British interest in Command

Press, 8 September 1982, Page 28

British interest in Command

The interest by British investors is the most likely reason for the strong demand for the shares of Command Services Corporation, Ltd. which have risen 36c since going ex dividend last week. The relative shortage of Command scrip is undoubtedly also a factor. A Press Association report said that a Nelson reader suggested that the interest was probably because of the feature article in a leading London Stock Exchange tip sheet, the “Fleet Street Letter." The fortnightly letter, started 43 years ago, is understood to have a very large readership. Its own shares are traded on the unlisted market on the LSE. The publication devoted its main news page to a study of Command. Command was “reallj’ something,” it said, recommending readers to buy the shares as this would be well "worth it.” It said Command had a marvellous growth record and plenty of potential, with a cash-rich balance sheet.

The company operated in the growth sectors of the economy, it said. On a projected profit of 52.400,000 the price-earnings multiple was under six, “about a third of what it would be if this was a United Kingdom company.” It noted that Com-

mand's significant shareholder, Pritchard of the United Kingdom, itself was on a p-e of 15. The “Fleet Street Letter" said it had never before recommended a New Zealand stock, and said buyers would probably have to deal through Australian brokers. The letter's run-down on the company also contained a number of other errors (New Zealand brokers are known in London). It gave Pritchard’s shareholding as 32 per cent instead of 68 per cent and it said that the company’s “loss” last year should be disregarded. Command did not make a loss last year: the apparent downturn in earnings was for a 40 w'eek period to bring its results into line with its parent British company. The newsletter’s profit forecast for the present year of a rise of 30 per cent also seems unduly conservative, as Command has just reported a 69 per cent increase in its first half. The letter, at the end of a lengthy piece added: Command’s growth rate has been outstanding by any standards, and is not hurt bj' recessionary influences as it operates on long-term contracts in essential services. It pointed out that Command earned $lB a head per person in New Zealand, compared with only $3 to date in Australia. In the six months to July 26 Command increased net profit by $546,000 or 69.73 per cent, to $1,329,000. This reflected last year’s take-over of Pritchard's Australian operations as well as good trading in all subsidiaries.

The directors said they expected to exceed the year’s budgeted profit, which would indicate a profit in the vicinity of $2.6M for the full year — for a return of about 83 per cent on capital.