Houston defends RHL profit projection

Ruapehu Bulletin, Volume 14, Issue 652, 3 September 1996, Page 1

Houston defends RHL profit projection

Aprojected profit of $420,000 for the first year of Ruapehu District Council' s new company Ruapehu Holdings Limited, is realistic according to council chief executive officer Cliff Houston. The company' s statement of corporate intent was presented to the council at their last meeting. Some councillors questioned the projection which represents a targeted net profit equal to 1 0 per cent of the value of the company, $4.2m. The company, owned by the council, in turri owns Ruapehu Construction Limited and Ruapehu Quarries Ltd.

Mr Houston said the estimate was realistic in the current financial climate. Cr Bob Peck asked how any conflict between the performance of the company and the quality of the work of RCL could be handled. Mr Houston said contract management and the owrw ership benefits were two entirely separate issues. "It is not a panaceato go

easy on contracts if profitability of contracts is lowered," he said. Cr Hooroo asked how, given the loss of the major state highways contract by RCL, the company could turn things around to a profitable situation. Mr Houston said that major contract was not the most profitable and that last year was not a good year. But he said the history of the company overall has been "pretty good". He said the value of RCL has grown from $1.2 million when it was set up to $2.4 million now. "The company had difficulty meeting the contracts' performance standards. That situation was bad and we acknowledge it was bad, but it doesn't have to continue." Cr Graeme Cosford said RCL's council contracts were also not profitable. Mr Houston said just because a contract wasn't profitable last year, didn' t mean it wouldn' t be next year. Turn to Page 2

RHL projectioris defended

FROM PAGE 1 "You can actually change work practices and turn it around. It's no good harping on about last year." Mr Houston said RCL's contracts with the council would be up for renewal in 1998-99 and that there would be fierce competition for those contracts. Once again problems of communication were discussed, this time citing the recent decision to sell the RCL garden centres. Councillors said they had once again been embarrassed through an RCL decision that they were not aware of before being made public. Mr Houston said RHL could keep a much closer eye on its subsidiary companies than the council could and that RHL would keep the council better informed. "The board has got to be able to operate on a commercial basis but will keep the council informed of any developments." Mayor Weston Kirton challenged councillors to look to their performance in the matter. "We have an opportunity when we meet with the representatives of these companies to review their performance. I would suggest we haven't been all that great at talking through these issues. We have an input but we've got to use it when the time comes — we haven't done that," said Mr Kirton. Cr John Compton suggested councillors "wait until the paint dries" on the new company, saying it had not yet had a chance to perform, let alone defend its performance.