Chairman’s report
I am pleased to present the 2009 Annual Report to our shareholders, in what has been a challenging year for Norfolk Group Limited.
Relatively early in our financial year cycle it became evident that New Zealand in particular was going to confront very tough economic conditions that, in quick succession and with little warning, would flow through to our Australian operations.
The impact of the fast-changing economy led to Norfolk revising its full-year forecast in early October and again at the time of delivering our first half results for the 2009 financial year in late November.
Taking into account the full impact of the now well-documented global financial crisis, the Board believes it is a solid result by Norfolk to have delivered a normalised EBIT result within the revised range of $27 million to $30 million.
While the EBIT result for the 2009 financial year was solid, the company made the decision to discontinue Trafalgar’s underperforming operations.
Disappointingly, we were required to incur a one-off impairment charge of $13.5 million in relation to outstanding claims relating to the Southern Suburbs Rail (‘SSR’) Project in Western Australia. Notwithstanding this charge to the 2009 financial accounts, Norfolk is continuing to pursue its rights in relation to the SSR Project.
It’s worth noting that the SSR Project was contracted in 2004, prior to Norfolk’s formation and subsequent listing on the ASX in 2007, and that current policies and practices would not permit Norfolk to enter into a contract with such onerous conditions.
Share price performance
The performance of Norfolk’s share price over the year has also been disappointing. The combination of our revised outlook for the year and a declining market overall dragged our share price lower, leading to a number of institutional investors becoming ‘forced sellers’ as the profile of the company no longer matched their investment mandate.
We are pleased that there has been some recovery in our stock since the lows in early 2009 and continue to believe that through a commitment to our strategy and in turn the delivery of strong results, the true value of the company will ultimately be reflected in its share price.
Retention of dividend
Given the very challenging market environment, the Board concluded in May that Norfolk should not pay a final 2009 dividend. Instead, the funds will be retained by the company to pay down debt.
Future growth opportunities
I would like to take this opportunity to congratulate the management of Norfolk for achieving some excellent outcomes in the 2009 financial year that will support the future growth of the company, including:
- O’Donnell Griffin’s signing of the Group’s largest-ever contract with RailCorp (Rail Corporation of NSW) as part of the Novo Rail Alliance;
- The outstanding performance of Haden’s service division, which delivered a year-on-year increase in revenue of 14 per cent;
- The growth of Norfolk Mechanical India, which now has branches in 20 cities across India; and
- Resolve FM’s successful tender to deliver facility management services to the University of Wollongong’s newly established Innovation Campus.
To conclude, Norfolk maintains its commitment to growing all its businesses over the longer term to deliver value for shareholders. We thank you for, and look forward to, your continued support.
Rod Keller
Chairman
Norfolk Group Limited