Following the Ports of Auckland (PoAL) decision to introduce competitive stevedoring, Auckland Council Investments Limited (ACIL) is clarifying the governance model for PoAL.
ACIL Chief Executive, Gary Swift, says he would like to clarify the respective roles of ACIL, the Mayor and Auckland Council.
“ACIL’s legislative obligation is to bring a strong commercial focus to the ownership and governance of PoAL - in other words, to deliver a commercial return.
“It’s ACIL, not Auckland Council, which has the obligation for the governance of PoAL; the council’s role is to appoint a board of directors for ACIL and establish a yearly Statement of Intent. ACIL is then responsible for establishing a Statement of Corporate Intent for PoAL and for appointing its board of directors,” says Mr Swift.
“The Mayor, Auckland Council or ACIL does not manage the operations of PoAL and that includes its employee relations. Those decisions are wholly a matter for PoAL’s management and board,” he says.
Mr Swift says new appointments were made to the PoAL board in 2010. This board has put in place new strategies to increase profitability, designed to provide an adequate financial return, at the direction of ACIL.
These strategies include labour flexibility, increasing revenue per container, freezing non-essential capital spending and completing a review of PoAL operating processes to ensure PoAL is operating effectively and efficiently.
Mr Swift says clarification is also required on the return target from PoAL.
By implementing the new strategies, the profitability of PoAL would be equivalent to a 12 per cent return on shareholders’ funds by 30 June 2016. Current return is 6 per cent.
“The 12 per cent over five years was agreed to in order to achieve a better return for Auckland ratepayers and ensure PoAL is as successful as it can be. It is a measure we’ve set, which is actually its net profit after tax as a percentage of their shareholder funds, not a dividend or return on investment of that level,” he says.
It is important to note that this target was set prior to the commencement of collective bargaining and was incorporated into the thinking that informed PoAL initial offer, which excluded the full contracting out model.
Greater labour utilisation formed only part of PoAL’s strategy for achieving a better return and it is wrong to assign blame for the current situation on the target, he said. If the target hadn’t been put in the SOI the PoAL board would still be implementing the same strategies.
Note to Editors:
There are a number of ways of measuring a company’s profitability; return on shareholders funds (or equity), return on total assets or return on the market value of the investment. Returns can also be defined as net profit after tax or dividends, or net operating profit after tax. ACIL has chosen to measure PoAL’s profitability as net profit after tax as a percentage of shareholder funds.
Background information on ACIL
Auckland Council Investments Limited (ACIL) is a Council Controlled Organisation (CCO) of Auckland Council. Its role is to manage Auckland Council’s major equity investments.
The value of investments that ACIL owns and/or manages is approximately $1.7 billion. In addition to the investment in POAL, it owns 22.4% of the shares in Auckland International Airport Limited and 100% of the shares in Auckland Film Studios Limited. It also manages a diversified financial assets portfolio for the Council.
The return on these investments, in the form of dividends received by ACIL on behalf of Auckland Council, are invested by the council into activities that help to make Auckland the world’s most liveable city.