Chairman Nixon Qurusu, Secretary Dagonal Dereveke and Treasurer Sam Keqa of Choiseul Provincial Government Taskforce into Lauru Shipping Limited made a short presentation on the findings.
The report was finally handed to Deputy Premier at the Provincial Assembly Chamber in Taro Island after a very informative presentation.
This is to comply with terms of reference guided the task force with a mandatory role to provide the findings of the report to the Choiseul Provincial Executive.
Lauru Shipping Limited was incorporated in 1999 under Choiseul Provincial Government’s Ordinance to provide shipping services to the people of Choiseul Province.
It operates as a corporate entity under the Choiseul Province Investment Authority.
But it was not able to provide up to date financial reports over the years.
The entity’s financial status on profit or loss to determine any dividend payment to the Choiseul Provincial Government that holds a majority share in Lauru Shipping Limited with 99% was not declared over many years.
Premier Watson Qoloni and his executive have noted the corporate governance and financial performance challenges of Lauru Shipping Limited.
Over the years Lauru Shipping Limited was unable to provide an updated financial statement and audit reports.
This non-compliance resulted in an audit query that continues to hold back Choiseul Provincial Government to achieve a clean audit report for more than five years.
The indecision on the status of Lauru Shipping Limited not to consolidate financial accounts cause Choiseul Provincial Government to lose points and millions of dollars from provincial capacity development funds over the years.
On a standard $300,000 per project, Choiseul Provincial Government is losing 17 projects equivalent to $5,040,000.
The past forgone opportunities due to uncertain decision-makings put Choiseul Provincial Government at risks to lose the funds that could have utilized in the small-scale capital infrastructure projects for benefits of the communities.
The task force was appointed through Choiseul provincial executive resolution on 14 December 2018.
The assignment is very important to find out the governing and financial capability of Lauru Shipping Limited to rectify through collaborative measures for the benefit of management and workers, Choiseul Provincial Government and the people of Laura.
The findings noted Lauru Shipping Limited continues to face legal obligatory constraints to comply with registration, Company Act 2009 and maritime legislations.
This is related to registration requirements, disclosing of financial information to shareholders, safety and seaworthiness of vessels for travelling passengers.
In terms of financial performance, Lauru Shipping Limited was experiencing liquidity (cash flow) problems over the past 8 years to pay off its current liabilities.
With current ratio of 0.11 that is less than the accepted ratio of 1, it has a problem with current assets like cash to effectively manage and meet costs on its liabilities.
Lauru Shipping Limited’s over-dependency on debt/donations to finance its assets imposes a high risk to leverage the problem in settling all debts with limited marketable value on assets during liquidation.
It has been noted that Lauru Shipping Limited heavily depends on its fixed assets (3 vessels) to generate income with an average fixed asset turnover ratio of $1.31 in every $1.00 of its assets.
The risk here is the shipping entity’s operational services will be affected to collect revenues in circumstances there is a breakdown of running vessel that may need high repairing costs while it has incurred net loss after tax over the years since 2011.
It is very important to consider sustainability and ongoing concern of the entity.
This is in consideration of the core problems related to inadequate net cash flows to finance current operations and income-generating activities.
It also includes the profitability problem of the entity that has indicated inadequate income to cover rising operational and administrative costs.
Three options have been recommended for Choiseul Provincial Government to consider as opportunity costs.
These include (1) out-right sale of Lauru Shipping Limited (2) leasing of M.V. Nuatabu and (3) restructuring of Lauru Shipping Limited.
Premier Watson Qoloni appreciated the Lauru Shipping Taskforce team for the great efforts contributed together to complete and present the report to the executive.
He thanked his executive members, Provincial Secretary, head of divisions and technical supporting service team to come and contribute on findings of the report.
Provincial Secretary also acknowledged members of the task force for the report and presentation on the findings.
He stated the report would now be handed to the executive for discussion. It will be further tabled at the assembly for final decision making.
Chairman Nixon Qurusu and Secretary Dagnal Dereveke thanked the executive for entrusted them to carry out the investigative study.
Now it’s up to the executive’s decision.
Copies of the report were handed to the Deputy Premier Derald Galo who is the Provincial minister for works and communication.