L.W.R. reserves $5M for reconstruction

Press, 25 September 1980, Page 22

L.W.R. reserves $5M for reconstruction

Lane Walker Rudkin Industries, Ltd, is creating a $5 million reconstruction reserve to meet the expected costs or losses involved in the reconstruction programme, says the chairman (Mr N. H. Rudkin) in the annual report. He says that for some years now the asset backing of Lane Walker Rudkin Industries shares has significantly exceeded the market value of those shares — the difference at time of •writing being about $lO million.

The directors intend that some of that difference should be used to form a $5 million reserve which will be used to write off specific costs arising from the reconstruction proposals. “Reconstruction will inevitably incur one-time costs which have no relevance to the group’s onaoina profitabilty and activities,” he savs.

To “avoid obscuring the strengths of these activities specific reconstruction, costs incurred after June 20 this year will be offset against this reconstruction reserve so that the onaoing profit of the group fairly reflects the mainstream of operations in which the group’s future lies.”'

Mr Rudkin says that' the reconstruction is intended to progressively give rise to a reduced product mix and tc a; reduced level of asset involvement through a concentration on profitable product areas where LWR has the major market share. .

This in turn will involve organisational changes which will make all operating units of the group more independent than they are today.

“We will continue to invest heavily in the ongoing areas to ensure that our plant is the most efficient available and so that we can be increasingly competitive irrespective of changes in the industrial environment. Fabric production remains a major contributor to group profits.” Referring to the recommendations of the Industrial Development Commission on the garment and textile industry, Mr Rudkin says that the Government policies affect the company in two main areas.

“The first is a streamlining of the yarn supply industry which will make our group more effective and competitive. “Secondly, the I.D.C. recommends increased international competition by way of greater apparel imports, the effects of which must reduce the volumes available to the New Zealand appareltextile industry. “It was these policy changes which had prompted the board, to make a further study of all activities with a view to streamlining and eliminating the less competitive so that we . could look to a secure and flourishing future.” . He says that some product areas have not been contributing adequately to profits, and that the company is how committed to a withdrawal from those activities.

The first changes in this direction were made in May, when the independently operated men’s sportswear division was closed. In August and the Hokitika plant was closed because is area of specialisation yielded an inadequate profit margin. Shareholders have been issued with a separate and very detailed report on the reconstruction.

It will return 25c a share capital, increase the specified preference dividend from 12 to -16 per cent, and make a one-for-three bonus issue.

A final dividend of 4.5 c a share on pre-bonus capital will be paid, maintaining last year’s higher rate of 8c per share. The directors expect to maintain this rate on the bonus-increased capital, Mr Rudkin says.