15
THE YEAR IN REVIEW
Financial Results
The board is pleased to announce
that the net tax paid profit for the year
was $1.81m.
This compares to last year's figure of
$2.2m. As a result of price reductions
of $1.5 million that were delivered
to the Christchurch City Council at
the beginning of the financial year,
a simple year-to-year comparison
obscures an improved underlying
operational performance.
For the same reasons, the board
is pleased that tax paid return of
average equity has only dropped
from 19.9% to 15.4%.
Had the price reduction not occurred,
the company would have achieved
earnings growth in excess of 25%
over the previous year and delivered
a return on average equity in excess
of 24%.
Revenue for the year grew to $62.7
million - an increase of almost 20%
on the prior year. A substantial
proportion of this growth was
achieved from our new operations in
the North Island.
Late in the year, City Care presented
a business case to Christchurch City
Holdings Limited for additional equity
funding. After balance date, CCHL
approved and provided $2.5 million
of additional funds to City Care in
the form of redeemable preference
shares. These funds will be used to
support continued growth.
City Care declared total dividends of
$895,000 for the year.
The Christchurch
City Council
The Christchurch City Council is the
company's primary customer and
if we are to maintain and grow this
relationship then the commercial
imperative is that we should
offer service improvements and
productivity gains that can be passed
to the customer.
From the City Council's perspective,
City Care has delivered these
improvements each year since City
Care was formed in December 1999.
That said, there was a milestone this
year with the Council's acceptance
of City Care's offer to reduce prices
on existing maintenance contracts
for an extension of term on these
contracts. The price reduction of
$1.5 million came into effect on the
1st of July 2003, and key contracts
were extended 3 years from current
expiry dates.
Overall, since City Care's inception,
the City Council has received
annualized cost reductions in excess
of 15% of the contract values.
These benefits are a clear measure
of the operational success of the
Company being passed directly to
the customer and demonstrate the
strength of the relationship we enjoy
with the City Council.
From City Care's perspective
the price for term outcome has
strengthened the company's strong
financial base of maintenance
contracts that extends well into
the future. With these longer term
contracts in place, City Care is able
to support the ongoing investment
in plant, technology and people
to provide future service and
productivity improvements that in
turn will further benefit our customers
and shareholder. We can support
innovations, for example, in integrated
information systems that will benefit
the company and Christchurch City.
An assured base workload also
provides security of employment for
many of the 550 people we employ
in Canterbury.
Growth
On the 1st of July 2003, City Care's
contract to maintain the water and
wastewater network for Tauranga
City Council commenced. Our
Tauranga branch was the first of two
new North Island operations opened
in the year, with New Plymouth
following in February 2004.
NOV-03: City Care wins $1 million
stormwater construction contract
for Franklin District Council.
