Andas loss explained

Press, 4 December 1985, Page 44

Andas loss explained

The directors of Andas Group, Ltd, were given a torrid time at the annual meeting as disgruntled shareholders asked for an explanation of the $3.3 million loss in the year ended June 30. The chairman, Sir John Mowbray, told them that although some reduction in demand was apparent in the retail sector of the New Zealand operations, over-all sales activity achieved during the first four months of this year was encouraging and was only 6.5 per cent behind a budget which had provided for a significant increase in trading levels. Losses had continued in the Andas Centre’s operation as a flow-on of factors of the previous year but other "significant operations” previously in a loss situation had turned around. “While the half-year’s results may still show a loss, the board is quite hopeful of a positive result for the full year,” Sir John said. “Among other things the interest bill is now declining and greater controls are being effected on all costs and expenditure.”

Sir John said later that the $4.4 million advance from Brierley Investments and the $4.1 million received for the sale of Andas’ 49.7 per cent holding in Powercorp had allowed the group to reduce its local borrowings by almost 40 per cent, or $5.5 million. Sir John said the directors were considering alternatives regarding the second call on the contributory; shares but meanwhile the call on the shares would remain postponed indefinitely. One shareholder said that in view of the directors’ statement in the prospectus dated March 22 for the renounceable offer, he felt the second payment should be cancelled. The prospectus included a directors’ statement saying that no circumstances since the last balance date had arisen that would materially adversely affect the trading or profitability of Andas, the value of its assets or the ability of the group to pay its liabilities due within the next 12 months. The shareholders said that within six months an

“enormous loss” was announced. Sir John said the directors had made that statement in good faith and the deterioration (in profit) had, in the main, occurred subsequently. He said the board was taking legal advice on how to deal with the second payment, adding that it was very complex. The meeting, which lasted more than an hour, also spent some time discussing the placement of $5 million of cumulative preference shares with Brierley Investments. The issue of shares, if converted by Brierley,' in three years would leave Brierley with 68 per cent of the capital of Andas. Brierley’s representative on the board, Mr C. J. Thompson, explained later that the dividend Brierley would receive from the shares equated to the cost of the capital that BIL had to raise. “It is of no benefit to BIL,” be said, “but is just matching the cost of capital.”