Audited accounts for the piggery half-owned by the Prime Minister’s family company show it to be worth $8 million less than stated in the originally lodged unaudited accounts.
The original unaudited reports for Brown and Hatton Group Ltd were lodged with the Australian Securities Commission in June. The ASC required them to be audited. The audited accounts were lodged last week and became publicly available yesterday.
The unaudited accounts put total shareholders’ equity at the end of 1990-91 at $7.5 million. The audited accounts put it at a deficiency of $528,000.
The accounts were audited by KPMG Peat Marwick. They also gave a different picture of the company’s profit-and-loss accounts. The unaudited accounts showed a profit of $114,000 in 1989-90 and a loss of $1.5 million in 1990-91. The audited accounts show a loss of $3.1 million and $2.8 million respectively _ a difference of $4.4 million in the two years. The company now has accumulation losses of $7.3 million.
One could conclude from the accounts that the unaudited picture was one of a substantial reasonably prosperous company, whereas the audited one was of a very struggling business, only kept above water by the patience of its bankers and shareholders.
The auditor said: “”The continuity of normal business activities is dependent upon the continued support of the company’s ultimate shareholders together with the support of the bankers of the group. Financial support has been forthcoming from the group’s bankers.”
The banker is the Commonwealth Bank which is owed the lion’s share of the company’s total $19 million debt through a related company.
Mr Keating’s half ownership is through his family company, Pleuron Pty Ltd, which owns a half share in Euphron Pty Ltd which in turn wholly owns Brown and Hatton Group. Euphron’s annual returns to the ASC have not yet caught up with the latest accounts lodged for Brown and Hatton Group.
The accounts of Euphron formed the basis of questions from the Opposition in Parliament about how Mr Keating’s original shareholding of $430,000 became to be worth on paper $4.2 million within one financial year. With the audit of the Brown and Hatton accounts, revisions to the Euphron accounts are inevitable. It would seem that Mr Keating’s original investment of $430,000 shown in the Euphron return would now be worth something substantially less.
Mr Keating is not a director of either Euphron or Brown and Hatton and is not responsible for their accounts. He has made all appropriate declarations of interest as a member of Cabinet and Parliament.
The auditing of the accounts will ensure there is no danger in the coming election of Mr Keating being labelled a millionaire with unfavourable comparisons to the Leader of the Opposition, John Hewson. However, the question remains: why were the unaudited accounts so far out?
A letter signed by a director of Brown and Hatton, Achilles Constantinidis, said, “”Accounts previously lodged by the company with the commission for the years 1990 and 1991 were prepared and signed by the former directors and then principals of the company, before their resignation in August 1991. The present directors did not inquire further into those accounts until questioned by the Commission on them. It now appears that the former principal directors misunderstood some accounting principles of consolidation which, with some minor typographical errors, led to inaccuracies in the accounts previously lodged.”
One could only comment that the statement that new directors appointed by new shareholders taking over a company with a stated equity of some $7.5 million “”did not inquire further into those accounts” is extraordinary.
Mr Constantinidis said, “”The current directors have also established systems to ensure that the information required under the Corporations Law is lodged in a timely manner by the company and its subsidiaries with the Australian Securities Commission.”
Brown and Hatton Group has now been converted from a public to a private company.
The new accounts continue to show a revaluation of buildings and land between 1990 and 1991 from $7.4 million to $11.5 million at directors’ valuation. A note explains the company’s policy is to get an independent valuation at least every three years. The additional $4.1 million appears in an asset revaluation reserve and becomes part of shareholders’ equity. If the directors’ revaluation proves unrealistic (upwards or downwards) that will reflect in the equity position of the company. The revaluation was made despite continued losses and declining sales.
The new accounts continue to show a sub-ordinated loan to a company owned by the former Minister for Tourism, John Brown, one of the original owners of Brown and Hatton Group. In the unaudited accounts it was shown as $4.45 million, in the audited accounts as $2.76 million. A note says the loan will be reduced as profitability and cash resources permit. The $2.76 million owed to Mr Brown’s company does not detract from the net value of the company in the accounts as it is payable only as directors determine.
The auditor said in their report attached to the accounts lodged last week, “”The company’s directors are responsible for the preparation and presentation of the financial statements and the information they contain. We have conducted an independent audit of these financial statements. In our opinion the accounts of Brown and Hatton Group Pty Ltd are properly drawn up.”
The company is in a $80 million joint venture with a Danish company, Danpork. A director of Euphron, Christopher Coudounaris, said the joint venture hoped to provide 200 jobs in the Scone area, bring cutting-edge Danish technology to Australia and boost Australian exports through exports of pig meat to Asia.