BIL annual meeting in Bermuda allows shareholders minimal say

Friday 15th September 2000

Any New Zealand-based Brierley Investments (BIL) shareholder who makes it to the company's annual meeting on November 6 should not expect to see many other New Zealand individual shareholders.

The meeting will be held at 3pm Bermuda time in the Paget suite, Elbow Beach Hotel, 60 South Shore Rd, Paget, Bermuda.

After allowance for time differences and our daylight saving, that would be 8am New Zealand time on Tuesday, November 7.

We have a Bermudean-registered company operating out of Singapore and still with thousands of New Zealand shareholders holding a meeting thousands of kilometres away from its operating base and from the majority of its shareholders, irrespective of the legal requirements of the country of incorporation.

That could be extracted from the company's preliminary report for the year ended June 30.

Any other information to be extracted required several exchange rate calculations and an ability to cut through corporate hype.

BIL's financial statements were expressed in US dollars, as were the comparatives for 1999. The figures in the New Zealand Stock Exchange's daily memo for September 8 had no New Zealand dollar equivalents, although a note said all current and prior year consolidated balance sheet and "P & L" accounts had been restated by converting at the spot exchange rate applied at the close of business on June 30, 2000, of 46.87NZc to the US dollar.

The accounts were prepared in conformity with international accounting standards, whereas they were previously prepared using New Zealand accounting standards.

BIL's report said the adoption of international accounting standards resulted in:

opening shareholders' funds at June 30, 1999, (shouldn't it be July 1, 1999?) decreasing by $US166.7 million;
net profit for the year ended June 30, 1999, decreasing by $US20.1 million; and
net profit for the year ended June 30, 2000, increasing by $US22.1 million.

That was fine but many New Zealand shareholders would like to know what the result was in our currency. A summary of the figures in US and New Zealand currencies is in the table, using the spot exchange rate as at June 30.

The tenor of the report, from accounting changes through sole use of US dollars to accompanying comments, suggested it had divorced the group from this country, apart from a few investments.

That may have been inevitable, given the previously announced change of direction and the need to comply with overseas legal requirements, but it left New Zealand shareholders with minimal say - if they ever had any say - in recent years.

Chief executive Greg Terry's comments accompanying the financial results could be described as considerably optimistic at best and hype at worst.

"These results close the chapter on a difficult period in BIL's history. The results are by no means symptomatic of ongoing issues, nor do they reflect the results we expect in the financial year ending June, 2001.

"Year 2001 begins a new chapter for BIL where investors can expect transparent profitability and steady growth in shareholder value. The new BIL is being built and the foundations are now in place. In the weeks and months ahead, investors can expect the focus of our efforts to shift from dealing with past problems to taking new investment initiatives.

"By this time next year, I am confident shareholders will see very different financial results and the market will have a very different perception of BIL and its prospects."

And so on including this:

"The establishment of a new culture and the urgent need to deal with problem assets dominated the first six months. We now have a new team in place, operating within a completely new culture based on financial discipline, best practice and the best of entrepreneurial flair.

"In addition, we have substantially dealt with our problem and underperforming assets, leaving the way clear to focus on our core investments and on building BIL as a leading investor in the region."

That was good stuff to rally the troops in the organisation and the dominant shareholders. The markets and everyone else will wait and see.

Mr Terry was not the first person to talk about cultural change in the context of a New Zealand or former New Zealand company's reorganisation, particularly while they were relatively new to the top job.

It may happen. If so, Mr Terry and colleagues will be heroes. If not, we might eventually read about people moving on to "pursue other business interests."

New Zealand shareholders will also have to deal with a re-denomination of capital into 10USc and a consolidation of shares to 20USc.

Those proposals are subject to regulatory approvals and approval of shareholders. The latter is a foregone conclusion in which New Zealand-based shareholders will have little say because they lack voting clout.

BIL'S SUMMARISED STATEMENT
Year ended June 30, 2000
	As reported $USm	As converted $NZm

Profit before financial and corporate costs	111.9	238.7
Net financing costs	(104.9)	(223.8)
Corporate costs	(32.7)	(69.7)
Net profit (loss) before exceptional items	(25.7)	(54.8)
Exceptional items: (impairment of investments)	(72.1)	(153.8)
Goodwill written down: (Air NZ deferred tax)	(64.0)	(136.5)
Net profit/(loss)	(161.8)	(345.1)
(Conversion rate: $NZ1 = 46.87USc at June 30)

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