Dalgety Crown boosts profit in first year

Press, 5 October 1984, Page 12

Dalgety Crown boosts profit in first year

Dalgety Crown Corporation, Ltd, increased its net trading profit 49.8 per cent to $16,527,000 in its first year of business since the merger of Dalgety New Zealand, Ltd, and Crown Consolidated, Ltd, the company reported yesterda.y-

However, after including extraordinary profits of $1,865,000 ($5,790,000 previously) the final result for the year to August 1 was ahead 9.3 per cent to $18,392,000.

The year’s result covered a 13-month period for Dalgety and 12 months for those of Crown.

The chairman, Sir Roderick Weir, said it was a particularly pleasing performance because the directors had originally forecast a result of $12,500,000 in the prospectus issued at the time of the merger. The benefits accruing from the merger of Dalgety and Crown in agricultural and horticultural services were as originally projected.

As a result, profitability benefited from savings in trading expenses and also from using funds realised from surplus assets ahead of original projections, he said.

Higher cattle prices and more business in the real estate division also improved the profit. “However, the return

achieved in the rural servicing operations is still below what the board considers to be an acceptable rate of return.”

Meat trading performed strongly during the year mainly because of benefits from the recent money spent to increase production and the much larger supply base achieved by the merger.

Like the agricultural servicing business rationalisation benefits were achieved during the year, he said. The agricultural machinery division produced a record result and provided an acceptable return on capital. The division was benefiting from the restructuring and organisational changes made recently, with all aspects of its business returning materially improved profits.

It was a difficult year for the financial services division. The pastoral clients were badly affected by the lack of funding for most of the year, and because of this the company, in support of the agricultural sector of the nation’s economy, made very heavy commitments to financing its clients. “While we see this as a relatively short term commitment on our part, it did have an adverse affect on our profitability and, as a result, we have made moves to correct the situation,” Sir Roderick said.

Dalgety Crown Finance, Ltd, the retail finance company, achieved an excellent profit increase, in spite of a most uncertain ' market in relation to liquidity, interest rates, and profitability. The finance company’s operations and services were expanded to make it a big contributor to group profits. Financially Dalgety Crown was in a strong position, given the nature of its business, and the large part of that business that is related to its financial services operations. Since the balance further steps had been taken to protect the group’s profit base. The first of these was to acquire a 20 per cent interest in Cable Price Downer, Ltd, Sir Roderick said. The benefits included an investment in a profitable and soundly financed company, which offset the cyclical profits experienced in the agricultural business, and it also provided opportunities for profits in both groups, particularly in financing, agricultural machinery, and motor-vehicle sales.

The investment in CPD was necessary to ensure the stability of Dalgety Crown and to assist in increasing the share price and returns to shareholders.

“As already announced, Dalgety PLC, of London,

has sold its 24.7 per cent interest in Dalgety Crown Corporation to CPD. While the loss of an association that dates back to the previous century is regretted, it has . resulted in Dalgety Crown becoming a truly New Zealand-owned organisation.

“Consequently the board will be recommending to shareholders that the company’s name be changed to Crown Corporation, Ltd. There will, in the meantime, be no change to the name of our stock and station subsidiary company, which will continue to trade as Dalgety Crown, Ltd.

Group turnover rose 14.5 per cent to $1660 million. The profit was after providing $5,689,000 more for tax at $11,604,000, and minority interests of $124,000 (nil). Earnings on average shareholders’ funds was 11.3 per cent and represented an earnings a share of 23.7 c on an undiluted basis, after revaluing land and buildings $14.6M to 85 per cent of current market value, as determined by an independent valuer.

Instead of recommending a final dividend, the board has declared a second interim tax-free dividend of 5c a share, payable on November 2, ex dividend on October 18, making the annual dividend rate 10c a share (20 per cent) as forecast in the prospectus.