Balex Marine, the automatic boat loader maker, has been washed away after the high cost of manufacturing and slow sales saw the Tauranga-based company burn through the crowdfunded $330,000 it raised last October.
BDO's Kenneth Brown and Paul Manning were appointed liquidators of Balex and sister company Suelex on May 1 after events conspired to drain the companies coffers without an immediate lifeline. Balex raised $330,000 through 80 investments via equity crowdfunder Snowball Effect in October, just above its minimum target. However, Brown and Manning's first report says that was $700,000 below target, leaving it in a tight cash position until the end of March 2017 and prompting Balex's board to search for a new investor willing to inject between $2 million and $5 million.
The failure is the first by a company that's used Snowball's platform to raise funds, and while Snowball chief executive Simeon Burnett says it was surprising and disappointing how quickly liquidators were appointed after the capital raising, there were a number of "good reference points" such as the shareholdings of directors and management and the company's earlier funding rounds.
"Is there anything we would have done differently? Probably not," Burnett said. "Directors are responsible for the information they put out. The reference points were there and we got to the point of comfort and were clearly there for a number of investors as well."
Balex's local sales of its boat loader started in March 2016, six months later than scheduled due to design and manufacturing problems, and it later branched out into Australia, the UK and Europe and had planned to push into North Amerca this year.
Before hitting up the crowd, Balex had already raised $2.2 million since it was set up in 2013, with research, development and manufacturing needing "significant capital investment", the liquidators said. Its tight cash position got even worse through the tail end of last year with poor sales in New Zealand and Australia, the cancellation of a $180,000 order from a new Korean distributor, delays in European sales after the UK's vote to quit the European Union and limited opportunities to cut production costs in the foreseeable future.
The liquidators said Balex was spending about $100,000 a month, couldn't extend its funding line with Kiwibank and had no leads for a new investor by late January this year.
At that stage, the directors looked for a buyer of the business after seeking advice on the firm's financial position, and while there were a number of interested parties who got in touch, a deal hadn't been done by late April and the directors recommended a voluntary liquidation.
"The liquidators intend to advertise the business for sale and contact previously interested parties with the hope the business might sell and continue to market the product it has development," the report said. Due to the previous level of interest, the liquidators are hopeful a sale will be achieved."
BDO's Manning said the buyer interest had come from both domestic and international parties.
Balex's shareholders include managing director Paul Symes, Tauranga-based investor group Enterprise Angels, the New Zealand Venture Investment Fund's Seed Capital Investment Fund, and Auckland investors Ice Angels.
The liquidators didn't disclose the total amount owing or the value of group's assets. Balex had 28 creditors as at May 1. Suelex, which held the intellectual property, had two creditors. Of those, there were five secured creditors including Kiwibank. Callaghan Innovation had previously provided Balex a research grant and wasn't among the company's creditors.
The Reserve Bank of New Zealand hosted the 22nd annual Executives' Meeting of East and Asia-Pacific (EMEAP) central banks in Auckland yesterday.
EMEAP is a co-operative forum of eleven central banks and monetary authorities in the East Asia and Pacific region comprising the Reserve Bank of Australia, the People’s Bank of China, the Hong Kong Monetary Authority, Bank Indonesia, the Bank of Japan, the Bank of Korea, Bank Negara Malaysia, the Reserve Bank of New Zealand, Bangko Sentral ng Pilipinas, the Monetary Authority of Singapore and the Bank of Thailand.
Governor Graeme Wheeler, who chaired the meeting, said governors exchanged views about recent global economic and policy developments. Discussion focused on the potential impact of global factors on EMEAP monetary policy, as well as recent supply-side developments in EMEAP economies. Governors welcomed the improving prospects for regional growth and noted that EMEAP financial markets have generally functioned well over the past year. Governors emphasised that communication among authorities in the EMEAP region and other parts of the world is especially important at a time when global uncertainty is heightened.
It is the second time the meeting of EMEAP Governors has been held in New Zealand, and follows a meeting of EMEAP Deputies in Auckland in April.
Debt to Income caps (DTI) have been highlighted in a recent IMF report as an important measure to build resilience in our banks and housing market to protect financial stability. The Government needs to be willing to give the RBNZ the power to implement these DTI caps, say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive Dieter Adam says, “Financial stability remains an issue for our economy, particularly with a rapidly increasing housing market, despite some recent moderation, and high private debt levels. All parts of the economy are damaged in any financial downturn, especially the tradable sector, such as our manufacturers.
“Loan to Value ratios were a positive step forward in this area by the RBNZ, and adding DTI caps, which have been used in other countries, could help further ensure the quality of debt in the housing sector and increase bank's strength against future financial pressures.
“The IMF’s report on New Zealand stated, “Adding a debt-to-income cap to the macroprudential toolkit would enhance systemic resilience by limiting the risks from growing household indebtedness.”
“It was disappointing that the Minister of Finance removed DTI’s from the Memorandum of Understanding (MOU) earlier in the year. The RBNZ should move forward with their research and consultation of DTI’s and the Minister of Finance needs to add these back into the MOU to allow the RBNZ to implement them.” Said Dieter.
Statement by Reserve Bank Governor Graeme Wheeler:
The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 1.75 percent.
Global economic growth has increased and become more broad-based over recent months. However, major challenges remain with on-going surplus capacity and extensive political uncertainty.
Stronger global demand has helped to raise commodity prices over the past year, which has led to some increase in headline inflation across New Zealand’s trading partners. However, the level of core inflation has generally remained low. Monetary policy is expected to remain stimulatory in the advanced economies, but less so going forward.
The trade-weighted exchange rate has fallen by around 5 percent since February, partly in response to global developments and reduced interest rate differentials. This is encouraging and, if sustained, will help to rebalance the growth outlook towards the tradables sector.
GDP growth in the second half of 2016 was weaker than expected. Nevertheless, the growth outlook remains positive, supported by on-going accommodative monetary policy, strong population growth, and high levels of household spending and construction activity.
House price inflation has moderated further, especially in Auckland. The slowing in house price inflation partly reflects loan-to-value ratio restrictions and tighter lending conditions. This moderation is projected to continue, although there is a risk of resurgence given the continuing imbalance between supply and demand.
The increase in headline inflation in the March quarter was mainly due to higher tradables inflation, particularly petrol and food prices. These effects are temporary and may lead to some variability in headline inflation over the year ahead. Non-tradables and wage inflation remain moderate but are expected to increase gradually. This will bring future headline inflation to the midpoint of the target band over the medium term. Longer-term inflation expectations remain well-anchored at around 2 percent.
Developments since the February Monetary Policy Statement on balance are considered to be neutral for the stance of monetary policy.
Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.
The Taxpayers’ Union is slamming this afternoon’s announcement by Science and Innovation Minister Paul Goldsmith of an additional $74.6 million in Budget 2017 for Callaghan Innovation’s corporate welfare “Growth Grants”.
“There is nothing scarier than a Government in surplus and a politician's willingness to waste money on corporate welfare," says Taxpayers’ Union Executive Director, Jordan Williams.
"Instead of delivering tax relief, it appears the Government’s priority is ‘Goldsmith Grants’ and more Callaghan corporate welfare.”
"Rather than hire an army of bureaucrats to pick winners with R&D grants, the Government should scrap its $1.36 billion dollar corporate welfare regime and use that money to cut company tax from 28 to 22.5 percent. That way, the many businesses, and not the few, could afford to get ahead."
Jim Rose's most recent report on corporate welfare, Welfare Bums: Adding up the cost of corporate welfare in the 2016 Budget is available at www.taxpayers.org.nz/welfare_bums.
Key facts on corporate welfare (based on Budget 2016 figures):
Corporate welfare cost taxpayers $1.36 billion this year, up from $1.2 billion in the 2015/16 financial year
The Government spends the equivalent of $803 per household on corporate welfare
Handouts to the private sector in Science and Innovation have grown to $250 million, co-funding “commercialisations”, R&D and start-up grants. Today's announcement increases that further.
Economic Development Minister Simon Bridges and Science and Innovation Minister Paul Goldsmith have launched a new edition of an investment guide into New Zealand’s fast growing technology sector.
The Investor Guide to the New Zealand Technology Sector showcases the breadth and variety of technology companies in New Zealand.
“The tech sector is New Zealand’s third largest exporting sector, contributing $16 billion to GDP and it is growing fast,” says Mr Bridges. “It presents multiple opportunities for New Zealand and international investors.
“New Zealand technology is gaining recognition internationally along with our innovative and can-do culture, and the fact that we are ranked first in the world for ease of doing business by the World Bank Group is a huge drawcard for investors.
“High profile successes like Vend, Xero, Fisher and Paykel Healthcare and Vista Group are leading the way. But, a growing number of early stage companies like Soul Machines and 8i, are attracting significant international attention for their cutting edge technologies in artificial intelligence and virtual reality.
“One of the top priorities of the Government’s Business Growth Agenda is to ensure that these businesses are supported and enabled to grow and compete with the world’s leading technology innovators,” says Mr Bridges.
The Government is also planning to meet the needs of this growing sector through investment in innovation, and building the skills needed in the sector.
“The Government is working hard to develop New Zealand as a hub for high-value, research and development intensive businesses,” says Mr Goldsmith.
“The recent 29 per cent increase in businesses investment in research and development reported by Statistics New Zealand is largely driven by technology businesses, and shows that our efforts are delivering results”.
“To support this growth we’re developing pathways for young New Zealanders to enter the tech sector. This includes the TechHub in Schools, and FutureInTech initiatives which aim to engage young people and get them interested in a career in tech,” says Mr Goldsmith.
“Alongside these skills and employment initiatives the Digital Technology Skills Forum, is bringing together industry associations with government agencies to identify opportunities to develop the skills that the sector will need in order to continue its rapid growth,” says Mr Bridges. “It’s a sign of a sector that is in good health, and planning to meet its future needs.”
The Investor Guide is produced by the Technology Investment Network (TIN) in collaboration with the Ministry of Business Innovation and Employment (MBIE). It is freely available online.
More than 100,000 employment agreements have been completed using an online tool refreshed by Business.govt.nz just over one year ago, says Small Business Minister Jacqui Dean.
“As a Government we are committed to helping New Zealand’s small businesses thrive, and the Employment Agreement Builder is just one way we’re helping small businesses get ahead,” Ms Dean says.
“Using the Employment Agreement Builder you can create employment agreements tailored to meet the needs of your business, with clauses clearly labelled mandatory, recommended, or voluntary.
“Accessible online, mobile-friendly, and with the ability to save users progress, this tool adds up to more time for business owners to work on their business, and less time on compliance.
“Since the tool was refreshed 127,671 people have visited the site to create employment agreements and learn about their rights and responsibilities, with the tool receiving a 95 per cent positive feedback rating.
“An employment agreement is the foundation of a good employment relationship, clearly setting out expectations for both employers and employees, and helping to avoid disputes.
“With the Employment Agreement Builder and other Business.govt.nz tools such as the Workplace Policy Builder we are making it easier for businesses to create positive and productive workplaces,” Ms Dean says.
New Zealanders will have to pay an extra 40% in their insurance fire levy from July despite the key selling point of the Government’s amalgamation of fire services being ‘efficiency’ - according to a new report being published today by the Taxpayers' Union. The Government's reform package will result in an immediate cost increase of $80 million for little or no increase in services, despite claims by Peter Dunne, who has driven the reform, that the amalgamations will save money.
Taxpayers’ Union Executive Director Jordan Williams says, “Total fire services costs will shoot up by $80 million per year despite efficiency being the key promise by Mr Dunne of these reforms. What is worse, the Government has increased the economic burden on New Zealanders without any comparable increase in the level of service.”
“According to the Government's own figures, efficiency gains years down the track will not even recoup 12% of the forecast increase in costs due to the amalgamations.”
“Despite rhetoric by politicians that these reforms are about saving money, according to official estimates, the emperor has no clothes. The costs are forecast to skyrocket.”
The Fire and Emergency New Zealand Bill is in the final stages of passing in Parliament and will centralise both urban and rural fire services under the funding of the insurance levy on 1 July 2017.
Mr Williams says, “Currently, only New Zealand First are blowing the whistle on this issue. The question is, why haven’t the other parties done their homework and held Peter Dunne to account for what appears to be an enormous own goal? His reform, which he’s sold on the basis of ‘efficiency’ will, in fact, cost New Zealanders’ hundreds of millions over the next few years alone.”
The report's author, Mac Mckenna, says, “New Zealanders currently pay less than a third of the cost of Tasmania - which has a similar fire climate to New Zealand - where rural and urban fire services are centralised. Tasmanians pay $293 per person compared to only $86 in New Zealand. Despite that, the Government is adopting the Tasmanian business model.”
“Not only are the costs going up, but the reforms will mean insurance holders are unfairly targeted to fund the fire service. For example, foresters, who seldom insure, will now pay 38% less in protection whilst Mum and Dad households are paying 40% higher levies on their insurance. How is that fair?”
“The changes do nothing to incentivise self-insurance and actually rewards those who opt out of insurance altogether.”
New Zealand's two big meat co-ops, Silver Fern Farms and Alliance Group have both had new CEOs at the helm for the past two years, each charged with improving returns to their farmer-shareholders. Dean Hamilton and David Surveyor talked to Tony Benny from NZFarmer