Mas­sive loss

Southern Riverina news - - NEWS -

Mur­ray Ir­ri­ga­tion Ltd will an­nounce a mas­sive loss of nearly $75 mil­lion for its main busi­ness in the 2015-16 year at next month’s an­nual general meet­ing.

The com­pany has been forced to write down as­sets by $66 mil­lion due to wa­ter re­cov­ery from the Mur­ray-Dar­ling Basin Plan.

Be­fore wa­ter re­cov­ery un­der the plan, MIL had as­sets de­signed to de­liver over 1000GL a year.

How­ever, with more than 27 per cent less wa­ter it now ex­pects to de­liver an av­er­age of 600GL.

CEO Michael Rene­han said with more than 27 per cent less wa­ter en­ti­tle­ments “some of our older as­sets are un­der­utilised against their book value yet the cost of car­ry­ing those as­sets, and the de­pre­ci­a­tion each year, sig­nif­i­cantly re­duces our ca­pac­ity to re­turn a neu­tral or pos­i­tive EBIT which ul­ti­mately needs to be con­sid­ered when we cal­cu­late fees and charges”.

“An in­de­pen­dent assess­ment of our busi­ness as­sets re­turned a sig­nif­i­cantly lower value than that on our books, which means an im­pair­ment, or write-down, was needed to revalue the as­sets in the ac­counts.

“This one-off write-down of as­sets in this year’s fi­nan­cial re­ports will im­prove our re­turns in the fu­ture, com­ple­ment­ing the cost cut­ting mea­sures we have al­ready im­ple­mented to help us con­trol the fees and prices we charge for our ser­vice.

“Im­pair­ment is a stan­dard ac­count­ing prac­tice and is ef­fec­tively an ad­just­ment on our books. It has no im­pact on our ser­vice or the use of those as­sets.’’

Mr Rene­han said the busi­ness is in a tran­si­tion phase with on­go­ing net­work mod­erni­sa­tion, but a clear pri­or­ity is the need to ad­dress costs to man­age the busi­ness across boom and bust wa­ter sce­nar­ios.

“We have re­struc­tured the busi­ness for this tran­si­tion phase while we com­plete our mod­erni­sa­tion, at the same time as iden­ti­fy­ing the need to ad­dress costs as a clear pri­or­ity,” Mr Rene­han said.

“In 2014/15 the com­pany de­liv­ered 739GL and made a $1.5 mil­lion loss at EBITDA (earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion). That loss only got worse once you added de­pre­ci­a­tion.

“In 2015/16, de­spite only de­liv­er­ing 340GL the com­pany man­aged to re­duce op­er­at­ing costs by $3.5 mil­lion and re­turn a pos­i­tive EBITDA, how­ever, ac­count­ing for as­set de­pre­ci­a­tion means we still re­turned a neg­a­tive op­er­a­tional EBIT.

“What this showed us is that as a busi­ness we can op­er­ate at break even, even in years of low wa­ter avail­abil­ity, if we can ad­dress un­der­ly­ing busi­ness costs and rev­enue streams. avail­abil­ity

‘‘The on­go­ing mod­erni­sa­tion of the busi­ness pre­sented us with the op­por­tu­nity to con­duct a whole­sale re­view to se­cure the long-term fi­nan­cial sus­tain­abil­ity of the com­pany, in­clud­ing look­ing at the value of as­sets to en­sure they are val­ued against the cur­rent busi­ness and not what the busi­ness used to be.”

Mur­ray Ir­ri­ga­tion chair­man Mark Robert­son said the re­sults were de­liv­er­ing on the board’s ob­jec­tives to make Mur­ray Ir­ri­ga­tion fi­nan­cially sus­tain­able.

“We gave that ob­jec­tive to CEO Michael Rene­han when he joined the busi­ness last year and it is tes­ta­ment to his ef­forts that we are al­ready see­ing the re­sults to com­mer­cialise the busi­ness by re­struc­tur­ing and iden­ti­fy­ing the three drivers of price, vol­ume and cost,” Mr Robert­son said.

Mur­ray Ir­ri­ga­tion will pro­vide a com­plete re­port on its fi­nan­cial re­sults at its an­nual general meet­ing to be held at the De­niliquin Golf Club from 7pm on Thurs­day, No­vem­ber 17. Pre­sented as a com­mu­nity ser­vice by South­ern Rive­rina Sui­cide Preven­tion Re­source Group and the South­ern Rive­rina News

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.