Horticultural Industries right on target

Press, 2 November 1984, Page 18

Horticultural Industries right on target

. The directors of Horticultural Industries, Ltd, are confident of a profit after tax of at least $1.2 million for the full year to July 31 next, the chairman (Mr A. F. Crothall) says. In the company’s first report since being publicly listed in April this year, he says that although the balance date was changed from March 31 to July 31, the directors are sticking with their forecast.

As reported, this year’s profit for a period of 10 months ended July 31 was $692,000, and would have been higher but for a shortfall, as the managing director (Mr A. D. Goudie) put it in his review, of some high expectations in some areas.

Referring to the group’s expansion, Mr Goudie says that the ten month period under review has seen a great deal of activity with the acquisition of Kerifuit Farm in Kerikeri, and the Te Puke Orchard. Both these kiwifruit properties have progressed well and will be very productive orchards. A considerable number of other businesses have been investigated with a view to acquisition and the following acquired since balance date.

“In Brisbane we bought Grahams Indoor Gardens Pty, Ltd, an excellent business which must take first place among those firms servicing the rental plant ■ market in that city. “In October we bought a well-located nursery property in Lower Hutt as a base for our new Wellington rental plant operation. During the same month we acquired the small but profitable seed business of Ocean View Seeds, Ltd, which operates out of New Plymouth. This activity will combine very well with our Watkins Seeds business and strengthen considerably their ability to service the grower and nursery market. Mr Goudie explains in his

review the attitude of the directors to the 20 per cent stake held in the company by Freightways Holdings, Ltd. He says that Freightways is already quite involved in other aspects of horticultural and wish to increase their investment. “Your board is well pleased with this involvement from a strong and well managed company. “The freighting of plants and plant products overseas is a very real challenge with a shortage of airspace for cargo and the need to move perishable products rapidly. This is an area where the application of new controlled storage techniques will have as much effect on the successful movement of horticultural products as refrigeration did on the meat trade many years ago. Freightways’ interest in developing this new technology will prove most beneficial to Horticultural Industries.

“It was the declining availability of airspace referred to above that made us depart from our intention to set up a cut flower division to grow and export flowers around the world. Any sizeable investment in the short term would, in our view, be unwise.

“It is very much part of group strategy that our Australian activities not only parallel those in New Zea-' land, but that they are integrated to the extent of being seen as truly Australasian. We expect a merging of management which will strengthen the divisions and optimise our opportunities in the much larger market that C.E.R. is planned to develop,” Mr Gourdie says. As previously reported, group net trading profit for the 10 months period was $692,361, after providing $357,031 for tax and $79,135 for minority interests. The profit was reduced to $619,020 by writing off $73,341 in goodwill. Because of the recon-

struction of the company before the public issue, and the acquisitions thereafter, the profit is not comparable with the previous one, which was $681,404 for the year ended March. On an annual basis the profit is equivalent to a 30 per cent increase, and is in line with the prospectus forecast. A maiden dividend of 2.5 c a share (5 per cent) was paid last month .free of tax, in lieu of the final dividend promised in the prospectus. It was covered 2.3 times by the trading profit. The annualised earning rate on balance sheet shareholders’ funds was 6.6 per cent, and net asset-backing at July 31 was $1.04 for each 50c share. The funds statement shows that during the period

the company paid $13.3 million for acquisitions (fixed $7.8 million, current $5.5 million) part paid with cash of $6.5 million. The total funds movement was $16.3 million, of which $12.2 million came from the share issue. The funds were mainly applied, apart from the acquisitions already mentioned, to further purchase of fixed assets ($5.8 million) and a $3.4 million increase in working capital. The $17.5 million capital employed — comprised mainly of $12.7 million shareholders’ funds and $4.2 million term liabilities — is represented mainly by fixed assets $12.3 million, goodwill $1.3 million, and working capital $3.5 million. The current ratio is 1.8 to 1.