'Retail margins set in 1970’

Press, 19 October 1976, Page 26

'Retail margins set in 1970’

PA Wellington The retail industry .was tied to retail margins set in 1970, says the chairman of James Smith, Ltd (Mr D. A. Smith) in his annual review. This was when costs were vastly different and before the introduction of equal ■pay, the last two stages of which were to be completed this- coming financial year, he says. ? “Three successive Governments have in fact stated that industry generally will be allowed tei recoup extra costs. To date this has not occurred in the retail trade.” Although sales for the group continued their upward trend, the level of profitability continued to cause concern. As reported, group net profit fell 25.2 per cent toi $224,755 in the year to July 19, on turnover ’which increased 1 12.5 per cent to $15.5M. "The decrease in the group’s profit has been directly caused by the initial losses involved in the management of the Maidstone Mall,” Mr Smith says.

“In April it was announced through the stock exchange that the company had acquired all the share capital of Maidstone Development,’ Ltd, the company responsible for the promotion, development and management of the Maidstone Mall in Upper Hutt, where the group has the' lease of a departmental store. “This action, . which had been mutually agreed upon with the previous share-1 holders, had become neces-l sary as the interests they represented were unable to continue.

“The situation resulted in the group having to assume sole responsibility for the considerable costs involved in establishing a major ven-

ture of this nature — all such costs incurred to date have been written off.

“Subsequently, James Smith has concluded an agreement appointing Fletcher Trust and Investment Company, Ltd, as its agents and mall manager. The shopping centres division of the (Fletcher Trust is the largest manager of shopping malls in New Zealand. “The board of directors are confident that this association between the two companies will be of mutual advantage and considerable benefit to the Maidstone Mall,” Mr Smith says. The report shows that the ! company has adopted a change in the accounts to provide depreciation on a “straight-line” basis. To incorporate this change the (.assets have been revalued by $226,074.

Referring to the group’s liquidity, Mr Smith says that

trading stocks and debtors had been closely controlled, and held to an increase of only $250,000. or 5 per cent.

“The ratio of current assets to current liabilities at 3.1 to 1, places the company in a strong position for what, on present indications, could (be a difficult trading year,” Ihe says. “It is not possible to predict the future with any real [confidence in view of the (country’s present economic difficulties, and the action being taken by the Government to depress consumer spending.”

Howe-’er, the company is soundly based, its liquidity situation is strong, and it is thus in a' position to take advantage of improvements in the economy,... The profit was struck after providing $20,629 less for depreciation at $188,240, and $207,115 $30,497 less for taxation at $207,115.

As announced a 16 per cent dividend (8c a share) is being maintained, requiring $lBO,BOO, and covered 1.24 times (1.66 previously). The earning rate on issued capital drops from 26.6 to 19.9 per cent with the ratio on shareholders’ funds being l down from 5 to 3.6 per cent.

At balance date the 50c shares had a net asset backing of 272 c (265 c The consolidated balance sheet as at July 19 shows (shareholders’ funds increased from $5,988,103 to $6,143,989 with issued capital constant at $1,130,000. Term liabilities are up from $2,792,620 to $3,547,716 I while current liabilities are I down from $1,852,224 to 1 $1,649,086. Fixed assets have increased from $6,094,792 to $6,218,286 while investments total $58,800 ($46,840). Current assets have increased from $4,491,315 to $5,063,705 and include stocks up from $3,162,720 to $3,333,528 and debtors up from $1,228,963 to $1,307,510.

Perm. Inv. div steady The Permanent Investment and Loan Association of Canterbury will pay a steady final di idend for the half year to September 1976 of 6c a share (6 per cent) on paid up capital, making 111 per cent, payable on November 23, ex dividend November 11. The unaudited profit is $42,322 — a small increase on the previous year, the directors say.

L and M policy L and M Oil, Ltd will not be making application for licence in Taranaki by the official deadline (October 15) because of unacceptabiljty of Government policy to L and M’s partners. A change in this policy may make late application a possibility. On clarification the directors would consider appropriate action, which might include calling a shareholders meeting, they say.