FACTS FOR INVESTORS.

Auckland Star, Volume LXV, Issue 214, 10 September 1934, Page 4

FACTS FOR INVESTORS.

WOOLWORTHS, LIMITED. CHAIN STORE FINANCE. "Woolwortlis (Sydney)" is really a misnomer as applied to tlje concern whoso shares have featured largely on New Zealand stock exchanges during the past few weeks. It is true, the headquarters of the firm are in Sydney, but tho title is simply Woohvorths, Limited, Woohvorths, Limited, was formed in Sydney in 1021. It is an independent organisation and is in no way connected with the American company of the same name. The business, however, is conducted upon chain store methods in vogue abroad, that is to say. goods are purchawed in largo quantities and sold for cash. The company was successful from it»s inception, ami from one stoic in 1024 the business lias grown to 12 stores in Sydney and suburbs, two in Brisbane, and onq each in Toowooniba, Ipswich, Rockhampton and Townsville. These storrs are all operated by the parent company. J In 192!) a subsidiary company, known as Woqlworths (W.A.), Ltd,, was formed to conduct a business in Perth, and subsequently Woohvorths (N.Z.), Ltd., and Woohvorths (Victoria), Ltd., were formed, and a small company known as AustraI lian Chain Stores. Limited, in which tlui parent company holds practically all the shares. Position of Subsidiaries. The following table shows tho holding of Woohvorths, Limited, in the various subsidiaries:— Name of company. 'Wool- Held l>y worths, I.ld. public. hold, (onl) Woolwortlis (AV.A.) 1.~,540 1.">,T!I0 ord •JO.fMIO cll.pf Woohvorths (N.Z.) . 4l),0flo 4!M)l.> ord 50,001) 0 % cu.pt Woolwortlis (Vic.) . 00.000 80,<J<H> 7 % cii.pt Aust. Chain Stores: t'Oll shares of loot) ord. £1 Hluires issued. Note. —£41,230 is uncalled and unpaid oil the ordinary shares in Woohvorths (Vic.l, Ltd., all other shares are fully paid to i.l each. Not only lias tho parent company retained sufficient sliaieholdmg to contiol the subsidiaries, but the directors ot Woolworths. Ltd.. also constitute the boar I for each of the allied companies. In other words the control of all the companies and all the branches emanates from Sydney. Results over the pust six years nave been as follow: — js,>t Placed to profit. Ord. I)iv. Keserves. Jan., £ !»■£• 1 «)••»» -■< 11)80 .... 40,«vi:i in'nor JO3l ~.. 41,73(5 11)311 .... 02,407 171 1983 CB.7SS 224 11)34 .... 85,032 25 31,<>-.0 Balance-Shoot Items.

Chief items from ths Inst three balancesheets have been as follow: — 1032. 1033. 1034. Paid capital .. 242,788 242,788 Inabilities 127,170 2(4,911 272,15S

ASSETS. Freehold! .... 1J5,007 302,810 340,080 Leaseholds •• • D,083 SH.4-1 Plant 51,020 08.528 180,003 Shares .•••••. 103,100 102,001 110,031 KtoeliH 121,000 143,470 I.)U,JuS Debtors . 4,044 21,057 20,710 cSSh 05;703 41:020 i,m Capital Position. At last balancing paid capital comprised £342,788 in 75,000 10 per cent preference shares, 100,000 7 per cent cumulative preferences and 167,738 ordinary, all fully Reserves and individual profits at that date totalled £159,010 ami the total assets, including goodwill £87,495,' were valued at £783,659. The item of goodwill is usually considered as anything but a source ot strength qn a balance-sheet, and it is surprising that a firm which has been in profitable existence for six years lias not already written the amount off. llovveyer, apy shortcomings over this item are more than compensated for in the valuation of subsidiary companies' shares. These are taken in at par and when it is remembered that there are buyers ot Xew Zealand £1 shares at £7 5/ it will be seen that this particular item was considerably undervalued. . In July it was decided to capitalise £253.182 of the company's assets, and a distribution lias since been made in the proportion of three new fully-paid a; I ordinary shares for every two ordinary shares held, and the paid up capital is now £595,970 in 420,970 £1 ordinary shares and 175,000 £1 preference Bhare3.

Bonus to Shareholders. Subsequent to the publication of the latest balance-sheet, the directors had the assets revalued and then issued a circular, in which they stated, inter alia:—"That it is desirable to capitalise the sum of £253,182, "being portion of the amount standing to the credit of assets revaluation reserve account, comprising undivided profits of the company created by a revaluation of the assets of the company not acquired for the purpose of resale at a profit, and for the time being not required for paying fixed dividends on any preferanee shares," „ 1 They thereupon created 253,182 new £1 shares, giving to holders of two shares three more. As a similar step was taken in 1931 when shareholders received a bonus share for each share held, the position is tliat a person who purchased 100 shares before the first watering has now become the owner of 500 shares without any further outlay. On the basis of last year s profits, the company could, after arranging for preference dividends, pay to ordinary shareholders on the new capitalisation approximately 15 per cent dividend. Market Changes. Prior to the announcement of the proposed adjustment of capital, the shares were valued at £5 10/, showing on a 25 per cent dividend a return of approximately 4% per cent per annum on outlay. Upon publication of the directors' intentions, the shares rose sharply to £8 15/, cum rights. At ex rights, they started off at £3 3/ and rose to £3 14/6. They then receded to £3 8/6 and have since recovered to £3 10/6. The shares of New Zealand Woolworths are valued at £7 6/ and the preference shares at £2 2/0. The ordinary shares paid 20 per cent dividend for last year, and the rate paid on the preference issue is 0 per cent cumulative. Holders of preference shares are protected against the operations of the National Expenditure Adjustment Act by the issue of a special bonus which equals to 20 per cent statutory deduction.