Deanes chairman critical of dole payments

Press, 17 June 1982, Page 23

Deanes chairman critical of dole payments

The attractiveness of the unemployment benefit and other social welfare payments did little to encourage many jobless to actively seek employment, said the chairman of Deanes Indsutries. Ltd (Mr T. I. Perry) in the company’s annual report.

Until the level of these payments reflected some greater degree of hardship, the situation would not improve. he said. In the previous year, when the demand for apparel was less than buoyant. Deanes had followed a policy of reducing direct labour by not replacing staff. “The lower level of productive capacity that resulted greatly assisted liquidity levels at that time, but created a low base upon which to rebuild output after the significant increase in demand that took place in the second half of 1981," he said.

As a result it had not been possible for production to keep pace with demand, affecting the financial performance of the group during the last financial vear.

The group's performance did not stand or fall on that problem alone. Mr Perry said.

There had been a significant upheaval in Deanes Industries because of the widespread corporate restructuring during 1980-1981. “In hindsight. I must now state that the group has taken much longer to ‘shake down’ into its new organisation than was originally anticipated. Significant problems have arisen in three areas. The provision of information from the recently installed "in-house” computer had not proceeded as was originally programmed, and there was still a requirement for further systems. Considerable costs had also been incurred in alter-

ing the product mix in workrooms. and the re-organisa-tion of the group had left Farage International Marketing. Ltd. of Auckland with a short-term loss. Mr Perry said.

Farage had inherited the “newer" fashion-oriented products through which it was beginning to establish a reputation, but had yet to exploit the full potential of the lines. Consequently, its performance had adversely affected the over-all profit of Deanes, and it would require further support “in the current period before it achieves an acceptable return on input." Mr Perry said.

In spite of the likelihood of a slowing up of real economic activity in the remainder of 1982. the demand for the products of Deanes would remain healthv.

The demand' will provide a solid platform to expand production "with some degree of confidence.” . However, such were the problems associated with expanding the group’s output that it was unlikely that real signs of improvement would be apparent before the second half of 1982, he said. Mr Perry said he was mindful of' his comments made in the half-yearly report that he had seen in the favourable economic conditions of the first six months, better trading for the group in the second half. Although this revival, associated with an election year, had stimulated demand, the group was unable to achieve ment which would normally be reported under such conditions. Closer Economic Relations with Australia have an air of inevitability about that which requires the directors to look at the impact that such free trade measures will have on Deanes. "We must be aware of the potential benefits that unim-

paired access to Australia customers will offer. Equally, however, as an industry, we must be prepared for the likely impact on the domestic market that free competition from Australian will bring." The present exchange rate of the Australian and New Zealand currencies provided this country’s manufacturers with an effective level of protection from apparel groups across the Tasman, plus profitable sales of products could be made to Australia duty free, and under unlimited access.

However, relying on favourable exchange rates and generous Government export tax incentives were tenuous grounds for both protection from imports and of the export market.

The Deanes directors, through management, were monitoring developments, and where necessary, were making representations to the Government through industry groups, Mr Perry said.

As reported, the group net profit fell 38.3 per cent to $510,417 in the year to February 28.

The group earned export credits down $82,164 at $83,358. and after providing $44,461 more for depreciation at $226,853. A recommended final dividend of 5c a share gives an unchanged annual rate of 10c a share (10 per cent). The dividend requirement is $224,568, and it is covered 2.0 times by the profit after allowing for the preference dividend. Shareholders' funds rose $318,651 to $8,946,020. including ordinary capital up $64,516 to $2,245,679 after the conversion of the unsecured convertible notes on July 1.

Working capital fell $177,196 to $1,995,300, and the current ratio improved from 31.1 to 3.5 to one.