COMMERCIAL Brighter Profit News May Push Gloom Aside

Press, Volume CVI, Issue 31084, 13 June 1966, Page 17

COMMERCIAL Brighter Profit News May Push Gloom Aside

fßy Our Commercial Stag]

Some times on the greyest winter dav a ray of sunshine breaks through, giving promise of better days to come. Last week on the stock market there seemed a hint that some of the gloom of the last few weeks may be passing.

While share prices have been trying to find a level during the last week there has been a ran of good company news, and last week there were more announcements of better profits and higher dividends.

Vibrapac, .Buntings, Deanes Industries, Kidd Garrett, Dominion Fertiliser, M.S.D.Spiers, Consolidated Plastics, New Zealand Accumulation Trust, Broadlands Investments and New Ze? land Newspapers have all announced better results.

Vibrapac directors reported in the middle of the week that the latest year had been good for sales and profits. Although they did not give profit figures they announced an increase in the dividend for the year from 10 5/6 per cent to Hi per cent. Earlier in the week Buntings reported a profit rise of 22.7 per cent to a new peak of £87,534 and dividend for the year has been raised from 9 per cent to 10 per cent.

Northern Steam profit jumped by a massive 208 per cent to the third best level ever reached by the company. However, it will be recalled that last year Northern Steam’s profit fell to £11,938 and dividend was cut to 2} per cent, but this year it is up to 6 per cent. Peak Profit Dominion Fertiliser reached a new peak profit of £118.102 —more than 30 per cent higher than last year’s record. All this good news seems to be putting a little heart back into the market. During last week’s four days of trading there was steady buying, perhaps with a little caution. On the week the market was in balance for the first time In five weeks. Key stocks in the New Zealand list were in balance. Overseas leaders did slightly better, mirroring the better trend in Australia. Australian stocks attracted ■ local attention and again turn-over of industrials and retailers in this list was higher than that of New Zealand industrials and retailers. Two announcements made in Parliament last week by the Minister of Justice, Mr Hanan, were of interest to investors. Early in the week Mr Hanan told Parliament the Justice Department was considering applying to the Supreme Court for an investigation into the activities of Mr Stanley Korman in New Zealand. Without elaborating, Mr Hanan said he had asked the Crown Law Office to make an investigation after reading a newspaper report about Mr Korman’s activities in Australia. However, there was not a great deal of information about the companies concerned in the Companies Office records because information on take-overs did not have to be filed at the time of the transactions. Interim Report Mr Hanan said the Attor-ney-General of Victoria had sent him an interim report of an investigation into Mr Korman’s activities in Australia.

New Zealand’s Supreme Court has power under the Companies Act to appoint inspectors to investigate the affairs of a company. The report from the Victorian Attorney-General was probably that of Mr Peter Murphy, Q.C., presented to the Victorian Parliament on May 12. In this Mr Murphy was harshly critical of Mr Korman who, he said, “has shown himself wholly unfit to direct any company in which the public may be induced to repose its trust or invest its money.” Mr Korman is chairman and joint managing director of Factors, of Melbourne, owner of Holeproof Industries, of Auckland. Early in April it was announced that Factors had entered into a conditional agreement with an unnamed buyer for the sale of Holeproof’s entire ordinary capital. Ratification Factors’- aim was to float off the New Zealand subsidiary for about £2.2m in cash, but the agreement was not ratified and the deal fell through. Ordinary capital of Holeproof (N.Z.) w r as acquired by Factors in February, 1959, after an offer of six Factors 5s shares for each 20s New Zealand share in Holeproof or 25s New Zealand cash a share. In his report Mr Murphy commented at length on the take-over by Factors of Holeproof. He said that in the takeover, the Korman family agreements and the allied loans to Korman family companies negotiated while the company was being effected, and in consideration of it, could only be classified as a fraud on the New Zealand minority shareholders. Shareholders in Holeproof (N.Z.) did not know “there was any inducement offered or additional benefit to be gained by Mr Stanley Korman ... as a result of accepting the offer.”

Mr Murphy said: “Certainly this was not made known to the minority shareholders in Holeproof (N.Z.) when Stanley and Hilel Korman, as directors of the company, recommended that they (the minority shareholders) should accept Factors’ offer for their shares.”

“But the principle that no directors shall take a secret profit on a transaction entered into by the company applied then as it does today in both Victoria and New Zealand,” Mr Murphy added. Mr Murphy’s report attracted wide attention in Australian financial circles when it was presented to the Victorian State Parliament.

Its importance also to this country was underlined last week when questions were

asked in Parliament on whether any legal action was to be taken against Mr Stanley Korman. Under take-over legislation passed by the present Government the Korman sale would not have been able to occur. And it seems the Government also plans tightening up the prospectus provisions of the Companies Act. Mr Hanan told Parliament on Thursday that the Government intended soon to introduce legislation to do this. He revealed this when answering a question about companies offering the public high rates of interest for unsecured deposits or to take up unsecured debentures. Fair Disclosure The principle of the Companies Act was that there should be full and fair disclosure. This meant that an investor should be able to get enough facts from a prospectus to make up his mind whether to risk his money. New legislation would require the appointment of an approved trustee to see that the borrowing company kept its promises as far as it was able, Mr Hanan said. But, he emphasised, such investments were a matter for personal decision. Investors have-been warned in the past that the higher the interest rate offered for such investments, the greater the risk. This is sound investment advice.