E. Adams now ‘reaping the benefit’

Press, 30 July 1986, Page 39

E. Adams now ‘reaping the benefit’

Ernest Adams, Ltd, was now reaping the benefit of investment in manufacturing equipment and the development of the North Island market, the chairman, Mr H. A. Adams, told the company’s annual meeting in Christchurch yesterday. Productivity was beginning'to climb sharply, and sales in the North Island were lifting quickly. The firm was now doing more than half its business in the north.

In the first quarter of the year sales in Auckland were up 45 per cent. The leased depot the firm had used in the city for two years was now too small, and a new building was under construction. Increased profits were being earned in Palmerston North, Christchurch, Dunedin and Invercargill.

Orders for Christmas products were up on last year.

The managing director, Mr David Booth, said there was every reason to believe that the first six months of the current year would be as good as the first quarter had been.

“But we do not know what the effects of the Goods and Services Tax will be,” he added. “The effect on our sales will depend on the disposable income in the hands of the people who buy our products.”

Of the take-over bid for Ernest Adams by Goodman Fielders N.Z., Ltd, this month, Mr Adams said that the bidder had said the offer price of 475 c was not negotiable.

After giving much consideration to the offer, the directors decided they would be selling the shareholders short if they accepted it, Mr Adams said. It was too low.

“I personally contacted most of the major shareholders, who were of the opinion that the price offered was totally inadequate, and in any event most were not keen to sell.”

The main adviser to the directors on the offer was Mr Richard Somerville, associate director of the advisory services of South Pacific Merchant Finance, Ltd, helped by his staff.

The Somerville opinion was based on a detailed study of the company, its finance position and immediate prospects. Suggestions were made about how the market price of the company’s shares might more properly reflect their “true value.” The board was now dealing with this matter.

Several shareholders at the meeting praised the directors for rejecting the offer.

One said that many companies were now making mediocre products and covering them by heavy advertising. Ernest Adams, however, had never compromised on quality. As part of a large group the emphasis on quality might have disappeared.

Another shareholder said the bid should be seen as great flattery of the Adams directors.

The Rangiora milling firm in which Adams holds a 26 per cent interest, H. Archer and Sons, Ltd, was "going very well,” Mr Adams said. Norths Bakery, Ltd, holds 20 per cent of Archer’s shares, and the two firms will provide a stable outlet for Archer flour when the wheat industry is deregulated next year.

Half of Archer’s turnover comes from stockfeed products. The shareholders approved the amendment of the articles to allow: • The choice of more shares in lieu of dividends.

• The directors to issue up to 2 per cent of the issued capital in a year to staff.

@ The board to declare bonus issues.

Two retiring directors, the chairman, Mr H. A. Adams, and the Christchurch accountant, Dr S. M. Lojkine, were reelected to the board.

The shareholders also approved an increase in total directors’ fees from $17,438 to $23,625.

They also ratified the final dividend of lie a share bringing the total for the year to 21c a share, compared with 20c the previous year. As’ previously reported, the after-tax profit before extraordinary items for the year was $826,327 ($639,495 the previous year), on sales of $19,533,500 ($16,513,779).