EMCO well along diversification path

Press, 3 November 1984, Page 24

EMCO well along diversification path

Cars and bicycles will continue to be a declining proportion of the output of the EMCO Group, Ltd. The chairman, Mr L. M. Papps, and the. managing director, Mr R.. N. Mason, said this in an interview yesterday after a meeting of the board in Christchurch and a lunch for Christchurch businessmen and officials.

They said the group would continue to seek opportunities for diversification.

The firm began diversifying from the car industry in the days when it was the New Zealand Motor Corporation. It was prodded by the oil shocks of 1973 and 1979.

“We’re getting there,” Mr Papps said of progress in diversification.

On the agenda at yesterday’s board meeting was videotext — the transmission of information in words to television screens. This holds potential for Group Rentals, NZ, Ltd, which is EMCO’s television set retailing and hiring arm. Mr Mason said EMCO saw videotext as offering great potential for Group Rentals, in the hardware side: the installation of terminals.

Mr Papps told the luncheon at Noahs, attended by

more than 100 people, that EMCO has about $lO million worth of fixed assets in Christchurch and employed 269 people in the city. Group Rentals in its conventional activities is hedged from economic downturn. If television set sales are hit, rental revenue is almost certain to increase.

At Healing Industries, Ltd, which makes bicycles in Christchurch, the big future is seen in paints and chemicals, especially marine paint, for which the firm is finding markets overseas.

There will be a heavy expenditure on sponsorship of yachting in the coming year, emphasising EMCO’s faith in the market prospects for Healing’s marine paint. Healing’s results are now expected to improve after a re-organisation to allow more product specialisation by executives. In cars, the firm’s market share had dropped because of production limitations in the surge in sales caused by devaluation, but the firm is confident of recovering its place.

The assembly plant: at Nelson was described as efficient and doing well. Among the new products coming up are an up-mar-

ket Honda-Rover model, the XX; whether New Zealand will be taking the British or Japanese product of the joint design has not yet been decided. If the Labour Government introduced a valueadded tax in the Budget this might affect demand by reducing disposable income. However, if the sales tax on cars was reduced to allow for VAT, this might compensate, Mr Mason said. Mr Papps believes that the effects on the, sharemarket wil not be too heavy if the Government stops tax-free dividends from capital reserves. This is because of the high proportion of shares held by institutions, which do not qualify for this tax break. He and Mr Mason said EMCO could continue to generate sources of tax-free dividends for some years if the Government allowed them to be distributed.

Regardless of the content of the Budget, Mr Papps believes that the New Zealand sharemarket will march on towards the future predicted for it by Mr R. A. Brierley. He agrees that there will be about 10 large dominant companies in New Zealand, with a total of about 60 companies listed on the stock exchange.