UNITED DOMINIONS CORPORATION (SOUTH PACIFIC) LIMITED

Press, Volume XCIX, Issue 29220, 2 June 1960, Page 19

UNITED DOMINIONS CORPORATION (SOUTH PACIFIC) LIMITED

During the Financial Year 19591960 New Zealand’s economic position looked at from an external point of view showed a decided improvement over 19581959, which in itself had commenced to overcome the position that existed in 1957-1958, said Mr A- D. Park, C.M.G., Chairman of Directors, at the annual General Meeting of Shareholders of United Dominions Corporation (South Pacific), Ltd., in Wellington. With a population at present of some 2.4 million people and with the prospect of some 3 million in 1975, the country maintains a sheep flock of over 46 million—the fifth largest in the world, and ranks second in wool production. The so-called Golden Fleece is estimated for the sales season just closed to be worth over 100 million pounds and some 30 million pounds in excess of the previous season. Dairy products are maintained by some 2 million milking cows and the overall production for the past season has been about normal, whilst overseas sales realised some £I6J million more than the previous year. Farm production and export receipts from same govern standards of living in the country at present. Given stable overseas prices for our primary products we can maintain our standards by importing all the types of goods necessary to implement same, but when overseas prices for our exports slump, as they did in 19571958, particularly in wool and dairy products, then repressive expedients are resorted to which naturally affect our living standards. Thus national economy is lopsided as regards the discrepancy between primary and secondary industries. It is said that we are on the eve of a major expansion of manufacture, but this is only part of the story. The goods manufactured must be sold and this involves finance. It is in this realm that our company operates and stresses the need to have a reasonably open road free from unnecessary hurdles and obstacles. In the 1959 Budget the Minister of Finance announced “in general the Government welcomes overseas investment in New Zealand and it may be helpful to state the practice regarding the remittance of profits and repatriation of capital.” This encouragement contrasts with the rejection of our company’s efforts to aid industry, even in the light of its non-remittance of profits to Great Britain. CREDIT FOR INDUSTRY The rea l need for developing New Zealand’s secondary industries and establishing new ones to replace imported goods as far as is economically possible remains imperative, and this field is one in which United Dominions Corporation has made a noteworthy contribution in the past. If our company had not been hemmed in by the Finance Emergency Regulations we could have made an even bigger contribution. By providing raw materials and machinery for the expansion of textile factories, printing works, box makers, engineering firms, sawmills, the manufacture of electrical appliances, component parts for motor vehicles, and many other industries and also by financing heavy equipment for important developments such as Rongotai, Benmcre, Roxburgh, harbour works and highways, it has given material assistance running into millions of pounds over the years. It has taken its share and risk in pioneering new ventures in diversified fields, such as aerial topdressing, two-way radio telephones, the manufacture of motor mowers, the first commercially used New Zealand designed jet boat, etc. The percentage of funds devoted to productive purposes during the year under review reached a record figure of 76 per cent, of total business written as against 24 per cent, for consumer goods. In spite of these facts the provisions of the Finance Emergency Regulations are still applied by the Capital Issues Committee against the company as if it were merely a Hire Purchase Finance Company. Its subsidiary, Credit for Industry (New Zealand), Ltd., meets with the same treatment although its activities are exclusively directed to the purpose which its name indicates. Applications for funds have been consistently declined by the Capital Issues Committee. In the light of the attitude and pronouncements of the Government regarding industrial development, including the statement by the Head of the Department of Industries and Commerce, viz., “Industry is expanding even more rapidly and more deeply than it has in the past,” in the light of his estimate that a capital investment within the next few years in excess of £100,000.000 is expected, and of the increase and trend of population the attitude of the Capital Issues Committee can hardly be understood. HIRE PURCHASE New Zealand is a young and virile country. The high standard of living of her people is praised and encouraged. One would think that in line with the people of other countries enjoying a high standard of living, the people of New Zealand, too, would make extensive use of hire purchase finance to procure the amenities which are part and parcel of a high standard of living. One cannot but reach the same conclusion in this matter if one considers that the Government applies two sets of Regulations, i.e., the Hire Purchase and Credit Stabilisation Regulations and the Finance Emergency Regulations. 1940, against what is said to be the extensive use of hire purchase facilities, but statistics and figures available prove just the contrary. Hire purchase sales totalling £34.500.000 (1958 Census) represent only approximately 5.8 per cent, of all retail sales and only 3.4 per cent, of total private incomes. They compare with a totalisator turnover of more than £46.000.000, with more than £37.000.000 spent on beer and alcoholic beverages, and more than £17.000,000 spent on smoking. Since H.P. balances outstanding as published by the Department of statistics (averaging £10,000,000 refer to 49 companies only, the total of the balances outstanding in New Zealand can only be esti-

mated. We conservatively estimate it at approximately £15,000,000. Recently an estimate of £20,000,000 from another source has come to my knowledge. On the basis of these two estimates H.P. balances outstanding in New Zealand would be approximately £6 10s to £8 10s per head of population as against £l7 10s in the United Kingdom. £35 in Australia, and £75 in the United States.

True, the pre-war total for New Zealand of £4,500,000 has approximately trebled. However, if we take into account that today’s purchasing power of money is approximately only one-third of the pre-war pound, and that the average amount financed under Hire Purchase Agreements over motor-cars has trebled since prewar days (£422 against £141), we find that the volume of goods which can be purchased with £15,000.000 today is no more than the volume of goods procurable in 1938 with £4,500,000. Even this is not the whole story, because this same volume of goods is to be shared by today’s 2.4 million people against only 1.6 million in 1938.

Many labour-saving household appliances, e.g. refrigerators and electric washing machines, which are an integral part of every household today, were in comparatively little use before the war.

The number of factories has increased by 47i per cent. The number of farming tractors in use has increased from 1942 to 1957 from 14,000 to per cent. Hire purchase in New Zealand is far from excessive.

We are in fact considerably behind in the use of this universally established method of buying, of satisfying the people’s demands, and of a specific means of compulsory savings. The Government policy of encouraging local manufacture will surely create a greater demand for H.P. facilities.

FINANCIAL POLICY I do not propose to deal with the problem of whether the restrictions imposed on finance companies in general, as part of an overall anti-inflationary monetary policy, are good or bad, necessary and unavoidable in New Zealand under prevailing conditions. However, if and as long as restrictions are applied, one would at least expect that they operate in an equitable manner. Unfortunately this is by no means the case. A multitude of new small finance companies and whole chains of finance companies have sprung up in New Zealand during a comparatively short span of years. Their formation and the raising of funds within a limit of £lO,OOO per annum does not require consent from the Capital Issues Committee. We calculate that in the six months from July to December, 1959, alone the aggregate amount raised by such finance companies by means which require registration is almost £500,000,* and, taking into account other ways and means which do not require registration, is probably considerably in excess of that figure. From statements and figures taken from prospectuses and advertisements published during the last few months, as far as they have come to our knowledge, it is apparent that five chains of finance companies claim accumulated aggregate assets in excess of £1,400,000, and adding additional funds, on the raising of which they are at present engaged, even £1,700,000. These figures show clearly that as a result of the extensive use made of the gaps in these Regulations, a use which does not constitute an offence under the law as is, the Finance Emergency Regulations no longer achieve tneir ends.

The Authorities are aware of the position and we hope that remedial measures will be taken in order to change the present unsatisfactory policy which, if not intentionally so, in fact discriminates on the one hand between the old established companies which comply with the Finance Emergency Regulations but are barred by them from expansion and, on the other hand by the chains of companies and the multitude of small finance companies the activities of which have assumed proportions which defeat the Regulations. The formation of groups of finance companies and the participation tnerein of New Zealand and overseas newcomers made it necessary for us to take steps to preserve the pre-eminent position held by our company. In conversations with a number of other old-established companies which found themselves in a similar position, we met on common ground in the desire to find ways and means for a consolidation. A merger between the companies not being feasible in view of the Finance Emergency Regulations, the only alternative was the purchase by United Dominions Trust, Ltd., London—our Parent Company—of the share capital in the companies concerned. The Group thus formed includes United Dominions Corporation (South Pacific) (and its subsidiaries). The Traders’ Finance Corporation in Auckland, United Finance Corporation in Dunedin, and The New Plymouth Finance Company in New Plymouth, commanding an overall business in excess of £2,000,000, and constituting the leading group in size in New Zealand. These companies were established in 1933, 1928, 1937, and 1925 respectively and are amongst the oldest New Zealand finance companies. The acquisition of the three companies by United Dominions Trust, Ltd., London, resulted merely in a change of ownership without creating any increase in funds available to the companies for additional business. We have been able to slightly increase our business by ploughing back the profits made and by realisation of some investments. The increase in tax-paid profit to £38,000 as shown in the Consolidated Statement, i.e., approximately 13 per cent, over last year, is modest, although satisfactory taking into’ account the restrictions mentioned before and imposed on the company. In line with the policy adopted for many years, no dividend is paid to our Parent Company, United Dominions Trust, Ltd., London. (•This figure has been extracted from notices published in The Mercantile Gazette.) —P.BA.