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Investors give PRG board first degree

By Deborah Hill Cone

Friday 26th September 2003

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"I am hopeful they have started to see the light and that small shareholders are going to get a run."

That's former broker and company director Mike Daniel, speaking yesterday after the Pacific Retail Group annual meeting.

Mr Daniel was delighted the listed retailer appeared to be considering to pay a dividend to its shareholders, answering criticism from minorities who have questioned whether the company is a gravy train for its major shareholder, Eric Watson and his interests.

Mr Daniel, who is on the board of companies including Sky City Leisure and Northport and owns 0.43% of PRG, said he had written to PRG urging it to improve value for the minority shareholders by paying a dividend. "They replied 'we think we are Warren Buffett' [in the past] and had chosen to ignore it, but they now think they might pay a dividend, which is wonderful."

At the meeting chairman Maurice Kidd said PRG's policy had been to reinvest in the business rather than pay a dividend but given the group was now fully invested "it might be appropriate to review the dividend policy in future."

On an investment website shareholders lapped up that kind of talk and the share price was trading at $2.45 at press time, up from a low of $2 earlier this month.

One shareholder said PRG's price had been unjustifiably depressed in recent years due to the false perception "the Watson factor" meant minorities were likely to miss out.

Although delighted by talk of a dividend, shareholders did question the timing given PRG's new Powerhouse acquisition in the UK would need a big injection of capital.

"Maybe it's to appease the number two and number three shareholders, Axa and Francis Securities?" one shareholder suggested.

Mr Daniel, a former broker with Morrow & Benjamin who now lives in Northland, confronted Mr Kidd with a number of queries including:

* What had happened with PRG's "punt" on Burns Philp?

* Why was there only one independent director?

* What was he doing to make the share price go up?

* Did he feel happy about executive directors getting paid fees of $120,000?

* Why weren't directors buying shares?

* Why was the meeting held so long after the end of the financial year, with only three days before its deadline?

Mr Kidd replied saying the Burns Philp investment had been "great." The strategy for buying into Burns Philp had been about Treasury management and was under constant review. He said in fact there were two independent directors but only one of them was at the meeting ­ Jock Irvine had sent his apologies.

Mr Kidd said in 1999 the share price was languishing at $1 and now it was about $2.37. "I would have thought in anybody's language that's not too bad."

He was more than happy with the level of directors' fees.

"I think if anything you could build a case to say they are underpaid."

Mr Kidd said it was difficult for directors to buy shares because the company had been so busy with acquisitions. (Under insider trading rules this limits the windows of opportunity for directors to trade shares.)

And he said the point about the lateness of the meeting was noted.

Mr Daniel said the company was showing signs it had realised it was in the interests of the major shareholders to keep the smaller shareholders happy.

He said the company had "really good" management, and although the UK acquisition was a big punt, it was encouraging that respected PRG chief executive Peter Halkett was taking that over.

"The empire hasn't struck back too often," Mr Daniel noted.

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