Forty-Three Toss for the Lot 1987

CHAPTER FORTY-THREE

Toss for the Lot

Throughout the four months since the Extraordinary General Meeting the directors and the pivotal triumvirate of Scheme managers in waiting – Messrs Hazard, Simpson and Train – had been painstakingly planning measures to rejuvenate the company in the hope that the High Court would bring down a decision in their favour and thereby grant legal status to operate without undue hindrance from creditors. A team of dedicated clerical staff had been contacting shareholders, creditors, organising meetings and dealing with the huge number of restructuring reports being generated to support the management team in the quest to get governance of the company under control. If the decision by the High Court went against them, all these efforts would have been in vain. Brian Train, Trevor Harrop, Colin Morrison and the team were living in hope. It was an enormous relief when, on Friday 31 July 1987, chairman Brian Train was finally able to deliver to the board of directors and Scheme managers news of the receipt of the Court Order approving the Scheme. With debts of approximately $6 million accrued before 1 April 1987 frozen, the Scheme managers could now go about the business of restructuring without creditors bringing actions against the company to recover debt outside the terms of the Scheme of Arrangement.

David Simpson was now asked to enlighten the directors on how the Scheme of Arrangement would impact on them and the Farmers’ Co-op in general in the coming months. He explained that it involved a moratorium period of 12 months during which no action by creditors could be taken against the company, which was now completely in the hands of the Scheme managers, who had a responsibility to report to the Committee of Creditors at least every three months. Should the moratorium period require extension after one year, creditors would be required to meet again and resolve to continue with the Scheme. At this stage the plan was to continue with the realisation of assets and repayment of debt in the attempt to return the company to profit. Mr Hazard gave credit to the Chairman and the Board for their actions in saving the company. He was fully appreciative of the efforts put in by all concerned over the past four months. He further respected the feelings of Directors in having put a great deal of effort, time and involvement into the company over those months, now having to more or less step aside. Mr Hazard stated that the Board continues to exist for Statutory requirements, to call the Annual General Meeting etc., and will need to be actively involved in the raising of the additional capital. The Scheme Managers intend to keep the Board fully informed of progress by monthly reporting. They will hold Board meetings at possibly the same time as the Committee of Creditors meetings and Directors were assured that the Scheme managers will not hesitate to call on Board members for assistance when required. Elaborating further, David Simpson stated that the measure of success would be ‘the speed with which the company could be turned around’ and only then would it be returned to the control of the

directors. Mr Harvey stated that ‘it was also important for the Scheme managers to realise that they could benefit by reports from directors of knowledge gained by them in their ambassadorial role in the field’. Mr Hazard accepted that directors had an important role to play in promoting the company, but they now ‘need to stand to one side to allow the Scheme managers to tackle the problems and manage the company’. Despite the fact that some directors felt disenfranchised after committing themselves to direct the proceedings of Taranaki Farmers in its time of need, it was acknowledged that Messrs Hazard and Simpson’s involvement had undoubtedly provided the expertise and Mr Pedersen congratulated them by saying that ‘without them the company would not have got this far’.

With the Scheme managers meeting every fortnight and the board of directors every three months to familiarise them with the progress made, the management became a tight, no-frills, highly effective executive unit, with no formal minutes of meetings. It soon became clear that every decision relating to management or finance required the approval of Doug Hazard and David Simpson which was then implemented by Brian Train who had overall responsibility for day-today matters pertaining to staff, debtors and running the business.

The time had arrived to implement the ‘Reconstruction Programme’ created by Messrs Simpson and Hazard. This 21-page document covered: Assets Realisation, New Plymouth property and some other branches. Profit Improvement Programme. Staff Salary Reviews – to bring rates of pay in line with competitors. Proposed Disposition of Funds Realised. Preliminary Budgets – by the Merchandise and Livestock divisions. Forward Programme – possible closure of other branches. Capital Expenditure Control. Corporate Strategic Planning. Realisation of other Assets.

Sale of the New Plymouth departmental store was now crucial to the overall survival of Taranaki Farmers, with $6.2 million being set as the lowest acceptable price. Without realising the capital investment in this building, nothing else in the reconstruction plan could be achieved and every month the company was losing $300,000. Due to uncertainty in relation to the outcome of the creditors meeting a lack of direction was also being felt around the board table on what course to take. The main hurdle to any finite agreement had been the outcome in the High Court, and as this was now a matter of fact, the process could continue unhindered. A sale and purchase deal being negotiated with Messrs Dunlop and Grantham had been withdrawn. However, a number of other parties were now showing interest but the key to making the store ‘more saleable’ was a long-term tenant. General Properties had asked for a 14-day option on the complex and Paul Harris had been in discussion with the Quatro Group, property developers, in conjunction with Fletcher Development, who had a property company concept to deliver to the board. There were two other prospective purchasers showing interest in the New Plymouth business. On 2 June 1987 the board resolved to sell the New Plymouth retail business to Mr Wally Curry, excluding the New Plymouth farm centre and with a 12-year lease of the building. The sale also required that continuing employment be provided for at least 50 members of staff currently employed in the retail store, and settlement and possession date would be 15 June 1987. As well, the company made arrangements to lease back the basement area of the store on a month-by-month basis for the purpose of conducting a farm supplies business. Mr Curry also owned the business operating from what was formerly Farmers’ Co-op’s Londontown departmental store in Wanganui.

With an agreement to purchase the Waitara branch building and a tenant in the New Plymouth departmental store the company could now tender all remaining properties superfluous to requirements. Advertisements were prepared to offer for sale by tender the following buildings:

HAWERA Motor retail garage, Princes Street HAWERA Storage depot, Scott Street KAPONGA Three-bedroom house STRATFORD Motor retail garage, between Broadway and Miranda Street STRATFORD Residential zone. Vacant section. ELTHAM Three-bedroom weatherboard house NEW PLYMOUTH Taranaki Farmers retail and wholesale land and buildings complex, New Plymouth City.

Although expressions of interest in the New Plymouth departmental store premises were increasing daily, one thing or another always caused the deal to fall over. There was finally some traction through an unlikely source. At a social function at his sister’s residence at Linton, speaking with another guest, a real estate agent from Palmerston North, Brian Train said in jest – ‘I have a deal for you. I have a store for sale in New Plymouth!’ As a result of this, a purchaser was introduced to Farmers’ Co-op and the sale was completed with no other bidders in the wings, and with payments to be spread over the following six months. On 2 July the chairman reported that an agreement for the sale and purchase of the store had been signed with a Nelson syndicate for $6 million. This significant event was described by Brian as ‘the saving grace’ of Farmers’ Co-op. One interesting aspect of the sale, never previously disclosed, was when the parties were negotiating the final price, with a $150,000 gap between the two. Brian explained how he resolved the impasse: ‘I offered to meet them halfway, they would not budge. I offered to toss for the lot, being 150K, and they accepted and lost!’

Good luck continued and fortune still favoured the brave when, following unconditional settlement of the New Plymouth building on Thursday 9 July 1987, the sharemarket crashed on 19 October 1987 and the purchasers were required to on-sell to facilitate settlement. A lease had been obtained on the Burgess Fraser building on Molesworth Street to house the New Plymouth Farm Supplies retail outlet, Livestock operation and the Real Estate division. At the same meeting directors were advised that the Ohura store and business had been sold to Mrs Eden and the dwelling and vehicle to Mrs C. Persson. Peter Budden purchased the Waitara branch store to establish a pharmacy/chemist shop. A relocatable building to house a small rural service centre was now situated on the corner of McLean and Grey Streets, Waitara. However, Taranaki Farmers was requested to remove the building in 1988 as it did not comply with Labour Department standards. The last straw in relation to the closure of the Waitara store was ‘the fact that 80% of the turnover was produced by the merch. reps in the field’. The servicing of north Taranaki was now undergoing a major change with the New Plymouth and Waitara buildings sold and strategies for the overall operation in the area were being considered.

In South Taranaki the Manaia branch store was in a dilapidated condition, but spending money on renovations or rebuilding at this time was completely out of the question. Kiwi Co-operative Dairies had purchased a section in the town and were considering establishing a merchandise store to accommodate suppliers. They were concerned that should Taranaki Farmers end up in the hands of Elders Pastoral there would not be a locally owned and operated farm merchandising store servicing the district. Morris Roberts, chairman of Kiwi Co-operative Dairies, communicated his concern to the board of Taranaki Farmers, promising not to establish a Manaia store if they committed to the town by building new premises. This resulted in a group of 19 individuals closely connected to the Taranaki Farmers directorate, including FCOS Finance Limited, and headed by Paul Harris, establishing the Manaia Farm Centre partnership, which built new premises to house the store. They then leased it back to Taranaki Farmers at a cost of $152,000, and ten years later, in 1998, sold it to the Co-op for $227,000.

The Farmers’ Co-op Trust Fund of $3 million established as a holding ground ‘to gauge the support for The Farmers Co-operative Organisation Society of New Zealand Limited’, had

unfortunately not reached its target, with contributions, including interest, only totalling $462,088 by September 1987. Acquiring additional funds was imperative to the overall reconstruction plan and consequently, with the Scheme of Arrangement now in place, a team comprising Messrs Hobson, Spilman, Clifford and Newland was employed to canvass throughout the districts to encourage shareholders to put their hands into their pockets as they had clearly shown they would. After two weeks and some 60 personal visits the signs were not good; only $1,500 had been raised! The main reason given for the poor result was, ‘the lack of money at this time of the year in the farming community’, and it appeared that the total Trust Fund had little chance of exceeding $500,000. In fact following authority to issue $5 million Redeemable Preference shares where the Trust funds could be employed, only $576,000 was eventually subscribed, well short of the target figure.

During what Brian Train described as the ‘Dark Hours’, he toiled every moment of his waking hours, seven days a week, with a drive and enthusiasm that was infectious. Rank and file staff and all who held executive positions were spellbound by his energy and commitment to the task. There were times when Brian was going home from work when others were arriving. It was an astounding example of dedication. As a natural fighter who would not accept defeat, there was no doubt that whatever the future held Brian Train would be the last man standing. With significant progress having been made during a very short period, it was now important that momentum was maintained and efforts focused on improving profit and planning the long-term goals of the company. It was now time to appoint a general manager to take over from acting general manager Colin Morrison, who had held the fort valiantly. On 27 August 1987 the chairman advised the board that the Scheme managers had appointed Mr Roydon Day as general manager, with duties to commence on 28 September 1987. Mr C. W. Morrison would become deputy general manager. Mr Day had a strong background in the stock and station industry, having graduated from Lincoln College in 1973 with a degree in valuation and farm management. He had later joined the Wrightson Dalgety organisation in Southland and worked in mid Canterbury during the early 1980s, and more recently in the Bay of Plenty for the company. His motivation in moving to the company had been ‘the challenge of playing a leading role in the recovery of Taranaki Farmers’. His first task was to reaffirm that headquarters would continue to be in Hawera as he and his family had moved to the district. He acknowledged the progress that had preceded his appointment and said that, ‘The Company now had a base from which to work and increase its market share and profitability.’

The new general manager acknowledged the continual rural downturn, saying ‘the Company rose and fell with clients’ cash flow’. However, he was optimistic about the future, saying ‘clients of Taranaki Farmers would soon note the team effort among staff and their desire to give the best service and expert knowledge of the products sold’. There was now a glimmer of light at the end of the tunnel but there was a long way to go before they would see daylight through an open window.

Approaching the first annual general meeting called by the new board of directors operating under the Scheme of Arrangement, careful consideration was given to ensuring shareholders were well informed on progress made over the past nine months. There were only seven directors currently serving on the board, with the Articles of Association prescribing a maximum of 15. With two retiring by rotation, there were ten vacancies, which was generally considered too many. Peter Cook commented that the northern part of the province was not well represented on the board and at times there was a struggle to get a quorum. It was resolved to put a Notice of Motion to the annual general meeting setting the directors numbers at nine. The annual general meeting was scheduled for 9 December 1987 at the Hawera Community Centre.

Roydon I. Day, general manager of The Farmers’ Co-operative Organisation Society of New Zealand Limited, 1987–90.