COMMERCIAL Labour and supplies restricted M. O’Brien

Press, Volume CXIV, Issue 33654, 2 October 1974, Page 20

COMMERCIAL Labour and supplies restricted M. O’Brien

The improvement in the net profit of M. O’Brien and Company, Ltd, in the year to June 30 may be attributed to an increase in sales value coupled with a reduction in overhead costs.

Very buoyant market conditions enabled the company to make the record profit — which was not foreseen at the half-year. But such conditions are unlikely to continue, shareholders are warned by the chairman (Mr G. W. Hunt) in the annua! report. During the year, the company experienced excess demand for its products, beyond the capacity of its resources. Material suppliers were unable to cope, and proper co-ordination of supplies for production had not been possible. Mr Hunt blames Govern-ment-propelled wage rises and price and profit controls, which have not only alienated the confidence of businessmen and the investing public but created new and serious problems for management. This applies particularly to labourintensive industries such as footwear manufacture, he says. Because competent staff are difficult to. find, the company continues to develop satellite workrooms in the suburbs to attract female employees. A new workroom has also been opened at Rakaia. Sales for the year were limited only by problems of supply and the availability of labour. The forward order position for all products is good. But with stagflation already in view, says Mr Hunt, and the sudden and unpredictable acts which have character-, ised the present Govern-1

ment, it would be foolhardy! to predict beyond the first; half of the current year. This looks good. The company intends to build a new factory on a two-acre site in the Wairakei Road industrial area, as the present lease expires at the end of 1976. As announced, net profit rose 31.9 per cent* to a record $63,702. It was after providing $l5OO more for depreciation at $32,140 and $13,03.3 more for taxation at $49,285. The ordinary dividend has been increased from 6 to 8 per cent, taking $23,932 — covered 2.6 times by profit. || The earning rate on aver- i

I age ordinary shareholders’ funds increases from 10.0 to 12.4 per cent. Working capital again improved, from $358,554 to $431,109. The current ratio is 3.8. Ordinary shareholders’ equity is 71.1 per cent; the funds are represented by capital of $328,749 (in-i eluding $29,600 preferenceland $220,598 reserves. The last reported sale of the shares was at 46c. Onj that basis, they yield 8.9 peri cent from dividend, and 22.41 per cent from earnings. The! price-earnings ratio is 4.5, ■ and the net tangible assets | backing for each 50c ordi-j nary share is 87c.