Kupe profit running at double projection

Press, 15 October 1986, Page 39

Kupe profit running at double projection

Kupe Investments, Ltd, preliminary assessment of the performance for the six months ended September 30 suggests an annual profit almost double that projected. Mr Peter Grayburn, chairman, of Kupe, told the annual meeting in Auckland yesterday that the preliminary earnings assessment for the six months was $7.5 million, before revaluations and extraordinary gains. “This equates to annualised earnings of $l9 million — almost double projections — with diluted earnings of 21c a share.” In February the earnings of the Kupe Petro-leum-Grosvenor Properties group for the full year to March, 1987, were projected at $9.0 million after revaluations and extraordinaries. . The Kupe-Grosvenor six month reported earnings in 1985 were $1.45 million. Mr Grayburn announced that Kupe had bought 50 per cent of Datacorp Systems, Ltd, a provider of credit and business information. In the last year it had established itself as one of the few New Zealand specialist commercial credit re-

porting organisations and has taken a major market share in its field. Its client base includes many of New Zealand’s top industrial, investment and finance companies, Mr Grayburn added. Of the acceptances of the Chase offer for Kupe’s 6.5 per cent holding in Farmers Trading Company, Ltd, Mr Grayburn said the Farmers’ stakes represented one of Kupe’s more recent investments, made in the face of a Chase offer to Farmers’ shareholders with an interesting alternative investment and redevelopment proposition given our skills in both the property and investment fields. Kupe was unable to outbid Chase, but would now make a net gain of about SSM, as it would be left with about 3M Chase shares and more than half a million options. The proposed merger with the Apex Group, Ltd, would represent a leap in investment and earning capabilities. "The Apex offer of two shares for every three in Kupe is conditional on at least 50.01 per cent acceptance, but as Kupe’s two major shareholders, McConnell Dowell Corporation, Ltd, and Grahame Hamilton, have agreed to accept the offer, that condition is virtually assured. Between them, McConnell Dowell and Grahame Hamilton own 44 per cent of Kupe. "Since their initial invest-

ment in Kupe there has been mutual agreement between Grahame Hamilton and Malcolm McConnell as to their respective shareholdings in the company. This agreement remains intact, despite the McConnell interests having been transferred to McConnell Dowell Corporation.” The acquisition of 28 per cent of Kupe Investments by McConnell Dowell Corporation required Commerce Commission approval. “Meanwhile compulsory acquisition of the entire company by the Apex Group is permissible upon a 90 per cent acceptance of the Apex offer. If less than 90 per cent acceptance is received then Kupe will become a majorityowned subsidiary of Apex. This will present only minor administrative problems and will not restrict the group’s investment plans.” Four Kupe directors have already been appointed to the Apex board. The merged company will assume the Kupe Investments name. The rationale for the merger was to capitalise upon, and improve, the performance of Kupe Investments, Mr Grayburn said. Kupe had a strong asset and equity base. Its investment assets were well-balanced. A high equity ratio has given the company a strong borrowing base. A study early in the year determined that two of the . company’s core areas of operation should be investment, and property owner-

ship and development. A third core business operation was being sought. The size of the New Zealand market, coupled with opportunities for greater returns from investing elsewhere, led the directors to base at least half our operations overseas within a reasonably short period of time, Mr Graybum said. The substantial Kupe‘stake in Apex would be effectively unlocked for sale to outside parties. Our initial purchase price can therefore be recouped at the same time as Kupe effectively increases the size of its assets and shareholders’ funds by SI4OM to S2BSM and $235M respectively. Market capitalisation would more than double to S4B3M. The new company would potentially have a further S3OOM to spend on opportunities already identified, both ■ in New Zealand and overseas, which satisfied Kupe’s investment criteria, included: The merger would see Kupe rise to eleventh place by size of shareholders’ funds and the proprietorship ratio of the merged company would be a high 82 per cent, Mr Grayburn said. A $25.3M call on partlypaid shares would be made in June next year. Added to the projected earnings of S43M for the year to August, 1987, this would provide projected shareholders’ funds of S3O3M by the end of the 1987 financial year.