BSG Ltd Interim Report Dec 2010 - NZX · PDF file2 Blue Star Group Limited (ÒBlue StarÓ) is pleased to report its interim results for the 6 months ended 31 December 2010. The period

For the six months ended 31 December 2010 (unaudited)I N T E R I M R E P O R T

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I N T E R I M R E P O R T For the six months ended 31 December 2010 (unaudited)

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Contents

Managing Director’s report 2

Consolidated income statement 6

Consolidated statement of comprehensive income 7

Consolidated balance sheet 8

Consolidated statement of changes in equity 9

Consolidated statement of cash flows 10

Notes to the financial statements 11

Directory 21

BLUE STAR GROUP LIMITED AND SUBSIDIARIES

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Blue Star Group Limited (“Blue Star”) is

pleased to report its interim results for the

6 months ended 31 December 2010.

The period under review for Blue Star

shows a picture of continuing gradual

improvement in its financial performance.

The results also show further strong

operational performance from the web,

label and print management businesses

although additional costs associated with

the set up of the Auckland facility have

impacted overall earnings for web.

As has been the case for sometime,

conditions in the print industry remain

challenging, particularly in the sheetfed part

of the business. Blue Star’s management

has responded by implementing a range of

strategies including reducing costs in its

core operations and implementing software

solutions to improve the flexibility, speed

and efficiency of the various operating

divisions. There are clear signs that these

strategies are gaining traction. There is still

more to be done but these actions should,

over time, position Blue Star well for a

meaningful recovery in profitability.

Signs of positive momentum are highlighted

by an encouraging solid lift in operating

performance (when compared to prior

comparable six month period) and good

cashflow generation.

Despite the operating environment

remaining challenging Blue Star continues

to invest in the business where compelling

propositions present themselves, as

evidenced by the new print facility in

Auckland to accommodate the ACP

New Zealand contract won during the

period under review.

FINANCIAL PERFORMANCE HIGHLIGHTS

In terms of financial performance, Blue Star

achieved sales revenue of $293.3 million

for the 6 months ended 31 December

2010, which was a slight decline of 0.8%

on the corresponding period.

Earnings before interest, tax, depreciation,

amortisation (“EBITDA”) were $25.3 million

for the 6 months to December 2010. This is

an improvement of 37% from the prior

comparable six month period.

When normalising financial performance by

incorporating the trading results of McMillan

Print Group Pty Limited – integrated into

Blue Star’s Sydney Print operations on

18 December 2009 – to reflect the


Managing Director’s reportFOR THE SIX MONTHS ENDED 31 DECEMBER 2010

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underlying trading in the business, EBITDA

was up 3.3% for the period under review

over the previous comparable period.

Blue Star’s trend in earnings performance

improvement is also reflected in Blue Star

Group Holdings Limited (“BSGH”), the

ultimate parent of Blue Star and its

subsidiaries. EBITDA for the BSGH was

$24.6 million for the 6 months to December

2010.This is an improvement of 5.5% from

the prior comparable six month period.

OPERATIONAL PERFORMANCE

There are clear opportunities for the

financial performance of the web division to

further improve with the winning by that

division of the ACP Media New Zealand

printing contract early this financial year.

The contract covers all ACP’s consumer

magazines, trade press and the coveted

New Zealand Property Press. Consumer

magazine titles include Metro, Next, North

& South, Woman’s Day, and The Australian

Women’s Weekly. This contract will have

minimal impact on Blue Star’s FY11

operational performance but is expected

to contribute to the continued strong

performance of this division over time.

The sheetfed printing operations make up

approximately 46% of group revenues

and operate throughout NZ and Australia.

Sydney, ACT and Auckland are important

markets and these have been most

impacted by reduced print volumes,

over-capacity and resultant margin

compression. However, these sheet

divisions have started to respond to the

various strategies management has

deployed to improve their financial

performance. Profitability in those divisions

is up on last year in both New Zealand and

Australia, in spite of the fact that economic

and print market conditions remain difficult.

UPDATE ON CAPITAL STRUCTURE

Blue Star has initiated discussions with its

banking group and major shareholders well

ahead of its senior debt facilities maturing

in 2012. As at the date of these interim

financial results Blue Star’s senior lenders

have conditionally agreed to the terms of a

renegotiated senior debt facility, including

among other things an extension in the

maturity date of the senior debt facility to

February 2015.


Managing Director’s report (continued)FOR THE SIX MONTHS ENDED 31 DECEMBER 2010

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The terms of the new arrangements

approved by Blue Star’s senior lenders are

conditional upon the satisfaction of various

requirements, most particularly:

further shareholder cash contributions,

which the major shareholders have

agreed to provide subject to the

satisfaction of certain conditions,

including but not limited to, the approval

of Bondholders to amended terms of the

Subordinated Capital Bonds; and

Bondholders approving a restructuring of

the terms of the Subordinated Capital

Bonds, including an extension and other

concessions.

Further detail on the proposed amended

terms for the Subordinated Capital Bonds

will be provided separately, as soon as these

have been finalised. Following announcement

of the details of the proposed amended

terms of the Subordinated Capital Bonds,

Blue Star will organise a meeting to seek

approval from Bondholders to the proposed

amendments. In the meantime the Board

of Blue Star suggests Bondholders and

potential investors should take all of these

factors into consideration when deciding to

buy, sell or hold Blue Star Subordinated

Capital Bonds.

OUTLOOK

Significant steps have been made to

improve the financial performance of Blue

Star and reposition the business so as to

meet the changing demands now driving

the print industry.

The strategies the company has deployed

are showing clear signs of traction and this

is evidenced by the senior lenders and

shareholders having confidence to support

a refinancing package. If the Subordinated

Capital Bondholders approve it, the

proposed package should provide the time

needed to enable these strategies to bring

significant improvements in financial

performance.

The ongoing exercise to reposition Blue Star

has been extensive and one that could not

have been achieved without the continued

strong and dedicated support of staff, our

shareholders and our senior lending group.

The Board of Directors would like to again

acknowledge this commitment during what

have been extraordinarily difficult times.

Blue Star’s strong market position, its solid

cashflow conversion, modern asset base,

loyal customers and the commitment of its

staff alongside the ongoing support of



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Blue Star’s shareholders and lenders, have

all combined to provide Blue Star with an

environment which is conducive to ongoing

transformation.

Management, directors and shareholders

remain committed to continuing to improve

the financial performance of the group in

the 2011 financial year and beyond.

BLUE STAR GROUP LIMITED EBITDA RECONCILIATION(As extracted from the interim financial statements)

6 months ended

31 Dec 2010

6 months ended

31 Dec 2009$’M $’M

Profit/(loss) before income tax 1.2 (2.0)Finance costs 13.4 8.3Interest income (0.7) (0.1)Amortisation and depreciation 11.4 12.2EBITDA 25.3 18.4

CHRIS MITCHELL

Managing Director



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6 months ended

31 Dec 2010

6 months ended

31 Dec 2009NOTES $’000 $’000

Revenue 293,327 295,618

Cost of sales (242,087) (251,061)

Gross profit 51,240 44,557

Other revenue 2,393 1,158

Sales and marketing (10,186) (9,735)

Occupancy costs (1,940) (2,648)

Administration costs (25,336) (25,443)

Restructuring costs 4 (350) (1,590)

Movement in derivatives (1,271) (100)

Gain on sale of property, plant and equipment 20 139

Finance costs (13,367) (8,305)

Profit/(loss) before income tax 1,203 (1,967)

Income tax (expense)/credit (738) 502

Profit/(loss) after income tax for the period 465 (1,465)

Attributable to:Equity holders of Blue Star Group Limited 465 (1,465)


Consolidated income statementFOR THE SIX MONTHS ENDED 31 DECEMBER 2010 (UNAUDITED)

The above consolidated income statement should be read in conjunction with the accompanying notes.

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6 months ended

31 Dec 2010

6 months ended

31 Dec 2009

12 months ended

30 Jun 2010$’000 $’000 $’000

Profit/(loss) after income tax for the period 465 (1,465) (2,656)

Other comprehensive income/(loss)Cash flow hedges transferred to profit and loss for the period (37) (119) 724

Deferred tax gain/(loss) on cash flow hedges 181 (40) (228)

(Loss)/gain on cash flow hedges taken to equity (568) 253 37

Translation of foreign operations exchange difference 8,389 (225) (1,423)

Other comprehensive income/(loss) for the period 7,965 (131) (890)

Total comprehensive income/(loss) for the period, net of tax 8,430 (1,596) (3,546)

Attributable to:Equity holders of Blue Star Group Limited 8,430 (1,596) (3,546)


Consolidated statement of comprehensive incomeFOR THE SIX MONTHS ENDED 31 DECEMBER 2010 (UNAUDITED)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

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As at 31 Dec 2010

As at 31 Dec 2009

As at 30 Jun 2010

NOTES $’000 $’000 $’000ASSETSCurrent assetsCash and cash equivalents 20,465 28,163 25,370Receivables and other prepayments 87,508 86,636 80,132Related party receivables 496 439 39Inventories 38,360 36,160 31,249Other financial assets 208 54 293Total current assets 147,037 151,452 137,083

Non-current assetsReceivables and other prepayments 106 111 231Related party receivables 21,676 9,511 14,938Other financial assets 55 52 26Property, plant and equipment 8 141,533 127,150 121,306Deferred tax assets 6,698 8,097 7,523Goodwill 138,727 132,401 131,386Other intangible assets 8,235 4,979 7,115Total non-current assets 317,030 282,301 282,525

TOTAL ASSETS 464,067 433,753 419,608

LIABILITIESCurrent liabilitiesPayables and accruals 96,193 92,830 85,855Related party payables 21 234 45Interest bearing liabilities 9 18,345 10,334 10,456Other financial liabilities 1,786 990 228Provisions 3,415 5,209 4,356Total current liabilities 119,760 109,597 100,940

Non-current liabilitiesPayables and accruals 8,502 5,857 7,077Related party payables 1,030 1,011 1,030Related party borrowings 51,509 58,468 52,766Interest bearing liabilities (including accrued subordinated capital bond interest) 9 157,602 138,063 139,983Provisions 6,276 7,849 6,854Total non-current liabilities 224,919 211,248 207,710

TOTAL LIABILITIES 344,679 320,845 308,650

NET ASSETS 119,388 112,908 110,958

EQUITYContributed equity 30,670 30,670 30,670Cash flow hedge reserve (398) (413) 26Foreign currency translation reserve 8,417 1,226 28Retained earnings 80,699 81,425 80,234TOTAL EQUITY 119,388 112,908 110,958


Consolidated balance sheetAS AT 31 DECEMBER 2010 (UNAUDITED)

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

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Consolidated statement of changes in equityFOR THE SIX MONTHS ENDED 31 DECEMBER 2010 (UNAUDITED)

Sharecapital

Foreigncurrency

translationreserve

Cash flowhedge

reserve Retainedearnings

Totalequity

$’000 $’000 $’000 $’000 $’000

Balance as at 1 July 2009 30,670 1,451 (507) 82,890 114,504

Total comprehensive (loss)/income for the period – (225) 94 (1,465) (1,596)

Balance at 31 December 2009 30,670 1,226 (413) 81,425 112,908

Balance as at 1 July 2009 30,670 1,451 (507) 82,890 114,504

Total comprehensive (loss)/income for the year – (1,423) 533 (2,656) (3,546)

Balance at 30 June 2010 30,670 28 26 80,234 110,958

Balance at 1 July 2010 30,670 28 26 80,234 110,958

Total comprehensive income/(loss) for the period – 8,389 (424) 465 8,430

Balance at 31 December 2010 30,670 8,417 (398) 80,699 119,388

6 months ended

31 Dec 2010

6 months ended

31 Dec 2009

12 months ended

30 June 2010$’000 $’000 $’000

Total comprehensive income/(loss) for the period is attributable to:Equity holders of Blue Star Group Limited 8,430 (1,596) (3,546)

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

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Consolidated statement of cash flowsFOR THE SIX MONTHS ENDED 31 DECEMBER 2010 (UNAUDITED)

6 months ended

31 Dec 2010

6 months ended

31 Dec 2009NOTES $’000 $’000

Cash flows from operating activitiesReceipts from customers 292,364 291,413

Payments to suppliers (185,091) (190,592)

Payments to employees (84,511) (84,428)

Interest received 8 99

Interest paid (3,623) (729)

Finance lease interest charges (1,593) (1,961)

Net GST received 355 653

Net cash inflow from operating activities 12 17,909 14,455

Cash flows from investing activitiesPurchase of property, plant and equipment (15,293) (1,634)

Purchase of intangible assets (2,179) (1,149)Settlement of consideration for businesses acquired in prior period – (1,648)

Advance to related party (5,187) (4,286)

Proceeds from sale of property, plant and equipment 10,353 490

Net cash outflow from investing activities (12,306) (8,227)

Cash flows from financing activitiesFinance lease principal payments (5,671) (4,601)

Repayment of loan to related party (5,182) (5,658)

Net cash outflow from financing activities (10,853) (10,259)

Net decrease in cash and cash equivalents (5,250) (4,031)

Cash and cash equivalents at the beginning of the period 25,370 25,960

Cash balance acquired on acquisition – 6,406Effects of exchange rate changes on cash and cash equivalents 345 (172)

Cash and cash equivalents at the end of the period 20,465 28,163

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

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Notes to the financial statementsFOR THE SIX MONTHS ENDED 31 DECEMBER 2010 (UNAUDITED)

1 GENERAL INFORMATIONBlue Star Group Limited (“the Company”) and its subsidiaries (“the Group”) offers a range of individual and integrated services across a broad range of print and print management sectors.

The Company is a profit oriented limited liability company incorporated and domiciled in New Zealand. The address of its registered office is 30 Constellation Drive, Mairangi Bay, Auckland.

Blue Star Group Limited is a wholly owned subsidiary of Blue Star Group Investments Limited. The ultimate parent entity is Blue Star Group Holdings Limited.

These unaudited consolidated financial statements for the period ended 31 December 2010 were authorised for issue by the Board of Directors on 1 March 2011.

The companies listed below are referred to within these financial statements as follows:

Ultimate parentBSGHL Blue Star Group Holdings Limited (formerly Sirius NZ Holdco Limited)

ParentBSGIL Blue Star Group Investments Limited (formerly Sirius NZ Finance Co Limited)

CompanyBSGL Blue Star Group Limited (formerly Blue Star Print Group Limited)

SubsidiariesBSGNZ Blue Star Group (New Zealand) Limited (formerly Blue Star Print Group

(New Zealand) Limited)

BSGA Blue Star Group Australia Pty Limited (formerly Blue Star Print Group Australia Pty Limited)

McMillan McMillan Print Group Pty Limited

BSG Vic Blue Star Group (Victoria) Pty Limited (formerly The Craftsman Press Pty Limited)

Other related partiesSAFPL Sirius Aus Finance Pty Limited

SAHP2 Sirius Aus Holdco 2 Pty Limited

Other acronymsSSCFA Senior Secured Credit Facilities Agreement

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2 STATEMENT OF COMPLIANCEThese unaudited consolidated financial statements for the six months ended 31 December 2010 have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand and International Accounting Standard 34 and New Zealand equivalents to International Accounting Standard 34 Interim Financial Reporting (“NZ IAS 34”). They do not include all the disclosures and information required for full annual financial statements and should be read in conjunction with the Group’s annual report for the year ended 30 June 2010.

(a) Statutory baseBSGL is a company registered under the Companies Act 1993 and is an issuer in terms of the Securities Act 1978. These unaudited consolidated financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act 1993.

(b) Changes in accounting policiesThere have been no significant changes in accounting policies from those applied by the Group in its financial statements as at 30 June 2010. The presentation of certain comparatives have been revised to ensure consistency of disclosure with the current period.

3 CAPITAL COMMITMENTSCapital commitments of $1,970,000 was committed at 31 December 2010 but not provided for (31 December 2009: $1,700,000).

4 RESTRUCTURINGIncluded in restructuring expense, for the period ended 31 December 2010, is a provision release of $658,000 no longer required and an additional provision of $281,000 relating to the re-estimation of an existing provision.

5 CAPITAL RISK MANAGEMENT AND GOING CONCERNThe Group’s capital comprises share capital, reserves and retained earnings.

The Group’s objectives when managing capital are to safeguard the Group’s ability to operate as a going concern, to maintain the optimal capital structure commensurate with risk and return and to reduce the cost of capital.

The capital structure may be maintained or adjusted by the payment of dividends by the Group to its shareholder, a return of capital to that shareholder, an issue of new shares, the sale of assets to reduce debt or by drawing more debt.


Notes to the financial statements (continued)FOR THE SIX MONTHS ENDED 31 DECEMBER 2010 (UNAUDITED)

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5 CAPITAL RISK MANAGEMENT AND GOING CONCERN (continued)As disclosed in note 6, each member of the Group is part of a guaranteeing group which is subject to a number of externally imposed borrowing covenants as part of the terms of a secured bank loan facility, the SSCFA.

While the covenants under the SSCFA were in compliance during the period, under the terms of the SSCFA, payment of interest is not permitted on the Subordinated Capital Bonds if the senior debt leverage ratio, as defined in the SSCFA (being the ratio of net senior debt to earnings before interest, tax, depreciation, amortisation and restructuring (“EBITDAR”)) is or is forecast to be greater than 3.00:1.00 or if a default or event of review under the SSCFA has occurred or will result from the making of that interest payment.

Accordingly, interest on the Subordinated Capital Bonds was suspended from 15 September 2009 and interest is currently accruing on the Subordinated Capital Bonds at the step up interest rate of 13.1% per annum compounded quarterly. As at 31 December 2010, the senior debt leverage ratio is 3.53 and interest on the Subordinated Capital Bonds remains suspended.

The Group is also subject to borrowing covenants under the Subordinated Capital Bond Trust Deed (“the SCB Trust Deed”). As at the 31 December 2010 test date both the gearing and interest cover ratios under the SCB Trust Deed were in compliance. However as the interest on the Subordinated Capital Bonds remains suspended, interest continues to accrue at the step up interest rate of 13.1% per annum compounded quarterly.

For the prior comparative period, as at the 31 December 2009 test date, the gearing ratio and interest cover ratio for the Group under the terms of the Subordinated Capital Bonds were not in compliance with the levels set out in the SCB Trust Deed. However, the SCB Trust Deed provides that additional interest will not apply to the Subordinated Capital Bonds if interest on the Subordinated Capital Bonds is suspended. Interest on the Subordinated Capital Bonds was suspended from 15 September 2009 and interest is accruing on the Subordinated Capital Bonds at the step up interest rate of 13.1% per annum compounded quarterly. Accordingly, no additional interest was payable on the Subordinated Capital Bonds as at 31 December 2009 as a result of the gearing ratio and the interest cover ratio mentioned above not being in compliance with the SCB Trust Deed.

Currently the Group is unable to make any distributions to its shareholder due to a restriction in the SCB Trust Deed that applies while the payment of interest on the Subordinated Capital Bonds is suspended. As a result, the Group has advanced funds to BSGIL (the NZ borrower under the SSCFA) to assist with funding senior debt obligations under the SSCFA.

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5 CAPITAL RISK MANAGEMENT AND GOING CONCERN (continued)The Directors have adopted the going concern assumption in the preparation of the financial statements having regard to:

forecast financial performance of the Group and BSGHL Group which indicates continued compliance based on current forecasts and expectations with the covenant ratios under the Trust Deed and SSCFA after taking account of a recent amendment to a key covenant ratio;

continued access to funding from the Senior Lenders under the terms of the SSCFA; and

a reasonable expectation that funding arrangements the Group is reliant upon will be renewed.

The SSCFA matures on 26 February 2012. The Subordinated Capital Bonds mature on 15 September 2012. The Group’s ability to continue as a going concern is reliant on the restructure and extension of these borrowings.

As at the date of the approval of the interim financial statements, the Senior Lenders have agreed to, in the form of an executed terms sheet, the terms of a renegotiated SSCFA which will allow for:

Reset covenant requirements allowing increased financial flexibility for the business; and

A maturity date of February 2015.

While these terms have had credit approval by all of the Senior Lenders they are conditional upon satisfaction of various requirements of the Senior Lenders including further shareholder contributions and the Subordinated Capital Bonds being restructured and extended.

While the Directors expect that the Company will be successful in restructuring and extending the Subordinated Capital Bonds, the outcome is still subject to existing Bond Holder approval.



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6 CONTINGENT LIABILITIESContingent liabilities include all those noted in the annual financial statements of the Group as at 30 June 2010. Fluctuations in exchange rates will affect the values included in that report and these fluctuations have not been disclosed below.

Additional contingent liabilities since 30 June 2010 include:

Bank guarantees required to secure property lease obligations of BSG Vic $33,000.

A potential commitment for BSGA of $13,323,000 to acquire property, plant and equipment which is subject to contractual acceptance requirements.

Reductions in contingent liabilities since 30 June 2010 include:

Standby letters of credit no longer required to secure certain obligations of BSGA $1,826,000.

Bank guarantees no longer required to secure property lease obligations of BSGA $59,000.

Bank guarantees no longer required to secure property lease obligations of McMillan $314,000.

Each member of the Group is a guarantor under the SSCFA. The borrowers under the SSCFA are BSGIL and SAFPL. The guarantors under the SSCFA have each granted security in support of their guarantee obligations and, as a result of that secured position, claims under those guarantees will rank ahead of all unsecured creditors of those Group members (including claims of the Subordinated Capital Bondholders) other than creditors preferred by law.

The total amount of senior debt, non-cash facilities (i.e. letters of credit or bank guarantees) and working capital facilities outstanding under the SSCFA at 31 December 2010 is $161,717,000 (31 December 2009: $161,543,000) of which non-cash facility utilisation at 31 December 2010 is $11,376,000 (31 December 2009: $11,092,000).

Bank accounts of Group members in New Zealand and Australia are subject to pooling and set off arrangements. Those pooling and set off arrangements apply to debit and credit balances held in accounts maintained by members of the Group and accounts maintained by entities that are subsidiaries of BSGHL but are not subsidiaries of BSGL (and accordingly are not members of the Group). Under those arrangements, credit balances in accounts maintained by Group members may be offset against, and reduced by the amount of, debit balances in accounts maintained by entities that are not Group members.

The aggregate amount of net debit (i.e. overdraft) balances in the accounts maintained by entities that are subject to the Australian or New Zealand pooling and set off arrangements but are not Group members is $24,608,000 (31 December 2009: $23,960,000).



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7 SEGMENT REPORTING(a) Description of operating segments

The operating segments have been determined based on the reports reviewed by the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources, assessing performance of the operating segments and making strategic decisions for the Group, has been identified as the Managing Director.

Operating segments are organised based on geography and product as follows:

New Zealand print Suppliers of print, print management services and labels in New Zealand

Australian print Suppliers of print, direct mail and print management services in Australia

Webstar Providers of web offset print services in New Zealand and Australia

Unallocated Property operations and the Group’s corporate functions in New Zealand and Australia

The operating segments are managed separately by Group Chief Executive Officers who report directly to the Managing Director.

Information on assets and liabilities by segment is not reported in this note as this information is not reported to the chief operating decision maker.

Inter-segment pricing is determined on an arm’s length basis in a manner similar to third parties. Segment revenues and expenses include transfers between segments, which are eliminated on consolidation.

Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

No single customer’s revenue accounts for more than 10% of the Group’s revenue.

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7 SEGMENT REPORTING (continued)(b) Operating segments

NEW ZEALAND PRINT

AUSTRALIA PRINT WEBSTAR

UNALLOCATED SEGMENTS CONSOLIDATED

6 months ended 31 December 2010 $’000 $’000 $’000 $’000 $’000Revenue from external customers 82,070 135,302 83,720 300 301,392Inter-segment revenue (2,694) (1,472) (3,599) (300) (8,065)Total sales revenue 79,376 133,830 80,121 – 293,327Operating segment result * 6,778 8,226 13,450 (1,600) 26,854

Unallocated (expenses)/revenues

Depreciation and amortisation (11,390)Restructuring costs (350)Movement in derivatives (1,271)Interest expense (13,367)Interest income 707Gain on sale of property, plant and equipment 20Profit before income tax 1,203Income tax expense (738)Profit after income tax for the period 465

6 months ended 31 December 2009Revenue from external customers 77,091 148,393 79,690 300 305,474Inter-segment revenue (1,510) (694) (7,352) (300) (9,856)

Total sales revenue 75,581 147,699 72,338 – 295,618Operating segment result * 6,294 7,322 14,618 (1,975) 26,259

Unallocated (expenses)/revenuesDepreciation and amortisation (12,191)Restructuring costs (1,590)Movement in derivatives (100)Interest expense (8,305)Interest income 99Gain on sale of property, plant and equipment 139Related party charges (6,278)Loss before income tax (1,967)Income tax credit 502

Loss after income tax for the period (1,465)

* Operating segment result is defined as operating earnings before interest, taxation, depreciation, amortisation, restructuring and non-operational expenses as included in unallocated (expenses)/revenues.

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7 SEGMENT REPORTING (continued)(c) Secondary reporting format – geographical segments

EXTERNAL REVENUE NON-CURRENT ASSETS6 months

ended 31 Dec 2010

6 months ended

31 Dec 2009As at

31 Dec 2010As at

31 Dec 2009$’000 $’000 $’000 $’000

New Zealand 110,408 103,632 108,627 86,532

Australia 182,919 191,986 201,544 187,509

293,327 295,618 310,171 274,041

Non-current assets not included in geographical segments

Receivables and other prepayments 106 111

Other financial assets 55 52

Deferred taxation 6,698 8,097

Total non-current assets 317,030 282,301

8 PROPERTY, PLANT AND EQUIPMENTDuring the 6 months ended 31 December 2010, there were additions to property, plant and equipment of $25,010,000. Excluding finance lease arrangements, no material disposals occurred.

Significant items in this movement include:

Assets funded by finance lease of $10,571,000.

Recognition of plant and equipment totalling $10,216,000. BSGNZ and BSGA entered into agreements during the period to purchase certain assets relating to existing operating lease agreements at the expiry of the lease agreements. The impact, for accounting purposes, requires these agreements to be treated as finance leases resulting in recognition of the assets with a corresponding finance lease liability. Previously the future financial commitments on these assets were included in the disclosure of operating leases. At 31 December 2010, future operating lease commitments decreased by $5,793,000.

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9 INTEREST BEARING BORROWINGSDuring the six month period ended 31 December 2010, interest bearing liabilities (current and non-current) increased by $25,508,000.

Significant items in this movement (excluding scheduled repayments and foreign exchange impacts) include:

recognition of finance lease liabilities as a result of additions to property, plant and equipment as highlighted in note 8 of $20,469,000.

accrued interest on the Subordinated Capital Bonds increasing by $8,211,000.

10 RELATED PARTIESSignificant related party transactions for the period ended are:

Related entity Relationship

Receivable/ (payable)

31 Dec 2010

Receivable/ (payable)

30 Jun 2010Increase/

(decrease) Nature of transaction$’000 $’000 $’000

Receivable from:Current receivable from BSGHL

Ultimate parent entity

211 – 211 Payments on behalf of ultimate parent

Advance to BSGIL*

Parent entity 16,176 10,291 5,885 Advance for funding of senior debt obligations

Non-current receivable from SAHP2

Related entity due to common ownership

3,828 2,939 889 Tax losses transferred to related party

Other current related entities

Entities owned by directors / shareholders of the Group

265 (5) 270 Sale and purchase of goods on an arm’s length basis

Payable to:Loan from SAFPL #

Related entity due to common ownership

50,715 51,972 (1,257) Partial repayment of Australian denominated loan (AUD balance at 31 Dec 2010 $38,437,000 and 30 Jun 2010 $42,367,000)

* This loan was made by BSGNZ to BSGIL to assist with funding senior debt obligations under the SSCFA. The Group members are guarantors under the SSCFA. Interest is charged at the interest rate applicable to the Subordinated Capital Bonds under the Trust Deed, which is currently 13.1% per annum. The loan is unsecured and is subordinated to all external indebtedness of the borrower but will rank pari passu with all other intra group indebtedness of BSGIL. The repayment date for the loan is 26 August 2012, although that date may change if the maturity date for the Subordinated Capital Bonds, or the maturity date under the SSCFA, or both, is amended.

# The terms of the intercompany loan provide that payments under that intercompany loan must be applied in payment of amounts owing by SAFPL under the SSCFA and that the intercompany loan will be discharged and extinguished when the senior bank debt of the BSGHL group has been repaid in full. Interest is currently charged at 13.1% per annum. The loan is unsecured and ranks pari passu with all unsecured debt of the borrower. The repayment date for the loan is 29 June 2019.



20



10 RELATED PARTIES (continued)

Related entity Relationship

(Income) / expense

31 Dec 10

(Income) / expense

31 Dec 09 Nature of transaction$’000 $’000

BSGIL Parent entity (147) (147) Management fee income35 34 Interest expense

(698) – Interest incomeBSGHL Ultimate parent entity 34 163 Management fee expenseSAFPL Related entity due to

common ownership3,572 300 Interest expense on intercompany

loanSAHP2 Related entity due to

common ownership(399) (479) Management fee income

McMillan – pre-acquisition

Related entity due to common ownership (pre-acquisition)

– 6,277 Purchases on an arm’s length basis and recharged expenses

11 SUBSEQUENT EVENTSThe Group operates throughout New Zealand and Australia, including the Canterbury region, which has been affected by the major earthquake on 22 February 2011. While our Christchurch facility comprises a comparatively small portion of our New Zealand capacity, at this point in time no reliable financial assessment of the impact of this event to the Group has been able to be made. The Group will submit a claim to its insurers.Other than the item noted above, there have been no significant events subsequent to the balance date which require disclosure in or adjustment to the financial statements.

12 CONSOLIDATED RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO REPORTED PROFIT / (LOSS) AFTER TAX

6 months ended

31 Dec 2010

6 months ended

31 Dec 2009$’000 $’000

Profit/(loss) after income tax for the period 465 (1,465)Adjusted forDepreciation and amortisation 11,390 12,191Non-cash movement in derivatives 1,271 100Non-cash movement in Class A Redeemable shares – 137Gain on sale of property, plant and equipment (20) (139)Accrued interest on Subordinated Capital Bonds 7,996 6,081Net exchange differences (1,768) (233)Change in operating assets and liabilities(Increase)/decrease in receivables (13,461) (837)(Increase)/decrease in inventories (7,111) 1,787Increase/(decrease) in payables 20,330 (3,390)(Decrease)/increase in provision for income taxes payable (1,183) 223

Net cash inflow from operating activities 17,909 14,455



Directory

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DIRECTORS

N Greiner – ChairmanC Mitchell – Managing DirectorR FranceT SturgessN ChildresJ ThickinsB Zuckerman as alternate for N Childres

REGISTERED OFFICE

Blue Star Group Limited30 Constellation DriveMairangi BayAuckland 0632New Zealand

POSTAL ADDRESS

PO Box 100616Auckland 0745New Zealand

TELEPHONE NUMBER

64-9-477-0400

FACSIMILE NUMBER

64-9-477-0401

WEBSITE

For more company information visit: www.bluestargroup.co.nz

AUDITORS

PricewaterhouseCoopersPrivate Bag 92162Auckland 1142New Zealand

SOLICITORS

Chapman TrippPO Box 2206Auckland 1140New Zealand

BANKERS

Bank of New ZealandPO Box 2139Auckland 1140New Zealand

National Australia BankLevel 23, 255 George StreetSydney, NSW 2000Australia

TRUSTEE

Perpetual Trust LimitedPO Box 3376Auckland 1140New Zealand

BOND LISTINGS

The Company’s Subordinated Capital Bonds are listed on the NZDX market.

BONDHOLDER ENQUIRIES

Bondholders with enquiries about bond transactions, changes of address, or interest payments should contact the Bond Registrar.

BOND REGISTRAR

Computershare Investor Services LimitedPrivate Bag 92119Auckland 1020New Zealand

Documents

BSG Ltd Interim Report Dec 2010 - NZX · PDF file2 Blue Star Group Limited (ÒBlue StarÓ) is pleased to report its interim results for the 6 months ended 31 December 2010. The period