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Annual Report 2011


Contents 4. Chairman’s Report 6. Director’s Report 8. Treasurer’s Report 10. Auditor’s Report 12. Consolidated Statement of Earnings 13. 2012 Pre–Tax Income


Rob Morrison

On paper you might think we look like other professional businesses; with advance facilities, technical resources and skilled and experienced people. Think again. When you work with us, you’ll see the difference. We have a commitment to teamwork, to completing a job absolutely right and then some—delivering more than others think is possible. We take pride in the way we conduct business for our clients and customers. You can’t run a successful operation without great people and excellent relationships based on honesty

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Kiwibank Limited

Chairman’s Report

and commitment. We are proud of our ethical standards. We see every project as an opportunity to further long term relationships with clients. We have invested wisely in equipment that delivers substantial benefits to our customers creating a clear competitive advantage for our company. All our business units use innovative technology to offer improved service and reliability, a higher quality output and greater speed at competitive rates. However, innovation isn’t just about technology. It also means embracing new ways of

doing business, finding more value for our clients, searching for potential investors and offering unique solutions. Anyone can talk about service. It’s entirely different to experience an unparalleled level of it. To us service isn’t a marketing notion. It’s demonstrating to clients how much we value them and their business. From concept to action. Countless, unseen details are often the only difference between mediocre and magnificent. Our customers know that whatever the size or


Anyone can talk about service. It’s entirely different to experience an unparalleled level of it. To us service isn’t a marketing notion. It’s demonstrating to clients how much we value them and their business.

complexity of their project, it will be completed to the highest standards which we provide. It is this approach to work that ensures professional customer service and a striving for excellence in everything we do. Teamwork is the ability to work together toward a common vision. It’s the attitudinal ability of individuals to work towards big picture organisational objectives. It’s also the fuel that allows our staff to attain exceptional results. Our commitment to teamwork is entrenched in our business culture. We employ the best in

the industry—and we expect the best from them. With the best individuals working together, goals are reached easily and often surpassed. This last year has been one of enormous progress and highlighted events. We have strengthened relationships internally, nationally and internationally with our yearly award ceremony of excellence. A colourful display of performance, integrity and achievement across the board. Finally, following a year of progress and achievement I would like to thank my fellow board members for their energetic

support, and the staff of industrial research for continuing to build the enviable reputation this organisation now enjoys.

Rob Morrison Chairman

Kiwibank Limited

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Michael Cullen

Financial performance Group tax paid earnings of $922,000 were significantly below the original budget target and 45 percent down on last year’s result. At an operational level the earnings achieved were in line with last year, based on revenue growth of nine percent. Return on equity of 3.3% for the year resulted from the low earnings combined with the company having another year of significant investment. Expansion in May 2009, the board approved the establishment of a new facility to scale–up production of high–value for the industry. The facility is scheduled to commence production in mid June 2011 and

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Kiwibank Limited

Director’s Report draws on the capabilities of a number of teams. Supporting New Zealand businesses Our ongoing commitment to helping New Zealand businesses saw Investor Network Events in Auckland and Wellington in July 2010. These events, otherwise known as MINE for Business Angels, were part of an industrial research initiative aimed at creating a business angel network matching innovative new and early stage companies with investors. Our technology incubator service for start–up businesses has progressed well this year with incubators operating at our premises in Auckland and

Wellington. We are working on developing the concept in New Zealand and offshore with advanced technology businesses being the main focus. The MINE initiative, together with our technology incubator service, have been recognised by government with funding support received from industry New Zealand for both during the year. Partnerships Our collaborations with universities, other crown research institutes and industry continued to produce valuable relationships. Most notable in this period was the establishment of five Centres of Research Excellence with us, we were delighted


Many of you have been with us since it’s inception and can look back on the achievements of the past 10 years with pride. We look forward to another successful year ahead.

to be associated with two of these. They are the MacDiarmid Institute for Advanced Materials and Nanotechnology hosted by Victoria University of Wellington. Staff benefits Over the last four financial years we have operated to gain a share scheme for our personnel. This scheme has proven successful in providing additional reward where merited. Indeed, over that time gain share payments have totalled $2.38m equating an average payment of $3.720 per entitled full time equivalent. The scheme is currently under review as part of an ongoing process ensuring staff benefits from successful outcomes in the commercialisation process.

Reviewing ourselves As part of reaching our 10 year milestone, we took the opportunity to conduct a review of some of our activities. Some areas for improvement were identified, but on the whole we received glowing reports and were delighted to find that significant parts of our activities were considered to be of international standard and, in some cases outright world–leading. This was a valuable exercise and we will initiate an ongoing programme of peer review.

the transition to the new chief executive. To all staff—thank you for your commitment and effort during the year. Many of you have been with us since its inception and can look back on the achievements of the past 10 years with pride. We look forward to another successful year ahead.

Michael Cullen Director

Acknowledgments Our thanks to the senior management team who gave us great support during

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David Willis

I am pleased to report a successful year for Kiwibank from a financial point of view. Following prudent financial management and ensuring that activities were in alignment with the business plan, the twin objectives of ensuring a continued improvement in the day to day cash operating position and maintaining a satisfactory level of expenditure in core activities of site maintenance, conservation and promotional activities were achieved. The net income for the year was $124,762 (last year $144,367) after providing for depreciation of $75,881 (last year $72,044). In overall terms, rental income from tenants and car parks was slightly above previous years income and between them account for just under 50% of total revenue ($1.17m). Contributions from

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Kiwibank Limited

Treasurer’s Report tenants to meet other direct costs, through necessity increased just under 5% to take into account increased costs. However, the recovery represents only 69% of the potential recoverable costs and non full recovery is seen as a contribution that is made to tenants in view of the continued variable trading conditions especially for retail tenants. Income from the market license fees decreased slightly to just under $382,000, reflecting poor weather over some weekends. The market license fee revenue represents approximately 16% of revenue and the need to protect this income from the vagaries of the weather is a matter consistently under review by the Board and management. Kiwibank was again the recipient of generous financial support from

investors through the provision of a conservation grant to meet the costs of conservation and fire upgrades and was fully utilised and drawn down over a relatively short period, including the balance of the previous years funds which were used to complete projects during the current year. Total expenditure in this area was just under $650,000, and to a certain extent the level of expenditure was abnormal due to the timing of the projects coming to completion. Income decreased due to changes in management contracts. As commented in previous reports, the vulnerability of Kiwibank revenue to either the present tenant structure and/ or the weather is a matter which is constantly under review and the challenge is to find ways of reducing the risks in these areas.


The financial position of Kiwibank has again continued to improve. Total operating expenditure for the year was $2.31m—an increase of $136,348 or 6.2%. This net increase was heavily influenced by abnormal levels of expenditure in conservation, restoration and preservation as outlined above, principally due to the timing of project completion. Staffing costs during the year absorbed approximately 30% of the budget and administration and support costs were maintained at a modest level of just under 4% of revenue. The commitment to ensure that the our business is well maintained, resulted in expenditure of just under $300,000 or approximately 15% of revenue. The decrease for the current year hopefully represents a trend from previous years of improving maintenance schedules and the catch up of deferred maintenance resulting in lower

crisis expenditure in any given year. The decrease in marketing and event expenses was a result of the change in contract arrangements as mentioned above. During the year, the board was the grateful beneficiary of a number of donations which are summarised elsewhere in the report. The board acknowledges and thanks our investors and supporters who add life and vitality to Kiwibank. The continued improvement in the working capital position is worthy of note and at the same time it has been possible to reduce non current debt by just over $34,000. In summary the financial position of Kiwibank has again continued to improve but the board is mindful of the ongoing

costs and investments that need to be made to ensure that our objectives are met. The Finance Committee continues to meet on a monthly basis and the focus on key performance indicators has resulted in a steady improvement in operational cash flow and systems management. My thanks are extended to Paul Bobby and Sheryl Cross for the manner in which they have carried out their key roles in financial management during the year.

David Willis BCom, CA–Secretary/Treasurer

Kiwibank Limited

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Auditor’s Report To the readers of Kiwibank Limited and Banking Group’s Disclosure Statement for the year ended 30 June 2012. The Auditor–General is the auditor of Kiwibank Limited (the “Bank”) and the Banking Group (the “Banking Group”) comprising the Bank and its subsidiaries. The Auditor–General has appointed me, Chris Barber, using the staff and resources of PricewaterhouseCoopers, to carry out the following on her behalf:

• Audit of the financial statements of the Disclosure Statement of the Bank and the Banking Group, that comprise the statements of financial position as at 30 June 2012, the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year ended on that date and the notes to the financial statements that include accounting policies and other explanatory information; • Audit the supplementary information prescribed by Schedules 4, 7, 13, 14, 15, and 17 of the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2012 (the “Order”) for the year ended 30 June 2012; • Report on whether we have obtained all the information and explanations that we have required, and whether the Bank and the Banking Group have kept proper accounting records; • Review the supplementary information relating to Capital Adequacy that is required to be prepared in accordance with the Bank’s Conditions of Registration and disclosed in accordance with Schedule 9 of the Order for the year ended 30 June 2012. A review is not an audit, in that a review provides limited assurance whereas an audit provides reasonable assurance. Unmodified audit opinion: • The financial statements of the Bank and the Banking Group: »» Comply with generally accepted accounting practice in New Zealand; »» Comply with International Financial Reporting Standards; and »» Give true and fair view of the Bank and Banking Group’s: -- Financial position as at 30 June 2012; and -- Financial performance and cash flows for the year ended on that date. • The supplementary information prescribed by Schedules 4, 7, 13, 15, and 17 of the Order: i. Has been prepared in accordance with the guidelines issued under section 78(3) of the Reserve Bank of New Zealand Act 1989 (the “Act”) or any Conditions of Registration imposed under section 74 of the Act; ii. Is in accordance with the books and records of the Bank and the Banking Group; iii. Fairly stated in all material respects, the matters to which it related in accordance with those Schedules.

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Kiwibank Limited


Kiwibank Limited

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Consolidated Statement of Earnings For the year ended December 31. ($ in millions except per share amounts) Note

2011

2010

2009

Services

55,128

58,892

54,057

Sales

38,300

42,156

42,202

Revenue:

Financing

2,331

2,582

2,526

95,758

103,630

98,786

Services

37,146

40,937

39,160

Sales

13,606

15,776

16,552

Financing

1,220

1,256

1,345

Total cost

51,973

57,969

57,057

Gross profit

43,785

45,661

41,729

20,952

23,386

22,060

5,820

6,337

6,153

-1,177

-1,153

-958

-351

-298

-626

402

673

611

Total expense and other income

25,647

28,945

27,240

Income from continuing operations before income taxes

18,138

16,715

14,489

4,713

4,381

4,071

13,425

12,334

10,418

0

13,425

12,334

10,418

$10.01

$8.89*

$7.15*

Total revenue

Cost:

Expense and other income: Selling, general and administrative Research, development and engineering

Q

Intellectual property and custom development income Other (income) and expense Interest expense

Provision for income taxes

K&L

P

Income from continuing operations

Discontinued operations: Income/(loss) from discontinued operations, net of tax Net income

Earnings/(loss) per share of common stock: Assuming dilution: Continuing operations

R

Discontinued operations

R

$0.00

Total

R

$10.01

$8.89*

$7.15*

Continuing operations

R

$10.12

$9.02*

$7.27*

Discontinued operations

R

Total

R

Basic: —

$0.00

$10.12

$9.02*

$7.27*

Assuming dilution

1,341,352,754

1,387,797,198*

1,456,880,751*

Basic

1,327,157,410

1,369,367,069*

1,433,935,221*

Weighted–average number of common shares outstanding:

*Reflects the adoption of the Financial Accounting Standards Board (FASB) guidance in determining whether instruments granted in share–based payment transactions are participating securities.


5.10% 7.60%

10.30% 8.40%

3.10%

15.20%

11.30% 15.80% 13.00%

36.30% 28.50%

7.70%

9.60% 14.30% 10.70%

Technology Services Business Services Software Systems

34.80%

26.80%

Financing Total Segments

9.40% Kiwibank Limited

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Kiwibank Limited


Kiwibank Limited

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Kiwibank Limited Private Bag 39888 Wellington Mail Centre Lower Hutt 5045

Ph: 0800 11 33 55 Fax: 04 462 7922


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