ICC holding company to sell Invercargill City Forests Ltd

Thursday, 30 May 2019

The Invercargill City Council's holding company Holdco has decided to sell one of its subsidiary companies, Invercargill City Forests Limited.

City Forests Limited made a $733,000 after tax profit in 2018 and paid a $550,000 dividend to Holdco which is passed to the council to help offset rates.

However, Holdco general manger Andrew Cameron said the decision was made to sell City Forests Limited following clarification of Holdco's future strategy and expectations.

'These include strategic investments for the broader benefit of the community, as well as investments which produce a commercial return.'

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Holdco wanted sustainable and consistent dividend streams into the future and the view was formed that forestry didn't fit into that criteria, he said.

It was 'not purely' about the forestry company not making enough money, he said.

'Obviously businesses go up and down … we are not suggesting it's not making money at the moment, it really is just looking at the long term forecast and projections.

'We can see it might not fit the criteria we are trying to get at with the council in the longer term.'

The council wanted to know it was going to get x amount of dollars from its holding company every year, rather than nothing one year and a  profit the next year.

'It's consistency … we want investments that provide x amount of dollars every year, give or take.'

Holdco chairman Brian Wood said Holdco identified that its investment in City Forests Limited was inconsistent with the strategic objectives agreed with the council.

'On that basis, Holdco has decided to divest its investment in [City Forests Limited],' Wood said.

Holdco was now working with City Forests Limited and other stakeholders to determine the best method to manage the sale process.

'Any funds realised from the sale would be managed in a manner consistent with the strategic direction of Holdco.' 

Holdco's other subsidiaries include Electricity Invercargill Limited, Invercargill Airport Limited and Invercargill City Properties Limited.

Cameron said the 64 million dollar question was whether Holdco would replace City Forests Limited with another company.

Holdco would go through the process of realising its investment in forestry and then consider what the appropriate use of the funds was, whether that be reducing its debt, providing finance to its existing investments or investing in a new entity.

'Those questions will have to be considered and determined as we go forward.'