South Port NZ Ltd – Interim Report to 31 December 2019

“
“Being part of one
team without limits
or boundaries
provides a great
safety culture
where everyone
strives to do the
right thing, even
when no one is
watching. This
allows everyone to
go home to their
families at the end
of their working
day.”
ROCHELLE
“The opportunity to transfer between departments provides
chances to upskill. We are learning new things every day,
regardless of how long we have been in the job. Being part of
a team that enjoys their job means we work together well and
respect one another.”
LAWRENCE
FINANCIAL PERFORMANCE
South Port had a steady but pleasing start to the financial
year. Bulk cargoes, particularly logs and fertiliser came under
pressure. This was balanced out by a strong performance in the
cold storage operation as a result of recent capital investments
allowing an increase to blast freezing capacity.
South Port’s NPAT for the first six months of FY2020 was $4.6
million, consistent with the previous corresponding period
in FY2019. Several factors impacted on this interim result
including:
öParticularly wet conditions resulted in lower than expected
volumes of inbound fertiliser being received in the first six
months.
ö High log prices in China led to an oversupply of softwood into
this market. This has now been exacerbated as a result of the
bark beetle infestation in Europe, pushing large volumes of
spruce logs into this market. These two factors have seen a
reduction of log exports through the Port.
öThe installation of a new blast freezer has improved the
efficiency and capacity of this operation which has allowed
the introduction of new customers.
The reported FY2020 interim 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 1,687,000 tonnes compared with
1,772,000 tonnes in the prior year interim period. This represents
a reduction in cargo flows of 85,000 tonnes or less than 5%.
Some bulk cargoes were negatively impacted as noted above
with fertiliser (-51,000) and logs (-84,000) however there
were some positive movements which included increases in
petroleum products (+13,000) and alumina (+20,000).
Containerised cargo increased 7% to 21,000 TEU. This
improvement was due to a number of cargo categories
increasing which is a pleasing result.
The Company achieved a milestone of 50,000 TEU in the
calendar year which was a strategic goal set five years ago at
the time of the purchase of the second crane.
Interim Report
OPERATIONAL EVENTS
Cold Stores
The benefits of the recent capital expenditure on the cold
stores load in/load out area and the installation of a new blast
freezer are now being realised. Increased efficiency, safety
and capacity have allowed the Port to increase throughput and
introduce more customers to our blast freezing facility. This
is consistent with our purpose which is to facilitate the best
logistic solutions for the Region.
Review and Audit of Pilotage Practices
South Port has undertaken an external review of pilotage
practices at Bluff. This was last carried out in 2003 and it is
timely that this review is done to ensure that our systems
are current/up to modern day practice for this very important
aspect of the Port’s operation.
Maintenance
The Port is making pleasing progress with the installation of
the Impressed Current Cathodic Protection (ICCP) system
on the Access Bridge. After a successful trial on Bay 5, two
further bays have been completed in the first six months of
this financial year with work now beginning on the next two
bays. The expectation is that four bays will be completed
each summer (14 bays in total) with the work expected to be
completed by FY2022.
Container Terminal Expansion
A $1.2M container terminal expansion was successfully
completed in December 2019. This expansion was undertaken
to alleviate some of the stress caused by the 25% growth in
volumes experienced in FY2019.
Intermodal Freight Centre (IFC)
The IFC remains an important part of the container supply
chain in the Southland landscape. Adjacent to the KiwiRail
container transfer yard in Invercargill, this operation has proven
to be successful and works extremely well for our customers
providing the flexibility to choose port of origin/destination and
mode of transport for the movement of containers in and out of
the region.
CUSTOMERS
Open Country Dairy (OCD)
OCD has completed the construction of their new 8,000 m2
warehouse located at Awarua. This warehouse will primarily
be used to store ingredient products but will also hold finished
goods for a short period before being transported to the
Port for packing for export. The existing South Port owned
warehouse on the Port where ingredients are currently stored
will now be marketed to other potential customers.
International Maritime Organisation (IMO) – MARPOL Annex VI
From 1 January 2020, the sulphur content in fuel oil used on
board ships has been reduced to 0.50% (down from 3.5%) due
to new regulations implemented by the IMO. Although New
Zealand is not a signatory to this treaty (planning to join in late
2021) most if not all international ships trading in our waters
will have to comply with the new regulations from that date.
It is pleasing that the Mediterranean Shipping Company,
calling to Bluff with their weekly Capricorn container service,
has invested heavily worldwide fitting scrubbers to their
vessels in order to comply with these MARPOL regulations.
New Zealand Aluminium Smelter (NZAS)
The issues around the strategic review have been well
documented in recent times.
Since 2008 NZAS has paid close to $200M of increased
transmission pricing costs, most of which is used for upgrades
in the North Island (currently pay between $65M and $70M
annually). This pricing regime needs to be addressed by
the Electricity Authority now to allow NZAS to become
internationally competitive once again and remain an
important part of the Southland landscape.
An update on the strategic review of NZAS is expected at the
end of the first quarter 2020.
OMV – Natural Gas Exploration
OMV began drilling an exploratory well in the Great South
Basin in early January. This operation takes approximately 40 to
50 days therefore all support services are being run out of their
existing base in Taranaki. Should OMV be successful in their
search for natural gas then South Port is well positioned to be
involved in supporting the next stages of the development.
DIRECTORS
Rex Chapman
Chairman
Philip Cory-Wright
Thomas Foggo
Nicola Greer
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
INTERIM
REPORT
FOR THE SIX MONTH PERIOD
ENDED 31 DECEMBER 2019
WWW.SOUTHPORT.CO.NZ
Island Harbour | PO Box 1
Bluff 9842 | New Zealand
 +64 3 212 8159
 reception@southport.co.nz
  South Port NZ

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
TOTAL EQUITY 42,729 39,758 43,026
Non-Current Assets
Property, plant & equipment 50,225 49,091 49,571
Total non-current assets 50,225 49,091 49,571
Current Assets
Cash and cash equivalents 1,387 905 1,426
Trade and other receivables 7,682 7,031 5,702

Total current assets 9,069 7,936 7,128
Total assets 59,294 57,027 56,699
Non-Current Liabilities
Employee entitlements 35 39 19
Deferred tax liability 19 219 48
Loans and borrowings 10,500 – 7,000
Financial liabilities 542 296 530
Total non-current liabilities 11,096 554 7,597
Current Liabilities
Trade and other payables 3,843 3,065 3,152
Employee entitlements 1,230 775 1,172
Provision for taxation 395 653 1,682
Loans and borrowings 1 12,100 –
Financial liabilities – 122 70
Total current liabilities 5,469 16,715 6,076

Total liabilities 16,565 17,269 13,673
TOTAL NET ASSETS 42,729 39,758 43,026

Net asset backing per share $1.63 $1.52 $1.64
31/12
2018
$000’s
31/12
2019
$000’s
Year to
30/06/19
$000’s
UnauditedUnauditedAudited
Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
SIX MONTH PERIOD ENDED
31 DECEMBER 2019
Total operating revenues
from port services 21,583 20,918 43,950
Total operating expenses (13,140) (12,489) (25,768)
Gross profit 8,443 8,429 18,182

Administrative expenses (1,871) (1,756) (3,802)
Operating profit before
financing costs 6,572 6,673 14,380

Financial income 66 10 25
Financial expenses (200) (312) (746)
Net financing costs (134) (302) (721)
Other income 2 23 51
Surplus before income tax 6,440 6,394 13,710
Income tax (1,884) (1,843) (3,923)
Net surplus after income tax 4,556 4,551 9,787
Other comprehensive income – – –
Total comprehensive
surplus/(loss) after income tax 4,556 4,551 9,787
Basic earnings per share $0.174 $0.173 $0.373
31/12
2018
$000’s
31/12
2019
$000’s
Year to
30/06/19
$000’s
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTH PERIOD ENDED
31 DECEMBER 2019
Cash flows from operating
(note 7) 3,847 3,417 13,554
Cash flows from investing (2,533) (3,550) (6,098)
Cash flows from financing (1,353) 47 (7,021)
NET INCREASE/(DECREASE) (39) (86) 1,426
IN CASH
31/12
2018
$000’s
31/12
2019
$000’s
Year to
30/06/19
$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 AMENDMENTS TO NZ IFRS
One new standard is effective for annual periods ending
30 June 2020, being NZ IFRS 16: Leases.
NZ IFRS 16 has been adopted however the impact to the Group
is immaterial. The right-to-use asset, lease liability, interest
and depreciation will be recognised in the Statement of
Comprehensive Income and Statement of Financial Position at
year end (30 June 2020).
4 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.
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2019
R T CHAPMAN
Chairman
N G GEAR
Chief Executive
Total equity at beginning
of the period 43,026 40,060 40,060
Profit/(loss) after income tax 4,556 4,551 9,787
Other comprehensive income – – –
Total comprehensive surplus 4,556 4,551 9,787
Distributions to shareholders (4,853) (4,853) (6,821)
Total equity at end of the period 42,729 39,758 43,026
31/12
2018
$000’s
31/12
2019
$000’s
Year to
30/06/19
$000’s
UnauditedUnauditedAudited
6 STATEMENT OF CHANGES IN EQUITY
SIX MONTH PERIOD ENDED
31 DECEMBER 2019
Surplus after taxation 4,556 4,551 9,787
Add/(less) items classified
as investing/financing activities – – –
Add/(less) non-cash items 1,792 1,824 3,762
Add/(less) movement in working
capital (2,501) (2,958) 5
Net cash provided by operating
activities 3,847 3,417 13,554
7 NET CASH FLOW FROM OPERATING ACTIVITIES
5 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 2019. This customer
contributed $5.06 million for the six months ended
31 December 2019 (2018: $4.22 million).
HEALTH, SAFETY AND WELLBEING (HSW)
The HSW team began the first of many Bowtie risk
assessments this financial year. These assessments are
currently focused on critical risks and developing controls
to mitigate these risks or alternatively to “fail safely”. To fail
safely is important as controls need to be put in place for
when accidents do occur to protect our employees from harm.
These sessions involve all staffing levels and have been very
successful to date with a number of positive outcomes being
actioned as a result.
It is pleasing to note that the Company’s Lost Time Injury
Frequency Rate (LTIFR) has been steadily dropping for the past
18 months and is now the lowest it has been in four years.
OUTLOOK
The recent outbreak of the coronavirus has sent ripples
through the international marketplace, impacting tourism and
trade. There is a fair amount of uncertainty as to the level of
impact however the Port will notify shareholders should there
be any material changes in the coming months.
Weather and offshore market conditions are two variables
that regularly have an impact on the trade volumes through
the Port and this year is no exception. The continuing wet
conditions leading up to Christmas impacted fertiliser imports
and although these are recovering, we do not expect to recoup
the total volume lost.
The log trade has also been difficult and expectations are
that this trend will continue for the remainder of the year.
Our expectations are that all other cargoes will track close
to budget with potential upside in both containers and cold
storage activities although the recent flood event in rural
Southland and Otago may also impact volumes.
Based on all known factors at the date of releasing its 2020
interim result, South Port estimates that its full year earnings
should fall in the range of $8.20 million to $8.70 million (FY2019
- $9.79million).
DIVIDEND
After assessing the anticipated year end result, the Directors
have declared a fully imputed interim dividend of 7.50 cents
per share (2019 – 7.50 cents) payable on 4 March 2020. In the
event that the Company’s FY2020 year end profit falls within
the forecast range then the Directors are confident that the
full year dividend payment will be consistent with the previous
year.