Change in accounting lifts Rubicon result

By PAM GRAHAM

Rubicon yesterday reported a profit of $9.38 million for the six months to September 30, but avoided a much worse result by changing its accounting policies.

It limited a decline in the value of its investment in Fletcher Forests by moving to equity accounting and blamed the loss in Fletcher's value on 19.9 per cent shareholder Guinness Peat Group.

It has also endorsed Fletcher Forests' strategy of selling forests and released three pages of explanation of two executive bonus schemes which it said were $80,000 "out of the money" for the chief executive, Luke Moriarty.

Rubicon said it had the agreement of its auditors to change the accounting treatment of its Fletcher Forests investment, valued at $141.2 million in its latest accounts and comprising 75 per cent of its non-cash assets.

The company now equity-accounts the investment, which means it includes its share of earnings in its income statement.

Previously, it treated the shareholding as an investment which meant changes in value flowed through the income statement.

Rubicon valued Fletcher Forests shares at 28.7c a share, above the 19c they are trading at if a recent five-for-one consolidation is unwound.

"The directors are comfortable with the carrying value in Rubicon's accounts, and are strongly of the opinion that Fletcher Forests is worth well in excess of the 19c per share level at which it shares are currently trading," the company said.

Rubicon would have received 37c a share in a deal in which Fletcher Forests was to buy the Central North Island Forest Partnership's assets.

That deal failed to win approval from Fletcher Forests' shareholders.

"We were both surprised and disappointed when GPG campaigned and voted against the proposed transaction," Rubicon said.

GPG director Tony Gibbs, who is also a director of Rubicon, said he would make a statement today.

The $9.38 million profit on revenue of $12.4 million included $3.37 million of earnings from associates.

Operating expenses of $6.39 million included $3.5 million of costs from the failed forestry deal, $300,000 relating to a court case between GPG and Rubicon shareholder Perry Corporation and a $2.1 million provision for the executive bonus schemes which were triggered by a partial takeover of Rubicon by GPG.

Operating expenses excluding the above items were $7 million. The company has $63.72 million in cash.