Apollo's annual report really is Greek tragedy

PUBLISHED : Tuesday, 04 June, 1996, 12:00am
UPDATED : Tuesday, 04 June, 1996, 12:00am
 

Apollo was the Greek god of the sun, a patron of music and poetry along with order and self-discipline.


It seems unfortunate then that China Apollo should have used this great symbol of early Western mythology as its namesake.


The 1995 group annual report of this new listing is out and it makes for sad reading.


China Apollo, in its listing prospectus, gave a year-end profit forecast of $190 million. The document was published on December 7, or 12 days before listing.


The profit for the year to December 31, 1995, was measured after tax and minorities, before extraordinaries, but excluding exceptionals.


As events turned out, China Apollo failed to keep its word.


Profit, after tax and minorities, for the period was $192 million, but this figure contained a $15.8 million exceptional investment sale.


The exceptional disposal was booked on December 26. This was 19 days after the issue of the listing prospectus, seven days after listing and five days before the financial year ended.


Following this disclosure on May 21, China Apollo shares fell from a near record of $2.10 to $1.50, down 27 per cent in a day.


The company tried to suggest the directors did not know of the exceptional sale or expect such a development to occur, when the prospectus document was put together.


The directors also claimed they did not know the prospectus profit forecast was in danger of not being met, during the same period.


Shareholder derision saw the stock slide further, to $1.29 yesterday.


The group 1995 accounts show things could have been a lot worse, as far as profit went. Operating profit of $207 million was reached after the group slashed advertising spending by 38 per cent from $106 million to $65.76 million. Provision for doubtful debts fell by a similar margin to $8 million. Staff welfare and bonuses were cut by 30 per cent to $24 million. Interest expenses on loans almost doubled, though, to $16.4 million.


Despite this apparent woeful record, the directors have not been scared to benefit from China Apollo.


On face value, directors' emoluments apparently slipped 44 per cent from $5 million in 1994 to $2.8 million in 1995.


The 1994 number contained a $5 million consultancy fee to a company beneficially owned by a company executive director. After stripping out the consultancy fee, the emoluments jumped from $98,000 to $2.8 million - a rise of 2,750 per cent.


Of course, in 1994 emoluments were not an issue as the dividend payout ratio was a handsome 75 per cent, taking the total payment to $141.5 million, down on the payout ratio of 1993 of 84.6 per cent and a total payment of $144.5 million. For the record, the net listing proceeds were $275 million.


The accounts show that on March 4, 1996 share options were granted to executive directors and senior employees with a subscription price of $1.44, between the issue date and March, 2016. Of the total, 5.1 million were exercised. The directors involved booked up to $3.23 million of profit on the deal.


The exercise of these options came in March, more than two months after the close of the financial year. It was almost a month before the group announced its results and saw its shares drop dramatically.


The use of Apollo in the group brand name does not appear to properly reflect all the endeavours of some of the directors.


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