It’s been a year of getting our hands in the dirt, of mucking in and tending to our crops.

It’s no secret that it’s been a tough year for Aotearoa and beyond, both economically and climatically, which has impacted on people and whenua. As responsible portfolio managers, our role is to be connected to each industry, with an awareness of the social and environmental conditions, so we can respond with strategic conviction, whilst still nurturing the seedlings through adverse weather.

Each year, the Quayside Investment team develops a dynamic investment strategy for each asset class that can accommodate short, mid and long-term needs, flexing as required. This encompasses the deployment of capital into various assets through due diligence and actively managing each asset against our planned strategy.

This year’s events have had an impact on our approach and our portfolio too. From a macro sense, we’ve seen a tightening of the economy, in alignment with central bank monetary policy to address the issue of inflation. This has begun working its way through our portfolio, impacting in industry-specific ways, with some assets feeling the pinch through inflated operating costs and high costs of financing putting pressure on profitability. These impacts on the portfolio have largely been systemic in nature and have been managed to a large extent through diversification across the portfolio.

With diversification across asset class, industry, sector and geography, we continue to play our part by providing support to the segment of our portfolio that has been vulnerable to more specific risks. Further examples of cross-portfolio asset management are shared in the following pages.

Quayside has attempted to position itself to take advantage of the opportunities that we are seeing arise. We are strategically thinking about how we can maximise the potential of our assets, through capital injection, structure changes, mergers and smart acquisitions.

We continue to leverage our two key endowments; a broad investment mandate and a long time horizon, allowing us to take an intergenerational view of managing our investment assets.

You get to take your chances, by being prepared for them.
Brendon Barnes, CIO

MUCK’N IN
A snapshot of this year’s activities across a slice of our portfolio.

Hop Revolution
Working with a wide variety of stakeholders, Quayside facilitated a merger between a horticultural operation and a marketing company to create a vertically integrated agribusiness selling ingredients to the global brewing industry. The purpose of this merger was to create a more sustainable and economic organisational structure. Despite short term challenges in this sector, Quayside see long-term value in the industry, noting it was important to change the operating structure to position the business for long-term growth.
Investment in this Nelson operation also increased our regional diversification of natural resources.

GoodBuzz
Active management of this asset, in collaboration with the Goodbuzz Board led to Quayside undertaking a strategy to grow margins to ensure the sustainable profitability of this business in potentially tough operating conditions. Operationally, this strategy was delivered via restructuring and implementation of a capex program to house its own bottling line, which has significantly benefited margins whilst the business continues to see top-line sales growth.

Lakes Commercial Development
During the year, Quayside took advantage of the requirement for short-term liquidity by our Joint Venture (JV) partner, successfully purchasing an additional 24.9% share in this business. This purchase also unlocked significant operating synergies around governance, management and tax that have provided important economic benefits back to the Quayside portfolio. The relationship with our former JV partner remains very strong and we are jointly investigating potential partnerships for the future.

Mystery Valley
December 2022 saw the divestment of Bay of Plenty-located asset, Mystery Valley. The timely sale allowed capital to be reinvested into South Island-located natural resource assets in the forestry and horticulture sectors work with management to support growth on the business.

TRG Natural Pharmaceuticals
The TRG skincare range was launched into the Canadian market with partner Taro Pharmaceuticals, with several other potential licensing deals in the pipeline.

Techion
Techion continues to advance its transformational imaging and diagnostic technology with several potential partnership opportunities under discussion.

Trade Window
During the year QHL supported its investee company Trade Window by participating in capital raises to continue to fund growth. Despite significant sector headwinds to NZ tech companies QHL continues to work with management to support growth on the business.

Quayside manages a diversified investment portfolio with a gross rolling Internal Rate of Return (IRR) for the last five years of 8.65% as of 30 June 2023.

This is an excerpt from the Quayside Annual Report 2023. Access the full report here.