W. Neill boosts interim in spite of high $NZ

Press, 2 December 1987, Page 42

W. Neill boosts interim in spite of high $NZ

The profitability of Wilson Neill has suffered as a result of the high New Zealand dollar and high local interest rates, says the chairman, Mr Jim Valentine, in the company’s interim report. "The volatility and high value of the New Zealand dollar has made exporting from New Zealand very difficult and profitability has suffered as a result. “This has been exacerbated by high domestic interest rates,” Mr Valentine says, “Until a better balance is established between exchange rates, interest rates and domestic cost structures, exporters will continue ’to experience unsatisfactory returns on their investments,” he adds.

Mr Valentine says that in spite of these difficulties, Wilson Neill remains convinced there is a profitable place in world markets for the products which it exports. As previously reported, Wilson Neill boosted its tax-paid profit 60 per cent to $21,499,000 in the six months to September 30. The directors say that, as is normal for the group, the net profit in the second half of the year is expected to be greater than for the first half.

The full year result will

be in line with the SSOM forecast at the time of the merger with Saudicorp. Mr Valentine says because of the current instability of world financial markets, the strengthening of the group’s balance sheet is significant.

Shareholders’ funds rose to 53.5 per cent of consolidated assets at September 30, from 43.4 per cent in the previous year.

“This lessens considerably the group’s exposure to interest rate and liquidity risks,” Mr Valentine says. Wilson Neill has also minimalised its exposure to equity markets. Mr Valentine says that in what, retrospectively, was a prudent move, Saudicorp significantly reduced its exposure to equity markets both in New Zealand and offshore over the first half of the year.

“The net effect has been largely to insulate the group from the worldwide downturn in share prices.” He says the group’s biggest equity investment, a 40 per cent share in Barwon Farmlands, the listed Australian company, is well placed with a solid earnings base and effectively a debt-free balance sheet.

Mr Roger Gaskell, Wil-

son Neill’s assistant managing director, has joined the company’s managing director, Mr Colin Herbert, on the board of Barwon.

Mr Valentine says this will significantly improve the influence Wilson Neill has on the direction of the company.

The 1987 annual profit of Barwon was a record SNZ3.ISM — up 307 per cent, and Mr Valentine says he is satisfied the Australian investment vehicle will make further progress in the ensuing year.

He says companies with a strong trading and financial base, such as Wilson Neill, can obtain substantial benefits from the exciting growth opportunities which the current sharp downturn in share prices is presenting.

Mr Colin Herbert has recently been granted Commerce Commission approval to buy up to 100 per cent of the share capital of Wilson Neill.

Earlier this month he bought the remaining Wilson Neill shares held by Saudicorp after the merger, to bring his holding to about 43 per cent. He bought the shares at 40c above market value saying “the shares have a real value of at least 120 c despite the current market conditions.” x Mr Herbert said further purchases would be only for the purchase of rounding off his holding as he preferred to maintain “a

strong listed company vehicle.”

As previously reported, Wilson Neill has declared an interim dividend of 3c a share (1986, 0.93 c). The group pre-tax profit rose 66.1 per cent to $24,540,000. Tax took $2,909,000 ($1,711,000). Sales improved 15.7 per cent to $83,071,000. The company has total assets of $194,486,000 ($151,467,000) and shareholders’ funds rose $39.5M to $104,072,000.