Stock Takes podcast: Is it time to list the Ports of Auckland on the stock market?

Could the Ports of Auckland perform better under a different ownership model? Photo / Supplied

A new report has highlighted that it might be time to rethink the ownership model for the Ports of Auckland.

Speaking to the Herald’s Stock Takes podcast, TDB Advisory director Phil Barry says a new report from his organisation shows full government ownership of major infrastructure rarely drives the best results.

Barry says the financial performance of the port has been “mediocre at best”.

“There have been some well-known project failures, such as the $65 million automation project that was scrapped at Ferguson Container Terminal.

“But the bigger picture has been one of a subpar return on assets and very low dividend payouts.”

Ports of Auckland’s return on assets improved from 10.1 per cent to 12 per cent between 2015 and 2016 (for years ending June 30), and return on equity went from 12.5 per cent to 14.4 per cent – but then deteriorated.

By 2017 the return on assets was 7.9 per cent and return on equity 9.1 per cent, only to see an improvement in 2018 with 8.3 per cent and 10.7 per cent respectively before the ratios came crashing down.

The return on assets fell from 5.9 per cent in 2019 to a negative 0.1 per cent in 2022 and the return on equity went from 6.9 per cent to -1 per cent in the same period.

The dividend yield (for the 100 per cent owner Auckland Council) was steady in 2015 and 2016 at 8 per cent before slipping to 7 per cent in 2017 and 2018 and 6 per cent in 2019, and then falling to zero in 2020, 1 per cent in 2021 and similar last year. Asked whether these struggles were a byproduct of the pandemic, Barry says it can’t only be attributed to Covid.

“Covid certainly affected the performance of all ports across the country, but it’s interesting to note that 100 per cent local government-owned ports were less resilient and their return on assets fell more.”

Looking at 11 ports across the country, research from TDB Advisory found the four with some degree of private ownership consistently performed better over the past eight years.

Port of Tauranga, South Port and Napier Port all have shares listed on the share market, allowing for some degree of private ownership.

“The average return on assets for the 100 per cent-owned local government ports was around 6 per cent, while mixed-ownership ports achieved about a 50 per cent better return, or around 10 per cent on average.”

So is it time for the Ports of Auckland to list on the stock market? Why does mixed-ownership drive better results? Will there be an appetite to list the Ports of Aucklandt? And would anyone even want to buy Ports of Auckland stock, given all the controversies?

Listen to the full podcast to hear Barry discuss these issues and more.

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