MR MURDOCH GOES INTO FIGURES.

Hawera Star, Volume XLIX, 31 August 1929, Page 4

MR MURDOCH GOES INTO FIGURES.

(To tihe 3Sditor_) Sir, —I find, “Spotlight’s” letter very amusing. lie analyses the capital of the company, Which. of course, 1 did not. He entirely misses the essential poiut, which is the nett profit earned by tlie concern oil the capital actually employed in it. This is tlie more curious, because he so very obviously has “inside information.” Now, Mr Editor, take the figure of “capital used” from Mr Lamb’s table as published, and the nett profits of the • concern as shown in the audited bal-ance-sheets (which cannot be disputed) and we find a most valuable index to the whole proposition. Capital Nett Year. employed'. profits. 1925 £81,391 £6466 1926 £87,989- £7546 1927 £94,308 £8242 1928 , £104,187 £9937 1929 £109,666 £11,371 Taking the last year, to 31/3/29, on a capital employed in the concern of £109,666, the Electric Company made nett profits amounting to £11,371 15s Sd. (By the way, “Spotlight” missed the point that the Power Board pays no income tax.) To obtain a true basis of comparison /between the company’s results and the Power Board's propos-. ition, attention must be paid to the company's profit and loss' account for the period under review. We find they paid their bankers for accommodation (interest) the sum of £I4BO 16s Id, as against which they received/ £94 interest on war bonds Which we are not taking over. Accordingly, the difference between these two amounts, namely £1385 16s Id, must be added to the net profits as shown in the company’s balance-sheet to give tlie position. Thus : Nett profits as shown ... £11,371 15 8 Adjustment as above ... £1385 16 1 Total £12,757 11 9 The Power Board’s capital: employed in this business, including expenses, will be £136,500- —a known fixed sum. At the authorised rate 5J- per cent, this ' briars interest amounting to £7507 10s a year. The 2 per cent, sinking fund is money saved to redeem the lean in 26 years, and amounts to £2730 a year. Add the two together, and we have a total of £10,237 10s per year. Deduct this amount from the adjusted nett profit of the company, and we find that the Power Board will make a nett profit of £2520 l® 9d during its very first year in operation. Thus: Adjusted profit 1929 balance-sheet £12,757 11 9 Deduct year’s interest and sinking fund .... £10,237 10 0 Board’s nett profit first year £2,520 1 9 The 'board hopes to raise the money at a lower rate than 5J per cent. But, the sinking fund is money saved for the redemption of the loan, and that it belongs to the board for that purpose. It amounts to £2730 for the year. Clearly, then, the Power Board is £5250 Is 9d to the good at the end of its first year's operations. Thus: Board’s nett profit first year £2,520 1 9 Sinking fund first year £2,730 Board to the good at end of first year £5,250 1 9 That, Mr Editor, is my reply to “Spotlight”—at the end of the Power Board’s very first year in operation, the board will be £5,250 on the right, side of the ledger. Iu other words, the ratepayers will be in pocket to that amount.

As to future development, I say emphatically that the business wiy. increase by 'leaps and bounds. Does “Spotlight” seriously suggest that the company's, witnesses exaggerated the position at the arbitration ? I personally am convinced they did not do so. Why, ,some«,of their statements were based on Government returns, showing what has actually been, accomplished in other parts of the Dominion. I have been content to adopt their statements which confirm the statements of the six experienced and qualified engineers who were employed by the board in this matter. It ill, becomes “Spotlight” to criticise as he has done the witnesses for the company. They are men eminent. in their profession, just as are the men- who were the board’s witnesses. With all tlhe engineers on both sides in. agreement on this most important topic what is the value of “Spotlight’s” anonymous criticism? “Spotlight,” in fighting for his- side, has forgotten Mr Lamb's statement that the proposition will pay at the price fixed in the award. That is correct. It will pay, and will pay handsomely, -and tile ratepayers will have the advantage of reduced prices in the near future. No red herring as to what sharehdlders got twenty per cent, and wbait shareholders did hot, affects the cold fact that the figures for profits are as I have stated. Neither “Spotlight” nor -anyone else oan deny what appears in the audited balance-sheets. I am prepared to produce to any ratepayer copies of the balance-sheets, or of the exhibit- covering same used by the company at. the arbitration. No ratepayer is in any way misled by “Spotlight's” statements, and I am convinced that the public are solidly with the board as will be proved by the result of the poll next Thursday.—l am, etc., J. B. MURDOCH, Chairman S.T.P.B.