Invercargill City Council's Holdco dividend $2m short of forecast

Thursday, 7 November 2019

Invercargill City Holdings Ltd has distributed $4.715m to the Invercargill City Council for the year ending June 20, less than the forecatsed $5.8m.

Invercargill City Council's 2019 dividend from Invercargill City Holdings Ltd is close to $2m million short of the initial forecast, but the council's money man is comfortable with that.

Invercargill City Holdings Ltd [Holdco] is an investment company that is 100 percent owned by the council. It owns Electricity Invercargill Ltd, Invercargill City Forests Ltd, Invercargill City Property Ltd, and 97.2 percent of Invercargill Airport.

Holdco returns a dividend each year to the council which effectively helps ease the burden on ratepayers.

Holdco forecasted a $5.8m dividend, but it was confirmed on Thursday that the council ended up with a $3.85m dividend instead.

* ICC holding company to sell Invercargill City Forests Ltd

* Holdco dividend to ICC in doubt**

Council finance director Dave Foster did not believe it would have been smart to push Holdco to come up to the $5.8m dividend.

That would put Holdco under medium-term stress, which in turn could sacrifice dividends in the future, he said.

Because the council had 'a good financial result' itself the smaller dividend had not effected the council's overall budget, Foster said.

The council forecasted an operating loss of $2.75m, but when councillors adopted the annual report on Thursday the actual result was $1.15m in the red.

'It's a turnaround of $3.9m positive. That's why we weren't concerned about really shaking the tree from Holdco,' Foster said.

Council's revenue was bolstered through higher NZTA subsidies and added interest income.

Holdco produced an after-tax loss of $2.313m for this year, compared to a profit of $8.160m last year.

Holdco chairman Brian Wood pointed to the following factors behind the loss in his chairman's report tabled at Thursday's Holdco annual general meeting.

It included a decision by Invercargill Property Ltd directors to write down to zero the advance to HWCP Management Limited. HWCP is the company behind the Invercargill's planned CBD block development.

There was also a loss on the revaluation of the Invercargill City Forest Limited forest estate, as well as fair value adjustments by Electricity Invercargill Limited investment.

Wood said Holdco directors are satisfied that the underlying positive cash flow of $4.1m, and the changes that are being implemented, Holdco will continue to make sustainable dividend payments to the council.

In April Holdco resolved that Invercargill City Forests Limited was not a good investment fit and will be sold.

'This decision was not taken lightly but took into account the company's debt position, the forecasted reduction in harvesting revenue and the risks associated with owning forestry,' Wood said.

For the 2019 year, Invercargill City Forests Limited recorded a loss of $2.6m compared to a profit of $733,000 last year.

Invercargill City Property Limited produced an after-tax loss of $5.3m this year compared to a loss of $383,000 last year.

'While HWCP Management Limited had made significant progress in the development of the inner city project during the financial year, there remained significant uncertainty relating to the funding of the proposed development as at 30th June 2019.'

There has been confirmation of funding for the project.

That has given the directors confidence that its investment in HWCP Management Limited will be recovered as the development progresses and the land held by HWCP Management Limited is sold, Wood said.

Electricity Invercargill Limited produced an after-tax profit of $4.665m compared to $7.333m last year.

Invercargill Airport Limited produced an after-tax profit of $805,000 compared to $302,000 last year.

The company has undertaken further development of the airport terminal and its facilities during the last financial year to enable the introduction of a jet service direct to Auckland.