‘New look’ John Burns wins approval

Press, 22 October 1980, Page 25

‘New look’ John Burns wins approval

Shareholders had before them the “first fruits” of the new policy of John Bums and Company, Ltd, of specialising in industry segments, increasing market share, more aggressive marketing, and the development of a closer relationship with suppliers and customers, the annual meeting last week was told by the chairman (Mr G. R. Brabant). “In the longer term, the company has been looking for opportunities for diversification to be developed and exploited in the 1980 s and 19905, and many projects of this nature have been under study,” he said. Mr Brabant welcomed to the group the new subsidiary, Bums and Ferrall, Ltd. “They have two factories in Auckland, and one in Christchurch, where they manufacture a wide range of products in stainless steel and other metals, and without doubt are the industry leaders, and also good profit earners,” he said. “They have the capacity for expansion and won an export award in 1978 for their sizeable export business to Australia and the Pacific basin. The Burns and Ferrall companies will thus integrate very satisfactorily into the new and revitalised lohn Bums Group and the merger, which will be effective as soon as it is approved by the Examiner of Commercial Practices, will be financed by cash payments to Burns and Ferrall Holdings, Ltd, over an agreed period. “The boards of both companies see this merger as a very desirable development which will broaden the base of operations and lead to in-

creased opportunities both domestically and in export markets.

Mr Brabant congratulated the group management team and all staff on the turnaround from a loss of $4OOO in 1979 to a profit of $804,000 in 1980. “That profit was actually 7.4 per cent below the 1979/80 budget but as divisional management (including our new subsidiaries) are budgeting for substantial profit increases in 1980/81, the directors are confident of another very satisfactory year, unless general economic circum, stances outside our control affect the position; profits for the three months since June 1980 are right on the seasonally-phased budget for this year, although sales are slightly below budget” “However, by the end of our centenary year, 1981/82, it appears that the $1 million tax savings from losses may have been absorbed, and to maintain the impetus of further profit increases in future years will be a real challenge to management. “Other items of note in the accounts are that revaluation reserves still exceed $2.2 million and unappropriated profits which are distributed to shareholders free of tax, almost reached $1.4 million. Debtors are reduced 9 per cent on 1979, and the 5 per cent decrease in cost of inventories is pleasing. “An amount of about $1 million remains at the credit of the special provision made in 1979 for costs and losses on reconstruction. It is unlikely that any sizeable amount will be required for further reorganisation, but

the setting aside of this amount in 1979 has enabled shareholders to measure immediately the performance of the restructured divisions. The 90 shareholders present voted unanimously in favour of the director’s widely-discussed bonus share issue proposal. Last month the company announced that it intended recommending to shareholders that they forego the final “reconstruction” cash payment of 75c a share, in favour of a bonus issue of three new ordinary shares for each four shares held. Mr Brabant said that in the board’s view the cash needs of the new investment opportunities, and the profit growth possibilities, were in the long term more advantageous to shareholders. “Where it is unfortunately necessary to. choose between short term and long term considerations we believe we must act for the long term benefits of both our shareholders and our loyal staff.” “I suggest that those who have been shareholders for some years are now better off than if they had accepted the take-over offer in March, 1979, of 175 c for each ordinary share.” He added that the 50c share is still worth around 170 c, on the market, and shareholders have had 100 c per share refunded in cash. They will now have received an equivalent of 112 c more than if they had accepted the take-over offer for an ordinary share with a market price immediately before the offer of 158 c — an increase in share value of about 70 per cent in 18 months.