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Tainui Group Holdings absorbs downturn

Thursday 17 July 2008

Tainui Group Holdings absorbs downturn, increases asset base

Tainui Group Holdings Ltd 2008 annual results released

Tainui Group Holdings Ltd (TGH) and Waikato Tainui Fisheries (WTF) recorded a net surplus of $52.4 million for the year ended 31 March 2008. The comparable figure for 2006/07 was $64.2 million.

This year for the first time TGH reported as two entities – Tainui Group Holdings and Waikato-Tainui Fisheries. This is a result of the application of the Maori Fisheries Act, which requires assets received under fishing settlements to be separately accounted for.

TGH Chairman John Spencer said that the company was very pleased with the results given market conditions in the second half of the year.

“Fortunately, with such a large proportion of our balance sheet invested in cashflow-producing investment properties, we have not felt the impact of the deteriorating economic climate to the extent that other investment companies have.”

“This factor should also continue to be a buffer until conditions improve.” At balance date TGH had grown its total assets to $496m, an increase of $118m for the year. The majority of these assets are in a diversified property portfolio. $69m was invested in managed funds and equities with the remainder in fishing assets, both shares and quota. TGH paid its shareholder, the Waikato Raupatu Lands Trust, a dividend of $10.5 million for the year.

TGH Chief Executive Mike Pohio said he expected a further drop in the company’s net surplus in 2009.

“The contribution from investment property revaluations that we’ve enjoyed in recent years will not continue. The next few years’ results will depend on cash operating returns.” Mr Pohio said that the major focus for the year had been on managing the impact of the downturn in the economy, while still focusing on long-term investments.
- 2 - “Last year we warned of the possibility of a hard landing for the economy. It’s no comfort to be proved right, but it meant we acted quickly from the third quarter of last year when the impact of the sub-prime situation became apparent.”

“We postponed two residential developments which we won’t reactivate until the market has clearly steadied.”

Mr Pohio said that TGH had also maintained a very conservative level of debt.

“At balance date on 31 March this year, our debt to total assets ratio was 15 percent. And we’ve been vigilant in managing exposure to risk in our other investments.” During the year TGH acquired the 50% share in the project it did not own from joint venture partner The Warehouse Group. At balance date, The Base was the group’s single biggest asset, valued at $100 million.

It also purchased a 4.5% stake in Ryman Healthcare in a joint arrangement with South Island-based Ngai Tahu Holdings Group. Together the two iwi-owned companies hold a strategic 12.5% stake in Ryman, and together, their combined assets are valued at over $1 billion.

Other major milestones in the year included the opening of the Ibis Tainui hotel, and the completion of 5-yearly rent reviews on most of its major properties.

Like many other managed funds, those owned by the Group fell in value during the year, but these are unrealised losses. It also had to absorb part of the $1.4 m loss on the wind-up of Raukura Moana Fisheries Ltd, a joint venture with Ngati Raukawa and Ngati Maniapoto. The quota fished by the three tribes under the RMFL banner has subsequently been leased to other operators. Mr Pohio said that TGH saw economic conditions remaining very difficult over at least the next 12 months.

“Nevertheless, a number of new opportunities have already arisen which, over the long term, could prove to be worthwhile investments. We will proceed with caution, but try to ensure we don’t miss out on any chances to add value to the business.”

“We are however very clear on one thing – we must never put at risk the financial platform we have established to date,” he said.


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