Judge costs Kupe $100M

Press, 4 May 1988, Page 40

Judge costs Kupe $100M

By MARK REYNOLDS Kupe Group has revealed the damage of its association with the Christchurch-based Judge Corporation group of companies in reporting a loss of $146,096,000 for the six months ended February 29.

The result compares with a profit of. $16,174,000 for the same period last year. Chairman, Mr Peter Graybum, said the company lost about $lOO million because of the sharemarket meltdown in October. The realised and unrealised losses on investments included those on Judge Corporation, Renouf Corporation, and Ariadne Australia. The Ariadne investment, bought by Kupe for $67.36 million, has been sold for a mere $9 million — a realised loss of $58.36 million. Mr Grayburn said the company had retained its holdings in Judge and Renouf, but was waiting for the opportunity to get out. The Renouf stake, bought for $19.92 million has a market value of $1.9 million while the Judge stake, bought for $12.49 million, had a market value of $91,000 when the shares last traded.

The Stock Exchange suspended trading in Judge shares in February, after the company failed to submit a pro-forma balance sheet revealing the extent of its sharemarket losses.

Mr Grayburn said he had not been contacted by the principals of Judge and had no idea what the company’s situation was.

“Its of some concern because there is no market for Judge shares at the moment,” he said.

Mr Grayburn said the share losses were a stark contrast to the previous year when the company made a $5O million profit on share transactions.

But Mr Grayburn remains optimistic and says the indications are that the worst is over.

“Since February Kupe has embarked on a programme of realising nonstrategic assets while still continuing with its major central business district developments in New Zealand and offshore,” he said.

“All equities, with the exception of Renouf and Judge shares, have now been disposed of along with a number of nonstrategic land holdings.” The group’s turnover fell to $24,617,000 for the interim from $31,137,000 last year. This was a result of the disposal of a number of operating activities, Mr Grayburn said. These operations had been running at a small profit, he added.

Further revenue was lost with the sale of investment properties related to the Grosvenor Group, which has been sold to the Smart Group for $5O million. This was above book value, Mr Grayburn said. At balance date Kupe had a property portfolio worth $l3l million, but some of this has and will be realised so that the company can concentrate on its activities in central business district properties.

Kupe has sold properties with a book value of $2O million since balance date and properties valued at another $lO million are up for sale. All properties have been sold at a profit, Mr Grayburn said, but he would not elaborate on how much of a profit.

He said the realisation of assets had enabled Kupe to pay back some of its debts. The indebted-

ness of the company is $5O million, compared with $7O million at balance date.

The company’s property portfolio has been written down to the lesser of cost or realisable value, Mr Grayburn said. Coupled with the equity writedowns, this means Kupe had at balance date total assets of $181,713,000,compared with $453,185,000 last year.

With shareholders’ funds of $109.5 million, the company has an asset backing of 81c a share. This compares with a last sale price of 40c a share.

Mr Grayburn said Kupe has born the brunt of sharemarket losses in this accounting period and the company is now looking to consolidate and develop some previously announced projects. Construction of a $2OO million hotel and office block on the former post office site in Wellington began last November and the project is expected to be a major contributor to group revenue when completed. The company is also putting together a proposal for the Britomart site in Auckland which will be submitted to the Auckland City Council on June 30.

“If and when it proceeds it will be the major development in New Zealand,” Mr Grayburn said. The development will incorporate some council owned land and it is possible a joint venture will be undertaken with the council and the Auckland Harbour Board which also owns some of the site.

Developments in Honolulu and Los Angeles are also progressing well, he said. With the exception of the Kiwi China Prawn Company, Kupe’s trading operations are making worth-while contributions to profit. The former company, in which Kupe has an 11 per cent stake, collapsed recently. The venture was worth $4 million.

Mr Grayburn concluded that in the second half of the year Kupe will be concentrating on reducing borrowings and consolidating its present activities.

Predictably, Kupe has not declared an interim dividend,