Dunedin City Holdings Ltd Half Year Result to 31 Dec 2007

The Dunedin City Holdings group has achieved another steady half-year result. 

Group sales and the net surplus before the shareholders’ interest have both increased. The surplus before shareholders’ interest has increased from $11.4m in the same period last year to $12.1m this year, whilst revenue has increased 2% to $90.5m.

“It is satisfying to see that the group as a whole continues to generate good surpluses even under economic conditions that have weakened” comments DCHL Chairman, Paul Hudson. “High exchange rates, increased fuel costs, key offshore economies under some stress and some quite marked changes in the tourism industry have provided a challenging business environment. We are fortunate therefore to have a good diversified portfolio of companies that can maintain over time a steady stream of earnings”

Ongoing building development in the Central Otago region has again underpinned an excellent result from the electricity distribution business. Wide ranging development in the region has continued to create strong demand for new connections to the electricity network. Financial results from Aurora Energy Limited have been solid and have exceeded expectations. DELTA Utility Services Limited, which often works alongside Aurora Energy Limited, has succeeded in expanding its activity in the busy central region through the acquisition of Lakes Contract Services Limited of Frankton.

The NZ forestry industry has operated through a very tough period of unfavourable exchange rate and excessive freight costs. City Forests Limited responded by significantly reducing its log production with the result that operating revenues were down. However, it improved its accounting surplus under the new accounting rules through an improved forest valuation at the end of December 2007.

Citibus Limited and Taieri Gorge Railway Limited continue to negotiate their way through a fickle tourism market. Incoming tourist numbers to the South Island have declined. High fuel costs have impacted the margins of both companies, but particularly that of Citibus, who in servicing the local Dunedin commuter market, has seen no increase in fares.

This year we have started reporting the figure “surplus before shareholders’ interest” rather than just surplus. This is because the Dunedin City Holdings Limited group and its shareholder the Dunedin City Council has altered the way which they will manage distributions between the sections of the overall group. In the past, distributions of cash between the DCHL group and the DCC have predominantly been made via dividends. However, in the future dividends will be reduced by the extent that net interest payments on the shareholders advance are increased. This change in policy alters the “look” of the accounts and the Income Statement in particular. In order to make proper “apples with apples” comparisons in the future it will be necessary to review the figures for the surplus before net interest payments to the DCC.

In looking forward, based on current trading, the DCHL board remains confident that it will produce a satisfactory trading result for the full financial year.