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Tena koutou, otira tena tatau katoa. Tena tatau o tatau tini mate, ratau kua wheturangitia, kua katohia i te ringa kaha o aitua. Haere atu koutou, okioki. Okioki koutou ki te okiokitanga a o tatau matua tipuna. Waiho mai matau me o matau tangi. Ki a tatau te hunga ora, nga waihotanga iho o ratau ma, tena hoki tatau katoa.
The 2017 year was another busy year for the Ngati Porou Holding Company (NPHCL) as we continued to try to grow and develop the business of the company. From a financial point of view NPHCL had a much stronger year:
This result was driven largely by improved performance from the investment portfolio and the harvesting of the forestry on Hoia Station. However, as the summary indicates, there were positive earnings contributions from both Ngati Porou Seafoods and Pakihiroa Farms, despite challenges for both of those business (refer to their specific reports elsewhere in this annual report).
NPHCL has also continued to work on the growth and development of its operations.
The highlights have been:
Matakitaki mai: Watch Ngati Porou HoldCo Chair, Matanuku Mahuika report on the HoldCo's 2016/2017 activities. To listen to the Radio Interview and to download the full TRONPnui Annual Report scroll down to the end of this article.
Group earnings $15.3m up from $6.5m in 2016
Return on net assets of 7.4%Group revenue $31.0m up from of $16.7m.
Total assets $217.7m up from $210.9m in 2016
Dividends to Te Runanganui o Ngati Porou of $7.4m
Ngati Porou Seafoods profit $0.9m
Pakihiroa Farm profit $0.5m
Sale of carbon credits $3.6m
The above table and graph shows that the NPHCL Group had revenue of $31.0m (includes extraordinaries), EBIT $15.5m and earnings of $15.3m. NPHCL’s financial performance was up by $8.5m to record an EBIT of $14.5m. This was due primarily to an increase in the value of equity investments. Ngati Porou Seafoods Group financial performance was in line with its 2016 year result to record an EBIT of $1.0m. Pakihiroa Farm financial performance was slightly down resulting in an EBIT of $0.6m compared to $0.7m for the previous year.
As in previous years, the return of forest land from Ernslaw has required that NPHCL replant that land. The result of this is that NPHCL is becoming an increasingly large forest owner in the region. NPHCL is carrying $16.0m of forestry assets (up from $15.8m in 2016), comprising $12.4m of forest land and $3.6m of trees.
During 2017, Ernslaw returned a total of 725 hectares of land from the Ruatoria and Tokomaru forests, which NPHCL planted at a total cost of $747k. This brought the total area of forest NPHCL has planted to 3,422 hectares. NPHCL is continuing to look for possible joint venture partners to co-invest in the replant programme over the next 25 years.
NPHCL is also continuing to explore opportunities to add value to its forestry investments and the East Coast forestry sector generally. One of the opportunities explored by NPHCL was the possibility of a port development in Te Araroa or Hicks Bay. To this end an initial feasibility study was completed in 2017. This study has given NPHCL an idea of what a full port development would look like and what that might cost. A lot of further work will still need to be done before a port development could be realistically considered. Any development would also need to be discussed with the Ngati Porou communities in the Te Araroa and Hicks Bay regions. Those communities are understandably concerned about the possible impact of any development and from NPHCL’s point of view any port development would need their support.
Pakihiroa Farms has its own section in the annual report, which provides a detailed overview of the 2017 year. Pakihiroa Farms had a solid year despite a lower than usual lambing percentage of 127% and an extremely dry first half of the financial year through to the end of January. Earnings of $0.5m were an improvement on 2016 of $0.4m and the return on net assets of 4.1% were an improvement on 2016 of 3.7%. Pleasingly, however, the farms produced a strong cash flow result leading to a more than $500,000 reduction of debt.
Like Pakihiroa Farms, the Seafoods Group has its own section in the annual report, which provides a detailed overview of the 2017 year. This is the largest of the operating entities within the NPHCL group at approximately $46.4m in total assets. Not surprisingly it has also, historically, made the largest contribution to NPHCL’s result alongside investments. This was true again for the 2017 year. Earnings of $1.0m was in line with 2016 with return on assets being 2.1% compared to 2.3% in 2016. This was due in large part to a challenging year across most aspects of the fishing industry. The Seafoods Group is continuing to work on opportunities to add value to its operations through the development of its smoked products brand, Ahia, and by continuing to look at ways to refine its processing operations.
NPHCL has continued to work with the Ngati Porou Miere Limited Partnership and its member land blocks to develop honey opportunities within Ngati Porou. In addition to working with the Ngati Porou Miere Limited Partnership, NPHCL has continued to keep an eye on developments within the wider manuka honey industry. It has been a tough year for the industry with a combination of an extremely poor season and the introduction of new regulatory standards and classifications. The regulatory changes in particular have seen a drop in demand and therefore pricing for lower UMF honey. On the positive side of things NPHCL has, alongside the Runanganui, been in discussions with the Department of Conservation in an effort to secure beehive concessions over the conservation estate. The Department of Conservation agreed to these concessions in respect of an area over 19,000ha of the conservation estate. As at the date of this report, work was still being carried out to complete the site assessments necessary to enable hives to be put on this area for the upcoming season.
During 2017 NPHCL made two new investments – a $250,000 investment for a 3.7% shareholding in Hautupua LP Ltd, trading as the Miro Limited Partnership, and a commitment to invest up to $1.8m in Amanti and the related design company Pohewa Limited. The Miro Limited Partnership is currently a 100% Maori-owned venture involving a number of iwi and large Maori land trusts and incorporations, the majority of which are concentrated around the Bay of Plenty. The Miro Limited Partnership will invest in blueberry genetics and licencing, supply chain development, and some orchard establishment. NPHCL and other first stage investors will also have the right to obtain blueberry licences at no cost.
During the year $523,000 was invested in Amanti. Amanti is an early stage company that has been established to design, build and operate tourism experiences associated with prominent brands. It also provides tourism consultancy services. The investment in Amanti will be drawn down over time as the company achieves certain development milestones. Pohewa Limited is 100% owned by Amanti and will provide the expertise to deliver the design aspect of the tourism experiences. As a condition of NPHCL’s investment this company will operate out of Gisborne.
One other significant step that occurred in 2017 was the signing of a Letter of Intent between Air New Zealand and NPHCL. Under this Letter of Intent Air New Zealand and NPHCL will work together on agreed projects, one of which is the development of a tourism experience in relation to Hikurangi. It is expected that this tourism experience will be developed in the lead-up to Christmas. This is an exciting relationship for NPHCL and it has the potential to add value in other ways as the relationship develops.
Hikurangi maunga and the whakairo series, Te Takapau a Maui, are a key feature of marketing Ngati Porou tourism.
The NPHCL was established in June 2012 to manage and oversee the commercial assets of Te Runanganui o Ngati Porou. The structure of the NPHCL has not changed from the structure reported in previous annual reports and is set out below. The equity interests that NPHCL has in Miere, Miro and Amanti form the basis of the NPHCL investment portfolio.
The SIPO is the NPHCL “Statement of Investment Priorities and Objectives”, which was approved by the Runanganui and reported to the hui-a-tau in 2013. The SIPO sets out the investment policies and objectives that govern NPHCL’s investment portfolio. The policy settings require that investments are well spread across a range of investment classes including cash, bonds, and equities, with an overall target allocation of 70/30 between growth and inflation sensitive assets. The target real rate of return over the long term is 2.50% per annum (after inflation).
The inflation rate of 3% was assumed for the purposes of the financial modelling that was carried out at the time of the SIPO, although the actual rate of inflation since 2013 has been substantially lower than that. To ensure geographical risk is minimised, there are various weightings used so that investments are not exposed to one particular location. Direct investments within our rohe are benchmarked against the New Zealand Stock Exchange index returns and weighted against the Trans-Tasman portfolio of investments.
As reported previously, NPHCL has also developed direct investment criteria to be used as a guide when assessing direct investment opportBunities, as follows:
1. The investment meets or exceeds the rate of return thresholds established by the relevant SIPO investment category (Trans-Tasman Equities or, in some circumstances, Emerging Markets).
2. It is an investment in an industry or activity that is important to the East Coast region.
3. There will be benefits in addition to the projected financial returns to NPHCL (eg employment, further development of industries important to Ngati Porou).
4. NPHCL has the required expertise available to effectively manage the investment. The reason for these criteria is to provide a framework against which direct investment can be considered. It also reflects the view of NPHCL that, while financial returns are important, there are other criteria that NPHCL should apply around the value that the investments will create for Ngati Porou.
Matanuku Mahuika
Chairperson
Ngati Porou Holding Company Ltd.
