maps group ltd (strategic purchasing ......maps group ltd (strategic purchasing) – trading results...

F I N A N C E A N D G O V E R N A N C E C O M M I T T E E R E P O R T

Agenda Item 5.4

11 March 2008

MAPS GROUP LTD (STRATEGIC PURCHASING) – TRADING RESULTS FOR YEAR ENDED 30 SEPTEMBER 2007 AND APPOINTMENT OF BOARD MEMBERS

Division Corporate Services

Presenter Joe Groher, Manager Financial Services

Purpose

1. To present the annual results of MAPS Group Ltd (‘MAPS’) trading as Strategic Purchasing, for the trading period 1 October 2006 to 30 September 2007 and to note the appointment of new directors to the Board.

Recommendation from Management

2. That the Finance and Governance Committee note:

2.1. the annual results of MAPS Group Ltd for the trading period 1 October 2006 to 30 September 2007; and

2.2. the appointment of new directors to the Board of MAPS Group Ltd.

Key Issues

3. Good governance practice dictates that an organisation monitors performance of all entities in which they hold an equity interest. The purpose of this report is to inform the Committee of the annual financial performance of the MAPS Group Ltd in compliance with its governance responsibility.

4. The Annual General Meeting (‘AGM’) of the MAPS Group Ltd was held on 11 February 2008, at which the following matters were considered:

4.1. Minutes of the 2006 AGM;

4.2. Receive the Statements for the 2006/07 financial year;

4.3. Election of Directors; and

4.4. Approve the lodgement of the 2007 Annual Return.

5. All matters referred to above were addressed and concluded at the meeting.

Financial Information

6. Operating profit was $0.059 million for the 12-month period, compared to an operating profit of $0.081 million for the previous year. Total revenue was up 2.36% compared to the previous year.

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7. The net cash flow over the year was positive $0.042 million maintaining the strong level of liquidity in the company with a current ratio of 6.2.

8. The Company continues to be debt free and remains financially sound.

9. Total assets at the end of the period amounted to $2.961 million, an increase of 0.172 million from the prior period.

10. Liabilities amounted to $0.540 million at the end of the period, an increase of $0.113 million from the prior period

11. Total shareholders equity amounted to $2.422 million at the end of the period represented by share capital of $0.404 million and retained profits of $2.018 million.

Dividends

12. The Board resolved to pay a $0.10 dividend. In 2007/08 the City of Melbourne budgeted for a $37,500 dividend payment compared to the actual dividend payment of $25,000. This represents a return on equity of 10%.

Board of Directors

13. At the AGM on 11 February 2008, in accordance with the Articles of the MAPS Group Ltd, there is a requirement for existing directors to retire on a rotational basis (and stand for re-election should they choose to continue). Furthermore, there is a requirement for casual directors to stand for election. There were seven nominees for four vacant positions. The candidates who were successful were Scott Chapman (existing Chairman and director), Ken McNamara (existing director), Marianne Di Giallonardo (existing director) and Chris Gillard (new director). The City of Melbourne’s ballot was for a full distribution of votes to Scott Chapman, Director of Commerce and Marketing at the City of Melbourne.

14. With the exception of Frank Phillips, all Directors standing for re election were returned, Chris Gillard from the Shire of Mitchell was appointed as a new director. He has been involved in local government in a range of senior positions for over 20 years. He is currently general manager Corporate Services at Mitchell Shire. He has considerable private sector experience and a master’s degree in business.

Relation to Council Policy

15. There are no policy implications arising from this report.

Government Relations

16. In March 1993, MAPS Group Ltd acquired the MAPS business from the City of Melbourne, following approval by the responsible Minister and the Treasurer under Section 193(1) of the Local Government Act 1989 (“the Act”) for the formation and operation of the Company.

Finance

17. The financial implications are discussed throughout the report.

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Attachment: 1. MAPS Group Ltd Financial Statements

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Legal

18. The report is for noting only and no direct legal implications arise from the recommendation made.

Sustainability

19. There is no significant sustainability impact.

Comments

20. An extract of the financial statements of MAPS Group Ltd, is included as attachment 1 to this report.

Background

21. The Municipal Authorities Purchasing Scheme (MAPS) was formed in 1985 when 14 inner metropolitan Councils, using infrastructure provided by the City of Melbourne, co-operated to organise purchasing contracts for commonly used goods in pursuit of high quality products at lower prices. MAPS was formed on the premise that purchases in bulk and in larger volumes would result in reduced costs to members. The City of Melbourne administered the scheme, providing resources including staff and a central store facility.

22. MAPS experienced considerable growth in its early years and within two years of the scheme being established, there were 22 participating Councils. By early 1993, 170 Councils and other public authorities were using the scheme.

23. In March 1993, MAPS Group Ltd acquired the MAPS business from the City of Melbourne. This followed approval by the responsible Minister and the Treasurer under Section 193(1) of the Act for the formation and operation of the Company. The Section 193 approval permitted the purchase or acquisition of shares in the Company by any Victorian municipality. The approval also required that copies of annual reports and other reports as requested from time to time be provided to the Office of Local Government (now Local Government Victoria). The approval did not require any additional reporting requirements in respect of the City of Melbourne over and above those that would normally apply to shareholders under the Corporations Law (now the Corporation Act 2001).

24. Today, MAPS Group Ltd provides Local Government Authorities with access to a wide range of goods and services at competitive prices. Approximately 200 councils, tertiary institutions and water authorities use MAPS’ services. Penetration into NSW and South Australia has continued to increase.

25. MAPS Group Ltd acquired the MAPS business from the CoM for $350,000 represented by the issue to Council of 250,000 fully paid ordinary shares and the payment of $100,000. MAPS Group Ltd has issued a total of 403,882 fully paid ordinary shares.

26. The City of Melbourne is entitled to 12,449 votes, being 10,100 votes plus one vote for every 100 shares held over the first 15,000 shares. It should be noted that although the City of Melbourne’s holding of 250,000 shares in MAPS Group Ltd represents 62% of the Company, the shareholding does not represent control on a poll, as the Articles of Association of MAPS Group Ltd contain certain limitations on the voting power of members.

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Text Box

Attachment 1 Agenda Item 5.4 Finance and Governance Committee 11 March 2008

Agenda Item 5.4 Finance and Governance Committee

11 March 2008

FINANCE ATTACHMENT


There are no direct financial implications associated with the recommendations contained in this report, however the dividend return from the company will be slightly lower than the 2007/08 budget based on the declaration of a 10 cent per share dividend distribution made at the AGM.

Joe Groher Manager Financial Services

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Agenda Item 5.4 Finance and Governance Committee

11 March 2008

LEGAL ATTACHMENT


The report is for noting only and no direct legal implications arise from the recommendation made.

The report on the trading results has been prepared in accordance with the Corporations Act (Cth) 2001 and the terms of the approval granted by the Minister and Treasurer under section 193 of the Local Government Act 1989.

Kim Wood Manager Legal Services

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