Lachie Johnstone, Chairman
Lachie Johnstone

Chair report

The headwinds of the COVID-19 pandemic have not prevented CentrePort’s regeneration gathering momentum, and the business has produced solid results despite ongoing disruption.

CentrePort recorded an underlying net profit after tax (NPAT) – before Kaikōura earthquake-related items, changes in fair value, abnormal items and the tax impacts of these items – of $7.2m compared to $14.7m in FY20.

Revenue of $80.2m compared to $84.9m the previous year reflected the absence of cruise revenue due to the ongoing COVID-19-related ban on international cruise ship visits.

Trade volumes were up across the board, with log exports particularly strong, achieving a new record high for CentrePort.

Underpinning CentrePort’s solid performance has been good cost management, with significant reductions achieved and further reductions to come in FY22. Costs fell from $87m to $74m. Operating costs of $2.7m incurred in the current year will be eliminated next year. The cost savings less increased depreciation charges will come from:

  • the reinstatement of rail infrastructure in March 2021 eliminating road-bridging costs
  • reduced truck and trailer hire costs from purchasing electric container-transfer vehicles
  • reduced generator hire and associated fuel costs as permanent repairs are made.

Health and safety

Health and safety is a primary focus for the Board and senior management, and it is heartening that continued improvements have been achieved, with ongoing downward trends in key indicators. It is clear from the performance of the port industry as a whole that there is no room for complacency. CentrePort is committed to investing in its technology, systems and people, and the people it works with, to look to ensure everyone goes home healthy and safe each day.

Dividends and special dividend

A dividend of $5m (FY20 $5m) was paid to shareholders the Greater Wellington Regional Council and the Horizons Regional Council, as well as a special dividend of $15m.

CentrePort’s strong balance sheet and the finalisation of the Kaikōura earthquake claims in 2019 allowed the company to pay the special dividend.

The impact of the 2016 Kaikōura earthquake meant CentrePort paid lower-than-planned dividends totalling $11.7m during the financial years spanning 2017-2020.

The $15m restores the dividend pay-out to 50 percent of underlying NPAT in that period (ie $26.7m).

Regeneration

CentrePort’s regeneration towards becoming a 21st century supply chain logistics asset continued to gather pace with a range of major initiatives achieved and underway, which are outlined in detail in the Chief Executive’s report. The pillars of the regeneration are our people, customers, community and environment and there was good progress in all areas.

A major initiative was the finalisation and adoption by the Board of the Carbon Emission Reduction Strategy. This strategy lays out the route for CentrePort to achieve a 30 percent reduction in emissions by 2030, and net-zero emissions by 2040. Several carbon-reduction projects have already been implemented.

Income tax

A number of assumptions have been applied in the tax calculation as a result of the different tax rules that apply to insurance proceeds and asset repairs or reinstatement.

CentrePort is in the process of obtaining a binding ruling from Inland Revenue to confirm the key assumptions underpinning the tax treatment of the insurance proceeds. These assumptions include the allocation of the settlement proceeds to the different claim components, the allocation of the material damage claim amount to the various damaged assets, the classification of specific assets to be treated as disposals for tax purposes, and the application of the roll-over relief provisions.

The most material estimate is an allocation of $174m (2020: $268.1m) of the insurance proceeds to assets that are likely to be deemed disposed of for tax purposes.

This estimate has changed from 2020 after Inland Revenue indicated that it disagreed with the classification of specific assets deemed to be disposed, and that roll-over relief was unlikely to apply. This has resulted in a prior period adjustment to income tax expense of $23.5m being included as a prior period adjustment in the current year.

Captive Insurance Limited

With the approval of the Board and shareholders, CentrePort Limited established CentrePort Captive Insurance Limited. The company was created to manage more effectively the risks and costs of CentrePort’s asset base.

CentrePort Captive Insurance Limited was incorporated on 27 May 2021 with $1m of capital.

CentrePort is in the process of applying to the Reserve Bank of New Zealand for a licence under the Insurance (Prudential Supervision) Act 2010 for this company to operate as an insurance company.

Thank you

A thank you to my fellow directors for their valuable contributions, support and commitment to CentrePort.

The Board also thanks CentrePort’s people, and their Chief Executive Derek Nind. Their commitment to health and safety, ‘making it happen’ for customers and progressing the port’s regeneration despite COVID-19-related disruptions is greatly appreciated.