Broadlands decides to stay liquid

Press, Volume CXV, Issue 33878, 25 June 1975, Page 18

Broadlands decides to stay liquid

Broadlands Dominion Group. Ltd. reacted to the more difficult trading conditions of the latest year by improving its liquidity, and the company will continue to do so, the chairman (Mr A. C. Montgomery) says in his review of the year to March 31. The proportion of long«r term borrowings has increased, and me accounts show that moneys due to be repaid within one year comprise 39 per cent of total borrowings, compared with 46 per cent the year before. The;

proportion of borrowings duel to be repaid within one and two years fell from 20 to 13: per cent, while maturities of more than two years increased from 34 to 48 per cent. Bank balances increased from 5611.000 to $2.3 mil-: lion, and bank overdrafts' fell from s4.om to sl.3m. Total borrowings are 82.6 m lower at Ss4.vm, wnii the largest fall in unsecured uviro....igs: $5.7m to $3.2m. Accounts receivable are; $8 7m lower at $47.2m, but’ bills and discounts rose from $19.1m to $33.9m. Total assets employed fell about $900,000 to slol.Om. Since [balance date the group Ms

become even more liquid, Mr Montgomery says. Profitability may be slightly affected by this decision, he says, but with all the other factors that might militate against buoyancy in the commercial sector one cannot be confident about the profit of the coming year in any event. Mr Montgomery says that the economic indicators are,; on the best interpretation, confused. The fact that this is an election year further com-: plicates the situation, he says, as by Government action the economic climate might differ materially from before to after the election, irrespective of which party succeeds.

As announced, profit for the year fell 8.0 per cent to $2.1 million Profitability was affected by the decision to curtail lending, by higher interest outgoings — resulting from higher cost but longer term borrowings, and higher Euro-currency interest rates I — lower property sales, and the cost of the extra premises for the year because of the move of head office. Income fell, while the steadily increasing overhead costs had to be spread over a lower volume than that over which these costs are I normally charged, Mr Mont-! gomery says. Property sales were inhibited by the shortage pf mortgage finance, which also affected builder-customers. Payments slower As a matter of accounting policy, Broadlands writes off against profit all holding charges of land devel- ;

f opments, and does not inI elude a property sales in the accounts until a certain proportion of the sale price is ! received. With buyers tardier in paying deposits, many sales 'were not brought into account — even where bind- ' ing contracts had been entered into, Mr Montgomery says. The result was that in the ' property area also costs had to be charged against a ismaller volume of sales. I However, arrears of instalments on property purchase agreements are negligible, he says. The sale of the major portion of the group’s Westharbour land holdings — which attracted publicity — was in the ordinary course of business, and Broadlands Property division remains involved as contractors to the Government. High quality sections are now much scarcer than a year ago, and as sales have shown a revival since March and the mortgage situation is showing a slight easing, the directors are confident of the value and saleability of the company’s land, ” Mr Montgomery says. Broadbank had an ex-1 cellent year, more than' doubling the previous year’s' profit. Branches were estab-' lished in Christchurch and Dunedin. Sales by Tropex Exports,; were well above previous! levels, and its trading base' was broadened. Tropex, on its own behalf or on behalf of its clients, accounted for 30 per cent of New Zealand; non-food exports to South! Pacific Islands. Diners Club reported a; good profit. I

i Broadlands Computer Bureau increased its gross revenue considerably. The I policy of writing off the ’ production costs of new programmes as they occur has the effect of depressing profitability in the short : term, but the company is (expanding rapidly. The fund controlled by Broadlands Fund Managers ! continues to grow, but it ! had to limit its mortgage in- ! vestments — because of j overwhelming demand — to I the professional firms supporting it. The group has taken a 40 i per cent interest in General ! Investment Company, Ltd. which is listed on the Perth Stock Exchange. The directors consider the long-term ' potential of this investment ' exciting. The group also has large minority holdings in Dalhoff and King Holding, Ltd, and New Zealand Pastoral Holdings, Ltd. Mr Montgomery says that the directors are (well satisfied with these investments. The profit was after providing $140,000 less for taxation at $1,337,000, $84,000 more for depreciation at $417,000, and $592,000 more for interest charges at $4.4 million. The earning rate on average shareholder’s funds fell from 22.3 to 16.5 per cent. Total dividend for the year is unchanged at 14 per cent. It requires $1.2 million, covered 1.7 times by profit. The shares last sold at 98c, for a dividend yield of 7.1 per cent and an earnings yield of 12.4 per cent. The price-earnings ratio is 8.1 and the net tangible asset backing 73c a 50c share.