TLC produces turn-around result
10 August 2020
Exceeds financial forecasts
Increases capital Investment
Delivers substantial beneficiary discount
The Lines Company (TLC) has ended the financial year having made a “significant positive step-change in its business”.
In releasing its annual report today, TLC Chair Mark Darrow said the company has provided a “record business-driven return” that should provide confidence to TLC’s shareholder, the sector and the wider community.
Darrow credits TLC’s outstanding financial result to the purchase of TrustPower’s metering assets during the year as well as a significant improvement in the Network business.
TLC, via its wholly owned subsidiary FCL Metering (FCLM) purchased the TrustPower metering assets in November 2019 to secure more revenue outside of core network assets which are subject to government regulation. The purchase accelerated FCLM’s planned growth which has materially lifted the business’s net meter numbers.
The decision has proven to be strategically and financially astute and sets up FCLM and TLC well for the future, Darrow said.
“The purchase meant we became the third largest metering provider in New Zealand and the increased revenue offset our reducing allowable regulated returns. Alongside strident efforts to improve efficiency, we have ended the year with a very strong balance sheet and a solid foundation to build on for the coming years.”
TLC’s total revenue for 2019/2020 was $52.5 million with a net profit after tax of $6.7 million. The result surpassed financial forecasts by 28 per cent and was achieved despite transaction costs for the TrustPower purchase.
Debt has increased from $72.5m in March 2020 to $94.5m with borrowings, in the main, related to the TrustPower purchase as well as ongoing long-term capital investment in TLC’s network.
“Last year we invested $15.4 million on network assets to further improve ongoing security and quality of supply across our community,” Darrow said.
“A further $20 million is budgeted for network investment for the coming year. The level of year-on-year investment reflects our absolute commitment to building and supporting an inter-generational asset that supports our community and enables local business.”
During the year TLC returned $5.6 million to its beneficiaries as a discount alongside its shareholder, Waitomo Energy Services Customer Trust (WESCT).
Darrow said the company had made significant reputational gains in the past year, with customer feedback “significantly improved”. The company had put in place a number of initiatives including the establishment of a Customer Advisory Panel and the rolling out of a Vulnerable Customer model to help its most at-risk customers.
“2019/20 is the culmination of three years of hard-fought positive change within TLC,” Darrow says. “Where we have re-engaged with our community, changed our pricing system, strengthened our financial position and improved the way we manage our network.”
“The Executive and staff of TLC should be incredibly proud of the significant progress made in the business, capably lead by CEO Sean Horgan. On behalf of the Board the whole team has our respect and thanks. The community should be very proud of having such a quality team as a key service provider in the region.”
Key non-financial highlights over the past three years include:
- Extensive engagement with our community including the establishment of a permanent Customer Advisory Panel
- Development of a dedicated Vulnerable Customer model with supporting resources
- Changed our approach to asset management which has resulted in doubling our project spend while improving productivity
- Implementation of a simpler Time of Use pricing structure, including stopping the practice of prompt payment discounts
- Material improvements in our health and safety practices and performance
- Growth in staff engagement and pride in the business
- Actively developed local skills through our scholarship and apprentice programmes
- Insulation of over 100 homes through Maru Energy Trust with another 500 planned for FY21
- Incorporated the GoodMeasure investment into FCLM
Darrow said he was particularly proud of TLC’s speedy response to the COVID-19 global pandemic and of the “extraordinary” efforts of TLC staff.
“Within three days, our entire staff had mobilised and changed all necessary processes to allow people to work from home, without missing a beat. The Board was extremely proud of such a quick and quality response to an unprecedented event which allowed us to support our community as much as possible.”
TLC provided nearly $1 million of immediate support to residential customers during the lockdown period by wiping all variable charges during April.