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returns.
Each is important in its own right with the ¬rst largely dictating the extent to which the sec-
ond can be achieved. Management is absolutely committed to both objectives and will
take whatever steps are necessary in pursuit of their achievement.

INVESTMENT ACTIVITIES
While investment returns are an important component of BIL™s overall pro¬t, the pro¬table
realisation of any speci¬c investment is often not in itself a noteworthy occasion. By the
time an investment is sold, its underlying value is usually readily apparent and identi¬-
able, with the marketplace generally having recognised the merits of BIL™s original invest-
ment decision.
A good case in point was the sale in 1995 of the Group™s residual holding in Carter
Holt Harvey for $468 million resulting in a surplus of $142 million. The initial investment
in Carter Holt Harvey was made in 1990. Around that time its own acquisition strategies
had resulted in it becoming heavily indebted and out of favour with the market. While
771
Case: Brierley Investments Limited




41
Part 4 Additional Cases




BIL™s involvement is well documented and the success of that investment now widely rec-
ognised, the reality is that the initial investment was viewed sceptically by the market as,
somewhat ironically, was the ¬nal selldown”but for quite different reasons.
As a contrarian value-based investor we were delighted with our investment in Carter
Holt Harvey which, over time, averaged some $500 million and realised in excess of
$1 billion.
The investment highlight of the year was unquestionably the purchase and subsequent
sale of a 28% interest in New Zealand™s pre-eminent publishing company Wilson & Hor-




Brierley Investments Limited
ton. After an extensive evaluation process BIL acquired its interest in November 1994 at
$9.50 per share and a total outlay of $265 million, with the intention of being a long-
term shareholder. Subsequent to the acquisition, discussions were held with the com-
pany™s directors who expressed their preference for a major shareholder to be an existing
newspaper industry participant. BIL agreed to work with the company to identity a suitable
shareholder and to sell its shareholding, provided the price re¬‚ected the strategic value of
the shareholding and the real underlying value of the company. The sale process intro-
duced a number of potential buyers who concurred with our view on value and resulted in
BIL selling its shareholding for a pro¬t of $65 million. The outcome has already proven to
be of signi¬cant bene¬t to all Wilson & Horton shareholders with the company™s new div-
idend policy ensuring that the longer term share price more fully re¬‚ects the underlying
value of the company.
A more recent outcome and one which will be accounted for in the 1995/96 ¬nancial
year is the recent completion of the partial selldown of the Group™s interest in Auckland
casino owner, Sky City. With construction now well advanced and the casino due to open
in early 1996, we arranged $300 million in external debt facilities based on equity of
$186 million. Having completed this ¬nancing, BIL offered 29% of the total capital for
sale by way of a private placement. The selldown in July valued Sky City™s equity at $425
million and resulted in a pro¬t to BIL of $65 million. BIL retains a 50.6% interest which,
based on recent sales, now has a market value of $278 million, which compares favour-
ably to its book value of $95 million.

OUTLOOK
There are three key determinants to BIL™s future prospects:
• current investments”a careful review of current investments highlights the opportunity
to grow cash¬‚ow and earnings and hence enhance value in each of the regions in
which the Group operates with the gross trading contribution forecast to rise from $290
million in 1995 to over $400 million in 1997;
• strong ¬nancial position”there will always be new investment opportunities available
in any market environment. While careful evaluation of, and commitment to, each new
investment is a fundamental prerequisite, as important is maintaining a strong ¬nancial
position which will enable BIL to take advantage of these opportunities; and
• people”the importance of a capable team cannot be underestimated. BIL is appropri-
ately resourced with well motivated, highly skilled people, enabling us to add value to
existing investments and create value from new investments.
BIL is well positioned to continue to enhance shareholder value in the future as it has in
the past. While the present market capitalisation is a source of disappointment, we never-
theless are committed to ensuring that the value created is represented in a tangible form
in the hands of individual shareholders.
772 Case: Brierley Investments Limited




42 Part 4 Additional Cases




FINANCIAL SUMMARY

Net Pro¬t Sales Total Assets Shareholders™ Funds
BIL 1995 1994 1995 1994 1995 1994 1995 1994
Holding millions millions millions millions millions millions millions millions

New Zealand
Air New Zealand Ltd 42% $260.2 $190.7 $2,888 $2,598 $3,107 $2,915 $1,274 $1,198
Brierley Investments Limited




LWR Industries Ltd 66% $12.6 $13.2 $152 $157 $98 $97 $65 $60
Sealord Products Group 50% $32.3 $23.5 $307 $301 $325 $320 $158 $128
Skellerup Group Ltd 30% $44.4 $25.4 $828 $646 $519 $421 $217 $177
Ltd**
Tasman Agriculture 52% $6.1 $5.5 $17 $15 $203 $155 $154 $108
Union Shipping Group Ltd 50% $14.7 $15.3 $137 $152 $126 $107 $74 $71
..................................................................................................................................................
Australia
Australian Consolidated
Investments Ltd 96% A$9.8 A$85.4 A$797 ” A$893 A$440 A$298 A$280
The Austotel Trust 100% A$7.2 A$5.1 A$351 A$32I A$319 A$391 A$125 A$122
..................................................................................................................................................
Asia
Paul Y.”ITC Construction
Holdings Ltd* 21% HK$230.4 HK$201.9 HK$3,965 HK$2,074 HK$3,094 HK$2,039 HK$1,004 HK$611
..................................................................................................................................................
United States
Associated Hosts Inc+ 100% US$(5.5) US$(4.5) US$58 US$57 US$55 US$62 US$34 US$29
Everest & Jennings
International Ltd ++ 85% US$(9.7) US$(55.7) US$79.4 US$94.5 US$62 US$59 US$(16) US$(7)
Molokai Ranch Ltd 100% US$(4.8) US$(1.0) US$3 US$5 US$187 US$181 US$175 US$172
..................................................................................................................................................
United Kingdom
Mount Charlotte
Investments Plc ++ 70% £26.4 £10.4 £241 £214 £1,880 £1,853 £1,185 £1,159

BIL holding percentages as at 11 September 1995
* Balance date 31 March
** Balance date 31 May
+ Balance date 30 September
++ Balance date 31 December
773
Case: Brierley Investments Limited




43
Part 4 Additional Cases




COMPARATIVE FINANCIAL REVIEW

Consolidated
1995 1994 1993 1992 1991
$000 $000 $000 $000 $000

Pro¬ts
Net Operating Surplus 381,356 378,162 222,860 354,829 303,741




Brierley Investments Limited
Less
Taxation 1.883 (2,771) (12,920) 55,392 50,044
Minority Interests 38,786 38,861 23,099 11,696 63,147
Unrealised Reduction in
Value of Investment Properties ” ” 18,960 ” ”
Add
Equity Earnings 91,083 88,005 77,623 (36,631) 21,183
Pro¬t Attributable to the Group 431,770 430,077 271,344˜ 251,110 211,733
Less
Cash Dividends 226,747 151,988 160,033 225,564 161,676
Pro¬t Retained in the Group $205,023 $278,089 $111,311 $25,546 $50,057
Capital Funds
Issued Capital 1,328,701 1,302,882 1,253,135 1,253,135 1,253,135
Reserves and Retained Earnings 2,006,410 1,917,245 1,762,689 2,012,206 1,977,724
Total Shareholders™ Funds 3,335,111 3,220,127 3,015,824 3,265,341 3,230,859
Minority Interests in Subsidiary Companies 1,138,725 1,129,278 1,190,180 1,409,895 1,030,091
Capital Notes 449,219 461,838 168,239 ” ”
Convertible Notes 269,414 269,414 269,414 ” ”
Subordinated Debt ” 74,085 736,575 866,918 372,394
Investment Fluctuation 10,999 252,995 17,155 63,740 21,024
Surplus on Acquisitions 386,568 420.925 454,026 566,178 457,992
Total Capital Funds $5.590,036 $5,828,662 $5,851,413 $6,172,072 $5,112,260
Represented By
Fixed Assets 5,712,567 5,938,367 5,991,068 7,502,037 6,320,079
Investments and Intangibles 2,200,187 2,261,430 2,244,149 2,191,372 2,128,494
Current Assets 1,507,710 948,593 1,746,941 1,600,456 3,500,918
Total Assets 9,420,464 9,148,390 9,982,158 11,293,865 11,949,491
Miscellaneous Contingencies 273,849 319,662 334,153 499,808 468,522
Term Liabilities 2,720,263 1,302,619 2,205,993 2,946,632 3,112,251
Current Liabilities 836,316 1,697,447 1,590,599 1,675.353 3,256,458
$5,590,036 $5,828,662 $5,851,413 $6,172,072 $5,112,260
...................................................................................................................................................
Statistics
Adjusted Earnings per 50c Ordinary Share 15.4c 15.8c 10.8c 10.0c 10.5c
Adjusted Dividend per 50c Ordinary Share 9.0c 9.0c 9.0c 9.0c 9.0c
Net Asset Backing per 50c Ordinary Share $1.26 $1.24 $1.20 $1.30 $1.29
Rate of Net Pro¬t Earned on Year-end Ordi-
nary Capital 32.5% 33.0% 21.7% 20.0% 16.9%
Rate of Net Pro¬t Earned on Average Share-
holders™ Funds 13.2% 13.8% 8.6% 7.7% 7.1%
774 Case: Brierley Investments Limited




44 Part 4 Additional Cases




CONSOLIDATED PROFIT AND LOSS ACCOUNT

1995 1994
For the year ended 30 June 1995 $000 $000
Net Operating Surplus (13) 381,356 378,162
Less
Taxation (14) 1,883 (2,771)
Brierley Investments Limited




Consolidated Net Pro¬t After Taxation 379,473 380,933
Less
Share of Pro¬ts Applicable to Minority Interests 38,786 38,861
340,687 342,072
Add
Equity Earnings (15) 91,083 88,005
Pro¬t Attributable to the Group (4) (16) $431,770 $430,077
775
Case: Brierley Investments Limited




45
Part 4 Additional Cases




CONSOLIDATED BALANCE SHEET
1995 1994
As at 30 June 1995 $000 $000
CAPITAL FUNDS
Authorised Capital (1) $2,000,000 $2,000,000

Issued Capital (1) 1,328,701 1,302,882
Reserves (2) (3) (31,686) 129,414




Brierley Investments Limited
Retained Earnings (4) 2,038,096 1,787,831
Total Shareholders™ Funds 3,335,111 3,220,127

OTHER CAPITAL FUNDS
Minority Interests in Subsidiary Companies 1,138,725 1,129,278
Capital Notes (5) 449,219 461,838
Convertible Notes (6) 269,414 269,414
Subordinated Debt ” 74,085
Investment Fluctuation 10,999 252,995
Surplus on Acquisitions 386,568 420,925
Total Other Capital Funds 2,254,925 2,608,535
Total Capital Funds 5,590,036 5,828,662

MISCELLANEOUS CONTINGENCIES 273,849 319,662

TERM LIABILITIES (7)
Loans and Advances 2,720,263 1,302,619

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