By Deborah Hill Cone
Friday 27th September 2002 |
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Elders 50% shareholder Mark Hotchin said the company's exposure to IT Media was limited to $772,000 because its loan to IT Media was secured over Wilson Neill's Parnell restaurant asset, Iguacu. The eatery was sold for $5.4 million in February.
Elders, one of many subsidiaries of the labyrinthine Hanover Group, reported a record after-tax profit of $24.4 million, up from $9.5 million the previous year.
The profit included a one-off payment of $10.2 million from selling subsidiaries U-Bix Document Solutions and Cogent Communications to its parent as part of a restructuring of the company.
Mr Hotchin said accountancy firm KPMG had done a cross check on the audit by longtime auditors Grant Thornton plus an extensive legal audit had been carried out.
"We take corporate governance very seriously," Mr Hotchin said, who owns the company with entrepreneur Eric Watson.
Revenue was up from $36.6 million last year to $68 million and shareholders equity was up from $25.4 million to $36.5 million.
During the year subsidiary companies were acquired at a cost of $87.9 million, compared with $32.6 million the previous year, reflecting the company's acquisition spree.
Elders' parent company, Hanover, is going through yet another restructuring, being streamlined into three separate company groupings:
* Hanover Financial Services Elders Finance, Nationwide, United finance, FAI and other finance subsidiaries;
* Hanover Investments OneSource, U-Bix and Cogent Communications; and
* Hanover Management funds and property management.
Mr Hotchin said the reason for the restructuring was that Hanover had grown very quickly.
Accountancy giant Ernst & Young is consulting on the restructuring.
The new figures show related party lending in Elders, which has come under scrutiny from The National Business Review has increased from $43.8 million last year to $61.9 million this year.
The increased figure includes a $6 million loan to Cullen Capital and $15.6 million in loans to Cullen Investments but Mr Hotchin said $3 million of the Cullen Investments loans had been paid back since balance date.
"It's a deceptive term 'related party' people assume it's money going out to the shareholders or directors when the bulk of it is to subsidiary or sister companies still within the group," Mr Hotchin said.
Loans to associated companies included $13.6 million lent to Hanover Group, $3.6 million to EFL Leasing, $3.5 million to EFL Asset Management and $3.2 million to Hanover Financial Services.
Mr Hotchin said Mr Watson's decision to move offshore would not affect the day to day running of the company, or the filing of accounts.
"Eric not being here isn't that critical to the business, I can still talk to him on the phone and the company that owns his Elders shares isn't him, it's a company still domiciled in New Zealand."
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