Recession affects profit of Simpson and Williams

Press, Volume CXII, Issue 33063, 2 November 1972, Page 19

Recession affects profit of Simpson and Williams

The accounts of Simpson and Williams, Ltd, Christchurch stationer and bookseller, disclose a substantial decline in profit, but the directors are recommending a dividend of 15 per cent.

The directors also foreshadow a tax free capital distribution.

The chairman (Mr E. A. Cleland) says in the directors’ I report that shareholders! should receive an adequate dividend; part of the pay-. went will be made from this] year’s profit, and the balance from accumulated profits of previous years. The dividend is 2 J per cent less than last year’s, and is at the same rate of that paid out in the years 1965-68. “For most of the year there was a decided recession in the printing industry, and thia, together with intensive competition and severe price cutting, has greatly reduced our profit margins,” Mr Cleland says.

The accounts bear this out: while expenses were well held, and actually declined jslightly to $187,701, gross ' profit from printing, publishing and trading fell by 8.8 per cent to $197,172. After providing $ll5O less I for depreciation at $8389, and : $lO,BOB less for tax at $4961, a net profit of $5869 was left. ' The profit compares with $13,716 last year. The recommended dividend requires $12,000. The earning rate on unl changed capital of $BO,OOO I falls from 17.1 to 7.3 per i cent, and the rate on average | shareholders’ funds eases i from 82 to 3.6 per cent. ■ With the expectation of an ■ improvement in business conditions generally, the direcI tors feel that more stable trading wil prevaile, Mr Cleland says. I The balance sheet shows a I strong financial position. The . proprietary ratio is 68 per rcent, and the current ratio ! improved from 2.2 to 2.4:1. , Working capital decreased by $6527 to $67,681; the imporI tant movements are decreases in cash and debtors, while creditors are also lower.

The reserves of $80,771 compare with a capital of $BO,OOO. The 100 c shares, which are closely held, have an asset backing of 201 c, and last sold for 285 c, 5c up on the previous sale. On that basis they yield 5-3 per cent from dividend, and 2.6 per cent from earnings; the price-earnings ratio is 39.

During the year the company’s retail premises were

sold at a highly satisfactory figure, says Mr Cleland. After repayment of the mortgage of $26,000 part of the proceeds will be used to improve the company’s printing facilities. “It may take some little time to investigate and decide which of various alternatives in relation to the printing business will be in the best interests of shareholders. “Once a final decision has been made and the cost determined the directors hope that it will be possible to earmark a portion of the sale proceeds for a tax-free capital distribution to shareholders,” Mr Cleland says.