferred shares are repaid to members at the discretion of the Board.

Withdrawal of Members A member may withdraw from the Society by providing notice in writing of their intention to withdraw once the Board has consented to their withdrawal. The Rules state that the Board has absolute discretion to either accept or decline the withdrawal of a member. Accordingly, repayment of ordinary and deferred shares is at the discretion of the Society, not the member. For this reason, ordinary and deferred shares have been classified as equity.


19

Group 2013 ($000)

Group 2012 ($000)

Parent 2013 ($000)

Parent 2012 ($000)

Movement in Capital Share Capital at start of period New Members at $1 per share Less Redemptions During Period

1,337 28 (16)

1,311 50 (24)

1,337 28 (16)

1,311 50 (24)

Share Capital Issued and Paid Up at end of period

1,349

1,337

1,349

1,337

2,441 (277) (9)

2,742 (277) (24)

2,441 (277) (9)

2,742 (277) (24)

Deferred Shares Brought Forward Less 2002 Shares Paid Out Less Paid Out Withdrawals Plus Deferred Rebates Converted for 2013

-

-

-

-

Deferred Shares Balance

2,155

2,441

2,155

2,441

Total Capital at end of period

3,504

3,778

3,504

3,778

3.

4.

Investment in Associates Ashburton Trading Society has a 40% interest in Watermetrics NZ Limited (2012 40%). Watermetrics NZ Limited is incorporated in New Zealand. The principal activity of Watermetrics NZ Limited is water meter wholesale and retail. Watermetrics NZ Limited has a 30 June balance date and is unaudited. The directors are not aware of any significant events or transactions since Watermetrics NZ Limited balance date. Watermetrics NZ Limited share capital is $70,000. Ashburton Trading Society has a 45% interest in Coulter Seeds Limited (2012 45%). Coulter Seeds Limited is incorporated in New Zealand. The principal activity of Coulter Seeds Limited is seed dressing, mixing, and treatment. Coulter Seeds Limited has a 30 June balance date (2012 31 March) and is unaudited. As the investment in Coulter Seeds has been revalued to zero the ATS Group have discontinued to take its share of losses in the current year accounts. The directors are not aware of any significant events or transactions since Coulter Seeds Limited balance date. Coulter Seeds Limited share capital is $1,000. Ashburton Trading Society has a 50% interest in Ruralco NZ Limited (2012 NIL). Ruralco NZ Limited is incorporated in New Zealand. The principal activity of Ruralco NZ Limited is facilitating trade between cardholders and approved suppliers. Ruralco NZ Limited has a 30 June balance date and started operations from 1 July 2013. The share of surpluses taken up is disclosed in the Statement of Comprehensive Income. The directors are not aware of any significant events or transactions since Ruralco NZ Limited balance date. Ruralco NZ Limited share capital is $NIL. The deferred consideration ATS receives from the sale of the card business to Ruralco NZ Limited will be received over a maximum of 5 years, and is dependent on the performance of Ruralco NZ Limited. The deferred consideration is directly linked to the value of transactions made by the card holders that are also ATS members.


20

4Contd.

Investment in Associates

Group 2013 (000)

Shares in Associates Watermetrics NZ Limited Coulter Seeds Limited Ruralco NZ Limited

28 - -

Group 2012 (000)

28 1 -

Parent 2013 (000)

Parent 2012 (000)

28 - -

28 1 -

Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting and are carried at cost by the parent entity. Interest Held by Consolidated Group 2013 2012 2013 % % ($000) Watermetrics NZ Limited 40% 40% 70 Coulter Seeds Limited 45% 45% (182) Ruralco NZ Limited 50% - -

Consolidated Carrying Amount 2012 ($000) 105 315 -

Summarised financial information in respect of the Group’s associates is set out below:

Group 2013 ($000)

Group 2012 ($000)

Balance Sheet Total assets Total liabilities

3,582 3,864

2,194 1,250

Net assets

(282)

944

Group’s share of net assets of associate

(134)

414

Statement of Comprehensive Income Total revenue Total Profits/(Loss) for the period before tax

3,182 (476)

3,037 143

Group’s share of Profits/(Loss) before tax of associates Income tax

(35) -

56 (16)

Recognised Profit/(Loss)

(35)

49

Parent 2013 ($000)

Parent 2012 ($000)

Group 2013 ($000)

Group 2012 ($000)

Movements in Carrying Amount Shares at Cost Balance At Start of Period Shares of Recognised Revenues and Expenses Share of Dividends Shares Purchased Write down Disposals

44 409 (35) - - (322) -

365 59 49 - 322 - (21)

44 365 - - - (321) -

365 54 322 (11)

Balance At End of Period

52

409

44

365


21

2013 Parent ($000)

2012 Parent ($000)

5. Related Party Transactions Pro-Active NZ Limited During the period there have been material transactions between Ashburton Trading Society Limited and its subsidiary, Pro-Active NZ Limited, as follows: Goods Purchased from Pro-Active NZ Ltd Management Fee Received Amounts Payable Amounts Receivable

2,213 40 14 4

2,458 40 8 4

ATS Fuel Limited During the period there have been material transactions between Ashburton Trading Society Limited and its subsidiary, ATS Fuel Limited, as follows: Amounts Receivable Sales to Society Members

763

Watermetrics NZ Limited During the period there have been material transactions between Ashburton Trading Society Limited and its associate, Watermetrics NZ Limited, as follows: Goods Purchased from Watermetrics NZ Limited Director Fees Amounts Receivable Amounts Payable Cash Advance

- 873

825 14 - 112 41

1,263 3 226 41

Coulter Seeds Limited During the period there have been material transactions between Ashburton Trading Society Limited and its associate, Coulter Seeds Limited, as follows: Sales to Society Members Cash Advance Director Fees Amounts Receivable Amounts Payable

299 316 - 1 -

170 316 16

Ruralco NZ Limited During the period there have been material transactions between Ashburton Trading Society Limited and its associate, Ruralco NZ Limited, as follows: Cash Advance Deferred Consideration Receivable

500 8,437

Key Personnel & Directors Short-term remuneration to key management personnel and directors during the period totalled $1,092,651 (2012 $959,327). All directors and staff of the Society hold ATS trading accounts and transact with ATS on the same basis as other members.

-


22


23


24

25 October 2013

Notice of Annual General Meeting Notice is hereby given that the 50th Annual General Meeting of Members of the Ashburton Trading Society Limited will be held at the Hotel Ashburton, Valetta and Arrowsmith Lounges, Racecourse Road, Ashburton on Monday 18 November 2013 at 7.30pm. Please use the conference entrance off Racecourse Road. BUSINESS 1. To approve the Minutes of the 49th Annual General Meeting held on Monday 26 November 2012. 2. To receive and adopt the Chairman and Group Chief Executive Review and Financial Statements for the year ended 30 June 2013. 3. To elect Directors—Messrs P J McKendry and J D Sim retire by rotation in accordance with Rule 6(c). Mr Sim does not seek re-election. Mr McKendry is available for re-election. 4. To appoint the Auditors. 5. To receive the report of the Independent Board Remuneration Sub Committee and to approve their recommendation. 6. To transact any other business that may be properly brought before the meeting.

PROXIES Under the present Rules of the Society there is provision for voting by proxy.

N D Shaw Group Chief Executive/Company Secretary


25

Nomination of Directors Jessie Chan-Dorman Occupation

On farm background

Profile

Dairy business owner

My husband Hayden and I are dairy business owners leasing 420 ha, milking 1700 cows and producing 950,000 kg milk solids. We run a high input high producing system while maximizing pasture production. After 12 years in dairy farming (Hayden) and as a rural professional (Jessie) we started variable order sharemilking in 2009, progressing to herd owning sharemilkers in 2011 and moving to a lease arrangement in 2013.

I am a strong believer in our rural cooperatives and am keen to contribute my skills to the ATS Board to help lower costs for our farming communities. My husband Hayden and I are dairy business owners leasing 420 ha at Dorie and milking 1700 cows. I have an Honours degree in Animal Science and have worked in a range of rural professional jobs over the past 15 years including Policy Manager for Federated Farmers, R&D Programme Manager for Meat and Wool NZ, and Developer for Dairy NZ. I have completed the Fonterra Governance Development Programme, the Food and Agribusiness Marketing Experience and the Kellogg Rural Leaders Programme. I am currently Vice President of Federated Farmers Mid Canterbury, a Trustee on the FAME Alumni Trust Board and a member of the Institute of Directors.

Current governance experience:

Director, Dorman Partnership Ltd Trustee, FAME Alumni Trust Board Junior Vice President, Federated Farmers Mid Canterbury Fonterra Governance Development Programme Member, Institute of Directors Previous governance experience:

Off farm background

Vice Chair—Federated Farmers National Sharemilkers Section

I have an Honours degree in Animal Science from Massey University and have worked in a range of rural professional jobs over the past 15 years. My various roles have included Technical Advisor for MAF Biosecurity, Policy Manager at Federated Farmers, R&D Programme Manager at Meat & Wool NZ, Developer at Dairy NZ and more recently Principal Extension Services Officer at Environment Canterbury.

Trustee, NZ Holstein Friesian Association Aorangi Club Chair, Wellington Young Farmers Club

Philip McKendry Occupation

Off farm background

Farmer

I was born and breed in Mid Canterbury and attended secondary school in Christchurch. I studied at Lincoln College and graduated with a 1st class Honours degree in Agricultural Science.

Current governance experience:

Director: Electricity Ashburton; Ashburton Trading Society (since 1998); Watermetrics NZ Ltd Trustee: Advanced Ashburton Community Foundation Member of the New Zealand Institute of Directors Previous governance experience:

Director: Barhill Chertsey Irrigation Ltd (Founding Chair) Trustee: Lady of the Snows Board of Trustees On farm background

My wife Judith and I farm a 200ha irrigated arable property near Methven growing a variety of grain and seed crops alongside lamb finishing and dairy support crops.

Since returning after overseas travel and study I have had a long involvement in my community, including large scale irrigation development, having been the founding chair of the Barhill Chertsey Irrigation scheme. I have dedicated time to education where I was the Chair of the Lady of the Snows School board of trustees. Today I am a trustee of the Advanced Ashburton Community Foundation, Chair of ATS and director of Electricity Ashburton and Watermetrics. Profile

I have had considerable experience in the governance of substantive commercial entities including ATS. I have significant knowledge of the governance

of co‑operatives such as ATS, always working to ensure that they remain true to purpose and deliver on a clear strategy, thus contributing excellent value for their members. The skills which I believe enable me to be a worthy contributor is that I have good strategic, analytical and people skills. I undergo on-going professional development to update my director skills, and I am a member of the Institute of Directors. I commit professionally to director positions, act with integrity, and I contribute in a candid and transparent manner.  I bring to the board table an in-depth knowledge of today’s farming systems as I am a working farmer with skills and experience in a variety of agricultural enterprises.  I will work wholeheartedly to ensure that ATS remains the best farm supplies business in NZ, offering unmatched competition for and support to our local farming community.


ASHBURTON

METHVEN

RAKAIA

HEAD OFFICE

97 Burnett St Tel: 03 307 5100 Fax: 03 307 6721 ashburton@ats.co.nz

88 Main St Tel: 03 303 2020 Fax: 03 302 8184 methven@ats.co.nz

68 Elizabeth Ave Tel: 03 303 5440 Fax: 03 303 5430 rakaia@ats.co.nz

PO Box 131, Ashburton Tel: 03 307 5100 Fax: 03 307 6721 ats@ats.co.nz

www.ats.co.nz


ATS Annual Report 2013