Fabiola still Deanes main concern

Press, 19 June 1980, Page 18

Fabiola still Deanes main concern

The lack of profitability of Fabiola Fashions, Ltd, and its effect on Deanes Industries Ltd, is still the major concern of the directors, according to the chairman (Mr T. I. Perry) in the annual report. The pre-tax loss recorded by Fabiola was $950,460 — a considerable, but still insufficient rate of reduction against the $774,339 pre-tax loss recorded in the six months ownership last year, he said.

"In spite of the efforts of a largely new management team, Fabiola has not yet achieved the market penetration required. "The sales performance reported as being 15 per cent above budget at the last annual meeting (June 29) rapidly fell away, and only 73 per cent of the budgeted annual target was achieved,” Mr Perry said. The loss incurred by Action Apparel, Ltd, was primarily because of the development, introduction, and marketing of' an extended market range and the associated costs involved. “Recourse to the overworked phrases describing today’s trading climate does nothing to advise or inform shareholders, and I am mindful that Deanes is trading in the same domestic economy as our competitors and other manufacturers,” he said.

Major rationalisation, restructuring, and consolidation were being considered with the aim of giving a better service to customers, reducing the total stock holding, and improving internal efficiency. Efforts were being maintained to regain lost export sales and introduce new products to the market. However, New Zealand’s increasing cost structure, together with shipping and air freight increases, made this task exceedingly difficult, Mr Perry said. “Domestic demand _ is weak, and .with rapidly increasing prices for food and energy, and inflation running in excess of 16 per cent, the battle for what is left of the consumer dollar will continue.” Because of the number of factors outside the control of Deanes, Mr Perry said the

directors were unwilling to predict the result of the current financial year. Given reasonable trading and the benefits from rationalisation, a reasonable result was contemplated, he said. Government policy together with the erosion of the New Zealand dollar had largely impaired the ability of Deanes Industries to export .to the Australian market Mr Perry said "The Government’s seeming acceptance of the internally created element of our crippling inflation rate, which is fuelled by a continual escalation of wages and salaries with no relation to productivity, benefits nobody but the tax man.”.

Mr Perry said that the full impact of the Industry Development Commission report, rightfully points to the survival of only efficient manufacturers and Deanes must ensure that it remains in that category. ’ As announced, group net

profit declined from $1,098,804 to $785,987, after a tax credit of $55,739, and providing $54,692 more for depreciation at $201,166. The interest charge on debenture and fixed loans fell $38,650 to $240,741. The steady dividend of 10c a share (10 per cent) is covered 3.3 times by the profit. The earning rate on shareholders’ funds drops from 14.6 to 9.7 per cent. Working capital rose from SS.OM to $5.3M; the current ratio declined from 2.2 to 2.0:1. Shareholders’ - equity fell from 49.4 per cent; the funds of SB.IM are comprised of $2.7M capital, $2.2M capital reserves, and $3.5M revenue reserves —• of which intangibles of $297,462 must be deducted. The shares last sold at 150 c, for a dividend yield of 6.7 per cent and an earnings yield of 22.2 per cent. The price-earnings ratio is 4.5, and the net tangible asset backing 348 c a 100 c share.