Airways Corporation of New Zealand Limited Statement of Corporate Intent 2020-2022
The Crown’s Investment in Airways
INTRODUCTION AND NATURE & SCOPE OF ACTIVITIES
The Directors’ estimate of the current commercial value of the Crown’s investment in the Airways group as at 30 June 2019 is $251.3 million (June 2018 $238.2 million). Key points about the manner in which that value was assessed are: X X The Free cash flow (FCF) to Enterprise methodology was used to calculate the Net Present Value (NPV) of the entire Airways Group, including all subsidiaries, on an after-tax basis. X X The NPV was based on the expected nominal future cash flows set out in the Airways Group’s three-year business plan, with forward projections then also made about years four to 10. A terminal value (“TV”) of $245.2 million (present value) was included. A growth rate of 0% per annum was assumed in the terminal value calculation for all business units. X X The discount rate was based on the projected average cost of capital (long-term averages of 6.59% for the core business and 10.23% for the commercial businesses). X X The valuation was prepared by the Airways’ management, and reviewed by Ireland, Wallace & Associates Limited, prior to approval by the Board. X X The current commercial value of the Crown’s investment of $251.3 million (the equity value) was calculated by taking the enterprise value of $357.1 million and deducting net debt of $105.8 million.
STRATEGIC CONTEXT
AIRWAYS’ BUSINESS UNITS
FY20 KEY STRATEGIC WORKSTREAM
MEASURE OF SUCCESS
FINANCIAL FORECAST BY UNIT ($NZM)
The chart illustrates how the valuation is determined (all amounts are stated at their Net Present Value):
DIVIDENDS
400
REPORTING TO SHAREHOLDING MINISTERS
350
33.2
105.8
300
250
POLICY FOR SHARE ACQUISITION
212.0
200
150
251.3
COMPENSATION FROM THE CROWN
100
50.8
50
61.2
THE CROWN’S INVESTMENT IN AIRWAYS
0
Core Business Yr 1-10 cashflows
Commercial Business Yr 1-10 cashflows
Core Business TV
Commercial Business TV
Less: Net debt
Equity value attributable to the Crown
APPENDICES
DIRECTORY
15
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