6 September 1996

Dairy Crest share issue gaffe costs Lloyds Bank dear

By Philip Clarke

LLOYDS Bank has had to fork out a six-figure sum to pay for an administrative mistake it made in the hand-out of Dairy Crest shares.

A computer glitch at Lloyds Bank Registrars, which was dealing with the mechanics of the allocation, meant some 1662 milk producers received too few shares. These were producers who took part in the pre-registration exercise, who applied for shares instead of cash in lieu of their rolling fund dues, and also applied to buy extra shares using their own money. Their allocations were subsequently scaled back to 71% instead of the 86% intended.

The shortfall amounted to almost 400,000 shares, which Lloyds Bank has had to buy on the open market. These are now being offered back to affected producers at the launch price of 155p each.

Letters have been sent out giving them until September 20 to accept.

Although Lloyds Bank has been reticent over how much it paid for these shares, a number of big block purchases were made as soon as trading began last week at 185-187p. At this rate, and assuming a full uptake by farmers, the exercise will have cost Lloyds Bank an estimated £125,000.

"Put into context, the number of shares involved is just 0.36% of the total," said Richard Vause, a director of Lloyds Bank Registrars. "But that doesnt alter the fact we made a mistake which simply should not have happened. We are working hard to put this right and can only apologise profusely for the inconvenience we have caused."

NFU milk adviser, Julie Smith said it was unfortunate such a mistake should have been made, but at least producers would not end up out of pocket.

Meanwhile, trade in Dairy Crest shares has been slow with few farmers selling. On Wednesday they were valued at a solid 190-193p. "It is a funny situation, with a huge number of shareholders on the register, but a very illiquid market," said David Higham of brokers Quilter & Co.

"Most of the enquiries we have had so far have been on the tax aspect. Since these shares cost the farmer nothing, any sale will generate a pure capital gain, liable for tax."

There are several ways of sheltering this gain, for example transferring the shares to a spouse if he or she is on a lower tax rate, or investing the income in a PEP. &#42