Extra funds aid A. Beaven

Press, 20 October 1976, Page 22

Extra funds aid A. Beaven

The level of trading of Andrews and Beaven, Ltd, in the year to June 30, was achieved only by the infusion of additional funds from the two-for-nine cash issue of ordinary shares and the SI.IM raised by the issue of secured convertible debenture stock, says the chairman (Mr R. H. Clark) in the annual report.

Business remained buoyant during the year under review. External sales rose $36.7M and the downward profit trend which was apparent half-way through the year was corrected, he says. The issue of debenture stock, together with the conversion of preference shares to ordinary shares on a 11-to-20 basis, completed the financial restructuring which began in 1972. “Nevertheless, the combination of high taxation rates and the continuing high level of inflation limited some development because of the need to control capital outflow. “While it is hoped that the measures recently introduced by the Government will prove successful at controlling inflation, there is an equally urgent need for a review of company taxation to give recognition to the implications of inflation accounting. “Until such recognition is given, company taxation remains too high to permit retained profits to be held at an adequate level,” Mr Clark says. This is the fourth year of sustained growth after the restructuring of a number of major trading divisions. Irrespective of the need for current consolidation, the group has not dropped plans for future growth, he says. The Buchanan’s foundry in Maces Road, Christchurch, is expected to go into production towards the end of the present calendar year, while

the old site at St Asaph Street, was placed on the market and sold at a “very acceptable figure,” Don Agencies, Ltd, brake material specialists, which was acquired during the year, has provided Andrews and Beaven with a manufacturing and distribution outlet which will prove a useful adjunct to the automotive and merchandising division and will work in conjunction with the friction material bonding plants, Mr Clark says.

Agreement has also been reached in principal to restructure Automotive Products (N.Z.), Ltd, a subsidiary of Automotive Products, Ltd, a major producer of automotive components in the United Kingdom, which will result in Andrews and Beaven acquiring a major shareholding in the subsidiary. A major policy decision was made to withdraw from engine building in the North Island, and the equipment from the two plants in Wiri and Palmerston North were used to strengthen the group’s plants in the South Island. In addition a new plant was opened in Timaru. Because of the increasing popularity in Fiat tractors and New Holland harvesting equipment, the branch network of the agricultural division had to be’ strengthened and expanded.. The materials handling division produced the highest number of forklifts ever, and was also successful in obtaining orders for more than 20 van carriers, worth in excess of $200,000 each, for container ports in New Zealand.

“The development of irrigation equipment has been on a similarly spectacular scale, and to allow the division to concentrate on irrigation plant, the industrial pumping section was transferred to the industrial supplies division,” he says. The transmission division acquired the franchise for David Brown Gear Industries, Ltd, in the U.K. — one of the world’s leading suppliers of industrial transmission components — while the industrial service division and the automotive and merchandising division continued their sales growth. But, Mr Clark says, the year had its full quota of problems. "Industrial unrest, some of it quite unnecessary, created some disturbance and the continuing threat of more drastic action was evan

more disturbing. “Although the directors can understand toe Government’s desire to strengthen the economy by imposing the Import deposit scheme, they were somewhat disconcerted by the inclusion of agricultural tractors into the selection of goods to which the scheme applied,” Mr Clark says. As announced, group net profit rose 12.7 per cent to $1,371,664 in the year to June 30; net share of profit in associate company, of and depreciation and taxation overprovided, at $62,810, raise the profit on an equity basis to $1,414,878. The result was after providing $62,302 more for depreciation at $471,472, $143,504 more for interest on fixed loans at $664,922, $284,493 more for currency variation at $307,594, and $258,082 more for taxation

at $1,220,068, The earning rate on average shareholders’ funds falls from 11.5 to 10.4 per cent. The unchanged dividend of 11 per cent is 2.2 times covered by the profit.

Net current assets increased from $10.4M to $l3 JM; the current ratio improved from 2.0 to 2.3:1. Shareholders’ equity improved from 41.9 to 44.9 per cent; the funds — $2.4M higher at $14.4M — are comprised of $6.2M capital, $3.7M capital reserves, and $4.6M revenue reserves. Goodwill on consolidation stands in the books at $131,816. The shares sold yesterday at 130 c, for a dividend yield of 8.5 per cent and an earnings yield of 18.8 per cent. The price-earnings ratio is 5.3 and the net tangible asset backing 233 c a 100 c share.