Christchurch City Holdings pays out all underlying profit to council owner

The doubling of a special dividend payment from a “capital release programme” will reduce the ability of Christchurch’s council-owned holding company to make further investments.

Christchurch City Holdings, the substantial owner of the region’s airport, sea port and lines company, is paying virtually all of its underlying or “normalised” pretax profit of $138.3 million in a dividend of $132 million. This includes the $90 million special dividend, which is nearly double the special dividend of $46 million in 2015.

Consolidated net profit for the year was $38.8 million, well down on last year’s $132.3 million mainly due to a $99.5 million impairment taken against Lyttelton Port’s assets because its "value in use" has been assessed as significantly lower than its net asset position.

Chairman Bruce Irvine says the dividend payment is to meet the need for the council to raise a “substantial amount capital … to keep its forecast debt within appropriate limits.”

In other words, the holding company is now a cash cow for the council to offset its debt. It also follows decisions by the council to renege on the sale of some of its assets despite pressure from the government to use this measure for its rebuild obligations. This is complicated by privatisation opponent John Minto standing against popular mayor Lianne Dalziel on an anti-sale platform.

Mr Irvine says the payout of all the holding company’s profit to meet council debt obligations “will keep the group focused in the year ahead.”

The buoyant state of the holding company’s operations is proving a bonanza for the council owner.

• Orion New Zealand, the lines company, delivered $136 million, including $80 million in a share buyback and a special dividend of $13 million;

• Christchurch International Airport’s net profit before tax of $57.5 million was up 14% on the previous year.

• City Care was able to purchase Apex Environmental Services, pay a dividend of $4.1 million and reduce debt. 

The accounts include a $107.4 million impairment for Lyttelton Port Company (LPC) after receiving $358 million in 2014 from an earthquake damage insurance payment.

“LPC invested significant capital to increase the resilience of the company’s infrastructure, although that investment did not, in isolation, increase operational earnings. The resulting discrepancy between earnings and net assets gave rise to the impairment,” Mr Irvine says.

In the past year, LPC received approval for its Port Recovery Plan, established MidlandPort (a new inland port at Rolleston) and opened a new Cashin Quay 2 wharf, which doubles the container berth capability.

Christchurch City Holdings also completed acquisition of the Crown Fibre Holdings shares in Enable Networks, giving the community 100% ownership of its fibre broadband network.

The holding company also owns Red Bus, EcoCentral and Development Christchurch, while also monitoring the Canterbury Development Corporation on behalf of the council.