Christchurch City Holdings Limited Analysis
Overview
CCHL is the commercial and investment arm of the Council. It was incorporated on 12 May 1993 to act as the holding company for the Council's commercial investments. As a result, it is a council controlled organisation under the Local Government Act 2002.
CCHL has eight direct Operating Subsidiaries, being Orion, CIAL, LPC, ESL, City Care Limited (Citycare), Red Bus Limited (Red Bus), EcoCentral Limited (EcoCentral) and Development Christchurch Limited (DCL). Six of these are 100% owned,the other two are majority owned by CCHL, being Orion (10.725% owned by Selwyn District Council) and CIAL (25% owned by the Crown).
CCHL's mission is to support the future growth of Christchurch by investing in key infrastructure assets that are commercially viable and environmentally and socially sustainable. CCHL's approach is to work with the Council to identify infrastructure needs of the region not being filled by the private sector or existing Council operations. This led to the establishment of entities such as ESL and DCL. This approach has resulted in CCHL and the Council (through its ownership of CCHL) owning a valuable portfolio of trading companies with strategic assets.
Continuing with this approach may result in CCHL's portfolio changing over time to meet the Christchurch region's infrastructure needs. At the date of this PDS CCHL does not have any plans to sell its shareholdings in its existing companies.
CCHL does not itself hold any infrastructure assets. Rather, CCHL is a holding company with its principal assets being the shares that it holds in its direct Operating Subsidiaries.
CCHL's main activities are monitoring the performance of its subsidiaries, through letters of expectation, regular reporting, and the appointment of Directors to its direct subsidiaries.
CCHL's primary source of income is dividend receipts from its direct Operating Subsidiaries. Its other source is interest income earned on loans advanced.
Performance
The following information was extracted from Christchurch City Holdings Limited's full year results, released on 29 August 2024:
Against the backdrop of tightening economic conditions and rising inflationary pressures, the Group delivered a solid result for the 2024 financial year (FY24). The CCHL portfolio value increased $254m (7.9%) across the year – growing from $3.2 billion to $3.5 billion at the end of FY24. Across FY24, CCHL paid $50.7 million in dividends to Christchurch City Council, in line with the FY24 SOI target and an increase on the $32.4 million paid during FY23. Total operating revenue for the Group in FY24 was $1,562 million compared to $1,444 million in FY23, whilst earnings before interest, tax, depreciation, amortisation and impairment for the Group was $450 million in FY24, compared to $383 million in FY23.
The Group delivered a normalised net profit after tax (NPAT) in FY24 of $81 million, compared to $99 million in FY23,in line with the target NPAT outlined in the FY24 SOI to Christchurch City Council of $84 million.
Normalised NPAT adjusts the reported NPAT of $38m for deferred tax expense related to a legislative change removing tax depreciation on commercial buildings. The elevated tax expense for FY24 also reflected Christchurch City Council’s utilisation of CCHL’s historical tax losses. Both tax expenses were non-cash and did not impact the Group’s ability to pay dividends or the independently assessed portfolio value.
Despite wage and supplier inflationary cost pressure being felt across the Group, Enable Services delivered favourable results on the prior year through pricing and strong cost control, whilst Orion was slightly behind prior year noting the negative impact of higher operating and interest costs. Both continued their investment and development of their respective electricity and fibre networks, supporting their resilience along with the growth and development of Canterbury.
Christchurch International Airport’s bounce-back post Covid continues despite some industry challenges with respect to capacity. New summer seasonal services supported passenger growth in FY24, alongside a solid performance from the airport precinct property portfolio.
Lyttelton Port Company faced particularly tough operating conditions following a challenging start to FY24 container volumes, before signs of normalisation during the second half of the financial year. Citycare’s Water and Property lines of business both delivered strong operating results, but softer FY24 profit due to higher non-cash expenses and in FY23 a one-off gain on the sale of property. The Group’s total assets increased from $5.8 billion to $6.0 billion.
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