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City Care - Performance report 2005 (Page 7)

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City Care - Performance report 2005
7
City Care has implemented a number of remedial actions to
improve performance. Most notable are the restructuring of
the Auckland branch, and where possible a review of contract
pricing and revenues. We have also secured some new contracts
that will have an impact in the coming year and we have
stabilised our occupation costs.
The outlook for the year to 30
th
June 2006 is that these changes
will secure an improved result despite the negative impact of the
sale of the waste management business.
City Care continues to experience strong revenue growth as new
contracts are secured. This expansion has been funded through
bank facilities and by issuing 5,000,000 redeemable preference
shares. As at 30
th
June 2005, Christchurch City Holdings Limited
had subscribed for and fully paid 2,500,000 of these new shares.
At the end of the year, total equity stood at $15,222,000 and
total assets amounted to $37,402,000. City Care's financial
structure remains strong particularly having regard to the issued
but unsubscribed redeemable preference shares.
Acquisition of Local
Construction
In November 2004, City Care acquired the business of Local
Construction, a Christchurch based civil and roading contractor.
This was merged with our existing roading division, and has
grown our capacity to serve this exciting market sector.
Other smaller acquisitions for the year included Telsys, a
Tauranga industrial electrical contractor, and Taranaki Road
Boring, a directional drilling specialist. Both of these purchases
added new technical skills, equipment and customers to our
water and wastewater group.
FINANCIAL PERFORMANCE
City Care achieved a net profit for the year of $1,525,000. This compares with the prior year profit
of $1,809,000. The directors are disappointed with this result which did not meet expectations.
The reduced earnings are a result of exceptional cost increases particularly energy, materials,
labour and occupation costs which were not able to be recovered during the year and the impact
of increased financing costs as we continued to expand the business.
Sale of waste management
business
Just after year end, City Care sold its waste management
business to Christchurch City Council, so that the council
could contract for an alternative refuse management system
for Christchurch. Operational staff were transferred to the new
provider on their existing conditions of employment. The majority
of the consideration for the sale consisted of the transfer to City
Care of around 7ha of land off Springs Road where City Care
operates its asphalt plant. City Care will be looking to develop
this site so that it can move from its increasingly expensive
Milton Street depot to purpose-built facilities that will in
themselves secure efficiencies within the next two years.
Success with new contracts
City Care was successful in securing a number of new contracts
through the year. Of particular note were the contract to maintain
all of Tauranga City's sports fields and 40% of their parks, and
a maintenance contract for almost 1,000 rental properties
owned by Dunedin City. The establishment of a new depot in
Dunedin now enables City Care to tender for smaller contracts
in that region.
Drive for Health & Safety
improvements
As you will read in this report, one of City Care's values is to get
better and better at our business. Recent results have shown
us that the rate of improvement in our workplace injury rates
has stalled. For this reason, City Care has recently introduced a
behaviour-based workplace initiative targeting a 25% decrease
in lost time accident rates over each of the next two years.
CITY CARE IN 2005

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