N.Z. FARMERS’ CO-OP ASSOCIATION.

Ashburton Guardian, Volume 60, Issue 302, 28 September 1940, Page 6

N.Z. FARMERS’ CO-OP ASSOCIATION.

ANNUAL MEETING TO-DAY.

INCREASE IN NET PROFIT.

FUTURE INDICATIONS

DISTURBING

(Special to the “Guardian.”) CHRISTCHURCH, This Day. Resolutions amending the articles of association were carried at the annual meeting at Christchurch this morning of the New Zealand Farmers’ Co-oper-ative Association, of Canterbury, Limited. The chairman of the board of directors (Mr C, P. Agar) presided over an attendance of 75 shareholders. The vice-chairman (Mr F. It*. Jones) and all the directors were present except Mr IC. G. C. Harper, who sent an apology. The resolutions to amend tho articles of association as notified to the shareholders, were adopted, the first permitting payment of remuneration and expenses to directors who might do special work in connection with tho supervisio i of i'ann properties, and the second deleting provision for the payment of 2s 6d as transfer fee on share transfers. The meeting expressed approval of the directors’ action in setting up the reconstruction account as shown in the balance sheet.

“It is my privilege on moving the adoption of tho fifty-ninth annual report and balance sheet of the Association to givfe you a resume of the activities of the Association during the past vear,” said the chairman of directors (Mi C. P Agar) in his annual address.

“Before doing this I have to report the loss which we sustained through the death of two of our colleagues, Mr Arnaud 'McNeilar and Mr Tlios. Stevenson. Mr McKellar at this meeting last year vacated the office of chairman, a position which he had filled with conspicuous success since 1934. Pie joined the board of directors in 1925 and was vice-chairman from 1925 to 1934. Throughout his term of office he gave to the affairs of the Association the full measure of that ability, wisdom and experience which he had. Mr Stevenson joined the board in 1935 on the- death of his brother, the late Mr James Stevenson.

The Impact of the War.

“When we met last,year the war had just commenced. Since then history has been made in Europe and we see now, more clearly than then, the forces against which the Empire is fighting. We feel now, more than then, the impact of the war on our own Dominion and on our own business. However, despite the difficulties of trading in the past year our net profit earned for the yeir was £59,4-5S against '£54,760 for the previous year—an improvement of £4698. Under all the circumstances your Board considers this is a very satisfactory result and in fact it is the highest net profit since/1920. “You will have seen that the first item taken from-the available profits was an amount of £7254 for additional depreciation of our plant, machinery and fixtures. This was done with the approval of the Commissioner of Taxes and has been allowed by him as a deductible item for income tax.

“It is proposed to deal with the remaining balance of £52,204 Is 4d as follows: —Dividend of 4) per cent, on first preference shares £6750, dividend of 4 per cent, on “A” preference shares £BOOO, dividend of 4 per cent, on “B” preference shares £3440, dividend of 2 per cent, on paid up capital of ordinary shares £2294, transfer balance to provision for taxation account £31,720 Is 4d; £52,204 Is 4d.

“It should be noted that the company lias paid Social and National Security taxes on the amounts distributed by way of dividends and they are therefore free of these taxes in the hands of the shareholders. “These rates are in accordance with the Articles of Association of the company. It is pleasing to the directors to be able to recommend in particular the payment of the ordinary dividend. It may be of interest to note that the Association has something like 10,700 shareholders, many of whom have holdings of a few ordinary shares. Many are, resident outside of Canterbury but* 75 per cent, to SO per cent, are in Canterbury and we hope to see a continuing and increasing volume of trade with all our shareholders. It is the earnest desire of the directors bo have the fullest support of all shaveholders in all activities conducted by the Association in our merchandise departments, in auction, wool and grain business. Increases in Costs. “You will have seen that in the profit and loss account the gross profit figure of £228,835 was £13,887 higher than the corresponding figure of £214,948 last year. General expenses, however, increased also bj r £9189. As you cat: readily understand there has been a general increase in all our costs. For example the increase in postage rates during the year cost us an extra £6OO, increased printing charges for stationery meant another £SOO. I can assure you the directors and management use every effort to keep these charges as low as possible but the large bulk of the expenses are fixed, such as award rates of wages and they do not admit of any reduction.

“Coming to the balance sheet I think the two most noteworthy features are firstly the very strong liquid position of our finances and secondly the extinguishing of the large profit and loss appropriation debit and the raising of the now reconstruction account. The total of liquid funds in short date investments and bank credit and cash in hand is £201,229, or £15.394 more than last year.

“Your directors have given careful consideration to the financial policy of the Association, and are of the opinion that it is wise for us to have an adequate amount of liquid money- always available for seasonal advances and to offset demand liabilities. “When one takes into account the fact that whereas the balance sheet at July 31 disclosed over £200,000' of

liquid assets fully three-quarters of that amount is to-day employed in financing the activities' of the Association or of its clients, together with the fact that our demand liabilities on current accounts total £200,000 shareholders will realise the prudcncy of maintaining a further liquid position within the Association.

"The balance of funds which we have in hand at the present time will be required lor the payment of the proposed dividends and the payment of taxation demands. It is also expected that with the issue of the Government loan there will bp further calls upon our liquid resources in order to finance our customers’ requirements without in any way interfering with their normal demands for production finance. "The reconstruction account of £175,000 is a new item in our balance sheet—it takes the place of the profit and loss appropriation account debit which had been reduced to £191,261 4s Bd. Losses and Dividends. "It is unnecessary for me to refer at any length to the losses sustained in past years by the Association. While the policy adopted by the board of reducing this debit out of annual profits was a splendid one (when we paid no income tax), it became increasingly difficult in recent years to continue this policy owing to the everincreasing amounts we had to provide for taxation, and it has now become practically impossible to make provisions to reduce this debit and at the same time pay dividends to shareholders.

"Your directors have therefore given very careful consideration to the reconstruction of the balance sheet and after transferring an amount from leserves which reduces the debit to the profit and loss account to £176,000, proposed to ask shareholders’ authority to create a goodwill account in order to eliminate this item from our balance sheet.

"The board consulted its bankers, the chairman of the Stock Exchange, its auditors and its solicitors, all of whom agreed with the wisdom of the proposal, but it was found on further examination that it was not possible to create a goodwill account without actually disposing of a business to a third party. The Board therefore termed the account reconstruction account and it is proposed to ask your authority to regard this as a permanent item in the balance sheet of the Association.

"You will notice that the paid up capital has increased by £3O during the year through the payment of this amount of calls in arrears and that secured deposit stock is £350 less through the payment of some holdings drawn in the ballot two years ago and only presented for payment in the year just closed. 'Hie amount at credit of current accounts' .stands at £197,581 oi £27,414 higher than last year. This is only a seasonal trend. “Sundry creditors are £8566 higher at £58,909. This is very largely—almost entirely—through our much larger buying of local goods and is represented by normal trade accounts. "General reserve stands at £18,280 after being reduced by the £16,261 transferred to the profit and loss account debit. The mortgage of £IO,OOO on properties was paid off during the year. The Ashburton Store. ■ "On the assets side of the balance sheet the properties are increased by £4601, being final payments on the new Ashburton property less the usual depreciation. In passing, I might state that the trade in our new store in Ashburton lias been satisfactory. I am sure our Ashburton shareholders and clients will agree that we have there a store worthy of the Association and of the district.

•‘Warehouse fixtures, etc., are substantially decreased to the present figure of £51,739 through tho additional amount of depreciation written off. “Stocks of goods on hand stand at £317,746 or £36,370 more than last year. This increase, while possibly accounted vfor partly, by higher price levels, is satisfactory at the present time owing to tho great difficulty in obtaining many lines. I think it only right to express appreciation of the service given during a difficult year by our London Agents, Raymond Wilson and Co., Ltd. Just a week or two ago we heard that a vessel bearing goods for us had been torpedoed. Within a day or so we had a cable from Messrs Raymond Wilson advising that all tho goods lost had been rebought. In such ways we hope to overcome any difficulties arising from war losses. Our goods are, of course, fully insured against all risks while in transit.

“There has been a further reduction in advances against land, stock, etc., through further cleaning up of old unsatisfactory accounts and this movement is also reflected in a reduction in the reserves' figure. “The item, shares in other companies, has been reduced by return of part of the Association’s capital in the Farmers’ wholesale federation. Turnover Nearly £3*000,000. “I have given you in the foregoing a review of the important items of oui balance sheet. Shareholders will get some idea of the volume of business transacted by the Association when I tell them that wo handled during the year close on £3,000,000 in merchandise, wool, grain, etc.

“To give a further illustration of the ramifications of your business I would mention that from tho head office trading departments alone over three-quarters of a million dockets were issued during the year and wo had to purchase 20 tons of newsprint to print the dockets required by the Association for the year. Our staff figures total 617, and here it is fitting to record tho Board’s appreciation of the work of the staff, its interest in the affairs of the Association and appreciation of the services that has been rendered to our clients.

I would like at this point also to draw your attention to the burden of taxation which this Association, in common with other trading companies, is bearing at the present time. Ths Peak of Taxation. “The Government has a right to expect from both capital, employers' and labour, co-operation in the difficult conditions created arising from war. On the other hand it is easy fo prescribe a policy of ‘pay as yon go’ without realising the full repercussions that may arise from such a policy. With tho full knowledge and with the full sense

of the responsibility of the statement I am making, I unhesitatingly say that if the Government takes £6OOO out of every £IO,OOO that the trading companies of this Dominion make in profits, they have reached the peak of the taxation that industry and trado is able to bear and to carry on with.

"In the past Governments havo said ‘put it on, put it on—•and industry and trade find their own way of carrying the burden.’ That may havo been true in the past hut it is equally as true that the peak limit has been reached in taxation and that any further increases can only have one ultimate result, and that is a lowering of the amount of taxation received by the Government.

"The> last year was rather a mixed on© for many of our farmer clients. The previous winter had been a severe one, resulting in a higher than average death-rate and with the sheep low in condition after the winter a smaller lam,bing percentage and a lighter wool clip. The weight of wool was 20 to 30 per cent, down on previous years in most cases. Tire ewe fairs opened satisfactorily, but prices at later fairs fell heavily and were very low for all but the top quality lines. The price of wool had, of course, been stabilised under the appraisal scheme: and showed a considerable advance on the previous year. I am pleased, to note from reports from our various districts that through' the mild winter we have experienced this year stock generally is in much better condition than at this time last year and the coming wool clip promises to be a very good one. Articles of Association'. "You will have seen from the notice calling the meeting that certain alterations to the Articles of Association are proposed. In briefly mentioning these at the present time I would explain that under the existing Articles it was found that it was not legally permissible tci pay a director travelling expenses when on the business of thei Association. For illustration, if farmer members of the hoard required to visit one of the Association’s properties and any directors desired to visit a branch on an official inspection, unless a. board or committee meeting was held at that place, no legal provision for the payment of expenses existed'. "To-day we have certain properties, some of which we farm under the supervision of Mr H. E. Cook, in charge of the land and properties department; others are farmed under the supervision of directors with practical farming knowledge and the purpose behind the special resolution altering Clause 82 is first to provide for payment of expenses to directors and secondly to permit of some remuneration! to any director undertaking special duties or supervision of properties. "It may be felt by some shareholders that this resolution has a personal application to l myself as chairman of the board. Permit me to say that although I am giving practically halftime service to the Association I have intimated to my colleagues that while I expect to receive an; adequate expenses allowance, it is not my wish nor my intention to accept any added monetary reward for the services given to the Association.

"You are -also asked to delete subclause (b) of Article 84. This is because if the alteration to Article 82 is made then it is contradicted by this sub-clause and the Association’s solici - tors advise it should be deleted. "Transfer Fees. —You will be asked to amend the Articles of Association fixing the transfer fee at 2s 6d by the substitution of a clause requiring no transfer fee. Shareholders will appreciate that most companies to-day are discontinuing the charging of transfer lees and that the injustice of charging 2s 6cl to transfer two shares -which may have a market value of less than the transfer fee cannot be sustained.

“I think my remarks have covered the position as regards the Association and the directors’ stewardship during tho past year. Disturbing Indications. “One’s mind would now turn to the future, and whilst it is next to impossible under war and present trading conditions to give any reliable forecast, it can, however, be stated that whatever indications there are, are disturbing. In the first six weeks of our trading year we have done approximately 1000 transactions a week less than the previous year, and this fact, coupled with the increase in wages and salaries costs under awards, etc., amounting to £4OOO, makes one realise the difficulties of trading concerns and the dangers that will arise should turnover decline and costs not be arrested.

“At this time last year there was a good deal of accelerated buying resulting from the outbreak of war, a,nd this fact lias to be borne in mind when considering these comparisons. “So far as the Association’s business is concerned!, we are severely hit in our motor section by the petrol restriction which has brought about a substantial reduction in staff and has turned what was a profitable department into one which may show a net loss unless the allocations of petrol are increased to a basis which will permit of the resumption of fair business. “1 view the future with some concern because money and goods are undoubtedly out of balance, with the result that trading is impeded and many useful workers are out of employment. In this city one business recently advertised for a driver and no less than 700 odd written applications were received for the position. Those of us who are in. business know the numbers of people who are daily calling on our management for positions, which is certainly not encouraging as an outlook as regards future turnover figures. Management Reorganised. “In conclusion, with the (retirement of our general manager, the board reorganised .the management of the Association and appointed the chief accountant (Mr G. Gibson), secreta.rv, appointed Mr L. G. K. Steven merchandise manager and shared to a degree the responsibilities of the Association’s policy with other important officers. A certain amount, of decentralisation. at branches was done and the. policy of the hoard was administered by the two executive officers previously referred to in consultation with the chairman of directors.

“I would like to take this opportunity of thanking both Mr Gibson and Mr Steven for their work on behalf of the Association, for their co-operation with the board, their unfailing attention to their duties andi to express the Board’s and I am sure your appreciation of a job well done. My personal contact with these two officers has been of a most cordial nature and although one might find at times that the (responsibilities of the Association are

great, one’s reward comes from the cooperation and team spirit which permeates the hoard, the executive and the staff.”

He moved the adoption of the annual report and balance sheet and tho motion, seconded by Mr N. E. .Jones, was carried.

The following directors, whb retired by rotation, were re-elected, there being no other nominations: Messrs C. P. Agar, J. W, Black, E. Hay, T. A. McKellar, G. W. Osborne. Messrs W. E. Best and Wilkinson were re-elec-ted auditors on the motion of Mr H. E. Robbins, seconded by Mr W. Machin, A vote of thanks to the staff was carried bv acclamation.