Napier Port Holdings Ltd · NZX:NPH
Napier Port — FY2020 Earnings Presentation
43 slides from Napier Port's earnings presentation, November 2020
Slide 1: Standing Strong for Our Region – Annual Results 2020
STANDING STRONG FOR OUR REGION ANNUAL RESULTS 2020
Slide 2: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER This presentation has been prepared by Napier Port Holdings Limited (together with Port of Napier Limited, "Napier Port"). This presentation is being provided to you on the basis that you are, and you represent and warrant that you are, Past performance: Any past perf
Slide 3: Presenting Today
PRESENTING TODAY ALASDAIR MACLEOD TODD DAWSON KRISTEN LIE CHAIRMAN CHIEF EXECUTIVE CHIEF FINANCIAL OFFICER 3
Slide 4: Welcome & Introduction
WELCOME & INTRODUCTION 2020 a challenging but successful year Continued focus on strategic purpose to build a thriving region by connecting our customers, people and community to the world Good progress on strategic initiatives, including 6 Wharf Demonstrated resilience operationally, backed up by t
Slide 5: Highlights
HIGHLIGHTS
Slide 6: Highlights
HIGHLIGHTS Good financial result in line with original PDS forecasts, in the face of significant challenges as a result of COVID-19 A resilient local economy and rural sector saw solid primary sector exports and continued investment in Hawke’s Bay Significant progress on strategic development initia
Slide 7: Driving Growth and Resilience: Strategic Projects Update
DRIVING GROWTH AND RESILIENCE STRATEGIC PROJECTS UPDATE A PLATFORM FOR GROWTH • 6 Wharf - on time and within budget • Off-port depot capacity – Thames Street second site commissioned • Kaweka, third tug operational STRATEGIC PROJECTS • New technologies driving efficiencies across port • Out of regio
Slide 8: Driving Growth and Resilience: Emerging Growth Opportunities
DRIVING GROWTH AND RESILIENCE EMERGING GROWTH OPPORTUNITIES OPPORTUNITIES • Opportunities in national supply chain: • As import supply chains continue to be disrupted by the pandemic and the congestion issues being felt at New Zealand’s northern most ports • Lower and central North Island cargo owne
Slide 9: 6 Wharf Construction
6 WHARF CONSTRUCTION STATUS: • 131 of 400 reinforced concrete piles completed • Dredging - 340,000 m3 of around 1.3 million m3 has been completed • Seawall being trimmed and armour laid - 883 of 4500 revetment armour blocks cast, 71 are now in place • Deck construction expected to commence FY2021 Q2
Slide 10: Trade Result Down on COVID-19 Disruptions
TRADE RESULT DOWN ON COVID-19 DISRUPTIONS TRADE OVERVIEW COMPARED TO 2019 Variance Volume FY2020 FY2019 kT / TEU % Total cargo (kT) 5,049 5,459 -410 -7.5 Containerised cargo (TEU) 268,000 271,000 -3,000 -1.1 Bulk cargo (kT) 3,121 3,404 -283 -8.3 - Logs exports (kT) 2,365 2,581 -216 -8.3 • Forestry p
Slide 11: Underlying Financial Results in Line with PDS Forecasts
UNDERLYING FINANCIAL RESULTS IN LINE WITH PDS FORECASTS FINANCIAL RESULTS OVERVIEW COMPARED TO PDS FORECAST Variance Pro forma3 FY2020 FY2020F1 $M $M $M % EBITDA 41.0 40.9 +0.1 +0.4 Net profit after tax 20.4 20.0 +0.4 +2.3 Cash flow from operations 29.6 29.9 -0.3 -1.1 • Despite COVID-19 challenges,
Slide 12: Resilient Financial Result
RESILIENT FINANCIAL RESULT REPORTED FINANCIAL RESULTS OVERVIEW COMPARED TO 2019 FY2020 FY2019 Variance $M $M $M % Revenue 100.4 99.6 +0.8 +0.8 Results from operations 41.2 42.0 -0.8 -2.0 Net profit after tax 22.0 6.8 +15.2 +221.4 Cash flow from operations 29.3 29.3 - - • Net profit in FY2019 depress
Slide 13: Financial & Operating Performance
FINANCIAL & OPERATING PERFORMANCE
Slide 14: Revenue Growth Despite Lower Volumes
REVENUE GROWTH DESPITE LOWER VOLUMES • 0.8% revenue growth year-on-year (YoY) • 1.9% YoY revenue growth across container services and 14.9% cruise • Revenue decrease of 3.1% for bulk cargo • Lower trade volumes offset by higher average revenue per unit 1 across bulk & containers FY2020 REVENUE Cruis
Slide 15: Container Services Revenue Up 1.9%
CONTAINER SERVICES REVENUE UP 1.9% • Revenue up 1.9% YoY • Container volume down 3,000 TEU (1.1%) • Reefer volume growth 1.4% YoY • Export apples volume consistent with prior year • Increased containerisation of squash • Average revenue per TEU increased 3.0% to $232/TEU from $226/TEU FY2020 TEUs $7
Slide 16: Lower Bulk Cargo Revenue Driven by Volume Decrease
LOWER BULK CARGO REVENUE DRIVEN BY VOLUME DECREASE • Revenue down 3.1% YoY • Lower revenue driven by 8.3% volume decrease • Forestry products deemed ‘not essential’ during Alert Level 4 • Average revenue per tonne increased 5.7% to $10.02/T from $9.48/T FY2020 REVENUE $35 $10.20 32.3 32.1 31.3 Other
Slide 17: Log Volumes Impacted by COVID-19
LOG VOLUMES IMPACTED BY COVID-19 • Logs exports down 8.3% YoY • COVID-19 impact in Q2 and Q3 • High Chinese log inventories in Q2 compounded by the extended Chinese New Year holiday • No incoming logs during Alert Level 4 lockdown in Q3 • Volumes have since recovered with good Q4 volume, continuing
Slide 18: Record but Shortened Cruise Season
RECORD BUT SHORTENED CRUISE SEASON • Revenue up 14.9% YoY • Revenue result driven by 6 additional visits YoY and passenger levy implementation • 76 vessel calls - 11 fewer visits against forecast – 4 due to weather and 7 due to COVID-19 • No cruise revenue expected in FY2021 • Given border restricti
Slide 19: COVID-19: Response Plan in the Face of Uncertainty
COVID-19: RESPONSE PLAN IN THE FACE OF UNCERTAINTY RESPONSE RECAP Despite disrupted operations, essential services to the region maintained Aimed to reduce or defer expenditure while looking after our people and not compromising operational capability Focus on cash expenditures for 18 month period t
Slide 20: COVID-19 Response Measures Control Expense Growth
COVID-19 RESPONSE MEASURES CONTROL EXPENSE GROWTH • Employee benefit expenses1 up 6.4% YoY (2.7% below the PDS forecast) • Key COVID-19 measures including cancellation of staff and executive incentives helped to offset increases in employee expenses including general remuneration increases and antic
Slide 21: EBITDA Steady and Margin >40%
EBITDA STEADY AND MARGIN >40% • Pro forma EBITDA up $0.5m (1.3%) YoY • EBITDA margin maintained at >40% • PDS forecast assumed declining margin % as we built for growth • FY2020 earnings supported by temporary COVID-19 cost saving measures $60 % Revenue 42.0% 40.7% 41.0% 40.9% 39.9% 39.9% $50 41.8 4
Slide 22: Pro Forma Net Profit After Tax In-Line with PDS Forecast
PRO FORMA NET PROFIT AFTER TAX IN-LINE WITH PDS FORECAST • Pro forma NPAT increased by 4.2% YoY • FY2020 pro forma NPAT excludes: • $1.0m revaluation gain on investment property • $650k tax benefit for the reinstatement of tax depreciation on buildings • $550k impairment of infrastructure assets for
Slide 23: Increasing Development Capital Expenditure
INCREASING DEVELOPMENT CAPITAL EXPENDITURE • Capital expenditure $53.1m1 with majority of spend on 6 Wharf • Completion of significant development projects – Kaweka tug and Thames Street off-port depot FY2020 $80 72.4 Compliance and other $0.4m $70 Replacement $60 $9.8m 53.1 $50 Other development 6
Slide 24: Cash Flow & Liquidity
CASH FLOW & LIQUIDITY FY2020 FY2019 Var $M $M $M Operating cash flows 29.3 29.3 - Investing cash flows (46.0) (17.5) -28.5 IPO proceeds (net of equity costs) - 119.5 -119.5 Repayment of bank debt, swaps - (87.6) +87.6 Other financing cash flows (6.6) (12.4) +5.8 Net (decrease)/increase in cash & cas
Slide 25: Capital Management
CAPITAL MANAGEMENT • Target ratio of Net Debt to EBITDA of no greater than 3.5x through the 6 Wharf construction period, with the expectation that the ratio will be managed to within its long-term target range of 2.0x – 3.0x over time, following completion of 6 Wharf • Increase in Net Debt to EBITDA
Slide 26: Conclusion & Outlook
CONCLUSION & OUTLOOK
Slide 27: Conclusion
CONCLUSION STANDING STRONG FOR OUR REGION In the face of significant challenges, we have continued to deliver on our strategic purpose to work for our region Demonstrated resilience and continuity of our cargo base and our shipping line trade Achieved a solid financial result Significant progress on
Slide 28: Current Outlook
CURRENT OUTLOOK COVID-19 UNCERTAINTY DOMINATES OUTLOOK • Experiencing month to month trading volatility • Continuing economic uncertainty – NZ & global markets • Challenges in key Napier Port trades: • Pipfruit – seasonal labour unavailability likely to undermine increasing crop size potential • Cru
Slide 29: FY2021 Earnings Outlook
FY2021 EARNINGS OUTLOOK • Expected underlying result from operations for FY2021 between $34m and $38m • There are several factors contributing towards the reduction from $41.2m in FY2020 • Key factors • Loss of cruise revenue ($4.3m in FY2020 and growing) • Temporary cost saving measures unwinding i
Slide 30: FY2020 Dividend
FY2020 DIVIDEND • Final dividend of 5 cps declared • Fully imputed • Record date: 4 December 2020 • Payment date: 18 December 2020 See Appendix for dividend policy summary 30
Slide 31: Questions
QUESTIONS
Slide 32: Appendices
APPENDICES The following appended financial information provides a summary of actual 2020 financial results compared to prior periods and the 2020 prospective financial information (PFI) contained in the Product Disclosure Statement (PDS) and the document entitled "Napier Port’s Prospective Financia
Slide 33: Revenue
REVENUE NZ$000 FY2018 FY2019 FY2020 PDS FY2020F Revenue from Port Operations 89,884 97,432 98,166 100,425 Revenue Other 1,865 2,185 2,261 2,109 Total operating income 91,749 99,616 100,427 102,533 NZ$000 FY2018 FY2019 FY2020 PDS FY2020F Container Services 58,005 61,169 62,339 63,117 Bulk Cargo 28,96
Slide 34: Operating Expenses
OPERATING EXPENSES Employee benefit expenses* NZ$000 FY2018 FY2019 FY2020 PDS FY2020F Wages & salaries 23,896 26,862 28,813 29,509 Other staff expenses 2,455 2,130 2,029 2,198 Total employee benefit expenses 26,352 28,992 30,843 31,708 Maintenance expenses NZ$000 FY2018 FY2019 FY2020 PDS FY2020F Mai
Slide 35: Operating Expenses
OPERATING EXPENSES Other operating expenses NZ$000 FY2018 FY2019 FY2020 PDS FY2020F Administration expenses 4,928 5,880 6,220 6,642 Occupancy expenses 5,207 5,393 6,269 6,021 Contract labour 4,139 4,335 4,415 4,414 Site expenses 1,626 2,315 1,284 2,076 Other staff expenses 1,350 1,641 1,578 1,710 Of
Slide 36: Capital Expenditure
CAPITAL EXPENDITURE NZ$000 FY2018 FY2019 FY2020 PDS FY2020F Development capex 6 Wharf pre-construction 957 3,442 991 - 6 Wharf construction - - 33,319 49,784 Additional tug - 4,939 5,082 5,961 Acquisition and development of off-port depot services land 4,101 1,930 2,599 1,600 Refrigerated container
Slide 37: Reconciliation of Pro Forma EBITDA
RECONCILIATION OF PRO FORMA EBITDA NZ$000 FY2018 FY2019 FY2020 PDS FY2020F Statutory net profit after tax 17,576 6,848 22,012 19,973 add: Taxation expense 6,859 5,182 7,309 7,901 add: Net interest expense 4,107 10,437 (149) (61) add: Depreciation and amortisation 10,849 11,981 12,432 12,947 EBITDA 3
Slide 38: Reconciliation of EBITDA to Result from Operating Activities
RECONCILIATION OF EBITDA TO RESULT FROM OPERATING ACTIVITIES NZ$000 FY2018 FY2019 FY2020 PDS FY2020F Result from operating activities 38,912 41,987 41,166 40,880 Adjustments: Impairments of property, plant and equipment (135) (190) - - Underlying reported EBITDA 38,777 41,797 41,166 40,880 38
Slide 39: Reconciliation of Pro Forma NPAT
RECONCILIATION OF PRO FORMA NPAT NZ$000 FY2018 FY2019 FY2020 PDS FY2020F Statutory net profit after tax 6,848 22,012 19,973 Pro forma adjustments: Offer costs 6,404 (285) n/a Other (income) expenses - fair value movements (230) (1,000) - Impairment of joint venture 852 - - Impairment of infrastructu
Slide 40: Reconciliation of Pro Forma Net Cash Flows from Operating Activities
RECONCILIATION OF PRO FORMA NET CASH FLOWS FROM OPERATING ACTIVITIES NZ$000 FY2018 FY2019 FY2020 PDS FY2020F Statutory net cash flows from operating activities 29,336 29,327 29,945 Pro forma adjustments IPO transaction and related costs 5,643 478 n/a Incremental listed company costs (1,393) (136) n/
Slide 41: Dividend Policy
DIVIDEND POLICY • The Board is targeting paying total dividends within a range of 70% to 90% of Free Cash Flow 1 • Free Cash Flow1 is a non-NZ GAAP measure adopted by Napier Port. It excludes capital expenditure on development projects (including 6 Wharf) and the interest costs which will be capital
Slide 42: Our Strategy Builds on a Strong Business
OUR STRATEGY BUILDS ON A STRONG BUSINESS A LONG TERM ASSET ESSENTIAL TO THE HEALTH OF THE HAWKE’S BAY ECONOMY RELEVANCE DURING COVID-19 AN INFRASTRUCTURE ASSET ESSENTIAL TO THE HEALTH OF THE HAWKE’S BAY ECONOMY Napier Port is an essential regional infrastructure asset and, by connecting Hawke’s Bay
Slide 43: Further Information on Napier Port
FURTHER INFORMATION ON NAPIER PORT TO LEARN MORE ABOUT NAPIER PORT AND WHAT IT DOES PLEASE REFER TO: • Our website at napierport.co.nz • The Management Roadshow Presentation available on the Disclose Register published in connection with the initial public offer of Napier Port Holdings Limited avail