He raupō ka piko e te hau ka ara

Income resilience key in a challenging business environment

It has been another challenging year for PKW, with the narrative of a slowed economy, geopolitical influences and the effects of climate change being told by the numbers that make up the year-end financial report.

But by protecting key income streams created by a diversified investment Papatupu (portfolio), the Incorporation has the resilience and strength to stand resolute for the long-term.

“Sometimes you have to look behind the numbers to get the full story of how a business is performing,” says Jahron Neha, Te Rau Māhorahora/GM Finance and Investments. “When the underlying value of our greatest asset, our whenua tupuna, is subject to such volatility from annual revaluations, it is inevitable that the balance sheet is going to feel the impact.”

“The expectation for the year is that the impact will be a significant one, placing strain on the reporting result in our 2023/2024 accounts.”

“But the true value of that whenua to our Te Rau Titikura / Shareholders cannot be held in a number, because any movement in value would never be realised through being sold. The legacy of our tūpuna remains steadfast and resilient, as always.”

The annual rent from the whenua tupuna is a key revenue stream for PKW, along with the ground lease payments generated by the Tai Hekenga property investment portfolio.

“Tai Hekenga represents a strong, stable and enduring source of income for the Incorporation, maintaining our cashflow regardless of outside influences, for the most part,” says Jahron. “It’s a valuable example of the benefit of a diversified investment strategy.”

The slowing of the NZ economy, high interest rates and the uncertainty presented by key offshore markets have had the highest impact in two key business areas.

“Our largest investment, our dairy farming business, is always working in a challenging environment with high operational costs and changeable returns,” explains Jahron. “We also experienced drought-like conditions that severely curtailed grass growth with a knock-on effect of significantly reducing milk production.”

“The Ngāmotu Hotel joint venture has also been hit hard by the economic conditions, with families and businesses tightening their purse strings and reducing discretionary spending.”

But the news is not all bad, with Port Nicholson Fisheries showing the best performance ever over the first three quarters of the year, enabled by high sale prices for kōura in China and favourable foreign exchange rates.

Harvesting is now well underway on the 300-hectare Mangaoapa Forestry Block too, converting timber into $10m of cashflow over the next three years.

“We have been weathering the economic storm for some time now, however the outlook on the domestic front is encouraging with expectations of multiple interest rates cuts before the end of the year. Unfortunately, we are anticipating continued uncertainty globally,” says Jahron.

“But PKW is well-placed and resilient. We know we have a strong strategic approach and a kaupapa that will sustain us through what is to come.”