NZSB gets breaks

Press, 23 January 1984, Page 22

NZSB gets breaks

The New Zealand South British Group has celebrated the holiday season in style:

• On Christmas Eve the group received authority from the Australian Foreign Investment Review Board to increase its stake in the Australian finance company, Kimberley-NZI Finance, Ltd, to 70 per cent. • With the announcement of the Bunting’s-Brierley merger NZSB looks set to pick up a handsome capital gain in share-swapping its 20 per cent Bunting investment to Brierley’s, thereby securing an important position in what may become one of New Zealand’s largest corporations. • The group was recently appointed by Westpac to underwrite the house and contents insurance package now offered by the bank throughout Australia. The amounts involved are considerable.

The group lifted its operating earnings 125 per cent in the six months ended September 30, 1983, compared with the six months of the previous year. The earnings were $14,245,000 ($6,329,000), on gross revenue of $334,555,000, which was up 8.5 per cent. Unaudited consolidated net

earnings after tax were $21,064,000. Operating earnings on general insurance for the first half increased from $3.7M to SIO.IM — up 172 per cent on 1982. Sir Alan Hellaby, the chairman, says investments of the group produced capital gains, for the period of $10,464,000, and the surplus of market value over book value of investments had increased from $l4 million at last balance date to more than S63M. “However, exchange fluctuations for the period had been adverse, with a deficit of $3,645,000 as against a gain of $4,160,000 in the 1982 half-year. This arose principally from the weakening of the Hong Kong dollar and other Asian currencies against the New Zealand dollar.

As the sale of the group’s shareholding in the Mount Cook Group to Air New Zealand is still subject to the decision of the Examiner of Commercial Practices, expected profit from the sale has not been included in the halfyear accounts.

The directors announced an interim dividend of 3.75 cents per share on fully paid shares of the company and a dividend of half this rate (1.875 c per share) on the partly paid shares in the company. The dividend, paid on January 20, is tax free.

Sir Alan says the group has reserves sufficient to provide

tax-free dividends for at least the next two years. “Further reserves are expected to be generated in the future.” For group chief executive, Mr David Chalmers, the improving returns and growing optimism within the $1.4-bil-lion-assets group are early indicators of the success of a decentralised structure and style he and his management team have been introducing since Mr Chalmers assumed the top position in 1982. “We now have six operating divisions: general insurance; finance companies; investment services; information services; life insurance and trustee services,” says Mr Chalmers.

“Each division operates under a divisional holding company which is appropriately capitalised in the light of its operations and each divisional general manager is committed to earning a target rate of return on those shareholders’ funds. Most divisions extend over several geographic territories:” The breadth of the new structure is helping one of he group’s primary objects: to promote NZSB as a financial services organisation in addition to its traditional insurance activities.

The structure has allowed advances in the concept of cross-selling between divisions of the group. “Perhaps the best demonstration of the benefits of cross-marketing in the group

has been the remarkable development of NZI Finance which has become a market leader in only 10 years,” says Mr Chalmers. “This was achieved through the huge base provided by NZI shareholders and customers and the large network of NZI branch offices."

It is the company’s intention to move Kimberley-NZI Finance along similar lines in Australia.

In 1980 the group took a 50 per cent position in Kimberley. Since then the company has expanded from its traditional West Australian base to the eastern states through the acquisition of the United Leasing Group, represented in Brisbane and Sydney. While still a relatively small Australian finance company, Kimberley’s assets have increased since the NZSB partnership from sAustl4.sM to sAustss.4M.

Considerable resources have been allocated to the information services division during the last 12 months, and according to Mr Chalmers the division is poised for a major thrust in to computer software markets beyond New Zealand and Australia to the United States and elsewhere.

The division’s growth-by-ac-quistion policy has seen several leading names in software in New Zealand and Australia becoming part of the NZSB group. In March, New Zealand’s largest manufacturer of microcomputer programs, Interactive Applications, Ltd, joined the information services division. A month later the Brisbanebased Hartley group of companies was acquired. Hartley specialises in the development of software products particularly for chartered accountants and had diversified into the manufacture of microcomputers. Hartley has 70 per cent of the Australian chartered accountants market. The company is represented in five states of Australia as well as New Zealand.

The division’s final expansionary move in 1983 occurred with the acquisition in Australia of Manufacturing and Commercial Systems Pty, Ltd, a Sydney based software company with products developed for manufacturing and distribution industries.

The group’s focus on Australia was further enhanced by the recent moves to merge New Zealand’s Bunting’s and Brierley’s, both of which have Australian investments.

The proposed Brierley takeover of Bunting would see the group with 3 per cent of the huge Brierley Investments Corporation, the second largest shareholder after Mr Brierley himself.