Near $8m loss for Masterton Licensing Trust

TOUGH YEAR: Trust House is making changes to improve profitability. PHOTOS/LYNDA FERINGA

With slipping sales and a net loss of almost $8 million over the past three years, Trust House has had to make some tough decisions, says chief executive Allan Pollard.

Sales have fallen by $7.4 million, and the trust has sold off six of its businesses and is selling two more.

Mr Pollard said changing market forces meant the trust had to review businesses for their viability and make some tough decisions to sell.

It had a net deficit of $2.5 million for the year ended March 31, according to a summary of financial statements released last week by the Masterton Licensing Trust, the majority shareholder of Trust House.

The trust blamed increased competition, tight economic times and climbing operating costs for its lack of profitability.

It recorded $45 million in revenue and gave out $2.8 million in community grants - down on previous years.

The trust has also borrowed $20 million.

However, debt had not increased since last year and the trust had paid off $2 million, said Mr Pollard.

He said profits could have been better but he was positive about the trust's strong balance sheet.

"We have a large amount of assets, especially the housing portfolio, which is undervalued."

The trust assets were valued at $62 million.

Mr Pollard said the sale of the Greytown and Solway Four Square businesses would have a positive impact on profits. "Both had been losing money, this will stem the tide of loss."

Craig Roberts, a candidate for the Masterton Licensing Trust, says its finances are unsustainable.

He said the trust's business strategy had been unclear.

"There are some things in their favour but everything is trending negatively.

"If you are borrowing money to buy the groceries, you are in trouble," he said.

Mr Roberts said revenue was down and financing costs had gone up significantly.

"Debt went down because they sold those businesses, not from running the businesses well."

He said he was concerned about how the trust would finance the Featherston supermarket development, which is estimated to cost $2-2.5 million.

The trust would have to borrow more money or sell off more assets to fund it, he said.

Mr Pollard said the development was feasible, based on financial indicators.

He said Mr Roberts had made an assumption that the trust would increase debt to build the Featherston complex. "This, I can categorically state, is just not so. We will take on no debt to advance this project."

Major investments by the trust over the past year were the Kourarau hydro scheme, the housing portfolio and the Solway Four Square.

The trust spent $873,000 on developing the Solway Four Square, which is for sale.

Mr Roberts said this was a big investment for a business that was owned for less than a year.

The financial statements also reveal the trust broke its loan terms with the bank, as it did not earn enough money to cover 1.5 times its interest payments.

Now the trust must pay an additional 0.2 per cent interest on its loans until it meets the requirement again.

Mr Roberts said this was a serious breach and "quite shocking".

A bank can ask for a loan to be paid back in full and potentially put the business in receivership. But Mr Pollard said it was almost back to the required interest cover.