‘Loss exceptional’

Press, 12 November 1981, Page 21

‘Loss exceptional’

PA Wellington A one million dollar profit in the 1980 12 months, which turned into a $649,000 loss in the 15 months to June 30 this year, has been described in the annual report of Dalhoff and King Holdings, Ltd, as “exceptional" by the chairman (Mr A. Robb). The directors are satisfied that the operating loss for the (15 month) period is exceptional, and consider they are justified in recommending payment of a final dividend.” he says. The “exceptional” circumstances were mainly caused by the high interest rates which occurred during the period, as much of the company’s borrowing is in U.S. currency with interest linked to the U.S. prime rate (which went as high as 21 per cent). “The continuing devaluation of our own currency excerbated the situation even further, resulting in an increase in borrowing costs

from $1,702,000 to $3,279,000 (equivalent to $2,623,000 annually). The report says that because of the incompatibility of high gearing with such conditions, steps were taken to correct the situation by realising assets which were not returning an acceptable earning rate. These included the lands and forests in the Marlborough Sounds (sold for $l.l million) and the aviation division (sold to Motor Holdings — realised assets of more than $6 million). The agreed settlement date for this sale was October 30, 1981. (This division was depressed for much of the period, with aircraft sales and service income being $3 million lower.) The Taieri floods halted all output at the Dunedin aviation branch for almost three months, the report notes. “These two moves will provide the company with

funds to reduce borrowing substantially and save the very high interest costs of servicing it, and the high gearing of borrowing to shareholders’ funds will show a much needed improvement in the accounts,” said Mr Gordon Robb. The aviation buildings have been retained for leaseback purposes, providing a contribution to the property revaluation reserve of $408,000 which, being unrealised could not be included in the income statement and retained earnings for the period. Conservative values applied to used vehicle and equipment parts, has depressed the current results also, but this is expected to give a sounder basis for the future, the report notes. All departments equalled or bettered last year’s turnover except the aviation division.