2013 Annual Report
Chief Executive's Report
Well-trimmed, focused and on course
I'm no Olympic sailor, but I've spent enough time on the water to know that a well-trimmed yacht will be better balanced, easier to handle, sail a course more successfully and be, quite frankly, more exciting to run. It is the same for business. You need to be agile and able to respond to the environment around you quickly and strategically, but you also need to be streamlined and focused on the goal ahead.
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In our 21st year of business, NIWA has had these thoughts very much front of mind. We remain focused on two primary goals – growing revenue opportunities by working closely with our main sector customers, and managing our resources prudently. We have continued to change our structure and operations to ensure we maintain the appropriate capabilities and assets to meet the demands for our research and applied science services, whilst reducing costs and waste. We have made some changes at our Lauder site, in Central Otago, so that it is better aligned with our broader atmospheric science and research priorities, and we have centralised our aquaculture research at our Bream Bay Aquaculture Park in Northland. These have not been easy, nor always popular, decisions, but we are confident our science capabilities and capacity are now better placed to meet New Zealand's key environmental research and applied science needs.
We have also continued to make important investments in new technology and equipment to support our science staff. Key investments this year have included $1 million to add extra processing power to our high-performance computing facility, and upgrading our isotope ratio mass spectrometer, which supports research projects across NIWA, such as tracking the origins of sediments and pollutants in coastal environments or determining the effects of aquaculture on marine organisms.
Our 21st year has been a positive one. We met all financial targets and retired all debt. Our final results show revenue of $120.8 million (2011/12: $121.4 million), with earnings before interest, tax, and depreciation (EBITDA) of $18.7 million ($18.9 million) and profit after tax of $4.6 million ($5.5 million). On the strength of our financial performance, we are able to return a dividend to the Government this year of $2 million.
New Zealand's future challenges answered by science
The 10 National Science Challenges announced in May set a clear course for New Zealand science and innovation research and funding in the coming years – the goal being to build a more productive and competitive economy. As Minister Joyce noted in his announcement of the Challenges, "we have a small and reasonably fragmented science system". The 10 Challenges touch on almost all areas of NIWA's work and we are very pleased to have been involved in the initial workshops to help turn those Challenges into collaborative research programmes. Aligning and focusing New Zealand's research through the Challenges will help the Government get better value from its $1.3 billion investment in science and innovation, and we look forward to working collaboratively to achieve this.
The Challenges emphasise the issues at the forefront of New Zealanders' minds – protecting and managing our unique biodiversity, enhancing agriculture while conserving land and water quality, sustainably realising our vast marine resources, exploring Antarctica's role in New Zealand's climate and environment and strengthening New Zealanders' resilience to natural disasters, for example. These are issues – and opportunities – that NIWA has at its core, as New Zealand's leading provider of environmental research and applied science services. By working closely with our stakeholders – sector groups, central government, iwi, and individuals – our science is helping drive our economy forward. Our goal remains to enhance the benefits of our nation's vast natural resources, in a sustainable manner.
Building resilience to nature's challenges
New Zealanders do not need reminding that we remain at the peril of Mother Nature. The December Hobsonville tornado claimed three lives and the Wellington storm in June was one of the worst on record. Preliminary findings released by the Insurance Council estimate the cost of the storm at $33 million. How prepared we are for future natural hazard events depends heavily on NIWA's research, in collaboration with our Natural Hazards Platform partners. When the Hobsonville tornado hit, our people, along with colleagues from the University of Auckland, were on the ground within hours, gathering information about damaged buildings and property. This information was then fed into NIWA's RiskScape model to help assess future risks and how New Zealanders can be better prepared for them. Other natural hazards work this year has included surveying the Kaikoura Canyon to provide new insights into the tsunami risk from undersea landslides, and helping our Pacific Island neighbours better prepare for tsunami risk in their part of the world (see page 28 of the report).
For many years, the public assumed that we forecast the weather. In a sense they were right, but our work was behind the scenes. However, this year, in response to the increasing demand for accurate forecasting services, we have refined our forecasting capabilities to develop and launch public products tailored to the specific needs of different users. The first was 'NIWA forecast' – a web-based subscription service, launched at National Fieldays in June, to help New Zealand farmers and growers decide when to carry out weather-dependent operations such as fertilising, spraying and harvesting. The service also helps farmers and growers weigh up risk and make preventative decisions like when to move stock and machinery, irrigate, or protect against frost, snow, heavy rain or high winds. A similar NIWA product is being used by the National Rural Fire Authority to ensure forest owners, rural land management agencies and the public have earlier and better warnings about rural fire dangers, especially in summer (see page 27 of the report). This year we also launched a new, free, public weather website, NIWA Weather, which provides six-day forecasts for New Zealand urban centres using simple data and striking graphics.
The 2012/13 summer may have delivered ideal weather for those enjoying a range of outdoor activities, but it also delivered one of the most severe and widespread droughts in recent decades, highlighting just how vulnerable our economy can be to a changing climate. The financial impacts of the drought are still being quantified and will likely continue for several seasons, but initial figures from the Ministry for Primary Industries (MPI) show a decline in overall primary sector export revenues for the year to June 2013 of $1.3 billion. Throughout the drought, our climate scientists delivered regular situation briefings to the National Adverse Events Committee and regional councils, and MPI's website linked to NIWA's comprehensive online drought reports and maps showing the latest rainfall, river flow and soil moisture situations. NIWA also fielded hundreds of media enquiries about the drought, emphasising the profound impact the severe weather conditions were having on lives and livelihoods in both rural and urban areas (see page 29 of the report).
Understanding the Deep South and its role in our future climate
During the next 30 years, discernible effects on New Zealand's multi-billion-dollar primary sector are likely to arise from climate change. Increasing temperatures and atmospheric carbon dioxide concentrations, and changing rainfall patterns, will have both positive and negative impacts on primary production. NIWA is helping New Zealanders understand those impacts and helping producers adapt and build resilience into their lives and businesses (see page 31). One of the strongest influences on our future environment and climate is the Southern Ocean and Antarctica. This year, our deepwater research vessel Tangaroa completed its 10th trip to the ice, in a collaborative 42-day voyage with French and Australian scientists, to study the impact on the environment caused by the 2010 calving of the Mertz Glacier tongue, and to retrieve data being collected by instruments moored to the seafloor in the Mertz Polynya (see page 41 of the report).
Making more of our vast marine resources in a sustainable way
Investigating how New Zealand can make the most of its vast marine resources, in a sustainable way, is a core part of NIWA's work. This year, Tangaroa undertook an extensive seabed survey off the Otago coast, a potentially rich region for oil and gas exploration, as part of the Ocean Survey 20/20 project led by Land Information New Zealand. Investment in surveys like this helps encourage uptake of exploration permits by the petroleum industry, but also provides data to support future environmental impact and engineering risk evaluations (see page 21 of the report). In collaboration with the fisheries sector and MPI, NIWA also carried out research to assess the stock status of 12 commercially valuable species this year – including hoki, ling, hake, southern blue whiting, snapper, paua, oysters and toothfish – as well as continuing to monitor more than 40 other species (see page 19 of the report).
Ensuring water quality and quantity for future generations
The multi-billion-dollar primary sector is the cornerstone of New Zealand's economy – and its continued development is essential to our future prosperity. But impacts on the quality and quantity of our freshwater will determine whether such development is viable. In March, Environment Minister Amy Adams announced the first stage of an action plan to improve water quality and the way freshwater is managed. NIWA scientists are working on a range of projects to inform water quality and allocation issues – such as helping to restore the health of our lakes and coastal lagoons (see page 35 of the report), eradicating aquatic pest plants from our waterways (see page 37 of the report) and developing new tools for farmers to make smarter irrigation decisions. Our freshwater work also includes projects to manage New Zealand's unique biodiversity (see page 36 of the report) and protect the environment from biosecurity risks.
Transferring our knowledge to New Zealanders
The public's interest and involvement in setting the National Science Challenges reminded us all that, in order for science investment to provide maximum benefit to New Zealand, our research must be delivered in a way that encourages its uptake and application. NIWA continues to emphasise knowledge transfer as one of our key objectives – through public presentations to community and business groups, sponsorship of major science conferences, social media, and our website and mainstream media activities. This year alone, our work generated more than 6000 media stories and nearly 700,000 unique visitors to our website.
As part of NIWA's outreach to young potential scientists and leaders, NIWA is collaborating with the Sir Peter Blake Trust to provide young people with the opportunity to join a NIWA voyage on Tangaroa each year, and we are also sponsors of nine school science and technology fairs. Visits by Science and Innovation Minister Steven Joyce and Energy and Resources Minister Simon Bridges, as well as members of the Education and Select Committee, also gave us the opportunity to demonstrate first-hand how the Government's significant investment in our work is being applied. For more on our outreach initiatives see page 53 of the report.
Ensuring excellence in all areas of our business
NIWA has a long-held reputation for high-quality science. That reputation is founded on the profound expertise of our people. We are committed to ensuring excellence in all areas of our work. With that in mind, last year we celebrated our inaugural NIWA Excellence Awards, recognising the achievements of staff who have made an exceptional contribution to NIWA. As it was last year, it was incredibly difficult to select just 12 staff to receive these awards in 2012/13, but we are delighted to present those winners to you in this Annual Report (see page 56 of the report, and here). We acknowledge, in particular, the significant achievements of Dr Michelle Kelly, who was awarded a Doctor of Science degree by the University of Auckland for her outstanding contribution to the taxonomy and systematics of sponges, and Principal Technician Tony Bromley, who celebrated 50 years of work with NIWA and our predecessor organisations in June. Tony's contribution to meteorological and air quality investigations has been hugely valuable, as has his work in atmospheric sampling and analysis.
As part of our ongoing recognition of the importance of health and safety in the workplace, and our focus on continuous improvement, we have reviewed our policies and processes to ensure the health and safety of staff remains paramount. This is especially important given the often challenging environments we work in. Initiatives this year include the appointment of a new National Health and Safety Manager and a new Health and Safety Advisor for our vessels team. Health and safety is also one of the six refreshed NIWA values launched at our Leaders' Forum in September (see page 54 of the report).
My role as Chief Executive, and that of the wider Executive Team, is to ensure that we respond to the changing demands of our customers and stakeholders, work with the Board to develop a compelling strategy and act appropriately in the economic environment we face, in order to ensure NIWA's ongoing success.
With the changes and investments we have made in recent years, and with improved agility, we have set ourselves up well for the years ahead. We have continued to build on our internationally recognised science capability, improved our customer service levels and interaction, and are starting to see a small revival in growth of demand for our services.
Our financial performance for the year to 30 June 2013 has been robust, and it is pleasing to be able to resume paying a dividend to the Government as a result.
I am very proud of the NIWA team and thank them for the commitment they have shown to the company this year. Through hard work and prudent management, we continue to build on our successes and achieve strong financial outcomes. I also want to thank the NIWA Board and the rest of the Executive Team for their ongoing support and leadership.
Our purpose is to drive New Zealand's economic and environmental prosperity forward as the country's leading natural resources and environmental science services provider. I am confident NIWA will continue to fulfil that role in the year ahead. It's not just the winds and the currents driving us forward, the vessel is in good shape too. I invite you to take a look at some of our highlights from 2012–13 over the following pages.