DCHL Half year result to 31 December 2008

Under difficult market conditions, the Dunedin City Holdings Ltd (DCHL) group has achieved another steady half-year result.

Sales have increased 10.9% to $110.5m with a strong contribution from City Forests Limited. The surplus before shareholders' interest has decreased to $10.4m from $12.1m in the same period last year. Much of the cause for this drop is the reduced amount included in income this year for the revaluation of the forest.

"It is satisfying to see that the group, even in a tough economy, continues to generate surpluses and that the diversity in the commercial operations of the group continue to provide strength" comments DCHL Chairman, Paul Hudson. "The rapid and significant fall in demand for timber products, property development services and tourism products has affected our group as it has the economy as a whole. Yet to date, the group remains well in surplus and it continues to generate a strong, if lower, cash flow that fully meets its foreseeable capital requirement."

Building development in the Central Otago region has reduced in pace and the number of new connections for Aurora Energy Limited has slowed although heavy capital investment has continued in Queenstown to underpin future supply security. DELTA Utility Services Limited in a shrinking market has produced a result fully in line with budget.

The NZ forestry industry has operated in a very volatile environment. The oil price, the cost of freight for logs into Asia and the exchange rate have all improved but the market for the logs in Asia and for timber in a range of world markets has been very soft. Despite this market, trading conditions for City Forests Limited improved marginally over the six months and this is reflected in the small increase in the forest valuation.

Citibus Limited and Taieri Gorge Railway Limited continue to negotiate their way through a declining tourism market. Incoming tourist numbers to the South Island declined last year and have declined further this year. In another business sector Citibus has continued to acquire new super low floor buses for the Dunedin commuter market and from 1 July 2008 increased its services to the Regional Council and Dunedin public.

Recent announcements by Air New Zealand as they affect Dunedin International Airport Limited have been well covered in the press. The effect on the income and cash flows of the airport company will undoubtedly be negative. The full extent of this is still being thoroughly worked through and the first impact will be seen in the year end result. Despite our disappointment over the reduction of international services, it is pleasing to see an overall 15.8% increase in passenger numbers using the airport.

In the current economic environment predictions are less certain and directors claim no special foresight. However, we do have the advantage that our investments are spread over a wide range of activities and some key business sectors remain steady. The board believes that with this underlying strengt, the group will trade profitably for the second half of the year.

Contact details

Contact Paul Hudson on 0274 321 632.

Last reviewed: 12 Mar 2009 10:24am