APA Group (APA) 2015 AGM Report

Company/ASX Code : APA Group (APA)
Venue :
10.30am City Recital Hall,
Angel Place
Sydney, New South Wales
Monitor : Mr Nick Bury
AGM Details / NoM : Thursday 22nd October, 2015
# of Attendees : Approximately 100
# Holdings represented by ASA : 590
Value of Proxies : $55 million
# Shares Represented by ASA : 6.1 million
Market Capitalisation : $9.5 billion

Good performance continues into 2015 

APA’s corporate trust structure obviates a securityholder vote being held on its Remuneration Report, and again this year its remuneration paid to key personnel has increased about 20%, but the latter remain modestly paid when compared to their counterparts working for similarly sized companies (in terms of market capitalisation) listed on the ASX.  

There were six items voted on at the AGM.  Non-executive Chairman Len Bleasel and non-executive director (NED) Russell Higgins were overwhelmingly re-elected. Mr Bleasel is a strong and experienced Chairman, he was CEO of AGL for many years, and that tenure has particular pertinence to APA’s operations. APA was asked about what measures had been taken to groom a Chairman of similar ilk to eventually replace Mr Bleasel, and in response advised that its board had considered the matter.

Michael Fraser was elected as an APA NED earlier this year, he also is a former AGL CEO, brings experience to APA’s board, and was easily re-elected, as was Debra Goodin, who is an experienced director of other energy and utility companies. Items 5 and 6 comprised of machinery type constitutional amendments that were likewise easily passed, the arising need for which had earlier been addressed in the ASA’s pre AGM voting intentions earlier put up on ASA’s website.    

APA has continued to perform very well in 2015, has done so since inception, and now owns, operates, or has an interest in about $19 billion worth of infrastructure energy assets. Since listing it has continued to increase its share price, profits and distributions, and provided security holders with an annual grossed up compound interest rate return of about 19.2%.

Reported profit after tax and non-controlling interest increased by 62.9%, mainly due to APA’s profitable sale of its interest in Envestra, which was recorded as an extraordinary item. Normalised NPAT increased by 2.1% to $203.9M, and revenue increased by $126.7M (12.8%) to $1,119.2M. Operating cash flow increased by 30.3% to $562.2M, and significantly operating cash flow per security increased 13.5% or 6.7cents to 56.5 cents per security.

Distributions increased 4.8% to 38.5 cents per security, which was fully funded from operating cash flow, and represented a lesser percentage of the same than last year’s payout.

Concerns continue to be expressed about APA’s high gearing rate, mainly by analysts who are unfamiliar with its workings, but it’s very stable and in part regulated cash flow enables it to easily service its borrowings, which are fixed for the nearer future. The same concerns would have much more pertinence with regard to most listed companies, whose earnings are less secure, but a recognition both of the nature of its income and APA’s capacity to repay its borrowings need to be calibrated into any assessment of its vulnerability in that regard.