Investment Notes

Investment Notes

Demo context: This template was applied to a historical public-sector meeting. It does not represent a real client-advisor relationship and is not current financial or investment advice. Relative dates refer to the period represented by the recording.

Participants and roles:

• Chair: Mike [surname not provided]
• Tourism presenter: Jason [surname not provided]
• Council and sector participants: Andrew Graham; Lou [surname not provided]; Ken [surname not provided]; Susan [surname not provided]; Bruce [surname not provided]; Sam [surname not provided]; Clare/Claire [surname not provided]; Liz [surname not provided]; Marcus [surname not provided]; Kelvin [surname not provided]; Barry Harris (Board Chair, referenced); Gary Diack (Hamilton City liaison, referenced); Mark Morgan (Chief Executive, Hamilton Airport); Scott Kendall (Finance Manager, Hamilton Airport); Peter (Chair, LASS); Andrew (LGFA); Ms. Nada [surname not provided]; Mr. Steve Shaw; Ms. Bev [surname not provided]; Mr. Roger [surname not provided]; Mr. Philip [surname not provided]; Mr. Elwin [surname not provided]; Chair [name not provided]
• Apologies: Hazel; partial absence for Jim (left at 13:30 for a “future proof” meeting)

Purpose and context:

This session consolidated updates from Jason on tourism sector impacts in the Waipā and greater Waikato region, operational briefings from Hamilton Airport (Mark Morgan and Scott Kendall), and financing presentations from LASS and LGFA. The focus was to assess COVID-19 impacts on the broader visitor economy, implications for sector and council strategies, and financing options relevant to council and regional initiatives. Minutes from 18 February were accepted subject to corrections for attendance (Andrew Graham and Bruce), to be updated by Sam.

Sector profile and financial planning implications:

Jason outlined the sharp decline in international arrivals to New Zealand post-COVID, triggering substantial reductions in visitor expenditure across Waipā, with card transaction data showing notable drops except for relatively resilient categories (food, liquor, pharmacies). Prior to December 31, 2019, the district experienced double-digit growth in visitor spend and commercial accommodation nights. The early loss of China group travel—previously the fourth-largest international market—hit hotels, motels, and Airbnbs first, cascading through retail, hospitality, transport, events, and major venues (Mystery Creek, Avantidrome, Lake Karapiro), resulting in job losses and closures (including Hobbiton’s publicized closure). Jason emphasized a pivot to domestic tourism for the next 6–12 months, leveraging self-drive segments, motorhome/caravan demand, and proximity markets within a three-hour drive of Waikato. Infrastructure improvements (Waikato Expressway extensions) support this recovery.

From a planning perspective, the sector’s multi-year recovery outlook (international connectivity recovering in 2–5 years; domestic ramp within 6–12 months) implies a phased approach to liquidity management, workforce redeployment, and organizational resilience. The 12-week wage subsidy was helpful; lobbying sought an extension to 20 weeks to mitigate cash-flow gaps. Repurposing examples included caterers supporting food banks and transport operators focusing on essential services, indicating tactical redeployment while preserving core capabilities. For event and conference recovery, delayed openings of major convention centers in other cities created near-term share opportunities for Claudelands and Mystery Creek, contingent on alert-level constraints and attendance caps.

Operational and financing insights affecting planning:

Hamilton Airport reported a 97–98% loss in aeronautical revenue following late-March flight suspensions, terminal closure, and emergency-only operations, with general aviation and flight school activity reduced. The onsite hotel, upgraded recently (~NZD 4 million), served as an isolation backup in April (payments ending now) and expects challenging trading conditions, particularly given its reliance on conferencing. Property tenancies remain a key cash flow stabilizer, aided by early tenant cooperation. Cost reductions (operating and payroll up to 20%), director fee cuts, wage subsidies, and staged hotel restructuring (Jet Park) were implemented, with a follow-up meeting scheduled this week.

Financial strategy and modeling from the airport indicates conservative forecasting through June next year: minimal Air New Zealand activity until October, then approximately 40% passenger recovery through 2021–2022 before positive EBITDA; minimal hotel activity for the remainder of the calendar year. Property program is central: an unconditional major land sale and letter of credit will fund road construction and deliver ~NZD 2.5 million margin/free cash flow early next year; additional Central Precinct opportunities may add cash. Debt facilities are expanding to ~NZD 30 million (BNZ supportive), with overdraft covering interim cash burn until land settlements. Crown infrastructure submissions include shovel-ready terminal redevelopment (~NZD 15 million; tenders received, consent lodged) and an amalgamated infrastructure package (~NZD 11 million) covering roading/wastewater/lateral assets; execution depends on funding structure (grant vs loan). Aeronautical capex remains low for 12–18 months after recent upgrades (~NZD 1 million), aiding liquidity. L3 Harris flight school may resume limited Level 3 operations for advanced trainees; Level 1 may still face constraints due to cockpit proximity and cross-border logistics; global airline contraction is a headwind for training volumes. Prior interim results were strong and on track for a record year per the SOI, now superseded by COVID realities; EBITDA will recover with land sale contributions 6–18 months out, with net profit impacted by depreciation. Property value compression may affect equity, but land sales are surplus to aeronautical needs and do not compromise core operations. Governance noted diversification decisions under former chair John Spencer and current leadership have added resilience, with no anticipated need for additional shareholder funding under current modeling.

LGFA and LASS presentations:

Peter (Chair, LASS) described a vision for more effective, efficient regional collaboration, emphasizing bold, disruptive projects over the next 18 months, relevant to post-COVID recovery priorities (public works delivery, spending restraint, staff development). Councillor Claire raised resource constraints; LASS had engaged councils to identify staff who could be allocated to LASS projects with positive responses. Andrew (LGFA) confirmed stable, low-cost long-term financing access: short-term rates below 1% and six-year money around 1.7%, supported by government and Reserve Bank bond purchases. He noted the likelihood of covenant pressure in 2021 but recognized Waipā’s relatively low debt profile. Andrew also confirmed LGFA’s readiness for green, social, and sustainable financing, with adoption at council discretion for qualifying projects. Claire encouraged proactive market communications. Operational finance highlights: as of end-March, income at 74% of forecast; opex at 72%; vested assets at $11.8m (94%); development and reserve contributions at $4.4m; subsidies and grants at 47%; capex at $71.3m (51%); a March 12 arbitrage utilized $6m short-term fixed borrowing maturing in June, targeting ~$13,000 net interest; rates for the year set at $62.1m; outstanding prior years at $62k versus $464k currently YTD; reforecasting was underway due to COVID impacts. Health and safety oversight (Steve Shaw, Bev) addressed incident monitoring, lead indicators, occupational-health monitoring, EAP, and training. Councillor Gordon raised COVID-related staff wellbeing; level-three operational planning and protocols were being finalized. The Chair commended CEO Gary’s visible commitment to health and safety.

Recommendations and proposed adjustments:

• Prioritize domestic tourism pivot for the next 6–12 months; leverage self-drive, motorhome/caravan segments, and proximity markets within a three-hour drive of Waikato.
• Implement “hibernation” strategies to preserve business continuity and workforce attachment; prepare phased reopening plans under alert level changes, with compliance to health guidelines.
• Engage major venues (Mystery Creek, Avantidrome, Lake Karapiro) for staged event resumption and financial viability under attendance limits; ready business events restart campaign to capture share while major convention centers are delayed.
• Monitor airline connectivity and repatriation/cargo routes; coordinate with Air New Zealand for phased service restoration and aligned marketing/comms.
• Maintain conservative cash management across affected assets: reduce expenses, optimize payroll, advance land sale settlements, and ensure liquidity through expanded facilities (~NZD 30 million) and overdraft until cash inflows.
• Utilize LGFA’s low-cost financing environment and explore green/social/sustainable certification for qualifying projects to broaden market access and signal readiness; proactively communicate LGFA green framework status to stakeholders.
• Continue Mighty Local campaign and buy-local activation; coordinate with Motorhome and Caravan Association and AA Traveler to stimulate self-drive visitation.
• Proceed with shovel-ready terminal redevelopment and broader airport infrastructure package contingent on Crown funding terms; prepare enabling works to commence within one month of approval.
• Maintain health and safety program cadence, finalize Level 3 operational protocols, and continue wellbeing monitoring.

Compliance-relevant notes:

• New strategic emphasis on domestic tourism and phased recovery timelines: domestic ramp 6–12 months, international connectivity 2–5 years; acknowledge sector-wide permanent closures and impacts on vulnerable communities.
• Wage subsidy utilization and lobbying for extension to 20 weeks; documentation of workforce redeployment and hibernation strategies.
• Financial modeling changes for Hamilton Airport: 97–98% aeronautical revenue loss, minimal hotel trading near term, property-led cash flow strategy (~NZD 2.5 million margin/free cash flow from unconditional land sale early next year), expanded debt facilities (~NZD 30 million), conservative recovery to positive EBITDA post-2021/2022.
• Crown infrastructure submissions: terminal redevelopment (~NZD 15 million) and airport infrastructure (~NZD 11 million); dependence on grant/loan funding and conditions.
• LGFA financing environment: short-term rates below 1%, six-year around 1.7%; readiness for green/social/sustainable financing with certification; council discretion for adoption.
• Financial operations: March 12 arbitrage ($6m, June maturity, ~$13k net interest); reforecasting triggered due to COVID impacts; updated forecasts to appear in next report.
• Health and safety: documented training budget (~$27k), protocols, and entranceway monitoring; CEO commitment noted.

Action items:

• Sam to correct the 18 February minutes to include Andrew Graham and Bruce’s attendance and circulate the amended version.
• Finance team to compile a brief sector-impact note for internal planning on Waipā tourism trends, alert-level-three hospitality adjustments, and implications for organizations exposed to tourism, retail, and events.
• Schedule follow-ups with venue operators (Mystery Creek, Avantidrome, Lake Karapiro) to assess reopening plans, attendance limits, and financial needs; finalize business events restart campaign planning.
• Develop a checklist for tourism-exposed organizations on hibernation practices, liquidity management, staffing contingencies, and compliance with health guidelines under phased reopening.
• Track weekly card-transaction data and airline-connectivity updates to inform scenario and planning adjustments; coordinate with Air New Zealand on service-restoration scenarios.
• Engage Motorhome and Caravan Association and AA Traveler to drive self-drive visitation; align marketing to proximity markets.
• Hamilton Airport (Mark Morgan, Scott Kendall): finalize and present revised three-year SOI to shareholding councils in May, reflecting the 15-month conservative forecast and updated priorities; prepare for terminal redevelopment mobilization pending Crown funding decisions; continue tenant engagement and manage debt facilities expansion to ~NZD 30 million.
• Hamilton Airport and Jet Park: conduct stage-two restructuring meeting this week; confirm staffing plan, subsidy utilization, and forward hotel operating strategy.
• LGFA: prepare and issue an update on green, social, and sustainable financing framework status and readiness; coordinate an in-depth briefing session for council teams on certification and issuance mechanics.
• Finance team (Ms. Nada, Mr. Ken): finalize COVID-adjusted reforecast and present revised forecast columns in the next financial report; continue monitoring favorable LGFA borrowing rates for future financing needs.
• Health and safety team (Mr. Steve Shaw, Ms. Bev): circulate finalized Level 3 operational protocols and wellbeing monitoring measures; continue entranceway monitoring and training cadence.