Fletcher Earnings Up From Tax Incentives

Press, Volume CVIII, Issue 31725, 8 July 1968, Page 15

Fletcher Earnings Up From Tax Incentives

Tax incentives enabled Fletcher Holdings, Ltd, Auckland, to raise its group profit by $220,207, or 8.7 per cent, to $2,741,299 in the year to March 31 in spite of a fall of 17.2 per cent in turnover.

Expectations that the effects of the economic measures taken by the Government in February, 1967, would fall with particular severity on the building industry and ita suppliers, have been realised, says the chairman (Mr L J. Stevens). These measures have resulted in a substantial fall in the backlog of construction work and in the turnovers of the manufactring and trading companies which service the building industry. However, the diversification of the group, especially in the export trade, has limited the fall in turnover by $1,442,403 to $82,213,169. Tax Provision

This export trade with its incentive tax benefits, other forest write-offs and Increased investment income, have reduced the tax provision by $557,102 to $759,770. As announced, the ordinary dividend has been held at 11 per cent and requires $3573 more at $1,732,773. This is covered 1.5 times by profit after allowing for the preference charge of $78,918. Earning Rates

The earning rate on average ordinary shareholders’ funds is up from 8.2 to 8.6 per cent, while the rate on average ordinary capital is up from 15.6 to 16.9 per eent The group does not foresee any major Improvements in conditions for the rest of this calendar year, says the managing director (Mr J. C. Fletcher). However, if international liquidity problems are overcome and export prices remain at reasonable levels, then 1969 could see a steady recovery in the

economy and starting from a sounder and more stable basis.

Export Earnings The group’s exports should exceed s4m in the current year. The export Incentives, together with devaluation, has made many marginal transactions profitable, thus Creating quite substantial benefits in increased overseas earnings. A breakdown of the turnover figures shows that construction activities accounted for $26.7m (6r 32.4 per cent) of the total; steel and engineering, SI2A (14.9 p.e.): manufacturing, $8.7 m (10.7 p.e.); builders' supplies, $12.4m (15 p.e.); timber, $20.7m (25.2 p.e.), and miscellaneous, sl.sm (IB p.e.). The biggest fall was in timber, which fell $2.5m. Fletcher Construction

In spite of difficult trading conditions, Fletcher Construction held its New Zealand turnover at a slightly higher level than the previous year, says Mr J. C. Fletcher. Fletcher Industries turnover and profit was slightly better than the previous year in spite of the downward trend in the building industry. Fletcher Merchants was affected by the decline in permit issues. Steel Sales

Although the consumption of steel fell, sales in the second half of the year reached higher levels than predicted and the total company turnover was higher than the year before. The level of demand for wood products has been low and Fletcher Timber plants

have worked at reduced capacity. Shareholders’ Funds

Ordinary shareholders’ funds are up $1,555,742 to $31,820,355. Ordinary capital rose $345,000 to $16,065,000 from the issue at 145 c a share to Colonial Sugar Refinery, so that funds could be raised to redeem $500,000 in preference capital which now stands at sl.lm.

Minority interests rose $1739 to $1,425351, term loans rose $1,159,055 to $18,021,149, while the deferred tax provision is up $125,003 to $555,487. Fixed Assets

These funds were used in raising fixed assets by $759,644 to $28,852,132, and investments $543,879 to $8,667,921, which have a market value of $14,777,001. Working capital rose $1,034,538 to $15,402,789 with current assets down $376,372 to $32,895,540, and current liabilities down $1,787,282 to $17,492,751. Bank overdraft is down $906,872 to $5,597,038. Although dividends from companies in which Fletcher has a shareholding of more than 10 per cent but which are not subsidiaries, is $659,647, Fletcher’s share of the profits is $1,005,835.