CEO Report

Tēnā koutou katoa. As long as people have worked the land, remaining resilient in the face of uncertainty and change has been a challenge.

Peter Reidie

Chief Executive Officer

At Farmlands, we seek to supply the advice and products at the best price that our shareholders require to build their resilience and financial success, whatever the challenges they face. For this reason, our Purpose is to Grow Shareholder Success. We aim to achieve this through the delivery of our Mission – Harness our Co-operative Spirit to be first for New Zealand food and fibre inputs.

 

Performance

COVID-19 is a storm that has inundated almost all boats. It turned the 2019/20 financial year (and will continue to affect the financial year to come) into a period of challenge and uncertainty unlike anything most of us have experienced in our lifetimes. The fact that our business remains robust provides grounds for confidence.


Our Net Profit Before Tax and Rebates of $7.0m is a credible result given the year. It is important to acknowledge this positive result is on the back of immense support from our people, shareholders, suppliers, landlords, other stakeholder partners and an $8.8m Government wage subsidy, which sustained our business through the first wave of COVID-19.


The pandemic and subsequent need to protect our people negatively impacted New Zealand’s economy. The country, as one community, rallied in support of each other. Farmlands has been a grateful beneficiary of this. In particular, I want to state our appreciation to the landlords of our Farmlands sites – all of whom extended rent relief during the second half of our financial year. Without the response we initiated, including accessing the Government wage subsidy, rent relief, staff remuneration sacrifice, supplier support and other austerity measures, Farmlands would have incurred a substantial loss.


Farmlands, like businesses the length and breadth of the country, felt the impact of the virus on our operational performance over the last three months of the financial year. Through April, we experienced a drop in revenue of more than 30%. Sales in May tracked circa 15% behind the same period last year and for the year to June our sales performance was down 3.7%.


These sobering figures were experienced in spite of the core role that farming plays in our economy. Thankfully, our business was categorised as an essential service, which meant we could continue to trade while closing access to our stores through Alert Levels 3 and 4. Although COVID-19 has put us to the test, even endangered us and threatened our financial health, the resilience of our operation and business model, and the commitment of our people to support their shareholders, shone through.


Further details on our financial performance can be found in the Chairman’s Report and our financial statements.

Trading in a pandemic

The fact we were able to trade at all during Alert Levels 3 and 4 came down to the hard work and dedication of the Farmlands team. With support from our external partners, our Technology team was able to provide a functioning e-commerce platform within 4 weeks – an immense effort that made global headlines through international partners such as Microsoft and Adobe. The doors to our store network were required to be shut but our Farmlanders remained available in-store to organise orders for collection, to provide our shareholders what they needed to continue working their land. Our in-store teams responded amazingly positively to the complexity of packing every order, engaging with customers around what we could provide, answering phones and ensuring that orders could be collected at the time committed to. Many of our field staff also helped out in stores, which is also a testament to the people of
Farmlands’ desire to do right by our shareholders, even in the most challenging of times.


The COVID Click and Collect online store is a success story for our organisation and is testament to the Farmlands Co-operative Spirit. Our shareholders needed us and we responded accordingly. In its first month, the Click and Collect store brought in more than ten times more revenue than the previous e commerce site had in an entire year.


The lessons of COVID Click and Collect reflect not only what is possible. It also reflects the benefits of change accelerated by circumstance. While our e-commerce platform provided a better site and offer than the previous version, it also highlighted our shareholders’ and customers’ receptiveness to, and need for, digital solutions and the benefits they can provide.


While the Alert Level 4 lockdown played out, Farmlands also focused on what we can control – our cost base. Our co-operative implemented a range of measures to, wherever possible, mitigate the effects of steep revenue declines.

This included:

 

  • Cancelling our National Conference and stopping all air travel on Farmlands business.
     

  • Establishing a headcount freeze, with the objective of not replacing people while we remained exposed to adverse trading circumstances.
     

  • Asking our people for voluntary uptakes of annual leave and work hour reductions.
     

  • Seeking the voluntary removal of annual incentive entitlements for the staff entitled to them.
     

  • Freezing wage and salary increases for the financial year.
     

  • Reaching out to landlords to request and receive rent relief during challenging trading conditions.
     

  • Applying for – and receiving – the Government wage subsidy.
     

  • Instigating an "ideas register" for staff to contribute their own cost reduction ideas.
     

  • Remaining closed for Saturday trading during higher Alert Levels – a decision that allowed us to provide staff with a well-earned rest as they worked physically harder during lockdown.

Balancing the need to protect our business while ensuring the safety and wellbeing of our people was a visible marker on our year’s performance. We are proud that all of our people could be supported through this time, even those who were unable to be at work due to being vulnerable or at increased risk.


The pandemic has also sharpened our focus on where we need to further improve our performance to serve our shareholders better. Farmlands has energetically assumed a leadership role in the big and sometimes confronting field of Health and Safety through such things as the introduction of SafeFarm and SafeVisit, free safety apps for shareholder on-farm use. The pandemic has yielded us a fresh (if unexpected and unwelcome) opportunity to walk the talk on this commitment. We have made the call to place support and wellbeing ahead of profit as we navigate the period of stress and uncertainty we are currently experiencing.

60

+

Net Promoter Score

$48.8m

Returned to shareholders via Farmlands Card rebates

6.5m

Total number of Farmlands Card transactions

$4.1m

Choices loyalty rewards earned by our shareholders

Braveheart and beyond

While the second half of our financial year was dominated by resilience, our first half was dominated by achievement. In November, Farmlands completed the implementation of our massive three-year business transformation programme, known as Braveheart. This programme consolidated all of our legacy IT systems into one, providing us with a holistic view of our co-operative on one system for the first time. Farmlands has been built on a series of mergers and acquisitions over close to 60 years. This resulted in multiple (and in some cases obsolete) ERP platforms operating simultaneously. The fragmentation of multiple systems running simultaneously was negatively impacting both our operations and our results.


Braveheart enables us to generate a whole-of-business view. It has been a monumental undertaking and a very significant investment. During the three-year implementation phase, every shareholder, staff member, supplier and partner has been affected by the roll-out. We now have new Point of Sale systems at all of our 82 retail stores.


It would be difficult to overstate the demands the roll-out of Braveheart has made on our people. Their commitment to getting it done has been critical to the success of the programme and I offer my warmest thanks to them for their hard work and their dedication. I also acknowledge that the system change has not been without “bumps in the road”, as we have had to adjust our processes, behaviours, skills and introduce new ways of working. I thank our shareholders for their additional tolerance during this phase.


Having consolidated all our business systems into one unified platform, we now turn to the challenge of ensuring that the structure of our organisation is also fit for purpose – that is, making the best use of the investment we have made in our systems. Our strategic plan for the next 12 months and beyond has identified where we need to improve our performance. The experience we’ve endured with COVID-19 has, if anything, prompted us to sharpen our focus on this next phase of re-organisation.


We have identified that our business unit structure had resulted in duplication, unnecessary complexity and made us more difficult to do business with than we needed to be. Put bluntly, we haven’t been as efficient as we could be – and if that was a problem for us, it would certainly be an issue for our shareholders. We exist for them. Our purpose is to Grow Shareholder Success. We have already re-organised our business for the coming years to allow us to better deliver on the mission we have set ourselves – Harness our co-operative spirit to be first for New Zealand food and fibre inputs.


Braveheart is actually the beginning of the journey, not the end. We not only have to organise based on the benefits the system can give us, we have to use the system backbone to offer better solutions across the board. I am confident you will see better information provided to you from the Farmlands team, more accessible and appropriate shareholder portals, new and improving e-commerce platforms and a more efficient and effective Farmlands operation – to name a few. This journey never ends and you will see our desire to consistently do better being made apparent through constantly upgrading what, and how, we offer to our shareholders.

Sustainability

As I stated in last year’s Report, Farmlands has embarked on a journey to integrate sustainability into everything we do. We view the drive for sustainability as increasingly key to the decisions farmers and growers will be making with regard to their essential inputs and farming practices.


We are providing ongoing support to a number of important sustainability initiatives, some of which we highlight later in this Annual Report. We have also undertaken an independent sustainability audit, via Toitū Envirocare, to capture our carbon footprint, identify areas for improvement and develop plans that reduce our impact on the earth. To achieve accreditation, Farmlands Co-operative has committed to reducing our carbon footprint by at least 30% by 2030.


To assist in reporting our sustainability initiatives, we are adopting an integrated reporting format. This is designed to make us more accountable and visible, tracking our performance and delivery against our strategies.

$108.5m

Value of fuel transacted via Farmlands Card

119k

Phone calls answered by Contact Centre

72k

Emails actioned by Contact Centre

Putting our people first

A top priority for us is to continue to embed the positive Health and Safety culture we are building at Farmlands. We are committed to directing significant resource towards monitoring and improving the health, safety and wellbeing of our people. Our intention is to be recognised as the sector leader in this aspect of our business.


This ambition has been realised through market-leading health, safety and wellbeing initiatives. We have strengthened our existing programmes to increase engagement, while reducing harm across our business through wellbeing initiatives and an approach to safety that involves everyone. This included:

 

  • As an organisation, actively participating in (and promoting) Mental Health Awareness Month for the first time.
     

  • Continuing to evolve and develop our ‘critical risk’ framework, whereby we create a more robust and effective means to keep our people safe during our most at-risk activities.
     

  • Combining health, safety and wellbeing training in both our Senior Leader and Frontline Leader training courses, to build our capability.
     

  • Once again, raising the bar on our Health and Safety reporting. This year 7,416 Safety Interactions were recorded – an increase of 29%.


Our health and safety education focus complements our commitment to knowledge and capability across our organisation. We have launched our ‘Centre of Learning’ – an education hub designed to provide best practice guidance on how our people can be more effective in their roles. The Centre of Learning doubles as a national and global network, opening up opportunities to learn from leading technical experts on all aspects of the primary sector and our business.

Shout Outs submitted recognising our hard working Farmlanders

312

7,416

Safety Interactions submitted

29% increase on previous year

$650k

Spent on learning and development upskilling our Farmlanders

574

New SafeFarm accounts created

&

2,916

Downloads of the SafeVisit app

Highlights

Our ambition is to drive benefit across every part of our co-operative. We are committed to providing our shareholders with quality inputs at the best possible prices. Over and above that we are seeking to be in a position where we can help them solve the challenges they are facing in an ever-changing, increasingly demanding world. During the year, we have taken steps towards this:

 

  • Farmlands has signed Memorandums of Understanding with Manaaki Whenua - Landcare Research, AgResearch and Beef + Lamb NZ. Each agreement is a commitment to work with these organisations in the primary sector to stay at the front of innovation. Where our shareholders need to be in the future, Farmlands wants to have the roadmap to get there.
     

  • The first part of our ambitious Beyond Plastic project has been completed. Farmlands Card is now  accepted for online shopping at two Card Partners, Topmaq and Repco, with more to be added in the near future. This is an important step forward to providing our shareholders with even more value.
     

  • Earlier this year, we announced Ford would return as our strategic vehicle partner. This has been a popular choice, with more than 200 Ford vehicles sold in the first 3 months (which included the majority of Alert Level 4).
     

  • To increase the reach of real estate services to our shareholders, Farmlands Real Estate merged with Property Brokers. The agreement means more shareholders than ever before have direct access to real estate services via their co-operative.
     

  • The development and implementation of a revised pricing model brings clearer, fairer, more consistent pricing to all Farmlands stores. Our 5% discount to shareholders is clear and present to all.
     

  • Providing our Gore shareholders with new, purpose-built premises. The remainder of our store network has continued to benefit from our store layout programme, with 63 of 82 stores now featuring improved layouts that provide opportunities to stock more products.
     

  • Close to $650,000 spent on the training and development of our people. Fostering the capability of our people is a key focus and something we have developed further through our in-house Centre of Learning hub, the Kellogg Rural Leadership Programme and partnerships with like-minded primary sector organisations.
     

  • The completion of 2,775 online modules, delivered by our Learning Management System (LMS). This includes 1,235 successful completions of training sessions resulting from the Braveheart Programme,
    to prepare our people for our new systems, processes and developing their leadership and technical capabilities.

     

  • 32 people completed internal leadership programmes, to foster our next generation of leaders.
     

  • Delivery of $91.1m in benefits to shareholders, made up of $38.3m in rebates at Point of Sale, $48.8m in discounts and rebates from our Card Partner network and $4.1m in Choices Rewards Points earned.

Summary

In a year like no other, your co-operative is committed to continuing its significant presence in our local communities. Through perseverance and ambition, we have delivered a combination of technical expertise and support, leading products and competitive pricing to our shareholder base.
 

In the context of our year it is a result we can have comfort with, but we know we can do better. I am confident our shareholders will see us doing that in 2021 and beyond.
 

It is all possible through your ongoing support, along with our suppliers, partners, communities and of course, our people. Thank you for being part of our journey to grow shareholder success.


Kia ora rawa atu. Together Stronger.

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