Wiri prison operator narrows full-year loss, doubles dividend

Wednesday 16th November 2016

SecureFuture Wiri Holdings, which has the contract for the Auckland South Corrections Facility, narrowed its full-year loss while managing to double its dividend payment.

The loss narrowed to $1.6 million in the year ended June 30, from a loss of $7.5 million a year earlier. Revenue fell 27 percent to $41 million but costs fell by about 40 percent to $33 million, resulting in a gain in gross profit of about $7.2 million.

SecureFuture Wiri, which is owned by InfraRed Capital Partners, John Laing Investments and the Accident Compensation Corporation, won the contract for the high-security men's prison at Wiri in 2012 via a public-private partnership (PPP) arrangement. The Wiri prison was officially opened in May last year and is run by Serco, which sold its 10 percent stake in SecureFuture to InfraRed in June.

The company garnered almost as much interest income as it did revenue at $30.2 million, up from $28 million a year earlier. It operates under a 25-year concession with the Department of Corrections, which pays a monthly charge to SecureFuture to cover the construction, finance and operating costs for the prison. Under the agreement, Corrections provided land adjacent to the Auckland Region Women’s Corrections Facility to the contractor on which to build and run the prison.

SecureFuture's annual financial statements show the balance of its concession finance receivables at June 30 was $329 million, down from $332 million a year earlier. The effective interest rate was 9 percent, up from 8 percent in 2015. The receivables are pledged as security for its senior bank debt facility, which stood at $297 million and paid interest of 6.1 percent. The bank facility matures in August 2019. In addition, it had $45 million of lower-ranking shareholder loan notes at an interest rate of 10.5 percent and a final repayment date of May 2040.

The company paid about $34 million to Serco to operate the prison, up from $16.4 million a year earlier.

London Stock Exchange-listed Serco's New Zealand unit doubled revenue to $64 million in calendar 2015 but costs including a $10 million onerous contract provision associated with the Mt Eden contract and a doubling in its wage bill to $40 million led to a wider loss of about $11 million, from a loss of $2.6 million in 2014. Serco last year agreed to pay $8 million to Corrections after the department's chief executive Ray Smith invoked a step-in clause in the Crown's contract with Serco, taking back management of the Mt Eden Corrections Facility following revelations of fight clubs, contraband and other management failures at the remand prison.

SecureFuture's annual loss included a $92,000 tax expense, while the year-earlier loss included a $2.69 million tax gain. The company declared dividends of $5.5 million in its latest year, up from $2.1 million a year earlier.

BusinessDesk.co.nz

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