Australian Timeline

www.history-aust.com

1990

Adelaide Steamship Company Annual Report, the following companies were reported as "Principal operating subsidiaries" of the AdSteam Group, with the following cross ownerships greater than 5%:

The Adelaide Steamship Company
  • 100% Marine Interests (various)
  • 100% Martin Wells Holdings Ltd - Optical Goods - acquired 1982
  • 100% Sellers Atkins Ltd - Building Supplies - acquired 1976.
  • 100% Pioneer Property Group Ltd – House Building & Property Development
  • 100% WA Realty Pty Ltd - Real Estate
  • 49% David Jones Limited - Department stores and investments
  • 50% Metro Meat (Holdings) Ltd - Meat
  • 14% Tooth and Co. - (Brewing,) Hotels, Investments, Wine, Food - Acquired 1981. Brewing interests sold 1983 to Carlton and United Breweries.
  • 18% Petersville Sleigh Ltd - Food, Timber, Woodchips, Mining, Distribution of Earthmoving Equipment, Shipping Agencies, Investments - Food product manufacture, distribution and marketing (sold to Pacific Dunlop).
  • 13% National Consolidated Ltd - Diversified Manufacturing and Marketing, Investments
  • 33% Industrial Equity Ltd Food and Beverages, Energy and Resources, Manufacturing and Distribution, Propertey Services, Investments
  • 18% AWA Ltd - Manufacturing & Installation of Electronics & Electrical Communications products
  • 23% Macmahon Holdings Ltd - Civil Engineering, Leisure Industries
  • 48% Markheath Securities PLC - Property Development, Manufacturing, Investment
David Jones Limited
  • 100% John Martin & Co. - Department stores - Acquired 1985
    • John Martin Financial Services Limited
    • John Martin Retailers Limited
  • 44% The Adelaide Steamship Company
  • 44% Tooth & Co Ltd - Hotels, Investments, Wine, Food
  • 30% AAM Inc - Coal Handling, Office Supplies, Investments
  • 33% Industrial Equity Ltd Food and Beverages, Energy and Resources, Manufacturing and Distribution, Propertey Services, Investments
Tooth and Co.
  • 50% Metro Meat (Holdings) Ltd - Meat
  • 33% Industrial Equity Ltd Food and Beverages, Energy and Resources, Manufacturing and Distribution, Propertey Services, Investments
  • 18% National Consolidated Ltd - Diversified Manufacturing and Marketing, Investments
Petersville Sleigh Ltd
  • 30% AAM Inc - Coal Handling, Office Supplies, Investments
  • 51% Howard Smith Ltd - Shipping, Distribution, Heavy Engineering, Investments
National Consolidated Limited
  • 20% David Jones Limited - Department stores and investments
  • 10% Markheath Securities PLC - Property Development, Manufacturing, Investment
Howard Smith Ltd
  • 7% Markheath Securities PLC
Industrial Equity Limited (IEL)
  • 100% Woolworths Ltd - Retail

Other companies, acquisitions and disposals in the group included:

  • Lockwood locks
  • Buffum's - chain of Long Beach, California based department stores
  • Wineries, including Penfolds, Wynns Coonawarra Estate, Seaview, Glenloth, Kaiser Stuhl, Barossa Co-op, Tulloch and Loxton Co-op, sold to SA Brewing holdings in 1990. Other wineries owned by group members at one time or another included Seppelts and Woodley Wines (IEL).
  • Bridgestone
  • Farmers Union - subsequently floated as part of National Foods
  • SAFCOL Food Processing - sold to Tropical Canning (Thailand) PLC
  • Vaniro - for some reason not explained, Vaniro is not included in the 1990 Annual Report Group Structure diagram. It does, however, feature significantly in the State Bank audit report.
  • Dextran Pty Ltd - like Vaniro, another AdSteam subsidiary. Dextran is the owner of IEL.

During the 1980s, AdSteam instigated a number of "Share plays", and also made significant investments in a number of companies including:

  • ANZ Bank
  • BHP
  • Bell Resources
  • Royal Insurance PLC
  • National Australia Bank
  • Westpac Bank

The opaque nature of the AdSteam Group caused rising concern in a variety of circles. Although shareholders continued to enjoy bonus shares, rights issues, and significant dividends, the share price plateaued. Financial journalists started asking questions, and the share price faltered. After the 1990 AGM and the announcement of the 25c dividend (per share) against a diminished share price, investor confidence deserted the company and the share price crashed from over $5 to under $1 in one day.

The previously "nervous" banks were far from happy, and started demanding the return of their capital. Of course, AdSteam had this money invested, and did not have billions of dollars of liquid assets. Also of course, the banks were not keen to force AdSteam into bankruptcy as such a situation would be unlikely to achieve the return of their assets. Hence, AdSteam organised an "arrangement" with the 200 banks, and in 1991 the Adsteam group was placed under an informal, receivership-type scheme of arrangement. Under this arrangement, there was an orderly disposal of assets.

In order to facilitate the orderly disposal of assets, a number of the group members were renamed:

  • The Adelaide Steamship Company became The Residual Assco Group
  • David Jones Limited became DJL Ltd
  • Metro Meat Holdings became Ortem Holdings

During the course of the disposal, there were a number of sales, and four very successful floats:

  • National Foods (1991)
  • Woolworths Limited (1993)
  • David Jones Limited (1995) and
  • AdSteam Marine (1997)

Nevertheless, not all of the disposals were made under ideal circumstances, and Adsteam's loss of $4.49 billion represented one of Australia's largest corporate collapses.

However, the major lesson out of the AdSteam collapse was for the accounting profession; a newspaper report on its failure carried the sub-headline "Adsteam a humiliation for the accounting profession". "Adsteam was "an excellent instance of how the rule-book approach to consolidation accounting imposed by the law and the Accounting Standards at the time determined managerial actions" ".

The "Adsteam saga" resulted in major changes to Australian accounting rules pertaining to consolidation and led to the issue of AAS 24 Consolidated Financial Statements by the accounting profession in June 1990 for application from 30 June 1991 (subject to a "legal impediment", see Deegan, 2005, p. 880)[68] and the issue of AASB 1024 Consolidated Accounts with statutory backing in 1991

Specifically, the definition of "control" for consolidation purposes was broadened beyond prescribed ownership interests to embrace control over an entity's financial and operating policies, making use of the notion of "substance over form" in determining the existence of a controlled entity.[29]

The "AdSteam saga" also provided some lessons for banks and auditors. For example, the SA Govt Auditor produced a number of Case Studies - Volume 6 is titled "The Management of Credit: Case Studies", and Chapter 9 is titled "Case Study in Credit Management: The AdSteam Group". The opening sentence states: "The exposure to the Adelaide Steamship Company Limited Group of Companies was complex.", and if your interests lie in those directions, makes fascinating reading.

Several matters from the collapse are still ongoing - over 15 years after "the collapse". Industrial Equity Ltd (IEL) is worthy of particular mention:[11][56][72][73]

  • IEL acquired Woolworths Limited in 1989 as a wholly owned subsidiary
  • AdSteam investment company Dextran purchased IEL from Brierley Investments Ltd (BIL) in November 1989
  • Dextran was one-third each owned by AdSteam, David Jones & Tooth
  • IEL delisted in 1990.
  • Woolworths floated in 1993 - very successfully - "it was floated in the biggest share sale (at that time) in Australia's history"
  • The Australian Taxation Office (ATO) ruled to disallow IEL $524m of deductions
  • IEL challenged this ruling - the matter has been before the courts on and off ever since - "One of the largest and longest tax disputes in Australian history."
  • In December 2007, IEL was given leave to challenge the ATO ruling
  • "While prime assets such as Woolworths and Adsteam Marine were floated, IEL and its tax liabilities remained within the corporate shell of Adelaide Steamship when it was renamed Residual Assco Group Ltd in 1997 and delisted in 1999. Residual Assco has no operating businesses but remains active while several IEL tax disputes wind their way through the courts."
  • Residual Assco's October 2007 annual report notes that the group holds $429 million "on deposit pending resolution of the outstanding matters between IEL and the ATO". At that time, the ATO were claiming $7.3 billion.
  • The dispute continues; the Chairman's address to the concurrent AGMs of Residual Assco, DJL and Tooth on 14 November 2008 is rather bleak. The Tooth & Co. Ltd. Annual Financial Report to 30 June 2008 summarises the then current situation in detail.