President’s Report

I am pleased to have this opportunity to report on the past year of progress for ADLS, and to look ahead to the challenges and opportunities that face us as a new decade begins.

All members will have had the opportunity of reading the whole of this Annual Report in which detailed and specific information about the role that the Society plays within the profession and also its important liaisons with institutions which intersect with the law.

I wish to begin by acknowledging my colleagues on the Council for their work during the year. I particularly wish to acknowledge and thank Mary Anne Shanahan, who steps down from Council this year, for all she has done for ADLS having served six years on the Council. I also want to thank the ADLS executive team and staff for everything they do for ADLS and its members.

Next, I want to acknowledge the many volunteers of our 17 committees. They all have demanding jobs but give of their valuable time and expertise to ensure we engage widely regarding such matters as new legislation and regulations, and raising issues that affect the profession and New Zealanders generally. Their work lies at the heart of our membership organisation and gives ADLS mana both within the profession and in the community.

It has been another strong and busy year for ADLS in terms of its core businesses. Membership remains strong and providing a range of networking and other collegial events for practitioners to meet and share experiences has again been a highlight.

Financial

While the underlying financial performance of the organisation remains sound, with an underlying (trading) surplus of $359,877, it is unfortunate that we must report an overall after tax loss for the year.

In 2016 ADLS, as a lease inducement, invested $450,000 in a fitout of the ground floor restaurant to attract what was then described as a ‘prestige tenant’. The tenancy ended in 2018. As part of the settlement with the tenant, $612,000 of assets were transferred to ADLS. The restaurant has been vacant for some period of time, and as a result, an impairment of $400,130 on this asset has been recorded in this year’s accounts.

This has resulted in a overall loss of $128,000 due to this one-off write-off for the financial year ending 2019, an unfortunate turn around of $695,000 on the 2018 financial result. While it is disappointing to report a loss to you for the year, this is not a reflection of the underlying profitability of ADLS.

A drop in overall income of 11% is mainly attributable to loss of restaurant income and rooftop terrace hire, and ADLS cash reserves remain healthy at $3.5m, an increase of 6% over last year.

IT Upgrade

During 2019 ADLS began a project to replace and upgrade its key IT systems. This project will deliver an enhanced online presence during 2020 and beyond by improving the ADLS website and associated systems. The most apparent change will be a new and improved experience for the many members and other people who connect with ADLS online every day. The ADLS website itself will be more intuitive and easier to use when accessing the wide range of ADLS services.

Improved online functionality will include self-service features and the site will also be optimised for use on mobile devices to better service our busy members.

Behind the scenes, brand new management and financial systems which support the delivery of all ADLS services will also be implemented. This project will streamline and improve the services being provided to members by ADLS during 2020 and beyond.

This project is an important one for ADLS and members will see the results and benefits of that investment following the launch later this year. We look forward to hearing your feedback.

The Building (Chancery)

When I offered myself to members for the position of President last year, I raised two matters which I wished to address during this term. One of the matters concerned the continued ownership of Chancery Chambers.

My intention on becoming President was to put in place plans that would future proof Chancery Chambers, and above all put members views at the heart of it. Key to this plan was progressing an initial $2.4 million capital expenditure and maintenance project as part of a larger repair and maintenance plan.

This plan, however, has had to be placed on hold following the result of a seismic report into the building that indicated Chancery Chambers is 18% of New Building Standards (NBS), considerably lower than previously advised by Auckland Council.

Given this assessment, which will be peer reviewed, Chancery Chambers may be deemed an earthquake prone building by Auckland Council in the future. Many other heritage or character buildings in Auckland and across the country have already been deemed earthquake prone. To provide some context, local councils collectively estimate there to be over 10,000 earthquake prone buildings across New Zealand, and of course Auckland is considered to be an area of low seismic risk.

Further investigations are ongoing and strengthening work will be required in the longer term. The Building Act provides for a timeframe of 35 years for strengthening work to be undertaken on such buildings in Auckland. As you would expect, we have advised all tenants and staff of this information, along with the assessment based on expert advice that there is no reason to treat the situation as anything other than business as usual in the meantime.

While there is no immediate need to undertake the strengthening work, the seismic report does of course highlight a significant future issue for both the Council and members to carefully consider.

ADLS differs from larger businesses that may have a broader property portfolio and the resources to manage buildings in a variety of stages of their development and maintenance. Historically, we have been used to viewing Chancery as a source of much needed rental income rather than a building requiring significant capital investment.

Chancery Chambers continues to be a magnificent heritage building which occupies prime land in the heart of Auckland city’s central business district. The question is not whether it is a wonderful building – rather it is whether ADLS, when considering its goals and objectives should continue owning this particular building into the longer term. The question is, whether or not retaining the building is in the best financial interest of the membership.

Since receiving the initial information regarding the building’s seismic rating, your Council has had a number of detailed discussions about the potential challenges of continued ownership. In particular, we have asked ourselves the question of whether we consider ADLS to be the logical owner of Chancery Chambers in say ten to fifteen years’ time.

Given the need to borrow significant sums of money to undertake the capital, repair and maintenance projects already identified, plus the cost of seismic strengthening, increasingly the view of the majority of the Council has been that ADLS may not be the logical long term owner of Chancery Chambers.

More detailed information on the continued financial implications of continued ownership of Chancery is set out elsewhere in this Annual Report and I encourage members to consider it carefully.

Following feedback from members during the last proposed sale process in 2018, some of whom have been critical of past attempts to sell the building, I’d make four points here in particular:

First, I will be ensuring that there is a full and open discussion on the future of Chancery Chambers at our AGM on 5 March. There both your Council and management will be able to take members through the situation in detail and the options ahead.

Second, as a Council we are united that it is the members who will ultimately make the decision of a sale or no sale. Council will in due course put a proposal to members along with all the necessary information to make a considered decision. This process will be timely but not rushed.

Third, we have heard the desire of members for there to be an open, market-led sale process, in the event that a sale is approved by members.

Fourth, it is my expectation that any new Council embarking on this process would provide members with information on how any sale proceeds would be used for the longterm benefit of members. All of us agree that Chancery Chambers is ADLS’ legacy asset, and should a sale proceed, funds raised must be equally safeguarded and ring fenced from day-to-day operations.

I must be honest with members and say that I am disappointed that a sale of Chancery Chambers is to again be considered. As you may know, it had been my strong intention to keep the building in ADLS members hands for the future. However, the additional information in the form of the medium to long term capital, repair and maintenance costs and the seismic report, especially when combined with a more challenging insurance situation as noted elsewhere in the building report, gives us little choice but to reconsider the matter.

The financial statements highlight the challenges ahead, and as your President I do not consider it prudent that the organisation should go into considerable debt to undertake the work necessary to strengthen the building in addition to the other maintenance and capital works required. Those funds would be better invested in other critical parts of our organisation’s service to members.

Over the last year the Council has spent an enormous amount of time and energy on the building issue. While that has been appropriate given its significance to our balance sheet, there is an opportunity cost. We have had less time to spend focussing on how best to grow and enhance membership services, and on such strategic issues the profession may face in the future.

These include:

1. ADLS involvement in the recently announced NZLS strategic review and opportunities that might benefit that (common) relationship.

2. Considering an independent review of the governance of ADLS.

3. Exploring opportunities to expand membership, membership services, products and addressing the increasingly competitive environment in which it operates.

4. Continuing the update of the ADLS IT systems to further leverage superior competitive membership and executive services.

Governance

The matter of governance of ADLS was the second matter I raised when I offered myself for President. In particular I raised the matter of the appropriateness of the current governance structure of ADLS and the value the membership received from the President’s current honorarium.

An independent report was received from EY concerning the honorarium and considered by the Council. The Council accepted the recommendation in that report and the honorarium will be reduced from $111,720 to $51,600 per annum. The next stage in this review process I believe is to obtain an updated independent report to ascertain whether the current governance structure continues to be suitable for ADLS now and into the future and to explore possible alternative governance structures. The last such report was obtained in 2015 from Board Works International. ADLS businesses and assets and the complexity of the organisation and the environment in which it operates have grown considerably since the last report was undertaken and I believe this needs to be revisited. This matter will be raised at the AGM.

Summary

Setting aside matters concerning the building, the Society is in good heart. Membership numbers are increasing, the relevance of the organisation nationally continues to grow. ADLS is continuing its significant investment in technologies which benefit our CPD, business and membership systems. We are proud of the leadership we show in the profession generally, in the promotion of collegial events and in the community.

ADLS is reliant upon the support and encouragement of its members for its success. On behalf of the Council and staff of the society, I wish to thank you for your trust for that support.

It is my hope that during 2020 we will be able to spend more time and focus on these matters. We have been fortunate that the strength of our management team has ensured a strong business as usual year, and again I thank them and all the staff on your behalf.

Sincerely Tony Bouchier President