Freightways sound

Press, 26 November 1980, Page 26

Freightways sound

I Freightways Holdings, Ltd. is budgeting for an improved profit in the current financial year, and earnings have increased by 30 per cent in the first quarter, the , chairman (Mr J. A. Valentine) told shareholders at the -annual meeting.

I He said the improved results are in spite of reduced business during the period, particularly in September when the’movement jof goods was affected by inIdustrial action outside the : company.

The company's first quar ter in the last financial year was marked by major’ industrial unrest, although Mr Valentine reported at” that time that profits were slightly ahead. ! _ A feature of Mr Valen-. tine’s address was an outline of the effect inflation ac-! counting would have on the I results to June 30. ■ One was that the tax pro

..vision, based on historical ■ iaccounting methods. worked lout at an effective rate of 63 {per cent. compared with the ■ normal company rate of 45 •'per cent. ; “From a financing point of view, inflation resulted in a need for additional wording capita! to finance (debtors and stocks and in [increased costs of replacing (fixed assets," Mr Valentine ■said. ’ “Freightways is less afTectf- than most companies {in its need for additional! ifunds arising from inflation.; !A significant proportion of. its operations are service {orientated where stocks are (minima! and where there is I la lesser requirement for ca-; lpit.il assets. I “The over-all financial! effect is significant and' ‘means that the company has! {more funds available for expansion. This aspect gives’ I Freightways a permanent fi-<

I‘nanctttg advantage over I many other companies.” > Mr Valentine said that al- ' though the company sup- ’ (ported the concept of curlrent cost accounting and its i ( undcrlying principles, it had t‘reservations about the ar--ibitrary nature of the calculatjtions used in rhe preparation t of C.C.A. statements. L As announced, the company increased its profit to a ‘record $6.2M and made a . or.e-for-lhree bonus issue. But the restatement of the II figures under C.C.A. shows ■‘the operating surplus for the oyear of $11,251,000 is re- ‘ dueed to $6,472,000 by inflation accounting and, with a ! {steady tax provision of ■{54,445,000 and a provision [for capital maintenance of !$ 1,826,000. leaves a net I (profit after tax of ; $2,600,000. compared with | the actual reported profit of !$5,553.000 arrived at under ihistoric cost methods.