Waikato Stud on target

Press, 24 June 1985, Page 32

Waikato Stud on target

Waikato Stud, Ltd, has reached the objectives set out in its prospectus, says the chairman, Mr J. S. Lawrey, in the annual report. These were achieved from funds raised from shareholders, further term advances from Mr Nelson Bunker Hunt, and shortterm advances from AMP Acceptances (N.Z.), Ltd. The objectives were to acquire the Waikato Stud property established in New Zealand by Mr Hunt, buy Balcarres Stud, Ltd, from the Lindsay family, and to run a commercial thoroughbred stud through the ownership and breeding of horses.

The 1985 national thoroughbred yearling sales represented the realisation of assets acquired from Mr Hunt and the Lindsay family. The results were well above estimates in the prospectus and helped earlier repayment of the bulk of the advance from Mr Hunt covering stock purchased . from him, Mr Lawrey says. Although the devaluation of the New Zealand dollar helped increase prices received for the yearlings, it also increased the amount of money owed to Mr Hunt from his advances. As the value of the New Zealand dollar declined, the company was able to arrange forward cover. All costs from devaluation have been absorbed in the profit and loss account, he says. Next year’s account will further reflect the realisation of matings achieved before the company was formed.

The company has repaid a substantial proportion of the loan from Mr Hunt and acquired the neighbouring Glencairn Stud. The directors have decided it is not yet appropriate to recommend a dividend, but they believe it will be possible to recommend a payment next year. Because the company has made substantially more progress than earlier expected, the directors have recommended a l-for-10 bonus issue. Those optionholders who exercise their options by June 30 will qualify for the bonus. The managing director, Mr Steven Brem, says that the rise in value of commercial bloodstock ensured that Waikato Stud’s first results were ahead of expectations.

“It is reasonable to expect that, in straight dollar terms, this escalation will continue. The challenge facing Waikato, along with all other breeders, is to ensure that the product is being marketed in the top strata of demand.”

Waikato’s performance at the January yearling sales was the company’s highlight for the year. It came as a surprise to many in the industry and also analysts. At the sales, the company’s 14 yearlings grossed $1,554,000 for an average $lll,OOO . (compared with $71,313 for the. sale average). At.the Waikato' yearlingsales the average of the company’s • 15 lots was $22,466, compared with sales average of $14,261. ■ • The individual, highlight was the $550,000 paid for the Imposing (Aus)—Calera colt, the second highest price in the history of the national

sales. The company has since bought a one-sixth interest in the colt, Mr Brem says. In 1985, the company offered 29 yearlings on its own account. This will drop next year to 21, three of which are half-owned, reflecting the relatively high number of empty mares at the time of acquisition. “The 21 are a top-class group whose gross value should exceed that of the 29 in 1985.”

Of the 21, 13 are fillies and in the next few months the directors will have to consider the need to generate income from sales against the desire to retain some stock as broodmare replacements, he savs.

As reported, the total group net profit in the 10 months to March 31 was $964,963, and included extraordinary profits of $398,649 from property sales and realised reserves, after formation expenses of $88,175. Income totalled $3,899,964, including bloodstock sales of $2.4 million, and value of natural increase and unborn foals of $l.OB million. Expenses totalled $3,333,650, including depreciation of $29,004. No tax is payable. Because of the depreciation of bloodstock, taxation losses amount to $831,000. The directors say that this situation is unlikely to be reversed and so no provision has been made for deferred taxation.

Shareholders’ funds totalled $10,918,886, including ordinary capital of $4,753,925. Working capital stood at $2,897,843 and the current ratio was 2.4 times to one.