Provincial Growth Fund wind up could end 'stellar' times for Hawke's Bay roading company

QRS has been involved in the significant work on the erosion plagued Mahia East Coast Rd. Photo / File

The construction company owned by Wairoa District Council has reported a record six-month profit of $1.6 million, but the future is uncertain, its board says.

Quality Roading and Services (QRS) recorded a profit before tax of $1.6m in the half-year ending December 31, 2020, compared to $350,000 in 2019.

The company reported total revenue of $13.3m and costs of $11.7m in its six-monthly report, presented on Tuesday to the council which is the sole shareholder.

QRS board chairman Guy Gaddum said it had been a "stellar six months" of business, but warned councillors that the next 18 months would be challenging as significant income streams dried up.

Central Government had indicated there would be no more funding from the Provincial Growth Fund (PGF), and two high-value Waka Kotahi NZ contracts, Safe Roads and Boost, had come to an end, he said.

"At QRS we're cognisant that the PGF funding is no more. There will be funding in some other forms, but probably not as we've known it.

"We have a business at the moment that's based around a certain turnover. We have a capability that we built, that we've invested a lot in. We're not going to walk away from that in terms of staff, relationships with those stakeholders, and subcontractors.

"We need to be out there and looking at what we're doing, doing more, going further afield," Gaddum said.

The four largest income revenue streams as at December 2020 were the PGF at $5.2m, Wairoa District Council at $4.3m, Waka Kotahi New Zealand Transport Agency $2.2m, and Higgins $725,000.

"We are definitely on the lookout for other income sources and the work that's going to keep us going over the next 12 to 18 months," he said.

As a council controlled trading organisation (CCTO) set up under the Local Government Act, the company announced its six-month interim distribution to the council would be $100,000.

Typically they would give an interim payment of $50,000, Gaddum said.

QRS also contributed $18,000 worth of sponsorship and support in kind to Wairoa events, teams, schools and marae.

Mayor Craig Little commended QRS, and said the council had done a lot of work to make it the preferred contractor, which was "all above board".

"You're certainly putting it into the community.

"I can just say from my experience around the country that a lot of CCTOs, it's not a good story, you lose control of what you're up to, so well done."

Deputy mayor Hine Flood noted the policy to return a minimum of $250,000 to the shareholder but asked if there was scope to increase that if larger profits were recorded.

Gaddum said they were guided by the shareholder's letter of expectation, but policies required they sign a solvency test before they made any distributions or payments.

"If the business is able to, then we are fully aware that we need to support our shareholder and this community," he said.

"Our first and foremost (priority) is to sustain the business and what it does, but then after that, it's what is our shareholder need?"

Board member Fenton Wilson congratulated Little and the council for "using your political capital to the best intent" to score PGF funding.

"This part of the world, on a per capita basis, got more money than anyone else in the country.

"The company appreciates that."

QRS took out the supreme award at the Hawke's Bay Chamber of Commerce Awards in November.

The company, which employs 88 people, recorded zero injuries over the six-month period to December 2020.

- Local Democracy Reporting