Bancorp Wealth management New Zealand Limited. Annual Report June 2012

Transcription

1 Bancorp Wealth management New Zealand Limited Annual Report June 2012

2 Report to Shareholders Dear Shareholders The 2012 financial year has seen the company make great strides in positioning itself for the future. We achieved many things that will position us extremely well for For example: Having completed the refinancing of the Auckland Airbus Express our funding cost for that business being in excess of $500,000 less in 2013 than in 2012; In July our subsidiary Aviation Capital purchased a further aircraft which will provide us with a full year s positive earnings in 2013 We increased our stake in the world s leading independent aviation insurance broker, Boston Marks, from 20% shareholding to 40% These steps will enable the company to continue to grow its profitability and its position as New Zealand s leading internationally focused investment and private banking organisation. Frankfurt Stock Exchange Changes The Frankfurt Stock Exchange s decision to close the First Quotation Board in December 2012 has required us to undertake a restructure of the organisation. This will result in the new listing of Bancorp Wealth Management New Zealand Limited on the Frankfurt Entry Standard Board by December Unfortunately this has been disruptive to shareholders but is something that is out of our hands. The change has affected over 450 companies. To put this into perspective, this is more than double the total number of companies listed on the New Zealand Stock Exchange s main board and alternative board. Ultimately, our move up to the Entry Standard Board, and the consequent requirement for the issuance of an EU compliant prospectus, will produce higher visibility for the company, more liquidity for shareholders and enhance our target capital raising in In addition, although there are one off costs in the prospectus and listing requirements, the change will produce savings by eliminating the need for a UK based parent company which was expensive to maintain and added complication to the group structure. Dividends The Directors have elected not to pay an end of year dividend in the 2012 financial year. The audited net profit for the year is a loss of NZ$77,704. Instead we are focused on paying an interim dividend and final dividend in the 2013 year. Although the projected 2013 dividend will not be significant, approximately NZ1.5 cents per share in total, it will be an indication to shareholders that the company is maturing and believes it can now move to a phase of paying dividends as well as continuing to grow its earnings and thereby enhancing the value of the company. 1

3 Strategic Initiatives As we continue to grow and develop our businesses we also continue to refine our strategic goals. Our strategic aim remains the same. We want to be New Zealand s leading and most successful internationally focused investment and private banking organisation. Our business is now structured in two parts, private banking and asset management. Our private banking operations are focused on providing international investors the highest quality service and access to investment and banking products in New Zealand; Our asset management business seeks to own New Zealand domiciled business with global application and client bases. For example, aircraft financing and aviation insurance broking. Our private banking business effectively sees us managing client funds, e.g. our mortgage bonds, in a way that provides the highest return relative to the risk. In our asset management business we invest shareholder s funds and manage the businesses or assets the funds are invested in to maximise shareholder returns relative to risk. This year, we are investing in establishing two new securitisation trust arrangements with a target of achieving up to $100 million in total assets in the next 3 years. Our efforts in 2013 and 2014 will see us continue to put our greatest focus on these two strategies. In 2012 Bancorp was instrumental in bringing to New Zealand over two trips more than 50 children from the Tohoku region which had all been affected by the earth quake and tsunami. In August Bancorp arranged for the Prime Minister, The Right Honourable, Mr. John Key (centre of picture) to visit with the children at Bancorp s Auckland office. 2

4 Highlights for the year AUCKLAND AIRBUS EXPRESS transported over 600,000 passengers in the last financial year. A record for the company. The business gives us exposure to New Zealand s largest industry Tourism as well as to the domestic market. Auckland Airport is New Zealand s largest international airport and typically the gateway to most people visiting the country as well as for local business travellers working in Auckland. As a consequence the business contributed $9 million in revenue to the group. The projected earnings of the business for the 2013 financial year are for it to continue to grow along with passenger numbers through Auckland Airport. AVIATION CAPITAL s XSTOL-750 continued on lease in Papua New Guinea doing on average 85 flying hours per month. The lease arrangement sees us obtain additional earnings the more hours the aircraft flies. We have been very pleased with the performance of the lease and aircraft and have purchased a second XSTOL-750 which will begin on lease in Papua Indonesia as of July The 2013 financial year will provide us with two aircraft on full leases for a full financial year and contributing around $2.1 million in revenue to the group. BOSTON MARKS remains a core investment which saw our cornerstone position in the parent, of what will become the world s largest independent aviation insurance broking business, increase from 20% to 40% at 1 July The Boston Mark s business now spans the USA, Canada, South Africa, Switzerland, Australia, New Zealand, Indonesia and the UK. The 2013 financial year will see its first full year of global consolidated results. 3

5 MORTGAGE FUND operations continued in 2012 marking the fourth year of issuance of Bancorp Capital Bonds (the bonds related to our mortgage investment business). The investment in these bonds comes mainly from international investors who want a low risk and medium return investment proposition. The funds raised from the bond issuance are typically placed in first ranking directly owned residential mortgages or invested in asset secured loans via trust arrangements. $120,000 $115,000 $110,000 $105,000 $100,000 $95,000 $90, Investors who made an initial investment in 2009 will have received a compounded return to June 2012 of approximately 23%. Almost all original investors have elected to maintain their investment in the bonds and compound. We have high expectations for the mortgage bonds issuance in the 2013 financial year and growing our investor base in this premium private banking product. BANKING PRODUCTS in the coming 2013 financial year we will hope to see the introduction of the Bancorp Debit card and the Bancorp foreign currency card. The Debit card will give clients global access to their New Zealand dollar funds and allow for internet banking. The card is an important part of the package offered to private banking clients and will be accepted around the world wherever VISA is accepted including on the internet. MULTI CURRENCY DEBIT CARD The foreign currency card which will be available in the second quarter of 2013 will allow clients to preload up to 12 currencies onto it, including Japanese Yen, which will avoid clients incurring additional FX fees and currency movements incurred using credit cards whilst they use that card. 4

6 Financial Results The financial year to 30 June 2012 has seen Bancorp achieve a net profit after tax loss of NZ$77,704. The accounting profit is less than 2011 but that year was affected by a large one off non cash profit relating to the cessation of our direct property lending business. The 2012 result was also affected by higher financing costs in Auckland Airbus Express ($1,338,373 million which, following the refinancing in April 2012, are budgeted at only $371,000 for the 2013 year). In addition, the result was unfortunately impacted by the inability of our Japan New Zealand Fund partner, Bansei Securities, to obtain new investment into the Japan New Zealand Fund in Japan along with the underperformance of East & Partners Pty Limited. $40,655,196 $30,859,589 $18,445,334 $15,943,428 $13,031,455 $9,041,431 $5,487,591 $2,967,727 Total Assets Operating Income Shareholder's Equity Net Assets Total assets have grown in the last two years and more importantly net assets have improved by almost 50%. Operating income has grown by around $4,000,000 in the 12 months from 2011 to We have paid down debt and issued further capital which has seen net assets and share capital grow. The business is in good shape with cash and cash equivalents on hand at balance date of $4,616,508. We expect to pay down approximately $1 million in bank debt attributed to Auckland Airbus Limited by the year to 30 June 2013 and we will see Boston Marks, following its refinancing, to begin paying down bank debt as well. 5

7 Global Positioning The Bancorp group is a global business operated from a New Zealand base. We export financed aircraft and aviation insurance broking and we import private banking investment. We will continue to invest in growing our overseas operations and chase a global market seeking investment in New Zealand. The extended group now employs approximately 64 people around the globe. From our offices in Auckland we are able to run a global business utilising the lower cost operating environment that New Zealand offers. We would like our international foot print to continue to grow. Already, in addition to physical offices, Boston Marks undertakes insurance broking clients in South Africa, South America and Indonesia. 6

8 Governance As of 1 July 2012 the Board adopted a board and management charter. In addition it put in place two sub-committees, an audit sub-committee and a remuneration sub-committee. Mr. Tim Williams, as independent director, has been appointed Chairman of the sub committees. The Board and management charter is set out below. Board and Management Charter 1. Role of the Board 7 The Board's key objectives are to: (a) (b) increase shareholder value within an appropriate framework which safeguards the rights and interests of Bancorp s shareholders; and to ensure Bancorp is properly managed. 2. Responsibility of the Board The Board is collectively responsible for promoting the success of Bancorp by: (a) (b) (c) (d) (e) (f) (g) (h) (i) supervising Bancorp s framework of control and accountability systems to enable risk to be assessed and managed which includes but is not limited to paragraphs (b) to (i); ensuring Bancorp is properly managed, for example by: (i) (ii) (iii) (iv) (v) appointing and removing the Managing Director of Bancorp; ratifying the appointment and, where appropriate, the removal of the Chief Financial Officer; input into and final approval of management's development of corporate strategy and performance objectives; reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct, and legal compliance; and monitoring senior management's performance and implementation of strategy, and ensuring appropriate resources are available; approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures; approval of the annual budget; monitoring the financial performance of Bancorp; approving and monitoring financial and other reporting; overall corporate governance of Bancorp, including conducting regular reviews of the balance of responsibilities within Bancorp to ensure division of functions remain appropriate to the needs of Bancorp; liaising with Bancorp s external auditors and audit committee; and monitoring and ensuring compliance with, all of Bancorp s legal obligations. The Board must convene regular meetings with such frequency as is sufficient to appropriately discharge its responsibilities.

9 The Board may from time to time, delegate some of its responsibilities listed above to its senior management team. In delegating this power, the Board must be satisfied that the delegate will exercise it reliably and competently, and in accordance with the requirements of the Board. The Board accepts responsibility for the manner in which the delegated powers are exercised, and must monitor the efficiency and effectiveness of the exercise of these powers by the delegate. 3. Delegation of Authority to Managing Director The Board delegates responsibility for the day-to-day management of Bancorp and its operations to its Managing Director. This delegation of authority includes responsibility for: 8 (a) (b) (c) (d) (e) (f) (g) (h) (i) formulating with the Board, the vision, strategies, business plans and budgets, and, to the extent approved by the Board, implementing these plans, budgets and strategies; operating Bancorp's businesses within the parameters and guidelines set by the Board from time to time, and keeping the Board informed of material developments in relation to those businesses; where proposed transactions, commitments or undertakings exceed the parameters set by the Board, referring the matter to the Board for its consideration and approval; identifying material business risks, formulating strategies in conjunction with the Board to manage the risks, monitoring the effectiveness of the management process and reporting to the Board; developing and managing financial reporting and internal control and monitoring systems to ensure that they are efficient and effective, and provide adequate and timely financial information pertaining to the performance, condition, and prospects of Bancorp; implementing and monitoring compliance with the policies, processes and codes of conduct approved by the Board; negotiating the terms and conditions of appointment of senior executives for Board approval, appointing the senior management team, and endorsing the terms and conditions of appointment of all other staff members; evaluating and advising the Board on the performance of senior management; and providing strong leadership to, and effective management of, Bancorp in order to: (i) (ii) (iii) encourage cooperation and teamwork; build and maintain staff morale at a high level; and build and maintain a strong sense of staff identity with, and a sense of allegiance to, Bancorp. 4. Delegation of Authority to Senior Management Senior Management is responsible for supporting the Managing Director and to assist him implement the running of the general operations and financial business of Bancorp, in accordance with the delegated authority of the Board. Senior Management is responsible for reporting all matters at first instance to the Managing Director, or if the matter concerns the Managing Director, then directly to the Chairperson or an independent Director, as appropriate.

10 5. Board Procedures 5.1 Quorum Under the constitution a quorum for Directors must equal the majority of Directors entitled to vote. 5.2 Committees of the Board The Board may establish as required, standing and temporary committees to which it may delegate some of its powers. In order to define the role, responsibility, powers, structure, composition, operation and administration of each committee, the Board and committee should adopt a charter for that committee. The Board committees that are in place are as follows: (a) (b) Audit Committee; and Remuneration Committee. The charters of each committee have been approved by the full Board, and committee minutes are provided expeditiously to all Directors. The Audit Committee's responsibilities are: to oversee compliance with statutory financial reporting requirements to ensure that adequate internal controls are in place to advise the board regarding accounting policies, practices and disclosure to review the scope and outcome of the external audit to review annual and half-yearly financial statements prior to approval by the board. The committee reports the proceedings of each meeting to the board. The Managing Director is not a member of the Audit Committee. The Audit Committee comprises Mr. Tim Williams (Chairman) and Mr. Nigel Spratt. The Remuneration Committee s responsibilities are: Assisting the Board in the establishment of effective remuneration policies and practices including in connection with the setting and reviewing the effectiveness of the remuneration, recruitment, retention and termination policies and procedures for senior executives Making recommendations to the Board on all components of the remuneration of the non-executive directors Remuneration packages are reviewed annually and independent external advice is used as a basis for establishing competitive packages. Remuneration Packages are a combination of cash and non cash benefits. Packages for senior executives and managers include a cash bonus opportunity linked to company performance in areas subject to the manager's control. The Remuneration Committee comprises Mr. Tim Williams (Chairman) and Mr. Nigel Spratt. The Managing Director is not a member of the remuneration committee. 9

11 6. Indemnity and Insurance The Company will enter into an agreement with each Director in which Bancorp will agree: (a) (b) (c) to indemnify each Director against the liability arising out of the discharge of their duties as a Director of Bancorp; provided cover can be obtained at reasonable rates and on reasonable terms, to insure each Director against liability incurred in their capacity as a Director of Bancorp; and to provide access to company material as required for proper purposes. Financial Statements The Directors are pleased to present the financial statements for the 30 June 2012 year which can be viewed on the Company s web site under page Corporate and tab Investors. 10

12 GREAT NEW ZEALAND ACHIEVEMENTS 1893 New Zealand is the first country in the world to give all women the vote 1903 Richard Pearce undertakes the first powered heavier than air aircraft flight in the world 1917 Ernest Rutherford split the atom 1936 Jean Batten undertook the first direct flight from Britain to new Zealand 1953 Sir Edmund Hillary becomes the first to climb Mt. Everest 1954 William Hamilton invents the Hamilton jet boat 1956 Colin Murdoch invents the disposable syringe 1962 Maurice Wilkins received Nobel Prize for work on DNA Structure 1963 Bruce McLaren creates the McLaren F1 Team 1985 New Zealand becomes the first Nuclear free legislated country 1988 A J Hackett begins world s first commercial invents Bungy jumping in Queenstown 1991 John Britten designs and manufactures the world s fastest motor bike 2000 s Peter Jackson films the Lord of the Rings Trilogy in New Zealand 2012 Bancorp Wealth Management New Zealand Limited publicly lists on the Frankfurt Stock Exchange