P. Ent seeks record despite its ‘crisis’

Press, 13 August 1986, Page 37

P. Ent seeks record despite its ‘crisis’

PA Wellington The chairman of Progressive Enterprises, Ltd, yesterday repeated the company’s forecast of another record profit for the current financial year, despite reference to a “profit crisis” in a leaked company memo. The memo from Progressive’s chief executive, Mr Graeme Kelly, to senior executives three weeks ago, issued instructions to increase food prices to counter the profit plunge. The chairman, Mr W. Wilson, in a statement to the Stock Exchange yesterday, said the memo’s contents were based on “early results coming through for the year. “Since then forecasts have been revised and are as reported to the annual general meeting on July 29,” he said. The memo, described the situation as "unknown in the company’s history”. Mr Kelly set out a list

of emergency measures with top priority going to a campaign to increase prices.

“Prices must be increased forthwith. Our profit crisis is of such a magnitude and time available for recovery is of such short duration, raising prices is the only option,” the memo said. Later it added: “Existing customers must pay for the increased wage bill.”

The memo said the two supermarket chains and the Georgie Pie restaurants owned by the group reported profits substantially below budget and substantially less than last year.

Mangere-based Progressive owns 25 Foodtown supermarkets, 19 3-Guys supermarkets and five Georgie Pie restaurants. The company employs 7300 people. Mr Kelly later said he blamed the company’s problems on a high wage round last year.

“Inflation in the food industry runs at around 6.8 per cent, while the last wage settlement averaged 16.5 per cent for us,” he said. “This adds about $lO million to our costs.” Mr Kelly said the memo, written three weeks ago, had already led to some price increases. The annual meeting was told that the half year would show profits slightly ahead of those for the same period last year. Additional business from new Foodtowh stores and improved contributions from 3 Guys and Georgie Pie divisions in the second half should ensure another record profit for the full year, the retiring chairman, Mr Roger Haworth, told the meeting. In the report, Mr Kelly had hinted at the profit problems. “On average, wages have increased 16.5 per cent. Because of our large

number of employees, a substantial dollar amount must either be recovered or absorbed. The competitive environment in which we operate caused more to be absorbed than recovered, thereby reducing profits in the short term,” he wrote.

In the year ended March 31, Progressive reported a 41 per cent lift in sales to $645.4 million. After-tax earnings were up 8.2 per cent to $11.5 million. Last week Rainbow Corporation, Ltd, took, a 20 per cent stake in Progressive and then applied for Commerce Commission approval to increase it to 100 per cent. Rainbow’s director, Mr Gary Lane, said that Rainbow was happy with its investment. “We know that their profit had fallen off a little bit, and we have some ideas about how to rectify that, but it would not be appropriate for me to comment,” he said.