APPENDIX 2 Final Report from the Directors Chief Executive 2013

Transcription

1 APPENDIX 2 Final Report from the Directors Chief Executive 2013 Page 283 of 374

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3 Report from the Directors and Chief Executive to Shareholders Quayside Holdings Limited is pleased to bring you its Annual Report for the year to 30 June This is the twenty second Annual Report of Quayside Holdings Limited and Group ( Quayside Holdings or Quayside Group ), which dates back to Quayside Holdings is a Council Controlled Organisation, it being a 100% subsidiary of the Bay of Plenty Regional Council. The Group is also proud to have over 4,500 shareholders of non-voting Perpetual Preference Shares. The Quayside Group investments include subsidiaries: Quayside Securities Limited (100%), Quayside Properties Limited (100%), Quayside Unit Trust (100%), Port of Tauranga Limited (54.94%). The Quayside Group exists to act as a responsible commercially focused investor and manager, targeting long term commercial returns, delivering to shareholders growth and income. 30 June June 2012 % Change $000 $000 Port Operations NPAT 77,228 73, % Port Sale of Associate 34, % Quayside Operations 9,407 (7,459) 226.1% Group Profit 121,530 66, % Less Minority Interest (50,514) (33,056) 52.8% Profit Attributable to Quayside 71,016 32, % Group Financial Performance The Group has achieved an excellent result in the twelve months to 30 June 2013, despite on-going domestic and global economic and financial caution and uncertainty. The Group has reported profit increases in all operating divisions for the year, with Group profit up 84.1% to $ million including extraordinary items. Pleasingly, in addition to the on-going success of the Port of Tauranga, the Group has seen positive returns from the recovery globally of share markets and domestically from the kiwifruit sector. Group assets grew by 8.8%, reflecting the asset growth and profitability of the Port of Tauranga, the increase in the value of the Group s investment portfolio and the return to profit of the Group s property assets. The Group met all obligations under its 2012 Statement of Intent as submitted to Bay of Plenty Regional Council. The Group also met all obligations for the period in respect of its Perpetual Preference Shares. Quayside Holdings Limited Annual Report 2013 Page 285 of 374 I

4 Port Performance 30 June June 2012 % Change $000 $000 Operating Income 244, , % Surplus After Tax Underlying 77,228 73, % Surplus After Tax Reported 112,123 73, % Total Assets 1,112,581 1,033, % Net Assets per Share $5.92 $ % NZX Market Share Price $13.85 $ % The Quayside Group retains its cornerstone interest in the Port of Tauranga Limited as a strategic asset. Quayside Securities Limited (as trustee for Quayside Unit Trust) holds 54.94% of the ordinary shares in the NZX listed Port of Tauranga Limited ( Port ). The Port has delivered a record profit for the third successive year, delivering an underlying profit of $77.2 million, an increase of 5.1%. The result capitalises on the success of last year, both in retention of previously won new business and growing income by 7.4% during the period. The Port maintains its position as New Zealand s largest port, with growth in dairy, meat and log exports. The importance of the Port as New Zealand s hub port is demonstrated with container volumes rising 7%, including a 12% rise in transshipped cargo. Capital Expansion The Port continues to develop its strategy to be New Zealand s hub port of choice through a programme of continuing capital expansion. On 4 April 2013, New Zealand Prime Minister John Key joined the Port CEO Mark Cairns and Chairman John Parker at the official opening of the Ports expansion. This included a 170 metre wharf extension at Sulphur Point and the installation of a Super-Post Panamax container lifting crane, the sixth crane of this type on the port s Sulphur Point wharf. The Port was granted consent on 5 March 2013 to dredge the Tauranga harbour to facilitate larger vessels. The consent will permit the Port to widen and deepen the shipping channel from 12.9 metres to 16.0 metres depth at low water. The November 2012 UNISA study into Upper North Island Ports identified that the Port of Tauranga holds over 63% of the current Upper North Island regions on port container and bulk storage land thus providing ample opportunity for the Port to continue its growth. On 12 August 2013 the Port announced the acquisition of 6.8 hectares of land and associated building in Auckland to facilitate expansion of its Auckland operations. The Port also acquired a further two hectares of land adjacent to its current land holdings in Tauranga during the period. II Page 286 of 374 Quayside Holdings Limited Annual Report 2013

5 Acquisitions and Disposals The Port disposed of its 50% interest in on-wharf cargo operator C3 on 28 November The transaction value of $70 million included the repayment of capital notes and gave rise to a gain on sale of $34.895m during the reporting period after accounting for associated transaction costs. Ownership Pleasingly, the New Zealand Government has cited the ownership model of the Port of Tauranga Limited as the benchmark for successful mixed ownership, allowing both public and private investors to benefit from the financial performance of the Port of Tauranga. The acquisition of Quality Marshalling (Mount Maunganui) Limited on 31 January 2013 further expands the Ports marshalling capacity and allow a more vertically integrated exposure to the forestry sector. Quality Marshalling is the second largest log marshalling and scaling company in New Zealand, handling approximately 2.5 million cubic metres of logs per annum at Tauranga and Northport. The share price of the Port of Tauranga rose from $11.03 to $13.85 at year end, a 25.5% increase reflecting the excellent work of the entire Port team including directors management, staff and contractors. The market value of the Quayside investment in the Port of Tauranga at 30 June 2013 was $1,020 million, an increase from $813 million a year earlier. The Port announced on 1 July 2013 the acquisition of the operating assets of Priority Logistics Limited into its 100% subsidiary, Tapper Transport Limited. The Port also announced it had entered into a Strategic Alliance with PrimePort Timaru that will see the Port acquire 50% of the Timaru port and operate terminal operations at Timaru for a period of up to 35 years. The deal is subject to public consultation on behalf of Timaru District Council. The Quayside Group would like to acknowledge the outstanding service to the Group of outgoing Port Chairman Mr John Parker and retiring senior management team members Messrs Graeme Marshall and Tony Reynish each of whom in their respective capacities have made valued contributions to the Port of Tauranga Limited. Quayside Holdings Limited Annual Report 2013 Page 287 of 374 III

6 Investment Performance 30 June June 2012 % Change $000 $000 Investment Assets 70,261 58, % Dividend Income 2,466 2, % Market Gains (Loss) 9,242 (4,346) 312.6% Investment Income 11,708 (1,881) 722.4% Gross Internal Rate of Return 21.57% -2.26% The year to 30 June 2013 represented a period of recovery for global share markets. Most developed markets showed signs of recovery and recovered losses from the previous year. The Quayside Group was no exception in this regard, delivering a gross return of 21.57% for the 12 months to 30 June The Group has continued to benefit from an overweight holding position in New Zealand equities. Investments in Australian and global equities also delivered positive returns. The Group achieved its 2012 Statement of Intent target of an 8.5% return on a rolling three year basis. The investment portfolio of the Group increased from $58.5m to $70.3m through market performance. Asset Allocation - 30 June 2013 NZ Equity NZ Property Australian Equity International Equity Cash IV Page 288 of 374 Quayside Holdings Limited Annual Report 2013

7 Property Performance Source: NZTA The Tauranga Eastern Link showing Quayside investment in the Proposed Rangiuru Business Park. Operating Profit/(Loss) Revaluation Gains/(Loss) Gross Profit/(Loss) 30 June 30 June % Change $000 $ (225) 237.3% (15) (2,663) 99.4% 294 (2,888) 110.2% by grafting all existing gold kiwifruit vines with the new Gold 3 (G3) kiwifruit variety and when accompanied by the right growing environment. Quayside Groups initial grafting of the G3 variety onto existing rootstock has taken well and the Group has received more G3 licences from ZESPRI in 2013.The 2013 harvest of the Group s Green kiwifruit has provided a good return. The property assets of the Group returned to operating profit in 2013 following a successful growing season for Green kiwifruit. The Group also benefited from a levelling out of land values in the region, with land values beginning to show signs of recovery. A bacterial disease, Pseudomonas syringae pv actinidae (Psa) infected Quayside s Gold kiwifruit orchard in 2012 and had a consequential impact on the value and returns from property assets. While Psa continues to be a significant threat to the Bay of Plenty kiwifruit industry, there are signs emerging that this disease can be managed The key property asset of the Group however, is the Rangiuru Business Park, which is currently in an undeveloped state. The business park is situated approximately twenty minutes driving time from the Port of Tauranga along the route of the currently under construction Tauranga Eastern Link motorway. The motorway is targeted for completion in early The Group continues to seek the best opportunity to see the business park developed and contribute to the promotion of economic activity in the Bay of Plenty region. Quayside Holdings Limited Annual Report 2013 Page 289 of 374 V

8 Operational Performance Debt Facilities The Group refinanced the ANZ National Bank $75 million debt with Westpac Banking Corporation. During the period, the Group was able to reduce debt by $4.975 million to a balance of $60 million at 30 June Statement of Intent The Group achieved all of its objectives as set out in its Statement of Intent dated 30 June The Group has submitted its 2013 / 2014 Statement of Intent to the Bay of Plenty Regional Council in accordance with the requirements of the Local Government Act A copy of the current year Statement of Intent is available of the Group website Distributions to Perpetual Preference Shareholders of $10.84 million were paid during the year on Preference Shares. The distributions were fully imputed at a rate of 28%. Looking Forward The Group will continue to manage and foster its interest in the Port sector as New Zealand prepares itself for larger container ships operating through critical hub ports such as the Port of Tauranga. The Quayside Group will continue to look for growth opportunities in the Bay of Plenty Region through investment in new and existing infrastructural and assets in accord with the Groups Statement of Intent. Perpetual Preference Shares The Group has obtained an extension of the current arrangement with a new Private Binding Ruling with the Inland Revenue Department of New Zealand. The new ruling applies for a further three years from 17 September 2013 to 16 September The Groups Perpetual Preference Shares are currently paid a dividend rate of 5.42% per annum, with dividends payable quarterly. The rate is reset every three years. The next reset will occur on 14 March Shareholder Returns Quayside Holdings Limited made gross distributions during the year of $27.5 million. M J Smith Chairman A S Hamilton Chief Executive Officer R B Tait Director Distributions to the Bay of Plenty Regional Council on Ordinary Shares of $16.56 million were paid in accord with the Statement of Intent and Bay of Plenty Regional Council Ten Year Plan. The distributions were fully imputed at a rate of 28%. VI Page 290 of 374 Quayside Holdings Limited Annual Report 2013

9 Corporate Governance Role of the Board The Board of Directors ( the Board ) of Quayside Holdings Limited ( the Company ) is appointed by the Ordinary shareholder, the Bay of Plenty Regional Council. The key roles of the Board are: to monitor and supervise the management of the Company, to ensure that the shareholder s interests are protected, to develop and oversee the Quayside Groups strategic objectives and policy framework. An important objective is to monitor the performance of Port of Tauranga Limited of which it is a 54.94% shareholder. Board Composition The Board must have at least five directors, with a minimum of two being independent. At 30 June 2013 the Board comprised of six members, including three independent. The Bay of Plenty Regional Council, as voting shareholder, adopted a new policy in regard to the appointment and reappointment of directors onto the Board of Quayside Holdings Limited in May Under the new policy, Messrs A J Herbert and J H Mansell retired during the year on 30 September 2012 and 31 October 2012 respectively. Mr R B Tait was appointed to the Board from 1 October Ms P J Thompson was appointed to the Board from 1 November During the period the shareholder also reappointed Mr M J Smith for a further two years and Ms J M Nees for a further three years. Messrs M J Smith, J M Green, and R B Tait are independent directors, while Mses M Macleod, J M Nees and P J Thompson are directors of the Board. Mr M J Smith is the Chairman of the Board. Board Diversity The Board does not have a formal policy on diversity. Appointments to the Board of Quayside are made in accord with the Bay of Plenty Regional Council Policy for the Appointment and Remuneration of Directors to the Boards of Council Subsidiaries. NZDX Listing Rule (j) requires all Issuers to disclose Board gender diversity as at balance date in respect of Directors and Officers. For the purpose of this disclosure, Mr A S Hamilton as Chief Executive is deemed the sole officer of the company. Female Male 30 June June Director Remuneration The Bay of Plenty Regional Council Policy for the Appointment and Remuneration of Directors to the Boards of Council Subsidiaries sets the guidelines for setting the pool for director remuneration. The shareholder has approved a directors pool of $190,000, with an equivalent aggregate sum for remuneration pools for directors divided between subsidiaries Quayside Securities Limited ( QSL ) and Quayside Properties Limited ( QPL ). There has been no change in the pool size since Board and Committees The constitution of the Company sets out the procedures for the election of a Board Chairman, the convening of Board meetings and the establishment of Committees. The Directors of the Company met formally on 8 times during the year, while the Companies Committees met as required. In the period there were 8 formal meetings of the Directors of QSL and 8 formal meetings of the Directors of QPL. The twenty first Annual Report of the Quayside Group and the audited financial statements for the period ended 30 June 2012 together with an unqualified Audit Certificate were presented to the voting shareholder on 27 September The twenty second Annual Report incorporating the audited statements for the year ended 30 June 2013 are presented with this report. Quayside Holdings Limited Annual Report 2013 Page 291 of 374 VII

10 The following table outlines the number of meetings of the Company attended by Directors during the course of 2012/2013. Full Board Committees Board Audit Remuneration M J Smith J M Green A J Herbert (R) 1-1 M Macleod J H Mansell (R) J M Nees R B Tait (A) P J Thompson (A) Total Meetings Held The Board of Directors has established an Audit Committee and a Remuneration Committee. Audit Committee The Board has adopted an Audit Committee Charter setting out the terms of engagement of the Board Audit Committee. The Committee has been established to focus on audit and risk management with respect to accounting practices, policies and controls, in order to assist the Board in meeting its responsibilities under the Companies Act 1993, the Financial Reporting Act 1993, the Port Companies Act 1988, the Securities Act 1978, the Local Government Act 2002 and the NZDX listing rules. The Committee members at the commencement of the period were J M Green (Chairman), J H Mansell and M J Smith (ex officio). The Board on 31 October 2012 appointed J M Green (Chairman), J M Nees, R B Tait and M J Smith (ex officio) to the Audit Committee. The Audit Committee Charter was last updated in April Remuneration Committee The Board has also adopted a Remuneration Committee Charter establishing a Board Remuneration Committee. The Committee s objective is to assist the Board in all aspects of remuneration policy and statutory compliance in respect of both officers and directors. The Committee members at the commencement of the period were M J Smith (Chairman), A J Herbert and J M Nees. The Board on 31 October 2012 appointed M J Smith (Chairman), J M Nees and P J Thompson to the Remuneration Committee. The new Committee are yet to meet as at the time of publishing the annual report. The Remuneration Committee Charter was last updated in April Board Performance The Board undertakes a review of performance biennially. The Board, through the Groups Statement of Intent has undertaken to review Group policies and charters biennially. Board Charter and Code of Ethics The Board has adopted a Board Charter, setting out the vision, role, responsibilities, powers, delegations and membership of the Board. At the same time the Board adopted a Code of Ethics setting out the ethical and behavioural standards expected of Directors and Officers. Share Trading The Company has a Policy on Share Trading. The Policy details times where Directors, Officers, and Staff of the Quayside Group cannot transact, or encourage the transacting in, shares issued by the Port of Tauranga Limited or Quayside Holdings Limited. Other Matters Quayside Holdings Limited maintains a register of directors interests in which particulars of certain transactions and interests of directors must be recorded. The company maintains both standard directors and officers liability and defence cost insurance. During the period the company website was updated. The website facilitates communication of annual and interim reports to the Perpetual Preference shareholders. The Quayside Group 2013/2014 Statement of Intent can also be found on the Company website. VIII Page 292 of 374 Quayside Holdings Limited Annual Report 2013

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27 here to enter text. File Reference: Significance of Decision: Receives Only - No Decisions Report To: Finance, Audit and Risk Committee Meeting Date: 25 September 2013 Report From: Brian Trott, General Manager Corporate New Zealand Local Government Debt Report- Quarter Executive Summary This report provides an overview of Local Government borrowing for the second quarter of Recommendations That the Finance, Audit and Risk Committee under its delegated authority: 1 Receives the report, New Zealand Local Government Debt Report- Quarter New Zealand Local Government Debt Report The quarterly New Zealand Local Government Debt report is provided for information. PWC has prepared the report for the second quarter of Andy Dixon Asset Accountant for General Manager Corporate 6 September 2013 Click Page 309 of 374 1

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