Annual Report 2013 Contents
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ANNUAL REPORT 2013 CONTENTS 2 Eastland Group annual Report 2013 Eastland Group annual Report 2013 3 HIGHLIGHTS TOTAL INCOME OVER 2 MILLION $ TONNES 72.3M RECORD-BREAKING UP FROM $61.0M IN 2012 EXPORT VOLUME NET PROFIT OUT OF EASTLAND PORT $12.8M 133,113 TOTAL PASSENGER MOVEMENTS UP FROM $5.3M IN 2012 THROUGH GISBORNE AIRPORT DIVIDEND PAID OUT TO ECT 306.2 GWHRS $ TOTAL ANNUAL ENERGY 4.6M DISTRIBUTED BY THE NETWORK UP FROM $4.4M IN 2012 NETWORK AND GENERATION ACCREDITATION GAINED TOTAL SPENT ON LOCAL FOR THE PUBLIC SAFETY GOODS & SERVICES MANAGEMENT SYSTEM AND EASTLAND GROUP STAFF WAGES, APPROXIMATELY NETWORK ACHIEVED $ REGULATED 25.0M PERFORMANCE TARGETS 4 Eastland Group annual Report 2013 Eastland Group annual Report 2013 5 FINANCIAL COMPARISON THE YEAR IN REVIEW 2012/2013 Financial Metrics 1992/1993 2002/2003 2012/2013 performance in a nutshell Report from Chairman and Group Chief Executive Staff 120 18 100 • Income up 18.5% to $72.3m Income $25.4m $22.6m $72.3m from 2012 Profit $1.5m $2.8m $12.8m • NPAT up 141.5% to $12.8m Shareholder Dividend - $250,000 $4.6m from 2012 Assets $28.2m $106.2m $366.1m “ The record net profit of • Operating Profit (EBIT) up Equity $21.0m $48.9m $181.0m 38% to $29.0m from 2012 Bank debt as % of Assets 14.2% 29.0% 25.4% $12.8M underscores how • Assets up 3.5% to $366.1m from 2012 Since 2002-2003 we’ve grown from a Many of the company’s businesses are successful the company’S • Equity up 10% to $181.0m single electricity network business, with monopolies, or have strong monopoly from 2012 an operating profit (EBIT) of $7.5m, to a characteristics, and as such our strategy has been” mixed portfolio of businesses including customers don’t have the luxury of choice • Investment into local economy the three strong performers of logistics or a competitive market for the services (goods, services, wages) (port and airport), an electricity network, they procure from Eastland Group. approximately $25m and energy generation, so that in In all these businesses there is a price/ 2012-2013 we returned an operating • Bank Debt $93.0m quality trade-off. We can increase or profit of $29.0m. (25% of assets) improve the quality of service but this • Interest paid on shareholder Total dividends paid out to our comes at a cost. As such we work capital notes of $2.6m shareholder over the past 10 years, extensively with our customers, on a one “ $7.2M has been paid to our for injection back into community to one or one to few basis, to understand • Return on Equity 7.1%, organisations and initiatives, totals their needs and to deliver fit-for-purpose shareholder, the eastland up from 3.2% in 2012 $38.7m. Equity growth in this time has infrastructure that finds the balance • Total dividend and interest grown by $132.1m meaning the $48.9m between price and quality of service and paid to shareholders $7.2m initial investment in 2003 has been also meets the needs of our shareholder community trust, in interest rewarded with $170.8m of additional for an appropriate return. shareholder value. and dividends” We strive to get the balance about right, and while many of our customers don’t Health and safety have choice, our hope is that if they did Customers and fit for purpose they would choose us. Health and safety is Eastland Group’s infrastructure number one priority and across the company we are focused on managing Eastland Group is primarily a business- From the top Eastland Port handled more than two million tonnes, highlighting hazards, building understanding of the to-business company, albeit one with a Operating profit significant growth since the 382,000 tonnes that were handled The 2013 financial year was an important one for Eastland Group, environments we work in and making strong customer focus. Our customer in 2006. Gisborne Airport successfully negotiated an increase in We define operating profit to be earnings with it being ten years since the strategy of owning, managing them safer. numbers, where we have a billing landing fees, required to underwrite future investment. before interest and tax (EBIT). The port, and growing a diversified set of businesses based around a relationship, are relatively small which There are many examples of how this network and generation businesses common set of shared services, operating in a provincial setting, Part of the company’s success has been narrowing the focus of means we are able to maintain meaningful is being progressed. Random drug and contributed the bulk of the company’s EBIT. was set in motion. The concept was a relatively simple one; use its activities around asset intensive infrastructure and that means on-going relationships with regular alcohol testing was introduced during the collective size of a number of smaller regional businesses as divesting investments that sit outside of the core and as a result communication and consultation. The operating profit for these parts of the the year and is in effect right across the a basis to recruit and retain great people who in turn can help the two aviation businesses were sold, with the resulting capital business are shown graphically below. company at all levels. The company the company meet its strategic aspirations for strong sustainable proceeds being directed to the company’s other development became a member of the Business commercial growth. projects. There was a loss on sale and this contributed to a loss Leaders’ Health and Safety Forum and from discontinued operations of $691,000. Ten years are also an adequate period to reflect back and to their ZeroHarm Workplace vision and the THREE GREAT BUSINESSES Overall, while the company is not making super-profits, it is assess whether the strategy has been a success, and on the energy sector achieved accreditation for OPERATING PROFIT back of Eastland Group’s strongest ever financial result the making strong and appropriate returns from our investments. the public safety management system. MILLIONS answer is unequivocally yes. Investing heavily in local infrastructure, while continuing Health and Safety is a specific item on to provide growth and an ever-increasing dividend for every board agenda and is discussed 30 The company delivered a record post tax profit of $12.8m, our shareholder. at each meeting in some detail. What well ahead of the previous year and also the $8.0m result we do know is that Health and Safety – 25 delivered in 2010-2011. Eastland Group has continued to look for investment outside regardless of progress and how good of the region as part of its desire to continue to grow as well as the company becomes – is a journey that It is also twenty years since Eastland Energy (now Eastland having geographic and sector diversification, at this point of time 20 never ends and in that respect we must Network) was established from Poverty Bay Electric Power 89% of its investment is inside the Wairoa and Gisborne District continue to improve and do better. Board in 1993. Council boundaries. 15 Eastland Group now has three great businesses operating in the 10 infrastructure sectors, a regulated energy distribution business, 10 and 20 years on an international seaport and a domestic airport, as well as an Our aspiration electricity generation business. From 1992-1993 until 1998 Eastland 5 At the highest-level, Eastland Group’s aspiration is simple and Energy operated as a electricity The big contributors were the port, electricity network and audacious; to be one of New Zealand’s great companies. distribution and retail company. In 1998 0 energy generation businesses who collectively represent more Great can mean many things to many people and it doesn’t it was forced to sell off its retail business than 90% of the company’s total investments. This is consistent 2003 2013 mean biggest or even necessarily best, but it captures the and became a pure electricity distribution with the company’s strategy of focusing primarily on the energy feel-good factor that our employees, customers and company and changed its name to and logistics sectors. GENERATION LOGISTICS NETWORK stakeholders hopefully have. Eastland Network. 6 Eastland Group annual Report 2013 Eastland Group annual Report 2013 7 “ Over the next five years we plan to invest APPROXIMATELY 10 YEARS ON 2002 / 2003 2012 / 2013 $110M on infrastructure within Tairawhiti, while pumping MORE THAN $25M A year into the region through purchasing goods and services and paying wages” STAFF 18 100 Assets and equity New investment and Port investment developments Since 2003 we have invested more than Since Eastland Group’s formation into $69m in purchasing and developing a more diversified and growth focused Eastland Group looks for projects and Eastland Port and we are forecast to entity in 2003, the company has grown opportunities that fit with its strategy, and $22.6M invest a further $55m in port and airport its total assets from $106.2m to $366.1m. meets its rigorous investment criteria. INCOME $72.3M related capital projects over the next five More importantly, we have also grown These may be within Tairawhiti or outside years. These projects are likely to include shareholder value. Compound annual the region, and the diversification strategy an outer breakwater reconstruction, a growth in shareholder value (growth has resulted in generation assets that are second log berth, the upper log area’s in equity book value plus dividends) performing well and currently producing redevelopment, harbour deep dredging, is greater than 19% per annum. strong returns. and the purchase of a second port tug.