Howick and Pakuranga Times
Botany and Ormiston Times : Howick and Botany Times, Wed, March 13, 2013
www.times.co.nz Howick and Botany Times, Wednesday, March 13, 2013 --- 5 OG_AC1687_E_HBT 121832 You are going to love this... HOWICK resident and Polish Hon- orary Consul, John Roy, says that he was “livid” when he heard Mainzeal Property and Construction had collapsed. “I knew this would happen. They didn’t understand the fundamentals of the construction business. The money wasn’t theirs to spend.” In 1983, Mr Roy and a former school pal, Peter Menzies, stunned the corporate world when they put together an ambitious plan to buy the still surviving New Zealand arm of the collapsed Australian construction company Mainline, which eventually changed to the more New Zealand- friendly name, Mainzeal. It was run as a stand-alone entity under Mr Menzies, a civil servant with the Ministry of Works before joining Mainline in 1969. In his book, A Strange Outcome – The Remarkable Survival of a Polish Child, Mr Roy and co-author Allan Parker describe how Mr Roy’s quiet little offce in Picton Street was the command centre, ‘the bunker well away from the gaze of the high-rise world of Auckland’s commercial heart downtown. ‘There was swift reaction to the effrontery of the two upstarts. ‘They were admired for their experience and skills, but in terms of wealth, power, prestige and infu- ence, they were lightweights in the minds of the big boys who ran New Zealand business.’ However, at the end of the takeo- ver, the one-time Polish refugee, in his modest Howick offce, was part- owner of a giant multimillion-dollar enterprise. With Mr Roy’s track record as a fnancial doctor to failing companies and Mr Menzies’ construction expe- rience, they set to ‘create some of the real stuff, rather than manipulate their illusory wealth’. “It will be 20 years this June since I left the company,” Mr Roy says, in an interview with the Times. “At that stage, it had $32 million cash in the bank.” Construction, he says, is a high cash-generating business with the contractor being paid, but holding retentions instead of immediately paying subcontractors. “The bigger the business, the higher the cash fow, and the big- ger the bank balance. That is fun- damental. A lot of companies think the money generated is theirs, but it belongs to the subcontractors through the retentions.” Mr Roy is critical of Richard Yan, who heads Mainzeal’s parent com- pany, Richina Pacifc. “Yan didn’t understand the fun- damentals. He thought the money belonged to him. “What did he do with it? He bought a winery at Waiheke, theme parks in China. He personally made a lot of money, while the shareholders and subcontractors lost a lot.” With the exception of Clive Tilby, a construction industry consultant, the other independent directors, Mr Roy says, had big names but not the skills. Former Prime Minister, Dame Jenny Shipley, who chaired the com- pany, and former Brierley Invest- ments chief executive Paul Collins knew nothing about the construction industry, says Mr Roy. “They didn’t have a Peter Menzies with his construction background and a John Roy at the fnancial helm. They were hopeless.” In his book, Mr Roy and Mr Men- zies are described as sharing a belief that wealth is what you have in your bank account, not some arbitrary amount set by someone else, like the share market. ‘In the next few years, they would watch with amazement as competi- tors, colleagues, self-styled business leaders and ordinary New Zealanders became caught up in a bizarre feed- ing frenzy that infected the whole country.’ Despite the frenzy of corporate and individual greed, they remained fairly conservative. ‘By property development stand- ards, we were very cautious,’ Mr Roy says, in the book. ‘We could have been three times as big if we had taken the risks others were taking, but that wasn’t our way. It wasn’t the way we had learned to do business.’ They never built buildings on spec. They’d buy a promising piece of land and design a commercial offce tower project for it. Then they’d ‘tour’ the concept to prospective tenants to gauge inter- est. Only if the results were positive, would they go to a developer. And only when the developer was signed up, with money assured, would they begin building it. Mr Roy is critical of Pakuranga MP Maurice Williamson, the Minister outside of Cabinet for Building and Construction, who says no change is needed to the legislation ruling con- struction industry retentions. “That’s bull. He’s been badly advised. Retentions should be placed in a trust account. It’s not their [com- pany owners] bloody money.” Mr Roy also says New Zealand needs to “have a good look at its receivership legislation, because the banks always win”. “The legislation should protect everyone – the owners, contractor and subcontractors – not just the bank.” Mr Roy’s book says that there was always plenty of cash in the partners’ bank accounts and in Mainzeal’s coffers. They had no hankerings for the corporate trappings that the share market darlings were buying – heli- copters, private jets, extravagant par- ties, super-mansions, holiday treats and foating gin palaces. ‘They resisted such excesses, mainly because they really had no need for them.’ John Roy retired from Mainzeal in 1994 and reclaimed his life with Valerie, his wife of 40 years, at their long-established Howick home where they continue to live. By slowly selling his Mainzeal shareholding, he eventually became a regular name on the National Busi- ness Review annual Rich List of New Zealand’s wealthiest people. John Roy, a former owner of failed construction company Mainzeal, is "livid" that its directors didn't understand construction business fundamentals. Times photo Wayne Martin Sorrow at Mainzeal collapse Shocked and "bloody angry" is the reaction of a former owner of a multimillion-dollar construction company now in receivership, reports MARIANNE KELLY.
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