Challenge Corp. New Zealand’s first billion dollar company

Press, 29 September 1979, Page 19

Challenge Corp. New Zealand’s first billion dollar company

I Challenge Corporation,: • Ltd, has become the first' ; New Zealand billion-dollar » company. Its turnover * reached $lOl6 million in the ( year ended June 30 and if wool handled on behalf of J clients is included — as it is ■ by most stock and station » agents — the figure rises to I $llBB million. ‘ Most of this turnover ♦ came from the rural sector, J where turnover amounted to r $790 million, or $935 million » if again wool handled on beI half of clients is included. ’Sales as agent were $570 p million, and sales as principal (trading, motors, and I* manufacturing) were $447 f , million. As previously reported, JA the net profit derived from {.ail this activity was $25.1 million. Income tax was $9.3 >• million, and net profit, after all allowances, was $16.0 million. However, the inflation accounts which Challenge again has included in the re'port, shows that at current costs profit before tax was $B.O million only — so that, * after the $9.3 million tax, in ; real terms a loss of $1.3 million was incurred. « . • Many New Zealand companies, of course, are in real I

terms barely profitable. It, only goes to show the per-! nicious effects of double-j digit inflation, and how much tax is paid on illusory profits. Be that as it may, Challenge’s result is a consid-i erable improvement on the previous result. It represents a return of 12.3 per cent on shareholders’ funds written up to current market value, and earnings of 52.7 c a share. As reported, the dividend has been increased from 12.5 c to 15c a share and has again been paid free of tax from realised capital profits. Taking account of the effect of the bonus issue, it represents an increase of 32 per cent in total dividend paid. Most realised capital profits have now- been distributed and further dividends from this source will; depend on future realisations, say’s the chairman (Mr R. R. Trotter) in his report. Referring to prospects for the coming year, Mr Trotter says that the outlook for the first half of the year is good, “but we have more uncertainty about the latter half and expect some reistraint on consumer demand

>and on the growth of liquid- ;• ity.” He also expects initiation to be a problem. Commenting on the longer term, Mr Trotter says:— “We are concerned at the pessimism expressed in isome quarters as to the i economic future of New ; Zealand. We have uni bounded optimism about the i medium and longer term fut- , ure provided: i “We are prepared to build on the inherent strengths we I have; i “We have the courage to i save for and invest in the : opportunities that are avaiL . able; “We are prepared to be ■ more flexible in our struc- ■ ture and the organisation of people in government, ■ unions and business; “And we are prepared to l reward risk-taking and I enterprise.

“We intend to develop; Challenge in those areas! .where New Zealand has a ! [competitive advantage and; where we have the opportunity of reaching a position of leadership. We will prune or divest in areas where this is not the case. At the present time we are actively pursuing investment possibilities in the fields of agriculture, forestry, energy and fishing. “if we are to undertake ( these — and we believe Newt Zealand companies should — then we will need the support of our shareholders and an environment which encourages risk-taking and recognises the need for profitability. Either New Zealand companies accept the | challenge of undertaking [ projects of an international ; scale or we leave the field Ito the overseas investor.