LWR virtually debt-free

Press, 6 October 1988, Page 27

LWR virtually debt-free

By

MARK REYNOLDS

The Christchurch-based clothing manufacturer, Lane Walker Rudkin Industries, has an enviable position among listed New Zealand companies — it is virtually debt free.

The company’s total net borrowings were reduced to just over $lO million at balance date, June 30, but with proceeds from the sale of Adidas Marketing Group it will be essentially debt free, the chairman, Mr David Lee, says in the annual report. In the year to June 30, LWR settled more than $l6 million in short-term loans, the report reveals. The company paid an average 12.4 per cent interest on this debt last year and more significantly had paid an average 20 per cent the previous year. LWR’s cost reduction programme enabled it to remain profitable despite an 11 per cent drop in group turnover, from 5181.45 M to $161.5M. Pre-tax profit fell 50 per cent, from $11.7M to $5.9M while after-tax profit fell from SB.9M to $4.9M, after the inclusion of a $2.77M profit on property sales. "It must be noted, however, that had we not reacted rapidly and decisively to the new economic order, the decline in earnings would have been

more dramatic,” Mr Lee says. Government policy had a dramatic effect on LWR’s business, not only in terms of reduced demand but also in relation to the future operating environment for the company. The advancing of free trans-Tasman trade to July 1990, together with earlier access for Australians to the New Zealand market without reciprocal rights in some product lines, is an indication of the Government’s cavalier approach to industry, Mr Lee claims. “We have significant reservations about the Government’s economic policies in the emerging economic order. The predictable consequences of these policies will be an extremely high level of unemployment, continued balance-of-payment problems, and a high level of net migration of skilled people across the Tasman.” In 1992 New Zealand will be the only economy, apart from Hong Kong, to offer open access in the apparel sector and this

will see LWR sourcing more products from overseas. As a consequence, LWR’s future planning does not allow for expansion in New Zealand. Already Kenco carpet, a 50 per cent associate, has decided to increase its Australian operation, transferring some plant from New Zealand. The company supplies about 20 per cent of the New Zealand carpet market. “Increasingly we will see, particularly in the outer-wear sectors, a separation of production and marketing,” says Mr Lee. The development of a new group, Apparel Resourcing (N.Z.), Ltd, will continue, with specialised and automated plants supplying products to group subsidiaries. The establishment of this group last year saw pleasing progress in productivity. Mr Lee concludes that having made major progress in restructuring and improving liquidity, the next task will be to review opportunities. “While the group faces some very real chal-

lenges, we are financially well positioned to move when necessary. Improving levels of retail purchasing are being experienced and we are planning on a better result in the current financial year.” As previously reported, LWR will pay a second interim dividend of 6c a share to make an unchanged dividend of 10c a share for the full year. The dividend was covered 0.5 times by the net profit before extraordinaries. Earnings per share were 5c before extraordinaries (last year 22c), while with total assets of SIO9M the company’s shares had an asset backing of 177 c each (184 c The return on average shareholders’ funds (total $81M) was only 2.7 per cent, compared with the previous year’s 12.6 per cent. At balance date Lane Walker Rudkin had 2215 employees, 476 fewer than in 1987 and a drop of 841 from 1986.