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ANNUAL REPORT 2012 & Waikato-Tainui Fisheries Limited & waikato-tainui fisheries limited OUR BUSINESS Our core business is property investment and development. 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. Our 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 as redress for raupatu (land confiscation) in the 19th century. TGH’s principal objective is to maximise Shareholder wealth through a sustainable asset portfolio. This is achieved through our core business which is property investment and development. Our strategy of identifying and growing high quality assets to generate income from them, 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 for education, welfare, health and social and cultural development. 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. Tainui Group Holdings Annual Report 2012 2 Financial performance summary 3 Year in review 4 Our strategy 6 Our structure 7 10 years in review contents 12 Business review Chairman’s report CEO’s report Overview Operational review Financial overview Sustainability Growth Partnerships 34 Our people Our management Our team 38 Our directors Board of directors Directors’ report Governance 48 Financial information Five year trend statement Financial statements – Tainui Group Holdings Limited Financial statements – Waikato-Tainui Fisheries Limited 1 Financial performance summary (TGH and WTF) 2012 2011 Net operating profit $20.7m $14.9m Additional rental and hotel income more than offsets the increase in financing costs. Net profit $39.9m $23.1m Unrealised movement in value of assets provided favourable increases. Revenue growth 57.7% 16.3% Increase in hotel income and a full year’s rental from Te AWA contributed 32% to the revenue growth. Total assets $694m $658m Capital expenditure on The Base and the divestment of shares in Ryman Healthcare is represented in the movement in assets. Capital expenditure $56.4m $114.2m Te AWA and Novotel Auckland Airport were completed during the year. Bank debt to total assets 26.0% 28.3% Proceeds from the sale of the Ryman Healthcare shares were applied to debt. Dividend $11.0m $10.5m The dividend increases by $0.5m annually. The 2011 dividend was declared on 31 March 2011 and is recorded in the financial statements. The 2012 dividend in relation to the year ended 31 March 2012 was declared on 22 June 2012 and is not recorded in the financial statements. Return on Shareholder funds 10.3% 6.7% Returns have been affected by the unrealised movement in asset values as well as a full year’s earnings on major developments. 2 Tainui Group Holdings Annual Report 2012 AUGUST NOVEMBER FEBRUARY HERE-TURI-KOOKAA WHIRINGA-AA-RANGI HUI-TANGURU Lease of Te AWA complete for APRIL PAENGA-WHAAWHAA stages 1-4 Demolition commences for TGH wins TVNZ HOYTS at Te TGH head office Marae Investigates: AWA opens at 6 Bryce Street, 2011 Maori Stage 3 at Te AWA with the global Hamilton of the year – opens premiere of business section Billy T: Te Movie MAY HARATUA TGH wins MARCH Human Rights POUTUU-TE-RANGI Commission: TGH white water Special award rafting team for cultural building references and Novotel Auckland bi-lingual signage Airport Hotel at The Base and in opens particular, Te AWA TGH a finalist The in the New JUNE PIPIRI Base Zealand Institute gift of Chartered Raukura Hauora WTTKI vs TGH card Accountants: O Tainui opens its car rally is launched office as the first 2011 Best non-retail tenant JULY Annual Report at The Base HOONGONGOI SEPTEMBER by a Corporate Bank debt MAHURU Organisation facility for $50 The Callum million signed, Brae Tainui increasing total Joint Venture DECEMBER lending facilities sales surpass 600 HAKIHEA from $200 million sections to $250 million OctobER TGH’s 2011 annual WHIRINGA-AA-NUKU stakeholder function New Te Arataura Public formed and Resource consultation unanimously consents for the by Hamilton approves development of Novotel Auckland City Council appointment of Sir the balance of Airport wins for Ruakura Henry van der land at The Base Auckland commences Heyden as TGH is approved Architecture director and Awards: appointment of Ryman Commercial Joanna Perry as shares architecture and an advisor to the sold interior award TGH board. 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 fishing, managed funds and equities. 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 tenant relationships for mutual benefit. Shareholder We reflect Waikato-Tainuitanga in business wherever appropriate. We provide a consistent dividend stream. 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 2012 Key Strategies OBJECTIVE Progress OUTLOOK Deliver a long term TGH assets grew by 5.5% to Ruakura will be a Growth sustainable dividend $694 million in 2012. unique commercial Grow beyond stream. The Base is New Zealand’s development that Be a recognised largest single retail development will become a $1 billion in contributor to the by area and Australasia’s only project of national high quality region’s economy. hybrid (large format and mall) significance centre. Businesses at The Base creating growth and total assets Be the leader or employment. preferred partner employ 1,528 full and part-time by 2021 of significant employees. development projects. The completion of award winning Novotel Auckland Airport has contributed $59 million to total assets. Deliver investment Weighted average cost of capital Assess all future Operational returns in excess of methodology used to assess capital and market based hurdle performance of TGH’s existing investment projects Deliver returns rates. asset portfolio and inform to determine investment decisions. if returns meet required hurdle rate. To develop highly Implementation of the People Recruitment and People competent, motivated Strategy 2025. retention focus on Value employee and engaged people. Graduate recruitment evening creating a motivating To enable people held in March 2012 to showcase and positive contributions to express their full TGH achievements. environment. potential. Medical checks and flu jabs offered for all staff. Weekly provision of fresh fruit provided to the team. Team building events. Create enduring A group of preferred, strategic Regular review Partnerships relationships with partners to provide appropriate of long-standing partners whose views advice and support as relationships and Create enduring are closely aligned required which includes banks, active engagement relationships with TGH. construction, legal, financial and with principals to advisory services. We profile a ensure that our sample of our strategic partners business needs are on pages 30 to 33. being met. Differentiate from Novotel Auckland Airport hotel The current Sustainability competitors by is infused with Waikato-Tainui development of the completing projects design features providing the new TGH offices Differentiate from that reflect the first insight into New Zealand at 6 Bryce Street, competitors enduring place in New culture for many travellers. Hamilton will feature Zealand society of The Base, and in particular, Waikato-Tainui Waikato-Tainui. Te AWA design features are influences. embedded with cultural elements from Waikato-Tainui. 5 OUR STRUCTURE Waikato-Tainui Te Kauhanganui Incorporated is the Shareholder of both Tainui Group Holdings Limited and Waikato-Tainui Fisheries Limited. Waikato-Tainui consists of over 60,000 registered iwi members. Each iwi member affiliates to at least one of the 68 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 – currently Kiingi Tuheitia. From the Tribal Parliament,