Challenge half-year profit falls 61%

Press, Volume CXV, Issue 33773, 20 February 1975, Page 11

Challenge half-year profit falls 61%

Challenge Corporation’s net trading profit fell 61 per cent to $1,451,000 in the six months to December 31, the chairman (Mr R. R. Trotter) announced in the company’s half-yearly report.

Group net profit, after taxi and minority interests, |< declined 61 per cent and i group net income, including t capital profits on the dis-'I posal of assets, declined by < 45.8 per cent. Trading profit! before tax fell 59.7 per cent. Group turnover fell almost! s6sm to s2l7m; the turnover) of Wrightson N.M.A. Ltd, ] the largest subsidiary', fell’, s69m. This decline related ( entirely to wool and live-) stock transactions on which j a commission is earned and) reflects the very serious fall in wool and meat prices, Mr!, Trotter said. The volume of wool I handled increased significantly, but there was a : reduction in livestock num- i bers because of the favour-j able season, and depressed! trading conditions. Turnover of most other subsidiaries was up on last! year, in total by ssm. Subsidiaries profit Despite the over-all; decline in turnover, the) gross earnings of the group! increased by sl.9m — this! increase was, however, more than offset by an increase in; expenses of $5.7m as a direct result of inflationary pressures on costs, particularly wages, interest rates, and motor vehicle expenses. Net profits of the following subsidiaries showed' a useful increase on the previous year:— MacEwans Machinery, Wintest Industries, Electric Refrigeration N.Z., Challenge Finance, and Challenge Secu-

rities. The extremely) difficult economic conditions in Australia have affected the results to date of the two Australian subsidiary companies, Mr Trotter said. : Measures not enough | “In the report at this time last year, reference was made to the inherent dangers in half year comparisons of profit, particularly in regard to Wrightson IN.M.A., our stock and sta- ! tion company, whose major earnings are achieved in the !second half of the year. We' expect some improvement in! lour relative position in the; I second half of the year,” he| said. I “The economic conditions lin the agricultural sector which have so adversely affected Wrightson N.M.A. are having an equally severe effect on our farmer clients. I The recent measures anInounced by the Government to assist farmers will help, but, although they have generated some improvement in; I confidence, we do not con-1 Isider that they are sufficient; .to encourage adequate farm) maintenance, let alone fur-; ther investment in farming. Support for clients “One step we believe to be imperative is for the Meat Board to bring forward, to the beginning of February, the minimum price for bee'' of 55c kg that they have announced will be paid from next October. This price is so far above the

current supported schedule! of 29c kg that it is com-: pietely distorting normal i ! slaughtering and trading pat-, terns, and this will have very serious repercussions next winter and spring. “Inflation and the financial support needed by our farm- : er clients has placed some ; pressure on our liquidity. However, the group was able to meet the seasonal! spring peak without resort) i to the special borrowing fac-| ilities provided by the Re-! ■ serve Bank for stock andi ■ station companies. »l !; Steady dividends >1 ' ■ ■I we continue to support lour farmer clients in these s difficult times. For the six months to December 31, ' Wrightson N.M.A. advances ■ to farmers increased by an ! amount greater than all ■ other stock and station com- ■ pames combined. We cannot I continue to increase our ad- • vances indefinitely, and it is ■ important that the GovernI I ment provide the Rural ■ißank with the funds to ■(refinance current advances 1 1 which became permanent ■ I when prices fell so sharply j last year. The stock and staI tion industry estimates that I the sum of s26m is involved. I The interim dividends are > i unchanged, being 5 per cent j lon ordinary shares and 2| . per cent and 3 per cent on f the 5| per cent and 6 per i cent preference stock. The t directors expect that last » year’s total ordinary divis dend of 121 per cent will be » maintained, Mr Trotter said.