Fine year for Buntings

Press, 19 July 1983, Page 23

Fine year for Buntings

The latest financial year (ended March 31) was a momentous year for Bunting and Company, Ltd, with a wide range of diverse investment activities, the chairman, Mr W. B. Barnes, says in the annual report. But the proposed merger with Ariadne investments, together with the acquisition of a 14.9 per cent shareholding in Ariadne Australia gives a new dimension to the group, and a solid base for future development, he says. “As far as 1983-84 is concerned, we expect that shareholders will be well satisfied with the result,” he adds.

Bunting will issue 72,275,000 shares to Ariadne Investments, as the merger terms were based on the historic and likely sustainable future earnings of the participating companies. Referred to as the “60/40 • valuation” it valued Bunting as having S3M in earnings and Ariadne Investments S2M.

The company has also negotiated a 10-year management contract with the key employees of H. W. Smith, Ltd, and their associates, which provided for a small retainer and a profitsharing arrangement based on 10 per cent of the Bunting pre-tax profit in excess of SIM. The merger will result in the issue of 3,637,500 Bunting shares to NZI Securities, 1,636,875 shares each to H. W. Smith Holdings, Ltd, and Mr B. R. Judge, and 181,875 shares each to Messrs P. D. Collins and G. E. McKenzie. Farmers On the take-over of New Zealand Farmers’ Co-opera-tive Association of Canterbury, Ltd, Mr Barnes says that the stock and station division was simply not profitable. The sector employed gross assets of more than S2OM. “Additionally, on its own, it was not capable of

achieving a realistic or acceptable profit which is essential in the stock and station industry where, in particular, there is a continuing high demand for increased farm lending,” Mr Barnes says.

He comments on the difficulty in obtaining approval from the Examiner of Commercial Practices for the division’s sale.

“We vigorously disagreed with his attitude, and with strong support from virtually all the interested parties, we succeeded in finally obtaining his approval in March.

“We were extremely perturbed by these delays, which resulted in a loss to the company in excess of S4M. One must question the need for a Government appointed authority to become involved in commercial transactions which are in the public interest and supported by the major interested parties.” Because of the level of assets involved and losses incurred on the sale, the full effects of this deal have been incorporated in the 1983 accounts. Edmonds Referring to the sale of half the capital of Edmonds Food Industries, Ltd, to W. F. Tucker and Co., Ltd, Mr Barnes says the joint venture company has considerable potential. Growth should result from the combined exporting strengths and the development of food service marketing concentrating on a range of products specially presented for the larger scale catering needs of hotels, restaurants and industrial users.

Significant cost savings are also expected from more effective warehousing and distribution.

He says that if W. F. Tucker exercises its option to purchase Bunting’s remaining 50 per cent interest in Edmonds, then the purchase price will reflect the

financial returns achieved by the new company. Riverlands Riverlands Meat Company, Ltd, the group’s Blenheimbased stock-killing and meat processing subsidiary now supplies wholesale and retail meat traders in many North Island districts as well as servicing a large customer base in the Canterbury and Marlborough areas. Increasingly unacceptable freight costs imposed by Cook Strait ferry operators, and a longer term objective to become involved in meat exporting and marketing, have resulted in upgrading of the abattoir to export standard. However, to achieve maximum flexibility and profitability it is indisputable that meat should be processed at the site of kill, says Mr Barnes. “Accordingly, we have now approved capital expenditure of $2.8 million to establish a Meat Packing House on site. On completion in February we will have a high quality cost efficient plant which will also enable Riverlands to compete in the export arena.” Mercers

Since the balance date Buntings subscribed to a cash issue of J. Mercer Industries, Ltd, thereby securing 23 per cent of the issued capital of that company. Immediately before that Mercers acquired from Ceramco, Ltd, the entire shareholding in Midland Coachlines, Ltd, the proprietor of the Midland Tour coach charter operation and of the wholesale tour operator Trans Tours. Since the settlement of this acquisition the directors of Mercer have completed a profitable rationalisation of the coach charter operations.

The effect of this rationalisation is to significantly reduce the company’s liability to maintain a large

coach fleet but at the same time still allows it to retain sufficient coaches to satisfy, the base tour programmes of Trans Tours, 4 and B Commenting on Andrews and Beaven, Ltd, he says that “in consultation with the directors of Andrews and Beaven we reached agreement to sell our 10 per cent shareholding in that company to Repco Australia, Ltd. “This sale was settled shortly after balance date. There is no question that the subsequent merger of Andrews and Beaven, MSI Corporation and Repco New Zealand to form Repco Corporation N.Z., Limited, will establish a new group with a strong financial and managerial base. This will enable Repco Corporation N.Z. to participate in the competitive environment which will be generated by CER and by the recommendations of the Industries Development Commission Report. Sth Cross The upgrading of the Southern Cross Hotel, Dunedin, has been completed, but the disturbance effect of the alterations on hotel revenues resulted in the hotel incurring a significant trading loss. “We expect the hotel to perform better in the current year,” Mr Barnes says. Property As a result of the acquisition of New Zealand Farmers and Tjmond Properties the group now has $l6 million invested in property. Particularly in the case of the retail properties previously occupied by Farmers and Haywrights, where favourable long term leases have been established with Farmers Trading Company, the group has a strong and conservatively valued property base, Mr Barnes says.