Leyland to brush up its image

Press, 13 November 1985, Page 50

Leyland to brush up its image

By

SIMON LOUISSON

m Wellington

The low profile image of the Leyland group of companies is about to change. The company invited a group of finance journalists to Auckland for the announcement Of Leyland Growth’s 1985 result but, more importantly, to get to know the companies better. There is little doubt that the group has suffered from the name, both from connotations of the British car manufacturer and the confusion caused by having three companies under the same title. Leyland executives admit that thought has been given to altering the name but for the moment they are sticking with it and concentrating on a harder sell to investors and the public. Leyland began life as the Leyland O’Brien Timber Company, but when the company’s cutting rights expired the Strevens family bought in in the 1960 s and 1970 s following an unsuccessful take-over bid by Broadlands. Today, the Strevens family, led by Mr John Strevens, chairman of the Leyland companies, owns 35 per cent of Leyland Investments. Leyland Investments developed into an investment company along the lines of a unit trust, but last year it floated off Leyland Capital, which became the investment company. This year Leyland Capital was launched as an investment bank. The parent, Leyland Investments, which owns 40 per cent of the two offspring, has become a holding company. Mr Strevens says the group was structured in such a way to obtain market acceptance, bring in new shareholders and allow them to choose the type of investment company they wished to be involved in. “There is no circular relationship like some companies on the Stock Exchange. None of the companies is a dumping ground for the others.” What makes the Leyland B interesting is the NZI •. NZI Investment Services, Ltd, a subsidiary of NZI Corp, has a 25 per cent interest in Leyland Investments. It also has management contracts to

manage the. investment decisions of Leyland Growth and Leyland Capital. The relatively small Leyland companies, each with capital of around SIOM, benefit from the expertise and contacts of NZI, to say nothing of its SBOOM investment muscle. The general manager of NZI Investment Services, Mr Ross Jewell, says that working through Leyland and equity accounting profits is an efficient way of operating for NZI. Control of Leyland Investments is firmly locked up through NZTs 25 per cent holding, together with the Strevens family interests. NZl’s management charge is 0.15 • per cent of turnover, which amounts to about $200,000 — effectively a loss. However, NZI gets its incentive through its shareholding and an option to buy more shares at double their issued ' value (so that only if the shares appreciate significantly will NZI Benefit). Leyland Growth, the investment company, has a wideranging portfolio, ' including some which are “strategic” shareholdings, but it does not wish to go beyond in order that quick exits can be made if necessary. Mr Jewell says the key to Leyland Growth is through superior performance to the rest of the sharemarket. He says the S2.IM profit just announced (compared with SIM in 1984) can . be attributed to the connections and skills of the NZI management team. This was in “the most, difficult market to operate in.” Next year he expects the market to be flat but volatile, which is a climate Mr Jewell prefers to operate in. While investors will have to wait until the release of the annual report to find out details of the portfolio, Mr Jewell says all major investments, bar one, were profitable. ■ The company would have performed even better had it not been for foreign exchange losses of $325,000. The profit includes 80 per cent of all unrealised gains on its investments, which Mr Strevens considers conservative accounting. The fledgling company, Leyland Growth, is the most exciting, but also the most risky, says Mr Jewell. It is not a venture' capital company, but will take positions to maximise the benefits. The strategy is to take significant shareholdings in companies which: have above average growth potential; are in sunrise industries; land have strategic market shares in their industries. Leyland Capital will aim to get at least 20 per cent holdings so that it can influence management through representation on the board and be able to equity account. Mr Jewell says the risk is that while it is easy to make gains on a rising market, a 20 per cent holding can be extremely “bad news” on a falling one. Monday’s announcement that Leyland Capital had achieved 14.2 per cent of Allflex Holdings was a coincidence in timing, but representative of the strategy, says Mr Jewell.