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Hi Chatters
I hope you all acted on the best performing shares that was posted.
I went heavy on DPC in my portfolio last year ( see sharechat history).
As DPC has limited trading shares ( 7-8 million available to trade) I will assume that you are too late!!!!!!!!!!!!!!!!! if you want to buy in... ..cheaply...
see the announcement..
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| DPC Dorchester Pacific Limited |
|
| 20/08/2003 |
| 5:09 pm |
|
| CHAIR: DPC: Chairmans Address to AGM |
|
Chairman's Address to the Annual Meeting held at the Tamaki Yacht Club on
20 August 2003 followed by the General Manager's Speech:
I am going to speak briefly on the past year and the year to date. Brent
King will talk more specifically on the various Dorchester entities and
where he, as our managing director, sees the company going from here. I
have no doubt he will explain as you will have seen in the annual report
that we had a good year in 2002/2003 with revenue up 20%, and profit up 8%.
There were no acquisitions during the year but assets increased by 29% to
over $266 million, and as a result of the year's activities shareholders'
funds increased by 13% to nearly $23 million. That and the return on
average shareholders equity of 18.6% represents a year of achievement by
our management and staff in a year that was by no means easy for some of
our companies, as you will have read in the managing director's review. In
summary, the finance and insurance divisions performed well but the
consulting divisions had a disappointing year. Happily, the last few
months have been much better for the consulting divisions. Part of the
consulting division was the funds management company, Sterling Portfolio
Management Ltd. You will know that at the end of the year we sold Sterling
and you will have read in the annual report the reasons why we purchased
and why we sold, and that will be expanded on later. I said at last year's
meeting that Sterling was a useful addition to our consulting sector but
that proved, in a difficult year for all fund managers, to not be the case.
On the share capital side, we again did not issue any shares during the
past financial year for acquisitions and there were no issues of shares to
directors or staff. However, as you will have read last week, we have made
recently a placement of 400,000 shares at full market price for the
acquisition of the business of Energy Direct Ltd, and we are proposing to
issue further shares shortly to our staff share scheme, subject to approval
of shareholders at this meeting. I will also be announcing shortly a
planned issue of warrants to all shareholders which WILL increase share
capital in the future. On the expenses side, I accept that it is not easy
to make comparisons from year to year, often because of acquisitions,
although not so much this year. But since we don't stand still, and as we
expand our entities and the operations of those entities in different ways
each year, direct expenses increase and overheads increase and with
acquisitions and disposals, goodwill amortisation varies. And as we
expand, so our borrowing book increases with more investors in debentures
and unsecured notes, we are able to lend more and so our interest costs and
revenue increase. On the lending side, we are exposed to interest rate
pressures from competitors and we have to accept market rates for
investment of our cash reserves that can vary hugely from month to month. |
Bad debts show in our accounts as a major expense but as I say every year,
we are very much in the business of lending money and bad debts are part of
that business; particularly in the vehicle financing business, which is a
large part of our lending. Bad debts still represent a large cost but much
work continues to be done on improving the quality of lending and credit
control with the pleasing results. On a brighter note, I am sure you will
have been pleased that we increased the final dividend to 3.9 cents per
share giving a total dividend payout of 7.5 cents per share fully imputed
this year compared with 6.6 cents per share last year. We have over 3
years of imputation credits available at the current dividend payout rate.
There is room for a higher dividend payout but as in the past we have
preferred a conservative dividend policy and a consequent higher retention
to provide the capital to expand our activities. In order to expand
Dorchester Finance's borrowing the parent company Dorchester Pacific needs
to keep increasing its investment in Dorchester Finance to ensure trust
deed ratio compliance. Retention of profit is used in this way. Overall
then, I think Dorchester had a very good year in very challenging times in
most of our markets. As for the future, I will leave our managing director
Brent King to address you in detail on the various business sectors and, as
chief executive of our company, his vision for the future. Before doing
that, and as alluded to earlier, I am pleased to announce that the
directors have decided to issue pro-rata to all shareholders, warrants to
subscribe for ordinary shares in 2 and 3 years time. The issue of warrants
(also known as options) at no initial cost to shareholders will be in the
ratio of 2 warrants for every 4 shares held, with 1 option exercisable in 2
years time to subscribe for 1 share at $1.70, and 1 option exercisable in 3
years time, also at $1.70. In effect this is a deferred cash issue but at
a known price. The warrants will be traded on the Exchange and we hope
they will create some trading interest and further interest in our ordinary
shares. As this issue is to all shareholders equally, it does not require
the approval of shareholders. Mr King will give you more information about
the warrants and the rationale for their issue shortly. In conclusion, my
thanks to all who have assisted us during the past year and in particular
to our staff who have again shown commendable loyalty and dedication and
who continue to do a great job ----- and my thanks to my fellow directors
who are dedicated to the task and offer wise counsel. I am proud of what
has been achieved by Brent and his team over the last years and I now
invite him to address you.
Address by Brent King, General Manager:
Our Chairman has given a good overview of how the last 12 months have been.
The Annual Report is direct and honest and as to our successes and
failures. I do not need to reiterate those matters. I do want to focus on a
number of key drivers of performance. Total Assets - our assets have shown
consistent and measured growth, over the last 5 years. Total Equity - this
has mirrored the growth in our total assets. Total equity is the value
that you as shareholders have in this business. Net Profit after Tax: You
can see that by growing our assets and our equity we have been able to
consistently increase our profits. You will have noticed the correlation |
been growth in assets, equity and net profit. The benefit to you as
shareholders is that each share has gained in value. Your Earning per
Share have increased and your Net Assets Per Share have increased. I am
very pleased with the major drivers of our business and we are showing that
we can continue to perform year on year. Our record relative to other
companies on the New Zealand Stock Exchange is excellent and when reviewing
our performance we should bear in mind that we continue to be in the top
echelon of NZ shares. When we talk to individual brokers and potential
investors we always receive very positive feedback on our trading
performance. The one comment that we constantly receive is, "if the
company was bigger then you would receive more coverage and the support
from the investing public would be stronger." The Board of Directors have
discussed this matter numerous times over the last 12 months. How can we
continue to grow our group? Clearly the first step is to increase profits
so that investors are prepared to pay a higher price for each share. This
is an ongoing challenge. Secondly we have recently issued shares to
purchase assets. This has been a policy over the past 6 years and has
worked well for us, as we have acquired additional revenue streams.
Thirdly, we have in the past and we are proposing to you today another
share issue to Directors and Staff. The issue this year is modest however
we believe it does fulfil the object of increasing size and market
capitalisation of the Dorchester Group as well as aligning staff and
shareholders interests. We are seeking other ways to reward shareholders
and grow the business. Our Chairman has stated that the directors have
resolved to issue warrants to shareholders and I will deal with these
later.
Individual Subsidiaries
Consulting Division
The consulting division is now made up of Equity Investment Advisers,
Direct Broking and Dorchester Capital. We have with us today Brett Wright,
General Manager of Equity Investment Advisers. Brett is responsible for
the general management of Equity and of course is responsible for the very
popular NZ Investor Monthly. Copies of the magazine are available at the
back of the room. We have seen with Equity, an increase in profit in the
last 3 or 4 months and a large component of that is due to the improvement
in the quality of the magazine. As shareholders we would welcome your
input into articles and aspects of the magazine you believe we could
improve on. Please either raise matters with Brett or myself, if you can
think of questions on articles that we could include in future issues.
Also please encourage family and friends to subscribe.
Direct Broking
We have with us today Nigel Wynn, Chris Lambert and David Speight, who are
all executive directors of Direct Broking. Direct Broking had a very tough
year to March and the low trading volumes on the New Zealand Stock Exchange
certainly had significant impact on the group. Since March of this year we
have seen improvement in revenue and that has been a significant benefit to |
the trading of this group. David Speight and Chris Lambert had previously
specialised in the fixed interest market, particularly capital notes and
other fixed interest securities. This business has been very good for us
recently and we are looking to continue the platform that we have
developed. I would like to draw the shareholders attention to the Direct
Broking website which has been in the past few years an award winning site
and continues to offer all the data and information that an informed
investor would want.
Dorchester Capital
We have with us today, Mike Jensen and David Koni from Dorchester Capital.
This division arranges capita and finance packages for clients and it
continues to produce very good income for the Dorchester group.
Summary
In summary the consulting division had a tough year last year but with the
sale of Sterling last year, plus a very good start to the new year by
Equity, Direct and Dorchester Capital indicate this division will
contribute significantly to this years result.
Finance Division
The finance division has been the mainstay of the group over the period.
We continue to see strong growth in revenue and in profits from this
division and this will be the backbone of our group for the foreseeable
future. Greg Pearce is our General Manager. Greg has managed the overall
development of Dorchester Finance and lending books. We are very pleased
with the development of our funding base and the loyalty of our investors,
particularly the bowling fraternity and Korean investors. We have
continued to grow niche lending markets and to develop our regional branch
network. We have rebranded our Tauranga branch operation to Dorchester
Finance (BOP) Ltd and we have with us today Mr Leigh Neilson, Area Manager.
We have also rebranded our Dunedin operation to Dorchester Finance (SI)
Ltd. We have Stephen Reeve with us here today. Both of these operations
have continued their very positive trading performances for the group and
they are going from strength to strength under excellent management of
Leigh and Stephen. Our Palmerston North operations will be operating under
the names of Lynx Finance and Senate Finance, effective from the 1st
September we will have a combined operation operating under the name of
Dorchester Finance (Central) Ltd. I am pleased to announce that we will
open a Dorchester Finance Christchurch office within the next month and
this office will be a start-up. We have with us today Mr Paul Murray, Paul
is the manager of our new office and we welcome Paul to the Dorchester
Group.
I also advise that we are in the process of opening a Hamilton office. We
have always had Senate Finance representation in Hamilton and we are now
upgrading the representation to a full Dorchester office. |
Senate Finance
Senate Finance has been a strong performer in the finance division. We
have Mark Burn, Chief Executive of Senate with us today. Senate had a
strong year last year a significant contribution to the group and Senate
has again started this year very positively. Our strategy in the finance
division has been to continue to diversify our income streams and our asset
bases, both client and also by region. We believe that, although this may
not maximise profit in the short term it will give the group the most solid
result over the medium term and long term. The development of regional
offices has increased the Dorchester brand and gives the investing and
borrowing public an opportunity to interact with our staff and to continue
the very strong progress that we have made in the finance group over the
past 8 years. I know some of our competitors believe it is simply easy to
lend money from a central base however we believe that the New Zealand,
economy is such that there are significant regional differences and to
obtain an ongoing return at these levels diversification is the key.
Insurance Division
Stephen Jonas, General Manager and Dave Mackay, General Manager, Sales &
Marketing.
Save and Invest showed significant development in the last 12 months and
was a star performer in the year to March. The business is in a steady
phase and we are looking for ways in which we can further develop this
business. The business has been very sound for us since acquisition and we
see a very positive outlook for this group. The company is best known for
its saving and investment products plus its innovative RAM products. You
may have noticed the television campaign we are running on TV3. Based on
current trading we expect another good year for SAI Life.
Other Matters
The Dorchester group has now reached critical mass and we are achieving
solid results. The multiple income streams mean that even in a situation
where a problem occurs, such as Sterling last year, the group is
sufficiently robust to absorb it and continue to deliver quality returns to
our shareholders.
Shareholder Value
Warrants
I want to now talk in detail about the warrants that the Chairman has
announced.
The issue will be 1 warrant for every 4 shares that you own, maturing
September 2005. There will be also be 1 warrant for every 4 shares that
you own, maturing September 2006. The effect is that you will receive two |
separate warrants for each 4 shares you own. The strike price of the
warrants is $1.70c and the warrants will be traded on the NZX. We believe
that this is of significant value to all existing shareholders. All
shareholders will receive the same, and hence a short form prospectus has
now been lodged at the company's office. This matter does not require
shareholder approval and is a matter that directors are able to approve as
all shareholders are being treated equally. What are the benefits to you
as shareholders? If you do nothing and accept the warrants, what will
happen is you will have three different securities which you own and are
able to trade. You may choose to sell any of those 3 securities, i.e.
either your head share, your 2005 warrant or your 2006 warrant. You may
choose to buy more of any of these. In short, you as the shareholder
simply receive more opportunities to invest and become part of the
Dorchester Group. The strike price will be $1.70c. It is the current
share price and hence there are no tax implications for you as
shareholders. The major issue for Dorchester is that we want to grow but
we did not want to burden existing shareholders with a cash issue now. We
believe that the warrants will increase the total market capitalisation of
the group and move it onto the radar screens of a number of other investors
including institutional investors.
Shareholders of Dorchester
Over time a number of issues have occurred which place various groups in
conflict with each other. There is a constant issue of staff versus
director, vs. shareholder, vs. depositor's interest. At any given point we
have to deal with issues such as how much should we pay investors, how much
should we pay our staff, what level of dividends should be declare, what
level of directors fees should be pay. These are issues that we have to
deal with every day and I believe that over time we have consistently been
as fair and as balanced as we possibly could. I want to state that I
believe your directors have approached each decision in a professional and
ethical manner and have served you well.
Lets Turn to the Future
There is no question that we live in very unpredictable times, there are
things occurring on our planet that are very unusual. As the quote goes:
You know the world is gone crazy when:-
the best rapper in the worlds a white guy,
the best golfer's a black guy,
the Swiss hold the America's Cup,
the French are accusing the USA of arrogance
and the Germans don't want to go to war.
To add to that as well, we have a situation where with Swiss government has
effectively reduced their interest rates to 0%. The impact of that is
unknown and is new territory. We are seeing the events of the last week in
the United States and the ongoing reaction to that. We must accept that
the world is somewhat unsettled at the moment and we must think of |
Dorchester's future in terms of that. Dorchester is influenced by the
international markets but not as significantly as other companies are. We
are more effected by domestic matters and the major factors I see are as
follows:
The NZ economy is continuing to show strength. At last years general
meeting I stated the economy was misleadingly strong and I continue to
believe so.
The consumer spending plus the strong property growth has meant the feel
good factor of NZ has been extremely strong.
On top of this we have had retail sales being approximately double NZ's
growth and seemingly to defy logic, although share prices of our retail
stocks are probably indicating that this cycle may be coming to an end.
The major concern for me is the increase in household debt and the numbers
that are being bandied around that year on year the household debt has
increased in the vicinity of 10.9%. Of course most people believe that
with low interest rates debt is more affordable and hence increasing the
commitment is not such a big issue. I can't agree with that. I believe
that the household debt has grown to a level that it is of concern. We
raised last year that we may seek to interact with some retailers to see if
we could obtain some retail lending. We have made the decision not to do
so as the market appears to be over supplied plus we have concerns about
the credit risks that are emerging in this area. We will continue our
retail funding in the motor vehicle sector because of NZ's transport system
is based around the motorcar, cars are effectively a necessity as opposed
to a luxury that many other products are. So in these terms, there are
some real risks within the NZ market, particularly in regards to property
development and the high level of personal debt. We should also cast our
minds to political aspects. We seem to be forgetting why our economy is
performing well. The simple fact is that we have had an economy which is
relatively free and open and hence the basis of capitalism, i.e. capital
flowing to the highest return has meant that our economy has functioned
particularly well when many of the constricted economies have not. We of
course have a centre left government, which seems determined to reverse
this and we must understand that this will bring significant impediments
into the market and it will reduce the operational efficiency of the
market. Each of these interventions of course will take us back to the
times when our economy could not react to major events such as Asian
crisis, September 11 etc, etc. To summarise I see the two major
influencers, i.e NZ's domestic debt levels plus the significant ongoing
shift of our politicians to the left. Both of these aspects put a fast
looming clouds on our horizon.
Dorchester's Future
The first four months of the financial year have shown significant progress
for all divisions of the Dorchester Group. The key factor is our
diversification and we are seeing a strong performance from all of the
business units. The two issues that I have listed earlier, of course have |
to be borne in mind for future profitability however, I believe that the
strategy that we have implemented will continue to increase profitability
for our group.
Exciting Developments
You will have noted that the media have been reporting our relationship
with 42 Below. In the last week there was an announcement that 42 Below
had appointed Dorchester to consider funding options. We cannot confirm
final recommendations however the Dorchester group will be the adviser to
any offer or placement. Mr Geoff Ross is the creator and founder of the
company, he now has two excellent businessmen as partners, Mr Grant Baker
and Mr Shane McKillan. These three have moved the business from a very
good concept to being a viable and well-structured business model, which
has the characteristics that I admire. These are:
1. The product is about high quality and as such the brand attracts a
premium price.
2. There has been international acceptance of the quality of the vodka
product.
3. There are two businessmen who have been very successful in a number of
enterprises, who are committed to the success of the venture..
4. The brand and products are able to build on the strengths of NZ, of its
purity, of its freshness and it's a premium image that NZ has been able to
generate internationally through other products such as wine, fashion,
food.
The Dorchester group is very fortunate to be able to receive a mandate of
this quality. We will advise you within 2 weeks as to the result and any
benefits to the Dorchester group.
Summary
Ladies and Gentlemen, in summary - it has been a very interesting 12 months
since our last general meeting. The group is in better heart than it has
ever been. We as directors and staff have attempted to give you returns
that reward your support. We hope that the announcements today,
including:-
the strength of our trading in the first 4 months,
the announcement of the exciting new warrants plus
the involvement with 42 Below will show that we are growing and
developing your company.
You have my commitment that over the next 12 months your directors and
staff will be focussed on ways in which we can continue to develop our
group and reward you for your support. Last year we had a tough year and
turned in increased profits. This year we intend to do the better. We of
course need your support. Please look at all of our products and services.
Please use as many as possible and recommend them to your friends and
family. Ladies and Gentlemen, I enjoy my job and I really appreciate the |
support I have had from you over time. I say this sincerely; it is an
honour to lead your company.
End CA:00091803 For:DPC Type:CHAIR Time:2003-08-20:17:09:25 | |
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