Failed pest destruction business owed more than $7m

Failed Canterbury pest-destruction business Target Pest had liabilities totalling more than $7 million when it went into receivership this year.

More than a third of the money – $2.6m – was owed to the ASB Bank, about $2.2m to Environment Canterbury (ECan), $1.8m to unsecured creditors, and the balance to a range of other creditors.

Target Pest Enterprises (TPE), wholly owned by ECan, and Target Pest Contracting (TPC), a wholly owned subsidiary of TPE, are now in liquidation.

David Crichton and Keiran Horne, of Crichton Horne and Associates Ltd, were appointed liquidators last week after an application to the High Court by the ASB Bank, which is owed $2.6m.

Crichton said yesterday that they would meet the receivers, who had first right to the company assets, and would be looking to see if there were other areas where funds could be recovered, he said.

The companies' liquidation comes as receivers BDO Spicers, in the first report since the May 22 receivership, warned unsecured creditors they were unlikely to be paid any of the $1,872,000 they were owed.

Target Pest Enterprises was formed in 1999, with its core business being animal pest management in Canterbury.

In 2003-04 it expanded into biosecurity, commercial and domestic pests, spraying and weeds through Target Pest Contracting.

Receivers Stephen Tubbs and Shaun Adams, who have sold the business, said the growth in revenue across the division was significant.

However, from 2004 to 2007 substantial losses of about $4m resulted in the need for cash injections by ECan and increased banking facilities.

Extreme weather conditions during the winter of 2006, a tight labour market and the tightening of performance standards, impacted severely on the business for the year ended June 2007, the report said.

A $1m boost from Agriquality, which resulted in it taking a 47.3 per cent stake in the company in September 2006, failed to keep the business afloat and, after an independent business review, ECan decided it would not expose any further ratepayers' funds by injecting more money.

Agriquality, which sold its shares to ECan for a "nominal" amount just two weeks before ECan called in the receivers in May, is listed as a secured creditor owed $270,000.

The report said the only remaining assets to be realised were residual work in progress – which at May 22 amounted to $2.37m – and trade debtors who at the date of receivership owed $1.84m.

ECan last month admitted the failed companies had left it with a debt of $2.2m – money it could not recover despite the company's sale for an undisclosed sum.

ECan chairman Sir Kerry Burke announced the loss would be met from reserves and fiercely defended the council's continued support of the company over its eight years despite it consistently failing to meet its projections and objectives and making a profit only once.

In 2004, the firm posted a $450,000 deficit and a year later went $1m into the red, forcing ECan to inject another $750,000, taking its capital investment in the business to $1.2m.

TPE's deteriorating financial position was further dented by heavy snow in 2006.

- © Fairfax NZ News