New Zealand market at record high level

Press, 11 July 1983, Page 14

New Zealand market at record high level

By

ADRIAN BROKKING,

r, commercial editor

The New Zealand sharemarket continued to ease during the first three days of last week, but the trend was reversed on Thursday, and on Friday the price level rose sharply, easily surpassing the previous high reached on June 20.

The market probably took heart from rumours that began to gain currency in the middle of the week that statistics, due soon, would show a single-figure inflation rate, and that the Budget would be neutral as to share investment — apart from a decision on the tax for property trusts. Sales volumes were fairly light; for the whole of the week rises outnumbered falls almost two to one, and the rises were generally more substantial: Allflex, Ernest Adams, McConnell Dowell, Skellerup, and Crown Consolidated stood out among the many doublefigure gains. An anomoly in the present state of the market was the 30c loss by Command Services Corporation shares. This is possibly a reaction to the news late the previous week that Mr Graham Crothall stepped down as chairman. This came hard on the heels of the surprise resignations of two executives of Lane’s Industries — which in turn appeared to be the harbinger of a big loss —

and investors could be forgiven for thinking that the position at Command might be similar.

Mr Crothall told me that he resigned — leaving the group in great shape — because he wanted to pursue his own business interests. In particular, he wanted again to own his own company, or at least have a majority interest. After building up the turnover of Command in the United States from $700,000 to $l3O million, the offer by Pritchards of the United Kingdom was simply too good to refuse, he said, but now he was looking for new fields to conquer in the United States, where he lives.

In any case, his father, Mr Alan Crothall, remains a director.

The new chairman, Mr Guy Weston, head in Australia of the well-known merchant banking group, Morgan Grenfell, is a most experienced businessman.

Both he and Mr Graeme Crothall said that they were sure that Pritchards would leave the management of Command very much in local hands, as they were more than happy with the return on their investment. Command would continue to strengthen its existing operations in New Zealand and Australia — concentrating on what it is doing well — but both men saw exciting opportunities for expansion, especially in Australia. Lane’s, of Levin, a recent star performer in the textile industry, slumped to an unaudited $384,599 loss after a $663,291 profit in 1982. Divi-

dend is to be halved. The loss follows the surprise resignation last week of two senior executives of the company, the managing director, Mr Graham Smellie, and the secretary, Mr John Bull.

Lane’s had increased profits in recent years from $207,000 in 1980-81 to more than $600,000 last year.

The directors said that the latest loss was after deduction of an abnormal item increasing the provision for bad debts by $600,000.

A tax over-provision relating to the 1982 year reduces the loss attributable to the group to $290,923.

The directors said that the dividend would be passed. An interim dividend of 10 per cent was paid in November. Total last year was 20 per cent. McConnnell rose 25c to 250 c in response to its takeover bid for Mainzeal. McConnell Dowell moved to smooth the way on Thursday to taking over Mainzeal Corporation with a new offer amended on technical points.

The new notice of takeover scheme, dated July 7, was designed to meet reservations of the Mainzeal directors that the first offer was little more than an option, that there was no obligation to declare the offer unconditional in respect of the specified preference shares, and that the contractual obligation to pay dividend to the prefer-

ence shareholders on November 30 may be breached if settlement was after that date. The Mainzeal directors said, subject only to confirmation by their legal advisers that the conditions had been met, the directors proposed to unconditionally recommend acceptance. Meanwhile, Noisel Enterprises has withdrawn its offer, which was pitched at 290 c for each ordinary Mainzeal share and 180 c for each preference share. The offer was worth $7.1 million cash.

McConnell Dowell’s offer, worth more than $8.4 million, had a cash option of 340 c for each Mainzeal ordinary and 210 c for each preference share. An alternative offer is three McConnell Dowell ordinary shares for each Mainzeal ordinary share plus 170 c cash for each Mainzeal ordinary, and three McConnell Dowell ordinaries for each seven Mainzeal preference share plus 115 c cash for each Mainzeal preference share. The chairman of McConnell Dowell, Mr A. L. Carpenter, said that he believed the new offer met the requirements of the Mainzeal directors.

Within the next few days we may learn the outcome of the discussions between Waitaki NZ Refrigerating and Southland Frozen Meat. The best guess at this stage is that it involves some kind of rationalisation, short of a merger.