Primary Production Committee Releases
PRESS RELEASE
Primary Production Committee
FOR IMMEDIATE RELEASE
Inquiry into sale of Terralink’s
Property Services Division continuing
Wellington, New
Zealand, 16 June 2000—
Yesterday, the Primary Production
Committee continued its inquiry into the sale of Property
Services Division of Terralink New Zealand Limited to its
former employees. The terms of reference for the inquiry
are:
To inquire into the circumstances surrounding the
sale of Property Services Division of Terralink New Zealand
Limited to its former employees
To inquire into the
appropriateness of the decision to sell the division
To
identify any issues in relation to the sale for the
governance and oversight of Crown entities
To report
its findings and recommendations, if any, to the House of
Representatives.
Mr O’Connor, Chairperson of the
committee, said, “In our review of the 1998/99 financial
performance and current operations of Terralink New Zealand
Limited, we identified a number of issues about the sale
that needed further examination. These were: fair value,
oversight of the sale process, availability of information,
use of section 13 of the State-Owned Enterprises Act 1986 to
override the sale, protection of intellectual capital,
strategies to avoid competition from staff, and consequences
of management buyout in State enterprises. The terms of
reference cover these concerns.”
“We have received advice
from the Office of the Controller and Auditor General that
addresses most of our concerns about the first two terms of
reference,” Mr O’Connor said. “The committee’s focus will
be on what lessons can be learned from the sale.”
[ENDS]
PRESS RELEASE
Primary Production Committee
FOR IMMEDIATE RELEASE
Committee
completes financial review of Terralink
Wellington, New
Zealand, 16 June 2000
Yesterday, the Primary Production Committee completed its financial review of Terralink New Zealand Limited. The committee draws particular attention to the sale of the Property Services Division of Terralink. The division was sold to a group of its senior employees as the result of aggressive management buyout action.
The committee examined the valuation and selling price of the business and notes that there are several issues related to the sale, particularly the lack of information regarding the sales process. Other issues include the role of shareholding Ministers in significant asset sales and the need for State enterprises to protect their intellectual capital and safeguard against competition from employees.
Mr O’Connor, Chairperson of the committee said, “This
situation sets a dangerous precedent for the sale and
control of State enterprises generally and we have initiated
an inquiry into the sale of the division to further examine
these matters.”
Terralinks continuing financial viability
is questioned, with the committee calling the reduction in
shareholder equity from $13.8 million in 1996 to $1.91
million in 1999 “a very unsuccessful outcome for the Crown”.
The committee, however, acknowledges Terralink’s aim to
achieve its first profit in the coming financial year and
will closely monitor Terralink’s progress.
The committee notes that one positive development is the refocusing of Terralink’s business on Geospatial services and the increase in operating revenue from $11.72 million in 1998 to $12.232 million in 1999.
The committee also notes the sale of the
Survey Services Division, a loss-making part of Terralink,
to staff in 1998. Mr O’Connor said, “We expect the sale
will have a positive impact on the financial viability of
Terralink, but again we have concerns that there is
insufficient information to determine whether fair value was
achieved for the sale or if there was appropriate oversight
of the sale process.”
ENDS.
PRESS
RELEASE PP/7/8
FR/ASNZ
Primary Production
Committee
FOR IMMEDIATE RELEASE
Primary
Production Committee reports on ASURE New Zealand
Limited
Wellington, New Zealand, 16 June 2000—
The
Primary Production Committee presented its report on the
review of the 1998/99 financial performance and current
operations of ASURE New Zealand Limited today. This is the
first time that ASURE has come under select committee
financial review scrutiny. The company was established in
November 1998 to enable the separation of the delivery
function of meat inspection from the regulatory and
verification functions (which remain with the Ministry of
Agriculture and Forestry (MAF).
The committee identified
three issues:
the level of goodwill in ASURE's asset
base
restructuring
contestability
The
treatment of goodwill is the significant issue for ASURE.
Goodwill represents 94.5 percent of its net assets as at 30
September 1999, and is valued at $9.5 million. The
committee noted that goodwill was being amortised over a ten
year period. However, Damien O’Connor, Chairperson, said,
“We are concerned that if, in a contestable environment with
goodwill needing to be written down immediately, there could
be a permanent impairment in the value of the goodwill that
has not yet been amortised. This could have a considerable
effect on the financial position of the company.”
The
committee was impressed with ASURE’s restructuring efforts,
particularly in eliminating middle management and reducing
frontline charges and Head Office overheads. This resulted
in a substantial reduction
in total charges to the meat
industry. Furthermore, ASURE has concentrated on improving
performance and ensuring that technical competence among its
meat inspectors is developed to a high standard. Mr
O’Connor said, “We commend ASURE for its restructuring
efforts, in reducing costs and developing organisational
competencies. In a contestable environment, however, ASURE
could face the loss of significant intellectual capital. We
are particularly concerned that the company makes every
effort to minimise this risk.”
Meat inspection services
will not become fully contestable until foreign governments
consent to non-government meat inspection. ASURE considers
that there will be a contestable environment operating from
the 2001/2002 year onwards. The company has developed a
three-year strategy aimed at increasing the value of revenue
streams for currently contestable business. This area of
business still constitutes a very small part of ASURE's
business, however. Mr O’Connor said, “We encourage ASURE to
not lose sight of the need to focus on the mandatory
business as it appears that United States Government
approval of a contestable environment, based on MAF's model,
may not be readily forthcoming. The American concern is, in
fact, that ASURE's commercial interests may be a potential
conflict of interest. In view of this concern, we believe
the Government's priority is to protect United States market
access rather than a contestable environment for ASURE to
operate
in.”
[ENDS]