Zip Cushioned Shock To New Shareholders

Press, Volume CVI, Issue 31150, 29 August 1966, Page 15

Zip Cushioned Shock To New Shareholders

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Shareholders in Zip Holdings had a nasty surprise last week when profit for the year was announced as being 55 per cent lower than the £280,000 forecast at the time of the public placement of shares late last year.

Frankly admitting that the placement price had been pitched too high, Zip cushioned the shock to shareholders by taking an unusual step in New Zealand company finance: it promised to give them more shares as compensation.

This move also offsets to some degree the high placement price of 14s a 5s share for the issue of the 470,000 new shares.

Directors of Zip, a subsidiary of the giant Consolidated Gold Fields group, reported in February that sales for the six months to December were up by almost 15 per cent on the year before.

they forecast a profit for the year of about £280,000, so the decline in the second half year was a little staggering.

Disruption

This reversal was attributed by the chairman (Mr F. H. Kember) to disruption of production because of » move to a new plant. Certain new lines got away to a late start- Performance of some of the wholesale companies was also upset.

But it seems the directors were not very far-sighted. They must have known that the move to a new plant would adversely affect production. Zip’s troubles were probably more acurately pinpointed in the statement that the board has re-organised management structure, strengthening controls throughout the group, to improve costs. Unfortunately, the state of the New Zealand economy and the level of competition are such that it is doubtful if any but the harshest measures will bring profitability quickly back to previous levels.

Forecast profit of £280,000 seems to be out of sight for some time to come.

New investors will get two “gift” shares for each five they already hold from the holdings of the original shareholders. This will reduce the average cost of their holdings to 10s a share. Old shares and “gift” shares rank for the 7j per cent dividend. Forecast dividend was 12* per cent, but under the share transfer move the yield will be 10J per cent. Share Yield On the basis of 10s a Share the yield becomes 3.8 per cent, against 2.7 per cent if no shares were to be transferred. Sales were made on Tuesday in Christchurch at 12s 6d, but no sales have been reported since then. This voluntary act on the part of the original minority shareholders must be applauded as a fine gesture. Mr Kember’s statement that this is a responsible measure on their part designed to keep faith with the investing public will be generally endorsed. Turnover on the Christchurch Stock Exchange last week was the highest for a month and was, in fact, only slightly below the average prevailing since trading in Australian shares was suspended. Prices did not stand up well, and on the week there were far more falls than rises.

Many downward moves were substantial. On an average the down trend was greater than for upward moves.

Noticeable upward moves were made by P.T.Y. Industries, up lOd to 14s, Ashby, Bergh, up Is to 475, and Tekau up 9d to 16s 3d. The unlisted Hellaby rose Is 3d to 47s 3d. Most other rises were small.

Among the falls Wright, Stephenson lost Is 7d to 31s 3d, Bell Radio Is 3d to 21s 6d, Consolidated Brick Is to 15s, Skellerup Is 3d to 545, Winstone new Is 6d to 41s, Wisemans Is 6d to 18s, Wormaid Brothers Is to 29s and Evening Star Is 6d to 325.

Gen. Finance One-For-Four ttt.t. Pros. Association! WELLINGTON, Aug. 28. General Finance, Lower Hutt, hire purchase financier, is to make a further one-for-four cash issue at par payable in full on application. It made a similar rights issue in July. Fully paid ordinary share capital stands at £575,000 and the proposed issue will take this figure to about £716,000. New shares will not participate in the final dividend for tiie year ending in October, but will otherwise rank equally with the existing shares.