$53M loss to Wormald Int.

Press, 5 March 1988, Page 24

$53M loss to Wormald Int.

Wormaid International N.Z. reports an unrealised fall of $53 milliop in i its sharemarket investment.

The directors I report, with a strong | interim result, that there I was ;an unrealised “variahce’N of $53,159,000 in the! market value of its holding in Wormaid based on the latter firm's share price on the Hong Kong stock exchange at| December 31.

The price of the share then, HK97 cents, gave the market price of the investment as $NZ36,133,000. The directors say that the unrealised loss will not be brought Into the accounts because, “the company’s investment in Wormaid Pacific; is long term and will not; be realised unless a sufficiently attractive offer in excess of book value is {received and the relative exchange rates are favourable.” The pro forma balance sheet for December 31 gives the value of investments at $89,292,000 and a market value : of $36,133,000. ! Interim profit of Wormaid International N.Z. for the half year ended December 31 was up three fold bn the 1986 interim result. .

Unaudited, tax-paid profit for the six months was $6,821,000, compared with $1,611,000 in ' the previous corresponding period. This is an increase of 323 per cent. More than 70;per cent of the increase {was I contributed by a $3,823)000 share of associated companies' profits in the latest half, compared with none in the first half of the 1986-87 i year. : After-tax I profit before the share of associated companies' I profit ;was §2,998,000, compared’ with $1,611,000. i i I

Turnover was 281 ; per cent up on the { corresponding period at $58,311,000 compared with $45,566,006. I 1 However, the| Wormaid International N|.Z. directors say an analysis of this investment by Schroders Australia for Wormaids Australia put the value of Wormaid Pacific shares at HKl7Oc each. This would value the investment at $56,303,000 — above book value. i)

An unaudited group pro forma balance I sheet for Wormaid International N.Z. at December 31 shows the exchange fluctuation reserve has increased because of adverse currency movements from $2,453,000 to $3,900,000.

“In the meantime, the directors suggest shareholders recognise that

current market prices are unrealistically low,” says Mr M. T. Lee, the executive chairman. The company reports! that orders for the eight months ended February 29 are ahead of budget. j { However, while commercial construction in Auckland and Wellington continued to be buoyant) other activities, particularly when the group is servicing local manufacturing, and in the provincial {areas, vary from near budget to well below budget. i l

The directors say the New Zealand group is trading at an improved profit and is in a “moist satisfactory liquid position!” This wll enable advantage to be taken of anyi opportunities being available to expand the company’s trading 1 activities following finalisation of the controlling shareholding changes. Tjhe directors say that because of these problems and uncertainties and concerns relating to the New Zealand economy, las well as the overseas investment taxation proposals, they are unable “to | commit to a forecast” for| the second six-mohth period but hope it will |tje possible to maintain current earning rates. { j Wormaid International Australia, subject !to shareholders’ approval and to the finalisation; bf an (agreement for a longterm continuing relationship, has accepted a cash offer of 200 c an ordinary share from Allied Overseas Investments for its shareholding of 49.83 per cent in Worm'ald International N.Z. The basis for the sale of {the Wormaid operating companies in Asia to Womiald International N.Z. and Wormaid Pacific group has also been agreed [in principle. It is hoped that by rtiidApril all of these matters can be finalised. The directors of Wbrmald International say they will recommend this offer to their shareholders for approval at an extraordinary general meeting to be held on March; 124. They say their recommendation is based on; Jan independent valuation {assessing the adjusted I net tangible asset value { of Wormaid International N.Z. at December 31), as between 187 c and 236 c a share, and stating | the opinion that 200 c is a fair price taking into account all factors. Allied Overseas Investment is a public-listed Hong Kong company in which Mr M. T. Lee's interests have a substantial investment.