Forum Archive Index - March 2000

[frank fernandez <frank.fernandez@xtra.co.nz>]

BRY's HALF-YEAR REPORT

Brierley Investments heralded the move of its global headquarters to
Singapore by unveiling its new corporate direction and investment
strategy. The company also announced its interim result for the six
months ended 31 December 1999, and its intention to move its primary
listing to Singapore. 
                 
Commenting on new direction, Mr Terry noted, "We have had to quickly
address the historical problems faced by BIL.  Substantial restructuring
has been completed and a new management team is in place with a clear
vision, objectives and a strong focus on creating shareholder value." 
                 
He added, "We are committed to growing BIL through investing in
businesses where we can play an active role in managing and exploiting
opportunities in growth sectors like technology.  Our approach combines
discipline and entrepreneurial flair, as well as the implementation of
international best practices. In achieving the results sought by our
shareholders, we are dealing promptly with assets which do not meet our
new investment return criteria." 
                 
In creating shareholder value BIL plays an active role in the management
of investee companies, be it at Board level or directly through the
management of a business.  The company aims to develop a diversified
investment portfolio comprising a mix of longer-term core investments
and several smaller investments, and to implement an investment strategy
which maximises value opportunities inherent in the existing asset base.
The company also plans to leverage existing competencies in pursuing new
investments and to explore strategic investment alliances which leverage
financial resources, key skills and experience. 

Asset Management 
                 
In line with the new strategy and the move to offer complete
transparency, management has adopted the following approach in
addressing the current asset base: 
                 
Resolve Problem Investments 
                 
* Asia Power - Equity value has been severely hit by tariff changes, and
the investment has been written off.  Progress is being made on
restructuring the business, however there will be no further cash out
from BIL 
                 
* Graham Field - Equity value has been destroyed by years of inadequate
R&D and the business has been written off as a result of a decision by
the Board of that company to seek Chapter 11 bankruptcy protection in
the United States.  The company is currently in workout using Rothschild
New York as advisors.  There will be no further cash out from BIL 
                 
* Vox is for sale through Rothschild Australia and cash is being
returned to BIL 
                 
* Molokai Ranch has been written down to a level consistent with a
recent independent valuation, which is based on a full development
strategy.  A strategic review of this asset is underway, and if the
current strategy changes, a further write off is possible. 
                 
Optimise Realisation of Non-Core Assets 
                 
* Sealord - Expressions of interest have been sought for the business,
which is performing well.  Strong interest has been received, however no
decision in regards to this investment has yet been made 
                 
* Bondway was sold for NZ$37 million in late 1999, achieving a
significant margin above book value 
                 
* We are currently reviewing smaller investments with the objective of 
maximising shareholder returns 
                 
Advance Strategy in Regards to Core Assets 
                 
* Air New Zealand - The remainder of Ansett Australia not owned by the
company has now been acquired, creating the first true Australasian
airline. The new group will rank amongst the world's top 20 airlines. 
BIL is working closely with the company to realise the synergies and
cost savings accruing from the merged group, which could amount to more
than NZ$200 million per annum within 1 to 3 years. The new group will be
a stronger competitor through focussed ownership, combined asset base
and cashflow, and increased borrowing and purchasing capacity 
                 
* Thistle Hotels - BIL is working closely with management to position
Thistle as the UK's leading hotel group.  The company is nearing
completion of a major refurbishment programme, and is developing an
e-commerce strategy designed to give it first mover advantage in the UK
hotel industry 
                 
* James Hardie Industries - A well managed business, James Hardie
continues as a high growth, high return business.  A second Board seat
has been obtained for BIL, and James Hardie continues on the road to
globalising its world-leading fibre cement business. While the market
ratings of BIL's key investments fell during the period, all continue to
generate solid earnings, with James Hardie Industries in particular
experiencing excellent earnings momentum.  For the third quarter 
of the1999/2000 financial year James Hardie reported a net profit of
A$46.3 million, a 56 percent improvement over the previous corresponding
period. 

Begin Investing in High Growth Opportunities 
                 
As a first articulation of the company's new direction, new investments
were made in a number of areas and reflect BIL's focus on the Asia
Pacific region as well as a commitment to investing in the technology
sector. 
                 
* tech@BIL - Announced in a separate release today, the company has 
established a new operating division which has received an initial
allocation up to US$100 million to invest in internet related businesses
in the Asia Pacific region.  The division will incorporate a number of
existing investments, including BIL's US$20m investment in the Madrona
Venture Fund. Further announcements regarding this new division are
likely to be made in the near future. 
                 
* BIL Rothschild - the Asia Recovery Fund is now established, and in
addition to initial funding has received commitments for a further
US$250 million from third parties.  A joint venture between the two
companies has been formed, and a first investment has been made. 
                 
Interim Result 
                 
Consistent with the implementation of the new strategy, a conservative 
approach to asset valuation, and the desire to offer complete
transparency to shareholders, the Board has approved the allocation of
the general investment provision of NZ$686 million to specific
non-performing investments.  This approach has also resulted in an
additional provision of NZ$150 million being applied to specific assets,
reflecting management's assessment of the carrying value of the
company's asset base.  Specific details of the provisions are included
within this release. 
                 
As a result of the additional provisioning, the company reported a net
loss of NZ$83million for the six month period to 31 December 1999 (NZ$67
million surplus before additional provisions). 
                 
Commenting on the provisioning effect, Mr Terry noted, "Our objectives
in preparing the financial accounts for the first half of the 2000
financial year were to ensure the asset values of our investments were
both realistic and transparent.  We achieved both objectives through the
apportionment of the existing general investment provision, which the
Board had prudently established, against specific investments as well
taking a further charge against the values of other investments where
further deterioration had occurred." 
                 
Consolidated Profit and Loss Account and Balance Sheet 
                 
BIL had gross income of NZ$160 million for the six month period.  Income
from subsidiaries and associate companies totalled NZ$128 million, while 
investment income was NZ$32 million.  Overheads were NZ$23 million
compared with NZ$37 million in the previous corresponding period. 
Shareholders' funds were NZ$2,485 million at 31 December 1999 (30 June
1999 - NZ$2,795 million) and total assets NZ$6,022 million (30 June 1999
- NZ$6,360 million).  Net of cash, total assets were NZ$5,558 million
(30 June 1999 - NZ$5,498 million). Shareholders' funds as a percentage
of total assets (X of cash) were 45 percent at 31 December 1999 compared
with 51 percent at 30 June 1999. Consolidated net debt at 31 December
1999 was NZ$2,439 million (30 June 1999 - NZ$2,173 million). 
                 
Investment Balance Sheet 

Net assets per share at the investment balance sheet level was NZ 74
cents, or NZ$2,016 million at 31 December 1999.  The Group's three
largest investments, Thistle Hotels, James Hardie Industries and Air New
Zealand accounted for 66% of the market value of investment balance
sheet assets representing NZ 93 cents per share of net assets at 31
December 1999.  The values of these investments reduced by NZ$83 million
or NZ 3 cents per share during the period. Net senior debt at the
investment balance sheet level was NZ$1,480 million at 31 December 1999
an increase of NZ$170 million over the 30 June 1999 figure. 

End CA:00054349 For:BRY    Type:HLFYR      
Time:2000-03-09:17:16:44 Encrypt:Y

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