Firms reducing investment spending
PA Wellington! Many clients of UDC Group Holdings, Ltd, were postponing capital expenditure, and some were substantially reducing stock, the chairman (Sir Clifford Plimmer) said at the annual meeting. The Budget provided additional incentives for the export sector. industry development, and agriculture, but it was apparent that monetary restrictions would continue to affect many businesses.
The Budget also mentioned that the economic outlook was uncertain, and no short-term solutions of the country’s problems could be seen. "I believe that there is an air of nervousness in the business sector as the general economic outlook remains in the doldrums, with continuing inflation, and the ikelihood of further balance-of-payments problems,” Sir Clifford Plimmer said.
Trading by UDC to date had been dominated by high interest rates, especially for short-term money. ‘‘The abnormally high rates for short-term money have not helped fund-raising for longer terms, as manyinvestors have been tempted into placing their money at high rates in the short-term money-market, instead of investing for longer terms. “It is pleasing to note that there has been a reduction in short-term interest rates during the last few weeks, and it is hoped that this trend will continue,” he said. The group’s profit was ahead of that for the comparable period of last year. However, the future growth of the company depended on a continuing steady growth in deposits, which under today’s conditions could be difficult to maintain. The rise in interest rates on Government and local authority sector securities had brought them more into line with market conditions, but those groups which were required to hold statutory holdings in Government
stock could face substantial book-losses as a result of the increases.
The greater freedom given to savings banks in setting interest rates on investment accounts and term deposits would undoubtedly mean increased competition for finance houses, as would infla t i o n-adjusted savings bonds. Sir Clifford Plimmer said.
He applauded the Government’s decision to introduce a Credit Contracts Bill this year, to replace the Moneylenders Act.
The planned Securities Bill to control fund-raising from the public, should cover all seekers of money, including the Post Office, he said.
A committee of the ooard had reached the conclusion that shareholders would be better served by keeping the share premium account available to make bonusissues of shares. It is believed that it was
not good policy to pay out cash in relatively small sums in this way. More tangible benefits accrued to shareholders who receive a bonus issue. However, at present the board had no proposal to make a bonus issue, the meeting was told.
Shareholders re-elected five directors — Messrs A. L. Carpenter. K. E. Hill, C. I. Patterson. J. B. Stevenson, and T. M. Williamson.
The UDC group had received a “very valuable insight” into the collapse of the Securitibank Group, said a director. Mr Patterson.
He had been appointed convenor of the committee of accountants and lawyers set up by the Government, to advise on reforms to the law as a result of the collapse of the group.
Mr P. Francis, of the group's merchant bank division had also served on the committee representing New Zealand’s merchant banks.
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Press, 4 August 1977, Page 20
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529Firms reducing investment spending Press, 4 August 1977, Page 20
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