tainui group holdings limited & waikato-tainui fisheries limited
annual report 2013 our business Tainui Group Holdings Limited (TGH) and Waikato-Tainui Fisheries Limited (WTF) are the commercial entities of Waikato-Tainui Te Kauhanganui Incorporated (WTTKI), the Shareholder and tribal authority of Waikato-Tainui. TGH’s role is to deliver commercial returns on assets for the Waikato-Tainui people. This includes assets that were returned by the Crown under the Waikato Raupatu Claims Settlement Act 1995.
TGH’s principal objective is to maximise Shareholder wealth through a sustainable asset portfolio. Our strategy of identifying and growing high quality assets to generate income, allows us to provide consistent, long-term dividends for the benefit of current and future generations of Waikato-Tainui. These dividends are used by our Shareholder to meet tribal expenditures and for charitable purposes, distributed in the form of grants, to Waikato-Tainui Marae and registered tribal members.
Strong governance of our strictly commercial business model is the cornerstone of our business philosophy. A clear distinction between wealth creation and the responsibilities of distributing wealth has been agreed between us and the Shareholder. The two parties have signed a Statement of Corporate Intent (SCI) that documents all the necessary understandings that must exist between us.
Our structure
Waikato-Tainui iwi members
Waikato-Tainui Marae
Waikato Raupatu Waikato-Tainui Te Kauhanganui Waikato Raupatu Lands Trust Incorporated (tribal parliament) River Trust
Te Arataura
Tainui Group Waikato-Tainui Holdings Limited Fisheries Limited
Waikato-Tainui consists of over 64,000 registered iwi members. Each iwi member affiliates to at least one of the Waikato-Tainui Marae. Each Marae tri-annually elects three representative iwi members for the appointed WTTKI – or the Tribal Parliament. One additional representative to the Tribal Parliament is appointed by the Head of the Kaahui Ariki – Kiingi Tuheitia. From the Tribal Parliament, 10 members are elected onto its executive – Te Arataura, and one is appointed by Kiingi Tuheitia. Te Arataura oversees the tribal operations. Tainui Group Holdings Annual Report 2013
CONTENTS
2 Financial performance summary 3 Year in review 4 our strategy 6 profile – Ruakura
8 Business review Chairman’s report CEO’s report Overview operational review financial overview Sustainability Growth partnerships
30 Our people our management our team
34 Our directors Board of Directors directors’ report Governance
42 Financial information five year trend statement financial statements – Tainui Group Holdings Limited financial statements – Waikato-Tainui Fisheries Limited
1 FINANCIAL PERFORMANCE SUMMARY 2013 Tainui Group Holdings Limited & Waikato-Tainui Fisheries Limited Net operating profit $20.8m $20.7m in 2012 Marginal increase in operating profit, the result of a full year’s Net earnings from Novotel Auckland Airport. $45.1m profit $39.9m in 2012 REVENUE Favourable increases from unrealised movement in the value GROWTH of assets, particularly 13.5% investment properties. 57.7% in 2012 Hotel performance provided a 65% contribution to the TOTAL increase in revenue. $738m ASSETS $694m in 2012 The increase is largely due to Capital unrealised movement in expenditure investment property $ values and capital 20.9m expenditure. $56.4m in 2012 Mainly represented by capital spend at The Base, Bank debt especially infrastructural improvements. % to total 25.3 assets 26.0% in 2012 Dividend While there was a 4% increase in bank debt, it was diluted by the increase in $11.5m total assets. $11m in 2012 The dividend increases Return on $0.5m annually. Shareholder 9.2% funds 10.3% in 2012
2 Tainui Group Holdings Annual Report 2013 YEAR IN REVIEW
APRIL Paenga-whaawhaa SEPTEMBER Mahuru DECEMBER Hakihea
TGH welcomes two new directors, ANNUAL REPORT 2012 Paki Rawiri and Hemi Rau and
Board advisor Joanna Perry & Waikato-Tainui Fisheries Limited
MAY Haratua
& waikato-tainui fisheries limited
Te Awa wins silver at the 2012 TGH participate in the International Council of Shopping Heartstopper Challenge fundraiser Centres Awards for design and development excellence in Novotel Auckland Airport Shanghai, China wins the 2012 New Zealand TGH a finalist in the New Zealand Hotel Industry Environmental Institute of Chartered Accountants Initiatives Award 2012 awards for best annual report OCTOBER Whiringa-aa-nuku for a corporate organisation Hamilton City Council publicly TGH team participate notifies its Proposed District JUNE Pipiri in the Tri-Maori Festival Plan which includes the Ruakura structure plan
Bank debt facility of $50 million renewed Rotokauri Joint Venture agreement is signed FEBRUARY Hui-tanguru TGH’s hosts the 2012 annual stakeholder function
Te AWA wins a bronze Nga Aho design award for ‘Aotearoaness’ JULY Hoongongoi
NOVEMBER Whiringa-aa-rangi million TGH team move into new offices at Capitalisation of $70 million loan 6 Bryce Street, Hamilton to Shareholder equity approved by Waikato Regional Council issues WTTKI Regional Policy Statement decisions confirming Ruakura as a major employment growth cell MARCH Poutuu-te-rangi
Submissions on the Hamilton City Council Proposed District Plan close
TGH farewells retiring Chairman, John Spencer and Hon. Koro Wetere and welcomes Sir Henry van der Heyden as Chairman Two new tenancies open at The Base, Sunny’s and The Clearance Shed Te AWA wins Waikato/Bay of Plenty Architecture award for Roading and signalisation project at commercial architecture The Base completed
3 OUR STRATEGY
OUR VISION
To lead Maaori economic development, alongside other iwi-owned businesses, to benefit Maaori and the whole community.
OUR OBJECTIVE
To maximise wealth, provide long term returns and a consistent dividend to our Shareholder. We do this primarily through strategic acquisition, investment and development of property, and by investments in growth assets and fishing.
OUR FORMULA
To meet our Vision and Objective, we apply a formula that is targeted towards the following key components that are important to our company. Growth We invest for the long term, a horizon that stretches over decades. We maintain a strong balance sheet with prudent borrowing levels. We bring freshness, vibrancy, quality and longevity to the design and functionality of our property portfolio. Customers We cultivate long-term co-investor and tenant relationships for mutual benefit. Shareholder We reflect Waikato-Tainuitanga in business wherever appropriate. We provide a consistent dividend stream. We continue ongoing engagement with our Shareholder entities. Stakeholders We engage leading specialists to deliver the best service and products for our business. We invest in long term partnerships with other businesses, including iwi. We encourage cultural, social and environmental responsibility. We invest in the team.
4 Tainui Group Holdings Annual Report 2013
Key strategies Objective Progress Outlook
Growth deliver a long tgh’s total assets grew by 6.4% ruakura will be a unique term sustainable to $738 million in 2013. commercial development dividend stream. that will become a project of tgh’s equity grew by 26.4% to Grow beyond national significance creating be a recognised $490 million in 2013 – almost growth and employment. $1 billion in contributor to the half-way towards our 2021 target. region’s economy. increasing TGH’s investment the Base is New Zealand’s capacity and exposure to risk high quality be the leader or largest single retail development through diversification into preferred partner by area and Australasia’s only growth assets will be critical in total equity of significant hybrid (large format, mall and delivering the expected return development outlet) centre. Businesses at The and assets target. by 2021 projects and growth Base employ just under 1,700 full investments. and part-time employees.
Operational deliver investment Weighted average cost of capital by focusing on risk adjusted returns in excess methodology used to assess returns TGH can measure the of market based performance of TGH’s existing asset viability of competing projects on a Deliver hurdle rates. portfolio and inform investment like for like basis. decisions. returns assess all future capital and investment projects to determine if returns meet required hurdle rate.
people to develop highly implementation of the People recruitment and retention focus competent, Strategy 2025 on creating a motivating and motivated and positive environment. graduate recruitment evening held Value engaged people. in March 2013 to showcase TGH To enable people achievements. employee to express their full potential. medical and vision checks and flu contributions jabs offered for all staff. Weekly provision of fresh fruit provided to the team. Team building events. implementation of staff surveys.
Partnerships create enduring a group of preferred, strategic regular review of long-standing relationships with partners to provide appropriate relationships and active the Shareholder advice and support as required which engagement with principals to Create and partners whose includes banks, construction, legal, ensure that our business needs views are closely financial and advisory services. We are being met. enduring aligned with TGH. profile a sample of our strategic We will partner with other iwi in partners on pages 28 and 29. relationships commercial developments. Iwi representation at WTTKI tribal forums. are natural partners who share similar financial goals. implementation of the one team, one location strategy between TGH and Further support and engagement the Shareholder with the tribe.
Sustainability Differentiate novotel Auckland Airport hotel is ruakura will showcase TGH’s from competitors infused with Waikato-Tainui design core attributes, competitive by completing features providing the first advantage, and cultural edge. Differentiate projects that experience of New Zealand culture reflect the for many travellers. from enduring place the Base (and in particular Te AWA) in New Zealand design features are embedded with competitors society of cultural elements from Waikato-Tainui. Waikato-Tainui. development of Bryce Street, Hamilton boutique business precinct.
5 What does Ruakura offer Hamilton?
A competitive advantage for the region’s economy What is it all about? •• A mixed-use land development on New jobs for thousands of people the eastern side of Hamilton City Growth and business opportunities for Hamilton City •• Undertaken in gradual stages over a 30-50 year period A wide range of new housing •• Uses 500 hectares of Waikato- Tainui land at Ruakura, along with Well designed buildings adjoining land owned by Chedworth Properties Ltd A great place to live, with plenty of open spaces •• It is still a proposal. It requires and trees planning approval before work can start Walkways, cycleways and excellent public transport connections What does it involve? A better balanced city, with jobs and houses •• New housing co-located on the eastern side of the River •• Green belts, open spaces and wetlands A substantial new source of rates for the Council •• A commercial and light industrial district Trucking freight taken off local roads •• A ‘knowledge zone’ around Reduced carbon emissions AgResearch, University of Waikato and Waikato Innovation Park •• A logistics and distribution centre (inland port and freight handling) •• Shopping and service precincts for local residents
6 Artist’s impression. Tainui Group Holdings Annual Report 2013
What’s the rationale for the the country. The inland port of the •• Further work on wetland and development? Ruakura development will be compact: drainage systems for storm water it takes up less than 5% of the land management It will provide much needed within the area earmarked for growth. employment on the eastern side of •• Walkways and cycleways started Hamilton City. Excellent walking, The proposed first stages 2021 – 2025 (indicative) cycling and public transport links will make it easy for people to travel to and Up to 2019 (indicative) •• Housing continues to expand from work. •• Wetland and drainage systems •• More green spaces and New housing will be provided, both created for storm water complementary amenities developed management medium and standard density, to •• Logistics and warehousing facilities meet a wide variety of needs. It will •• Work begins on green belts and functions expand be complemented with generous open •• The first housing development •• Full integration of road and rail spaces and recreation areas to provide starts adjoining Fairview Downs freight handling starts to take place an attractive living environment. •• Work begins on the logistics and in the logistics and distribution area It will feature low impact, sustainable distribution zone, including water storm-water and waste-water and power supplies, rail earthworks Ruakura – by the numbers management systems, with particular and some distribution warehouses. •• 1,800 new homes built use of wetlands to filter and cleanse the The logistics and distribution area water before it can reach the Waikato •• 83 hectares of reserve, recreation will initially cover about 80 hectares River. areas, parks, walkways and •• Limited freight movements – mostly cycleways provided A ‘knowledge zone’ will be developed by road – will begin around The University of Waikato, •• 6,000-12,000 full time jobs created AgResearch and Waikato Innovation •• Some light industrial development •• $3 billion in investment attracted to Park, allowing for future growth and underway the region greater collaboration. 2019 – 2021 (indicative) •• A projected $4.4 billion increase in An inland port and logistics centre •• Green belt areas expanded the Waikato Region’s GDP will be created, where freight will •• When finished, it will generate be swapped between road and rail, •• Housing areas expanded over $14 million in extra rates for containers packed and unpacked and •• Opening of the Hamilton section Hamilton each year, over 10% of the goods stored. This takes advantage of the Waikato Expressway and city’s current budget of Ruakura’s unique location right an interchange for Ruakura. Road on the intersection of the Eastern infrastructure created within •• 630 fewer tonnes of carbon emissions Main Trunk railway and the new Ruakura to link with it emitted into the air – and over one Waikato Expressway, as well as the million fewer kilometres travelled – •• Rail freight starts to be on and off- large projected increase in freight each year by taking freight off road loaded at the site volumes in the upper North Island. and onto rail • Warehousing and logistics services World class technology will be used to • •• Over 30 years, 740,000 heavy vehicle handle container freight more quickly activity increases trips avoided and efficiently than anywhere else in
7 Teenaa koutou katoa FROM THE Chairman
Sir Henry van der Heyden
8 8 Tainui Group Holdings Annual Report 2013
people of Waikato-Tainui, TGH must This is my first Net operating profit after minority interest have an asset base capable of delivering TGH & WTFL report as Chairman much higher returns to its Shareholder. 21 21 Our dividend this year is equivalent of Tainui Group 16 15 to only $180 per person. Our Ruakura 12 Holdings. I accepted development is vital to get to that next $M stage where we increase our returns, 0 the position because 2009 2010 2011 2012 2013 but it will not be an overnight process. I am a firm believer in the increasingly 2013 financial results important role Taking into account subdued economic Net profit after minority interest growth, TGH and WTF performed TGH & WTFL 0.4 Maaoridom will play well in 2013. Their combined net 0.5 in our economy. It’s operating profit was steady at $20.8 45 million, a marginal increase on 2012. 39 my hope that Waikato- 34 The net profit for TGH and WTF 0.4 Tainui will take a was $45.1 million, up 13% from $39.9 23 leadership role. million last year. This came on the back of a 13% increase in revenue, principally For iwi-owned companies, their first reflecting good trading conditions at responsibility is to pay dividends from the Novotel Auckland Airport. $M their profits. But as retained earnings 0 and debt are their only sources of TGH and WTF together paid a capital, they must reinvest some of dividend to the Shareholder of $11.5 their profit each year to increase the million, up $0.5 million from 2012. value of their assets, which they can in The value of total assets at 31 March (27) turn borrow against. increased by $44 million, to $738 (1) TGH WTFL Over recent years TGH has created a million. solid core of investment properties that Our Shareholder converted its $70 2009 2010 2011 2012 2013 generate a reliable cash flow, among million loan, on the books since the them The Base, Te AWA and the settlement assets first transferred Novotel Auckland Airport. to TGH, to equity. This has given an Net profit after minority interest They are however, stages in a much extra $70 million of permanent capital, TGH & WTFL 24 longer journey. If we are to make a real which now stands at $490 million. As a 19 difference for the more than 64,000 result, the return on Shareholder funds reduced from 10.3% to 9.2%. 18 Total bank debt (excluding Novotel 8 Auckland Airport) sits at $161 million, 21 21 If we are to make with approved but unused facilities of 16 15 a real difference $89 million. Total debt represents 25% 12 of total assets, in line with our policy $M for the more than that debt cannot represent more than 0 30% of total assets. 64,000 people of Waikato-Tainui, New investment strategy TGH has embarked on a diversification TGH must have an strategy. While the majority of our assets remain in property, and will asset base capable continue to do so, TGH’s strategy (40) TRADING NON-TRADING will see us diversifying into other of delivering much 2009 2010 2011 2012 2013 investment sectors. higher returns to its There is good reason for this. The company is charged with achieving shareholder. a return on the commercial assets of
9 Waikato-Tainui. These are mostly land It also means we have now set a much holdings, restored after the tribe’s 1995 higher earnings threshold for all our settlement with the Crown. However, future property-based investments. While the it takes many years to develop an investment property before we earn any Tribal engagement majority of our revenue from it, and a large percentage Ultimately what TGH does has to be of the capital needed must be borrowed. assets remain in for the benefit of tribal members. To At The Base, for example, we have achieve higher returns, without taking property, and will consents for the balance of the site undue risk, takes time, and for many and we will carefully develop as tribal members the wait is frustrating. continue to do so, market demand and returns on While in recent years the company has TGH’s strategy will capital warrant further expansion. reported regularly to its Shareholder, Other potential property investments it is fair to say that its main focus has see us diversifying are viewed similarly. Over the been on getting TGH operating well. medium term we do not want to While the company has developed into other affect our ability to pay an increasing its experience and expertise over the Shareholder dividend. We have investments. last decade, it has been much harder therefore decided to use the freed- on the Shareholder side to afford the up cash to pursue a higher yielding structures, training and resources investment strategy. needed to execute tribal plans. There will be two parts to this new The result is that the combined people, total assets approach. assets and resources of the tribe and its 13 TGH & WTFL 13 14 The first is to identify property commercial arm have been not been 13 725 development opportunities, selling consistently aligned. 13 645 680 516 rather than retaining the investment If TGH wants to be a part of Waikato- 484 for the long term. We recognise Tainui, and reach the goal of delivering however that there could be lengthy a much higher sustainable dividend, it timeframes between development needs to engage much more deeply with $M concepts, locating the land, rezoning, all the stakeholders of Waikato-Tainui. 0 resource consenting, tenanting, TGH WTFL building and then exiting. We need to take a holistic view and 2009 2010 2011 2012 2013 have a much better understanding of So the second is to invest in one or more mutual expectations. We have made an medium to large private businesses intensive effort over the last 12 months where the owner(s) are looking for fresh to engage with the entire tribe, but this portfolio value by sector equity, and where there is potential for is only the start of a process. TGH & WTFL TGH to receive good cash flows after a 1% relatively short time. We will aim for 2.7% Private equity a few large stakes rather than many Agriculture This new 0.3% smaller ones, and add value through our 5% Development properties governance and management expertise. investment Fishing 10% This new investment strategy builds Hotels strategy builds on on the fact that we still have capacity as well as a strong, reliable earnings the fact that we stream. We also have the ability to 11% take on more risk. We can accept a still have capacity Rural maximum volatility in earnings of properties 10% in any one year, and our current as well as a strong, rate is 7%. Together these factors reliable earnings give us, our Shareholder, and the 49% investment community the confidence stream. 21% Commercial Crown that this new strategy is sound and properties properties that we can continue to grow.
10 TainuiTainui Group HoldingsHoldings AnnualAnnual ReportReport 2013
6 Bryce Street, Hamilton.
One way of looking at it is the health Outlook Over the coming and wellbeing of a person, except here We expect trading conditions to stay we are talking about the health and steady over the coming 12 months. year we hope wellbeing of the tribe, and how we can Returns will be on a par with the last improve it. two years. Any uplift will depend on that there will be One of the first tangible results of the timing and size of investments that further milestones this closer collaboration has been our flow from our new strategy, but it will Shareholder’s decision to convert the be some time before that bears fruit. in what we intend $70 million loan it has had on our I look forward to the ongoing books to capital. This will allow the engagement with our Shareholder, will be a much capital to be in one place, will drive and to achieving the many important more integrated financial efficiency and should lead objectives we have set for the year ahead. to higher dividends being paid to the relationship. tribe. Over the coming year we hope In terms of specific projects, Ruakura that there will be further milestones continues to be our major focus. The in what we intend will be a much more vision for this project, led by our CEO, integrated relationship. Mike Pohio, is a tremendously exciting opportunity for Waikato-Tainui and the Governance region generally to put itself on the map. I would like to thank all Board members, the management team and staff of TGH for their commitment and achievements this year, and particularly for their welcome and support for me as the new Chairman. Sir Henry van der Heyden I would like to pay special tribute to Chairman John Spencer who retired as Chairman on 30 June 2012, after almost a decade on the Board. I have inherited the very strong foundation he put into place, and he also ensured the transition between us was exceptionally smooth.
11 Teenaa koutou katoa FROM THE CEO
Mike Pohio, CEO
1212 Tainui Group Holdings Annual Report 2013
Three years ago TGH The Base and Te AWA set a target of a 10 At The Base, we’ve appointed a Centre Manager, Assistant Manager, per cent per annum Marketing Manager, two Facilities cumulative growth Managers, a Caretaker and three Customer Service Representatives. in cash earnings. By These changes have enabled the 2013 we had achieved company to delegate considerable authority to team members. it, despite the ongoing backdrop of the Global Financial over Crisis. It was a challenge which came in two parts. 69,000 The first was to concentrate on the core Novotel Auckland Airport. business, maximising earnings and people visited The minimising costs. It’s vital the original Novotel Auckland Airport assets we were entrusted with continue Base on Boxing to be managed in a professional way. As At the Novotel Auckland Airport the business increases in complexity, we continued to be proactive. The we’ve added new resources and highest possible service levels and Day, 2012 consolidated internal processes so all our concentration on the source of The Base is the largest retail centre in assets perform to expectations. It also earnings is key to delivering a good New Zealand, so being sure the team means senior management can continue outcome. As a result, patronage has take action for the right reasons, and in to concentrate on growing the business. increased. We’re pleased with how the right way, is important. On Boxing it is being managed by ACCOR. The The second was to complete key Day last year we had more than 69,000 hotel has cemented in its position developments, most notably Te people there, with very few incidents. as a quality offering in the broader AWA at The Base and the Novotel The same figure in 2011 was 60,000, Auckland market. The Novotel brand Auckland Airport. That heavy and in 2010 it was 40,000. works well across many segments, capital investment in the retail and including domestic and international hospitality sectors has been gradually travellers, flight crews, government reduced, falling from $56 million to agencies and the general public. $21 million this year.
As the business Novotel increases in Auckland complexity, Te AWA, The Base, Hamilton. we’ve added new Airport has Retailing had a tough year in 2012. The Base has 190 tenants, so there is a resources and spread of business models and tenants competing in the Waikato market. consolidated Large format retail is well patronised in 263 good and bad times. We were therefore internal processes highly selective in the tenant mix and so all our assets four and a the standard of the offering presented to customers. We also aim to have perform to half star strong relationships with both existing and prospective tenants. Our strength, expectations. rooms above all, is our commitment to 13 making it a great shopping experience. key customers including Fonterra, Despite some turnover during the Gallagher Group, The University of year, at balance date we were at 99% Waikato and AgResearch, as well as occupancy. sports teams that included Super 15 rugby, international cricket and ANZ Our strength, Cup netball. The business has captured more market share but overall the above all, is our Hamilton market remains subdued particularly the corporate sector. commitment Residential subdivisions to making it a After many years we are coming to the great shopping end of our Huntingdon development, with 11 sections still to be sold. The experience. long term partnerships we established with Malcolm MacDonald, Lugton We refined the master plan for The Real Estate, CKL Surveyors, Norris Base, as we do every year, and were Ward, and Ellice Tanner have been successful in obtaining amended beneficial to all parties. We are resource consents for the rest of the looking to retain a presence in the centre. There will be ongoing capital Hamilton residential market beyond expenditure but at a more measured this, and hope to carry over some of fashion. Last year we’d envisaged these partnerships into a 700 section first floor retailing, a multi-level car development at Rotokauri over the park, offices, more large format retail next decade. and a comprehensive health facility or Whaanau Ora. We also planned Other properties Wintec, Hamilton. an auto precinct, but with recent Our underlying property investment vehicle testing regulatory changes portfolio is sound, though, other than agencies. We undertake rent reviews we’ll proceed with a modified version positive movements in valuation using independent valuers and reach of the concept. We also re-considered for The Base and Ruakura there has agreement in a professional manner. the multi level car park and first floor been no other significant movement Since our balance date is 31 March, retail of Te AWA and concluded that, in property values. We continue our farms were partly affected by the given the current economic climate to manage both our assets and our drought. We are uncertain of the full and the amount of capital involved it relationships with all our tenants, effects beyond that, but there will will take more time to commit to that including the Crown and Crown certainly be an impact on next year’s portion of the development. volumes and earnings. We have nearly completed a re- Hamilton Riverview Hotel TGH owns development of our Bryce Street This joint venture with Hamilton precinct in the Hamilton central City Council comprises the Novotel nearly business district (CBD). TGH has Tainui and the Ibis Tainui. We refurbished the street-front site, continue to see ongoing support from moving our staff into that building along with new tenant Joe’s Garage. As our operations have grown it became 14ha increasingly difficult to maintain of commercial effective and efficient working arrangements. Our tribal CEO and her staff have moved into our old office at and retail 4 Bryce Street, and Slater & Company, chartered accountants, have taken the property in tenancy at 2 Bryce Street. The precinct layout and landscaping have also been IBIS Tainui, Hamilton Hamilton’s CBD improved. 14 Tainui Group Holdings Annual Report 2013
The overall Statement (RPS). This is a very TGH manages important document. It sets the intention is to framework for all District Plans within the area, as well as the Regional grow earnings at Transport Plan. TGH and its partner Chedworth Properties sought and a higher rate than $33m obtained approval for the Ruakura the cost of debt project to be included in the proposed of tribal RPS, and presented comprehensive and the first step reports to the hearings in front of the investments independent panel. At the time of will be to appoint writing there are some appeals to the Environment Court, and the RPS is in fishing a Chief Investment expected to be finalised in 2014. Fishing Officer, with The second was Hamilton City Council’s Proposed District Plan (PDP). Fishing is a business that carries proven capability to continuous risks. These include The Council included in its April 2012 catching the quota, the make-up look at investment draft what is known as the Ruakura and saleability of the catch and the Structure Plan, which gave effect to the exchange rate. In the past these risks propositions. Ruakura provisions in the RPS – such have been managed by others on as zoning, permitted activities, roads our behalf. Given recent regulatory to look at investment propositions but and services, the nature of the built changes regarding foreign chartered also refresh the framework in which environment and so on. vessels, TGH has proactively sought these decisions are made. This role to maintain and improve the tribe’s will complement the current returns from fishing. We have investment work at governance and therefore chosen to align with Sealord management level. Limited in terms of fishing our deep-sea Up until this time we’ve looked at quota, and with Aotearoa Fisheries pre-existing investment propositions Limited in respect of our in-shore quota. or ones we’ve been introduced to. With the new CIO, we intend to build on the TGH has sectoral analysis work we’ve already done to identify specific targets for proactively sought investment. to maintain and TGH’s unique offer will be that of a local investor that is there for the long improve the tribe’s term, our ability to share a vision, our experience in governing a business returns from that is managed to a high standard Farmland at Ruakura, Hamilton. and strong discipline. This is the same fishing. proven philosophy that has been so successfully applied over the course of the last ten years. Hamilton Riverview Ruakura New investment strategy Hotel and Novotel Auckland Airport As the Chairman has outlined, TGH are clear illustrations. provides nearly has decided to diversify its investment strategy. The overall intention is to Ruakura grow earnings at a higher rate than the Our proposed development at Ruakura cost of debt. was a major focus during the year as we 500ha In terms of private company worked our way through a number of investments, the first step will be to regional and local planning processes. for long-term appoint a Chief Investment Officer The first of these was Waikato (CIO), with proven capability not only Regional Council’s Regional Policy development 15 TGH and Chedworth Properties our main Agency as it worked its way through submitted a wide range of structural, options for Hamilton interchanges environmental, social and cultural focus will be with the new Waikato Expressway. reports as part of the draft District There have been several rounds of Plan process, and participated in three on completing consultation with a final proposed public open days and a workshop in solution to be revealed in May 2013. May 2012. The PDP was notified in the regulatory December 2012, and submissions processes for People called for by mid 2013. TGH continued to invest in its staff in We have also worked with the Ruakura, and 2013, with ongoing implementation Hamilton City Council to develop an identifying the of the People Strategy 2025. The move integrated catchment management to new offices has resulted in more plan, that is required before any potential to grow productivity, energy and collaboration development can take place. This is yet to the working environment, to be finalised. our investment promoting the one team, one location strategy. Our focus is very much on In late 2012, TGH and Chedworth portfolio in new submitted a Private Plan Change to the creating a motivating and positive Council for our Ruakura development. areas. workplace, and supporting each It was designed to lift prohibitions member of staff with a specifically on land inherited from the Waikato tailored individual development District Council. Importantly, it would While it might be more like five years programme. also allow us to lodge resource consent in practice, the Council wouldn’t be applications, most crucially for roading able to guarantee that. In other words, Outlook and services, both necessary precursors work on the site could be years away TGH will continue to consolidate its for the inland port and logistics zone to under that scenario. asset management processes in 2014, proceed in a timely fashion. The New Of its own accord, TGH initiated in a market that may show some Zealand Transport Agency, Waikato consultation with the local community marginal improvement albeit with a Regional Council and the Waikato and as a result made a number of number of attendant risks. District Council supported our modifications to the private plan. Over and above that our main focus application. However, in April 2013, Hamilton City will be on completing the regulatory Councillors, in a 7-5 split, decided not processes for Ruakura, and identifying to allow the plan change to proceed to the potential to grow our investment Over the next stage. That would have meant portfolio in new areas. notifying the plan change, calling for public submissions, and having them I would like to finish by expressing heard by independent commissioners. my gratitude to all members of the Councillors decision to prevent the TGH team and our many partners for 1,000ha plan from being notified ran counter all their hard work again this year. to the views of both Council officers It is sincerely appreciated. It is also of farmland and independent legal and regulatory heartening to know that so many advisors. TGH has therefore appealed people see the advantages and value is managed the decision to the Environment Court. that ongoing investment by iwi- owned businesses bring to the whole We note that the inland port and community. by TGH logistics zone at Ruakura is included The alternative would have been in FutureProof, the region’s long-term to let the Ruakura development be plan. It also features in assessments dealt with as part of the PDP, which by the Upper North Island Strategic also removes the prohibition. TGH’s Alliance, a consortium of most upper concern however was that the PDP North Island territorial authorities would not of itself enable resource and several government agencies, as Mike Pohio consenting. The current District Plan well as in Ports of Auckland planning Chief Executive also took 13 years to finish. In the documents. worst case scenario, the new one might Throughout the year we also worked not be fully operative until 2025. with the New Zealand Transport
16 Tainui Group Holdings Annual Report 2013
So many people see the advantages and value that ongoing investment by iwi-owned businesses bring to the whole community
17 Operational review
Portfolio Base. The development was broken management into multiple stages, so TGH received rental revenue as each stage was Cash Flows completed, allowing debt to be serviced accordingly. Before commencing each Managing cash flows is crucial to stage, a committed leasing threshold TGH. They are reported on and also had to be met to provide surety of managed weekly. The ability to do this cash inflows. The approach taken there successfully has a cascading effect on will also be applied to future property Interest bearing liabilities (bank debt) - tgh the timing of debt draw downs, and developments. Another significant therefore interest rate exposure. As a development was the construction of 28.9% 25.8% high proportion of income is derived 26.5% the Novotel Auckland Airport. Built from property rental, cash inflows during the global financial crisis, are regular with very little deviation. with demand for construction at a low 17.0% Cash outflows may spike according 15.5% point, the pricing was competitive. to the various development projects requiring funding, but otherwise Economic Value Added and operating outflows also remain at Sector Reporting consistent levels. 75 88 187 180 187187 TGH’s market is as wide and varied as Sustainability and quality of cash 2009 2010 2011 2012 20132013 the business TGH operates. However, flows are essential components of Bank debt Debt to total assets gearing the nature of the core business placed TGH’s business. They must withstand TGH in the investment property sector Maximum gearing = 30% debt: total assets market fluctuations, and service in 2013 (This is set to change from not only operating costs but also the 2014 as outlined in the Chairman dividend to our Shareholder and debt and CEO’s reports). Largely based in Interest cover position (ratio) requirements. Waikato, TGH owns a significant Through its tenancy profile, TGH footprint in the Hamilton area where 2.6 is provided with stable, long-term, competitors are commercial landlords, 2.0 high quality tenants such as Genesis, retail operators and residential and Waikato Institute of Technology, commercial property developers. University of Waikato, Kiwi Income Gearing position TGH periodically compares its Property Trust and Crown agencies. In performance to market benchmarks 2013, these tenants generated the bulk to assess returns on investments. 67% of investment property cash inflow, The balance sheet consists mostly of 60% comprising 23% of total rental revenue, tangible assets that are reported at down from 29% in 2012. Quasi equity as a % of total tangible assets market value, and so an Economic March 2013 Covenant Minimum Covenant TGH’s rental cash flows are now Value Added (EVA) analysis is suited predominantly from retail tenants at to TGH’s business. Unlike most Key The Base. TGH’s increased exposure property companies however, TGH Covenant: Covenants are the financial measures to the retail sector prompts a hands- which TGH must abide by under the terms of the is compelled to hold significant bank debt facilities and only apply to the entities on approach to tenant relationship parcels of strategic undeveloped land within the Group that have provided guarantees. managemesant and debt collection. that have considerable value. There Interest cover ratio covenant: Interest cover ratio calculates the number of times the profit A careful and considered approach are also parcels of land that are of (before interest cost) exceeds interest costs. is applied to property development. significance to Waikato-Tainui which The ratio must be more than two times. Before any property development is cannot be sold and whose returns Gearing percentage covenant: The gearing approved, its feasibility is analysed would otherwise be considered low percentage covenant is the equity as a percentage of the total tangible assets. to ensure that the project’s cash flows by comparison to sector benchmarks. meet internally developed risk- This has the inevitable impact of adjusted hurdle rates. eroding traditional performance The most significant development metrics such as return on assets (ROA) undertaken in TGH’s history was and return on equity (ROE). the construction of Te AWA at The TGH has evolved its EVA reporting to
18 Tainui Group Holdings Annual Report 2013
allow for the review of the sectors for capital expenditure is also taken to The level of overheads recognises which it has significant investment provide future funding requirements. TGH’s need to attract talented staff in. These are investment properties, In December 2012 TGH renewed $50 and to engage specialist external (commercial, retail, government and million of its core debt, maintaining consultants and legal advisors as rural), development properties, hotels, total debt facilities (excluding debt needed. The long ‘gestation period’ agriculture and fishing. associated with the Novotel Auckland between concept and completion of a For each sector, TGH has developed Airport) at $250 million. The company project means that overheads are often risk adjusted hurdle rates using public has a clear focus on tenor (debt incurred ahead of resultant steady- information to assess its balance duration) and balancing the associated state revenue streams. sheet profile. These rates are used as pricing. This focus provides greater a basis to evaluate potential future security around future liquidity Margin Management investment in these sectors, as well as requirements and means that TGH As TGH is predominately in the benchmarks for reviewing current or does not need to constantly refinance property investment and development historic performance. The nature of its debt every year, which usually business it places significant emphasis sector reporting allows TGH to ‘drill comes at considerable cost and on achieving commercially acceptable down’ into individual assets if required management time. returns on property leases, and adopts to assess performance and therefore As the company embarks on the new a selective approach to property make decisions to either dispose of or higher yielding investment strategy, investment and development projects improve the asset. there will be robust consideration of all to ensure the risks TGH takes are investement options before the balance appropriately compensated for. Treasury Management of the debt facilities are drawn. Rent reviews are another opportunity TGH has a similar challenge to to review and negotiate terms with companies operating a co-operative Interest Rate Risk existing tenants. Depending on the structure, in that it is dependent on Utilising both banking relationships lease agreement, rent reviews are based debt to fuel growth. TGH has not and technology, TGH monitors the on a number of standard mechanisms, issued capital to anyone other than its interest rate market on a daily basis. such as current market rental as Shareholder. This dependence on debt, This is particularly important in times assessed by an independent valuer, by necessity, requires TGH to take of global economic uncertainty, as this inflation, and an increase in tenant’s a pragmatic approach in managing impacts on the swap rates that TGH revenues. The majority of TGH’s leases liquidity and risk exposure by: is able to achieve. Swaps are financial have clauses which stop the rental Utilising relationships with banks, instruments which are entered into from decreasing. Further detail on rent business partners and advisors; with banks to hedge interest rate risks. reviews is provided on page 20. Building sound internal treasury Further detail on TGH’s interest rate A feasibility study is undertaken competencies; risk is provided in note 25.1 (b)(ii) of the where a property development or notes to the financial statements on investment opportunity is presented Employing technology to provide page 72. to the company. The study assesses current market information; and With little growth anticipated in what resources are required for the Developing and adhering to TGH’s forecast debt, and with hedging development and calculates the practical liquidity, debt, and policy limits at adequate levels, development margins and rental hedging policies. the company did not take out any returns. Property development Management reports each month to additional interest rate swaps in the projects are assessed based on the the Board on TGH’s compliance with current financial year. calculated returns and are dependent policies governing hedging profiles, on compensation for the resources debt durations, and overall risk Cost Effectiveness utilised and risk involved. As a project exposure. Any compliance deviation is progressed, constant monitoring of TGH constantly monitors overheads its feasibility is conducted, ensuring is reported, explained fully, and to ensure that profitability margins corrective action taken as necessary. that there are no cost over-runs. In are not compromised. TGH provides 2013, all projects were maintained corporate services to the Shareholder within budget. Debt Duration which avoids duplication of resources TGH forecasts its debt monthly, on a within the wider Waikato-Tainui 12 month rolling basis for operational group and enhances the depth of purposes, but a longer term view of specialist functions.
19 Investment Properties Investment and Management TGH’s investment properties comprise 79% (2012 78%) of the company’s total 135 rent reviews were completed during Weighted average lease term - tgh : assets. In 2013, they out-performed the the financial year which resulted in listed property sector average in terms of additional revenue of $1.2 million, 12.8 growth in both value and cash, despite a providing an uplift of 4.4% over prior relatively flat market over the past year. rentals. Total occupancy for 2013 was A high proportion of Crown tenants 99% (2012: 98%) at year end. Occupancy with good quality covenants, long term was maintained at high levels leases provide a significant contribution throughout the year as industrial and retail vacancies were filled. 6.9 7.3 to both rental revenue and capital growth. Ground leases provide further 5.7 5.7 5.2 stability as tenants have a shared The Base Profile interest in retaining their tenancies The Base is New Zealand’s first super and renewing beyond the initial lease regional shopping centre due to its Years expiry date. Our property values scale, the diversity of its retail offering 0 have been boosted by the statutory Rural Office Retail Industrial Public Portfolio and high number of anchor tenants. planning progress at Ruakura. The Consequently it draws a significant retail sector also contributed to growth proportion of its patronage from Investment property porfolio value - tgh due to tenant mix improvements, regional areas, in addition to Hamilton retail sales increases, infrastructural City, enhanced by excellent customer improvements made to support the access with the network of major 105 existing retail and planned expansion. arterial roads connecting to The Base. The values of all other property sectors 78 The Base continues to be the country’s have remained relatively static. 43 largest retail development comprising 42 74 large format retail (LFR), food and 55 Acquisitions and Disposals 64 hospitality, a large DIY offer, an outlet 40 TGH continually reviews its property 74 centre and an enclosed specialty portfolio to ensure that all its 61 retail shopping mall which includes a 59 39 investments are providing appropriate cinema complex. returns. While a number of acquisition During the year a further 18 40 62 opportunities were presented in tenants signed lease agreements and 2013, there were only two properties 63 commenced trading at The Base, that were purchased. Both were at including 12 new tenants in Te AWA, Rotokauri, and were acquired for 3 new LFR tenants and 2 tenants that added residential development. Three 133 176 248 311 334 were relocated. In total The Base has properties were disposed of during 190 tenants, 109 in Te AWA and 31 the year. Two properties in Hamilton, outlet tenants (such as DressSmart) and $M 25 29 29 29 36 located in Hill Street and Queens 0 50 LFR tenants. 2009 2010 2011 2012 2013 Avenue, were considered uneconomic Office/comercial Industrial to retain or develop. The third A key strength of The Base continues to Retail Rural/industry property sold was part of the former be customer car parking, roading layout Public sector Hort Research block at Pukekohe, and car-parking management system. which also proved difficult to develop Investment property Property and low yielding. In total, 7.43 hectares asset value Occupancy Key statistics portfolio (%) were purchased and 5.94 hectares sold The Base summary ($million) 2013 2012 during 2013. 2013 2012 2013 2012 Net lettable area (sqm) 82,622 81,171 Retail 334 311 99 100 Number of tenancies 190 180 Rural 105 78 100 100 Occupancy 99% 99% Public 55 64 98 95 Carparks 3,479 2,860 Industrial 43 42 100 100 Office 36 34 96 94 Pedestrian count 7.5m 7.1m Total 573 528 99 98 Vehicle count 3.9m 3.6m
20 Tainui Group Holdings Annual Report 2013
During the year, a further 619 (net) customer car parks were constructed, bringing capacity to 3,479. Additional access ways were created to ease traffic congestion, aided also by the Te Rapa bypass which opened in December 2012.
CBD Development TGH’s new head office, including Joe’s Garage Cafe, a new cafe operator to Hamilton, was completed at 6 Bryce Street, Hamilton. This re-development, along with TGH’s neighbouring buildings at 2 Bryce Street, occupied by Slater & Company (Chartered Accountants), and 4 Bryce Street, now occupied by Waikato-Tainui Te Kauhanganui Incorporated (TGH’s Shareholder), will form a boutique office precinct which will help enhance the CBD and reinforce TGH’s commitment to the central city. Residential Development Finding the right fit
TGH is also very pleased to have The Callum Brae Tainui joint It took two years for Garageworks successfully tenanted Palate restaurant venture development at Huntington directors Karyn Grant and business in its refurbished premises located in is nearing completion with only partner Craig Macfarlane to find the the Alma Street building in Hamilton, 11 of its 655 sections remaining for right spot for Joe’s Garage, Hamilton. which overlooks the Waikato River. sale. Planning is underway for the “We loved the natural elements of the Palate continues to be one of the residential development of 44 hectares building, the steel and stonework and region’s premier restaurants, and at Rotokauri, less than a kilometre the sunny profile. And it was a fringe the shift to this location should only west of The Base, along with a further location, not on the main street or in enhance that reputation. 7 hectares purchased at Rotokauri the “hospo” zone. Joe’s ethos is that it During the year TGH also secured during the year. This will ensure that TGH remains in the residential has to be a destination known to locals the Earthquake Commission as a new and sought out by visitors,” Grant says. tenant for the Hamilton CBD and development sector with a supply of “TGH wanted quality and longevity for the Waikato region in a refurbished sections available for the next 20 years. the fitout and the lease, and so did we. property in London Street. Added to Rotokauri and located an easy distance from both Hamilton and They understood the importance of us Auckland, 31 sections are available for making sure everything was just right.” sale at Hartis Avenue, Huntly. Grant says that’s all about making Joe’s a place comfortable for locals and visitors alike. Awards and Accolades “We need a place that’s understated and international council Shopping Center Awards – Asia pacific: unpretentious, funky and industrial, 2012 International Council of Shopping Centers, Silver Award for Design and Development for Te AWA where you can get fresh food and New Zealand Hotel Industry Awards: 2012 Environmenal Initiative Award exceptional espresso in a relaxed and for Novotel Auckland Airport casual environment. New Zealand Commercial Project Awards: 2013 Silver Award for Retail “Being new to the Waikato, TGH also New Zealand Architecture Awards: 2012 Bay of Plenty/Waikato made us feel very welcome. It feels Architectural Award for Commercial Architecture for Te AWA Nga Aho Design Award: 2012 Bronze Award for Aotearoaness for Te AWA like we have family here, which is very special in a commercial environment.” Nominations NZ Institute of Chartered Accountants: 2012 Best Annual Report by a Corporate Organisation (Finalist) 21 TGH’s quota investment of $20 million InvestmentS dairy production kilograms of milk solids provides a return of 7%. Snapper and Hotels crayfish are the highest value quota 325 326 held. The volume of hoki also provides 266 286 284 TGH’s investment in hotels totalled $69 a significant contribution to the total million as at March 2013, comprising quota. the Novotel Auckland Airport and the company’s shareholding in the TGH has an alliance with AHC’s Hamilton Riverview Hotel (HRH). of Ngaati Raukawa and Ngaati 2009 2010 2011 2012 2013 Maniapoto, and the three iwi have MS/Kg in thousands TGH maintains a 70% controlling until now leased out their aggregated interest in the Tainui Auckland Airport quota, having ceased to run an active Hotel Limited (TAAH). Auckland fisheries operation together in 2008. Effective Farm Area by Hectares International Airport Ltd and ACCOR As mentioned in the CEO’s report on own 20% and 10% respectively. Opened page 15, TGH, Ngaati Raukawa and 109 Hukanui (Dairy) in May 2011, with 2013 being the Ngaati Maniapoto have aligned with first full year of operation, the hotel’s Aotearoa Fisheries Limited (AFL) in occupancy and room rates have 250 a multi-year quota lease arrangement. Tainui Road 650 exceeded expectations and provided In addition, TGH has entered into a (Dairy) Hangawera solid results which are forecast to joint management agreement with (Drystock) strengthen over the coming year. Sealord Group Limited to jointly TGH’s investment in HRH was one of manage its deep-sea quota. With the the company’s first major financial new arrangements in place, it is hoped Forest by Hectares investments in 1998. TGH owns 41% of that returns from fishing will start to 150 HRH whilst Hamilton City Council improve. Whatawhata (HCC) and Accor own 41% and 18% WTF holds 5.48% of the income shares (Pine) planted 2001-2002 respectively. HRH holds total assets in AFL, an iwi owned company which 374 of $44 million which are represented provided a dividend to WTF of $0.4 Kawhia (Pine) by two hotels within close proximity million in December 2012. Separate 270 planted of each other, Novotel Tainui and Ibis financial statements are presented for Waipuna 1996-1997 Tainui. HRH’s performance during the (Redwood) WTF from pages 77 to 82. planted year was flat as occupancy suffered. 2005-2007 Looking ahead, growth in occupancy and room rate is assumed to be average Agriculture on a 50/50 sharemilker basis with the given the subdued market. farms collectively producing 326,000 kgs of milk solids from approximately Farms Fishing 1,000 cows. TGH owns and operates one drystock TGH’s fishing interests total $33 station and has sharemilkers contracted TGH is reviewing the agriculture land million, and comprise commercial on two dairy farms. Today the three portfolio with a view to maximising quota and other assets allocated to farms are valued at approximately returns and considering opportunities Waikato-Tainui as a result of the Maaori $22 million (including Fonterra shares). to take a more active approach in the commercial fisheries settlement with management of these assets as part of a The drystock farm, also known as the Crown. wider farming system. Hangawera Station, is located near Under the Maori Fisheries Act 2004, Morrinsville. It runs 2,500 ewes, 200 assets from the settlement could only Forestry cows and approximately 300 trading be transferred to those entities that met cattle. These stock numbers include As a long-term investment in the the prescribed criteria as a Mandated approximately 150 bulls that are sold TGH portfolio, a total of 795 hectares Iwi Organisation (MIO), and which to the dairy market each year. TGH is currently planted in trees with a would be managed by an approved employs two full-time farm staff and further 1,074 hectares leased out. The Asset Holding Company (AHC). is an active manager of this farm. The trees are a mix of Radiata Pine and The MIO for Waikato-Tainui is two dairy farms are located on Bankier Californian Redwood. The latter is well Waikato-Tainui Te Kauhanganui Road, Gordonton and Tainui Road, placed for the New Zealand Emissions Incorporated, and TGH is an AHC. north of Morrinsville. Both are run Trading Scheme.
22 Tainui Group Holdings Annual Report 2013
solid results are forecast to strengthen over the coming year
23 financial Overview
Net operating profit movement
7.5 (6.7)
(0.5) (0.2)
20.7 20.8
Key: The white bar represents increases in income in 2013 which is offset by the red bars, representing increases in costs. The net result of the white and red bars will provide the movement between 2012 and 0 $M 2013 net operating profit. Net Income Expenses Net Share of Net operating finance associates operating profit profit profit 2012 2013
Revenue 6% 4% Sale of sections 3% Sale of sections 3% Quota leasing Quota leasing 7% 10% Other Other 2013 2012 Total Total $62.7m $55.3m 30% 26% Hotel Hotel 57% 54% Rental Rental
3% Expenditure Cost 3% of sales 2% Cost 3% Depreciation and of sales Depreciation and 4% amortisation 5% amortisation Sale of sections Sale of sections 11% 2013 Rental 2012 9% Rental Total Total $28.8m $22.0m 9% 13% Other 54% Other Hotel 52% Hotel 17% 15% Employee costs Employee costs
24 Tainui Group Holdings Annual Report 2013
Net operating profit movement The net operating profit movement graph shows the change between 2012 and 2013. A full year of Novotel Auckland Airport transactions and also rental income from Te AWA at The Base resulted in increases in both total revenue and operating expenses. Finance costs are now also recognised in the operating results since these major capital projects are now complete. There was a minor increase in interest compared to last year, despite net debt increasing by $7 million. Revenue A full year of income from the Novotel Auckland Airport shows up in 2013, representing 30% of the total revenue. Rental income from Te AWA at The Base is now being received for a full A weight off the mind year on stages 3 and 4 tenancies. Palate moved to its present location at Residential section sales included the Top ten 20 Alma Street, Hamilton, overlooking sale of the Rotokauri land to Rotokauri the Waikato River, a year ago. The Development Limited joint venture, suppliers by spend in 2013 team, led by owner and head chef Mat while there were fewer section sales to McLean, hasn’t looked back since, external parties in 2013 as the stock on winning Cuisine’s Best Regional hand held by the Callum Brae Tainui Watts & Hughes Construction Limited Restaurant title in 2012. joint venture diminished. Fishing Construction services returns remained relatively flat. Other Mat has been running his own income included dairy revenue and Sam Pemberton Civil Limited restaurant for 8 years. One of the more Construction services livestock revaluations, both of which demanding but rewarding aspects of suffered compared to 2012, due largely Hamilton City Council the job is supervising the staff of 25 to drought conditions experienced Local Government services young people. during the 2012/2013 summer. In 2012, Naylor Love “You become a mentor, a counsellor, other income included dividends from Construction Limited everything. The whole experience, and Ryman Healthcare, but this did not Construction services seeing them grow, has changed me. It’s occur 2013 due to the sale of these shares Greenstone Group taught me perseverance and belief that in July 2011. Holdings Limited success is not just financial.” Project management services His relationship with TGH has also Expenditure ISS Facility Services Limited been positive. “We’d had enough of the Cleaning services Expenditure has been influenced other end of town, and when I heard by costs associated with the Novotel Ignite Architects Limited this site was empty, I worked overtime Auckland Airport and Te AWA at The Architectual services to develop a business plan and Base, given that we have a full year’s Boffa Miskell approached them. They were helpful worth of costs flowing through since Consultancy services and supportive, and I found a real the hotel opened and also for stages 3 Bell Gully respect. Since then it’s been seamless, and 4 at Te AWA. New positions at both Legal services we have a great relationship and my tenancy is no longer a concern.” The Base and at TGH head office, have Waikato Security Services affected employee costs. Security service
25 Sustainability
New Zealand Inter-iwi exchanges minimisation during construction. The hotel has obtained EarthCheck Emissions Trading Iwi represent a sizable economic force certification which is the leading Scheme (NZETS) in New Zealand. During the year benchmarking and certification TGH met with representatives from The NZETS is a complex scheme programme for the tourism and Ngaati Apa, Te Arawa, Ngai Tahu and focused on carbon management and hospitality industry. It provides Tauranga Moana. In addition, TGH administration. TGH is affected due to a framework for environmental and Ngai Tahu Holdings Corporation its fisheries, forestry, and agriculture and social performance through representatives have attended each related interests. We are fortunate independent third party verification. to have a forestry portfolio which other’s strategic planning sessions. strategically positions TGH to engage in the carbon credit market and Environment aim towards being a carbon neutral Responsible, sustainable development company. TGH holds 4,191 units for that makes sense and protects the the quota held in its fisheries portfolio environment is how TGH operates. The and expects to soon receive units for ethylene tetra fluoro ethylene (ETFE) the forestry portfolio. roof at Te AWA is an illustration of sustainable construction. Made Culture from 100% recyclable materials, TGH team participates in TriMaaori Festival. Waikato-Tainuitanga is a fundamental the product is self-cleaning and has aspect of TGH’s development and insulating properties. It is light-weight, Master planning for the Ruakura operations. We seek to ensure tikanga and requires minimal energy for development incorporates greenfield (protocol) is followed for all projects transportation and installation. ETFE design. Stormwater is proposed to be - including appropriate karakia also allows natural light penetration, processed on site, thereby minimising (spiritual prayer) for construction sites. requiring little need to illuminate discharge into the public stormwater the common areas of Te AWA with Waikato-Tainui designs feature in systems which flow into the Waikato additional lighting. our developments and businesses. River. This is a deliberate and essential The Novotel Auckland Airport, Te A car park management system design feature, and fits well with the AWA and The Base all have embedded (Meter Eye) has been installed in the Shareholder’s aspiration to restore and Waikato-Tainui cultural imagery, basement car park at Te AWA and at protect the health and well-being of the reinforcing our ownership and the large format retail area at The Base. Waikato River. identity, as well as creating unique Shoppers can easily view where vacant TGH promotes recycling throughout visitor experiences. car parks are located, saving both all business operations with weekly energy and vehicle running time. Staff are also made aware of the paper recycling at its premises. The cultural influences within the Novotel Auckland Airport has installed Base and Te AWA also promote the organisation through the induction triple glazing not only to eliminate recycling ethos with the provision of process and other measures, such as the airport noise, but also to provide recycling bins for shoppers and the celebration of Maaori Language Week. added insulation and has also been recycling programme for tenants. constructed with low energy fittings. This annual report has been printed Social Development Materials and finishes were selected on environmentally friendly paper for their low environmental impact. which has been sourced from legally Our business activities contribute Considerable thought was put into water harvested forests, and has been printed to positive growth for the greater and energy conservation and waste with environmentally friendly ink. Waikato region and New Zealand economy – from jobs created by our projects through to Shareholder distributions. The dividend we pay each year helps the Shareholder to meet tribal administrative costs and to fund distributions to marae, education, health and well-being initiatives, and
social and cultural developments. Example or reference site of stormwater system for Ruakura.
26 Tainui Group Holdings Annual Report 2013 growth
Community Located less than one kilometre west of The Base is the Rotokauri joint TGH supports many community The base venture land, the site of the company’s initiatives. In May 2012, TGH proposed 700 section residential continued its support of a community has created subdivision. Planning is underway initiative called the ‘At Heart with initial sales forecast to occur from Foundation’ for congenital heart 2015. Once established, the Rotokauri defects in children. During surgery, a employment development will complement and fuel child’s chest cavity is cooled down in further economic growth at The Base. an icy slush to slow their heart rate. for To replicate this process, the ‘At Heart Combined, these completed and Foundation’, in conjunction with The proposed projects will provide the Base, held an event on site where teams platform for the development at could be sponsored to jump in an icy Ruakura and investment propositions cold pool for five minutes and then 1,692 under the new investment strategy. warm up in a spa bath afterwards. As Assets and earnings growth have a result, $22,000 was raised on the day people been, and will continue to be, funded for the 12 Kiwi children born every via cash flow and bank lending week with a heart defect. TGH’s core focus is growing its asset facilities. One key challenge in ‘Shave for a Cure’ is Leukaemia and base to achieve long-term sustainable maintaining business growth will Blood Cancer New Zealand’s biggest returns for its Shareholder. With an be access to long term funding that fundraising event, helping the unprecedented $191 million capital matches the investment horizons estimated six Kiwis who are diagnosed spend incurred over the past three of TGH. Meeting this challenge is with a blood cancer every day. The years, TGH is now at the back end part of the wider strategic planning Base hosted the ‘Shave for a Cure’ event of its two major projects, Te AWA at regularly undertaken by the Senior where individuals, businesses and the The Base and the Novotel Auckland Management Team and Directors. community can seek sponsorship for Airport. TGH has experienced a step- shaving their head. The event was well change in benefits flowing from these Te AWA support by the community, raising two projects in the form of increased $2,000 for the cause. revenue and operating cash flows. The Base is the proud sponsor of the The Novotel Auckland Airport Facebook ‘player of the day’ where one child is continues to make a significant nominated from each netball or rugby contribution to TGH’s results. It has likes grew by team. The prize is a gift card from The now had its first full year of operations, Base – encouraging team spirit and having opened in May 2011. Providing almost 300% positive participation. solid returns, especially when compared to the capital invested, the hotel has established its presence in to over the Auckland market. The hotel employees 143 full and part-time employees. With an 11% increase in full and part time jobs, and a steady increase in patronage, The Base and Te 8,300 AWA were also major drivers behind The Novotel Auckland Airport the steady growth in 2013, becoming supports the ‘Cure Kids’ appeal the preferred shopping destination and up until March 2013 raised in Hamilton and the wider region. approximately $12,000 by hosting Resource consents for the development a wine and cheese evening, several of the remaining for 11 hectares, raffles, a pizza night, and a karaoke as well as additional retail on level night. one of Te AWA have been approved, providing capacity for further development and employment growth.
27 PARTNERSHIPS
Creating effective partnerships has been an invaluable component of TGH’s business strategy. THREE organisations whom the company currently works with are profiled here.
“It’s great to see the workings of the building which Innovative approach inspires are usually hidden out of sight. It’s interesting and different. The amalgamation of existing and new For Daryl Horn, Associate at Opus Architecture in works very well and you can’t help but be taken in by Hamilton, designing the new TGH offices and the the calming working atmosphere it creates.” Joe’s Garage tenancy at 6 Bryce Street was one of the Daryl is thrilled with the end result, which he says is a most enjoyable projects he’s worked on. “Despite a tight credit to everyone involved. timeframe and all the usual pressures of a construction “I see TGH as being very innovative. They had great project, it went very smoothly. The entire team gelled ideas and a strong design sense of what they want to and it ran like clockwork with any emerging issues being achieve. This allowed us to easily take their vision easily resolved. Everyone was focused and went the extra and make it a reality.” mile to ensure an excellent outcome was achieved.” Opus Architecture is currently working with TGH on developing the wider precinct at Bryce Street which will include new landscaping, upgrading the existing surrounding buildings and incorporating new covered walkways.
Open book process rewarding
For Watts & Hughes Construction, who undertook the construction work on 6 Bryce Street, it was also a rewarding project. The 125-strong company had worked with TGH before on the Ibis Tainui as well as Daryl Horn, Opus several projects at The Base.
Daryl attributes this to several things. “You’re made Mark Gutry, Construction Director, who worked to feel part of the TGH team. It’s the people first and on the project, says there was a lot of history in the foremost but also their innovation and drive. You can’t building that they uncovered during the project – old I see TGH as being help but be immersed and excited by their enthusiasm commercial kitchen and gym gear, even night club paraphernalia. very innovative. and ideas. This inspires and drives you to create something great.” “We initially set out to re-use as much of the old They had great ideas The design brief was very clear he says. “It was to brick façade as possible. Unfortunately the building and a strong design utilise and retain as much of the existing building as needed a lot of seismic strengthening to bring it up sense of what they possible especially the road front facade. The building to code, and the bricks were all mixed – there was no had a lot of heritage and character and TGH wanted consistency. We did use as many of them as we could want to achieve. This this preserved. On the ground floor the direction along the back walls though.” allowed us to easily was to have an industrial look open plan office area Like Opus, Watts & Hughes appreciated the take their vision and with exposed services and steelwork, and to utilise process that was followed. TGH project managed the existing brick walls. For the first floor it was to the refurbishment, but there was flexibility, good make it a reality. | have a more conventional office environment with a communication and the Watts & Hughes team felt combination of offices, open plan and meeting areas. very supported throughout.
28 Tainui Group Holdings Annual Report 2013
promptly in the foodcourt. Edges are wiped, spills
cleaned up and smears on glass doors rubbed off PARTNERSHIPS quickly. Waste must be dealt with and toilets checked every 60 minutes. The second is at night. A second team undertakes what’s called a deep clean, where A high quality job is all flat surfaces are dusted and wiped, and floors important because not Mark Gutry, Watts & Hughes Construction scrubbed and polished.” only ISS, but also TGH, Over and above the daily routine are what’s known “They involved us, the architect and the engineers as ‘periodicals’. These can be weekly, monthly, gets measured on the in the design and to help find efficiencies to meet the six-monthly or yearly. That’s when things like high team’s performance. budget they had in mind. It’s called an open book dusting, cleaning high windows and washing the process. It’s a good way to do it,” he says. outside of buildings are all tackled. “TGH’s approach is very “The number of staff on at any one time depends on professional. They command My daughter, peaks, such as lunchtimes, weekends, school holidays, respect from how fairly they oldest brother Christmas week and the Boxing Day sales,” he says. treat all their contractors. Even those who haven’t and sister-in- “And that’s not all. Because our staff are wearing TGH worked for them before, and law all work uniforms, they’re often asked questions or directions. come cold calling, always get a So they must know the layout of the place, and respond nearby. So there fair hearing.” courteously.” was no shortage There were some surprises on All this requires special training, careful planning and the project. Gutry says Watts of supervision lots of communication. & Hughes’ Directors make a for the job, I can ISS works closely with TGH’s facilities management point of getting involved in team at The Base on a daily basis to ensure it delivers tell you! | projects, but for him it was a the standard of service TGH expects. “A high quality bit of a double-edged sword. job is important because not only ISS, but also TGH, “My daughter, oldest brother and sister-in-law all work gets measured on the team’s performance.” nearby. So there was no shortage of supervision for the Kerr believes there’s mutual respect between ISS and job, I can tell you!” TGH, and is keen to grow the relationship. “I also personally think iwi will be critically important to the growth of this country. They’re going to be economic powerhouses within the economy.” More than meets the eye
It’s easy to take a clean and tidy shopping centre for granted. At The Base and Te AWA, a dedicated team of thirty, 10 full-time and 20 part-time, make sure people don’t even think about it. ISS Facilities Services Limited (ISS), one of the largest of its kind in New Zealand, and internationally the world’s fourth largest private employer, won the contract four years ago. The job has expanded significantly as The Base has grown and Te AWA has been built during that time. It’s a cornerstone contract for ISS, and TGH is their second largest client in the region after the Waikato District Health Board. Russell Kerr, ISS New Zealand’s General Manager, explains that there’s much more to the job than most people would imagine. “The normal daily cleaning is broken into two parts. The first covers opening hours. Tables are cleared Russell Kerr, ISS New Zealand
29 Senior management team
Chris Joblin Mike Pohio Tama Potaka Nathan York
Chris was appointed Mike was appointed Chief TAMA joined TGH in NATHAN was appointed Chief Financial Officer in Executive Officer in 2006. December 2009 as General General Manager of 2009. Prior to joining TGH Prior to joining TGH, Mike Manager, Corporate Property in 2003. He has a Chris held a number of held a number of senior Services and holds a Bachelor of Management senior financial positions management positions in practising solicitor’s Studies degree, an MBA in both New Zealand companies including the certificate. Tama has from the University of and the United Kingdom. Port of Tauranga, Fonterra, worked as a lawyer in the Waikato and is currently Chris is a member of the New Zealand Dairy Group United States and New studying Te Reo Maaori New Zealand Institute of and Elders Pastoral. Mike Zealand and is a graduate under the Te Tohu Paetahi Chartered Accountants and gained an MBA from IMD, of Columbia University programme. Nathan is INFINZ. Switzerland in 1999 and amongst other educational also chairman of Hamilton At TGH Chris is responsible is a member of both the institutions. He has Riverview Hotel Limited for finance, treasury New Zealand Institute of authored numerous articles and a director of Tainui management, financial Chartered Accountants and and is a regular public Auckland Airport Hotel information systems and Institute of Directors. He speaker on constitutional GP Limited, the entities audit. During the year Chris is a director of Transpower and Maaori development that contain the hotel joint has focused on refining the and is also Chairman of issues. venture investments on investment and funding BNZ Regional Partners At TGH, Tama is behalf of TGH. (Waikato), a member of The strategy and also became a responsible for corporate Nathan oversees all New Zealand Initiative and Director in associate entity, governance and property investment and a member of the Property Hamilton Riverview Hotel administration, legal issues, development operations Council of New Zealand. Limited. human resources/people, for TGH. In the last year Married to Colleen, Chris Mike has two adult sons policy and procedures, the property business units has two children. and is married to Karen. and health and safety. achieved strong portfolio Tama was instrumental in returns, saw the continued implementing electronic development at The Base, governance reporting as new offices for TGH and well as automation of substantial progress with the Shareholder’s payroll various statutory planning system. processes. Tama is married to Ariana Nathan and his partner and has three children. Briar have three children.
30 Tainui Group Holdings Annual Report 2013 people
TGH Corporate Structure Organisational levels 2013 our
Chief Executive Officer 3% First line 11% supervisors/managers graduates General Manager General Manager Chief Corporate Services Property Financial Officer 10% senior managers People Legal and Property Property Group Corporate Administrative Management Development Treasury Financial Services Services
16% middle Joint Ventures Performance Management management TGH is a partner in a number of TGH continues to focus on joint ventures including the Tainui performance management as a 60% individual Auckland Airport Hotel Limited key platform for ensuring the contributors Partnership (with Auckland company’s success. The performance International Airport Limited and management process focuses ACCOR), Hamilton Riverview Hotel managers and employees on Ethnicity 2013 Limited (with Hamilton City Council performance targets, measured over and ACCOR), Callum Brae Tainui six monthly and annual periods. 10% New Zealander Limited and Rotokauri Development (born overseas) 24% Limited (both with Messrs Malcolm Waikato-Tainui our team Macdonald and David Lugton). Each joint venture has its own governance Training and Development entity with representatives from each The company encourages training and joint venture partner. development for all team members, with a significant focus on practical 29% People Strategy engagement with its key partners and other iwi In the last 12 months, TGH has stakeholders. In the past year, Bell continued its people development Gully, Willis and other partners have plan entitled ‘People Strategy 2025’. presented seminars on topical business 37% and economic issues. External training New Zealander The core goals of the strategy are to (born locally) foster conditions where employees can priorities have also been clarified to perform to their individual potential, better match course selection with TGH’s skill and competency requirements. ensure that there is a ‘TGH way’ of Ethnicity 2012 doing the right things, and enhance All employees are required to have the people capacity to support all a training and development plan focusing on development and growth, 12% strategy and service issues. New Zealander and this is monitored during their (born overseas) 17% Over the reporting period, the performance management process. Waikato-Tainui company facilitated free vision checks, medical checks and flu injections for Health and Safety staff, as well as team-building through regular social activities. TGH interacts TGH is committed to providing a with the sole Shareholder on a weekly safe workplace and has promoted a basis to ensure its corporate and higher degree of health and safety 34% other iwi administrative support is aligned to consciousness in the workplace. This the Shareholder’s needs. has involved monthly hazard review processes being undertaken at key sites including The Base. 37% Over the past financial year, the New Zealander (born locally) company has had one work related incident with the loss of 22.5 work hours. 31 number of employees by gender
23 22
15 13
2013 2012
Male Female
number of employees by age
24 24
7 7 7 4 2013 2012
age<30 age 30- 50 age >50
number of employees who commenced service
amy Wharakura 8 2 5 2 You wouldn’t want to face former 2013 2012 graduate programme member, Amy Wharakura, in a ‘do or die’ race. She’d Permanent appointments Fixed-term appointments probably win. In late 2012 she was scheduled to sit part two of her professional accounting exams, and also expecting her first child. The night before the six hour test, her number of employees who left service contractions started. Come the morning they subsided a little, and having studied 2 1 5 4 hard for months, she was determined to 2013 2012 carry on. Amy managed 4 hours’ worth, Resignation End of fixed-term before the contractions got too much and she had to bow to the inevitable. Now the proud mother of Wairua, she re-sat the exam in January and passed, making her a qualified Chartered number of employees by length of service Accountant. She has also picked up a part time contract with the Waikato Raupatu Lands Trust. Working for the tribe is 16 12 13 13 a great motivation. “You know you’re 8 11 contributing to something bigger, even though you’re working behind a desk.” 2013 2012 They couldn’t have a more dedicated <2 years 2-4 years 5-10 years person on the job.
32 Tainui Group Holdings Annual Report 2013
Graduate Programme people The graduate recruitment programme is designed to give two university graduates of Waikato- Tainui descent the opportunity to develop their education, knowledge, skills and work experience our by working at TGH for a period of two years. The programme includes secondment to one of TGH’s key partners or advisors. Each year there is a fresh intake and with the programme now in its fifth rotation, it continues to be an attractive placement opportunity for Waikato-Tainui graduates.
Marie Hurinui (Waikato-Tainui and Ngaati Tuuwharetoa) Kahlea Tamati (Waikato-Tainui, Ngaati Porou and is the fourth Accounting and Finance Graduate and Ngaati Kahungunu) is the fifth Accounting and Finance commenced at TGH in 2011. Marie completed a Bachelor of Graduate and commenced at TGH in 2012. Kahlea Management Studies degree at the University of Waikato completed a Bachelor of Management Studies degree with a major in accounting. During the reporting period, at the University of Waikato with a major in accounting. Marie successfully completed New Zealand Institute of Kahlea is currently working towards becoming a qualified Chartered Accountants Foundations Programme which Chartered Accountant. is the first of two requirements necessary to become a Chartered Accountant.
Ashleigh Tukutuku Turner (Waikato-Tainui, Ngaati Maniapoto and Ngaati Awa) joined TGH in 2012 as the Tawa Campbell-Seymour (Ngaai Tai, Whakatoohea, Property and Corporate Services Graduate. Working across and Te Aitanga-aa-Maahaki) was appointed the Property both property and corporate services functions, the ‘hybrid’ Graduate in 2011 as the fourth graduate to have worked graduate role suited Ashleigh’s law and management in the TGH property team. Tawa completed a Bachelor of academic background. She graduated in 2012 with a Management Studies (Hons) majoring in Economics and conjoint Bachelor of Laws/Bachelor of Management Studies Finance, in conjunction with a Graduate Diploma in Te Reo with First Class Honours, majoring in Law and Strategic Maaori at the University of Waikato. During the year Tawa Management from the University of Waikato. During her undertook a secondment to Westpac Bank, gaining exposure tenure Ashleigh’s key tasks involved property development to property finance, business and institutional banking, as and legal duties. Ashleigh was recently appointed Business well as retail banking, over a period of six weeks. Analyst with the Waikato Raupatu River Trust.
33 OUR directors
sir Henry van der heyden Matthew Cockram MiKe Allen
Sir Henry is an independent Matthew was appointed as Appointed as an independent Director and was appointed an independent Director in Director in 2009, Mike has Chairman in 2012. A founding 2011. Matthew is the CEO considerable experience in Director of Fonterra Co- and Principal of Cooper and investment banking and general operative Group in September Company NZ, a highly successful management in New Zealand 2002, he contributed to its property development and and the United Kingdom. He governance for nearly 20 years investment company based was previously the Head of the both as Director and Chairman. in Auckland. Prior to that, Westpac Institutional Bank In 2009, Sir Henry was Matthew spent 20 years at law in New Zealand and Head of honoured with a Distinguished firm Bell Gully specialising Mergers and Acquisitions at Companion of the New Zealand in construction, commercial Southpac. Order of Merit for his extensive property and major projects. He services to agriculture. was also the firm’s Chairman for his last five years there. Entity Position
Canterbury Spinners Limited Director Entity Position Coats PLC Chairman Entity Position Auckland International Airport Limited Director Godfrey Hirst NZ Limited Director Auckland Arena Carpark Company Director Fonterra Co-Operative Group Limited Director Guinness Peat Group PLC Director Britomart Group of Companies Director Manuka S.A. Director NZWL – TRH Limited Director Castlebrook Investments Limited Director Pascaro Investment Limited Director NZ Windfarms Limited Director Coliseum Sports Media Management Limited Director Rabobank Australia Limited Director Tower Limited Director Cooper and Company NZ Director Rabobank New Zealand Limited Director TRH Services Limited Director Mountain Landing Project Management Limited Director Watercare Services Limited Director Tsavo Limited Director
34 Tainui Group Holdings Annual Report 2013
HEMI RAU PAKI RAWIRI joanna perry Hemi was appointed to the Appointed in 2012, Paki is an Board Advisor (from 1 April 2012) board in 2012. He was formerly Iwi and Maaori development Ms Perry is a full time the CEO of the Waikato consultant. He previously non-executive director. Her Raupatu Lands Trust. Prior managed the transfer of current roles include Deputy Chairman of Genesis Energy to that, Hemi was the Deputy fisheries assets to individual iwi and independent director of Chair of the inaugural Tribal at Te Ohu Kaimoana and prior to TradeMe, The Co-operative Executive and he also served that was a General Manager of Bank, Kiwi Income Property, Partners Life, Sport New Zealand as the Te Kotahitanga Marae the Waikato-Tainui commercial and New Zealand Rowing. She representative on the inaugural fishing companies. also sits on the Interpretations Te Kauhanganui (now WTTKI) Committee of the International Accounting Standards Board. in 1999. Entity Position
Ngati Tuwharetoa Fisheries Limited Director Entity Position Ngati Tuwharetoa Fisheries Holdings Limited Director Waikato-Tainui Distributions Limited Director Waikato-Tainui Executive member Waikato-Tainui Executive member Te Kauhanganui Incorporated (Te Arataura) Te Kauhanganui Incorporated (Te Arataura)
35 Directors‘ Report
TAINUI GROUP HOLDINGS limited (TGH)
The Board of Directors have pleasure in presenting Directors remuneration the Annual Report including the Audited Financial The remuneration received by Directors during the Statements of TGH (the Company) and its subsidiaries year is as follows: (the Group) for the year ended 31 March 2013. Consolidated & Parent 2013 2012 $’000 $’000 Principal business activity Sir H W van der Heyden (Chairman) 60 - TGH’s principal business activity is to manage the M N Allen 55 40 commercial interests of the Shareholder, Waikato- M Cockram 40 40
Tainui Te Kauhanganui Incorporated which includes R S Papa (resigned 30 April 2012) 3 40 assets returned by the Crown through the Waikato H W Rau (appointed 30 April 2012) 37 - Raupatu Claims Settlement Act 1995. P Rawiri (appointed 30 April 2012) 37 -
There have been no significant changes in the nature of R T M Schaafhausen (resigned 30 April 2012) 3 40
these activities during the year. J L Spencer (resigned 30 June 2012) 20 80
Hon. K T Wetere (resigned 30 June 2012) 10 40 Results J Perry – Board advisor (appointed 1 April 2012) 40 - The results for the year are reported in the statements 305 280 of comprehensive income on page 45. The Group has recorded a net profit of $45 million (2012: $39 million). Use of company information by Directors The Group’s total equity as at 31 March 2013 was $477 There were no notices from Directors of the million (2012: $374 million). Further information on Company requesting to use company information the movements in equity is provided in notes 9 and 10 received in their capacity as Directors which would on pages 60 and 61. not otherwise be available to them. The Directors are satisfied with the results for the year. Auditors Directors PricewaterhouseCoopers has indicated their The following persons were appointed, resigned or held willingness to continue in office. Audit fees paid to office as Directors of the Company as at 31 March 2013: PricewaterhouseCoopers are outlined in note 5 of the financial statements on page 59. Director appointed Resigned
Sir H W van der Heyden Shareholder resolution (Chairman) 1 July 2012 - The Shareholder of the Company has exercised its M N Allen 1 June 2009 - right under section 211(3) of the Companies Act 1993 M Cockram 25 March 2011 - and unanimously agreed that this Annual Report R S Papa 3 November 2010 30 April 2012 need not comply with paragraphs (e), (g) and (h) of P Rawiri 30 April 2012 - section 211(1) of the Act. H W Rau 30 April 2012 - Signed for and on behalf of the Directors of the R T M Schaafhausen 1 June 2009 30 April 2012 Company on the 18th of June 2013. J L Spencer 30 January 2003 30 June 2012 Hon. K T Wetere 9 April 2002 30 June 2012
Board advisor J Perry 1 April 2012 -
The Director’s profiles are reported on pages 34 and 35. Sir Henry van der Heyden Mike Allen The Company has twelve (2012: twelve) subsidiaries as listed in note 3 of the financial statements on page Chairman Director 57. M Pohio and T Potaka are the Directors of nine of the subsidiaries. M Pohio and N York are Directors of two subsidiaries and one subsidiary is a limited partnership. M Pohio, T Potaka and N York do not receive any remuneration or other benefits as Directors of subsidiaries within the Group. 36 Tainui Group Holdings Annual Report 2013
WAIKATO-TAINUI FISHERIES LIMITED (WTF)
The Board of Directors have pleasure in presenting Shareholder resolution the Annual Report including the unaudited Financial The Shareholder of WTF has exercised its right Statements of WTF for the year ended 31 March 2013. under section 211(3) of the Companies Act 1993 and unanimously agreed that this Annual Report need Principal business activity not comply with paragraphs (e), (g) and (h) of section WTF’s principal business activity is to manage the 211(1) of the Act. income shares held in Aotearoa Fisheries Limited Signed for and on behalf of the Directors of WTF on under the terms defined in the Maori Fisheries Act the 18th of June 2013. 2004. There have been no significant changes in the nature of these activities during the year.
Results The results for the year are reported in the statement of comprehensive income on page 78. WTF has recorded a Sir Henry van der Heyden Mike Allen Chairman Director net profit of $0.4 million (2012: $0.5 million). WTF’s total equity as at 31 March 2013 is $13 million (2012: $14 million). The Directors are satisfied with the results for the year.
Directors The following persons were appointed, resigned or held office as Directors of WTF as at 31 March 2013: Director appointed Resigned Sir H W van der Heyden (Chairman) 1 July 2012 - M N Allen 1 June 2009 - M Cockram 25 May 2012 - R S Papa 26 November 2010 30 April 2012 H W Rau 30 April 2012 - P Rawiri 30 April 2012 - R T M Schaafhausen 1 June 2009 30 April 2012 Hon. K T Wetere 9 April 2002 30 June 2012
Board advisor J Perry 1 April 2012 -
The Director’s profiles are reported on pages 34 and 35.
Directors remuneration There was no remuneration received by Directors during the year ended 31 March 2013 (2012: nil).
Use of company information by Directors There were no notices from Directors of WTF requesting to use company information received in their capacity as Directors which would not otherwise be available to them.
37 governance
Remuneration Board Audit Investment and Nomination
Member Attended Possible Attended Possible Attended Possible Attended Possible
Sir H W van der Heyden 8 9 - - - - 2 3
M N Allen 9 11 1 1 1 1 3 3
M Cockram 11 11 1 1 1 1 2 3
H W Rau 10 10 1 1 - - - -
R T M Schaafhausen 1 1 ------
P Rawiri 9 10 1 1 - - - -
R Papa - 1 ------
J L Spencer 3 3 1 1 1 1 1 1
Hon. K T Wetere 3 3 1 1 - - - -
Audit Committee – all members of the tgh Board are members of the tgh Audit Committee Investment Committee Remuneration & Nomination Committee
The Board of TGH is committed to the highest The Board Charter standards of oversight, accountability and The TGH Board operates in accordance with the Board management. It accepts this commitment by Charter (‘Charter’). The Charter is an important supporting the increasing emphasis on corporate document which outlines: governance in New Zealand, regularly reviewing •• Board composition and method by which members practices and making amendments where are appointed; necessary. •• Expected behaviour of the Board and its members; TGH’s business practices reflect corporate governance best practice in the following manner: •• Discharge of authority to Board members; •• Commitment to compliance with all relevant laws External benchmarks and regulations; and While TGH’s policies and Charter provide explicit •• Committees that sit under the Board being the Audit expectations, the company has also adopted the nine Committee, Remuneration and Nomination principles of corporate governance prescribed by the Committee, and Investment Committee. Financial Markets Authority. These, as well as other prescriptive doctrines such as NZX Listing Rules, Ethical standards provide strong external benchmarks for developing Through robust policy, the Board collectively and governance structures and processes. These benchmarks individually promotes ethical and responsible decision are particularly useful to the Shareholder and key making and behaviour. There have been no instances stakeholders as they demonstrate TGH’s commitment of unethical behaviour during the year ended 31 March to ensuring that the Board operates effectively and in 2013 (2012: nil). accordance with best practice guidelines. The 9 principles in summary, are as follows: Board composition and performance Ethical standards The Charter provides for a balance of independence, Board composition skill, knowledge, experience and perspectives among Directors so that the Board works effectively. The Board Board committees provides for six Directors. Of the six Directors, three are Reporting and disclosure appointed by the Shareholder and three are Independent Remuneration Directors. There is currently one Shareholder Director position which remains vacant. The Chair is always an Risk management Independent Director. The Directors consider that the Auditors six member Board is appropriate for both the size and Stakeholder relations business activity of TGH. Stakeholder interests TGH is committed, through its Charter, to ensuring Directors have the knowledge and information
38 Tainui Group Holdings Annual Report 2013
necessary to discharge their responsibility effectively Remuneration through the provision of comprehensive information Remuneration of Directors and senior management provided at monthly (excluding January) Board needs to be fair, transparent and reasonable. Adequate meetings. remuneration is necessary to attract, retain and motivate high quality directors and executives. Director induction The RNC oversees and recommends the process for There were three new appointments and four performance evaluation of the CEO and other key resignations from the TGH Board during the year executives. Further detail on the RNC is provided on ended 31 March 2013. New Directors went through an page 41. induction process which included: Risk management •• Meeting the senior management team (SMT), followed by presentations by each member of SMT TGH accepts that risk is an essential feature of any to describe their roles and accountabilities; business. TGH’s Risk Management Policy and practices ensure effective analysis, management and control •• A tour of TGH’s major properties and investments; of existing and potential risks. TGH maintains a and programme, which is approved by the Board, for •• Meeting with key members of the Shareholder’s the identification, assessment, monitoring and governors who sit on Te Arataura. management of risk to the business. The Board has •• All Directors are covered by Directors and Officers overall responsibility for the internal controls with Liability Insurance for the term of their directorship the Audit Committee being responsible for reviewing with TGH. its effectiveness. TGH has engaged Ernst & Young as internal auditors. The Board approved programme Board committees they undertake focuses on providing internal audits on policy, procedures, internal controls and any other The Board uses Committees to enhance its effectiveness areas of concern. Effective risk management provides in key areas whilst retaining Board responsibility. greater assurance that TGH’s vision and strategy will These Committees allow detailed and expert be achieved without surprises. One new policy was examination of relevant issues to facilitate decision- adopted in 2013, being the Business Continuity Policy. making. The Committees make recommendations to the Board and have no decision-making ability unless Auditors specifically delegated by the Board. External auditing is critical for integrity in financial There are three Board Committees the Remuneration : reporting. To properly perform their role, auditors must and Nomination Committee (RNC), the Audit observe the professional requirements of independence, Committee and the Investment Committee. Further integrity, and objectivity. They need to have access detail on each Committee is provided on pages 40 and to all relevant information and individuals within 41. All Committee members must abide by the terms an entity that play a role in its financial reporting of reference or Charter for that particular Committee. processes. The Audit Committee is comprised of the Board of TGH. All Independent Directors are members of the The Board and the auditors are jointly responsible RNC and the Investment Committee. for ensuring that an entity’s audit is conducted in the context described above. TGH requires structures that Reporting and disclosure promote auditors’ independence from the Board and executives, protect auditors’ professional objectivity The Board demands integrity both in financial in the face of other potential pressures, and facilitate reporting and in the timeliness and balance of access to information and personnel. disclosures on TGH’s affairs. The Board Charter creates effective policies and procedures to ensure the The Audit Committee has a crucial role in selecting integrity of financial information, responsibility for and recommending Board and Shareholder which has been delegated to the Audit Committee. appointment of auditors, and in overseeing all Independent external auditors are also appointed aspects of their work. PricewaterhouseCoopers solely to provide statutory and other audit services. continued as external auditors of the Group in the The Audit Committee ensures that the external current financial year. auditor’s responsibilities are in accordance with the requirements of the Board Charter.
39 Shareholder relations is achieved through a concerted and ongoing strategy TGH has an active relationship with its sole setting process which utilises financial modeling Shareholder, Waikato-Tainui Te Kauhanganui and business intelligence tools. At a minimum, TGH Incorporated. A Statement of Corporate Intent (SCI) maintains a 15 year outlook which recognises the formally documents the necessary understanding completion of existing projects (i.e. what we know for that must exist between TGH and its Shareholder sure), and the initiation of new ones (i.e. unchartered and is a living representation of the expectations of territory). each party. Although some of its provisions apply for This process of strategy setting culminates with an several years, the SCI is revised annually. annual, two day meeting with the TGH Board and The SCI sets out TGH’s key objectives, guiding senior management. Day one is an opportunity for principle and values. It highlights the importance senior management to present the strategy, and for the of the company’s brand and reputation, provides Board to challenge the proposed direction and offer financial reporting targets and sets out the guidance where appropriate. Te Arataura attends day accounting policies that will be maintained in two. This is a useful opportunity for the Shareholder accordance with the relevant statutory provisions. governors to observe the alignment of TGH’s The SCI clarifies the requirements of the dividend aspirations, with those of the Shareholder, as stipulated policy. It also requires Shareholder approval should in the SCI. any capital expenditure, acquisition or divestment occur that exceeds 30% of the total assets of Stakeholder interests the parent entity. Finally, the SCI outlines the Whilst the Shareholder relationship is paramount, necessary information that TGH must provide to TGH’s relationships with wider stakeholders, the Shareholder. A full description of the SCI can be including the community, customers and suppliers are found on the TGH website. considered on page 27 and 28 to 29 respectively. On an annual basis, TGH and Te Arataura conduct a joint strategic planning session. Both the TGH Board Audit committee and the Shareholder Board fundamentally agree that All members of the TGH Board are members of the a close working relationship should be nurtured to Audit Committee. The Audit Committee Charter draw on each other’s respective commercial and social is incorporated in the Board Charter. The Audit expertise to progress strategic initiatives. Committee has continual oversight for financial TGH also provides its Shareholder with corporate reporting, audit functions, risk management and services through a service level agreement which internal controls. More specifically, the Audit includes treasury management, financial services, Committee’s objectives include: property management and people support services. •• Oversight for reporting of financial information; The provision of such services by TGH to the •• Application of accounting policies; Shareholder creates cost efficiencies and cohesion. •• Financial management; The Board of TGH is committed to ensuring that the members of Waikato-Tainui, through the •• Internal control systems; tribal parliament, are kept abreast of the ongoing •• Risk management systems; performance of the company. This is prescribed in •• Business policies and practices; the Charter. TGH’s financial results are presented to the Shareholder’s executive on a monthly basis •• Protection of the Group’s assets; and and to the tribal parliament every quarter. This is •• Compliance with applicable laws, regulations, an opportunity to increase awareness and receive standards and financial disclosure best practice feedback on TGH’s development projects and its guidelines. operational performance. During the year, one meeting was dedicated to Audit Committee business for the purpose of approving Setting strategy the annual financial statements. All other Audit The aspirations of Waikato-Tainui span many Committee business was addressed at regular Board generations. The vision and strategy of TGH is meetings. consistent with this long term view. Projects are forecast well in advance of turning the first sod. This
40 Tainui Group Holdings Annual Report 2013
Remuneration and nomination committee The Investment Committee met three times during the As a sub-committee of the Board, the responsibility year. and role of the RNC is the appointment and remuneration of Directors and senior management and Statement of Investment Policy and Objectives other related matters. The RNC’s objectives are to assist (SIPO) and advise the Board in relation to: The SIPO underpins TGH’s primary strategic objective: •• The CEO appointment and remuneration; to maximise Shareholder wealth by implementing a sustainable asset portfolio supported by appropriate •• Performance management and appraisal of the CEO; financing and distribution policies. Not surprisingly, •• Succession planning; this is also TGH’s mission statement. The SIPO •• Setting annual incentive targets and objectives for responds to the choice between diversification and the CEO and the CEO’s direct reports; specialisation of TGH’s asset portfolio by assessing the company’s influence or control over an investment •• Approving the remuneration of the CEO’s direct alternative, and the extent to which TGH has expertise. reports; Under certain conditions, the SIPO does permit TGH •• The appointment and succession of the Board to invest in opportunities where there may not be Directors, especially Independent Directors and/or a controlling interest, but where the investment is Advisors to the Board; consistent with TGH’s commitment to furthering •• Independent Directors’ and Advisors remuneration; economic development. These may include pooled and investments, for example minority holdings in •• Any other matter referred to it by the Board. listed securities, or iwi co-owned investments by arrangement. Senior management’s annual incentives are determined by key performance indicators as Finally, the SIPO defines the responsibilities and stipulated in their individual employment agreements. delegation of the Board of Directors, the Investment Any changes in remuneration are based on Committee and senior management. performance and market comparisons. The total remuneration paid to Directors is reported on page 36. The Directors do not participate in any profit based incentive system. No additional Directors fees are paid for Committee members. Additional fees are paid to Independent Directors where their services are required in excess of specified requirements.
Investment committee As a sub-committee of the Board, the responsibility and role of the Investment Committee is to assist and advise the Board in relation to investment activities with the following objectives: •• To review investment policy; •• To review the appointment of investment advisors and fund managers; •• To monitor investment and fund manager performance; •• To monitor compliance with investment policies and mandates; •• To recommend to the TGH Board on matters noted above; and •• To monitor the investment policy, strategy and framework for decision making.
41 financial information
Tainui Group Holdings and Waikato-Tainui Fisheries Limited Five Year Trend summary for the year ended 31 March 2013
2013 2012 2011 2010 2009 ($’000) ($’000) ($’000) ($’000) ($’000) Income Statement Net operating profit after tax 20,778 20,747 14,913 15,896 11,940 Net profit/(loss) 45,146 39,852 23,073 34,069 (27,035)
Revenue 62,734 55,274 35,069 30,141 26,287 Finance cost - net (13,576) (13,216) (8,168) (4,711) (5,854) Net fair value gains/(losses) 24,368 19,105 8,160 18,173 (38,975) Distribution 11,500 11,000 10,500 10,000 10,000
Balance Sheet Total assets 738,706 693,661 658,440 529,402 497,182 Net assets 490,219 387,731 345,367 327,722 304,286
Current assets (excluding Shareholder advance) 17,497 23,583 17,442 11,762 14,195 Non-current assets 716,832 670,078 640,998 517,640 482,987 Current liabilities (excluding Shareholder advance) 46,271 42,466 92,639 33,375 10,656 Non-current liabilities 202,216 189,437 146,407 94,278 108,212 Non-controlling interest 5,675 8,921 9,300 1,539 - Bank debt 186,671 179,622 186,650 87,700 74,845 Net cash debt (179,068) (173,365) (184,399) (85,042) (68,913)
*Cashflow Statement Net operating cash inflow 25,510 21,269 14,430 21,119 16,144 Net investing cash outflow (21,074) (8,065) (103,287) (27,248) (7,771) Net financing cash inflow/(outflow) (3,090) (9,198) 88,450 2,855 (5,255)
Key Ratios Return on Shareholder funds 9% 10% 7% 10% -9% Return on Shareholder funds – including advance 9% 9% 6% 8% -7% Return on total assets 6% 6% 4% 6% -5% Total asset growth 6% 5% 24% 6% -5% Debt/equity ratio 38% 46% 54% 27% 25% Debt/total assets 25% 26% 28% 17% 15%
* there are no cash flows transacted through WTF, as WTF does not have its own bank account. All receipts and payments for WTF are processed through the TGH bank account.
42 These financial statements should be read in conjunction with the accompanying notes. Tainui Group Holdings Annual Report 2013 financial statements
Tainui Group Holdings Limited 44 Directory 45 statements of comprehensive income 46 statements of financial position 47 statements of changes in equity 48 statements of cash flows 49 notes to the financial statements 76 independent auditors’ report
Waikato-Tainui Fisheries Limited 77 Directory 78 statement of comprehensive income 78 statement of financial position 79 statement of changes in equity 80 notes to the financial statements
43 Tainui Group Holdings Limited Directory For the year ended 31 March 2013
date of establishment 10 June 1998
Shareholder waikato‑Tainui Te Kauhanganui Incorporated
board of Directors sir Henry van der Heyden (Chairman) Michael Allen Matthew Cockram Hemi Rau Paki Rawiri
board Advisor joanna Perry
chief Executive mike Pohio
Auditor PricewaterhouseCoopers Private Bag 92162, Auckland 1142
Solicitors Bell Gully McCaw Lewis
Banks Bank of New Zealand Westpac Banking Corporation
registered Office 6 Bryce Street, Hamilton 3204
postal Address p O Box 19295, Hamilton 3244
Telephone +64 7 834 4880
Facsimile +64 7 834 4881
Website www.tgh.co.nz
44 Tainui Group Holdings Annual Report 2013
Tainui Group Holdings Limited Statements of comprehensive income For the year ended 31 March 2013
Consolidated Parent
2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Revenue 4 62,364 54,775 222,839 7,814 Expenses 5 (28,769) (22,033) (6,487) (5,738) Finance costs – bank loans (13,576) (13,216) (11,800) (11,754) Finance income ‑ short term deposits 73 181 53 151 Share of net profit of associates 6 316 541 - - Net operating profit/(loss) for the year 20,408 20,248 204,605 (9,527)
Other gains – net 8 24,368 19,105 1,292 6,775 Net profit/(loss) for the year 44,776 39,353 205,897 (2,752)
Other comprehensive income for the year (Loss)/profit on revaluation of farm and other properties 10 (698) 2,872 (783) 2,872 Other comprehensive income for the year (698) 2,872 (783) 2,872 Total comprehensive income for the year, net of tax 44,078 42,225 205,114 120
Profit is attributable to: Equity holders of Tainui Group Holdings Limited 44,062 39,372 Non‑controlling interest 714 (19) 44,776 39,353
Total comprehensive income for the year is attributable to: Equity holders of Tainui Group Holdings Limited 43,364 42,244 Non‑controlling interest 714 (19) 44,078 42,225
These financial statements should be read in conjunction with the accompanying notes. 45 Tainui Group Holdings Limited Statements of financial position As at 31 March 2013
Consolidated Parent
2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 EQUITY Contributed equity 9 130,000 60,000 130,000 60,000 Retained earnings 10 320,561 286,589 203,115 7,308 Revaluation reserves 10 17,675 18,373 10,368 11,151 468,236 364,962 343,483 78,459 Non‑controlling interest 8,675 8,921 - - Total equity 476,911 373,883 343,483 78,459
ASSETS Current assets Cash and cash equivalents 7,603 6,257 5,032 2,054 Trade and other receivables 11 4,745 2,681 536 666 Inventories 12 3,941 4,202 - - Biological assets - livestock 14 835 1,082 835 1,082 Advances – related parties 15 4,377 8,448 420,249 254,339 Total current assets 21,501 22,670 426,652 258,141 Non‑current assets Other financial assets 16 10,005 5,385 10,004 5,294 Investments in associates 6 13,594 13,485 - - Trade and other receivables 13 1,617 1,287 - - Investments in subsidiaries - - 947 947 Intangible assets 17 20,435 20,488 14,586 14,617 Property, plant and equipment 18 80,658 84,895 19,828 20,365 Investment properties 19 573,121 528,412 84,623 81,033 Biological assets - trees 14 4,467 3,191 - - Total non‑current assets 703,897 657,143 129,988 122,256 Total assets 725,398 679,813 556,640 380,397
LIABILITIES Current liabilities Trade and other payables 20 15,401 11,325 2,735 3,446 Interest bearing liabilities 22 30,336 30,228 30,336 30,228 Other financial liabilities 23 162 - 162 - Advances – related parties 15 372 74,940 6,504 108,058 Total current liabilities 46,271 116,493 39,737 141,732 Non‑current liabilities Trade and other payables 21 1,131 - - - Interest bearing liabilities 22 156,335 149,394 129,950 121,209 Other financial liabilities 23 44,750 40,043 43,470 38,997 Total non‑current liabilities 202,216 189,437 173,420 160,206 Total liabilities 248,487 305,930 213,157 301,938 Total net assets 476,911 373,883 343,483 78,459
Sir Henry van der Heyden, Chairman Michael Allen, Director 46 These financial statements should be read in conjunction with the accompanying notes. 18 June 2013 18 June 2013 Tainui Group Holdings Annual Report 2013
Tainui Group Holdings Limited Statements of changes in equity For the year ended 31 March 2013
Attributable to owner of the Parent Contributed revaluation retained Non‑controlling total equity reserves earnings total interest equity Notes $’000 $’000 $’000 $’000 $’000 $’000
Consolidated
Balance as at 1 April 2011 60,000 15,501 247,217 322,718 9,300 332,018 Comprehensive income Net profit/(loss) for the year - - 39,372 39,372 (19) 39,353 Other comprehensive income Gain on revaluation of farm and other properties 10 - 2,872 - 2,872 - 2,872 Total comprehensive income - 2,872 39,372 42,244 (19) 42,225 Partnership refund - - - - (360) (360) Balance as at 31 March 2012 60,000 18,373 286,589 364,962 8,921 373,883
Balance as at 1 April 2012 60,000 18,373 286,589 364,962 8,921 373,883 Comprehensive income Net profit for the year - - 44,062 44,062 714 44,776 Other comprehensive income Loss on revaluation of farm and other properties 10 - (698) - (698) - (698) Total comprehensive income - (698) 44,062 43,364 714 44,078
Transactions with owner of Parent Issue of ordinary shares 9 70,000 - - 70,000 - 70,000 Dividend paid 15 - - (10,090) (10,090) - (10,090) Total transactions with owner of Parent 70,000 - (10,090) 59,910 - 59,910 Partnership refund - - - - (960) (960) Total transactions with owner of Parent 70,000 - (10,090) 59,910 (960) 58,950 Balance as at 31 March 2013 130,000 17,675 320,561 468,236 8,675 476,911
Parent
Balance as at 1 April 2011 60,000 8,279 10,060 78,339 - 78,339 Comprehensive income Net loss for the year - - (2,752) (2,752) - (2,752) Other comprehensive income Gain on revaluation of farm and other properties 10 - 2,872 - 2,872 - 2,872 Total comprehensive income - 2,872 (2,752) 120 - 120 Balance as at 31 March 2012 60,000 11,151 7,308 78,459 - 78,459
Balance as at 1 April 2012 60,000 11,151 7,308 78,459 - 78,459 Comprehensive income Net profit for the year - - 205,897 205,897 - 205,897 Other comprehensive income Loss on revaluation of farm and other properties 10 - (783) - (783) - (783) Total comprehensive income - (783) 205,897 205,114 - 205,114 Issue of ordinary shares 9 70,000 - - 70,000 - 70,000 Dividend paid 15 - - (10,090) (10,090) - (10,090) Total transactions with owner of Parent 70,000 - (10,090) 59,910 - 59,910 Balance as at 31 March 2013 130,000 10,368 203,115 343,483 - 343,483
These financial statements should be read in conjunction with the accompanying notes. 47 Tainui Group Holdings Limited Statements of cash flows For the year ended 31 March 2013
Consolidated Parent
2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Cash flows from operating activities Receipts from customers 60,098 59,497 3,907 6,967 Payments to suppliers (20,669) (25,193) (6,311) (3,930) Interest received 73 181 53 151 Interest paid (13,576) (13,216) (11,800) (11,754) Net cash generated from/(used in) operating activities 24 25,926 21,269 (14,151) (8,566)
Cash flows from investing activities Receipts from sale of investments in listed companies - 57,375 - 57,375 Payments for investments in unlisted companies (2,364) (683) (2,364) (683) Amounts (paid to)/received from related parties (913) (7,949) 21,351 (26,649) Payments for property, plant and equipment (4,072) (8,230) (479) (287) Proceeds from sale of property, plant and equipment - 13 - 10 Payments for intangible assets (111) (36) (89) (36) Payments for investment properties (16,785) (48,555) - - Proceeds from sale of investment properties 2,755 - - - Net cash generated from/(used in) investing activities (21,490) (8,065) 18,419 29,730
Cash flows from financing activities Proceeds from borrowings 8,800 - 8,800 - Repayment of borrowings (1,800) (6,498) - (17,433) Dividends paid to Company’s Shareholder 15 (10,090) (2,700) (10,090) (2,700) Net cash used in financing activities (3,090) (9,198) (1,290) (20,133)
Net increase in cash and cash equivalents 1,346 4,006 2,978 1,031 Cash and cash equivalents at the beginning of the year 6,257 2,251 2,054 1,023 Cash and cash equivalents at end of year 7,603 6,257 5,032 2,054
48 These financial statements should be read in conjunction with the accompanying notes. Tainui Group Holdings Annual Report 2013
Tainui Group Holdings Limited Notes to the Financial Statements For the year ended 31 March 2013 1 general information Tainui Group Holdings Limited (the ‘Company’ or ‘Parent’) and its subsidiaries (together referred to as ‘the Group’) have the following principal activities in New Zealand: ‑ property investment; ‑ property development; ‑ agriculture; ‑ hotels; ‑ fishing, and ‑ investments. The Company is a limited liability company incorporated and domiciled in New Zealand. These consolidated financial statements have been approved for issue by the Board of Directors on the 18th of June 2013. The Group’s Directors do not have the power to amend the financial statements once they have been issued.
2 summary of significant accounting policies These consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (‘NZ GAAP’). They comply with the New Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’) and other applicable financial reporting standards as appropriate for profit‑oriented entities that qualify for and apply differential reporting concessions. The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation The financial statements include separate financial statements for Tainui Group Holdings Limited as an individual entity and the consolidated Group consisting of Tainui Group Holdings Limited and its subsidiaries. The Company and Group are designated as profit‑oriented entities for financial reporting purposes. Statutory base Tainui Group Holdings Limited is a company registered under the Companies Act 1993. The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act 1993. Historical cost convention The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of farm land and buildings, investment properties, biological assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss which are carried at fair value. Differential reporting The Company and Group are qualifying entities within the Framework for Differential Reporting. The Company and Group qualify on the basis that they are not publicly accountable and there is no separation between the owners and governing body of the Company. The Company and Group have taken advantage of all differential reporting exemptions, except for the following with which they have fully complied: ‑ NZ IAS 7 – Statements of Cashflows ‑ NZ IAS 18 – Revenue ‑ NZ IAS 41 – Agriculture
2.2 Changes in accounting policy and disclosures New and amended standards adopted by the Group The Company and Group have not adopted any new standards during the year. Changes in accounting policies During the year the Group changed the accounting policy for depreciation on property, plant and equipment from diminishing value to straight line. There has been no material impact as a result of the change in accounting policy. Comparatives Where necessary, certain comparative information has been reclassified in order to conform to changes in the current year. 49 Notes to the Financial Statements continued
2.3 Critical accounting estimates The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The estimates and judgements are reviewed by management on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised. The following are the critical estimates and judgements management has made in the process of applying the Group’s accounting policies and that have the most significant impact on the amounts recognised in the financial statements. (a) Fair value of assets and liabilities The Company and Group record certain assets and liabilities at fair value in the statement of financial position as follows: Investment properties (note 19), farm and other properties (note 18) have been valued by independent valuers as at 31 March 2013 and 31 March 2012 using a mixture of market evidence of transactional prices for similar properties, direct comparison, capitalisation and discounted cash flow approaches. Biological assets (note 14) comprise livestock and forests. Both are valued by independent valuers using current market prices less point of sale costs (livestock) and expectation value method less point of sale costs (forests). Other financial assets at fair value through profit or loss (note 16) include shares in unlisted companies held at fair value. The fair value of these shares, in the absence of quoted prices, has been determined using valuation techniques. Interest rate swaps (note 23) are valued using discounted cash flow techniques. The determination of fair value for each of the assets and liabilities above requires significant estimation and judgement which have a material impact on the statement of comprehensive income and statement of financial position. (b) Impairment testing Intangible assets with indefinite useful lives being quota (note 17) are required to be tested for impairment at least annually. This requires an estimation of the recoverable amount of the quota based on the higher of value in use or fair value less costs to sell. The determination of the recoverable amount of the quota requires significant estimation and judgment.
2.4 principles of consolidation (a) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one‑half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de‑consolidated from the date that control ceases. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition‑related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition‑by‑acquisition basis, the Group recognises any non‑controlling interest in the acquiree either at fair value or at the non‑controlling interest’s proportionate share of the acquiree’s net assets. Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The excess of the consideration transferred, the amount of any non‑controlling interest in the acquiree and the acquisition‑date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income. Inter‑company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
50 Tainui Group Holdings Annual Report 2013
(b) Transactions with non‑controlling interests The Group treats transactions with non‑controlling interests as transactions with equity owners of the Group. For purchases from non‑controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non‑controlling interests are also recorded in equity. When the Group ceases to have control or significant influence, any retained interest in the entity is re‑measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate. (c) Associates Associates are all entities over which the Group has significant influence but not control, generally evidenced by holding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition (refer to note 6). The Group’s share of its associates’ post‑acquisition profits or losses is recognised in the statement of comprehensive income, and the Group’s share of post‑acquisition revaluation in property, plant and equipment is recognised in reserves. The cumulative post‑acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. (d) Joint ventures The proportionate interests in income of a jointly controlled operation have been incorporated in the financial statements under the appropriate headings. The Group’s interests in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share of joint ventures’ individual income and expenses, assets and liabilities on a line by line basis with similar items in the Group’s financial statements. The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture that is attributable to the other venturers. The Group does not recognise its share of the profits or losses from the joint venture that result from the Group’s purchase of assets from the joint venture until it sells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss. Joint ventures’ accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group. (e) Functional and presentation currency Items included in the financial statements of each of the subsidiaries’ operations are measured using the currency of the primary economic environment in which it operates (‘the functional currency’). The consolidated financial statements are presented in New Zealand dollars, which is the Company’s functional currency and the Group’s presentation currency.
2.5 revenue recognition Revenue comprises the fair value of the sale of goods and services, net of Goods and Services Tax (GST), rebates and discounts and after eliminating sales within the Group. Revenue is recognised as follows:
51 Notes to the Financial Statements continued
Note 2.5 continued (a) Hotel income Revenue from hotels comprises amounts earned in respect of services, facilities and goods supplied. Any revenue not recognised, but received by the reporting date, is treated as deposits in advance, and shown as a liability in the statement of financial position. (b) Rental income Rental income is recognised on a straight line basis over the lease term. Lease incentives which are offered to tenants as an inducement to enter into non‑cancellable operating leases are recognised as current prepayments and non‑current lease fitout contributions and are subsequently amortised over the term of the lease as a reduction of rental income. (c) Sales of goods Sales of goods are recognised when the Group has transferred the significant risks and rewards of ownership of the goods sold. For sections, recognition is on the sale contract becoming unconditional and the title passing. The recorded revenue is the gross amount of the sale. (d) Quota lease income Quota lease income is recognised on a straight line basis over the lease term. (e) Dairy income Dairy income is recognised when the Group has transferred the significant risks and rewards of ownership of the goods sold. (f) Interest income Interest income is recognised on a time‑proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. (g) Dividend income Dividend income is recognised when the right to receive payment is established. (h) Emission Trading Scheme allocation Emission Trading Scheme allocation is assistance provided by the Government in the form of transfers of resources to the Group in return for past or future compliance with certain conditions relating to operating activities of the Group. The Group was eligible for and has received units under the New Zealand Emission Trading Scheme as part of the fisheries allocation for quota owned. The fair value of units received is recognised in the statement of comprehensive income on allocation by the Government to the Group.
2.6 employee benefits Liabilities are recognised for benefits accruing to employees in respect of wages and salaries, annual leave, and sick leave where it is probable that settlement will be required and they are capable of being measured reliably. Liabilities in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities in respect of employee benefits which are not expected to be settled within 12 months are measured at the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. The Group recognises a liability and an expense for bonuses based on a formula that takes into consideration the achievements of agreed key performance indicators, including the achievement of financial budget targets. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
2.7 leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight‑line basis over the period of the lease. Property interests held by a lessee under an operating lease are recognised as part of the carrying amount of the investment property with a corresponding liability at fair value through profit or loss being recorded.
52 Tainui Group Holdings Annual Report 2013
2.8 Borrowing costs Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed. The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the rate associated with project related borrowings or the weighted average interest rate applicable to the Group’s outstanding borrowings during the year.
2.9 Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short‑term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.
2.10 trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the statement of comprehensive income within expenses. When a trade receivable is uncollectible, it is written off. Subsequent recoveries of amounts previously written off are credited against other expenses in the statement of comprehensive income.
2.11 Inventories Inventories are stated at the lower of cost and net realisable value. Cost of inventory is comprised of section costs and other direct costs using the weighted average cost basis. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.
2.12 Biological assets Biological assets are measured at fair value less estimated point of sale costs. The fair value of livestock is determined based on market prices of livestock of similar age, breed and genetic merit. The fair value of trees is determined annually by independent valuers by calculating the crop expectation and future value discounted back to the present value, based on the rotation age of the crop and the current market prices of the logs. The valuation of Redwood trees is based on the current replacement cost method used for young trees.
2.13 financial assets and liabilities Recognition and measurement A financial asset or liability is recognised if the Group becomes party to the contractual provisions of the instrument. Regular purchases and sales of financial assets and liabilities are recognised on the trade date, the date on which the Group commits to purchase or sell the asset or liability. A financial asset or liability is recognised initially at its fair value and in the case of a financial asset or liability measured at amortised cost includes transaction costs that are directly attributable to the acquisition or issue of the instrument. Financial assets and liabilities recorded at fair value through the profit and loss are designated at initial recognition. Financial assets and liabilities measured at amortised cost Financial assets and liabilities measured at amortised cost are non‑derivative financial assets and liabilities which meet the following criteria: a) held within a business model whose objective is to hold an instrument in order to collect contractual cash flows; and b) the contractual terms of the instrument gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A gain or loss on a financial asset and liability that is measured at amortised cost and is not part of a hedging relationship is recognised in profit and loss when the instrument is derecognised, impaired or reclassified and through the amortisation process. 53 Notes to the Financial Statements continued
Note 2.13 continued Trade and other receivables are classified as financial assets measured at amortised cost. Trade and other payables and debt instruments are classified as financial liabilities measured at amortised cost. Financial assets and liabilities measured at fair value through profit or loss Financial assets and liabilities are measured at fair value unless measured at amortised cost. At initial recognition, the Group may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument within the scope of NZ IFRS 9 ‘Financial Instruments’ that is not held for trading. If the Group makes this election, it shall recognise in profit or loss dividends from that investment when the Group’s right to receive payment of the dividend is established in accordance with NZ IAS 18 ‘Revenue’. The Group may also at initial recognition, designate an instrument as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring the instruments or recognising gains and losses on them on different bases. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transaction pricing models refined to reflect the Group’s specific circumstances. A gain or loss on a financial asset or liability that is measured at fair value and is not part of a hedging relationship shall be recognised in profit and loss unless the financial asset is an investment in an equity instrument and the Group has made an irrevocable election to present gains and losses on that investment in other comprehensive income. Financial assets are de‑recognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial liabilities are de‑recognised if the Group’s obligations specified in the contract expire or are discharged or cancelled. Investment property liabilities are classified as financial liabilities measured at fair value through profit or loss. Derivative financial instruments are classified as either financial assets or financial liabilities measured at fair value through profit or loss.
2.14 investments in subsidiaries Investments in subsidiaries are valued at cost less impairment in the Company.
2.15 intangible assets (a) Computer software Separately acquired computer software and licenses at a cost greater than $10,000 are capitalised on the basis of the costs incurred to acquire and bring to use the specific asset. These costs are amortised on a straight line basis over their estimated useful lives of two years. Costs under $10,000 associated with maintaining computer software programmes are recognised as an expense as incurred. (b) Quota Separately acquired fishing quota has an indefinite useful life and will generate economic benefits beyond one year. Fishing quota is tested annually for impairment and is carried at cost less accumulated impairment. The useful life is assessed annually to determine whether the indefinite useful life assessment continues to be supportable. (c) Carbon credits Intangible assets include carbon credits acquired by way of a Government grant and are initially recognised at fair value at the date of acquisition. Following initial recognition, these intangible assets are carried at cost less any accumulated impairment losses. The Group is able to either hold the New Zealand Units (NZU) within the carbon register or alternatively trade the NZU’s in domestic and international carbon markets. Carbon credits are not consumed in the production and are therefore not amortised. The NZU’s are not amortised but are tested for impairment on an annual basis or when indications of impairment exist.
2.16 property, plant and equipment Farm and other properties are comprised of land, buildings and plant held on the farms as well as the building occupied by the Parent, and are shown at fair value, based on periodic, but at least triennial, valuations by
54 Tainui Group Holdings Annual Report 2013
external independent valuers, less subsequent depreciation. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset. Land at cost, hotels, development properties, vehicles, equipment, fixtures and fittings are stated at historical cost less depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Increases in the carrying amounts arising on revaluation of farm and other properties are credited to the revaluation reserve in Shareholders’ equity. To the extent that the increase reverses a revaluation decrease previously recognised in the statement of comprehensive income, the increase is first recognised in statement of comprehensive income. Decreases that reverse previous increases of the same asset are first charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the asset; all other decreases are charged to the statement of comprehensive income. Development property and land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives. Estimated useful lives are as follows: Computers 2 ‑ 6 years Farm (buildings) 50 years Furniture and fittings and office equipment 1 ‑ 17 years Hotel (other assets) 3 ‑ 33 years Other building 100 years Plant and equipment 1 ‑ 14 years Vehicles 2 ‑ 11 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income. When revalued assets are sold, it is Group policy to transfer the amounts included in revaluation reserves in respect of those assets to retained earnings.
2.17 investment properties Investment properties include properties held to earn rental income, and/or for capital appreciation as well as investment properties under construction. A property is also classified as an investment property if it does not have an operating lease in place, but is held with the intention of attaining an operating lease. Investment properties are initially recognised at cost, including transaction costs. Subsequent to initial recognition, investment properties are carried at fair value, representing open‑market value determined annually by external valuers. Changes in fair value are recorded in the statement of comprehensive income. Where a property interest is held under an operating lease, and is classified as an investment property, the property is recognised at the lower of fair value of the property and the present value of the minimum lease payments, with an equivalent amount being recognised as a liability. Subsequent to initial recognition, the asset and liability are measured at fair value with changes in fair value recognised in profit or loss.
2.18 impairment of non‑financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised when the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Impairment losses are recognised first against the revaluation reserves in respect of the impaired asset, and second as an expense in the statement of comprehensive income. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying
55 Notes to the Financial Statements continued
Note 2.18 continued amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash generating unit) in prior years. A reversal of an impairment loss is recognised in the statement of comprehensive income immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non‑financial assets that suffered impairment, with the exception of fishing quota, are reviewed for possible reversal of the impairment at each reporting date.
2.19 trade and other payables Trade payables and other accounts payable are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services. The amounts are unsecured. Current trade and other payables are usually paid within 30 days of recognition. Non‑current other payables are usually paid between one and two years. Trade and other payables are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest method.
2.20 Interest bearing liabilities Interest bearing liabilities are initially recognised at fair value, net of transaction costs incurred. Interest bearing liabilities are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance date.
2.21 Contributed equity Ordinary shares are classified as equity. Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instrument. Transaction costs are the costs arising on the issue of equity instruments, incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.
2.22 Dividends Dividend distribution to the Company Shareholder is recognised as a liability in the Company’s and the Group’s financial statements in the period in which the dividends are approved by the Directors and notified to the Company’s Shareholder. Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at balance date.
2.23 Current income tax The Inland Revenue Department approved the Company as charitable for the purposes of the Income Tax Act 1994. Accordingly, no income tax is payable. See note 3 for details of entities that have charitable status. However some subsidiary and associate entities are taxable. In the instances where an entity is taxable, current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by the reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). The Group is not liable for tax on profits or losses from joint ventures as all entities within the Group that are partners of a joint venture through a joint venture agreement have charitable tax status.
2.24 Statement of cash flows The statement of cash flows are prepared exclusive of GST. For the purposes of the statement of cash flows, cash and cash equivalents include cash in banks and investments in money market instruments, net of outstanding bank overdrafts. Operating activities include all transactions and other events that are not investing or financing activities. Investing activities are those activities relating to the acquisition and disposal of current and non‑current investments and any other non‑current assets. Financing activities are those activities relating to changes in the equity and debt capital structure of the Company and Group and those activities relating to the cost of servicing the Company’s and Group’s equity capital.
56 Tainui Group Holdings Annual Report 2013
2.25 Goods and services tax (GST) The profit and loss component of the statement of comprehensive income has been prepared so that all components are stated exclusive of GST. All items in the statement of financial position are stated net of GST, with the exception of receivables and payables, which include GST invoiced.
3 Consolidation Subsidiaries: Charitable operatinG ownership and voting interest Balance status division 2013 2012 date Boat Harbour Ventures Limited No property 100% 100% 31‑Mar Raukura Moana Seafoods Limited Yes fisheries 100% 100% 31‑Mar Ruakura Fee Simple Limited No property 100% 100% 31‑Mar Ruakura Limited No property 100% 100% 31‑Mar Tainui Auckland Airport Hotel LP No investment 70% 70% 31‑Mar Tainui Auckland Airport Hotel GP Limited no investment 70% 70% 31‑Mar Tainui Corporation Limited Yes property 100% 100% 31‑Mar Tainui Development Limited Yes property 100% 100% 31‑Mar TDL No. 1 Limited Yes investment 100% 100% 31‑Mar Te Rapa 2002 Limited Yes property 100% 100% 31‑Mar TGH No. 1 Limited No investment 100% 100% 31‑Mar The Base Limited Yes property 100% 100% 31‑Mar
Associates: Charitable operating interest held Balance status division 2013 2012 date Hamilton Riverview Hotel Limited No investment 41% 41% 31‑Dec
Unincorporated Joint Ventures: Charitable operatinG ownership and voting interest Balance status division 2013 2012 date Callum Brae Tainui No property 50% 50% 31‑Mar Rotokauri Development Limited No property 70% ‑ 31‑Mar TAG Forestry Joint Venture No property 50% 50% 31‑Mar
The subsidiaries, interest in associates and joint ventures with reporting dates other than 31 March have been included based on their actual results and balances at 31 March 2013 and not the results and balances at their respective reporting dates. Hamilton Riverview Hotel Limited has a balance date of 31 December to align with its other shareholders operations. The country of incorporation for all subsidiaries, associates and joint ventures is New Zealand. During the financial year, 40 hectares of land at Rotokauri, Hamilton, was sold from Tainui Development Limited to Rotokauri Development Limited joint venture for the purposes of residential sub‑division. The sale transaction resulted in a total gain on sale of $7m. In the year ended 31 March 2013, $2m or 30% of the $7m gain on sale is recognised, representing the external joint ventures partners proportion of the gain. The balance of $5m of the gain on sale will be recognised in future financial years when the land is sub‑divided and sold to external parties and will be based on the proportional share of the land (see also notes 11 and 15).
57 Notes to the Financial Statements continued
Note 3 continued The Group’s interest in the joint ventures had the following effect on the financial statements:
Consolidated 2013 2012 $’000 $’000 Statement of financial position Current assets 1,638 2,442 Non‑current assets 5,908 210 Total assets 7,546 2,652 Less current liabilities 1,885 245 Net assets 5,661 2,407 Statement of comprehensive income Revenues 1,407 2,413 Expenses (1,111) (1,252) Profit before income tax 296 1,161
4 Revenue Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Rental income 33,935 31,441 2,414 2,642 Amortisation of capitalised lease incentives (167) (28) - - Hotel income 19,237 14,397 - - Sale of sections 3,781 2,409 - - Other income 15 2,846 2,144 2,386 2,505 Quota leasing income 1,708 1,745 - - Dairy income 840 1,056 840 1,056 Dividends from listed investments - 918 - 918 Dividends from unlisted investments 65 - 65 - Dividends from subsidiaries 15 - - 217,015 - Other operating gains 14 119 693 119 693 62,364 54,775 222,839 7,814
58 Tainui Group Holdings Annual Report 2013
5 Expenses Consolidated Parent 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Audit fees paid to Parent and Group auditors 68 75 24 23 Other fees paid to auditor 68 26 59 - Audit fees paid to other auditors 9 16 - - Bad debt written off 82 14 - - Consultancy fees 577 592 432 450 Cost of sales 9,140 6,893 703 639 Depreciation, amortisation and impairment 2,812 2,541 308 489 Direct costs from rental income 2,890 1,462 549 449 Direct costs from investment properties (non‑income generating) 180 425 3 3 Directors fees 305 280 305 280 Doubtful debt provision 159 12 1 1 Employee benefits 9,012 7,583 3,656 3,191 Operating lease expenses 86 52 46 45 Other expenses 3,381 2,062 401 168 28,769 22,033 6,487 5,738
Other fees paid to the auditor consists of treasury and consultancy services for the Group.
Depreciation, amortisation and impairment Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Amortisation and impairment of intangibles 17 133 220 89 211 Depreciation and impairment of: Computer, office equipment, furniture and fittings 18 300 283 107 87 Farm and other properties 18 107 167 81 167 Hotel 18 2,241 1,847 - - Motor vehicles 18 31 24 31 24 Total depreciation, amortisation and impairment 2,812 2,541 308 489
6 investments in associates
Consolidated Parent 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Investments in associates 13,594 13,485 - -
Carrying value of associates Carrying value at beginning of year 13,485 13,151 - - Share of net profit of associates 316 541 - - Dividend received (207) (207) - - Carrying value at end of year 13,594 13,485 - -
59 Notes to the Financial Statements continued
7 income tax The taxable members of the Group have sufficient losses to carry forward to meet any potential income tax liability. The taxable losses are not recorded in the financial statements due to the lack of probability that the losses will be recovered. The approximate unrecognised tax losses carried forward are $0.9m (2012: $0.9m). As at reporting date there is no current tax expense, tax payable or tax receivable (2012: nil).
8 other gains ‑ net
Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Biological assets – fair value gains unrealised 14 1,276 497 - - Financial liabilities designated at fair value through profit or loss – increase in investment property liability (3,730) (4,313) (3,730) (4,313) Interest rate swaps – fair value losses unrealised (1,140) (3,973) (906) (2,927) Investment properties – fair value gains unrealised 19 25,686 23,624 3,590 9,255 Investment properties – realised gain on sale 28 - - - Property, plant & equipment – impairment of land at cost 18 - (1,400) - - Shares in listed companies – fair value gains realised - 4,050 - 4,050 Shares in listed companies – fair value gains unrealised 964 - 964 - Shares in unlisted companies – fair value gains/(losses) realised 8 (53) 8 (53) Shares in unlisted companies – fair value gains unrealised 1,276 673 1,366 763 24,368 19,105 1,292 6,775
9 contributed equity Consolidated and Parent Consolidated and Parent 2013 2012 2013 2012 share no. share no. $’000 $’000 Share capital Ordinary shares Balance at beginning of year 60,000,000 60,000,000 60,000 60,000 Issue of shares 70,000,000 - 70,000 - Balance at end of year 130,000,000 60,000,000 130,000 60,000
All shares rank equally with one vote attached to each fully paid ordinary share. Ordinary shares do not have a par value. On wind‑up of the Company, all proceeds will be paid to the Shareholder. On 21 February 2013, the Parent issued a further 70,000,000 shares at $1 per share to the Shareholder, Waikato‑Tainui Te Kauhanganui Incorporated.
60 Tainui Group Holdings Annual Report 2013
10 reserves and retained earnings Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 (a) Reserves Farm and other properties 10,453 11,151 10,368 11,151 Associates 7,222 7,222 - - 17,675 18,373 10,368 11,151 Farm and other properties Balance at beginning of year 11,151 8,279 11,151 8,279 Revaluation gain/(loss) during the year 18 (698) 2,872 (783) 2,872 Balance at end of year 10,453 11,151 10,368 11,151
Associates Balance at beginning of year 6 7,222 7,222 - - Balance at end of year 7,222 7,222 - -
Nature and purpose of reserves Farm and other properties recognises the change in fair value of properties held in this category. Associates reserves comprises of the Group’s share of revaluation of property, plant and equipment in associate entity, Hamilton Riverview Hotel.
(b) Retained earnings Movements in retained earnings were as follows: Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Balance at beginning of year 286,589 247,217 7,308 10,060 Net profit/(loss) for the year 44,062 39,372 205,897 (2,752) Dividend 15 (10,090) - (10,090) - Balance at end of year 320,561 286,589 203,115 7,308
11 trade and other receivables
Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Trade receivables 1,775 1,610 264 477 Property settlements 15 2,219 562 - - Less provision for impairment (205) (68) (2) (1) Trade receivables from related parties 15 231 158 225 150 Prepayments 725 419 39 25 GST - - 10 15 4,745 2,681 536 666
Property settlements include $1.2m owing by the joint venture partners of Rotokauri Development Limited, (see note 15).
61 Notes to the Financial Statements continued
12 Inventories
Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Land – sections for sale 3,905 4,159 - - Other inventories at cost – food and beverage 36 43 - - 3,941 4,202 - -
The Bank of New Zealand currently holds a registered first mortgage over property situated at Huntington/ Gordonton Road, Hamilton. This property is part of the Callum Brae Tainui joint venture.
13 trade and other receivables (non‑current)
Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Other receivables 458 466 - - Lease fitout contribution 1,159 821 - - 1,617 1,287 - -
14 biological assets Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Current – livestock Balance at beginning of year 1,082 843 1,082 843 Additions 200 160 200 160 Decreases due to sales (566) (614) (566) (614) Changes in fair value 4 119 693 119 693 Balance at end of year 835 1,082 835 1,082
Non‑current – trees Balance at beginning of year 3,191 2,694 - - Changes in fair value 8 1,276 497 - - Balance at end of year 4,467 3,191 - -
The livestock consists of mixed age sheep, cattle and cows, which are held for dairy and dry stock farming. M Gaustad from PGG Wrightson determined the fair value of sheep, cattle and cows at 31 March 2013 (2012: C Heggie from PGG Wrightson). Both valuers provided valuations based on reference to market evidence of current market prices less point‑of‑sale costs. At balance date there were 2,486 sheep, 471 cattle and 197 cows (2012: 2,864 sheep, 428 cattle and 161 cows). The trees are comprised of a 374 hectare Pinus Radiata (2012: 374 hectares) forest planted from 1996 to 1997, 150 hectares Pinus Radiata (2012: 150 hectares) forest planted from 2001 to 2002 and 270 hectares of Californian Coast Redwoods (2012: 270 hectares) planted from 2005 to 2007. It is expected that the rotation age for the Pinus Radiata crop will be 27 years and 30 years for the Californian Coast Redwoods, at which time the crop will be harvested. The 374 hectares and 150 hectares of Pinus Radiata was valued using the Crop Expectation Value method at a 7.0% post‑tax discount rate to determine fair value, less point‑of‑sale costs. The 270 hectares of Californian Coast Redwoods was valued using current replacement cost method used for young trees at a 7.0% compounded rate. The non‑current biological assets are held for investment. All non‑current biological assets were valued by P Silcock from NZ Forestry Limited (2012: R H Webster from NZ Forestry Limited valued 374 and 270 hectares and Alan Bell valued 150 hectares). All valuers are independent registered valuers not related to the Company or Group. All valuers hold recognised and relevant professional qualifications and have recent experience in the categories of biological assets they have valued. 62 Tainui Group Holdings Annual Report 2013
15 related party transactions Amounts outstanding with related parties are:
Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Advances owing by related parties: Tainui Auckland Airport Hotel LP - - 18,620 20,860 Tainui Corporation Limited - - 123,742 - Tainui Development Limited - - 100,413 42,536 Te Rapa 2002 Limited - - 37,292 37,155 The Base Limited - - 135,805 145,340 Waikato Raupatu Lands Trust 4,377 8,400 4,377 8,400 Waikato Raupatu River Trust - 23 - 23 Waikato‑Tainui Distributions Limited - 25 - 25 4,377 8,448 420,249 254,339
Advances owing to related parties: Raukura Moana Seafoods Limited - - 351 6,306 Tainui Corporation Limited - - - 45,897 TGH No. 1 Limited - - 5,780 5,780 Waikato Raupatu Lands Trust - 74,027 - 49,162 Waikato‑Tainui Fisheries Limited 372 913 373 913 372 74,940 6,504 108,058
Trade and other receivables owing by related parties Waikato Raupatu Lands Trust 11 125 150 125 150 Waikato Raupatu River Trust 11 55 8 52 - Waikato‑Tainui Distributions Limited 11 44 - 44 - Other joint ventures 11 7 - 4 - Rotokauri Development Limited joint venture 11 1,185 - - - 1,416 158 225 150
Trade and other payables owing to related parties Other joint ventures 20 7 - 4 - 7 - 4 -
The Company’s Shareholder, Waikato‑Tainui Te Kauhanganui Incorporated is the Trustee of the Waikato Raupatu Lands Trust (the ‘Trust’ or the ‘Shareholder’). The Trust is the ultimate parent entity of the Group. All members of the Group are considered to be related parties of the Trust. Transactions between related entities include loans and advances to and from the Shareholder, certain subsidiaries and associates. All amounts owing by and to the Company and Group and ultimate Parent are repayable on demand and are interest free. There is no impairment of any related party balances. The amount owing to the ultimate Parent by the Group is subordinated to the Westpac and BNZ bank loans (see note 22). The Company charged its subsidiaries $1m, Shareholder $0.5m and the Waikato Raupatu River Trust $0.3m (2012: subsidiaries $0.9m, Shareholder $0.8m and the Waikato Raupatu River Trust $0.3m) for administration services and financial charges which is reported in other income (see note 4). There were no purchases of goods or services from the Group’s subsidiaries. The Company declared a dividend of $10.1m for the year ended 31 March 2013 (2012: nil) to the Shareholder,
63 Notes to the Financial Statements continued
Note 15 continued Waikato‑Tainui Te Kauhanganui Incorporated. The Company also declared a dividend of $11.1m on 18 June 2013 (see note 29). Tainui Corporation Limited, Tainui Development Limited and Raukura Moana Seafoods Limited declared dividends of $161.2m, $46.9m and $8.9m respectively, for the year ended 31 March 2013 (2012: nil) to the Company (see note 4). The advance account movement between the Company and its subsidiaries represents cash received and payments made by the Company on behalf of its subsidiaries as well as dividends payable by the subsidiaries. There are operating leases in place between the Shareholder and the Company for land owned by the Shareholder where the Group has developed and leased properties at The Base and the University of Waikato respectively. The interest held under the operating lease has been accounted for as an investment property and financial liability (see also notes 19 and 22 respectively). During the financial year, Tainui Development Limited sold 42 hectares of land at Rotokauri to the joint venture partnership, Rotokauri Development Limited for residential sub‑division. As at 31 March 2013, $1.2m is outstanding and has since been paid (see note 11).
16 other financial assets Consolidated Parent 2013 2012 2013 2012 $’000 $’000 $’000 $’000 At fair value through profit or loss: Listed companies 2,426 - 2,426 - Unlisted companies 7,579 5,385 7,578 5,294 10,005 5,385 10,004 5,294
17 intangible assets
CONSOLIDATED Computer nZ Units software quota ets total $’000 $’000 $’000 $’000 Year ended 31 March 2012 Opening balance 227 20,340 105 20,672 Additions 36 - - 36 Amortisation and impairment charge (146) - (74) (220) Closing balance 117 20,340 31 20,488
At 31 March 2012 Cost 448 20,340 105 20,893 Accumulated amortisation and impairment (331) - (74) (405) Net book value 117 20,340 31 20,488
Year Ended 31 March 2013 Opening balance 117 20,340 31 20,488 Additions 111 - - 111 Disposals (31) - - (31) Amortisation and impairment (110) - (23) (133) Closing balance 87 20,340 8 20,435
At 31 March 2013 Cost 455 20,340 105 20,900 Accumulated amortisation and impairment (368) - (97) (465) Net book value 87 20,340 8 20,435
64 Tainui Group Holdings Annual Report 2013
parent Computer nZ Units software quota ets total $’000 $’000 $’000 $’000
Year ended 31 March 2012 Opening balance 207 14,492 93 14,792 Additions 36 - - 36 Amortisation and impairment (146) - (65) (211) Closing balance 97 14,492 28 14,617
At 31 March 2012 Cost 428 14,492 93 15,013 Accumulated amortisation and impairment (331) - (65) (396) Net book value 97 14,492 28 14,617
Year ended 31 March 2013 Opening balance 97 14,492 28 14,617 Additions 89 - - 89 Disposal (31) - - (31) Amortisation and impairment (68) - (21) (89) Closing balance 87 14,492 7 14,586
At 31 March 2013 Cost 414 14,492 93 14,999 Accumulated amortisation and impairment (327) - (86) (413) Net book value 87 14,492 7 14,586
The Group is deemed a participant in the New Zealand Emission Trading Scheme (ETS) as it is an owner of fishing quota. NZU’s relate to 3,701 (Parent) and 490 (Group) units that were allocated by the Ministry for the Environment as part of the fisheries allocation for quota owned. The units were valued at $1.90 per unit (2012: $7.50) resulting in an impairment charge to the Group of $23,470 (2012: $73,342) and Parent of $20,725 (2012: $64,768). Quota benefits are expected to be received in perpetuity, therefore the useful life has been assessed as indefinite.
65 Notes to the Financial Statements continued
18 property, plant and equipment
Consolidated Computer, office Farm and equipment, other development land at motor furniture properties properties cost hotel vehicles and fittings Total Notes $’000 $’000 $’000 $’000 $’000 $’000 $’000 Year ended 31 March 2012 Opening net book value 18,878 51,996 4,640 - 91 806 76,411 Additions 205 7,436 - - 19 321 7,981 Depreciation 5 (167) - - (1,847) (24) (283) (2,321) Disposals (1) - - - (7) - (8) Net revaluation 10 2,872 - - - - - 2,872 Transfer from investment properties 19 - 1,360 - - - - 1,360 Impairment of land at cost 8 - - (1,400) - - - (1,400) Reclassification - (59,170) - 59,170 - - - Closing net book value 21,787 1,622 3,240 57,323 79 844 84,895
At 31 March 2012 Cost 41 1,622 3,240 59,170 227 1,473 65,773 Valuation 22,952 - - - - - 22,952 Accumulated depreciation (1,206) - - (1,847) (148) (629) (3,830) Closing net book value 21,787 1,622 3,240 57,323 79 844 84,895
Year ended 31 March 2013 Opening net book value 21,787 1,622 3,240 57,323 79 844 84,895 Additions 3,000 - - 415 123 534 4,072 Reclassification 1,536 (1,622) - - 44 42 - Disposals (43) - - - - (27) (70) Depreciation 5 (107) - - (2,241) (31) (300) (2,679) Net revaluation 10 (698) - - - - - (698) Transfer to investment properties 19 (1,622) - (3,240) - - - (4,862) Closing net book value 23,853 - - 55,497 215 1,093 80,658
At 31 March 2013 Cost 27 - - 59,585 433 1,912 61,957 Valuation 23,849 - - - - - 23,849 Accumulated depreciation (23) - - (4,088) (218) (819) (5,148) Closing net book value 23,853 - - 55,497 215 1,093 80,658
66 Tainui Group Holdings Annual Report 2013
Parent Computer, office farm and equipment, other motor furniture properties vehicles and fittings total Notes $’000 $’000 $’000 $’000
Year ended 31 March 2012 Opening net book value 17,256 91 146 17,493 Additions 182 19 86 287 Disposals (1) (7) (1) (9) Depreciation 5 (167) (24) (87) (278) Net revaluation 10 2,872 - - 2,872 Closing net book value 20,142 79 144 20,365
At 31 March 2013 Cost - 226 464 690 Valuation 21,330 - - 21,330 Accumulated depreciation (1,188) (147) (320) (1,655) Closing net book value 20,142 79 144 20,365
Year ended 31 March 2013 Opening net book value 20,142 79 144 20,365 Additions 89 123 267 479 Reclassification (86) 44 42 - Disposals (14) - - (14) Depreciation 5 (81) (31) (107) (219) Net revaluation 10 (783) - - (783) Closing net book value 19,267 215 346 19,828
At 31 March 2013 Cost - 432 747 1,179 Valuation 19,269 - - 19,269 Accumulated depreciation (2) (217) (401) (620) Closing net book value 19,267 215 346 19,828
67 Notes to the Financial Statements continued
Note 18 continued Development properties and land at cost In 2012, development properties relating to the development of the Novotel Auckland Airport hotel, which was completed in May 2011, had been transferred to a separate hotel category within property, plant and equipment (see also note 22 for ASB Bank security agreement over the hotel assets). The transfer to development properties relates to a property previously classified as investment property. The property will be developed as the Company’s new offices, therefore owner occupied, and as such the property has been reclassified to property, plant and equipment. In 2013, the property developed as the Company’s new offices has been transferred from development to farm and other properties. The Company’s prior office property has been transferred to investment properties. Land at cost includes two properties which were to be developed but are now considered investment properties. The properties are located in Taupo and Ruakiwi Road, Hamilton. Valuations of farm and other properties Telfer Young (Waikato) Limited and Curnow Tizard were contracted as independent valuers to value farm and other properties. Fair value has been assessed as the amount for which an asset could be exchanged or a liability settled between knowledgeable willing parties in an arms length transaction. The significant methods and assumptions applied in estimating the fair value were: ‑ the direct comparison approach (based on analysis of sales of vacant property. This analysis includes determination of land value, other improvements and residual value for principal improvements); ‑ the traditional capitalisation approach (focusing on the net maintainable income and the level of investment return); ‑ the discounted cash flow approach (based on establishing a cash flow budget for the property having particular regard to the length of lease term and nature of the leasehold interest and the following factors; discount rate, land inflation and rental rates); and ‑ comparing market evidence of transaction prices for similar properties. The total value of farm properties valued by Telfer Young (Waikato) Limited at 31 March 2013 for the Group and Parent is $19.3m (2012: $20.1m). The total value of other properties by Curnow Tizard Limited for the Group at 31 March 2013 is $4.6m (2012: $1.7m). All valuers are independent registered valuers not related to the Company or Group. All valuers hold recognised and relevant professional qualifications and have recent experience in the locations and categories of farm and other properties they have valued.
19 investment properties Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000 Balance at beginning of year 528,412 457,728 81,033 71,778 Development 16,785 48,420 - - Net gain from fair value adjustment 8 25,686 23,624 3,590 9,255 Transfer from/(to) property, plant and equipment 18 4,862 (1,360) - - Disposals (2,624) - - - Balance at end of year 573,121 528,412 84,623 81,033
Valuation basis of investment properties Investment property valuations were completed as follows: D.J. Saunders from Telfer Young (Waikato) Limited valued properties at fair value of $76m and parent $24m on 31 March 2013 (31 March 2012: $131m and Parent: $24m) using a mixture of market evidence of transaction prices for similar properties, direct comparison, capitalisation and discounted cash flow approaches. T. Arnott from CB Richard Ellis Limited valued properties at fair value of $310m and parent $61m on 31 March 2013 (31 March 2012: $282m and Parent: $57m) using a mixture of market evidence of transaction prices for similar properties, capitalisation and discounted cash flow approaches. M. J. Snelgrove from Curnow Tizard Limited valued properties at fair value of $109m on 31 March 2013
68 Tainui Group Holdings Annual Report 2013
(31 March 2012: $107m) using a mixture of market evidence of transaction prices for similar properties, direct comparison, capitalisation and discounted cash flow approaches. K Sweetman from Colliers International NZ Limited valued properties at fair value of $75m on 31 March 2013 (31 March 2012: nil) using a mixture of market evidence of transaction prices for similar properties, direct comparison, capitalisation and discounted cash flows approaches. R. H. Martin from Property Valuations Limited valued properties at fair value of nil on 31 March 2013 (31 March 2012: $1m) using a mixture of market evidence of transaction prices for similar properties and the direct comparison approaches. R. Peters from Seagar & Partners valued properties at fair value of nil on 31 March 2013 (31 March 2012: $2m) using a mixture of market evidence of transaction prices for similar properties and the direct comparison approaches. All valuers are independent registered valuers not related to the Company or Group. All valuers hold recognised and relevant professional qualifications and have recent experience in the locations and categories of the investment property they have valued. The Group also incurred work in progress, which is held at cost, as at 31 March 2013 of $3m (2012: $6m) in relation to the property located at The Base, Parent nil (2012: nil).
20 trade and other payables Consolidated Parent 2013 2012 2013 2012 Note $’000 $’000 $’000 $’000 Trade payables 810 2,092 15 1,284 Related party payables 15 7 - 4 - Income received in advance 1,590 1,094 - - Accrued expenses 11,306 7,041 2,423 1,850 Employee entitlements 542 468 293 272 GST 742 346 - - Other payables 404 284 - 40 15,401 11,325 2,735 3,446
21 trade and other payables (non‑current)
Consolidated Parent 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Income received in advance 1,131 - - - 1,131 - - -
22 interest bearing liabilities
Consolidated Parent 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Secured Bank loans 30,336 30,228 30,336 30,228 Total current interest bearing borrowings 30,336 30,228 30,336 30,228 Bank loans 156,335 149,394 129,950 121,209 Total non‑current interest bearing liabilities 156,335 149,394 129,950 121,209 Total interest bearing liabilities 186,671 179,622 160,286 151,437
69 Notes to the Financial Statements continued
Note 22 continued Total interest bearing liabilities for the Group is net of prepaid borrowing costs of $0.5m (2012: $0.5m). The Company holds a multi option credit line facility agreement with Westpac New Zealand Limited for $50m (2012: $50m) which matures on 15 March 2014. Borrowings of $30m of the available facility had been drawn at balance date (2012: $26m). The Company holds a multi option credit line facility agreement with Westpac New Zealand Limited for $25m (2012: $25m) which matures on 16 June 2015. No borrowings had been drawn at balance date (2012: nil). The Company holds a Wholesale Term Loan Facility with Westpac New Zealand Limited for $50m (2012: $50m) which matures on 27 July 2015. Borrowings of $50m had been drawn at balance date (2012: $50m). The Company holds a Committed Cash Advances Facility Tranche A Agreement with the Bank of New Zealand for $75m (2012: $75m) which matures on 31 July 2016. Borrowings of $48m of this facility had been drawn at balance date (2012: $46m). The Company holds a Committed Cash Advances Facility Tranche B Agreement with the Bank of New Zealand for $50m (2012: $50m) which matures on 30 November 2017. Borrowings of $32m of the available facility had been drawn at balance date (2012: $30m). Tainui Auckland Airport Hotel holds a Committed Cash Advance Facility with ASB Bank Limited for $33m (2012: $33m) which matures 27 May 2014. Borrowings of $26m of the available facility had been drawn at balance date (2012: $28m). The ASB Bank has a first and exclusive security agreement over the assets and undertakings of Tainui Auckland Airport Hotel LP and Tainui Auckland Airport Hotel GP Limited. The Company and guaranteeing subsidiaries (Tainui Corporation Limited, Tainui Development Limited, TGH No.1 Limited, Raukura Moana Seafoods Limited, The Base Limited and Te Rapa 2002 Limited) have granted to Westpac New Zealand Limited and Bank of New Zealand a charge in and over all present and future assets and present and future rights and interest in any asset as security for the finance facilities.
23 other financial liabilities Consolidated Parent 2013 2012 2013 2012 $’000 $’000 $’000 $’000 At fair value through profit or loss Interest rate swaps 162 - 162 - Total current other financial liabilities 162 - 162 - Interest rate swaps 12,740 11,763 11,460 10,717 Investment property liability 32,010 28,280 32,010 28,280 Total non‑current other financial liabilities 44,750 40,043 43,470 38,997 44,912 40,043 43,632 38,997
The notional amount of interest rate swaps is $150m (Parent: $135m) with maturity dates that range from 1‑9 years (Parent: 1‑8 years), (2012: $150m for the Group and $135m for the Parent, maturing between 1‑10 years). The Base and University of Waikato land is owned by the Shareholder. There is an operating lease in place between the Shareholder and the Group. The interest held under the operating lease has been recognised as a financial liability and investment property (see note 15 and note 19).
70 Tainui Group Holdings Annual Report 2013
24 reconciliation of profit/(loss) for the year to net cash inflow/(outflow) From operating activities
Consolidated Parent 2013 2012 2013 2012 Notes $’000 $’000 $’000 $’000
Net profit/(loss) for the year 44,776 39,353 205,897 (2,752) Non‑cash items: Depreciation, amortisation and impairment 5 2,812 2,541 308 489 Bad debts written off 5 82 14 - - Movement in doubtful debt provision 5 159 12 1 1 Gain on revaluation of biological assets 8, 14 (1,395) (1,190) (119) (693) Gain on shares in listed companies – unrealised (964) - (964) - Gain on shares in listed companies – realised 8, 16 - (4,050) - (4,050) Realised (gain)/loss on shares in unlisted companies 8, 16 (8) 53 (8) 53 Unrealised gain on shares in unlisted companies 8, 15 (1,276) (673) (1,366) (763) Loss on interest rate swaps 8, 16 1,140 3,973 906 2,927 Movement in investment property liability 8 3,730 4,313 3,730 4,313 Share of total profits of associates 6 (109) (334) - - Gain on revaluation of investment properties 8, 19 (25,686) (23,624) (3,590) (9,255) Impairment of land at cost 8 - 1,400 - - Dividends from subsidiaries 15 - - (217,015) - Other non‑cash items in relation to investing and financing activities (775) 2,693 (1,716) 2,190 (Increase)/decrease in current assets: trade and other receivables (2,394) 5,063 130 254 Inventories 261 415 - - Biological assets 247 (239) 247 (239) trade and other receivables – non‑cash fair value gain 119 693 119 693 Increase/(decrease) in current liabilities: trade and other payables 5,207 (9,144) (711) (1,734) Net cash inflow from operating activities 25,926 21,269 (14,151) (8,566)
25 Financial risk management
25.1 Financial risk factors Exposure to credit, liquidity and market (currency, interest and price) risks arise in the normal course of the Group’s business. The Company and Group have various financial instruments with off‑balance sheet risk. Senior management are required to identify and report major risks affecting the business and develop strategies to mitigate these risks. The board reviews and approves overall risk management strategies covering specific areas. (a) Credit risk Credit risk is the risk that a third party will default on its obligations to the Parent or Group, causing the Parent or Group to incur a loss. The Parent and Group do not have any significant concentrations of credit risk. The
71 Notes to the Financial Statements continued
Note 25.1 continued maximum exposure to credit risk at reporting date is the carrying amount of the financial assets as shown in the statement of financial position. The Group does not require any collateral or security to support financial instruments as it only deposits with, or lends to, banks and other financial institutions with high credit ratings except for funds lent to a related party and an external entity for which the Group has appropriate security and guarantees. The Group further minimises credit exposure by limiting the amount of surplus funds placed with any one financial institution. The Group does not expect non‑performance of any obligations at balance date. There are no material financial assets held by the Company and Group at balance date which are past due but not impaired. (b) Market risk (i) Currency The Group has no exposure to currency risk at balance date. There are no notional principal or forward foreign exchange contracts at 31 March 2013 (2012: nil). The Group’s interest rate risk arises from long‑term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rate expose the Group to fair value interest rate risk. (ii) Interest rate risk The Company and Group adopt a policy of ensuring that between 25 and 90 per cent of its exposure to changes in interest rates on borrowings is on a fixed rate basis. The Group manages its cash flow interest rate risk by using floating to fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Under interest rate swap contracts, the Group agrees to exchange the difference between fixed contract and floating rate interest amounts calculated by reference to the agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting the future cash flows at reporting date and the credit risk inherent in the contract, and are disclosed below. The average interest rate is based on the outstanding balances at the start of the financial year. (iii) Price risk The Group and the Parent are exposed to equity securities price risk. This arises from investments held by the Group and Parent that are classified at fair value through profit or loss. Neither the Group nor the Parent are exposed to commodity price risk. (c) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty raising liquid funds to meet commitments as they fall due. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. (d) Financial risk management strategies relating to agricultural activities The Group undertakes agricultural activities through its farm operations and forestry land. These operations are exposed to business risks, including the volatility of revenue and valuation of its assets. The Group utilises the skills of appropriately qualified and experienced farm consultants, farm managers and sharemilkers to mitigate the financial risk relating to farming activities. The Group utilises the skills of appropriately qualified and experienced forestry consultants and forestry contractors to mitigate the financial risk relating to forestry activities. (e) Fair value estimation The fair value of financial instruments traded in active markets is based on quoted market prices at balance date. The quoted market price used for financial assets held by the Group is the current bid price. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
72 Tainui Group Holdings Annual Report 2013
(f) Financial instruments by category Assets at fair assets at value through amortised profit or loss cost Total $’000 $’000 $’000 Financial assets as per statement of financial position Consolidated At 31 March 2013 Other financial assets 10,005 - 10,005 Trade and other receivables (current and non‑current) - 4,478 4,478 Cash and cash equivalents - 7,603 7,603 10,005 12,081 22,086 At 31 March 2012 Other financial assets 5,385 - 5,385 Trade and other receivables (current and non‑current) - 2,728 2,728 Cash and cash equivalents - 6,257 6,257 5,385 8,985 14,370 Parent At 31 March 2013 Advances to subsidiaries and Shareholder - 420,249 420,249 Other financial assets 10,004 - 10,004 Trade and other receivables (current) - 487 487 Cash and cash equivalents - 5,032 5,032 10,004 425,768 435,772 At 31 March 2012 Advances to subsidiaries and Shareholder - 254,339 254,339 Other financial assets 5,294 - 5,294 Trade and other receivables (current) - 626 626 Cash and cash equivalents - 2,054 2,054 5,294 257,019 262,313
Liabilities at fair liabilities at value through amortised profit or loss cost Total $’000 $’000 $’000 Consolidated At 31 March 2013 Borrowings - 187,151 187,151 Interest rate swaps 12,902 - 12,902 Investment property liability 32,010 - 32,010 Trade and other payables (current and non‑current) - 12,527 12,527 44,912 199,678 244,590 At 31 March 2012 Borrowings - 180,152 180,152 Interest rate swaps 11,763 - 11,763 Investment property liability 28,280 - 28,280 Trade and other payables (current and non‑current) - 9,417 9,417 40,043 189,569 229,612 Parent At 31 March 2013 Borrowings - 160,766 160,766 Interest rate swaps 11,622 - 11,622 Investment property liability 32,010 - 32,010 Trade and other payables - 2,442 2,442 43,632 163,208 206,840 At 31 March 2012 Borrowings - 151,967 151,967 Interest rate swaps 10,717 - 10,717 Invetsment property liability 28,280 - 28,280 Trade and other payables - 3,174 3,174 38,997 155,141 194,138
73 Notes to the Financial Statements continued
25.2 Capital risk management The Group’s capital is its equity plus debt, which is comprised of contributed capital, retained earnings and other reserves. Equity is represented by net assets. The Group manages its revenues, expenses, assets and liabilities, investments and general financial dealings prudently. The Group’s equity is largely managed as a by‑product of managing revenues, expenses, assets, liabilities, investments and general financial dealings. The objective of managing the Group’s equity is to ensure the Group effectively achieves its objectives and purpose, whilst remaining a going concern in order to provide returns for the Shareholder and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend paid to the Shareholder, return capital to the Shareholder, issue new shares or sell assets to reduce debt. The Group has not breached any bank covenants as required by the Bank of New Zealand and Westpac New Zealand Ltd during the reporting period (2012: no breach). There are no externally imposed capital requirements at balance date (2012: nil).
Consolidated Parent 2013 2012 2013 2012 Note $’000 $’000 $’000 $’000 Total borrowings 22 186,671 179,622 160,286 151,437 Less: cash and cash equivalents (7,603) (6,257) (5,032) (2,054) Net debt 179,068 173,365 155,254 149,383 Total equity 476,911 373,883 343,483 78,459 Total capital 655,979 547,248 498,737 227,842 Gearing ratio 27% 32% 31% 66%
26 Leases (a) Group and Company as lessee Commitments for minimum lease payments/receipts in relation to non‑cancellable operating leases are payable/receivable as follows:
Consolidated Parent 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Within one year 118 106 45 29 Later than one year but not later than five years 292 156 96 23 Later than five years 210 347 - 1 620 609 141 53
There are no options to purchase attached to any lease agreements. The operating leases that exist between the Shareholder and the Company for land owned by the Shareholder at The Base and the University of Waikato are rent free until the first rent review date which is in 2019 and 2022 respectively. (b) Group and Company as lessor The lease amounts due from leasees are as follows:
Consolidated Parent 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Within one year 32,820 31,518 1,743 2,000 Later than one year and not later than five years 96,984 104,238 6,858 8,000 Later than five years 117,269 139,239 48,401 58,942 247,073 274,995 57,002 68,942
The majority of lease agreements are renewable at the end of the lease period at market rates. There are no options to purchase attached to any lease agreements.
74 Tainui Group Holdings Annual Report 2013
27 contingent liabilities and gains The Parent and Group had contingent liabilities at 31 March 2013 in respect of: The Shareholder has first priority security of $15m over the present and future undertakings, property, assets, revenues and capital of Raukura Moana Seafoods Limited, Tainui Corporation Limited, Tainui Development Limited and Tainui Group Holdings Limited. Each company jointly and severally, unconditionally and irrevocably guarantees to the Shareholder all secured monies. The Directors believe that the expectation of a liability arising due to the guarantees and mortgages in place is remote.
28 capital commitments Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Consolidated Parent 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Property, plant and equipment - 2,157 - - Other financial assets 583 1,440 - - 583 3,597 - - Investment properties - 2,298 - - - 2,298 - -
29 eVents subsequent to the reporting period On 20 May 2013, Raukura Moana Seafoods Limited entered into a joint venture agreement with Sealord Group Limited to manage the fishing activities. The agreement is subject to Overseas Investment Office approval which is yet to be issued. The joint venture will have no material impact on the financial statements. The Company declared a dividend of $11.1m on 18 June 2013 (2012: $10.1m).
75 independent auditors’ report to the shareholder of Tainui group holdings Limited
Report on the Financial Statements We have audited the financial statements of Tainui Group Holdings Limited on pages 45 to 75, which comprise the statements of financial position as at 31 March 2013, the statements of comprehensive income and statements of changes in equity and statements of cash flows for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information.
Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation of these financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal controls relevant to the Company and the Group’s preparation of financial statements that give a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Other than in our capacity as auditors, tax advisor, and providers of other assurance services, we have no relationship with, or interests in, Tainui Group Holdings Limited or any of its subsidiaries. These services have not impaired our independence as auditors of the Company and the Group.
Opinion In our opinion, the financial statements on pages 45 to 75: (i) comply with generally accepted accounting practice in New Zealand; and (ii) give a true and fair view of the financial position of the Company and the Group as at 31 March 2013, and their financial performance and cash flows for the year then ended.
Report on Other Legal and Regulatory Requirements We also report in accordance with Sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993. In relation to our audit of the financial statements for the year ended 31 March 2013: (i) we have obtained all the information and explanations that we have required; and (ii) in our opinion, proper accounting records have been kept by the Company and the Group as far as appears from an examination of those records.
Restriction on Distribution or Use This report is made solely to the Company’s Shareholder, as a body, in accordance with Section 205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might state to the Company’s Shareholder those matters which we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s Shareholder, as a body, for our audit work, for this report or for the opinions we have formed.
Chartered Accountants Auckland 76 18 June 2013 Tainui Group Holdings Annual Report 2013
WAIKATO-Tainui FISHERIES Limited Directory For the year ended 31 March 2013
date of establishment 31 March 2008
Shareholder waikato‑Tainui Te Kauhanganui Incorporated
board of Directors sir Henry van der Heyden (Chairman) Michael Allen Matthew Cockram Hemi Rau Paki Rawiri
board Advisor joanna Perry
chief Executive mike Pohio
Solicitors Bell Gully McCaw Lewis
registered Office 6 Bryce Street, Hamilton 3204
postal Address p O Box 19295, Hamilton 3244
Telephone +64 7 834 4880
Facsimile +64 7 834 4881
77 WAIKATO-Tainui FISHERIES Limited Statements of Comprehensive Income (unaudited) For the year ended 31 March 2013
2013 2012 $’000 $’000
Revenue 370 499 Net operating profit for the year 370 499
Fair value gains/(losses) - - Net profit for the year 370 499
Other comprehensive income for the year Other comprehensive income for the year - - Total comprehensive income for the year 370 499
WAIKATO-Tainui FISHERIES Limited Statement of Financial Position (unaudited) aS At 31 March 2013
2013 2012 Notes $’000 $’000 EQUITY
Contributed equity 3 - - Retained earnings 4 13,308 13,848 Total equity 13,308 13,848
ASSETS
Current assets Advances 6 373 913
Non-current assets Other financial assets 5 12,935 12,935 Total assets 13,308 13,848
Total net assets 13,308 13,848
Sir Henry van der Heyden, Chairman Michael Allen, Director 18 June 2013 18 June 2013
78 These financial statements should be read in conjunction with the accompanying notes. Tainui Group Holdings Annual Report 2013
WAIKATO-Tainui FISHERIES Limited Statements of Changes in Equity (unaudited) For the year ended 31 March 2013
Contributed Retained total equity earnings equity $’000 $’000 $’000
Balance as at 1 April 2011 - 13,349 13,349 Comprehensive income Net profit for the year - 499 499 Total comprehensive income for the year - 499 499 Balance as at 31 March 2012 - 13,848 13,848 Comprehesive income Net profit for the year - 370 370 Total comprehensive income for the year - 370 370 Transactions with owner Dividend paid - (910) (910) Total transactions with owner - (910) (910) Balance as at 31 March 2013 - 13,308 13,308
These financial statements should be read in conjunction with the accompanying notes. 79 WAIKATO-Tainui FISHERIES Limited Notes to the Financial Statements For the year ended 31 March 2013
1 general information Waikato-Tainui Fisheries Limited’s (the ‘Company’) principal activity is to receive, hold and manage, for so long as they are to be retained, the income shares of Aotearoa Fisheries Limited (AFL), as that term is defined in the Maori Fisheries Act 2004, allocated by Te Ohu Kai Moana Trustee Limited to, or otherwise acquired by the Company. The Company is a limited liability company incorporated and domiciled in New Zealand. The financial statements were authorised for issue by the Directors on the 18th of June 2013.
2 summary of significant accounting policies The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (‘NZ GAAP’). They comply with the New Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’) and other applicable financial reporting standards as appropriate for the profit-oriented entities that qualify for and apply differential reporting concessions. The principal accounting policies applied in preparation of these financial statements are set out below. These policies have been consistently applied for all years presented, unless otherwise stated.
2.1 Basis of preparation Entities Reporting The financial statements are for the Company as a separate legal entity. The Company is designated as profit-oriented for financial reporting purposes. Statutory base Waikato-Tainui Fisheries Limited is a company registered under the Companies Act 1993. The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act 1993. Historical cost convention The financial statements have been prepared under the historical cost convention, as modified by the revaluation of other financial assets at fair value through the profit or loss which are carried at fair value. Differential reporting The Company is a qualifying entity within the Framework for Differential Reporting. The Company qualifies on the basis that it is not publicly accountable and there is no separation between the owner and governing body. The Company has taken advantage of all differential reporting exemptions except for NZ IAS 18 - Revenue, for which it has fully complied.
2.2 Critical accounting estimates and judgments The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The estimates and judgements are reviewed by management on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised. The following are the critical estimates and judgements management has made in the process of applying the Company’s accounting policies and that have the most significant impact on the amounts recognised in the financial statements. Fair value of assets Financial assets at fair value through profit or loss (note 5) are comprised of shares in an unlisted company held at fair value. The fair value of these shares, in the absence of quoted prices, has been determined by using valuation techniques.
2.3 Financial assets and liabilities Recognition and measurement A financial asset or liability is recognised if the Company becomes party to the contractual provisions of the instrument. Regular purchases and sales of financial assets and liabilities are recognised on the trade date, the date on which the Company commits to purchase or sell the asset or liability. A financial asset or liability is
80 Tainui Group Holdings Annual Report 2013
recognised initially at its fair value and in the case of a financial asset or liability measured at amortised cost includes transaction costs that are directly attributable to the acquisition or issue of the instrument. Financial assets and liabilities recorded at fair value through the profit and loss are designated at initial recognition. Financial assets and liabilities measured at amortised cost Financial assets and liabilities measured at amortised cost are non-derivative financial assets and liabilities which meet the following criteria: a) held within a business model whose objective is to hold an instrument in order to collect contractual cash flows; and b) the contractual terms of the instrument gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A gain or loss on a financial asset and liability that is measured at amortised cost and is not part of a hedging relationship shall be recognised in profit and loss when the instrument is derecognised, impaired or reclassified and through the amortisation process. Trade and other receivables are classified as financial assets measured at amortised cost. Trade and other payables and debt instruments are classified as financial liabilities measured at amortised cost. Financial assets and liabilities measured at fair value through profit or loss Financial assets and liabilities are measured at fair value unless measured at amortised cost. At initial recognition, an entity may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument within the scope of this NZ IFRS that is not held for trading. If an entity makes this election, it shall recognise in profit or loss dividends from that investment when the entity’s right to receive payment of the dividend is established in accordance with NZ IAS 18 ‘Revenue’. An entity may also at initial recognition, designate an instrument as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring the instruments or recognising gains and losses on them on different bases. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Company establishes fair value by using valuation techniques. These include the use of recent arm’s length transaction pricing models refined to reflect the Company’s specific circumstances. A gain or loss on a financial asset or liability that is measured at fair value and is not part of a hedging relationship shall be recognised in profit and loss unless the financial asset is an investment in an equity instrument and the entity has made an irrevocable election to present gains and losses on that investment in other comprehensive income. Financial assets are de-recognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities are de-recognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.
2.4 Revenue recognition Revenue is comprised of the fair value for the sale of goods and services, net of goods and services tax (GST), rebates and discounts. Revenue is recognised as follows: (a) Financial assets are classified as revenue on initial recognition; and (b) Dividend income is recognised when the right to receive payment is established.
2.5 Dividends Dividend distribution to the Company Shareholder is recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the Directors and notified to the Company’s Shareholder. Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at balance date.
2.6 Current income tax The Inland Revenue Department approved the Company as a Maaori Authority for the purposes of the Income Tax Act 1994. Accordingly, income tax is payable at a rate of 17.5%. The company currently has $1.9m in its
81 Notes to the Financial Statements continued
Note 2.6 continued Maori Authority Credit Account, which are the tax credits available to pass onto its Shareholder (2012: $0.2m). These future accounts recoverable are unrecognised at 31 March 2013 (2012: nil).
2.7 gST The Company is not registered for GST. Revenue and expenses are reported gross of GST (if any).
3 contributed equity 2013 2012 No. $’000 no. $’000 Ordinary shares Balance at beginning of year 100 - 100 - Balance at end of year 100 - 100 -
All fully paid ordinary shares carry one vote per share and carry the right to dividends. Ordinary shares do not have a par value. On wind-up of the company, all proceeds will be paid to the Sharehoder.
4 retained earnings Movement in retained earnings were as follows: 2013 2012 $’000 $’000 Balance at beginning of year 13,848 13,349 Net profit for the year 370 499 Dividend (910) - Balance at end of year 13,308 13,848
5 other financial assets 2013 2012 $’000 $’000 At fair value through profit or loss Shares in unlisted company – AFL income shares 12,935 12,935
The shares comprise of 6,851 income shares in AFL. These income shares received on 31 March 2008 have no voting rights attached and can be traded amongst iwi. The fair value of AFL income shares is based on a calculation of the equity value of AFL as determined at 31 March 2013. The calculation of equity value considers the average EBIT over the period from 2010 to 2012 and uses a market multiple to determine the enterprise value and deductng net debt to derive the equity value of each income share held at 31 March.
6 related parties Transactions between related entities include advances to and from other entities owned by the Shareholder. All amounts are repayable upon demand and are interest free. There is no impairment of any related party balances. The advance account movement of $0.5m represents cash received and payments made on behalf of the Company by Tainui Group Holdings Limited (2012: $0.5m).
7 contingent liabilities The Company has no contingent liabilities at balance date (2012: nil).
8 capital commitments The Company has no capital commitment at balance date (2012: nil).
9 eVents subsequent to the reporting period The Company declared a dividend of $0.4m on 18 June 2013 (2012: $0.9m)
82 Tainui Group Holdings Annual Report 2013
Notes
83 84 Tainui Group Holdings Annual Report 2013
85 86