Big goodwill write-off

Press, 28 September 1988, Page 38

Big goodwill write-off

The Australian and New Zealand finance group, InterPacific Equity, formed by a merger of an Australian investment bank with McConnell Dowell, of New Zealand, has made an enormous writeoff of goodwill. Inter-Pacific Equity has written off to the profit and loss account as an extraorindary item sAust2l7M (5NZ273.4M). This eliminates all goodwill. This write-off comes as the National Companies and Securities Commission of Australia moves to introduce annual depreciation of goodwill on acquisitions. The company’s move entailed discussion between Inter-Pacific Equity and the Commission. The shareholders’ equity at June 30, after the write-off is sAust72M (SNZ9O.7M). The balance-sheet at June 30 last year carries goodwill on consolidation at sAustlsB.4M. The company reports a trading loss .of sAust3s.4l2M (5NZ44.6M) for the 12 months ended June 30, 1988. This loss is increased by further extraordinary losses of sAustl3.llBM. The result compares with a profit of SNZ6.SSM in the previous financial year.

Inter-Pacific Equity owned National Pacific, which controlled National Insurance, and 50 per cent, of Renouf Partners (latterly National Pacific Securities), which failed. No final dividend will be recommended. The Inter-Pacific directors say the company has been one of the many groups badly affected by the October sharemarket crash and its subsequent impact, on major sectors of the company’s activities, particularly in New Zealand. The company was also adversely affected by the high debt after the acquisition of the McConnell Dowell companies. The directors say full provision for all these circumstances is made in the latest accounts. This includes provision for SAustlOM of losses in this year’s accounts rising from the construction of the Aotea Centre in Auckland. This results from significant design changes, by the client to improve the building, which has delayed the project. Strenuous efforts will be made to ensure this loss can be recovered either by negotiation or litigation. Major asset sales amounting to sAustlsoM have been accomplished with the object

of bringing the group back to its core activities of construction, property development and building products. These sales, which were completed near the end of the financial year, included the group’s 49.9 per cent interest in National Pacific Corporation, the New Zealand insurance and financial services group, and its 30 per cent interest in CIC Holdings, Ltd, an Australian general insurer. This has resulted in the company no longer having any investment position. “All core business activities are now wholly owned with the company benefiting from their full cash flows,” the directors say. The company’s debt has*, been substantially reduced ■ and further debt reduction of sAustBoM is planned before the end of December. Mr D. J. Lowrey has been appointed chief executive. “The company is nbw returning to profitability and, despite continuing depressed New Zealand market segments, directors anticipate a satisfactory trading result will be achieved for the 1988/89 financial year. At balance date the group had extensive forward work in excess of sAust3ooM.”