Fuji Xerox NZ managing director Peter Thomas says the company is “very close to being in the black” as it recovers from an accounting scandal that saw FXNZ and Fuji Xerox Australia (FXA) overstate revenues by a total of about $A450m.
‘A focused and detailed turnaround programme to get this company back to profitability’:
In a wide-ranging interview with Maria Slade, Business Editor of NZ news website The Spinoff, Thomas said he was unaware of the problems at Fuji Xerox NZ when he joined the company in 2015.
“From the outside looking in I thought it was a highly successful technology company striving for growth. Within a few weeks, it became clear to me things were not well. In March 2016, the company recorded losses of over $50m, and when we released those results that’s when the news broke about the scandal.”
An independent report ordered by parent company Fujifilm then revealed “inappropriate accounting” at FXNZ and FXA had inflated revenue by about $A450 million between 2011 and 2016.
“There were over 260 auditors and accountants based here in New Zealand reviewing every sales transaction the company had done from 2010 to 2015,” said Thomas. “This resulted in the losses the company ended up having to record. It was unbelievable, a very surreal time.”
The independent report identified a “sales at any cost” culture that led to commissions being paid on customer contracts that included speculative estimates of future printer usage.
The report said former FXNZ managing director Neil Whittaker had been paid more than $1 million to leave his job as MD of FXA after the accounting irregularities were uncovered. Fuji Xerox’s Japan-based chairman, deputy president and two directors all resigned following the release of the report.
Fuji Xerox NZ filed civil proceedings in the High Court against three former senior executives – Whittaker, former FXNZ MD Gavin Pollard and former chief financial officer Mark Allright. The case is continuing. The Serious Fraud Office is also investigating the matter.
“In the past, sales people were almost on minimum wage but earned significant commissions of hundreds of thousands of dollars,” said Thomas, who became FXNZ managing director in 2017. “What happens now is that there’s a far greater level of fixed remuneration as part of a sales person’s package, and there are caps over what commission can be earned. In the last financial year we moved our sales staff to gross profit paid plans, so they were rewarded based on the profit the company generates rather than off revenue. That’s helped change the culture. And certainly at my level the variable component of my remuneration is capped at 30 percent. So the significant over-achievement bonuses are a thing of the past.”
Thomas welcomed the NZ Government decision last month to reinstate Fuji Xerox as a government supplier on a probationary basis. He said the company was continuing to cooperate with the ongoing Serious Fraud Office investigation.
“I’m not sure if the SFO is investigating us or not. If you have a look at their website, their official word says that they are ‘investigating matters relating to Fuji Xerox’. I assume they will be looking into whether any criminal behaviour occurred and decide whether or not to lay charges. Through the last couple of years as their investigation has progressed they’ve requested a large amount of information from us, and we continue to co-operate with them as best we can.”
|Fuji Xerox NZ (artist's impression)|
Thomas is optimistic about the future and says the company is close to returning to profit.
“Over the past 18 months or so we’ve been running a focused and detailed turnaround programme to get this company back to profitability. We recorded losses in 2016-17 in excess of $350m. In the year ending March 2018 we recorded losses of $12-13m. Later this year we’re publishing our results for the year ending March 2019 and at this stage we’re very close to being in the black. It’s been a significant turnaround.”