COMMERCIAL Kidd Garrett liquidity problem explained

Press, Volume CXII, Issue 32977, 25 July 1972, Page 16

COMMERCIAL Kidd Garrett liquidity problem explained

The chairman of Kidd Garrett Holdings, Ltd (Mr D. A. Schnauer), was congratulated at the annual meeting in Auckland on his full and frank disclosure of the problems that have beset the Auckland engineering supplies firm.

Mr Schnauer’s explanation to the shareholders, who came from as far away as Dunedin, was a detailed example of the dangers that face a company when its liquidity suddenly dries up.

In the case of Kidd Garrett, the situation has been even more critical because of a general downturn in the machine tool industry that

caught the company with a large amount of unsold stock.

The company, normally a profitable trader, suffered a 17.4 per cent profit decline in 1971. In the latest year the company recorded a loss of $106,173 and omitted its normal 9 per cent dividend. Kidd Garrett’s problems began two years ago, Mt Schnauer said, when a majot source of credit was suddenly withdrawn by an institution. He preferred that the institution not be named. The directors decided to regain some liquidity by selling off part of the company’s s3m worth of stocks. But this move did not have an immediate impact. After discussions with the company’s brokers, the directors decided they had “no elbow room” in which to raise money through a debenture issue.

“We had to hold our creditors off as best we could,” Mr Schnauer said. "We were in a comer with our backs to the wall.” He said the board decided on “the grim alternative” of selling off its headquarters in Hobson St and leasing the building back. “We were faced with the constant fear that the institutions or our creditors would move in with dire consequences,” Mr Schnauer said. Although sales since March 31 are down 8.8 per cent, and the company cannot “hold out much hope for a dividend

in the current year,” Mt Schnauer said the stock situation, on which the company is basing its recovery, is improving. Kidd Garrett, which moved out of its Auckland base five years ago to open branches throughout the nation, has also put its properties in Timaru and Palmerston North on the market to improve liquidity further.

Mr Schnauer said: “We are budgeting for a profit this year.”