Pursuing Britomart claim depends on finding litigation funds
Savoy Equities Ltd chairman Garry Wells opened the company’s annual meeting on Friday by dryly reporting a proxy statement. Shares: “834 too many.” Proxy: “What have you clowns been up to?”
Mr Wells declared the shareholder’s proxy invalid. From the podium in a room with one of Auckland’s more spectacular views — the top of the Town restaurant in the Hyatt Regency Hotel — he went on to outline the company’s parlous state.
Grim news, but the chairman — reappointed to the board on 23 May, when the company wasn’t listed because it had too few directors — wasn’t about to start crying, though the company’s performance has probably made a few hopeful shareholders shed some tears.
Mr Wells mentioned the sale of Dairy Brands at 32c/share, just before the dollar fell in value, the entertainment of an idea that it could supply yoghurt to KFC throughout Asia, but with no contracts in place, and the subsequent move of Savoy into the electronics sector.
Just $519,000 left in the kitty
The outcome of Savoy’s writeoff of $71.65 million on the Britomart venture, and these other lesser misadventures, is that Savoy had just $519,000 of net assets at its December 2000 balance date.
The company depends on shareholder support and its assets have been valued on the basis of net realisable value, not a going-concern basis.
Said Mr Wells: “We see no reason why the shares have traded in the past fortnight at 20c, at least 20 times above their current asset backing [0.89c/share].”
The glimmer of light for the 2863 shareholders is that directors will find a way to sue the Auckland City Council for canning the Britomart project in which Savoy companies had major roles, in November 1999, and then succeeding in this litigation.
Company might issue shares to take court action
“The company believes it has a substantial valid claim against the council. We have held back until we have finalised funding arrangements. Funding required will be substantial,” Mr Wells said. “The directors are considering issuing shares if it decides to proceed against the city council,” he added.
The position will be clarified in the next fortnight by the half-year report, but without equity input Savoy has only four months’ shelflife left.
“We would be looking to do something in the way of an issue before that time. We’re looking for limited-risk ways of pursuing that option [suing the council],” chief executive Kerry Haycock said.
Mr Wells added later that Savoy was not talking of any particular option yet. But law firm Rudd Watts & Stone had produced a draft statement of claim which could be served on the council. “We’re looking at how we handle that advice.”
Like fighting a pig in mud
One shareholder issued a warning: “Arguing with a bureaucrat is a bit like fighting with a pig in the mud. After a while you realise the pig is enjoying it.”
And there was another piece of advice, this time to the board from advisors on the morning of the annual meeting. Mr Wells said they had been told “you’re better if you place your principles in front of the council initially rather than your quantum.”
Most of the rest of the meeting was concerned with answering questions posed by the Independent newspaper, whose editor and business editor, Warren Berryman & Jenny McManus, turned up as holders of 100 shares.
They had to be prompted to ask their questions, which Ms McManus had hoped somebody else would ask. Mr Wells told the meeting the board had prepared answers to all the newspaper’s questions, and he and Mr Haycock set about answering them.
Many of the questions related to former chief executive Jihong Lu, who was adjudicated bankrupt in November 2000, but whose family interests retain shareholdings in Savoy Equities. He was not at the meeting. The directors said they would not comment on matters relating to former directors, but indirectly did make some comments.
One concerned the leased company BMW Mr Lu had been driving, which Mr Haycock said he was no longer driving. But Mr Wells said none of the four leased cars had been returned, because the cost of returning cars early in the lease period was significant.
And while this debate was going on, at the foot of the building part of the basement floor was being demolished for a project in which Savoy had been a player — the Hyatt Residences apartment project. The company sold its interest in Hudson NZ Ltd to the Hudson group of Australia, which is carrying out the project.
Savoy still looking at litigation over Britomart
Company will need funding to sue council
Only $519,000 left in kitty
Independent asks its questions
Work starts on Hyatt Residences project