4.1 Our goal EC9

mecu to apply prudent financial and business practices to ensure our growth and profitability are maintained to bring success and prosperity to our members, staff, strategic communities, suppliers and partners.

4.2 Our approach and commitments

4.2.1 Financial performance

We monitor our financial performance in a number of different areas according to a set of key performance indicators. This year, ignoring the proceeds from the sale of Outlook Financial Planning (OFP) in 2005/06, our net profit before tax increased marginally and as a result we improved our efficiencies and maintained our soundness. Asset growth was strong and due mainly to growth in member loans and deposits which enabled us to strengthen our relationships with our existing members and new ones while managing our costs.

Figure 4a: Financial performance

*after an internal member benefit dividend of 10.0%

* after an internal member benefit dividend of 10.0%

** includes the proceeds from the sale of Outlook Financial Planning

4.2.2 Economic performance EC1 SOC1 SOC2

We add value to the economy, our members, employees, strategic communities, suppliers and the public sector through our operating expenditures and distributions. The following indicators capture these impacts:

Figure 4b: Net interest margin
 

Please Refer to our Annual Report for the geographic breakdown of our deposits and loans.

Retained earnings

‘Retained earnings’ are the funds that are not paid out as dividends but are instead reinvested in the core business.

Figure 4c: Retained earnings

Figure 4d: Credit control – bad debt write-offs

2006/07 saw an exceptional delinquency result against all industry benchmarks. Impaired loans have remained steady and very low by industry standards. Our Credit Control department adheres to all relevant legislation and codes regarding the handling of bad debt recovery.

mecu’s responsible lending practices support its long-term economic performance and have underscored a reducing provision for impaired loans against a growing loan portfolio. This is important given media commentary and the proposed parliamentary review (by the House of Representatives standing committee on economics, finance and public administration) of home lending practices and processes against evidence of increased personal indebtedness, individual bankruptcies and “mortgage stress”.

Suppliers EC6

The following is a list of our five largest suppliers (based on supplier costs for the year).

Figure 4e: Primary suppliers

Cuscal costs have decreased by 11% mainly due to the reduction of ATM Fees, the receipt of Visa Rebates and a reduction in new ATM installations from 2005/06.

Data Action costs have decreased by 20% from 2005/06 due mainly to a reduction in Facility Management Fees.

As a practice mecu sources all of its supplies in the Australian market. In terms of material contracts, Cuscal, our provider of wholesale and transactional banking services, is based in Sydney and represents 16% of operational expenditure. Data Action, our core banking and information technology bureau service provider, is based in Adelaide and represents 9% of operational expenditure.

Cost of materials and services purchased

Net Operating Expenses have decreased by 6.2% from 2005/06 and Capital Expenditure has significantly decreased by 62.9% due to the Moe office refurbishment in 2005/06. No major works were undertaken this year.

Payment

100% of contracts were paid in accordance with the agreed terms and conditions.
At mecu we have begun to actively monitor our method of payment. We work toward reducing our paper waste by using EFT where possible to make payments to creditors other than by cheque.

Figure 4f: Payments made by EFT

Being a part of a sustainable organisation, it is important that we:

• work with suppliers to reduce the impact of our products;
• encourage suppliers and services providers to reduce their environmental and
  social impacts; and
• purchase products that are environmentally and socially responsible.

mecu will continue to monitor and increase the use of EFT over cheque method where possible. 

Commitment 2005/2006	Progress
Encourage our major suppliers to be more sustainable. This commitment to be amended to: ‘Encourage our suppliers to be more sustainable.’
Incorporate sustainability requirements into the tender process, service agreement and contracts for all new suppliers and into those undergoing renewal.
Review our purchasing policy and incorporate appropriate This commitment to be amended to: ‘Review our policies to incorporate appropriate environmental and social requirements.’

How are we addressing these commitments?

• Banking and network facilities
   
  Data Action, our core supplier of banking and network facilities, has developed a Sustainability Policy approved by its Board as part of a sustainability requirement of our service agreement. Data Action was also encouraged to purchase offsets for its company pool vehicle.

• Insurance
   
  Our insurance providers, Allianz and CGU, were encouraged to present on their organisations’ activities around sustainable development to mecu’s senior Insurance management team.

• Mailhouse
   
  Dynamic Direct has been providing mailhouse services to mecu for over 10 years. Dynamic continues to help mecu to reduce paper consumption by implementing double-sided printing on member statements. The service agreement between Dynamic Direct and mecu includes a sustainability clause, requiring provision of an annual statement to mecu that Dynamic Direct complies with all environmental and industrial relations legislation relevant to its operations.

• Printers 
   
  Oberon has been providing printing services to mecu for over a decade. In the past 3 years, Oberon has assisted mecu in sourcing recycled print stock to assist conversion of all marketing and corporate stationery to recycled materials. Oberon Printing has been able to source an Australian-made environmental paper stock to be used in all printed mecu communications. The stock carries the Landcare logo and the manufacturer donates a percentage of profits (per tonne of paper sold) to Landcare. In addition, Oberon utilises vegetable inks in its printing process and disposes of printing waste in an environmentally friendly way. In 2006/07, mecu and Oberon worked together in creating an Environmental Policy for Oberon’s operations. Oberon has now decided to take this one step further by applying for an ‘Environmental Choice Label’ provided by Good Environmental Choice Australia. To obtain this label, Oberon must ensure it is compliant with the environmental, quality, regulatory and social performance criteria set out by the program (which is in line with the ISO 14024). This will form a solid framework for Oberon’s Environmental Management System. Accreditation will take place in the second half of 2007. 

• Contractors
   
  Cleaning contracts for mecu’s Gippsland offices have been reviewed. A new contractor has been appointed. This contractor addressed sustainability issues in its tender application. mecu requests proposals from suppliers covering environmental/social considerations.
   
  Companies submitting proposals to supply mecu with Call Recording systems/PABX were required to provide environmental information. Telstra business solutions was the chosen provider after providing mecu with information on energy efficiency, hardware recycling/disposal and use of certain hazardous chemicals in hardware.

• Stationery
   
  We have engaged with our major stationery supplier, OfficeMax, to identify environmentally friendly and Australian-made products, which are economically feasible to purchase. From this engagement, a preferred product listing and physical highlight in each OfficeMax catalogue has been made and communicated to staff. In 2006/07 22% (based on dollars spent) of stationery purchased through OfficeMax had a recycled material content. This is a decrease of 14%  (from 26% in 2005/06). However, it should be noted that the total amount spent on stationery through OfficeMax  increased by 59% from the previous year.

• Credit cards
   
  Throughout 2005 we worked with our plastic cards supplier, Placard (via Cuscal), on sourcing a new material from which to produce our members’ cards. On Tuesday 8 November 2005, mecu became the first financial institution in Australia to produce its cards from the more environmentally friendly PETG (Polyethylene Terephtalate, Glycol-modified) plastic.

• Fairtrade purchase
    
  Fairtrade tea. mecu recognises that the benefits of international commodity trade are not shared fairly by all and that many workers and producers in developing communities struggle to meet their basic needs. Therefore, mecu has taken steps to support those who support Fairtrade practices and has committed to purchasing Fairtrade Certified Organic Pure Ceylon teabags from Tradewinds, for all staff across the organisation. 

• Employees EC3
   
  Figure 4g: Payroll and benefits

Employee payroll and benefits paid slightly increased from last year.

• Subsidies
   
  We did not receive any subsidies throughout this reporting period.

• Income tax
   
  Figure 4h: Income tax

• Strategic communities SOC1
   
  In 2006/07, mecu invested a total of $447,076 which is 2.69% of our after tax profit of $16,591,038 with its strategic communities. This is an increase on last year’s investment which totalled $401,025. However, mecu wishes to increase this even further to make up 4% of our after tax profit in subsequent years. The investment went to fund projects focusing on environmental, education, science and social capacity programs.
   
  Figure 4i: Community support