Allied Press believes some Budget comments

Press, 2 August 1977, Page 20

Allied Press believes some Budget comments

The Government’s apparent lack of concern at the rate of inflation was criticised by the chairman of directors of Allied Press, Ltd, (Mr C. L. Nees) at the company’s annual meeting in Dunedin. Mr Nees said it was “both interesting and disturbing” to find that in so many analyses of the budget, inferences were being drawn that the Government appeared to be learning to live with inflation, rather than fighting it. “There are many areas of the community which cannot live with inflation," he said.

“While I can see commendable intentions on in-flation-proofing by the Government there are so many areas that cannot be in-flation-proofed, that this could be another slippery road to disaster. “For many firms, survival is now a major issue. In some areas of the trading community, even well-con-trolled expenses have increased by 15 to 17.5 per cent. In "many cases, the firms have neither the retained profits to nourish their enterprise at this level, nor access to borrowed money or equity capital to make up the balance. “Most reasonably successful firms had inbuilt resources to cope with the first year of galloping inflation. In the second year they could possibly borrow, but in the third they would need more equity capital to restore their ratios,” he said. “But are shareholders going to be forthcoming, with today’s conditions and restrictions, and what are the alternatives?” he asked. Many companies were now facing these problems and some had to decide whether to retrench and limit their activities to the shrinking monetary resources. “From our point of view, what will this do to their advertising allocation, which is our life blood, or in the broader scene, what will it

do to provide jobs, to our community, and our standard of living? “Cash flow from depreciation is usually fully committed to the minimum capital expenditure necessary, just to stand still, and the inflation factor on stocks and debtors alone is so often more than the retained profit, even in our most successful companies,” he said.

“While we have had a moderately successful year and our stocks and debtors are a smaller percentage of the total than with most trading companies, the inflation factor exceeds our retention also. “We are mindful of this problem for Allied Press, especially as it is compounded for us at this early stage of the merger, by increased need of capital expenditure — itself a great eroder of cash.

“Whichever way we lok at it, liquidity is going to need very careful attention in the months ahead.” Mr Nees referred to the problems of the Tasman Pulp and Paper Company, Ltd, and said this could mean a very substantial increase in the cost of newsprint which would further affect our liquidity and have a very serious effect on profit expectation,” he said. Messrs D. S. Braithwaite, V. G. Cavanagh and C. L. Nees were re-elected to the board of directors.