apr-11.pdf (2.07 MB) - Crown Ownership Monitoring Unit

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New Zealand Railways Corporation (trading as KiwiRail Group)CHAIR » John SpencerBOARD » Paula Rebstock,Bob Field, John Leuchars,Rebecca Thomas,Dr Kevin Thompson, Mark TumeCHIEF EXECUTIVE » Jim QuinnActivitiesKiwiRail Group owns and operatesthe New Zealand rail network andthe Interislander ferry service.Major services include nationalfreight, ferries, the Tranz Sceniclong distance passenger servicesand provision of Metro passengerservices in Auckland andWellington. Other KiwiRail divisionsmaintain the network and servicethe rolling stock.Financial performance measures2007 2008 2009 2010 2011ReturnsTotal shareholder return N/A N/A N/A N/A N/ADividend yield N/A N/A N/A N/A N/ADividend payout 0.0% 0.0% 0.0% 0.0% 0.0%Adjusted ROE (7.0%) (10.1%) 25.9% 13.6% 1.9%EfficiencyROCE (3.5%) (5.0%) 21.3% 12.9% 5.9%Operating margin 64.0% 59.3% 51.8% 48.2% 44.0%Generator efficiency N/A N/A N/A N/A N/ALeverageNet gearing 1.1% 1.6% 3.1% 3.5% 3.5%Interest cover 21.15 9.41 20.26 20.04 15.40Current ratio 2.5 1.9 0.6 1.0 0.5OtherFive-year averageDividend growthN/ARevenue growthN/AIncome statement$m 2007 2008 2009 2010 2011Revenue 224 243 943 1,105 1,012EBITDAF 143 144 488 533 445NPAT (19) (43) 239 194 34Balance sheet$m 2007 2008 2009 2010 2011Total assets 10,740 11,908 13,335 13,249 13,570Total liabilities 190 280 781 829 932Commercial value* 10,590 11,549 12,554 12,420 (484)Cash flow statement$m 2007 2008 2009 2010 2011Operating activities (net) 11 16 139 134 48Purchase of fixed assets 203 212 508 549 653Dividends paid 0 0 0 0 0Net cash flow 11 3 8 (12) 49Note:* Commercial valuation from the SCI. Up until 2010/11, KiwiRail’s commercial valuation was based onthe book value of net assets. 2010/11 was the first year where the Discounted Cash Flow valuationmethodology was used, which is the reason for the significant change in valuation from 2010 to 2011.page | 90
OperationsKiwiRail Group’s (KRG) core business is providing services for commercialfreight customers, in terms of bulk freight, import/export and domestic pointto-pointtransport. A 10-year Turnaround Plan is underway to fundamentallyreconfigure the organisation as a financially self-sustaining commercialentity. The plan involves major procurement and project work, and a shift tobecoming a customer service and customer relationship-focused organisation.Since the start of this plan in 2011, substantial investment has been made innew rolling stock (locomotives and wagons), increasing ferry capacity andreducing transit times on key parts of the network. Freight volumes haveincreased in all categories, and major customers have demonstrated theirsupport for the new strategy by committing to co-investment in warehousingand other facilities.KRG also provides metropolitan passenger services on behalf of Auckland andWellington regional authorities.Financial performanceKRG reported a reduction in EBITDAF of $88 million from 2009/10 which wasmainly owing to a reduction in grant income from the <strong>Crown</strong> of $110.5 million.NPAT was also impacted by a one-off write-down of the book value ofassets relating to the Wellington Metro business of $107.6 million when theywere transferred to the Greater Wellington Regional Council for nominalconsideration. Excluding these items, underlying performance improved in2010/11 from the previous year.KRG’s Turnaround Plan envisages about $4.6 billion of capital expenditure over10 years on renewal of the rail network and on rolling stock. The majority of theinvestment is to come from operating cash flows, but significant governmentsupport is also assumed. The Government agreed to provide KRG with supportof $250 million in each of the 2010/11 and 2011/12 financial years, with a further$250 million in the following year, subject to satisfactory performance.The negative commercial value attributed to KRG in its SCI reflects thesignificant capital expenditure required to address several decades of underinvestmentin rail infrastructure and equipment, and the significant <strong>Crown</strong>investment required to do so. Delivery of the Turnaround Plan should result incontinued improvement in the enterprise value of KRG.Performance against plan2010/11 was the first year of the Turnaround Plan. Whilst freight volumesand revenues have increased in 2010/11 over previous years, total revenueand EBITDAF are behind SCI targets. This was attributable to the effects ofunanticipated external events (the Canterbury earthquakes, Pike River mineexplosion and various weather events). Under the circumstances, KRG’sperformance has been creditable. However, its ability in future to produceEBITDAF results in line with targets will be crucial for funding its portion of thecapital investment associated with the Turnaround Plan.Major investmentsThe rail network continues to besubject to significant investment,particularly along the Auckland toChristchurch corridor. Investmentin completed infrastructure projectstotalled $402 million in 2010/11,from total capital expenditure of$653 million. Substantial numbersof new locomotives and wagonsentered service, improving bothreliability and running costs($62 million capital expenditure onrolling stock). The ferry Aratere hasbeen lengthened to increase CookStrait capacity.Non-financial performanceKey safety metrics for KRG are LostTime Injury Frequency Rate (target3) and the Medical TreatmentInjury Frequency Rate (target 30).Actual results were 6.1 and 49.1respectively. These are areas KRGis focused on improving.Corporate social responsibilityKRG has a number of safety,sustainability and beautificationobjectives.KRG has been an ongoingsupporter of the Chris CairnsFoundation, the Rail Heritage Trustand the Ferrymead Rail Museum.A wide range of other communityactivities are also supported fromtime to time.DividendsKRG has not paid dividends since its return to government ownership and noreturn to the owners is expected for some time.page | 91
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51 Crown Financial Institutions52 A
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jurisdictions is fraught. There are
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apr-11.pdf (2.07 MB) - Crown Ownership Monitoring Unit

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