140630 GFNZ Annual Report

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Goodman Fielder New Zealand Limited

Annual Report

30 June 2014


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Goodman Fielder New Zealand Limited30 June 2014-Annual report

ContentsPage

Corporate directory 1Directors' report 2Directors' declaration 4Financial statements

Statement of profit or loss and other comprehensive income 5Statement of financial position 6Statement of changes in equity 7Statement of cash flows 8Notes to the financial statements 9


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Goodman Fielder New Zealand LimitedCorporate directory

Nature of business Food manufacture

Incorporation Number 1508360

Directors Peter Reidie(Chairman)

Jonathon West

2013)26 November (resignedShane Gannon

2014)17 April(resignedJohn Fraser-Mackenzie

2014)17 April(appointedGilbert Iain Abercrombie

Principal registered office 2/8 Nelson Street1010 Auckland

Postal address PO Box 90 450Victoria Street West

Auckland 1010Auditor KPMG

New Zealand

Solicitors Bell GullyRussell McVeagh

Bankers Westpac New Zealand Ltd16 Taku Tai Square

1010 Auckland

Stock exchange listings Goodman Fielder New Zealand Limited has issued senior unsecured fixed rate bonds which are listed on the NZX DebtMarket (NZDX).

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Goodman Fielder New Zealand LimitedDirectors' report

30 June 2014

Directors' report

The directors present their report for the year ended 30 June 2014.

Directors

(Chairman)Peter ReidieJonathon WestShane Gannon (resigned 26 November 2013)John Fraser Mackenzie (resigned 17 April 2014)Gilbert Iain Abercrombie (appointed 17 April 2014)

Review of operations

The Company’s revenue increased 2% to $939.2 million, primarily as a result of pricing to help cover the increase in the Dairycommodity costs. This increment was partially offset by challenging trading conditions which impacted on price and volume inthe Baking division. Net loss for the year was $201.4 million, which was a decrease of more than 100% on prior year profit of $37.8 million.

The decline in profit for the year is a result of a loss on sale of the Meats and Pizza businesses before tax of $37.4 million, animpairment of goodwill of $160.2m, relating to the Baking and Grocery divisions of $137.7m and $22.5m respectively. Inaddition an increase Dairy commodity costs for the year of $49.7 million has added to the loss for the year. Prior year includedChristchurch earthquake insurance income of $29.5 million, not repeated in current year.

The financing costs decreased 17% to $41.1 million, which reflects the benefit of lower advances from Group companies for theyear.

DivestmentsDuring the year the Company successfully divested non-core assets of its Meats business (part of the Dairy segment) andPizza business (part of the Baking segment) to Hellers Limited in New Zealand and Mommas Frozen Products Limitedrespectively. The proceeds from the sale of these assets were used to repay intergroup borrowings.

Baking Revenue in the Baking division decreased 16% to $317.0 million, impacted by reduced volumes, partially offset by pricing.

Grocery

Revenue in the Grocery division increased 4% to $82.5 million. The improvement in the division is a result of average higher selling price, with volumes being consistent period on period.

Dairy Revenue in the Dairy division increased 6% to $520.3 million. The improvement in the division is a result of average higher selling price, to offset the increase in the dairy raw milk pricing, with consistent volumes period on period.

Asia Pacific Revenue in the Asia Pacific export business decreased 14% to $19.4 million. This business supplies Dairy products to Asia andthe decline is predomoinantly due to an increase in commodity costs, which has not been fully recovered via pricing.

Companies Act 1993

In accordance with section 211(3) of the Companies Act 1993 (the Act), Goodman Fielder Limited, as the Company's soleshareholder, has resolved that the Company's annual report for the year ended 30 June 2014 need not comply with paragraphs

211(1)(a) and 211(1)(e) to (j) of the Act and, accordingly, this annual report does not include particulars required by thoseparagraphs.

Directors.Signed in accordance with a resolution of the

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Goodman Fielder New Zealand LimitedStatement of profit or loss and other comprehensive income

For the year ended 30 June 2014

Notes2014$'000

2013$'000

Continuing operationsRevenue 939,186 921,551Cost of sales (633,849) (580,397)

Gross profit 305,337 341,154

Other income 6 1,027 30,636

Warehousing and distribution expenses (89,698) (90,525)Selling and marketing expenses (112,794) (115,245)General and administration expenses (68,085) (67,929)Other(i) (197,588) -

Operating (loss) / profit before financing costs (161,801) 98,091

Interest expense 8 (42,073) (49,711)Interest income 890 184

Net financing costs (41,183) (49,527)

(Loss) / profit before income tax from continuing operations (202,984) 48,564

Income tax benefit / (expense) 9 1,612 (11,564)(Loss) / profit for the year from continuing operations (201,372) 37,000

Profit from discontinued operations, net of income tax 11(c) - 819

(Loss) / profit after income tax (201,372) 37,819

Other comprehensive incomeItems that will never be reclassified to profit or loss - -

Items that are or may be reclassified to profit or loss - -

Total comprehensive (loss)/income (201,372) 37,819

(i) Includes $37,394,000 of loss on sale of the Meats and Pizza businesses, and impairment of goodwill of $160,194,000relating to the Baking and Grocery segments. Details are shown at Note 5 Segment information.

The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

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Goodman Fielder New Zealand LimitedStatement of financial position

As at 30 June 2014

Notes2014$'000

2013$'000

AssetsCurrent assetsCash and cash equivalents 12 73,758 31,791Trade and other receivables 13 45,894 45,918Inventories 14 40,628 47,205Current tax receivables 475 927Other current assets 243 -

Total current assets 160,998 125,841

Non-current assetsProperty, plant and equipment 15 164,519 175,382Intangible assets 16 952,152 1,149,502

Total non-current assets 1,116,671 1,324,884

Total assets 1,277,669 1,450,725

LiabilitiesCurrent liabilitiesTrade and other payables 18 128,264 99,298Borrowings 21 232 356Provisions 19 20,370 16,669 Advance from group companies 20 335,251 338,558

Total current liabilities 484,117 454,881

Non-current liabilitiesBorrowings 22 247,914 246,973Provisions 24 290 790Deferred tax liabilities 23 15,927 17,288

Total non-current liabilities 264,131 265,051

Total liabilities 748,248 719,932

Net assets 529,421 730,793

EquityContributed equity 25 883,480 883,480 Accumulated losses (354,059) (152,687)

Capital and reserves attributable to owners of Goodman Fielder Limited 529,421 730,793

Total equity 529,421 730,793

The above statement of financial position should be read in conjunction with the accompanying notes.

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Goodman Fielder New Zealand LimitedStatement of changes in equity


Attributable to owners of Goodman Fielder New

Zealand Limited

Notes

ShareCapital$'000

Accumulatedlosses$'000

Totalequity$'000

1 July 2012Balance at 883,480 (165,506) 717,974Profit for the year - 37,819 37,819Other comprehensive income - - -

Total comprehensive income - 37,819 37,819

Transactions with owners:Dividends paid 26 - (25,000) (25,000)

Total transactions with owners - (25,000) (25,000)

30 June 2013Balance at 883,480 (152,687) 730,793

1 July 2013Balance at 883,480 (152,687) 730,793Loss for the year - (201,372) (201,372)Other comprehensive income - - -

Total comprehensive loss - (201,372) (201,372)

Transactions with owners:Dividends paid 26 - - -

Total transactions with owners - - -

30 June 2014Balance at 883,480 (354,059) 529,421

The above statement of changes in equity should be read in conjunction with the accompanying notes.

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Goodman Fielder New Zealand LimitedStatement of cash flows


Notes2014$'000

2013$'000

Cash flows from operating activitiesReceipts from customers 1,074,591 1,144,957Payments to suppliers and employees (979,686) (1,040,919)Interest received 890 184Interest paid (48,590) (20,114)

from operating activitiesinflowNet cash 29 47,205 84,108

Cash flows from investing activitiesPayments for property, plant and equipment 15 (19,192) (16,092)Payments for purchase of intangibles 16 (3,697) (5,968)Proceeds from sale of property, plant and equipment 868 -Proceeds from sale of business 12,808 84,333Insurance recovery relating to Christchurch earthquakes 6 - 32,700

from investing activitiesinflow /(outflow)Net cash (9,213) 94,973

Cash flows from financing activitiesLoans (to)/from related parties 4,311 (184,189)Finance lease payments (336) (245)Dividends paid - (25,000)

from financing activities(outflow) /inflowNet cash 3,975 (209,434)

in cash and cash equivalents(decrease) /increaseNet 41,967 (30,353)Cash and cash equivalents at the beginning of the financial year 31,791 62,144

year Cash and cash equivalents at end of 12 73,758 31,791

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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Goodman Fielder New Zealand LimitedNotes to the financial statements

30 June 2014

Contents of the notes to the financial statements

Page

1 General information 102 Summary of significant accounting policies 103 Financial risk management 194 Critical accounting estimates and judgements 245 Segment information 246 Other income 277 Expenses 288 Interest expense 289 Income tax expense 2910 Employee benefit expense 3011 Business divestments and discontinued operations 3012 Current assets - Cash and cash equivalents 3213 Current assets - Trade and other receivables 3214 Current assets - Inventories 3315 Non-current assets - Property, plant and equipment 3416 Non-current assets - Intangible assets 3517 Superannuation plan 3818 Current liabilities - Trade and other payables 3819 Current liabilities - Provisions 3820 Current liabilities - Advances from group companies 3921 Current liabilities - Borrowings 3922 Non-current liabilities - Borrowings 4023 Non-current liabilities - Deferred tax liabilities 4124 Non-current liabilities - Provisions 4225 Share capital 4226 Dividends 4227 Contingencies 4328 Commitments 4329 Reconciliation of profit after income tax to net cash inflow from operating activities 4430 Related party transactions 45

31 Key management personnel disclosures 4632 Matters subsequent to the end of the financial year 47

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30 June 2014(continued)

1 General information

Goodman Fielder New Zealand Limited ("the Company") is a company incorporated and domiciled in New Zealand. TheCompany is registered under the New Zealand Companies Act 1993.

The principal activities of the Company are the manufacture, distribution and marketing of consumer food products.

The financial statements of the Company are for the year ended 30 June 2014. The financial statements were authorised for issue by the Directors on 13 August 2014.

2 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been

consistently applied to all the years presented, unless otherwise stated.

The consolidated financial statements were authorised for issue by the Directors on 13 August 2014.

(a) Basis of preparation

These general purpose financial statements have been prepared in accordance with New Zealand generally acceptedaccounting practice (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZIFRS), and other applicable New Zealand Financial Reporting Standards, as appropriate for profit oriented entities.

(i) Compliance with IFRS

The financial statements of the Company also comply with International Financial Reporting Standards (IFRS) as issued by theInternational Accounting Standards Board (IASB).

(ii) GroupNew and amended standards adopted by the

The following new standards and amendments to standards, including any consequential amendments to other standards, with

a date of initial application of 1 July 2013, has been adopted by the Company.

Presentation of other comprehensive income

As a result of the amendments to IAS 1, the Group has modified the presentation of items in OCI in its statement of profit or loss and other comprehensive income, to present separately items that would be reclassified to profit or loss from those thatwould never be. Comparative information has been re-presented accordingly.

Offsetting of financial assets and financial liabilitiesNZ IFRS 7

As a result of the amendments to NZ IFRS 7, the Group has expanded its disclosures about the offsetting of financial assetsand financial liabilities (see note 3).

Consolidated Financial Statements (2011)NZ IFRS 10

As a result of NZ IFRS 10 (2011), the Group has changed its accounting policy for determining whether it has control over andconsequently whether it consolidates its investees. NZ IFRS 10 (2011) introduces a new control model that focuses on whether

the Group has power over an investee, exposure to rights to variable returns from its involvement with the investee and abilityto use its power to affect those returns.

Joint ArrangementsNZ IFRS 11

The adoption of NZ IFRS 11 (2011) has had no impact on the Company as it does not have any joint arrangements.

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2 (continued)Summary of significant accounting policies

(a) (continued)Basis of preparation

(ii) (continued)New and amended standards adopted by the Company

Fair Value Measurement NZ IFRS 13

NZ IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements,when such measurements are required or permitted by other NZ IFRSs. In particular, it unifies the definition of fair value as theprice at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at themeasurement date. It also replaces and expands the disclosure requirements about fair value measurements in other NZ

Some of these disclosures are specifically required in financialDisclosures.Financial Instruments:IFRS's, including NZ IFRS 7statements for financial instruments; accordingly, the Group has included additional disclosures in this regard (see Note 2).

In accordance with the transitional provisions of NZ IFRS 13, the Group has applied the new fair value measurement guidanceprospectively, and has not provided any comparative information for new disclosures. Notwithstanding the above, the change

had no significant impact on the measurements of the Group’s assets and liabilities.

(iii) Statutory base

Goodman Fielder New Zealand Limited is a limited liability company which is domiciled and incorporated in New Zealand. It isregistered under the Companies Act 1993 and is an issuer in terms of the Financial Reporting Act 1993.

The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and theCompanies Act 1993.

(iv) Historical cost convention

The financial statements are prepared on the historical cost basis except for non-current assets held for sale which are valuedat the lower of carrying amount and fair value less costs to sell.

(v) Critical accounting estimates

The preparation of financial statements in conformity with NZ IFRS requires the use of certain accounting estimates. It also

requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areasinvolving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financialstatements are disclosed in note 4.

(vi) Going concern

As at 30 June 2014, the Company has net current liabilities of $323,199,000 (2013: $329,040,000). This is primarily due to theadvance from group companies. Refer to note 20 for further details.

The financial statements have been prepared on a going concern basis as the parent of the Company has provided a letter of comfort to the Company confirming its continuing financial support to the Company.

(vii) Presentation currency

The financial statements are presented in New Zealand dollars unless otherwise stated and all values are rounded to thenearest thousand dollars ($'000). The functional currency is New Zealand Dollars (NZD).

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(b) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decisionmaker. The chief executive officer has been identified as the chief operating decision maker that makes strategic decisions.

Segment assets include all assets used by a segment and consist primarily of cash, receivables, inventories, property, plantand equipment and goodwill and other intangible assets, net of related provisions. While most of these assets can be directlyattributable to individual segments, the carrying amounts of certain assets used jointly by segments are allocated, wherepossible, based on reasonable estimates of usage. IT and development software and corporate cash is not allocated tosegments. Segment liabilities consist primarily of trade and other creditors and employee provisions. External borrowings arenot allocated to segments. Segment assets and liabilities do not include derivative instruments and income taxes.

Segment result is earnings before interest and tax (EBIT) reported by segment revenue less cost of goods sold, selling andmarketing expenses, distribution expenses and general and administrative expenses (excluding corporate revenues andadministrative expenses relating to head office).

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangibleassets other than goodwill.

Inter segment transfersSegment revenues, expenses and results include transfers between segments. Such transfers are priced on an ''arms length''basis or a "fully absorbed" cost basis and are eliminated on consolidation of segments.

(c) Revenue

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

(i) Sale of goods

Revenue is recognised at the fair value of consideration received or receivable (net of returns, discounts and allowances) whenthe significant risks and rewards of ownership of the goods have passed to the customer and can be measured reliably. Risks

and rewards are considered to have passed to the buyer at the time of delivery of the goods to the customer.

(ii) Interest income

Interest income is recognised as it accrues, using the effective interest method. This is a method of calculating the amortisedcost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is therate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carryingamount of the financial asset.

(d) Expenses

Operating lease paymentsPayments made under operating leases are recognised in profit or loss on a straight line basis over the term of the lease.Lease incentives received are recognised in profit or loss over the lease term as an integral part of the total lease expense.

Interest expenseInterest expense comprises interest payable on borrowings. Interest payable on borrowings is calculated using the effective

interest method and recognised in profit or loss.

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(i) Trade receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the marketrate of interest at the reporting date. This fair value is determined for disclosure purposes or when such assets are acquired in abusiness combination.

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

Derecognit ion of securit ised receivables

Securitised receivables are derecognised when:

• the rights to receive cash flows from the receivable have expired;• the Company retains the right to receive cash flows from the receivable, but has assumed an obligation to pay them in

full without material delay to a third party; or

• the Company has transferred its rights to receive cash flows from the receivable and either (a) has transferredsubstantially all the risks and rewards of the receivable, or (b) has neither transferred nor retained substantially all therisks and rewards of the receivable, but has transferred control of the receivable.

Receivables for insurance recoveries are recognised only when the recoveries are virtually certain of receipt. The receivablesare presented gross in the statement of financial position and are not netted off against related payables or otherwise groupedto offset impairment losses of other current assets. The recoveries are recognised in the profit or loss under 'other income'.

(j) Inventories

Inventories are measured at the lower of cost and net realisable value. Cost is based on the first in first out or weighted averageprinciple, whichever is most appropriate, and includes expenditure incurred in acquiring the inventories and bringing them totheir existing location and condition.

In the case of manufactured inventories and work in progress, cost includes all direct costs plus that portion of the fixed andvariable production overhead incurred in putting inventories into their present location and condition, based on normal operating

capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and theestimated costs necessary to make the sale.

(k) Property, plant and equipment

Property, plant and equipment is measured at cost less accumulated depreciation and any accumulated impairment losses.

Any gain or loss on disposal on disposal of an item of property, plant and equipment is recognised in profit or loss.

Depreciation is charged to profit or loss on a straight line or diminishing value basis over the estimated useful lives of each partof an item of property, plant and equipment. Land is not depreciated. The depreciation rates for each class of property, plantand equipment are as follows:

Straight-line Diminishing value- Freehold Buildings 2% - 5% 4% - 6%

- Leasehold properties The shorter of the lease term or the life of the asset- Plant and equipment 4% - 60% 4% - 50%- Leased plant and equipment The shorter of the lease term or the life of the asset

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(l) Intangible assets

(i) Goodwill

Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.In respect of acquisitions that took place in the period, goodwill is provisionally determined based on the preliminary fair valueof net identifiable assets acquired. Goodwill recognised on acquisition is subject to change until the allocation of the purchaseprice to the fair value of net identifiable assets is finalised, not more than 12 months from the date of acquisition. Where theexcess is negative, the gain is recognised immediately in profit or loss.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units and is notamortised but is tested annually for impairment (see "Impairment of assets" below).

(ii) Brand names and licences

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses. Internally generatedintangible assets are not capitalised and are expensed in the year in which the expenditure is incurred.

Brand names and licences with indefinite useful lives are tested for impairment annually either individually or at the cashgenerating unit level. Such intangibles are not amortised. The Company assesses the useful life of all intangible assets at eachreporting date. Any changes in the useful lives are accounted for as a change in an accounting estimate and are thusaccounted for on a prospective basis. Licences with finite lives are amortised over their lives in accordance with the estimatedtiming of the benefits expected to be received from those assets.

(iii) IT development and software

Software is stated at cost less accumulated amortisation and impairment losses.

Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute tofuture period financial benefits through revenue generation and/or cost reduction are capitalised to software. Costs capitalisedinclude external direct costs of materials and service, direct payroll and payroll related costs of employees’ time spent on theproject. Amortisation is charged to profit or loss on a straight line basis over the estimated useful life ranging from 4 to 6 years.

IT development costs include only those costs directly attributable to the development phase and are only recognised followingcompletion of technical feasibility and where the Company has an intention and ability to use the asset.

(m) Impairment of assets

The carrying amounts of the Group’s assets, other than inventories and deferred tax assets, are reviewed at each reportingdate to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount isestimated.

For goodwill and intangible assets with indefinite useful lives, the recoverable amount is estimated at each reporting date, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverableamount. Impairment losses are recognised in the income statement.

Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of anygoodwill allocated to cash generating units (group of units) and then, to reduce the carrying amount of the other assets in theunit (group of units) on a pro rata basis.

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(m) (continued)Impairment of assets

(i) Calculation of recoverable amount

The recoverable amount of the Company’s non current receivables carried at amortised cost is calculated as the present valueof estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initialrecognition of these financial assets). Receivables with a short duration are not discounted.

Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significantreceivables are individually assessed for impairment. Impairment testing of significant receivables that are not assessed asimpaired individually is performed by placing them into portfolios of significant receivables with similar risk profiles andundertaking a collective assessment of impairment.

Non significant receivables are not individually assessed. Instead, impairment testing is performed by placing non-significant

receivables in portfolios of similar risk profiles, based on objective evidence from historical experience adjusted for any effectsof conditions existing at each reporting date.

The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value inuse, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largelyindependent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs. Acash generating unit represents the smallest group of assets that generates cash inflows from continuing use that are largelyindependent of the cash inflows of other assets or group of assets.

(n) Trade and other payables

Trade and other payables are stated at cost.

(o) Borrowings

Interest bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial

recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption valuebeing recognised in the income statement over the period of the borrowings on an effective interest basis.

Interest bearing borrowings are derecognised when the obligation under the liability is discharged or cancelled or expires.

(p) Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and itis probable that an outflow of economic benefits will be required to settle the obligation.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at apre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific tothat liability. When discounting is used, the increase in the provision due to the passage of time is recognised as an interestexpense.

(i) Business closure and rationalisation

A business closure and rationalisation provision is recognised when the Company has developed a detailed formal plan for thebusiness closure and rationalisation and has raised a valid expectation in those affected that it will carry out the businessclosure and rationalisation by starting to implement the plan or announcing its main features to those affected by it. Themeasurement of a business closure and rationalisation provision includes only the direct expenditures arising from the businessclosure and rationalisation, which are those amounts that are both necessarily entailed by the business closure andrationalisation and not associated with the ongoing activities of the Company.

(ii) Onerous contracts

Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract isconsidered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under thecontract exceed the economic benefits expected to be received under it.

The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expectednet cost of continuing with the contract.

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(q) Employee benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave and sick leave expected to be settled within 12months of the reporting date represent present obligations in respect of employees' services up to the reporting date. They arecalculated at undiscounted amounts based on remuneration rates that the entity expects to pay at the reporting date includingrelated on costs.

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. The obligation iscalculated using the projected unit credit method and is discounted to its present value. The discount is the market yield onrelevant New Zealand Government Stock at reporting date.

Obligations for contributions to defined contribution superannuation funds are recognised as an expense in profit or loss asincurred.

(r) Leases

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as financeleases. Upon initial recognition, the leased asset is measured at lower of its fair value and the present value of the minimumlease payments.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of theoutstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodrate of interest on the remaining balance of the liability.

Other leases are operating leases and are not recognised on the Company's statement of financial position.

Payments made under operating leases are recognised in profit and loss on a straight line basis over the term of the lease.

(s) Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash, loans, advances to and from group companiesand trade and other payables.

The non-derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition thesenon-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairedlosses. Any directly attributable transaction costs are deferred and amortised using the effective interest method.

A financial instrument is recognised if the Company becomes a party to the contractual provisions of the instrument. Financialassets are derecognised if the Company's contractual rights to the cash flows from the financial assets expire or if the companytransfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset.Financial liabilities are derecognised if the Company's obligations specified in the contract expire or are discharged or cancelled.

(t) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosurepurposes.

The fair values of financial instruments that are not traded in an active market are determined using valuation techniques. TheCompany uses a variety of methods and makes assumptions that are based on market conditions existing at each balancedate. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financialinstruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance date. Fair values reflectthe credit risk of the financial instrument and include adjustments to take account of the credit risk of the Company andcounterparty when appropriate.

The carrying value less impairment provision of trade receivables is assumed to approximate its fair value due to its short termnature. The fair value of non current financial liabilities for disclosure purposes is estimated by discounting the futurecontractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.

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(u) Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on whichcontrol is transferred to the Company. Control is determined by whether the Group has power over an investee, exposure torights and variable returns from its involvement with the investee and the ability to use its power to affect these returns.

The Company measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus• the recognised amount of any non controlling interests in the acquiree; plus• if the business combination is achieved in stages, the fair value of the pre existing equity interest in the acquiree; less• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

A bargain purchase gain is recognised immediately in profit or loss.

(v) Share Capital

Ordinary shares are classified as equity. Transaction costs of an equity transaction are accounted for as a deduction fromequity, net of any related income tax benefit.

(w) Dividends

A liability for dividends payable is recognised in the period in which the dividends are determined for the entire undistributedamount.

(x) Non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets or disposal groups comprising assets and liabilities, that are expected to be recovered primarily throughsale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale theassets or components of a disposal group are remeasured in accordance with the Company's accounting policies. Thereafter generally the assets or disposal group are measured at the lower of their carrying amount and fair less cost to sell. Anyimpairment loss on a disposal group is allocated to goodwill. Impairment losses on classification as held for sale and

subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of cumulative impairment loss.

Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated.

(y) Financial guarantee contracts

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initiallyProvisions,measured at fair value and subsequently at the higher of the amount determined in accordance with NZ IAS 137

and the amount initially recognised less cumulative amortisation, whereContingent Liabilities and Contingent Assetsappropriate.

The fair value of financial guarantees is determined as the present value of the difference in net cash flows between thecontractual payments under the debt instrument and the payments that would be required without the guarantee, or theestimated amount that would be payable to a third party for assuming the obligations.

Where guarantees in relation to loans or other payables of associates are provided for no compensation, the fair values are

accounted for as contributions and recognised as part of the cost of the investment.

(z) Prior year comparatives

Income Statement Prior year comparatives for certain items of expenses have been reclassified to correctly reflect the income statementclassifications. As a result $74,082,000 of fixed manufacting costs were reclassified to cost of sales.

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(aa) Standards, amendments and interpretations to existing standards that are not yet effective

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1July 2013, and have not been applied in preparing these consolidated financial statements. None of these is expected to have asignificant effect on the consolidated financial statements of the Group, except for NZ IFRS 9 Financial Instruments, which themandatory effective date is yet to be finalised, this could change the classification and measurement of financial assets. TheCompany does not plan to adopt this standard early and the extent of the impact has not been determined.

3 Financial risk management

The Company’s principal financial instruments include trade receivables and payables, cash and short term deposits, advancefrom group companies and borrowings.

A related group company, Goodman Fielder Treasury Pty Ltd NZ Branch, provides financing and hedging services to theCompany. This includes inter company loans, and derivative financial instruments such as interest rate swaps, foreignexchange rate forwards and commodity swaps. Intercompany interest is paid by the Company on all intercompany loans atmarket rates, and cashflows from hedging activities are fully passed through to the Company when realised.

As a result of the Company’s operations and sources of finance, it is exposed to credit risk, liquidity risk and market risks whichinclude foreign currency risk, commodity price risk and interest rate risk. These risks are described below.

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk managementframework. The Company’s risk management policies are established to identify and analyse the financial risks faced by theCompany, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policiesand systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis upon which income and expenses are recognised, in respect of each class of financial asset andfinancial liability are disclosed in the statement of accounting policies to the financial statements.

The Company holds the following financial assets and liabilities:

Carrying value

2014$'000

2013$'000

Financial assetsCash and cash equivalents 73,758 31,791Trade and other receivables 45,894 45,918

119,652 77,709

Financial liabilitiesTrade and other payables 128,264 99,298

Advance from group companies 335,251 338,558Borrowings 248,146 247,329

711,661 685,185

(a) Market risk

Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates and interest rates, willaffect the Company’s profit or loss or the value of its holdings of financial instruments. The objective of market risk managementis to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

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3 (continued)Financial risk management

(a) (continued)Market risk

(i) Foreign exchange risk

The Company predominantly operates in New Zealand and thus a significant portion of the Company’s revenues, expendituresand cash flows are generated, and assets and liabilities are located in New Zealand.

However, a significant portion of the Company's commodity purchases are denominated in either Australian dollars or USdollars. As a result, the Company is exposed to foreign currency risks arising from movements in foreign currency exchangerates.

The Company reports in New Zealand dollars. Movements in foreign currency exchange rates affect reported financial results,financial position and cash flows. Where practical, the Company attempts to reduce this risk by matching revenues andexpenditures, as well as assets and liabilities, by country and by currency.

Foreign exchange rates applied against the New Zealand Dollar, at 30 June 2014 are 0.9303 Australian Dollar (2013: 0.8467)and 0.8740 United States Dollar (2013: 0.7737).

The Group’s exposure to foreign currency risk at the reporting date was as follows (all amounts are denominated in NewZealand dollars):

2014 AUD$'000

USD$'000

EUR$'000

Trade and other receivables 478 478 -Trade and other payables (1,383) (2) (248)

Net exposure (905) 476 (248)

2013 AUD$'000

USD$'000

EUR$'000

Trade and other receivables - 517 -Trade and other payables (1,113) - (245)

Net exposure (1,113) 517 (245)

(ii) Commodity price risk

The Company's activities expose it to the risk of changes in commodity prices. The Company is a purchaser of certaincommodities including wheat, sugar, edible oils, fats and fuel. The Company purchases these commodities based on marketprices that are established with the supplier as part of the purchase process. It is Company policy that transactions to procurecommodities are executed within daily transaction limits as well as within minimum and maximum cover ratios for forecastrequirements over the following 12 month period.

(iii) Interest rate risk

The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's advance from groupcompanies and the retail bonds. Interest on inter company loans is fixed at 30 June each year for the full year ahead. Interest ispaid by the Company on inter company loans annually in arrears. Interest on the retail bonds is payable on a quarterly basis inarrears.

As at the reporting date, the Company had the following cash, advances from group companies, other borrowings and leaseliabilities outstanding:

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(a) (continued)Market risk

(iii) (continued)Interest rate risk

30 June 2014 30 June 2013Weightedaverage

interest rate%

Balance$'000

Weightedaverage

interest rate%

Balance$'000

Cash and cash equivalents 2.2% 73,758 2.4% 31,791 Advance from group companies 6.5% (335,251) 5.5% (338,558)Borrowings - retail bonds 7.5% (247,819) 7.5% (246,666)Borrowings - lease liabilities 4.9% (327) 2.8% (663)

(509,639) (554,096)

(iv) Summarised sensitivity analysis

The following table summarises the sensitivity of the Company’s financial assets and financial liabilities to foreign currency r iskand interest rate risk.

Interest rate risk (i) Foreign exchange risk (ii)-100 bps +100 bps -10% +10%

2014Profit$'000

Equity$'000

Profit$'000

Equity$'000

Profit$'000

Equity$'000

Profit$'000

Equity$'000

Cash and cash equivalents (738) - 738 - - - - -Trade and other receivable - - - - (96) - 96 -Trade and other payables - - - - 163 - (163) - Advance from group companies (note 20) 3,384 - (3,384) - 314 - (314) -Borrowings (iii) - - - - - - - -Total increase/(decrease) 2,646 - (2,646) - 381 - (381) -

Foreign exchange risk Interest rate risk-10% +10% -100 bps +100 bps

2013Profit$'000

Equity$'000

Profit$'000

Equity$'000

Profit$'000

Equity$'000

Profit$'000

Equity$'000

Cash and cash equivalents - - - - (318) - 318 -Trade and other receivable (52) - 52 - - - - -Trade and other payables 136 - (136) - - - - - Advance from group companies (note 20) 484 - (484) - 3,121 - (3,121) -Borrowings (iii) - - - - - - - -Total increase/(decrease) 568 - (568) - 2,803 - (2,803) -

(i)The interest rate sensitivity above represents a 100 basis point decrease and increase in variable interest rates.(ii)The foreign currency sensitivity above represents a 10% decrease and increase in spot foreign exchange rates.(iii)Interest rates on the retail bonds are fixed for the full term.

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(b) Credit risk

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. Thecreditworthiness of a customer or counterparty is determined by a number of qualitative and quantitative factors. Qualitativefactors include external credit ratings (where available), payment history and strategic importance of customer or counterparty.Quantitative factors include transaction size, net assets of customer or counterparty, and ratio analysis on liquidity, cash flowand profitability. The Company is exposed to credit risk from two major customers as noted on Note 5(c). The ageing of theCompany's trade receivables at the reporting date is disclosed in note 13(a).

In relation to trade receivables, it is the Company’s policy that all customers who wish to trade on terms are subject to creditverification on an ongoing basis with the intention of minimising bad debts. The nature of the Company’s trade receivables isrepresented by regular turnover of product and billing of customers based on the Company’s contractual payment terms.

The Company has entered into a trade receivable securitisation program. Refer to note 13(b) for further details of this program.

When utilising bank accounts and cash deposits, the Company transacts with counterparties who have sound credit profiles.Such counterparties are primarily large, highly rated financial institutions.

The carrying amount of the Company’s financial assets represents the maximum credit exposure as summarised above.

(c) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as and when they become due andpayable. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficientliquidity to meet its liabilities when they become due and payable, under both normal and stressed conditions, without incurringunacceptable losses or risking damage to the Company’s reputation. The Company utilises advances from specialist financingand treasury group companies to ensure continuity of funding whilst also maintaining sufficient flexibility to enable it to minimiseits financing costs.

The Company manages its cash balances on a daily basis based on quarterly forecast cash projections provided by eachoperating division.

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(c) (continued)Liquidity risk

(i) Maturities of financial liabilities

The following table details the Company's contractual maturities of financial liabilities, including estimated interest paymentsand excluding the impact of netting agreements, as at the reporting date:

1 year or less

Between 1to 5 years

Over 5years

Totalcontrac-

tualcashflows

Carryingamount(assets)/liabilities

30 June 2014At $'000 $'000 $'000 $'000 $'000

Trade and other payables 128,264 - - 128,264 128,264

Advance from group companies 335,251 - - 335,251 335,251Borrowings - retail bonds 14,137 268,850 - 282,987 247,819Borrowings - lease liabilities 232 95 - 327 327

477,884 268,945 - 746,829 711,661

At 30 June 2013Trade and other payables 99,298 - - 99,298 99,298 Advance from group companies 357,265 - - 357,265 338,558Borrowings - retail bonds 18,850 287,700 - 306,550 246,666Borrowings - lease liabilities 430 362 - 792 663

475,843 288,062 - 763,905 685,185

(d) Capital risk management

The Company’s target is to maintain a strong capital base so as to maintain investor, creditor and market confidence and tosustain future development of the business. The primary capital management measures assessed by the Board are the returnon capital employed, the interest cover ratio and the gearing ratio.

The Board monitors the return on capital employed, which the Company defines as reported EBIT (Earnings Before Interestand Tax) divided by capital employed. The Company’s target is to achieve a return on capital in excess of 13% over a rolling 12month period.

(e) Debt facility guarantee

The Company (amongst other subsidiaries of the Parent, Goodman Fielder Limited) is a party to debt facility guarantee for thegroup treasury entities. The treasury entities are the primary vehicles through which

Goodman Fielder Limited and its subsidiaries ("the Group") sources its external debt funding in Australia and New Zealand.In determining the fair value of the guarantee, the Company has given consideration to the following:

1. the probability of default or the Group entities being wound up while the guarantee is still in place;2. the existence of sufficient assets in the Group entities to meet their debt repayment obligations; and3. the likely timing of the potential winding up of the Group entities.

The fair value of the debt facility guarantee in respect of the treasury entities is considered to be immaterial to the Companyand therefore no liability has been recognised in the financial statements.

(f) Fair value measurements

The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other payables and advances fromgroup companies approximates their fair value due to their short maturity periods. The fair value of the retail bond which hasbeen determined using quoted prices (level 1) is disclosed in note 22.

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4 Critical accounting estimates and judgements

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

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised inthe period in which the estimates are revised and in any future periods affected.

The estimates and judgements that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Impairment of goodwill and intangibles with indefinite useful lives

The Company determines whether goodwill and intangibles with indefinite useful lives are impaired at each reporting period.This requires an estimation of the recoverable amount of the cash generating units to which the goodwill and intangibles withindefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of

16.goodwill and intangibles with indefinite useful lives are discussed in note

5 Segment information

(a) Description of segments

Operating segments have been identified on the basis of similarity in respect of the nature of product and service offeringsprovided by the reportable segments for which regular management information is internally provided to the Group's Chief Executive Officer ("the CEO") who is the chief operating decision maker. The performance of the segments is measured on thebasis of profit after tax.

The Company operates in five operating segments as described below.

Operating segmentsThe Baking division has a portfolio of leading food brands with six of the top 10 proprietary brands in New Zealand. It is one of the largest bakers in the region, with leading market shares in most of the market segments in which it competes.

The Dairy division is a major participant in the New Zealand dairy and smallgoods industries with some of the country’s mostrecognised brands in fresh and flavoured milk, yogurt, dairy desserts, specialty cheese, cultured products and meats. Thebusiness distributes fresh dairy products to almost 13,000 customer points every day.

The Grocery division is a leading supplier of consumer food products to supermarkets in New Zealand. It has a diverse portfolioof iconic market leading brands focused on the retail channel. Products include retail margarine and spreads, flour, cake mix,dressings and mayonnaise.

The Asia Pacific division has an emerging presence in the East Asian region with a core focus on China. It is a supplier of dairyproducts to the Asian markets.

The Integro Foods division was a leading processor of edible oils in New Zealand. The business supplied edible oils to the NewZealand food industry and specialised in the development and production of complex, higher value oil blends. The business, aswell as supplying in bulk, also supplied packed products under a number of leading brands. The Integro Foods business was

sold on 2 October 2012. The prior year segment results include the results of operations to that date.

Intersegmental sales during the period and intersegment profit on stock at reporting date are eliminated on consolidation of thesegments.

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5 (continued)Segment information

(b) Operating segments

2014 Baking Dairy GroceryAsia

Pacific Total$'000 $'000 $'000 $'000 $'000

Sales to external customers 316,965 520,310 82,462 19,449 939,186Inter-segment sales 2,032 19,550 554 6,499 28,635

Total segment revenue 318,997 539,860 83,016 25,948 967,821Intersegment elimination - - - - (28,635)Discontinued operations - - - - -

Total revenue 318,997 539,860 83,016 25,948 939,186

Segment resultEBITDA before restructuring costs 37,149 37,392 17,154 2,625 94,320Depreciation and amortisation expense (14,491) (17,004) - - (31,495)EBIT before restructuring costs 22,658 20,388 17,154 2,625 62,825Restructuring costs (1,192) (10,804) - - (11,996)Impairment charge (i) (137,677) - (22,517) - (160,194)Loss on sale of businesses (3,272) (34,122) - - (37,394)Segment EBIT (119,483) (24,538) (5,363) 2,625 (146,759)Unallocated restructure costs - - - - (1,203)Unallocated foreign exchange gains - - - - 66Unallocated expenses - - - - (13,905)Net interest expense - - - - (41,183)Loss before income tax from continuing operations (119,483) (24,538) (5,363) 2,625 (202,984)Income tax benefit - - - - 1,612Loss for the year (119,483) (24,538) (5,363) 2,625 (201,372)

Segment assets and liabilitiesSegment assets 366,038 715,564 178,388 12,473 1,272,463Unallocated assets - - - - 5,206

Total assets - - - - 1,277,669Total assets - - - - 1,277,669Segment liabilities 507,122 80,280 105,503 2,744 695,649Unallocated liabilities - - - - 52,599

Total liabilities - - - - 748,248Total liabilities - - - - (748,248)Capital expenditure 8,551 10,409 - - 18,960Unallocated capital expenditure - - - - 3,929

Total - - - - 22,889

(i) The impairment charge of $160,194,000 relates to the impairment of goodwill for the Baking and Grocery segments.(ii) The loss on sale of the business of $37,394,000 relates to the Meats (Dairy segment) and Pizza (Baking segment)

businesses divested during the year.

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5 (continued)Segment information

(b) (continued)Operating segments

2013 Baking(i) Dairy Grocery Asia PacificIntegro Foods(discontinued) Total

$'000 $'000 $'000 $'000 $'000 $'000

Sales to external customers 377,424 490,197 79,274 22,647 10,476 980,018Inter-segment sales 29,062 19,613 2,760 3,667 9,900 65,002

Total segment revenue 406,486 509,810 82,034 26,314 20,376 1,045,020Intersegment elimination - - - - - (65,002)Discontinued operations - - - - - (58,467)

Total revenue 406,486 509,810 82,034 26,314 20,376 921,551

Segment resultEBITDA before restructuring costs 49,530 65,932 16,076 3,972 415 135,925Depreciation and amortisation expense (12,520) (20,425) - - - (32,945)EBIT before restructuring costs (ii) 37,010 45,507 16,076 3,972 415 102,980Insurance proceeds 25,530 250 - - - 25,780Impairment charge (iii) (6,174) - - - - (6,174)Realised exchange loss (1,100) - - - - (1,100)Restructuring costs (2,529) (3,061) - - - (5,590)Segment EBIT 52,737 42,696 16,076 3,972 415 115,896Unallocated restructure costs - - - - - (372)Unallocated foreign exchange gains - - - - - 471Unallocated expenses - - - - - (8,061)Discontinued operations - - - - - (9,843)Net interest expense - - - - - (49,527)Profit before income tax from continuingoperations 52,737 42,696 16,076 3,972 415 48,564

Discontinued operations (refer to note 11) - - - - - 819Income tax expense - - - - - (11,564)Profit for the year 52,737 42,696 16,076 3,972 415 37,819

Segment assets and liabilitiesSegment assets 487,900 732,100 199,800 8,300 - 1,428,100Unallocated assets - - - - - 22,625

Total assets - - - - - 1,450,725Total assets - - - - - 1,450,725Segment liabilities 510,377 34,081 121,520 315 - 666,293Unallocated assets - - - - - 53,639

Total liabilities - - - - - 719,932Total liabilities - - - - - (719,932)Capital expenditure 8,500 7,100 - 100 - 15,700Unallocated capital expenditure - - - - - 6,360

Total - - - - - 22,060

(i) The Baking segment EBIT of $52,737,000 includes the financial information for New Zealand Milling (EBIT of $9,428,000including $622,000 loss from insurance settlements) which has been classified as discontinued operations. Further informationhas been set out in note 11 Assets classified as held for sale and discontinued operations.

(ii) The Baking segment EBITDA before restructuring costs includes $3,100,000 (2012: $9,085,000) of income relating to theChristchurch earthquakes insurance claim recognised in the ordinary course of business prior to final settlement, which isconsistent with prior year treatment. The insurance income recognised, is primarily offset by equivalent costs incurred as aresult of the earthquakes.

(iii) Asset impairment resulting from the Christchurch earthquakes.

(c) Other segment information

During 2014, 67.1% of the Group's revenues depended on two customers in the Baking, Dairy and Grocery segments (2013:65.1%).

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6 Other income

2014$'000

2013$'000

Insurance recovery - 29,502Other income 1,027 1,134

1,027 30,636

In the prior year a final cash settlement for $32,717,000 was received in relation to the 2011 earthquakes in Christchurch, whichcaused some disruption to the Company's dairy, baking and milling operations in the region and as a result, the Companylodged an insurance claim for damages to buildings, other assets and loss of business. The final settlement in addition toprevious settlements brought the total settlement to $56,648,000. The income recognised for continuing operations as a resultof the final settlement of $29,502,000 was shown as a significant item. The difference was predominantly due to settlement of prior period receivables and New Zealand Milling capital expenditure commitments.

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7 Expenses

2014$'000

2013$'000

Profit before finance costs includes the following specificexpenses:

Depreciation and amortisation 28,016 27,992

Research and development 3,984 4,090

Auditors remuneration - KPMG 186 212

Other fees paid to auditors (i) 127 11

Management fees 13,094 20,546

Restructuring costs 13,199 5,962

Net loss on sale of businesses 37,394 -

(note 16(a))Impairment charge on goodwill 160,194 -

Impairment charge on property, plant and equipment (ii) - 6,174

Loss on disposal of property, plant and equipment - 3,717

Operating leases 11,333 9,871

Other fees paid to auditors include services for the audit or review of financial information other than financial reports(i)including other audits required for local regulatory purposes, taxation and general accounting services. In the current year, aportion of the auditors remuneration relating to audit services provided by KPMG Sydney was paid for by Goodman Fielder Limited.

asset impairment resulting from the Christchurch earthquakes.(ii) Prior year relates to

8 Interest expense

Advance from group companies 20,865 28,498Retail bonds 19,969 19,976 Amortisation of deferred borrowing costs 1,168 1,150Finance lease liabilities 71 87

42,073 49,711

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9 Income tax expense

(a) Income tax expense

2014$'000

2013$'000

Current tax:Current period (1,186) 13,809(Under) / over in prior periods 227 (287)

Total current tax (959) 13,522

Deferred tax:Origination and reversal of temporary differences (148) (117)(Under) / over in prior periods (505) 227

Total deferred tax (653) 110

Income tax (benefit) / expense (1,612) 13,632

Income tax expense is attributable to:(Loss) / profit from continuing operations (1,612) 11,564Profit from discontinued operations (note 11) - 2,068

Aggregate income tax (benefit) / expense (1,612) 13,632

(b) Numerical reconciliation of income tax expense to prima facie tax payable

2014$'000

2013$'000

(Loss) / profit from continuing operations before income tax expense (202,984) 48,564Profit from discontinuing operations before income tax expense (note 11) - 2,887

(202,984) 51,451

Tax at the New Zealand tax rate of 28% (56,836) 14,406Tax effect of amounts which are not deductible (taxable) in calculating taxable income:

(Non-assessable income)/non-deductible expense 7,269 (1,552)Non-deductible impairment charge 47,694 -Other 539 1,065Over provided in prior periods (278) (287)

Income tax (benefit) / expense (1,612) 13,632

204,596 (62,683)

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10 Employee benefit expense

Wages and salaries 117,533 112,948 Annual leave 10,599 10,749Defined contribution superannuation expense 5,178 4,709Long service leave 347 248Medical insurance 664 628Termination benefits (within restructuring costs) 5,196 1,668Workers’ compensation costs 1,565 1,793

141,082 132,743

11 Business divestments and discontinued operations

(a) Business divestments

On 8 January 2014 Goodman Fielder announced its agreed intention to sell its Meats and Pizza businesses in New Zealand.

Goodman Fielders Meats business (part of the Dairy segment) processes and markets smallgoods meats products to the NewZealand market, including Kiwi bacon and ham, Brooks Deli continental meats and bacon, Hutton's luncheon, bacon and ham,Sizzlers pre-cooked smallgoods and Milano cooked continental meats.

Goodman Fielder agreed to a proposal to sell its Meats business to Hellers Limited in New Zealand, and the transaction wascompleted on 31 March 2014. The gross proceeds of the transaction was $12,100,000 and a loss on sale of $34,122,000 wasrealised.

Goodman Fielder also agreed a proposal to sell its Pizza business (part of the Baking segment) to Mommas Frozen ProductsLimited (now Mommas Foods Limited). The Pizza business primary brand is Leaning Tower which produces fresh chilled pizza,including pizza bases and snack sized frozen pizzas.

The transaction was completed on 28 May 2014. The gross proceeds of the transaction was $700,000 and a loss on sale of $3,272,000 was realised.

Both the sales are in line with the Company's strategy of optimising its product and brand portfolio.

These businesses did not meet the criteria to be disclosed as discontinued operations.

(b) Operations discontinued in the prior year

On 16 February 2012 Goodman Fielder Limited announced its intention to sell the Integro Foods business and the NewZealand Milling business, and initiated an active program to locate a buyer for each business and complete the sale. TheIntegro oils business and the New Zealand Milling business are reported in the comparative figures of this financial report asdiscontinued operations.

The decision to divest the Integro Foods and New Zealand Milling businesses was part of the ongoing portfolio prioritisationproject to focus more on core businesses.

On 2 October 2012, Goodman Fielder completed the sale of the Integro Foods business to a consortium comprising GrainCorpand Gardner Smith. The gross proceeds of the transaction (including settlement of trade and other receivables and payables byGoodman Fielder) was $30,000,000. Net proceeds of the transaction was used primarily to reduce debt.

On 7 December 2012, Goodman Fielder entered into an agreement with Nisshin Flour Milling Inc and its parent, Nisshin SeifunGroup Inc to sell its Champion Flour milling business in New Zealand. On 22 February 2013, Goodman Fielder completed thesale of its Champion Flour milling business to Nisshin Seifun Group Inc for $55,000,000.

Financial information relating to the discontinued operations for the prior year is set out below. Further information is set out innote 5 (b) - segment information.

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11 (continued)Business divestments and discontinued operations

(c) Financial performance and cash flow information from discontinued operations

The financial performance and cash flow information presented is for the prior year.

2014$'000

2013$'000

Revenue - 58,467Expenses - (48,624)Profit before income tax - 9,843

Income tax expense - (2,466)

Profit after income tax of discontinued operation - 7,377

Loss on sale of the division before income tax - (6,956)Income tax expense - 398

Gain on sale of the division after income tax - (6,558)

Profit from discontinued operation - 819

CashflowNet cash intflow from operating activities - 1,257Net cash inflow from investing activities - 83,847Net cash outflow from financing activities - -

Net increase in cash generated by discontinued operations - 85,104

(d) Details of the sale of the division

2014$'000

2013$'000

Consideration received:Cash - 84,333Total disposal consideration (i) - 84,333

Carrying amount of net assets sold - (91,289)Loss on sale before income tax - (6,956)

Income tax benefit - 398

Loss on sale after income tax - (6,558)

(i) Consideration excludes the net trade and other receivables and payables balance, collected and settled respectively, byGoodman Fielder.

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12 Current assets - Cash and cash equivalents

2014$'000

2013$'000

Cash at bank and in hand 73,758 31,791

(a) Cash at bank

Cash at bank earns interest at floating rates based on daily bank deposit rates.

(b) Right of set-off

The following entities are party to a set off deed with the Westpac Banking Corporation in New Zealand:• Goodman Fielder Treasury New Zealand Limited;• Goodman Fielder New Zealand Limited; and

• Goodman Fielder Treasury Pty Limited - New Zealand Branch.

13 Current assets - Trade and other receivables

2014$'000

2013$'000

Trade receivables 42,914 41,346Provision for doubtful receivables (342) (678)

and prepaymentsOther receivables 3,322 5,25045,894 45,918

(a) Credit risk

The ageing of these receivables is as follows:

2014$'000

2013$'000

Not past due 34,727 37,651Past due 1 - 30 days 4,252 (203)Past due 31 - 60 days 207 1,430Past due 61 - 90 days 1,131 514Past due over 90 days 2,597 1,954

42,914 41,346

Movements in the provision for impairment of receivables are as follows:

2014

$'000

2013

$'000

At 1 July 678 1,428Receivables written off during the year as uncollectable (336) (750)

30 June At 342 678

At the reporting dates presented, other receivables did not expose the Company to any significant credit risk.

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13 (continued)Current assets - Trade and other receivables

(b) Securitisation program

The Company has entered into a receivable purchase agreement which enables it to securitise selected amounts of itsreceivables up to a limit of $44,000,000 (2013: $44,000,000). At 30 June 2014, $39,300,000 (2013: $43,800,000) of receivableshave been securitised and are not included in the statement of financial position. In accordance with accounting policy note 2(i)the securitised receivables have been de recognised on the basis that substantially all the r isk and reward of the receivableshave been transferred to the counterparty including all credit risk with no recourse to the Company.

(c) Fair value

Due to the short term nature of these receivables, their carrying value, net of impairment loss, is assumed to approximate their fair value.

14 Current assets - Inventories

2014$'000

2013$'000

Raw materials and stores 12,411 17,711Work in progress 1,215 2,914Finished goods 27,002 26,580

40,628 47,205

In 2014, the write downs of inventories to net realisable value amounted to $4,641,000 (2013: nil). The expense has beenincluded in 'cost of sales' in the income statement.

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15 Non-current assets - Property, plant and equipment

Freeholdproperties

$'000

Leaseholdproperties

$'000

Plant andequipment

$'000

Leased plantand equipment

$'000Total$'000

1 July 2012AtCost 72,789 24,416 291,648 1,396 390,249 Accumulated depreciation (18,935) (10,160) (168,799) (514) (198,408)

Net book amount 53,854 14,256 122,849 882 191,841

30 June 2013 Year endedOpening net book amount 53,854 14,256 122,849 882 191,841 Additions 9,780 1,912 4,260 140 16,092Disposals (28) (22) (3,667) - (3,717)

Reclassifications 2,165 34 (2,199) - -Impairment charge (i) (1,806) - (4,368) - (6,174)Disposal through sale of business - - (424) - (424)Depreciation charge (2,228) (1,919) (17,727) (362) (22,236)

Closing net book amount 61,737 14,261 98,724 660 175,382

30 June 2013AtCost 81,679 24,987 247,008 1,536 355,210 Accumulated depreciation (19,942) (10,726) (148,284) (876) (179,828)

Net book amount 61,737 14,261 98,724 660 175,382

(i) Asset impairment resulting from the Christchurch earthquakes which has been included in general and administrativeexpenses in the statement of comprehensive income.

1 July 2013AtCost 81,679 24,987 247,008 1,536 355,210 Accumulated depreciation (19,942) (10,726) (148,284) (876) (179,828)

Net book amount 61,737 14,261 98,724 660 175,382

30 June 2014 Year endedOpening net book amount 61,737 14,261 98,724 660 175,382 Additions 1,293 1,922 15,934 43 19,192Disposals (2) (33) (789) (44) (868)Reclassifications (6,194) (69) 6,263 - -Impairment loss - - - - -Disposal through sale of business (404) - (7,770) - (8,174)Transfers from held for sale - - - - -Depreciation charge (2,431) (2,042) (16,204) (336) (21,013)

Effects of movements in foreignexchange rates - - - - -

Closing net book amount 53,999 14,039 96,158 323 164,519

30 June 2014AtCost 75,947 26,665 240,485 1,396 344,493 Accumulated depreciation (21,948) (12,626) (144,327) (1,073) (179,974)

Net book amount 53,999 14,039 96,158 323 164,519

Depreciation expense is included in general and administrative expenses in the statement of comprehensive income.

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16 Non-current assets - Intangible assets

Goodwill$'000

Brand namesand licences

$'000

IT developmentand software

$'000Total$'000

1 July 2012AtCost 911,726 255,970 35,012 1,202,708 Accumulated amortisation and impairment (11,500) (35,785) (6,133) (53,418)

Net book amount 900,226 220,185 28,879 1,149,290

30 June 2013 Year endedOpening net book amount 900,226 220,185 28,879 1,149,290 Additions (i) - - 5,968 5,968 Amortisation charge - (265) (5,491) (5,756)

Closing net book amount 900,226 219,920 29,356 1,149,502

Cost 911,726 255,970 41,037 1,208,733 Accumulated amortisation and impairment (11,500) (36,050) (11,681) (59,231)

Net book amount 900,226 219,920 29,356 1,149,502

30 June 2013AtCost 911,726 255,970 41,037 1,208,733 Accumulated amortisation and impairment (11,500) (36,050) (11,681) (59,231)

Net book amount 900,226 219,920 29,356 1,149,502

30 June 2014 Year ended

Opening net book amount 900,226 219,920 29,356 1,149,502 Additions (i) - 250 3,447 3,697Impairment charge (160,194) - - (160,194)Business disposed (7,927) (24,814) (1,109) (33,850) Amortisation charge - (127) (6,876) (7,003)

Closing net book amount 732,105 195,229 24,818 952,152

30 June 2014AtCost 903,799 230,120 42,021 1,175,940 Accumulated amortisation and impairment (171,694) (34,891) (17,203) (223,788)

Net book amount 732,105 195,229 24,818 952,152

(i) Borrowing costs of $81,808 (2013: $278,445) were capitalised during the year with an interest rate of 7.65% (2013: 8.2%).

Amortisation expense is included in selling and marketing expenses and also in general and administrative expenses in the

statement of comprehensive income.

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16 (continued)Non-current assets - Intangible assets

(a) Carrying amount of goodwill, brand names and licences allocated to each of the cash generating units

2014Goodwill

$'000

Brands andlicences

$'000


$'000Total$'000

Baking 159,995 79,000 24,818 263,813Dairy 419,087 100,929 - 520,016Grocery 153,023 15,300 - 168,323

732,105 195,229 24,818 952,152

2013

Goodwill

$'000

Brands andlicences

$'000


$'000

Total

$'000

Baking 298,159 81,500 29,356 409,015Dairy 426,527 123,120 - 549,647Grocery 175,540 15,300 - 190,840

900,226 219,920 29,356 1,149,502

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business acquired over the net fair valueof the identifiable assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised.Goodwill and intangibles with indefinite useful lives are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Brands include trademarks and patents that are owned by the Company as well as material licensing agreements that provide

the company the right to sell certain products under license. Brand names owned by the Company are considered to bemaintained into perpetuity and have therefore been assessed to have an indefinite useful life. The indefinite useful life reflectsmanagement's view that the brands are assets that provide ongoing market advantages for both new and existing sales in themarkets that the brands operate in. The current understanding of the markets that the brands operate in indicates that demandwill continue in a sustainable manner, that the brands could be managed by another management team, that changes intechnology are not seen as a major factor impacting the brands’ future value and the brands have a proven long life in themarkets in which they operate.

The licence of the Anchor brand name has been assessed to have a finite life of 10 years from the agreement date. Therefore,the brand is being amortised on a straight line basis over the useful life.

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16 (continued)Non-current assets - Intangible assets

(b) Key assumptions used for value-in-use calculations

The recoverable amount of each of the Company's CGU's was based on value in use calculations covering a 5 year period witha terminal value growth rate applied at the end of that period. The following key assumptions have been used for the value inuse calculation of each CGU.

Cashflows

The cash flows for the value in use calculations are based on the FY15 board approved budgeted EBITDA and three year strategic plan extended to five years at an underlying growth rate which does not exceed historic rates. Due to the commercialsensitivity of information, the values attributed to these forecasts have not been disclosed. Management determined forecastEBITDA based on recent performance and its risk adjusted expectations for the future.

Terminal Growth rates

The terminal growth rate used to extrapolate cash flows beyond the five year forecast period is 2.5% (2013: 2.5%). The growthrate does not exceed the long term growth rate for any of the CGU's, and is consistent with forecasts included in industryreports.

Discount rate

In performing the value in use calculations for each CGU, the Company has applied post tax discount rates of 8.5% (2013:7.7%) to discount the forecast future attributable post tax cash flows. The imputed pre tax discount rate for each CGU is in therange of 10.8 - 11.0% (2013: 9.6% 9.9%). The discount rates used reflect specific risks relating to the relevant segments andthe countries in which they operate.

(c) Impairment test for CGU's containing goodwill and intangibles with indefinite lives

Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. For goodwill andindefinite life intangibles, an impairment test is performed at each reporting period while other assets are only tested if there isan indicator of impairment.

Due to the continued retail competitive price pressure and higher operating costs impacting earnings negatively in the NewZealnd market, the outcome of impairment testing identified that the recoverable amount for certain CGUs were below carryingvalue. As a result a non cash impairment of goodwill was recognised of $160,194,000 (Baking $137,677,000 and Grocery$22,517,000).

The value in use tests are sensitive to discount rates, assumed long term growth rates and cash flow forecasts. The Companyhas performed detailed sensitivity analysis as part of its impairment testing to ensure that the results of its testing arereasonable. Sensitivity analysis on these inputs are noted below:

• Terminal growth rates: A 0.5% decrease in the terminal growth rate will result in no further CGUs being impaired at reportingdate.• Discount rates: A 0.5% increase in the discount rate will result in no further CGUs being impaired at reporting date.• Forecast cash flows: A 5% decrease in the forecast cash flows will result in no further CGUs being impaired at reporting date.

Management do not believe a reasonable possible change in assumptions for any CGU would cause the unit's carrying amount

to exceed recoverable amount, apart from those CGUs impaired at 30 June 2014 (Baking and Grocery) for which any adversechange in assumption would lead to impairment.

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17 Superannuation plan

Fund: Goodman Fielder (NZ) Retirement PlanBenefit Type: Defined Contribution and Defined BenefitDate of last actuarial valuation: 8 July 2013

The Goodman Fielder (NZ) Retirement Plan is a 'hybrid' superannuation plan as it comprises both defined contribution anddefined benefit member entitlements. The defined benefit component is closed to new members. All new members participateonly in the defined contribution plan. It also pays pension benefits to retired members under a previous benefit arrangement.Members are not required to contribute to the Plan, although they may contribute a minimum of 2% of basic pay after oneyear's service. Employer accounts are credited with amounts that depend on the member's years of contributory membershipand level of member contributions. The defined benefit obligation of the plan at 30 June 2014 was $12,499,000 (2013:$14,592,000). The net deficit of the defined benefit portion of the plan at 30 June 2014 was $271,

140630 GFNZ Annual Report

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