D.B.'s assets: from $22m to $51m in two years

Press, Volume CXI, Issue 32660, 16 July 1971, Page 16

D.B.'s assets: from $22m to $51m in two years

The total assets of Dominion Breweries, Ltd, increased from $86,849,085 to $51,464,564 ini the year to March 31; of this figure 64 per cent is represented by shareholders’ funds. Only twol years ago the company’s total assets were $22,445,531.

The company purchased 32 hotels during the year, involving the allotment of 3,895,485 fully paid ordinary 50c shares. This increased capital by $1,947,743. However, the share premium arising from these transactions increased the share premium account by $4,232,787. Although last year’s bonus issue reduced this account by $1,782,490, the share premium intake from the cash issue was $1,760,071. The share premium account, therefore! amounts to $12,250,630 —al* most as large as the amount 6f issued capital, which increased from . $7,431,416 to $12,921,720. Total capital reserves exceed this figure. Including revenue reserves, the reserves position is $19,998,279—51721 short of $2O million. Shareholders' funds increased from $21,862,769 to $32,919,999. It is interesting to note that the company’s reserves alone exceed total liabilities—current and long term. As might be expected, the largest increase on the assets side of the balance-sheet is in land and buildings, the written down book value being shown at $29,826,815, more than $ll million higher than last year.

Earning rates

In his review, the chairman (Mr L. J. Stevens) said that it was the established practice of the company to eliminate entirely the goodwill factor involved in share acquisitions in subsidiary companies, and no goodwill item appears in the accounts. The accounts confirm the previously reported increase in profit by $534,161 or 23.5 per cent, to $2,806,751. The result was after providing $294,663 more for depreciation at $1,570,805, and $571,154 more for tax at $2,832,063; payroll tax was $100,743. The profit represents an earning rate of 10.2 per cent on much higher average shareholders’ funds, down from 12.5 per cent last year; the earning rate on average capital eases from 25.7 per cent (after adjustment for the one for five bonus issue) to 23.5 per cent. Working capital is $522,107 —against a deficit of $23,485 last year. The dividend is maintained at 12j per cent, equal to 15 per cent on shares held prior to the bonus issue. It is almost twice covered.

Development of the magnitude undertaken by the company would obviously take time to come to full profit, Mr Stevens said. Likewise the large intake of funds from last year’s cash issue, and substantial share allotments for hotel acquisitions which contributed to earnings for only part of the

year must have some impact on immediate earning rates. Nevertheless the company is soundly based and in absolute terms is enjoying wellmerited success. It is well equipped to meet the growth needs of the future, he said. The managing director (Sir Henry Kelliher) said in his annual report that the brewery company, wine and spirit merchants and hotel outlets acquired in the last two years had all produced trading results in excess of budget anticipations. A number of the newlyconstructed motor hotels which recently commenced operations had produced results well up to expectations, he said. The DB Rotorua Trust Hotel had also far exceeded budget, and was earning profits at a very satisfactory level—despite nigh initial depreciation. The large number of South Island hotels acquired during the year contributed 24 per cent of the group profit increases. The parent company contributed 20 per cent of the increases, while the recentlyacquired subsidies provided the remaining 56 per cent. As the accounts do not reflect a full year’s trading by these hotels, a greater contribution to group profits might be expected in the current year. This, however, was subject to there being no serious deterioration in the relationship of costs to liquor prices and hotel tariffs, Sir Henry said. The group encountered a very marked increase in costs in all departments during the year. The profit would have been higher had it not been for the very substantial erosion of the January, 1970, beer price increase, because of rapidly rising costs of production and distribution. By March 31 the increase in the beer price had already been eroded by more than 70 per cent, Sir Henry said. The profit would also have been greater but for the high establishment cost and initial depreciation charges in.respect of new hotels and taverns. New major hotels had been constructed at Mangere, Hamilton, and Gisborne. Further motor hotels were under construction, and expected to be operating before the end of the year, at Kaikohe, Hastings, New Plymouth, Westport, Haast and Alexandra, Sir Henry said. Taverns are under construction at Dinsdale, Waharoa, and New Plymouth. Consequent on the reorganisation of marketing, the subsidiaries should make an even greater contribution , during the current year.

Marketing co-ordination should provide a foundation to secure a greater share Of the market.

As part of the policy of rationalising production and distribution of beer it was decided to produce draught beer for the Nelson-Murcni-son area at the Westland brewery in Greymouth, rather than improve the old Nelson brewery. Similarly, it was concluded that improving the Taranaki brewery would not be economically justifiable. Arrangements are in train for -supply by tanker from Otahuhu.

Construction is under way On the Nelson Tourist Hotel,! which will not open until towards the end of next year. This uncompleted contract, together with other contracts for hotel construction, accounts for most of the $6,085,032 shown in the accounts for outstanding capital commitments.

The group is associated with Mount Cook and Southern Lakes Tourist Company, Ltd, and Shaw Savill in the provision of a new hotel for Queenstown; construction is expected to begin before the end of this year, Sir Henry Kelliher said.