HALF-YEAR REPORT - Tainui Group Holdings
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Half-Year Report FY2020
HALF-YEAR
REPORT
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TAINUI GROUP HOLDINGS HE PUURONGO NAA TE HEAMANA ME TE TUMU WHAKARAE Report from the Chairman and Chief Executive Officer He tau whaangai te tau. He tau pai te tau. He tau whakatupu te tau. Kei ngaa nunui, kei ngaa roroa, nei raa te mihi mahana i teenei wahanga o te tau. There is new momentum building for Tainui Group Holdings (TGH). Our 2020 financial year is seeing outcomes that have been a while in coming because they have required patience and focus, robust negotiation and collaboration. Highlights include the start of construction of our new hotel at Auckland International Airport, the announcement of a Ruakura rail service agreement with Port of Tauranga, rapid progress on the extension to Novotel Tainui Hamilton Hotel, and a financial performance that is ahead of budget. Added to this is our strategy to protect and build returns from our Fixed Income portfolio. This is primarily focused on commercial properties, especially those in the Crown tenancy space. Discussions with one Crown agency are very well advanced. Other Fixed Income opportunities are also in the works and the challenge for us all will be to ensure that TGH is well-positioned to capitalise on those with suitable funding capability. The common factor in our progress so far this financial year is partnership, which we often talk about as a key part of how we do business. Partnership for us is about aligning interests and values, responding to need, tapping into resources, and accessing jointly-held skills and business intelligence to develop smart ways of doing business for mutual gain. It’s a good time to be building momentum and partnerships. Infrastructure projects valued at $1b are underway in Hamilton and the Waikato that will change the economic profile of our region. These are over and above a number of roading and housing developments, the Hamilton-Auckland passenger rail service, location moves by major corporate companies to our province, and our own Ruakura precinct project. There is a lot happening within our rohe. Of course, we acknowledge that the most important partnership we have is with our iwi, starting with our governing bodies, marae, fellow tribal entities, and our tribal members. We see ourselves as one part of a tribal engine that relies on the sum of its parts to be successful and, more importantly, build a strong future for Waikato-Tainui. Mahia te mahi hei painga moo te iwi. Sir Henry van der Heyden Chris Joblin CHAIRMAN CHIEF EXECUTIVE OFFICER | 2 |
Half-Year Report FY2020
Sir Henry van der Heyden
(left) and Chris Joblin on-
site at the Novotel Tainui
Hamilton Hotel extension.
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TAINUI GROUP HOLDINGS
WHAKARAPOPOTO WHAI PUUTEA
Financial Summary
ASSET PORTFOLIO
Our income comes from a range of asset sectors
including Property, Fixed Income (leases), Primary Industry
(farms, forests), Direct Investments (Go Bus and Waikato
Milking Systems), and Equities.
Over the last five years TGH has been actively diversifying
its investment portfolio to spread risk against any sector
experiencing a downturn.
68+5+207D 58+6+71910D
TOTAL ASSETS FY2014 TOTAL ASSETS FY2020 (forecast)
10%
7%
20%
19%
$827M 68% $1,006M 58%
5%
7%
6%
PROPERTY PRIMARY DIRECT FIXED INTEREST EQUITIES
INVESTMENTS
44+26+2073D
PROPERTY ASSET CLASS 3%
BREAKDOWN FY2020 (forecast) RETAIL
7%
Our investment in Property reflects our
RUAKURA
history as a company that was established 20%
with whenua from the Raupatu settlement, $585M 44% HOTELS
which included commercial, residential
and rural properties. It was a fortunate COMMERCIAL
start for TGH and much of our growth is 26%
a result of commercialising that whenua. RESIDENTIAL
The Base is an example of this.
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Half-Year Report FY2020
RIGHT: Higher valuations
for properties such as The
Base have contributed
to the strong financial
performance of TGH
FINANCIAL PERFORMANCE FY2020
The half-year has ended in line with our budget and we are
on target to exceed year-end forecasts for Net Operating
Profit ($23.7m) and Net Profit ($43.3m) respectively.
NET OPERATING PROFIT (forecast)
$23.7M
NET PROFIT (forecast)
$43.3M MANAGING FUTURE GROWTH
Growth will increase operating profits, and this will enable
TGH to increase dividends back to our iwi.
The strong performance has been underpinned by The
Some of this growth comes about naturally from running
Base, our hotels, and equities which have recorded
our businesses well and increased valuations on some
higher valuations.
of the existing assets. However, for TGH to really grow,
Areas of our business facing challenges include our it must invest in new opportunities, and this can only be
farming operations as a result of Fonterra not paying its achieved with more capital.
dividend. This has also had a flow-on effect to Waikato
Options to raise capital include increasing bank
Milking Systems which relies on sales to farmers.
borrowings (debt), selling assets, partnering with others,
Go Bus continues to demonstrate an improvement in
and receiving direct contributions (cash) from the
performance albeit in a tough public transportation sector.
company shareholder.
Under the current Statement of Investment Policy and
Objectives (SIPO) TGH can borrow up to 20% of its Total
Asset Value (which is very conservative by commercial
standards where debt-to-equity ratios of 35-40% are
common among property companies). TGH is currently
utilising 16%, leaving just 4% to fund future developments.
Of the four options, increasing our debt cap and
acquiring partners are potentially our best possibilities
for raising capital.
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TAINUI GROUP HOLDINGS
HE HOOTEERA HOU
New hotel on the way
A stunning karakia event in July 2019
set a strong cultural foundation to
bring to life our new luxury hotel.
Te Arikinui Pullman Auckland Airport Hotel, which we are
developing in partnership with Auckland Airport, will be
the fourth in our stable of hotels and is part of the airport’s
multi-billion dollar ‘airport of the future’ expansion.
Construction commenced on 1 August 2019 with
completion scheduled for 2022, and design plans
and renders reveal a hotel that will be worthy of
the title it carries and its 5-Star premium status.
The build presents a series of unique challenges
for the builder, Dominion Constructors, which
include its star-shape, its location within an
operational airport, height restrictions, and having
an existing hotel (Novotel Auckland Airport Hotel)
operating alongside the construction site.
Foundations and steelwork to level one are
expected to be completed by March 2020.
TOP: Kiingi Tuheitia
breaks the ground
BOTTOM: Loyal nannies
supporting the karakia
FAR RIGHT: Artist’s
impression of the new hotel
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Half-Year Report FY2020
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TAINUI GROUP HOLDINGS
LEFT: Mark Cairns, Chief
Executive of Port of
Tauranga with TGH CEO
Chris Joblin (right)
PORT OF TAURANGA
PARTNERS ON
RUAKURA
Partnering with Port of Tauranga
on a rail services agreement is
a key step towards fulfilling the
vision we have for Ruakura.
The agreement confirms that Port of Tauranga views
Ruakura as a key component of its port and container
movement operations within the golden triangle of
Auckland, Hamilton and Tauranga.
The 30-year agreement gives Port of Tauranga access
rights to Ruakura with priority rail slots. Port of Tauranga is
currently operating up to 86 train trips per week between
Auckland and Tauranga, carrying up to 9,000 shipping
containers.
Chief Executive, Mark Cairns, says Ruakura offers
significant cargo handling capacity and scope for his
organisation to meet its future needs.
KiwiRail has also welcomed the agreement, describing
it as an example of effective collaboration to design and
deliver rail infrastructure that will better connect Aotearoa.
We welcome Port of Tauranga to the TGH whaanau and
look forward to deepening a partnership that benefits
both organisations.
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Half-Year Report FY2020
EXTENSION NEARS
COMPLETION
A ‘project-first’ mindset by the
construction team has contributed
to a trouble-free build on the
four-level, 40-room extension to
Novotel Tainui Hamilton Hotel.
While all commercial construction projects present a
series of challenges around design and buildability,
working together to identify issues and provide solution
options has worked well for project manager Greenstone
Group, Babbage Architecture and builder Form NZ.
And by the time the extension opens next
year the hotel will offer guests the newest
and finest accommodation in the city.
Major milestones to date include installation of screw piles
and foundations, recast columns, walls and floors, and
completion of the roof. Fitout on all four floors, including
installation of window joinery and glass, is now underway.
Construction is expected to be
In January 2020, when the white building wrap is
removed, we will be able to view for the first time the
completed in the first quarter of 2020.
unique tuna design on the exterior of the extension wing.
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TAINUI GROUP HOLDINGS BOARD UPDATE In August 2019 we said farewell to long-serving director Matthew Cockram and welcomed two new appointments to the Board table. Matthew, who is a property development and major projects specialist, joined the Board in 2011. His time on the Board saw significant growth, including Equity more than doubling to $734m and $123m in dividends paid to Waikato-Tainui. Replacing Matthew is Dean Bracewell (Ngaati Maniapoto), who brings transport and logistics expertise having been Managing Director at Freightways Group for almost 20 years. Mark Petersen has also been appointed to the Board in an Advisor capacity. Mark has a background in property and port governance. His role will transition to Director in 2020 when another long-serving Director is due to retire. Both Dean and Mark offer experience that is especially valuable as we continue to create Ruakura and enhance property developments. SUPPORTING RANGATAHI INTO MAHI Getting proactive about mahi has proven to be a successful strategy for Victoria University student Ally Green (Waipapa Marae). With support from her Dad, Ally approached TGH looking for help to find job opportunities in Wellington where she is studying a conjoint degree in Commerce and Design Innovation. That led to an interview with Grand Mercure Hotel, which is owned by Accor who manages all three of our current hotels. Her job as a Food and Beverage Attendant is allowing her to save towards the cost of accommodation for next year when she moves out of Halls of Residence. It’s also led to a holiday job in Auckland. “I talked to my boss and he offered me an opportunity to transfer to the Grand Mercure in Auckland where I live. It’s really great.” Ally will resume her Wellington job after the holidays and hopes to use her hotel work experience to find mahi when she heads off on her post-graduation OE. | 10 |
Half-Year Report FY2020
CLOCKWISE FROM TOP LEFT:
Dean Bracewell and
Mark Petersen (right),
Lee Taharangi Gray,
Ally Green
DEVELOPING FUTURE
DIRECTORS
Te Ohu Amorangi is our new
governance development
programme and Lee Taharangi
Gray is the inaugural appointee.
Lee, who affiliates to Waikato, Ngaati Maniapoto, Ngaati
Apakura, Ngaati Raukawa, Ngaai Te Rangi, and Ngaati
Kahungunu, was selected from 47 high calibre applicants.
Te Ohu Amorangi is inspired by the Future
Directors Programme which offers opportunities
to those aspiring to a future in governance but
don’t yet have governance experience.
Te Ohu Amorangi is about helping to
develop future directors who could go on
to contribute to iwi development through
governance. Lee stood out because of
his desire to be a governor and make a
difference for his iwi,” says Sir Henry.
The programme was introduced to TGH by Sir Henry van
der Heyden who was behind its initiation into Auckland
Airport during his time as Chairman where he championed
diversity, including supporting more Maaori on boards.
TGH has adapted the Future Directors Programme
to run for two years, not one. During that time Lee
will have the same access to Board information
and decision-making as a director would. However,
as a non-director he is not able to vote.
The two-year timeframe is designed to give appointees
plenty of time to “learn, develop, contribute and have the
opportunity to add value to the business,” Sir Henry says.
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www.tgh.co.nz
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