"Margin on parts uneconomic"

Press, Volume CXIV, Issue 33700, 25 November 1974, Page 21

"Margin on parts uneconomic"

(New Zealand Press Association) WELLINGTON. Even before the introduction of the stabilisation regulations, the margin of profit in parts merchandising was at uneconomic levels, the chairman of the Colonial Motor Corporation, Ltd (Mr G. B. Gibbons), said at the annual meeting.

“This margin of profits! was also much less than applied in overseas countries. ! “This situaton continues to! exist, in fact the scale of! parts merchandising operations with increased in-’ ventory levels and servicing; costs will be difficult to : maintain. “The return per dollar of, sales is marginally higher compared with the previous year, but while we have maintained our satisfactory! stock-turn in all phases of, our operations, the cash’ funds required have grown! rapidly with inflation.

“Our stock-carry has increased by 38 per cent from $5.5m in 1973 to s7m in 1974. The very strong credit policy adopted has enabled the company to hold trade debtors to budgeted levels,” Mr Gibbons said.

“The loss of liquidity brought about by increased sales tax on the larger cars and by company P.A.Y.E. taxation is now having its effect.

“In March, 1975, we will be making the final twothirds tax payment on estimated profits earned up to May 31, 1975, the first third having been paid in September, 1974. “We are thus making a significant interest-free taxation payment in advance of earnings to the Inland

, Revenue Department at a time when funds for investment and growth are scarce. “This is in addition to the $BO,OOO which we have to jmeet each six months over a seven-year period, rep- | resenting taxation on the ' 1972-73 profits. “The varied and continuous marketing changes brought about by world policies beyond New Zealand domestic control have caused rapid modifications to established practices. “Soaring oil prices, and the resulting liquidity factors, have been followed

by increased sales tax on cars and more rigid hire purchase terms, which are astringent medicines,” Mr Gibbons said.