South Port NZ Ltd – Interim Report to 31 December 2017

Directors
Rex Chapman
Chairman
Rick Christie
Philip Cory-Wright
Thomas Foggo
Clare Kearney
Jeremy McClean
Corporate Executives
Nigel Gear
Chief Executive
Geoff Finnerty
Port General Manager
Jamie May
Business Development Manager
Hayden Mikkelsen
Container Manager
Frank O’Boyle
Infrastructure Manager
Lara Stevens

Finance Manager
Murray Wood
Warehousing Manager
Helen Young
Human Resources Manager
Group Companies
Parent Company
South Port New Zealand Limited
Subsidiary
Awarua Holdings Limited
Island Harbour, PO Box 1, Bluff 9842, New Zealand
 +64 3 212 8159
 reception@southport.co.nz
 South Port NZ
WWW.SOUTHPORT.CO.NZ
INTERIMREPORT
FOR THE SIX MONTH PERIOD
ENDED 31 DECEMBER 2017
Financial Performance
South Port’s NPAT for the first six months of FY2018 of $4.9M
(FY2017 - $4.10M) exceeded the expected level of half
year profit. Several factors contributed to this interim result
including:
ÎLarge volumes of inbound fertiliser were recorded for the
first six months.
ÎDry weather had a negative impact on pasture growth which
has led to an increase in stock food imports for the dairy
industry.
ÎLog exports have remained strong due to buoyant market
conditions.
The reported half-year profit should be read in conjunction
with the Outlook section of this report (where a year-end NPAT
forecast range is provided).
Cargo
Total cargo activity was 1,732,000 tonnes compared with
1,517,000 tonnes in the prior year interim period. This
represents an increase in cargo flows of 215,000 tonnes
or 14%. Bulk cargoes continue to be the backbone of the
Company recording strong volumes in fertiliser (+63,000), acid
(+20,000) stock food (+19,000) and logs (+49,000).
Containerised cargo declined 4% largely due to a reduction
of empty boxes being delivered to the Port, however there
has been a positive trend of increased volumes of imported
containerised cargo coming through the Port over the same
period.
Unusually dry conditions in the south have also seen an
increase in both containerised supplementary feeds being
delivered to the Port and meat products being exported due
to shortage of feed creating earlier processing demands.
Interim Report
Operational Events
Dairy
The most recent global dairy trade (GDT) auctions in 2018
have delivered small price increases on the previous events
held in December 2017. These price increases in the GDT are
a reflection of the tightening of supply in New Zealand due to
the recent dry weather and in some areas drought conditions.
Any shortening of supply from New Zealand is expected to
be met by increased production by both the European and
United States producers therefore this market dynamic will
most likely have an impact on the future GDT auctions.
Intermodal Freight Centre (IFC)
The IFC is now into its second full year of operation. Initially
set up for the handling of imported goods, containers are
now being recycled at this location allowing export product
to be loaded into the empty box and sent back to the Port for
shipment.
The central location, adjacent to the KiwiRail container transfer
yard in Invercargill works extremely well for our customers
providing the flexibility to choose port of origin / destination
and mode of transport for the movement of containers. The
ability to collect cargo at this facility rather than make a return
trip to Bluff provides a more efficient supply chain for the
customer. Additional benefits include removing trucks off
the road and less impact on the environment with reduced
emissions.
Container shipping market
The once top twenty container carriers in the world will be
reduced to a top seven over the next twelve months primarily
due to merger and acquisition activities. The respective lines
are MSC, Maersk, Cosco, CMA CGM, Hapag-Lloyd, ONE and
Evergreen, with the first four controlling approximately 70%
of the world market.
Of these top four, MSC is an important weekly caller to
the Port with the Capricorn Service providing a valuable
import/export link for all Southern region customers. This
year represents an important milestone for this customer
recognising the 10th anniversary of their first call to the Port in
May 2008 with the vessel MSC Hobart.
Log storage area development
The paving of the north rail log storage area is well underway.
The first half of the development has been completed with
the remainder expected to be finished in March. This is an
important development for both the Port and the log export
customers as it provides for increased storage, improved
traffic management and enhanced environmental outcomes.
Market conditions for export logs remain favourable.
Demand in China is high for wood fibre with resources being
channeled into the construction sector and the Indian market
is recovering after the recent GST reform and the bank note
demonetisation.


Total equity at beginning
of the period 37,223 35,596 35,596
Surplus after income tax 4,901 4,108 8,448
Other comprehensive
surplus/(loss) – – –
Total comprehensive surplus 4,901 4,108 8,448
Distributions to shareholders (4,854) (4,853) (6,821)
Total equity at end of the period 37,270 34,851 37,223
31/12
2016
$000’s
31/12
2017
$000’s
Year to
30/06/17
$000’s
Surplus after taxation 4,901 4,108 8,448
Add/(less) items classified
as investing/financing activities – – –
Add/(less) non-cash items 1,432 1,572 3,240
Add/(less) movement in working
capital (3,446) (2,201) 380
Net cash provided by operating
activities 2,887 3,479 12,068
UnauditedUnauditedAudited
5 STATEMENT OF CHANGES IN EQUITY
SIX MONTH PERIOD ENDED
31 DECEMBER 2017
6 NET CASH FLOW FROM OPERATING ACTIVITIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
TOTAL EQUITY 37,270 34,851 37,223
Non-Current Assets
Property, plant & equipment 46,834 47,436 46,570
Total non-current assets 46,834 47,436 46,570
Current Assets
Cash 535 1,037 1,675
Trade and other receivables 7,061 5,905 4,310
Total current assets 7,596 6,942 5,985
Total assets 54,430 54,378 52,555
Non-Current Liabilities
Employee entitlements 47 53 67
Deferred tax liability 405 425 441
Borrowings 11,900 14,700 9,600
Financial liabilities 331 263 254
Total non-current liabilities 12,683 15,441 10,362
Current Liabilities
Trade and other payables 3,032 2,798 2,898
Employee entitlements 668 771 868
Provision for taxation 777 517 1,204
Total current liabilities 4,477 4,086 4,970

Total liabilities 17,160 19,527 15,332
TOTAL NET ASSETS 37,270 34,851 37,223

Net asset backing per share $1.42 $1.33 $1.42
31/12
2016
$000’s
31/12
2017
$000’s
Year to
30/06/17
$000’s
UnauditedUnauditedAudited
Business Development Opportunities
Mataura Valley Milk (MVM)
Construction of MVM’s infant formula plant is on target to be
completed in the second quarter of 2018 with commissioning
scheduled for June 2018 and processing to begin
August 2018.
NZAS
NZAS has achieved another excellent production result for the
year ending 31 December 2017, almost matching the record
volumes of finished metal product exported in the same
period last year. This customer is an important contributor
to the Port and we will continue to work closely with NZAS
to determine where we can add value for both of our
businesses.
Health & Safety (H&S)
The Port Company is currently undertaking three important
H&S projects likely to take between 12 to 24 months to
complete:
ÎPerson Conducting a Business or Undertaking (PCBU) –
identifying all third party interactions, classifying contractual
relationships and documenting H&S obligations of the
respective parties.
ÎCommon User Safety Protocol (CUSP) – a document
outlining specific objectives to best identify and manage
the various H&S and environmental risks, threats and
opportunities at the Port.
ÎCritical Fatality Risks Project – The Fatality Risk Management
program will identify the critical controls, ensuring
accountability, implementing, verifying and reporting
on the effectiveness of these controls. Also essential
in preventing fatalities is conducting quality event
investigations and ensuring lessons are truly learned and
shared.
Outlook
The receipt of bulk fertiliser cargoes was “front ended” this
year by the customer and the expectations are that these
volumes will ultimately realign closer to the projected budget
by year end. As mentioned above, the market conditions for
logs are buoyant and export volumes are expected to remain
consistent with some potential upside.
All of the other remaining major cargo categories are
expected to track close to budget in the second six months
of the financial year.
Based on all known factors at the date of releasing its 2018
interim result, South Port estimates that its full year earnings
will fall in the range of $8.65 million to $8.90 million (FY2017 -
$8.4M).
Dividend
After assessing the anticipated year end result and future
increased capital expenditure, the Directors have declared a
fully imputed interim dividend of 7.50 cents per share (2017 –
7.50 cents) payable on 6 March 2018.
In the event that the Company’s FY2018 profit falls within the
above forecast range then the Directors expect that the full
year dividend payment will be consistent with the previous
year.
R T CHAPMAN
Chairman
N G GEAR
Chief Executive
Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
SIX MONTH PERIOD ENDED
31 DECEMBER 2017
Total operating revenues
from port services 19,474 17,410 36,868
Total operating expenses (10,828) (10,000) (21,549)
Gross profit 8,646 7,410 15,319

Administrative expenses (1,741) (1,477) (3,060)
Operating profit before
financing costs 6,905 5,933 12,259

Financial income 9 107 127
Financial expenses (333) (298) (576)
Net financing income/(costs) (324) (191) (449)
Other income 279 – 2
Surplus before income tax 6,860 5,742 11,812
Income tax (1,959) (1,634) (3,364)
Net surplus after income tax 4,901 4,108 8,448
Other comprehensive income – – –
Total comprehensive surplus
after income tax 4,901 4,108 8,448
Basic earnings per share $0.187 $0.157 $0.322
31/12
2016
$000’s
31/12
2017
$000’s
Year to
30/06/17
$000’s
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTH PERIOD ENDED
31 DECEMBER 2017
Cash flows from operating
(note 6) 2,887 3,479 12,068
Cash flows from investing (1,473) (2,496) (3,380)
Cash flows from financing (2,554) (854) (7,921)
NET INCREASE/(DECREASE) (1,140) 129 767
IN CASH
31/12
2016
$000’s
31/12
2017
$000’s
Year to
30/06/17
$000’s
UnauditedUnauditedAudited
UnauditedUnauditedAudited
Notes to the
Financial Statements
1 ACTIVITIES OF SOUTH PORT GROUP
The Group is primarily involved in providing and managing
port and warehousing services.
2 ACCOUNTING POLICIES
The Group is a Financial Markets Conduct (FMC) reporting
entity for the purposes of the Financial Reporting Act
2013 and the Financial Markets Conduct Act 2013. These
financial statements comply with these Acts and have been
prepared in accordance with the New Zealand equivalents
to International Financial Reporting Standards (NZ IFRS)
and other applicable Financial Reporting Standards, as
appropriate for profit-orientated entities. These financial
statements comply with International Financial Reporting
Standards (IFRS). There has been no change in accounting
policies. All policies have been applied on a consistent basis
with the most recent annual report.
3 TAXATION
Income tax expense comprises current and deferred tax
at the company tax rate of 28%. Income tax expense is
recognised in the Statement of Comprehensive Income
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
4 SEGMENTAL REPORTING
The South Port Group operates in the Port Industry in
Southland, New Zealand, and therefore only has one
reportable segment and one geographical area based on
the information as reported to the chief operating decision
maker on a regular basis. South Port engaged with one major
customer who contributed individually greater than 10% of its
total revenue for the period ended 31 December 2017. This
customer contributed $3.95 million for the six months ended
31 December 2017 (2016: $4.43 million).
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2017