AsureQuality posts 9% drop in 2015 profit on increased investment, sees further decline in 2016

Tuesday 8th September 2015

AsureQuality posted a 9 percent drop in 2015 annual profit and expects a further decline in 2016 as the state-owned food safety company steps up investment for future growth.

Profit fell to $11.4 million in the 12 months ended June 30, from $12.5 million a year earlier, the Auckland based state-owned enterprise said in a statement posted on the Treasury website. It expects profit to decline further to $10.6 million in 2016 before increasing to $12 million in 2017, according to its 2015-2018 statement of corporate intent.

AsureQuality has been praised by the government for its history of outperforming financial targets, and improving its profits, valuation and dividend levels. However the company has said it's now entering a period of investment as it seeks to expand outside its core New Zealand and Australian markets to Southeast Asia, China and the Gulf states.

"To maintain our relevance to our customers in the primary and food sectors within our core markets, it is planned to establish a growing presence across the Asia-Pacific and Gulf state regions," had said in its SCI. "Our geographic expansion will focus on developing/emerging markets with increasing middle class populations driving an increased focus on food safety and quality."

The company's board is scheduled to meet tomorrow to decide the level of its final dividend for the year. It paid an interim dividend of $3 million and a special dividend of $2.5 million in February. The first half dividends were consistent with its payments in 2014, when it also paid a final dividend of $4.5 million.

The government, which may not meet its target of returning to budget surplus this year, has put all state-owned enterprises on alert that its preference is for dividends over new reinvestment and any alternative capital allocation needs a "strong business case".

AsureQuality, which achieved a dividend payout ratio of 120 percent in 2014, expects that to decline to 119 percent in 2016, and to 74 percent in 2017, according to the SCI.

It calculates its dividend payout as a proportion of net operating cash flow less an allowance for capital maintenance.

In 2015, the company's revenue rose 9.3 percent to $189.2 million, reflecting higher sales from key laboratories in Auckland, Wellington and Singapore, as well as increased cattle export activities and biosecurity response activities.

BusinessDesk.co.nz

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