“Financial structure weakened”

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

“Financial structure weakened”

(New Zealand Press Association) WELLINGTON, October 11. “It is high time that the interests of the equity shareholder were given a fairer treatment—the return on equity shares in relation to that on loan moneys is lowering their value and weakening the whole structure of company finance,” the chairman of James Smith, Ltd (Mr D. A. Smith), says in his annual review. i

The Government took more than $301,000, or nearly 54 per cent of the company’s net profit in income and payroll tax, leaving $257,791 from which dividends must be paid and expansion financed. “Not altogether an encouraging situation,” Mr Smith says. “In an industry such as ours, which is dependent on the employment of a large labour force, it is extremely difficult to attain even a modest improvement in profit, as salaries and wages are our largest item of expense. “This year, for the first time in the history of the company, wages and salary payments exceeded slm, almost $lBO,OOO more than last year.” As already announced, the net profit for the year to July 19 rose 19.2 per cent to a record $257,791, compared with last year’s $216,090. Sales of $7,437,721 show an increase of 16.3 per cent over last' year. A final dividend Of 7 per cent, payable on October 27, will maintain the dividend at the increased rate of 12 per cent paid last year. The dividend requires $120,000 and is covered more than twice.

The earning rate on shareholders’ funds rose from 10.9 to 12.12 per cent, while the rate on issued capital rose from 21.6 to 25.8 per cent. Shareholders’ funds increased $137,791 to $2,126,528, giving the 5Qc shares an asset backing of 106 c.

The increase in turnover and the opening of three more “little shops” in the Johnsonville Mall, resulted in increased stocks, debtors, and bank overdraft. Working capital was $81,105 higher at $1,269,279, but the current ratio eased from 2.4 to 2.1 to 1.

The profit was struck after providing $117,629 for depreciation compared with $122,615 in the previous year and $278,683 for taxation ($214,954). The payroll tax was $22,441.