Rs. 62 million provision made against possible losses
Shaw Wallace claims turnaround but Bonaventure problems remain

Asset rich Shaw Wallace and Hedges claims to have come out of the woods in the year ended March 31, 1998, with a profit of Rs. 9.2 million, up from Rs. 1 million a year earlier, and the directors have recommended a dividend of 10% free of tax to shareholders.

But a careful reading of the company's accounts now with shareholders indicates that a problem remains with regard to its associate, Bonaventure Textiles (Lanka) Ltd. which is under liquidation.

Shaw Wallace has written of its Rs. 2.13 million investment in Bonaventure as well as Rs. 60 million due as preference shares from this company as an extraordinary item in its profit and loss account during the year under review.

According to a note to the accounts, the Shaw Wallace general reserve includes a balance of Rs. 115.75 million undistributed dividend income received in previous years from Bonaventure which had been appropriated from the profit and loss account. A sum of Rs. 62.13 million representing the value of the Bonaventure investment and the balance due from that company has now been transferred back from the general reserve to the profit and loss account.

"However, a claim has been lodged with the liquidators of Bonaventure by the company as a creditor for the recovery of the amount due on preference shares and as an ordinary shareholder for the share of assets of Bonaventure which is due to the company. The claim made is substantially higher than the above amounts written off in the accounts of the company,'' this note said.

There was no word however on Bonaventure's ability to pay the preference share debt. But the company's chairman, Mr. M.R. Chhabria, has reported that the liquidation case in pending and "in the interim, the company has taken steps to make provision in the accounts for 1997/98 for the amounts due from Bonaventure in the event the company is unable to recover all dues.''

Shaw Wallace owns substantial freehold and leasehold land and building assets including valuable Kollupitiya property carrying a net book value of Rs. 637.4 million at the end of the year under review. The cost/valuation of the freehold land was Rs. 518.7 million and the leasehold land, with the 99-year lease expiring in 2084, was Rs. 30.1 million.

The company has noted that the freehold land had been held for over 25 years within the group and as such there is no liability for capital gains tax on disposal.

Chhabria has attributed the "turnaround'' during the year, despite the loss of the Horlicks and Johnnie Walker agencies due to international mergers, to a variety of reasons. These include cost control and tighter working capital control and effective management of the company's assets.

He said that new products such as the internationally acclaimed `Ajinomoto' flavour enhancer, `Attack' mosquito coils had been launched in the large daily use consumer market segment and these were progressing well. They had also launched a new range of wines imported from France, Germany and Chile and also the low priced Ian Macleod range of Scotch whisky which they expected to do well in the future.

Chhabria said that their BOI garments company, Viking Fashions, had been able to maintain the momentum of its turnaround and achieved a tax free profit of Rs. 7.2 million for the year. Plans were in hand for further investment and modernisation of their Teldeniya plant for greater efficiency and higher profits.

The major shareholders of Shaw Wallace and Hedges here is its Indian parent.

The directors of the company are Messrs. M.R. Chhabria (chairman), R.K. Jain, P.J. Rao, M.A. Chandy (CEO), P.M. Nene, L.L. Samarasinghe, J.M. Swaminathan and T.L. Wijeweera (resigned with effect from 17.12.97)