BREWERY PROFITS

Sun (Auckland), Volume 1, Issue 62, 4 June 1927, Page 17

BREWERY PROFITS

STAPLES SIT TIGHT A CIRCULAR CAMPAIGN By ‘•PERTINAX.’’ The financial sensation of the hour is a campaign which is being waged by circulars between a committee of shareholders in the brewery’ and hotel company of J. Staples and Company, and the astute directors of that firm. It appears that about 70,000 shares are held in Canterbury, about 15,000 in Auckland, and further groups by ‘Wellington and Dunedin investors, while the directors and their friends in Wellington hold a large block which, controls the company. The total capital is £350,000. Since large capital distributions have been made by other brewing companies which sold their* beer factories to N.Z. Breweries Ltd., a big proportion of the Staples’ shareholders have felt ag- ! grieved because no such melon has been handed to them. A further grievance is that no balance sheet is issued to the shareholders, and that in order to obtain information, a few of their number-have had to make copies, when allowed to do so, cf the balance sheet which has to be given to the chairman of the Stock Exchange when the shares are listed. It is also claimed that legitimate requests for information i have been refused, and that since the principal object of the company, namely, the brewing of beer, has been abandoned, the course taken by other companies similarly situated should be followed by Staples and Company. Claiming that for these, and other reasons, the capital of the company should be partially refunded to the shareholders, and that a process of gradual liquidation should be carried out, a large body of interested persons has issued a strongly-worded circular to all the shareholders, notifying them that it is proposed to apply for an order of the Supreme Court to give effect to their wishes. Not to be outdone in the matter of propaganda, the directors have issued a counterblast in the shape of another circular which calls an extraordinary general meeting to be held in Wellington on Wednesday next, June S. This meeting is intended to confirm the present policy of the directors, which Is not very fully stated, but seems to be that of “sitting tight.” The circular of the directors admits that the “remaining branches of the business consist principally of the dealing in freehold and leasehold properties, both licensed and unlicensed.” It also claims that “an enforced liquidation such as is contemplated by a section of the shareholders must have a detrimental effect on the resources of the company and seriously affect the company’s assets and jeopardise a portion of the shareholders’ investments.” The comment might be made that the other brewery companies, such as Ward’s, Crown and Manning’s, seem to have evaded this risk very satisfactorily. JLidging by a perusal of the balance sheets for 1925 and 1926, the chief difficulty of the board appears to be that of keeping the company’s assets within reasonable bounds. This table

According to those figures, there was a decrease in total assets for 1926 of nearly £40,000. The estimate of the company’s assets which have been made by the shareholders’ committee shed a rather brighter light on the position as indicated by the balance sheet figures. The militant party asserts that the company’s assets include values in the neighbourhood of the following figures: £ 30 freehold properties exclusive of the Empire Hotel 300.000 Empire Hotel at cost 80,000 Unknown , leaseholds estimated at 25,000 3 new freehold sections in Wellington City (Approximate) .. 50,000 War Loan (£50,000 of which was held by the N.Z. Insurance Co. to cover N.Z. Breweries’ guaranteed interest) . 100.000 , 30,000 shares in N.Z. Breweries at current market price . . . . 75.000 140,000 debentures in N.Z. Breweries at market price .. 170,000 Sundry assets in balance sheet 60.0C0 Total £860,000 Interesting confirmation of this estimate is afforded by a statement in the directors’ circular. “When the brewery was sold, the proportion of capital employed in the respective branches of the business was approximately 25 per cent, brewing and 75 per cent, in properties (mainly hotel properties.)” Since the brewery was sold for £ 200,500 that would give a total of assets in 1923 as approximately £BOO.OOO, to which must be added three years’ surplus profits. It seems fairly evident that the shares are worth in the neighbourhood of £2 10s in net assets. One may at least express the opinion that June 8 will be a red-letter day. for the rival factions, and that a considerable quantity of bright dialogue will eventuate at the extraordinary meeting. The results of the present compaign will be watched with interest by shareholders in more than one other company which is similarly situated. A final quotation from the circular of the directors may be excused: "As regards the position of the section of shareholders who are pressing for liquidation and division of the assets, the only interpretation the directors can place upon their action is that having paid a high price for shares these shareholders are not content with the present rate of interest on their investment,” ! Some extracts from the circular issued by the committee are quoted below:

“A meeting of Canterbury shareholders was held in October. 1926, with the object of taking measures _o acquire full and detailed information rts to the intention of the board, and the resources of the company, and also to obtain such increased dividend and bonus payments as are considered justified by the financial position. “Since the shareholders' committee doubts the wisdom of the directors in continuing along the lines now bein'? followed, it was resolved to test the correctness of this attitude, and it was decided that the course of action should be to seek an order for the liquidation or reconstruction of the company. The purpose of this circular is to ascertain to what extent the shareholders would support such a The Supreme Court has power to make an order of this nature even at the instance of a minority of the shareholders. “If the court holds that we are entitled to have the company liquidated it is not intended that any liquidation should be hurried, nor any forced realisation of property made. The com-

mittee has no desire to be unreasonable, and if the directors had shown any disposition to meet it, there might have been no difficulty in arranging terms satisfactory to all concerned. in view, however, of what seems to be an uncompromising attitude on the part of the directors, it is thought well worth while going to the court, even if only to obtain information which should prove of special value to shareholders, and which at present is not available. This alone should compensate each shareholder for the small individual outlay necessary to cover expenses. “The following extracts from (Ua company’s balance sheet reveal what amount of the total income earned is distributed by way of dividend among shareholders: General Expenses,

For the committee — H. C. D. Van Ascii. Chairman, n. Ivan Lamb, Hon. Secretary.' *

shows the position in Freehold and leasea nutshell: — 1925 1926 £ £ hold properties . . 311,131 291,564 Sundry assets . . . . 7,677 10,094 Sundry debtors Investments and 39,129 44,754 shares 182,494 102,220

Taxation, Year. Income. etc. Dividend. £ £ £ 1924 74.99$ 35,264 35.000 1925 70.689 29,258 35.000 1926 73.541 22.997 3 .000