EDITORIAL: The Aqualine enigma

PAUL TAGGART
What is going on behind the closed doors of Aqualine Holdings, the company that a few years ago was seen as the great hope for a big-business revival in Hawke's Bay?
Many former Hawke's Bay-owned firms have been taken over by national or international companies and are now branch-offices run out of our bigger cities, or Australia, Japan, the US or Europe.
Therefore the idea that a high-flyer - Jim Scott, a former chief executive of Air New Zealand, who was also a director of operations at Carter Holt Harvey, vice-president Pacific for Northwest Airlines and a foundation director of Electricorp, was to establish a business in the Bay, which he saw growing into a major corporate player, was welcome news.
Millions of dollars were invested in the venture, much of it from Hawke's Bay resident shareholders. Prior to June, when it delisted, shares were traded on the Unlisted exchange. Before that it had been criticised because directors set the share price with an undisclosed formula.
The mystery formula meant some investors paid up to $20 a share. When the company withdrew from the Unlisted market in June its shares were changing hands at less than $5.
Poor company results also meant the business was breaching banking covenants.
Then, when more than 100 investors attended Friday's annual meeting they were told the balance sheet to June was covered in $7 million of red ink rather than the projected $10 million profit.
And for the bulk of investors who didn't attend the meeting, they couldn't read about the explanation for the big loss as the press was barred from the meeting by security guards.
So something is clearly amiss, especially when it is remembered that last year the company told a briefing in Auckland that it was predicting a 40 percent annual return to shareholders over the next two financial years. But how bad the problem is, and whether it is temporary or terminal is yet to be determined.
Aquiline's core business is in import and distribution. It owns Marsanta Foods, Instant Office Products, Woodhouse Apparel and Radiola Corporation. In the Bay Clark Products is one of its high-profile businesses.
Despite the fact that imports are strong, a high dollar may well have hurt Aquiline more than anticipated. However, shareholders deserve an independent view of how precarious their investments really are and Aqualine's secrecy - with its closed meeting and refusal to publicly release its results - are not good signs.
One piece of good news that filtered out from last week's meeting, however, was the appointment of Napier businessman Rodney Green to the board. Mr Green has had success with meat, hotel and property businesses and in his own words, plans to use his "grass roots" experience to assist the company.
If Aqualine were to fail it would be a huge blow, not only to the 300 investors who have millions at risk. It would also be an obstacle for future Bay entrepreneurs who would, without doubt, find it difficult to raise finance from those still smarting from having their fingers burnt by Mr Scott and his team.