Letter to shareholders of Challenge

Press, Volume CXV, Issue 33965, 4 October 1975, Page 19

Letter to shareholders of Challenge

“One cannot be satisfied when reporting a significant fall in profit. However, this year's result was better than might have been expected considering the general economic recession and the severe inflationary pressure on costs,” Mr R. R. Trotter says in the “chairman's letter to shareholders” in the Challenge annual report.

i The profit was achieved despite the very serious fall in 1 meat and wool prices, which It resulted in a drop of 24.7 per t (cent to $388.6m in the turn- ’ lover of the largest subsidiary, I Wrightson NMA, Mr Trotter I Isays. < The manufacturing, retail i finance, and property development sectors of the cor-|t iporation made a strong con-Il ; tribution to over-all results. The net profits of Mac-, c i Ewans Machinery, D. H. < Davies. Electric Refrigeration, j (Land Projects. Challenge j Securities all showed ini creases on the previous year. - and the results of Morrison j. (Industries, Wintest land Rockgas were close toi; ilast year’s. The extremely difficult economic conditions in Australia I affected the reults of the two (Australian subsidiaries. Scott s ’Bonnar and Wright Stephen- c Ison and Company. 8 f Manufacturing t Challenge Securities, pro- j duced exceptional results in * this, its first full year. The * range of activities of this ' merchant banking subsidiary will be increased this year. The acquisition of D. H. I Davies and Company, is al- 6 ready proving its worth. A r major factory extension has ' ’enabled the transfer of the f pump manufacturing opera- 1 Iti.ons of MacEwans s : Machinery from its adjacent jsite. r

The combined venture wi result in the most moder and efficient complex of it type of New Zealand. M Trotter says. The group’s policy ha been one of rounding-ou and developing areas of exis ing expertise. To this end the corporatio acquired its interest in Camf bell Motors. The acquisition was a log cal development of th group’s interest in the mote industry which is its thir largest area of investment. The manufacturing secto is now the second larges area of activity, and thus ha been expanded significant! in the last two years.' Rural activities Wrightson NMA ha adopted a programm of reorganisation, an a great deal of progres has been made. Restructurin to achieve increased special! sation has continued particu larly in its national rea estate network, and in it wholesale wine and spirit activities. To reduce costs, the com pany has eliminated unneces sary duplication of service b representatives. This has in volved reorganisation of in dividual territories, improv ing procedures and intensiv staff training. The company improved it market share in the rurs

Il.sector this year, and is in a n | strong position with an exSicellent staff'. We are confirident that the streamlining of (Services and improved siefficiency will result in a t.j further increase in turnover ■-land profitability, Mr Trotter i says. n During the year. Wrightson >-:NMA acquired a 35 per cent I interest in A.N.Z.D.E.C., a i_ I leading New Zealand firm of e agricultural consultants, r I which is conducting negotiations for work-in many marts of the world, particularly in Asia and the j Middle East. Wrightson NMA continued ‘o support its farmer clients, throughout these difficult! times. Only through the very! übstantial financial re-; • sources of the group were I s| levels of lending sustained, in e ; the face of the continuing i jrosion of farmers’ deposits' s ind credit balances. ? It is questionable whether • Inance will be available at - he same levels as in the past 1 f current trends continue. s The provision of further s long-term funds from theinstitutions and the- . Rural Bank is essential to im-i .prove farmer confidence and! capacity, Mr! Trotter says. Fall in incomes E ; We are expecting some im-l orovement in the rural sector' si text year, but it is clear this b vill not be sufficient-to re"i store farmer confidence and; iensure increased production.; 1; Devaluation and the announced floor prices for meat land wool can only be of limited and short-term significance. In the current inflationary conditions the squeeze of costs and prices has almost eliminated the farmer’s net i income. This will result in a continued fall in agricultural in-i vestment and production! ‘which will finally affect the! whole community, which unj til now has hardly been' touched by the current reces-h ! s ’ on - Mr Trotter says.