Farrier Waimak issue of $300,000 deb. soon

Press, Volume CXV, Issue 33962, 1 October 1975, Page 20

Farrier Waimak issue of $300,000 deb. soon

Farrier Waimak, Ltd. Christchurch, a ready-mixed concrete supplier and reading contractor, will be on (he market soon with a debenture issue of $300,000.

The debenture issue will! add greater stability to the! [company's financial struc-l Iture. says the chairman (Mr I C. W. Evans) in the directors’! report with the annual accI counts. During the last three years the company has borrowed short and medium-term funds from various sources, and a considerable portion of the debenture issue will be used to repay existing shortterm borrowing. Like all recent New Zea-

Hand company accounts, th< I Farrier Waimak account: ■ show the struggle with in I flation. Shareholders’ funds show t substantial increase o $255,116 fpr the year, bu this is made up of tht $lOO,OOO increase in share capital, plus an asset revalua tion reserve of $lOO,OOO. A revaluation of the com pany’s properties by a regis tered public valuer showec an excess of book value o more than $200,000. and i was therefore considered ad visable to write up the valut of the C.outts Island propertj by $lOO,OOO. Sales increased 12 per ceni to $2,561,889. mainly because of inflation, Mr Evans says. A high level of contracl activity in the first half of the year was not sustained in the second half, while the volume of ready-mixed concrete sole was slightly down on the previous year.

As already reported, group net profit rose 10.5 per cent to $93,866; profit before tax increased 19 per cent, but net profit rose less than proportionately because of lower expenditure on new plant with a corresponding reduction in the claim for investment allowance, and the cessation of the allowance as from April 1. Mr Evans says that expenditure on vehicles and equipment has been limited because of the need for more working capital. “It is an unfortunate but inescapable fact that under present day inflationary conditions funds generated within the company, including depreciation based on historical cost, and retained profits, are insufficient to provide adequately for the requirements of additional working capital and the high cost of asset replacements,” says Mr Evans. It was after providing $13,233 more for tax at $46,413, and $6302 more for depreciation at $144,604. The earning rate on average shareholders’ funds falls from 16.1 to 13.7 per cent, mainly because of the sharp increase in the funds—from $559,902 to $815,018. The dividend is unchanged at 11 per cent; however, it is paid on capital increased from $200,000 to $300,000, and takes $33,000, covered 2.7 times by ordinary profit. Five per cent, or $15,000, of the dividend is paid free of tax from capital reserves.

Net current assets improved $92,548 to $79,239; the ratio is 1.2:1. There are no outstanding movements. The auditors once again point out that a provision for deferred taxation (of $27,393) ought to be made. Ordinary shareholders’ funds of $815,018 are comprised of $300,000 ordinary capital, $lOO,OOO preference

[capital, $10,238 capital reserves, $lOO,OOO asset revalujation reserve, and $304,780 revenue reserves. The shares last sold at 71c, for a dividend yield of 7,7 per cent and an earnings yield of 20.7 per cent. The prices-earnings ratio is 4.8, and the net tangible asset backing 119 c a 50c ordinary share.