‘Brierley May Be Too Weak’

Press, Volume CIX, Issue 32228, 21 February 1970, Page 17

‘Brierley May Be Too Weak’

R. A. Brierley Investments, Ltd, might not have sufficient financial strength to withstand a temporary setback, says a report supporting a recommendation by the directors of Northern Steam Ship Company, Ltd, that the Brierley take-over bid should be rejected.

Northern Steam earned only $18,366 and paid no dividend last year, but the directors expect to pay at least 8| per cent, after earning more than $lOO,OOO, ini the current year to March 31. The profit prediction which is made in a report to shareholders criticising the bid, is supported by an independent report by Mr G. R. Brabant, a senior partner in Hunt Duthie and Company, Auckland chartered accountants, the Press Association says. The offer is one Brierley 50c share, plus 100 c cash, for every five Northern Steam 100 c shares. When it was announced early this month the offer was worth 97c per Northern Steam share, but Brierley shares have since risen in the unlisted section of the stock I exchanges from 385 c to 425 c giving the bid a value on paper of 105 c a share. Shares' Fluctuations The Northern Steam directors said in their report that Brierley shares have! fluctuated between 50c and! 465 c in the past 12 months, I with their price in December! at 220 c. “What is their future value,” they ask. The fluctuations were principally the result of Brierley’s interest in Offshore Oil, N.L. (a 41 per cent interest held through a 64 per cent-owned subsidiary), and such shares were speculative, they said. Another probable reason for the increased price of Brierley shares was the statement in Brierley's latest annual report that group profit was $1,034,763, but after the deduction of tax, minority interests and preacquisition profits, only $145,511 was left. This figure was reached! after crediting to revenue an| $822,011 surplus on sale ofi I investment, which would seem to be an abnormal item, | the Northern Steam directors said. There was no indication that a similar surplus would be achieved in the current year. They said also that of net assets of $2,874,593 (some of them at “directors’ valuation” only $610,725 were owned by j Brierley shareholders. Mr Brabant added to this that, because of speculative factors in oil shares, the current price of Brierley shares might not be maintained.

They said also that of net assets of $2,874,593 (some of them at “directors’ valuation” only $610,725 were owned by j Brierley shareholders. Mr Brabant added to this that, because of speculative factors in oil shares, the current price of Brierley shares might not be maintained.

I “A study of the operations jof conglomerates overseas , suggests that in many cases t their success depends on con- ! tinuing buoyant and inflationr ary trends.” He said, "Tem- , porary recessions tend to > I cause their share values to II react violently.” ) Mr Brabant said Brierley might not have sufficient financial strength to withi stand a temporary setback, . and he believed that an exchange of shares would have 1 “very doubtful” advantages t for Northern Steam share- , holders. More Liquidity > Discussing their own company, the Northern Steam ' directors said that the cash ' from the sale of two vessels, i current profits and financial arrangements for subsequent I acquisitions had radically im- ‘ proved the liquid position. 1 After setting aside funds ' for all commitments, includ- ’ ing the proposed final divi- : dend of 6 per cent, a special : fund of $300,000 was held on 1 short term deposit, to be used as various negotiations for diversification were concluded. The new bulk carrier Dido • had arrived and should i strengthen the company’s J l trading position, they said, Hand the Bay Fisher had been >1 bought at a very satisfactory 'I price in preference to renewing the charter. ! Good progress had been made with internal re- • organisation and expansion of ’ the subsidiary, Fork Truck ■ Hire Service, Ltd, the direct- > ors said. Good Profits i They disclosed that taxt paid profit in the first six • months was $52,068 and pret tax profit (unaudited) in the • first nine months was t $201,435. , A tax-paid profit in excess • of $lOO,OOO for the full year ' was confidently expected. j The profit last year, adjusted for profits on sale of i (assets and insurance reft covery, was $10,072, but the I highest profit in the last 10 , years was $129,296 in 1961. > The directors said they saw i no reason why the present I satisfactory trading should t not be maintained. Their immediate goal was a return of : 10 per cent on shareholders’ : funds and 16 per cent on ’ capital, and they expected a ' stable dividend policy of at least 8 per cent in the future. > Because of current and : future trends they believed ! the company’s shares might r reach a market price well - above what was now being offered by Brierley.