Paynter loss in building slump

Press, 8 December 1988, Page 25

Paynter loss in building slump

Paynter Corporation, Christchurch building group, reported yesterday a loss of $6,353,000, after extraordinaries for the year ended October 6, compared with a profit of $9,565,000 the previous year.

Turnover dropped to $65,023,000 ($75,594,000) while the group loss before tax was $6,634,000 ($7,737,000 profit). A tax credit of $149,000 ($1,323,000 tax bill) reduced the after-tax trading loss to $6,485,000 ($6,214,000 profit). Associate companies contributed $1,225,000 ($201,000) resulting in a group loss before extraordinaries of $5,260,000 ($6,415,000). Extraordinary items of $2,057,000 (nil) brought the group loss to $3,203,000 ($3,150,000) profit. The extraordinaries included a $1,905,000 profit from the sale of a controlling interest in Condux Corp of Australia and a $923,000 tax rate change on deferred tax. Extraordinary writedowns were $900,000 in advances to the Edgewater Resort Wanaka Ltd and $410,504 in redundancy payments after the closure of the group’s construction arm. A final major writedown was the reversal of a $3,150,000 development margin on the group’s Clarendon Towers office building in Christchurch. The unrealised development margin on the Clarendon project of $3,150,000, which was reported in the 1987 accounts has been reversed because of subsequent events, including the substantial decline in market

conditions and the sale of the Clarendon to Tokyobased Toranomon Jitsugyo Kaikan. Shareholder’s funds stood at $23,122,000. Net asset backing is 96c an ordinary share, which when compared with the current share price of 40c a share indicates the shares are trading at a substantial discount to their underlying value, Mr Paynter said. In view of the loss the directors are not recommending the payment of a dividend. Paynter’s chairman, Richmond Paynter said the financial year was the most difficult in the company’s history. Paynter was hit by the sharemarket crash and subsequent fall in business confidence which meant it had to restructure and reduce debt, Mr Paynter said.

Steps taken to- control debt included. © The sale of Clarendon Towers for $3B million. (The building was at one stage valued by Mr Paynter at $5O million.) © Sale of the 49 per cent interest in Condux Corp.

© Paynter Construction was wound down. The benefits of these three moves will accrue during the current accounting period, Mr Paynter said.

The sale of the Clarendon project for $3B million completed the

group’s asset divestment programme and was the single largest factor in the company recording a loss for the year. The proceeds of the sale of the Clarendon project and the company’s interest in Condux Corporation will have the effect of materially reducing group debt by about $45 million and consequently the equity ratio within the group will improve from 22 per cent to 38 per cent. “Furthermore, the onsale of the Robt Jones House development to Robt Jones Investments, scheduled for completion mid-1989, will result in this ratio improving to about 50 per cent,” said Mr Paynter. “By that time the company will have little or no interest-bear-ing debt apart from that associated with Paynter Timber Pty, Ltd, in Australia.” The timber interests of the group had a profitable year despite very difficult market conditions which saw a nationwide slump including the closure of 64 mills, and production levels falling by 18 per cent. Against this background in 1987/88 turnover of Paynter Timber NZ increased 15 per cent, from $18,957,000 in 1987 to $21,835,000 in 1988. The Australian subsidiary, Paynter Timber Pty, Ltd, contributed a turn-

over of $16,891,000 for its first four months of operation, and for the 1989 financial year the budgeted turnover for the combined New Zealand and Australian operations stands at $75 million. The directors predict 1989 will prove another difficult year as they believe property-based activity will remain depressed, but they are confident that sufficient opportunities do and will continue to exist to support a small development team concentrating on identifying opportunities both domestically and in Australia which can be profitably exploited. “Paynter Timber is well positioned to ensure the maintenance of positive cash flows within the group and to take advantage of the inevitable upturn in the New Zealand economy. In association with its Australian counterpart, Paynter Timber Pty, Ltd, Paynter Timber NZ will contribute significantly to group results,” said Mr Paynter. “Although this year’s result is disappointing, the completed asset divestment programme resulting in the payment of significant debt and the consolidation of group activities has significantly strengthened the balance sheet and will enable Paynter Corporation to restore profitability to acceptable levels,” .Mr Paynter said.