WEATHERS THE STORM.

Auckland Star, Volume LXIII, Issue 224, 21 September 1932, Page 4

WEATHERS THE STORM.

FARMERS' AUCTIONEERING CO. CO-OPERATIVE CONCERN'S SUCCESS STRONG LIQUID POSITION. It is not to be expected that a company, which depends for its success upon the prosperity of the farming community, can continue to earn big profits and pay dividends to shareholders during the time of economic crisis that lias afflicted all parts of the world during the past couple of years. How difficult the position is for these fanner financing concerns has been graphically told in the latest balancesheets of many of the leading New Zealand companies. Only last week the accounts of a leading Southern organisation were published disclosing a loss of £110,000, and the directors hinted that, in the future, it may be necessary to make provision for writing off any amount up to £250,000. Under these unfortunate circumstances shareholders have cause for congratulation upon the latest returns issued by the Farmers' Co-op. Auctioneering Co., of Hamilton, for the year ended July 31. Profits are well down —this was inevitable —but the ledger accounts show a balance 011 the right side, and, while ordinary shareholders are -asked to forego a dividend payment, preferential shareholders will receive their usual 6 per cent distribution. Net profits for the year total £5651. To this is added the balance brought forward from last year, namely, £1919, and aiso an amount of £9764 transferred from the reserve fund, making a total of £17,334. From this dividends paid on preference shares account for £15,193, leaving a balance of £2142, from which it is proposed to pay income tax and carry the balance forward. . The annual meeting is to be held m Hamilton on Saturday, October 8. The retiring directors, Messrs. A. E. Manning and W. Seavill, have been renominated for I election, and will not be opposed.

Past Years Compared. The following table indicates the trend of operations in recent years: — Profits. Div. General Gross. Net. p.c. Reserves. £ £ Pref. Ord. £ 1925 . 200,107 55,D0S C 8 26,376 1926 . 131,373 37,939 6 G 26,376 1927 107,552 18,294 6 — 192S . 130,530 41,065 6 6 26,376 1029 . 148,991 51,069 6- 8 ~J)>™4 1 qyn 146 578 46,261 6 7 J9, <64 1931 i 103454 13,196 C — 29,764 1932 . 88,510 5,651 t> — 20,000

The accounts submitted on October 28, 1925, were for a period of eighteen months ending July 31. There is no need to look for the cause of diminished profits. Farmers have been -having a bad time during the last couple of years. The price of everything they produce has gone down, and the customeis of the Farmers' Auctioneering Company have had to curtail their purchases. Moreover, the lowering of values cuts a big slice from the commission receipts, which are on a percentage basis.- Clearing sales nowadays are in some cases scarcely worth attending, as the commission on the gross amounts realised will barely cover the costs involved in attending to that class of business. » In the outside department the company, like all other stock firms, has had to curtail its services in order to reduce expenses. The accounts show, in this connection, that £10,000 less was incurred in expenses for the period ended July 31, 1931, and for the latest period a further saving of over £7000 has been made. However, despite the utmost care it is not possible for firms to immediately readjust their overhead to such violent fluctuations as the slump has produced, and this fact is disclosed in the following table:— EXPENSES TO PROFITS. 1929. 1930. 1931. 1932. Per cent ex- - pensea to gross profits 65.70 08.44 87.24 93.61 Per cent net , proiits to gross profits 34.30 31.56 12.76 6.38 Sound In Finance. But where this popular organisation shows up best is in its balance-sheet figures, revealing as they do a position of remarkable soundness; a tribute to the manner in which the affairs were conserved in more prosperous years. The general position was well summarised at last annual meeting by a shareholder, Mr. D. Hay,, who said he was very proud of the company, and the manner in which the .assets were conconducted during the fast 14 or 15 years. The concern was in a more liquid condition than any other similar company in New Zealand. The liabilities of some companies varied from 45 to 70 per cent in relation to their assets, and the fact that the Farmers' Co-operative Auctioneering Company's liabilities represented only 16 per cent of its assets showed excellent business.

If the Dominion had been governed with the same spirit that was behind the Farmers' Auctioneering Company, New Zealand would have been in a unique position to-day, said Mr. Hay. The company was of great benefit to its customers, the community and the shareholders. In putting reserves aside for contingencies the company had been wise, jind the shareholders had nothing to fear. One would have to go far in New Zealand or Australia to find equal results to those which had been achieved by the Farmers' Co-operative Auctioneering Company.

These remarks, made a year ago, are still applicable, as will be seen by a consideration of the following table, containing the chief balance-sheet items in recent years:— LIABILITIES. 1930. 1931. 1932. £ £ £ Paid capital .. 479,479 479,593 479,953 Mortgages .... 419 380 351 Fixed deposits i 23,321 23,7G1 21,205 Sundry cred's. . 49,820 46,474 26,660 Customers' cr's. 8,410 5,012 5.422 London office .. 5,657 1,945 — Bank of N.Z. ..' 51,091 23,632 — Total outside liabilities ... 138,718 101,211 53,788 The capital account shows £750,000 authorised;' £658,267 has been subscribed, of which £405,055 are ordinary shares of £5 each. Uncalled under this head totals £178,314. Preference shares at £1 each, all called up, total £253,212. ; ASSETS. 1930. 1931. 1932. Properties .... 167,944 169,462 168,440 Machinery and plant 10,040 6,965 5.138 Office equipment 5,485 4,687 4,285 London offico .. — — 2,393 Sundry debtors, etc 368,655 316,086 244,245 Stocks 97,165 86,322 90,126 Investments .. 41,183 39,883 39,241 Bank N.Z., etc. — — 9,610 Total assets . 690,47S 623,405 563,479 On the liabilities side it will ,be noted that sundry creditors have been reduced by nearly £20,000, and a bank overdraft of £23,632 has been changed to a credit of £9609. The chief assets are farmers' accounts, and these"have been reduced by over £70,000 to £244,245. This reduction includes a further substantial allowance for bad debts, but with the improved position of dairying and other favourable factors it seems reasonable to conclude that the accounts are now worth very close to their face value. Stocks and investments are virtually unaltered. The following table shows the relationship of outside liabilities to assets over a term of years:— PERCENTAGE "OF OUTSIDE LIABILITIES TO ASSETS. Per cent. Per cent. 1920 36.45 1927 10.98 1921 31.83 1928 15.51 1922 . 27.58 1929 20.37 1923 28.98 1930 20.09 1924 ..... 26.50 1931 16.23 1925 23.84 1932 ...;.. 9.54 1926 22.38 This year's percentage is the lowest in the company's history, and represents an unusually strong position for a trading i concern.