COMMERCIAL A. and B. net profit falls 15.7 per cent

Press, Volume CXI, Issue 32736, 13 October 1971, Page 13

COMMERCIAL A. and B. net profit falls 15.7 per cent

The group net profit of Andrews and Beaven, Ltd, Christchurch, fell $99,457 —or 15.7 per cent—to $535,846 in the year to June 30, the company’s full accounts disclosed.

Last month the company reported a fall in profit before tax of 3.1 per cent. The chairman (Mr R. C. Neville) says in his report that in comparing the accounts it must be kept in mind that last year’s accounts included 15 months trading by G.A.C. and that the payroll tax this year was $86,188. The result was after charging $21,562 more for interest, and providing $2BBO more for depreciation at $232,500 and $62,136 more for taxation at $615,387. As announced, the dividend is unchanged at 8 per cent; it requires $101,215 more at $330,881 and is covered 1.5 times. Earning rates fall The higher dividend requirement results from the increase in capital—by $501,637 to $4,512,248—by the rights issue. In addition, the preference dividend again takes $23,575. The return on capital falls from 15.2 to 11.4 per cent; the earning rate on average ordinary shareholders’ funds declines from 10.3 to 6.5 per cent. Working capital improved by $411,846 to $6,667,601, the ratio declined from 2.1 to 1.9:1. Debtors were only slightly higher, but inventories rose from $8,460,085 to $10,174,230 while bank overdraft was about $150,000 higher and creditors increased by almost slm. Deposits increased by almost $400,000. Referring to inventories Mr Neville says that stock values were inflated by substantial price increases, by the takeover of fairly large stocks in connection with the New Holland franchise, and by the increase in work in progress because of delays of imported

r components, as a result of • industrial unrest overseas. Measures had been introduced to lower inventories to ’ a more acceptable level, Mr ’ Neville says. I Shareholders’ funds increased from $7,687,361 to $8,963,898, party because of a revaluation of some of the company’s properties. Mr Neville says that his prophecy that the rationalisation of the activities of Andrews and Beaven and G.A.C. would involve abnormal expenditure had proved accurate. However, the process had been slowed down, to conserve capital expenditure, and it would be at least two or three years until it was completed. Some progress had been made which would have a beneficial effect during the coming year. G.A.C. Engineering, a Dunedin tool and die making plant, has been successfully disposed of. Rationalisation of branches and manufacturing facilities, with the exception of the main centres, had been achieved. Plans for a major warehousing operation were now under way. Demand sustained Some redundant properties had been sold in spite of a rather depressed market, and more would be disposed of as they became available, Mr Neville says. Steadily rising costs, and constraints imposed by the Government during the year necessitated the tightest possible control on expenses, Mr Neville says, and the need for efficient management, technical know-how, and highly trained staff became abundantly clear as the year progressed. Referring to exports, Mr Neville says that the comability to export would depend very largely on holding the inflationary trend in wages to an acceptable level. I The high cost of finance for development and reasonable growth was a problem, be says, and it was disheartening to report that the Melbourne branch had been closed, after several years spent on promoting a growing export market. Fortunately, the company had obtained the services of a long-established and aggressive agent, Mr Neville says.

However, in his separate report on trading Mr Neville says that after allowance for the effects of inflation, the volume of goods sold would be about 5 per cent lower. As the year progressed, increasing difficulties were experienced in maintaining adequate profit margins on a wide range of low value goods, and it was becoming increasingly difficult to handle these. Mr Neville foresees the possibility of more rationalisation between the companies merchandising lines for the automotive and industrial consumer.

The agricultural and industrial plant divisions had a particularly good year, he says, and products of the company's own design and manufacture were finding a ready market, in which there was considerable scope for expansion.

Business personal

Mr B. H. Ballin, general manager of the Ballins Industries, Ltd, group of companies. is in the United Kingdom negotiating agency arrangements in the wine .md spirit industry relating to the company’s expansion programme.

In spite of a difficult year domestic demand had been sustained, and all works were in full production, he says, although with some reduction in overtime.• All divisions, with one exception, traded profitably, and turnover was slightly higher than last year’s record.