Coca-Cola Holdings NZ Annual Report For the year ended 31 December 2016

Transcription

1 Annual Report For the year ended 31 December

2 Limited Annual Report For the year ended 31 December Contents Company Directory Page 2 Auditors Report 3 Directors Review 5 Consolidated Statement of Comprehensive Income 6 Consolidated Statement of Changes in Equity 7 Consolidated Statement of Financial Position 8 Consolidated Statement of Cash Flows 9 Notes to the Financial Statements 10

3 Limited Company directory As at 31 December Registered Office The Oasis Oasis Road Mount Wellington AUCKLAND Directors Caroline Beaumont Christopher Litchfield Bankers Bank of New Zealand Westpac Banking Corporation Australia & New Zealand Banking Group Business Location The Oasis Oasis Road Mount Wellington AUCKLAND 2

4 Chartered Accountants Independent Auditor s Report to the Shareholder of Coca-Cola Holdings NZ Limited Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Coca-Cola Holdings NZ Limited ( the Company ) and its subsidiaries (together the Group ) on pages 6 to 29, which comprise the consolidated statement of financial position of the Group as at 31 December, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended of the Group, and the notes to the consolidated financial statements including a summary of significant accounting policies. In our opinion, the consolidated financial statements on pages 6 to 29 present fairly, in all material respects, the consolidated financial position of the Group as at 31 December and its consolidated financial performance and cash flows for the year then ended in accordance with New Zealand equivalents to International Financial Reporting Standards Reduced Disclosure Regime. This report is made solely to the Company s shareholder. Our audit has been undertaken so that we might state to the Company s shareholder those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s shareholder, for our audit work, for this report, or for the opinions we have formed. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with Professional and Ethical Standard 1 (revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We provide consultancy and audit services to the Group. We have no other relationship with, or interest in, the Group. Partners and employees of our firm may deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group. Information Other than the Financial Statements and Auditor s Report The directors of the Company are responsible for the Annual Report, which includes information other than the consolidated financial statements and auditor s report. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. If, based upon the work we have performed on the other information obtained prior to the date of this auditor s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Directors Responsibilities for the Financial Statements The directors are responsible, on behalf of the entity, for the preparation and fair presentation of the consolidated financial statements in accordance with New Zealand equivalents to International Financial Reporting Standards Reduced Disclosure Regime, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. A member firm of Ernst & Young Global Limited

5 Chartered Accountants In preparing the consolidated financial statements, the directors are responsible for assessing on behalf of the entity the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (New Zealand) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located at the External Reporting Board website: This description forms part of our auditor s report Auckland 23 August 2017 A member firm of Ernst & Young Global Limited

6 Limited Directors Review For the year ended 31 December The Directors of Coca-Cola Holdings NZ Limited present this Annual Report, being the financial statements of the Group for the financial year ended 31 December and the auditor's report thereon. The shareholder of the Group has exercised its right under section 211(3) of the Companies Act 1993 and agreed that this Annual Report need not comply with any of paragraphs (a), and (e) to (j) of section 211(1) and section 211(2) of the Act. For and on behalf of the Board, who authorised these financial statements for issue on 23 August ') {... i& Director 2 1. _ 2..a \,... Date 5

7 Limited Consolidated Statement of Comprehensive Income For the year ended 31 December Note S'000's S'000's Trading Revenue 632, ,708 Other income 3 11,065 8, , ,075 Cost of goods sold 356, ,079 Selling and Marketing 87,407 81,267 Warehouse and Distribution 50,961 45,078 Administrative & Other 38,131 32,988 Total Expenses 4a 532, ,412 Profit before interest and income tax 110, ,663 Net Finance Cost 4b 11,781 10,910 Income Tax Expense 13a 27,870 26,634 Net Profit for the year 70,865 67,119 Other Comprehensive Income Cash flow Hedges: Gain / (loss) taken to reserves (3,938) (1,872) Income tax on items of other comprehensive income 1, Other Comprehensive Income for the year net of tax (2,835) (1,348) Total Comprehensive Income for the year 68,030 65,771 The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes EV 6

8 Limited Consolidated Statement of changes in Equity For the year ended 31 December GROLi' Ordinary Shares Share base payment reserve S'OOO cash Flow Hedge Reserve Amalgamation Reserve Retained Earnings Total At 1 January (Restated)' 142, ,108 85, ,077 Profit for the period Other comprehensive income Total income and expense for the period (2,835) (2,835) 70,865 70,865 70,865 (2,835t 68,030 Equit) Transactions: Shareholder equity contribution At 31 December 142, , , ,412 Ordinary Shares Share base payment reserve Cash Flow Hedge Reserve Amalgamation Reserve Retained Earnings Total At 1 January (Restated)' 142, ,456 (2,692) 120, ,010 Profit for the period Other comprehensive income (1,348) 67,119 67,119 (1,348) Total income and expense for the period 1,348 67,119 65,772 Equity Transactions: Shareholder equity contribution Finalisation of VMSL restructuring 296 2,692 (2,692) 296 Dividends paid (100,000) (100,000) At 31 December (Restated)' 142, ,108 85, ,077 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes 1 Refer to change in accounting policy note under basis of preparation for further details. EY 7

9 Limited Consolidated Statement of Financial Position As at 31 December Current Assets Cash and cash equivalents Prepayments Trade and other receivables Inventories Derivative financial instruments Total Current Assets Non-current Assets Property, Plant and Equipment Intangible assets Prepayments Derivative financial instruments Total Non-current Assets Total Assets 5 6 's 41,738 9, ,133 76,400 (Restated) 1 's 56,864 7, ,728 80,952 7 ;;;.;:...; ;;..,_.:;;. 258, , , , , ,593 2,432 1,602 ;;..;.;.:_...;...; 506, , , ,588 _ Current Liabilities Trade and other payables Provisions Derivative financial instruments Interest bearing borrowings Deferred income Income Tax Payable Total current liabilities lla llb 7 12a 150, ,588 3, , ,901 8, , ,772 Non-Current Liabilities Derivative financial instruments Deferred income Deferred tax liability Interest bearing borrowings Total non-current liabilities Total Liabilities Net Assets 7 13,314 10, ,012 82,880 13c 12b,;;; ;; c.:...:::. 174, , , , , , , ,077 Equity Contributed Equity Reserves Retained earnings Total Equity ,419 4, , , ,419 6,534 85, ,077 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes 1 Refer to change in accounting policy note under basis of preparation for further details. EV s

10 Limited Consolidated Statement of Cash Flows For the year ended 31 December Operating activities Profit before Interest and Tax Note 's 110,516 's 104,663 Adjustments to reconcile profit before tax to net cash flows: Depreciation of PPE 8 Amortisation of intangible assets 9 Changes in adjusted working capital Changes in deferred income Non cash share based payments Changes on disposal of PPE Changes in prepayments Changes in provisions Interest received Interest paid Income taxes paid Other non-cash expenses Net cash flows from operating activities 25,448 3,184 (3,611) (2,874) (3,992) 555 (11,979) (28,517) 90,332 24,594 2,521 13,910 (75) 296 (199) 798 (691) 1,106 (12,315) (26,111) ,187 Investing activities Proceeds from disposal of PPE & SDA Payments for - PPE Software development assets Net cash flows used in investing activities 759 (34,815) (1,013) (35,069) 597 (26,208) (355) (25,966) Financing activities Proceeds from borrowings Borrowings repaid Dividends paid Net cash flows from financing activities 17,719 (88,108) (70,389) 110,398 (72,226) (100,000) (61,828) Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December (15,126) 56,864 41,738 21,393 35,471 56,864 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes E.Y 9

11 1 General information Coca-Cola Holdings NZ Limited (CCH) is a wholly owned subsidiary of Coca-Cola Amatil Limited Australia (CCA). It is the holding company of Coca-Cola Amatil (NZ) Limited (CCANZ) and Vending Management Services Limited (VMSL), together known as Group CCANZ is the largest non-alcoholic beverage company in New Zealand. Its products include soft drinks, juice drinks, water, energy drinks, sports drinks, dairy drinks, cordials, and coffee products. CCANZ also has a number of alcoholic distribution arrangements consisting of beers, ciders, spirits and ready to drink beverages. 2 Summary of significant accounting policies (a) Basis of preparation The consolidated financial statements comprise the financial statements of CCH and its subsidiaries (the Group). The consolidated financial statements of the Group comply with New Zealand Equivalents to International Financial Reporting Standards Reduced Disclosure Regime (NZ IFRS RDR). The consolidated financial statements have been prepared in accordance with generally accepted accounting practice in New Zealand (NZ GAAP) and the requirements of the Companies Act For the purposes of complying with NZ GAAP the Group is a for-profit entity. The Group is eligible to report in accordance with NZ IFRS RDR on the basis that it does not have public accountability and is not a large for-profit public sector entity. The consolidated financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars unless otherwise stated. Measurement Base These consolidated financial statements have been prepared under the historical cost convention, except where mentioned in the accounting policies. Comparative Information Where necessary, comparative figures have been amended to correspond with current year classifications. Change in Accounting Policy As a result of the recent International Financial Reporting Standards Interpretation Committee's published agenda decision in relation to the accounting requirements for deferred tax and specifically clarifying the criteria that entities are required to apply when determining the recovery through sale or through use basis to determine tax values in relation to indefinite lived intangible assets, we have made the below mentioned adjustments to our financial statements. Previously, CCA had assessed that the recovery of the indefinite lived intangible assets would be through sale and therefore used tax bases for this purpose (for example capital gains tax cost bases) to determine taxable temporary differences. However, as a result of the interpretation, the deferred tax on CCA's investments in bottler agreement (IBA) assets have been adjusted to reflect recovery through use. The tax base for the recovery through use approach is zero, in that there are no tax deductions available to the Group. Accordingly, deferred tax liabilities have increased as a result. These adjustments have been applied as a retrospective change in accounting policy, meaning adjustment to the opening balance sheet position (1 January ) against retained earnings and goodwill, depending on whether the underlying IBA was acquired before or after New Zealand's transition to International Financial Reporting Standards in The effect of these adjustments on the financial statements are as follows: Deferred tax liability Retained earnings 1 January (restated) $M 84, ,010 I January (as 31 December reported) (restated) SM 22,830 82, , ,077 $M 31/12/ (as reported) $M 21, ,380 EV 10

12 (b) Foreign currency translation Foreign monetary balances are converted to New Zealand dollars at the rates of exchange ruling at balance date and any unrealised gain or loss resulting from the conversion is reflected in the consolidated statement of comprehensive income. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in the profit or loss with the exception of monetary items that are designated as part of the hedge of the Group's net investment of a foreign operation. These are recognised in OCI until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI. Summary of significant accounting policies (continued) (c) Basis of consolidation Subsidiaries are all those entities over which the Group has control. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. The acquisition of subsidiaries is accounted for using the acquisition method. The acquisition method involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition. Where consideration for an acquisition is in excess of the net assets of the entity at the date of acquisition, and the entity was previously an entity under common control of the ultimate parent, the excess is recorded in an amalgamation reserve in equity. (d) Revenue recognition Revenue is recognised and measured at the fair value of the consideration received or receivable net of discounts, allowances and applicable amounts of value added taxes such as the New Zealand Goods and Services Tax (GST). The following specific recognition criteria must also be met before revenue is recognised: (i) Sale of goods Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably. (ii) Equipment rental Revenue from installation and maintenance of equipment is recognised when the services have been performed and the amount can be measured reliably. {iii) Interest income Interest income is recognised as the interest accrues using the effective interest method. (iv) Rendering of services Revenue from rendering of services is recognised when the services have been performed and the amount can be measured reliably. EV 11

13 Summary of significant accounting policies (continued) (e) Investment in Bottler's Agreements The Group has a Bottler's Agreement with The Coca-Cola Company (TCCC) which provides CCH with the exclusive rights to manufacture, distribute, market and sell TCCC branded products in New Zealand, and are subject to certain performance criteria. The agreements are generally for 10 year terms, and reflect a long and ongoing relationship between the Group and TCCC. No consideration is payable upon renewal or extension of the agreements. In assessing the useful life of the agreements, consideration is given to the Group's history of dealings with TCCC since 1939, their established international practices and equity interests in the Group, participation of nominees of TCCC on CCA's Board of Directors and the ongoing profitability of TCCC brands. Accordingly, no factor can be identified that would result in the agreements not being renewed or extended and therefore the agreements have been assessed as having indefinite useful lives, which requires annual impairment testing. (f) Goodwill Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for noncontrolling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed), subsequently, goodwill on acquisition of business is included in intangible assets. It is carried at cost less any accumulated impairment losses and is tested for indicators of impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is not amortised. (g) Other intangible assets Software development costs Costs associated with developing or maintaining software programs are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by CCH or Group and that will generate economic benefits beyond one year, are recognised as intangible assets. Direct costs include the costs of employees dedicated to software development and an appropriate portion of relevant overheads. Subsequent software development costs are measured at cost less accumulated amortisation and impairment. Capitalised costs are amortised over the useful economic life of 2-10 years. Licensing agreements Costs associated with licensing agreements are capitalised. Subsequently they are carried at cost less accumulated amortisation and impairment. They are amortised over the period during which benefits are expected to be received. This period does not exceed 20 years. Trade Marks I Brand Names Trademarks and brand names arising from acquisition are carried at cost less impairment and amortised over their useful economic life of 50 years. (h) Cash and cash equivalents Cash and cash equivalents comprise of cash on hand, cash at banks and short term deposits with a maturity of one year or less that are repayable to the Group on demand and are subject to an insignificant risk of changes in value. Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods, depending on the immediate cash requirements of the Group, and earn interest at the respective short term deposit rates. EV 12

14 Summary of significant accounting policies (continued) (i) Trade receivables Trade and other receivables are recognised initially at fair value and subsequently carried at amortised cost using the effective interest rate method. Where there is evidence that amounts due may not be fully or partly recoverable, an allowance for doubtful receivables is recognised in the profit or loss. (j) Inventories Inventories are stated at the lower of cost (including fixed and variable factory overheads where applicable) and net realisable value. Cost is determined on the basis of first-in-first-out, average or standard, whichever is the most appropriate in each case. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses. (k) Financial assets and liabilities The Group classifies its financial assets and liabilities as either at amortised cost or fair value through the consolidated statement of comprehensive income. The classification of financial assets depends on - the entity's business model for managing financial assets; and the contractual cash flow characteristics of the financial asset. Financial assets or liabilities recognised initially at fair value are subsequently measured at either fair value or amortised cost using the effective interest method. In the case of financial assets or liabilities not subsequently measured at fair value, the initial fair value is adjusted for directly attributable transaction costs. Recognition and derecognition All regular purchases and sales of financial assets and liabilities are recognised on the trade date, which is the date the Group commits to purchase or sell the asset or liability. Financial assets and liabilities are derecognised when the right to receive or pay cash flows has expired or been transferred. i) Financial assets and liabilities at fair value through profit or loss. Financial assets or liabilities at fair value through profit or loss are derivatives or financial assets or liabilities designated as at fair value through profit and loss. The effective portion of the fair value gain or loss on derivative instruments designated in cash flow hedge relationships is recognised directly in equity. The Group's accounting policy in this regard is explained in Note 7. ii) Financial assets and liabilities at amortised cost A financial asset or liability is classified at amortised cost if it is acquired by the Group where the objective is to collect or pay contractual cash flows on specified dates for payments of principal and interest. Financial assets and financial liabilities at amortised cost include trade and other receivables and payables, bonds, loans, and bank overdrafts. Hedge accounting is applied to certain interest bearing liabilities (refer to Note 7). In such instances, the resulting fair value adjustments mean that the carrying value differs from amortised cost. The fair value of all financial assets and liabilities are based on an active market price. If the market for a financial asset is not active, the Group establishes fair value by using valuation techniques such as discounted cash flow analysis and option pricing models. These include reference to the fair values of recent arm's length transactions, involving the same instruments or other instruments that are substantially the same. E.Y 13

15 Summary of significant accounting policies (continued) (I) Derivative Financial Instruments Offsetting of derivative financial assets and derivative financial liabilities The Group presents all its derivative financial assets and derivative financial liabilities arising from fair value measurement on a gross basis. The net movements on the derivative financial assets and derivative financial liabilities are disclosed under Note 7. (ml Contributed Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of any new shares are shown in equity as a deduction, net of tax. (n) Property, plant and equipment Property, plant and equipment are stated at cost less depreciation and impairment. Land and buildings are measured at deemed cost, as of the date of transition to NZ IFRS, less depreciation on buildings and less any impairment losses. For accounting purposes, the depreciation of property, plant and equipment other than land is provided for on a straight line basis over their estimated economic lives. Estimated economic lives are as follows: Buildings Plant & equipment Finance leases 50 years 5-15 years 2-20 years Useful lives and depreciation methods are reviewed at the end of every financial year. Capital work in progress is not depreciated as assets are not yet in the location and condition necessary to be capable of operating in the manner intended. For taxation purposes, the maximum rates of depreciation allowable are used. Disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (cal cu lated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the year the asset is de recognised. EV 14

16 Summary of significant accounting policies (continued) (o) Trade and Other Payables Trade and other payables are recognised initially at fair value and subsequently carried at amortised cost using the effective interest rate method. Liabilities are brought to account for amounts payable in relation to goods received and services rendered, whether or not billed at reporting date. (Pl Borrowing costs Interest expense is recognised on an accrual basis. Borrowing costs are capitalised when they are directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying asset is an asset that takes a substantial period of time to get ready for its intended use or sale. Specific and general borrowing costs are capitalised. Amounts capitalised in any period do not exceed the borrowing costs incurred during the period, and the resulting carrying amount of the qualifying asset will not exceed its recoverable amount. Capitalisation commences when expenditures and borrowings are being incurred for the asset and when activities that are necessary to prepare the asset for its intended use or sale are in progress. (q) Income tax (i) Current tax Current tax liability or asset represents amounts payable or receivable in relation to income taxes attributable to taxable profits of the current or prior financial years, less instalments of income tax paid. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the Statement of Financial Position date. (ii)deferred tax Deferred tax is provided for using the liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying value for financial reporting purposes. Tax rates enacted or substantively enacted at the Statement of Financial Position date are used to determine deferred tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which temporary differences can be utilised. Deferred tax liabilities are recognised for all taxable temporary differences, except where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction, other than a business combination, and at the time of the transaction affect neither accounting profit nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in controlled entities, except where the timing of the reversal of temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. EV 1s

17 Summary of significant accounting policies (continued) Current and deferred taxes relating to transactions recorded in equity are recorded in the matching class of equity. (iii) Other taxes Revenue, expenses and assets are recognised net of the amount of GST except: When the GST incurred on the purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to the taxation authority. (r) Leases Operating leases are those where the lessor effectively retains substantially all the risks and benefits incident to ownership of the leased property. Operating lease payments are charged to the profit or loss on a straight line basis over the lease term. Lease income from operating leases is recognised in the profit or loss on a straight line basis over the lease term. Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in profit or loss. The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. EV 16

18 Summary of significant accounting policies (continued) (s) Employee entitlements (i) Wages, salaries, annual leave, long service leave, sick leave and other benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to balance date including related on-costs. The benefits include wages and salaries, annual leave, long service leave, incentives, compensated absences, and other benefits, which are charged against profits in their respective expense categories when services are provided or benefits vest with the employee. The provision for employee benefits is measured at the remuneration rates expected to be paid when the liability is settled. The liability for employee entitlements is carried at the present value of the estimated future cash flows. (ii)equity compensation plans Certain employees of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments of CCA. CCA shares are awarded to employees of the Group in accordance with the requirements of three share plans, being: i) CCA Long Term Incentive Plan ii) CCA Employees Share Plan; and iii) CCA Executive Post Tax Share Purchase Plan Further details in relation to these plans are covered in Note 16. Employer contributions to the CCA Employees Share Plan are charged as an expense over the vesting period. Any amounts of unvested shares held by the related trust are controlled by the Group until they vest and are recorded at cost in CCA's statement of financial position within equity as shares held by equity compensation plans until they vest. Summary of significant accounting policies (continued) (t) Comparative information Where necessary, comparative information is reclassified to achieve consistency in disclosure with the current financial amounts and other disclosures. (u) Restructuring Provision Restructuring provisions are only recognised when general recognition criteria are fulfilled. The Group needs to follow a detailed formal plan regarding the business (or part of the business) concerned, i.e. the location, the number of employees effected, a detailed estimate of associated costs and general time frames. The employees affected must have a valid expectation that restructuring is being carried out and/or that the implementation has been initiated. (v) Impairment Non-financial assets Non-financial assets, except for inventory and deferred tax, are assessed annually for any indication of impairment. Impairment losses are recognised in the profit or loss under administrative and other expenses. Goodwill Impairment is determined by assessing the recoverable amount of the cash-generating unit, to which the goodwill relates. An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its fair value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely dependent of those from other assets or groups of assets. When the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. When the goodwill forms part of a cash-generating unit and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cashgenerating unit retained. Impairment losses recognised for goodwill are not subsequently reversed. E.V 17

19 GROUP 3 Other Income Equipment Rental Royalties Received Rendering services 10,426 Management fees Total Other Revenue 11,065 8,367 7,473 GROUP 4 Expenses (a) Total expenses include: Depreciation and Amortisation expense Buildings 1,427 1,429 Plant and Equipment 24,021 23,165 Amortisation of Software 2,745 2,281 Amortisation of trademarks/brand names 239 Total depreciation & amortisation expense 28,632 27,114 Employee entitlements Wages and salaries 84,415 Defined contribution superannuation plan 2,880 2,701 Share based payment expense 1,098 1,078 Other Employee Benefits 4,397 3,624 Total employee entitlements 92,790 86, ,333 Lease Payments Minimum lease payments-operating 6,946 6,722 6,946 6,722 Other Expenses Management Fees (bl Financing cost Bank loans and overdraft interest 11,461 11,262 Guarantee fees Total Interest cost 12,336 12,016 Interest received-external parties 555 1,106 Total interest received 555 1,106 Net financing cost 11,781 10,910 EV 18

20 5 Trade and other receivables Trade Debtors Impairment Provision Owing by related parties Other Receivables Total Trade and other receivables 126,523 (758) 2,168 3, ,133 GROUP 119,032 (371) 774 3, ,728 Terms and conditions of related party receivables are disclosed in note Inventories Raw materials Finished goods Other Inventories Total inventories 22,646 49,123 4,631 76,400 GROUP 26,850 49,989 4,113 80,952 Other inventories include work in progress, spare parts (manufacturing and cold drink equipment) and fountain stock (post mix products) 7 Derivative financial instruments All derivative financial instruments are in hedging relationships. The fair value of the derivatives are as follows: Current Assets Non- Current assets Current liabilities Non- Current liabilities 17,717 13,314 GROUP , ,930 The notional amounts of the instruments relating to the above fair values are as follows Notional amounts Interest rate swaps Cross currency swaps 55, ,653 50, ,653 EV 19

21 7 Derivative financial instruments (continued) Recognition and measurement Derivative financial instruments are used to manage exposures to certain financial risks and are recognised initially at fair value. On subsequent revaluation, for example, from trade date, derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. The Group designates its derivatives as hedges for either: hedges for the fair values of certain liabilities (fair value hedges) hedges for the cash flows associated with assets and liabilities and highly probable forecast transactions (cash flow hedges) Derivatives - debt related Debt related derivatives apply solely to hedging of the foreign currency principal amounts and fair values of borrowings. During the financial year, the Group held cross currency swaps to mitigate exposures to changes in the fair value of foreign currency denominated debt from fluctuations in foreign currency and interest rates. The hedged items designated were a portion of the Group's foreign currency denominated borrowings. The changes in fair values of the hedged items resulting from movements in exchange rates and interest rates are offset against the changes in the value of the cross currency swaps. The objective of this hedging is to convert foreign currency borrowings to local currency borrowings. Hence, at inception, no significant portion of the change in fair value of the cross currency swap is expected to be ineffective. Ineffectiveness may arise from credit valuation adjustments and is recognised in the income statement as finance costs. Gains or losses from remeasuring the fair value of the hedge instruments are recognised within net finance costs in the income statement and are offset with the gains and losses from the hedged item where those gains or losses relate to the hedged risks. The hedge relationship is designed to be highly effective because the notional amount of the cross currency swaps is the same as that of the underlying debt and all cash flow and reset dates coincide between the borrowing and the swaps. The effectiveness of the hedging relationship is tested at inception and at regular intervals thereafter by means of cumulative dollar offset effectiveness calculations. The primary objective is to determine if changes to the hedged item and the derivative are highly correlated and thus support the assertion that there will be a high degree of offset in fair values achieved by the hedge. Derivatives - non-debt related Non-debt derivatives relate to all other derivatives other than those that are debt related (being foreign currency, commodity and interest rate because they do not impact the calculation of net debt). Cash flow hedges are used to hedge future cash flows or a probable transaction that could affect the income statement. Any gain or loss on effective portions of the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in the income statement as finance costs. Amounts recognised in equity are transferred to the income statement as and when the asset is consumed. If the forecast transaction is revoked or no longer expected to occur, amounts previously recognised in equity are transferred to the income statement over the life of the underlying exposure. Derivatives financial instruments in a hedge relationship are initially recognised in equity. Any gain or loss is reclassified to the income statement when the Group exercises, terminates, or revokes designation of the hedge relationship. Ineffectiveness may arise from credit valuation adjustments and is recognised in the income statement as finance costs. Interest bearing loans of the Group currently bear an average variable interest rate of 3.4% (: 3. 7%). The Group has entered into Interest Rate Swap and Cross Currency Swap contracts under which it has a right to receive interest at variable rates and to pay interest at fixed rates ranging between 4.5% and 6.5% _ (: 4.4% and 6.5%). Swap contracts are in place to cover 56.5% (: 60%) of the outstanding borrowings. EV 20

22 8 Property, plant and equipment Land and Buildings Construction in progress Plant and Equipment Total Cost or valuation At 1 January Additions Disposals/ write offs Transfers At 31 December Additions Disposals/ write offs Transfers At 31 December 85,375 7, ,365 1,027 (1,360) 86,566 31, ,652 (43) 12 (30,818) 86,713 7, , ,962 4,390 29,920 (3,844) (3,844) , ,341 34,743 27,913 (17,800) (17,843) 30,565 (242) 402, ,999 Depreciation At 1 January Depreciation charge for the year Disposals/ write offs At 31 December Depreciation charge for the year Disposals/ write offs At 31 December 11,801 1,429 13,230 1,427 (72) 14, , ,688 23,165 24,595 (2,724) (2,724) 233, ,559 24,021 25,448 (16,588) (16,660) 240, ,347 Net book value At 31 December At 31 December 72,128 7,436 73,336 31, , , , ,782 EV 21

23 9 Intangible Assets Bottlers Agreement Goodwill 1 Computer Software Cost At 1 January 218,939 9,462 23,425 Additions 654 Disposals/ write offs (299) Transfers (304) At 31 December 218,939 9,462 23,476 Additions 1,013 Disposals/ write offs Transfers 242 At 31 December 218,939 9,462 24,731 Trademarks/ Brand Names 2 11,974 11,974 11,974 Total 263, (299) (304) 263,851 1, ,106 Amortisation or impairment At 1 January 8,903 Amortisation 2,281 Disposals/ write offs (108) At 31 December 11,076 Amortisation 2,745 Disposals/ write offs At 31 December 13,821 5, , ,621 14,845 2,521 (108) 17,258 3,184 20,442 Net book value At 31 December 218,939 9,462 10,911 At 31 December 218,939 9,462 12,400 1 Goodwill relates to the purchase of the Cafe Direct business from Amatil Beverages NZ limited in Trade marks/brand names relates to the purchase of the Baker Halls Brand in ,353 5, , ,594 EV 22

24 10 Investment in subsidiary The consolidated financial statements include the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 2(c) Name of entity Principal activity Coca-Cola Amatil (N.Z.) Limited Vending Management Services Limited 1 Manufacture and distribution of beverages Hardware and software design for the vending industry 100% 100% 100% 1 Company deregistered on 23 June lla Trade and other payables Creditors and Borrowings Owing to related parties Employee entitlements Accrued expenses Total trade and other payables 77,404 14,770 9,821 48, ,987 GROUP 95,169 14,203 8,501 32, ,588 llb Provisions Provision - Current Total Provisions GROUP 3,992 3,992 Provisions in relate to relocation and redundancy costs associated with the new Keri juice plant. 12 Interest bearing borrowings (a) Current Loan Facility -current 1 33,000 Lease Liability - current 1,275 34,275 (b) Non current Loan Facility- non-current 1 Bonds-non-current 2 168,515 Lease Liability - non current 5, ,226 GROUP 110, , , The loan facility matures in October The bonds are in 3 tranches. The maturity dates are detailed below. Tranche Face Value (NZD) (OOO's) Maturity Tranche 1 - NZD 50,000 Aug-18 Tranche 2 - AUD 46,676 Jul-21 Tranche 3 - USO 71,839 Sep ,515 Face Value (NZD) (OOO's) 50,000 47,830 73, ,929 Maturity Aug-18 Jul-21 Sep-23 EV 23

25 13 Income Taxation (a) Reconciliation of effective tax rate Net Profit before taxation Prima Facie tax at 28% Tax effect of permanent differences: Other non-allowable expenses Adjustment in respect of Prior year Income tax expense 98,735 27, (146) GROUP (Restated) 1 93,753 26, (b) Components of income tax expense Current income tax expense Deferred tax expense Adjustments in respect of prior years Income tax expense reported in statement of comprehensive income 27, (146) 27,870 27,202 (725) ,634 (c) Deferred tax assets (liabilities) (i) Deferred taxes Deferred tax liabilities 80, (ii) Movement in Net Deferred tax assets/(liabilities) for the financial year Opening Balance (82,880) (84,133) Deferred tax expense (36) 725 Recognised against equity 1, Adjustment in respect of prior year --- 1,_ Net deferred tax liability (80,012} (82,880) ==::::::!:===:::::::::!::::::============================= (iii) Components of deferred tax liabilities Gross taxable temporary differences: Provision for employee benefits Provision for current assets Property, plant and equipment and intangibles Recognised in equity Other Total 3,706 1,041 (286,373) (4,167) 35 (285,758} 5, (293,484) (8,705) (106) (296,001} Deferred tax liability at 28% (80,012) (82,880) 1 Refer to change in accounting policy note under basis of preparation for further details. EV 24

26 GROUP 14 Contributed equity Ordinary shares -1,015 Total contributed equity 142, , , ,419 All ordinary shares are issued and fully paid up. The shares have equal voting rights and share equally in dividends and surplus on winding up. Employee Equity Compensation Plan reflects shares awarded to employees of the Group; refer to note 16 for further details. 15 Reserves Sharebased Payment Reserve Cash Flow Hedge Reserve Total Reserves 731 3,273 4,004 GROUP 426 6,108 6, Long Term Incentive Plans (LTIP) Under CCA's LTIP, senior executives (upon approval by the Board) have the opportunity to be rewarded with fully paid ordinary shares, providing the LTIP meets minimum pre-determined hurdles covering a three year period, as set by the People Committee. These shares are purchased on market or issued to the trustee once the LTIP vests. In prior years, half of the grant was subject to a Relative Total Shareholder Return (T5R) performance condition and the other half was subject to an Earnings per Share (EPS) performance condition. Employees remain subject to service conditions as determined by the Board in its absolute discretion. Commencing with the LTIP -2017, there are now three performance conditions namely Relative TSR, Absolute TSR and EPS. Dividends are payable to participants of the LTIP only once the rights vest into shares. The fair value of shares offered in the LTIP is determined by an independent external valuer using an option pricing model with the following inputs: Grant date Grant date share price Volatility Dividend yield Risk free rate 18 May $ % 5.1% 1.6% During the financial year, the number of share rights offered to executives of the Group under the Plan, and which are subject to performance hurdles, was 51,920 (: 52,404), with a weighted average fair value of NZD $4.83 / AUD $4.66 (: NZD $6.48 / AUD $6.08). The amount expensed in relation to the LTIP is $304,506 (: $296,761). EV 2s

27 Employees Share Plan (ESP) The ESP provides all full time and part time permanent employees with an opportunity to contribute up to 3% of their base salary to acquire shares in CCA. The ESP is administered by a trustee which acquires and holds shares for the benefit of the participants. These shares have been purchased on market at the prevailing market price. Shares that have been forfeited under the terms of the ESP are also utilised. For every share acquired with amounts contributed by each participant, a matching share is acquired by the trustee, which under normal circumstances vests with the employee after a period of two years from their date of issue (acquisition or utilisation) and are acquired with contributions made by the employing entities. There are no performance conditions. Members of the ESP receive dividends on both vested and unvested shares held on their behalf by the trustee. The amount expensed in relation to the Employee Share Plan is $789,703 (: $772,414). Executive Post-tax Share Purchase Plan All senior executives are required to have a portion of their short term incentives deferred as restricted shares. The shares are purchased on market and trading of these shares is restricted for 12 months for 50% of the shares, with the remaining 50% restricted for 24 months. Dividends are payable to the participants of the Plan. The amount expensed in relation to the Executive Post-tax Share Purchase Plan for the Group was $372,142 (: $276,930). Recognition and Measurement The value of services provided by employees to the Group in return for shares granted under employee ownership plans, is measured by reference to the fair value of the shares as at the grant date. Fair values are determined as the cost of shares purchased for employer contributions to the ESP (shares are purchased at grant date), and are determined by an independent external valuer for shares granted under the LTIP (shares are purchased at vesting date). The fair value of shares is charged to the income statement over the vesting period, and a matching increase in the share based remuneration reserve is recognised, representing the obligation to provide these shares on vesting. On vesting, the treasury shares account and this reserve are reduced. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition, such as Relative TSR and Absolute TSR or subject to service conditions being fulfilled (as determined by the Board in its absolute discretion). EV 26