E. Adams is optimistic on future

Press, 8 July 1986, Page 29

E. Adams is optimistic on future

Ernest Adams, Ltd, Christchurch pastry baker, saw little reason to be other than optimistic about the future, said the chairman, Mr Hugh A. Adams in the directors’ report with the annual accounts.

The new financial year has started well, with sales well ahead of last year and costs are being held.

The only qualification Mr Adams made was uncertainty over the impact of GST, which "may cause sales to be less buoyant in the latter half of the financial year.” "Long term, the company’s emphasis on quality of product and service should ensure continued profitability,” Mr Adams said.

The results for the year ended March 31 more than justified the optimism shown in the 1985 report. As reported, profit after tax rose 29 per cent to $826,327. Export sales in volume terms recorded a satisfactory Increase, but the returns on exports were adversely affected by the high value of the New Zealand dollar.

“The company is fortunate that sales are gained on quality and not price,” ,Mr Adams said.

The managing director, Mr David Booth, said in his review, that profits before tax were ahead, at $1,469,305, by 39 per cent, but a 54 per cent higher provision for tax held the

net profit increase back.

The reasons for the tax increase were:—

• the non-deductibility of fringe benefit tax. • despite increased exports, a lower tax credit because of a reduction in incentives. • a smaller deduction for depreciation at tax rates than the amount written off in the accounts. Mr Booth said that over-all, this was the most successful year in the company’s history. Sales rose 18 per cent, North Island growth was strong “while we more than retained our position in the South Island. “Careful consideration has' been given to future planning. We intend to build on to our present Strong position by widening our production base and further strengthening our distribution and marketing.”

The balance sheet shows a strong position, with shareholders’ equity at 70.1 per cent. Writing up of properties at balance date to 90 per cent of valuation added $1,269,409 to fixed assets and capital reserves. Net asset backing a 100 c share is 506 c. The current ratio is 1.6, up from 1.4. The 21 per cent dividend is covered 2.9 times. The directors intend to maintain the current annual dividend on capital after the one-for-five bonus issue.