Wednesday, November 22, 2006

Ngai Tahu reports on troubled year

Ngai Tahu’s ride as the success story of Maori claim settlements seems to be hitting some choppy water.

The South Island tribe’s 2006 annual report (here eventually)reveals a bottom line loss for the year to June 30 of $10.92 million, compared with a $15.657 million profit the previous year.

Kaiwhakahaere Mark Solomon says that was driven by a tough year in fisheries, its largest operating division, including a $20 million write down in assets, which Solomon said was a decision by the new board of Ngai Tahu Holdings Corporation to reflect "honest" value.

He said a structural review helped lower operating expenses.

Distributions to tribal purposes, constituent runaka and whanau doubled from $6.2 million to $12.5 million, including the set up costs of its Whai Rawa subsidised savings scheme.

There was a $35.7 million net outflow from operating activities, compared with a $2.8 million net inflow in 2005, and a $16.2 million net inflow from investing activities, compared with a $15.5 million net outflow last year.

Most of the investing inflow came from the sale of forest land at Tapanui, Otago Coast and Berwick.

Solomon denied the sales were designed to prop up the balance sheet, saying the process was kicked off 18 months ago.

Given that this report comes after a review and restructuring, and in the middle of a long drawn out battle between the half of the board which supports Solomon and the other half who lean towards chief executive Tahu Potiki (who yesterday announced he would depart in March).

Dr Robin Pratt, an experienced executive brought in to run Holdings Corporation, quit (or was pushed out by the restructure process) in May. Salary band disclosures in the report show that Pratt’s golden handshake took his final year’s pay above $1.1 million. Some 42 other executives earned over $100,000 – good pay for Christchurch.

His departure might have also affected how the corporation’s results were reported.

Ngai Tahu Holding Corporaiton’s net profit before tax was $9.336 million, down from $31.560 million the previous year.

It made $14.427 million from ongoing trading operations, almost $10 million less than 2005, and made a $17.261 million profit on asset sales. That was all knocked out by its $22.352 million write down in assets, $20.722 million of which were in the seafood operation.

Given that Ngai Tahu will in the current financial year bring into its books the fisheries settlement assets received from Te Ohu Kaimoana Trust, it is good policy to ensure valuations are correct. What will raise eyebrows though is the fact that $15 million of the write down was in the goodwill in Cook Strait Seafoods, a Wellington-based company bought in 2003.

Former Ngai Tahu chair Sir Tipene O’Regan has been critical of that deal. Give that he would have looked the company over during his time as chair of the fisheries commission, his view the price paid was too high now seems confirmed.

The justification for the deal was contained in a 2003 Unlimited article on the tribe: Ngai Tahu Seafoods’ acquisition this year of Cook Strait Seafoods and 50% purchase of fishing fleet Pacific Trawling doubles Ngai Tahu Seafoods’ turnover to $90 million and will take its export earnings from $35 million a year to around $65 million. The two acquisitions give Ngai Tahu 50% ownership of four inshore and deepwater vessels, retail and wholesale outlets in Wellington and Auckland, plus quota. In the past the company could not get enough product to sell in Europe without dropping customers in other markets. The acquisition of Cook Strait gives it the volume to have a good global spread and less exposure to the US dollar, chief executive Gavin Holley says.

Fast forward three years and the Pacific Trawling joint ventures were dissolved, the Albany Pacific Catch store sold and some deep sea vessels were sold or laid up.

A planned expansion of the Pacific Catch chain of retil stores was suspended while the company tries to bring existing stores into profit.

The seafood division made a $3.833 million loss on its trading operations, with revenue dropping $7.6 million $73.9 million.

The report blames the high dollar, high fuel prices and poor profitability for large volume wetfish species like hoki.

Of note is a decision to treat $6,531,650 in costs related to allocation of fisheries settlement assets – in other words the accumulated legal bills for years of litigating for a larger share – as an investment pending allocation, rather than an expense.

Also of note is its decision to join the rest of the industry in processing fish like orange roughy, oreo dory and monkfish in China, meaning fewer jobs in New Zealand.

Problems in the tourism businesses over summer, especially Shotover Jet, affected profits, which were $3.3 million after asset write downs.

Ngai Tahu’s total assets now stand at $561 million, up $40 million over the year, and shareholders’ equity is $411 million, up $33 million.


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