& waikato-tainui fisheries limited · tgh invested in hamilton riverview hotel limited with...
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& w a i k a t o - t a i n u i f i s h e r i e s l i m i t e d
& Waikato-Tainui Fisheries Limited
A N N U A L R E P O R T 2 0 1 2
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.
Our core business is
property investment and
development.
Our business
1
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
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
cont
ents
2
Return on Shareholder funds 6.7%10.3%
Returns have been affected by the unrealised movement in asset values as well as a full year’s earnings on major developments.
Dividend $10.5m$11.0m
The dividend increases by $0.5m annually.
Capital expenditure $114.2m$56.4mTe AWA and Novotel Auckland Airport were completed during the year.
Total assets $658m$694m
Capital expenditure on The Base and the divestment of shares in Ryman Healthcare is represented in the movement in assets.
Revenue growth 16.3%57.7%
Increase in hotel income and a full year’s rental from Te AWA contributed 32% to the revenue growth.
Net profit $23.1m$39.9m
Unrealised movement in value of assets provided favourable increases.
Additional rental and hotel income more than offsets the increase in financing costs.
Net operating profit $14.9m$20.7m
Bank debt to total assets 28.3%26.0%Proceeds from the sale of the Ryman Healthcare shares were applied to debt.
20112012
Financial performance summary (TGH and WTF)
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.
3
Tainui Group Holdings Annual Report 2012
NOvemBeR WhiRiNga-aa-RaNgi
auguST heRe-TuRi-kOOkaa
hOyTS at Te aWa opens with the global premiere of Billy T: Te Movie
The Base gift card is launched
Tgh wins human Rights Commission: Special award for cultural references and bi-lingual signage at The Base and in particular, Te AWA
SepTemBeR mahuRu
The Callum Brae Tainui Joint venture sales surpass 600 sections
Novotel Auckland Airport wins Auckland Architecture Awards: Commercial architecture and interior award
DeCemBeR hakihea
public consultation by Hamilton City Council for Ruakura commences
TGH a finalist in the New Zealand Institute of Chartered Accountants:
2011 Best annual Report by a Corporate Organisation
New Te arataura formed and unanimously approves appointment of Sir henry van der heyden as Tgh director and appointment of Joanna perry as an advisor to the Tgh board.
Tgh wins TVNZ Marae Investigates: 2011 maori of the year – business section
Lease of Te AWA complete for stages 1-4
maRCh pOuTuu-Te-RaNgi
TGH white water rafting team building
Raukura hauora O Tainui opens its office as the first non-retail tenant at The Base
Demolition commences for Tgh head office at 6 Bryce Street, Hamilton
TGH’s 2011 annual stakeholder function
Resource consents for the development of the balance of land at The Base is approved
Ryman shares sold
Tainui Group Holdings Annual Report 2012
JuNe pipiRi
WTTki vs Tgh car rally
Bank debt facility for $50 million signed, increasing total lending facilities from $200 million to $250 million
apRiL paeNga-WhaaWhaa
Stage 3 at Te aWa opens
Novotel auckland airport hotel opens
may haRaTua
FeBRuaRy hui-TaNguRu
JuLy hOONgONgOi
OCTOBeR WhiRiNga-aa-Nuku
4
Our visiOn
Our fOrmula
To lead maaori economic development, alongside other iwi-owned businesses, to benefit maaori and the whole community.
To meet our vision and Objective, we apply a formula that is targeted towards the following key components that are important to our company.
growthWe 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.
CustomersWe cultivate long-term tenant relationships for mutual benefit.
ShareholderWe reflect Waikato-Tainuitanga in business wherever appropriate.
We provide a consistent dividend stream.
StakeholdersWe 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.
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 Objective
Our strategy
5
Tainui Group Holdings Annual Report 2012
OBJECTIVE PROGRESS OUTLOOk
GrowthGrow beyond
$1 billion in high quality total assets
by 2021
OperationalDeliver returns
PeopleValue employee
contributions
PartnershipsCreate enduring
relationships
SustainabilityDifferentiate from
competitors
Deliver a long term
sustainable dividend
stream.
Be a recognised
contributor to the
region’s economy.
Be the leader or
preferred partner
of significant
development projects.
TGH assets grew by 5.5% to
$694 million in 2012.
The Base is New Zealand’s
largest single retail development
by area and Australasia’s only
hybrid (large format and mall)
centre. Businesses at The Base
employ 1,528 full and part-time
employees.
The completion of award winning
Novotel Auckland Airport has
contributed $59 million to total
assets.
Ruakura will be a
unique commercial
development that
will become a
project of national
significance
creating growth and
employment.
Deliver investment
returns in excess of
market based hurdle
rates.
Weighted average cost of capital
methodology used to assess
performance of TGH’s existing
asset portfolio and inform
investment decisions.
Assess all future
capital and
investment projects
to determine
if returns meet
required hurdle rate.
To develop highly
competent, motivated
and engaged people.
To enable people
to express their full
potential.
Implementation of the People
Strategy 2025.
Graduate recruitment evening
held in March 2012 to showcase
TGH achievements.
Medical checks and flu jabs
offered for all staff. Weekly
provision of fresh fruit provided to
the team. Team building events.
Recruitment and
retention focus on
creating a motivating
and positive
environment.
Create enduring
relationships with
partners whose views
are closely aligned
with TGH.
A group of preferred, strategic
partners to provide appropriate
advice and support as
required which includes banks,
construction, legal, financial and
advisory services. We profile a
sample of our strategic partners
on pages 30 to 33.
Regular review
of long-standing
relationships and
active engagement
with principals to
ensure that our
business needs are
being met.
Differentiate from
competitors by
completing projects
that reflect the
enduring place in New
Zealand society of
Waikato-Tainui.
Novotel Auckland Airport hotel
is infused with Waikato-Tainui
design features providing the
first insight into New Zealand
culture for many travellers.
The Base, and in particular,
Te AWA design features are
embedded with cultural elements
from Waikato-Tainui.
The current
development of the
new TGH offices
at 6 Bryce Street,
Hamilton will feature
Waikato-Tainui
influences.
kEY STRATEGIES
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, 10 members are elected onto its
executive – Te Arataura, and one is appointed by kiingi
Tuheitia. Te Arataura oversees the tribal operations which
are based in both Hopuhopu and Hamilton.
Our structure
6
People Property Management
Chief executive Officer
Property Investment and Development
Legal and Administrative
Services
General Manager Corporate Services
Group Treasury
Chief Financial Officer
Corporate Financial Services
General Manager Property
Tgh Corporate Structure
Waikato-Tainui iwi members
68 Waikato-Tainui marae
Waikato Raupatu River Trust
Waikato Raupatu Lands Trust
Tainui Group Holdings Limited
Waikato-Tainui Fisheries Limited
Waikato-Tainui Te Kauhanganui Incorporated (tribal parliament)
Te Arataura
7
Tainui Group Holdings Annual Report 2012
decisions.” Agreement was
eventually reached for non-
strategic lands to be sold but
on condition that the company
would acquire other (more
productive) parcels of land
over time to compensate, and
a process was established
to help guide future land
decisions. key parcels, such
as The Base, were also placed
back in tribal ownership under
‘Pootatau Te Wherowhero
title’, with TGH retaining
management responsibilities.
As land was sold, proceeds
were placed in a managed
fund that could be liquidated
easily as opportunities
were identified. Leases also
Chairman John Spencer and CeO
mike pohio reflect on a decade
of Tgh’s operation as a separate
commercial entity, and provide
some insights into the company’s
thinking throughout that period.
eaRLy yeaRS 1995-2002
In 1995 Waikato-Tainui settled
its Raupatu or confiscation
claims for $170 million,
comprising both land and
cash. In 1997 all the property
transfers from the Crown to
the tribe were completed, and
TGH was established.
Positive decisions were
taken in those early years.
TGH invested in Hamilton
Riverview Hotel Limited with
Hamilton City Council and
Accor in 1998, and the Novotel
Tainui was built in 1999.
The 655 section residential
development at Huntington
commenced in 2001, and The
Base was identified as a high
priority for future development
(along with TGH offices
and rationalisation of non
performing assets).
However, a number of other
early business ventures failed
due to inadequate systems
and processes, and some $40
million was lost. While banks
had earlier lent money to TGH,
they were now reluctant to
renew debt facilities.
ReBuiLDiNg 2003-2006
The tribe took stock, and
in 2002 John Spencer was
approached to advise on a
new direction. TGH took over
all commercial assets, as up
till then some had been held
under other structures. The
settlement included over
450 property titles, but some
were little more than roadside
strips, so a full stock-take was
required.
A Board ‘charter’ was
eventually written for the
company, providing for
six directors – three tribal
appointees and three
independents. The charter
stipulated that one of the
independent directors must
be the Chairman. Board
processes were reviewed,
and governance standards
established, based on the
nine principles set down in
the Securities Commission
guidelines (now the Financial
Markets Authority). New
Board appointments were
made, including the Hon.
koro Wetere, and John
Spencer became Chairman.
A new management structure
was established.
“The most important task
was to restore the confidence
of lenders. Without the ability
to borrow, the company
wouldn’t be able to proceed
with developments such as
The Base. This meant at least
three years of TGH proving it
could live within its means,”
says Spencer.
The only way to achieve
this was to sell assets and
establish a pool of funds.
“This was a difficult time,”
says Spencer. “Having just
had their land returned,
and given their ancestral
connections to it, the
tribe was faced with hard
2003Restructured management team commence
John Spencer appointed as Tgh’s Chairman
huntington development commences
2004Ownership of commercial assets transferred from the Shareholder to Tgh
Raukura moana Seafoods ceased harvesting and selling fish
The Base construction commences
8
received early attention, with
a formal register created, and
evaluations made of their value
for either income or strategic
purposes. For those that
were retained, independent
valuations were needed for
balance sheet purposes and to
reach agreement with tenants
to ensure fair market rentals
were being paid. “Processes
like these were vital steps in
establishing a professional
commercial reputation for the
company,” says Spencer.
The company’s big break
came in 2003 when Sir
Stephen Tindall, owner of
The Warehouse, agreed to become the anchor tenant at
The Base, and to joint venture
the development with TGH
on a 50/50 basis. Crucially, he
also advocated for the project
with Hamilton City Council,
who at that time seemed intent
on rejecting TGH’s resource
consent application so as to
protect Chartwell Shopping
Centre. “Without his personal
intervention, The Base would
not exist today, and once The
Warehouse was established
on the site, it attracted other
‘big box’ retailers, enabling the
project to gain momentum,”
says Spencer.
2005managed fund investments purchased
hamilton Riverside Casino sell down of 15% minority interest
Raukura moana Fisheries 30% sell down
The Base opens its first large format retail stores
2006puka park Resort sold
acquisition of two properties in hamilton CBD for $13m
NeW DiReCTiONS 2007-2012
Formal discussions took
place between TGH and the
tribe to resolve a key issue
– consistency in dividend
income from TGH, making it
possible for the tribe to plan
its activities with certainty.
John Spencer says a trade-off
had to be made between the
desired level of dividend and
reinvestment in the business
(to enable capital growth).
In 2006 TGH undertook to
guarantee an annual dividend
of $10 million for 5 years, and
the company was given a
strict new focus – to maximise
shareholder wealth.
In August 2006 Mike Pohio
replaced Steve Murray as
Chief Executive. By now TGH
was once again able to borrow
money for development, via an
initial $30 million facility from
Westpac. The timing could not
have been more fortuitous.
In 2007 agreement was
reached with The Warehouse
to sell its 50% share of The
Base, and with borrowed
capital, TGH was able to take
outright ownership. Placing
all TGH’s eggs in one basket
was however a risk: the plan
for developing the rest of
The Base was still only in its
conceptual stages. Three
factors swayed the decision:
the price was never going
to get cheaper, internal
confidence TGH could go
it alone and 12 hectares on
the northern boundary that
could now be added to the
development.
It had become apparent that
further development of The
Base had to be TGH’s single
most important strategic
investment. There were simply
no other comparable options.
By this time the majority of
potential asset sales had been
realised. Projecting forward,
the company also knew that
income from section sales at
Huntington were coming to
an end.
Meanwhile, the Ibis-Tainui was
built, and a close relationship
was developed with Ngai Tahu
Holdings Corporation.
Throughout this period, TGH
became very concerned
about an over-heated property
market. If it deflated suddenly,
property values could
plummet, risking a decline
in equity. The company did
however take confidence that
its debt to asset ratio was well
20042003
$m
-40
-20
0
20
40
60
80
20122011201020092008200720062005
40
23
34
(28)
52
6469
62
2218
NeT pROFiT (TGH AND WTF)$m TOTaL aSSeTS aND DeBT (TGH AND WTF)
20042003
0
100
200
300
400
500
600
700
800
20122011201020092008200720062005
13
316
238
180166
694658
529497
536
378
Total assets
Debt
1878875 180734 6
9
Tainui Group Holdings Annual Report 2012
2007Construction of ibis-Tainui hotel commences
$30m debt facility with Westpac established
2008ibis-Tainui opens
purchase of shares in Ryman for $37m
$14m of shares in aotearoa Fisheries Limited received
50% of The Base acquired from the joint venture partners, The Warehouse group
planning for Te aWa commences
2009partial selldown of managed funds investments
Construction at Te aWa stage 1 commences
Construction of The Base large format retail ends
2010Full selldown of managed funds investments
Construction at Novotel auckland airport hotel commences
planning for Ruakura commences
Construction of Te aWa stage 2 commences
$50m debt facility with BNZ established
Debt facility with Westpac is increased to $100m
That quality came not just
from attention to detail. “Both
The Base and Te AWA are
hugely complex equations”,
says Pohio. “It included
selection of the right tenants,
their placement in relation to
each other, their infrastructure
and support needs, and the
management of everything
from security to waste to
maintenance.”
Te AWA was partially financed
by a new $50 million debt
facility, this time from the BNZ.
Spencer says the signing
of this agreement was very
significant: the BNZ had
written off a loan in the early
years. Having them back was
a very special moment, and
another important milestone.
In 2008 the company
liquidated its managed funds,
and these proceeds were
also earmarked for Te AWA,
along with a new opportunity.
TGH and Ngai Tahu Holdings
Corporation had signed a
co-investment agreement, and
the chance to jointly purchase
shares in Ryman Healthcare
came up. TGH bought 4.5% of
Ryman. “We very much saw
it as a way to consummate
the relationship,” says Pohio.
under its self-imposed 30%
limit, and that by now all its
properties were insulated by
either strategic value or solid
tenancies.
Nevertheless, as the Global
Financial Crisis (GFC) hit,
TGH postponed most planned
developments save The Base.
Planning for Te AWA, the mall,
was underway, and in 2008
Spencer says the company
made “its biggest-ever call,
to proceed with this new
development despite the
ongoing impact of the GFC.”
The Board however issued
a caveat: 80% of tenancies
had to be signed up before
construction could begin on
each stage of development.
Farmers Trading became the
anchor tenant and construction
commenced in January 2009.
Pohio says that achieving this
in a market where no-one
else could attract tenants was
an absolute turning point for
the company. “What swung
it was prospective tenants’
understanding of what TGH
was capable of, and what Te
AWA could mean for their
competitive position.”
“For perhaps the first time,
the penny dropped that TGH
was a property investor, not a
property developer. In other
words, we weren’t going to
build this flagship asset and
then flick it on in six months,”
says Spencer. “Tenants saw
that we were flexible in
meeting their individual needs,
and we had a real commitment
to quality.”
20042003
$m
0
2
4
6
10
8
12
20122011201020092008200720062005
11.0
1010.510.510.7
7.4
5.5
3.4
0.0
10
21%
0%
35%
46%
68%
57%
84%
64%70%
53%
Dividend
Dividend % of NPAT
aNNuaL DiviDeND (TGH AND WTF)
2004
Te AWA
The Base (excluding Te AWA)
Novotel Auckland Airport
Farms and other investment property
Hamilton CBD properties
Callum Brae Tanui
2003
$m
0
20
40
60
80
100
120
20122011201020092008200720062005
CapiTaL expeNDiTuRe (TGH)
1 0
“Although we sold out in 2012
to help finance the Novotel
Auckland Airport hotel, we
maintain close ties with Ngai
Tahu, and are always on
the look-out for other co-
investments.”
The Novotel Auckland Airport
hotel wasn’t specifically in
TGH’s strategic plan, though
it had looked at potential
hotel developments. It came
about unexpectedly through
pre-existing relationships
with Accor and Auckland
International Airport, but it was
definitely an opportunity worth
checking out. “Airport hotels
are a very sound commercial
investment. Auckland had
none on its campus, and with
a 70% share, we got an added
boost to our future cashflows,”
says Pohio.
“Equally importantly, along
with Te AWA, it entrenched
our reputation for creating
top quality assets,” he
says, “and reinforced our
commitment to reflecting
Waikato-Tainui ownership
in our developments. The
hotel, which has since won
2011Construction of Te aWa stage 3 commences
Te aWa stage 1 & 2 opens
$50m debt facility with BNZ signed increasing debt capacity to $200m
2012Novotel auckland airport opens
Sale of shares in Ryman
huntington development nears completion
Te aWa stage 3 & 4 opens
regional and national design
and architectural awards, is a
showcase of New Zealand’s
rich cultural heritage.”
The Accor Group again
featured as a commercial
partner in a TGH-led hotel
development, and was a good
example of TGH’s approach to
joint-venturing. “The reality is
that we don’t want to finance
everything ourselves, even if
we could. And more than that,
it recognises that each party
brings different skills to the
table,” he says.
TGH has developed close
working relationships with
a range of professional
advisors as well. These
include: architects Ignite
and Warren and Mahoney,
property development
project managers Greenstone
Group, engineers Boffa
Miskell, construction
company Naylor Love, law
firm Bell Gully, auditors
PricewaterhouseCoopers,
financial advisors Ernst Young
and public affairs advisors
Busby Ramshaw Grice.
Partnerships will again be
to the fore in the inland port
and freight hub at Ruakura.
All these developments have
brought a higher public
profile, and from 2006, TGH
started to come out of its
shell. Up till then, it had been
a case of proving by doing.
What changed was a survey
the company did back then of
public attitudes. “There were
many misconceptions, and
a lot of negativity. It showed
we had to get out there more
and tell people what we were
doing, and by then we had a
good story to tell.”
Those efforts in recent years
have included an annual event
at which the company’s results
are presented to community
leaders, councils, the business
community and Members of
Parliament. They have also
seen the publication of an
enhanced annual report, one
that the New Zealand Institute
of Chartered Accountants
recognised as a finalist in
the main category of their
2011 Annual Report Awards.
In recent years it has been
augmented with a special
shareholder supplement that
provides further details on the
financial results. TGH’s website
has also had a refresh to make
it more user-friendly.
Behind the scenes, the
company puts a lot of effort
into shareholder consultation
via an annual strategic
planning session with Te
Arataura, the tribal executive,
and regular presentations to
Te kauhanganui, the tribal
Parliament. The Chairman and
CEO also have regular contact
with the Te Arataura Chair on
day to day matters.
Spencer and Pohio have
observed more than one
sea change in the past few
years in attitudes toward
the company. “The tribe
are certainly pleased with
what’s been achieved, and I
think the wider community
has now accepted that what
happened in the early days
after the settlement is well
and truly in the past,”says
Spencer. “More recently too,
people have moved past the
idea that we’re some kind
of threat.” The final stages
of The Base were famously
blocked in late 2009 by what
was known as ‘Variation 21.’ It
was overturned by the High
Court, and following the 2010
local body elections, the issues
were successfully resolved
by face to face negotiation.
“We now have a real sense
that Hamilton and the Waikato
see TGH as part and parcel of
their future.”
“Our track record shows
that we’re here for the long
term. We’re big investors
in the local economy. We’re
into partnerships. We value
long-term relationships. And
Ruakura is potentially the
biggest future driver of the
Waikato economy,” says Pohio.
For John Spencer, these kinds
of initiatives mean that iwi-
owned investors are going
to be a crucial part of New
Zealand’s economy in the
years to come.
One myth he still does want
to dispel though is that
Waikato-Tainui, and Ngai Tahu,
are ‘rich.’ “Take the annual
dividend and divide it by
60,000 members of the tribe.
It’s a few hundred dollars each.
And if you liquidated TGH
tomorrow – sold everything,
paid off the loans – each
person would get a one-off
cheque of about $6,000. So
there’s a long way to go yet,
but the trick is to stay positive
and to keep looking for what’s
possible.”
koro’s involvement with the Waikato-Tainui
Raupatu (land confiscation) settlement and
its aftermath goes back a long way.
He was a member of successive
Parliaments that created the Waitangi
Tribunal, extended its remit so it could
hear claims back to 1840 and expanded
its resources so it could process more
claims, more quickly. He was also involved
in several of those decisions in various
official capacities.
Although Waikato-Tainui finally settled
their Raupatu claim by direct negotiation
with the Crown, they were only able to do
so in this context.
Transition
koro was instrumental in the consolidation
of the tribe’s commercial operations in
the early 2000’s, signing off on a plan that
saw TGH separated out and given a single
objective – to maximise returns to its
Shareholder.
After that early restructuring, a long
period generating revenue and steady
accumulation of assets followed.
Development also started on The Base.
koro derives great satisfaction from what’s
been achieved there today, particularly
the tribal elements that infuse the whole
complex. “Our history is implanted in it.”
The late 2000’s were also a challenging
time with the Global Financial Crisis. “Our
valuations went down, and several projects
were put on hold, but we were still able to
pay the dividend.”
By the time the Novotel Auckland Airport
hotel came along, TGH’s assets had grown
sufficiently for the company to finally
normalise its banking relationships.
“That was a big thing. They could see we
were all reading off the same page, that
we had good asset backing and we were
determined to move ahead.”
Responsibilities
Before any action can be taken on land it
manages or owns, the company’s code
of ethics requires it to consult with the
relevant hapuu of Tainui.
Apart from carrying out his normal
Director’s duties, koro has played a
pivotal role in undertaking this work,
not least because of his knowledge of
history and the fact that he knows so
many of the people concerned.
For example, following koro’s
consultations, the Novotel Tainui, The Base
and the Ibis Tainui all received the green
light from the local hapuu, who then went
on to erect their own poupou at the sites.
With Ruakura, the latest development,
consultation with Tauranga Moana iwi
was involved. “Tauranga people have
had a long association with us,” koro
explains. “When we went to see them
about Ruakura, they were very keen.
These working relationships go back
some years, well before our time, and can
always be rekindled.”
Tribal and commercial alignment
Looking ahead, koro says that TGH and
the Waikato-Tainui Executive are likely to
come together more often than in the past.
“We need to continue to communicate
with one another, continue to work
together, and for the tribe to understand
the long-term steps we are taking to
develop and expand the assets.”
“People at every level of the tribe,
right down to the marae, need to be
involved and understand what this is
about. Communication is of the utmost
importance, from the top down. Our young
people need to be involved to ensure the
whole operation is based on true transition
and succession.”
On his retirement, koro says it’s important
to place on record the contribution of the
independent Directors he has worked
with over the years. “I want to especially
acknowledge the time and expertise
they have given, which I have greatly
appreciated.”
Hon. Koro Wetere
A lifetime of service
The hON. kORO WeTeRe haS SeRveD aS a TRiBaLLy-appOiNTeD
DiReCTOR ON Tgh SiNCe apRiL 2002, aND ReTiReS ThiS yeaR.
he WaS pReviOuSLy a memBeR OF paRLiameNT, hOLDiNg The eLeCTORaTe SeaT OF WeSTeRN
maORi FOR 27 yeaRS, aND WaS miNiSTeR OF maORi aFFaiRS
FROm 1984 TO 1990.
1 1
Tainui Group Holdings Annual Report 2012
1 2
OveRvieW
TGH made good progress in 2012.
General economic conditions remained subdued
during the year, and the European debt crisis created
great uncertainty in late 2011 and early 2012.
However, the company remained very much focused
during the first six months on completing the Novotel
Auckland Airport hotel and Te AWA, the specialty
retail mall at The Base.
From the chairman
It’s my pleasure to introduce
the 2012 Annual Report of
Tainui Group Holdings Ltd
(TGH) and Waikato-Tainui
Fisheries Ltd (WTF).
2012 FiNaNCiaL ReSuLTS
We are pleased with the 2012 results, despite the flat
to negative market conditions experienced through
the year, especially in the retail sector.
The combined net operating profit for TGH and WTF
was $20.7 million, up $6 million (40%) from 2011.
The increase is largely due to revenues from Te AWA
and the Novotel Auckland Airport hotel. Stage 3 of
Te AWA opened in April with the remaining planned
stage in August, and the Novotel Auckland Airport
hotel opened in late May.
For the first time, income from the hotel and retail
tenancies comprised the majority of the company’s
revenue, though we continue to derive great stability
from long-term commercial and Crown leases.
Residential property earnings were lower than 2011,
recognising that we are coming to the end of the
Callum Brae Tainui development at Huntington. 29
sections were sold during the year.
The cash flows they will generate over time are critical
to maintain a steady dividend to our Shareholder and
also to help finance development of the freight hub
and inland port at Ruakura.
The Base has been TGH’s primary focus for almost
a decade. While there are still several stages to
go before the whole complex is complete, for the
first time we have sufficient certainty there to be
able to concentrate our attention on another major
development. Ruakura is that new project, and this was
very much the focus during the second six months.
All the necessAry structures, policies, processes And stAndArds thAt Are criticAl for commerciAl success for tGh hAve been entrenched. KuA oti te puumAu o nGAA puunAhA, nGAA tuKAnGA, nGAA tiKAnGA me nGAA pAerewA mAhi e orA Ai te mAhi pAKihi A tGh.
John Spencer, Chairman
business review
1 3
Tainui Group Holdings Annual Report 2012
The net profit for TGH and WTF was $40 million, up
73% from $23 million last year. This largely reflects
the improved operating profit.
TGH’s and WTF’s combined dividend to its
Shareholder of $11 million was up $0.5 million from
2011, and the return on Shareholder funds improved
from 6.7% to 10.3%.
There was little movement in our balance sheet this
year. Total assets at 31 March were up $36 million to
$694 million.
On the plus side, re-valuations recognised Ruakura
advancing as a development proposition over the past
12 months. The Base also rose in value, now that Te
AWA is completed and additional resource consents
have been granted. The sale of our Ryman shares for
$57 million gave a capital uplift, though this is now
represented by an increased value of the property in
which we invested the proceeds.
The value of our swap book has fallen into negative
territory, not an unexpected result given the fact that
interest rates remained near historical lows. The value is
of course unrealised, and when interest rates eventually
rise, the book will come back into positive territory.
Borrowings have fallen slightly to $180 million. During
the year TGH took the opportunity to renegotiate its
existing debt facilities. These were increased $50 million
to $250 million in anticipation of upcoming projects.
TGH’s debt is currently budgeted to grow to around
$200 million by the end of the 2013 financial year and
$235 million by 2014. This however has to be seen
in the context of expected growth in the value of the
company’s assets. TGH has a stated policy that debt
cannot represent more than 30% of total assets. It is
currently sitting at 26%.
I’d also reiterate the points I made in last year’s report,
that apart from retained earnings, debt is currently
the only source of capital for the company. We are
also in the fortunate position to have been funding
developments over the past three years during a
period of low borrowing costs.
pORTFOLiO vaLue By SeCTOR TGH + WTF
Investment properties 81%
Fishing 5%
Hotels 11%
Development 3%
3418 1512
Trading Non-Trading
-60
-45
-30
-15
0
15
30
45
60
19
218
(40)
2008 2009 2010 2011 2012
$M
1816
NeT pROFiT aFTeR miNORiTy iNTeReST TGH + WTF
NeT OpeRaTiNg pROFiT aFTeR miNORiTy iNTeReST TGH + WTF
0
2
4
6
8
10
12
14
16
18
20
2008 2009 2010 2011 2012
$M22 21
1516
12
18
NeT pROFiT aFTeR miNORiTy iNTeReST TGH + WTF
-30
-15
0
15
30
45
60
0.5
390.4
23
(1)
(27)
1438 34
TGH WTF
2008 2009 2010 2011 2012
$M
TOTaL aSSeTS TGH + WTF
0
175
350
525
700
1314
484522
TGH WTF
2008 2009 2010 2011 2012
$M
13
516
1413
680645
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STRaTegiC DiReCTiON
As I’ve stated in previous years, while the company’s
primary objective is to maximise returns to its
Shareholder, the strategies needed to achieve that do
not focus on short-term financial results.
TGH is a firmly committed multi-generational investor,
looking to grow and add value to its investment
portfolio over the long term.
In recent years our business has become more
specialised, with the emphasis on property
investment. This is in part a natural progression: as
we invest more deeply in our property holdings, they
increase in value relative to our other assets.
However the company has consciously sought to
diversify within that portfolio. Once The Base is
complete for example, it is unlikely we will pursue
other retail opportunities.
Hence also the current focus on Ruakura. If the
necessary Regional and District planning approvals
are obtained, it will become the main development
focus for the company for several years.
In 2012 the company continued to enhance existing
partnerships and develop new ones, as this long-
established strategy will remain a key to its future
success. For example, TGH is looking to sign a co-
investment agreement with Te Arawa Group Holdings
Limited, the result of several meetings during the year.
TGH also invested in our people, supporting training
at all levels and recruiting new staff. Interest in our
graduate programme continues to grow, which is
extremely heartening, and at some stage in the future
we may expand the programme beyond four to five
places. At a recent recruitment evening, we had 27
attendees, mostly of Waikato-Tainui descent, up from
19 last year.
Ruakura, hamilton
Te aWa, The Base
1 5
Tainui Group Holdings Annual Report 2012
gOveRNaNCe
In February I gave notice of my intention to resign on
30 June 2012, after almost a decade on the Board. On
30 March, Te Arataura, the Executive of Waikato-Tainui,
unanimously approved TGH’s recommendation that
Sir Henry van der Heyden, the outgoing Chairman of
Fonterra, replace me as an Independent Director. At
its July meeting this year, the TGH Board must elect a
new Chairman.
From 1 April 2012, chartered accountant and
professional director Joanna Perry joined TGH as a
specialist advisor to the Board. It has long been our
intention to find a replacement in this role for Rob
McLeod, who performed this function for several years.
I would like to thank retiring Board members
Rukumoana Schaafhausen and Rahui Papa for their
work during the year, and welcome Paki Rawiri and
Hemi Rau.
I do however want to pay a very special tribute to the
Hon. koro Wetere, also retiring, who has served with
me on the Board for the whole decade I have held the
role of Chairman. His has been a pivotal role. koro
has been the rock-solid bridge between the tribe
and TGH, and between ourselves and other tribes
with whom we have sought to establish commercial
relationships over the years. He has also been an
active and engaged member of the Board throughout.
He, as much as anyone, deserves enormous credit for
where the company is today.
Improving the capability to deliver
Rukumoana Schaafhausen
has been a member
of Te kauhanganui, the
tribal Parliament, since
its inception in 1995. She
was a tribally appointed
Director of TGH from 2009-
2012. She is also a Director
of Genesis Energy, Regional
Facilities Auckland Limited
and the NZ Centre for
Social Innovation.
In 2011 she applied for and was accepted on a
one year course run by the New Zealand
chapter of ‘Global Women in Leadership’. The
course is designed for women in either the
public or private sectors who are breaking into
senior management or governance roles. It
involves a programme of study and assignments,
supported by monthly day-long workshops and
ongoing mentoring.
For Ruku, the most significant benefit was
becoming more aware of her own leadership
capabilities, and developing more confidence to
use them. “I definitely felt I was able to make a
greater contribution to TGH as a result, especially
around strategy.”
“Being a tribally-appointed Director is all
about ensuring alignment between the tribe’s
objectives and TGH’s commercial ones. It
also involves going back to the tribal Board
(Te Arataura) and talking with them about the
challenges and opportunities facing TGH. What
you’re looking for is win-win outcomes,” she says.
Looking back over her time in tribal governance
roles, Ruku says that tribal members have
become very astute and are more involved.
“They have always been clear about what they
wanted, but now they want to see greater and
more tangible returns from both tribal and
commercial investments.”
She applauds this. “If iwi are doing well, so will
the rest of New Zealand.”
Te koohao o te ngira ki Te aWa
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paRTiNg COmmeNTS
Since this is my last Chairman’s Report for TGH
consequent on my resignation, I’d like to sign off with
two parting comments.
First, one of the objectives we set for TGH a decade
ago was that the community also benefit from our
investments.
However, an alternative option that could have been
pursued was to put the Waikato-Tainui settlement in a
managed fund, much like the kiwiSaver schemes of
today that readers will be familiar with.
Had that option been chosen, there might be few if
any good quality hotels in Hamilton today. The tribe
could’ve leased the land at Te Rapa for industrial
use: there would then be no Base retail centre, and
Hamiltonians would’ve spent much of their shopping
dollar elsewhere. Neighbouring cities would have
gone from strength to strength. There would be no
contemplation of a freight hub at Ruakura, with other
regions instead looking to capitalise on the opportunity.
Today, despite some short-term issues, the Waikato
can look forward to a prosperous future. Dairying has
always been seen as the area’s strength, but history
shows that it’s not sufficient on its own. The region’s
future is also inextricably bound up with Waikato-
Tainui and TGH, and vice-versa.
Second, it is my hope that iwi as a whole will at some
stage realise their common potential by investing
at least some of their assets in a single investment
vehicle. There is strength in numbers, and such
a venture could truly diversify risk and take on
OuTLOOk
For the next few years, the company’s results are likely
to be fairly similar to 2012.
Longer term growth in earnings is currently
dependent on obtaining planning approvals for
Ruakura and finalising a plan for the development.
Mike Pohio, Chief Executive, elaborates further on this
in his report.
the reGion’s future is Also inextricAbly bound up with wAiKAto-tAinui And tGh, And vice-versA. Ko te whAnAKe o teenei rohe e whiri KotAhi AnA Ki A wAiKAto-tAinui me tGh.
Te aWa, The Base
1 7
Tainui Group Holdings Annual Report 2012
large projects. Like all iwi investments, it would be
long term, and all New Zealanders would be the
beneficiaries, just as the Waikato and Auckland have
been from TGH’s investments. The country sorely
needs large local investors, as ongoing debates over
foreign ownership reveal.
If I look back on the ten years I have served as
Chairman of the Board, my overwhelming feeling is
one of huge admiration for the people I’ve worked
with – my fellow Directors, the management team, our
staff, business partners, customers and suppliers.
It is not possible here to name them all, but I’d like to
sincerely thank everyone with whom I have worked in
my capacity as TGH Chairman.
It is my hope that Waikato-Tainui continues to produce
directors capable not only of sitting on their own
commercial board but who can also at the same time
operate at the top levels of commercial governance in
New Zealand as Rukumoana Schaafhausen has done.
The quality of my fellow independent Directors and
advisors has always been high, and is even more
so today with the likes of Mike Allen and Matthew
Cockram, and now Sir Henry van der Heyden and
Joanna Perry.
The management team and staff, under Mike Pohio’s
leadership, are as good as any I have encountered in
my managerial and directorship careers.
All the necessary structures, policies, processes and
standards that are critical for commercial success for
TGH have been entrenched.
So the future for the company is surely a bright one,
and I wish everyone associated with it all the very best.
John Spencer, Chairman.
Te aWa, The Base
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The financial results for the year were very welcome,
and vindicate our decisions to continue investing
in new property assets in recent years, despite the
Global Financial Crisis (GFC). The GFC has in fact
been an advantage in some respects: construction
costs, for example, have been very competitive.
Our initial focus during the financial year was on
bedding in Te AWA, the new specialty retail mall at
The Base, and the new Novotel Auckland Airport
hotel, both of which were completed in the first half.
The result is that TGH is now in the position of having
better comfort around future cash flows.
We are constantly making strategic assessments of
what the best options are for each of the company’s
assets. We benchmark each of our properties against
others in the same asset class. This not only gives us
the criteria for investment decisions, but also allows
us to measure how we’re performing over time. The
result is that we have more certainty than ever before
about where our future opportunities lie.
So in the second half of the year, it was more of a
behind-the-scenes effort directed toward that end.
Planning for our proposed freight hub and inland port
at Ruakura took up a lot of our time. It involved an
intensive programme of work to prepare the project
for inclusion in the draft Hamilton City District Plan and
Waikato Regional Council’s Regional Policy Statement.
Both are up for renewal and therefore consultation this
calendar year.
The Ruakura project involves creating a master
plan for 500 hectares of land, with all land uses
fully envisioned and integrated, and all necessary
infrastructure identified to facilitate those land uses. It
also means fully comprehending what is involved in
creating an effective inland port and freight hub.
But above and beyond that, it involves developing a
real vision for what Ruakura could become, more than
just what it must become.
Also high on the agenda in 2012 was identifying future
priorities at The Base and finalising The Base master
plan, having secured resource consents for most of its
remaining stages.
2012 was very
much a year of
consolidation
for Tainui Group
Holdings.
From the ceO
there will be huGe opportunities for others to join us in the ruAKurA development, And thAt it will AttrAct considerAble externAl investment into the wAiKAto. ArAA Anoo nGAA wheinGA o nGeetehi KiA pueA A ruAKurA, KA tooiA mAi tAhi nGAA putunGA tAhuA o wAho Ki te riu o wAiKAto.
Mike Pohio, CEO
1 9
Tainui Group Holdings Annual Report 2012
Te aWa
Stage 3A opened in April, and Stages 3B and 4 opened
in August, featuring the new Hoyts cinema complex
and the worldwide premiere of Billy T: Te Movie.
A major challenge for us with Stage 3A and 3B of
Te AWA was securing tenants in a subdued retail
market. The February Christchurch earthquake and
Queensland floods also affected the process, with
some potential tenants’ decisions unavoidably delayed
because of these events.
TGH’s property team however made a huge effort,
and while Stages 3A and 3B were not 100% tenanted
on opening day, we did achieve this milestone shortly
thereafter.
Completion of Te AWA was the right strategic
decision for TGH, just as locating there was the right
one for the new mall’s tenants.
When we were planning Te AWA, we undertook
a careful study of who its customers would be: the
312,000 people in the Waikato region, of which 60%
were resident outside of Hamilton City. We also knew
there was leakage to comparable malls in Auckland
and Tauranga, because there was little in Hamilton to
compete with them. While we had large format retail
at The Base, specialty retail, especially fashion and
complementary stores, was the value proposition for
Te AWA.
That approach has been validated by customer
patronage. On Boxing Day 2010, for example, 23,000
people visited Te AWA. A year later, on Boxing Day
2011, 41,000 did so. And in mid-March 2012, a normal
trading Saturday, 20,000 came to the mall.
Apart from the numbers, Te AWA has undoubtably
broadened the range of customers coming to The
Base, and has reinforced our property diversification
strategy, this time within the retail space.
NOvOTeL auCkLaND aiRpORT hOTeL
The 263-bed, four and a half star Novotel Auckland
Airport was officially opened on Friday 27 May by
kiingi Tuheitia and the Prime Minister, John key, in a
dawn ceremony.
With just 100 days out from the start of the Rugby
World Cup, the hotel was able to capitalise on that
event, and since then has maintained consistently
good occupancy and rates.
It has certainly met our expectations, as well as
that of customers, who have provided very positive
feedback. The hotel is located 20 metres from the
international terminal, and so is well placed to offer
accommodation for international travellers arriving
late in the evening or departing early morning.
The hotel’s restaurant, conference and meeting
facilities are also being well utilised, given that the
area has been short of such amenities.
The $65 million project was developed by a joint
venture comprising ourselves, Auckland International
Airport and Accor, who operate the hotel.
Auckland Airport handles over 13 million passengers
annually, projected to grow to 24 million by 2025, with
more than 70% of all international visitors to New
Zealand arriving or departing from Auckland.
The hotel therefore meets all our criteria for a high
quality, long term investment.
Novotel auckland airport
Te aWa, The Base
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RuakuRaAs I mentioned earlier, we determined that
envisioning what Ruakura could truly become was
going to be the key to a really special and successful
development.
This has involved considering the scope of activity,
what technologies could be deployed there, and what
different models we could use. To this end, we built
on our 2011 visits to several US and Australian inland
ports by engaging expert advisors with extensive
international expertise.
It is the right sequencing and aggregation of linkages
between ourselves as landowner, ports, transport
operators and infrastructure providers, tenants and
their customers that is the key to Ruakura achieving
the potential it is capable of.
Everything will grow around the inland port and the
technology employed there. For export and import
customers, visibility of their goods and access to them
are the keys. So Ruakura will need both state-of-the-art
terminal management systems as well as the latest in
equipment to physically move goods on and off and
around the site. Total co-ordination will be required with
roading authorities, kiwirail and the logistics community.
What we are now working on is the role TGH could play
over time. We are clear that we will employ the same
approach used at The Base, where key partnerships
were established at various stages. This means
there will be huge opportunities for others to join us
in the Ruakura development, and that it will attract
considerable external investment into the Waikato.
We also know that it will have humble beginnings, and
will be a carefully staged development. If Ruakura
obtains all the necessary regulatory approvals, the
project will start with one or two initial anchor tenants.
We will establish all the necessary infrastructure
and access to enable them to locate and operate as
efficiently as possible.
The BaSe
For the remaining stages of development at The Base,
we secured all resource consents during the year except
for the hotel and one other large format retail site.
We also continued to develop the master plan for
those remaining stages, working out what would be
the next best step to take. This work has been made
easier by our purchase of the one hectare property on
the corner of Te kowhai and Te Rapa Roads, a parcel
of land within the area that the tribe did not own.
Given the ongoing positive customer response to The
Base, access, egress and parking were a big focus for
us in 2012.
We completed all underground parking under Te
AWA, extended the parking areas at The Base
entrance, and created a new staff parking area
(important given that over 1,500 people work there).
We created a new mid point access to The Base, which
opened in Easter 2012, and signalisation of the Base
Parade will take place this coming financial year.
Our commitment to resolving traffic issues with
the Hamilton City Council builds on significant
expenditure by TGH made in earlier years. The two
lanes that used to be State Highway One running past
The Base for example, were expanded to four lanes in
2007, three years ahead of schedule, courtesy of TGH.
While they enabled traffic to move more freely, they
have been well used.
In that respect, the new Te Rapa by-pass, which will
be complete by the end of 2012, will be a major
step forward. It will provide an alternative route for
traffic heading north from the western side of the city,
decongesting Te Rapa Road where it passes in front of
The Base.
We have determined that the next addition to The Base
will be an ‘auto precinct,’ providing a range of vehicle
services. These are likely to include a valet service, a
tyre service, muffler and brake workshops, WOF, and
so on. Customers coming to The Base or Te AWA can
shop, eat or go to the movies while their cars are being
attended to. The precinct will match the rest of The
Base for the highest standards of quality.
The precinct will be located next to Heathcotes.
Foundations will be laid by the end of 2012, and we
expect it to be open for business around the end of
the first quarter of 2013.
Te aWa, The Base
2 1
Tainui Group Holdings Annual Report 2012
mike pohio, Chief executive.
The yeaR aheaD
While we have seen the company benefit this year
from the work on Te AWA and the Novotel Auckland
Airport hotel, we are under no illusions that 2013 will
be challenging and will require a lot of dedicated
work to maintain current levels of performance.
Despite benefiting from fresh earnings for these
two recent projects, there will be no revenue uplifts
from any of our investment properties beyond them.
And while some of our longer term leases are in the
process of being renewed, we expect the outcomes
will reflect the prevailing market conditions.
All this means we’ll need to pay close attention to
improving the efficiency and effectiveness of our
management of existing assets, and to constantly
review our portfolio to identify and deal with any
poorly performing assets. We will continue to look
here and overseas for best practice, in particular to
keep tabs on changing trends, and look to apply these
to our existing and future developments.
In the year ahead our focus will be very much
on Ruakura, along with the auto precinct, traffic
infrastructure and forward planning at The Base. The
company is working on some smaller, short to medium
term developments, notably at Rotokauri (residential)
and Bryce St (commercial). It is also examining a
range of other opportunities that will enable further
diversification of its investment portfolio.
Having said all that, TGH will still take up opportunities
that come its way and which make strategic and
commercial sense.
ThaNkS
I’d like to especially thank the other members of the
management team, all of the staff and our graduates
for the speed and quality of their efforts in 2012.
From the point of view of the staff, I would also like to
place on record our sincere thanks to the outgoing
Directors for their support, especially John Spencer
and koro Wetere. While setting high performance
standards, the Board has then given my team the
freedom to act to achieve the targets we’ve been set.
This has created a team culture where people not only
take responsibility, but are encouraged to add their
own ideas and look for opportunities. Good results
inevitably follow.
So with Ruakura, our efforts in 2012 focused on
preparing for and working with local and regional
regulatory authorities to make sure we met all of their
requirements, and that Ruakura makes a significant
contribution to the Waikato economy
This has involved extensive investigations, looking
at all economic, environmental, social, cultural and
regional perspectives. In anticipation of this work, we
appointed a project manager for Ruakura early on in
the financial year.
The company also invested a large amount of time
in presenting and explaining the concept to a wide
variety of stakeholders in the region.
In late 2012 we worked with Hamilton City Council to
undertake a first, preliminary round of consultation
with nearby residents. As a result, changes were made
to the interchange solution at the southern end, more
detail has been added around staging road network
changes as the inland port and new expressway
develop, and better methods of dealing with noise and
amenity issues were identified.
The draft District Plan was due to be released publicly
in April 2012, and a second round of consultation,
with open days, was planned for May. Following
submissions, Hamilton City Council are scheduled
to consider the draft plan in September, with formal
notification in November. A draft new Regional Policy
Statement is also due out in 2012, with a target of
adoption around September.
It is our understanding that the NZTA Board will
determine whether to give approval for the ‘macro-
scope’ of the new expressway in mid 2012. This would
then allow NZTA to amend the designations, start to
acquire land and move to a more detailed design, with
the intention of a full funding application being made
for the Expressway around 2014/15.
Ruakura, hamilton
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pORTFOLiO maNagemeNT
CaSh FLOWS
Managing cash flows is crucial to TGH.
They are reported on and managed
weekly. The ability to do this successfully
has a cascading effect on the timing of
debt draw downs, and therefore interest
rate exposure. As a high proportion of
income is derived from property rental,
cash inflows are regular with very little
deviation. Cash outflows may spike
according to the various development
projects requiring funding, but otherwise
operating outflows also remain at
consistent levels.
Sustainability and quality of cash flows
are essential components of TGH’s
business. They must withstand market
fluctuations, and service not only
operating costs but also the dividend to
our Shareholder and debt requirements.
Through its tenancy profile, TGH is
provided with stable, long-term, high
quality tenants such as Genesis, Waikato
Institute of Technology, University of
Waikato, kiwi Income Property Trust
and Crown agencies. In 2011, these
tenants generated the bulk of investment
property cash inflow. In 2012, with the
completion of Te AWA, this reduced from
39% to 29%, meaning TGH’s rental cash
flows are now predominantly from retail
tenants. TGH’s increased exposure to the
retail sector prompts a more hands-on
approach to debt collection and tenant
relationship management. This will
become increasingly important as TGH
navigates through what is expected
to be a sluggish period for the New
Zealand retail sector.
A careful and considered approach is
applied to property development. Before
any property development is approved,
its feasibility is analysed to ensure that
the project’s cash flows meet internally
developed risk-adjusted hurdle rates.
The most significant development
undertaken in TGH’s history was the
construction of Te AWA at The Base. The
development was broken into multiple
stages, so TGH received rental revenue
as each stage was completed, allowing
debt to be serviced accordingly. Before
commencing each stage, a committed
leasing threshold also had to be met to
provide surety of cash inflows.
In July 2011, TGH sold its 4.5%
shareholding in NZX listed company,
Ryman Healthcare Limited. The
divestment of the Ryman shares allowed
TGH to pay down a significant portion
of the company’s debt, and benefit from
subsequent savings in interest costs.
eCONOmiC vaLue aDDeD aND
SeCTOR RepORTiNg
TGH’s market is as wide and varied as
the business TGH operates. However, the
nature of the core business does place
TGH in the investment property sector.
Largely based in Waikato, TGH owns
a significant footprint in the Hamilton
area where competitors are commercial
landlords, retail operators and residential
and commercial property developers.
TGH periodically compares its
performance to market standards to
assess returns on investments. The
balance sheet consists mostly of tangible
assets that are reported at market value,
and so an Economic Value Added (EVA)
analysis is suited to TGH’s business.
TGH has evolved its EVA reporting
to allow for the review of the sectors
for which it has significant investment
in. These are: investment property
(commercial, retail, government and
rural), development property, hotels,
agriculture and fishing.
For each sector, TGH has developed
risk adjusted hurdle rates using public
information to access its balance sheet
profile. These rates are used as a basis
to assess potential future investment in
these sectors, as well as benchmarks for
reviewing current or historic performance.
The nature of sector reporting allows
TGH to ‘drill down’ into individual assets
if required to assess performance and
therefore make decisions to either
dispose of or improve the asset.
TReaSuRy maNagemeNT
TGH has a similar challenge to
companies operating a
co-operative structure, in that it is
dependent on debt to fuel growth. TGH
has not issued capital to anyone other
than its Shareholder. This dependence
on debt, by necessity, requires TGH to
take a pragmatic approach in managing
liquidity and risk exposure by:
Utilising relationships with banks, •
business partners and advisors;
Building sound internal treasury •
competencies;
Employing technology to provide •
current market information; and
Developing and adhering to practical •
liquidity, debt, and hedging policies.
Management reports each month to
the Board on TGH’s compliance with
policies governing hedging profiles,
debt durations, and overall risk
exposure. Any compliance deviation is
reported, explained fully, and corrective
action taken as necessary.
DeBT DuRaTiON
TGH forecasts its debt monthly, on a
12 month rolling basis for operational
purposes, but a longer term view of
capital expenditure is taken to provide
future funding requirements.
In July 2011 TGH increased its core debt
facilities (excluding debt associated with
the Novotel Auckland Airport hotel) by
$50 million to $250 million in anticipation
of longer term projects. The company
also restructured its facilities, with a focus
on tenor (debt duration) and balancing
the associated pricing. The restructure
provided greater security around future
liquidity requirements and means
that TGH does not need to constantly
refinance its debt every year, which
usually comes at considerable cost.
With a commitment to finishing what it
started at The Base, TGH will continue
the development of the currently
undeveloped area of land adjacent to
Te AWA, and existing large format retail.
This, in addition to some comparatively
OPERATIONAL REVIEW
2 3
Tainui Group Holdings Annual Report 2012
minor capital expenditure at Ruakura
will see TGH’s core debt grow to around
$200 million by the financial year end
2013, and $235 million by 2014, subject
to growth in the value of total assets.
iNTeReST RaTe RiSk
Utilising both bank relationships and
technology, TGH monitors the interest
rate market on a daily basis. This is
particularly important in times of global
economic uncertainty, as this invariably
impacts on the swap rates that TGH is
able to achieve. Swaps are financial
instruments which are entered into
with banks to hedge interest rate risks.
Further detail on TGH’s interest rate risk
is provided in note 23.1 (b)(ii) of the
financial statements on page 76.
During the current financial year, TGH
restructured $42 million of its interest
rate swaps with Westpac. The rationale
was two-fold:
To take advantage of pricing and •
flatness across the yield curve to
achieve lower interest rate swap
levels; and,
To align TGH’s swap portfolio with •
policy limits to avert a breach of policy
that might otherwise have occurred
in November 2012.
COST eFFeCTiveNeSS
TGH constantly monitors overheads
to ensure that profitability margins
are not compromised. TGH provides
corporate services to the Shareholder
which avoids duplication of resources
and enhances the depth of specialist
functions.
The level of overheads recognises
TGH’s need to attract talented staff and
to engage specialist external consultants
and legal advisors as needed. The long
‘gestation period’ between concept
and completion of a project means that
overheads are often incurred ahead of
resultant steady-state revenue streams.
The staged opening of tenancies at Te
AWA has mitigated overhead costs to an
extent, providing revenue streams close
to completion of each tenancy.
maRgiN maNagemeNT
As TGH is predominately in the property
investment and development business it
places significant emphasis on achieving
commercially acceptable returns on
property leases, and adopts a selective
approach to property investment and
development projects to ensure the
risks TGH undertake are appropriately
compensated for.
Rent reviews are another opportunity
to review and negotiate terms with
existing tenants. Depending on the lease
agreement, rent reviews are based on a
number of standard mechanisms, such
as current market rental as assessed
by an independent valuer, inflation, and
an increase in tenant’s revenues. The
majority of TGH’s leases have clauses
bu
sin
es
s r
ev
iew
iNTeReST COveR pOSiTiON (RaTiO)
0 0.5 1 1.5 2 2.5
March 2012 Covenant
Minimum Covenant 2.00
2.67
geaRiNg pOSiTiON
59% 60% 61% 62% 63% 64% 65% 66%
March 2012 Covenant
Minimum Covenant
Quasi Equity as a percentage of Total Tangible Assets
Maximum gearing is 30% of debt to total assets
60%
66%
which stop the rental from decreasing.
A feasibility study is undertaken where
a property development or investment
opportunity is presented to the company.
The study assesses what resources
are required for the development and
calculates the development margins and
rental returns. Property development
projects are assessed based on the
calculated returns and are dependent
on compensation for the resources
utilised and risk involved. As a project
is progressed, constant monitoring of
its feasibility is conducted, ensuring that
there are no cost over-runs. In 2012, all
projects were maintained within budget.
Covenant: Covenants are the financial measures which TGH must abide by under the terms of the bank debt facilities and only apply to the entities within the Group that have provided guarantees.
Interest cover ratio covenant: Interest cover ratio calculates the number of times the profit (before interest cost) exceeds interest costs. The ratio must be more than two times.
Gearing percentage covenant: The gearing percentage covenant is the equity as a percentage of the total tangible assets.
kEY
iNTeReST BeaRiNg LiaBiLiTy (BANk DEBT TGH)
0 0
50
100 15
150
200 30
2012
180
2011
187
2010
88
2009
75
2008
73
$m %
Ban
k D
ebt
Deb
t to
To
tal A
sse
ts
25
10
20
5
2 4
aCquiSiTiONS aND DiSpOSaLS
TGH continually reviews its property
portfolio to ensure that all its investments
are providing appropriate returns.
While a number of acquisition
opportunities were presented in 2012,
only two (adjacent to The Base) met
TGH’s investment criteria. Both these
properties were secured to strategically
enhance the land holdings at The Base,
for additional access, and control of the
state highway frontage. There were also
minimal property disposals throughout
the year, so the portfolio remains
relatively unchanged.
iNveSTmeNT aND maNagemeNT
71 rent reviews were completed during
the financial year which resulted in
additional revenue of $0.8 million,
providing an uplift of 5.4% over prior
rentals. Total occupancy for 2012
was 98% (2011: 97%) at year end.
Occupancy were maintained at high
levels throughout the year as industrial
and retail vacancies were filled.
The BaSe pROFiLe
The Base is one of only a few super
regional shopping centres in New
Zealand due to its scale of offer, high
presence of anchor tenants and that
it draws a significant proportion of its
patronage from other regions outside of
Hamilton
The Base is now the country’s largest
retail development comprising of
significant large format retail, food and
hospitality, a large DIY offer, an outlet
centre and a specialty retail shopping
mall including a cinema complex.
During the year a further 41 tenants
signed lease agreements and
commenced trading at The Base,
including 34 tenants in Te AWA with the
completion of stages 3 and 4, bringing
the total number of retailers within the
mall to 103. In addition to Te AWA there
are 77 large format tenants (including
outlet stores) bringing the total
tenancies at The Base to 180. A further
7 new tenants are planned to open by
Christmas 2012.
JORiS De BReS
‘quaLiTaTive STep FORWaRD’ eaRNS SpeCiaL aWaRD
In the 2011 Diversity Awards, the Human Rights Commission gave a special award to TGH. In making the award, the Commission recognised the design of The Base and in particular its new mall, Te AWA, which had been embedded with cultural reference points including whakatauki (proverbs), niho taniwha (tribal patterns), pou (carvings) and the Waikato River. It also noted that Te AWA was the first mall in New Zealand to establish bi-lingual signage throughout its public areas.
Only one special award per year is made.
Race Relations Commissioner Joris de Bres made an unaccompanied visit to Te AWA to see for himself what had been done.
“I was pretty impressed with the integration of Te Reo and Waikato-Tainuitanga into the look and feel of the complex, both inside and out. It’s the naturalness of the bilingual signage from the carpark right through to the utilities that’s very striking.”
De Bres says it all feels ‘deceptively normal’. “Whether you’re a local or a visitor, it’s immediately familiar and yet it’s unusual. That’s the sense you have.”
Combined with a similar approach in its hotels, de Bres feels TGH is breaking new ground.
“Athough there is now some bilingual signage in some supermarkets, I can’t think of another commercial operation with a general customer base like it, in terms of scale and overall integration of Te Reo into the building.”
“It’s a qualitative step forward for recognition of Maaori language and culture in both commerce and broader New Zealand. National recognition was warranted, and we hope it will encourage others to follow suit.”
Property asset value
($M)
Occupancy (%)
2012 2011 2012 2011
Retail 311 248 100 98
Rural 78 74 100 100
Public 64 61 95 98
Industrial 42 40 100 93
Office 34 35 94 98
Total 528 458 98 97
iNveSTmeNT pROpeRTy pORTFOLiO SummaRy
iNveSTmeNT pROpeRTieS
Comprising 78% (2011: 71%) of TGH’s
total assets, investment property has
had positive growth in value and cash
flow in a relatively flat market over the
past year. A high proportion of strong
tenants with good quality covenants
provide a significant contribution to
both rents revenue and long term
leases. Ground leases provide further
stability as tenants have a shared
interest in retaining their tenancies
and renewing beyond the initial lease
expiry date. Our property values in
the retail sector have been boosted
significantly by the capital investment
in the final stages of Te AWA, The Base.
The values of all other property sectors
have remained relatively static.
2012 2011
Net lettable area (sqm) 81,171 67,332
Number of tenancies 180 139
Occupancy 100% 98.1%
Car parks 2,860 2,017
pedestrian count 7.1m 5.5m
vehicle Count 3.6m 3.0m
key STaTiSTiCS – The BaSe
2 5
Tainui Group Holdings Annual Report 2012
A key strength of The Base is the
significant customer car parking,
roading layout and car-parking
management system. During the year,
a further 843 customer car parks
were constructed, bringing capacity
to over 2,860, additional access ways
were created, and the car park system
continued its roll out.
CBD DeveLOpmeNT
TGH’s head office has outgrown its
current premises located at 4 Bryce
Street, Hamilton. To accommodate
the necessary expansion, a re-
development of the premises at 6 Bryce
Street, Hamilton has commenced. The
expanded premises will house TGH
and also include Joe’s Garage Cafe,
a new cafe operator to Hamilton. This
re-development, along with TGH’s
neighbouring buildings at 2 and 4
Bryce Street, will form a boutique office
precinct which will help enhance the
CBD and reinforce TGH’s commitment to
the central city.
TGH is also very pleased that it has
secured Palate restaurant as a tenant in
refurbished premises in its Alma Street
building overlooking the Waikato River.
Palate continues to be one of the regions
premier restaurants, and the shift to
this location should only enhance that
reputation.
ReSiDeNTiaL DeveLOpmeNT
The Callum Brae Tainui joint venture
development at Huntington is nearing
completion with only 24 of its 655
sections remaining for sale. Planning
is underway for the residential
development of 40 hectares located at
Rotokauri, less than a kilometre west of
The Base, which will ensure that TGH
remains in the residential development
sector. Added to Rotokauri and located
an easy distance from both Hamilton and
Auckland, 31 sections are available for
sale in a recently developed property at
Hartis Avenue, Huntly.
0
3
6
9
12
15
WeighTeD aveRage LeaSe TeRm (TGH)years
Rur
al
Offi
ce
Re
tail
Port
foli
o
Ind
ustr
ial
Pub
lic
2.7
7.1 6.78.3 8.5
14.3
iNveSTmeNT pROpeRTy pORTFOLiO vaLue (TGH)
$m
0
100
200
300
400
500
600
20122011201020092008
Retail Rural Public OfficeIndustrial
aWaRDS aND NOmiNaTiONS
aWaRDS/aCCOLaDeS
property Council New Zealand – Waikato Branch The Judges choice award for overall outstanding contribution to the Waikato Property Industry.
New Zealand Concrete Society Commendation Landscape award for Te AWA.
human Rights Commission Special award for cultural references and bi-lingual signage at The Base and in particular, Te AWA.
marae investigates 2011 Maori of the year – business section.
auckland architecture awards Commercial architecture and interior award for Novotel Auckland Airport Hotel.
New Zealand architecture award Commercial Architecture for Novotel Auckland Airport Hotel.
2012 NZ property Council Awards Category – Retail Property Award for Te AWA.
2012 NZ property Council awards Category – Tourism and Leisure Property Award for Novotel Auckland Airport hotel.
NOmiNaTiONS
New Zealand institute of Chartered accountants 2011 Best Annual Report by a Corporate Organisation (Finalist).
2011 NZ Timber awards Commercial Architectural Excellence Category for Te AWA.
2011 NZ Timber awards Interior Fitout Category for Te AWA.
2011 NZ Timber awards Clever Wood Solution Category for Te AWA.
2012 international Council of Shopping Centers Asia Pacific Shopping Center Awards, Category – New Developments,
Category – Expansions, Te AWA.
bu
sin
es
s r
ev
iew
2 6
agRiCuLTuRe
FaRmS
TGH owns one drystock station and
two dairy farms. Today the three farms
are valued at approximately $22 million
(including Fonterra shares).
The drystock farm, also known as
Hangawera Station, is located near
Morrinsville. It runs 2,000 ewes, 200
cows and approximately 300 trading
cattle. These stock numbers include
approximately 150 bulls that are sold
iNveSTmeNTS
hOTeLS
TGH’s investment in hotels totalled $75
million as at March 2012, a $9 million
increase on 2011 due to the completion
of the Novotel Auckland Airport hotel,
and its existing shareholder in Hamilton
Riverview Hotel (HRH).
TGH maintains a controlling interest
of 70% of the Tainui Auckland Airport
Hotel Limited (TAAH), whilst Auckland
International Airport and Accor own 20%
and 10% respectively. The investment
in TAAH is reported at cost, of $61
million, which largely represents the
total development costs for the hotel.
Construction savings were achieved
due to rigorous negotiation of supply
contracts. The hotel’s occupancy and
room rates have exceeded initial
expectations in its first 10 months of
operations since opening in May 2011.
TGH’s investment in HRH was one of
the company’s first major financial
investments in 1998. TGH owns 41%
of HRH whilst Hamilton City Council
(HCC) and Accor own 41% and 18%
respectively. HRH holds total assets of
$46 million. HRH performed well in
comparison to last year’s occupancy
rates and revenue despite room
rates being slightly lower than 2011.
Performance was affected due to the
final stage of room refurbishment
undertaken at the Novotel Tainui which
was completed in September 2011.
equiTieS
TGH invested in Ryman Healthcare
following the signing of a strategic co-
investment agreement with Ngai Tahu
Holdings Group in 2008. In July 2011,
TGH divested its entire shareholding in
Ryman. This decision was made as part
of a review of other investments with the
outcome to retire debt. A capital gain of
$21 million and $5 million in dividends
were earned on the original purchase of
Ryman shares.
FiShiNg
TGH’s fishing interests total $33 million,
and comprise commercial quota and
other assets allocated to Waikato-Tainui
as a result of the Maaori commercial
fisheries settlement with the Crown.
Under the Maori Fisheries Act 2004,
assets from the settlement could only be
transferred to those entities that met the
prescribed criteria as a Mandated Iwi
Organisation (MIO), and which would be
managed by an approved Asset Holding
Company (AHC).
The MIO for Waikato-Tainui is Waikato-
Tainui Te kauhanganui Incorporated, and
TGH is an AHC.
TGH’s quota investment of $20 million
provides a return of 7.3%. Snapper and
crayfish continue to provide the highest
value of quota held, whilst the volume of
hoki provides a significant contribution
to the total quota held.
TGH has an alliance with AHC’s of
Ngaati Raukawa and Ngaati Maniapoto
to lease out the aggregated quota held
by the three iwi, having ceased to run
an active fisheries operation together in
2008.
WTF holds 5.48% of the income shares
in Aotearoa Fisheries Limited, an iwi
owned company which provided a
dividend to WTF of $0.5 million in
December 2011. Separate financial
statements are presented for WTF from
page 82 to 87.
250
260
270
280
290
300
310
320
330
TOTaL DaiRy pRODuCTiON (kILOGRAMS OF MILk SOLIDS)
2012
325
2011
284
2010
286
2009
266
2008
257
mS/kg in thousands
FOReSTRy
As a long-term investment in the TGH
portfolio, a total of 795 hectares is
currently planted in trees with a further
1,074 hectares leased out. The trees are
a mix of Radiata Pine and Californian
Redwood. The latter is well placed for the
New Zealand Emissions Trading Scheme.
eFFeCTive FaRm aRea BY HECTARES
650
109
Tainui Road (Dairy)
250
Hangawera (Drystock)
Hukanui (Dairy)
FOReST BY HECTARES
374
151
Whatawhata (Pine) planted 2001-2002
270Kawhia (Pine) planted 1996-1997
Waipuna (Redwood) planted 2005-2007
to the dairy market each year. TGH
employs two full-time farm staff and
is an active manager of this farm. The
two dairy farms are located on Bankier
Road, Gordonton and Tainui Road,
north of Morrinsville. Both are run on a
50/50 sharemilker basis with the farms
collectively producing 320,000 kgs of milk
solids from approximately 1,000 cows.
2 7
Tainui Group Holdings Annual Report 2012
Rental income
Hotel income
Other income
Quota leasing income
Dividends from listed investments
Sale of sections
ReveNue
2012 (outer circle): $55.3 million
2011 (inner circle): $34.7 million
71%
26%
10%
5%
9%5%
7%
5%
2%3%
57%
expeNDiTuRe
2012 (outer circle): $22.1 million
2011 (inner circle): $12.3 million
Direct costs from investment properties
Employee costs
Cost of sales
Other expenses
Consultancy fees
Depreciation and amortisation expenses
30%
26%17%
13%
4%
10%
34%
3%
8%
12%
12%
31%
NeT OpeRaTiNg pROFiT mOvemeNT
The net operating profit movement
graph shows the change between 2011
and 2012. Novotel Auckland Airport
hotel transactions and increased
rental income from Te AWA resulted
in increases in both total revenue
and operating expenses from 2011.
Finance costs are now recognised
in the operating results since major
capital projects are now completed.
The transactions from completed
developments are now flowing through,
improving the operating profit.
ReveNue
Income from the Novotel Auckland
Airport hotel is evident in 2012,
representing 26% of the total revenue.
Rental income from Te AWA is now
being received for a full year on stages
1 and 2 tenancies, and a partial year
on stages 3 and 4 tenancies. Fewer
residential section sales were realised
in 2012 as market conditions remained
flat and the stock on hand diminished.
With fishing, the quota market has seen a
decline in catch capacity and an increase
in the total allowable catch for some
key species. Combined, these have
reduced the need for major companies
to purchase third party quota and, as a
result, quota income has dipped in 2012.
Other income includes dairy revenue
and higher livestock values.
expeNDiTuRe
Expenditure has been influenced
by costs associated with the Novotel
Auckland Airport hotel and Te AWA.
Movement between 2011 and 2012
in employee costs, costs of sales and
depreciation are a factor of the Novotel
Auckland Airport hotel now being
included in 2012.
TOp TeN SuppLieRS BY SPEND IN 2012
Naylor Love Construction Limited Construction Services
Hawkins Construction Limited Construction Services
Sam Pemberton Civil Limited Construction Services
Hamilton City Council Local Government Services
Greenstone Group Holdings Limited Project Management Services
Ignite Architects Limited Architectual Services
ISS Facility Services Limited Cleaning Services
Schick Construction & Cartage Limited Construction Services
Auckland City Council Local Government Services
Boffa Miskell Consultancy Services
FINANCIAL OVERVIEW
bu
sin
es
s r
ev
iew
0
5
10
15
20
25
30
35
40
NeT OpeRaTiNg pROFiT mOvemeNT$m
Ne
t op
era
tin
g p
rofi
t 201
1
Inco
me
Exp
en
ses
Ne
t fin
ance
Shar
e o
f ass
oci
ate
pro
fit
Ne
t op
era
tin
g p
rofi
t 201
2
14.5
20.7
20.6 (9.7)
(5.1)
0.4
2 8
COmmuNiTyTGH supports many community
initiatives. In May 2011, TGH supported
a community initiative called the ‘At
Heart Foundation’ for congenital heart
defects in children. During surgery, a
child’s chest cavity is cooled down in
an icy slush to slow their heart rate.
To replicate this process, the ‘At Heart
Foundation’, in conjunction with The
Base, held an event on site where teams
could be sponsored to jump in an icy
cold pool for five minutes and then
warm up in a spa bath afterwards. As a
result, $10,000 was raised on the day for
the 12 kiwi children born every week
with a heart defect.
‘Shave for a Cure’ is Leukaemia and
Blood Cancer New Zealand’s biggest
fundraising event helping the estimated
six kiwis who are diagnosed with a
blood cancer every day. The Base hosted
the ‘Shave for a Cure’ event in March
2012 where individuals, businesses and
the community can seek sponsorship for
shaving their head. The event was well
support by the community, including
several members of the Chiefs Rugby
Team and All Blacks, pictured below,
raising $2,000 for the cause.
NeW ZeaLaND emiSSiONS TRaDiNg SCheme (NZeTS)The NZETS is a complex scheme
focused on carbon management and
administration. TGH is affected due to
its fisheries, forestry, and agriculture
related interests. We are fortunate
to have a forestry portfolio which
strategically positions TGH to engage
in the carbon credit market and aim
towards a carbon neutral company. TGH
holds 4,191 units for the quota held in
its fisheries portfolio and expects to
receive units for the forestry portfolio.
CuLTuReWaikato-Tainuitanga is a fundamental
aspect of TGH’s development and
operations. We seek to ensure tikanga
is followed for all projects – including
appropriate karakia (spiritual protocols)
for construction sites.
Waikato-Tainui design features in our
developments and business. The Novotel
Auckland Airport, Te AWA and The
Base all embed Waikato-Tainui cultural
imagery, reinforcing our ownership
and identity, as well as creating unique
visitor experiences. The construction of
the new TGH offices at Bryce Street in
Hamilton will also be embedded with
Waikato-Tainui design features.
Staff are also made aware of the cultural
influences within the organisation
through the induction process and other
measures, such as the celebration of
Maaori Language Week.
SOCiaL DeveLOpmeNTOur business activities contribute to
positive growth for the greater 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.
SUSTAINABILITy
The Novotel Auckland Airport supports
the Cure kids appeal and up until March
2012 raised $9,300 by hosting a bingo
night, wine and cheese evening, bike-a-
thon and Red Nose Day.
iNTeR-iWi exChaNgeSIwi represent a sizable economic force
in New Zealand. During the year TGH
hosted representatives from Te Arawa,
Ngai Tahu and (internationally) the
Southern Chiefs Organisation from
Manitoba, Canada. In addition, TGH
and Ngai Tahu Holdings Corporation
representatives have attended each
other’s strategic planning sessions.
eNviRONmeNTResponsible, sustainable development
that makes sense and protects the
environment is how TGH operates.
The ethylene tetra fluoro ethylene
(ETFE) roof at Te AWA is an illustration
of sustainable construction. Made
from 100% recyclable materials,
the product is self-cleaning and has
insulating properties. It is light-weight,
and requires minimal energy for
transportation and installation. ETFE also
allows natural light penetration, requiring
little need to illuminate the common
areas of Te AWA with additional lighting.
A car park management system (Meter
Eye) has been installed in the basement
car park at Te AWA and at the large
format retail area at The Base. Shoppers
can easily view where the vacant car
parks are located, saving both energy
and vehicle running time.
Novotel Auckland Airport has installed
triple glazing not only to eliminate
airport noise, but also to provide added
insulation. The hotel is also committed to
participating in the EarthCheck standard
which is the leading benchmarking and
certification programme for the tourism
and hospitality industry. It provides a
framework for environmental and social
performance through independent third
party verification.
Master planning for the Ruakura
development incorporates greenfield
design. Stormwater is proposed to be
processed on site, thereby minimising
discharge into the public stormwater
systems which flow into the Waikato
River. This is a deliberate and essential
design feature, and fits well with the
Shareholder’s aspiration to restore and
protect the health and well-being of the
Waikato River.
TGH promotes recycling throughout
all business operations with weekly
paper recycling at its premises. This
annual report has been printed on
environmentally friendly paper which
has been sourced from legally harvested
forests, and has been printed with
environmentally friendly ink.
bu
sin
es
s r
ev
iew
2 9
Tainui Group Holdings Annual Report 2012
The opening of the Novotel Auckland
Airport hotel early in the financial year
and the completion of Te AWA with
stages three and four opening during
the year, were significant contributors to
TGH’s growth in 2012.
TGH’s core focus is growing its asset base
to allow long-term sustainable returns for
its Shareholder. After an unprecedented
capital expenditure bill of $114 million in
2011, being the highest in TGH’s history,
we are now starting to see the step-
change in benefits flowing from these
two projects in the form of increased
revenue and operating cash flows.
The Novotel Auckland Airport hotel
contributed 26% of TGH’s total revenue
in 10 full months of operations, a result of
strong occupancy over a period which
included the Rugby World Cup 2011.
The hotel employs a total of 137 full and
part time staff.
The Base has created a tremendous boost
to the local economy with construction
activity and the creation of 1,528 (2011:
1,363) full and part time jobs across the
centre. In July 2011, resource consents
for the development of the remaining
11 hectares as well as additional retail
on level one of Te AWA were approved.
Additional development of the centre
will further enhance Hamilton City
employment and activity. The balance
of land at The Base is likely to include
an automotive precinct, health centre, a
hotel facility, commercial office space
and, to a lesser extent, further retail.
Future residential development is
proposed for a 40 hectare rural site
located in Rotokauri - less than a
kilometre west of The Base. This sub-
division will continue recent residential
activity as the Callum Brae Tainui joint
venture residential section development
at Huntington nears completion. The
Rotokauri residential development will
also supplement the economic growth
generated from The Base.
The growth trajectory for TGH will
continue over the next few years with
the development of the remaining land
at The Base, and the residential section
development at Rotokauri. Together,
these projects will provide the platform
for the Ruakura development.
Apart from the major activities at
The Base, the development of the
property located on Bryce Street in
Hamilton’s central business district will
accommodate the new head office for
TGH - now necessary to replace the
current smaller premises – along with
additional retail.
Assets and earnings growth have been,
and will continue to be, funded via cash
flow and bank lending facilities. One
key challenge for maintaining business
growth will be access to long term
funding that matches the investment
horizons of TGH. Meeting this challenge
is part of the wider strategic planning
regularly undertaken by the Senior
Management Team and Directors.
Finistere specialises in food, energy and
health sector investments. At any one time
it will have investments in 7-15 companies,
with up to US$5 million in each.
Born in Ngaaruawaahia, Arama has been
involved in whaanau land trusts and
farming for many years. After a double
degree at Victoria University and a
spell in trade promotion and investment
banking, he became the Chairman of
Parininihi ki Waitotara Incorporation’s
farming business in Taranaki. In 2001
he made his way to the US as Regional
Director, North America, for New
Zealand Trade & Enterprise, based in
LA. In 2005, he was approached by one
of the founders of Finistere to join the
company. For Arama it was a chance
to go back to private sector, to work
directly for a firm and to play a role in
helping grow businesses.
His background is a strong asset. “If
you’re looking to apply technology to
agriculture, you need to understand how
it might work in practice, and know how
farmers think.”
He also says that because New Zealand
needs to export to survive, its people
tend to have an international perspective.
“That’s an advantage for me. The
US tends to be quite inward looking,
because it’s such an enormous market.
On the other hand, the US is very open to
receiving the best the world has to offer.”
However he says not a day goes by
when he doesn’t think of home. “It’s
good to see the Raupatu Settlement
kicking in, and that the tribe has
been able to develop its support for
education. The best investment you can
make is in your human capital.”
GROWTH
aRama kukuTai
One of the social investments Waikato-
Tainui makes with its annual dividend
from TGH is tertiary education grants.
Approximately 700 were given in 2011
and 800 in 2010 (the number varies
from year to year depending on what
grants are given out for other charitable
purposes, and the numbers who apply).
A recipient from earlier years is Arama
kukutai, Managing Director and a partner
of Finistere Ventures, a venture capital
firm, based in San Diego California.
The Base with Rotokauri (in maize)
3 0
Owners’ relationships create positive workplaceMany people will be familiar with Novotel, Ibis,
Pullman and Sofitel hotels. Fewer will know about
the company that owns these brands, the Accor
Group. It operates 4,400 hotels in 92 countries, and
employs some 180,000 staff. In most cases Accor has
a management contract or has franchised the brand,
and the hotels themselves are owned by local or
international investors.
Accor’s association with TGH started with the Novotel
Tainui and Ibis Tainui in Hamilton, and this year
the relationship expanded to include the Novotel
Auckland Airport hotel, built in conjunction with
Auckland International Airport Limited.
Paul Richardson, Accor’s Vice-President, New
Zealand and Fiji, was an integral part of the team that
developed the Novotel Auckland Airport.
“As a hotelier it was a great project to be involved
in. The whole process with TGH and the Airport
was managed extraordinarily professionally, and
the accolades we’ve received from just about every
quarter have been very, very satisfying.”
The hotel has won both Auckland and national
architectural awards and is a contestant in the annual
Property Council of New Zealand awards.
“What made it work is that all three partners had the
making New Zealand proudAuckland International Airport CEO Simon Moutter
says the company already had the idea of an airport
hotel on its books before he joined in 2008.
“We’re a hub airport, so there was plenty of demand
for short-stay accommodation. We’ve got main centre
traffic, and trans-Tasman flights that depart early and
arrive late, so same day connections aren’t always
same goals and aspirations,” he says. “We all worked
together to produce a product that would create a
stunning first and last impression of New Zealand, and
be an economic proposition as well.
“Many hotels are not built that way. A lot start off with
dreams of grandeur and want to build an ode to
that. Then half-way through the money starts to get
tight, shortcuts are taken and the original goals not
achieved.”
“What we’ve managed to do here is deliver a four and
a half star hotel at a commercially viable price.”
“For me professionally it was inspiring and very
satisfying to come up with the end product that we did.”
While involved from the start on the location, design
and layout of the hotel, the Accor team also had the
job of staffing the hotel.
“We were particularly looking for interest from south
Auckland and Tainui territory, and we opened with
about 30-40% of staff from those areas. We also
worked with the Ministry of Social Development and
their Job Start programme, and about 20-30 people
came through that.”
Today, between 120-150 staff work at the hotel,
depending on occupancy and use of the meeting
facilities.
“So yes, we’re getting a return on our investment, but
we’ve achieved other goals as well. We now have one
of the best international gateway hotels in the world and
have created employment in South Auckland.”
Since opening nearly a year ago, there have been
some pleasant surprises, including a large number
of Aucklanders using the hotel, as well as local
businesses using the meeting facilities.
Richardson says that the very positive relationship
the three partners in the hotel have spills through and
creates a positive environment in the hotel.
“The feedback from staff and guests has been
fantastic. If you go into the hotel there’s nothing
negative, it’s all positive. It shows that the culture of a
place can be impacted by the owners’ relationships. I
can’t emphasise that enough.”
paul Richardson, accor’s vice-president, New Zealand and Fiji
Creating effective partnerships has been an invaluable component of TGH’s business strategy. Five organisations whom the company currently works with are profiled here.
PARTNERSHIPS
3 1
Tainui Group Holdings Annual Report 2012
experienced partnership delivers results The Huntington subdivision in Hamilton is nearly
complete, with 630 of the 655 sections sold.
Developed by a 50/50 joint venture (JV) between
TGH and Callum Brae Limited, it’s been an important
source of revenue for TGH, especially in its early years.
Malcolm MacDonald and David Lugton have been the
driving force behind Callum Brae Tainui.
Malcolm grew up in a farming family, trained as
a quantity surveyor, and has been farming in a
significant way since that time. At the time that
two Macdonald farms came into the city, the family
became directly involved in residential section
possible. There was also demand for a venue for short
1-2 day business sessions.”
When he became CEO, he formed a new
management team with a very commercial focus, and
the project was pushed up the priority list.
TGH recommended hotel operator Accor as a partner
on the back of their pre-existing relationship in
Hamilton, and TGH led the development.
“TGH were good at driving to the right outcome. We
saw a very adept team at work,” says Moutter. “They
have a very commercial structure and leadership
team, and have proven to be good co-investors.”
“They were on the same page as us in wanting an
efficient and effective hotel. At the same time we all
shared a strong commitment to representing New
Zealand and Waikato-Tainuitanga well in the project.”
Moutter says the airport company is thrilled with the
end result.
“The three partners have definitely created a beautiful
building. The fit-out is of high quality and there is a lot
of New Zealand in it. We all wanted a quality outcome
that New Zealanders would be proud of.”
development. David trained as a valuer before joining
the well-known family real estate business, where he is
now the Managing Director.
Since 1995, they have undertaken eight residential
developments. Malcolm handles the planning,
construction and contractor management. David and
his team of specialist section salespeople handle the
marketing side.
Huntington has been one of the city’s most successful
subdivisions, having outsold its competitors most
years since sales started in 2001, averaging 60
sections per annum.
In part this was down to its desirable location, with
gully aspects. However, a key ingredient was also
stringent building covenants applied to each section,
which were carefully monitored. These obligated
section owners to build quality, well-designed homes,
with good fencing. Another was ensuring a balance
of supply and demand, so the number of sections for
sale at any one time was managed.
CaReFuL TimiNg
While sales fell following the 2008 downturn,
Huntington did so by less than other subdivisions. The
JV also put in infrastructure for 40 sections at the time,
so it was six months ahead of the market when sales
picked up again.
Careful risk management also played its part.
“We’ve never over-capitalised ourselves,” says Malcolm.
“We could’ve done 15 subdivisions over the years
instead of eight, but have always lived within our means.”
Through Huntington, the pair say they and TGH have
developed mutual trust and respect, and now have a
valuable relationship.
“It’s like a marriage. You go through good and bad
times together, and come out all the stronger for it.”
auckland international airport CeO Simon moutter
malcolm macDonald and David Lugton
3 2
Forward thinking the key to managing growthGrowth is a huge issue in the upper North Island. Just
take these three projections:
The Waikato is already our fourth most populous •
region. Along with Auckland and the Bay of
Plenty, it’s growing at a faster rate than the rest of
the country. Only 20 years from now, the ‘golden
triangle’ will contain over half the country’s total
population.
Today, the three regions generate 45% of our GDP. •
In 15 years’ time that will be over 50%.
The rail link between Hamilton and Tauranga •
carries more freight per kilometre than anywhere
else in New Zealand. Freight generated from the
Waikato will double in volume in 20 years, creating
huge future pressure on rail and trucking services.
In an effort to grapple with these challenges, all the
region’s Councils, Waikato-Tainui and the New Zealand
Transport Agency (NZTA) drafted a plan called ‘Future
Proof.’ It acts as a broad blueprint for development,
providing guidance for each Council in their own area.
Launched in 2009, Future Proof was timely given the
reviews of the Waikato Regional Plan and Hamilton
City’s District Plan, both underway this year.
SCOpe WiDeNeD
ken Tremaine is a consultant to Future Proof. He
has many years of experience in this kind of work,
including the SmartGrowth project for the Bay of
Plenty. He says Future Proof has now widened its
scope to include the whole of the upper North Island,
given the huge inter-dependencies between each of
the three regions.
“The economies of Waikato and Auckland are
inextricably tied up with things like minerals, water
and freight. As Auckland grows, there are lots of
challenges. The Waikato needs to be seen as a
corridor of transport and land use between Auckland
and Hamilton. What goes where, and when, is actually
quite important. We have to get our heads around
what life will be like in 30 years.”
And growth isn’t the only issue, according to Tremaine.
“It costs as much to move a container from New
Plymouth to Auckland as it does to ship it to China.
With the rise of middle class markets in Asia, we
need to get exports to port very efficiently, or we’ll
lose international competiveness. So there’s a real
imperative to address that.”
TimeLy iNFRaSTRuCTuRe ChaLLeNge
Tremaine says there are challenges to overcome.
“As a country, we struggle to get timely infrastructure
in place. Unlike say Australia with its state
governments, central government here has preferred
to leave it to regions and the market to sort out.”
“Having said that, since the Government via NZTA
is kicking in over $2 billion in transport projects for
the Waikato, they naturally want some certainty from
Councils in the area about the long-term plan.
Tremaine sees TGH’s proposed inland port and freight
hub at Ruakura as a vitally important step in tackling
both the growth and cost issues.
“Opportunities like Ruakura only come along once
in every 50 years, where you’ve got a market need,
a willing developer and huge economic benefits that
can be generated from putting a high-tech intermodal
freight terminal there.”
“You’ve also got a large chunk of land in the hands of
one organisation, which is rare. It’s normally hard to
get landowners to co-operate, and to think long-term,
and TGH is intergenerational in its thinking. Their
CEO was Container Terminal Manager for the Port of
Tauranga and a senior manager for NZ Dairy Group,
so there’s a heap of practical skill there.”
impORTaNT DeCiSiONS immiNeNT
Tremaine says the key tasks with Ruakura are to get
the regulatory framework right, identify the funding,
get alignment between land uses and make it an
economic proposition to develop. The Regional Plan is
the most critical component of this he says.
“Decisions like Ruakura are very important. We
will be competing with others, if we aren’t already.
Singapore is already the northern Asia-Pacific hub,
and Brisbane is a contender for the southern one
alongside Tauranga.
“Not only that, but unless we get good inland facilities
and critical mass in distribution, then the southern part
of Auckland will end up pressuring the food bowls of
the city. You only have to look at the Hutt Valley and
large parts of Christchurch to see what happens when
you put motorways over food bowls.”
ken Tremaine – consultant to Future proof.
3 3
Tainui Group Holdings Annual Report 2012
Freight solutions vital to NZ economyWhen people think of the New Zealand Transport
Agency (NZTA), they probably associate it with
managing state highways, providing public transport
subsidies, and along with the Police, helping reduce
the road toll.
But it’s also responsible for long-term planning of –
and investment in – our major road networks. That has
implications for TGH’s proposed Ruakura development.
The stakes are high. NZTA spends $8.7 billion every
three years, at a rate of about $50 million a week.
In the last three years it has spent $1.6 billion in the
Waikato and Bay of Plenty.
Near the epicentre of all this is Harry Wilson. He’s
NZTA’s Regional Director for the Waikato and Bay of
Plenty. He also has a national responsibility around
freight efficiency.
“What we want to do is make sensible investment
decisions. That means we need to understand the
whole long-range land use story in the upper North
Island. It’s not just about Future Proof, though that does
feed into our thinking,” he says.
“We have to be careful we don’t make the wrong
investment choices. Take for example the high cost of
trucking goods over the kaimai ranges. One option
is to put a tunnel through, but that might cost up to
$2 billion. Another is to do what kiwirail have done.
By adding just one turning loop, they’ve been able to
significantly lift the carrying capacity of the East Coast
rail line, and at a cost of only $9 million.”
Wilson says that from a freight perspective, NZTA has
to be agnostic about mode, and is equally interested
in shipping, ports and rail.
“The holy grail of freight efficiency is full trucks, full
trains and full ships.”
NeeD
New Zealand, especially the upper North Island, is
currently some way off that.
“The export equation we have is low value, high
volume goods. The import equation is consumption
in Auckland. Between those two, there’s a whole story
to write. The emergence of kiwiRail as a long-haul
operator will change things if it works out. If kiwiRail
can get your product up and down the main trunk,
100% of the time, on time, you’ll get a shift from long-
haul road to long-haul rail.”
“And having kiwiRail as a reliable partner enables
long-haul transport operators to move from long-haul
harry Wilson – NZTa Regional Director, Waikato and Bay of plenty.
trucks, and start to run bespoke configurations. That will
start to suit inland port hubbing.”
In this area, the key aim for NZTA is efficiency.
“We’re very clear that our priority is reducing the freight
cost of getting goods to market. We’re not trying to do
all things for all people. We’re trying to support the New
Zealand economy.”
CO-ORDiNaTiON viTaL
But while NZTA is a big investor, it’s not going to dictate
what happens.
“We’re providing the road, but it’s the market which
determines who drives over it. We’re not trying to tell the
private sector what it can or cannot do. We’re trying to
work out where we can add value to that conversation. My
role is to make sure all the stakeholders in the region are
connected, and that everyone has good information.”
One result is the multi-region ‘Upper North Island
Strategic Alliance’ which has made transport one of its
top priorities. “The playing field has become a stadium.
Instead of just having regional interests, everyone is
starting to see the power to grow the New Zealand
economy by joining together.”
RuakuRa
Wilson explains that these changes have had implications
for Ruakura, as it has had to shift into a much wider
political and planning environment. He says however
that while the planning decisions have yet to be made,
Ruakura’s strategic advantage is the road and rail
combination and location between the Ports of Auckland
and Hamilton.
“Of course the NZTA can’t pick winners. The market
will dictate where inland ports and hubs are located but
Hamilton is a really good location strategically, given the
shortage of business land in Auckland, capacity issues,
congestion and so on. The critical thing is to stop thinking
about Auckland’s interest to grow Auckland’s economy,
but about the North Island’s interest to grow the New
Zealand economy.”
3 4
Chris Joblin
Chris was appointed Chief
Financial Officer in 2009.
Prior to joining TGH Chris
held a number of senior
financial positions in both
New Zealand and the United
kingdom. Chris is a member
of the New Zealand Institute
of Chartered Accountants and
INFINZ. Chris’s interests are
in Treasury Management, and
at TGH he is responsible for
finance, treasury management,
financial information systems
and audit.
His achievements in 2012
included extending TGH‘s
debt facility from $200
million to $250 million and
refining processes around
budget, forecast and financial
modelling.
Married to Colleen, Chris has
two children.
mike pohio
Mike was appointed Chief
Executive Officer in 2006.
Prior to joining TGH, Mike
held a number of senior
management positions in
companies including the Port
of Tauranga, Fonterra, New
Zealand Dairy Group and
Elders Pastoral. Mike gained
an MBA from IMD, Switzerland
in 1999 and is a member of
both the New Zealand Institute
of Chartered Accountants
and Institute of Directors. He
is a director of Transpower
and NZL Group. He is also
Chairman of BNZ Regional
Partners, Waikato; a member
of The New Zealand Initiative
and the Property Council of
New Zealand. Mike has two
adult sons and is married
to karen.
Nathan york
Nathan was appointed General
Manager of Property in 2003.
Prior to joining TGH, Nathan
was a senior analyst for a
private investment company in
Auckland. He has a Bachelor
of Management Studies
degree and an MBA from the
University of Waikato. Nathan
is an executive member of
the Waikato Property Council
and also a trustee and advisor
for a number of Maaori land
incorporations and trusts.
Nathan oversees all property
investment and development
operations for TGH. In
the last year the property
business units achieved solid
increases to portfolio returns,
the completion of Te AWA
mall at The Base, the Novotel
Auckland Airport hotel,
substantial progress on the
statutory planning for the
Ruakura project and
future development
occurring at The Base.
Nathan and his
partner Briar
have three
children.
Tama potaka
Tama joined TGH in
December 2009 as General
Manager, Corporate Services
and practising Solicitor.
Tama worked as a lawyer in
the United States and New
Zealand. He is a graduate of
Columbia University, amongst
other educational institutions.
He has authored numerous
articles and is a regular public
speaker on constitutional
and Maaori development
issues. Tama is responsible
for corporate governance and
administration, legal issues,
people, policy, procedures,
and health and safety.
Tama was instrumental in
implementing TGH’s corporate
services and people strategies
in 2012.
Tama is married to Ariana and
has three children.
OUR MANAGEMENT
Our PeOPle
3 5
Tainui Group Holdings Annual Report 2012
maNagemeNT COmmiTTeeS
TGH has three management committees – Callum Brae
Tainui Management Committee, The Base Management
Development Committee, and The Base Management
Operations Committee – all of which meet regularly. The
purpose of these committees is to ensure that specific
projects are monitored, priorities are set and operational
and development objectives are on target.
The Callum Brae Management Committees includes
TGH management and joint venture partners. The two
management committees for The Base include Luke
Bunt, the former CFO of The Warehouse Group, as an
independent member. All committees are required to
report through to the TGH senior management team.
peOpLe STRaTegy
In the last 12 months, TGH
has continued its people
development plan entitled
‘People Strategy 2025’. The
core platforms of the strategy
are to foster conditions
where employees can
perform to their individual
potential, ensure that there
is a ‘TGH way’ of doing the
right things, and enhance the
people capacity to support
all strategy and service
issues.
Over the reporting period
the company facilitated
free medical checks and flu
injections for staff, as well
as team-building through
whitewater rafting and other
activities. TGH interacts with
the sole Shareholder on a
weekly basis to ensure our
corporate and administrative
support is aligned to the
Shareholder’s needs.
peRFORmaNCe maNagemeNT
TGH continues to focus on
performance management as
a key platform for ensuring
the company’s success. The
performance management
process focuses managers and
employees on performance
targets, measured over six
monthly and annual periods.
NUMBER OF EMPLOYEES WHO COmmeNCeD SeRviCe
Perm
ane
nt a
pp
oin
tme
nts
5
2012 2011
Fixe
d-t
erm
ap
po
intm
en
ts
2 2Fi
xed
-te
rm a
pp
oin
tme
nts
11
Perm
ane
nt a
pp
oin
tme
nts
NUMBER OF EMPLOYEES WHO LeFT SeRviCe
en
d o
f fixe
d te
rm
en
d o
f fixe
d te
rm
resi
gn
atio
ns
resi
gn
atio
ns
4
1
2011
2
oth
er
31
2012
2012 2011
NUMBER OF EMPLOYEES BY LeNgTh OF SeRviCe
<2
year
s
16
2-4
year
s
8
2-4
year
s
4
5-10
ye
ars
11
5-10
ye
ars
10
<2
year
s
19
ORgaNiSaTiONaL LeveLS 2012
54%
17%
12%
6%
11%
First Line Supervisors/Managers
Middle Management
Individual Contributors
Graduates
Senior Managers
eThNiCiTy 2012
New Zealander (born overseas)
18%
11%
34%
37%
Waikato-Tainui
New Zealander (born locally)
Other Iwi
eThNiCiTy 2011
21%
9%
30%
40%
New Zealander (born overseas)
Waikato-TainuiNew Zealander (born locally)
Other Iwi
Ou
r P
eO
Pl
e
3 6
TRaiNiNg aND DeveLOpmeNT
The Company encourages
training and development
for all team members, with a
significant focus on practical
engagement with our key
partners and stakeholders.
In the past year, Bell Gully,
McCaw Lewis and other
partners have presented
seminars on topical business
and economic issues.
External training priorities
have also been clarified
to better match course
selection with TGH’s skill and
competency requirements.
All employees are required
to have a training and
development plan focusing
on development and growth,
and this is monitored
during their performance
management process.
heaLTh aND SaFeTy
TGH is committed to
providing a safe workplace
and has promoted a higher
degree of health and
safety consciousness in the
workplace. This has involved
monthly hazard review
processes being undertaken
at key sites including The
Base.
Over the past financial year,
the company has had three
work related incidents, with
no hours lost out of more than
54,000 hours worked by all
its employees.
iNFORmaTiON TeChNOLOgy
The implementation
of a human resource
information system (HRIS)
has optimised the people
function by improving leave
management, as well as
efficiency and effectiveness
in people support. TGH
continues to assess intranet
and other opportunities
to improve engagement
of team members in the
company’s business.
Aubrey joined TGH as part of
its graduate programme and
then successfully applied for
a full-time job at The Base.
Poonam landed at TGH as
an accountant in 2007, and
has since been promoted
to the role of Management
Accountant. In 2011, she
successfully passed the
required exams to become a
Chartered Accountant.
They come from very different
backgrounds but there are
strong commonalities in their
experiences working for the
company.
The opportunities to learn
come top of the list. “I’d
recommend the company for
anyone interested in property,”
says Aubrey. “It has good
corporate disciplines in place
and provides a professional
work environment.”
At TGH he’s worked on the Te
AWA opening, investigated
the impact of the Emissions
Trading Scheme, co-managed
a small construction project
and developed a strategic
facilities management plan for
The Base.
“I’ve been given real
opportunities to grow
professionally. I’m not sure
I would’ve got that level of
exposure in a larger company.”
“New duties keep being
added to my job description!”
says Poonam happily. Her
responsibilities cover financial
management for both TGH
and the tribe, but she has also
picked up work on other TGH
subsidiaries and tribal entities.
“I can see myself being here for
a while. There’s a real variety of
things to do, and you’re given a
lot of responsibility.”
Both also value the culture.
“It’s a very open and friendly
workplace,” says Poonam.
Aubrey echoes this. “We’re a
really good team.”
a vaLueD WORkiNg eNviRONmeNT
aubrey Te kanawa is a Facilities manager at The Base.
poonam Sharma is a management accountant at Tgh.
2012 2011
NUMBER OF EMPLOYEES BY age
age
30-
50
age
30-
50
age
<30
age
<30
7
24 24
age
>50
4
age
>50
45
NUMBER OF EMPLOYEES BY geNDeR
22
Mal
e
2012 2011
Fem
ale
12
Fem
ale
13
Mal
e
21
OUR TEAM
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Tainui Group Holdings Annual Report 2012
gRaDuaTe pROgRamme
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 by working at Tgh for a period of
two years. The programme includes secondment to one of Tgh’s key partners or advisors. With the programme
now in its fourth rotation, it continues to be an attractive placement opportunity for Waikato-Tainui graduates.
marie hurinui (Waikato-
Tainui and Ngaati Tuwharetoa)
is the fourth Accounting
and Finance Graduate
and commenced at TGH
in 2011. Marie recently
completed a Bachelor of
Management Studies degree
at the University of Waikato
with a major in accounting.
Marie is currently working
towards becoming a qualified
Chartered Accountant.
Tawa Campbell-Seymour
(Whakatohea, Ngaai Tai
and Te Aitanga-a-Maahaki)
was appointed the Property
Graduate in 2011 as the
fourth graduate in-take to
the Property team. Tawa
completed a Bachelor of
Management Studies (Hons.)
majoring in Economics and
Finance, in conjunction with a
Graduate Diploma in Te Reo
Maaori at The University of
Waikato. Whilst studying, he
took up a role as a Maaori
mentor providing academic
and pastoral support to first
and second year Maaori
Management students. He
also tutored a first year
microeconomics paper.
amy Wharakura (Waikato-
Tainui) started at TGH as
the Accounting and Finance
Graduate, having completed
a Bachelor of Management
Studies degree at the
University of Waikato majoring
in accounting. During the
reporting period, Amy
successfully completed New
Zealand Institute of Chartered
Accountants Foundations
Programme which is the first
of two requirements necessary
to become a Chartered
Accountant.
Whetu Taukamo (Ngaati
Ruanui, Ngaati Porou, Ngaati
Tu-hoe) joined TGH in 2010 as
the Property and Corporate
Services Graduate. With
Whetu working across both
property and corporate
services functions, the ‘hybrid’
graduate role was tailored to
suit his law and management
background. Graduating with a
Bachelor of Laws and Bachelor
of Management Studies with
a major in economics in 2010
Whetu also received a Master
of Laws (First Class Hons.) in
2011. In May 2012, Whetu was
appointed Junior Property
Manager with one of TGH’s
key partners, Greenstone
Group.
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matthew Cockram
Matthew was appointed as an
independent Director in 2011.
Matthew is the CEO and Principal of
Cooper and Company NZ, a highly
successful property development
and investment company based
in Auckland. Prior to that, Matthew
spent 20 years at law firm Bell Gully,
with the last 5 years as Chairman,
specialising in construction,
commercial property and major
projects.
mike allen
Appointed as an independent
Director in 2009, Mike has
considerable experience in
investment banking and general
management in New Zealand and the
United kingdom. Previously the Head
of the Westpac Institutional Bank in
New Zealand and Head of Mergers
and Acquisitions at Southpac.
John Spencer – Chairman
John is an independent Director and
was appointed Chairman in 2003
and will retire in June 2012. Prior
to the formation of Fonterra Co-
operative Group, he was the Chief
Executive Officer of the New Zealand
Dairy Group. John brings a wealth of
experience to TGH from directorships
and senior management positions
both in New Zealand and overseas.
Our DirectOrs
entity position
Coats PLC Chairman
Environment Investments Limited Director
Godfrey Hirst NZ Limited Director
Guinness Peat Group PLC Director
NZ Windfarms Limited Director
Tower Limited Director
Watercare Services Limited Director
entity position
Auckland Arena Carpark Company Director
Britomart Group of companies Director
Castlebrook Investments Limited Director
Cooper and Company NZ Director
entity position
DairyNZ Limited Director
Disputes Resolution Services Limited Director
kiwirail Chairman
Mitre10 NZ Limited Board Advisor
Tower Limited Director
WEL Networks Limited Chairman
3 9
Tainui Group Holdings Annual Report 2012
hon. koro Wetere
Having been on the Waikato-Tainui
Te kauhanganui Incorporated’s
Board in the past, koro has close ties
with TGH. koro brings knowledge
and experience from his former
Ministerial roles to the Board. koro
has been involved with community
projects throughout his career.
Rahui papa
Rahui was appointed in 2010 and
has a background in education and
tribal history. He is the Chairman
of Tainui Teachers Association and
the National Secondary Schools
kapa Haka Board. Rahui is also a
kiingitanga spokesperson, linguist
and historian.
Rukumoana Schaafhausen
Appointed to the board in 2009,
Rukumoana has been a member
of Waikato-Tainui Te kauhanganui
Incorporated since its inception in
1995. Having previously worked for a
large property development company
with a legal background specialising
in governance, Rukumoana has a
good understanding of TGH’s primary
business: investing in and developing
properties. Rukumoana is also the
Chair of the Waikato-Tainui Group
Audit and Risk Committee.
entity position
National Secondary Schools kapa Haka Chairman
Taniwha Media Limited Director
Waikato-Tainui Executive Member Te kauhanganui Incorporated (Te Arataura)
entity position
Genesis Energy Limited Director
New Zealand Centre for Social Innovation Trustee
Regional Facilities Auckland Limited Director
Waikato-Tainui koiora Limited Director
Waikato-Tainui Executive Member Te kauhanganui Incorporated (Te Arataura)
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TaiNui gROup hOLDiNgS LimiTeD (TGH)
The Board of Directors have pleasure in presenting
the Annual Report including the Audited Financial
Statements of TGH (the Company) and its subsidiaries
(the Group) for the year ended 31 March 2012.
pRiNCipaL BuSiNeSS aCTiviTy
TGH’s principal business activity is to manage the
commercial interests of the Shareholder, Waikato-
Tainui Te kauhanganui Incorporated which includes
assets returned by the Crown through the Waikato
Raupatu Claims Settlement Act 1995.
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 statements
of comprehensive income on page 51. The Group has
recorded a net profit of $39 million (2011: $23 million).
The Group’s total equity as at 31 March 2012 was $374
million (2011: $332 million). Further information on the
movements in equity is provided in note 10 on pages
66 and 67.
The Directors are satisfied with the results for the year.
DiReCTORS
The following persons held office as Directors of the
Company as at 31 March 2012:
Director Appointed
J L Spencer (Chairman) 30 January 2003
M N Allen 1 June 2009
M Cockram 25 March 2011
R S Papa 3 November 2010
R T M Schaafhausen 1 June 2009
Hon. K T Wetere 9 April 2002
There were no appointments or resignations of
Directors of the Company during the year.
The Director’s profiles are reported on pages 38 and
39.
The Company has eleven (2011: nine) subsidiaries
as listed in note 3 of the financial statements on page
63. M Pohio and T Potaka are the Directors of nine
(2011: seven) of the subsidiaries. M Pohio and N York
are Directors of one subsidiary 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.
DiReCTORS RemuNeRaTiON
The remuneration received by Directors during the
year is as follows: Consolidated & Parent 2012 2011 $’000 $’000
J L Spencer (Chairman) 80 65
M N Allen 40 41
M Cockram (appointed 25 March 2011) 40 -
J Eriksen (resigned 31 December 2010) - 28
R S Papa (appointed 3 November 2010) 40 11
R T M Schaafhausen 40 32
Hon. K T Wetere 40 32
J Wilson (resigned 3 November 2010) - 19
280 228
uSe OF COmpaNy iNFORmaTiON By DiReCTORS
There were no notices from Directors of the Company
requesting to use company information received in
their capacity as Directors which would not otherwise
be available to them.
auDiTORS
PricewaterhouseCoopers has indicated their
willingness to continue in office. Audit fees paid to
PricewaterhouseCoopers are outlined in note 5 of the
financial statements on page 65.
DONaTiONS
There were no charitable donations made by the
Company or Group during the year ended 31 March
2012.
ShaRehOLDeR ReSOLuTiON
The Shareholder of the Company has exercised its
right under section 211(3) of the Companies Act 1993
and unanimously agreed that this Annual Report need
not comply with paragraphs (e), (g) and (h) of section
211(1) of the Act.
Signed for and on behalf of the Directors of the
Company on the 22nd of June 2012.
Mike Allen, Director
John Spencer, Chairman
DIRECTORS’ REPORT
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Tainui Group Holdings Annual Report 2012
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WaikaTO-TaiNui FiSheRieS LimiTeD (WTF)
The Board of Directors have pleasure in presenting
the Annual Report including the unaudited Financial
Statements of WTF for the year ended 31 March 2012.
pRiNCipaL BuSiNeSS aCTiviTy
WTF’s principal business activity is to manage the
income shares held in Aotearoa Fisheries Limited under
the terms defined in the Maori Fisheries Act 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 83. WTF has
recorded a net profit of $0.5 million (2011: $0.4 million).
WTF’s total equity as at 31 March 2012 is $14 million
(2011: $13 million).
The Directors are satisfied with the results for the year.
DiReCTORS
The following persons held office as Directors of WTF
as at 31 March 2012:
Director Appointed
J L Spencer (Chairman) 31 March 2008
M N Allen 1 June 2009
R S Papa 26 November 2010
R T M Schaafhausen 1 June 2009
Hon. K T Wetere 31 March 2008
There were no appointments or resignations of
Directors of the Company during the year.
The Director’s profiles are reported on pages 38 and
39.
DiReCTORS RemuNeRaTiON
There was no remuneration received by Directors
during the year ended 31 March 2012 (2011: 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.
DONaTiONS
There were no charitable donations made by WTF
during the year ended 31 March 2012 (2011: nil).
ShaRehOLDeR ReSOLuTiON
The Shareholder of WTF has exercised its right
under section 211(3) of the Companies Act 1993 and
unanimously agreed that this Annual Report need not
comply with paragraphs (e), (g) and (h) of section
211(1) of the Act.
Signed for and on behalf of the Directors of WTF on
the 22nd of June 2012.
Mike Allen, Director
John Spencer, Chairman
GOVERNANCE
The Board of TGH is committed to the highest
standards of oversight, accountability and
management. It accepts this commitment by
supporting the increasing emphasis on corporate
governance in New Zealand, regularly reviewing
practices and making amendments where necessary.
TGH’s business practices reflect corporate
governance best practice in the following manner:
exTeRNaL BeNChmaRkS
While TGH’s policies and Charter provide explicit
expectations, the company has also adopted the nine
principles of corporate governance prescribed by the
Financial Markets Authority. These, as well as other
prescriptive doctrines such as NZX Listing Rules,
provide strong external benchmarks for developing
governance structures and processes. These
benchmarks are particularly useful to the Shareholder
and key stakeholders as they demonstrate TGH’s
commitment to ensuring that the Board operates
effectively and in accordance with best practice
guidelines.
The 9 principles in summary, are as follows:
Ethical Standards
Board Composition
Board Committees
Reporting and Disclosure
Remuneration
Risk Management
Auditors
Stakeholder Relations
Stakeholder Interests
The BOaRD ChaRTeR
The TGH Board operates in accordance with
the Board Charter (‘Charter’). The Charter is an
important document which outlines:
Board composition and method by which members •
are appointed;
Expected behaviour of the Board and its members;•
Discharge of authority to Board members;•
Commitment to compliance with all relevant laws •
and regulations; and
Committees that sit under the Board being: •
Audit Committee, Remuneration and Nomination
Committee, and Investment Committee.
eThiCaL STaNDaRDS
Through robust policy, the Board collectively and
individually promotes ethical and responsible
decision making and behaviour. There have been
no instances of unethical behaviour during the year
ended 31 March 2012 (2011: nil).
BOaRD COmpOSiTiON aND peRFORmaNCe
The Charter provides for a balance of independence,
skill, knowledge, experience and perspectives among
Directors so that the Board works effectively. The
Board consists of six Directors. Of the six Directors,
three are appointed by the Shareholder and three
are Independent Directors. The Chair is always an
Independent Director. The Directors consider that the
six member Board is appropriate for both the size and
business activity of TGH.
TGH is committed, through its Charter, to ensuring
Directors have the knowledge and information necessary
to discharge their responsibility effectively through the
provision of comprehensive information provided at
monthly (excluding January) Board meetings.
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Audit committee – all members of the TGH board are members of the TGH audit committee
investment committee
remuneration & nomination committee
Board Audit Remuneration and nomination
Investment
M E M B E R Attended Possible Attended Possible Attended Possible Attended Possible
John Spencer 11 11 1 1 1 1 1 3
Mike Allen 10 11 1 1 1 1 1 3
Matthew Cockram 10 11 1 1 1 1 3 3
Rahui Papa 9 11 - 1 - - - -
Rukumoana Schaafhausen 10 11 1 1 - - - -
Hon. Koro Wetere 11 11 1 1 - - 1 3
DiReCTOR iNDuCTiON
There were no new appointments or resignations
from the TGH Board during the year ended 31 March
2012. However, new Directors go through an induction
process which includes:
Meeting the senior management team (SMT), •
followed by presentations by each member of SMT
to describe their roles and accountabilities;
A tour of TGH’s major properties and investments; •
and
Meeting with key members of the Shareholder’s •
governors who sit on Te Arataura.
All Directors are covered by Directors and Officers
Liability Insurance for the term of their directorship
with TGH.
BOaRD COmmiTTeeS
The Board uses Committees to enhance its effectiveness
in key areas whilst retaining Board responsibility.
These Committees allow detailed and expert
examination of relevant issues to facilitate decision-
making. The Committees make recommendations to
the Board and have no decision-making ability unless
specifically delegated by the Board.
There are three Board Committees: the Remuneration
and Nomination Committee, the Audit Committee
and the Investment Committee. Further detail on
each Committee is provided on pages 44 and 45.
All Committee members must abide by the terms of
reference or Charter for that particular Committee.
The Audit Committee is comprised of the Board of
TGH. All Independent Directors are members of the
Remuneration and Nomination Committee and the
Investment Committee.
RepORTiNg aND DiSCLOSuRe
The Board demands integrity both in financial
reporting and in the timeliness and balance of
disclosures on TGH’s affairs. The Board Charter
creates effective policies and procedures to ensure
the integrity of financial information, responsibility for
which has been delegated to the Audit Committee.
Independent external auditors are also appointed
solely to provide statutory and other audit services.
The Audit Committee ensures that the external
auditor’s responsibilities are in accordance with the
requirements of the Board Charter.
RemuNeRaTiON
Remuneration of Directors and senior management
needs to be fair, transparent and reasonable.
Adequate remuneration is necessary to attract,
retain and motivate high quality directors and
executives. The Remuneration and Nomination
Committee oversees and recommends the process
for performance evaluation of the CEO and other key
executives. Further detail on the Remuneration and
Nomination Committee is provided on page 45.
RiSk maNagemeNT
TGH accepts that risk is an essential feature of
any business. TGH’s Risk Management Policy and
practices ensure effective analysis, management and
control of existing and potential risks. TGH maintains
a programme, which is approved by the Board,
for the identification, assessment, monitoring and
management of risk to the business. The Board has
overall responsibility for the internal controls with the
Audit Committee being responsible for reviewing
its effectiveness. TGH has engaged Ernst & Young as
internal auditors. The Board approved programme
they undertake focuses on providing internal audits
on policy, procedures, internal controls and any other
areas of concern. Effective risk management provides
greater assurance that TGH’s vision and strategy will
be achieved without surprises. New policies adopted
in 2012 are the Health and Safety Policy and the Media
PR Policy.
auDiTORS
External auditing is critical for integrity in financial
reporting. To properly perform their role, auditors
must observe the professional requirements of
independence, integrity, and objectivity. They need to
have access to all relevant information and individuals
within an entity that play a role in its financial reporting
processes.
The Board and the auditors are jointly responsible
for ensuring that an entity’s audit is conducted in the
context described above. TGH requires structures that
promote auditors’ independence from the Board and
executives, protect auditors’ professional objectivity
in the face of other potential pressures, and facilitate
access to information and personnel.
The Audit Committee has a crucial role in selecting and
recommending Board and Shareholder appointment
of auditors, and in overseeing all aspects of their
work. PricewaterhouseCoopers continued as external
auditors of the Group in the current financial year.
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Tainui Group Holdings Annual Report 2012
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ShaRehOLDeR ReLaTiONS
TGH has an active relationship with its sole
Shareholder, Waikato-Tainui Te kauhanganui
Incorporated. A Statement of Corporate Intent (SCI)
formally documents the necessary understanding
that must exist between TGH and its Shareholder and
is a living representation of the expectations of each
party. Although some of its provisions apply for several
years, the SCI is revised annually.
The SCI sets out TGH’s key objectives, guiding
principle and values. It highlights the importance
of the company’s brand and reputation, provides
financial reporting targets and sets out the accounting
policies that will be maintained in accordance with
the relevant statutory provisions. The SCI clarifies the
requirements of the dividend policy. It also requires
Shareholder approval should any capital expenditure,
acquisition or divestment occur that exceeds 30%
of the total assets of the parent entity. Finally, the SCI
outlines the necessary information that TGH must
provide to the Shareholder. A full description of the
SCI can be found on the TGH website.
On an annual basis, TGH and the Shareholder conduct
a joint strategic planning session. Both the TGH Board
and the Shareholder Board fundamentally agree that a
close working relationship should be nurtured to draw
on each other’s respective commercial and social
expertise to progress strategic initiatives.
TGH also provides its Shareholder with corporate
services through a service level agreement which
includes treasury management, financial services,
property management and people support services.
The provision of such services by TGH to the
Shareholder creates cost efficiencies and cohesion.
The Board of TGH is committed to ensuring
that the members of Waikato-Tainui, through the
tribal parliament, are kept abreast of the ongoing
performance of the company. This is prescribed in the
Charter. TGH’s financial results are presented to the
Shareholder’s executive on a monthly basis and to the
tribal parliament every quarter. This is an opportunity
to increase awareness and receive feedback on TGH’s
development projects and its operational performance.
SeTTiNg STRaTegy
The aspirations of Waikato-Tainui span many
generations. The vision and strategy of TGH is
consistent with this long term view. Projects are forecast
well in advance of turning the first sod. This is achieved
through a concerted and ongoing strategy setting
process which utilises financial modeling and business
intelligence tools. At a minimum, TGH maintains a
15 year outlook which recognises the completion of
existing projects (i.e. what we know for sure), and the
initiation of new ones (i.e. unchartered territory).
This process of strategy setting culminates with an
annual, two day meeting with the TGH Board and
senior management. Day one is an opportunity for
senior management to present the strategy, and for
the Board to challenge the proposed direction and
offer guidance where appropriate. The second day
incorporates the Shareholder executive, Te Arataura.
This is a useful opportunity for the Shareholder
representatives to observe the alignment of TGH’s
aspirations, with those of the Shareholder, as stipulated
in the SCI.
STakehOLDeR iNTeReSTS
Whilst the Shareholder relationship is paramount,
TGH’s relationships with wider stakeholders,
including the community, customers and suppliers
are considered on page 28 and 30 to 33 respectively..
TGH’s Communications Policy ensures that a
consistent and credible approach is applied to
communication with all stakeholders.
auDiT COmmiTTee
All members of the TGH Board are members of the
Audit Committee. The Audit Committee Charter
is incorporated in the Board Charter. The Audit
Committee has continual oversight and responsibility
for financial reporting, audit functions, risk
management and internal controls. More specifically,
the Audit Committee’s objectives include:
Reporting of financial information;•
Application of accounting policies;•
Financial management;•
Internal control systems;•
Risk management systems;•
Business policies and practices;•
Protection of the Group’s assets; and •
Compliance with applicable laws, regulations, •
standards and financial disclosure best practice
guidelines.
4 4
During the year, one meeting was dedicated to Audit
Committee business for the purpose of approving the
annual financial statements. All other Audit Committee
business was addressed at regular Board meetings.
RemuNeRaTiON aND NOmiNaTiON COmmiTTee
As a sub-committee of the Board, the responsibility
and role of the Remuneration and Nomination
Committee (RNC) is the appointment and
remuneration of Directors and senior management
and other related matters. The RNC’s objectives are to
assist and advise the Board in relation to:
The CEO appointment and remuneration;•
Performance management and appraisal of the •
CEO;
Succession planning;•
Setting annual incentive targets and objectives for •
the CEO and the CEO’s direct reports;
Approving the remuneration of the CEO’s direct •
reports;
The appointment and succession of the Board •
Directors, especially Independent Directors and/or
Advisors to the Board;
Independent Directors’ and Advisors remuneration; •
and
Any other matter referred to it by the Board.•
Senior management’s annual incentives are
determined by key performance indicators as
stipulated in their individual employment agreements.
Any changes in remuneration are based on
performance and market comparisons.
The total remuneration paid to Directors is reported on
page 40. 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.
The Investment Committee met three times during the
year.
STaTemeNT OF iNveSTmeNT pOLiCy aND OBJeCTiveS (SipO)
The SIPO underpins TGH’s primary strategic
objective: to maximise Shareholder wealth by
implementing a sustainable asset portfolio supported
by appropriate financing and distribution policies. Not
surprisingly, this is also TGH’s mission statement. The
SIPO responds to the choice between diversification
and specialisation of TGH’s asset portfolio by
assessing the company’s influence or control over an
investment alternative, and the extent to which TGH
has expertise.
Under certain conditions, the SIPO does permit
TGH to invest in opportunities where there may not
be a controlling interest, but where the investment
is consistent with TGH’s commitment to furthering
economic development. These may include pooled
investments, for example minority holdings in
listed securities, or iwi co-owned investments by
arrangement.
Finally, the SIPO defines the responsibilities and
delegation of the Board of Directors, the Investment
Committee and the senior management.
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ChieF exeCuTive OFFiCeR aND BOaRD iNTeRReLaTiONShip
While the Board needs to allow the CEO to carry
out the CEO’s role, this need is balanced by the
overarching obligation of the Board to supervise and
scrutinise the CEO appropriately. It is the Chair’s
role to lead and manage the Board so that it operates
effectively and to facilitate interaction between the
Board and the CEO. The CEO is responsible for day to
day leadership and management. A formal delegation
of authority to the CEO sets out specific authority to
manage the day to day business and the restrictions
and limitations that apply. The roles of the Chairman
and the CEO are, and always have been, separate
at TGH. The Chairman and the CEO regularly meet
between Board meetings.
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FROm The STaRT OF The 2013 FiNaNCiaL yeaR TheRe aRe a NumBeR OF ChaNgeS TO The Tgh BOaRD. They aRe:
SiR heNRy vaN DeR heyDeN –
iNDepeNDeNT DiReCTOR
(FROm 1 JuLy 2012)
Sir Henry is standing down as Chairman of
Fonterra. He is also a director of Auckland
International Airport Ltd, Rabobank
Australia, Rabobank NZ, Elevation Capital
Management Ltd, Pascaro Investments Ltd
and Manuka Ltd.
paki RaWiRi – ShaRehOLDeR
DiReCTOR (FROm 30 apRiL 2012)
Mr Rawiri is an Iwi and Maaori
development consultant, and holds
Directorships on a number of iwi
commercial companies. He is a former
General Manager of Waikato-Tainui
commercial fishing companies and
from 2002-2009 managed the transfer
of fisheries assets to individual iwi at
Te Ohu kaimoana.
hemi Rau – ShaRehOLDeR
DiReCTOR (FROm 30 apRiL 2012)
Mr Rau was the CEO of the Waikato
Raupatu Lands Trust from 2002-2009. He
was a Te kotahitanga Marae representative
on the inaugural Te kauhanganui in 1999,
and was Deputy Chair of the inaugural
Tribal Executive from 2000-2002.
JOaNNa peRRy – BOaRD aDviSOR
(FROm 1 apRiL 2012)
Ms Perry is a Chartered Accountant
and professional director. Her board
appointments include Genesis Energy,
Trade Me, Partners Life, The Co-operative
Bank, Rowing New Zealand and Sport and
Recreation New Zealand.
“It’s been extremely rewarding,” he says.
“I’m hugely satisfied with what TGH has
been able to achieve, and have absolutely
no regrets.”
TGH pretty much runs itself these days,
he says. “It’s a well-oiled machine and I’ve
been able to be more hands-off.”
Things were a little different when he first
started, and it was largely a full-time job
for the first few years.
Before joining TGH he was working in
Dunedin, having finished up as CEO of NZ
Dairy Group following the merger of NZ
Dairy and kiwi Co-op to form Fonterra.
He was approached to go onto the TGH
Board, and agreed to think about it.
Spencer’s first move was to ask to become
a Director of a Ngai Tahu Holdings Group
subsidiary so he could learn what was
involved in governance of an iwi-owned
company.
Taking on a new challenge
After discussions with Waikato-Tainui and
a number of advisors, Spencer accepted
the role in 2002, becoming not just an
independent Director but Chairman as well.
Crucial to his acceptance was Rob McLeod
and koro Wetere agreeing to join him.
“I took it on because I saw it as a personal
challenge. I wanted to prove that proper
governance structures work for everyone,
regardless of race, creed or activity.”
Others saw it differently, and he was initially
taken aback by some of their reactions.
“Two days after the announcement,
for example, someone said to me, “So
they finally got to the S’s I see.” (S’s as in
Spencer).
“One of the things that has kept me here
and spurred me on was those early
negative comments I got.”
keys to success
Looking back, he says the initial losses
that the tribe suffered were in many ways
a blessing in disguise.
“They allowed a framework to be created.
Your board and company policies on
day one might only be few in number,
but they grow. The key is to put them
down in writing. A key document in the
beginning was the adoption of a Board
Charter which clearly set out the duties
and powers of the TGH Board and its
relationship with its Shareholder.
“If you set proper standards, people
want to reach those standards, and over
time they get higher and higher. It’s
important to never be satisfied. You should
always want to do better next time.”
As Chairman, Spencer has always asked
for honesty and contribution in the
Boardroom. “Team chemistry and mutual
respect is extremely important. You don’t
get openness without it.
“At TGH the senior management team
attends Board meetings. The lines are clear,
but the question always is, ‘Where are
we going and what is the best way to get
there?’ The only time senior management
is not present is when we’re discussing
remuneration or sensitive tribal issues.”
There is a fifty-fifty split of independent
and tribally appointed Directors on the
Board, but he says they’ve never had to
take a vote. Decisions have always been
unanimous.
Spencer reflects that over the last ten
years attitudes have gradually changed
toward the company, and today he
receives numerous calls from people
wanting to be involved with TGH.
“That’s because we’ve got the runs on
the board and more people have come
to understand the very important role iwi
commercial companies will play in the
future prosperity of the country.
The future
Spencer sees TGH’s strengths today as its
structure, its governance, the quality of its
people and a clear vision of what it wants
to achieve.
“What we’ve tried to do is set in place
enduring value for the company and the
tribe, and the thing I’m really proud of is
the people. This team could do anything.”
John Spencer
Proving the worth of good governance
JOhN SpeNCeR ReTiReS ON 30 JuNe 2012 aS aN
iNDepeNDeNT DiReCTOR. he haS SpeNT The LaST
DeCaDe ON The BOaRD, aND haS BeeN ChaiRmaN
ThROughOuT.
4 7
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tainui grOuP hOlDings limiteDFive yeaR TReND STaTemeNTFor the year ended 31 March 2012
2012 2011 2010 2009 2008 ($’000) ($’000) ($’000) ($’000) ($’000)
Income Statement
Net operating profit after tax 20,248 14,499 15,896 11,940 18,488
Net profit/(loss) 39,353 22,659 34,069 (27,035) 38,114
Revenue 54,803 34,655 30,141 26,287 30,575
Finance cost - net (13,216) (8,168) (4,711) (5,854) (3,199)
Net fair value gains/(losses) 19,105 8,160 18,173 (38,975) 19,626
Distribution 10,090 10,500 10,000 10,000 10,500
Balance Sheet
Total assets 680,099 645,091 516,467 484,247 521,846
Net assets 373,883 332,018 314,787 291,351 289,037
Current assets 24,243 17,028 11,762 14,195 12,183
Non-current assets 655,856 628,063 504,705 470,052 509,663
Current liabilities - including Shareholder advance 116,321 166,666 107,402 84,684 119,459
Current liabilities - Shareholder advance 74,027 74,027 74,027 74,027 114,027
Current liabilities - excluding Shareholder advance 42,294 92,639 33,375 10,656 5,432
Non-current liabilities 189,895 146,407 94,278 108,212 113,350
Non-controlling interest 8,921 9,300 1,539 - -
Bank debt 180,152 186,650 87,700 74,845 72,900
Net cash debt (173,895) (184,399) (85,042) (68,913) (70,086)
Cashflow Statement
Net operating cash inflow 21,269 14,430 21,119 16,144 14,514
Net investing cash outflow (8,065) (103,287) (27,248) (7,771) (70,722)
Net financing cash inflow/(outflow) (9,198) 88,450 2,855 (5,255) 54,718
Key Ratios
Return on Shareholder funds 11% 7% 11% -9% 13%
Return on Shareholder funds - including advance 9% 6% 9% -7% 9%
Return on total assets 6% 4% 7% -6% 7%
Total asset growth 5% 25% 7% -7% 38%
Debt/equity ratio 48% 56% 28% 26% 25%
Debt/total assets 26% 29% 17% 15% 14%
financial infOrmatiOn
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Tainui group holdings Limited
50 Directory
51 Statements of comprehensive income
52 Statements of financial position
53 Statements of changes in equity
54 Statements of cash flows
55 Notes to the financial statements
81 Independent auditors’ report
Waikato-Tainui Fisheries Limited
82 Directory
83 Statements of comprehensive income
83 Statements of financial position
84 Statements of changes in equity
85 Notes to the financial statements
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FINANCIAL STATEMENTS
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tainui grOuP hOlDings limiteDDiReCTORyFor the year ended 31 March 2012
Date of establishment 10 June 1998
mission Statement To maximise Shareholder wealth by maintaining a sustainable asset portfolio supported by
appropriate financing and dividend policies.
Shareholder Waikato-Tainui Te kauhanganui Incorporated
Board of Directors John Spencer (Chairman)
Michael Allen
Matthew Cockram
Rahui Papa
Rukumoana Schaafhausen
Hon. koro Wetere
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 4 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
5 1These financial statements should be read in conjunction with the accompanying notes.
Tainui Group Holdings Annual Report 2012
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ntainui grOuP hOlDings limiteDSTaTemeNTS OF COmpReheNSive iNCOmeFor the year ended 31 March 2012
Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Revenue 4 54,803 34,655 7,814 6,576
Expenses 5 (22,061) (12,320) (5,738) (4,366)
Finance costs - bank loans (13,216) (8,168) (11,754) (8,168)
Finance income - short term deposits 181 193 151 129
Share of net profit of associates 6 541 139 - -
Net operating profit/(loss) for the year 20,248 14,499 (9,527) (5,829)
Other gains - net 8 19,105 8,160 6,775 4,399
Net profit/(loss) for the year 39,353 22,659 (2,752) (1,430)
Other comprehensive income for the year
Profit/(loss) on revaluation of farm and other properties 10 2,872 (2,689) 2,872 (2,689)
Other comprehensive income for the year 2,872 (2,689) 2,872 (2,689)
Total comprehensive income for the year, net of tax 42,225 19,970 120 (4,119)
Profit is attributable to:
Equity holders of Tainui Group Holdings Limited 39,372 22,659
Non-controlling interest (19) -
39,353 22,659
Total comprehensive income for the year is attributable to:
Equity holders of Tainui Group Holdings Limited 42,244 19,970
Non-controlling interest (19) -
42,225 19,970
5 2 These financial statements should be read in conjunction with the accompanying notes.
Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
EQUITy
Contributed equity 9 60,000 60,000 60,000 60,000
Retained earnings 10 286,589 247,217 7,308 10,060
Reserves 10 18,373 15,501 11,151 8,279
364,962 322,718 78,459 78,339
Non-controlling interest 8,921 9,300 - -
Total equity 373,883 332,018 78,459 78,339
ASSETS
Current assets
Cash and cash equivalents 6,257 2,251 2,054 1,023
Trade and other receivables 11 4,254 9,317 1,196 942
Inventories 12 4,202 4,617 - -
Biological assets 13 1,082 843 1,082 843
Advances - related parties 14 8,448 - 254,339 217,388
Total current assets 24,243 17,028 258,671 220,196
Non-current assets
Other financial assets 15 5,385 57,407 5,294 57,226
Investments in associates 6 13,485 13,151 - -
Investments in subsidiaries - - 947 947
Intangible assets 16 20,488 20,672 14,617 14,792
Property, plant and equipment 17 84,895 76,411 20,365 17,493
Investment properties 18 528,412 457,728 81,033 71,778
Biological assets 13 3,191 2,694 - -
Total non-current assets 655,856 628,063 122,256 162,236
Total assets 680,099 645,091 380,927 382,432
LIABILITIES
Current liabilities
Trade and other payables 19 11,081 20,225 3,446 5,180
Interest bearing liabilities 20 30,300 72,000 30,300 72,000
Advances - related parties 14 74,940 74,441 108,058 97,756
Total current liabilities 116,321 166,666 141,804 174,936
Non-current liabilities
Interest bearing liabilities 20 149,852 114,650 121,667 97,400
Other financial liabilities 21 40,043 31,757 38,997 31,757
Total non-current liabilities 189,895 146,407 160,664 129,157
Total liabilities 306,216 313,073 302,468 304,093
Total net assets 373,883 332,018 78,459 78,339
tainui grOuP hOlDings limiteDSTaTemeNTS OF FiNaNCiaL pOSiTiONAs at 31 March 2012
Michael Allen, Director22 June 2012
John Spencer, Chairman22 June 2012
5 3These financial statements should be read in conjunction with the accompanying notes.
Tainui Group Holdings Annual Report 2012
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ntainui grOuP hOlDings limiteDSTaTemeNTS OF ChaNgeS iN equiTyFor the year ended 31 March 2012
Attributable to owner of the ParentCONSOLIDATED Contributed Revaluation Retained Non-controlling Total equity reserves earnings Total interest equity $’000 $’000 $’000 $’000 $’000 $’000
Balance as at 1 April 2010 60,000 18,190 235,058 313,248 1,539 314,787
Comprehensive incomeNet profit for the year - - 22,659 22,659 - 22,659
Other comprehensive income
Loss on revaluation of farm and other properties - (2,689) - (2,689) - (2,689)
Total comprehensive income - (2,689) 22,659 19,970 - 19,970
Transactions with owner of the ParentDividend paid - - (10,500) (10,500) - (10,500)
Total transactions with owner of Parent - - (10,500) (10,500) - (10,500)Minority interest - - - - 7,761 7,761
Balance as at 31 March 2011 60,000 15,501 247,217 322,718 9,300 332,018
Balance as at 1 April 2011 60,000 15,501 247,217 322,718 9,300 332,018
Comprehensive incomeNet profit for the year - - 39,372 39,372 (19) 39,353
Other comprehensive incomeGain on revaluation of farm and other properties - 2,872 - 2,872 - 2,872
Total comprehensive income - 2,872 39,372 42,244 (19) 42,225
Minority interest - - - - (360) (360)
Balance as at 31 March 2012 60,000 18,373 286,589 364,962 8,921 373,883
PARENT
Balance as at 1 April 2010 60,000 10,968 21,990 92,958 - 92,958
Comprehensive income
Net loss for the year - - (1,430) (1,430) - (1,430)
Other comprehensive income
Loss on revaluation of farm and other properties - (2,689) - (2,689) - (2,689)
Total comprehensive income - (2,689) (1,430) (4,119) - (4,119)
Dividend paid - - (10,500) (10,500) - (10,500)
Total transactions with owner of Parent - - (10,500) (10,500) - (10,500)
Balance as at 31 March 2011 60,000 8,279 10,060 78,339 - 78,339
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 - 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
Michael Allen, Director22 June 2012
5 4 These financial statements should be read in conjunction with the accompanying notes.
tainui grOuP hOlDings limiteDSTaTemeNTS OF CaSh FLOWSFor the year ended 31 March 2012
Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Cash flows from operating activities
Receipts from customers 59,497 33,051 6,967 5,355
Payments to suppliers (25,193) (10,646) (3,930) (3,972)
Interest received 181 193 151 129
Interest paid (13,216) (8,168) (11,754) (8,168)
Net cash generated from/(used in) operating activities 22 21,269 14,430 (8,566) (6,656)
Cash flows from investing activities
Receipts from sale of investments in listed companies 57,375 - 57,375 -
Payments for investments in unlisted companies (683) (546) (683) (546)
Amounts received from/(paid to) related parties (7,949) 414 (26,649) (63,842)
Payments for property, plant and equipment (8,230) (38,639) (287) (146)
Proceeds from sale of property, plant and equipment 13 22 10 -
Payments for intangible assets (36) (49) (36) (33)
Payments for investment properties (48,555) (67,846) - -
Proceeds from sale of investment properties - 3,357 - -
Net cash generated from/(used in) investing activities (8,065) (103,287) 29,730 (64,567)
Cash flows from financing activities
Proceeds from borrowings - 98,950 - 81,700
Repayment of borrowings (6,498) - (17,433) -
Dividends paid to Company’s Shareholder 14 (2,700) (10,500) (2,700) (10,500)
Net cash generated from/(used in) financing activities (9,198) 88,450 (20,133) 71,200
Net increase/(decrease) in cash and cash equivalents 4,006 (407) 1,031 (23)
Cash and cash equivalents at the beginning of the year 2,251 2,658 1,023 1,046
Cash and cash equivalents at end of year 6,257 2,251 2,054 1,023
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Tainui Group Holdings Annual Report 2012
tainui grOuP hOlDings limiteDNOTeS TO The FiNaNCiaL STaTemeNTSFor the year ended 31 March 2012
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;
- 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 22nd of June 2012.
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 - cash flow statements
- 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.
5 65 6
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 18), farm and other properties (note 17) have been valued by independent valuers as at 31
March 2012 and 31 March 2011 using a mixture of market evidence of transactional prices for similar properties, direct
comparison, capitalisation and discounted cash flow approaches.
Biological assets (note 13) 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 15) 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 21) 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 16) 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
(i) 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.
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueD
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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.
(ii) 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.
(iii) 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.
(iv) 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.
5 85 8
(v) 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:
(i) 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.
(ii) Rental income
Rental income is recognised on a straight line basis over the lease term.
(iii) 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.
(iv) Quota lease income
Quota lease income is recognised when the Group has receipted income from the quota lessee. Quota is recognised on
a monthly accruals basis.
(v) Dairy income
Dairy income is recognised when the Group has transferred the significant risks and rewards of ownership of the goods
sold.
(vi) 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.
(vii) Dividend income
Dividend income is recognised when the right to receive payment is established.
(viii) Government grants
Government grants are 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
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueDNote 2.4 continued
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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.
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.
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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 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.
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 NZ IFRS 9 ‘Financial Instruments’ 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 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 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 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 and associates
Investments in associates, subsidiaries and joint ventures are valued at cost less impairment in the Company.
2.15 intangible assets
(i) 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
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estimated useful lives of two years.
Costs under $10,000 associated with maintaining computer software programmes are recognised as an expense as
incurred.
(ii) 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.
(iii) 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.
Carbon credits are not consumed in the production and are therefore not amortised. They are tested for impairment
annually and whenever there is an indication that impairment exists.
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 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 diminishing value
method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:
- Farm and other properties 2.0% - 11.4%
- Farm plant and equipment 4.8% - 48.0%
- Hotels 1.0% - 50.0%
- Vehicles 12.0% - 31.2%
- Computer, office equipment, furniture and fittings 9.5% - 50.0%
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.
6 26 2
2.17 investment property
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 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 and are usually paid within 30 days
of recognition. Trade and other accounts payable 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.
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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.
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 ConsolidationSubsidiaries: Charitable Operating Ownership and voting interest Balance Status division 2012 2011 date
Raukura Moana Seafoods Limited Yes Fisheries 100% 100% 31-Mar
Ruakura Fee Simple Limited Yes Property 100% - 31-Mar
Ruakura Limited Yes Property 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
6 46 4
Associates: Charitable Operating Interest held Balance date status division 2012 2011
Hamilton Riverview Hotel Limited No Investment 41% 41% 31-Dec
Unincorporated Joint Ventures: Charitable Operating Ownership and voting interest Balance Status division 2012 2011 date
Callum Brae Tainui No Property 50% 50% 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 balances at 31 March 2012 and not the 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.
The Group’s interest in the joint ventures had the following effect on the financial statements: Consolidated
2012 2011 $’000 $’000
Statement of financial position
Current assets 2,442 3,599
Non-current assets 210 4,195
Total assets 2,652 7,794
Current liabilities 245 567
Net assets 2,407 7,227
Statement of comprehensive income
Revenues 2,413 3,550
Expenses (1,252) (2,005)
Profit before income tax 1,161 1,545
4 Revenue Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Rental income 31,441 24,556 2,642 2,580
Hotel income 14,397 - - -
Sale of sections 2,409 3,522 - -
Other income 2,144 1,401 2,505 634
Quota leasing income 1,745 1,814 - -
Dairy income 1,056 1,048 1,056 1,048
Dividends from listed investments 918 1,586 918 1,586
Other operating gains 13 693 728 693 728
54,803 34,655 7,814 6,576
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueDNote 3 continued
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5 expenses Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Audit fees paid to Parent and Group auditors 75 71 23 28
Audit related fees 26 - - -
Audit fees paid to other auditors 16 - - -
Bad debt written off 14 - - -
Consultancy fees 592 1,252 450 675
Cost of sales 6,893 2,155 639 645
Depreciation and amortisation expense 2,541 443 489 376
Direct costs from rental income 1,442 3,375 449 265
Direct costs from investment properties (non-income generating) 425 51 3 12
Directors fees 280 228 280 228
Doubtful debt provision 12 22 1 -
Employee benefits 7,603 3,450 3,191 2,095
Operating lease expenses 52 61 45 38
Other expenses 2,090 1,212 168 4
22,061 12,320 5,738 4,366
Depreciation
Amortisation of intangibles 16 220 101 211 101
Computer, office equipment, furniture and fittings 17 283 116 87 51
Farm and other properties 17 167 197 167 195
Hotel 17 1,847 - - -
Motor vehicles 17 24 29 24 29
Total depreciation and amortisation 2,541 443 489 376
6 investments in associates Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Investments in associates 13,485 13,151 - -
Carrying value of associates
Carrying value at beginning of year 13,151 13,012 - -
Share of net profit of associates 541 139 - -
Dividend received (207) - - -
Carrying value at end of year 13,485 13,151 - -
The carrying value is comprised of:
Cost 6,000 6,000 - -
Share of associate revaluation reserves 7,222 7,222 - -
Share of associate post acquisition retained earnings 263 (71) - -
13,485 13,151 - -
6 66 6
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 (2011: $0.9m).
As at reporting date there is no current tax expense, tax payable or tax receivable (2011: nil).
8 Other gains - net Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Biological assets - fair value gains unrealised 13 497 789 - -
Financial liabilities designated at fair value through profit or loss - increase in investment property liability 21 (4,313) (2,572) (4,313) (2,572)
Intangible asset settlement 16 - 105 - 93
Interest rate swaps - fair value losses unrealised 21 (3,973) (4,140) (2,927) (4,140)
Investment properties - fair value gains unrealised 18 23,624 8,571 9,255 4,268
Investment properties - loss on sale - (393) - -
Property, plant & equipment - impairment of land at cost 17 (1,400) (950) - -
Shares in listed companies - fair value gains realised 4,050 - 4,050 -
Shares in listed companies - fair value gains unrealised - 6,750 - 6,750
Shares in unlisted companies - fair value losses realised (53) - (53) -
Shares in unlisted companies - fair value gains unrealised 673 - 763 -
19,105 8,160 6,775 4,399
9 Contributed equity Consolidated and Parent Consolidated and Parent 2012 2011 2012 2011 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
Balance at end of year 60,000,000 60,000,000 60,000 60,000
All ordinary shares rank equally and have a par value of nil and a nominal value of $1 per share.
10 Reserves and retained earnings Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
(a) Reserves
Farm and other properties 11,151 8,279 11,151 8,279
Associates 7,222 7,222 - -
18,373 15,501 11,151 8,279
Farm and other properties
Balance at beginning of year 8,279 10,968 8,279 10,968
Revaluation gain/(loss) during the year 17 2,872 (2,689) 2,872 (2,689)
Balance at end of year 11,151 8,279 11,151 8,279
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueD
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Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Associates
Balance at beginning of year 6 7,222 7,222 - -
Balance at end of year 7,222 7,222 - -
(b) Retained earnings
Movements in retained earnings were as follows: Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Balance at beginning of year 247,217 235,058 10,060 21,990
Net profit/(loss) for the year 39,372 22,659 (2,752) (1,430)
Dividend 14 - (10,500) - (10,500)
Balance at end of year 286,589 247,217 7,308 10,060
11 Trade and other receivables Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Trade receivables 1,832 1,680 477 421
Property settlements 562 2,781 - -
Less provision for impairment (68) (56) (1) -
Trade receivables from related parties 14 158 377 150 377
Prepayments 1,770 454 555 141
GST - 3,955 15 3
Other receivables - 126 - -
4,254 9,317 1,196 942
12 inventories Consolidated Parent 2012 2011 2012 2011 $’000 $’000 $’000 $’000
Land - sections for sale 4,159 4,617 - -
Other inventories at cost - food and beverage 43 - - -
4,202 4,617 - -
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 Biological assets Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Current
Balance at beginning of year 843 615 843 615
Additions 160 114 160 114
Changes in fair value 4 693 728 693 728
Decreases due to sales (614) (614) (614) (614)
Balance at end of year 1,082 843 1,082 843
6 86 8
Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Non-current
Balance at beginning of year 2,694 1,905 - -
Changes in fair value 8 497 789 - -
Balance at end of year 3,191 2,694 - -
The current biological assets represent livestock consisting of mixed age sheep, cattle and cows, which are held for
dairy and dry stock farming. N Lyons and C Heggie from PGG Wrightson determined the fair value of sheep, cattle and
cows at 31 March 2012 (2011: N Lyons and 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 2,864 sheep,
428 cattle and 161 cows (2011: 2,729 sheep, 407 cattle and 99 cows).
The non-current biological assets are comprised of a 374 hectare Pinus Radiata forest planted in 1996 and 1997 and 151
hectares Pinus Radiata forest planted in 2001 and 2002. It is expected that the rotation age for the forest crop will be 27 to
28 years, at which time the crop will be harvested. R H Webster NZIF Registered Valuer valued 374 hectares of the forest
crop as at 31 March 2012 (2011: 374 hectares) using the Crop Expectation Value method at a 7.0% post-tax discount rate
to determine fair value, less point-of-sale costs. R H Webster also valued 270 hectares of Californian Coast Redwoods
planted from 2005 to 2007 as at 31 March 2012 (2011: nil) using current replacement cost method used for young trees
at a 7.0% compounded rate. Alan Bell NZIF Registered Valuer valued 151 hectares of the forest crop as at 31 March 2012
(2011: 151 hectares) using the discounted future value method at a 10% pre-tax discount rate to determine fair value, less
point-of-sale costs. The non-current biological assets are held for investment.
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.
14 Related party transactions
Amounts outstanding with related parties are:
Consolidated Parent 2012 2011 2012 2011 $’000 $’000 $’000 $’000
Advances owing by subsidiaries and related parties:
Tainui Auckland Airport Hotel LP - - 20,860 21,700
Tainui Development Limited - - 42,536 42,775
Te Rapa 2002 Limited - - 37,155 35,688
The Base Limited - - 145,340 117,225
Waikato Raupatu Lands Trust 8,400 - 8,400 -
Waikato Raupatu River Trust 23 - 23 -
Waikato-Tainui Distributions Limited 25 - 25 -
8,448 - 254,339 217,388
Advances owing to Shareholder, subsidiaries and related parties:
Raukura Moana Seafoods Limited - - 6,306 4,965
Tainui Corporation Limited - - 45,897 37,435
TGH No. 1 Limited - - 5,780 5,780
Waikato Raupatu Lands Trust 74,027 74,027 49,162 49,162
Waikato-Tainui Fisheries Limited 913 414 913 414
74,940 74,441 108,058 97,756
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueDNote 13 continued
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Consolidated Parent 2012 2011 2012 2011 $’000 $’000 $’000 $’000
Trade and other receivables owing by Shareholder:
Waikato Raupatu Lands Trust 11 158 377 150 377
158 377 150 377
Trade and other payables owing to Shareholder:
Waikato Raupatu Lands Trust 19 - 2,722 - 2,722
- 2,722 - 2,722
The Company’s Shareholder, Waikato-Tainui Te kauhanganui Incorporated is the Trustee of the Waikato Raupatu Lands
Trust (the ‘Trust’). 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 by the ultimate Parent to the Group is
subordinated to the Westpac and BNZ bank loans (see note 20).
The Company charged its subsidiaries and Shareholder $1.9m (2011: $1.6m) for administration services and financial
charges. There were no purchases of goods or services from the Group’s subsidiaries.
The Company did not declare a dividend for the year ended 31 March 2012 (2011: $10.5m or $0.175 per share) to the
Shareholder, Waikato-Tainui Te kauhanganui Incorporated, however a dividend of $10.1m was declared on 22 June 2012
(see note 27).
The advance account movement between the Company and its subsidiaries represents cash received and payments
made by the Company on behalf of its 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
notes 18 and note 21 respectively).
15 Other financial assets Consolidated Parent 2012 2011 2012 2011 $’000 $’000 $’000 $’000
At fair value through profit or loss:
Listed companies - 53,325 - 53,325
Unlisted companies 5,385 4,082 5,294 3,901
5,385 57,407 5,294 57,226
In July 2011 the Company sold its shares in listed company Ryman Healthcare Limited for $57.4m or $2.55 per share.
16 intangible assetsConsolidated Software Quota NZ Units ETS Total $’000 $’000 $’000 $’000
Balance at 31 March 2010 279 20,340 - 20,619
Additions 49 - 105 154
Amortisation (101) - - (101)
Balance at 31 March 2011 227 20,340 105 20,672
7 07 0
Computer software Quota NZ Units ETS Total $’000 $’000 $’000 $’000
Total intangible assets at 31 March 2011
Cost 413 20,340 105 20,858
Accumulated amortisation and impairment (186) - - (186)
Net book value 227 20,340 105 20,672
Balance at 31 March 2011 227 20,340 105 20,672
Additions 36 - - 36
Amortisation and impairment (146) - (74) (220)
Balance at 31 March 2012 117 20,340 31 20,488
Total intangible assets 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
Parent
Balance 31 March 2010
Opening net book amount 275 14,492 - 14,767
Additions 33 - 93 126
Amortisation and impairment (101) - - (101)
Balance 31 March 2011 207 14,492 93 14,792
Total intangible assets at 31 March 2011
Cost 391 14,492 93 14,976
Accumulated amortisation and impairment (184) - - (184)
Net book amount 207 14,492 93 14,792
Balance 31 March 2011 207 14,492 93 14,792
Additions 36 - - 36
Amortisation and impairment (146) - (65) (211)
Balance 31 March 2012 97 14,492 28 14,617
Total intangible assets 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
The Group is deemed a participant in the New Zealand Emission Trading Scheme (ETS) as it is an owner of fishing quota.
The carbon credits are not consumed in the production and 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. The NZU’s are
not amortised but are tested for impairment on an annual basis or when indications of impairment exist. 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 $7.50 per unit (2011: $25.00) resulting in an impairment charge to
the Group of $73,342 (2011: nil) and Parent of $64,768 (2011: nil).
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueDNote 16 continued
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17 property, plant and equipment Computer, office equipment, Farm and Development Land Motor furniture &Consolidated other properties properties at cost Hotel vehicles fittings Total Notes $’000 $’000 $’000 $’000 $’000 $’000 $’000
year ended 31 March 2011
Opening net book value 21,694 6,313 5,590 - 120 280 33,997
Additions 70 45,683 - - - 647 46,400
Disposals - - - - - (5) (5)
Net revaluation decrements 10 (2,689) - - - - - (2,689)
Depreciation charge 5 (197) - - - (29) (116) (342)
Impairment of land at cost 8 - - (950) - - - (950)
Closing net book value 18,878 51,996 4,640 - 91 806 76,411
At 31 March 2011
Cost 19,917 51,996 4,640 - 227 1,213 77,993
Accumulated depreciation (1,039) - - - (136) (407) (1,582)
Closing net book value 18,878 51,996 4,640 - 91 806 76,411
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
Disposals (1) - - - (7) - (8)
Net revaluation 10 2,872 - - - - - 2,872
Depreciation charge 5 (167) - - (1,847) (24) (283) (2,321)
Transfer from investment properties 18 - 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
7 27 2
Computer, office equipment, Farm and Development Land Motor furniture &Consolidated other properties properties at cost Hotel vehicles fittings Total Notes $’000 $’000 $’000 $’000 $’000 $’000 $’000
At 31 March 2012
Cost 22,993 1,622 3,240 59,170 227 1,473 88,725
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
Computer, office equipment, Farm and Motor furniture &Parent other properties vehicles fittings Total Notes $’000 $’000 $’000 $’000
year ended 31 March 2011
Opening net book value 20,063 120 128 20,311
Additions 77 - 74 151
Disposals - - (5) (5)
Net revaluation decrements 10 (2,689) - - (2,689)
Depreciation charge 5 (195) (29) (51) (275)
Closing net book value 17,256 91 146 17,493
At 31 March 2011
Cost 18,278 226 430 18,934
Accumulated depreciation (1,022) (135) (284) (1,441)
Closing net book value 17,256 91 146 17,493
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)
Net revaluation 10 2,872 - - 2,872
Depreciation charge 5 (167) (24) (87) (278)
Closing net book value 20,142 79 144 20,365
At 31 March 2012
Cost 21,330 226 464 22,020
Accumulated depreciation (1,188) (147) (320) (1,655)
Closing net book value 20,142 79 144 20,365
Development properties
Development properties relating to the development of the Novotel Auckland Airport hotel, which was completed in May
2011, has been transferred to a separate hotel category within property, plant and equipment (see also note 20 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.
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueDNote 17 continued
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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 2012 is $20.1m (2011: $17.2m).
The carrying amount that would have been reported for farm properties under the historical cost method is $9.2m (2011:
$9.0m).
The total value of other properties by Curnow Tizard Limited at 31 March 2012 is $1.7m (2011: $1.6m). The carrying
amount that would have been reported for other properties under the historical cost method is $0.9m (2011: $1.2m).
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.
18 investment properties Consolidated Parent
2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Balance at beginning of year 457,728 385,061 71,778 67,510
Development 48,420 67,846 - -
Net gain from fair value adjustment 8 23,624 8,571 9,255 4,268
Transfer to property, plant and equipment 17 (1,360) - - -
Disposals - (3,750) - -
Balance at end of year 528,412 457,728 81,033 71,778
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 $131m and parent $24m on 31 March
2012 (31 March 2011: $122m and Parent: $22m) 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 $282m and parent $57m on 31 March 2012 (31
March 2011: $114m and Parent: $50m) 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 $107m on 31 March 2012 (31 March 2011:
$104m) using a mixture of market evidence of transaction prices for similar properties, direct comparison, capitalisation
and discounted cash flow approaches.
R. H. Martin from Property Valuations Limited valued properties at fair value of $1m on 31 March 2012 (31 March 2011: $2m)
using a mixture of market evidence of transaction prices for similar properties and the direct comparison approaches.
7 47 4
R. Peters from Seagar & Partners valued properties at fair value of $2m on 31 March 2012 (31 March 2011: $2m) using a
mixture of market evidence of transaction prices for similar properties and the direct comparison approaches.
Property under construction valuations were completed as follows:
T. Arnott from CB Richard Ellis Limited valued properties at fair value of nil on 31 March 2012 (2011: $112m) using
a mixture of market evidence of transaction prices for similar properties, capitalisation and discounted cash flow
approaches. The carrying amount that would have been reported for properties under construction under the historical
cost method is nil (2011: $112m).
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 as at 31 March 2012 of $6m (2011: $2m) in relation to the property located at
The Base, Parent nil (2011: nil).
19 Trade and other payables Consolidated Parent
2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Trade payables 2,092 5,787 1,284 78
Dividend payable to related parties 14 - 2,700 - 2,700
Related party payables 14 - 22 - 22
Accrued expenses 8,135 11,402 1,850 2,158
Employee entitlements 468 253 272 161
GST 346 - - -
Other payables 40 61 40 61
11,081 20,225 3,446 5,180
20 interest bearing liabilities Consolidated Parent
2012 2011 2012 2011Secured $’000 $’000 $’000 $’000
Bank loans 30,300 72,000 30,300 72,000
Total current interest bearing borrowings 30,300 72,000 30,300 72,000
Bank loans 149,852 114,650 121,667 97,400
Total non-current interest bearing liabilities 149,852 114,650 121,667 97,400
Total interest bearing liabilities 180,152 186,650 151,967 169,400
The Company holds a multi option credit line facility agreement with Westpac New Zealand Limited for $75m (2011:
$50m) of which $50m matures on 15 March 2014 and $25m matures on 25 July 2015. Borrowings of $26m of the available
facility had been drawn at balance date (2011: $23m).
The Company holds a Wholesale Term Loan Facility with Westpac New Zealand Limited for $50m (2011: $22m) which
matures on 27 July 2015. Borrowings of $50m had been drawn at balance date (2011: $22m).
The Company holds a Committed Cash Advances Facility Tranche A Agreement with the Bank of New Zealand for $75m
(2011: $50m) which matured on 31 July 2016. Borrowings of $46m of this facility had been drawn at balance date (2011:
$50m).
The Company holds a Committed Cash Advances Facility Tranche B Agreement with the Bank of New Zealand for $50m
(2011: $50m) which matures on 22 November 2012. Borrowings of $30m of the available facility had been drawn at
balance date (2011: $35m).
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueDNote 18 continued
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Tainui Auckland Airport Hotel holds a Committed Cash Advance Facility with ASB Bank Limited for $33m (2011: $33m)
which matures 14 May 2014. Borrowings of $28m of the available facility had been drawn at balance date (2011: $17m).
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.
21 Other financial liabilities Consolidated Parent
2012 2011 2012 2011At fair value through profit or loss $’000 $’000 $’000 $’000
Interest rate swaps 11,763 7,790 10,717 7,790
Investment property liability 28,280 23,967 28,280 23,967
40,043 31,757 38,997 31,757
The notional amount of interest rate swaps is $150m (Parent: $135m) with maturity dates that range from 1-10 years
(Parent: 1-9 years), (2011: $139m for Parent and Group, 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 accounted for as a financial liability
and investment property (see note 14 and note 18).
22 Reconciliation of profit for the year to net cash inflow/(outflow) from operating activities Consolidated Parent
2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Net profit/(loss) for the year 39,353 22,659 (2,752) (1,430)
Non-cash items:
Depreciation and amortisation 5 2,541 443 489 376
Bad debts written off 5 14 - - -
Movement in doubtful debt provision 5 12 22 1 -
Loss on sale of investment properties 8 - 393 - -
Gain on revaluation of biological assets 8, 13 (1,190) (1,517) (693) (728)
Gain on shares in listed companies 8, 15 (4,050) (6,750) (4,050) (6,750)
Loss on shares in unlisted companies 8, 15 53 - 53 -
Gain on shares in unlisted companies 8, 15 (673) - (763) -
Loss on interest rate swaps 8, 21 3,973 4,140 2,927 4,140
Movement in investment property liability 8, 21 4,313 2,572 4,313 2,572
Share of total profits of associates 6 (334) (139) - -
Gain on revaluation of investment properties 8, 18 (23,624) (8,571) (9,255) (4,268)
Impairment of land at cost 8 1,400 950 - -
Other non-cash items in relation to investing and financing activities 3,386 577 2,883 (993)
(Increase)/decrease in current assets: Trade and other receivables 5,063 (4,329) 254 3 Inventories 415 (1,109) - - Biological assets (239) (228) (239) (228)
Increase/(decrease) in current liabilities: Trade and other payables (9,144) 5,317 (1,734) 650
Net cash inflow/(outflow) from operating activities 21,269 14,430 (8,566) (6,656)
7 67 6
23 Financial risk management
23.1 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 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 2012 (2011: nil).
(ii) Interest rate risk
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.
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 entity 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 entity 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.
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueD
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(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.
(f) Financial instruments by category Assets at fair value Assets at through profit amortised or loss cost TotalFinancial assets as per statement of financial position $’000 $’000 $’000
Consolidated
At 31 March 2012
Financial assets 5,385 - 5,385
Trade and other receivables - 2,484 2,484
Cash and cash equivalents - 6,257 6,257
5,385 8,741 14,126
At 31 March 2011
Financial assets 57,407 - 57,407
Trade and other receivables - 4,908 4,908
Cash and cash equivalents - 2,251 2,251
57,407 7,159 64,566
Parent
At 31 March 2012
Advances - 254,339 254,339
Financial assets 5,294 - 5,294
Trade and other receivables - 626 626
Cash and cash equivalents - 2,054 2,054
5,294 257,019 262,313
At 31 March 2011
Advances - 217,388 217,388
Financial assets 57,226 - 57,226
Trade and other receivables - 798 798
Cash and cash equivalents - 1,023 1,023
57,226 219,209 276,435
7 87 8
Liabilities at fair value Liabilities at through profit amortised or loss cost TotalFinancial liabilities as per statement of financial position $’000 $’000 $’000
Consolidated
At 31 March 2012
Borrowings - 180,152 180,152
Financial liabilities 40,043 - 40,043
Trade and other payables - 10,735 10,735
Advances - 74,940 74,940
40,043 265,827 305,870
At 31 March 2011
Borrowings - 186,650 186,650
Financial liabilities 31,757 - 31,757
Trade and other payables - 20,225 20,225
Advances - 74,441 74,441
31,757 281,316 313,073
Parent
At 31 March 2012
Borrowings - 151,967 151,967
Financial liabilities 38,997 - 38,997
Trade and other payables - 3,446 3,446
Advances - 108,058 108,058
38,997 263,471 302,468
At 31 March 2011
Borrowings - 169,400 169,400
Financial liabilities 31,757 - 31,757
Trade and other payables - 5,180 5,180
Advances - 97,756 97,756
31,757 272,336 304,093
23.2 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 (2011: no breach). There are no externally imposed capital requirements at balance date (2011: nil).
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueDNote 23.1 continued
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Consolidated Parent 2012 2011 2012 2011 Notes $’000 $’000 $’000 $’000
Total borrowings 20 180,152 186,650 151,967 169,400
Less: cash and cash equivalents (6,257) (2,251) (2,054) (1,023)
Net debt 173,895 184,399 149,913 168,377
Total equity 373,883 332,018 78,459 78,339
Total capital 547,778 516,417 228,372 246,716
Gearing ratio 32% 36% 66% 68%
24 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
2012 2011 2012 2011 $’000 $’000 $’000 $’000
Within one year 91 46 29 36
Later than one year but not later than five years 81 38 23 29
Later than five years 122 32 1 28
294 116 53 93
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
2012 2011 2012 2011 $’000 $’000 $’000 $’000
Within one year 31,518 30,204 2,000 2,000
Later than one year and not later than five years 104,238 108,306 8,000 8,000
Later than five years 139,239 149,847 58,942 60,948
274,995 288,357 68,942 70,948
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.
25 Contingent liabilities and gains
The Parent and Group had contingent liabilities at 31 March 2012 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.
8 08 0
26 Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows: Consolidated Parent
2012 2011 2012 2011 $’000 $’000 $’000 $’000
Property, plant and equipment 5,895 42,150 1,440 2,104
Proportionate interest in joint venture commitments - 588 - -
Share of associates’ commitments - 497 - -
5,895 43,235 1,440 2,104
27 events subsequent to the reporting period
The Company declared a dividend of $10.1m on 22 June 2012.
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueD
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Report on the Financial Statements
We have audited the financial statements of Tainui Group Holdings Limited on pages 51 to 80, which comprise the statements of financial position as at 31 March 2012, the statements of comprehensive income and statements of changes in equity and cash flow statements for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information for both the Company and the Group. The Group comprises the Company and the entities it controlled at 31 March 2012 or from time to time during the financial year.
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 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 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.
We have no relationship with, or interests in, Tainui Group Holdings Limited or any of its subsidiaries other than in our capacity as auditors and providers of other assurance services. These services have not impaired our independence as auditors of the Company and the Group.
Opinion
In our opinion, the financial statements on pages 51 to 80:
(i) comply with generally accepted accounting practice in New Zealand;
(ii) give a true and fair view of the financial position of the Company and the Group as at 31 March 2012, 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 2012:
(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 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.
inDePenDent auDitOrs’ rePOrtTO The ShaRehOLDeR OF TaiNui gROup hOLDiNgS LimiTeD
Chartered Accountants
Auckland
22 June 2012
8 2
Date of establishment 31 March 2008
Objectives Waikato-Tainui Fisheries Limited is established to:
Receive, hold and manage, for so long as they are to be retained, the income shares of Aotearoa
Fisheries Limited.
Shareholder Waikato-Tainui Te kauhanganui Incorporated
Board of Directors John Spencer (Chairman)
Michael Allen
Rahui Papa
Rukumoana Schaafhausen
Hon. koro Wetere
Chief executive Officer Mike Pohio
Solicitors Bell Gully
McCaw Lewis
Registered office 4 Bryce Street, Hamilton 3204
postal address P O Box 19295, Hamilton 3244
Telephone +64 7 834 4880
Facsimile +64 7 834 4881
waikatO-tainui fisheries limiteDDiReCTORyfor the year ended 31 March 2012
8 3These financial statements should be read in conjunction with the accompanying notes.
Tainui Group Holdings Annual Report 2012
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2012 2011 $’000 $’000
Revenue 499 414
Net operating profit for the year 499 414
Fair value gains/(losses) - -
Net profit for the year 499 414
Other comprehensive income for the year
Other comprehensive income for the year - -
Total comprehensive income for the year 499 414
waikatO-tainui fisheries limiteDSTaTemeNT OF COmpReheNSive iNCOme (unaudited)for the year ended 31 March 2012
Mike Allen, Director 22 June 2012
John Spencer, Chairman 22 June 2012
Note 2012 2011 $’000 $’000
EQUITy
Contributed equity 3 - -
Retained earnings 4 13,848 13,349
Total equity 13,848 13,349
ASSETS
Current assets
Advances 6 913 414
Non-current assets
Other financial assets 5 12,935 12,935
Total assets 13,848 13,349
Total net assets 13,848 13,349
waikatO-tainui fisheries limiteDSTaTemeNT OF FiNaNCiaL pOSiTiON (unaudited)as at 31 March 2012
8 4 These financial statements should be read in conjunction with the accompanying notes.
Contributed Retained Total equity earnings equity $’000 $’000 $’000
Balance as at 1 April 2010 - 12,935 12,935
Comprehesive income
Net profit for the year - 414 414
Other comprehensive income for the year - 414 414
Balance as at 31 March 2011 - 13,349 13,349
Comprehesive 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
waikatO-tainui fisheries limiteDSTaTemeNT OF ChaNgeS iN equiTy (unaudited)for the year ended 31 March 2012
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Tainui Group Holdings Annual Report 2012
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Tainui Group Holdings Annual Report 2012
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 Board of Directors on the 22nd of June 2012.
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.
waikatO-tainui fisheries limiteDNOTeS TO The FiNaNCiaL STaTemeNTSfor the year ended 31 March 2012
8 68 6
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 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 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
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 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 19.5%.
NOTeS TO The FiNaNCiaL STaTemeNTS CONTiNueD
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Tainui Group Holdings Annual Report 2012
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Tainui Group Holdings Annual Report 2012
2.6 gST
The Company is not registered for GST. Revenue and expenses are reported gross of GST (if any).
3 Contributed equity 2012 2011 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.
4 Retained earnings
Movement in retained earnings were as follows: 2012 2011 $’000 $’000
Balance at beginning of year 13,349 12,935
Net profit for the year 499 414
Balance at end of year 13,848 13,349
5 Other financial assets 2012 2011 $’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 are based on cash flows calculated on an annual basis from 2008 to 2017 and a
terminal value, based on cash flows in 2017 with an assumed growth factor of 2.6% per annum (2011: 2.6%) and a post
tax discount rate of 9.5% (2011: 9.5%). A 20% (2011: 20%) liquidity and minority interest discount has been taken into
account in determining the fair value.
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 $0.9m represents cash received and payments made on behalf of the Company by
Tainui Group Holdings Limited (2011: $0.4m).
7 Contingent liabilities
The Company has no contingent liabilities at balance date (2011: nil).
8 Capital commitments
The Company has no capital commitment at balance date (2011: nil).
9 events subsequent to the reporting period
The company declared a dividend of $0.9m on 22 June 2012.
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Tainui Group Holdings Annual Report 2012
This annual report has been printed on environmentally friendly paper which has been sourced
from legally harvested forests, and has been printed with environmentally friendly ink.
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