Talent2 accounts reveal Novopay loss

The company behind the bungled Novopay payroll system is picking it will lose $20 million on the controversial contract.

Latest: Talent2 accounts reveal $20 million Novopay loss

That gels with previous comments by Talent2’s chief executive John Rawlinson to NBR ONLINE that the company is losing money on Novopay.

The latest accounts – for the year ended June 30, 2011 – for Talent 2 NZ, the New Zealand subsidiary of Australian company Talent2 International, shows a loss of $16 million, compared to the previous year’s profit of $1.1 million.

The accounts, which appear on the Companies Office website, say the loss is mainly because of a $20 million “onerous contract expense” related to a “major payroll project”.

Over that financial year, total liabililities increased by 66% to $62.6 million, while assets increased 23% to $48 million.

The accounts say: “The costs associated with going live and the re-assessment of forecasted costs for the term of the contract following go-live resulted in the determination that a loss of $20,006,098 was foreseeable over the term of the contract.”

Talent 2 NZ has interests in four other New Zealand companies – Sugar International, Sugar NZ, Howgood, and Howgood Operations – and four Australian-based companies.

An amount of $11 million to related parties is listed as payable under non-current liabilities – and is unsecured, bears a market interest rateand is repayable after 12 months.

Last month, a ministerial inquiry into the ministry of education’s botched payroll system painted a picture of departmental failures across the state sector, and outlined a $23.9 million cost blowout.

The inquiry stated spending on Novopay was $56.8 million: $29.4 million on project implementation; $13.9 million on operational costs since it went live; and $13.5 million on remediation, including $6 million in schools.

Cost over-runs are expected to grow, the minister responsible for Novopay, Steven Joyce, said at the time.

Talent2 International, which was delisted from the ASX in September 2012, is jointly-owned by Australian companies Morgan & Banks Investments and Allegis Australia.

Novopay manages $4 billion of pay each year to 110,000 staff at almost 2500 schools.

Development of the system, to replace the existing, ageing service, began in 2008 and went live in August 2012.

dwilliams@nbr.co.nz