CONTENTS NIWA Science National Outcomes Statement of Core Purpose Outcomes Performance Targets 2022/23 Financial Summary Financial Statements Directory
Presented to the House of Representatives pursuant to section 44 of the Public Finance Act 1989. The NIWA Annual Report for 2023 is presented in two parts – the Year in Review and the Annual Report (Financial Statements). Collectively, these two documents fulfil our annual reporting responsibilities under the Crown Research Institutes Act 1992. The Year in Review is an illustrated document containing the Chairman and Chief Executive’s report, descriptions of our research capabilities and performance, including our partnerships with Māori, work with collaborators and stakeholders, and an overview of our people. Both reports are available digitally at: www.niwa.co.nz/about/annual-reports Published by:
September 2023
NIWA 41 Market Place Auckland Central 1010 New Zealand
ISSN 1172-8140 (print) ISSN 2423-0901 (online) www.niwa.co.nz
2 3 4 12 13 18 36
Cover: As Cyclone Gabrielle made its final approach to New Zealand on the evening of 13 February 2023, its wind field was expanding and becoming more intense. Red colours indicate areas where wind gusts more than 100 km/h were expected. The dramatic modelling was confirmed with record or near recordbreaking gusts at 25 locations in the North Island. The powerful winds helped siphon an atmospheric river of moisture on to the country, caused destructive storm surge, and brought down trees and power lines. [NIWA]
NIWA Annual Report 2022/23 Science for a resilient future
In February 2023, Cyclone Gabrielle claimed 11 lives, destroyed hundreds of homes and devastated huge swathes of agricultural and horticultural land. In the days that followed, NIWA researchers travelled to Hawke’s Bay to assess flood and stopbank extents and collect a range of data to contribute to understanding what happened during the deadly storm. [Rebekah Parsons-King]
NIWA SCIENCE OUR MISSION
OUR AIM
OUR AIM
To support the wellbeing of Aotearoa New Zealand’s people and business through
To deliver the science that will enable Aotearoa New Zealand to meet its environmental challenges and thrive in a rapidly changing world
To achieve these advancements
• improved management of the environment • sustainable use of natural resources • effective responses to global change
We will innovate, generate new knowledge, and apply our science to • provide industry opportunities • transition to a low carbon economy • adapt to a changing climate • improve the health of our waterways and oceans • care for our unique biodiversity
• we will partner with Māori • embrace new technologies • support major science infrastructure • collaborate with other science organisations and the sectors that apply our science products and services
OUR SCIENCE Will support the realisation of these national outcomes by applying innovative technology across multidisciplinary teams
CLIMATE
FRESHWATER
MARINE
New Zealand’s pre-eminent provider of atmospheric and climate science
Supporting the sustainable management of our freshwater resources
Understanding, managing and maximising the benefits of our marine estate
• Freshwater quality and quantity • Biodiversity and biosecurity • Sustainable use • Flood forecasting
• New Zealand’s Marine Estate • Fisheries stock assessment • Sustainable use of marine resources • Biodiversity and biosecurity • High-value finfish aquaculture
• Climate change and variability • High-precision weather forecasting • Weather-related hazard forecasting • Adaptation and mitigation 230 Science staff New Zealand’s largest team of climate scientists $42M Annual investment In weather and climate research 6,500 Climate stations The National Climate Database with information from 6,500 climate stations covering New Zealand, South-West Pacific and Antarctica $18M Supercomputer Enabling precise, highly localised forecasts
NIWA Annual Report 2022/23
240 Science staff New Zealand’s largest team of freshwater scientists $40M Annual investment Increasing knowledge of water quantity and quality A national flood forecasting service Providing river flow forecasts for more than 50,000 catchments nationwide 500 Hydrological monitoring stations A nationwide network of water and soil moisture monitoring stations
260 Science staff New Zealand’s largest team of ocean scientists $67M Annual investment In coast and ocean, fisheries and aquaculture science Northland Aquaculture Centre New Zealand’s leading science facility for finfish aquaculture State-of-the-art research vessels Supporting the New Zealand science community
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NATIONAL OUTCOMES We will innovate, generate new knowledge, and apply our science to address eight key areas of Government priority. These National Outcomes are: 1. 2. 3. 4. 5. 6. 7. 8.
Informing adaptation to changing climate Mitigating the drivers of climate change Enhancing resilience to extreme weather Protecting our biodiversity Improving environmental health Enabling water security Growing a resilient seafood sector Growing renewable energy
NIWA’S SCIENCE STRATEGY
NIWA Annual Report 2022/23
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STATEMENT OF CORE PURPOSE OUTCOMES The information in this section of the Annual Report demonstrates how NIWA is delivering on its expected outcomes. Our purpose, set out in our Statement of Core Purpose, is to: •
• •
enhance the economic value and sustainable management of Aotearoa New Zealand’s aquatic resources and environments provide understanding of climate and the atmosphere increase resilience to weather and climate hazards to improve the safety and wellbeing of New Zealanders
We are expected to fulfil our purpose through the provision of research and transfer of technology and knowledge in partnership with key stakeholders and partners, including industry, government and Māori, to achieve six key outcomes: 1. 2. 3. 4. 5. 6.
Increase economic growth through the sustainable management and use of aquatic resources Grow renewable energy production through developing a greater understanding of renewable aquatic and atmospheric energy resources Increase the resilience of New Zealand and South-West Pacific islands to tsunami and weather and climate hazards, including drought, floods and sealevel change Enable New Zealand to adapt to the impacts and exploit the opportunities of climate variability and change and mitigate changes in atmospheric composition from greenhouse gases and air pollutants Enhance the stewardship of New Zealand’s freshwater and marine ecosystems and biodiversity Increase understanding of the Antarctic and Southern Ocean climate, cryosphere, oceans and ecosystems and their longer-term impact on New Zealand
The new NIWA Hamilton research facility was officially opened by Research, Science and Innovation Minister Ayesha Verrall on 11 August 2023. The $45 million state-of-the-art facilities are the first of NIWA’s main centres to be rebuilt. [Stuart Mackay]
NIWA Annual Report 2022/23
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Outcome One
Increase economic growth through the sustainable management and use of aquatic resources PROJECT
KEY ACHIEVEMENTS
SECTOR IMPACT
Recirculating Aquaculture System update
Our Haku kingfish are now swimming in New Zealand’s first commercial-scale Recirculating Aquaculture System (RAS) at the Northland Aquaculture Centre in Ruakākā.
A joint venture with the Northland Regional Council, the RAS project has been a key strategic priority for NIWA.
The construction of eight, 350,000-litre fish tanks with two independent water treatment plants is completed.
Snapper survival rates
Careful fish handling helps support sustainable fisheries. Recent NIWA research for Fisheries New Zealand on survival rates of snapper that are caught recreationally and then released, showed two of the main impacts on fish survival rates were the depth they were caught and how they were hooked.
It represents the next stage in proving the economic, operational and environmental viability of growing kingfish to market size in a land-based aquaculture system that will help the aquaculture sector in its goal of $3 billion by 2035.
The results give anglers a better understanding of what happens when a fish is thrown back, allows researchers to estimate unseen mortality and helps fisheries managers set optimal fishing regulations, such as daily bag and minimum size limits.
The research suggested that practices such as using recurve hooks (which increase probability of lip hooking) could increase survival rates and save hundreds of thousands of fish per year.
Tonga Demersal Lines project
The Tongan deepwater demersal line fishery is a valuable source of income, livelihood and social wellbeing for the people of Tonga. The fishery has a history of boom-and-bust cycles with fluctuating catches and poor economic returns. A NIWA-led project (2015–23), supported by Tongan government agencies and the Pacific community, worked to develop a wellmanaged, economically and biologically sustainable fishery that could be a model for demersal line fisheries throughout the Pacific.
NIWA Annual Report 2022/23
Outcomes included the identification of increased opportunities through the economic and social analyses. Sustainability of the fishery was enhanced by strengthening the Ministry of Fisheries monitoring and management procedures and through the revision of the Deepwater Fishery Management Plan to include harvest control rules, in-season catch monitoring and an adaptive management framework for effective and transparent decision making.
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Outcome Two
Grow renewable energy production through developing a greater understanding of renewable aquatic and atmospheric energy resources PROJECT
KEY ACHIEVEMENTS
SECTOR IMPACT
Forecasting hydro lake inflows to optimise generation
NIWA has created new natural inflow forecasting systems for clients operating two of the main hydroelectric catchments in the South Island – the Clutha catchment for Contact Energy and the Waitaki catchment for Meridian Energy.
Robust inflow forecasts enable the companies to better optimise their generation and reduce spill – increasing profits while supporting New Zealand’s aim to achieve 100 percent renewable energy. Better forecasts also allow improved flood management and dam safety during high-flow events.
Validation completed for highresolution dataset to more precisely model potential renewable energy generation
To better understand New Zealand’s capacity for renewable energy production, a highresolution weather reanalysis has now reached the production stage.
Improving understanding of historical trends in wind, cloud, rain and snowfall helps to quantify New Zealand’s capacity for wind, solar and hydroelectric power generation. This work is also helping to make data more accessible for end users.
The reanalysis better resolves New Zealand’s complex terrain and the intricate atmospheric processes that drive our local weather and climate.
Offshore wind energy resources
Tom Buysse
NIWA Annual Report 2022/23
New Zealand’s position in the southwest Pacific Ocean means it has one of the best offshore wind energy resources in the world. NIWA is providing advice to wind farm developers to support them in understanding the environmental impacts that offshore windfarms could have on seabirds, fish, benthic communities and marine mammals.
Part of the Government’s emissions reduction strategy is putting a legislative framework in place to enable the development of an offshore renewable energy industry. New ventures need to be informed by scientific evidence on possible impacts, something NIWA is uniquely positioned to do.
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Outcome Three
Increase the resilience of New Zealand and South-West Pacific islands to tsunami and weather and climate hazards, including drought, floods and sea-level change PROJECT
KEY ACHIEVEMENTS
SECTOR IMPACT
Cyclone Gabrielle flood observations and modelling to inform response and build future resilience
When Cyclone Gabrielle hit New Zealand in February 2023, NIWA researchers contributed to understanding what was happening in a myriad of ways – from weather and landslide forecasting as the cyclone approached, through to assessing flood extents, stopbank breaches and sediment deposition.
The findings from this work helped iwi, government agencies, emergency responders, councils, infrastructure providers and many other partners across Hawke’s Bay and Tairāwhiti to understand the event and to make informed decisions about recovery, particularly in a changing climate.
Staff were also involved in gathering LiDAR data in the immediate aftermath, and in the analysis and modelling to inform recovery and future risk assessments.
Drought forecasting tool underpinned by NIWA35 model
A trial version of NIWA and MPI’s new drought dashboard has garnered much interest, both through sector briefings and at Fieldays in 2022 and 2023.
The drought dashboard is helping farmers and growers better prepare for periods of dryness, drought and high rainfall. It will go from trial mode to operational mode by summer 2023.
The drought dashboard is a web-based application that’s underpinned by the NIWA35 climate model, which uses artificial intelligence and innovative climate modelling techniques to predict conditions up to 35 days into the future.
Extreme coastal flooding maps reveal sea-level rise risk
NIWA Annual Report 2022/23
New maps from NIWA and the Deep South National Science Challenge show areas across New Zealand that could be inundated by extreme coastal flooding during a large stormtide event and with climate change-driven sea-level rise.
The publicly available maps are intended to help councils, the financial industry and national infrastructure and service providers risk assess their portfolios. They can help shape decisions on how we adapt to sea-level rise.
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Outcome Four
Enable New Zealand to adapt to the impacts and exploit the opportunities of climate variability and change and mitigate changes in atmospheric composition from greenhouse gases and air pollutants PROJECT
KEY ACHIEVEMENTS
SECTOR IMPACT
MethaneSAT research preparing for satellite launch
The NIWA-led MethaneSAT agricultural research programme is part of an international space mission helping to tackle climate change. The research in New Zealand is focused on reducing global emissions from agriculture.
This work is part of the preparation for the satellite’s launch in early 2024. Ultimately, the findings from MethaneSAT will help identify where emissions can be reduced or eliminated most effectively.
Over the past year the team has been carrying out ground-based measurements and modelling of the 200 identified agricultural targets from which the satellite will collect information.
Improving indoor air quality to reduce COVID-19 transmission
After the COVID-19 pandemic, demand soared for the assessment of ventilation and indoor air quality. The NIWA air quality team developed a prototype Smart Home Air Quality System (SHAQS). Each SHAQS delivers real-time and summary information for multiple rooms to users and managers, allowing air improvement plans to be rapidly developed, actioned and evaluated.
GoSouth atmospheric research increases understanding of cloud processes
NIWA air quality researchers hosted a group from the Leibniz Institute for Tropospheric Research (TROPOS) and Leibniz University Hannover in Germany to carry out an extensive atmospheric research campaign outside Invercargill. The coastal location was chosen to minimise human influences and to observe clean air coming direct from the Southern Ocean.
NIWA Annual Report 2022/23
The SHAQS have been tested in churches, early childhood centres, a marae, Pacific Islander community centres, clinics, vets, a gym, a media studio, a library, a bus and private homes. The data is informing changes in ventilation practice and helping the Ministry of Health develop future pandemic plans.
The researchers gained valuable data about particles in the air, turbulence and meteorological conditions in the marine boundary layer – all of which influence the formation of clouds. The findings are helping improve climate model predictions for the Southern Hemisphere. The German team hopes to return for a bigger joint campaign in the future.
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Outcome Five
Enhance the stewardship of New Zealand’s freshwater and marine ecosystems and biodiversity PROJECT
KEY ACHIEVEMENTS
SECTOR IMPACT
Corbicula (golden clams) response
The gold clam (Corbicula fluminea) is an invasive species that reproduces rapidly in freshwater, forming large populations that can clog hydro and irrigation pipes and outcompete native species. Once established, densities can reach tens of thousands per square metre.
The surveys have involved a multi-pronged approach including visual searches, eDNA and physical sampling. Clams were confirmed at the original sites plus two other upstream locations.
It was first found in May 2023 in the Waikato River, Lake Karāpiro. At the request of the Ministry for Primary Industries, NIWA has led site surveys of the Waikato River and Lake Taupō.
Fish passage guidelines & workshops
Understanding ecosystem health by monitoring kākahi
Dams, weirs and culverts make it difficult for native freshwater fish to navigate New Zealand’s waterways. NIWA is partnering with mana whenua, agencies and landowners to co-develop fish passage action plans and to deliver training on fish barrier assessment, barrier remediation and effective outcome monitoring.
The NIWA-developed Fish Passage Assessment Tool and Barrier Assessment and Reporting Tool support the documentation, prioritisation and reporting of instream barriers and the risk they pose to migratory fish.
The lifecycle of kākahi (freshwater mussels) is complex – they need the right fish hosts and a healthy environment to thrive. The adults remove algae and some sediment from the water, and they are an important part of a healthy freshwater ecosystem. By monitoring local populations, we can better understand the health of kākahi and their habitats.
The data being collected by community volunteers and Greater Wellington Regional Council is used to inform strategies to enhance the cultural values and ecology of the moana.
For the last nine years, NIWA has supported events to assess kākahi populations in Wairarapa moana.
NIWA Annual Report 2022/23
This information provides baseline data into the known distribution of this invasive species, however further research is required to understand the impacts on native species and their habitats.
Co-developed plans identify the impacts of fish passage barriers within catchments and prioritise their remediation strategies, fulfilling requirements of the National Policy Statement for Freshwater Management (NPSFM).
About one-third of the collectors have attended the surveys every year since its inception. These experienced collectors have become leaders, training new attendees in the finer points of kākahi monitoring and the methodology behind it.
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Outcome Six
Increase understanding of the Antarctic and Southern Ocean climate, cryosphere, oceans and ecosystems and their longer-term impact on New Zealand PROJECT 2023 Antarctic voyage
KEY ACHIEVEMENTS
SECTOR IMPACT
In early 2023, RV Tangaroa undertook a 45day voyage to the Southern Ocean and Ross Sea. The researchers had 15 separate objectives to better understand fundamental processes in the Ross Sea, the role of the Marine Protected Area (established in December 2017) and the impact of climate change.
Tangaroa voyages are a key component of New Zealand’s Antarctic science effort and are essential to increase knowledge about key environmental and biological processes in the Ross Sea region of Antarctica and the Southern Ocean. They improve understanding of ecosystem function and likely responses to future change.
These included research into coastal habitats, ocean physics, biogeochemistry, plankton, pelagic fish and marine mammals, along with atmospheric measurements.
Ross Ice Shelf stability work
Alongside its well-known work at sea, NIWA researchers are also working on the ocean under the Ross Ice Shelf to understand how this is driving change in the largest ice shelf in the Ross Sea and how it might change under different climate scenarios. Antarctica’s massive ice shelves flow out from the continent and float on the surrounding sea, holding 90% of the world’s ice and 80% of its freshwater.
Antarctic toothfish abundance in the Ross Sea
A long-running time series of research surveys is helping New Zealand monitor abundance of Antarctic toothfish in the southern Ross Sea. Carried out for Fisheries New Zealand in collaboration with the fishing industry, the eleven longline surveys to date are used to estimate year-class strength of Antarctic toothfish and provide essential input into the stock assessment used to inform international management decisions.
NIWA Annual Report 2022/23
The loss of land-based ice is now the largest single contribution to sea-level rise. Predicting how the ice sheet will evolve in the future is key to the resilience of communities, both in New Zealand and around the world. NIWA works with global partners in developing this science.
The voyages reflect industry support for this world-class science. They have resulted in a substantial increase in the knowledge and understanding of the distribution and relative abundance of a range of fish and invertebrates caught on the longlines, and they provide a key role in monitoring the Ross Sea Region Marine Protected Area.
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The experimental, commercial-scale Recirculating Aquaculture System (RAS) at NIWA’s Northland Aquaculture Centre is reaching full swing and tens of thousands of kingfish are now occupying the 350,000 litre tanks. The system is designed to demonstrate the viability of commercial-scale production of high-value seafood on land. [Stuart Mackay]
NIWA Annual Report 2022/23
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PERFORMANCE TARGETS 2022/23 NIWA will measure its performance against the outcomes and operating principles in its Statement of Core Purpose using the following set of indicators.
Financial Indicators Measure
Operating margin Profit per FTE
Quick ratio Interest coverage
Profit volatility Forecasting risk Adjusted return on equity Revenue growth Capital renewal
Calculation Earnings Before Interest, Tax, Depreciation, Amortisation and Fair-value (EBITDAF)/Revenue EBITDAF/FTEs Current assets less inventory less prepayments/ Current liabilities less revenue received in advance EBITDAF/ Interest paid Standard deviation of EBITDAF for past five years/ Average EBITDAF for the past five years Five-year average of return on equity less forecast return on equity NPAT excluding fair value movements (net of tax)/Average of share capital plus retained earnings % change in revenue Capital expenditure/Depreciation expense plus amortisation expense
Reporting frequency
Target 2022/23
Actual 2022/23
Annual Annual
17.8% $46,000
14.5% $39,000
Quarterly
1.6*
1.2
Quarterly
22.9
13.16
Annual
24.2%*
21.7%
Annual
2.9%*
2.1%
Quarterly
4.9%
4.4%
Annual
7.4%
9.3%
Quarterly
260.6%
245%
*The NIWA Statement of Corporate Intent for 2022/23 published figures of 1.51 for quick ratio, 19.4% for profit volatility and 3.2% for forecasting risk. These figures were incorrect.
Organisational Performance Indicators – 2022/23 at a glance Reporting frequency
Target 2022/23
Actual 2022/23
Quarterly
$108,000
$123,995
Publications with collaborators
Quarterly
85%
93%
Commercial reports per scientist FTE
Quarterly
1.0
1.77
Science quality* Operational efficiency*
Impact of scientific publications
Annually
2.5
4.46
Revenue per FTE
Quarterly
$261,000
$271,500
Operational delivery
% projects delivered on time
Annually
>90%
99.5%
Strategic progress
% annual KPIs achieved
Annually
>90%
100%
Measure End-user collaboration* Research collaboration* Technology & knowledge transfer*
Calculation Revenue per FTE from commercial sources
*Ministry of Business, Innovation & Employment generic indicators
NIWA Annual Report 2022/23
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FINANCIAL SUMMARY NIWA Group Financial Summary in thousands of New Zealand dollars Revenue and other gains – Research – Commercial science – Other income Profit before income tax Profit for the year Capital expenditure Adjusted return on average equity (%)** Return on average equity (%)
2023 186,036 101,063 84,972 1 7,764 5,938 45,270 4.4 3.8
2022 170,233 95,614 74,618 1 8,958 6,470 40,817 5.0 4.3
2021 176,887* 109,111 67,775 1 22,594 16,263 23,080 13.9 11.6
2020 158,860* 93,800 65,059 1 9,982 7,370 14,757 6.9 5.7
2019 161,292 94,901 66,390 1 8,708 6,247 21,460 6.2 5.1
* Includes $8.27 million from the Government’s COVID-19 Response and Recovery Fund (CRRF). **The ‘adjusted return on average equity’ uses a valuation basis comparable to that used by other Crown Research Institutes. This valuation basis arose from the transition to New Zealand Equivalents to International Financial Reporting Standards in 2006/07 and reverses the effect of the revaluation of certain land and buildings.
Group actual performance versus Statement of Corporate Intent (SCI) For the year ended 30 June 2023 2023 Actual 186,036 178,562 7,764 5,938 238,458 157,417
2023 SCI 177,630 166,198 11,600 6,648 226,396 158,389
2022 Actual 170,233 161,331 8,958 6,470 225,998 151,225
Profitability Operating profit margin (%) (EBITDA/revenue) Adjusted return on average equity after tax (%) (net surplus/adjusted average equity) Return on average equity after tax (%) (net surplus/average equity) Return on assets (%) (EBIT/average total assets) Profit volatility (%) (non-adjusted ROE) Forecasting risk (%)
14.5 4.4 3.8 3.1 21.7 2.1
17.8 4.9 4.2 5.0 24.2 2.9
16.3 5.0 4.3 3.9 24.3 2.2
Liquidity and efficiency Current ratio Quick ratio
0.9 1.2
1.0 1.6
1.3 2.4
Financial leverage Debt to average equity (%) Gearing (%) Proprietorship (%) (average shareholders’ funds/total assets)
– – 65
– – 68*
– – 65
in thousands of New Zealand dollars Revenue and other gains Operating expenses, depreciation, and amortisation Profit before income tax Profit for the year Average total assets Average shareholders’ funds
*The NIWA Statement of Corporate Intent for 2022/23 published the figure of 69.7 for proprietorship. This figure was incorrect.
NIWA Annual Report 2022/23
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OVERVIEW OF GROUP FINANCIAL PERFORMANCE The financial year 2022/23 presented challenges for many businesses, and NIWA was no exception. While there has been a noticeable increase in demand for NIWA’s science, the organisation has been significantly impacted by inflationary pressures.
Revenue by source
4% 20%
28%
Revenue
MBIE Strategic Science Investment Fund MBIE Contestable Funds Central government agencies
NIWA achieved revenue of $186.0 million for the year. Compared with the budget set out in NIWA’s Statement of Corporate Intent, revenue was up by $8.4 million. Year-on-year, revenue was $15.8 million above the previous year. NIWA’s MBIE-funded research revenue was $5.4 million higher than the prior year. Of this increase, $3.6 million was associated with NIWA’s ocean-going research vessels, largely due to the biennial voyage of the RV Tangaroa to Antarctica. Commercial revenue, sourced both domestically and overseas, was $10.4 million more than the prior year. Total revenue ($ in thousands)
190,000 185,000 180,000 175,000 170,000 165,000
Ministry for Primary Industries
12%
Private sector
10%
27%
Local government agencies
Expenditure Operating expenses (including depreciation and amortisation) were above budget by $12.4 million. Yearon-year, operating expenses increased by $17.2 million. The increase in operating expenses from the prior year primarily resulted from higher personnel costs due to inflation-driven salary increases alongside intense competition for skills in the market. Travel & accommodation costs grew by $3.3 million, due both to inflation and to increased travel following the end of COVID-19-related restrictions. The increase of $4.2 million in Materials & Supplies, Utilities and Insurance expenses was solely driven by inflation. Additionally, research collaboration expenses increased by $1.4 million year-on-year due to increased subcontractor activity.
160,000 155,000 150,000 145,000 2019
2020
2021
2022
2023
The share of NIWA’s revenue arising from contracts with the Ministry of Business, Innovation & Employment was 54%, comprising $50.6 million SSIF funding and $50.5 million contestable and other contracts. Revenue from the Ministry of Primary Industries at $21.7 million accounted for 12%. Combined, the share of NIWA’s revenue from these two agencies was 1% lower than the position in 2021/22.
NIWA Annual Report 2022/23
Above-budget inflationary pressures were experienced across the full range of costs, both salary and nonpersonnel. While NIWA’s board and management have taken pricing actions to respond to these pressures and maintain long-term financial sustainability, these will take time to feed through to financial performance because of contracts having been agreed months or even years earlier. However, these actions are nonetheless expected to have a positive impact in the coming financial year.
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Total expenditure ($ in thousands)
EBITDA ($ in thousands)
200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 -0
98.0% 96.0% 94.0% 92.0%
2022
35,000 30,000
88.0%
20,000
82.0% 2021
40,000
25,000
84.0% 2020
45,000
90.0% 86.0%
2019
50,000
2023
15,000 10,000 5,000 0 2019
Personnel costs Total costs Total costs % of revenue
Profitability NIWA delivered profit before tax of $7.8 million and profit after tax of $5.9 million during 2022/23. Compared with the previous year, these results reflect a reduction of $1.2 million and $0.5 million respectively. Compared with budget, the result was $3.8 million and $0.7 million lower before and after tax respectively, reflecting the impact of significant inflationary pressures on cost, partly offset by higher revenue. Net profit after tax ($ in thousands)
16,000 14,000 12,000 8,000 6,000 4,000 2,000 0 2019
2020
2021
2022
2023
NIWA also closely monitors its Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA), as this measure assists in understanding the Company’s capacity to fund future investments and carry debt. NIWA achieved EBITDA of $27.0 million for the year against a budget of $31.6 million. We continue to manage this measure carefully to ensure that we remain in a position to finance our planned major facility investments over the coming several years.
2023
Cash flows The following table summarises NIWA’s cash flows this year and last year: 2023
2022
Change
Net cash flows from operating activities
16.397
30.167
(13.770)
Net cash flows from investing activities
(37.181)
(19.106)
(18.075)
(2.208)
(2.082)
(0.126)
(22.992)
8.979
(31.971)
The above presentation is consistent with New Zealand Equivalents to International Financial Reporting Standards and therefore treats cash flows relating to short-term deposits with maturities greater than three months as investing activities. In order to provide more useful and relevant information concerning the Company’s cash flows, the table below restates the summary of cash flows, treating all short-term investments as equivalent to cash: ($ in millions)
2023
2022
Change
Net cash flows from operating activities
16.397
30.167
(13.770)
Net cash flows from investing activities
(61.181)
(39.106)
(22.075)
(2.208)
(2.082)
(0.126)
(46.992)
(11.021)
(35.971)
Net cash flows from financing activities Net increase/(decrease) in cash including other term deposits
NIWA Annual Report 2022/23
2022
Capital management and cash
Net cash flows from financing activities Net increase/(decrease) in cash
10,000
2021
NIWA’s fundamental financial performance metric is adjusted return on equity, which enables comparison between CRIs on an equivalent basis. The Company delivered an adjusted ROE of 4.4% this year, which was marginally below the budget objective of 4.9% and the 5.0% achieved in the previous year.
($ in millions)
18,000
2020
15
Net cash flows from operating activities Net cash inflows from operating activities decreased by $13.8 million to $16.4 million in 2023. This year-on-year change reflected additional personnel and subcontractor costs. Net cash flows from investing activities Net cash outflows from investing activities (excluding the impact of cash flows associated with term deposits with maturities in excess of three months) increased by $18.1 million to $37.2 million. This year-on-year variance was related to the costs associated with the new Hamilton property, the replacement of the RV Kaharoa, and the recirculating aquaculture system at NIWA’s Northland Aquaculture Centre.
Capital expenditure ($ in thousands)
50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2019
2020
2021
2022
2023
Capital structure and liquidity Net cash flows from financing activities Net cash outflows from financing activities increased by $0.1 million to $2.2 million. These costs relate to the treatment of long-term lease costs under the accounting standard, NZ IFRS 16 Leases. The Company paid no dividend during the year. This was signalled in the previous year’s Statement of Corporate Intent and reflects upcoming essential and material investments designed to ensure that our science facilities remain fit for purpose for the coming decades. Capital spending The following table summarises NIWA’s capital expenditure this year and last year: ($ in millions)
Land, buildings & improvements Equipment ICT equipment Vessel equipment Other Total capital spending
Shareholders’ equity at 30 June 2023 was $160.4 million (2022: $154.5 million) which was $1.3 million below the level forecast in the SCI budget. Total assets at year-end were $242.7 million (2022: $234.2 million). As at 30 June 2023, the Company’s net debt balance was zero, equal to that at the prior year-end. NIWA’s liquidity is mainly provided by operating cash flows. In addition, the Company has access to financing facilities of $20.5 million (2022: $10.5 million) provided by its bank. This was undrawn at 30 June 2023 (2022: also undrawn). Dividends
2023
2022
Change
32.387 8.498 2.483 (6) 1.909 45.270
23.686 9.598 2.884 2.972 1.677 40.817
8.701 (1.100) (0.401) (2.978) 0.232 4.453
As foreshadowed in the Company’s Statement of Corporate Intent, the Directors of NIWA have once again decided not to declare a dividend in respect of the 2023 year. This is in the light of a series of significant capital investments which will be required to maintain and build the Company’s capability and financial sustainability for the future. These investments include renovating or replacing the physical infrastructure and facilities at three of the Company’s main sites.
Total capital expenditure was $45.3 million during the year, up from $40.8 million during the prior year. In addition to the above, a further $12.5 million is recorded as a prepayment, but can be considered in substance as equivalent to capital spending. This relates to initial payments for the construction of the replacement for NIWA’s ocean-going research vessel Kaharoa, and is reflected as an investing activity in the cash flow statement.
NIWA Annual Report 2022/23
16
NIWA’s new mid-sized research vessel, designed to replace RV Kaharoa, is making extraordinary progress and is now afloat in Spain undergoing its final fitout. Handover to NIWA is expected in late January-early February 2024, and the vessel is anticipated to be in its home port of Wellington in April 2024. [Armon]
NIWA Annual Report 2022/23
17
FINANCIAL STATEMENTS NIWA GROUP STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2023
in thousands of New Zealand dollars
Notes
Revenue and other gains Revenue Other gains Total income
1
Operating expenses Employee benefits expense Other expenses
2
Profit before interest, income tax, depreciation, and amortisation (EBITDA) Depreciation Amortisation
4, 5 7
Profit before interest and income tax (EBIT)
2023 Actual
2023 SCI Budget (unaudited)
2022 Actual
186,035 1 186,036
177,628 2 177,630
170,232 1 170,233
(88,449) (70,603) (159,052)
(85,584) (60,414) (145,998)
(82,178) (60,347) (142,525)
26,984
31,632
27,708
(18,514) (996)
(19,338) (862)
(17,978) (828)
7,474
11,432
8,902
Interest income Finance expense Net interest and other financing income
5
858 (568) 290
667 (499) 168
553 (497) 56
Profit before income tax Income tax expense Profit for the year
11
7,764 (1,826) 5,938
11,600 (4,952) 6,648
8,958 (2,488) 6,470
Other comprehensive (loss)/income Items that may be reclassified to profit or loss Foreign currency translation differences of foreign operations
(65)
–
40
Total comprehensive income for the year
5,873
6,648
6,510
Profit attributable to: Owners of the Parent Non-controlling interest Profit for the year
5,792 146 5,938
6,648 – 6,648
6,415 55 6,470
Total comprehensive income attributable to: Owners of the Parent Non-controlling interest Total comprehensive income for the year
5,727 146 5,873
6,648 – 6,648
6,455 55 6,510
The accompanying ‘Notes to the financial statements’ are an integral part of, and should be read in conjunction with, these financial statements.
NIWA Annual Report 2022/23
18
NIWA GROUP STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2023
Foreign currency translation reserve (289)
Total equity 147,970
Share capital 24,799
Retained earnings 123,127
Noncontrolling interest 333
– – –
6,415 – 6,415
55 – 55
– 40 40
6,470 40 6,510
Balance at 30 June 2022
24,799
129,542
388
(249)
154,480
Balance at 1 July 2022
24,799
129,542
388
(249)
154,480
– – –
5,792 – 5,792
146 – 146
– (65) (65)
5,938 (65) 5,873
24,799
135,334
534
(314)
160,353
in thousands of New Zealand dollars Balance at 1 July 2021 Profit for the year Other comprehensive income Total comprehensive income
Profit for the year Other comprehensive (loss)/income Total comprehensive income/(loss) Balance at 30 June 2023
Note
The accompanying ‘Notes to the financial statements’ are an integral part of, and should be read in conjunction with, these financial statements.
Share capital The Group has authorised issued and fully paid capital of 24,798,700 ordinary shares (2022: 24,798,700 ordinary shares). All shares carry equal voting and distribution rights and have no par value.
NIWA Annual Report 2022/23
19
NIWA GROUP STATEMENT OF FINANCIAL POSITION As at 30 June 2023
in thousands of New Zealand dollars
Notes
Equity and liabilities Equity Share capital Equity reserves Shareholders’ interest Non-controlling interest Total equity Non-current liabilities Provision for employee entitlements Lease liabilities Deferred tax liability Total non-current liabilities
3 5 12
Current liabilities Payables and accruals Revenue in advance Provision for employee entitlements Taxation payable Lease liabilities Forward exchange derivatives Total current liabilities
3 5
Total equity and liabilities Assets Non-current assets Property, plant and equipment Identifiable intangibles Deferred tax asset Right-of-use asset Prepayments Total non-current assets
4 7 12 5
Current assets Cash and cash equivalents Other short-term investments Forward exchange derivatives Receivables Prepayments Tax Receivable Assets held for sale Uninvoiced receivables Inventory Total current assets
9 8 10
Total assets
2023 Actual
2023 SCI Budget (unaudited)
2022 Actual
24,799 135,020 159,819 534 160,353
24,799 136,582 161,381 331 161,712
24,799 129,293 154,092 388 154,480
963 18,831 752 20,546
1,113 18,000 1,612 20,725
966 12,250 1,057 14,273
16,310 31,157 12,490 – 1,890 – 61,847
16,367 21,639 10,381 2,641 – – 51,028
18,477 33,339 11,042 396 2,162 – 65,416
242,746
233,465
234,169
164,354 1,166 136 19,216 194 185,066
106,343 59,438 – 16,094 51 181,926
136,204 1,744 122 12,537 269 150,876
9,009 – 651 16,748 15,749 5 – 9,631 5,887 57,680
16,108 10,000 36 13,054 2,618 – – 6,919 2,804 51,539
32,019 20,000 570 17,107 3,419 – 245 5,690 4,243 83,293
242,746
233,465
234,169
The accompanying ‘Notes to the financial statements’ are an integral part of, and should be read in conjunction with, these financial statements.
For and on behalf of the Board:
Barry Harris
Chairman
Janice Fredric
Audit Committee Chair
The financial statements were authorised for issue by the directors on 30 August 2023.
NIWA Annual Report 2022/23
20
NIWA GROUP CASH FLOW STATEMENT For the year ended 30 June 2023
in thousands of New Zealand dollars Cash flows from operating activities Cash was provided from: Receipts from customers and grants Dividends received Interest received Cash was disbursed to: Payments to employees and suppliers Interest paid Taxation paid Net cash inflow from operating activities
Notes
5 13
2023 Actual
2023 SCI Budget (unaudited)
2022 Actual
179,943 1 858
174,478 – 667
176,275 1 553
(161,291)* (568) (2,546) 16,397
(139,907) (499) (3,206) 31,533
(139,135) (497) (7,030) 30,167
Cash flows from investing activities Cash was provided from: Sale of property, plant, and equipment Term deposits maturing Cash was applied to: Purchase of property, plant, and equipment Purchase of intangible assets Investments in other term deposits Net cash outflow from investing activities
604 24,000
(4,000) –
1,693 44,000
(57,367)* (418) (4,000) (37,181)
(39,000) (862) (10,000) (53,862)
(40,064) (735) (24,000) (19,106)
Cash flows from financing activities Cash was applied to: Payment for lease principal Net cash outflow from financing activities
(2,208) (2,208)
(2,136) (2,136)
(2,082) (2,082)
(22,992)
(24,465)
8,979
(18) 32,019 9,009
– 40,573 16,108
52 22,988 32,019
4,792 4,217 9,009
16,108 – 16,108
2,057 29,962 32,019
Increase/(decrease) in cash and cash equivalents Effects of exchange rate changes on the balance of cash held in foreign currency Opening balance of cash and cash equivalents Closing cash and cash equivalents balance Made up of: Cash at bank and on hand Short-term deposits Closing cash and cash equivalents balance
The accompanying ‘Notes to the financial statements’ are an integral part of, and should be read in conjunction with, these financial statements.
* The amount of $12,549,000 recorded in the Statement of Financial Position as Prepayments relates to the construction of a new research vessel. The associated cash flow is classified as an investing activity in accordance with its substance.
NIWA Annual Report 2022/23
21
NIWA GROUP NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2023 1.
Revenue and other gains
Rendering of services The Group uses the ‘percentage-of-completion method’ to determine the appropriate amount of revenue to recognise in a given period. The stage of completion is measured by reference to the labour and nonlabour costs incurred up to the end of the year as a percentage of total estimated costs for each contract. Contract duration is typically 1–5 years and revenue is recognised over time as service is rendered. The customer pays a fixed amount over the contract term in accordance with the payment frequency specified in the contract. Goods sold The Group recognises revenue from the sale of goods when control of the goods has passed to the customer, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and there is a high probability that a significant reversal in the revenue recognised will not occur. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances. The timing of the transfer of control varies depending on the individual terms of the sales agreement.
Financing components The Group does not expect to have any significant contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money as this is considered to not have a material impact. Contract balances Contract assets A contract asset is the right to consideration in exchange for goods or services transferred to the customer, conditional on something other than the passage of time. If the Group performs under a contract by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. Contract assets are classified as ‘Uninvoiced receivables’ in the Statement of Financial Position. Contract liabilities A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services, a contract liability is recognised. Contract liabilities are recognised as revenue when the Group performs under the contract. Contract liabilities are classified as ‘Revenue in advance’ in the Statement of Financial Position. Revenue and other gains
Government grants related to costs are deferred and recognised in profit or loss over the period in which the Group incurs the costs for which the grant is intended to compensate.
in thousands of New Zealand dollars Research Strategic Funding Rendering of services Commercial Science Rendering of services Sale of goods Dividends Total revenue and other gains
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as revenue in advance and they are credited to profit or loss on a straight-line basis over the expected lives of the related assets.
Revenue recognised in relation to contract liabilities (revenue in advance)
A government grant that becomes receivable as compensation for expenses or losses already incurred, or for the purpose of giving immediate financial support to the Group with no future related costs, is recognised in profit or loss in the period in which the grant becomes receivable.
in thousands of New Zealand dollars Revenue recognised that was included in the contract liability balance at the beginning of the year Rendering of services
Government grants Government grants are recognised under NZ IAS 20 when there is a reasonable assurance that the Group will comply with the conditions attached to the grant, and that the grant will be received.
Strategic funding NIWA and the Crown are parties to a Strategic Science Investment Fund – Programmes Investment Contract (SSIF Contract) under which the Crown contracts NIWA to perform research activities that support NIWA’s Statement of Core Purpose (SCP). Specific SCP outcomes, and their associated delivery programmes, are agreed annually with Shareholding Ministers and documented in NIWA’s Statement of Corporate Intent. For financial reporting purposes this Strategic Funding is treated as a Government Grant in terms of NZ IAS 20. Strategic Funding received and recognised during the year was $50.552 million exclusive of GST (2022: $50.552 million). All Strategic Funded projects were completed during the year.
NIWA Annual Report 2022/23
2.
2023
2022
50,552 50,511
50,552 45,062
77,070 7,902 1 186,036
69,189 5,429 1 170,233
2023
2022
25,699
20,464
2023 3,246 408 179 84,616 88,449
2022 3,024 356 191 78,607 82,178
Operating expenses
Employee benefits in thousands of New Zealand dollars Defined contribution plans Defined benefit plans Termination benefits Other employee benefits Employee benefits expense
Termination benefits were paid out in respect of five employees.
22
4.
Other expenses in thousands of New Zealand dollars Materials and supplies Research collaboration Property occupancy costs Information technology Remuneration of directors Foreign currency (gain)/loss Movement within loss allowance provision Change in the fair value of derivatives Other expenses Total other expenses
2023 11,054 23,649 6,224 8,613 296 (568) (38) (81) 21,216 70,365
2022 8,914 22,244 4,283 11,066 234 (833) – (562) 14,804 60,150
Auditor’s remuneration in thousands of New Zealand dollars Auditor’s remuneration comprises: Audit of the financial statements (Group) Audit of the financial statements (Subsidiary) Other assurance services Total auditor’s remuneration
3.
2023
2022
200
168
30 8 238
29 – 197
Employee entitlements
Liabilities for wages and salaries, including non-monetary benefits and annual leave, long service leave, retirement leave, and training leave are recognised when it is probable that settlement will be required, and they are capable of being measured reliably. Provisions, in respect of employee benefits, are measured using the remuneration rate expected to apply at settlement. Employee benefits are separated into current and non-current liabilities. Current liabilities are those benefits that are expected to be settled within 12 months from balance date. Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured at the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to the reporting date.
in thousands of New Zealand dollars Remuneration Salary accrual Annual leave Training leave Long service leave Retirement leave Total employee entitlements Comprising: Current Non-current
2023
2022
3,958 7,880 184 946 485 13,453
2,845 7,545 200 940 478 12,008
12,490 963
11,042 966
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation to date, less any impairment losses. Expenditure incurred on property, plant and equipment is capitalised where such expenditure will increase or enhance the future economic benefits provided by an asset’s existing service potential. Expenditure incurred to maintain future economic benefits is classified as repairs and maintenance. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the Statement of Comprehensive Income. Property, plant and equipment items, except for freehold land and work in progress, are depreciated on a straight-line basis at rates estimated to write off their cost over their estimated useful lives, which are as follows: Category Buildings and leasehold improvements Vessels Plant and equipment IT equipment Office equipment Furniture and fittings Motor vehicles Small boats
Useful life 5–40 years 20–31 years 8–10 years 3–8 years 5 years 10 years 6 years 10 years
Assumptions underlying the estimated useful life of assets include timing of technological obsolescence and future utilisation plans. Major source of uncertainty The useful lives of item of property, plant and equipment are key assumptions concerning the future that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The Group reviews the estimated useful lives of property, plant and equipment items during each annual reporting period.
The provisions for long service leave, retirement leave, and training leave are dependent upon several factors that are determined by the expected employment period of employees, current remuneration, and the timing of employees’ use of the benefits. Any changes in these assumptions will impact on the carrying amount of the liability. The employment period used to determine the appropriate long service leave liability is based upon historical average length of service. The training leave liability is based upon typical historical usage of the benefit.
NIWA Annual Report 2022/23
23
in thousands of New Zealand dollars Land Cost Balance at 1 July 2022 15,153 Additions 3,770 Transfers 202 Disposals – Foreign currency adjustment – Balance at 30 June 2023 19,125 Accumulated depreciation and impairment losses Balance at 1 July 2022 – Depreciation – Disposals – Foreign currency adjustment – Balance as at 30 June 2023 – Net book value at 30 June 2023 19,125
Buildings & leasehold improvements
Vessels
Plant & equipment
IT equipment
Office equipment
Furniture & fittings
Motor vehicles
Small boats
Work in progress
Total
65,781 435 123 –
41,972 (41) 64 –
118,482 (624) 5,676 (288)
38,967 94 1,905 (230)
7,969 117 – (72)
2,279 10 198 (3)
4,517 (26) 1,165 (374)
3,640 (27) 259 (90)
48,436 41,130 (9,592) –
347,196 44,838 – (1,057)
–
–
(6)
(3)
–
(1)
–
–
–
(10)
66,339
41,995
123,240
40,733
8,014
2,483
5,282
3,782
79,974
390,967
47,625 3,493 –
28,763 1,459 –
92,390 6,457 (284)
27,031 4,376 (226)
7,165 303 (71)
1,467 132 (3)
3,998 273 (375)
2,553 182 (90)
– – –
210,992 16,675 (1,049)
–
–
(3)
(2)
–
–
–
–
–
(5)
51,118
30,222
98,560
31,179
7,397
1,596
3,896
2,645
–
226,613
15,221
11,773
24,680
9,554
617
887
1,386
1,137
79,974
164,354
in thousands of New Zealand dollars Land Cost Balance at 1 July 2021 15,768 Additions – Transfers – Disposals (615) Foreign currency adjustment – Balance at 30 June 2022 15,153 Accumulated depreciation and impairment losses Balance at 1 July 2021 – Depreciation – Disposals – Foreign currency adjustment – Balance as at 30 June 2022 – Net book value at 30 June 2022 15,153
Buildings & leasehold improvements
Vessels
Plant & equipment
IT equipment
Office equipment
Furniture & fittings
Motor vehicles
Small boats
Work in progress
Total
63,818 (134) 2,344 (247)
41,813 (641) 800 –
111,803 3,568 3,101 (1)
36,628 1,657 1,021 (342)
7,840 263 – (134)
2,193 80 5 –
4,557 119 59 (218)
3,635 5 – –
20,601 35,165 (7,330) –
308,656 40,082 – (1,557)
–
–
11
3
–
1
–
–
–
15
65,781
41,972
118,482
38,967
7,969
2,279
4,517
3,640
48,436
347,196
44,932 2,839 (146)
27,297 1,466 –
85,820 6,567 (1)
22,979 4,382 (338)
6,926 372 (133)
1,347 119 –
3,914 295 (211)
2,369 184 –
– – –
195,584 16,224 (829)
–
–
4
8
–
1
–
–
–
13
47,625
28,763
92,390
27,031
7,165
1,467
3,998
2,553
–
210,992
18,156
13,209
26,092
11,936
804
812
519
1,087
48,436
136,204
NIWA Annual Report 2022/23
24
5.
Right-of-use asset and lease liability
Lease liabilities maturity analysis
Reconciliation of right-of-use asset balance in thousands of New Zealand dollars Right-of-use asset net book value opening balance Lease modifications and additions Disposals Depreciation Foreign currency adjustment Right-of-use asset net book value closing balance Represented by: Cost Accumulated depreciation Right-of-use asset net book value closing balance
2023
2022
12,537 9,234 (711) (1,839) (5)
8,819 5,465 – (1,754) 7
19,216
12,537
25,509 (6,293)
16,985 (4,448)
19,216
12,537
The Group’s leases relate to buildings and land. These leases are recognised as a right-of-use asset and a corresponding liability. Each lease payment is allocated between the lease liability and the finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present-value basis. Lease liabilities include the net present value of fixed payments. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group’s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment, with similar terms and conditions. Right-of-use assets are measured at cost, comprising the amount of the initial measurement of lease liability. These assets are subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small storage spaces.
in thousands of New Zealand dollars Within one year One to five years Beyond five years Lease liabilities at 30 June 2023
Minimum lease payments 2,982 8,463 27,492 38,937
Interest (1,092) (3,656) (13,468) (18,216)
Present value 1,890 4,807 14,024 20,721
in thousands of New Zealand dollars Within one year One to five years Beyond five years Lease liabilities at 30 June 2022
Minimum lease payments 2,621 8,189 16,118 26,928
Interest (459) (1,066) (10,991) (12,516)
Present value 2,162 7,123 5,127 14,412
Lease-related expenses included in the statement of comprehensive income in thousands of New Zealand dollars Depreciation Short-term and low-value leases Interest on leases Total
6.
2023
2022
14,412 9,234 (711) 561 (2,769) (6)
11,022 5,465 – 502 (2,584) 7
20,721 1,890 18,831 20,721
14,412 2,162 12,250 14,412
* The total finance expense of $568k shown in the statement of comprehensive income for 2023 comprises the lease interest of $561k shown in the table above, together with other minor interest payments of $(7)k.
NIWA Annual Report 2022/23
2022 1,754 298 502 2,554
Heritage assets
NIWA has one collection and three databases that have been defined as heritage assets. Heritage collection assets are those assets held for the duration of their physical lives because of their unique scientific importance, and heritage databases are maintained as an incidental part of existing business operations. NIWA has the following heritage assets: Type Marine Benthic Biology Collection National Climate Database
Water Resources Archive Database
Reconciliation of lease liabilities in thousands of New Zealand dollars Net present value of future lease liability opening balance Additions and modifications Disposals Interest for the year* Lease payments made FX impact Net present value of future lease liability closing balance Current lease liability Non-current lease liability Total lease liabilities closing balance
2023 1,839 353 561 2,753
New Zealand Freshwater Fish Database
Description A national reference collection of marine invertebrates. A national electronic database of highquality climate information, including temperatures, rainfall, wind and other climate elements. A national electronic database of river and lake locations throughout New Zealand, including levels, quality and flows. A national electronic database of the occurrence of fish in the fresh waters of New Zealand, including major offshore islands.
The nature of these heritage assets, and their significance to the science NIWA undertakes, makes it necessary to disclose them. In the directors’ view, the cost of these heritage assets cannot be assessed with any reliability, and accordingly these assets have not been recognised for financial reporting purposes.
7.
Identifiable intangibles
Purchased identifiable intangible assets, comprising copyrights and software, are recorded at cost less amortisation and impairment. Amortisation is charged on a straight-line basis over the assets’ estimated useful lives. The estimated useful life and amortisation method are reviewed each balance date. Category Copyrights Development costs Software
Useful life 5 years 5 years 3 years
25
8.
Intangible assets which arise from development costs that meet the recognition criteria are recognised as an asset in the statement of financial position.
Assets held for sale are stated at the lower of their carrying amount and fair value less costs to sell.
Capitalisation is limited to the amount which, taken together with any further related costs, is likely to be recovered from future economic benefits. Any excess is recognised as an expense.
No assets were reclassified as held for sale in 2023 (2022: $245k). The site at Mahanga Bay was sold in February 2023.
All other development and research costs are expensed as incurred.
in thousands of New Zealand dollars Land Total
Subsequent to initial recognition, internally generated intangible assets are reported at cost, less accumulated amortisation and accumulated impairment losses, on the same basis as purchased identifiable intangible assets. in thousands of New Zealand dollars
Software
Cost Balance as at 1 July 2022 12,078 Additions 79 Disposals (462) Transfers 348 Foreign Currency Adjustment (5) Balance as at 30 June 2023 12,038 Accumulated amortisation and impairment losses Balance as at 1 July 2022 10,598 Amortisation 955 Disposals (464) Foreign Currency Adjustment – Balance as at 30 June 2023 11,089 Net book value at 30 June 2023 949 in thousands of New Zealand dollars
Software
Cost Balance as at 1 July 2021 11,302 Additions 593 Disposals – Transfers 183 Foreign Currency Adjustment – Balance as at 30 June 2022 12,078 Accumulated amortisation and impairment losses Balance as at 1 July 2021 9,813 Amortisation 785 Disposals – Foreign Currency Adjustment – Balance as at 30 June 2022 10,598 Net book value at 30 June 2022 1,480
NIWA Annual Report 2022/23
Assets held for sale
9.
Copyrights
Development costs
Work in progress
Total
215 – – –
377 6 – –
65 347 – (348)
12,735 432 (462) –
–
(6)
(1)
(12)
215
377
63
12,693
215 – –
178 41 –
– – –
10,991 996 (464)
–
4
–
4
215
223
–
11,527
–
154
63
1,166
Copyrights
Development costs
Work in progress
Total
215 – – –
374 8 – –
114 134 – (183)
12,005 735 – –
–
(5)
–
(5)
215
377
65
12,735
215 – –
140 43 –
– – –
10,168 828 –
–
(5)
–
(5)
215
178
–
10,991
–
199
65
1,744
2023 – –
2022 245 245
Receivables
Receivables are stated at amortised cost using the effective interest rate, less an allowance for expected losses. A loss allowance provision is established when the assessment under NZ IFRS 9 deems a provision is required. Changes in the carrying amount of the provision are recognised in the Statement of Comprehensive Income. Debts which are known to be uncollectable are written off against the provision, once approved by the Board of Directors. in thousands of New Zealand dollars Trade receivables Sundry receivables Loss allowance provision Total Classified as: Non-current Current Total
2023 16,747 1 – 16,748
2022 17,048 59 – 17,107
– 16,748 16,748
– 17,107 17,107
Included in the Group’s trade receivables balance at the end of the year is one Crown debtor’s balance which equates to 32% of the Group’s total receivables balance (2022: 32%). 98% of that debtor’s balance is less than 60 days over-due and is deemed to be low credit risk (2022: 94%). The Group considers that a large proportion of its customers have a low credit risk associated with them. Before providing any service or goods to a new customer on credit terms, a check is undertaken when deemed appropriate to verify the credit-worthiness of the customer. The Group reserves the right to charge interest at a rate of 2% per month, calculated daily, on all invoices remaining unpaid at the due date. Included in the Group’s trade receivable balance are debtors with a carrying amount of $378k (2022: $935k) which are more than 60 days past due at the reporting date. The Group has not created a provision for this balance because the amounts are still considered recoverable. The Group does not hold any collateral over past due or impaired balances. The Group has applied the simplified approach to providing for expected credit losses, which requires the recognition of a lifetime expected loss provision for trade receivables. To measure the expected credit losses, trade receivables have been grouped based on days past due. The expected loss rates are based on the payment profiles of customers on a lifetime basis and the corresponding historical credit losses over a period of five years, adjusted for any significant known amounts that are not receivable. The total expected credit loss allowance provision has been determined as nil (2022: nil) for the Group.
26
in thousands of New Zealand dollars As at 30 June 2023 Current Past due 1 – 30 days Past due 31 – 60 days Past due 61 – 90 days Past due >90 days Total
Expected Loss Rate 0.0% 0.0% 0.0% 0.0% 0.0%
Gross Carrying Amount 14,586 1,240 544 169 209 16,748
Loss Allowance Provision – – – – – –
As at 30 June 2023
Inventory is stated at the lower of cost and net realisable value. The basis on which cost is calculated is first in, first out (FIFO) for consumables, finished goods and work in progress; and weighted average for raw materials. 2023 835 859 4,193 5,887
2022 1,138 145 2,960 4,243
The income tax expense for the year is the tax payable on the current year’s taxable income, based on the income tax rate for each jurisdiction. This is then adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and changes in unused tax losses.
Property, plant and equipment Library books Uninvoiced receivables Employee benefits Unrealised forex gains/losses on creditors/debtors Doubtful debts Leases R&D Tax credit (Australianbased subsidiary) Total
in thousands of New Zealand dollars As at 30 June 2022
The income tax expense is determined as follows:
Closing balance
(2,014) – (1,593) 2,341
1,334 – (1,103) (32)
(680) – (2,696) 2,309
(185) – 516
221 – (101)
36 – 415
– (935)
– 319
– (616)
Opening balance
Credited/ (charged) to profit or loss
Closing balance
(3,135) 1 (1,852) 2,166
1,121 (1) 259 175
(2,014) – (1,593) 2,341
(27) – 609
(158) – (93)
(185) – 516
– (2,238)
– 1,303
– (935)
Temporary differences 2023
2022
2,145
3,791
(319) 1,826
(1,303) 2,488
Reconciliation of income tax expense in thousands of New Zealand dollars Profit before income tax
2023 7,764
2022 8,958
Tax at current rate of 28% Adjustments to taxation: Other non-deductible expenses Australian-based subsidiary subject to foreign tax (Over)/under provision in previous year Income tax expense
2,174
2,508
5
23
21
5
(374) 1,826
(48) 2,488
12. Deferred tax liability and assets Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that sufficient taxable amount will be available against which those deductible temporary differences can be utilised.
NIWA Annual Report 2022/23
Opening balance
Credited/ (charged) to profit or loss
Temporary differences
11. Income tax
in thousands of New Zealand dollars Income tax expense Current tax Deferred tax relating to temporary differences Income tax expense
Current and deferred tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the deferred or current tax is also recognised in other comprehensive income or directly in equity, or where it arises from the initial accounting for a business combination. in thousands of New Zealand dollars
10. Inventory
in thousands of New Zealand dollars Consumables Raw materials Finished goods Total
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset and liability giving rise to them are realised or settled, based on the tax laws that have been enacted or substantively enacted at balance date.
Property, plant, and equipment Library books Uninvoiced receivables Employee benefits Unrealised forex gains/losses on creditors/debtors Doubtful debts Leases R&D Tax credit (Australianbased subsidiary) Total
In accordance with the Income Tax Act 2007 the Group is not required to establish or maintain an imputation credit account by virtue of its classification as a Crown Research Institute.
13. Cash and cash flows 13a Cash and cash equivalents and other short-term investments Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Other short-term investments consists of deposits with financial institutions with maturities over three months which are presented as a separate line item in the statement of financial position.
27
13b Reconciliation of the profit for the year to net cash from operating activities
containing all relevant interests is updated on a regular and timely basis.
in thousands of New Zealand dollars Profit for the year Add/(less) non-cash items Net (gain)/loss on disposal of property, plant and equipment Depreciation and impairment Amortisation of identifiable intangibles Net foreign currency (gain) Increase/(decrease) in deferred tax Add/(less) movements in working capital Increase/(decrease) in payables and accruals and revenue in advance Increase/(decrease) in employee entitlements Decrease/(increase) in receivables and prepayments Decrease/(increase) in inventory and uninvoiced receivables Increase/(decrease) in taxation payable and receivable Increase/(decrease) in forward exchange derivatives Net cash flows from operating activities
2023 5,938
2022 6,470
Key management personnel compensation
(347) 18,514
(966) 17,978
The table above includes the remuneration of the Chief Executive, Executive Team and the Board of Directors.
996 (47) (319) 18,797
828 (12) (1,303) 16,525
(4,370)
9,764
1,445
1,195
653
842
(5,585)
(827)
(401)
(3,239)
(80) (8,338) 16,397
(563) 7,172 30,167
14. Subsidiaries The Group financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company. Control is achieved where the Company has the power (including the ability to use the power) to govern the financial and operating policies of an entity so as to obtain benefits from its activities. All intra-group transactions, balances, income, and expenses are eliminated in full on consolidation. The subsidiaries of the Group and their activities are listed below: Name NIWA Vessel Management Ltd
Country New Zealand
Unidata Pty Ltd
Australia
Principal activities Vessel charters for scientific research Supplier of environmental technology products Commercial-scale production of high value finfish
Ownership 100% 80%
in thousands of New Zealand dollars Short-term benefits
2023 3,830
2022 3,484
16. Financial Instruments and Risk Management The classification of financial assets and liabilities depends on the purpose for which the financial assets and liabilities were incurred. Management determines the classification of the Group’s financial assets and liabilities at initial recognition. Financial assets Classification The Group classifies its financial assets in the following measurement categories: those to be measured at amortised costs, and those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss). The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flow. For assets measured at fair value, gains and losses will be recorded in either profit or loss, or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. The Group reclassifies debt investments when, and only when, its business model for managing those assets changes. Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets and liabilities at fair value through profit or loss – Derivative financial instruments This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term, or if so designated by management.
100%
Derivatives are also categorised as held for trading, unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date. After initial recognition, they are measured at their fair values. Gains or losses on remeasurement are recognised in the Statement of Comprehensive Income.
No stake in any subsidiary was acquired or disposed of during the year.
Financial Assets at Amortised Cost The Group classifies its financial assets at amortised cost only if both of the following criteria are met:
15. Related party transactions
● ●
NIWA Aquaculture Solutions Ltd
New Zealand
All subsidiaries have a balance date of 30 June.
The Government of New Zealand (the Crown) is the ultimate shareholder of the NIWA Group. No transactions with other New Zealand Government-owned entities are considered related party transactions in terms of NZ IAS 24. No related party debts have been written off or forgiven during the year. Any business the NIWA Group has transacted in which a director or an employee has an interest has been carried out on a commercial basis. Any potential conflict is recorded in the minutes of Board meetings for directors and a separate interest register for employees. The interests register
NIWA Annual Report 2022/23
The asset is held to collect the contractual cash flows, and The contractual terms give rise to cash flows that are solely payments of principal and interest.
Impairment of financial assets The Group assesses, on a forward-looking basis, the expected credit losses associated with its assets carried at amortised cost and fair value through other comprehensive income. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 9 details how the Group determines whether there has been a significant increase in credit risk.
28
For trade receivables only, the Group applies the simplified approach permitted by NZ IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. Capital management The Group has the following requirements imposed upon it under the Crown Research Institutes Act 1992: ●
to operate in a financially responsible manner so that sufficient operating funds are generated to maintain financial viability;
●
to provide an adequate rate of return on shareholders’ funds; and
●
to operate as a going concern.
The Group’s maximum exposure to credit risk by geographic region is as follows: in thousands of New Zealand dollars New Zealand Australia USA Other Asia Pacific countries Other regions Provision for doubtful debts Total credit risk
2023 32,093 2,473 190 589 41 – 35,386
2022 72,198 1,536 370 452 260 – 74,816
Interest rate risk
The Group’s policy is to maintain a strong capital base to maintain shareholder and creditor confidence and to sustain future development of the business.
Interest rate risk is the risk that cashflows will fluctuate because of changes in market interest rates. This could particularly affect the return on investments.
The Group’s policies in respect of capital management and allocation are reviewed regularly by the Board of Directors.
The interest rates on the Group investments as at 30 June:
The advance facility available from ANZ Bank (refer note 16 subsection financing facilities) is subject to two covenants: 1.
That the value of the Group’s net tangible assets is greater than $50 million; and
2.
That ANZ reserves the right to review the facility in the event of a change in the shareholding structure.
The Group was compliant with these covenants throughout the year. Capital refers to the equity and borrowings of the Group. There have been no material changes in the Group’s management of capital during the year. Fair value of financial instruments The carrying value of all financial instruments is considered to approximate fair value. All the Group’s financial instruments are classified as being within level 2 of the fair value hierarchy as defined by NZ IFRS 13 Fair Value Measurement (2022: the same). Their fair value is determined with reference to quoted rates for identical instruments on active markets. Credit risk Credit risk is the risk that a third party will default on its obligations to NIWA and the Group, causing a loss. In the normal course of business, the Group incurs credit risk from trade receivables, uninvoiced receivables, and transactions with financial institutions (cash and short-term deposits and derivatives). The Group has a credit policy that is used to manage this risk. As part of this policy, limits are placed on the amounts of credit extended to third parties, and care is taken to ensure the credit-worthiness of third parties dealt with. All credit risk exposures are monitored regularly. The Group does not require any collateral or security to support financial instruments, because of the quality of financial institutions and counterparties it deals with. There are no significant concentrations of credit risk, other than with the New Zealand Government, which the Group does not consider represents a material credit risk. The exposure to the Group to credit risk as at 30 June 2023 was $35,386k (total exposure to credit risk, comprising cash and cash equivalents $9,009k, uninvoiced receivables $9,629k, and receivables net of provisions $16,748k) (2022: $74,816k). Further analysis on the receivables balance can be found in note 9. The Group has not renegotiated the terms of any financial assets which would result in the carrying amount no longer being past due or avoid a possible past due status.
NIWA Annual Report 2022/23
Cash (on call) Other short-term investments
2023 2.70–2.90% N/A
2022 0.10–2.00% 0.05–3.70%
The directors do not consider there is any significant exposure to interest rate risk. Currency risk The Group undertakes transactions in foreign currencies from time to time, and, resulting from these activities, exposures in foreign currency arise. It is the Group’s policy to hedge foreign currency trading transaction risks economically as they arise. To manage these exposures, the Group may use financial instruments such as forward foreign exchange contracts. The Group’s exposure to foreign currency denominated nonderivative financial instruments was as follows, based on notional amounts: in thousands of New Zealand dollars 30 June 2023 Cash balances Trade receivables Trade payables Statement of financial position exposure in thousands of New Zealand dollars 30 June 2022 Cash balances Trade receivables Trade payables Statement of financial position exposure
AUD 1,931
EUR 59
USD 68
FJD 4
GBP 205
CAD 2
SGD 14
171
–
432
–
–
–
38
(230)
(46)
(95)
–
(98)
–
–
1,872
13
405
4
107
2
52
AUD 1,138
EUR 75
USD 174
FJD 4
GBP 29
CAD 2
SGD 2
390
–
155
–
117
–
36
(229)
(33)
(38)
–
(4)
–
–
1,299
42
291
4
142
2
38
NIWA has a regularly reviewed treasury management policy in place which ensures the appropriate management of currency risk.
29
Liquidity risks Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity requirements on an ongoing basis. In general, the Group generates sufficient cash flows from its operating activities to meet its obligations arising from its financial liabilities and has credit lines in place to cover potential shortfalls. Payables and accruals of $10.13 million (2022: $13.083 million) have a contractual maturity of less than one year. This is based upon the earliest date on which the Group can be required to pay. Financing facilities The Group has access to financing facilities made available by ANZ Bank with a total value of $20.5 million (2022: $10.5 million). This was undrawn at 30 June 2023 (2022: also undrawn). The total facility of $20.5 million relates to an overdraft facility of $0.5 million (on-call) and an overnight placement and short term advance facility of $20 million.
17. Capital commitments in thousands of New Zealand dollars Commitments for future capital expenditure Contracted, but not provided for
2023
2022
22,204
46,759
The majority of the 2023 balance relates to contracts that have been awarded for the replacement of the RV Kaharoa.
18. Subsequent events On 26 July 2023 the State Owned Enterprises Minister, Duncan Webb, announced that the Government has commissioned a review of New Zealand’s weather forecasting system. The Group's role in the system is intended to be in the scope of this review. The review will commence in September 2023 and the review’s final report is anticipated to be with the Government in February 2024. It is currently not known what implications may arise, if any, for the Group as a result of the review and the Government's response.
NIWA Annual Report 2022/23
30
PREPARATION DISCLOSURES Reporting entity
Goods and services tax (GST)
National Institute of Water and Atmospheric Research Limited (‘NIWA’ or ‘the Company’) and its subsidiaries form the consolidated Group (‘the NIWA Group’ or ‘the Group’). NIWA is a profit-oriented company registered in New Zealand under the Companies Act 1993.
The financial statements are prepared on a GST-exclusive basis, except for receivables and payables, which are stated GST-inclusive.
The financial statements for the NIWA Group are presented in accordance with the requirements of the Crown Research Institutes Act 1992, the Crown Entities Act 2004, the Public Finance Act 1989, the Companies Act 1993, and the Financial Reporting Act 2013.
Transactions Transactions in foreign currencies are converted to the functional currency of the Group, being New Zealand dollars, by applying the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each year, monetary assets and liabilities are translated to New Zealand dollars using the closing rate of exchange at balance date, and any exchange gains or losses are recognised in the statement of comprehensive income.
Nature of activities The NIWA Group conducts research and commercial science in water and atmospheric sciences in New Zealand and internationally. Basis of preparation The measurement basis adopted in the preparation of these financial statements is historical cost, except for financial instruments as identified in specific accounting policies above. The presentation currency of the Group and functional currency used in the preparation of these financial statements is New Zealand dollars. All amounts disclosed in the financial statements and notes have been rounded to the nearest thousand New Zealand dollars unless otherwise stated. Accounting policies are selected and applied in a manner that ensures that the resulting financial information meets the concepts of relevance and reliability, ensuring that the substance of the underlying transaction or event is reported.
Foreign currencies
Translation of foreign operations On consolidation, revenues and expenses of foreign operations are translated to New Zealand dollars at the average exchange rates for the year. Assets and liabilities are converted to New Zealand dollars at the rates of exchange ruling at balance date. Exchange rate differences arising from the translation of the foreign operations are recognised in other comprehensive income and accumulated as a separate component of equity in the Group’s foreign currency translation reserve. Such exchange differences are reclassified from equity to profit or loss (as a reclassification adjustment) when the foreign operation is disposed of. Adoption of new and revised standards There are no standards that are not yet effective and that would be expected to have a material impact on the Group.
The accounting policies have been applied in preparing the financial statements for the year ended 30 June 2023 and the comparative information for the year ended 30 June 2022. The 2023 Statement of Corporate Intent (SCI) Budget that is used for comparative information is not audited. Statement of compliance The financial statements have been prepared in accordance with New Zealand generally accepted accounting practice (NZ GAAP). They comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable financial reporting standards appropriate for profit-oriented entities. The financial statements comply with International Financial Reporting Standards (IFRS).
NIWA Annual Report 2022/23
31
AUDITOR’S REPORT Independent Auditor’s Report To the readers of National Institute of Water and Atmospheric Research Limited’s Group Financial Statements for the year ended 30 June 2023. The Auditor-General is the auditor of National Institute of Water and Atmospheric Research Limited Group (the Group). The Auditor-General has appointed me, Troy Florence, using the staff and resources of PricewaterhouseCoopers, to carry out the audit of the financial statements of the Group on his behalf. Opinion We have audited the financial statements of the Group on pages 18 to 31 that comprise the statement of financial position as at 30 June 2023, the statement of comprehensive income, statement of changes in equity and cash flow statement for the year ended on that date and the notes to the financial statements that include accounting policies and other explanatory information. In our opinion, the financial statements of the Group: ● present fairly, in all material respects: ‒ its financial position as at 30 June 2023; and ‒ its financial performance and cash flows for the year then ended; and ● comply with generally accepted accounting practice in New Zealand in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
As part of an audit in accordance with the Auditor-General’s Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. Also: ●
●
● ●
Our audit was completed on 30 August 2023. This is the date at which our opinion is expressed. The basis for our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and our responsibilities relating to the financial statements, we comment on other information, and we explain our independence. Basis for our opinion We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the Professional and Ethical Standards and the International Standards on Auditing (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board. Our responsibilities under those standards are further described in the Responsibilities of the auditor section of our report. We have fulfilled our responsibilities in accordance with the Auditor-General’s Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of the Board of Directors for the financial statements The Board of Directors is responsible on behalf of the Group for preparing financial statements that are fairly presented and that comply with generally accepted accounting practice in New Zealand. The Board of Directors is responsible for such internal control as it determines is necessary to enable it to prepare financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors is responsible on behalf of the Group for assessing the Group’s ability to continue as a going concern. The Board of Directors is also responsible for disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless the Board of Directors has to cease operations, or has no realistic alternative but to do so. The Board of Directors’ responsibilities arise from the Crown Research Institutes Act 1992. Responsibilities of the auditor for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but it is not a guarantee that an audit carried out in accordance with the Auditor-General’s Auditing Standards will always detect a material misstatement when it exists. Misstatements are differences or omissions of amounts or disclosures and can arise from fraud or error. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of readers taken on the basis of these financial statements. For the budget information reported in the financial statements, our procedures were limited to checking that the information agreed to the Group’s statement of corporate intent. We did not evaluate the security and controls over the electronic publication of the financial statements.
NIWA Annual Report 2022/23
●
●
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. We obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. We evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. We conclude on the appropriateness of the use of the going concern basis of accounting by the Board of Directors and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. We evaluate the overall presentation, structure and content of the financial statements, including the disclosures and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We obtain sufficient appropriate audit evidence regarding the financial statements of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Our responsibilities arise from the Public Audit Act 2001. Other Information The Board of Directors is responsible for the other information. The other information obtained at the date of our report is the Financial Summary and Group actual performance versus Statement of Corporate Intent on pages 13 to 16, and the Corporate governance and disclosures, Statement of responsibility and Directory on pages 33 to 36, but does not include the financial statements, and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of audit opinion or assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information. In doing so, we consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on our work, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Independence We are independent of the Group in accordance with the independence requirements of the Auditor-General’s Auditing Standards, which incorporate the independence requirements of Professional and Ethical Standard 1: International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board. In addition to the audit we carried out an engagement in the area of agreed-upon procedures regarding payments received in accordance with a research agreement, which is compatible with those independence requirements. Other than the audit and this engagement, we have no relationship with or interests in the Company or any of its subsidiaries.
Troy Florence PricewaterhouseCoopers On behalf of the Auditor-General Auckland, New Zealand 30 August 2023
32
CORPORATE GOVERNANCE AND DISCLOSURES Board and committee meeting attendance
Subsidiary company directors
The table below shows director attendance at these Board meetings and committee member attendance at committee meetings. In addition, any director may attend any committee meeting.
The following people held office as directors of NIWA’s subsidiary companies at 30 June 2023:
Director Barry Harris (Chairman) Nicholas Main (Deputy Chairman until 31 May 2023) Dr Tracey Batten Janice Fredric Margaret Hyland Mary-Anne MacLeod Dean Moana Livia Esterhazy (from 1 June 2023) Total meetings held
Board meetings
ALCR Committee*
People & Culture Committee*
Future Property Programme Governance Committee*
9
1**
3**
–
Subsidiary Company NIWA Vessel Management Ltd Unidata Pty Ltd NIWA Aquaculture Solutions Ltd
Directors B Harris, N Main, T Batten, J Fredric, M Hyland, M-A Macleod, D Moana, L Esterhazy W Johnston1, C Pearson1, D Saunders2 J Morgan1, P Baker1
1. Employee of the Group’s parent company 2. Appointed by the minority ownership interest in Unidata Pty Ltd No fees were paid in respect of membership of subsidiary boards. 9
4
–
2
9
–
4
2
9
4
–
–
9
4
–
–
9
–
4
–
9
–
3
2
–
–
–
–
9
4
4
2
* Only attendances by Committee members and Chairman are recorded. **Barry Harris attends Committee meetings in an ex officio capacity.
The NIWA Group has arranged insurance policies for directors and employees which, with a deed of indemnity, ensure that they will generally incur no monetary loss as a result of lawful actions undertaken by them as directors or employees. These include, among others, directors and officers and professional indemnity policies. Certain risks are specifically excluded from the cover provided, including the imposition of penalties and fines in respect of breaches of the law. Auditors In accordance with Section 21(1) of the Crown Research Institutes Act 1992, the Group’s auditor is the Auditor-General. The Auditor-General has appointed Troy Florence of PricewaterhouseCoopers to conduct the audit on his behalf. The audit remuneration and fees paid for other services are detailed in note 2. Interests register The following are transaction types recorded in the interests register for the year. Interested transactions Any business the NIWA Group has transacted in which a director has an interest has been carried out on a commercial basis. Any potential conflict is recorded in the minutes of Board meetings. A register containing all relevant interests is updated on a monthly basis.
Directors’ remuneration The total remuneration received or receivable by directors of NIWA during the year was: in thousands of New Zealand dollars
Insurance for directors and employees
2023
2022
Barry Harris (Chairperson)
72
72
Nicholas Main (Deputy Chairperson until 31 May 2023)
41
45
Dr Tracey Batten
36
36
Janice Fredric
36
15
Margaret Hyland
36
15
Mary-Anne Macleod
36
36
Dean Moana
36
15
Livia Esterhazy (from 1 June 2023)
3
–
Directors’ remuneration Details of the directors’ remuneration are provided in the ‘Directors’ remuneration’ section above. Use of company information by directors Pursuant to section 145 of the Companies Act 1993 there were no recorded notices from directors requesting to use company information received in their capacity as directors that would not otherwise have been available to them. Share dealings During the year no director purchased, disposed of, or had recorded dealings of any equity securities of the NIWA Group. Directors’ loans No loans by the NIWA Group to any director were made or were outstanding during the year.
NIWA Annual Report 2022/23
33
Disclosure of directors’ interests Directors disclosed, under section 140(2) of the New Zealand Companies Act 1993, the following interests as at 30 June 2023: Director and company Barry Harris McFall Fuel Ltd Rural Fuels Ltd OSPRI New Zealand Limited TB Free Ltd National Animal Identification and Tracing (NAIT) Ltd New Zealand Food Innovation (Waikato) Ltd Waikato Regional Airport Ltd WEL Networks Ltd Melody Dairies Tracey Batten EBOS Group Ltd Medibank Private Limited (Australia) Accident Compensation Corporation Mary-Anne Macleod University of Waikato AgResearch Araneacattus Family Trust MacMacleod Limited DairyNZ Limited Environmental Protection Authority Ministry for the Environment Various Regional Councils Fire and Emergency New Zealand Janice Fredric Mainpower Ltd Green Power New Zealand Ltd Mt Cass Wind Farm Ltd Lincoln University Unity Credit Union Civil Aviation Authority Aviation Security Service NZ Shipwreck Welfare Trust Tregynon Charitable Trust Timaru District Council – Audit & Risk Committee Aurora Energy Dean Moana Whangaokena ki Onepoto Takutai Trust NZ Food & Beverage Group Ltd Te Runanganui o Ngati Porou The NZ Institute for Plant & Food Research Ltd Ngati Porou Holding Company Tohetaka Ltd Ngati Porou Manuka Ltd Ngati Porou Seafoods Ltd, NP Fisheries Ltd, Real Fresh Ltd
NIWA Annual Report 2022/23
Position Chair Chair Chair Chair Chair Chair Chair Chair Director (appointed 1 July 2022) Director Director
ICP General Partner Ltd Port Nicholson GP Ltd, Koura Inc GP Ltd Koura Inc GP Ltd Ahi Mokopuna GP Ltd Akaroa Salmon NZ Ltd AsureQuality Ltd BV-AQ (Singapore) Holdings Pte Ltd Margaret Hyland Scion Science Advisory Board Cirrus Materials Science Te Herenga Waka-University of Wellington Research Trust of Victoria University of Wellington Wellington UniVentures Karori Sanctuary Trust (trading as Zealandia Te Māra a Tāne) Livia Esterhazy GNS
Director
HortNZ – A Lighter Touch
University Council Director Trustee Director/Shareholder Director Director
The Thrive Collective
Strategic Advice Occasional Consultancy Director
Director Director (until May 2023) Director (until May 2023) Council Member Director (until 28 October 2022) Chair Chair Trustee Trustee Independent Member Director (appointed July 2022) Trustee Director & Shareholder Director & Shareholder Director Director Director/Chair Director Director
Director Director Director Director Director Director Director
Advisor (appointed May 2023) Director Vice-Provost (Research) Chair Deputy Chair Trustee
Director (appointed June 2023) Programme Director (appointed October 2022) Director (appointed July 2022)
Employees’ remuneration The number of employees (not including directors) whose remuneration exceeded $100,000 during the year, stated in brackets of $10,000, was: 2023 100,000 – 109,999 100,000 - 119,999 120,000 - 129,999 130,000 - 139,999 140,000 - 149,999 150,000 - 159,999 160,000 - 169,999 170,000 - 179,999 180,000 - 189,999 190,000 - 199,999 $200,000 - $209,999 $210,000 - $219,999 $220,000 - $229,999 $230,000 - $239,999 $250,000 - $259,999 $270,000 - $279,999 $320,000 - $329,999 $340,000 - $349,999 $360,000 - $369,999 $390,000 - $399,999 $700,000 - $700,999
71 65 60 54 34 29 12 11 9 7 14 5 5 2 1 2 1 1 2 1 1
The remuneration reflected in the above table comprises base salary only. This excludes payments in respect of superannuation or in respect of the cessation of employment of employees. In 2023, the Group made payments of $179k for compensation or other benefits in respect of the cessation of employment of employees (2022: $191k).
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Executive Remuneration Remuneration Components The Group’s Executive Team (ET), including the Chief Executive, receive fixed remuneration only. This consists of base salary and benefits, including KiwiSaver and insurance. Chief Executive’s remuneration The Chief Executive’s remuneration package that applied for 2023, together with the comparative information for the prior year, is as follows: in New Zealand dollars Base salary Benefits* Total Remuneration
2023 681,081 63,083 744,164
2022 658,714 56,692 715,406
* Benefits include KiwiSaver, insurance and vehicle fuel expenses.
STATEMENT OF RESPONSIBILITY The following statement is made in accordance with section 155 of the Crown Entities Act 2004. 1.
The Board of the Company is responsible for the preparation of these financial statements and the judgements used therein.
2.
The Board of the Company is responsible for establishing and maintaining a system of internal controls designed to provide reasonable assurance as to the integrity and reliability of financial reporting.
3.
In the opinion of the Board, these financial statements reflect a true and fair view of the financial position and operations of the Group for the year ended 30 June 2023.
The Chief Executive is a member of KiwiSaver. As a member of this scheme, all Group staff, including the Chief Executive, are eligible to contribute and receive a matching company contribution up to a maximum of 5% of gross taxable earnings. In 2023, the Group’s contribution was $35,194 (2022: $32,936). A summary of the Chief Executive’s total remuneration during the past five years is as follows:
2023 2022 2021 2020 2019
Total remuneration 744,164 715,406 718,670 714,996 706,512
Barry Harris
Chairman
Janice Fredric
Audit Committee Chair
30 August 2023
Executive Team remuneration In addition to the Chief Executive, NIWA’s Executive Team consists of eight members. The remuneration package for all Executive Team members combined (excluding the Chief Executive) that applied for 2023, together with the comparative information for the prior year, is as follows: in New Zealand dollars Base salary Benefits* Total Remuneration
2023 2,563,112 203,305 2,766,417
2022 2,347,497 186,475 2,533,972
* Benefits include employer contributions to superannuation schemes (KiwiSaver or legacy government superannuation schemes, as applicable), insurance and wellness allowances. Donations Donations of $2,000 were made during the year (2022: $1,000).
NIWA Annual Report 2022/23
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DIRECTORY DIRECTORS Barry Harris, Chairman Nicholas Main, Deputy Chairman (until 31 May 2023) Dr Tracey Batten Livia Esterhazy (from 1 June 2023) Janice Fredric Prof. Margaret Hyland Mary-Anne Macleod Dean Moana EXECUTIVE TEAM John Morgan, Chief Executive Dr Rob Murdoch, Deputy Chief Executive and General Manager, Science Geoff Baird, General Manager, Communications & Marketing Patrick Baker, Chief Financial Officer Dr Mary-Anne Dehar, General Manager, People & Capability Warrick Johnston, General Manager, Technology & Innovation Dr Helen Neil, General Manager, Operations Marino Tahi, General Manager, Māori & Pacific Partnerships Dr Alex Thompson, General Manager, Research Strategy REGISTERED OFFICE AND ADDRESS FOR SERVICE 41 Market Place Auckland Central 1010 New Zealand AUDITOR Troy Florence with the assistance of PricewaterhouseCoopers on behalf of the Auditor-General BANKERS ANZ Bank New Zealand Ltd ASB Bank Ltd Westpac New Zealand Ltd SOLICITORS Meredith Connell Atkins Holm Majurey INSURANCE BROKER Marsh Ltd HEAD OFFICE 41 Market Place Auckland Central 1010 Private Bag 99 940 Newmarket 1149, Auckland New Zealand Tel +64 9 375 2050 Fax +64 9 375 2051 WEBSITE AND SOCIAL MEDIA www.niwa.co.nz weather.niwa.co.nz facebook.com/nzniwa twitter.com/niwa_nz twitter.com/niwaweather instagram.com/niwa_science linkedin.com/company/niwa youtube.com/nzniwa
NIWA Annual Report 2022/23
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