Scope Oil
This division has continued to grow and now returns
a profit with surplus funds invested into research
and development into the cleaning of hydraulic oil.
TLC is excited about the future of this division.
John Deere Electrical
JDE continues to be profitable in a constrained
market and is looking at extra market
opportunities over the 2013 financial year.
Debt
Our debt has reduced slightly from $41.4m to
$40.9. If the land owner involved in the Speedys
Road scheme exercises his option to increase his
ownership, we may able to reduce debt further
over the next year.
Projected Results and Future
Dividends
The increase in network valuation will add close to
$300,000 to our 2013 network depreciation. The
change does mean that network renewals will be
close to fully funded from network depreciation,
leaving the surplus available for either increased
investment or an increased dividend distribution.
While the economic environment continues to
be challenging due to uncertainty in Europe, we
have reduced bank debt to $2m less than in 2009
despite having constructed two hydro schemes
during that time. Given that the local economy
has not recovered, TLC feels that now is the time
for shareholders to share in the success of the
company through an increase in dividend.
The Board believes that, if TLC is to continue to
grow in value for the benefit of the shareholders,
then it needs to continue to diversify into
businesses other than the network business.
However, in order to guarantee success, such
diversification should leverage off the proficiencies
the Company has developed and TLC is committed
to both minimising price and maximising
shareholder dividends.
In order to maintain an acceptable cost of debt
TLC needs to maintain its earnings before interest
and tax at a ratio of at least 2.5 times its interest
costs. Generation schemes fully funded from debt
do not initially meet this ratio, but do over time as
electricity prices rise. As TLC’s owners are customer
trusts it is important that the dividends that are
paid to them are stable over time and at a minimum
reflect the earning capacity of the network.
This ensures that this year’s beneficiaries are not
expected to sacrifice the returns they receive from
the trusts to fund investments which provide
a return to future beneficiaries. The need to
fully fund initial generation schemes and other
investments from debt caps the total funds
available for non-network investment. As the
investment portfolio develops its cash flow will
be sufficient to fund other investments and this
restriction will ease and dividends will increasingly
benefit from the extra cash produced from non
network investments.
The Board and Management extend their thanks to
staff for TLC achievements of 2011/12.
We would also like to thank our customers and
assure you that everything we do is designed to
keep the network sustainable and the lines charges
as low as possible for permanent residents.
Malcolm Don,
Chairman
John Anderson,
CEO
keeping you connected
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