Port company gets awkward
NO-ONE LIKES a public tellingoff. Certainly not Sir John Goulter, a senior company director and chairman of Marsden Maritime Holdings.
After his company was censured by the stock exchange last month, he issued a statement saying his board was ‘‘extremely disappointed’’ to be censured for what was ‘‘no more than a technical question’’.
Since the NZX had imposed no penalty, demanded no recovery of costs and made no comment on the board’s decision-making ‘‘the board had to question the need for the company to be publicly censured’’.
You can feel the tension in the neck muscles. What was it all about?
The NZX Disciplinary Tribunal had reacted with its customary speed, issuing a decision 10 months after the event in question – a shareholder vote at the company’s annual meeting in Whangarei last October.
Marsden Maritime Holdings is basically a listed holding company for a half share in Northport, owner and operator of the port at Marsden Point near Whangarei. The other half is owned by Port of Tauranga.
This has made it an awkward beast, big enough to be influential but not big enough to run anything. Not only that, it is dominated by its own big shareholders – 54 per cent owner Northland Regional Council and 20 per cent owner Ports of Auckland.
Still, Marsden Maritime has required some hefty governance and went into the AGM with a board of eight people. The provocative resolution was a request to raise their fees from a collective $182,600 to $200,000.
Arguably it wasn’t a big deal. An AGM presentation showed the directors received less than those of port companies elsewhere in New Zealand and still would after the proposed increase.
Opposing the resolution was former director Mike Daniel, who held proxies on behalf of the Shareholders Association and Ports of Auckland. In Daniel’s view, Marsden Maritime was not a port company and didn’t need to be spending more shareholders’ money on directors. Northland Council saw it differently and the measure was approved.
After complaints from Daniel and the NZSA, the NZX decided Marsden Maritime director Colin Mitten was an associated person of the council because he was chairman of council subsidiary Northland Inc, which meant the council was not entitled to vote on the resolution. It duly censured the company for allowing the vote, but took no other action.
Given Daniel’s proxies it is likely the resolution would not have passed had the council been blocked from voting, which implies the directors got their fee rise unjustifiably.
Of course, the company could have applied to the NZX for a waiver allowing the council to vote. It would probably have got it – the NZX hands out waivers like a priest at communion.
At the end of the day, is a $17,400 increase in the fee pool worth much fuss? In itself perhaps not. However, the fact that some shareholders wanted to make something of it should show investors that Marsden Maritime Holdings is not a happy ship.
Although the board is now down to seven, that’s a big board for a company whose revenue of $10.5 million comes almost entirely from its Northport dividend. Northport, the company that actually runs the port, has a board of just four.
Marsden Maritime uses its income carefully. In the year to June its net operating cashflow was $7.8m and its maintenance capital expenditure was zero, so most of its income was free cashflow. Out of that, it paid a dividend of $4.3m. Much of the remaining cash was applied to buying investment property.
Since balance date Marsden Maritime has bought the Marsden Cove marina next to the port, paying $6.95m. The purchase from Hopper Developments was financed to the tune of $5.5m by borrowing from BNZ.
The company’s previous debt level was zero.
The idea is apparently to use the marina and its associated 1.7ha of land to stimulate development of the Marsden Point area. When the deal was announced, chief executive Graham Wallace said: ‘‘The opportunity exists to make Whangarei Harbour in general and Marsden Cove Marina, in particular, the destination of choice for long-distance yachties arriving in and departing from New Zealand. And an attractive option for boat owners closer to home looking for an alternative mooring with a wide selection of marine facilities, close to a major centre and with easy access to and from Auckland.’’
This sounds reasonable, although it seems a bit of a turnaround in the company’s approach because it had previously sold its half share in the Hopper Developments joint venture in 2007 for $10.6m, realising a gain of $7m.
Wallace has explained the move as following a major strategic review leading Marsden Maritime to focus on developing its land holdings and play a part in the growth of the greater Marsden Point area.
You can see where this is heading. It looks to me that on one hand we have a council shareholder interested in local economic development, while on the other we have commercial shareholders who are focused on profitability.
It’s not a good combination. The vote on fees was perhaps just a sign of growing tension.
As I understand it, Port of Tauranga has expressed interest in buying out Marsden Maritime’s stake in Northport but the proposal did not go far.
Shares in Marsden Maritime are currently trading around $2.73, down from their peak in March of $3.15. The underlying port business appears to be going well, with record cargo of 3,282,000 tonnes going through the facility in the last year, up 6 per cent on a year earlier.
The current annual dividend payout of 11.25c implies a net yield of about 4 per cent.
Future investors may experience a different type of company, with debt and development risk complicating an otherwise basic picture. The awkward governance involved in reconciling its major shareholders – as revealed by the NZX censure – may also make it less attractive in the short term.
No wonder Goulter was unhappy.