Midland profit down; costs much higher

Press, Volume CXII, Issue 33033, 28 September 1972, Page 22

Midland profit down; costs much higher

The group net profit of Midland Coachlines, Ltd, fell by 9.4 per cent to $120,993 in the year to June 30. Revenue rose by 26 per cent, but costs increased by 31 per cent, says the chairman (Mr L- K. Laugesen) in his report with the annual accounts.

The trading profit at $252,025 was 9.6 per cent lower, after the company provided $45,384 more for depreciation at $451,447, and $31,538 more for interest on fixed loans, at 112,136.

The provision for current taxation is $1072 lower at $59,290, and the transfer to the deferred taxation provision was $19,767 less at $49,979. A final dividend of 5 per cent is recommended on the ordinary shares which rank for dividend for the full year; on the new shares issued during the year 3 per cent will be paid. On the old shares the dividend for the full year is therefore unchanged at 9 per cent. The payments require $74,700, including the preference dividend, and the ordinary dividend is covered 1.7 times. Earning rate down The earning rate on ordinary dividend bearing capital falls from 18.5 to 15.0 per cent. The additional capital raised during the year, together with further borrowed funds, has enabled the assets of the group to be increased from $3.2m to $3.7m. Shareholders’ funds have also benefited by capital profits of $74,148, arising principally from the sale of surplus property, and a reduction of $40,424 in the provision for deferred tax as a result of the lower tax rates. The earning rate on average shareholders’ funds falls from 15.4 to 10.3 per cent;

the net asset backing a share rises from 137 c to 145 c. The balance sheet shows a provision for deferred taxation of $428,336. This figure records the long term liability for taxation resulting from the adoption of rates of depreciation on the coach fleet and rental vehicles which, in the opinion of the directors, adequately reflects the life of those vehicles.

These vehicles are in the books at $2,082,607.

Liquidity improved

The company’s liquidity continues to improve; working capital was $36,009 — in other years a deficit had been shown. During the year, twelve new tour coaches of modern design were introduced to the fleet and the company continues to be well equipped to meet the demand of the growing tourist industry, says Mr Langesen. “Costs were difficult to contain at acceptable levels, but as a result of Government legislation there appears to be some easing off in wage and salary claims which hopefully will reduce the rate of inflation to more manageable proportions. “The half yearly report mentioned that the base of the Auckland coach fleet was being shifted to new premises on May 1. This move was accomplished as scheduled and the previous premises sold at a substantial capital profit. The new leasehold premises, close to Queen Street, offer very much improved facilities and the company now has an excellent base for its North Island operations,” Mr Langesen says. Car rental growth “The growth rate in Tasman Rent A Car has been very good and rental cars continue to make an excellent contribution to profit. “The new premises at Rotorua are well located and although the company has operated from them for only a short period, results are very encouraging. During the coming year the company plans to erect car servicing buildings at Auckland and Christchurch International Airports in order to meet increasing demand by both businessmen and tourists. An entirely new sales booth is currently in the course of erection at a good location in the Auckland Airport terminal building and as a result increased business is

confidently anticipated,” Mr Langesen says. During the year the company purchased the Motor Body Building and Panel Repair Business of G. B. McWhinnie and Co., Ltd, Christchurch. The purpose of this acquisition was to provide facilities for the repair of coaches and Tasman rental cars, together with outside work. Urban services No dividends were received from the companies in which Midland has a minority interest, but a satisfactory return on these investments is expected in this coming year. The maintenance of urban services is still of some concern to the directors, ,Mr Langesen says. Last year the company received a grant from the Government towards the cost of operating, but this year despite the recommendations of the Carter Committee, the grant was withdrawn. However, in the recent budget, the Government announced that limited funds would be provided to assist the operators of urban services, and as the company will qualify for assistance, application has been made for a grant.