Commerical O’Brien recovers costs

Press, 15 November 1977, Page 24

Commerical O’Brien recovers costs

M. O’Brien and Company,! I Ltd, did not escape the ef- 1 ; fects of inflation, and much? 'of the increase in turnovers came from the recovery of 1 i rising costs in materials, labour and expenses, says]' the chairman (Mr G. W. I 1 Hunt) in the annual report. I i In the year to June 30, thep cost of living index rose 15.6 per cent, and the com-'i panx experienced increases ] ; in leather up 14 per cent,: female wages up 17 per.i cent, a slightly lower rise 1 for male wages, and freight i up 11 per cent. In addition:! there was considerable in-;s creases in bank and finance > charges, he says. 1 “Because of the Govern- ! i ment’s price freeze and keen: i competition in a declining if market, the group was 1 unable to fully recover all s the cost increases it had to ! < bear. (

“Our retail customers I were under the increasing! strain of inflation to finance! purchases during the year. “In the final six months! they were considerably! affected by the downturn in] the economy. This markedly reduced orders for men’s footwear,’’ Mr Hunt says. Added to this a rapidly improved material supply

boosted stocks to a high ] level and strained the com- ! pany’s financial resources, : which was difficult to rem- ' edy. "Arising from the continued high inflation we share with the great majoriity of New Zealand manufacturers the awesome pros- , pects of insufficient profit 'retention after taxes to finance trading. “The debilitating effects of Government taxes continue to push New Zealand manufacturers further into borrowing with no end in sight ** The addition of $121,2501 to funds from the preferencel issue in January, 1977. was) the first issue of paid shares since a small one in 1967. Ini the ten years since 1967] sales have risen 26.8 per! cent to 53.2 M indicating] changes that have occurred]

i in financing the business, he : says. i Strong efforts have been | made to re-establish trade with Australia, and there are • promising signs of success. “While recent tinkering by Governments on both sides may upset such efforts, we will continue to push hard to achieve success so that we may gain the funds derived from taxation incentives for improved profit | retention. “Sales of “Adidas” sports; I shoe • continue with strong i I demand. Production of new: |road shoes has progressed well, though late supply of I side moulds from Europe:

'prevented the introduction of an important range planned for sale in MayJune, 1977,” he says. The newly acquired Dalgety Street factory is now working successfully as a self-contained unit manufacturing “Adidas” road shoes and sports bags. During the year the company gained for the first time the full benefit of commissions earned on special imported “Adidas” sports footwear. As announced, group net trading profit fell 5.8 per (cent to $120,303 in the year to June 30, on sales which rose 33.2 per cent to $3.2M. | The profit was after providing $3306 more for depre- ] elation at $57,341; and $19,016 more for taxation at ! $101,714. Interest payments rose $28,272 to $45,682'. ■ An unchanged recom-

mended annual dividend of 5c a share (10 per cent) takes $32,875 and is covered 3.4 times by the profit. However, 1.5 c a share (3 per cent) of the dividend is taxfree from capital reserves, compared with the whole of the dividend last year. Shareholders’ funds rose $198.82« to $1,055,880, including $121,250 from an issue of 12 per cent 50c convertible preference shares. The earning rate on average ordinary capital fell from 17 • per cent to 13.5 per cent, and on capital from 38.8 per cent to 34.4 per cent. Working capital rose $99,929 to $619,213, but the current ratio fell from ■ 2.3 to 1.9:1. The shares last sold for 53c for a dividend yield of 9.4 per cent and an earnings yield of 32 per cent. The price-earnings ratio was 3.1.