Lower margins make H.B. profits fall

Press, Volume CXV, Issue 33941, 6 September 1975, Page 18

Lower margins make H.B. profits fall

Increased costs and reduced mark-ups reduced the profit on sales of Hallenstein Bros, Ltd, Dunedin-based clothing group, from 6.6 per cent to 4.6 per cent in the year to June 30, the annual report shows.

As reported, although sales increased $253,375 or 1.9 per cent to $13.8m, the group net profit fell 29.5 per cent or $265,270 to $632,120.

The sales comparison between the 1974 and 1975 years had been distorted by an additional $900,000 extra sales in 1974 as a result of a New Zealand-wide centennial sales event, the chairman (Mr P. W. Fells) says. “Ordinary” business produced $1,146,318 in extra sales, or a 9.1 per cent increase, which is a better measure of the sales trend for the year, Mr Fels says. “Although the suit market in New Zealand is a sizeable — and growing — one, by world standards New Zealand men are not frequent purchasers of suits. “As New Zealand’s largest men’s and boyswear specialist retail chain, we are doing everything we can to correct this situation, and are working towards gaining an increasing share of a lucrative market,” Mr Fels says. During the year new stores were opened at Chartwell Square (Hamilton), Riccarton Mall (Christchurch), and Brown’s Bay (Auckland). Each is performing to budgeted expectations. The company’s branch in Balclutha is now housed in a new building, and turnover has increased substantially. Work is in progress on new shop presmises in Waimate, and Dannevirke.

At Green Island, Dunedin, the company has leased a building which houses an extension of garment manufacturing activities. Major alterations were carried out at Newton (Auckland), Upper Hutt, Cuba Street (Wellington) and Taupo. Modernisation of the company’s properties is proceeding but at a reduced tempo. The pre-tax profit fell $487,770 or 30.0 per cent to $1,141,620, after increases in selling distribution of $338,760 to $3,681,737 and after providing $18,535 more for depreciation of $169,462. The provision for taxation was $222,500 lower at $509,500. The directors are recommending a final dividend of 8 per cent making an unchanged 13 per cent (13c a share) for the year. The dividend is covered 2.3 times by available profit, compared with 3.4 times in 1974. Shareholders funds were increased from $5,406,345 to $6,844,445, but this, and the lower profit, reduced the earning rate on the funds from 17.0 per cent to 9.2 per cent The increase in shareholders’ funds was mainly because of revaluations of land and buildings. The assets revaluation reserve was increased $746,906 to $1,105,185, and the value of freehold, and leasehold premises rose more than sl.lm to $3,423,670. During the year the board decided that both land and buildings should be revalued in line with latest Government valuations. Additions subsequent to the date of the Government valuations are at cost. The directors are satisfied that a realistic valuation has been placed on properties, and that the

value arrived at is not overstated. After the conversion of preference shares to ordinary shares, and the issue of 17,611 shares in consideration for the new branch at Brown’s Bay the ordinary capital was $2,114,075 in 100 c ordinary shares. Working capital rose $229,693 to $3.7m, and the current ratio rose from 3.9 to 4.0 to 1. Proprietorship was increased from 68 per cent to 72 per cent. At 170 c the ordinary shares have a dividend yield of 7.7 per cent, and an earnings yield of 17.6 per cent. The p.e. ratio is 6.