Far North Holdings Ltd under scrutiny
An independent report has suggested sweeping changes be made to both the operation and structure of Far North Holdings Ltd.
In a bid to improve the company’s responsiveness to community aspirations and provide essential working capital for investment in new assets, the report calls for a review of corporate objectives including asset acquisition and divestment policies.
The report from accountant and former Northern Community Board elected member Tony Norman was tabled before the company’s 100% shareholder, the Far North District Council, at Kaikohe today.
The council has responded in the short term with decisions to:-
• Appoint a third director to the company
• Review all three directorships
• Initiate a full review of the company’s Statement of Intent, with the outcome being an orderly return of capital to the council.
The review of director appointments will be carried out by Far North Mayor Wayne Brown, deputy Mayor Sally Macauley, and the chairman of the new Audit & Finance Committee Steve McNally.
Mayor Brown said today it was intended to review the directorships “quite quickly” with an emphasis on local people with business and commercial acumen for any new appointments.
The directorship review will be followed by a comprehensive review of the Statement of Intent (the agreement between the company and the Council on policy on how the company operates) based on the changes proposed in the Norman report. In particular the review will be looking at ways to improve both the company’s working capital and the cash returns to the shareholder.
“To have close to $40 million in capital invested without a dividend makes no commercial sense to me. It’s also clear that the company cannot operate effectively without working capital,” Mayor Brown said.
The Norman report has called for :-
• a reconciliation of financial returns and objectives to accommodate community aspirations and provide more balanced guidelines
• moderation of the company’s “user pays” focus, for example Bay of Islands Airport car parking and tenant charges at Ashby’s Boatyard
• Council to take greater responsibility for pro-actively managing public perceptions
• “adequate and honest” support (the Council should not hide behind the company on controversial issues)
• divestment of non-strategic assets to replenish working capital and release capital for investment in new strategic assets
• an analysis of incremental returns to justify any additional Council funding
• concentrated investment on economic development initiatives with a focus on marine, engineering, aquaculture and tourism industries
• a review of whether and when it would be appropriate to divest any of its existing infrastructural assets
• divestment of fixed assets with low commercial returns, such as service centres at Kaikohe, Kaitaia, Kaeo and Rawene, either to the private sector or back to the Council
• immediate steps to improve the company’s working capital, including the sale of the Kerikeri Memorial Hall
• management of company operations with a focus on the views and concerns of its business counterparts
• quantification of additional capital needed to maintain existing infrastructure and expand into other strategic sectors
• the appointment of a third director as spokesperson for FNHL and the shareholder
• public information regarding the reforms
• publication of the company’s quarterly performance reports
In a separate report also tabled yesterday FNHL chairman Malcolm Nicolson said the company fully supported the review process, which the company had been seeking for twelve months.
The company was “committed to working with council to implement any changes to its shareholding objectives and to addressing any operational issues that arise from the review”.
Mr Nicolson said some matters raised in the Norman report may have been made without adequate background material or knowledge of contractual commitments, and these matters could be addressed as part of the review process.
The report questioned the level of cash benefit ratepayers derived from the company’s operations.
However Mr Nicolson said from1998 to 2001 $3.85 million had been returned to the council as a cash dividend. Since that date, as a result of a council policy change and restructuring of lease arrangements, the company was directed to apply company surpluses to the development and maintenance of infrastructure and properties.
As a result, $5.86 million had been applied to the maintenance and development of assets between 2002 and 2007.
Mr Nicolson said the company accepted there would always be room for improvement in operational performance and that it needed to be more sensitive to the demands of tenants and the community. However the company had been confined by contractual arrangements.