Commercial Haywrights will move carefully

Press, 21 November 1979, Page 21

Commercial Haywrights will move carefully

Despite the substantial provisions that have been made, the coming year will be difficult for Haywrights, Ltd, the chairman (Mr H. W. Revell) says in the company’s annual report. Amalgamation decisions between Haywrights and N.Z. Farmers Co-op. will have to be thoroughly researched and taken with great care, Mr Revell — appointed after the resignation of Mr R. R. Trotter — says. During November the management committees will develop proposals detailing the many steps to be taken and it is hoped that a comprehensive report will be available in time for the annual meeting of Haywrights on December 14. Referring to the loss of the past year, Mr Revell says: “In reporting to the shareholders this year, there is a clear responsibility to : adequately canvass the events (of the past 12 months before 1 making any observations about the company’s prospects for the future. ‘The major decision taken was to discontinue trading in the North Island. The company’s presence there arose from the 1969 merger with Wright Stephenson and the subsequent entries into the Auckland market, firstly in 1971 with two new stores and then in 1976 by the acquisition of the Milne’s stores from Fletcher Holdings, Ltd. “It was those latter decisions that proved to be ■so costly although it would

be unfair to blame the Auckland developments or the mergers alone for the

reverses that the company has experienced. Many of; the stores acquired were ! profitable and, in particular, I Nelson and Blenheim have! been very successful, and! results have measured up to! the performance of other South Island stores. Without! the problems in Auckland,! most other North Island! stores would have pros-; pered. “The decision to withdraw! from the North Island arose from falling profitability as losses in Auckland mounted and liquidity suffered. The directors could have decided to withdraw onlv from Auckland but considered the timing was opportune to sell the other stores in order that, on completion, we would have a sound and successful company with funds for consolidation in the South. “We believe this decision was the correct one. Although the decision was costly, most stores have been sold as going concerns and with minimum impact on the staff. Relationships with unions have been good throughout and we consider that they adopted a realistic and fair! position, and goodwill has been maintained on both sides. “At this stage the stores at St Lukes. Manukau and Masterton remain unsold. Efforts will continue to sell them as going concerns. The Downtown store since balance date has been successfully converted into the Downtown Square Shopping Centre and we retain a total of only 3500 sq. ft in two areas which have not yet been leased. Mr Revell says that the

directors have chosen to make full provision in this year’s accounts for all known and expected losses on withdrawal; they are expected to be substantial, but benefits will be seen in future years. As reported, the company’s loss for the year ended July 31 was $1,660,881, after making a provision of $2.3M for future costs associated with Haywrights’ total withdrawal from the North Island. Sales for the year totalled $54.7M compared with $51.7M in the previous year. All stores did not trade for the full 12 months so that a true comparison cannot be made. South Island store, turnover was $28.3M, an increase of 17.7 per cent. For most of the year, trading was buoyant, with some peaks following Government action in several areas, including additional sales tax on a wide range of products. The trading profit after deducting the realised North Island withdrawal costs of $648,750 was $324,242, including the share of profits from associated companies. During the year capital profits totalling $314,877 have arisen from the disposal of assets in the North Island, including the Napier building. Mr Revell says that the directors are confident that the provision of $2.3M in respect of North Island stores unsold at balance date, will be adequate, and that this will substantially reduce future taxation liability. “The South Island stores again provided a substantial profit which compares favourably with industry standards on the basis of profit to sales. With the North Island prob-

lenis now eliminated or adequately provided for, this South Island performance will provide a strong basis for a stable and profitable future. The balance sheet shows significant changes from last year but does not fully reflect the position that will apply after withdrawal has been completed. At balance date sales of only some stores had been concluded but a number of other sales had been made for settlement in the new financial year and will be reflected in the 1980 balance sheet. Total assets reduced by 53.5 M, current liabilities by 81.5 M, fixed term liabilities by 8671,000; a reduction of 82.4 M in shareholders’ funds arose from losses and provisions. The ratio of current assets to current liabilities remained at 1.6:1, but however, asset backing dropped to 128 c a share. When reconstruction is completed there will be a significant improvement in the current ratio and with the expectation of a good lift in the level of retained profits in the ensuing year, asset backing will rise and will be represented by assets on which good profits are being made, Mr Revell says. “The over-all result for the year does not justify the payment of a final dividend but the directors believe that the steps that have now’ been taken will lead to more promising trading and a stable dividend policy.” Shareholders’ discount on purchases will be continued and paid for the year on December. 14.