Goodman profit up 7.8% in interim

Press, 5 December 1985, Page 61

Goodman profit up 7.8% in interim

By

Simon Louisson

in Wellington

Goodman Group yesterday announced an interim profit before extraordinaries of $24,647,000 for the six months to September 30 compared with $22,861,000 for the corresponding period last year. Trading profit before tax of $11.9 million exceeded the $11.4 million share of associated companies’ profits. In the previous period the associated companies provided $17.9 million compared with only $2.5 million trading profit. Extraordinaries of $6.6 million (losses of $3.1 million in 1984) brought the profit after extraordinaries to $31.2 million ($19.7 million). Turnover was $221.5 million ($162.2 million) and the tax benefit was $1.3 million against $2.5 million in 1984.

An unchanged interim dividend of 6.5 c has been declared payable on January 6. The dividend is payable on capital increased by a one-for-five bonus.

In a statement accompanying the result the directors report they are “well satisfied” given the high interest rates and the adverse effect of currency movements. They are also pleased with the increasing proportion of profit being sourced from wholly-owned subsidiaries — 54 per cent against 22 per cent in 1984. The board also says it is supportive of the Fielder Gillespie merger proposal, but is still considering details of the offer. The board is concerned about exchange fluctuations.

“The fluctuations in Australian assets and profit performance because of the large movements in our respective exchange rates is disconcerting. “Although we are naturally hedged for all our

liabilities in Australia the effect on our net asset and earnings is still significant.” Had the profit before extraordinaries been reported in Australian dollars, operating earnings would have shown a 40 per cent increase, from sAust 13.4 million to 18.8 million. “We therefore believe there is a real need for the Government to put in place a mechanism that will reduce fluctuations in transTasman exchange rates as a stable currency market is essential if the benefits of CER are to be achieved.” The sale of three equity investments realised $49 million. These inluded 12.5 per cent of NZ Forest Products, and the same percentage of Saudi New Zealand Capital Corporation.

The decreasing proportion of equity-based income (currently 46 per cent) reflects the transition that Goodman is undergoing, the directors say. They are pleased with the progress made during the last six months, given the difficult financial conditions.

Earnings from associated companies came from Elders IXL (14 per cent-owned), Wattie Industries (30 per cent), Newmans Group (24.8 per cent) and Allied Mills (14 per cent). No income was received from Mount Cook Group. The company’s agreement to sell the 50 per cent share in Aulsebrooks, Ltd to Arnotts was approved yesterday but this is still subject to regulatory consents. The New Zealand operation was highlighted by a “very satisfactory” sales performance, up 21 per cent, and underpinned by steady earnings growth.

“Excellent performances by NZ Cereal Foods, Quality Bakers and the pastoral division (Hammond Irving

and Brownlee, Ltd) resulted in earnings comfortably exceeding budget.” The textile, division’s (Bonds) New Zealand earnings exceeded budget, absorbing substantial non-re-curring costs with the integration of its Australian hosiery manufacturing subsidiary, Andersons Hosiery Mills, into the company. The directors are confident that Andersons has a profitable future.

Earnings from management of Provincial Traders Foods Pty, Ltd have continued to show significant growth, and budget expectations were easily exceeded.

The movement in exchange rates between the two reporting periods reduced by $3.4 million the contribution that Australian equity holdings and operations made to group profit. Despite this movement in exchange rates the earnings contribution from Australian operations was well above budget and last year’s result.

Depreciation in the accounts was $3.1 million ($2.4 million in 1984). In calculating its share of earnings from Wattie Industries, Ltd and Elder IXL, Ltd, the group has continued its past policy of eliminating from its profits any share of Goodman Group earnings.

The earnings per share, on an annualised basis, is 28.9 c compared with 27.8 for the year ended March 31, 1985.

In view of the proposed merger, the board has decided to adopt an interim management structure to cover the vacancy left by the impending retirement of the managing director, Mr Peter Shirtcliffe. In the interim period, the chairman, Mr Pat Goodman, will act in an executive capacity.