Mainzeal takes loss on major projects

The Vector Arena in Quay Park, Auckland. Picture / Dean Purcell

Major losses on the $80 million development of Auckland's indoor events centre, which is also three months behind schedule, were announced yesterday by one of the country's largest building contractors.

Asian-based Richina Pacific said subsidiary Mainzeal Property and Construction had "experienced significant and unexpected losses on two major projects in Auckland".

The projects are the Scene One, Two and Three apartment developments in the CBD - which are finished - and the 12,200-seat Vector Arena in Quay Park.

Brendan Hines, Vector Arena's financial controller, said the job was late - the arena due for completion around April would now not be ready until July or August.

"There's a whole bunch of reasons for that," Hines said, adding that Mainzeal was working on the arena's roof, landscaping and internal fitout. But an arena spokesman said it was wrong to blame the new management for problems because Mainzeal had not handed over the arena's keys yet.

Richina Pacific yesterday reported a full-year net profit of US$10.3 million ($15.5 million), but said the earnings were not cash and cancelled dividend payments. The share price closed yesterday steady at 50c. The result was disclosed after the market closed.

"The company's overall financial position, which has been adversely impacted by the performance of Mainzeal, does not allow the payment of a dividend this year," Richina Pacific said.

"The company's profits were non-cash gains and do not reflect positive results from the company's operating businesses."

Mainzeal executives refused to comment on rumours it had lost about $15 million on the Auckland arena job. The company said chief executive Neil Ranford had not left the company and would be back at work next week.

New Zealand Shareholders' Association corporate liaison director Des Hunt criticised Richina for not declaring its arena losses and for presenting consolidated accounts which did not disclose the extent of Mainzeal's financial problems.

Richina chairman John Walker said he hoped Mainzeal's losses would be turned around in the year ahead and steps had been taken to ensure the failures were not repeated.

Three months ago, Richina reported a third-quarter loss of US$234,000 on revenue of US$133.9 million, prompting Walker to lay the blame mainly at Mainzeal's door for continuing to drag on profits.

Walker also blamed Mainzeal's Auckland problems on a string of apartments by developer Tony Gapes' Redwood Group.

Mainzeal built all three 16-level Scene apartment blocks on the waterfront near the arena. Residents finished moving into these Beach Rd blocks last year but problems arose on final sign-off.

Walker said the issues surrounding these projects and Mainzeal's operating structures had been the subject of internal and independent reviews.

"The New Zealand construction market has recently suffered extensively from resource shortages, and in particular from a lack of availability of skilled subcontractors and labour in a generally buoyant marketplace, which have resulted in delays in completion of other major projects," Walker said last year.