Wellesley loss S$152M

Press, 30 September 1988, Page 18

Wellesley loss S$152M

Wellesley Resources incurred a total loss of $151.3 million for the 15 months ended June 30, after writing off $125.1M in extraordinary items.

The chairman, Mr Selwyn Cushing, said the result reflected the adverse circumstances, especially in the last nine months, and brought "all events” to account.

Significant among these were an extraordinary writeoff of S6SM in goodwill, the realised losses on sale or write-down of investments in associate companies and equities of S4SM, and losses on sale of development activities of SIIM.

The company incurred a trading loss of $25.4M against a $22.8M profit in the 7 months to March 31, 1987.

No trial dividend has been recommended. An interim dividend of 4c a share (8 per cent) was paid in November, 1987.

Only a year ago, Wellesley Resources was known as an investment company with big interests in property development and ownership.

The company sustained substantial losses in the sharemarket crash because of its exposure to equity investments, most of which were in New Zealand.

Because of additional pressure from a decline in property values it was decided to realise certain investments and to re-examine the com-

pany’s development activities. The result was that Wellesley Resources now concentrated on property ownership in central business district locations. This formula provided security for shareholders and a real prospect of growth, Mr Cushing said.

The trading loss was caused by Wellesley not reaching development sales, together with the reduction in investment income and increased interest costs.

The expected minimum of development sales of SIOSM was not achieved, and a proposed cash issue of shares to raise S4BM did not take place before Christmas.

The October sharemarket crash had its effect on the value of Wellesley’s equity portfolio. There was no realisation of profits and Wellesley was S22OM in debt. These events meant that the "old” Wellesley needed restructuring. The restructuring, subject to shareholders’ approval at an extraordinary meeting, after the annual meeting on November 3 would be: ® The sale of previously committed development and activities to eliminate the high risk and volatility in property development. These realisations would give S37M, release Wellesley from exposure to further losses in this area and the funding obligations to complete the projects. & To further reduce debt,

the sales of smaller properties which no longer fitted Wellesley as a prime property owning company, would realise S22M.

During the 15 months being reported, long-term share investments had been made outside Wellesley’s core business. Because of the changed sharemarket the cost of retaining these investments'became unacceptable. The sale of them was warranted, and this immediately reduced debt S26M, he said.

The rental income more than trebled from $3.3M to $11.7M for the 15 months to June 30, 1988. The retained property portfolio of prime property in Auckland and Wellington at June 30 was $235M (SISOM) in March, 1987. Retained property valuations adopted in the end of year accounts are those of a registered valuer’s current assessment of market value.

Shareholders’ funds rose $21.9M to 5143.6 M, ' representing net asset backing of 78c a share compared with the current market price of 43c. At March 31, 1987, the share price was 250 c and the net asset backing 1.05 c. Total assets were $328.7M ($275.1M), to March 31, 1987. Working capital moved from a deficit of $7.6M to a surplus of $11.4M. The current ratio was 1.1 to 1. Proprietorship ratio as at June 30 remained the same as March, 1987, at 44 per cent.