Mount Cook tackles costs

Press, 23 September 1980, Page 18

Mount Cook tackles costs

The Mount Cook Group, Ltd, is tackling the problems of marketing and cost control, and it is hoped that some of the measures and innovations introduced in the next few months will bring improved results, according to the annual report. In his chairman’s report, the late Sir Henry Wigley said that in recent months a number of tourist organisations had complained about the decline in the growth of the tourist industry, and there was no doubt that some, particularly those that had relied on the Australian coach tour market, had suffered. “However, firms like Mount Cook, which have been marketing strongly in Japan, Taiwan, Singapore, and North America have shown increases, which but for the much higher fuel and tax payments, would have resulted in a record profit. “For the second year in succession Mount Cook suffered a relatively indifferent snow season at Coronet Peak, with the consequent impact on revenue from the skifield and the adverse flow-on effect to the air and road services feeding this area.”

After the previous year’s conditions, Australian skiers were even more chary, and it made the marketing job more difficult, Sir Henry said. The impact on revenue and cash flow was immediate and although by the half-year we had recovered, it put strains on short-term financing which proved expensive. Rising fuel prices accounted for the major part of increased operating costs. In the main airline, the general aviation division, coachlines and freightlines activities alone, expenditure on fuel rose 108.8 per cent, or $1,642,166. Actual consumption, because of extra hours flown and kilometres run, rose only 17.5 per cent. “Because of the delays in obtaining fuel-related fare increases, and when these were obtained, putting them into effect, it is estimated that the main airline alone was forced to absorb more than $600,000 in extra fuel costs.” Mount Cook was heavily involved in earnings overseas exchange, and during the past year was responsible for bringing in a sum

exceeding $lO million. “In the 1980-81 year, the introduction of exchange earning incentives by . the Government will result in a substantial effect on the tax pay r able, and on our end of year profit,” Sir Henry said. “The prospects for the current year look reasonably’ good as far as overseas traffic is concerned, but somewhat gloomy for the domestic market.”. It seemed that since the last round of fare increases had occurred, there had been a fall in domestic demand. “It will take some time for the current levels to be accepted by the New Zealand travelling public and the Government was to reconsider the imposition of the 5 per cent revenue tax on airline travel. “This tax can only have the effect of making us less competitive as a holiday destination for New Zealanders compared with overseas destinations,” Sir Henry said. The Mount Cook Group annual report was compiled before the death of Sir Henry last week, and a tribute is paid to him in a

special. insert with the report. The total group net profit rose 11 per cent 'to $1,130,917 in the year to May 31, on gross revenue 39.1 per cent higher at $32,370,061. The profit was after providing $196,342 less for tax at $330,752, including deferred tax up $32,232 to $42,646. Depreciation rose $157,386 to $1,240,135,... Operating expenses rose 42.3 per cent to S2S.IM. A steady annual dividend of He a share (He share) is recommended. The dividend absorbs $497,563, and is covered 2.3 times by the profit. Shareholders’ funds rose $3,079,711 to $13,136,767. including ordinary capital up $2,160,082 to $6,224,145 after the issuing of 1,010,848 shares to The New Zealand Insurance Company, Ltd, and 1,149,234 shares after the conversion of debentures on a one-for-one basis, including shares arising from the bonus issue. Neither the shares issued to New Zealand Insurance nor those arising from the debenture conversion are eligible for the annual dividend.