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Allied Farmers Limited today announced an unaudited operating loss after tax of $15.68 million (2008: $3.91 million loss) for the six month period ended 31 December 2009. After accounting for non-operating and non-cash items, including the $3.84 million impairment of goodwill in its investment in subsidiary Allied Nationwide Finance, the Group result was a loss of $11.84 million (2008: $4.76 million loss). Corporate expenses for the period included acquisition costs of $5.12 million, directly related to the purchase of the Hanover Finance and United Finance assets.
Table 1 - refer attachment
Chairman John Loughlin said “The Company has been through a challenging time, in which we have witnessed the failure of many businesses. This result is largely in line with expectations, and the acquisition of Hanover and United assets has clearly strengthened our position. This will allow us to take advantage of any opportunities which might arise short to medium term”.
Managing Director Rob Alloway said that while core business performance has started showing signs of improvement in 2010, the first half year had been extremely difficult for the company. Key rural and financial services sectors have not yet normalized following the global financial crisis, although there were positive signs in sectors such as dairy and asset finance.
Finance subsidiary, Allied Nationwide Finance, contributed a group unaudited net loss after tax of $1.21 million for the period. The operating surplus before tax and loan provisioning was $2.91 million with the bottom line result impacted by impaired asset expenses of $4.62 million and the costs of holding surplus cash reserves. The result was also before the recognition of $1.54 million of after tax gains on the revaluation of interest rate derivatives for the period, resulting in an underlying group surplus attributable to the parent of $0.33 million. “Pleasingly arrears levels have remained steady signaling a strengthening position in the market and the number of participants in the segment has declined therefore we are starting to enjoy the benefits of less competition” said Alloway.
Rural services subsidiary, Allied Farmers Rural continued to be effected by the significant reduction in farm income in the dairy sector in the prior period resulting in a net loss after tax of $0.90 million (2008: $2.70 million profit) for the period. Revenue in the rural business was down 32% on the same period last year, predominantly due to weak sales in the merchandising and livestock divisions. Third quarter trading conditions are however exceeding expectations with livestock trading particularly buoyant due to increasing export schedules, good rainfall in some regions, and an improved outlook for dairy commodity prices.
Internet trading of livestock through the portal mylivestock.co.nz continues to grow with steady increases in membership numbers resulting in strong interest for listings. This month the company will launch an extension to the service allowing farmers to trade feed such as maize and hay, an industry first in New Zealand.
As part of the half year process, the assets of Hanover Finance and United Finance, acquired by Allied Farmers in December 2009 through a share for debenture swap, have been consolidated into the balance sheet at an IFRS accounting fair value of $175.52 million.
“The Allied Farmers board with guidance from external advisors has undertaken a provisional fair value assessment on what we still consider to be a challenging group of assets. Since settlement of the transaction, a number of positions have softened further than expected. We have taken the opportunity to review each position incorporating any new developments which have come to hand, when assessing fair value” Alloway said.
While we are confident a number of realisations can be achieved in the medium term, there is uncertainty attached to some positions. For the purposes of 2010 year end financial statements, the company will complete further fair value assessments which may result in changes to the provisional fair values stated as at 31 December 2009.
In the period leading up to settlement, the value of assets transferred was decreased by a net amount of $20.71 million. This decrease related to asset realisations, loan advances, asset restructures, provisioning, and bad debt write offs approved by the board and management of Hanover Finance and United Finance. The initial transaction value was calculated on a gross realisation basis; however the New Zealand International Financial Reporting Standards (IFRS) require acquired assets and liabilities to be recorded at acquisition date fair values. This is done with reference to net present value, after discounting the expected realisation cash flows at applicable interest rates. The IFRS interest adjustment to recognise the period of expected realisation of the loans transferred, results in a $55.95 million net decrease in the value of the acquired assets.
Subsequent to these decreases, further fair value adjustments of $27.86 million have been attributed to property assets (held for resale), $16.83 million to investments, and $99.30 million to finance loans, the latter heavily impacted by uncertainties associated with stage 1 of the Kawerau Falls Station project in Queenstown. This in turn has affected prospects for further development on Kawerau Falls Station stages 2 & 3 where the company has major exposures.
Table 2 - refer attachment
The Hanover Finance and United Finance assets are now contained within a new subsidiary, Allied Farmers Investments, which has been fully resourced with a very experienced legal and finance team. We have moved quickly to commence litigation against a number of borrowers and in some instances formally issued notice to call up guarantees.
NZ Windfarms Limited Results for announcement to the market
Reporting Period Six months to 31 December 2009 Previous Reporting Period Six months to 31 December 2008
Amount (000s) Percentage change Revenue from ordinary activities 1,728 (34.9) Profit (loss) from ordinary activities after tax attributable to security holder. (6,535) (351.9) Net profit (loss) attributable to security holders. (6,535) (351.9)
Final Dividend Amount per security Imputed amount per security Nil It is not proposed to pay a dividend Not Applicable
Record Date Not Applicable Dividend Payment Date Not Applicable
Comments: Refer to the attached Chairman’s Review
NZ WINDFARMS LIMITED CHAIRMAN’S REVIEW
For the Six Month Period Ended 31 December 2009
The most significant event for the Company during this reporting period occurred during November 2009 when the final Stage 3 turbines at the Te Rere Hau wind farm were commissioned, making a total of 65 commissioned turbines. However this achievement has been somewhat overshadowed by the dispute with our turbine supplier, Windflow Technology Limited and the impact that it has had on the timing of the capital raising.
Low electricity prices affected financial performance for the six months to 31 December 2009. The Loss for the period before asset impairments, depreciation, amortisation and tax, was $1,044,000 (31 December 2008 – loss of $1,727,000).
Electricity sales for the six months to the end of December 2009 were 40,842 MWh at an average price of $38.92/MWh.
While revenue from electricity sales has increased as turbines are commissioned, the increase in revenue has been offset by lower interest income as the cash funds on deposit are utilised to meet the Te Rere Hau construction expenditure.
The net loss attributable to Equity Holders of the Parent for the six months was $6,535,000 compared to a net profit of $2,594,000 for the six months ended 31 December 2008. The six months to 31 December 2008 result included $3,162,000 Discount on the acquisition of NPBB’s 50% share in the Te Rere Hau Wind Farm Joint Venture; the net deficit before the Discount on acquisition was $568,000.
Net loss included $1,590,000 from electricity sales (31 December 2008 - $113,000), however this was offset by lower interest income of $138,000 (31 December 2008 - $3,162,000) as available cash reserves were used to continue construction and commissioning the Te Rere Hau wind farm.
Net assets at 31 December 2009 were $74,557,000, compared to $81,092,000 at 30 June 2009 and $82,724,000 at 31 December 2008.
During the period the Company carried out a review of the carrying values of assets in accordance with NZ IAS 36 - Impairment of Assets, and has determined to make an impairment charge of $6,300,000. The valuation of the Te Rere Hau wind farm assets is very sensitive to assumptions about discount rate and electricity price. In ascertaining the “fair value less costs to sell” in accordance with NZ IAS 36, the Company has applied a post-tax (nominal) discount rate of 10% consistent with the discount rate factored into the Ministry of Economic Development’s long run marginal cost modelling on which the adopted future price path is based. Accordingly this rate reflects the Ministry’s estimate of the hurdle rate applied by a typical investor evaluating an electricity generation project.
The wholesale electricity price path used in the discounted cash flow model to determine fair value is based on Energy Hedge forward price contracts through to 2012. Post 2012 the price path is based on the Ministry of Economic Development (“MED”) Energy Outlook reference scenario which was published in September 2009.
The Company has an agreement with the Crown to receive emission units from the Te Rere Hau project. The Company commenced earning emission reduction units on 1 January 2008 and earned 30,390 units during the calendar year ended 31 December 2009 (31 December 2008: 1,296 units). The emission reduction units will be recognised as an asset at fair value at the time the Crown issues the units and when fair value can be determined by reference to an active market. The 2008 and 2009 units have not yet been issued by the Crown. There is no active market for carbon credits within New Zealand at this time. The current international market price of carbon credits typically ranges from Euro8 to Euro12 per tonne.
TE RERE HAU PROJECT
Since 30 June 2009 the focus has been on commissioning turbines at the Te Rere Hau wind farm and resolving the dispute with our turbine supplier, Windflow Technology Limited. At 31 December 2009 all 28 Stage 2 turbines and 32 Stage 3 turbines have been fully commissioned, making a total of 65 turbines operational and producing electricity into the National Grid.
Your Board had always taken comfort from the fact that Windflow Technology Limited (WTL) was committed to seeking International Electrotechnical Commission (IEC) Class 1A Type Certification for the WF500 turbine. Conformity with a recognised design standard assured us that the turbines would be suitable for use at Te Rere Hau and that we could be confident in seeking public investment in this project. As reported in August 2009, we learned that none of the turbines would be at the standard required for IEC Certification. At that time Windflow Technology advised that to incorporate all the design changes in all turbines would require a fundamental refit of those turbines and the potential cost to do this could be as high as $24 million. This meant it was essential we understood the impacts and risks of not having these design changes.
In December 2009, we were provided with a copy of a report by a Consultant engaged by Windflow Technology into the significance of the design modifications. Since then NZ Windfarms has been in dialogue with Windflow Technology over the implications of the findings from the Consultant’s report.
Resolving this matter has not been easy - it has proven difficult to sort out and been time consuming. However the Company has made good progress on resolving this issue with Windflow Technology and continues to work with them to resolve outstanding issues.
On 29 May 2009 NZ Windfarms lodged a resource consent application with Tararua District Council to install 56 turbines in an area adjoining the current consented Te Rere Hau wind farm. This Extension area has a better wind resource than the lower slopes of the existing farm and hence NZ Windfarms would like to preferentially locate most or all of the Batch 4 turbines in this area.
On 4 February 2010 the Company received the decision of the Joint Hearing Commissioners in respect to the Resource Consent application for the Te Rere Hau wind farm Eastern Extension. The Hearing Commissioners have granted consents for the 56 additional turbines applied for. At the time of authorising these financial statements one appeal had been lodged with the Environment Court in respect to this decision. The Company believes the appellant’s concerns can be addressed, and has initiated discussion with the intention of reaching an agreement to have the appeal withdrawn.
Operational performance and outlook
Some problems have been experienced with some of the turbines delivered in the project. These problems have affected turbine availability which for the 2009 calendar year was 93.3% percent. Problems have been experienced with cast gears on 6 turbines where an incorrect heat treatment process has made these gears prone to cracking. All affected gears have been replaced but with some adverse impact on availability. Five turbines have also been affected by operating with incorrect oil filters fitted, which have potentially allowed manufacturing debris to enter the gearboxes. These turbines are all being inspected and parts replaced under warranty if damage is found.
A more recent problem was experienced with overheating of generator assemblies within the turbines installed at Te Rere Hau. Windflow Technology has completed, under warranty, a project to retrofit cooling fans to the generator assemblies and replace generators where necessary to resolve this issue which manifested itself when the turbines were operating for sustained periods at high output. The Company continues to closely monitor the effectiveness of the solution we have been provided by the manufacturer.
Availability levels should improve as these problems are resolved.
CAPITAL RAISING AND SHORT TERM FUNDING
As reported at the Company’s Annual Shareholders’ meeting held on 18 December 2009, following the completion of the acquisition of NPPB Pty Limited 50 per cent share in the Te Rere Hau wind farm, your Board recognised that the Company needed to raise additional funds to complete the Te Rere Hau project. We assessed the options for doing this and were well advanced with plans to go to shareholders for additional capital when Windflow Technology advised us that none of
the turbines already supplied to the project nor any of the remaining turbines to be supplied would comply with the design submitted by Windflow Technology for IEC Class 1A Certification.
This information meant that the your Board had no option but to delay the capital raising and get a third party assessment so that we understood the impact and risks of not having these design changes incorporated into our turbines, and whether any mitigating actions needed to be taken either with the turbines already supplied or with those that were still to be supplied. This is a project that is expected to have at least a 20 year life and the life and operating cost of the turbines is fundamental to the economics of the project.
In your Board’s view, the Consultant’s report has confirmed that its decision to disclose this matter to the market and to delay the capital raising until it obtained a clearer understanding of the implications of not receiving IEC Certified turbines from Windflow Technology was appropriate.
As a result, the Company, after assessing alternatives, approached its cornerstone shareholder, Vector Limited, and negotiated a short term bridging loan facility that will provide the funds required to continue the Te Rere Hau project and provide working capital until the capital raising is completed. The two Vector directors on the NZ Windfarms Limited Board immediately declared their conflict of interest in the transaction and had no involvement in negotiations with Vector Limited or the NZ Windfarms Limited Independent Directors’ decision to enter into the loan facility.
Due to the tight deadlines in respect of the need for short term funding the Company applied for, and was granted a waiver of NZX Listing Rule 9.2.1 seeking approval from shareholders to the entry into of the loan by way of ordinary resolution, as the Loan constitutes a "material transaction" with a "related party".
The Independent Directors obtained independent advice to the effect that the terms of the Loan Facility Agreement are commercially reasonable in the circumstances.
The last six months have been challenging but your Board remains comfortable that the decision to delay the capital raising until the implications of not receiving IEC certified turbines were understood, and the decision on the resource consent application known, are in the best interest of the Company and shareholders. Further information of the nature of the capital raising will be released to NZX and shareholders shortly.
Despite all these issues we need to recognise that we do now have a 65 turbine, 32 megawatt wind farm operating. While not yet at warranted availability we expect this to be achieved as the causes of downtime are identified and rectified.
Our priority remains the completion of the Te Rere Hau project. The coming year will focus on resolving the outstanding issues with Windflow Technology, completing construction of Stage 4 of Te Rere Hau, and maximising the value of the completed wind farm.
The condensed consolidated interim financial statements have been prepared using the going concern assumption. The continued operations of the Group are dependent on the ability to fund future activities from operational cash flows and funding.
The Company and its subsidiaries have prepared business plans and budgets which indicate that cash generated as a result of operations is insufficient for the Company to continue operating for a period of at least 12 months from the date these financial statements were approved by the Board of Directors.
The Company is proposing to raise funding to complete the development of the Te Rere Hau wind farm and to repay the short term loan from its cornerstone shareholder, Vector Limited, by way of a shareholder rights issue. On completion of the wind farm the Company’s cash flow projections demonstrate sufficient net cash surpluses to fund the ongoing operations of the wind farm.
The Board is close to finalising the timing and method of raising funding and further information of the nature of the rights issue will be released to NZX and shareholders shortly.
For the reasons set out above, the Board believes the going concern assumption is a valid basis on which to prepare the financial statements. The Board reached this conclusion having regard to the circumstances which they consider likely to affect the Company during the period of one year from the date these financial statements are approved, and to circumstances which they believe will occur after that date which could affect the validity of the going concern assumption.
While the Board is confident in the Company's ability to continue as a going concern, there is uncertainty with respect to achieving the operational cash flows predicted and the raising of sufficient additional funding prior to utilisation of available cash resources and to complete the Te Rere Hau wind farm project. Accordingly, there is uncertainty as to whether the Company can continue as a going concern and therefore whether it will be able to pay its debts as and when they become due and payable. If the Company was unable to continue in operational existence and pay debts as and when they become due and payable, adjustments may have to be made to reflect the situation that assets may need to be realised and liabilities extinguished other than in the normal course of business, and at amounts which could differ significantly from the amounts at which they are currently recorded in the statement of financial position.
The condensed consolidated interim financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.
The external auditor has referred to the fundamental uncertainty in its audit report.
Pumpkin Patch Limited Unaudited result for the 6 months ended 31 January 2010
Note: all references to dollars are NZ Dollars unless otherwise stated
Highlights - Net profit after tax up 50% to $14.3m - Trading conditions improving across all markets - Earnings growth across all retail markets - Development of a number of new Wholesale markets - Net bank debt down 70% to $9.6m. - Interim dividend increased 50% to 4.50 cents per share - The Company is well positioned to take advantage of the improving market conditions and growth opportunities across markets
Overview Pumpkin Patch Limited has today announced its unaudited result for the 6 months ended 31 January 2010. On revenue of $194m Pumpkin Patch has increased half year earnings to $14.3m, a 50% lift on the same period last year.
A number of major initiatives over the last 18 months have strengthened the Company’s Balance Sheet with bank debt now less than $10m and inventory reduced 34% from a year ago.
While conditions in all of Pumpkin Patch’s retail markets have improved management is still cautious of the retail spending outlook for the remainder of the financial year.
The Company is well positioned to take advantage of growth opportunities being developed in Australasia, the United Kingdom, and a number of Wholesale markets.
Individual Market Commentary
Australia Retail Trading conditions improved steadily across the period. Total AUD sales (excluding temporary clearance stores open in 1H09 but now closed) were up 3% and up 6% in NZD terms due to more favourable exchange rates.
The Company continued to focus on growing market share and reinforcing the brand’s position in the market. While promotional activity remained higher than normal overall segment EBIT was up 2% to $19.9m. Excluding the temporary clearance stores in 1H09 EBIT was up 4%.
Similar trading conditions are anticipated for the remainder of the year.
During the period 3 new stores were opened (1H09: 3) taking total stores to 114. Negotiations continue on the first tranche of the 30-40 stores expected to be opened over the next three years. Four stores will be opened by the end of the financial year including the first of the new smaller format stores.
New Zealand Retail Although the New Zealand retail environment remained subdued for much of the period sales were up 1% (excluding temporary clearance stores).
Improved margins led to a 1% increase in total segment EBIT to $6.2m. Excluding the temporary clearance stores in 1H09 EBIT was up 4%.
The Company expects trading conditions to slowly improve across the second half of the year with a fuller recovery not occurring until 2011.
At January 50 stores were open across New Zealand. Two stores are expected to open before the end of the financial year.
Wholesale and Direct As indicated earlier in the year Wholesale partners lowered orders in response to softer retail environments in their home markets. As a result of this and the continued strength of the NZD against most export currencies total sales were down 14% to $24.0m.
Lower sales led to EBIT being down 13% to $6.8m however EBIT margins were at levels slightly higher than 1H09.
Early indications are that these markets are slowly returning to more normal buying patterns.
The Company now has wholesale partnerships in 20 international markets with China, Lebanon, Malta, and Thailand being the latest added.
United Kingdom Retail While general United Kingdom retail sales conditions remained volatile store level sales growth was generated across the period with the exception of January when the stores were impacted by severe snow storms. Total sales were up 3% in GBP terms however the higher exchange rate led to a 12% reduction in NZD sales.
Trading conditions are expected to improve steadily across the remainder of the year and into 2011.
The EBIT loss for the period was $0.2m, an 81% improvement on last year (1H09: $1.1m loss). The Company is benefiting from improving margins and supply chain processes.
The softer leasing environment is allowing the Company to negotiate better lease terms when existing leases are renewed. This environment is also creating a number of new store opportunities which are currently being assessed.
During the period 3 new stores were opened (1H09: 1) taking the total number of stores to 39. At least one new store will open before the end of the financial year.
United States Retail Retail conditions remained very volatile however some small signs of improvement were seen in the latter part of the period. Total sales from the 20 stores trading during the period were at similar levels as 1H09.
The segment EBIT loss from the 20 continuing stores was $0.8m, 80% better than last year (1H09: $3.8m loss). As part of the reorganisation plan implemented in 2009 store leases were renegotiated downwards to levels that better reflect the current market and full impairment was made of all store fixed assets.
Conditions are expected to remain soft but improve slowly through into 2011. The changes made to the store network in 2009 and the slowly improving environment will lead to a much improved result for the year.
The Company expects all legal requirements relating to the 2009 reorganisation to be completed in May 2010. Based on current estimates the costs recognised in 2009 are expected to be sufficient to complete all aspects of the reorganisation.
Other Financial Information
Unallocated Overheads Unallocated overheads were $9.7m (1H09: $8.5m). The increase reflects lower gains made this year on the mark to market revaluation of foreign exchange contracts. Overhead costs of operating Head Office functions remained similar to last year.
Cash Flows and Balance Sheet The Company has continued to strengthen its balance sheet in 2010 and remains very well positioned to take advantage of growth opportunities that are arising across markets.
The 70% reduction in bank debt over the last 12 months highlights the cash generating capabilities of the Company. Net bank debt was $9.6m at January. Based on current trading conditions and expected working capital and capital expenditure requirements net bank debt is expected to be around $15m at year end. The bulk of the bank debt facilities are in place until December 2011.
Capital expenditure cash flows totalled $3.9m (1H09: $8.2m).
Inventory is expected to remain around current levels based on an average store holding basis.
Dividend The Directors have approved a 50% increase in the interim dividend to 4.50 cents per share (2009 interim: 3.00cps). The dividend will be paid on 22nd April 2010, have a record date of 8th April 2010, and will be fully imputed for New Zealand shareholders and fully franked for Australian shareholders. Non-resident shareholders will receive a supplementary dividend.
Summary Although there remains some way to go before the markets fully recover the Company has placed itself in a position to benefit from improving trading conditions and the result announced today reflects this.
Pumpkin Patch is becoming a truly global childrenswear brand exporting New Zealand based intellectual property to the world. The Pumpkin Patch brand is now sold in 22 markets around the world with New Zealand making up only 16% of total Group turnover. The Company continues to focus on the numerous growth opportunities that international markets offer and is confident of being able to develop many of these in the next 2 to 3 years.
As a consequence of this diversification Pumpkin Patch is less reliant on any one market and has weathered the economic downturn well. Management remain confident this strategy will deliver long term rewards to shareholders.
On behalf of the Board of Directors we again thank the Pumpkin Patch team for their continued hard work and their ongoing dedication to the global success of the brand.
Maurice Prendergast - Chief Executive Officer Greg Muir - Chairman Pumpkin Patch Limited 2nd March 2010
This report has been prepared in a manner which complies with New Zealand International Financial Reporting Standards (NZIFRS) and gives a true and fair view of the matters to which the report relates and is based on un-audited financial statements. It should be read in conjunction with Appendix 1 and Appendix 7 issued to the New Zealand Stock Exchange on 2nd March 2010.
CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE (Under NZIFRS)
Current Half Year NZ$'000; Up/ Down %; Previous Corresponding Half Year NZ$'000
TOTAL OPERATING REVENUE FROM CONTINUING ACTIVITIES: $193,988; Down 4.1%; $202,191
PROFIT AFTER TAX FROM CONTINUING ACTIVITIES ITEMS: $14,256; Up 19.9%; $11,892
LOSS FROM DISCONTINUED OPERATIONS AFTER TAX: Nil; ($2,390)
OPERATING SURPLUS AFTER TAX ATTRIBUTABLE TO MEMBERS OF LISTED ISSUER: $14,256; Up 50.0% $9,502
Final Dividend: 4.50 cps (2009: 3.00cps) Record Date: 8th April 2010 Payment Date: 22nd April 2010
Tax credits on final dividend: Fully imputed for New Zealand residents; fully franked for Australian residents; Supplementary dividend payable to non-residents.
PPL - HY10 Result Presentation.pdf
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Final Dividend: Gross amount per share 5.00 cents Imputed amount per share 5.00 cents
Record Date: 24/03/2010 Payment Date: 31/03/2010 Imputation tax credit: $0.024627
The directors of Briscoe Group Limited announce an audited net profit after tax (NPAT) of $21.03 million for the year ending 31 January 2010, representing an increase of 80.7% over the $11.63 million achieved for the previous year.
The directors have resolved to pay a final dividend of 5.00 cents per share (cps). This compares to last year’s final dividend of 3.50 cps. The dividend is fully imputed and, when added to the interim payment of 2.00 cent per share, brings the total dividend for the year to 7.00 cps (previous year 4.50 cps) and represents 71% of the Group’s NPAT.
The final dividend will be paid on 31 March 2010, earlier than in previous years, to take advantage of the ability to impute the final dividend at 33% rather than the reduced 30% rate that will apply for any dividends paid after 31 March 2010. The share register will close to determine entitlements to the dividend at 5 pm on 24 March 2010.
The result incorporates an additional week’s trading in comparison to the 52 week period last year but is net of asset impairment adjustments totalling $1.86 million in relation to the Living & Giving specialty homeware stores.
The earnings were generated on sales revenue of $416.69 million, an increase of 7.3% on the $388.47 million reported in the previous year.
The Group’s gross profit increased 10.9% from $150.09 million to $166.46 million for the year, equating to a gross profit margin of 39.9%, compared to 38.6% for the 2008-09 year.
Earnings before interest and taxation (EBIT) increased 99.3% from $15.11 million for 2008-09 to $30.12 million for the 2009-10 year.
Group Managing Director, Rod Duke, said “We are proud of the recovery we achieved in a market environment of continued global economic uncertainty and only a partial recovery in overall retail spending in New Zealand.
“Briscoe Group is continuing to derive benefits from the key strategic and structural initiatives recently put in place. In particular, the result has benefited materially from the positive ways our store management and support team have accepted and responded to the revitalised operational structure introduced at the beginning of the 2009-10 year and to the cost and inventory management improvements made during the second half of the previous year.”
Total floor area of the Group’s homeware operations increased slightly during the year to 94,852 square metres across 58 stores reflecting the opening of a Living & Giving store in Riccarton in June. The number of sporting goods stores remained unchanged at 32 with a total floor area of 53,714 square metres.
On a same-store basis (and adjusted for the 53 week year), sales increased by 4.74% for the Group. The homeware and sporting goods segments returned same store sales increases of 4.16% and 6.02% respectively.
During the year $6.69 million of capital investment was made by the Group. Most of this was for the purchase of property in Palmerston North, into which we expect to relocate the existing Briscoes Homeware and Rebel Sport stores by the end of 2010.
Inventories totaled $63.35 million at year-end, being a $5.89 million increase on last year. This reflected the realignment of inventory levels for the increased consumer demand experienced during the second half of 2009-10 as stronger sales trends for the Group emerged.
Trade and other payables at year end were $33.23 million, the $17.20 million reduction from last year being a function of the later financial year-end date for the current year.
Cash and bank balances as at 31 January 2010 were $59.25 million, $4.04 million less than the $63.29 million as at 25 January 2009, after the significantly higher outlays for capital investment and trade and other payables in the year just ended.
Net cash inflows from operating activities were $14.91 million, $13.19 million below those of last year, primarily as a result of increased payments made in relation to GST and to suppliers, arising from the later financial year-end date.
Net cash outflows from investing activities were $6.68 million reflecting investment made during the year, primarily in relation to the property purchased in Palmerston North.
The results are for the 53 week period from 26 January 2009 to 31 January 2010.
Group Managing Director, Rod Duke, said ”The Group’s store opening / refurbishment programme for 2010-11 will see a step up from last year’s rather subdued level as the storm of economic downturn was weathered. By the end of this year the existing Briscoes Homeware and Rebel Sport stores at Palmerston North will be relocated to our newly purchased site and full refurbishments are planned for Rebel Sport stores at Botany and Wellington City as well as for Briscoes Homeware stores at Botany and Salisbury Street, Christchurch. We will also continue to look for opportunities in the main centres to establish large format Briscoes Homeware stores, to build on the successes we are achieving at Panmure.
“These excellent results do, however, incorporate a less than satisfactory performance by the specialty homeware Living & Giving stores, which operate in a highly discretionary sector that has been severely impacted by the economic downturn. As part of the first half year result an impairment adjustment of $0.83 million was made for under-performing assets associated with these stores, and included in this full year result is a further adjustment of $1.03 million.
“This past year has been one of major change for most of the store managers and support functions as a consequence of the new ‘profit centre’ structure we introduced. We believe that this has been a key driver to the speed of the Group’s recovery. The opportunity for management to create and share incremental profit has transformed the way managers view their specific areas of responsibility. For the ‘Senior Profit Partners’ responsible for store profit centres, this change has driven a real sense of ownership of sales, margin and costs within their particular areas of control.
“Although the economic indicators are still difficult to read we are cautiously optimistic that we will continue to build on the improvements in operating and financial performance we made through 2009-10. We expect that Briscoe Group will further strengthen its position as New Zealand’s leading retailer of homeware and sporting goods.
“On behalf of the Board I would like to acknowledge again, the huge contribution from all the team and thank them for their continued support and effort over the past 12 months.”
Postie Improves on Last Year’s First Half. Nationwide apparel and baby products group Postie Plus Group has confirmed a significantly lower loss for the first half year ended 31 January 2010.
The group has posted a loss of -$1.11m for the first half, which traditionally is overshadowed by the profit positive second half. This result which includes a provision for the sale of the Waimate knitting factory of $77,000 compares with the loss of -$2.68m recorded in the prior corresponding period, and represents a reduction of $1.57m or 58%.
This was achieved on sales of $54.07m, which is an 8.3% ($4.16m) improvement on $49.91m in the same period last year.
Whilst the sales result and management of the first half show good gains on last year the PPGL directors have decided that no interim dividend will be paid for the first half due to the current tentative economic environment.
“The turnaround for the summer season is really pleasing considering the retail climate and statistics,” said Mr. Ron Boskell, group chief executive. “The loss is 58% less than last year and that level of improvement confirms that the group is well on track to post an improved full year result.”
It is important to note that key financials are showing improvement on the FY09 first Half.
- Retail sales increase of $4.16m - Inventory is down by $400,000 - Distribution costs have shown further improvement falling by a further $338,000 on the previous year’s very good reduction. - Administration expenses of $11.2m now represent 20.7% of sales compared with 22% last year. This has resulted from the ongoing focus on costs
“We have achieved the improvement in very demanding economic conditions where consumer confidence remains fragile but is improving,” said Mr. Boskell. “We have benefited from strong consumer loyalty to our brands and we grew market share for all of our brands during the period.
Mr. Boskell added that the group has a footprint across both metropolitan and regional heartland New Zealand and has succeeded with a product mix that appealed to its loyal customer base and as a result our stores picked up market share throughout the summer period.
“Our emphasis on the core values of our brands continues with new look branding being introduced for our postie apparel store. We are looking forward to showcasing the new elements of during this autumn season. As part of our roll out of postie, we opened our latest look with an expanded store at the Richmond shopping mall, Nelson, last week.”
ABOUT POSTIE PLUS GROUP:
Postie Plus Group Ltd is a publicly listed company based in Christchurch. The group has three trading divisions.
- postie is one of the largest specialty clothing retail businesses in New Zealand with a nationwide chain of 79 stores located from Northland to Southland. This includes the new Manukau store which opened in November.
- Baby City is a chain of 24 nursery retail stores located across New Zealand. The Baby City market comprises expectant mothers, parents of babies, their relatives and friends.
For Further Information Please Contact: Mr Ron Boskell Chief Executive Postie Plus Group Ltd Tel (03) 339 5700 Mobile (027) 221 7561
Mr Warren Head Head Consultants Ltd Tel (03) 3650 344 Mobile (021) 340 650
PPG - Interim Report For the Half Year Ended 31 January 2010.pdf
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The Warehouse Group 2010 Interim Results Announcement
THE WAREHOUSE GROUP LIMITED
Reporting Period: 3 August 2009 to 31 January 2010 Previous Reporting Period: 28 July 2008 to 25 January 2009
CONSOLIDATED OPERATING STATEMENT 2010 Half Year Performance
REVENUE $918.916 million versus $923.490 million in 2009, a decrease of 0.50 %
OPERATING PROFIT $83.222 million versus $84.246 million in 2009, a decrease of 1.2 %
EARNINGS BEFORE INTEREST AND TAX $85.337 million versus $74.503 million in 2009, an increase of 14.5 %
PROFIT BEFORE TAX $81.926 million versus $69.610 million in 2009, an increase of 17.7 %
PROFIT ATTRIBUTABLE TO PARENT SHAREHOLDERS $57.430 million versus $48.968 million in 2009, an increase of 17.3 %
EARNINGS PER SHARE 18.6 cents per share versus 15.9 cents per share in 2009, an increase of 17.0 %
Interim Dividend: 17.0 cps Record Date: 19 March 2010 Date Payable: 30 March 2010
Tax credits on interim dividend: Fully imputed for New Zealand residents; Supplementary dividend payable to non-residents.
THE WAREHOUSE ANNOUNCES INTERIM RESULTS
Net Profit After Tax Maintained Interim Dividend Increased
Auckland, 12 March 2010 – The board of The Warehouse Group today announced reported net profit after tax for the half year of $57.4 million compared to $49.0 million in the prior comparable period. Last year’s first half profit included a $7.4 million post tax charge relating to the exit from fresh food and liquor.
Adjusted net profit after tax for the half year ended 31 January 2010 was $57.0 million compared to adjusted net profit of $56.8 million last year, excluding unusual items.
Group sales for the half year were $918.9 million, down 0.5% on the prior comparable period. After adjusting for discontinued activities, sales were up 0.7%. Last year’s first half sales included $11.3 million attributable to discontinued fresh food and liquor.
The Directors have declared an interim dividend of 17.0 cents per share, which includes an increase of 1.5 cents per share compared to the 2009 interim dividend in order to distribute the balance of imputation credits available at 33 cents.
In announcing the result, Chairman Keith Smith says, “The group continues to deliver consistent earnings compared to the first half of 2009 which was a strong result in the recession.”
The Warehouse reported sales of $821.0 million, flat compared to last year after adjusting for discontinued activities. After adjusting for F09’s 53rd week same store sales for the half year were down 1.2% with second quarter sales down 1.1%.
Operating profit for the half year was down 3.2% to $78.7 million.
Commenting on The Warehouse result Group Chief Executive Officer, Ian Morrice says, “The recovery in overall retail spending remains patchy with some specialist sectors seeing quite a bounce-back from the recessionary levels of 2008/9. Department stores as a sector has not seen the lifts experienced by softgoods, clothing and appliance specialists in the second six months of 2009. The Warehouse’ sales performance reflects this”
Mr Morrice also commented, “Our strong overall margin performance achieved in the first half of the 2009 financial year has been maintained, although having planned for increased sales which didn’t eventuate, we have needed to clear more seasonal inventory than the same period last year impacting gross margins. We are pleased with the progress we are continuing to make on a number of our growth initiatives but these gains are not yet sufficient to offset the exit from fresh food and liquor and sales shortfalls in other areas.”
Warehouse Stationery reported sales of $96.2 million up 8.7% compared to last year. After adjusting for F09’s 53rd week same store sales for the half year were up 7.2% with second quarter same store sales up 10.2%.
Operating profit was up 139.8% to $3.0 million.
Mr Morrice says, “We are very pleased with the overall performance improvement in Warehouse Stationery over this first half. This reflects a very focused approach to trading with customer visits increasing and sales recovery being achieved across most categories. We expect sales to recover to levels at least equal to the 2008 financial year having experienced such a significant drop in consumer spending in 2009”.
Subject to any material change in expected trading conditions, the Directors expect adjusted net profit after tax for the full year to be similar to adjusted NPAT for F09.
Dividends will be paid on 30 March 2010 with the record date being 19 March 2010.
Background: The Warehouse Group Limited
The Warehouse Group Limited comprises 86 Warehouse stores and 47 Warehouse Stationery stores in New Zealand. The company has a turnover of $1.7 billion and employs over 7,000 people.
Contact details regarding this announcement:
Investors and Analysts Luke Bunt Chief Financial Officer Telephone: +64 21 644 882
Media Ian Morrice, Group CEO to be contacted via Wendy Irving on +64 9 488 3231
WHS - 2010 Interim Result.pdf
WHS - 2010 Interim Results Presentation.pdf
WHS - 2010 Strategy Update.pdf
WHS - Bond Offer.pdf
WHS - Bond Offer Roadshow Presentation.pdf
WHS - Warehouse Group SDP March 2010.pdf
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Kathmandu Holdings Limited has provided NZX with a copy of its FY10 Half Year report. Please find attached.
Kathmandu Holdings announces first half year results and confirms its prospectus forecast:
NZ$ DENOMINATED RESULT
· Sales up 27.5% to NZ$106.6m, · EBIT up 49.6% to NZ$15.5m (excluding IPO costs), · NPAT up NZ$6.8m to NZ$4.4m (excluding IPO costs and associated tax deductions)
AU$ DENOMINATED RESULT:
· Sales up 22.2% to AU$85.8m, · EBIT up 43.3% to AU$12.5m (excluding IPO costs), Kathmandu Holdings announces first half year results and confirms its prospectus forecast:
NZ$ DENOMINATED RESULT
· Sales up 27.5% to NZ$106.6m, · EBIT up 49.6% to NZ$15.5m (excluding IPO costs), · NPAT up NZ$6.8m to NZ$4.4m (excluding IPO costs and associated tax deductions)
AU$ DENOMINATED RESULT:
· Sales up 22.2% to AU$85.8m, · EBIT up 43.3% to AU$12.5m (excluding IPO costs), · NPAT up AU$5.6m to AU$3.6m (excluding IPO costs and associated tax deductions)
Kathmandu Holdings Limited (ASX/NZX:KMD) today announced a 49.6% increase in earnings before interest and tax (EBIT) to NZ$15.5 million, excluding the one-off costs associated with its initial public offering (IPO) of shares in November 2009. Net profit after tax (NPAT) increased from NZ$(2.4) million to NZ $4.4 million for the six months ended 31 January 2010, excluding IPO costs with associated tax deductions compared to the same period last year.
Kathmandu Holdings Limited Chief Executive Officer, Mr Peter Halkett said he was pleased with Kathmandu’s trading performance following last year’s listing on both the Australian and New Zealand Stock Exchanges. “It is very satisfying to deliver a good first result announcement given we have recently been added to the ASX 300 index, and are already included in the NZX50”, said Mr Halkett.
A calculation of NPAT adjusted to compare with the pro-forma FY10 NPAT detailed in the Kathmandu’s prospectus issued last October (NZ$30.9 million for the full year) is provided for the first half year. There was an increase in NPAT of NZ$1.3m in the first half year of FY10 per this calculation compared to the pro-forma FY10 NPAT calculated for the same period.
Comparison of the calculated 1H FY10 result to the calculated prospectus forecast for the same period is as follows:
Half Year Ending 31 January 2010 Actual Prospectus Actual Prospectus Sales 106.6 97.1 44.4% 40.4% +$9.5m 9.8% EBITDA 18.1 15.1 31.6% 26.4% +$3.0m 19.9% NPAT pro-forma 1 8.0 6.7 26.0% 21.6% +$1.3m 20.7% 1H FY10 NZ $m 1H as % of FY10 Forecast
Excludes IPO costs, adjusts for new debt levels and listed company costs, net of associated tax deductions
Other highlights from 1H FY10 results include:
· Same store sales growth of 13.7% (11.7% at comparable exchange rates),
· Eight stores opened, six in Australia and two in New Zealand.
Mr Halkett said the results were achieved in an improved retail environment, and reflected both a successful ongoing store rollout programme and a strong sales result from the Kathmandu Christmas sales promotion. The sales performance was supported by continued tight margin and expense control.
“Whilst this was a very positive result and ahead of our prospectus forecast it must be remembered that Kathmandu’s first half year provides a relatively low proportion of the full year’s profit. Also we are cycling a stronger trading performance in the second half year of FY09 compared to first half year FY09”.
SALES, STORE NUMBERS AND GROSS PROFIT MARGIN
Half year Ending NZ $m % of Total Sales Same Store 1H FY10 # of 31 January 2010 1H FY10 Total Growth % Growth % New Stores Sales - New Zealand 42.8 40.2% 24.9% 14.1% 2 Sales - Australia 58.7 55.1% 24.7%1 9.9% 6 Sales - United Kingdom 5.1 4.8% 37.3%1 13.0% 0 Total 106.6 100.0% 27.5% 13.7% 8
In local currency
Mr Halkett noted that “the relativity of the strong same store sales increases in Kathmandu’s two major markets (New Zealand up 14.1% and Australia up 9.9%) in our view reflected cycling the flow through effect of the economic stimulus packages introduced by the Australian Government from December 2008. We do expect
Australian trading for the second half year to be similarly impacted from cycling the autumn 2009 Australian stimulus package”.
Stores open 31 January 1H FY10 1H FY09 New Zealand 33 30 Australia 51 44 United Kingdom 6 6 Total Group 90 80
Kathmandu opened eight new stores in the period (following two in the second half of FY09):
· New Zealand: Onehunga (Outlet store) and Timaru,
· Australia: Townsville, Macarthur, Chapel St, South Wharf DFO (Outlet store), Frankston and Devonport.
In addition, the Brisbane city store was relocated.
The prospectus forecast of 12 new stores in the full financial year is now expected to be exceeded. Two new stores (Ballarat and Hastings) and the relocated Christchurch city store will open before the end of March. There are also five new store sites that are currently being negotiated for opening prior to 31 July 2010.
If more than 12 stores are opened in this financial year, there is the potential for Kathmandu’s sales performance to exceed the prospectus forecast, however this remains dependent on successful conclusion of the relevant lease negotiations.
Although pleasing progress is being made in the U.K. with good same store sales results achieved again, the ongoing uncertain short and medium term outlook for the U.K. retail environment remains. No further new stores are planned for the U.K. this financial year.
Half Year Ending 31 January 2010 1H FY10 1H FY09 Gross profit margin % 61.3% 62.4%
Gross profit margins, though slightly less than last year, were in line with expectations given the variation in mix (both product and location) of sales experienced in a half year period where overall sales performance was substantially higher than last year.
Operating Expenses excluding depreciation and IPO costs 1H FY10 1H FY09 Rent 12.7m 10.8m % of sales 11.9% 13.0% Other Operating costs 35.0m 30.7m % of sales 32.9% 36.7% Total 47.7m 41.5m % of sales 44.8% 49.7% NZ $m & % of Sales
Kathmandu’s operating expenses reduced by 490 bps as a % of sales, reflecting operating leverage achieved from a period of improved sales that was supported by
necessary increases in operating costs to support growth such as advertising and retail salaries and wages.
EBITDA margin (excluding IPO costs) for the first half year increased from 15.3% to 17.0% and EBIT margin (excluding IPO costs) similarly increased from 12.4% to 14.6%.
IPO COSTS NZ$ m Half Year Ending 31 January 2010 1H FY10 IPO Costs expensed in period 16.8 IPO Costs attributed to raising of new equity 4.5
Actual IPO costs of $21.3 million compared to the prospectus estimate of $15 million.
IPO costs relating to advisory fees were substantially higher, due to the scope of work eventually required to meet the requirements of dual listing on both the NZX and ASX.
Additional costs were also incurred as a result of the change in banking arrangements.
The difference between total IPO costs and the amount that was retained by Kathmandu from the share issue proceeds ($19.7m) to pay for these costs primarily reflects expected tax deductions Kathmandu will make on some IPO costs.
OTHER FINANCIAL INFORMATION Half Year Ending 31 January 2010 1H FY10 1H FY09 Capital Expenditure 5.1 5.2 Operating Cashflow 0.5 (8.3) Inventories 38.9 45.7 Net Debt 73.9 183.9 Net Debt : Net Debt + Equity 25.3% 56.7% NZ$ m
Total capital expenditure per the prospectus forecast of NZ$12.6 million is unlikely to be exceeded even if more than 12 new stores are opened in the full financial year.
Maintenance capital expenditure is likely to be less than was projected in the prospectus, as fewer refurbishment and relocation projects for existing stores are now scheduled in this financial year.
Total inventories reduced by over NZ$6.7 million, and by 24% on a $ per store basis, due to the strong first half year sales performance coupled with ongoing supply chain management efficiency improvement. This inventory reduction, in conjunction with the trading performance, resulted in positive first half operating cashflow, which improved by nearly NZ$8.8 million on last year.
As a result of the pay down of debt in conjunction with the IPO, new banking arrangements and the first half year trading performance, including the reduction in inventories referred to above, net debt decreased by just under NZ$110 million, and the ratio of net debt to net debt plus equity has improved from 57% to 25%.
FULL YEAR RESULTS GUIDANCE
Kathmandu is confident that it will meet the full year FY10 prospectus forecast (EBIT NZ$50.6 million) and NPAT (NZ$30.9 million), after allowing for the full year pro forma adjustments contained in the prospectus. In order for the full year prospectus forecast to be achieved, Kathmandu must still deliver a successful second half year, and the outcome of trading in this period will be influenced by:
· The variability of performance that can occur in the two key promotional events still to come in the second half of the year;
· Kathmandu’s key winter trading period being potentially impacted (favourably or unfavourably) by weather conditions, and;
· General uncertainty and variability in the retail environment in each of Kathmandu’s markets.
Kathmandu confirms that as set out in the prospectus no interim dividend will be paid and that subject to its forecast being achieved a dividend of NZ6.7 cents per share will be declared in respect of the second half year FY10.
For further information please contact:
Peter Halkett, Chief Executive Officer or Mark Todd, Chief Financial Officer +64 3 3736110
Media Enquiries to Helen McCombie, Citadel PR +61 2 9290 3033
This report has been prepared in a manner which complies with New Zealand International Financial Reporting Standards (NZIFRS) and is based on unaudited financial statements.
Reporting Period 6 months to 1 February 2010 Previous Reporting Period 6 months to 1 February 2009
Amount (000s); Percentage change Revenue from ordinary activities: $102,322; +6.9% Profit from ordinary activities after tax attributable to security holders: $8,548; +55.9% Net surplus attributable to security holders: $8,548; +55.9%
The directors advise that the unaudited net profit after tax for the 6 months ended 1 February 2010 was $8.548 million, an increase of 56% on the prior period profit of $5.481 million. The result is slightly ahead of the guidance given to the market on 29th January 2010. Total group sales were $102.322 million, up 7% on the prior period of $95.713 million.
Key aspects of the interim result were:
- Group turnover up 7% - Gross margin on sales up 205 basis points to 55.12% (53.06%) - Losses in Australia reversed to a modest profit for the period - Stock levels tightly controlled
Chairman of directors, commented “The improved profit is a solid step towards regaining profit levels achieved before the impact of the 2008/2009 recession. The effect of improved sales, increased margin, and tight control on costs has all combined to lift profits towards the levels previously achieved. Our stock levels are where we want them to be, and the balance sheet remains particularly strong. Strong trading over the Christmas period and early January cemented what had been a steady improvement during the period.”
Dividend An interim dividend of 14 cents per share (last year 10 cents) was declared on the 29th January, payable on the 26th March 2010. The dividend will continue to reflect earnings and capital expenditure requirements.
Outlook and current trading After a year of curtailed capital expenditure on store development, a number of projects are now in progress. During March Glassons launched a new look and brand update at Palmerston North and at Riccarton Mall (Christchurch). The new fitout takes the brand to another level and sets a new standard for women’s fashion in New Zealand. The concept will be rolled out in a larger store in Newmarket and also a new store at Te Rapa towards the end of the half. Other key sites will be upgraded later in the year.
Hallensteins will relocate to a larger site in Cuba Mall Wellington, at the end of March, and has also relocated to a new site in Palmerston North.
A new site in Wellington has been secured for Storm, opening August 2010, and further sites are under active consideration.
The first 7 weeks group sales for the new half have been down 2% on the prior year, although margin is ahead of last year. Sales are against strong discounting last year, and we caution against reading too much into these figures. It is too early in the season to make any prediction on the winter season results. The retail environment is reasonably stable and consumer confidence is at a stronger level than last year. Other retailers have used the phrase ‘cautiously optimistic’ and in the absence of any major negative economic news we concur with that sentiment.
Half Year Results for six months ended 28 February 2010
The Group’s unaudited result for the six months ended 28 February 2010 was a net profit before tax of $1.4 million, compared to an unaudited loss before tax of $0.7 million for the six months ended 28 February 2009. Group revenue for the six months was $20.3 million, compared to Group revenue of $13.5 million for the six months ended 28 February 2009. A pleasing aspect of the first six months’ result is the strong positive cashflow from operations of $1.6 million.
Review of Operations
The improved performance and trading conditions that we saw in the second half of 2009, continued into the first half of 2010.
During this period we have been successful in securing significant system sales within the Appliance, Precious Metals and Meat Processing markets. Contracts for new projects destined for Australia, Brazil, China, Chile and the USA have stretched our capacity to a point where we have a requirement for additional resources. In addition to these new projects, we have been working on, and completing, production lines for customers in Australia, Turkey, USA and Spain.
We continue to see increased activity within our meat processing market and this has been boosted by the establishment of Scott Technology Australia Pty Ltd in Sydney. An Australian General Manager has been appointed who has significant experience in the meat industry, both within Australia and worldwide. Development work is carrying on to extend our product offering and world leading technology. This is in addition to the rollout of our commercialised systems and we are pleased to report another X-Ray Primal System was successfully installed at a New Zealand meat processing plant during this period.
The past six months has seen an uplift in the global appliance market with enquiries increasing toward normal levels. We are also seeing this in our minerals and precious metals markets where the strong combination of Rocklabs’ industry experience with Scott’s expertise in large automated systems is being recognised by the market.
Dividend and Bonus Issue
In late March the Directors paid an interim dividend of 1.25 cents per share, together with a 1 for 10 non-taxable bonus issue which also participated in the dividend. This reflects the Directors’ confidence in the growth and trading ability of the company supported by the underlying strength of the company’s balance sheet.
With a strong balance sheet, improved trading conditions and a talented team of people, we are positioned to deliver on a growing level of current work and future prospects. We continue to assess business and growth opportunities and will progress those where there is a positive impact on earnings and where strong synergies exist.
Stuart J McLauchlan Christopher C Hopkins Chairman Managing Director
Directors’ Report to Shareholders for the Year ended 28 February 2010
- Group Net Profit after Tax (excluding non trading items) was $19.9 million (20.5 cents per share), up 70% or $8.2 million on prior year, as a result of continued strong performance by KFC and a solid turnaround in Pizza Hut.
- Reported Net Profit (including non trading items) was $19.5 million (20.1 cents per share) compared to $8.3 million in the prior year.
- Total revenues for the company were $318.3 million, up $8.8 million (2.8%) on prior year, with same store sales up 6.8%.
- KFC achieved yet another sales record at $223.2 million (up 9.2% on a same store basis). with Pizza Hut at $64.2 million up 3.9% on a same store basis and Starbucks Coffee at $30.5 million (down 2.9% same store).
- Bank debt was reduced by $16.6 million (on top of the $8.2 million reduction in the prior year) as the company continued to reduce borrowings on the back of strong operating cash flows.
- A final full year fully imputed dividend of 8.0 cents per share has been declared making a full year dividend of 12.5 cents, up 5.5 cents or 79% on prior year.
Note: Results for the 2009/10 financial year are on a 52 week basis vs 53 weeks for the previous year. Because the company normally uses a 52 week (364 day) year, a “leap” year is occasionally required; hence the extra week last year.
Group Operating Results
Directors are pleased to announce that the 2009/10 year has seen a significant lift in performance for Restaurant Brands with a Net Profit after Tax (excluding non trading items) of $19.9 million (20.5 cents per share), slightly above previous expectations. This result is $8.2 million or 70% up on last year’s profit of $11.7 million (12.1 cents per share).
The bulk of the improvement arose from another very solid performance by KFC, but both the Pizza Hut and Starbucks Coffee businesses recorded improved profitability.
Net Profit after Tax (including non trading items) was $19.5 million (20.1 cps) compared to $8.3 million (8.5 cps) in 2008/9.
Non trading costs (mainly fixed asset write offs on store closures) were only $0.6 million in the current year compared with $5.0 million in 2008/9. Last year’s non trading costs were primarily impairment charges against goodwill in the Pizza Hut business.
Total store EBITDA for the year was up $11.2 million to $54.9 million, with KFC contributing $8.3 million of the improvement, Pizza Hut $2.6 million and Starbucks $0.3 million.
G&A (above store overheads) at $12.9 million were up on prior year but these were largely offset by reduced funding costs at $1.4 million (down $2.5 million).
Total store sales of $317.8 million were up $8.7 million (2.8%) on the previous year’s sales. Same store sales for the group were up 6.8% (1.6% in 2008/09). Both KFC and Pizza Hut demonstrated continuing same store sales growth, up 9.2% (4.1% in 2008/09) and 3.9% (-6.5% in 2008/09) respectively, but Starbucks Coffee saw annual same store sales drop 2.9% (up 3.6% in 2008/09).
Year end store numbers at 217 were two down on February 2009 following two Pizza Hut and one Starbucks Coffee store closures and one new KFC opening over the year.
KFC yet again grew both sales and margins with the momentum of the continuing brand transformation. Total sales reached a new record of $223.2 million, up $11.7 million (5.5%) on prior year and 9.2% on a same store basis (on top of 4.1% same store growth in 2008/9 and 7.7% in 2007/8).
During the year, KFC successfully introduced such new products as Pocketfuls and the Popcorn Chicken Roller, as well as bringing back old favourites such as Hot n Spicy Chicken and KFC Tower Burger. The brand also completed the rollout to 56 stores of Krushers, a new frozen beverage range, which also assisted in growing sales.
A further six KFC stores were rebuilt over the year bringing total rebuilt or refurbished stores to 40, nearly one half of the total network. Store numbers increased to 85 with the opening of a new store at Greenlane in Auckland.
KFC profitability also continued to improve markedly with EBITDA up by $8.3 million (21.8%) to $46.3 million (20.7% of sales). The brand continued to improve its operational controls and benefit from volume leverage with no substantial cost increases incurred over the year.
The Pizza Hut business finally began to return to profitability in 2009/10. Whilst sales of $64.2 million for the year were down $0.4 million (0.7%), this was as a result of having two less stores. The brand delivered same store sales growth of 3.9% in the year, the first time Pizza Hut has seen an increase in same store sales since 2002/3.
More importantly, however, the leverage from the sales growth and the closure of unprofitable stores, together with a number of margin improvement initiatives and continued emphasis on improved controls, meant that the brand produced an EBITDA result of $5.4 million for the year, $2.6 million or 95% up on prior year. Pizza Hut’s EBITDA margin as a percentage of sales finished at 8.4% compared with 4.3% in the previous year.
Limited time offers such as the 'More-4-All' and 'Garlic Bites’ pizzas have attracted new customers. Existing successful products such as the 'Jumbo' size pizza and 'Slab' have provided further growth. Towards the end of the financial year, Pizza Hut launched the everyday value 'Pizza Mia' as well as a range of seven new flavours, bringing innovation to the core pizza range with both initiatives assisting in generating repeat business.
Two stores closed over the course of the year: Hamilton North red roof and Mairangi Bay delco. Both closures have been positive for profitability.
Store numbers at year end totalled 91.
Starbucks Coffee revenues at $30.5 million were down $2.5 million (7.6%) on 2008/9 and down 2.9% on a same store basis. One store in Palmerston North was closed (at lease end) over the year bringing store numbers at year end to 41.
Despite the sales result, the Starbucks business managed to improve earnings by $0.3 million (9.6%) on prior year to produce an EBITDA of $3.2 million (or 10.6% of sales). A more favourable exchange rate and enhanced in-store controls, together with some product rationalization, all contributed to the improved result.
Corporate and Other Costs
G&A (above store overheads) at $12.9 million were significantly ($2.4 million) above prior year because of higher headcount and increases in variable remuneration due to improved financial performance of the company. G&A costs were 4.1% of sales (2009: 3.4% of sales).
With the delays in KFC transformation and capital expenditure flowing over from the previous year, depreciation charges at $12.0 million for the year were slightly lower than incurred for 2008/09.
Non trading charges of $0.6 million were $4.4 million lower than prior year because the previous year’s result included $0.4 million in write offs from Pizza Hut store closures (largely red roofs) and $3.7 million in Pizza Hut goodwill impairment charges following a review of the carrying value of this investment.
Interest and funding costs at $1.4 million were $2.5 million lower than prior year, with the company benefiting from both lower debt levels and the continued fall in interest rates. Bank interest rates for the year averaged 4.3% compared with 8.3% in 2008/9.
Cash Flow and Balance Sheet
Operating cash flows for the year at $38.7 million were up $15.4 million on prior year. This was largely because of the improved profit performance of the company, although a portion thereof ($6.8 million) is attributable to favourable working capital movements.
Investing cash flows of $13.2 million were $5.1 million higher than prior year, reflecting the acceleration in the pace of KFC transformation spend.
The improved free cash flow position has meant that total bank borrowings reduced by $16.6 million over the year (in addition to the $8.2 million reduction in 2008/9) with closing bank debt of $17.7 million, well within current facility limits of $45 million. Bank debt has been reclassified as current in the accounts, reflecting the expiry of the Westpac facility in October 2010. The renewal of the facility was deferred as the company seeks to reduce its exposure to increased funding costs as old interest rates roll off. Directors expect that it will be renewed in the normal course of business on or prior to this date.
Total assets at $103.0 million were up $1.9 million on the $101.1 million as at last year, with small increases in fixed assets, reflecting transformation spend ahead of depreciation and a deferred tax asset. Shareholders’ Funds closed at $48.7 million, reflecting the higher profitability of the company.
In June 2009, the company finalised an agreement with Yum! Restaurants International for the re-franchise of the Pizza Hut stores in New Zealand for a ten year period, with a further ten year right of renewal. The agreement also set out a framework for the progressive sell down of Pizza Hut stores to individual operators. Management control of the brand still vests in Restaurant Brands for which the company receives a management fee from Yum!
A marketing process has commenced for a number of stores and the sale of some stores is expected to be completed in the course of the next financial year.
Directors believe that the company has produced a very satisfactory performance for the current year, with the business recording improved profitability and the balance sheet in a relatively strong position.
In accordance with the board policy of reflecting the continuing improved performance of the company in an increased return to shareholders, directors have declared a final fully imputed dividend of 8.0 cents per share. This brings the total dividend for the year to 12.5 cents from 7.0 cents last year, an increase of 79%.
The dividend will be paid on 25 June 2010 to all shareholders on the register as at 11 June 2010. A supplementary dividend of 1.41176 cents per share will also be paid to overseas shareholders on that date.
The dividend re-investment plan will remain suspended for this dividend.
The company has produced a significant step up in this year’s profit performance with all three brands delivering trading results well above the prior year.
In the coming year, the pace of investment in the KFC brand transformation programme will be increased and at least two new stores will be opened. Positive same store sales growth is expected to continue.
Pizza Hut is expected to continue the momentum of same store sales growth seen in the current year. The sale of stores to independent franchisees will be actively pursued as will the programme of unprofitable store closures, particularly of the red roof stores.
Starbucks Coffee is expected to return to same store sales growth and produce further margin improvement on the current year.
The current year’s profit performance has demonstrated the resilience of Restaurant Brands during the economic downturn. As the economy improves, these levels of profitability are expected to be maintained and directors are cautiously optimistic of producing a profit slightly in excess of $20 million in the new financial year.
Annual Shareholders' Meeting
The Annual Shareholders' Meeting for the company will be held at the Newmarket Room, Ellerslie Events Centre, Ellerslie Racecourse, 80-100 Ascot Avenue, Greenlane, Auckland on Thursday 1 July 2010, commencing at 11.00am.
For further information please contact:
Russel Creedy Grant Ellis CEO CFO/Company Secretary Phone: 525 8722 Phone: 525 8722
RBD - RBNZ Stat Accounts.pdf
RBD - Directors’ Report to Shareholders for the Year ended 28 February 2010.pdf
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The Directors of Kirkcaldie & Stains Limited are pleased to announce the result for the half year ended 28 February 2010 is a pre tax profit of $1,015,000 compared to the result for the same period last year of $731,000, an increase of $284,000, or 38.8%. The after tax result for the company is a profit of $725,000, an improvement of $243,000 over the prior year result of $482,000 or 50.4%.
The result from the retail company is a pre tax profit of $716,000 versus the prior year result of $593,000, an increase of $123,000, or 20.7%.Retail sales for the half year period were $19.8 million which is a reduction on the prior year sales of $20.9M, a 5.2% decrease. Reduced inventory level has led to fewer markdowns, but meant that we had less product available for the annual sale which has in turn led to less sales revenue. Retail sales remain subdued as consumers remain cautious about the economic situation. We would expect that the year ahead will remain difficult for retail trading, particularly as consumers have become accustomed to “sale” prices.
The half year result for the property company pre tax is $393,000 versus the prior year result of $227,000, an increase of $166,000, or 73%. The majority of this increase is attributable to a reduction in interest expense saving the company $145,000 for the six month period.
The Directors have declared a fully imputed dividend of three cents per share for the half year ended 28 February 2010 (2009: three cents fully imputed). The dividend will be paid on 17 May 2010 with a record date of 10 May 2010.
For further information:
Ms Kerrie Cole Company Secretary Kirkcaldie & Stains Limited P: 04 494 7283 E: [email protected]
Media Release For Release: 29 April 2010 ANZ 2010 Interim Result Profit up as ANZ benefits from renewed regional growth
ANZ today announced an underlying profit for the half year ended 31 March 2010 of $2.3 billion up 23% on the preceding half (HOH) and 20% higher than the prior corresponding period (PCP).
Statutory profit for the half year ended 31 March 2010 was $1.93 billion up 26% HOH and 36% PCP. The interim dividend of 52 cents per share fully franked is 6 cents per share or 13% higher PCP. Key Points - Underlying profit growth was driven by an 8% growth in profit before provisions excluding Global Markets (up 3% including Global Markets) and a 32% reduction in the credit impairment charge. - Underlying EPS increased 15%. - Group margins (ex Global Markets) were up 15 basis points (bps) from recovery of higher funding costs and more sustainable pricing for risk, with Institutional the major contributor. - Customer deposits grew 2% while Group lending levels were broadly flat with growth in mortgages offset by lower demand in Corporate and Institutional and a repositioning of the Institutional book. - The total provision coverage ratio remains high at 2.1% of Credit Risk Weighted Assets (CRWA) with the collective provision ratio at 1.38% of CRWA. - The reported Tier One capital level at the end of March was 10.7% . - Australia region profit was up 15% with good contributions from the Institutional, Wealth and Commercial businesses and a sound performance in Retail. - Asia Pacific Europe & Americas (APEA) region USD profit increased 19% or 8% AUD with Institutional and Partnerships the main contributors. - New Zealand region profit of NZ$372 million was a NZ$238 million increase on the prior half with a 45% reduction in the provision charge. - Institutional division profit was up 19%, with provisions down 38% and income off 4% as Global Markets revenues trend back from the above normal 2009 levels. Income grew 8% excluding Global Markets.
ANZ Chief Executive Officer Mike Smith said: “Across the Group revenue and profit increased. Australia performed well and we’re establishing greater clarity and discipline around growth. New Zealand’s performance has improved as the economy recovers and we are seeing the benefits of a tightly managed business. While Asia Pacific moved to a period of consolidation, it still recorded double digit profit growth. Institutional’s result shows we are now making tangible progress in turning around the business based on a clear strategy aligned to our super regional objective.
“The backdrop to our improving business performance is a considerably better outlook for provisions which reflects the strength of the economic recovery particularly in Australia and Asia.
“With the multi-speed economic recovery that’s now occurring around the world, our super regional strategy positions us perfectly to take advantage of the growth story in Asia and the flow on it has to the Australian and to the New Zealand economies.
“What’s encouraging in this result is that we’re also beginning to see the benefits of the difficult decisions we’ve taken over the last two and a half years. While there is still a lot to do, we clearly have a much stronger foundation. It’s allowed us to weather the financial crisis and come out of it a stronger bank than we went into it. That’s enabled us to continue to deliver to our shareholders and to our customers.
“However, the scale of the global financial crisis and the depth of the economic downturn in the US and Europe means we have to be realistic about the outlook. Recovery from events of this magnitude will not happen smoothly.
“We are now half way through our five year plan to create a super regional bank. In this environment while there’ll be further bumps along the way - I believe ANZ is well positioned and there’s the opportunity for us to aim higher.
“We have a strong base in Australia, New Zealand and the Pacific and increasingly in Asia. We have tighter discipline in the business and a strong management team of experienced international bankers. It’s giving us real clarity around growth opportunities and greater discipline in sustaining our business performance,” Mr Smith said.
PERFORMANCE BY GEOGRAPHIC REGION
Profit for the Australia region grew 15% HOH with positive contributions from Institutional, Commercial and Wealth, with the Retail business flat impacted by headwinds from intense competition in deposit pricing, particularly for term deposits, and from lower fees. The reduction or removal of 27 fees is delivering benefits to customers of around $170 million on an annualised basis. Household customer deposits rose 4% with the Retail business achieving around 1.7 times system growth over the half. Lending grew 5% dominated by growth in the mortgage book. Mortgage lending returned to slightly above system growth rates during the early months of calendar 2010. ANZ’s customer satisfaction score remains the highest of the major banks, indicating that our customer proposition of being easy to do business with has appealed to the market with strong growth in trial intention and new account openings. While Commercial lending demand remained at low levels, ANZ performed well relative to the market in the face of high levels of degearing over the past year. The Commercial business grew profit 16% largely the outcome of a decrease in provisions and repricing. The Wealth result was up strongly against a weak second half 2009, largely through the contribution of the INGA business, which became 100% ANZ owned from December, and improvement in the equity market. The acquisition of the Landmark financial services business from AWB in December 2009, brought with it around $300 million in deposits and a loan book of around $2.4 billion taking the ANZ Regional Commercial business into the number two marketshare position. A 14% increase in Institutional Australia profit was assisted by a 33% decrease in provisions. Revenues declined 7% with the Global Markets business tracking down on the above trend performance of second half 2009. Expenses declined 4%. There has been an uptick in mortgage and business banking arrears over the half however both remain manageable. Consistent with this stage in the cycle some stress is evident in the small business book. Asia Pacific, Europe & America (APEA) (all figures reflect USD) Following profit growth averaging 59% in the past two years, 2010 will be a lower growth year for the APEA business as it completes the integration of the businesses acquired from the Royal Bank of Scotland (RBS). Strong contributions from Partnerships and Institutional drove a 19% HOH increase in profit; however a higher AUD/USD exchange rate saw profit up 8% when expressed in Australian dollars. While the Institutional profit contribution was up 20% half on half, it declined 14% PCP following an unusually strong performance in Global Markets in first half 2009 during which volatility and widening credit spreads produced particularly high revenues. In line with our customer focused strategy an increasing level of business flow is now being generated from sales creating a more sustainable performance. Strong momentum in customer deposit growth continued up 39% with lending more subdued, up 6%, as corporates focused on paying down debt. The provision charge reduced by 24%, an outcome of the improved economic environment. There has been significant progress in the region during the half with the integration of the RBS acquisitions on track for full completion in June and recent regulatory approvals for a bank license in India and preparatory approval for local incorporation in China. New Zealand (all figures reflect NZD) The New Zealand economy is stabilising and business conditions are slowly beginning to improve, albeit growth remains subdued. The provision charge reduced substantially, down $268 million, driving a significant profit increase off a low base in the preceding half. Excluding the contribution from the now consolidated INGNZ, income and balance sheet growth were flat. Tight cost control was a feature with costs down 5% (excluding INGNZ). Margins have improved, up 6bps, as higher funding costs continue to be recovered through the rollover of the fixed rate lending book. This was offset by the impact of the removal or reduction of 29 fees across our two retail banks, saving customers an estimated $55 million on an annualised basis. Deposit and asset growth trends were broadly steady, with the outlook for asset growth during the year remaining weak, as continued de-leveraging by customers and businesses offsets new lending. Credit quality has begun to show signs of improvement in Retail, however some uncertainty remains around the Rural and Commercial sectors and more time is required for the full credit impacts of the downturn to work through. Cycle and concentration risk adjustments have been carried forward to reflect this expectation. INSTITUTIONAL (all figures FX adjusted) Institutional profit after tax grew 22% with a 37% lower provision charge. Total income declined 2%, while income excluding Global Markets grew 10% reflecting good deposit growth, particularly in Asia, revenue growth of 11% in Trade and Supply Chain driven by strong customer acquisition, and the benefit of repricing the loan book for credit risk. Expenses were flat on the prior half. Global Markets revenue declined 15% during the half, a function of reduced market volatility leading to lower customer hedging activity and reduced trading opportunities. Revenues were evenly split between sales and trading. Capital Markets’ revenue was up 12% and ANZ is now raising more debt capital for Australian borrowers in the Asian region than any other bank. Looking through the volatility driven spike in revenues in 2009, the compound annual growth rate for Global Markets’ revenue over the past two years has been circa 30%. Average net lending assets were down 8%; however, asset declines have moderated following the large decreases in 2009. While the market will retain a cautious tone in the short term, we expect to see asset growth in the second half. The business is making good progress with its turn around, with an increasing focus on sustainable income streams such as cash management and trade.
While the credit environment has improved over the past year the impact of the financial crisis and the difficulties associated with the global economic downturn are still evident in the corporate, rural and and small business markets in Australia and New Zealand. ANZ believes it is prudent to take a cautious approach to its credit provision outlook.
While total impaired assets grew during the half the amount of new impaired assets fell 13%. The make up of the new impaired assets is more broadly spread, largely driven by the lower end of Institutional and the middle market and better secured. ANZ expects the absolute level of impaired loans to continue to increase, albeit at a slower rate, into 2011, however the growth in new impaireds should continue to fall.
The provision charge is declining consistent with the movement in new impaired loans with both the individual and collective provision charges decreasing.
Loss rates have improved across all categories. While there has been a reduction in the number of large single name defaults as the economic environment improves, stress has continued to work its way through the system and ANZ has therefore retained a substantial portion of collective provision balance for economic overlay and concentration risk.
The coverage ratios remain strong with the total provision ratio at over 2.1% of CRWA and the collective provision ratio steady at 1.38% of CRWA.
CAPITAL AND FUNDING
Tier One capital at the end of March was 10.7% with a Core Tier One ratio of 8.5%. Prime liquidity levels at $63 billion remain strong with the Group having raised around 70% of its 2010 wholesale funding requirements. Deposit growth has moderated after the significant growth in the past 18 months however deposit costs have continued to increase particularly in Australia. The proportion of funding originating from customer funds is 56%. NON-CORE ITEMS ANZ provides underlying profit figures which adjust statutory profit for non-core items. The Group believes that separating out non-core items helps with the analysis of the underlying business trends. There was a net $373 million in non-core items in the first half. The key adjustment of $322 million related to acquisition costs and valuation adjustments. This includes an adjustment, required under newly revised accounting rules, to the carrying value of ANZ’s existing 49% holding in the ING joint venture of $181 million, based on the fair value of the 51% acquired. There was $95 million after tax of acquisition transaction and integration costs related to the ING, Landmark and RBS transactions and a small amount for the amortisation of acquisition related intangibles.
The credit valuation adjustment (CVA) related to the Group’s Credit Intermediation Trades reduced by a further $51 million during the half and has now cumulatively reduced by $646 million over the last 12 months. A period of credit market recovery at the beginning of this calendar year was used to exit some of the exposures such that the notional exposure has reduced by around 25%.
“Clearly with the magnitude of issues in the US and Europe, we are going to see lower economic growth around the world compared to the decade prior to the financial crisis. In Australia, growth is now expected to be over 3% in 2010 while in New Zealand we expect growth of almost 2% after the economy contracted in 2009.
“Asia will remain the world’s best performing region with annual economic growth of almost 8% (excluding Japan) which highlights the significance of our super regional strategy,” Mr Smith said.
For media enquiries contact:
Paul Edwards Group GM, Corporate Communications Tel: +61 (3) 8654 9999 or +61 (0)434 070 101 Email: [email protected] Stephen Ries Senior Manager, Media Relations Tel: +61 (3) 8654 3659 or +61 (0)401 561 480 Email: [email protected]
For investor and analyst enquiries contact:
Jill Craig Group GM, Investor Relations Tel: +61 (3) 8654 7749 or +61 (0) 412 047 448 Email: [email protected] Cameron Davis Manager, Investor Relations Tel: +61 3 8654 7716 or +61 (0) 421 613 819 Email: [email protected]
ANZ Profit and Loss Statement by Division
ANZ - ANZ 2010 Half Year Consolidated Results Announcement.pdf
ANZ - ANZ 2010 Half Year Results Presentation.pdf
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Review and results of the Group’s operations during the half year The net profit of the Group for the half year ended 31 March 2010, after tax and non-controlling interests was $2,875 million, an increase of $700 million or 32% compared to the net profit for the half year ended 31 March 2009 of $2,175 million. Contributing to this increase was an additional six weeks of net profit from St.George during the half year ended 31 March 2010; the half year ended 31 March 2009 included the net profit of St.George from the merger date (which for consolidation purposes was 17 November 2008).
Basic earnings per share for the half year ended 31 March 2010 was 97.5 cents per share compared to 84.3 cents for the half year ended 31 March 2009, with no major equity raisings since early 2009 and only a small increase in shares issued, mostly from the dividend reinvestment plan.
Net interest income increased by $455 million or 8% compared to the half year ended 31 March 2009. The increase was driven by the incremental revenue from St.George as well as strong volume growth, particularly in the Australian mortgage market, improved margins from the Institutional Bank and improved Treasury income.
Non-interest income increased by $39 million compared to the half year ended 31 March 2009. Other than the incremental St.George revenue, the increase in non-interest income was largely driven by growth in wealth management and insurance income due to improvements in equities markets over this period and increases in other income due to the non-recurrence of asset write downs and losses on financial assets held at fair value. Offsetting this was a reduction in fees and commissions, particularly in exception fees, and a decrease in trading income due primarily to lower contributions from foreign exchange as increased competition resulted in reduced volumes and margins. Operating expenses increased by $263 million or 8% compared to the half ended 31 March 2009. The increase is due mainly to incremental operating expenses related to St.George, the higher amortisation from St.George’s intangibles and merger integration costs.
Impairment charges decreased by $678 million from $1,557 million to $879 million compared to the half year ended 31 March 2009. The substantial decrease in impairment charges reflected an improved operating environment and stabilised credit portfolios, as well as the non-recurrence of a number of substantial single name losses which emerged in the Institutional Bank in the half year ended 31 March 2009.
The effective tax rate decreased to 28% from 29% in the half year ended 31 March 2009, driven primarily by a $106 million write back of a tax provision in the half year ended 31 March 2010 relating to the long standing tax disputes over various New Zealand Structured Finance transactions.
Given the improved earnings, an interim dividend of 65 cents per share has been declared by the Board. The dividend is fully franked. This represents an increase of 16% over the dividend declared for the half year ended 31 March 2009 and a pay-out ratio of 66.7%. In considering the interim dividend, the Board took into account that there still remains a degree of uncertainty over future bank regulatory requirements.
Against this backdrop we have strengthened our capital position and delivered a good financial performance supported by strong volume growth in loans and deposits.
Significant events during the half year ended 31 March 2010 Merger with St.George Bank Limited On 1 December 2008, Westpac completed its merger with St.George by way of scheme of arrangement. The merger, originally announced on 13 May 2008, was approved by holders of St.George ordinary shares on 13 November 2008 and subsequently approved by the Federal Court of Australia on 17 November 2008. Following 1 December 2008, St.George Bank Limited continued to operate as a wholly-owned Westpac subsidiary. A regulatory condition of the merger was that Westpac and St.George would transition to a single authorised deposit-taking institution (ADI).
On 1 March 2010 Westpac and St.George commenced operating as a single ADI. In conjunction, the legal entity, St.George Bank Limited was deregistered and Westpac became its successor in law. That transition resulted in all St.George assets and liabilities (including all deposits, contracts and debt securities previously issued by St.George Bank Limited) becoming Westpac assets and liabilities. All St.George Bank Limited directly owned subsidiaries are now directly owned by Westpac. Australian government guarantee scheme On 7 February 2010, the Australian Government announced that the Guarantee Scheme for Large Deposits and Wholesale Funding (the Guarantee Scheme) would close to new liabilities from 31 March 2010. The Guarantee Scheme, originally announced in October 2008, provided a guarantee facility for deposits of amounts over $1 million and wholesale funding of an eligible ADI, in return for a fee payable by the eligible ADI.
Deposit balances above $1 million covered by the Guarantee Scheme as at 31 March 2010 will be covered until maturity (for term deposits), or until October 2015 (for at call deposits). For at call deposits, the amount covered will be capped at the closing guaranteed amount on 31 March 2010. Deposits and interest payments after this date will only be covered (up to the capped amount) if the guaranteed balance has fallen below the capped amount. For term deposits, interest due after 31 March 2010 will be guaranteed to maturity. Statutory trust accounts will be treated in the same way as other large deposits. Guaranteed wholesale liabilities as at 31 March 2010 will also be guaranteed to the earlier of maturity or five years.
Guarantee Scheme fees based on eligible ADIs’ long term credit rating will continue to apply throughout the period for which the guarantee applies to the respective deposits. ADIs administer this fee on behalf of the Australian Government. At Westpac this fee is calculated daily and paid monthly in arrears. The monthly payment is calculated on the basis of the funds to be guaranteed, multiplied by the Guarantee Scheme fee. The Guarantee Scheme fee applicable to Westpac, based on its current long term rating by Standard and Poor’s of AA, is 70 basis points or (0.70%) per annum. The fee waiver for guaranteed amounts held in statutory trust accounts will continue to apply.
The closure of the Guarantee Scheme does not affect the Financial Claims Scheme (FCS), administered by the Australian Prudential Regulation Authority (APRA), which will continue to provide depositors a free guarantee of deposits up to and including $1 million in eligible ADIs. The FCS applies to an eligible ADI if APRA has applied for the winding up of the ADI and the responsible Australian Government minister has declared that the FCS applies to that ADI. The Financial Claims Scheme (ADIs) Levy Act 2008 provides for the imposition of a levy to fund the excess of certain of APRA’s financial claims scheme costs connected with the ADI. The levy is imposed on liabilities of eligible ADIs to their depositors and cannot be more than 0.5% of the amount of those liabilities. The $1 million FCS cap will be reviewed by the Australian Government in October 2011. New Zealand government guarantee scheme Westpac New Zealand Limited (WNZL) opted into the New Zealand deposit guarantee scheme which the New Zealand Government originally announced on 12 October 2008. The scheme was for a two year period from that date. WNZL entered into a Crown Deed of Guarantee on 11 November 2008, which was amended by a Supplemental Deed dated 24 November 2008. The Crown withdrew the original deed in respect of indebtedness incurred on or after 1 January 2010 and entered into a revised deed of guarantee with WNZL dated 16 December 2009. The expiry date of the scheme remains 12 October 2010. The New Zealand deposit guarantee extends to debt securities issued by WNZL in any currency (which includes deposits and other amounts lent to WNZL), other than debt securities issued to excluded creditors such as financial institutions and related parties of a participating entity. It does not extend to subordinated debt obligations. The debt securities covered by the New Zealand deposit guarantees are limited to an amount of NZ$1 million per creditor per approved institution. Under the original New Zealand deposit guarantee, WNZL was required to pay a fee of 10 basis points (or 0.1%) on the amounts owing to creditors covered by that guarantee to the extent that amount exceeded NZ$5 billion as at 12 October 2008. A similar additional fee was payable in respect of the position as at 12 October 2009.
On 25 August 2009 the Crown announced an extension of the deposit guarantee scheme. The extension scheme is effectively a new scheme that will commence on 12 October 2010 and end on 31 December 2011. Institutions must re-apply to have a guarantee under the extension scheme. As at the date of this report, WNZL and Westpac Banking Corporation's New Zealand Branch have not applied for the extension scheme.
On 1 November 2008, the New Zealand Government announced details of a wholesale funding guarantee facility to investment- grade financial institutions that have substantial New Zealand borrowing and lending operations (Facility). The Crown entered into a Crown Wholesale Funding Guarantee Facility Deed with WNZL on 23 February 2009 and has provided a Crown Wholesale Funding Guarantee in respect of WNZL dated the same date. The Facility operated on an opt-in basis, by institution and by instrument. Wholesale funding liabilities of WNZL (which could include amounts guaranteed by WNZL) only have the benefit of the Facility where a Guarantee Eligibility Certificate has been issued in respect of those liabilities. Copies of the Guarantee Eligibility Certificates issued in respect of WNZL obligations are available on the New Zealand Treasury internet site. A guarantee fee is charged for each Guarantee Eligibility Certificate issued under the Facility, differentiated by the credit rating of the issuer of the relevant securities, the term of the security being guaranteed and, in the case of issues with terms of more than one year, between New Zealand dollar and non-New Zealand dollar issues. The maximum term of securities guaranteed is five years.
The Facility closed on 30 April 2010. From that time no new Guarantee Eligibility Certificates will be issued but existing guaranteed liabilities will not be affected. Westpac Banking Corporation’s New Zealand branch did not participate in the scheme.
Further information about the New Zealand deposit guarantee and the Facility may be obtained from WNZL’s General Short Form Disclosure Statement for the three months ended 31 December 2009 and the New Zealand Treasury internet site ‘www.treasury.govt.nz’.
Liquidity On 17 December 2009 the Basel Committee on Banking Supervision (BCBS) released a consultative document titled International framework for liquidity risk measurement, standards and monitoring. The BCBS intends to release final standards by December 2010, with implementation by national jurisdictions before December 2012.
APRA has indicated that it will release revised liquidity standards for consultation following the finalisation of the BCBS standards. It is expected that APRA will release final standards by December 2011.
A consultation process and Quantitative Impact Study is currently being undertaken by the BCBS and details of the proposed enhanced liquidity requirements may change through that process. Until there is greater clarity regarding the new prudential requirements, any impact on Westpac cannot be determined.
Capital It is currently anticipated that APRA’s amendments to the methodology for calculating risk-weighted assets for market risk in the bank’s trading book will be implemented from 1 January 2011. The final version of these changes is expected during 2010. It is likely that the new methodology will increase the risk-weighted assets reported for market risk.
On 17 December 2009 the BCBS also released a consultative document titled Strengthening the resilience of the banking sector.
New prudential requirements for regulatory capital and the measurement of risk-weighted assets are expected to be released by December 2010, with implementation targeted for the end of 2012. At this stage, it is uncertain how many of the proposed changes in the consultative document will be translated into prudential requirements for banks and for supervisors. Until there is greater clarity, any impact on Westpac cannot be determined.
Further standards are anticipated from the BCBS during 2010, with attention expected to be paid to the prudential requirements for systemically important banks, including Westpac.
The Australian Federal Government commissioned Australia’s Future Tax System Review (the Review) which is a comprehensive review of the Australian taxation system (except GST), chaired by the Secretary to the Treasurer, Dr Ken Henry AC.
On 2 May 2010 the Federal Government released the Review and its initial response. A large proportion of the Review’s 138 recommendations are not dealt with in the Government’s initial response. Of the recommendations addressed in its initial response, the Government recommends reducing the company tax rate to 29% for the 2013-2014 income year and to 28% from the 2014-15 income year (28% for small business by 2012), and the gradual increase of the employers’ compulsory superannuation guarantee from 9% to 12% by 2020. Detail of these proposed reforms, and the Government’s response to the other recommendations, are expected to be released progressively. Until further detail is released, and any changes to the law
finalised, any impact on Westpac cannot be determined. Further regulatory developments The Australian Federal Government has embarked on a program of regulatory reform which will affect Westpac. This includes:
- credit law reform; - the introduction of an unfair contracts regime in relation to contracts with consumers; - margin lending reform; - superannuation changes; - changes to the regulation of the financial planning sector and the provision of financial advice including obligations to promote advisers acting in the best interest of their clients and a prospective ban on remuneration structures perceived to give rise to undue conflicts of interest; and - the introduction of a new regulatory framework for personal property securities.
Westpac continues to review the above developments and will amend its systems, processes and operations to align with regulatory changes as they occur.
Operating model review in New Zealand
Until 1 November 2006, Westpac Banking Corporation (WBC) conducted its banking operations within New Zealand in a branch structure. On that date, and after extensive consultation with the Reserve Bank of New Zealand (RBNZ), Westpac adopted a dual registration operating model including a locally incorporated subsidiary, Westpac New Zealand Limited (WNZL), to conduct its retail and business banking activities in New Zealand, and a branch, Westpac Banking Corporation New Zealand Branch (NZ Branch) to conduct its institutional and financial markets activities. The conditions of registration of each of WNZL and NZ Branch are consistent with these operating model arrangements. In 2008, it became apparent that both WNZL and NZ Branch had been non-compliant with certain of their conditions of registration. Consequently, the RBNZ asked Westpac to review the structure of its operating model in New Zealand to ensure that it is able to sustain durable compliance with the RBNZ's prudential policies. Accordingly, it was agreed that an independent review would take place, with the terms of reference for the review established through consultation between the RBNZ, WNZL and NZ Branch. The RBNZ, WNZL and WBC have now reached agreement on changes to the operating model and an implementation programme is currently being developed. As a result, there will be a transfer of assets and liabilities from NZ Branch to WNZL with WNZL then assuming most of the lending and deposit-taking activities, and certain other activities, currently conducted by the NZ Branch. The NZ Branch will continue to provide full financial markets functionality to its customers. The new operating model is currently expected to be in place by the end of 2011.
New Zealand Commissioner of Inland Revenue On 23 December 2009, Westpac reached a settlement with the New Zealand Commissioner of Inland Revenue (CIR) of the previously reported proceedings relating to nine structured finance transactions undertaken between 1998 and 2002. Under the settlement, Westpac agreed to pay the CIR 80% of the full amount of primary tax and interest and with no imposition of penalties. All proceedings have been discontinued and the other terms of the settlement are subject to confidentiality. Westpac provided in full for the primary tax and interest claimed by the CIR as part of its 2009 result, and consequently there has been a write back through income tax expense in the half year ended 31 March 2010.
Principal risks and uncertainties
Our business is subject to risks that can adversely impact our business, results of operations, financial condition and future performance. If any of the following risks occur, our business, results of operations or financial condition could be materially adversely affected, with the result that the trading price of our securities could decline and you could lose all, or part, of your investment. You should carefully consider the risks and the other information in this Interim Financial Report and our 2009 Annual Report before investing in our securities. The risks and uncertainties described below are not the only ones we may face. Additional risks and uncertainties that we are unaware of, or that we currently deem to be immaterial, may also become important factors that affect us.
Risks relating to our business
Our businesses are highly regulated and we could be adversely affected by changes in regulations and regulatory policy Compliance risk arises from the regulatory standards that apply to us as a financial institution. All of our businesses are highly regulated in the jurisdictions in which we do business. We are responsible for ensuring that we comply with all applicable legal and regulatory requirements (including accounting standards) and industry codes of practice, as well as meeting our ethical standards. The nature and impact of future changes in such policies are not predictable and are beyond our control.
The recent global financial crisis is leading to changes in regulation in most markets in which we operate, particularly for financial institutions. These changes may include changes in capital adequacy and liquidity. Other changes to prudential requirements, accounting and reporting requirements, tax legislation, regulation relating to remuneration, consumer protection legislation, or changes in the oversight approach of regulators may also occur. It is also possible that governments in jurisdictions in which we do business or obtain funding might revise their application of existing regulatory policies that apply to, or impact, Westpac’s business, including for reasons relating to national and systemic stability.
Changes in law, regulations or regulatory policy could adversely affect one or more of our businesses, including limiting our ability to do business, and could require us to incur substantial costs to comply or impact our capital and liquidity requirements.
The failure to comply with applicable regulations could result in fines and penalties or limitations on our ability to do business.
These costs, expenses and limitations could have a material adverse effect on our business, financial performance or financial condition.
For further information regarding accounting standards refer to the sections ‘Adoption of new and revised accounting policies’, ‘Critical accounting assumptions and estimates’ and ‘Future accounting developments’ in Note 1 to the 2009 Financial Statements in our 2009 Annual Report.
Adverse credit and capital market conditions may significantly affect our ability to meet liquidity needs, adversely affect our access to domestic and international capital markets and increase our cost of funding Global credit and capital markets have experienced extreme volatility, disruption and decreased liquidity in recent years. While some stability has returned to markets in the last six months, the environment remains volatile. We rely on credit and capital markets to fund our business. As of 31 March 2010, approximately 43% of our total funding originated from domestic and international wholesale markets. As a result of the recent adverse global capital market conditions our funding costs have increased.
A shift in investment preferences of businesses and consumers away from bank deposits toward other asset or investment classes would increase our need for funding from wholesale markets.
The Australian Government withdrew the Australian government guarantee scheme for wholesale funding from 31 March 2010 and the New Zealand Government withdrew its wholesale funding guarantee facility from 30 April 2010. Although Westpac had not utilised either guarantee for new long term funding since January 2010, our continued access to the unguaranteed market is dependent on investor appetite.
If our current sources of funding prove to be insufficient, we may be forced to seek alternative financing. The availability of such alternative financing, and the terms on which it may be available, will depend on a variety of factors, including prevailing market conditions, the availability of credit, our credit ratings and credit capacity. Even if available, the cost of these alternatives may be more expensive or on unfavourable terms, which could adversely affect our results of operations, liquidity, capital resources and financial condition. There is no assurance that we will be able to obtain funding at acceptable prices.
If Westpac is unable to source appropriate funding, we may be forced to reduce our lending or begin to sell liquid securities. Such actions would adversely impact our business, results of operations, liquidity, capital resources and financial condition.
For a more detailed description of liquidity risk, refer to the section ‘Liquidity Risk’ in our 2009 Annual Report. Failure to maintain credit ratings could adversely affect our cost of funds, liquidity, competitive position and access to capital markets The credit ratings assigned to us by rating agencies are based on an evaluation of a number of factors, including our financial strength.
In light of the recent difficulties in the banking sector and financial markets, one rating agency has indicated they remain concerned about the level of wholesale funding of the major Australian banks and are waiting for new regulations to be clarified to determine any rating implications.
Moodys has all the major Australian banks, including Westpac, on a negative outlook. A credit rating downgrade could also be driven by the occurrence of one or more of the other risks identified in this section or by other events.
If we fail to maintain our current credit ratings, this would adversely affect our cost of funds and related margins, liquidity, competitive position and our access to capital markets.
A systemic shock in relation to the Australian, New Zealand or global financial systems could have adverse consequences for Westpac that would be difficult to predict and respond to In the current global economic environment, there is a risk that another major systemic shock could occur that causes a further adverse impact on the Australian, New Zealand or global financial systems. Such an event could have a material adverse effect on financial institutions such as Westpac, including the undermining of confidence in the financial systems, reducing liquidity and impairing access to funding. The nature and consequences of any such event are difficult to predict and there can be no guarantee that we could respond effectively to any such event.
Declines in asset markets could adversely affect our operations or profitability Declines in Australian, New Zealand and other global asset markets, including equity, property and other asset markets, could adversely affect our operations and profitability.
Declining asset prices impact our wealth management business and other asset holdings. Earnings in our wealth management business are, in part, dependent on asset values, such as the value of securities held or managed. A decline in asset prices could negatively impact the earnings of the division. Declining asset prices could also impact customers and the value of security we hold against loans which may impact our ability to recover amounts owing to us if customers were to default. It also affects our level of provisioning which in turn impacts on profitability.
Our business is substantially dependent on the Australian and New Zealand economies Our revenues and earnings are dependent on economic activity and the level of financial services our customers require. In particular, lending is dependent on customer confidence, economic activity, the state of the home lending market and prevailing market interest rates in the countries in which we operate.
We currently conduct the majority of our business in Australia and New Zealand and, consequently, our performance is influenced by the level and cyclical nature of business and home lending in these countries. These factors are in turn impacted by both domestic and international economic and political events. The global financial crisis adversely impacted global economic activity which, in turn, impacted the Australian and New Zealand economies. This has led to a slowdown in credit growth and an increase in impaired assets. While activity has improved there is the risk of further declines in economic activity, or recession, in international economies which could affect our financial performance if we operate in those regions or could lead to a similar effect in Australia and New Zealand. Should this occur, our results of operations, liquidity, capital resources and financial condition could be adversely affected. An increase in defaults under our loan portfolio could adversely affect our results of operations, liquidity, capital resources and financial condition Credit risk is a significant risk and arises primarily from our lending activities. The risk arises from the likelihood that some customers will be unable to honour their obligations to us, including the repayment of loans and interest. Credit exposures also include our dealings with, and holdings of, debt securities issued by other banks and financial institutions whose conditions may be impacted to varying degrees by recent turmoil in the global financial markets. We hold collective and individually assessed provisions for impaired assets. As a result of the recent market and economic conditions, we have increased our impairment provisions and, if economic conditions deteriorate, some customers could experience higher levels of financial stress and we may experience a significant increase in defaults and write-offs, and be required to increase our provisioning. Such actions would diminish available capital and would adversely affect our results of operations, liquidity, capital resources and financial condition.
For a discussion on our risk management procedures, including the management of credit risk, refer to the section ‘Risk management’ in our 2009 Annual Report.
The withdrawal of the actions implemented by the Australian, New Zealand, United States and other foreign governments and other governmental and regulatory bodies to stabilise financial markets could lead to a recurrence of instability in financial markets, which may adversely affect our business In response to the global financial crisis stabilising actions were taken by governments and regulatory bodies in Australia, New Zealand, the United States, the United Kingdom, Europe and other jurisdictions. These governments have begun to withdraw these measures.
There can be no assurance as to what effect the withdrawal or modification of stabilising actions will have on financial markets, consumer and investor confidence, or the levels of volatility in financial markets.
In the event of renewed economic deterioration there is no guarantee that governments and regulatory bodies would seek to, or be successful in, stabilising financial markets. Further declines in consumer and investor confidence and continued uncertainty and volatility could materially adversely affect our business, financial condition and results of operations. We face intense competition in all aspects of our business We compete, both domestically and internationally, with asset managers, retail and commercial banks, investment banking firms, brokerage firms, and other financial service firms. In addition, the trend toward consolidation in the global financial services industry is creating competitors with broader ranges of product and service offerings, increased access to capital, and greater efficiency and pricing power.
If we are unable to compete effectively in our various businesses and markets, our business, results of operations and financial condition would be adversely affected.
For more detail on how we address competitive pressures refer to the section ‘Competition’ in our 2009 Annual Report.
We could suffer losses due to market volatility We are exposed to market risk as a consequence of our trading activities in financial markets and through the asset and liability management of our financial position. In our financial markets trading business, we are exposed to losses arising from adverse movements in levels and volatility of interest rates, foreign exchange rates, commodity prices, credit prices and equity prices. If we were to suffer substantial losses due to any market volatility it may adversely affect our results of operations, liquidity, capital resources and financial condition.
For a discussion of our risk management procedures, including the management of market risk, refer to the section ‘Risk management’ in our 2009 Annual Report.
We could suffer losses due to operational risks or environmental factors As a financial services organisation we are exposed to a variety of other risks including those resulting from process error, fraud, information technology instability and failure, system failure, security and physical protection, customer services, staff competence, external events (including fire, flood, earthquake or pandemic) that cause material damage, impact on our operations or adversely affect demand for our products and services, and product development and maintenance. Operational risks can directly impact our reputation and result in financial losses which would adversely affect our financial performance or financial condition.
In addition we and our customers operate businesses and hold assets in a diverse range of geographical locations. Any significant environmental change in any of these locations has the potential to disrupt business activities or affect the value of assets held in the affected locations. For a discussion of our risk management procedures, including the management of operational risk, refer to the section ‘Risk management’ in our 2009 Annual Report.
Technology Our ability to develop and deliver products and services to our customers is dependent upon technology that requires periodic renewal. We are constantly managing technology projects including projects to consolidate duplicate technology platforms, simplify and enhance our technology and operations environments, improve productivity and provide for a better customer experience. Failure to implement these projects effectively could result in cost overruns, operational instability, or operating technology that could place us at a competitive disadvantage and may adversely affect our results of operations.
Reputational damage could harm our business and prospects Various issues may give rise to reputational risk and cause harm to our business and our prospects. These issues include appropriately dealing with potential conflicts of interest, legal and regulatory requirements, ethical issues, money laundering laws, trade sanctions legislation, privacy laws, information security policies, sales and trading practices and conduct by companies in which we hold strategic investments. Failure to address these issues appropriately could also give rise to additional legal risk, subject us to regulatory enforcement actions, fines and penalties, or harm our reputation among our customers and our investors in the marketplace. We could suffer losses if we fail to syndicate or sell down underwritten equity securities As a financial intermediary we underwrite listed and unlisted equity securities. Equity underwriting activities include the development of solutions for corporate and institutional customers who need equity capital and investor customers who have an appetite for equity-based investment products. We may guarantee the pricing and placement of these facilities. We could suffer losses if we fail to syndicate or sell down our risk to other market participants. The integration of our operations and those of St.George presents significant challenges that could delay or diminish the anticipated benefits of the merger There are risks associated with the integration of two organisations of the size of Westpac and St.George. Particular areas of risk include: difficulties or unexpected costs relating to the integration of operating systems and processes; unexpected losses of key personnel; decrease in employee morale; senior management time requirements and distraction from the day to day business; and potential damage to the reputation of brands due to actions from competitors, media and lobby groups in relation to the merger. If any of these events should occur, or if there are unexpected delays in the integration process, the anticipated benefits of the merger may be delayed, which could have an adverse affect on our results of operations or financial condition.
The merger has resulted in additional concentration risk in the lending books of the combined business The lending books of each of Westpac and St.George have exposures to a range of clients, assets, industries and geographies which, now that they are combined, has resulted in additional concentration risk, in particular in the commercial property book.
Other risks Other risks that can adversely impact our performance and our financial position include insurance risk, model risk, business risk and contagion risk. Refer to the ‘Corporate governance’ and ‘Risk management’ sections in our 2009 Annual Report for more information on these risks.
Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 10 and forms part of this report.
Rounding of amounts ASIC Class Order 98/100 applies to Westpac and in accordance with that Class Order all amounts have been rounded to the nearest million dollars unless otherwise stated.
Responsibility statement The Directors of Westpac Banking Corporation confirm that to the best of their knowledge:
(i) the condensed set of financial statements have been prepared in accordance with AASB 134 Interim Financial Reporting and are in compliance with IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board; and (ii) the Directors’ Report includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7R of the United Kingdom Financial Services Authority.
Signed in accordance with a resolution of the Board of Directors.
Ted Evans AC Chairman Gail Kelly Managing Director and Chief Executive Officer
Name of Listed Issuer: Telecom Corporation of New Zealand Limited
For nine months ended: 31 March 2010
This report has been prepared in a manner which complies with generally accepted accounting practice and gives a true and fair view of the matters to which the report relates and is based on unaudited accounts.
The financial information presented has been extracted from Telecom’s Consolidated financial statements, which comply with New Zealand equivalents to International Financial Reporting Standards, as appropriate for profit-oriented entities. The comparative information has been restated for the retrospective application of Part 1 of NZ IFRS 9 ‘Financial Instruments’.
CONSOLIDATED INCOME STATEMENT
Current nine months NZ$’000; Up/Down %; Previous Corresponding nine months NZ$’000
Total operating revenue and other gains (before adjusting items): 3,936,000; Down 7.7%; 4,265,000
EARNINGS BEFORE ADJUSTING ITEMS AND TAX: 427,000; Down 23.3%; 557,000
Adjusting items for separate disclosure: Income / gains Nil; NM; Nil Expenses Nil; Down 100%; 101,000
EARNINGS BEFORE INCOME TAX: 427,000; Down 6.4%; 456,000
Less income tax expense /(credit): 87,000; Down 35.1%; 134,000
NET EARNINGS FOR THE PERIOD: 340,000; Up 5.6%; 322,000
Less minority interests: 2,000; Nil; 2,000
EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: 338,000; Up 5.6%; 320,000
Earnings per share: 18 cps; 17 cps
Third Quarter Dividend: 6.0 cps
Date Payable: 4 June 2010
Imputation tax credit on latest dividend: Nil
Short details of any bonus or rights issue or other item(s) of importance not previously released to the market Related attachments
TEL - Telecom Q3 results - Appendix 7.pdf
TEL - Telecom Q3 results - condensed accounts.pdf
TEL - Telecom Q3 results - investor presentation.pdf
TEL - Telecom Q3 results - management commentary.pdf
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Sealegs Corporation (NZX:SLG) today announced an unaudited operating profit of $642 thousand for the year ended 31 March 2010. This represents a 174% improvement when compared to the $869 thousand loss in the previous year.
Sealegs CEO, David McKee Wright, says he was elated with the company’s maiden profit result. He said “when you consider the difficult worldwide economic conditions and the destruction within the worldwide marine market, Sealegs has done extremely well. The company’s performance in spite of the economic environment demonstrates the potential of Sealegs in coming years.”
When asked about why the company had performed so well he said the result was attributable to the changes in sales strategy and a reduction in expenses.
Sales strategy during the year was widened and defined to target the amphibious boat opportunity in both the recreational and commercial market segment. Recreational sales continued to perform well, however it was the commercial sector success that validated the new sales strategy.
The focus on commercial sales revealed a significant opportunity in the first responder and rescue market. Worldwide events such as flooding in the Philippines, USA, UK and Malaysia have highlighted a need by governments around the world for a rapid response amphibious rescue vehicle. This opportunity has resulted in excess of $2 million of new revenue from the sale of rescue boats and a twenty fold growth rate.
He went on to say “Sealegs is patented technology which means we do not have any direct competition. Because of this when the company is engaged in a government purchasing cycle we’re assured a strong chance of success.” He said whilst the sales cycles were long and subject to political changes, the strategy was right.
The company is currently engaged in sales processes with the Malaysian Ministry of Defence, Malaysian Fire Department, Indian Police Department Royal, Thai Navy and the Bangkok City Council.
Mr McKee Wright said “US Coast Guard compliance and the commercial sales options which include, all wheel drive and extended run time, has made the product well suited for commercial and government application.” He went on to say “as a result of success to date we have engaged in a specific and targeted sales strategy at the thousands of marine enabled fire departments in the US. The results of this effort will take time but it should be significant.”
He also went on to say “the commercial sales strategy sheltered Sealegs from the devastation within the marine market as a result of the economic environment. Where most companies involved in the marine market have seen drastically reduced revenue results and restructuring, Sealegs has been able to grow market sectors and more importantly become profitable.”
In addition to the commercial sales strategies Sealegs reduced its expenses. Operating and cash expenses were reduced 15% or $795 thousand from $5.216 million to $4.421 million and non cash expenses were down 95% or $4.656 million to $235 thousand. The cumulative effect of both these reductions saw expenses reduced by $5,451 thousand and a positive net result of $406 thousand compared to a prior year loss of $5.7 million.
The net result of $406 thousand was not subject to tax as Sealegs has in excess of $20 million in bought forward tax losses, as at 31 March 2009.
Mr McKee Wright commented on the expense reductions and said “whilst it was difficult to govern the company with reduced resources the benefit from responding to the economic environment is evident in our maiden profit. Now that the company has demonstrated profitability and has a reduced expense base we hope to resume some development projects in order to respond to market demand in the commercial sector.”
Total revenue for the period of $11.4 million, was comparable to the $11.5 million recorded last year. Mr McKee Wright said Sealegs revenue performance was well above the overall marine sector’s performance and demonstrated some very good financial indicators.
Firstly the average unit selling price of the boats improved 3% as a result of government sales and new options targeted at the commercial sector.
Secondly and more importantly gross margin grew from $4.347 million to $5.063 million an increase of $716 thousand. As a percentage of sales, gross margins increased from 37% to 42%. The increase is a direct result of greater in-house manufacturing capability and a consolidation of resources. Sealegs could benefit from further margin improvements through bulk purchasing and offshore production. Both are good options and will be investigated over the course of the coming year.”
The company generated an operating cash flow for the year of $518K. This represented a 152% increase or an improvement of $1.523 million. At balance date the Sealegs had $2.7 million in cash and $1.1 million in receivables.
In April, Sealegs moved to a single manufacturing site to further enhance production efficiencies.
Sealegs Corporation Limited Results for announcement to the market
Reporting Period Year ended 31 March 2010 Previous Reporting Period Year ended 31 March 2009
Amount (000s) Percentage change Revenue from ordinary activities NZ$ 11,375 (0.02%) Profit (loss) from ordinary activities after tax attributable to security holder. NZ$ 407 107% Net profit (loss) attributable to security holders. NZ$ 407 107%
Interim/Final Dividend Amount per security Imputed amount per security N/A N/A N/A
Record Date N/A Dividend Payment Date N/A
Comments: This report is based on un-audited financial statements.
SLG - Sealegs Financial Statements to 31 March 2010.pdf
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