Feltex warns against undue optimism

Press, 11 October 1982, Page 28

Feltex warns against undue optimism

PA Auckland The chairman of Feltex New Zealand. Ltd. Mr H. G. Callam. has warned shareholders not to be too optimistic about the company’s results for the forthcoming year.

Mr Callam, who issued the warning in the company’s annual report, said the world-wide economic malaise and the short-term problems of this country must be taken into account when considering the future.

But, he said, with the diversity of the company’s operations, the directors are confident the progress of the past five years will continue. He said that a 124 per cent net profit increase and 210 per cent sales increase in that time are well ahead of the inflation rate of 100 per cent.

Mr Callam said employee numbers had grown from 5616 to 6500. "The final statistics indicate that a strong, healthy business provides continuing jobs during a year when unemployment has been of growing concern."

Tax-paid trading profit for the June year rose 39 per cent to $23.0 million.

The managing director, Mr H. M. Titter, said that sales rose 22 per cent to $444.8 million.

Exports were up 29 per cent to $57 million. Overseas loans were reduced to $1 million from $5.6

million to minimise exchange rates. Mr Titter said that the newly-formed natural resources group was now moving ahead steadily. Restructuring of the rubber group had begun. The return was regarded as inadequate and the longterm prospects as poor, said Mr Titter.

The most dramatic change in results came from the finance and property group, he said.

Mr Titter said the property side is. managed and operated as a separate division. Its profit contribution has been raised from 10 to 20 per cent of company consolidated profit. Net profit for property operations, including gains from the sale of properties, increased 233 per cent. All company properties are controlled ’by the property group. Towards the end of the year activities were extended into industrial and commercial properties by the new wholly-owned subsidiary Feltex Properties. Ltd. “There would appear to be considerable potential profit in this area," he said.

After the injection of further capital and a major effort in product development. sales of StevensBremner carpet product in New Zealand were nearly double those of the previous year.

This enabled the business

to earn a very satisfactory profit and fully justified the decision in 1980 to invest in this company." Mr Titter said.

A major new marketing programme saw a 35 per cent increase in sales of the retail group. Smith and Brown. The results of the N.Z. Nurseries Holdings. Ltd (33 per cent-owned) after a disappointing start through losses in export markets, is showing signs of growth and improved profit. An improved result is expected in Feltex Reidrubber.

The Feltex accounts show that tax took $3.9 million (1981. $4.1 million). Export incentives were worth $2.40 million ($300,000).

Under extraordinary items where there is a net profit on the disposal of assets of. $3,293,000. less $3,386,000 provided for restructuring of operations and reappraisals of valuation of fixed assets, giving a nett loss of $93,000. Mr Titter said a substantial sum has been provided for the restructuring of the rubber group which is to be completed this year. Although the process is costly, he said, the results of the restructured textile, carpet and plastic group clearly demonstrate it is worth while.

Dividend cover is up from 2.9 to 3.4, profit to average shareholders’ funds is 15.1 per cent (13.8).