QUAYSIDE HOLDINGS LIMITED AND SUBSIDIARIES

Transcription

1 QUAYSIDE HOLDINGS LIMITED AND SUBSIDIARIES ANNUAL FINANCIAL STATEMENTS For the year ended 30 JUNE 2015

2 CONTENTS PAGE Auditor s Report 1 Income Statement 4 Statement of Comprehensive Income 5 Statement of Changes in Equity 6 Statement of Financial Position 8 Statement of Cash Flows 10 Notes to the Financial Statements 12 Statutory Information 92 Directory 97

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6 INCOME STATEMENT Group Parent Note $'000 $'000 $'000 $'000 Income Trading revenue 9(a) 270, , Other income 9(b) 4,017 3,322 40,243 41,489 Other gains 9(c) 22,614 14,713 4,260 2,645 Operating Income 297, ,242 44,503 44,134 Expenses Employee benefit expenses 10 (43,076) (41,919) (414) (370) Depreciation and amortisation 14,15 (23,241) (22,389) (3) - Trading and other expenses 11(a) (95,506) (95,015) (598) (503) Other losses 11(b) (7,239) (4,137) (956) (928) Operating Expenses (169,062) (163,460) (1,971) (1,801) Operating profit before finance costs and taxation 127, ,782 42,532 42,333 Finance income 12(a) 2,971 1,723 2,418 2,354 Finance expenses 12(b) (19,935) (17,904) (2,843) (2,498) Net finance costs (16,964) (16,181) (425) (144) Subvention income Net gain on disposal of investments 8, Impairment of goodwill 15 (6,221) Share of profit of Equity Accounted Investees 17 10,298 9, Profit before income tax 123, ,971 42,107 42,689 Income tax expense 13 (26,243) (26,559) - - Net profit after tax 97,469 90,412 42,107 42,689 Attributable to: Equity holders of the parent 61,807 55,154 42,107 42,689 Non controlling interest 35,662 35, ,469 90,412 42,107 42,689 The accompanying notes form part of these financial statements. 4

7 STATEMENT OF COMPREHENSIVE INCOME Group Parent Note $'000 $'000 $'000 $'000 Net profit after tax 97,469 90,412 42,107 42,689 Other comprehensive income Items that will be reclassified to profit or loss when specific conditions are met: Available for sale revaluation , ,004 Cash flow hedges - changes in fair value* Cash flow hedges - reclassified to profit or loss* Net changes in cash flow hedges transferred to property, plant and equipment, net of tax* Change in share of Equity Accounted Investees' cash flow hedge reserve Items that will not be reclassified to profit or loss: (4,584) ,624 3, (58) (269) (2,768) 3, , ,004 Asset revaluation, net of tax* 67, Kiwifruit licence revaluation Change in share of Equity Accounted Investee's revaluation reserve 17 (328) (8) - - Total other comprehensive income 64,656 3, , ,004 Total comprehensive income for the period 162,125 93, , ,693 Attributable to: Equity holders of the Parent 97,404 56, , ,693 Non controlling interest 64,721 36, ,125 93, , ,693 *Net of tax effect disclosed in notes 13 and 26. The accompanying notes form part of these financial statements. 5

8 STATEMENT OF CHANGES IN EQUITY Share capital Hedging Revaluation Reserve Reserve Non Retained controlling Earnings interest Total Equity $'000 $'000 $'000 $'000 $'000 $'000 GROUP Balance at 1 July ,011 (3,773) 329,150 (53,268) 357, ,816 Profit after tax ,154 35,258 90,412 Net effective portion of changes in fair value of cash flow hedges, net of tax Net change in fair value of cash flow hedges transferred to profit or loss, net of tax - 1, ,422 3,157 Net changes in cash flow hedges transferred to property, plant and equipment, net of tax - (32) - - (26) (58) Net change in share of Equity Accounted Investees' cash flow hedge reserves Net change in share of Equity Accounted Investees' revaluation reserve - - (4) - (4) (8) Total Comprehensive Income - 1,822 (4) 55,154 36,748 93,720 Non controlling interest adjustments Increase/(Decrease) in paid up capital Dividends to shareholders (22,561) (28,402) (50,963) Balance at 30 June ,011 (1,951) 329,146 (20,675) 366, ,592 Balance at 1 July ,011 (1,951) 329,146 (20,675) 366, ,592 Profit after tax ,807 35,662 97,469 Net effective portion of changes in fair value of cash flow hedges, net of tax - (2,519) - - (2,065) (4,584) Net change in fair value of cash flow hedges transferred to profit or loss, net of tax ,624 Net changes in cash flow hedges transferred to property, plant and equipment, net of tax Net change in share of Equity Accounted Investees' cash flow hedge reserves - (148) - - (121) (269) Net change in share of Equity Accounted Investees' revaluation reserve - - (180) - (148) (328) Kiwifruit licence revaluation Reclassification of prior year retained earnings (note 15c) (603) - - Asset revaluation, net of tax ,134-30,453 67,587 Total Comprehensive Income - (1,522) 37,722 61,204 64, ,125 Non controlling interest adjustments (21) 2 Movement in subsidiary's employee share scheme (71) (59) (130) Equity settled share-based payment accrual (note 21b) ,041 1,041 Dividends to shareholders (note 21c) (24,278) (31,839) (56,117) Balance at 30 June ,011 (3,473) 366,868 16, , ,513 The accompanying notes form part of these financial statements. 6

9 STATEMENT OF CHANGES IN EQUITY Share capital Availablefor-sale revaluation reserve Retained Earnings Total Equity $'000 $'000 $'000 $'000 PARENT Balance at 1 July ,011 1,026,668 (170,181) 1,056,498 Profit after tax ,689 42,689 Investment in subsidiaries revaluation - 122, ,004 Total comprehensive income - 122,004 42, ,693 Dividends to shareholders - - (22,561) (22,561) Balance at 30 June ,011 1,148,672 (150,053) 1,198,630 Balance at 1 July ,011 1,148,672 (150,053) 1,198,630 Profit after tax ,107 42,107 Investment in subsidiaries revaluation - 150, ,280 Total comprehensive income - 150,280 42, ,387 Dividends to shareholders - - (24,278) (24,278) Balance at 30 June ,011 1,298,952 (132,224) 1,366,739 7 The accompanying notes form part of these financial statements.

10 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 Group Parent Note $'000 $'000 $'000 $'000 ASSETS Current Assets Cash and cash equivalents 32,477 27,528 6,636 9,805 Trade and other receivables 19 41,224 41, ,112 Inventories , Derivative financial instruments 18 1, Other financial assets 22-1,300-1,300 Total current assets 75,466 71,106 7,120 12,217 Non-current Assets Intangible assets 15 22,183 44, Property, plant and equipment 14 1,097, , Investments in subsidiaries ,355,444 1,175,512 Investments in Equity Accounted Investees ,032 71, Investment property 29 10,735 9, Biological assets 30 6,049 4, Derivative financial instruments Other financial assets ,089 76,524 59,073 71,311 Total Non-current Assets 1,368,792 1,205,026 1,414,600 1,246,823 Total Assets 1,444,258 1,276,132 1,421,720 1,259,040 LIABILITIES Current Liabilities Trade and other payables 27 20,987 20, Borrowings , , Provisions 25 2,120 2, Deferred consideration Derivative financial instruments , Current taxation 9,919 9, Total Current Liabilities 214, , Non-Current Liabilities Trade and other payables Borrowings , ,129 54,500 60,000 Provisions 25 1,607 1, Deferred consideration Deferred tax liabilities 26 60,357 48, Derivative financial instruments 18 8,384 3, Total Non-current Liabilities 249, ,487 54,500 60,000 Total Liabilities 464, ,540 54,981 60,410 NET ASSETS 979, ,592 1,366,739 1,198,630 The accompanying notes form part of these financial statements. 8

11 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 Group Parent Note $'000 $'000 $'000 $'000 EQUITY Paid up capital 21a 200, , , ,011 Reserves 21b 363, ,195 1,298,952 1,148,672 Retained earnings 16,203 (20,675) (132,224) (150,053) Total equity attributable to equity holders of the parent 579, ,531 1,366,739 1,198,630 Non controlling interest 21d 399, , TOTAL EQUITY 979, ,592 1,366,739 1,198,630 9 The accompanying notes form part of these financial statements.

12 STATEMENT OF CASH FLOWS Group Parent $'000 $'000 $'000 $'000 Cash flows from operating activities Receipts from customers 272, , Dividends received 3,946 2,972 40,197 41,457 Interest received 1, Payments to suppliers and employees (138,583) (140,237) (990) (895) Subvention income - (7) Taxes received/(paid) (28,886) (27,355) - - Interest paid (18,795) (17,302) (802) (511) Net cash flow from operating activities 92,199 83,474 39,505 40,449 Cash flows from investing activities Proceeds from sale of property, plant and equipment Proceeds from disposal of Equity Accounted Investee Proceeds from sale of investments 18,926 8,348 6,139 1,585 Intercompany borrowings repaid - - 9,564 - Finance lease payments received, including interest 2,116 4, Dividends from Equity Accounted Investees 8,504 8, Purchase of intangibles (200) (516) - - Purchase of improvements to investment property (178) Purchase of property, plant and equipment (54,353) (61,119) (26) - Payment of deferred and contingent consideration - (1,500) - - Purchase of investments (42,160) (9,888) (175) (3,000) Cash transferred to Coda Operations Limited Partnership on disposal of subsidiary operations (929) Investment in Quayside Investment Trust - - (29,652) (19,313) Maturing Term Deposit 1,300 1,300 1,300 1,300 Purchase of Equity Accounted Investees (3,889) (19,776) (60) - Advances to Equity Accounted Investees (6,180) (1,400) - - Consideration for net assets of Priority Logistics Group - (10,000) - - Consideration for net assets of PrimePort Timaru - (2,062) - - Payments under finance leases, including interest (197) (437) - - Interest capitalised on property, plant and equipment (350) (395) - - Net cash flow from investing activities (76,911) (84,892) (12,910) (19,428) Cash flows from financing activities Proceeds from share/units issue Increase in borrowings 95,180 64, Repurchase of shares (248) Purchase of premium paid collars - (500) - - Repayment of borrowings (50,500) (34,000) (5,500) - Dividends paid (56,117) (50,963) (24,278) (22,561) Net cash flow from financing activities (11,685) (21,292) (29,778) (22,561) Effects of exchange rate changes on cash and cash equivalents 1,346 (316) 14 - Net increase/(decrease) in cash and cash equivalents 4,949 (23,026) (3,169) (1,540) Cash and cash equivalents at the beginning of the year 27,528 50,554 9,805 11,345 Cash and cash equivalents at the end of the year 32,477 27,528 6,636 9,805 The accompanying notes form part of these financial statements. 10

13 STATEMENT OF CASH FLOWS Group Parent RECONCILIATION OF PROFIT AFTER TAXATION TO CASH FLOW FROM OPERATING ACTIVITIES $'000 $'000 $'000 $'000 Reported profit after tax 97,469 90,412 42,107 42,689 Items classified as investing/financing activities: Finance lease interest revenue (258) (771) - - Finance lease interest expense Gain on sale of property, plant and equipment (95) (15) - - Gain on investments (13,288) (6,531) (3,290) (1,750) (13,540) (7,187) (3,290) (1,750) Non cash and non operating items Depreciation and amortisation 23,241 22, Change in deferred taxation expense (3,282) (2,119) - - Fair value movement in non hedge accounted derivatives - (52) - - Seeka share rebate scheme (36) Share-based payment reserve 1, Fair value (gains)/losses on investment property (625) (1,027) - - Fair value (gains)/losses on biological assets (1,834) (2,963) - - Fair value (gains)/losses on intangible assets - (603) - - Subvention income payable by Quayside Properties Ltd (476) Share of surpluses retained by Equity Accounted Investees (10,277) (9,370) - - Ineffective portion of changes in fair value of cash flow hedges (1,261) (21) - - Effective portion of change in fair value of ineffective cash flow hedges taken to property, plant and equipment Additional provisions net of reversals (546) (1,160) - - Gain on disposal of investments (8,609) Impairment of goodwill 6, Net change in impairment of property, plant and equipment (160) Impairment to property, plant and equipment on revaluation 1, Net change in impairment of trade receivables (29) ,360 5,281 3 (476) Movements in working capital: Change in trade receivables and prepayments (3,396) (6,723) 628 (248) Change in inventories 335 (325) - - Change in taxation payable 108 1, Changes in foreign cash deposits (1,346) 316 (14) - Change in trade and other payables 6, ,910 (5,032) 685 (14) Net cash flow from operating activities 92,199 83,474 39,505 40,449 The accompanying notes form part of these financial statements. 11

14 1 Reporting Entity Quayside Holdings Limited (the Company ) is a company domiciled in New Zealand, registered under the Companies Act 1993 and listed on the New Zealand Stock Exchange. The Company is a Financial Markets Conduct (FMC) reporting entity for the purpose of the Financial Markets Conduct Act Financial statements for the Company ( the Parent ) and consolidated financial statements (the Group ) are presented. The consolidated financial statements comprise the Company and its subsidiaries: Quayside Properties Limited, Quayside Securities Limited, Quayside Investment Trust and Quayside Unit Trust (all 100% beneficially owned), the Port of Tauranga Limited (54.14% owned) and its subsidiaries and interests in Equity Accounted Investees. The Parent and ultimate controlling entity of Quayside Holdings Limited is the Bay of Plenty Regional Council. Quayside Holdings Limited is a council-controlled organisation as defined under Section 6 of the Local Government Act 2002, by virtue of the Council s right to appoint the Board. The Quayside Group has investments in equities, shares and other investments. Port of Tauranga Limited is New Zealand s largest port situated in Mount Maunganui in the Bay of Plenty. Bay of Plenty Regional Council Perpetual Preference Shares 100% Voting $200m Non Voting (NZDX Listed) QUAYSIDE GROUP 100% 100% Quayside Holdings Limited 100% 100% 25% INVESTING SEGMENT Quayside Investment Trust Trustee Quayside Securities Limited Trustee Quayside Unit Trust Quayside Properties Limited WNT Ventures Limited Partnership 54.14% Port of Tauranga Limited PrimePort Timaru Limited 50% 50% Coda Group Limited Partnership PORT OF TAURANGA GROUP Northport Limited 50% Port Connect Limited 50% 50.1% 100% 100% Quality Marshalling Limited Port of Tauranga Trustee Company Limited PORT SEGMENT Timaru Container Terminal Limited Note: The Port of Tauranga Group also includes 100% owned subsidiaries MetroPack Limited, Tapper SIP Limited and Tapper Transport Limited which are non-operating shell companies. 12

15 2 Basis of Preparation (a) Statement of Compliance These financial statements have been prepared in accordance with the requirements of the Local Government Act 2002, which includes the requirement to comply with generally accepted accounting practice in New Zealand (NZ GAAP). The financial statements comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards as appropriate to for-profit entities. The financial statements also comply with International Financial Reporting Standards (IFRS). The Company is a Financial Markets Conduct (FMC) reporting entity for the purpose of the Financial Markets Conduct Act The Company applies External Reporting Board Standard A1 Accounting Standards Framework (For-profit Entities) ( XRB A1 ). Under the framework, the Group is a Tier 1 entity, required to apply New Zealand equivalents to International Financial Reporting Standards ( NZ IFRS ), on the basis that it does have public accountability and is a large for-profit public sector entity. The financial statements were authorised for issue by the Board of Directors on 25 August (b) Basis of Measurement The financial statements have been prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: available-for-sale financial assets, other financial assets and liabilities (including derivatives) at fair value through the income statement, land, buildings, harbour improvements, wharves and hardstanding, kiwifruit licences, investment properties and biological assets. The methods used to measure fair values are discussed further in note 4. (c) Functional and Presentation Currency These financial statements are prepared in New Zealand dollars ($), which is the Group s functional currency. All financial information presented has been rounded to the nearest thousand. (d) Use of Estimates and Judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have a significant effect on the amount recognised in the financial statements, are detailed below: valuation of land, buildings, harbour improvements, and wharves and hardstanding (notes 4(a) and 14); valuation of financial instruments (notes 4(c) and 4(d)); intangible assets (note 15); 13

16 2 Basis of Preparation (continued) lease classification and accounting for arrangements containing a lease (notes 19,23 and 28); provisions (note 25); business combinations (note 4(e)) valuation of investments in subsidiaries (note 16); valuation of investment properties (note 29) valuation of biological assets (note 30) trade receivables includes an estimated sale price for kiwifruit sold (note 19) Classification of Property The Group owns a number of properties, which have been purchased for long term capital appreciation and profit rather than for short term sale in the ordinary course of business. The receipt of market based rental and the sale of biological produce from these properties is incidental to holding these properties. The directors in applying their judgement have classified these properties as investment property according to NZ IAS 40. Classification of Perpetual Preference Shares as equity The directors have considered the terms and conditions of Perpetual Preference Shares and have classified these shares as equity. Note 21 explains the terms and conditions of the perpetual preference shares and why they are classified as equity. 14

17 3 Significant Accounting Policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements. (a) Basis of Consolidation (i) Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. In assessing control, potential voting rights that are presently exercisable, are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. In respect of the Parent accounts, the accounting policy is to account for subsidiary investments at fair value as an available-for-sale financial asset. Non controlling interest The share of net assets of controlled entities attributable to non controlling interests is disclosed separately in the statement of financial position. In the income statement, the profit or loss of the Group is allocated between profit or loss attributable to non controlling interests and profit or loss attributable to owners of the Parent Company. (i) Equity Accounted Investees The Group s interests in Equity Accounted Investees comprise interests in associates and joint ventures. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Equity Accounted Investees are accounted for using the equity method. The consolidated financial statements include the Group s share of the income and expenses of Equity Accounted Investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences, until the date that significant influence or joint control ceases. When the Group s share of losses exceeds its interest in an equity investee, 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 the Group has an obligation or has made payments on behalf of the investee. In respect of Equity Accounted Investees, the carrying amount of goodwill is included in the carrying amount of the investment and not tested for impairment separately. 15

18 3 Significant Accounting Policies (continued) (iii) Transactions Eliminated on Consolidation Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with Equity Accounted Investees are eliminated against the investment to the extent of the Group s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (b) Business Combinations and Investments in Equity Accounted Investees The Group applies the acquisition method for all business combinations. The consideration transferred in an acquisition includes the fair values of the assets transferred, liabilities incurred by the Group to the previous owners of the acquiree, and the fair value of contingent consideration. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at fair value at acquisition date, irrespective of the extent of non controlling interest. Where the Group contributes a non-monetary asset, that does not constitute a business, to an Equity Accounted Investee in exchange for an equity interest in an investee, the Group recognises any gain or loss on disposal of the non-monetary asset to extent of the interest of the other venturers in the Equity Accounted Investees. Where the Group contributes a nonmonetary asset, that does constitute a business, to an Equity Accounted Investee, the Group recognises the full gain or loss on disposal of the non-monetary asset. The Group measures goodwill as the fair value of consideration transferred, less the fair value of the net identifiable assets and liabilities assumed at acquisition date. The same approach is used to ascertain the value of goodwill included within the carrying amount of investments in Equity Accounted Investees. If the cost of a business combination is less than the fair value of the net identifiable assets transferred, the difference is recognised directly in the income statement. If the cost of investment in an Equity Accounted Investee is less than the fair value of the share of net identifiable assets of the investee, the difference is recognised by the Group in the income statement within share of profit from Equity Accounted Investees. Transaction costs that the Group incurs in connection with a business combination such as legal fees, due diligence fees and other professional and consulting fees are expensed as incurred. When investing in an Equity Accounted Investee, the same types of transaction costs are included as a component of the cost of the investment. (c) Sale of Interest in Subsidiary When the Group sells a shareholding in a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non controlling interest and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. 16

19 3 Significant Accounting Policies (continued) (d) Foreign Currency Transactions in foreign currencies are translated into the functional currency of Group entities at the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges. (e) Financial Instruments (i) Non-Derivative Financial Assets The Group initially recognises loans and receivables on the date that they originated. All other financial assets (including assets designated at fair value through profit and loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group classifies non-derivative financial assets into the following categories: Held-to-Maturity Investments If the Group has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method, less any impairment losses. Held to maturity investments are term deposits. Assets held for trading through profit or loss A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group s documented risk management or investment strategy. Attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes in to account any dividend income, are recognised in profit or loss. Financial assets designated at fair value through profit or loss include: equity securities that otherwise would have been classified as available for sale. 17

20 3 Significant Accounting Policies (continued) Loans and Receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables include: advances and receivables; cash and cash equivalents; trade and other receivables including intercompany loans from Quayside Holdings Limited to Quayside Properties Limited and Quayside Securities Limited as Trustee for Quayside Unit Trust. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Available-for-sale financial assets Available-for-sale financial assets are non-derivative assets that are designated as available-forsale or are not classified in any of the above categories of financial assets. Available-for-sale financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses are recognised in comprehensive income and presented in the fair value reserve in equity. When an investment is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss. Available-for-sale financial assets include: shares held in the Port of Tauranga Limited, A units held in Quayside Unit Trust, units in Quayside Investment Trust, shares in Quayside Properties Limited and shares held in Quayside Securities Limited. (ii) Non-Derivative Financial Liabilities The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. Other financial liabilities include: loans and borrowings, deferred consideration, trade and other payables. 18

21 3 Significant Accounting Policies (continued) (iii) Derivative Financial Instruments and Hedging Activities The Group uses derivative financial instruments to hedge its exposure to foreign exchange, commodity and interest rate risks arising from operational, financing and investment activities. In accordance with its Treasury Policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments qualifying for hedge accounting are classified as non current if the maturity of the instrument is greater than 12 months from reporting date and current if the instrument matures within 12 months from reporting date. Derivatives accounted for as trading instruments are classified as current. Derivative financial instruments are recognised initially at fair value and transaction costs are expensed immediately. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the hedging relationship (see below). Cash Flow Hedges Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in the cash flow hedge reserve to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in the income statement. If the hedging instrument no longer meets the criteria for hedge accounting, expires, or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in the hedging reserve remains there until the highly probable forecast transaction, upon which the hedging was based, occurs. When the hedged item is a non financial asset, the amount recognised in the hedging reserve is transferred to the carrying amount of the asset when it is recognised. In other cases the amount recognised in the hedging reserve is transferred to the income statement in the same period that the hedged item affects the income statement Fair Value Hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. (f) Property, Plant and Equipment (i) Recognition and Measurement The Group has five classes of property, plant and equipment: - freehold land - freehold buildings - harbour improvements - wharves and hardstanding - plant and equipment 19

22 3 Significant Accounting Policies (continued) Land, buildings, harbour improvements, and wharves and hardstanding are measured at fair value, based on periodic valuations by external independent valuers. Revaluations are performed with sufficient regularity to ensure that the carrying value of an asset does not differ materially from its fair value. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset. Increases in the carrying amounts arising on revalued assets are credited to the revaluation reserve in shareholders equity. To the extent that the increase reverses a decrease previously recognised in the income statement, the increase is first recognised in the income statement. Decreases that reverse previous increases of the same asset are first charged against the revaluation reserve attributable to the asset. All other decreases are charged to the income statement. Upon disposal or derecognition, any revaluation reserve relating to the particular asset being disposed or derecognised is transferred to retained earnings. Capital and maintenance dredging are held as harbour improvements within property, plant and equipment. Capital dredging has an indefinite useful life and is not depreciated as the channel is maintained via maintenance dredging to its original depth and contours. Maintenance dredging is depreciated over three years. Plant and equipment are stated at historical cost less depreciation and impairment losses. The cost of purchased property, plant and equipment is the value of the consideration given to acquire the assets and the value of other directly attributable costs which have been incurred in bringing the assets to the location and condition necessary for their intended service. Cost also includes transfers from the hedging reserve of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. The cost of assets constructed by the Group includes the cost of all materials used in construction, associated borrowing costs, direct labour on the project and an appropriate proportion of variable and fixed overheads. The Group capitalises borrowing costs where they are directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying asset is deemed as having expenditure exceeding $0.5 million and takes a substantial period, greater than six months, to complete and prepare the asset for its intended use. Costs cease to be capitalised as soon as the asset is ready for productive use. Land and buildings held by Port of Tauranga Limited to provide a port facility to facilitate trade and commerce will be accounted for as property, plant and equipment, notwithstanding that certain land and buildings are leased to port customers and operators. Land and buildings that are not integral or associated with port operations and are leased with the principal objective of earning rentals and/or for capital appreciation are accounted for as investment properties. 20

23 3 Significant Accounting Policies (continued) (ii) Subsequent Costs Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group, and the cost of the item can be reliably measured. All repairs and maintenance costs attributable to property, plant and equipment, are charged to the income statement during the financial period in which they are incurred. (iii) Depreciation Depreciation is provided on a straight line basis on all property, plant and equipment, other than freehold land and capital dredging (included within harbour improvements), at rates calculated to allocate the assets cost or valuation less estimated residual value, over their estimated useful lives. Depreciation methods, useful lives and residual values are reassessed at each reporting date. Major useful lives are: Freehold Buildings Freehold buildings 33 to 100 years Harbour Improvements Maintenance dredging 3 years Wharves and Hardstanding Wharves 10 to 60 years Wharf rocks 150 to 200 years Wharf piles 60 to 130 years Basecourse 50 years Asphalt 15 years Plant and Equipment Gantry cranes 10 to 40 years Floating plant 10 to 25 years Other plant and equipment 5 to 25 years Electronic equipment 3 to 5 years (g) Dividend Income Dividend income is recognised on the date that the Group s right to receive payment is established, being the ex-dividend date. (h) Intangible Assets (i) Goodwill Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. In respect of Equity Accounted Investees, the carrying amount of goodwill is included in the carrying amount of the investment. Goodwill is measured at cost less accumulated impairment losses. 21

24 3 Significant Accounting Policies (continued) (ii) Kiwifruit licences Kiwifruit licences are initially measured at cost. After initial recognition, licences are carried at a revalued amount, being fair value at the date of revaluation less any subsequent accumulated impairment losses. The licences are revalued annually. Increases in the carrying amount arising on revaluation are credited to the revaluation reserve in other comprehensive income. To the extent that the increase reverses a decrease previously recognised in the income statement, the increase is recognised in the income statement. Decreases in the carrying amount on revaluation are recognised in the income statement. Decreases that reverse previous increases of the same asset are first charged against the revaluation reserve in other comprehensive income, to the extent of any credit balance in the revaluation reserve in respect of that asset. (iii) Other Intangible Assets Other intangible assets acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses. (iv) Subsequent Expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. (v) Amortisation Amortisation is recognised in the income statement on a straight line basis over the useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows: Rail services agreement 10 to 15 years Computer software 1 to 10 years (i) Leased Assets (i) Where the Group is the Lessee Leases, in terms of which the Group assumes substantially all the risks and rewards of ownership, are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. (ii) Where the Group is the Lessor When assets are leased under a finance lease, where the lessee effectively receives substantially all the risks and benefits of ownership of the leased items, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. 22

25 3 Significant Accounting Policies (continued) An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an asset. Assets leased under operating leases are included in investment property or property, plant and equipment in the statement of financial position as appropriate. Payments received under operating leases are recognised in the statement of comprehensive income on a straight line basis over the term of the lease. (j) Inventories Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is determined on a first-in first-out basis, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. (k) Impairment of Assets The carrying amounts of the Group s property, plant and equipment, intangibles and investments in Equity Accounted Investees, subsidiaries and receivables, are reviewed at each reporting date to determine whether there is any objective evidence of impairment. With respect to goodwill, it is tested for impairment at least annually. (i) Property, Plant and Equipment, Intangibles and Investments in Subsidiaries and Equity Accounted Investees An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment of individual assets for which it is not possible to estimate the recoverable amount, these assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit and then to reduce the carrying amount of the other assets in the cash generating unit on a pro-rata basis. Impairment losses directly reduce the carrying amount of assets and are recognised in the income statement, unless the asset is carried at a revalued amount in which case it is treated as a revaluation decrease and recognised in equity. An impairment loss in respect of goodwill is not reversed. (ii) Advances and Receivables The recoverable amount of advances and receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate. Advances and receivables with a short duration are not discounted. 23

26 3 Significant Accounting Policies (continued) (l) Employee Benefits (i) Long Term Employee Benefits The Group grants employees certain one-off annual leave entitlements upon reaching certain long service targets. The liability for long service leave is measured as the present value of expected future payments to be made in respect of services provided by employees up to reporting date, using the projected unit credit method. Consideration is given to the expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on New Zealand Government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows. (ii) Short Term Employee Benefits Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short term cash bonus or profit sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. (m) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. (n) Revenue Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group s activities. Revenue is shown, net of GST, rebates and discounts. Revenue is recognised as follows: (i) Port Services Port services revenue is recognised when the related service is performed. If at reporting date, the service is in progress, then the portion performed is recognised in the current year. (ii) Rental Income Rental income from property leased under operating leases is recognised in the income statement on a straight line basis over the term of the lease. Lease incentives provided are recognised as an integral part of the total lease income, over the term of the lease. 24

27 3 Significant Accounting Policies (continued) (iii) Transport Services Transport services revenue is recognised when the service is performed. If at reporting date, the service is in progress, then the portion performed is recognised in the current year. (iv) Marshalling Services Marshalling services income is recognised when the service is performed. If at reporting date, the service is in progress, then the portion performed is recognised in the current year. (v) Kiwifruit Income Revenue from the sale of kiwifruit is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods, or where there is continuing management involvement with the goods. Income at year-end is based on an estimate of the income per tray to be received. Any revision of the estimate during the year will be recognised in the income statement. (o) Finance Income and Expense Finance income comprises interest income on funds invested, finance lease interest and gains on hedging instruments that are recognised in the income statement. Interest income is recognised as it accrues, using the effective interest method. Finance lease interest is recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return. Finance expenses comprise interest expense on borrowings, finance lease interest expense, unwinding of the discount of provisions, impairment losses recognised on financial assets (except for trade receivables), and losses on hedging instruments that are recognised in the income statement. Except as described in note 3(f)(i), all borrowing costs are recognised in the income statement using the effective interest method. (p) Lease Payments Payments made under finance leases are allocated between the liability and finance charges, using the effective interest method, so as to achieve a constant periodic rate of interest on the finance balance outstanding. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset s useful life and the lease term. Payments made under operating leases are recognised in the income statement on a straight line basis over the term of the lease. Lease incentives are recognised as an integral part of the total lease expense, over the term of the lease. 25

28 3 Significant Accounting Policies (continued) (q) Income Tax Expense Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes, and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting or taxable profit; and differences relating to investments in subsidiaries and Equity Accounted Investee entities, to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (r) Share capital Ordinary shares and perpetual preference shares are classified as equity. information in Note 21. Refer to further Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any Group company purchases the company s equity share capital (treasury shares) the consideration paid, including any directly attributable incremental costs, is deducted from equity attributable to the company s equity holders until the shares are cancelled or reissued. (s) Segment Reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographic segment is engaged in providing products or services within a particular economic environment, that are subject to risks and returns that are different from those of segments operating in other economic environments. The Group operates in two business segments, the first being the business of facilitating export and import activities (Port), and the second being the business of investment (Investing). Both segments operate in one geographic segment, being New Zealand. 26